Desjardins Group experienced a significant decline in surplus earnings before member dividends in 2022, at $892 million compared with the prior year.
Surplus earnings were $2.05 billion, a 30 per cent drop from the $2.9 billion reported in 2021. The decrease was “largely due to a rise in the cost of automobile and property insurance claims in the Property and Casualty Insurance segment.”
The only surpluses over prior year were seen in fourth quarter 2022. Surplus earnings were $576 million in 2022, versus $393 million in 2021. This represents an increase of $183 million or 46 per cent.
In its February 22 release, Desjardins adds that 2022 was marked by an increased frequency of auto insurance claims, the impact of inflation on repair costs and more adverse weather conditions.
The decrease in surplus earnings was offset by increases in net interest income and other operating income, the effect of higher interest rates on actuarial liabilities in life and health insurance, and an overall more favourable experience in group insurance.
Net surplus earnings after member dividends were $1.75 billion in 2022, down $905 million or 34 per cent from $2.66 billion in the previous year.
Desjardins Group’s total assets were $407.1 billion as at December 31, 2022, up $10 billion (2.5 per cent) from a year earlier.
Property and Casualty Insurance
The contribution of Property and Casualty insurance to net surplus earnings was $450 million in 2022, down from $1.2 billion in 2021. This represents a 62 per cent decrease.
In the fourth quarter of 2022 alone, surplus earnings were $116 million, compared with $330 million in Q4 2021. The difference amounts to a decrease of $214 million, or 65 per cent.
Desjardins points out that fiscal 2022 was marked by a major catastrophe, the May 2022 derecho, which hit densely populated areas in Quebec and Ontario, and by five major events: flooding, windstorm, heavy rain, Hurricane Fiona and a snowstorm.
In contrast, 2021 saw only one disaster, a hailstorm in Alberta, and a major event.
Wealth Management and Life and Health insurance
For the Wealth Management and Life and Health Insurance segment, Desjardins posted a net surplus of $692 million, compared with $463 million in 2021. The increase amounts to $229 million or 49 per cent.
This growth is particularly notable in fourth quarter 2022, where the net surplus was rose to $227 million, versus a net deficit of $6 million in 2021.
Operating income
Desjardins’ operating income totalled $21.8 billion in 2022, up nearly 7 per cent or $1.4 billion from $20.4 billion in 2021.
The Wealth Management and Life and Health Insurance segment reported operating income of $7.6 billion, compared with $7.1 billion in 2021, for an increase of $477 million or 6.7 per cent.
In Property and Casualty Insurance, operating income advanced by $238 million to $6 billion in 2022, from $5.7 billion in 2021. This represents growth of 4.2 per cent.
Premiums
Desjardins’ total net premiums were $11.8 billion in 2022, compared with $11.3 billion in 2021. The increase amounts to $564 million or 5 per cent.
For the Wealth Management and Life and Health Insurance segment, Desjardins reported premiums of $6.2 billion in 2022, versus $5.7 billion in 2021. The difference of $499 million represents a 9 per cent increase.
Group annuity premiums largely propelled this growth. These premiums climbed $313 million to $1.6 billion, for an increase of 24 per cent.
In Property and Casualty Insurance, net premiums were $6 billion in 2022, compared with $5.9 billion in 2021. They rose by a mere $96 million or 1.6 per cent.
Investments
Desjardins reported investment losses of $3.76 billion in 2022. Losses in 2021 were $85 million, while investment income exceeded $3 billion in 2020.
Nearly all of the variance is attributable to the Wealth Management and Life and Health Insurance segment, where investment losses were $3.4 billion in 2022, compared with losses of $55 million in 2021.
In its Management’s Discussion and Analysis published on February 24, Desjardins explains this difference by the following factors: 1) decrease in the fair value of assets related to life and health insurance activities and backing liabilities, 2) a greater decrease in the fair value of matched bonds in the Property and Casualty Insurance segment compared with 2021, and 3) the decline in derivative financial instrument activities. However, these factors were offset by higher gains on disposal of securities and real estate investments than in 2021.
