UV Insurance achieved a net income of $14.4-million in 2022, nearly tripling the net income of $5.3-million it earned in 2021.
The substantial reduction of $656.6-million in technical provisions in 2022, compared to 2021, propelled the insurer's net profit.
Often referred to as "reserves," technical provisions constitute a significant portion of an insurance company's liabilities. In UV Insurance's balance sheet for 2022, technical provisions amounted to $1.777 billion out of a total liability of $1.806 billion. In 2021, they stood at $2.434 billion. Therefore, the technical provisions for 2022 were reduced by 27 per cent compared to 2021.
The variation in technical provisions significantly contributed to reducing the insurer's expenses. The charge labeled "variation in technical provisions" on UV Insurance's balance sheet was $17.4-million in 2021, compared to $656.6-million in 2022.
Pierre Parenteau, first vice president and appointed actuary for actuarial and finance at UV Insurance, explained to the Insurance Portal that the reduction in technical provisions in 2022 can be attributed to the rise in interest rates. Interest rates surged in 2022, with the Bank of Canada's benchmark rate increasing from 0.25 per cent to 4.25 per cent between January 26 and December 7, 2022.
Technology boosts sales
Parenteau added that 2022 marked an important milestone for UV Insurance, calling it the completion of technological transformation and the beginning of a growth era.
"The growth era began in 2022 as we exceeded our growth targets in all lines of business," Parenteau revealed, adding that the insurer achieved net insurance and annuity premiums of $177.3-million in 2022, compared to $170.4-million in 2021, representing growth of 4 per cent.
In UV Insurance's annual report, Christian Mercier, president and CEO, states that the company was one of the first insurance companies in Canada to operate all its individual insurance systems on new technologies. One of these systems, called "My Universe," contributed to the sales growth in 2022, according to Mercier. The site allows for the fully digital issuance of both term and permanent life insurance without a medical examination.
"Our electronic platform for advisors is highly valued within the distribution network, which has favored our sales in the past year and propelled us to record results. We have established a strong presence in the field, particularly in Quebec and Ontario and have forged partnerships while introducing competitive new products," he wrote.
UV Insurance has also expanded outside of Quebec, as well. "With the arrival of a new director of business development, Mike Minville, we have taken the opportunity to reorganize our sales force outside Quebec, enabling us to penetrate new markets and engage a greater number of advisors," Mercier emphasized.
On the other hand, UV Insurance's investment and retirement sector experienced a slowdown at the beginning of 2022. Mercier explained that this slowdown was influenced by inflation and economic deceleration. However, he added, "the investment campaign launched in the fall, offering particularly advantageous rates, allowed us to stand out and finish the year with very satisfactory results."
UV Insurance's capital position?
Parenteau meanwhile, says UV Insurance has been cautious in its inflation projections concerning contract and pension plan management. According to him, the mutual insurer from Drummondville maintains a high solvency ratio. The company’s Life Insurance Capital Adequacy Test (LICAT) ratio stood at 199 per cent in 2022.
In comparison, financial data on life insurance companies published in the fourth quarter of 2022 by the Office of the Superintendent of Financial Institutions (OSFI) shows the average LICAT ratio for insurers was 127 per cent. OSFI states that insurers must maintain a minimum core capital ratio of 55 per cent and a total capital ratio of 90 per cent. Additionally, OSFI established a target core capital ratio for monitoring at 70 per cent and a target total capital ratio for monitoring at 100 per cent. "Historically, UV's ratio has always been high compared to the industry," Parenteau says.
However, this situation could soon change. "Now that we have completed our overall (technological and infrastructure) transformation, we are entering a phase of growth to utilize and make use of this surplus capital. We expect that over the next few years, our ratio will decrease to support this growth while remaining prudent and without sacrificing UV Insurance's financial strength," explained Parenteau.
Diversity and equity
In a recent interview with the Insurance Portal, Mercier also discussed the crucial role played by young people and women in the company's success, highlighting their inclusion at all levels of the small mutual insurer. In the company of 200 employees, he says 75 per cent are women, while 60 per cent of the company’s managers are also women.
Mercier mentions Joëlle Girouard as an example. She was appointed as compliance officer at the age of 27, one of the two positions previously held by Éric Timmons before he was named senior director of the brand-new projects and strategic planning office at UV Insurance. Timmons also served as senior director of actuarial and finance.
Joining UV Insurance in 2018 as a legal analyst in compliance, Girouard became one of the youngest compliance officers in the Canadian insurance industry according to the CEO. He believes that Girouard's appointment reflects UV Insurance's commitment to the advancement of young talent.
In addition to implementing and monitoring internal policies, Girouard provides advice to the insurer about regulation and compliance matters, represents them on these issues with regulators, and serves on committees with the Canadian Life and Health Insurance Association (CLHIA).
Collaboration to maintain an advantage
In a statement explaining the creation of the projects and strategic planning office led by Timmons, Mercier emphasized the need for a "collaborative approach" to achieve objectives, due to the accelerated digital changes and industry transformation.
During the interview with the Insurance Portal, Mercier discussed UV Insurance's significant transformation over the past six years, including the consolidation of individual and group policy administration into a single system, the implementation of a new accounting system, development of expertise in cybersecurity, establishing a headquarters during a pandemic, and launching a simplified insurance issuance platform.
"We have laid the foundation we need to move forward. I consider that we now have a technological advantage," he says. Timmons' role, meanwhile, is to preserve this advantage. Mercier describes Timmons as the conductor between the company's strategic objectives and the tactical actions taken in the field to achieve them. "He becomes the organization's conductor."
Timmons, also a member of UV Insurance's executive committee, says he sees his role as an opportunity to take tactical actions that will harmonize efforts between teams, mobilize them and ensure the necessary rigor for projects to progress at a good pace.
"Not everyone progresses at the same pace in a project. We need to have the right people in the right positions. Some are more involved, while others have their daily tasks. There is always a tension in the velocity at which a project moves," Timmons explains.
Mercier says the implementation of new accounting standard IFRS 17 has created a significant workload for a small companies like UV Insurance, “but we are particularly proud to have finished the year ahead of schedule,” he says. "Our teams have embraced the new system and prepared for the next transformation phases, which aim to comply with the new accounting standard IFRS 17," he wrote in UV Insurance's annual report.
"The IFRS 17 project is an excellent example of accountability, in which we must evaluate the results and ensure they meet the expectations we set at the beginning," Timmons says.
He adds that accelerating the arrival of new business through simplified issuance would also be a priority. "Underwriting can be a cumbersome process for policyholders and advisors. We want to reduce delays and documentation. Other insurers are already in this area, but we aim to take it to the next level."
The continuation of UV Insurance's growth trajectory and its commitment to diversity, equity, and technological advantage position the company for continued success in the insurance industry.