Definity Financial Corporation reported net income attributable to common shareholders of $225.9 million for the fourth quarter of 2023.
This is an increase of $40.9 million or 22 per cent compared with net income of $185 million in the same quarter of 2022. This amount has been adjusted for IFRS. Any comparison with the previous year must be analyzed with caution.
For the full year 2023, the company posted net income attributable to shareholders of $350.1 million, up 215 per cent from the $110.9 million announced a year earlier, on an adjusted basis.
The company explains that its improved results are due to revenues from investments, with proceeds of over $331 million in 2023, compared with an adjusted loss of $313 million in 2022.
Underwriting result
Underwriting results showed net income of $87 million in the fourth quarter of 2023, compared with net income of $66.7 million on an adjusted basis in the same period of 2022.
For the full year, underwriting income was $144.9 million in 2023, compared with $189.4 million in 2022 on an adjusted basis.
For the full year, catastrophe losses had an impact of 6.2 percentage points on the company's combined ratio, 2.5 points higher than the 3.7 per cent recorded in 2022.
Premiums
Fourth-quarter gross written premiums (GWP) exceeded $1 billion, up 8.5 per cent or $81.3 million compared to $952 million reported in the same period of 2022 on an adjusted basis.
For the full year, GWP reached $4 billion in 2023, compared with $3.7 billion in 2022 on an adjusted basis. This is a year-on-year increase of $342.9 million or 9.4 per cent on an adjusted basis.
Gross written premiums in personal lines reached $694 million in the fourth quarter of 2023, compared with $655 million in the same period of 2022 on an adjusted basis. This is an increase of six per cent.
For the full year, this segment's GWP totaled $2.8 billion, up $178 million or 7 per cent over the previous year.
In 2023, some 57 per cent of premium volume was written in Ontario, the company states in its management report. Alberta and the other two Prairie provinces account for 15 per cent of the company's premium volume, while British Columbia accounted for 11 per cent, the Atlantic region eight per cent and Quebec eight per cent.
The broker distribution network accounts for 89 per cent of Definity's direct written premium volume, compared with 11 per cent for direct insurance.
Commercial lines
The company reported a 14 per cent increase in commercial insurance GWP, which reached $339 million in the fourth quarter of 2023, compared with $297 million for the same period a year earlier on an adjusted basis.
For the full year, commercial insurance GWP totalled $1.2 billion, up $164.5 million or 15 per cent compared to 2022 on an adjusted basis.
In commercial lines, the combined ratio was 93.3 per cent in the fourth quarter of 2023, compared with 88.8 per cent for the same period in 2022. This is a 4.5 per cent difference.
For the full year, the commercial lines combined ratio was 88.8 per cent, compared with 90.1 per cent in 2022. This is a 1.3 per cent per cent difference.
Combined ratio
In terms of claims experience, the combined ratio stood at 90.6 per cent in the fourth quarter, compared with 92.2 per cent for the same quarter in 2022. This is a difference of 1.6 per cent.
For the full year, Definity's combined ratio stood at 95.9 per cent in 2023, compared with 94.2 per cent in 2022. This is a change of 1.7 per cent.
Definity CEO Rowan Saunders is particularly pleased with the combined ratio result, which remains within the company's 95 per cent target range, despite 6.2 points of catastrophe losses in 2023.
In the document provided to analysts, the company underlined its recent investments in the brokerage distribution network.
The company’s subsidiaries have a combined direct written premium volume of $1 billion, divided between Ontario (80 per cent) and Alberta (20 per cent). Over the next three to five years, this volume is expected to rise to $1.5 billion, the company stated. Definity estimates that revenue from distribution should be around $75 million in 2024.
For his part, VP Finance Philip Mather noted that the company has $1.2 billion in financial capacity to make further acquisitions, giving it the flexibility to support the company's organic growth.
Since Jan. 1, 2024, Definity has been operating under the Canada Business Corporations Act. The company was formed from the demutualization of Economical in November 2021.
Innovation
In its management report, Definity points out that the Sonnet Shift program now enables motorists to revise their insurance premium on a quarterly basis according to their driving habits, thanks to an application on their phone. In Ontario in the fourth quarter, more than two-thirds of Sonnet's new auto insurance customers signed up for this program.
Definity also says it is continuing its work with Google Cloud to use the digital giant's data analytics and artificial intelligence capabilities to enhance the digitization of its business and strengthen the customer experience for consumers and its broker network.
Personal auto
On the personal auto insurance side, Definity's management report notes that claims frequency is back to where it was in 2019. Inflationary pressures are still affecting claims costs.
The impact of auto theft remains strong on the insurer's business, as criminal networks target newer, more luxurious vehicles. As a result, the company offers incentives to consumers to install more effective anti-theft systems.
As it has done each time it has published its quarterly results, Definity deplored the measures adopted by the Alberta government with regard to the pricing of personal automobile insurance premiums.
Since Jan. 1, 2024, the province has imposed a good driver rate cap based on the increase in the Consumer Price Index. Alberta has also allowed the Automobile Insurance Rate Board to force private insurers to offer premium discounts to motorists if their profits exceed 6 per cent.
