Desjardins Group off to dismal start in 2022.
For all of its operations, the financial institution reported surplus before member dividends of $519 million in the first quarter of 2022, compared with $798 million in Q1 2021.
This decrease of 35 per cent or $279 million was “mainly due to larger amounts invested in strategic projects, especially in relation to the digital shift and security, and a higher loss experience in the Property and Casualty Insurance segment,” explains Desjardins.
The financial institution adds that “the reduction in surplus earnings was partially offset by gains in net interest income and other operating income.”
Property and casualty insurance
For its P&C insurance segment, Desjardins reported a net surplus of $147 million in the first quarter of 2022, compared with $248 million in Q1 2021. This 40.7 per cent or $101 million decline is “primarily due to a higher loss experience in the current year in automobile and property insurance.”
This downturn was counterbalanced by an “increase in investment income, excluding the change in the fair value of matched bonds.”
The combined ratio worsened by 17.9 points. It was 96.9 per cent in the first quarter of 2022, compared with 79 per cent in Q1 2021.
Wealth management and personal insurance
In contrast, for its Wealth Management and Life and Health Insurance segment, Desjardins reported a net surplus of $137 million in the first quarter of 2022, compared with $125 million in Q1 2021. This increase of 9.6 per cent or $12 million is mainly due to “a generally more favorable experience than in the first quarter of 2021, particularly in group insurance, as well as higher gains on the disposal of securities than in 2021.”
These factors were offset by the “by the markets' unfavourable impact on guaranteed investment funds, versus their favourable impact in the same quarter of 2021.”
Expenses
Expenses related to claims, benefits, annuities and changes in insurance contract liabilities decreased by $149 million in the first quarter of 2022.
They declined by $285 million in Wealth Management and Life and Health Insurance and by $12 million in Other.
These expenses rose by $148 million in P&C insurance, notably because “the first quarter of 2022 was affected by one major event, namely flooding in Quebec and Ontario.”
Operating income
Desjardins’ reported total operating income of $5 billion in the first quarter of 2022, versus $4.8 billion in Q1 2021. Income thus increased by 5.6 per cent or $267 million.
The P&C insurance segment recorded operating income of $1.5 billion in the first quarter of 2022, up from $1.4 billion in Q1 2021. The corresponding increase is 6.5 per cent or $90 million.
The Wealth Management and Life and Health Insurance segment recorded operating income of $1.6 billion in the first quarter of 2022. This represents an increase of 3.1 per cent or $49 million.
Premiums
Desjardins' total net premiums were $2.6 billion in the first quarter of 2022. They climbed 2.5 per cent or $65 million.
P&C net premiums were $1.5 billion in the first quarter of 2022, compared with $1.4 billion in Q1 2021. This increase of 3.1 per cent or $44 million was “basically as a result of business growth and also growth in the average premium for property insurance and business insurance.”
Wealth Management and Life and Health Insurance net premiums were $1.3 billion in the first quarter of 2022, versus $1.2 billion in Q1 2021. Net premiums increased by 2.4 per cent or $29 million. In closer detail, net premiums:
- Rose 7.2 per cent or $16 million in individual insurance to $238 million
- Climbed 4 per cent or $34 million in group insurance to $874 million, and
- Fell by 12.6 per cent or $21 million in annuities, to $146 million
What’s more, Desjardins Group reported a loss of $79 million in premium income under “Other” in the first quarter of 2022, versus a loss of $71 million in Q1 2021. This represents a decline of $8 million.
Investments
Desjardins reported investment losses of $2.2 billion in the first quarter of 2022, compared with $1.7 billion in Q1 2021. This $435 million decline is mainly attributable to the following sectors:
- Wealth Management and Life and Health Insurance sustained investment losses of $2 billion in the first quarter of 2022, versus $1.7 billion in Q1 2021. This $224 million decline is primarily attributable to a “decrease in the fair value of assets backing liabilities related to life and health insurance operations, while Desjardins recorded higher gains on disposal of securities compared to 2021.”
- P&C Insurance recorded investment losses of $63 million in the first quarter of 2022, compared with $36 million in Q1 2021. This decline of $27 million is due to the “larger decrease in the fair value of matched bonds compared to the corresponding quarter of 2021, mainly as a result of an increase in market interest rates during the first quarter of 2022 that was higher than in the first quarter of 2021,” Desjardins explains. This fluctuation was “offset by a decrease in the cost of claims due to matching.” At the same time, the insurer achieved “higher positive results for derivative financial instruments compared to those in the first quarter of 2021.”
