Although Desjardins Group’s P&C insurance hit record volumes in 2020, its consolidated annual earnings declined.
Desjardins reported surplus earnings before member dividends of $2.4 billion in 2020, down from $2.6 billion in 2019. The decrease amounts to 6.9 per cent or $179 million.
For fourth quarter 2020 alone, Desjardins posted net surplus earnings of $876 million, versus $935 million in Q4 2019, for a decrease of 6.3 per cent or $59 million.
“Desjardins Group posted strong financial performance for fiscal 2020, despite the negative impacts of the pandemic,” president and CEO Guy Cormier said.
Looking at the results in detail, this consolidated result was affected by a downturn in the main business segment as well as in Wealth Management and Life and Health Insurance. Conversely, performance was driven by solid results in the P&C insurance sector.
P&C insurance earnings skyrocket
In P&C, Desjardins reported a net surplus of $622 million in 2020, compared with $187 million in 2019. This increase of 232.6 per cent or $435 million “stems from higher net premiums and a lower claims experience in 2020 in automobile insurance as a result of changes in driving habits attributable to the COVID-19 pandemic. In addition, more favorable weather conditions contributed to the lower claims experience,” Desjardins says.
Desjardins added that it has granted $155 million in automobile insurance premium refunds to more than 2.1 million policyholders in 2020. It was one of the first financial institutions to introduce relief measures to mitigate the effects of the COVID-19 pandemic.
For Q4 2020 alone, the Property and Casualty segment had a net surplus of $378 million, compared with $111 million in the fourth quarter of 2019. This increase of 249.5 per cent or $267 million is explained “mostly” by lower claims experience and higher net premiums.
These quarterly and annual results are the best ever reported in this sector. What’s more, this is the first time since 2012 that the net surplus in general insurance has exceeded the net surplus in wealth management and life and health insurance.
Wealth management and life and health insurance decline
Desjardins’ wealth management and life and health insurance sector earned a net surplus of $609 million in 2020, down from $697 million in 2019. This decrease of 12.6 per cent or $88 million “was due to the $43 million increase in costs related to travel insurance and the rise in expenses from 2019, especially administrative costs to improve services to caisse members and clients,” Desjardins says.
The decrease is also explained by the “unfavourable impact of markets on guaranteed investment funds.”
However, these items were offset by “higher gains on the sale of securities and real estate investments compared to 2019.”
For fourth quarter 2020 alone, the net surplus is $249 million, compared with $285 million in Q4 2019. The corresponding decrease is 12.6 per cent or $36 million.
Mixed results mirrored in other sectors
Desjardins’ two other sectors followed a similar pattern: One did better, the other worse.
For the institution’s main sector, namely Personal and Business services, Desjardins reports a surplus of $1.3 billion in 2020. It is down 31.3 per cent or $599 million compared with 2019, when it was $1.9 billion. The annual result of this sector had not declined since 2013, when it slid to $809 million, versus $811 million in 2012.
“This decrease was due to the financial impacts of the COVID-19 pandemic,” Desjardins says, “which led to a $499 million increase in the provision for credit losses, primarily due to the significant deterioration in the economic outlook and the expected impacts on credit quality as well as lower business volumes from payment and financing activities at Desjardins Card Services.”
This downturn also stems from increased investments, particularly in the digital shift and information security. “On the other hand, solid performance from the caisse network and Desjardins Securities Inc. helped offset the decrease in surplus earnings.”
Lastly, the “Other ” segment reported a net deficit of $126 million in 2020, compared with a net deficit of $199 million in 2019. Its performance thus improved by $73 million.
Increase in operating income
Desjardins’ total operating income advanced by 3 per cent in 2020. It slid by 4.6 per cent for the personal and business sector, but edged upward by 0.9 per cent for the wealth management and personal insurance sector and by 10.5 per cent for the property and casualty insurance sector. This growth is mainly attributable to higher net premiums.
Property and casualty insurance propels premiums
Desjardins reported total net premiums of $9.9 billion in 2020, compared with $9.4 billion in 2019, up 5.4 per cent or $508 million. The growth was driven mainly by P&C insurance.
Net premiums in this segment total $5.5 billion. Their gains of 9.9 per cent or $496 million pushed them past the $5 billion mark for the first time. This increase is “in particular related to the end of the cession of premiums under the reinsurance treaty signed as part of the acquisition of the Canadian operations of State Farm.” However, it was offset by premium funds in automobile insurance.
In fourth quarter 2020 alone, net property and casualty insurance premiums increased by 11.7 per cent or $153 million, to $1.5 billion.
As in 2019, net premiums in P&C insurance exceeded net premiums in the Wealth Management and Life and Health Insurance segment.
Net insurance and annuity premiums were $4.7 billion in 2020. They rose by 0.5 per cent or $22 million versus 2019.
In Q4 2020 alone, net premiums declined by 4 per cent or $52 million to reach $1.2 billion.
