Canada NewsWire
TORONTO, May 11, 2023
(TSX: DFY)
(in Canadian dollars except as otherwise noted)
TORONTO , May 11, 2023 /CNW/ -
Highlights
Executive Messages
"We reported a robust 11.4% increase in premiums in the first quarter, while maintaining our disciplined underwriting approach amid firm market conditions. Our combined ratio of 95.3% was in line with our financial target and reflected strong performances in our personal property and commercial lines, offsetting a seasonally elevated period for personal auto results which experienced persistent inflationary pressures and heightened levels of theft. Our decline in underwriting income was offset by robust net investment income and an increasing contribution from our recently strengthened distribution capabilities. Overall, we generated first quarter operating net income of $63.4 million, or $0.54 per share, largely unchanged from a year ago. With the year off to a solid start, we remain confident in our ability to deliver on our financial targets while continuing to diversify our insurance portfolio and sources of earnings. We welcomed McFarlan Rowlands to Definity earlier this week and believe their partnership with McDougall not only establishes a leading broker platform in Ontario, but also provides a solid foundation for national expansion."
– Rowan Saunders, President & CEO
"We maintained our strong financial position, with book value per share of $22.90 up 12.2% compared to the first quarter of 2022 under IFRS 4. Earnings continued to benefit from the expansion in net investment income, strengthened by our proactive actions to capture yield in an increasing rate environment. Additionally, solid underwriting and growing contributions from our distribution business combined to generate an operating ROE of 9.3%, despite the significant increase in our equity base. With over $840 million in financial capacity, and the continuance application well underway, we have significant flexibility as we continue to prioritize reinvestment and growth in our business."
– Philip Mather, EVP & CFO
Consolidated Results
(in millions of dollars, except as otherwise noted) | Q1 2023 | Q1 2022 (Restated) | Change | ||||||||
Insurance revenue | 907.5 | 814.3 | 11.4 % | ||||||||
Gross written premiums1 | 846.9 | 760.1 | 11.4 % | ||||||||
Net underwriting revenue1 | 839.1 | 765.3 | 9.6 % | ||||||||
Claims ratio1 | 62.6 % | 59.1 % | 3.5 pts | ||||||||
Expense ratio1 | 32.7 % | 33.3 % | (0.6) pts | ||||||||
Combined ratio1 | 95.3 % | 92.4 % | 2.9 pts | ||||||||
Insurance service result | 93.9 | 116.0 | (22.1) | ||||||||
Underwriting income1 | 39.5 | 57.8 | (18.3) | ||||||||
Net investment income | 41.0 | 25.8 | 15.2 | ||||||||
Distribution income1 | 8.9 | 4.7 | 4.2 | ||||||||
Net income (loss) attributable to common shareholders | 100.9 | (32.6) | 133.5 | ||||||||
Operating net income1 | 63.4 | 63.3 | 0.1 |
1 This is a supplementary financial measure, non-GAAP financial measure, or a non-GAAP ratio. Refer to Supplementary financial measures and non-GAAP financial measures and ratios in this news release, and Section 12 – Supplementary financial measures and non-GAAP financial measures and ratios in the 2023 Q1 Management's Discussion and Analysis dated May 11, 2023 for further details, which is available on the Company's website at www.definityfinancial.com and on SEDAR at www.sedar.com. |
Q1 2023 | Q1 2022 (Restated) | Change | |||||||||
Per share measures (in dollars) | |||||||||||
Diluted EPS | 0.87 | (0.28) | 1.15 | ||||||||
Operating EPS1 | 0.54 | 0.54 | - | ||||||||
Book value per share ("BVPS")1 | 22.90 | 21.68 | 1.22 | ||||||||
Return on equity | |||||||||||
Return on equity ("ROE")1 | 9.5 % | N/A | |||||||||
Operating ROE1 | 9.3 % | N/A |
Note: 2023 Q1 ROE and Operating ROE measures are on a rolling twelve-month basis. 2022 Q1 is N/A due to adoption of IFRS 17 — Insurance Contracts ("IFRS 17") and IFRS 9 — Financial Instruments ("IFRS 9"). The full year 2022 Operating ROE is 9.4%. |
Net Income and Operating Net Income
1 This is a supplementary financial measure, non-GAAP financial measure, or a non-GAAP ratio. Refer to Supplementary financial measures and non-GAAP financial measures and ratios in this news release, and Section 12 – Supplementary financial measures and non-GAAP financial measures and ratios in the 2023 Q1 Management's Discussion and Analysis dated May 11, 2023 for further details, which is available on the Company's website at www.definityfinancial.com and on SEDAR at www.sedar.com. |
Line of Business Results
(in millions of dollars, except as otherwise noted) | Q1 2023 | Q1 2022 (Restated) | Change | ||||||||
Personal insurance | |||||||||||
Gross written premiums1 | |||||||||||
Auto | 357.8 | 339.8 | 5.3 % | ||||||||
Property | 225.3 | 200.4 | 12.4 % | ||||||||
Total | 583.1 | 540.2 | 7.9 % | ||||||||
Combined ratio1 | |||||||||||
Auto | 100.9 % | 96.2 % | 4.7 pts | ||||||||
Property | 91.1 % | 92.6 % | (1.5) pts | ||||||||
Total | 97.0 % | 94.8 % | 2.2 pts | ||||||||
Commercial insurance | |||||||||||
Gross written premiums1 | 263.8 | 219.9 | 20.0 % | ||||||||
Combined ratio1 | 90.9 % | 85.9 % | 5.0 pts |
Personal Insurance
Commercial Insurance
1 This is a supplementary financial measure, non-GAAP financial measure, or a non-GAAP ratio. Refer to Supplementary financial measures and non-GAAP financial measures and ratios in this news release, and Section 12 – Supplementary financial measures and non-GAAP financial measures and ratios in the 2023 Q1 Management's Discussion and Analysis dated May 11, 2023 for further details, which is available on the Company's website at www.definityfinancial.com and on SEDAR at www.sedar.com. |
Financial Position
(in millions of dollars, except as otherwise noted) | As at March 31, 2023 | As at December 31, (Restated) | Change | ||||||||
Financial position | |||||||||||
Investments | 4,881.5 | 4,897.2 | (15.7) | ||||||||
Equity attributable to common shareholders | 2,637.2 | 2,549.8 | 87.4 | ||||||||
Financial capacity | 845.9 | 658.5 | 187.4 |
Note: Financial capacity for December 31, 2022 has not been restated to reflect the adoption of IFRS 17 and IFRS 9 nor OSFI's MCT 2023 guidelines. |
Dividend
NCIB
Conference Call
Definity will conduct a conference call to review information included in this news release and related matters at 11:00 a.m. ET on May 12, 2023. The conference call will be available simultaneously and in its entirety to all interested investors and the news media at www.definityfinancial.com. A transcript will be made available on Definity's website within two business days.
About Definity Financial Corporation
Definity Financial Corporation ("Definity", which includes its subsidiaries where the context so requires) is one of the leading property and casualty insurers in Canada, with over $3.7 billion in gross written premiums for the 12 months ended March 31, 2023 and over $2.6 billion in equity attributable to common shareholders as at March 31, 2023.
Cautionary Note Regarding Forward-Looking Information
This news release contains "forward-looking information" within the meaning of applicable securities laws in Canada. Forward-looking information may relate to our future business, financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding possible future events or circumstances.
Forward-looking information in this news release is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as at the date such statements are made, and are subject to many factors that could cause our actual results, performance or achievements, or other future events or developments, to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors:
If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above and described in greater detail in the "11 – Risk Management and Corporate Governance" section of the December 31, 2022 Management's Discussion and Analysis should be considered carefully by readers.
Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, the factors above are not intended to represent a complete list and there may be other factors not currently known to us or that we currently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as at the date made. The forward-looking information contained in this news release represents our expectations as at the date of this news release (or as at the date they are otherwise stated to be made) and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada.
All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.
Supplementary Financial Measures and Non-GAAP Financial Measures and Ratios
We measure and evaluate performance of our business using a number of financial measures. Among these measures are the "supplementary financial measures", "non-GAAP financial measures", and "non-GAAP ratios" (as such terms are defined under Canadian Securities Administrators' National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure), and in each case are not standardized financial measures under GAAP. The supplementary financial measures, non-GAAP financial measures, and non-GAAP ratios in this news release may not be comparable to similar measures presented by other companies. These measures should not be considered in isolation or as a substitute for analysis of our financial information reported under GAAP. These measures are used by financial analysts and others in the P&C insurance industry and facilitate management's comparisons to our historical operating results in assessing our results and strategic and operational decision-making. For more information about these supplementary financial measures, non-GAAP financial measures, and non-GAAP ratios, including (where applicable) definitions and explanations of how these measures provide useful information, refer to Section 12 – Supplementary financial measures and non-GAAP financial measures and ratios in the Q1-2023 Management's Discussion and Analysis dated May 11, 2023, which is available on our website at www.definityfinancial.com and on SEDAR at www.sedar.com. These measures have been updated to reflect the estimated impact arising from the adoption of IFRS 17 and IFRS 9.
Below are quantitative reconciliations of non-GAAP measures for the three month periods ended March 31, 2023 and March 31, 2022:
Distribution income:
(in millions of dollars) | Q1 2023 | Q1 2022 | ||
Distribution revenues1 | 25.5 | - | ||
Distribution business expenses2 | (16.6) | - | ||
Share of distribution profit from investments in associates2 | - | 3.4 | ||
Remove: Income taxes included in share of distribution profit from investments in associates | - | 1.3 | ||
Distribution income | 8.9 | 4.7 |
1 Distribution revenues includes commissions on policies underwritten by external insurance companies. |
2 Included in Other (expenses) income in our interim consolidated financial statements. These amounts exclude amortization of intangible assets recognized in business combinations. |
Net claims and adjustment expenses
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Claims and adjustment expenses1,2 | 557.5 | 460.7 | ||
Impact of onerous insurance contracts3 | (1.2) | (0.7) | ||
Claims recoverable from reinsurers for incurred claims2,4 | (31.2) | (8.0) | ||
Net claims and adjustment expenses | 525.1 | 452.0 |
1 Included in Insurance service expenses and other (expenses) income in our interim consolidated financial statements. |
2 Excludes the impact of discounting and risk adjustment. |
3 Included in Insurance service expenses |
4 Included in Net expenses from reinsurance contracts held in our interim consolidated financial statements. |
Net commissions
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Commissions1 | 136.5 | 131.6 | ||
Commissions earned on ceded reinsurance2 | (11.7) | (8.7) | ||
Net commissions | 124.8 | 122.9 |
1 Included in Insurance service expenses in our interim consolidated financial statements. |
2 Included in Net expenses from reinsurance contracts held in our interim consolidated financial statements. |
Net underwriting revenue
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Insurance revenue | 907.5 | 814.3 | ||
Earned reinsurance premiums ceded1 | (68.4) | (49.0) | ||
Net underwriting revenue | 839.1 | 765.3 |
1 Included in Net expenses from reinsurance contracts held in our interim consolidated financial statements. |
Operating net income, Operating income, Non-operating gains (losses)
Net income (loss) attributable to common shareholders is the most directly comparable GAAP financial measure disclosed in our interim consolidated financial statements to operating net income, operating income, and non-operating gains (losses), which are considered non-GAAP financial measures.
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Net income (loss) attributable to common shareholders | 100.9 | (32.6) | ||
Remove: income tax expense (recovery) | 30.6 | (14.9) | ||
Income (loss) before income taxes | 131.5 | (47.5) | ||
Remove: non-operating gains (losses) | ||||
Recognized gains (losses) on FVTPL investments | 91.7 | (197.8) | ||
Discounting1 | 16.4 | 16.9 | ||
Risk adjustment1 | 2.3 | 4.1 | ||
Finance (expenses) income from insurance contracts issued | (64.5) | 52.7 | ||
Finance income (expenses) from reinsurance contracts held | 5.6 | (3.2) | ||
Interest on restricted cash, and demutualization and IPO-related expenses2 | 2.5 | (1.9) | ||
Amortization of intangible assets recognized in business combinations3 | (3.2) | (0.6) | ||
Other2,3 | 0.1 | (0.3) | ||
Non-operating gains (losses) | 50.9 | (130.1) | ||
Operating income | 80.6 | 82.6 | ||
Operating income tax expense | (17.2) | (19.3) | ||
Operating net income | 63.4 | 63.3 |
1 Included in Insurance service expenses and Net expenses from reinsurance contracts held in our interim consolidated financial statements. |
2 Included in Other (expenses) income in our interim consolidated financial statements. |
3 Other represents foreign currency translation of fintech venture capital funds, acquisition-related expenses, and a number of other expenses or revenues that in the view of management are not part of our insurance operations and are individually and in the aggregate not material. |
Prior year claims development
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Changes in fulfilment cash flows relating to the liabilities for incurred claims1 | (10.8) | (50.8) | ||
Changes to amounts recoverable for incurred claims2 | 3.1 | 10.5 | ||
Remove: discounting included above | (16.0) | (0.7) | ||
Remove: risk adjustment included above | 16.0 | 19.1 | ||
Prior year claims development | (7.7) | (21.9) |
1 Included in Insurance service expenses in our interim consolidated financial statements. |
2 Included in Net expenses from reinsurance contracts held in our interim consolidated financial statements. |
Underwriting expenses
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Net commissions | 124.8 | 122.9 | ||
Operating expenses | 118.4 | 104.2 | ||
Premium taxes | 31.3 | 28.4 | ||
Underwriting expenses | 274.5 | 255.5 |
Underwriting income
(in millions of dollars) | Q1 2023 | Q1 2022 (Restated) | ||
Net underwriting revenue | 839.1 | 765.3 | ||
Net claims and adjustment expenses | 525.1 | 452.0 | ||
Net commissions | 124.8 | 122.9 | ||
Operating expenses | 118.4 | 104.2 | ||
Premium taxes | 31.3 | 28.4 | ||
Underwriting income | 39.5 | 57.8 |
Below are quantitative reconciliations of non-GAAP ratios for the periods ended March 31, 2023 and December 31, 2022, as applicable:
ROE
For the 12 | ||||||||||||
(in millions of dollars, except as otherwise noted) | March 31, | |||||||||||
Net income attributable to common shareholders | 244.4 | |||||||||||
Equity attributable to common shareholders1 | 2,637.2 | |||||||||||
Adjusted equity attributable to common shareholders | 2,637.2 | |||||||||||
Average adjusted equity attributable to common shareholders2 | 2,572.0 | |||||||||||
ROE | 9.5 % | |||||||||||
1 Equity attributable to common shareholders is as at March 31, 2023. |
2 Average adjusted equity attributable to common shareholders is the average of adjusted equity attributable to common shareholders (equity attributable to common shareholders as shown on our consolidated balance sheets, adjusted for significant capital transactions, if applicable) at the end of the period and the end of the preceding 12-month period. Equity attributable to common shareholders and adjusted equity attributable to common shareholders as at March 31, 2022 was $2,506.9 million. |
Operating ROE
For the 12 months ended | |||||||||||||
(in millions of dollars, except as otherwise noted) | March 31, | December 31, (Restated) | |||||||||||
Operating net income1 | 236.9 | 236.8 | |||||||||||
Equity attributable to common shareholders, excluding AOCI2 | 2,668.1 | 2,582.2 | |||||||||||
Adjustment for unrealized gains on FVTPL equity instruments | (30.3) | (15.6) | |||||||||||
Adjusted equity attributable to common shareholders, excluding AOCI | 2,637.8 | 2,566.6 | |||||||||||
Average adjusted equity attributable to common shareholders, excluding AOCI3 | 2,536.1 | 2,515.3 | |||||||||||
Operating ROE | 9.3 % | 9.4 % |
1 Operating net income is a non-GAAP financial measure. |
2 Equity attributable to common shareholders, excluding accumulated other comprehensive (loss) income ("AOCI") is as at March 31, 2023 and December 31, 2022. |
3 Average adjusted equity attributable to common shareholders, excluding AOCI is the average of adjusted equity attributable to common shareholders, excluding AOCI (equity attributable to common shareholders and AOCI each as shown on our consolidated balance sheets, adjusted for significant capital transactions, if applicable) and excluding unrealized gains or losses on FVTPL equity instruments, at the end of the period and the end of the preceding 12-month period. Equity attributable to common shareholders, excluding AOCI, and adjusted equity attributable to common shareholders, excluding AOCI, as at March 31, 2022 was $2,434.4 million and as at December 31, 2021 was $2,464.0 million. |
SOURCE Definity Financial Corporation
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