Definity Financial Corporation Reports Second Quarter 2022 Results – QNT Press Release

TORONTO, August 2, 2022 /CNW/ – (TSX:DFY)
(in Canadian dollars except as otherwise noted)

Highlights

• Premiums increased 12.6% in the quarter, driven by growth across all lines of business, with double digit growth continuing in commercial lines, Sonnet, and personal property
• Combined ratio¹ of 95.8% in Q2 2022 was bolstered by the strong underwriting performance in our personal auto and commercial lines, and remained in our target range despite elevated catastrophe losses¹ of 5.8 percentage points in the quarter
• Operating net income¹ of $48.8 million in Q2 2022, compared to $52.6 million in Q2 2021, resulting in operating EPS¹ of $0.42 per share. Operating ROE¹ was 10.7% over the last twelve months
• Financial position remained resilient, despite significant declines in capital markets, with book value per share¹ of $19.51down 4.4% in the quarter but 3.4% higher than a year ago

Executive Messages

“The underlying strength in our business, against the backdrop of ongoing firm market conditions, was once again demonstrated by delivering a 95.8% combined ratio in a quarter with the 6^th largest catastrophe event in Canadian history. Profitability in personal auto remained strong, but was down from a year ago, reflecting claims frequency moving off pandemic-related lows as well as the impact of inflation on claims severity. Our commercial business is generating solid underwriting results and is well positioned to continue gaining market share. We were pleased with our continued strong top line growth of 12.6% in the quarter. Our underwriting capabilities and pricing sophistication give us confidence in our growth ambitions. Midway through the year, we remain on track to deliver on our financial targets as an innovative, digitally-focused industry leader.”
– Rowan SaundersPresident & CEO

“The resilience of our business has been on display throughout 2022 as we’ve maintained a strong financial position in the face of numerous headwinds, including elevated catastrophe losses and a significant correction in capital markets. The rising yield environment again negatively impacted our fixed income investments, and ultimately our book value, but has begun to benefit us in the form of higher net investment income, which is expected to continue in the coming quarters. Solid underwriting and higher net investment income combined to generate an operating ROE of 10.7%. We believe we are well positioned to continue delivering value to shareholders as we grow profitably and deploy our capital in a disciplined manner over time.”
– Philip MatherEVP & CFO

Consolidated Results

• Gross written premiums (“GWP”) for the second quarter of 2022 increased by $110.1 million or 12.6% compared to the second quarter of 2021, driven by growth across all our lines of business. Personal lines GWP was up 10.4% with increases in both our broker and direct businesses. Commercial lines GWP increased 17.9% as we continued to focus on growth in this line of business. Customer relief related to the COVID-19 pandemic, which ended in May 2022resulted in a reduction in GWP of approximately $8 million (Q2 2021: $14 million) and a reduction in net earned premiums of approximately $13 million (Q2 2021: $16 million).

  Year to date, GWP increased by $193.9 million or 12.6% compared to 2021. Personal lines GWP increased 10.4% and commercial lines GWP increased 18.4%. The impact of the customer relief related to the COVID-19 pandemic in the first six months of 2022 was a reduction in GWP of approximately $21 million (2021: $28 million) and a reduction in net earned premiums of approximately $26 million (2021: $29 million).

• Underwriting results for the second quarter of 2022 produced underwriting income of $34.0 million and a combined ratio of 95.8%, compared to underwriting income of $41.2 million and a combined ratio of 94.1% in the same quarter a year ago. Our underwriting results were strong despite the impact of the significant windstorm in Ontario and Québec in May. Catastrophe losses impacted the combined ratio by 5.8 percentage points, compared to only 1.8 percentage points in the same quarter a year ago. The increase in catastrophe losses was partially offset by higher favourable prior year claims development and an improvement in the core accident year claims ratio.

  Year to date, our underwriting income decreased by $5.0 million and led to a combined ratio of 94.0% in 2022 as compared to 92.7% in 2021. Results were impacted by higher catastrophe losses, partially offset by higher favourable prior year claims development and an improvement in the core accident year claims ratio. Catastrophe losses impacted the combined ratio by 4.0 percentage points, compared to only 1.5 percentage points in 2021.

• net investment income increased $7.6 million in the second quarter of 2022 and $10.5 million year to date, driven primarily by the investment of funds generated from our underwriting results and business growth, net proceeds retained by the Company from the initial public offering (“IPO”) and related transactions, as well as higher fixed income yields.

Net Income and Operating Net Income

• net income was $21.0 million in the second quarter of 2022 compared to $43.9 million in the second quarter of 2021. Net income decreased due primarily to higher market value losses on our bond portfolio due to increasing fixed income yields, an investment impairment charge of $19.3 million in the quarter reflective of the significant volatility in equity markets, and lower underwriting income driven by higher catastrophe losses. …

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