WaWanesa Insurance 2012 annual report

Transcription

Wawanesa Insurance
2012 Annual Report
Wawanesa is a Canadian mutual company owned by its policyholders. With assets of
over $7.7 billion and nearly 2 million policies inforce, Wawanesa is one of the 10 largest
property and casualty insurers in Canada.
Wawanesa has a rich history dating back to September 25, 1896, when it was founded in
the Village of Wawanesa, Manitoba. Today, our head office continues to be located in the
Village of Wawanesa with the executive office located in Winnipeg, Manitoba.
Wawanesa has 100% ownership of two operating subsidiary companies.
The Wawanesa Life Insurance Company
400–200 Main Street
Winnipeg, Manitoba R3C 1A8
Book value of shares $105,123,000
Wawanesa General Insurance Company
9050 Friars Road
San Diego, California 92108
Book value of shares $264,664,000
1
Mission and Values
Mission
“Earning your trust since 1896”… As a policyholder-owned mutual insurance company,
we will continue to earn trust by providing quality products and services at the lowest
price which supports long-term growth and financial stability.
Values
• We treat others in a respectful and truthful manner.
• We conduct business with integrity, honesty, consistency and fairness.
• We act ethically and lawfully.
• We take pride in making service a priority.
• We encourage collaboration, innovation and excellence.
• We support the communities in which we work and live.
2
President’s report
Overall, 2012 can
be characterized
as a steady year for
our Company.
Premium revenue
increased and profit was strong due to improved
underwriting performance and excellent
investment income.
Property and Casualty Operations
Financial Results
Property and casualty premium income grew in
2012 but at a slower rate than in previous years.
Premiums grew by 4.1% in 2012 and now total almost
$2.5 billion. However, for the first time in a number
of years, there was no overall policy growth. That
was acceptable and expected as we took a number of
specific actions designed to achieve premium adequacy
On a consolidated basis, gross premiums written
in all regions and lines of business. In fact, most regions
increased by 4% to $2.6 billion. Investment income
reported policy growth. Only those regions in which we
increased by 21% to $357 million. Profit for the
took specific market actions experienced slight declines.
year was $220 million increased from $108 million
in 2011. Total assets increased to $7.7 billion while
total capital now exceeds $2.5 billion. Our capital
An underwriting loss of $47 million is reported for
2012, much improved from $90 million in 2011.
Automobile results
ratio remains strong at
303%, unchanged from
2011. This is in spite
of increased capital
requirements included in
the regulatory formula
for the first time.
Actions taken to adjust
certain bond portfolio
characteristics and the
strong income earned
in the year allowed our
capital ratio to stay at a
high level. As a mutual
company, we take pride
As a mutual company, we
take pride in having a strong
capital position. It provides
assurance to our policyholders
that we are able to meet all of
our financial obligations to
them and can withstand any
unforeseen future events.
in having a strong capital
position. It provides assurance to our policyholders that
we are able to meet all of our financial obligations to
them and can withstand any unforeseen future events.
In recognition of the Company’s financial strength,
Wawanesa was again awarded an A+ (Superior) rating
by A.M. Best.
deteriorated somewhat
to a break even position.
On a positive note, we
recorded an underwriting
profit in Ontario auto
after many years of
significant losses.
Overall property results
improved in the year
but a significant loss
is still being reported,
mainly driven by results
in Western Canada.
Continuing a four-year
trend, severe weather was
again very costly, most notably in Southern Alberta.
While the total cost of weather catastrophes declined
somewhat in 2012 and actions taken to adjust products
and pricing generated some additional premium
income, results are still unacceptable. The positive
impact on premium income of the product and price
changes will be more fully realized in the future.
3
Policy reserves were adjusted in the year to reflect
have yet to be fully implemented and tested through
continued declines in the interest rate environment.
mediation/arbitration processes and the courts. Our
The impact of this was to reduce underwriting income
property results were quite good and represented an
by $25 million.
improvement over 2011.
Net investment income increased from $245 million
Auto insurance always attracts a certain amount
to $322 million with overall profit of $219 million in
of political attention in Ontario as insurance rates
our property and casualty operations, increased from
are very high in the province. However, contrary
$110 million in 2011.
to what some would suggest, the cause is not the
Regional Results
industry. Auto insurance is a highly regulated business.
Government sets the rules and companies operate and
The Maritime Region had another excellent year in
compete within those rules. Government establishes
2012. Growth was very good with policy counts up
the benefits to be provided by the auto policy in the
over 4% and premium income up by 7%. Results are
province, establishes the rules that must be followed
very balanced with underwriting profits recorded in
by companies in setting rates, approves individual
all lines and all provinces. The auto insurance regimes
company rates and serves as mediator/arbitrator on
are quite stable in all three Maritime provinces. While
many claim issues. The reason premium rates are so
governments have reviewed these regimes in recent
high in Ontario is the high level of benefits provided
years, any actions taken have been prudent and not
by the standard auto policy established by government,
risked the stability of the market.
not a lack of competition or excessive profits in the
industry. The benefits paid are much higher than in all
In 2012, we continued to work at updating our
other private auto insurance jurisdictions in Canada
approach to the marketplace in Quebec. We introduced
and all public auto programs in Canada. Also, it is the
a completely new auto rating approach in November
high level of benefits that provides the incentive for
of 2011 which was designed to better address market
fraud which increases claims costs further. Claims costs
competition. All policies had renewed under the
drive premium levels. For premiums to decline, claims
new system by October of 2012 and as expected,
costs must decline. For claims cost to decline, benefits
our auto business declined in 2012. But we are now
provided by auto policies must be reduced and fraud
seeing improvements in business retention and
must be removed from the system. The industry would
will be pushing for increased new business in 2013.
like to see premiums decline but the issues that must be
Underwriting results were not positive in the year.
addressed to achieve a decline in claims costs are within
We experienced minimal policy decline in the Ontario
the government’s control, not the industry’s.
Region in 2012 but premiums increased by 6%. This
The Winnipeg Region had another steady year in 2012.
was not unexpected as we took specific actions to
Policies increased by more than 2% and premiums
improve underwriting profitability. In recent years, we
increased by 6%. A modest underwriting profit was
have experienced poor underwriting results in Ontario
reported for the year, slightly increased from 2011. The
auto. In 2012, we experienced a turnaround such that
auto business in Northwestern Ontario was profitable
we are reporting an underwriting profit appropriate for
but a loss was reported in property primarily due to
our business in the province. The reforms introduced
a major rainstorm in Thunder Bay which resulted in
by government in 2010 combined with the effect of
$15 million of losses, mainly from sewer backup claims.
rate adjustments in recent years have provided for this
necessary correction. However, there is still reason
Both Alberta regions continued with steady business
for concern in this market as certain of the reforms
growth with policy count increases of close to 2%
3
4
and premium growth of over 6%. However, 2012 was
required premium increases and not unexpectedly,
another challenging year of severe weather as losses
our business was impacted as policies declined
from major wind and hail storms were only slightly
somewhat and premiums grew only modestly. A
less than 2011. A significant underwriting loss was
significant underwriting loss is reported with the
again realized in the property line, and auto results
largest contributor being our continued inability, due
declined as more of the weather losses were incurred in
to competitive pressures, to pass on full earthquake
this line. This severe weather kept our claims staff very
reinsurance costs. We are quite convinced that the
busy, but as the impact was much greater in Southern
provision of earthquake insurance will be a significant
Alberta Regions than in the Northern Alberta Regions,
challenge for insurers going forward. We are committed
our Calgary claims staff were under great pressure to
to making it available to our policyholders but are also
deal with the large number of claims and deliver great
committed to collecting adequate premiums such that
service to our policyholders. After about four years of
it is not being subsidized by other lines of business
severe weather and resultant losses, we took significant
or regions.
action in 2012 by changing the product offerings
for wind and hail coverages and varying premium
rates by area according to the likelihood of claims.
Our United States Operation, which operates almost
exclusively in southern California, has been challenged
in recent years by a very
It is challenging to make
significant product and rate
changes and we appreciate
our brokers’ support in
educating our policyholders
regarding the need for
premium increases and the
coverage options available.
Prairie Region reported
good growth with policies
increasing almost 5% and
Customer service is always
a priority in all regions
of Wawanesa and it is
very satisfying when our
service is recognized by
an independent observer.
premiums increasing close
competitive insurance
market and poor economic
conditions. There has been no
growth in the total personal
lines market so achieving
company growth is difficult.
In 2012, our policies and
premiums were almost
unchanged from 2011 but
due to rating actions taken
and an increased focus on
marketing, our underwriting
to 10%. Underwriting results were disappointing in
position improved. While a loss is being reported, it
2012, just slightly improved over 2011. While the net
is much less than in 2011. We expanded our property
cost of severe weather events in Saskatchewan and
product line during the year by introducing renters
Western Manitoba declined somewhat from 2011
insurance. This was well accepted by customers with
levels, the impact on underwriting results was still very
significant sales recorded in the year. Customer service
significant. As with Alberta, we have been engaged in
is always a priority in all regions of Wawanesa and it
product and rate changes designed to address the severe
is very satisfying when our service is recognized by an
weather problem but have yet to be fully successful. It
independent observer. In mid-2012, it was announced
is difficult to take the necessary actions in a competitive
that Wawanesa Insurance ranked #1 in customer
insurance marketplace.
satisfaction in the California Region for the 2012 J.D.
The British Columbia Region was challenged in 2012
as we continue to address issues related to providing
earthquake coverage to our policyholders and deal with
modestly deteriorating property results. Both items
Power and Associates Auto Insurance Study. While J.D.
Power has been performing these surveys in the United
States for many years, the 2012 survey was the first to
publish regional results. It is a major recognition of the
service culture that exists within our U.S. Operation.
5
implemented) and these new components comprise
Operational Comments
For a number of years, I have been reporting on
progress toward renewal of our core insurance systems.
In early 2009, we committed ourselves to renewal
or replacement of these systems and at that time
developed and adopted an Enterprise System Renewal
Strategy (ESRS) to guide this endeavour. While the
ESRS has been modified somewhat along the way to
reflect changing business circumstances and technology
environments, it is essentially unchanged. We have
Guidewire’s InsuranceSuite and full implementation
of the suite will provide us with the necessary systems
to service our customers and manage our business in
a very effective manner far into the future. Guidewire
was selected after a lengthy assessment period. We
believe Guidewire’s InsuranceSuite to be the best system
available to meet our needs, and our partnership with
Guidewire will ensure that our systems stay current and
robust for many years to come.
stayed true to our selected strategy. Since that time, we
This is an extremely important decision for Wawanesa.
have progressed well with the strategy. The first key
But while the selection of the vendor is a critical
element of the strategy,
a new claims system,
has been successfully
implemented and we
continue to find ways
to benefit from the new
system. In addition,
we have actually gone
beyond the ESRS and
implemented other
first step, this will be a
Due to our successes in
implementing new systems
in recent years, we feel very
confident in our ability to
implement these new systems.
multi‑year project and
there is much work to do
over the next few years.
Due to our successes
in implementing new
systems in recent years,
we feel very confident in
our ability to implement
these new systems.
major systems. We have
Outside of systems, we
developed a broker
transaction portal which provides for electronic
continue to work on a number of other initiatives.
transaction connectivity with brokers. We are currently
Work continues on the development of our enterprise
working on the implementation of an entirely new
risk management program. The program is expected to
financial management system. While this is not a core
be in place by next year.
insurance system, replacement of the existing system
was very necessary and is being accomplished without
compromising the replacement of our core systems.
Property and casualty insurance is increasingly
becoming a data driven industry. The use of predictive
analytics in pricing and other operational functions is
We are now beginning the final phase of the ESRS. It is
fast becoming a necessity. We have acquired analytical
the largest phase in terms of time, cost and importance
software and are well along in the building of an
to our Company, but when complete, will mark
enterprise data warehouse. This will allow our actuarial
the final transition to a completely new technology
and other teams to use our insurance data to more
platform. At that time, we will decommission our
effectively address the market.
old mainframe legacy technology which has served
us well since the 1970s but just can’t meet today’s
business needs.
We are committed to increasing our volume of
commercial insurance in the small to medium size
segment. We are addressing this with development of
We previously announced the selection of Guidewire
new and enhanced products, hiring of experienced
Software as the provider of all necessary components
commercial personnel and development of software
to replace our current policy administration system.
applications for sales support.
Collectively, ClaimCenter (which we have already
6
Life Operations
in system architecture, infrastructure design and
project management.
Financial Results
In 2012, Wawanesa Life’s assets under administration
grew to $894 million and earnings returned to
an overall positive position. These are significant
achievements in the face of a difficult economic
environment. Premium income net of reinsurance
grew to $109 million; the result of exceptionally
strong new business levels in individual insurance and
strong policy persistency in both the individual and
New business sales of group insurance reached
$2.4 million, a result more in line with historical
production levels when sales of the initial 3-9 life
product are removed. When first introduced the 3-9
life product resulted in exceptionally strong sales
activity until pricing action tempered this activity and
improved profitability. Policy persistency exceeded
our internal target but was not enough to sustain the
strong premium growth
group lines of business.
Like others in the life
insurance industry, earnings
continued to be hampered
by the continuation of low
long-term interest rates.
The Company reported net
income of $1.0 million for
the year.
Operational Comments
New business sales of
individual insurance set a
new record at $6.5 million;
21.5% better than 2011.
Production was strong
across the country with
Premium income net
of reinsurance grew to
$109 million; the result
of exceptionally strong
new business levels in
individual insurance and
strong policy persistency
in both the individual and
group lines of business.
seven of eight regions
experienced over the last few
years. Net premium revenue
decreased $2.3 million to
$32.0 million. The current
challenges in the economy
have caused some group
clients to control costs by
reducing their number of
active employees which
leads to reduced group
insurance premiums.
The operational review of
our group product pricing
and underwriting approach
was completed by year’s end.
Changes will be gradually
phased in to minimize any
surpassing 2011 numbers. Policy persistency was very
impact to our policyholders and brokers. A bonus
good with inforce net premium growing by 6% to
program was introduced mid-year to enhance our
$43.1 million.
broker compensation program, rewarding qualifying
Prudent management action was taken this year to
brokers for both business retention and new sales.
optimize our asset allocation in order to reduce our
Wawanesa Life continued to demonstrate its financial
sensitivity to low long-term interest rates. Product
strength despite the economic and financial market
reviews resulted in premium increases and the removal
challenges in 2012. The MCCSR (Minimum Continuing
of some payment options to lessen the risk inherent in
Capital and Surplus Requirements) ratio is well in
permanent insurance products.
excess of 200%, significantly above the requirement
Work continued during the year on the replacement of
the Individual Operation’s various legacy systems. The
objective is to modernize the technology environment
and gain efficiencies in the back office environment
which will enhance policyholder and broker
servicing. This is a very complex implementation
and the project is utilizing key corporate IT resources
set by the Office of the Superintendent of Financial
Institutions (OSFI). In addition, Wawanesa Life
continues to be rated as A (Excellent) by A.M. Best.
Acknowledgements
There were a few senior management changes in 2012.
7
Bob G. LaPage, FCIP (Hons.), CRM, Vice President,
Catherine (Kay) M. Best, FCA, ICD.D was Executive
Regional Insurance Operations, retired at the end of the
Vice President, Risk Management and CFO, Calgary
year after 25 years of dedicated service to Wawanesa
Health Region until 2009. She is a director of Canadian
in both Edmonton and Winnipeg. Bob had previously
Natural Resources Ltd., Superior Plus Corporation,
served as Vice President, Claims for a number of years.
AltaGas Ltd. and Aston Hill Financial Inc. She is
Tracy L. Nelson, BA, FLMI/M, CHRP, CIP was appointed
Vice President, Regional Insurance Operations effective
January 1, 2013. Tracy joined Wawanesa Life in 1978
and held various positions of increasing responsibility
within Wawanesa Life
prior to being appointed
Manager, Human Resources
in Wawanesa Mutual’s
Executive Office in 2003.
In 2005, she was appointed
Vice President, Human
Resources, her position
prior to this appointment. Jodi E. Carradice, BSc,
CHRP was appointed
Vice President, Human
Resources effective
January 1, 2013. Jodi
joined Wawanesa in 2007
bringing many years of
extensive human resources
experience. Her most recent
an active member of the volunteer community in
Calgary and currently serves as a member of the Audit
Committee of the Calgary Stampede, a director of the
Alberta Children’s Hospital Foundation, and member
of the Audit Committee of the University of Calgary
and as a director of the
The year just ended was a
good one for Wawanesa.
We grew modestly in a very
competitive environment,
added to our strong capital
position and continued to
make progress at renewing
our system infrastructure
that will position us well
for the future.
position was Director,
Human Resources. There were also some changes in the composition of
our Board of Directors during the year.
At the annual meeting in May, 2012, Margot E. Northey
retired from the Board of Directors after serving for
16 years. We thank Margot for her dedicated service
to Wawanesa.
Calgary Foundation.
Nicholas R. Logan, BA,
B.Comm is the founding
President and CEO
of National Leasing.
Headquartered in Winnipeg,
National Leasing has grown
to become the leader within
the Canadian finance and
leasing industry. He is also
a founding member of
the Business Council of
Manitoba and past Chair
of Economic Development
Winnipeg. In addition, he
has served on the boards
of a number of community
organizations including for
the 1999 Pan Am Games and is a past campaign Chair
of the United Way of Winnipeg.
The year just ended was a good one for Wawanesa. We
grew modestly in a very competitive environment,
added to our strong capital position and continued to
make progress at renewing our system infrastructure
that will position us well for the future. I would like
to thank our brokers for their continued support
Also at the annual meeting, two new members were
especially in regions where significant product and rate
appointed to the Boards of The Wawanesa Mutual
changes were required. I would also like to thank all of
Insurance Company, The Wawanesa Life Insurance
our employees for their dedication and commitment
Company and Wawanesa General Insurance Company.
to the continued success of Wawanesa. I believe we are
The appointments reflect the Companies’ desire to have
positioning the Company to compete and be successful
appropriate skill, experience and diversity within the
in any future industry environment.
Board membership.
Ken McCrea, CA, FLMI
President and Chief Executive Officer
8
Founded in 1896
the wawanesa mutual insurance company
Incorporated May 1, 1929
Report of the Independent
Auditor on the summary
consolidated financial
statements
Head Office
Wawanesa, Manitoba
Executive Office
900–191 Broadway
Winnipeg, Manitoba
February 20, 2013
Officers and Corporate
Management
K. E. McCrea, CA, FLMI
G. N. Bass, Q.C.
Vice President, General Counsel and Secretary
B. A. MacKinnon, FCAS, FCIA, MAAA
Vice President and Chief Actuary
G. J. Timlick, CA
Vice President and Chief Financial Officer
J. E. Carradice, BSc, CHRP
Vice President, Human Resources
S. J. Goy, ACAS, CIP
Vice President, Insurance Products
C. R. Loeppky, BScCS
Vice President, Information Services
To the Directors of
The Wawanesa Mutual Insurance Company
The accompanying summary consolidated financial statements, which
comprise the summary consolidated balance sheets as at December 31, 2012
and the summary consolidated statements of operations for the year ended
December 31, 2012 are derived from the audited consolidated financial
statements of The Wawanesa Mutual Insurance Company for the year ended
December 31, 2012. We expressed an unmodified audit opinion on those
consolidated financial statements in our report dated February 20, 2013.
The summary consolidated financial statements do not contain all the
disclosures required by International Financial Reporting Standards.
Reading the summary consolidated financial statements, therefore, is not a
substitute for reading the audited consolidated financial statements of The
Wawanesa Mutual Insurance Company.
C. B. Luby, FCIP, CRM
Management’s Responsibility for the Summary Consolidated
Financial Statements
Vice President, Marketing and
Business Development
Management is responsible for the preparation of a summary of the audited
B. K. MacIntyre, BBA, FCIP
Vice President, Claims
T. L. Nelson, FLMI/M, CHRP, CIP
Vice President, Regional Insurance Operations
K. P. Boyd, CA, CIP
Controller
P. R. Mulaire, CMA, CIA, FCIP, CRM
Director, Internal Audit
consolidated financial statements on the basis described in note 1.
Auditor’s Responsibility
Our responsibility is to express an opinion on the summary consolidated
financial statements based on our procedures, which were conducted in
accordance with Canadian Auditing Standards (“CAS”) 810, “Engagements
to Report on Summary Financial Statements”.
Opinion
In our opinion, the summary consolidated financial statements derived
from the audited consolidated financial statements of The Wawanesa
Mutual Insurance Company for the year ended December 31, 2012 are
a fair summary of those consolidated financial statements, on the basis
described in note 1.
Chartered Accountants
Winnipeg, Manitoba
9
Appointed Actuary’s Report
February 20, 2013
To the Directors of
The Wawanesa Mutual Insurance Company
I have valued the insurance contract liabilities of the Company for its
regional Offices
Maritime
1010 St. George Boulevard
Moncton, New Brunswick
B. E. MacKenzie, CIP
Vice President, Maritime Region
Québec
8585 Décarie Boulevard
Montréal, Québec
C. Auclair, PAA
consolidated balance sheets as at December 31, 2012 and their change
Vice President, Québec Region
in the consolidated statements of operations for the year then ended
Ontario
100–4110 Yonge Street
Toronto, Ontario
T. R. Greer
in accordance with accepted actuarial practice including selection of
appropriate assumptions and methods.
In my opinion, the amount of insurance contract liabilities makes
appropriate provision for all policyholder obligations, and the consolidated
financial statements fairly present the result of the valuation.
Vice President, Ontario Region
Winnipeg
Winnipeg, Manitoba
E. Rossong, FCIP
Vice President, Winnipeg Region
Brett A. MacKinnon, FCAS, FCIA, MAAA
Prairie
Wawanesa, Manitoba
W. G. McGregor, FCIP
Winnipeg, Manitoba
Vice President, Prairie Region
Northern Alberta
100, 8657–51st Avenue
Edmonton, Alberta
K. E. Hartry, FCIP, MBA
Vice President, Northern Alberta Region
Southern Alberta
600, 708–11th Avenue S.W.
Calgary, Alberta
M. M. Cote-Johnson, CIP
Vice President, Southern Alberta Region
British Columbia
400–1985 West Broadway
Vancouver, British Columbia
G. R. Haigh, FCIP, CAIB
Vice President, British Columbia Region
United States
9050 Friars Road
San Diego, California
D. G. Fitzgibbons, CPCU
Vice President, United States Operations
10
summary consolidated balancE Sheets
As at December 31
2012
2011
(000s)
Assets
Cash and cash equivalents
$
96,762
$
90,211
28,356
30,774
Investments
6,205,522
5,622,206
Other assets
1,414,016
1,318,714
Accrued investment income
Total assets
$
7,744,656
$
7,061,905
$
4,418,608
$
4,209,645
Liabilities
Insurance contract liabilities
Other liabilities
754,958
519,774
Total liabilities
5,173,566
4,729,419
Equity
2,571,090
2,332,486
Total liabilities and equity
$
7,744,656
$
7,061,905
Note 1
These summary consolidated financial statements have been derived from the audited consolidated financial
statements of The Wawanesa Mutual Insurance Company (the Company) for the year ended December 31, 2012,
which are prepared in conformity with International Financial Reporting Standards (IFRS).
The criteria developed by management for the preparation of the summary consolidated financial statements is as
follows: that the information included in the summarized consolidated financial statements is in agreement with
the related information in the complete consolidated financial statements, and that the summarized consolidated
financial statements contain the information necessary to avoid distorting or obscuring matters disclosed in the
related complete consolidated financial statements, including the notes thereto, in all material respects.
A full set of audited consolidated financial statements is available from the Company or at www.wawanesa.com.
11
summary consolidated statements of operations
For the year ended December 31
2012
2011
(000s)
Revenue
Net premiums written
$ 2,504,327
$
(45,254)
Change in unearned premiums
Net premiums earned
Net investment income
Instalment service charges earned
2,416,305
(71,298)
2,459,073
2,345,007
356,902
294,994
37,960
35,660
2,853,935
2,675,661
Expenses
Net claims and insurance benefits incurred
Other expenses incurred
$
1,897,106
$
681,393
1,905,568
2,578,499
616,878
2,522,446
Profit before income taxes
275,436
153,215
Provision for income taxes
55,658
45,365
Profit for the year
$
219,778
$
107,850
$
219,342
$
114,543
Profit (loss) for the year attributed to:
Policyholders of the Company
436
Participating policyholders’ interest
$
219,778
A full set of audited consolidated financial statements is available at www.wawanesa.com
(6,693)
$
107,850
12
consolidated supplementary information
gross premiums written 2012
profit
$219,778
(000s)
1%
Automobile
Life
57%
Other
$100,468
Property
2009
2010
$107,850
37%
$129,420
5%
2011
2012
2009 is prepared under Canadian GAAP
2010 –2012 are prepared under IFRS
equity
(000s)
(000s)
2009
2010
All years prepared under IFRS
$2,571,090
$2,332,486
$2,019,957
$2,238,190
$7,061,905
$6,589,087
$6,076,300
$7,744,656
total assets
2011
2012
2009
2010
2011
2012
13
consolidated supplementary information
investments 2012
bonds credit quality 2012
<1%
1%
(000s)
11%
(000s)
11%
9%
Canadian Bonds $4,061,165
12%
AAA $1,808,699
Foreign Bonds $722,898
Canadian Stocks $685,350
65%
38%
34%
Foreign Stocks $666,499
Other $69,610
AA
$923,416
A
$1,622,245
B
BB $425,530
19%
B
elow BBB $4,173
Investments are managed in a conservative manner to provide steady, consistent investment income to support
the cash flow and liquidity needs of Wawanesa.
Property and Casualty (P&C)
operations Profile
P&C Operations consist of
The Wawanesa Mutual Insurance
Company in Canada and Wawanesa
General Insurance Company in
the U.S. Our P&C Operations have
conducted business in Canada and
the U.S. for over 115 years and
35 years, respectively.
Key Facts
P&C Operations provide automobile, personal and
financial statements (2012–2010 are prepared under
commercial property, and liability insurance products
IFRS, 2009 is prepared under Canadian GAAP) and are
in all major areas of Canada as well as in California
consistent with financial measures used in the P&C
and Oregon. Wawanesa’s P&C insurance products
insurance industry.
are distributed by over 1,600 independent insurance
brokers except in Quebec and the U.S. where products
are distributed through company agents.
• Total assets of $7.0 billion
• Strong financial position with equity of $2.5 billion
• Over $2.4 billion in annual policy premiums
• Over 2,400 employees across Canada and in the U.S.
KEY FINANCIAL MEASURES
The following information and charts may not be IFRS
measurements, but are derived from elements of the
14
P&C operations
gross premiums written
Gross premiums written are the premiums for all insurance policies placed during the period including new policies
and renewals.
(000s)
$1,481,833
$1,448,140
Personal Property
Commercial Property
2010
2011
$40,493
$227,590
$727,973
$38,080
$211,261
Other
$683,402
$35,542
$195,136
$619,817
$1,409,048
$32,923
$176,768
$543,540
$1,338,426
2009
Automobile
2012
2009 is prepared under Canadian GAAP, 2010 –2012 are prepared under IFRS
Combined ratio
The combined ratio is a measure of the underwriting performance. It is the relationship between claims and other
expenses incurred and premiums earned for the year expressed as a percentage. When there is an underwriting profit,
the combined ratio will be less than 100%. When there is an underwriting loss, the combined ratio will be greater
103%
104%
106%
100%
102%
111%
116%
99%
104%
101%
102%
108%
101%
103%
103%
97%
110%
103%
105%
than 100%.
Total
Automobile
Personal Property
76%
Commercial Property
2009
2010
2011
Other
2012
15
P&C operations
Underwriting Results
net investment income
Underwriting profit (loss) represents the profit (loss)
Net investment income is comprised of interest income,
from insurance operations.
dividends and distributions from pooled funds, the
realized gain (loss) on sale of available-for-sale financial
assets, and other investment income less expenses.
(000s)
$244,920
$182,248
$(90,334)
$(78,740)
(000s)
$322,384
2012
$232,436
2011
$(47,004)
2010
$(49,745)
2009
2009
2010
2011
2012
Capital ratio MCT
The Minimum Capital Test (MCT) is a calculation established by OSFI to measure the financial strength of P&C
insurance companies. The MCT ratio is determined by dividing capital available by capital required, expressed as
303%
302%
299%
302%
a percentage.
MCT
2009
2010
2011
150%
150%
150%
150%
OSFI Requirement
2012
16
life operations profile
Our life insurance operations are
conducted by The Wawanesa Life
Insurance Company. It is a Canadian
life and health insurance company that
has been in operation for over 50 years.
Key Facts
• Total assets of $894 million
• Individual life insurance volume of $15 billion
insured through 67,000 policies
• Insures more than 24,000 employees through
group benefit plans
Wawanesa Life provides term, permanent and critical
Key Financial Measures
illness insurance plus investment product options
including segregated funds to individuals through its
The following information and charts may not be
independent broker channel. Group life and health
IFRS measurements, but are derived from elements of
insurance products are designed to service the needs
Wawanesa Life’s financial statements (2012–2010 are
of employers, associations and unions by working
prepared under IFRS, 2009 is prepared under Canadian
with group benefit brokers. Wawanesa Life maintains
GAAP) and are consistent with financial measures used
regional sales offices across the country to support its
in the life insurance industry.
many broker and client relationships.
Net PremiumS and Equivalents
Net premiums and equivalents are the sum of billed insurance premiums, contributions received for investment in
annuities or segregated funds, management fees earned on segregated fund balances and fee income earned from the
administration of group business where the policyholder retains the insurance risk.
2009
$36,347
$32,455
$43,053
$33,907
$34,738
$32,482
$26,967
$27,402
$23,486
$37,668
$39,080
$40,731
(000s)
Individual
Group
Annuity
2010
2011
2012
17
life operations
Net Income (Loss)
Net income (loss) attributed to the participating policyholders (PAR Account) and the shareholder is shown in the
following chart.
$436
$608
$4,974
$1,711
$3,732
$1,347
(000s)
PAR Account
$(6,693)
$(593)
Shareholder Account
2009
2010
2011
2012
Equity
Equity includes amounts related to the shareholder account and the participating account. Shareholder equity
supports the non-participating business and participating equity supports participating business.
A summary of Wawanesa Life’s Participating Account Management Policy and Participating Policyholder Dividend
Policy can be found on page 26.
2009
PAR Account
S
hareholder Account
$21,564
$22,272
2010
$105,123
$93,165
$87,638
$29,203
$29,289
$82,698
(000s)
2011
2012
18
life operations
Total Assets
Represents total assets managed by Wawanesa Life which include its general fund assets and policyholder
contributions to the segregated funds that are held separate and apart from the general fund assets.
$666,278
$636,847
General Fund Assets
$163,636
$139,896
2009
$182,612
Segregated Funds Net Assets
$167,842
$591,519
$711,839
(000s)
2010
2011
2012
Investments
Investments are managed in a conservative manner to provide steady, consistent investment income to support the
cash flow and liquidity needs of Wawanesa Life.
$519,348
$476,877
Bonds
Stocks
2010
2011
2012
$20,323
$80,798
$30,021
$73,605
$34,259
Other
$70,506
$38,912
$59,413
$436,489
2009
$584,652
(000s)
19
life operations
Bonds Credit Quality
$269,039
$247,854
$214,226
AAA
AA
A
2009
2010
2011
$160,874
Below BBB
$20,116
$110,322
$2,051
$18,565
$135,853
$93,840
$6,374
$12,160
$100,480
$110,009
$4,682
BBB
$12,116
$111,463
$94,002
$293,340
(000s)
2012
Capital Ratio
The MCCSR defines capital available and capital required. The MCCSR Ratio equals capital available divided by capital
required. OSFI expects life insurance companies to establish an internal target capital ratio above the supervisory target
2009
2010
244%
MCCSR
2011
150%
150%
OSFI Requirement
150%
150%
226%
259%
280%
capital ratio of 150%. Capital available is the life insurance company’s equity with certain prescribed adjustments.
2012
20
Incorporated July 7, 1960
Head Office
Wawanesa, Manitoba
Executive Office
Winnipeg, Manitoba
Officers and Management
the wawanesa LIFE insurance company
Report of the Independent
Auditor on the summary
financial statements
February 20, 2013
Corporate
To the Shareholder and Policyholders of
K. E. McCrea, CA, FLMI
The accompanying summary financial statements, which comprise the
M. K. Nemeth, CA, FLMI, GBA
Vice President and Chief Operating Officer
G. N. Bass, Q.C.
Vice President, General Counsel and Secretary
I. R. MacDonald, FSA, FCIA
Vice President and Actuary
C. R. Loeppky, BScCS
Vice President, Information Services
J. E. Carradice, BSc, CHRP
Vice President, Human Resources
E. Elvebo, CA
Manager, Corporate Reporting
P. M. Horncastle, CGA
Controller
P. R. Mulaire, CMA, CIA, FCIP, CRM
Director, Internal Audit
K. J. Richtik, FSA, FCIA
Manager, Actuarial Financial Reporting
Insurance Operations
G. G. Sadler, CLU, ChFC, CHS
Director, Individual Sales and Marketing
M. M. Nolin, DDM, ALHC, ACS, AIAA
summary balance sheets as at December 31, 2012 and the summary
statements of operations for the year ended December 31, 2012 are
derived from the audited financial statements of The Wawanesa Life
Insurance Company for the year ended December 31, 2012. We expressed
an unmodified audit opinion on those financial statements in our report
dated February 20, 2013.
The summary financial statements do not contain all the disclosures
required by International Financial Reporting Standards. Reading
the summary financial statements, therefore, is not a substitute
for reading the audited financial statements of The Wawanesa Life
Insurance Company.
Management’s Responsibility for the Summary
Financial Statements
Management is responsible for the preparation of a summary of the
audited financial statements on the basis described in note 1.
Auditor’s Responsibility
Our responsibility is to express an opinion on the summary financial
statements based on our procedures, which were conducted in accordance
Manager, Group Benefit Services
with Canadian Auditing Standards (“CAS”) 810, “Engagements to Report
D. M. Smook, BA
on Summary Financial Statements”.
Manager, National Group Sales and Marketing
D. I. Verwey
Manager, Group Underwriting and
Policy Administration
A. E. Waller, MBA, CFP, ChFC, CLU, FALU
Manager, Individual Life Administration
Medical Director
Opinion
In our opinion, the summary financial statements derived from the
audited financial statements of The Wawanesa Life Insurance Company
for the year ended December 31, 2012 are a fair summary of those
financial statements, on the basis described in note 1.
Dr. R. B. Boyd, MD
Chartered Accountants
Winnipeg, Manitoba
21
regional Offices
Appointed Actuary’s Report
Atlantic
1010 St. George Boulevard
Moncton, New Brunswick
February 20, 2013
S. B. Brydges, CFP, CHS
Regional Life Manager
To the Shareholder and Policyholders of
Ontario
100–4110 Yonge Street
Toronto, Ontario
I have valued the insurance contract liabilities of The Wawanesa Life
B. I. Lang, RHU
Insurance Company for its balance sheet at December 31, 2012 and
their change in the statement of operations for the year then ended
R. J. Rowe, GBA
in accordance with accepted actuarial practice, including selection of
Regional Group Manager
appropriate assumptions and methods.
Western Manitoba
208–740 Rosser Avenue
Brandon, Manitoba
In my opinion, the amount of insurance contract liabilities makes
appropriate provision for all policyholder obligations and the financial
statements fairly present the result of the valuation.
Ian R. MacDonald
G. L. C. Goymer, BA, CFP, ChFC, CLU, CHS
Eastern Manitoba
and NW Ontario
Winnipeg, Manitoba
J. A. Kien, BA, BComm (Hons)
Fellow, Canadian Institute of Actuaries
T. A. McDowell, BComm (Hons)
Winnipeg, Manitoba
Saskatchewan
201, 3501–8th Street East
Saskatoon, Saskatchewan
205, 2631–28th Avenue
Regina, Saskatchewan
G. F. M. Kurmey, FLMI
Regional Life Marketing Representative
Northern Alberta
100, 8657–51st Avenue
Edmonton, Alberta
L. P. J. Addison
S. Lambert
Southern Alberta
600, 708–11th Avenue S.W.
Calgary, Alberta
B. Reid Galarnyk
British Columbia
310–1985 West Broadway
Vancouver, British Columbia
S. F. Engmann, BA
B. R. Wyne, MBA
22
summary balancE Sheets
As at December 31
2012
2011
(000s)
Assets
Cash and cash equivalents
$
11,890
$
30,281
Investments
685,773
622,974
Other assets
14,176
13,023
General fund assets
711,839
666,278
Segregated funds net assets
182,612
163,636
Total assets
$
894,451
$
829,914
$
8,126
$
7,006
Liabilities
Other liabilities
Insurance contract liabilities
577,026
543,835
General fund liabilities
585,152
550,841
Segregated funds contract liabilities
182,612
163,636
Total liabilities
767,764
714,477
Equity
126,687
115,437
Total liabilities and equity
$
894,451
$
829,914
Note 1
These summary financial statements have been derived from the audited financial statements of The Wawanesa Life
Insurance Company (the Company) for the year ended December 31, 2012, which are prepared in conformity with
International Financial Reporting Standards (IFRS).
The criteria developed by management for the preparation of the summary financial statements is as follows: that
the information included in the summarized financial statements is in agreement with the related information in
the complete financial statements, and that the summarized financial statements contain the information necessary
to avoid distorting or obscuring matters disclosed in the related complete financial statements, including the notes
thereto, in all material respects.
A full set of audited financial statements is available from the Company or at www.wawanesa.com.
23
summary statements of operations
For the year ended December 31
2012
2011
(000s)
Net premiums and equivalents
$
111,855
$
109,376
34,518
50,074
146,373
159,450
Net claims and benefits incurred
78,283
73,775
Net change in insurance contract liabilities
36,581
58,370
Expenses incurred
31,453
28,676
146,317
160,821
Net investment income
Total income
Total benefits and expenses
Income (loss) before income taxes
56
Provision for (recovery of) income taxes
Net income (loss) for the year
(1,371)
(988)
348
$
1,044
$
(1,719)
$
608
$
4,974
Net income (loss) for the year attributed to:
Shareholder
436
Participating policyholders
$
A full set of audited financial statements is available at www.wawanesa.com
1,044
(6,693)
$
(1,719)
24
source of earnings statement
The Source of Earnings are attributable to one of the
following categories:
Expected profit on inforce business
This includes the release of the Provision for Adverse
Management action and changes
in assumptions
This section includes specific management actions and
the impact of changes in assumptions used to calculate
actuarial liabilities.
Deviations (PFADs) plus the expected profits on
Segregated Funds. The release of the PFADs is the
profit arising on the inforce business if the expected
assumptions used in calculating the actuarial liabilities
are realized.
Impact of new business
This represents the overall loss during the first year
on new business. The PFADs in the actuarial liabilities
contribute to an overall initial loss on issuing new
business. These PFADs are anticipated to be released
into income in future years to the extent they are not
required to cover future adverse experience.
Experience gains and losses
The experience gains result from items such as
investment returns, claims and expenses where the
actual experience during the year differs from the
expected experience assumed in the actuarial liabilities.
It also includes the amount the fee income generated
on Segregated Funds differs from expected.
Other
This represents all other sources of earnings not
included above.
Earnings on surplus
This reflects the earnings on the surplus and capital of
the Company.
25
source of earnings statement
Total
company
Source of Earnings 2012
Individual
life
Individual
annuity
Group life
and health
(000s)
$
$7,562
$
5,044
$
$
(9,910)
(1,818)
553
(307)
(2,064)
in assumptions
(1,848)
(979)
(160)
(709)
Other
(1,240)
(1,240)
Earnings (loss) on operations
(7,254)
$
(5,708)
(824)
574
–
–
$
653
–
$
(2,199)
7,310
Earnings on surplus
Income before income taxes
56
(988)
Income taxes
Net income
(9,086)
1,944
$
$1,044
Total
company
Source of Earnings 2011
Individual
life
Individual
annuity
Group life
and health
(000s)
$
6,978
(17,449)
(720)
Other
–
Earnings (loss) on operations
(7,250)
Earnings on surplus
5,879
Income (loss) before income taxes
(1,371)
Income taxes
348
$
(1,719)
4,331
$
(13,435)
3,941
in assumptions
Net income (loss)
$
668
67
(533)
(170)
(8,969)
$
(827)
–
$
2,031
(3,187)
3,206
(17)
–
$
1,101
616
–
$
618
26
Summary of the Participating Account
Management Policy*
A Participating Account is maintained in respect of the
Surplus exists in the Participating Account for the needs
Company’s participating business which is separate
of the current inforce business and future new business.
from the Shareholder Account. Revenue and expenses
Surplus is managed to meet the continuing financial
that are directly related to participating business are
stability of the Participating Account and to exceed any
recorded to the Participating Account. Allocation
minimum regulatory requirements.
methods are also used to record certain expense and
revenue items to the Participating Account.
Participating policyholders are eligible to receive
The Expense Allocation Method is designed to allocate
experience justifies their payment. The Board of
expenses and taxes fairly and equitably between the
Directors determines the amount of dividends
Participating Account and the Shareholder Account.
to be paid in accordance with the Company’s
The Investment Income Allocation Method is
distributions from the Participating Account when
Dividend Policy.
designed to allocate investment income fairly and
The Company is allowed to transfer an amount from
equitably between the Participating Account and the
the Participating Account to the Shareholder Account
Shareholder Account.
each year as described in the Insurance Companies Act.
The Investment Policy Statement (IPS) governs the
investment activities of the Company. Assets have been
segmented into funds to facilitate managing assets with
liabilities. The IPS specifies the investment objectives,
investment risks, and management of these risks for
The Company intends to transfer an amount equal
to the lesser of 10% of the amount of the dividends
paid to the participating policyholders during the
year and the maximum permitted by the Insurance
Companies Act.
each of the funds.
Summary of the Participating Policyholder
Dividend Policy*
Participating Individual Life Insurance
Participating Earnings are generated when collective
experience related to investment, mortality, lapse,
expenses and taxes is more favourable than assumed
in developing the premiums. The Company may
distribute a portion of the participating account
earnings to the participating policyholders. The
distribution is in the form of dividends payable to
the policyholders. The amount available to be paid
as dividends is determined based on various factors
including the Company’s earnings, any regulatory
requirements and the amount of surplus required
The dividend scale sets out a formula for the
allocation of distributable earnings to the participating
policies. The principle factors used to distribute
earnings are investment earnings, mortality, and
expense experience. The dividend scale allocates
distributable earnings among policies in the same
proportion as the policies are considered to have
contributed to distributable earnings. Dividends are
credited to the policies on their policy anniversary
date. The distribution of dividends is designed
to maintain reasonable equity between classes of
participating business.
to ensure the continuing financial stability of the
Dividends are declared at the discretion of the Board
Participating Account.
of Directors.
* Complete policies are available upon request
Standing (L to R): J. S. McCallum, G. J. Hanson, C. M. Best, D. G. Unruh, D. C. Crewson, K. L. Matchett, E. J. Beale, R. O. Landry, N. R. Logan
Seated (L to R): K. E. McCrea, R. R. Bracken
Board of directors
The Wawanesa Mutual Insurance Company, Wawanesa General
Insurance Company and The Wawanesa Life Insurance Company
R. R. Bracken 1,2,3,4
Chairman of the Board
E. J. Beale 2,3
C. M. Best 2,3
D. C. Crewson 1,2
G. J. Hanson 3,4
R. O. Landry 2,3
N. R. Logan 1,4
K. L. Matchett 1,4
J. S. McCallum 3,4
K. E. McCrea
D. G. Unruh 1,4
1. Member of the Audit Committee
2.Member of the Conduct Review and Corporate Governance Committee
3. Member of the Investment Committee
4. Member of the Human Resources Committee

WaWanesa Insurance 2012 annual report

Transcription

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