(Montreal) Motorists should expect an increase in their insurance premiums at a time when rising repair costs and an increase in accidents have eaten into Desjardins Group’s profitability in 2022, according to the president and chief executive officer. director of Desjardins Group, Guy Cormier.
In 2022, the surplus before patronage refunds decreased by 892 million to settle at 2.05 billion, according to the results of the financial cooperative released on Wednesday. This decline is “largely attributable” to an increase in claims incurred in the property and casualty insurance sector, in automobile and property insurance.
With the easing of health measures, households have resumed their journeys and the number of road accidents has returned to a certain normality. The scarcity of parts, rising repair costs and an increase in thefts have made the business environment more difficult for insurers.
“In all the claims that we have compensated, we are talking about an inflation of costs which is sometimes 10%, 15%, 20%”, comments Mr. Cormier during a press conference aimed at discussing the results. of Desjardins Group.
To illustrate the explosion of repair costs, the leader gave the example of repairing the mirrors of a car. “Ten or fifteen years ago, you replaced the mirror and it was over. Today there is a camera, there is a motion detector, the mirror is heated. Listen, just a mirror hanging on a street is already thousands of dollars. »
This context will have an effect on premiums, he concedes, giving the example of the price of butter. “Well, the butter croissants have gone up in price, too. So we are caught in this same dilemma. »
Mr. Cormier added that Desjardins Group has developed insurance products to take into account in its rate schedule customers who have good driving habits. He gave the example of the Ajusto program, which, for those who consent, shares data to assess driving habits using a smart phone.
The decrease in profits is not a surprise, assures the big boss of Desjardins. He replied that he expected this decrease and that he was “very happy” with the results “meeting expectations”.
The insurance sector represents an important part of the cooperative’s activities. He mentioned that this sector was more volatile and that a comparison with the major Canadian banks was not the most adequate way to analyze Desjardins’ results.
For fiscal 2022, patronage dividends increased by $16 million, or 4.1%, to $403 million. Including donations, sponsorships and scholarships, Desjardins deployed $518 million, an increase of 4.2%, in the community.
Households under pressure
The results of the Mouvement Desjardins show that the rise in interest rates has shaken the most vulnerable households. During the conference, Mr. Cormier mentioned that the quality of the credit card loan portfolio had deteriorated.
The provision for credit losses also reached 274 million, up 199 million compared to 2021. The year 2021 was however marked by an improvement in the economic outlook and the quality of borrowers’ credit. Net write-offs in 2022 and 2021 remained “historically low” for all portfolios, management said.
The boss mentioned that Desjardins had identified about 50,000 borrowers with variable mortgages who were in a more difficult position due to the rise in interest rates. In November, the cooperative contacted the members in question to offer them solutions such as extending their amortization period.
“Of this number, there is perhaps 10% to 15% who are really in a situation of vulnerability. These folks might have difficulty in all of their repayment capability. »
There is still good news on the economic front, adds Mr. Cormier. He said he was reassured by the idea that interest rates were probably nearing their peak while inflation moderated in January and the Bank of Canada seemed to want to take a break.
“The unemployment rate is historically low. People have accumulated savings. People have jobs. We will certainly have two or three more difficult quarters by the end of the year, but from 2024, according to our economists, we could see some recovery. »