The “explosion of costs” in insurance hits Desjardins hard

The rise in auto insurance claims costs and the multiplication of weather-related claims in home insurance weighed heavily on Desjardins Group’s profitability in 2022.

In its annual results released on Wednesday, Desjardins shows surpluses down 30% to 2.05 billion at the end of fiscal 2022, or 892 million less than in 2021.

This fall in profitability occurred despite growth in operating income of 6.8% to 21.78 billion. Also, the total assets of the cooperative financial giant grew by 2.5% or 10 billion to reach 407.1 billion at the end of the 2022 financial year.

According to Desjardins, the decrease in annual surpluses in 2022 is “largely attributable to an increase in the load of claims in the P&C insurance sector, in automobile insurance and in property insurance. »

“The increase in the frequency of automobile claims, whereas this was at a lower level in 2021 in the context of the pandemic, the impact of inflation as well as more unfavorable climatic conditions marked the year 2022. “, indicates Desjardins in its financial comments.

Among other things, “the year 2022 was marked by a disaster in Ontario and Quebec, namely a rare meteorological phenomenon called derechoand by five major events (floods, wind, heavy rains, hurricane Fiona and snowstorm), while the year 2021 had been marked by a disaster, a hailstorm in Alberta, and a major event.

In the end, despite operating income up 4.2% to 5.97 billion, the “P&C insurance” sector at Desjardins posted surpluses down 62% to 450 million, compared to the amount of 1.19 billion which had been recorded a year earlier.

In motor insurance in particular, “with the costs [de réclamation] exploding, and the number of auto thefts is increasing considerably, it is clear that we will have to adjust insurance rates upwards, like the rest of the industry, for that matter,” commented Guy Cormier , President and Chief Executive Officer of Desjardins Group, during a press conference call.

Financial services

In the financial services sector for “Individuals and Businesses”, surpluses are also down by 22% to 1.12 billion for the 2022 financial year, while operating income increased by 12% to 8.62 billion.

According to Desjardins, this decrease in segment profitability is mainly due to “the increase in the sums invested in strategic projects, particularly in terms of digital transformation and security, as well as the increase in personnel costs in order to support the progression of activities and enhancement of the service offer to members and clients. »

But also, Desjardins had to increase its provisions for credit losses in 2022 due to the impact of interest rate increases and price inflation on the financial health of certain categories of borrowers and card customers. credit.

At the end of the 2022 financial year, these provisions were recorded at 274 million, an amount three times higher than that established a year earlier.

In the “Wealth Management and Life and Health Insurance” business sector, Desjardins posted operating income up 6.7% to 7,631 billion, which propelled the segment’s surpluses to strong growth of 49. 5% to 692 million.

According to Desjardins, this growth is mainly due to “the positive effect of the increase in interest rates” on the valuation and performance of group annuity and group insurance products, as well as an “increase in gains on disposal of real estate securities and investments”.

In addition, as a positive counterpart to the decline in surplus earnings in 2022, Desjardins maintained the increase in the provision for patronage dividends to client members of its network of caisses populaires.

The amount of patronage refunds at the end of the 2022 financial year was recorded at 403 million, up by 16 million or 4.1% compared to the amount of the previous year.