For the first quarter ended March 31, 2011, Desjardins Group posted surplus earnings before member dividends of $357 million, compared to $371 million one year earlier, for a 3.8% decrease. Return on equity was 12.0% compared to 14.2% in the same quarter of 2010. The Tier 1 capital ratio was 17.6%, comparable to the ratio as at December 31, 2010. An amount of $81 million was given back to members and the community in the first quarter, including donations, sponsorships and bursaries, as well as a $65 million provision for member dividends, compared to a provision of $76 million for the same period one year earlier.
For the first quarter of 2011, the Wealth Management and Life and Health Insurance segment posted $63 million in surplus earnings before member dividends, down $2 million or 3.1% from the same period of 2010.
Total income for the segment declined $129 million from the same period of 2010, to $1,025 million. This reduction was primarily due to a $204 million reduction in investment income associated with life and health insurance operations. However, the decline was mostly offset by a change in provisions, included under Claims, benefits, annuities and changes in insurance and investment contract liabilities. The decline in total income was counterbalanced by a $42 million increase in insurance premiums, $23 million growth in annuity premiums and a $20 million increase in other income arising from the growth in assets under management for the distribution of savings products, brokerage services and private management.
Expenses related to claims, benefits, annuities and changes in insurance and investment contract liabilities decreased by $125 million as a result of lower provisions following a negative change in the fair value of the related investments. This reduction was partially offset by an increase in disability benefits due to more beneficiaries than in the first quarter of 2010.
For the first quarter of 2011, surplus earnings before member dividends for the Property and Casualty Insurance segment declined by $22 million or 34.9% from the same period in 2010, to $41 million. This decline was primarily due to a loss ratio that was less favourable than during the first quarter of 2010, when the segment’s loss ratio was particularly low. The loss ratio, which corresponds to claims expenses divided by net premiums earned, was 66.7% in the first quarter of 2011, up 10.8 points over the results for the same period of 2010.
The sector’s total income was $425 million, up $42 million or 11.0% from the same period of 2010. This excellent performance was due to the $40 million increase in net premiums as a result of the larger number of policies issued and a higher average premium in some business lines, particularly in property insurance. In fact, gross premiums written grew more than 10% from the same period of 2010 due, in particular, to the benefits from advertising campaigns, a private label partnership agreement with a Canadian financial institution, new partnerships and renewals of group insurance agreements.
“In accordance with the orientation adopted at our 2009 Meeting, we also pursued our expansion strategy by acquiring Western Financial Group,” said Ms. Leroux. “This transaction will expand our presence in Western Canada, benefitting in particular our Property and Casualty Insurance subsidiary.”
Expenses attributable to claims, benefits, annuities and changes in insurance and investment contract liabilities grew $66 million compared to the same period of 2010 because of a higher loss ratio.
The 8.9% increase in non-interest expense was close to the 11.0% rate of growth in income and will support business growth in the sector.
Key financial data
|For the three months
ended March 31
|(unaudited, in millions of $ or as a %)||2011||2010||Change|
|Net interest income (1)||$||967||$||944||2.4%|
|Net premiums (1)||$||1,159||$||1,047||10.7%|
|Surplus earnings before member dividends (1)||$||357||$||371||(3.8)%|
|Return on equity (1)||12.0%||14.2%||—|
|BALANCE SHEET AND RATIOS|
|As at March 31, 2011||As at Dec. 31, 2010|
|Tier 1 capital ratio (2)||17.6||%||17.7||%|
|Total capital ratio (2)||19.1||%||18.7||%|
|Ratio of gross impaired loans/gross loans (1)||0.42||%||0.43||%|
|(1)||The financial data from 2010 have been adjusted to conform to international financial reporting standards (IFRS).|
|(2)||The regulatory capital ratios for 2011, as required by the Autorité des marchés financiers, are calculated using financial data prepared in accordance with IFRS. The regulatory capital ratios for 2010 were calculated from financial data prepared in accordance with GAAP.|
Significantly, since January 1, 2011, Desjardins Group has become the first Canadian banking institution to adopt international financial reporting standards (IFRS) as its accounting framework for the preparation of combined interim and annual financial statements. This conversion has not resulted in any significant changes to the Group’s strategic activities. Furthermore, it has had no significant impact on financial results, cash management, risk management or business activities. It should be noted that comparative data from 2010 have been adjusted as a result of changes made to apply IFRS.