How Canadian P&C insurers look in 2023 Q1 (the IFRS 17 Remix)

Canada’s solvency regulator released the property and casualty insurance industry’s first-quarter financial results for 2023, and under IFRS 17 reporting standards, the results look – er, different.

Gone are the industry’s familiar financial metrics and key performance indicators (KPIs), such as net premiums earned, net claims incurred, loss ratios, and performance by key business lines. Gone also is the ability to compare this year’s first-quarter figures from last year’s figures because the assumptions and metrics are different under IFRS 17 reporting standards.

“It’s a new language,” as MSA Research president and CEO Joel Baker put it in an email to Canadian Underwriter, when asked for help interpreting the new approach to results.

The results under the new IFRS 17 regime are still a work in progress. Baker confirms he’s still working with insurers to establish new KPIs under the new reporting standards. And Canada’s Office of the Superintendent of Financial Institutions (OSFI) observes on its website:

“As a result of the transition to IFRS 17, some insurers may have requested filing extensions on data that OSFI publicly discloses. Please note that some [financial institutions] data may therefore be missing, and aggregate totals may be incomplete for the foreseeable future. OSFI will refresh its financial data web page once all filings have been received.”

Related: High interest rates crater the P&C industry’s investment income

Be that as it may, Baker was able to share the industry’s high-level 2023 Q1 results.

“Total Insurance Revenue,” which is similar in concept to gross earned premiums, as Baker notes, was up by 19.6% compared to 2022 Q1. “This reflects the severe hardening of the reinsurance market for year-end renewals, along with continued rate increases in personal and commercial lines, which are all attempting to outpace inflation,” as Baker observes.

“Insurance Service Expense,” including claims and other underwriting expenses (among other things) was up over 25% over the same first-quarter timeframe last year.

“This resulted in a nearly flat ‘Insurance Service Result,’ which in itself did not keep pace with inflation,” Baker commented. This result was up 3.5% nominally, but down in real terms, he added.

The net investment result in 2023 Q1 rebounded by slightly less than $1 billion, “resulting in an income boost overall,” Baker noted.

Last year, in 2022, the Canadian P&C insurance industry took more than $2-billion hit on its net investment income. In 2021, the industry’s net investment income totalled $2.35 billion. Last year, it was a paltry $156 million, according to OSFI.

Feature image courtesy of iStock.com/Gennadiy Kravchenko