The glossary below defines GAAP and Non-GAAP financial measures, as well as other insurance-related terms used in our financial reports. The terms are updated to reflect changes under IFRS 17. The glossary under IFRS 4 remains available for your reference in our 2022 Annual Report (pages 242 to 245)

A

Acquisition, integration and restructuring costs

Acquisition costs – Include professional fees related to the closing of an acquisition. Acquisition costs incurred in connection with an acquired business do not represent an ongoing operating expense of the business.

Integration costs – Include costs related to an acquisition, such as severances, retention bonuses, system integration, the initial net impact of a reinsurance coverage for the purpose of an acquisition, as well as changes in the fair value of the contingent considerations. Integration costs incurred in connection with an acquired business are incurred do not represent an ongoing operating expense of the business.

Restructuring and other costs – Include non-recurring reorganization costs not related to an acquisition, impairment of IT systems related to our exited lines businesses and expenses related to the implementation of significant new accounting standards.

Adjusted average common shareholders’ equity¹
Mean of Common shareholders’ equity at the beginning and end of the period, adjusted on a prorata basis (number of days) for significant capital transactions. Equity attributable to shareholders is determined in accordance with IFRS, and excludes preferred shares and other equity, as per IFRS.

Adjusted debt-to-total capital ratio¹
Debt outstanding (excluding hybrid debt) at the end of the period, divided by Adjusted total capital.

Adjusted earnings per share (AEPS)¹
Adjusted net income attributable to common shareholders, divided by the WANSO.

Adjusted net income attributable to common shareholders¹
Adjusted net income attributable to shareholders less preferred share dividends and other equity distribution.

Adjusted net income attributable to shareholders¹
Net income attributable to shareholders, as reported under IFRS, adjusted for the after-tax impact of acquisition-related items, such as amortization of intangible assets recognized in business combinations, as well as acquisition and integration costs. 

Adjusted return on equity (AROE)¹
Adjusted net income attributable to common shareholders for the last 12 months, divided by the Adjusted average common shareholders’ equity over the same period.

Adjusted total capital¹
The sum of Debt outstanding, Equity attributable to shareholders and preferred shares instruments held by subsidiaries, at the same date. The preferred shares instruments held by subsidiaries are included in the equity attributable to non-controlling interests.

Affiliated brokers
Brokers in which we hold an equity investment or provide financing.

Attributable to shareholders
Excludes Non-controlling interests (NCI).

Average investments
Mid-month average fair value of investments portfolio held during the reporting period.

B

Book value per share
Common shareholders’ equity divided by the number of common shares outstanding at the same date.

Book value per share (excluding AOCI)¹
Common shareholders’ equity (excluding AOCI) divided by the number of common shares outstanding at the same date.

C

Catastrophe losses (CAT losses)
Any one claim, or group of claims, equal to or greater than a predetermined CAT threshold, before reinsurance, related to a single event for the current accident year (on an undiscounted basis). Our CAT threshold is as follows by segment: P&C Canada: $10 million, P&C UK&I: £7.5 million and P&C US: US$5 million. For multi-jurisdiction events, IFC aggregate threshold: $15 million (combined impact across all segments of $15 million or more). Reported CAT losses can either be weather-related.

CAT loss ratio

Net current year CAT losses
, expressed as a percentage of Operating net underwriting revenue.

Claims ratio¹
Operating net claims expressed as a percentage of Operating net underwriting revenue.

Combined ratio¹
The sum of the Claims ratio and the Expense ratio. A combined ratio below 100% indicates a profitable underwriting result. A combined ratio over 100% indicates an unprofitable underwriting result.

Common shareholders’ equity
Equity attributable to shareholders determined in accordance with IFRS, excluding preferred shares and other equity at the end of a specific period.

Company action levels (CALs)
Thresholds below which regulator notification is required together with a company action plan to restore capital levels. The average CAL for all regulated Canadian insurance entities is 169% MCT. The CAL varies by legal Canadian entities. The CAL is 200% RBC for regulated insurance entities in the US and 120% SCR for those in the UK&I.

D

Discounted result¹
Includes the impact of the discount build on claims liabilities on results. Claims liabilities are discounted to reflect the time value of money using yield curves based on risk-free rates adjusted for an illiquidity premium.
For MD&A purposes, discount build for all P&C segments is included within our Corporate underwriting income.

Distribution income¹
Includes operating income before interest, taxes and amortization from our consolidated brokers, broker associates, managing general agents (MGA) and other supply chain related businesses.

E

Earnings per share (EPS)
Net income attributable to common shareholders divided by the WANSO, as reported in the Consolidated statements of income.

Expense ratio¹
Operating net underwriting expenses, expressed as a percentage of Operating net underwriting revenue.

F

Frequency (of claims)
Average number of claims reported in a specific period.

Full-time equivalent number of employees
A unit of measurement equivalent to an employee with a full-time workload. If two employees each have a 50% workload, they would represent one full-time equivalent employee.

Funding ratio
Pension plan’s assets expressed as a percentage of funded plans’ obligations.

I

Income (loss) from exited lines
Includes the underwriting results and net investment income from exited lines. Lines are classified as exited once we have a formal decision to exit a specific line of business and/or geographical area of operations. The results of these lines are considered non-operating as they are no longer part of the core business and cannot be extrapolated to evaluate future earnings. Under IFRS, these are included within Insurance revenue, Insurance service expenses, Net expenses from reinsurance contracts held and Net investment return.

Incurred but not reported (“IBNR”) claims reserve
Reserves for estimated claims that have been incurred but not reported by policyholders, including a reserve for future developments on claims which have been reported.

Insurance acquisition cash flows (FS)
Insurance acquisition cash flows are costs directly attributable to selling or underwriting a portfolio of insurance contracts and are presented in the liability for remaining coverage. These cash flows include direct costs such as commissions and premium taxes; and an allocation of indirect costs such as salaries, rent and technology costs.

Insurance service result (FS)
Insurance service result, as determined in accordance with IFRS, comprises of the following:

1. Insurance revenue;
2.
Insurance service expense;
3.
Net expense from reinsurance contracts held.

1. Insurance revenue (FS)

Insurance revenue on direct business is allocated over the coverage period of the contract and includes:

  • Premium receipts net of cancellations, promotional returns, and sales taxes (excluding any investment component); and
  • Other insurance revenue which includes fees collected from policyholders in connection with the costs incurred for the Company’s yearly billing plans and fees received for the administration of other policies.
2. Insurance service expense (FS)

Insurance service expense includes fulfilment and acquisition cash flows which are costs directly attributable to insurance contracts and are comprised of both direct costs and an allocation of indirect costs.

It is composed of the following:

  • Incurred claims and other insurance service expense, which are fulfilment cash flows and include direct incurred claims and non-acquisition costs directly related to fulfilling insurance contracts (excluding any investment component);
  • Amortization of insurance acquisition cash flows; and
  • Losses and reversals on onerous contracts.

3. Net expense from reinsurance contracts (FS)
Net expense from reinsurance contracts comprises of the amounts expected to be recovered from reinsurers and an allocation of the reinsurance premiums paid.

The Company treats reinsurance cash flows that are contingent on claims of the underlying contracts as part of the amounts recoverable from reinsurers and includes ceded commissions not contingent on claims as a reduction of the premiums paid to reinsurers.


L

Large loss
A single claim, which is considered significant but that is smaller than the CAT threshold.

Liability for incurred claims (LIC) (FS)
The obligation to investigate and pay valid claims for insured events that have already occurred, including events that have occurred but for which claims have not been reported, and other incurred insurance expenses.

M

Market-based yield
Annualized total pre-tax operating investment income (before expenses), divided by the weighted-average investments.

Market yield adjustment (MYA) and FX on claims liabilities
MYA and FX on claims liabilities arises mostly from movements in interest rates and foreign currency exchange rates, which impact our claims liabilities.
Claims liabilities are discounted using yield curves based on risk-free rates adjusted for an illiquidity premium, reflecting the characteristics and duration of claims liabilities. The impact of changes in the discount rate used to discount the claims liabilities throughout the year is referred to as MYA

Minimum capital test (“MCT”)

Ratio of total capital available to total capital required, as defined by the Office of the Superintendent of Financial Institutions (OSFI) and Autorité des marchés financiers (AMF).

N

Net current year CAT losses (Net CAT losses)
Current accident year Catastrophe losses, including reinstatement premiums, are used in the calculation of the CAT loss ratio. Reported CAT losses can either be weather-related or not weather-related and exclude those from exited lines.

Net income attributable to common shareholders¹
Net income attributable to shareholders, as reported under IFRS, less preferred share dividends and other equity distribution.

Net insurance financial result (FS)
Net insurance financial result, as determined in accordance with IFRS, comprise the change in the carrying amount of the group of insurance contracts arising from the effect of the time value of money and changes in the time value of money and the effect of financial risk and changes in financial risk.

Net operating income (NOI) attributable to shareholders¹
Net income attributable to shareholders, as reported under IFRS, excluding the after-tax impact of Non-operating results. NOI is presented net of Net income attributable to non-controlling interests.

Net operating income attributable to common shareholders¹
Net operating income, less preferred share dividends and other equity distribution.

Net operating income per share (NOIPS)¹
Net operating income attributable to common shareholders, divided by the WANSO.

Net unwind of discount on claims liabilities
Net insurance financial result, as reported under IFRS, less Changes in discount rates and other financial assumptions, Net foreign currency gains (losses) and Net insurance financial result from claims acquired in a business combination.
For MD&A purposes, Net unwind of discount on claims liabilities is included within Operating net investment result.

Non-catastrophe weather event
A group of claims, which is considered significant but that is smaller than the catastrophe threshold, related to a single weather event.

Non-operating pension expense
For our Canadian pension plans is the difference between the total IAS 19 pension expense and the operating pension expense calculated using the expected return on assets. For our UK pension plans, the non-operating pension experience represents the net of the asset return on the defined benefit pension plans assets and the administrative expenses for these plans.

Non-operating results¹
Include elements that are not representative of our operating performance because they relate to special items, bear significant volatility from one period to another, or because they are not part of our normal activities. These include the Amortization of acquired intangible assets, Acquisition, integration and restructuring costs, Net gains (losses) on investment portfolio, Other net gains (losses), Non-operating pension expense, Net result from claims acquired in a business combination, MYA and FX on claims liabilities, Results from exited lines, as well as other costs or revenues that are not representative of our operating performance.

Non-weather catastrophe losses
Catastrophe losses mostly related to large commercial losses (such as non-weather-related fires, surety and liability losses).

Normal course issuer bid (“NCIB”)
A program for the repurchase of the Company’s own common shares, for cancellation through a stock exchange that is subject to the various rules of the relevant stock exchange and securities commission.

O

Onerous contract losses (FS)
For onerous contracts, as determined in accordance with IFRS, a loss component determined based on estimated fulfilment cash flows is included in the Liability for remaining coverage (LRC) when insurance contracts are issued with a loss recognized immediately in Net income. The loss component will be reversed to Net income over the coverage period, therefore offsetting incurred claims. The loss component is measured on a gross basis but may be mitigated by a loss recovery component if the contracts are covered by reinsurance.

Operating direct premiums written (Operating DPW)¹
The total amount of premiums for new and renewal policies written during a specific period. The Operating direct premiums written exclude the impact of industry pools, fronting and exited lines.

Operating income tax expense (benefit)¹
Includes the impact of income taxes from our broker associates, which are accounted for using the equity method (net of tax) under IFRS.

Operating net claims¹
Comprised of claims related to our underwriting activities, including losses on onerous contracts. The claims incurred are net of reinsurance, and exclude the non-operating pension expense as well as claims from exited lines. The claims reported under the General Measurement Model (including those acquired through a business combination and the ADC) will not be grossed-up.

Operating net investment income¹
Net investment income, as reported under IFRS, excluding the the investment income from the RSA Middle-East exited operations.
For MD&A purposes, Operating net investment income is included within Operating net investment result.

Operating net investment result¹
Represents the sum of Operating net investment income and Net unwind of discount on claims liabilities.

Operating net premiums written (Operating NPW)¹
Operating direct premiums written (Operating DPW) plus assumed premiums (external and industry pools) less ceded premiums (reinsurers and industry pools), excluding operating NPW from exited lines.

Operating net underwriting expenses¹
Comprised of commissions (including regular and variable commissions), premium taxes and general expenses related to our underwriting activities, as well as the amortization of our deferred allocated acquisition costs. These direct and indirect expenses related to our underwriting activities are net of reinsurance, and exclude the non-operating pension expense as well as underwriting expenses from exited lines.

Indirect costs include salaries, rent and technology costs, which are indirectly related to our underwriting activities, as well as the net results pursuant to acting as a servicing carrier for the Facility Association.

Operating net underwriting revenue¹
Comprised of earned premiums net of reinsurance contracts (previously ‘Operating NEP’) and other revenues directly related to our insurance activities including fees collected from policyholders in connection with the costs incurred for the Company’s yearly billing plans and fees received for the administration of other policies. Operating net underwriting revenues exclude those from exited lines and commissions assumed/ceded (as well as premium adjustments). 

  • Operating net earned premiums (Operating NEP)¹
    Operating net premiums written (Operating NPW) recognized for accounting purposes as revenue during a specific period, excluding operating NEP from exited lines.
  • Other insurance revenue
    Other insurance revenue includes fees collected from policyholders in connection with the costs incurred for the Company’s yearly billing plans and fees received for the administration of other policies.

Operating return on equity (OROE)¹
Net operating income attributable to common shareholders for the last 12 months, divided by the Adjusted average common shareholders’ equity (excluding accumulated other comprehensive income) over the same period.

Organic growth1
Excludes the impact of exited lines and growth attributable to acquisitions.

Other operating income (expense)¹
Includes general corporate expenses related to the operation of the group and our public company status, consolidation adjustments, and other operating items.

P

Policies in force
The number of insurance policies in effect at a specific date. If two or more separate risks are covered under the same insurance policy, this counts as one policy in force.

Pre-tax income¹
Income before income taxes, as reported under IFRS, excluding income taxes from our broker associates, which are accounted for using the equity method under IFRS. 

Pre-tax operating income (PTOI)¹
Represents Income before income taxes, as reported under IFRS, including the Share of income tax expense (benefit) of broker associates (accounted for using the equity method – net of tax – under IFRS), and excluding the pre-tax impact of Non-operating results. Comprises the following items: Underwriting income (loss), Operating net investment result, Distribution income, Total finance costs and Other operating income (expense).

Prior year claims development (PYD)¹
Change in total prior year claims liabilities during a specific period, net of reinsurance, excluding the PYD related to exited lines. A decrease to claims liabilities is referred to as favourable prior year claims development. An increase in claims liabilities is referred to as unfavourable prior year claims development.

PYD ratio¹
PYD, expressed as a percentage of Operating net underwriting revenue.

R

Regulatory capital ratios
Minimum capital test (as defined by the Office of the Superintendent of Financial Institutions and the Autorité des marchés financiers in Canada), Risk-based capital requirements (as defined by the National Association of Insurance Commissioners in the US), and Solvency capital requirement (as defined by the Prudential Regulation Authority in the UK).

Reinstatement premium
Premium payable to restore the original reinsurance policy limit as a result of a reinsurance loss payment under a catastrophe coverage. 

Reinsurer
An insurance company that agrees to indemnify another insurance or reinsurance company, the ceding company, against all or a portion of the insurance or reinsurance risks underwritten by the ceding company, under one or more policies.

Return on equity (ROE)
Net income attributable to common shareholders for the last 12 months, divided by the Adjusted average common shareholders’ equity over the same period.

Risk-based Capital (RBC)
Risk-based capital, as defined by the National Association of Insurance Commissioners (NAIC) in the U.S.

S

Severity (of claims)
Average cost of a claim calculated by dividing the total cost of claims by the total number of claims.

Solvency Capital Requirement ratio (SCR)
Ratio of Eligible Own Funds to Solvency Capital Requirement as defined under Solvency II and regulated by the Prudential Regulation Authority in the UK.

Structured settlements
Periodic payments to claimants for a determined number of years or until death, typically in settlement for a claim under a liability policy, usually funded through the purchase of an annuity.

T

Total capital margin
Total capital margin includes capital in excess of the internal CALs for insurance entities in Canadian, US, UK and other internationally regulated jurisdictions and the funds held in non-regulated entities less any ancillary own funds committed by the Company.

Total finance costs¹
Other finance costs, as reported under IFRS, adjusted to include finance costs from our broker associates, which are accounted for using the equity method under IFRS (included in Share of profit from investments in associates and joint ventures under IFRS).

Total income tax benefit (expense)¹
Income tax benefit (expense), as reported under IFRS, adjusted to include income taxes from our broker associates, which are accounted for using the equity method under IFRS.

U

Underlying current year loss ratio¹
Operating net claims, excluding Current year CAT losses and Prior year claims development, expressed as a percentage of Operating net underwriting revenue.

Underlying performance (underwriting)1
Represents current accident year performance, or Operating net claims, excluding Current year CAT losses and Prior year claims development.

Underwriting income (loss)¹
Operating net underwriting revenue less Operating net claims and Operating net underwriting expenses for a specific period. Underwriting income (loss) represents Insurance revenue, Insurance service expense, Net expense from reinsurance contracts, all of which reported under IFRS, excluding non-operating pension expense, underwriting results from exited lines and net insurance service result from claims acquired in a business combination.
Underwriting income (loss) also includes certain indirect costs (salaries, rent and technology costs, which are indirectly related to our underwriting activities, as well as the net results pursuant to acting as a servicing carrier for the Facility Association) and an intercompany commission adjustment.

Underwriting results from exited lines
Includes the underwriting results and net investment income from exited lines. Lines are classified as exited once we have a formal decision to exit a specific line of business and/or geographical area of operations. The results of these lines are considered non-operating as they are no longer part of the core business and cannot be extrapolated to evaluate future earnings. Under IFRS, these are included within Insurance revenue, Insurance service expenses, Net expenses from reinsurance contracts held and Net investment return.

Undiscounted result1
Excludes the impact of the discount build on claims liabilities . This basis is line with how we manage our business.


W

WANSO
Weighted-average number of common shares outstanding on a daily basis during a specific period.

Written insured risks
Also referred to as Units. The number of vehicles in personal automobile insurance and the number of premises in personal property insurance written for a specific period.

¹These are non-IFRS financial measures, which do not have any standardized meaning prescribed by IFRS and are unlikely to be comparable to similar measures presented by other companies.