Glossary

Include items such as acquisition-related expenses, severances, retention bonuses, system integration costs, changes in the fair value of the contingent considerations, as well as expenses related to the implementation of significant new accounting standards.

Adjusted net income attributable to common shareholders, divided by the WANSO.

Adjusted net income less preferred share dividends.

Net income, 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 net income attributable to common shareholders for a 12-month period, divided by the Average common shareholders’ equity over the same 12-month period.

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

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, if appropriate.

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

The liability established to reflect the estimated cost of unpaid claims that have been reported and claims expenses that the insurer will ultimately be required to pay.

Current year CAT claims plus net reinstatement premiums, expressed as a percentage of NEP (MD&A basis) before reinstatement premiums.

Any one claim, or group of claims, equal to or greater than $7.5 million for P&C Canada (US$5 million for P&C U.S.) before reinsurance, related to a single event. 

Technical accounting provisions comprising case reserves, claims incurred but not reported by policyholders (IBNR), and a risk margin as required by accepted actuarial practice. Claims liabilities are discounted to consider the time value of money, using a rate that reflects the estimated market yield of the underlying assets backing these claims liabilities at the reporting date.

Total net claims expressed as a percentage of NEP (MD&A basis).

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.

Shareholders’ equity (excluding preferred shares) determined in accordance with IFRS at the end of a specific period.

Thresholds below which regulator notification is required together with a company action plan to restore capital levels. The CAL is 165% MCT for most Canadian insurance subsidiaries effective April 1, 2020 and going forward (previously 170% MCT) and 200% RBC and other CALs in other jurisdictions.

Current accident year Catastrophe losses, net of reinsurance, excluding those of exited lines.

Total debt outstanding divided by the sum of total shareholders’ equity and total debt outstanding, at the same date.

The total amount of premiums for new and renewal policies written during a specific period, as determined in accordance with IFRS.

DPW (IFRS) normalized for the effect of multi-year policies, excluding the impact of industry pools, fronting and exited lines. This measure matches direct premiums written to the year in which coverage is provided, whereas under IFRS, the full value of multi-year policies is recognized in the year the policy is written.

Operating income excluding interest and taxes related to our distribution and supply chain strategies for a specific period. Distribution EBITA and Other includes the operating results of our consolidated brokers (including our wholly-owned broker, BrokerLink), our share of operating results of our broker associates, as well as the operating results of Frank Cowan Company Limited (a specialty managing general agent in Canada) and On Side Developments Ltd. (a Canadian restoration firm).

DPW growth, excluding the impact of foreign currency fluctuations, calculated by applying the exchange rate in effect for the current period results to the results of the previous year.

Net income attributable to common shareholders divided by the WANSO, as reported in the Consolidated financial statements.

Underwriting expenses (MD&A basis), expressed as a percentage of NEP (MD&A basis).

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.

Average number of claims reported in a specific period.

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.

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

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. In the MD&A, income taxes from our broker associates are included in Total income taxes (MD&A). In the Financial statements, the share of profit (loss) from investments in associates and joint ventures is presented net of taxes.

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.

Industry pools
Canadian operations – When certain automobile owners are unable to obtain insurance via the voluntary insurance market in Canada, they are insured via the Facility Association (“FA”). In addition, entities can choose to cede certain risks to the FA administered Risk Sharing Pool (“RSP”). The related risks associated with FA insurance policies and policies ceded to the RSP are aggregated and shared by the entities in the Canadian P&C insurance industry, generally in proportion to market share and volume of business ceded to the RSP. 

U.S. operations – As a condition of its license to do business in certain states in the U.S., the Company is required to participate in various mandatory shared market mechanisms commonly referred to as residual or involuntary markets. Each state dictates the type of insurance and the level of coverage that must be provided. 

Canadian operations - When certain automobile owners are unable to obtain insurance via the voluntary insurance market in Canada, they are insured via the Facility Association (“FA”). In addition, entities can choose to cede certain risks to the FA administered Risk Sharing Pool (“RSP”). The related risks associated with FA insurance policies and policies ceded to the RSP are aggregated and shared by the entities in the Canadian P&C insurance industry, generally in proportion to market share and volume of business ceded to the RSP.

U.S. operations - As a condition of its license to do business in certain states in the U.S., the Company is required to participate in various mandatory shared market mechanisms commonly referred to as residual or involuntary markets. Each state dictates the type of insurance and the level of coverage that must be provided.

A ratio calculated by the Company as the sum of the dollar duration of the pension asset portfolio divided by the dollar duration of the registered pension plans’ obligation. An interest rate hedge ratio below 100% indicates that funded status of the pension plans would increase if government bonds yield rise, all else equal.

A single claim larger than $0.25 million for P&C Canada (US$0.25 million for P&C U.S.) but smaller than the catastrophe threshold of $7.5 million for P&C Canada (US$5 million for P&C U.S).

Claims liabilities are discounted at the estimated market yield of the assets backing these liabilities. The impact of changes in the discount rate used to discount claims liabilities based on the change in the market-based yield of the underlying assets is referred to as MYA. MYA is included in Net claims incurred in our consolidated statements of income.

The annualized total pre-tax investment income (before expenses) divided by the average net investments. Average net investments are defined as the mid-month average fair value of net equity and fixed-income securities held during the reporting period. 

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).

Net premiums written recognized for accounting purposes as revenue during a specific period including net reinstatement premiums, as determined in accordance with IFRS.

NEP (IFRS), excluding net earned premiums of exited lines.

Net operating income, less preferred share dividends.

Net income, as reported under IFRS, excluding the after-tax impact of Non-operating results.

Net operating income, less preferred share dividends.

Net operating income attributable to common shareholders, divided by the WANSO.

Direct premiums written (MD&A basis) plus assumed premiums (external and industry pools) less ceded premiums (reinsurers and industry pools).

A group of claims, which is considered significant but that is smaller than the catastrophe threshold of $7.5 million for P&C Canada (US$5 million for P&C U.S.), related to a single weather event.

Difference between the asset return (interest income on plan assets) calculated using the expected return on plan assets versus the IFRS discount rate. The expected return better reflects our operating performance given our internal investment management expertise and the composition of our pension asset portfolio.

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 intangible assets recognized in business combinations, Acquisition, integration and restructuring costs, Net gains (losses), Non-operating pension expense, Market yield adjustment on underwriting, Underwriting results of exited lines, as well as other costs or revenues that are not representative of our operating performance.

Catastrophe losses mostly related to large commercial losses (including non-weather-related fires), surety and liability losses, as well as direct losses related to the COVID-19 crisis.

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.

Net operating income attributable to common shareholders for a 12-month period, divided by the Average common shareholders’ equity (excluding accumulated other comprehensive income) over the same 12-month period.

Include general corporate expenses and income, consolidation adjustments, regulatory fees related to our public company status, special projects and other operating items.

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.

Comprises of the following items (MD&A basis): Underwriting income, net investment income, Distribution EBITA and Other, Finance costs and Other income (expense).

Change in total prior year claims liabilities during a specific period. 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.

Prior year claims development (IFRS basis), net of reinsurance, excluding the PYD related to exited lines. 

PYD (MD&A basis), expressed as a percentage of NEP (MD&A basis).

Minimum capital test (MCT), as defined by the Office of the Superintendent of Financial Institutions (OSFI) and the Autorité des marchés financiers (AMF) in Canada and Risk-based capital requirements (RBC) as defined by the National Association of Insurance Commissioners (NAIC) in the U.S.

Premium payable to restore the original reinsurance policy limit as a result of a reinsurance loss payment under a catastrophe coverage. Reinstatement premiums are reported in Net earned premiums (IFRS).

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.

Net income attributable to common shareholders for a 12-month period, divided by the Average common shareholders’ equity over the same 12-month period.

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

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

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

Total capital margin includes the aggregate of capital in excess of company action levels (CALs) in regulated entities plus available cash and investments in unregulated entities. 

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

Claims incurred, net of reinsurance (as determined in accordance with IFRS), excluding the Impact of MYA on underwriting results, adjustment for Non-operating pension expense and net claims of exited lines and expressed as a percentage of NEP (MD&A basis).

Total net claims, excluding Current year CAT claims and prior year claims development, expressed as a percentage of NEP (MD&A basis) before reinstatement premiums.

Underwriting expenses, net of reinsurance and other underwriting revenues, including commissions, premium taxes and general expenses related to underwriting activities but excluding the adjustment for non-operating pension expense and underwriting expenses of exited lines.

NEP (MD&A basis) less Total net claims and Underwriting expenses (MD&A basis) for a specific period.

Included the results of the U.S. Commercial’s business Programs, Architects and Engineers, Healthcare (effective July 1, 2019), as well as BC auto exit (effective in Q4-2020).

The number of vehicles in personal automobile insurance and the number of premises in personal property insurance written for a specific period.