Glossary

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.

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 and Preferred shares and other equity is determined in accordance with IFRS.

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

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

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

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 net income is net of net income (loss) attributable to non-controlling interests.

Adjusted net income attributable to common shareholders for the last 12 months, divided by the Adjusted average common shareholders’ equity over the same period.

The sum of Debt outstanding, Equity attributable to shareholders, Restricted Tier 1 notes and preferred shares instruments held by subsidiaries, at the same date. The restricted Tier 1 notes and preferred shares instruments held by subsidiaries are included in the equity attributable to non-controlling interests.

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

Excludes Non-controlling interests (NCI).

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.

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

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

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

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

Under IFRS 4, CAT loss ratio was defined as Net current year CAT losses plus net reinstatement premiums, expressed as a percentage of Operating NEP before the impact of reinstatement premiums.

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. 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, IFC aggregate threshold: $15 million (combined impact across all segments of $15 million or more, effective January 1, 2023). Reported CAT losses can either be weather-related or not weather-related and exclude those from exited lines.

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

Under IFRS 4, Claims ratio was defined as Operating net claims expressed as a percentage of Operating NEP.

Equity attributable to shareholders determined in accordance with IFRS excluding preferred shares 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 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.

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

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

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

Under IFRS 4, Expense ratio was defined as Operating net underwriting expenses, expressed as a percentage of Operating NEP.

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 assets expressed as a percentage of funded plans’ obligations.

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.

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. 

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 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.

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.

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 bond yields rise, all else equal.

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

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.

MYA and FX on claims liabilities arises mostly from movements in interest rates, which can be volatile to earnings. 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. Starting in Q1-2022, net foreign currency gains (losses) on claims liabilities have been reclassified to MYA and FX on claims liabilities. In the financial statements, MYA and Net foreign currency gains (losses) on claims liabilities are also recognized outside of insurance results, in Net insurance financial result, as determined in accordance with IFRS.

For MD&A purposes, MYA and FX on our claims liabilities is reclassified to Non-operating results.

Under IFRS 4, Market yield adjustment was described as follows: 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 under IFRS.

Net gains (losses) on our FVTPL bonds are expected to offset change in rates used to discount our claims liabilities (MYA), which are both reflected in non-operating results. The net result of these two items is referred to as the Market Yield Effect (MYE). As part of MYE, we have also included the foreign currency gains (losses) in regard to the currency fluctuations of our claims liabilities and bonds denominated in foreign currencies.

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

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).

Current accident year Catastrophe losses, net of reinsurance, excluding those from exited lines. Under IFRS 17, CAT losses now include net reinstatement premiums..

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.

Net operating income, less preferred share dividends and other equity distribution.

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, less preferred share dividends.

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

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.

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

Canadian pension plans: The non-operating pension expense is the difference between the total IAS 19 pension expense and the operating pension expense. The operating pension expense is the current service costs calculated using the expected return on assets as the interest rate, as opposed to the IFRS discount rate, for our Canadian pension plan. The expected return better reflects our operating performance given our internal investment management expertise and the composition of our pension asset portfolio.

UK pension plans: the net of the asset return on the DB pension plans assets and the administrative expenses for these plans. The DB pension plans have been closed to new entrants since 2002.

The non-operating pension expense is included in Insurance service expense under IFRS.

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 from 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.

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.

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

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.

Under IFRS 4, Operating direct premiums written (Operating DPW) was defined as Direct premiums written normalized for the effect of multi-year policies, excluding the impact of industry pools, fronting and exited lines. This measure matches operating 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 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.

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

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.

Under IFRS 4, Operating net claims was defined as 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 from exited lines.

Operating net premiums written (Operating NPW) recognized for accounting purposes as revenue during a specific period, excluding operating NEP from exited lines.

Under IFRS 4, Operating net earned premiums was defined as Net premiums written recognized for accounting purposes as revenue during a specific period, including net reinstatement premiums, as determined in accordance with IFRS, excluding net earned premiums from exited lines.

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 income and Net unwind of discount on claims liabilities.

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.

Under IFRS 4, Operating net premiums written (Operating NPW) was defined as Net premiums written normalized for the effect of multi-year policies, excluding NPW from exited lines.

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. 

Under IFRS 4, Operating net underwriting expenses  was defined as 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 from exited lines.

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). Insurance contracts reported under the General Measurement Model following IFRS 17 (including those acquired through a business combination and the net adverse development cover (“ADC”)) will not be presented grossed-up. The closest GAAP measure is Insurance revenue, as reported under IFRS, net of Allocation of reinsurance premiums, as reported under IFRS.

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.

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.

Includes general corporate expenses related to the operation of the group and our public company status, consolidation adjustments, 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.

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 tax expense (benefit). In the Financial statements, the share of profit (loss) from investments in associates and joint ventures is presented net of taxes.

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).

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, expressed as a percentage of Operating net underwriting revenue.

Under IFRS 4, PYD ratio was defined as PYD, expressed as a percentage of Operating NEP.

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).

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 under 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.

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.

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, 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.

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

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.

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.

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).

Under IFRS 4, Other finance costs were referred to as Finance costs.

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.

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

Under IFRS 4, Underlying current year loss ratio  was defined as Operating net claims, excluding Current year CAT losses and Prior year claims development, expressed as a percentage of Operating NEP before reinstatement premiums.

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. 

Under IFRS 4, Underwriting income was defined as Operating NEP less Operating net claims and Operating net underwriting expenses for a specific period. Underwriting income (loss) represents Net earned premiums, Other underwriting revenues, Net claims incurred and Underwriting expenses, all of which are reported under IFRS, excluding the impact of MYA on underwriting results, non-operating pension expense and underwriting results from exited lines.

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

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