Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
Actuarial gains (losses)

Effect of changes in actuarial assumptions and experience adjustments (effect of differences between the previous actuarial assumptions and what has occurred).

Adjusted earnings per share (AEPS)

Calculated as net income for a specific period less preferred share dividends, adjusted for the after-tax impact on net income of amortization of intangible assets recognized in business combinations, integration costs, acquisition-related currency derivative gains or losses and the impact from the U.S. Corporate Tax reform, divided by the weighted-average number of common shares outstanding during the same period.

Adjusted return on equity (AROE)

Calculated as net income for a 12-month period less preferred share dividends, adjusted for the after-tax impact on net income of amortization of intangible assets recognized in business combinations, integration costs, acquisition-related currency derivative gains or losses and the impact from the U.S. Corporate Tax reform, divided by the average shareholders’ equity (excluding preferred shares) over the same 12-month period. Net income and shareholders’ equity are determined in accordance with IFRS.

Affiliated brokers

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

Average shareholders’ equity

Mean of shareholders’ equity at the beginning and end of the period, adjusted for significant capital transactions, if appropriate. Shareholder’s equity is determined in accordance with IFRS.

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B
Book value per share

Shareholders’ equity (excluding preferred shares) divided by the number of common shares outstanding at the same date. Shareholders’ equity is determined in accordance with IFRS.

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C
Case reserves

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.

Cash flow available for investment activities

Includes net cash flows from cash and cash equivalents and the investment portfolio.

CAT loss ratio

Current accident year catastrophe losses, including net reinstatement premiums, expressed as a percentage of Net earned premiums (MD&A basis) before reinstatement premiums.

Catastrophe losses

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.) related to a single event.

Change in constant currency

The growth or change between two figures, 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 period.

Claims liabilities

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 take into account 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.

Claims ratio

Claims incurred, net of reinsurance (as determined in accordance with IFRS), excluding the market yield adjustment, the difference between expected return and discount rate on pension assets and claims incurred from U.S. Commercial exited lines, during a specific period and expressed as a percentage of Net earned premiums (MD&A basis) for the same period.

Combined ratio

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.

Company action levels (CALs)

Thresholds below which regulator notification is required together with a company action plan to restore capital levels.

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D
Debt-to-total capital ratio

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

Direct premiums written (DPW) (IFRS)

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

Direct premiums written (DPW) (MD&A basis)

DPW (IFRS) normalized for the effect of multi-year policies, excluding industry pools, fronting and U.S. Commercial 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.

Distribution EBITA

Operating results excluding interest and taxes from our consolidated brokers (including our wholly-owned broker, BrokerLink), as well as our share of operating results excluding interest and taxes from our broker associates for a specific period.

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E
Earnings per share to common shareholders (“EPS”)

Net income attributable to common shareholders divided by the weighted-average number of common shares outstanding during the same period.

Expense ratio

Underwriting expenses, net of other underwriting revenues, including commissions, premium taxes and general expenses related to underwriting activities for a specific period and expressed as a percentage of Net earned premiums (MD&A basis) for the same period.

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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.

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I
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.

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.

Interest rate hedge ratio

A ratio calculated by the Company as the duration of the pension asset portfolio divided by the duration of the registered pension plans’ obligation. A lower hedge ratio increases the Company’s exposure to changes in interest rates.

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L
Large loss

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).

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M
Market yield adjustment (MYA)

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.

Market-based yield

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

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).

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N
Net distribution income

Operating income excluding interest and taxes from our consolidated brokers (including our wholly-owned broker, BrokerLink) and our share of operating income including interest and taxes from our broker associates for a specific period.

Net earned premiums (NEP) (IFRS)

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

Net earned premiums (NEP) (MD&A basis)

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

Net operating income (“NOI”)

Calculated as net income for a specific period, excluding the after-tax impact Non-operating results.

Net operating income per share (“NOIPS”)

Calculated as net operating income for a specific period less preferred share dividends, divided by the weighted-average number of common shares outstanding during the same period.

Net premiums written

Direct premiums written for a specific period less premiums ceded to reinsurers during the same period.

Non-catastrophe weather event

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.

Non-operating results

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, integration and restructuring costs, net gains (losses), difference between expected return and discount rate on pension assets, market yield adjustment, underwriting results of U.S. Commercial exited lines, the impact from the U.S. Corporate Tax reform, 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, including 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.

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O
Operating return on equity (“OROE”)

Calculated as net operating income for a 12-month period less preferred share dividends, divided by the average shareholders’ equity (excluding preferred shares and accumulated other comprehensive income) over the same 12-month period.

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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.

Prior year claims development (PYD) (IFRS)

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 (PYD) (MD&A basis)

PYD (IFRS basis), adjusted to exclude the PYD related to U.S. Commercial exited lines.

PYD ratio

PYD (MD&A basis), expressed as a percentage of Net earned premiums (MD&A basis).

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R
Regulatory capital ratios

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.

Reinstatement premium

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).

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 for a 12-month period less preferred share dividends, divided by the average shareholders’ equity (excluding preferred shares) over the same 12-month period. Net income and shareholders’ equity are determined in accordance with IFRS.

Risk-based Capital (“RBC”)

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

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S
Severity (of claims)

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

Structured settlements

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.

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T
Total capital margin

Total capital margin includes the aggregate of capital in excess of company action levels in regulated entities (170% MCT, 200% RBC) plus available cash in unregulated entities.

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U
Underlying current year loss ratio

Current year claims excluding catastrophe losses and prior year claims development, expressed as a percentage of Net earned premiums (MD&A basis) before reinstatement premiums.

Underwriting income (MD&A basis)

Net earned premiums less net claims incurred, commissions, premium taxes and general expenses, excluding market yield adjustment, the difference between the expected return and discount rate on pension assets and the underwriting results of U.S. Commercial exited lines.

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W
Written insured risks

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

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