| Actuarial gains (losses) |
Effect of changes in actuarial assumptions and experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred).
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| Adjusted earnings per share |
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Calculated as net income less preferred share dividends, plus the net after tax impact of integration and restructuring costs and amortization of intangible assets recognized in business combinations, divided by the average number shares outstanding.
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| Adjusted return on equity |
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Net income for a 12-month period less preferred share dividends, add the net of tax impact of integration and restructuring costs and amortization of intangible assets recognized in the business combinations and 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 GAAP. The average shareholders’ equity is the mean of shareholders’ equity at the beginning and end of the period.
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| Asset-backed security |
A financial security whose value and income payments are derived from and collateralized (or "backed") by a specified pool of underlying assets such as auto loans and credit card receivables.
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| 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.
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| Catastrophe |
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Catastrophe claims are any one claim, or group of claims, equal to or greater than $5.0M, related to a single event.
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| Claims expenses |
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The direct and indirect expenses of settling claims.
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| Claims liabilities |
Claims liabilities are technical accounting provisions comprised of three main elements: 1) case reserves 2) claims that are incurred but not reported (IBNR) and 3) provision for adverse development as required by accepted actuarial practice in Canada. Claims liabilities are discounted to take into account the time value of money.
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| Claims ratio |
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Claims incurred, net of reinsurance, during a defined period and expressed as a percentage of net premiums earned for the same period.
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| Collateral |
Assets pledged as security for a loan or other obligation. Collateral can take many forms, such as cash, highly rated securities, receivables, etc.
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| Combined ratio |
The sum of the claims ratio and the expenses ratio. A combined ratio below 100% indicates profitable underwriting results. A combined ratio over 100% indicates unprofitable results.
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| Corporate sustainability |
Corporate sustainability represents the way a company achieves enhanced ethical standards and a balance of economic, environmental and social imperatives addressing the concerns and expectations of its stakeholders.
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| Corridor method or approach |
Systematic method for recognizing into the statement of income the net cumulative unrecognized actuarial gains and losses. Under this method, the portion of actuarial gains and losses to be recognized for a specific pension plan is the excess of the greater of: (a) 10% of the present value of the defined benefit obligation and (b) 10% of the fair value of the plan assets, both established at the same date, divided by the expected average remaining working lives of the employees participating to the plan.
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| Counterparty |
A counterparty is any person or entity from which cash or other forms of consideration are expected to extinguish a liability or obligation to the company.
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| Credit derivatives |
Credit derivatives, such as credit default swaps, are over-the-counter contracts that transfer credit risk related to an underlying financial instrument (referenced asset) from one counterparty to another.
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| Credit risk |
Credit risk is the possibility that one counterparty may not be able to meet payment obligations when they become due.
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| Currency forwards and futures contracts |
Contractual obligations to exchange one currency for another at a specified price for settlement at a predetermined future date.
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| Currency risk |
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
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| Earnings per share (EPS), basic |
Calculated as net income less preferred share dividends divided by the average number of shares outstanding.
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| Earnings per share (EPS), diluted |
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Calculated as net income less preferred share dividends divided by the average number of
shares outstanding adjusted for the dilutive effects of stock options and other convertible
securities.
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| Equity price risk |
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Equity price risk is the risk of losses arising from movements in equity market prices.
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| Excess capital |
Excess capital in the P&C insurance subsidiaries at 170% minimum capital test (“MCT”) plus excess liquid assets in the holding company and other subsidiaries.
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| Expense ratio |
Underwriting expenses including commissions, premium taxes and all general and administrative expenses, incurred in underwriting income during a defined period and expressed as a percentage of net premiums earned for the same period.
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| Facility Association |
The Facility Association is an entity established by the automobile insurance industry to ensure that automobile insurance is available to all owners and licensed drivers of motor vehicles where such owners or drivers are unable to obtain automobile insurance through the private insurance market. The Facility Association serves the following provinces and territories: Alberta, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario,
Prince Edward Island and Yukon.
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| Fair value |
The amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act.
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| Forwards derivatives |
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Forward contracts are effectively tailor-made agreements that are transacted between counterparties in the over-the-counter market
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| Frequency (of claims) |
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Total number of claims reported in a specific period.
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| Futures derivatives |
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Futures contracts are standardized contracts with respect to amounts and settlement dates, and are traded on regular future exchanges.
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| IFRS |
International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB). The term ‘IFRS’ includes IFRS standards and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or its predecessor, the former Standing Interpretations Committee (SIC).
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| Incurred but not reported (IBNR) claims reserve |
Reserves (accounting provisions) for estimated claims that have been incurred but not yet reported by policyholders including a reserve for future developments on claims which have been reported.
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| Industry pools |
Industry pools consist of the “residual market” as well as risk-sharing pools (“RSP”) in Alberta, Ontario, Québec, New Brunswick and Nova Scotia. These pools are managed by the Facility Association except for the Québec RSP.
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| Interest rate forwards and futures contracts |
Contractual obligations to buy or sell an interest-rate sensitive financial instrument at a predetermined future date at a specified price.
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| Interest rate risk |
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Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
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| Invested assets or investment portfolio |
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Financial instrument assets owned by the Company including debt and equity securities and loans.
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| 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.
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| Market yield effect |
The difference between the MYA and the gains and losses on “held-for-trading” debt securities (the objective is that these two items offset each other with a minimal overall impact to net income).
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| Market-based yield |
The market-based yield is a non-GAAP measure defined as the annualized total pre-tax dividend and interest income (before expenses) divided by the average fair values of equity and fixed income securities held during the reporting period.
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| Master netting agreement |
An agreement between the company and a counterparty designed to reduce the credit risk of derivative transactions through the creation of a legal right to offset the exposure in the event of a default.
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| Minimum capital test (“MCT”) |
Ratio of available capital to required capital. Federally regulated property and casualty insurers, including our Canadian insurance subsidiaries, must meet a minimum capital test (“MCT”) that assesses the insurer’s available capital in relation to its required capital and requires that available capital equal at least the minimum capital requirement. OSFI expects insurers to establish a target capital level above the minimum requirement, and maintain ongoing capital, at no less than the supervisory target of 150% of required capital under MCT. The company has an internal operating target of 170%.
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| Net operating income |
After-tax net income from underwriting activities (excluding MYA), corporate and distribution activities and interest and dividend income from invested assets.
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| Net premiums earned |
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Premiums written that are recognized for accounting purposes as revenue earned during a period.
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| Net premiums written |
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Direct premiums written for a given period less premiums ceded to reinsurers and retrocessionaires during such period.
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| Net underwriting income |
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Net premiums earned less net claims incurred, commissions, premium taxes and general expenses (excluding MYA).
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| Normal course issuer bid |
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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| Notional amount |
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The contract amount used as a reference point to calculate cash payments for derivatives.
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| Office of the Superintendent of Financial Institutions Canada (OSFI) |
The primary regulator of federally chartered financial institutions and federally administered pension plans in Canada. OSFI’s mission is to safeguard policyholders, depositors and pension plan members from undue loss.
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| Operating return on equity |
Net operating income for the last 12-months divided by the average shareholders’ equity (excluding accumulated other comprehensive income) over the same 12-month period. The average shareholders’ equity is the mean of shareholders’ equity at the beginning and the end of the period.
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| Options |
Contractual agreements under which the seller (writer) grants the purchaser the right, but not the obligation, either to buy (call option) or sell (put option) an asset (underlying asset) at a predetermined price, at or by a specified future date.
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| Reinsurer |
An insurance company that agreed 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.
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| Return on equity (ROE) |
Net income for a 12-month period divided by the average shareholders' equity over the same 12-month period. Net income and shareholders’ equity are determined in accordance with GAAP. The average shareholders’ equity is the mean of shareholders’ equity at the beginning and end of the period.
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| Risk |
Financial institutions, including insurance companies, face a number of different risks that expose them to possible losses including market risk, interest rate risk, currency risk, basis risk, credit risk, liquidity risk, insurance related risk, operational risk, strategy implementation risk, regulation and legal risk, solvency risk, reputation risk and other risks.
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| Securities lending |
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Transactions in which the owner of a security agrees to lend it under the terms of a prearranged contract to a borrower for a fee. The borrower must collateralize the security
loan at all times.
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| Securities sold short |
A transaction in which the seller sells securities and then borrows the securities in order to deliver them to the purchaser upon settlement. At a later date, the seller buys identical securities in the market to replace the borrowed securities.
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| Severity (of claims) |
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Average cost of a claim calculated by dividing the total cost of claims by the total number of claims.
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| Shareholders' equity |
Capital invested by the shareholders via share capital and contributed surplus, plus retained earnings and accumulated other comprehensive income (loss).
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| Structured settlements |
Periodic payments to an injured person or survivor for a determined number of years of for life, typically in settlement for a claim under a liability policy, usually funded through the purchase of an annuity.
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| Swaps, including currency and total return swaps |
Over-the-counter contracts in which two counterparties exchange a series of cash flows based on agreed upon rates such as exchange rates or value of an equity index applied to a contract notional amount.
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