Financial Summary - March 2021 - ICBC
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Financial Summary – March 2021 Financial Results ICBC’s corporate net income for the fiscal year, which ended March 31, 2021, was $1.538 billion, of which $1.527 billion was attributed to ICBC and $11 million was attributed to non-controlling interest. At the end of the 2019/20 fiscal year, ICBC was experiencing the positive effects of reforms to the insurance system implemented in April 2019 while observing a general downward trend in crashes. Starting in March 2020, the COVID-19 pandemic and subsequent public health restrictions began to result in decreased driving activity, further reducing crashes. Overall during fiscal 2020/21, there were nearly 30 per cent fewer crash claims than would have been expected without the pandemic, including fewer injury claims. At the same time, the pandemic negatively impacted ICBC’s revenue as there were more policy cancellations, fewer renewals and customers reduced coverages. However, this unfavourable impact from revenues was more than offset by the reduction in claims costs. ICBC and the Government of British Columbia returned the net COVID-19 savings (lower claims costs offset by lower premiums) to customers through two rebates totalling $950 million. In addition to the downward trend in crashes and decrease in claims from the pandemic, ICBC also benefitted from favourable outcomes on claims from prior years, including fewer bodily injury claims and lower large bodily injury severities, contributing to lower claims costs compared to fiscal year 2019/20. ICBC’s investment portfolio performed strongly, mostly due to lower interest rates that led to higher bond gains from trading activity, gains from the disposition of investment properties and higher dividend income. The positive bottom line result of $1.538 billion net income and the improvement in the investment markets have improved ICBC’s equity on the statement of financial position by $2.4 billion—turning from a $0.5 billion deficit position at 2019/20 fiscal year-end to a $1.9 billion surplus position at the 2020/21 fiscal year-end. ICBC’s Minimum Capital Test ratio is higher than fiscal year 2019/20 primarily due to the recovery of the financial markets from COVID-19 since our previous year-end and our positive net income. ICBC’s Minimum Capital Test ratio continues to be low, which impacts the ability to absorb any unanticipated adverse impacts. The increase in ICBC’s expense ratio is because of the COVID-19 customer rebates. Without the rebates, the expense ratio would have been slightly lower than fiscal year 2019/20.
Statement of Operations
For the Twelve Months Ended March 31, 2021 and 2020
Basic Optional Corporate
2020/211,2 2020/211,2 2020/211,2
($ Millions) (Unaudited) 2019/20 (Unaudited) 2019/20 (Unaudited) 2019/20
Premiums written1,2 $ 2,735 $ 3,579 $ 2,084 $ 2,777 $ 4,819 $ 6,356
Premiums earned1 2,945 3,564 2,432 2,722 5,377 6,286
Service fees and other income 83 87 61 61 144 148
Total earned revenues1 3,028 3,651 2,493 2,783 5,521 6,434
Current year claims 2,172 2,900 1,536 1,828 3,708 4,728
Prior years' claims adjustments (127) 757 (240) 423 (367) 1,180
Net claims incurred 2,045 3,657 1,296 2,251 3,341 5,908
Claims services, road safety and loss management services 299 313 147 151 446 464
Total claims and related costs 2,344 3,970 1,443 2,402 3,787 6,372
Administrative and Insurance expenses 124 132 160 172 284 304
Premium taxes and commissions 194 227 593 548 787 775
Deferred premium acquisition costs adjustment - (34) - - - (34)
Total claims and expenses 2,662 4,295 2,196 3,122 4,858 7,417
Underwriting income (loss) 366 (644) 297 (339) 663 (983)
Investment income 701 734 317 324 1,018 1,058
Income (loss) - insurance operations before impairment loss 1,067 90 614 (15) 1,681 75
Provincial licences and fines 616 641 - - 616 641
Less:
Licences and fines transferable to the Province 616 641 - - 616 641
Non-insurance operating expenses 107 110 - - 107 110
Commissions 34 31 - - 34 31
Non-insurance other income (5) (7) - - (5) (7)
Total non-insurance expenses 752 775 - - 752 775
Loss - non-insurance operations (136) (134) - - (136) (134)
Net income (loss) before impairment loss 931 (44) 614 (15) 1,545 (59)
Impairment loss (5) (220) (2) (97) (7) (317)
Net income (loss) $ 926 $ (264) $ 612 $ (112) $ 1,538 $ (376)
Net income (loss) attributable to:
Non-controlling interest3 $ 8 $ - $ 3 $ - $ 11 $ -
Owner of the corporation 918 (264) 609 (112) 1,527 (376)
$ 926 $ (264) $ 612 $ (112) $ 1,538 $ (376)
Insurance Industry Ratios
% 2020/21 2019/20 2020/21 2019/20 2020/21 2019/20
Loss ratio 79.6 111.4 59.3 88.3 70.4 101.4
Expense ratio 15.6 13.9 30.0 25.6 22.1 19.0
Combined ratio 95.2 124.4 90.3 114.7 93.0 120.2
1 2020/21 actual premiums written and earned reflect the two approved COVID-19 rebates to ICBC customers.
2 2020/21 actual premiums written reflect the Enhanced Care refund to ICBC customers.
3 Non-controlling interest net income is income that is attributable to the minority shareholder of a joint venture who has no control over decisions. Under IFRS, ICBC, as the parent, has to reflect 100% of the net
income and disclose separately the portion related to non-controlling interest.
Please see Glossary for definitions of certain terms. 1Statement of Financial Position
As at March 31, 2021 and 2020
March 31
1,2
2021 March 31
($ Millions) (Unaudited) 2020
Assets
Cash and cash equivalents $ 20 $ 52
Accrued interest 60 69
Assets held for sale 59 216
Financial investments 20,544 17,501
1
Premium and other receivables 1,985 2,180
Reinsurance assets 28 32
Investment properties 558 610
Property, equipment, intangible and lease assets 460 438
Accrued pension benefits 90 64
Deferred premium acquisition costs and prepaids 378 410
$ 24,182 $ 21,572
Liabilities and Equity (Deficit)
Liabilities
Current liabilities $ 353 $ 399
Provision for premium rebates/refunds1,2 1,186 $ -
Bond repurchase agreements and investment-related liabilities 2,271 2,406
Unearned premiums and premiums and fees received in advance 2,466 3,037
Lease liabilities 61 54
Pension and post-retirement benefits 458 219
Provision for unpaid claims 15,520 16,004
22,315 22,119
Equity (Deficit)
Equity (Deficit) 1,131 (396)
Other components of equity 729 (165)
Equity (Deficit) attributable to parent corporation 1,860 (561)
Non-controlling interest 7 14
1,867 (547)
$ 24,182 $ 21,572
Minimum Capital Test ("MCT") 51% -30%
1 2020/21 reflects the reclassification of Enhanced Care refund from unearned premiums to provision for premiums rebates/refunds and premium and other
receivables. For non-payment plan customers, the refund will be issued by cheques and is included in the provision for premium rebates/refunds and for payment
plan customers, the refund will reduce the premium and other receivables.
2 Provision for premium rebates/refunds reflects the two approved COVID-19 rebates and a portion of the Enhanced Care refund to ICBC customers.
Please see Glossary for definitions of certain terms. 2Glossary – March 2021
Combined ratio
A key measure of overall profitability within the insurance industry. It is the ratio of all costs (claims,
claims-related costs, operating expenses, premium taxes and commissions, and deferred premium
acquisition costs adjustment) to premiums earned. A lower combined ratio is better.
Current year claims
Current year claims expense is the total costs (paid and expected) to settle claims for all insured losses
that have occurred during the current fiscal year, regardless of whether the loss has been reported to
ICBC.
Deferred premium acquisition costs ("DPAC") Adjustment
The deferred premium acquisition costs adjustment is an accounting adjustment that limits the amount
of commissions and premium taxes that can be deferred and recorded in the income statement over
the policy term based on the future profitability. If the business is unprofitable, no deferral of expenses
is permitted and these costs must be immediately recognized as expenses. If the business becomes
profitable, then this accounting treatment is reversed.
Expense ratio
The ratio of operating expenses (excluding claims costs and claims-related costs), premium taxes and
commissions to premiums earned. It excludes the deferred premium acquisition costs adjustment,
Rate Affordability Action Plan and Enhanced Care Coverage implementation costs as these are one-
off projects. A lower expense ratio is better.
Impairment Loss
An expense arising due to the decline in the value of an asset where the price that a knowledgeable
third party is willing to pay for such asset is below cost.
Loss ratio
The loss ratio is an industry measure of claims and claims-related costs (claims services, road safety
and loss management services) to premiums earned. The lower the percentage, the more profitable
the product is.
Minimum Capital Test ("MCT")
An industry measure used to determine whether a company has sufficient capital levels,
commensurate with the risks within its business. The measure is based on guidelines set by the Office
of the Superintendent of Financial Institutions.
Non-controlling interest
ICBC’s financial reporting standards attribute the total comprehensive income of investment
partnerships between the majority and minority partners based on their respective ownershipinterests. Non-controlling interest represents the portion of ICBC’s net income and assets that are attributable to minority partner. Prior years’ claims adjustments Prior years’ claims adjustments are the change since the prior fiscal year-end in claims cost estimates for losses that occurred in prior fiscal periods.
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