ICPEI HOLDINGS INC. ECHELON FINANCIAL HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the nine months ended September 30, 2020
TABLE OF CONTENTS | |
IMPORTANT NOTE | |
SEGMENTED FINANCIAL INFORMATION ........................................................................................................... | 7 |
SUMMARY OF QUARTERLY RESULTS ............................................................................................................... | 9 |
BALANCE SHEET ANALYSIS............................................................................................................................. | 10 |
LIQUIDITY AND CAPITAL MANAGEMENT ........................................................................................................ | 13 |
COVID-19 PANDEMIC......................................................................................................................................... | 13 |
ACCOUNTING POLICIES ................................................................................................................................... | 14 |
CONTROLS AND PROCEDURES ...................................................................................................................... | 14 |
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ........................................................................... | 14 |
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the nine months ended September 30, 2020
References to "EFH" or "Company" in this Management's Discussion and Analysis refer to Echelon Financial Holdings Inc. on a consolidated basis, both now and in its predecessor forms.
Important Note:
The unaudited condensed consolidated interim financial statements for the quarters ended September 30, 2020, and 2019 have been prepared in accordance with International Financial Reporting Standards (IFRS) applicable to the preparation of interim financial statements, including IAS 34 Interim Financial Reporting. The policies applied in the unaudited condensed consolidated interim financial statements are based on IFRS and have been consistent with those of the previous financial year.
The following discussion should be read in conjunction with EFH's unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2020 and 2019, with the notes to the unaudited condensed consolidated interim financial statements, and with management's discussion and analysis (MD&A) and audited annual consolidated financial statements and accompanying notes for 2019. The financial data in this discussion has been prepared in accordance with IFRS and has been derived from the unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2020 and 2019.
The following commentary is current as of November 12, 2020. Additional information relating to EFH is available on SEDAR at www.sedar.com. Certain totals, subtotals and percentages may not reconcile due to rounding.
EFH uses both IFRS and certain non-IFRS measures to assess performance. Securities regulators require that companies caution readers about non-IFRS measures that do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures used by other companies. EFH analyzes performance based on underwriting income and underwriting ratios such as combined, expense and loss ratios, which are non- IFRS measures. Underwriting income is defined as net earned premiums less net claims incurred, net acquisition costs, operating expenses, and excludes any impact of change in discount rate on claims and corporate expenses. Loss ratio is net claims incurred divided by net earned premiums. Expense ratio is net acquisition costs plus operating expenses divided by net earned premiums. Combined ratio is the sum of loss ratio and expense ratio.
The following discussion contains forward-looking information that involves risk and uncertainties based on current expectations. This information includes, but is not limited to, statements about the operations, business, financial condition, priorities, targets, ongoing objectives, strategies and outlook of EFH. These statements, which appear in this MD&A (including the documents incorporated by reference herein), generally can be identified by the use of forward-looking words such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "plan", "would", "should", "could", "trend", "predict", "likely", "potential" or "continue" or the negative thereof and similar variations.
This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a projection as reflected in the forward-looking information. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific. A variety of material factors, many of which are beyond EFH's control, affect the operations, performance and results of EFH and its business, and could cause actual results to differ materially from the expectations expressed in any of this forward- looking information. Please see the "Risk Factors" set out in EFH's annual information form dated March 23, 2020.
Management's Discussion and Analysis | Page 3 |
COMPANY OVERVIEW
EFH operates in the property and casualty ("P&C") insurance industry in Canada through The Insurance Company of Prince Edward Island ("ICPEI"), a provincially regulated P&C insurance company.
The Company sold its businesses in Echelon Insurance and the unregulated warranty business of EFH in 2019 and its European operations in Qudos in 2017. After the sale of Echelon Insurance and the unregulated warranty business of Echelon Financial Holdings Inc., the Company has insurance operations in ICPEI and cash in Echelon Financial Holdings Inc.
The Company is listed on the Toronto Stock Exchange but has applied to migrate to the TSX Venture Exchange.
BASIS OF PRESENTATION
This MD&A is based on information in the audited consolidated financial statements and accompanying notes there to for the year ended December 31, 2019 and the unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2020.
The results relating to Echelon Insurance, the unregulated warranty business of Echelon Financial Holdings Inc. and the settlement of New Nordic Odin Denmark lawsuit related to the sale of Qudos , have been presented as discontinued. See the Discontinued Operations section of this MD&A.
IFRS 9 FINANCIAL INSTRUMENTS AND IFRS 17 INSURANCE CONTRACTS
In March of this year, the IASB announced the delay of the implementation date for IFRS 17 to January 1, 2023 with retrospective application. Since the Company has deferred the adoption of IFRS 9 until the adoption of IFRS 17, the implementation date for IFRS 9 with retrospective application will be delayed to January 1, 2023.
THIRD QUARTER HIGHLIGHTS
- Net income per share on continued operations of $0.24 per share compared to a net loss of $0.04 per share in the third quarter of 2019.
- A combined ratio of 95.4% compared to 115.4% in the third quarter of 2019.
- A 14% increase in Direct Written Premiums over the same period in 2019 to $11.7 million as a result of growth in both the Personal and Commercial Lines. The COVID-19 pandemic did not have a significant impact on direct premiums written for the third quarter of 2020 when compared to the same period in prior year.
- Investment income was $2.2 million higher in the third quarter compared to same period in 2019, largely due to the sale of the majority of Common Shares portfolio.
- The Company settled the claim from New Nordic Odin Denmark arising from the sale of its European operations for $7 million, the result is included in discontinued operations. The Board concluded that it is in the best interests of EFH and the shareholders to settle the claim for a reasonable amount in order to avoid the expenses and risks of a lengthy litigation. A special dividend of $5.60 per share was paid in September. See details in August 26, 2020 press release available at www.sedar.com.
- Closing book value per share of $1.55 after the Company paid a dividend of $5.60 per share and results of discontinued operations of $0.49 per share during the quarter. The Company's book value per share increased by 8% over that at the end of second quarter on a comparable basis after adjusting for the dividend paid and the results of discontinued operations.
Management's Discussion and Analysis | Page 4 |
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
Echelon Financial Holdings Inc. published this content on 12 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 November 2020 00:58:07 UTC
