President and Chief Executive Officer’sReport
Our biggest achievement in 2015 was the progress we made toward our strategic goals, despite the unstable environment within which we currently find ourselves.
To achieve this, we had to sacrifice some growth in favour of responsible management, which required a premium increase for some of our products that were particularly vulnerable to low interest rates and maintaining important investments that are part of our strategic development plan.
This boosted our sales in the ROC in our individual insurance segment to just over 30% for 2015. In addition, if we exclude the sales of our subsidiary, LS-Travel, over 20% of the Company’s sales occurred online. We are delighted by these results, which are central to the Company achieving the main targets of our development plan.
While our total sales grew by nearly 10% last year, they remained stable in 2015. Despite this, some segments made marked progress, such as our travel insurance sector, which has maintained steady growth despite the increasing competition in this line of business. Once again, I would like to underline the exceptional work of our partner Tour+Med.
Our second product, Children360, that is only available online.
The Company has forged ahead with its individual insurance strategy to develop markets outside of Quebec and web distribution by proposing a second product available only online, Children360, to our advisor network. This product is aligned with our strategy and targets a very specific market. Our goal was to offer better protection for children ages 0 to 15 diagnosed with a critical illness and to increase support for their parents. On the heels of our commercial and technological success, Insurance Without Medical Exam, this new, innovative product has confirmed that our teams are fully capable of developing and marketing reliable, high-quality online products.
In group insurance, our sales have significantly declined due to our reluctance to enrol groups with rather uncertain profitability. Instead, we focused on supporting select strategic partnerships that help us meet the needs of groups seeking long-lasting relationships. Although this strategy lowered our sales volume in this line of business, we believe it will prove more profitable for the Company in the long run.
Our most valued strategic partnership is that which connects us to our advisor network.
In terms of distribution, we reiterate our full faith in our advisor networks’ ability to distribute our products. We are well aware of the many challenges facing distribution firms. We are a proud partner of the advisor network and readily invest in it to support the development of firms seeking financial assistance. It is our intention to maintain and further develop what we feel is our most valuable strategic partnership - that which connects us to the advisor network. It is with this in mind that, in 2015, Humania Assurance strengthened its over 15-year association with Pro Vie Insurance by acquiring a majority of its shares.
Our partnership with the Fonds de solidarité des travailleurs du Québec (F.T.Q.) brings added financial depth to the Company.
Another highlight this past year was the association we established with the Fonds de solidarité des travailleurs du Québec (F.T.Q.). To recap, in 2012, Humania Assurance undertook legal restructuring to enable the Company to issue share capital, while ensuring that members retained majority ownership of their insurance Company. The purpose of this restructuring was to improve the Company’s access to external capital to finance our ambitious web development projects, boost sales in the ROC and support the advisor network. Over the course of 2015, Humania Assurance issued a minority portion of its share capital to the Fonds de solidarité des travailleurs du Québec (F.T.Q.). Our Board of Directors and management team have no doubt that this partnership adds financial depth to the Company in a time when it is investing heavily in its future.
In 2015, the Company generated earnings before taxes of $5.1 million, with net earnings of $4.5 million, down from last year’s $4.9 million. The primary factors contributing to our drop in earnings include the strengthening of our actuarial reserves derived from components of some of our products’ premium returns and the ongoing investments within our development plan.
Our gross revenue jumped by 12.1% to a total of $152.5 million in 2015. This figure does not include investment income generated by the change in fair value of our investments, as this change is duly reflected in our expenses. It does, however, include the results from the Pro Vie Insurance firm, which has been a subsidiary of the Company since January 1, 2015.
A strong majority of our revenue came from gross insurance premiums, which brought in $130.9 million, an 8.7% increase over last year. This growth is explained by our sales performance in 2015 and our high contract retention rate.
Our net earnings increased by 13.2%
Our net investment earnings reached $15.7 million, the same level as last year. As a result, if we exclude the change in fair value of investments matched to actuarial liabilities, Humania Assurance’s 2015 net revenue totalled $124.8 million, up by 13.2%.
Company expenses in 2015 totalled $115.8 million. This includes the $14.1 million change in actuarial liabilities. Our general expenses rose to $33.4 million, a significant increase from last year that can be largely attributed to the consolidation of our financial statements due to the acquisition of an additional subsidiary in 2015. By excluding this factor, the increase in our general expenses matches our initial forecast.
Benefits paid to our insureds reached $66.2 million, up nearly 3% compared to last year.
The Company’s assets as at December 31, 2015, rose by 7.7%, totalling $514 million, versus $477.2 million in 2014.
Our liabilities grew to $444.5 million, 86.8% of which were actuarial.
Humania Assurance's equity saw significant growth, rising from $52.5 million last year to $69.6 million as at December 31, 2015. This increase of over 32% is largely due to the Company’s issuing of shares valued at $15 million to the Fonds de solidarité des travailleurs du Québec (F.T.Q.).
Variation in Assets
Growth in Gross Revenue
(excluding the market value change of investments tied to actuarial liabilities)
Challenges for 2016
The Company has reached the halfway mark for implementing its 2015-2018 development plan. The development plan is intended to help the Company overcome some major challenges, such as expanding our market in order to maintain growth and reforming our customer service model to meet the new expectations of our web-based clients.
Expand our Market to Maintain Steady Growth
As previously stated, the specialized nature of our products and our desire to target specific lines of business demonstrate how important it is to expand our market in order to maintain steady growth over the long term. Despite highly encouraging results over the last two years and over 30% individual insurance sales volume in the ROC, we must continue to focus heavily on expanding our market for several years to come. We will therefore continue our efforts to develop tools which make us stand out by automating our processes for faster, more efficient service to better meet the changing needs of our clients.
Furthermore, in the short term, we will continue to build upon the success of our web-based products, Insurance Without Medical Exam and Children360, in order to expand our penetration of the ROC. We will also expand our presence in other provinces by improving manager support in Western Canada and Ontario. Their contribution is key to the ongoing development of our Canada-wide advisor network.
Reform our Customer Service by Leveraging New Tools
We also plan to reform our customer service model to continue meeting the needs of our growing English-speaking client base comprised of insureds and distributors, and to better meet web-based service challenges.
Reviewing our customer service model to better meet web-based service challenges
We believe that the inclusion of web-based sales in our distribution strategy should also mean streamlining transactions and customer relations with these new clients. This will be a multi-phase project to be carried out over several years. Our ultimate goal is to implement a cutting-edge customer relationship management (CRM) platform enabling us to better leverage our system data to facilitate information access and improve the quality of our communications and services. The implementation of this multi-channel service centre will continue to be one of our main focuses in 2016.
Our Company is continuously evolving.
Our many projects show that our Company is constantly evolving and adapting. They are a reflection of our belief that the only way for us to earn our current position as a market leader and to generate growth is to accept change and transform along with it at the pace and to the extent set by the consumer. This is the challenge Humania Assurance has been rising to meet in recent years, with all the boldness required to innovate and astound, a challenge that we take on yet again in 2016.
We could not maintain such ambition and enthusiasm for the Company’s future without the steadfast dedication of our staff. Dedication that, once again, merits sincere thanks to each and every employee for their exceptional work.
I would also like to thank the management team. Each member demonstrates exemplary leadership, inspiring us all to invest in the Company’s development.
Humania Assurance also relies on an exceptional Board of Directors, who inspire trust and respect. I wish to thank every manager and the Chairman of the Board, Jacques Martineau.
I would also like to extend a very special thanks to our colleague, Stéphane Rochon, who, after dedicating thirteen years of his career as Vice-President, Sales and Marketing at Humania Assurance, has decided to take on a new career opportunity. Thank you, Stéphane, for making such a positive impact on Humania Assurance. I wish you every success in the future.
President and Chief Executive Officer