An increasing number of employers plan to offer only high-deductible plans to their workers.
For the fourth quarter ended December 31, 2012, Desjardins Group, a cooperative financial group, posted surplus earnings before member dividends of $325 million, compared to $427 million for the same period of 2011.
In a release on February 22, the Company noted that the caisse network, Card and Payment Services and the insurance subsidiaries continued to post strong growth in business volumes throughout the fourth quarter, allowing Desjardins Group to pursue business development in its various market segments.
For fiscal 2012, Desjardins Group recorded surplus earnings before member dividends of $1,591 million, similar to the amount posted one year earlier. Return on equity was 10.4 percent, compared to 12.2 percent in 2011. This decrease resulted from an increase in equity following the issuance of $1.0 billion of capital shares in the Federation and growth in retained earnings.
"I am very satisfied with the financial performance of our cooperative financial group in 2012," said Monique F. Leroux, Chair of the Board, President and CEO of Desjardins Group. "It demonstrates the depth of our members' and clients' trust, year after year, and how Desjardins Group's offer adds value. We worked on improving our service offer throughout the year, both in the Personal Services and Institutional Services segment and in wealth management and insurance. I am also pleased with our business growth, as evidenced by a major increase in our insurance premiums and the success of both the business ownership transfer program and the Ready-to-Drive Loan program, our innovative auto financing offer.
"Declared by the United Nations the International Year of Cooperatives, 2012 was also the year we held the first International Summit of Cooperatives, allowing us to demonstrate the major role played by cooperatives in our economies," added Leroux. "More than ever, the cooperative model has made inroads around the world, and of course Desjardins Group will continue to provide leadership in this area, for the benefit of its members and clients as well as that of our communities."
Operating income stood at $11,300 million, up $364 million, or 3.3 percent, from 2011. Much of this increase was the result of higher net premiums, comprising premiums on life and health insurance, property and casualty insurance and annuity premiums. It also includes a $109 million contribution from Western Financial Group Inc. Net interest income fell $73 million, or 1.9 percent, mainly because of the ongoing low interest rate environment and strong competition in the market. Lastly, other operating income grew $162 million, or 7.5 percent, primarily due to commission income generated by Western Financial Group Inc.
Investment income reached $1,178 million at the end of the year, down $1,091 million, or 48.1 percent, compared to fiscal 2011. This was mainly attributable to investment income related to life and health insurance activities, due to a $1,073 million change in the fair value of assets used to support liabilities. This decline was almost fully offset by a decrease in the related actuarial provisions.
Expenses related to claims, benefits, annuities and changes in insurance and investment contract liabilities came to $4,397 million, down $895 million, or 16.9 percent, from one year earlier. This change was primarily due to a decline in actuarial provisions included under "Insurance and investment contract liabilities," in particular as a result of changes in the fair value of investments.
Non-interest expense totalled $5,760 million, compared to $5,623 million for the same period of 2011, up $137 million or 2.4 percent. The increase was mainly due to growth in salaries and fringe benefits as a result of business growth and annual indexing.
The productivity index - calculated as non-interest expense to total income, net of expenses related to claims, benefits, annuities and changes in insurance and investment contract liabilities - was 71.3 percent for fiscal 2012, a level comparable to the previous year.
Desjardins Group's approach to distributing surplus earnings seeks a healthy balance between development and capitalization. For fiscal 2012, the liability provision for member dividends - calculated on the basis of the surplus earnings of the caisse network - was $305 million, compared to $331 million in 2011. A $23 million downward adjustment was recorded as provision for member dividends in 2012 to account for the reversal of the amount provisioned in 2011. Adding donations and sponsorships to the provision for member dividends, a total of $364 million was given back to members and the community, compared to $401 million in 2011.
The quality of Desjardins Group's loan portfolio remains excellent. Gross impaired loans outstanding stood at $466 million as at December 31, 2012, compared to $520 million at the end of 2011. The ratio of gross impaired loans to the total gross loan portfolio was 0.35 percent as at December 31, 2012, an improvement over the ratio of 0.41 percent posted one year earlier. Desjardins Group has one of the best ratios in Canadian banking. It should also be noted that loans guaranteed by governments and other public and parapublic institutions represented 30.4 percent of the total gross loan portfolio.
As at December 31, 2012, Desjardins Group's total assets stood at $196.7 billion, up $6.6 billion, or 3.5 percent, from one year earlier. Despite slower economies in Canada and elsewhere in the world, the Group continued to expand in 2012 due in large part to strong credit demand from individuals, including for residential mortgage finance.
As at December 31, 2012, the portfolio of outstanding loans, net of the allowance for credit losses, was up $7.4 billion, or 5.9 percent, on an annual basis, to $132.6 billion. This compares to an increase of $6.9 billion, or 5.8 percent, recorded in 2011 and despite economic upheavals.
The financing, which included residential mortgages, consumer loans, credit card advances and other personal loans, represented 78.5 percent of the total portfolio, slightly more than that recorded at the end of 2011. More specifically, these loans outstanding, which totalled $104.5 billion at the end of December 2012, were up $6.8 billion, or 6.9 percent, for the year, compared to an increase of $5.7 billion, or 6.2 percent, in 2011. This difference was in particular due to the quality and diversity of Desjardins Group's mortgage loan products, combined with the strength of its large distribution network. To a lesser extent it was also due to progress made by the Card and Payment Services in automobile financing.
Moreover, Desjardins Group was also very active in business financing. Its loans outstanding in this sector, which stood at $26.9 billion as at December 31, 2012, were up $871 million, or 3.4 percent, for the year. This compares with an increase of $1.2 billion, or 4.9 percent, in 2011.
((Comments on this story may be sent to email@example.com))