EFH : Annual 2020 Audited Financial Statements

Consolidated Financial Statements of

EFH Holdings Inc.

December 31, 2020 and 2019

Management's Responsibility for Financial Reporting

Roles of Management, Board of Directors and Audit and Risk Committee

Management is responsible for the preparation and fair presentation of the consolidated financial statements ("the financial statements"). The financial statements of EFH Holdings Inc. ("the Company") were prepared in accordance with International Financial Reporting Standards. Where necessary, these financial statements reflect amounts based on the best estimates and judgement of management.

In meeting its responsibility for the reliability of the financial statements, management maintains the necessary system of internal controls. These controls are designed to provide management with reasonable assurance that the financial records are reliable for preparing financial statements and other financial information, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The Audit and Risk Committee composed of directors who are not officers or employees of the Company, meets, as required, with management, the Appointed Actuary and the external auditor to review actuarial, accounting, reporting and internal control matters. The Audit and Risk Committee is responsible for reviewing the financial statements and recommending them to the Board of Directors for approval.

Role of Appointed Actuary

The Actuary is appointed by the Board of Directors, pursuant to the Insurance Companies Act. The Appointed Actuary is responsible for ensuring that the assumptions and methods used in the valuation of policy liabilities are in accordance with accepted actuarial practice, applicable legislation and associated regulations or directives. The Appointed Actuary is also required to provide an opinion regarding the appropriateness of the policy liabilities to meet all policyholder obligations of the Company at the consolidated balance sheet date. Examination of supporting data for accuracy and completeness and consideration of the Company's assets are important elements of the work required to form this opinion. The Appointed Actuary uses the work of the external auditor in verifying data used for valuation purposes. Policy liabilities include unearned premiums, provision for unpaid claims, reinsurers' share of unearned premiums and provision for unpaid claims and deferred policy acquisition costs.

Role of External Auditor

PricewaterhouseCoopers LLP, external auditor, has been appointed by the shareholders to conduct an independent audit of the financial statements of the Company in accordance with Canadian generally accepted auditing standards and report to the shareholders regarding the fairness of the annual financial statements. The external auditor considers the work of the Appointed Actuary in respect of policy liabilities included in the financial statements, on which the Appointed Actuary has rendered an opinion.

Toronto, Ontario

_____________________________________

March 4, 2021

_________________________________

(Signed) Serge Lavoie

(Signed) Teddy Chien

Chief Executive Officer

Chief Financial Officer

EFH HOLDINGS INC. Consolidated Balance Sheets (in thousands of Canadian dollars)

2020	2019
Assets
Cash and short-term deposits	7	11,859	70,932
Accounts receivable	12,039	10,020
Investments	7	44,582	48,019
Due from insurance companies	596	324
Deferred policy acquisition costs	8	5,110	4,209
Income taxes recoverable	460	1,184
Prepaid expenses and other assets	9	1,688	4,028
Reinsurers' share - unearned premiums	11	799	1,031
- provision for unpaid claims	12	3,683	3,268
Right of use asset	10	482	777
Goodwill	378	-
Deferred income taxes	15	195	228
Total assets	81,871	144,020
Liabilities
Accounts payable and accrued liabilities	3,549	4,528
Unearned premiums	11	22,571	18,749
Unearned commission	8	220	195
Income taxes payable	1,620	-
Lease liability	10	409	712
Provision for unpaid claims	12	29,668	26,629
Total liabilities	58,037	50,813
Equity
Share capital	16	2,794	2,794
Contributed surplus	1,507	1,507
Retained earnings	16	14,186	83,140
Accumulated other comprehensive income	22	616	2,034
Equity attributed to shareholders of the Company	19,103	89,475
Non-controlling interest	25	4,731	3,732
Total equity	23,834	93,207
Total liabilities and equity	81,871	144,020

NoteDecember 31,December 31,

The accompanying notes, which include significant accounting policies and other explanatory information, are an integral part of these consolidated financial statements approved on March 4, 2021.

On behalf of the Board of Directors:

_____________________________________

(Signed) Serge Lavoie

Chief Executive Officer

_____________________________

(Signed) Murray Wallace Chairman of the Board

EFH HOLDINGS INC.

Consolidated Statements of Income and Comprehensive Income

(in thousands of Canadian dollars, except per share amounts)

Note	2020	2019
Revenue
Gross written and assumed premiums	43,188	36,829
Less: premiums ceded to reinsurers	(2,122)	(2,040)
Net written and assumed premiums	41,066	34,789
(Increase) in gross unearned premiums	(3,822)	(1,901)
(Decrease) in unearned premiums, reinsurers' share	(232)	(491)
Change in provision for unearned premiums	(4,054)	(2,392)
Net earned premiums	37,012	32,397
Investment income	7	4,795	2,942
Total revenue	41,807	35,339
Expenses
Gross claims incurred	21,118	23,059
Less: claims recoveries from reinsurers	(1,205)	(161)
Net incurred claims	19,913	22,898
Gross acquisition costs	8,984	7,208
Less: acquisition recoveries from reinsurers	(66)	(239)
Net acquisition costs	8,918	6,969
Operating costs	18	7,040	5,769
Total expenses	35,871	35,636
Income (loss) before taxes and discount rate impact on claims	5,936	(297)
Impact of change in discount rate on claims(1)	(342)	(457)
Income (loss) before income taxes	5,594	(754)
Income tax expense (recovery)	15	698	(449)
Net income (loss) from continuing operations	4,896	(305)
Net (loss) Income from discontinued operations	24	(5,866)	45,722
Net (loss) income	(970)	45,417
Attributed to:
Shareholders of the Company - continuing operations	4,149	(127)
Shareholders of the Company - discontinued operations	(5,866)	45,722
Non-controlling interest - continued operations	747	(178)
Net (loss) income	(970)	45,417
Other comprehensive income (loss), net of taxes that may be
classified subsequently to net income
Available-for-sale investments:
Change in net unrealized gains (losses)	1,800	2,517
Reclassification of net realized (gains) losses to net income	(2,538)	(156)
Tax impact	15	(428)	(111)
Other comprehensive (loss) income on continuing operations	(1,166)	2,250
Other comprehensive income on discontinued operations	-	1,254
Other comprehensive (loss) income	(1,166)	3,504

For the year ended

December 31