ICPEI HOLDINGS INC. EFH HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the twelve months ended December 31, 2020
TABLE OF CONTENTS
IMPORTANT NOTE
QUARTER AND YEAR ENDED DECEMBER 31, 2020 COMPARED TO QUARTER AND YEAR ENDED
DECEMBER 31, 2019 ............................................................................................................................................. 5
SEGMENTED FINANCIAL INFORMATION ........................................................................................................... 8
SUMMARY OF QUARTERLY RESULTS ............................................................................................................... 9
SETTLEMENT OF NEW NORDIC LAWSUIT ........................................................................................................ 9
BALANCE SHEET ANALYSIS ............................................................................................................................. 10
5 YEAR FINANCIAL HIGHLIGHTS ..................................................................................................................... 14
LIQUIDITY AND CAPITAL MANAGEMENT ........................................................................................................ 15
COVID-19 PANDEMIC ......................................................................................................................................... 15
ACCOUNTING POLICIES ................................................................................................................................... 15
CONTROLS AND PROCEDURES ...................................................................................................................... 16
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ........................................................................... 16
ADDITIONAL INFORMATION ............................................................................................................................. 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the twelve months ended December 31, 2020
References to "EFH" or "Company" in this Management's Discussion and Analysis refer to EFH Holdings Inc. on a consolidated basis, both now and in its predecessor forms.
Important Note:
The audited consolidated financial statements for the year ended December 31, 2020, and 2019 have been prepared in accordance with International Financial Reporting Standards (IFRS). The policies applied in the audited consolidated 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 audited consolidated financial statements and the related notes. The following commentary is current as of March 4, 2021. Additional information relating to EFH is available on SEDAR atwww.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.
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's name was changed from Echelon Financial Holdings Inc. to EFH Holdings Inc. after receiving approval from shareholders on December 11, 2020.
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. On December 30, 2019, The Company also dissolved its wholly owned subsidiary CIM Re in Barbados. After the sale of Echelon Insurance and the unregulated warranty business of EFH Holdings Inc., the Company has insurance operations in ICPEI and oversight operations in EFH Holdings Inc.
The Company's stock was delisted on the Toronto Stock Exchange and listed on the TSX Venture Exchange December 23, 2020.
BASIS OF PRESENTATION
This MD&A is based on information in the audited consolidated financial statements and accompanying notes thereto for the year ended December 31, 2020 and 2019.
The results relating to Echelon Insurance, the unregulated warranty business of Echelon Financial Holdings Inc., the wind-up of CIM Re, 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 2020, 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.
FOURTH QUARTER AND FULL YEAR 2020 HIGHLIGHTS
• Net income from continued operations of $4.9 million for 2020 compared to a loss of $0.3 million for 2019 and $0.5 million in Q4 2020 compared to a loss of $0.03 million in Q4 2019.
• A 17% increase in Direct Written Premiums in 2020 over 2019 and 35% increase in Q4 2020 over the same period in 2019 as a result of growth in both the Personal and Commercial Lines. Company also started writing business in Quebec in Q4 2020.
• Combined ratio improved from 104.8% in 2019 to 93.2% in 2020 and from 109.5% in Q4 2019 to 94.9% in Q4 2020 largely due to growth in premium and lower frequency of claims.
• Closing book value per share of $1.59 compared to $1.55 at the end of the third quarter. The increase from the third quarter is the results of $0.02 from earnings per share in the fourth quarter and $0.02 from increase in accumulated other comprehensive income.
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EFH Holdings Inc. published this content on 04 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2021 02:56:04 UTC.
