Echelon Financial : Third Quarter 2020 Consolidated Financial Statements

Unaudited Condensed Consolidated Interim Financial

Statements of

Echelon Financial Holdings Inc.

For nine months ended September 30, 2020 and 2019

NOTICE OF NO AUDITOR REVIEW OF

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

In accordance with National Instrument 51-102 of the Canadian Securities Administrators, the Company discloses that its external auditors have not reviewed the unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2020. These financial statements have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company.

ECHELON FINANCIAL HOLDINGS INC.

Consolidated Balance Sheet

(unaudited, in thousands of Canadian dollars)

	Note	September 30,	December 31,
		2020	2019
Assets
Cash and short-term deposits	7	14,097	70,932
Accounts receivable		11,832	10,020
Investments	7	37,583	48,019
Due from insurance companies		1,068	324
Deferred policy acquisition costs		4,764	4,209
Income taxes recoverable		2,179	1,184
Prepaid expenses and other assets		1,772	4,028
Reinsurers' share - unearned premiums		773	1,031
- provision for unpaid claims	8	2,769	3,268
Right of use asset		487	777
Deferred income taxes		216	228
Total assets		77,540	144,020
Liabilities
Accounts payable and accrued liabilities		3,668	4,528
Lease liability		411	712
Unearned premiums		21,559	18,749
Unearned commission		229	195
Income taxes payable		1,246	-
Provision for unpaid claims	8	27,342	26,629
Total liabilities		54,455	50,813
Equity
Share capital		2,794	2,794
Contributed surplus		1,507	1,507
Retained earnings		13,914	83,140
Accumulated other comprehensive income	12	406	2,034
Equity attributed to shareholders of the Company		18,621	89,475
Non-controlling interest	15	4,464	3,732
Total equity		23,085	93,207
Total liabilities and equity		77,540	144,020

The accompanying notes are an integral part of these condensed consolidated interim financial statements

ECHELON FINANCIAL HOLDINGS INC.

Consolidated Statement of Income and Comprehensive Income (unaudited, in thousands of Canadian dollars, except per share amounts)

		3 months ended	9 months ended
		September 30	September 30
	Note	2020	2019	2020	2019
Revenue
Gross written and assumed premiums		11,739	10,271	31,569	28,200
Less premiums ceded to reinsurers		(598)	(591)	(1,630)	(1,613)
Net written and assumed premiums		11,141	9,680	29,939	26,587
Change in gross unearned premiums		(1,766)	(1,271)	(2,810)	(2,477)
Change in unearned premiums, reinsurers' share		66	(47)	(258)	(286)
Change in provision for unearned premiums		(1,700)	(1,318)	(3,068)	(2,763)
Net earned premiums		9,441	8,362	26,871	23,824
Investment income	7	3,046	874	4,012	1,859
Total revenue		12,487	9,236	30,883	25,683
Expenses
Gross claims incurred		5,433	6,687	14,732	16,158
Claims (recoveries) from reinsurers		(98)	(165)	(242)	(231)
Net incurred claims		5,335	6,522	14,490	15,927
Gross acquisition costs		2,423	1,887	6,540	5,288
Acquisition cost (recoveries) from reinsurers		(17)	(19)	(50)	(56)
Net acquisition costs		2,406	1,868	6,490	5,232
Operating costs	11	1,483	1,782	4,710	4,647
Total expenses		9,224	10,172	25,690	25,806
Income (loss) before taxes and discount rate impact on		3,263	(936)	5,193	(123)
claims
Impact of change in discount rate on claims (1)		(101)	(78)	(101)	(386)
Income (loss) before income taxes		3,162	(1,014)	5,092	(509)
Income tax expense (recovery)	10	55	(341)	665	(236)
Net income (loss) on continued operations		3,107	(673)	4,427	(273)
Net income (loss) on discontinued operations	14	(5,866)	-	(5,866)	46,220
Net income (loss)		(2,759)	(673)	(1,439)	45,947
Attributed to:
Shareholders of the Company - continued operations		2,923	(505)	3,877	(284)
Shareholders of the Company - discontinued operations	14	(5,866)	-	(5,866)	46,220
Non-controlling interest - continued operations	15	184	(168)	550	11
Net income (loss)		(2,759)	(673)	(1,439)	45,947
Other comprehensive income (loss), net of taxes that may be
classified subsequently to net income
Available-for-sale investments:
Change in net unrealized gains		1,002	301	1,379	2,233
Reclassification of net realized (gains) losses to net		(2,407)	2	(2,509)	(79)
income
Tax impact		(83)	10	(316)	(132)
Other comprehensive income (loss) on continued operations		(1,488)	313	(1,446)	2,022
Other comprehensive income on discontinued operations		-	-	-	1,254
Other comprehensive income (loss)		(1,488)	313	(1,446)	3,276

ECHELON FINANCIAL HOLDINGS INC.

Consolidated Statement of Income and Comprehensive Income (unaudited, in thousands of Canadian dollars, except per share amounts)

		3 months ended	9 months ended
		September 30	September 30
	Note	2020	2019	2020	2019
Attributed to:
Shareholders of the Company - continued operations		(1,535)	320	(1,628)	1,947
Shareholders of the Company - discontinued operations		-	-	-	1,254
Non-controlling interest - continued operations	15	47	(7)	182	75
Other comprehensive income (loss)		(1,488)	313	(1,446)	3,276
Total comprehensive income (loss)		(4,247)	(360)	(2,885)	49,223
Attributed to:
Shareholders of the Company - continued operations		1,388	(185)	2,249	1,663
Shareholders of the Company - discontinued operations		(5,866)	-	(5,866)	47,474
Non-controlling interest - continued operations	15	231	(175)	732	86
Total comprehensive income (loss)		(4,247)	(360)	(2,885)	49,223
Earnings per share attributable to shareholders of the Company	13
Earnings per share continued operations - basic		0.24	(0.04)	0.32	(0.02)
Earnings per share discontinued operations - basic		(0.49)	-	(0.49)	3.86
Earnings per share - basic		(0.25)	(0.04)	(0.17)	3.84
Earnings per share continued operations - diluted		0.24	(0.04)	0.32	(0.02)
Earnings per share discontinued operations - diluted		(0.49)	-	(0.49)	3.80
Earnings per share - diluted		(0.25)	(0.04)	(0.17)	3.78

1. As interest rates may change each period, and have an impact to the incurred claims and therefore management believes it is beneficial to the users to see the impact of this change separately in order to understand the true movement in claims incurred.

The accompanying notes are an integral part of these condensed consolidated interim financial statements