2014 Annual Report

Transcription

2014 Annual Report

2 0 1 4
A N N U A L
R E P O R T
70 YEARS OF COLLECTIVE SUCCESS
SUMMARY
02
04
18
30
2014 Financial Highlights
Chairman’s Message
CEO’s Message
Sustainable Development
and Societal Responsibility Report
48 SSQ, Mutual Management Corporation – Consolidated
Financial Statements as at December 31, 2014
49 Independent Auditor’s Report
50 Consolidated Statement of Excess of Revenues
50 Consolidated Statement of Comprehensive Income
51 Consolidated Statement of Financial Position
52 Consolidated Statement of Equity
53 Consolidated Statement of Cash Flows
54 Notes to the Financial Statements
62 SSQ, Life Insurance Company Inc. –
Excerpt from the Consolidated Financial Statements
as at December 31, 2014
63 Management’s Report
64 Consolidated Statement of Income
65 Consolidated Statement of Comprehensive Income
66 Consolidated Statement of Financial Position
67 Consolidated Statement of Changes in Equity
68 Consolidated Statement of Cash Flows
69 Excerpt from the Notes to the
Consolidated Financial Statements
102Structure
103 Boards of Directors, Senior Management
and Vice-Presidents
107Addresses
107 Contact Us
SSQ FINANCIAL GROUP — 2014 ANNUAL REPORT
A COLLECTIVE SUCCESS STORY:
1944-2014
From its beginnings in 1944 as a small-scale
healthcare cooperative in a working-class neighbourhood of Quebec City, SSQ Financial Group
has risen to the ranks of the most important and
diversified mutualist financial institutions in Canada.
Having come so far, the company knowingly
decided to adapt to change. What was true in
1944 still holds true today, over seven decades
later: growth in the face of change is a reality that
SSQ has faced since the start.
In celebration of its 70th anniversary, SSQ Financial
Group published A Collective Success Story:
1944-2014 as a tribute to the individuals who
built SSQ and those who continue to carry out its
mission. The book focuses on both the highs and
lows of the company’s collective history. It also
honours the men and women who worked hard
to make SSQ what it is today, along with the
partners who put their trust in the company over
the years and continue to do so today.
The book is also available on ssq.ca. We hope
you enjoy it!
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2014
FINANCIAL
HIGHLIGHTS
3
(in millions of dollars)
CONSOLIDATED DATA
Premiums under management
Assets under management and administration
Equity attributed to shareholders
Equity attributed to non-controlling interest
Net income attributed to shareholders
Net income attributed to non-controlling interest
Net global income
Number of employees
12000
12000
2014
$
2013
$
Variation
%
2,777.2
10,622.3
670.7
–
49.7
4.3
54.0
2,052
2,995.7
11,382.9
363.8
223.1
38.0
9.6
47.6
1,961
-7.3
-6.7
84.4
1,600.5
1,015.0
4,643.8
3.9
-30.6
-5.6
165.8
10.4
214.4
294,998
97.4 %
6.1
-2.9
-1.2
8.6
211.5
–
15.8
12000
30.8
13.4
SSQ, LIFE INSURANCE COMPANY INC.
9600
7200
4800
2400
9600
Premiums and premium equivalents − Group Insurance
Premiums and premium equivalents − Investment and Retirement
Assets under management − segregated funds
1,662.6
704.2
4,382.4
7200
SSQ INSURANCE COMPANY INC.
Premiums − Individual Insurance
9600
7200
4800
4800
183.0
2400
2400
SSQ GENERAL INSURANCE COMPANY INC.
0
Written premiums
Number of insureds
Net combined ratio
227.5
286,360
96.2 %
0
SSQ REALTY INC.
670.7
363.8
315.5
307.3
306.1
10,622.3
11,421.8
10,871.5
2,777.2
2,995.7
3,045.5
2,564.2
7,970.8
8.6
244.9
6,939.6
Net income − SSQ properties
Market value − SSQ properties
2,359.6
0
2010 11 12 13 14
2010 11 12 13 14
2010 11 12 13 14
CONSOLIDATED PREMIUMS
UNDER MANAGEMENT
CONSOLIDATED ASSETS UNDER
MANAGEMENT AND ADMINISTRATION
EQUITY ATTRIBUTED
TO SHAREHOLDERS
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Chairman’s
Message
1944-2014:
BUILDING ON THE PAST
MODERNIZING
THE ANNUAL REPORT
Over the past 70 years, SSQ has steadily grown,
evolved and adapted to a world of change. It is
both a young company and a mature one. It continues to record strong growth thanks to all those
individuals who have worked hard to transform
what was once a small healthcare cooperative
into the major financial group we know today.
Dating back to their founding in 1991, SSQ, Mutual
Management Corporation and SSQ, Life Insurance
Company Inc., used to publish two separate annual
reports providing information on their respective
operations and financial results. In light of our
rapid growth in recent years, not to mention our
recent string of acquisitions and our desire to
remain up to date, we decided to modernize our
process of reporting to our stakeholders. In 2012,
we innovated by producing our first paperless
annual reports. For 2014, we are going a step
further by combining our activity report and our
business report in a single document, together with
the financial results of SSQ, Mutual Management
Corporation and those of SSQ Financial Group.
To mark its 70th anniversary, SSQ published
A Collective Success Story: 1944-2014, an update
of the 1984 book covering the first 40 years of
the company’s history. In addition to providing a
summary of our achievements, this beautiful book
preserves the memory of our history and reflects
the work of the builders of SSQ and of those who
continue to promote the company today across
Quebec and the other Canadian provinces.
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CORPORATE RESTRUCTURING:
A PATHWAY TO THE FUTURE
SSQ is a modern, high-performance financial
institution whose growth is clearly based not only
on a set of core values, but also on a rock-solid
financial footing and an ability to make required
changes to maintain this position. Along those
lines, the boards of directors approved a corporate
restructuring in 2014 under which SSQ, Life
Insurance Company Inc. became the sole shareholder of SSQ Insurance Company Inc., its individual
and specialized group insurance subsidiary. These
two life and health insurance companies were consolidated in order to improve the solvency ratio, thus
facilitating better capital integration and increasing
flexibility while maintaining a solvency ratio of
nearly 200% and meeting new capital adequacy
requirements. Under the specific provisions of this
new structure, the shareholders’ respective ownership interests were maintained. This reorganization had no impact on the companies’ risk profiles
or on the members, insureds or policyholders.
SOUND GOVERNANCE
The boards of SSQ, Life Insurance Company Inc.
(SSQ Life), SSQ Insurance Company Inc. (SSQ
Insurance) and SSQ General Insurance Company
Inc. (SSQauto) carried out an annual review of their
governance programs to ensure that best practices
were upheld. On the recommendation of the Audit
and Risk Management Committee, the crisis simulation policy and its implementation program
were also adopted in 2014 by the boards.
SSQ Life arranged an initial independent audit
report on its solvency ratio, which concluded that
this ratio in relation to the company’s capital adequacy requirements as at December 31, 2013, was
in all material respects calculated in compliance
with the Guideline on Capital Adequacy Requirements issued by Quebec’s Autorité des marchés
financiers (AMF). The results of this process
demonstrate not only that SSQ is in compliance
with all regulatory requirements, but also that it
is committed to safeguarding the interests of
mutualists and insureds on an ongoing basis.
RELEVANT TRAINING ACTIVITIES
In the hopes of remaining consistently alert to
insurance industry trends and best practices while
staying informed about matters of relevance to
their duties, the directors took part in several
training sessions in 2014. As regards damage
insurance–related issues, they attended seminars
on topics such as the results of our customer
experience survey, advances in telematics systems,
a new auto insurance pricing tool and the impacts
of climate change.
As regards life and health insurance, the directors
attended four life and health insurance training
sessions focused on SSQ’s business model for
individual products, our asset management–related
corporate watch, the group insurance market and
financial derivatives. In addition, the three boards
held a special joint working session for the annual
follow-up on the 2013-2017 strategic plan.
HIGH ATTENDANCE
The directors of SSQ’s boards care deeply about
their roles and responsibilities, as borne out by
their attendance record and the quality of their
meeting-related preparations. In 2014, the attendance rate for meetings of the various bodies was
over 97%, as shown in the following table:
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ATTENDANCE RECORD FOR DIRECTORS OF SSQ, MUTUAL MANAGEMENT CORPORATION,
SSQ LIFE AND SSQ INSURANCE
for the year ended December 31, 2014
Board
of Directors
Brouillet, Normand**
Choquette, Claude*
Doré, Chantal*
Genest, Pierre**
Hamel, René*
Jomphe, Eddy**
MacDougall, Andrew**
Martineau, Jude*
Morin, Gaétan*
Nadeau, Michel**
Paradis, Denyse**
Paré, Sylvain*
Pélissier, Alain**
Perron, Jean**
Picard, Sylvain**
Ross, Angus H.*
Turnbull, Norman A.*
Vallée, Émile**
Verreault, Dominique**
6/6
6/7
6/7
7/7
7/7
7/7
7/7
7/7
6/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
Executive and
Human Resources
Committee
Investment
Committee
Audit and Risk
Management
Committee
Ethics
Committee
4/4
5/6
5/6
6/6
4/4
6/6
6/6
5/6
5/6
4/4
6/6
6/6
6/6
6/6
6/6
6/6
4/4
* Director of SSQ Life and SSQ Insurance
**Director of SSQ, Mutual Management Corporation, SSQ Life and SSQ Insurance
ATTENDANCE RECORD FOR DIRECTORS OF SSQauto
for the year ended December 31, 2014
Board
of Directors
Genest, Pierre
Hamel, René
Lachapelle, Josée
Lallemand, Danielle
L’Écuyer, André
Martineau, Lucie
Piché, Bernard
Rochefort, Jacques
Tremblay, Jocelyn
Vachon, Pierre-Maurice
5/5
5/5
5/5
4/5
5/5
5/5
5/5
5/5
5/5
5/5
Executive and
Human Resources
Committee
Investment
Committee
Audit and Risk
Management
Committee
Ethics
Committee
4/4
1/1
5/5
5/5
1/1
4/4
4/4
6/6
1/1
5/5
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The road to growth
means constant
adaptation
YOUTH INVOLVEMENT:
LEADERS OF THE FUTURE
International Summit of Cooperatives
For the second time, Quebec City hosted
the International Summit of Cooperatives in
October 2014, which drew more than 3,000 participants from cooperatives and mutual organizations
from around the world. Special emphasis was
placed on young cooperative and mutualist leaders
aged 18 to 35, for whom a special series of discussion forums, lunch seminars and roundtables was
arranged. SSQ’s five-person delegation included
four young employees who are active members
of SSQ’s Mutual Life Promotion Committee. For
these young leaders, the summit provided an
opportunity to make contact with representatives
of the cooperative movement and to discuss
global issues affecting cooperatives and mutual
organizations.
“I realized that the role of cooperatives and mutual
organizations in the global economy is much larger
than one might think. In fact, they are growing
by leaps and bounds. I particularly enjoyed the
conference on communications and marketing
within cooperatives.”
Alexandre Trudel, Financial Security Technician,
Investment and Retirement
“The young leaders program enabled me to meet
a group of dynamic and committed individuals,
which had a mobilizing effect. It also increased
my desire to get involved and make a difference
by putting my own values into practice. It served
as a reminder that, working together, we can
make a difference. There’s no doubt that my
involvement in the International Summit of
Cooperatives strengthened my sense of pride in
being part of a mutualist organization!”
Andrée-Anne Julien, Claims Agent,
Disability Management
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A special place was reserved for young cooperative and
mutual leaders at the International Summit of Cooperatives,
which took place in October 2014.
“The week we spent at the summit gave us new
perspectives on the world and a way of getting
to know other people’s realities. It was very worthwhile in both personal and professional terms. I also
discovered new ways of promoting cooperative and
mutualist life and implementing these values on a
day-to-day basis. It’s a great way to learn new things,
challenge your beliefs and reposition yourself.”
C‑Geneviève Gauthier, Contract Administration
Technician, Premiums and Enrolment
“The summit gave me fresh insight into the international realities facing large and small cooperatives
and mutual organizations operating in various
areas. It also provided confirmation that the cooperative and mutualist world is highly dynamic at
the community level and has a direct impact on
the local economy!”
Marjorie Côté, Compliance Advisor, Internal Audit
and Risk Management
Quebec City-Appalaches regional
development cooperative
Jean-Philippe Lapointe, an administrative analyst
in the Corporate Actuarial division, was appointed
to the board of the Quebec City-Appalaches
regional development cooperative (CDRQA) as
a junior director for a one-year term. This position
was created to enable an individual between the
ages of 18 and 35 to become familiar with the
workings of a board of directors and to gain initial
experience as an observer/director of a regional
development cooperative. Jean-Philippe is the fourth
SSQ employee to hold this position since 2008.
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INTERCOOPERATION: MUCH MORE THAN
A COOPERATIVE PRINCIPLE!
For SSQ, cooperating with other institutions
within the cooperative and mutualist movement
is standard practice. Over the years, various SSQ
employees have taken part in SOCODEVI’s missions
to francophone Africa and to Latin America. In 2014,
Geneviève Hamel, Senior Director and HR Partner,
Group Insurance and Corporate Sectors, joined
SOCODEVI’s team for a mission to Vietnam
(October 27-November 7) as part of the Cooperative Partnership and Mutualist Program. Among
other objectives, this mission sought to develop
a gender equality strategy and to secure an
agreement on an implementation program in
Vietnam with a view to helping women play
more active roles in their cooperatives.
“Essentially, my contribution was to share SSQ’s
cooperation experience and to focus on what is
being done to encourage gender equality in our
governance and organizational structures, as well
as in day-to-day life. In light of my training and
strategy development experience, I also contributed
by exchanging views with SOCODEVI’s employees
in Vietnam. Professionally, I found it very interesting
to share training practices, not only to optimize
the program in Vietnam, but also to enhance my
own training.”
Geneviève Hamel, Senior Director and HR Partner,
Group Insurance and Corporate Sectors
At the end of October 2014, SSQ joined the SOCODEVI
team for a mission to Vietnam as part of the Cooperative
Partnership and Mutualist Program.
In addition, Hélène Plante, Corporate Secretary
of SSQ Financial Group, joined the team of the
University of Sherbrooke’s Cooperative/Mutual
Research and Education Institute (IRECUS) for
the 2014 winter session as an instructor in the
master’s program in cooperative/mutual management and governance.
As a guest of IRECUS, I had the pleasure of
serving as “prof for a day” in connection with
a seminar I gave on corporate governance for
executives enrolled in the MBA program at the
University of Sherbrooke’s Longueuil campus
in the fall of 2014.
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The SSQ Foundation owns the house formerly
occupied by Dr. Jacques Tremblay, who founded
SSQ in 1944. Over the past few years, it has allowed
Le Pignon Bleu, a community-based resource centre
that provides support to low-income families, to
use the first-floor office space. In 2014, the SSQ
Foundation approved a development project that
will enable Le Pignon Bleu to meet growing demand
for the cooking workshops it runs for participants
in a job integration program, as well as for families
in need in Quebec City’s Lower Town.
PROMOTING MUTUALISM
AND MUTUALIST VALUES
From one year to the next, more participants than ever before
take part in the Health 5K event of the SSQ Quebec City
Marathon.
PROVIDING FOR THE FUTURE
BY GIVING BACK TO THE COMMUNITY
It is often noted how committed and kind-hearted
our employees are. Once again this year, they
extended the boundaries of their generosity:
thanks to their participation, as well as to SSQ’s
contribution, slightly more than $269,000 was
raised for the Centraide/United Way campaign.
In connection with the SSQ Quebec City
Marathon’s 5K Health event, SSQ’s employees
joined the ranks of the 13,000 participants and
raised nearly $110,000 for the Seinbiose research
project organized by the Quebec City CHU
Foundation. In addition, donation requests
submitted by employees in connection with
the support program for employee volunteers rose
by 40% in 2014!
As they have for the past 15 years, SSQ’s employees
responded to the company’s invitation and took
part in the Christmas hamper campaign organized
by Magasin Partage. Thanks to their generosity and
dedication, approximately 9,000 food items were
collected and given to more than 2,000 disadvantaged families in the Quebec City region.
In keeping with ongoing efforts to promote mutualist
values among its employees, SSQ conducted
training sessions in 2014 aimed at showcasing the
benefits of the cooperative and mutualist formula.
A condensed version of this training is offered to
new delegates so they can gain insight into SSQ’s
environment and their role within the company.
SSQ’s partnership with the University of Sherbrooke’s
Cooperative/Mutual Research and Education
Institute (IRECUS) was renewed in 2014. André
Martin, an associate professor at IRECUS, continued to participate in the training activities by presenting the mutualist and cooperative formula
as an alternative to the dominant capitalist model.
More than 200 employees from SSQ’s offices
in Quebec City, Montreal and Toronto took part
in these sessions, which were led by SSQ’s
Chairman of the Board, Corporate Secretary
and Professor Martin.
Supporting the start-up of a youth co-op initiative
is an excellent way for SSQ to promote cooperative
and mutualist values among young people and its
employees. SSQ is proud to have contributed to
this organization for 12 years in a row. Showing
great generosity, the 2014 edition of the SSQ Youth
Co-op (CJSSQ) shared a portion of the profits
generated by sales of homemade desserts with
Seinbiose, a research project aimed at the
development of customized external breast
prostheses and endorsed by the SSQ Quebec City
Marathon in 2014. The co-op also donated
250 books to the Salvation Army after organizing
a book fair. The next generation clearly has its values in the right place!
The Committee for the Promotion of Mutualist
Life (CPML) was very active in 2014. Beginning
in February, a group of young people from the
Navigateurs school board’s business and recycling
training centre (CFER) responded to the CPML’s
invitation and presented SSQ employees with the
Sustainable Development Caravan, focusing on
the dual themes of energy efficiency and water.
To mark Cooperation Week, the CPML partnered
once again with the SSQ employees’ social club
by sponsoring the distribution of cooperative
products at a wine and cheese activity held in
the fall. Three gift certificates, redeemable at a
cooperative of the winners’ choice, were presented.
This event gave the CPML an opportunity to promote
SSQ’s role in the cooperative and mutualist movement. The CPML subsequently organized a contest
entitled “Do you practice intercooperation?” so
that employees in Quebec City, Montreal and
Toronto could share information on their favourite
cooperatives with their co-workers. Five winners
each received a $100 gift certificate redeemable
at a cooperative of their choice.
DESIGNATING DELEGATES
The formula for delegate designation, which has
been in effect since 2006, continues to pay off.
The number of designated delegates among the
membership rose from 116 in 2007 to 187 in
2014, ensuring that mutualists from across
Canada are represented at the annual meeting.
13
CQCM (QUEBEC COUNCIL ON
COOPERATION AND MUTUALISM)
SSQ continues to play an active role in the activities of the CQCM, which seeks to foster Quebec’s
social and economic development by promoting
the cooperative and mutualist movement, in
accordance with the principles and values of the
International Cooperative Alliance. In Quebec,
the mutualist movement is made up of 39 mutual
organizations, including SSQ, Mutual Management
Corporation.
FECM (FOUNDATION FOR COOPERATIVE
AND MUTUALIST EDUCATION)
As a founding member of Quebec’s FECM, SSQ
(via the SSQ Foundation) contributes financially to
this organization’s mission: to promote the values
and diversity of the cooperative and mutualist
formula among young people.
SOCODEVI (SOCIETY FOR COOPERATION
AND INTERNATIONAL DEVELOPMENT)
SSQ is among the Quebec-based cooperative and
mutualist organizations that founded SOCODEVI
in 1985 in order to promote and strengthen the
cooperative formula as an international sustainable
development tool.
Through SOCODEVI, SSQ shares its expertise and
experience with organizations in the developing
world, in particular by sending its employees on
technical assistance missions. I continue to serve
on SOCODEVI’s board and I also chair its Audit
and Risk Management Committee.
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You have to know
how to come out
on top
SSQ, MUTUAL MANAGEMENT
CORPORATION’S FINANCIAL RESULTS
SSQ, Mutual Management Corporation’s financial
results represent a percentage of SSQ Financial
Group’s results, in accordance with its ownership
stake in the Group. Accumulating over the years,
these results constitute member equity.
Total revenues for 2014 were $16.5 million,
including the proportionate share of SSQ, Life
Insurance Company Inc.’s and SSQ Insurance
Company Inc.’s net income, which amounted to
$14.4 million and $2.0 million respectively. After
deducting expenses of $0.1 million and the net
surplus attributable to the non-controlling interest
of $7.0 million, the net surplus attributable to
members was $9.4 million.
As at December 31, 2014, members’ equity
totalled $112.5 million, up 14.5% from the previous
year. SSQ, Mutual Management Corporation is
satisfied with the results obtained by SSQ, Life
Insurance Company Inc. and by SSQ Insurance
Company Inc., particularly since steps were taken
to ensure a fair balance between the members’
rights, the financial stability of the Group’s
companies and the shareholders’ reasonable
return-on-investment expectations.
16
PAYING TRIBUTE TO A BUILDER
APPOINTMENTS
In selecting the name “Espace Richard Bell”
for the reception hall on the third floor of the
Roland-Giroux building, SSQ paid tribute to
Richard Bell, who worked for the company from
1987 to 2008, including a six-year term as CEO.
Commemorative plaques were unveiled at a
ceremony on December 11, 2014, which was
attended by Mr. Bell and his wife, together
with the members of SSQ’s board and senior
management.
We were very pleased to learn that Gaétan Morin,
an SSQ director since 2009, was appointed
CEO of the FTQ’s Fonds de solidarité. In addition,
Sylvain Paré, an SSQ director since 2011, was
appointed Senior Vice-President, Finance of the
Fonds de solidarité. On behalf of the Board and
the members of SSQ’s senior management,
we would like to offer our congratulations for
these well-deserved appointments!
Richard Bell, with Pierre Genest and René Hamel, at the
dedication ceremony of the Richard Bell Space on the third
floor of the Roland-Giroux building on December 11, 2014.
René Hamel, CEO of SSQ, was elected Chairman
of the Centre de développement en assurances
et services financiers (CDASF), a non-profit
organization that seeks not only to promote
the insurance sector in the Greater Quebec City
Area, but also to attract qualified workers and
boost the number of bilingual employees. Mr. Hamel
also came in fifth in the rankings of the Top 25
financial industry leaders in Quebec, published
by Finance et Investissement magazine. This
honour recognizes René’s leadership qualities
and industry involvement. We can all take pride
in this achievement!
ACKNOWLEDGEMENTS
SSQ Financial Group’s position as a solid and
successful organization is largely due to the
directors of its various boards, who once again
in 2014 were dynamic and steadfast in their
commitment to SSQ. They also provided invaluable
guidance and advice to senior management. I know
I can count on their support, preparedness and
competence as SSQ continues to pursue growth
while keeping its values in the right place!
I am deeply grateful to SSQ’s management team
for successfully overseeing SSQ’s business in
line with the interests of our members, insureds,
shareholders and partners. Thank you!
I would also like to thank the employees of the
Group’s companies, without whom we would not
be able to grow or achieve the results we have
obtained. You are all a part of our organization’s
success.
Thank you as well to the delegates of SSQ, Mutual
Management Corporation for demonstrating
a keen interest in your company and SSQ
Financial Group.
Pierre Genest
Chairman of the Board
SSQ, Mutual Management Corporation
SSQ Financial Group
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CEO’s
Message
A COLLECTIVE SUCCESS STORY:
1944-2014
SSQ Financial Group started out as a healthcare
cooperative in a working-class district of Quebec
City in 1944. It was originally designed to offer
access to health care, one of the community’s
essential needs. You could say that people and
social needs are at the heart of the company’s
mission, embedded in its DNA so to speak.
Seventy years later, SSQ Financial Group is still
prioritizing and promoting health, in addition to
offering a wide range of health insurance products.
Mutualist values are still in its DNA. People and
social development are still the central focus of
its actions.
SSQ has demonstrated a winning combination of
imagination, creativity and audacity in embracing
change over the past 70 years. It proved its
adaptability, as it grew from being a healthcare
cooperative based in Quebec City’s Saint-Sauveur
district to become a mutual insurance company.
As a major financial group with Canada-wide
operations, it now offers an array of services in
the areas of group insurance, individual life/health
insurance, general insurance and investment/
retirement products.
1944 also marked the beginning of the third wave
of the industrial revolution, which would eventually
transform the world of communications. It would
also rewrite the rulebook for the business sector
as information delivery, purchasing patterns
and consumer habits changed almost beyond
recognition.
For SSQ, staying on the road to growth requires
constant adaptation. Nothing is ever taken for
granted: our products and processes are being
constantly reassessed, as are the ways we interact
and communicate with our customers, who are
better informed and more demanding than ever
before. We seek to ensure that their experience
is as pleasant as possible each time they get in
touch with us, whatever their concerns may be
and however they may wish to make contact.
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21
Staying the course
is what matters
People skills are also embedded in SSQ’s DNA;
they remain intact with the passage of time. In
pursuit of collective success, the company will
also keep on developing its technical expertise.
Over 40 years ago, in 1970, renowned American
sociologist and futurologist Alvin Toffler published
Future Shock, in which he stated that “Tomorrow’s
illiterate will not be the man who can’t read; he will
be the man who has not learned how to unlearn.”
We now live in that society, governed by diversity,
fluidity and creativity. Everything is in constant
flux; change comes quickly. All organizations
must understand and adapt if they are to meet
these challenges.
MAIN FINANCIAL RESULTS
AND HIGHLIGHTS OF 2014
Although satisfactory on the whole, 2014 did
present a good number of challenges. Our insurance business volume rose by 4.7%, a rate of
growth superior to that of the market but lower than
in past years. SSQ Financial Group’s operating
markets were extremely competitive, resulting in
lower sales than in 2013.
Thanks to stringent controls, our increase in
expenses was limited to 2.2%. Low interest rates
and additional taxes of nearly $1 million payable
as a result of the Quebec finance minister’s
economic and financial update in early December
also had an impact on results in 2014.
Long-term disability insurance results continued
to deteriorate in 2014. The claims are high across
the country for all insurers. This trend, coupled with
lower interest rates, had a negative impact on SSQ’s
financial results. Fortunately, a scheduled review
of the actuarial assumptions underpinning our group
life insurance coverage had a positive impact.
SSQ’s net profit was up 13.5%.
22
2014
2013
1,723.0
122.6
227.5
2,073.1
1,654.6
111.7
214.4
1,980.7
1,505.0
2,877.4
4,382.4
1,385.1
3,258.6
4,643.7
148.6
20.7
64.9
207.4
20.6
62.3
234.2
290.3
264.9
313.8
578.7
812.9
233.5
489.2
722.7
1,013.0
4,158.5
1,693.0
388.4
4,382.4
–
10,622.3
3,949.3
1,355.0
373.0
4,643.7
1,061.9
11,382.9
BUSINESS VOLUME – INSURANCE (in thousands of $)
Group insurance
Individual insurance
General insurance
TOTAL
SEGREGATED FUND ASSETS – INVESTMENT AND RETIREMENT (in thousands of $)
Individual
Group
TOTAL
SALES – INSURANCE (in thousands of $)
Group insurance
Individual insurance
General insurance
Total – insurance
SALES – INVESTMENT AND RETIREMENT (in thousands of $)
Individual
Group
Total – investment and retirement
GRAND TOTAL – SALES
ASSETS UNDER MANAGEMENT (in thousands of $)
General funds
• SSQ Life
• SSQ Insurance
• SSQauto
Segregated funds
Other funds
TOTAL
INCOME (in thousands of $)
SSQ Life (excluding insurance subsidiaries)
SSQ Insurance
SSQauto
TOTAL
Amortization of intangible assets and consolidating elements
Net income
31.4
15.5
11.1
58.0
(4.0)
54.0
26.3
14.4
10.6
51.3
(3.7)
47.6
8.3
11.7
8.5
8.3
12.6
8.0
198
245
261
181
276
242
RETURN ON EQUITY (%)
SSQ Insurance
SSQauto
SSQ Life consolidated – SSQ Financial Group
SOLVENCY RATIO (%)
SSQ Life
SSQ Insurance
SSQauto
A number of highlights marked 2014. Over 25% of
our group insurance business came from provinces
other than Quebec. It should be noted that the
Toronto office opened its door for business in 2002.
SSQ is now in its second development phase in
Canada’s financial capital.
SSQ also completed a strategic repositioning of
its investment and retirement business line, which
was discussed at length in the 2013 annual report.
Fondaction, a workers’ fund and longstanding
partner, left SSQ in June 2014 after deciding to take
on the administration of its member-shareholders’
files. It was with a mixture of regret and great
satisfaction that SSQ provided Fondaction with
guidance up until its departure. Regret, because
SSQ had worked with Fondaction since it began
operations back in 1996; and satisfaction, because
SSQ is convinced that everything will go well for
Fondaction, which re-established internal control
over the activities for which SSQ was previously
responsible. SSQ tips its hat to Fondaction’s founder
and CEO, Léopold Beaulieu, an ex-employee and
friend of SSQ.
SSQ completed the repositioning of this business
line by selling off its mutual fund management
portfolio. A new chapter has begun and our
energies are now fully focused on business
development in the areas of individual savings
and pension fund asset management.
23
In the area of general insurance, SSQauto scored
first place in J.D. Power’s customer satisfaction
survey of the home insurance sector, an exceptional result given the highly competitive nature of
this sector.
Last year, SSQ Financial Group launched two new
products and carried out a top-to-bottom review
of one of them. The group insurance division began
marketing our Compassion Insurance product,
the only coverage of its kind in Canada that offers
financial security to insureds required to take time
off work to care for a gravely ill family member.
Meanwhile, the individual insurance division launched
online sales of a cancer insurance product: the
entire enrolment and purchasing process is done
online and applicants only have to answer four
simple questions. In addition, SSQ carried out
a thorough review of its universal life insurance.
The launch of this product was accompanied
by a cross-Canada tour featuring our financial
advisory team.
Other new developments include an upgrade to our
online services platform and mobile applications.
Group insurance customers can now consult their
file, submit a health insurance claim and receive
reimbursement electronically in less than 48 hours.
SSQauto also launched a mobile application that
can be used to submit an insurance claim, file a
joint report and prepare a property inventory.
Pursuing its diversification strategy initiated several
years ago, SSQ acquired assurancevoyages.ca, a
company specializing in the sale of travel insurance.
SSQ is working to develop other products designed
to position it as an insurer in this sector. In addition, its F&I subsidiary, which specializes in the
distribution of credit insurance products and
vehicle replacement insurance, changed its name
to SSQ Évolution.
24
COMMUNITY INVOLVEMENT
SSQ acquired an office building next door to its Quebec City
headquarters to meet its future office needs.
The real estate division spent a good part of the year
working on a major transaction and a construction
project. In Quebec City, SSQ acquired a building
adjacent to its headquarters. This addition will
meet future needs. The construction of an office
building in the Greater Montreal area (Longueuil)
kicked off in the spring of 2014. Employees from
several sites in the Montreal region will be brought
together under one roof as of 2016.
In late 2013 and early 2014, we launched a call
for tenders with a view to appointing the Group’s
external auditors. The winning tender came from
the previous auditors, Mallette for the company’s
financial statements, and E&Y for the segregated
funds. It should be noted that the A.M. Best
ratings agency once again issued ratings of
A- and a- for SSQ, with a stable outlook.
SSQ continues to support worthy causes via
events such as the SSQ Quebec City Marathon,
with which we renewed our partnership for another
five years. In 2014, the Marathon was a resounding
success, drawing over 13,000 participants. On the
eve of the Marathon, SSQ’s 5K Health Run was
held; in 2014, this event was dedicated to Seinbiose,
a research project operated by the Quebec City
CHU Foundation (FCHUQ) aimed at developing
customized breast prostheses as an alternative
for women who have undergone mastectomies.
SSQ raised nearly $110,000 for Seinbiose. In
addition, SSQauto’s Défi Décalade event, which
involved rappelling down a building head first,
raised almost $30,000 for a Quebec firefighters’
foundation that works to help burn victims.
SUSTAINABLE DEVELOPMENT AND
SOCIETAL RESPONSIBILITY REPORT
2014 marked the second year of SSQ’s Sustainable
Development and Societal Responsibility plan.
Here are some results:
– Nearly 95% of group insurance groups use
e-billing
– 100% of home and auto insurance claims
are paperless
– Nearly $110,000 raised for Seinbiose, a research
project of the Fondation du CHU de Québec,
through SSQ Quebec City Marathon fundraising
event
– LEED© certification confirmed for St. Lawrence
tower of SSQ building in Quebec City
– 10% increase in employee contributions to
Centraide/United Way
Toronto’s SickKids Foundation is one of the causes SSQ
Financial Group supports. Through its financial support,
SSQ is involved in the purchase of specialized equipment
for young patients like Luke, who was born with a congenital
heart defect.
SSQ places great importance on how its employees
are treated, as well as on their health and level of
engagement. In this regard, the Group conducted
an employee survey. The response rate was extra
ordinary: 90% of staff members took part. In addition, two external events provided confirmation of
the ongoing relevance of the company’s employee
health programs: SSQ Financial Group was
presented with the 2014 Prix Distinction in the
large company category at the “Coming together
for company health and wellness” event put on
by the Healthy Enterprises Group, and maintained
its Healthy Enterprise – Elite certification.
25
Employees did not hesitate to rally behind various causes
in 2014, whether by participating in the Urban Duathlon
fundraising challenge for the CHU Sainte-Justine Foundation
or by volunteering at the Canadian Cancer Society’s Relay
For Life event.
26
27
Dynamic synergies
boost performance
ADAPTING TO CHANGE
Seventy years have passed since the company
was founded. To mark the anniversary, SSQ
published a book entitled A Collective Success
Story: 1944-2014. This work, which is available at
ssq.ca, recounts SSQ’s history through its prime
movers while retracing the major social changes
that have occurred over the decades.
Imagination, creativity and audacity served SSQ
well as the company navigated its way through
the past 70 years and the changes that took
place. Change is quickening its pace and our
expertise has to keep up. SSQ Financial Group
will face numerous challenges in the future as it
seeks to maintain products and services that are
relevant and appealing.
In the short term, SSQ will have to deal with
low interest rates without taking on undue risks.
Addressing the disability insurance experience
remains a priority. Despite many factors leaning
in favour of premium increases in several sectors,
the markets remain extremely competitive.
Stringent spending controls and ongoing efforts
to improve performance will be essential.
Business synergies will fuel the Group’s growth,
while operational synergies will improve its performance. The company will have achieved full
maturity in terms of operational synergies when a
given project or activity brings together the most
skilled employees, regardless of whom they report
to or which sector they come from. When that
occurs, the company will have completed its
administrative restructuring in an intelligent and
coherent way.
28
In the medium term, the Group will have to deal
with new accounting standards and new regulatory capital adequacy requirements. SSQ is playing an active role in industry representations on
these issues to the relevant authorities.
In the longer term, the insurance industry will
be faced with a number of daunting issues, with
climate change foremost among them. These
changes are sure to have a considerable impact
on the environment. One may be tempted to
conclude that only the general insurance sector
will be affected. Of course it will, but there will be
other issues like the fact that people’s life expectancy and state of health will also be affected
in the long term. From a long-term investment
perspective, one wonders which sectors and
industries will be hardest hit by climate change.
There is still a good deal of uncertainty surrounding these issues.
How will clients’ needs and habits evolve? How
will the clients of tomorrow behave? Some industries have been upended by rapidly emerging new
technologies. SSQ’s experience will only be the
tip of the iceberg. The client experience is being
transformed and this trend will continue. Drawing
on its energy and expertise, SSQ is ready to seize
this opportunity.
Pierre Genest and René Hamel were proud to present the
book about SSQ’s 70-year history.
Insurance stems from the need for financial
protection and inherently entails the notion of
risk-taking. Some insurers have begun to shy
away from risk-taking. It is foreseeable that over
the long term, insurers will have to take a stand
in this regard. Some will specialize in products
involving little or no risk, while others will do the
opposite, taking on greater and greater risks as
their signature activity. It will thus become harder
to stay competitive on all fronts. We would do well
to reflect on this issue. SSQ’s value added and
strength lie in its ability to assess and manage the
risks associated with products that offer financial
security in the short, medium and long term. This
is the case today, and will be so in the future.
Despite its challenges and changes, SSQ believes
firmly in its ability to adapt and succeed. The company has done so consistently over the past 70
years and it will continue to do so, first and foremost because people are looking for companies
that are ethically, morally and socially reliable. Drawing
on its integrity, SSQ has consistently strived to be
ethically, morally and socially reliable throughout its
long history and it is committed to doing so in the
future. People are also looking for companies that
are economically reliable and able to meet their
needs. Over the decades, SSQ has successfully
tailored its expertise to its clients’ expectations.
The company’s skills and agility and its unwavering
dedication to delivering an enjoyable customer
experience underpin its commitment to develop
expertise on an ongoing basis. That is why SSQ
feels so confident about its future.
ACKNOWLEDGMENTS
In closing, I would like to thank our members,
customers and partners for placing their trust in
us and for having faith in our ability to adapt. This
will continue to make SSQ an insurer that can be
counted on.
Our directors help us to anticipate and embrace
change, and I am grateful that they continue to
do so.
I would also like to thank our employees for being
agents of change. They do not simply undergo
change; they seek out change and take steps to
make it happen.
SSQ is certainly ready,
willing and able to adapt to change!
René Hamel
Chief Executive Officer
29
30
ADAPTING
TO CHANGE
SUSTAINABLE DEVELOPMENT AND
SOCIETAL RESPONSIBILITY REPORT
2014 was the second year in SSQ Financial
Group’s five-year Sustainable Development and
Societal Responsibility (SDSR) plan. Numerous
concrete actions were taken, with highly satisfactory
results. Reflecting its ongoing concern about
human, economic, social and environmental
impacts, SSQ is moving in the right direction.
Our task will be to update the plan so that SSQ
can meet the challenges of tomorrow.
PARTNERSHIPS
AND EMPLOYEE
INVOLVEMENT
31
$106,423
Money raised for Seinbiose,
a research project of the
Fondation du CHU de Québec,
through the SSQ Quebec City
Marathon fundraising event
Five-year renewal of a partnership
agreement with Courir à Québec
for the SSQ Quebec City Marathon
5 YEARS
40% more employees benefited
from the employer’s contribution
to personal volunteer activities
%
+40
10% increase in employee
contributions to
32
INNOVATION
Nearly 95% of group insurance
groups use e-billing
ssq.ca
Launch of a brand new ssq.ca
95
%
SSQauto launches a mobile app
allowing insureds to submit auto
and home claims, produce a joint
report, make an inventory of
property and track vehicle repairs
via Body Shop Direct
Increase in number
of online quotes
at SSQauto
33
Launch of Compassion Insurance,
a world first in group insurance
COMPASSION
34% increase in group
insurance claims submitted
using the mobile application
Access to online claims offered to
100% of group insurance customers
from groups offering this service
to their members
100
%
Nearly 60% more group
insurance members use
online claims
60
%
100% of home and auto insurance
claims are paperless
34
AWARDS AND
CERTIFICATIONS
“Prix Distinction” award in large
company category at the “Coming
together for company health
and wellness” event
Certification of the HERE WE
RECYCLE! program obtained
for the Roland-Giroux building
in Quebec City
REAL ESTATE
LEED© certification
confirmed for
St. Lawrence tower
of the SSQ building
in Quebec City
BOMA BESt© certification
for the Roland-Giroux
building and the St. Lawrence
tower of the SSQ building
in Quebec City
35
ENVIRONMENT
Distribution of the policy on responsible
acquisition of goods and services
to all company employees and providers/
suppliers, notifying them that the
SDSR selection criteria would now
be taken into consideration
Annual improvement of more
than 6% of the SSQ automobile
fleet’s performance, with the
addition of new environmental
standards
DDRS
Installation of nearly
2,000 square metres of carpet
(made of recycled fishing nets)
certified 100% carbon neutral
at the Roland-Giroux building
in Quebec City. SSQ received
a certificate for this initiative
Reduction of the office
supply list generated savings
of more than 25%
25
%
FSC© certification
of the Copy Centre
renewed for
five years
36
HUMAN COMMITMENT
Action 1 – O
ffer an accessible and high-quality customer experience
Gestures
Indicators
2014 Report
1. Conduct the necessary
surveys to measure member
and customer satisfaction
rates with our products
and services
• Surveys measuring the
satisfaction of our insured
members, customers
and partners
• 92% group insurance satisfaction rate
• Claim processing times in group insurance reduced
by 35%
• 92% of insureds are satisfied or completely satisfied
with the overall claim experience at SSQauto
• In development in the individual insurance sector
• Goals of excellence by
business sector
• In development
2. Develop and maintain
specific training programs
for employees who work for
different customer service
departments at SSQ
• Training new employees
within six months
• 100% of new employees trained within the specific
time frame
3. Expand our mobile and
online services
• Feasibility study detailing
the online needs to add to
the overall offering
• In development
• Surveys to determine
additional needs for online
services
• Available on ssq.ca
• Services with low
environmental impact
• Complete group insurance booklet available
electronically
• Electronic invoicing used by nearly 95% of our group
insurance groups, up by 15%
• 10% increase in direct deposits by our intermediaries
• 100% of home and auto insurance claims are
paperless
• SSQauto receives invoices electronically
37
Action 1 – O
ffer an accessible and high-quality customer experience (cont’d)
Gestures
Indicators
2014 Report
3. Expand our mobile and
online services (cont’d)
• New mobile and online
services offered
• The brand new ssq.ca launched in May. Revamped
site now adapted to all platforms and needs of users
with an updated look and browsing capabilities
• Online claims are being added to Group Insurance’s
mobile app (in progress)
• SSQauto launches a mobile app allowing insureds
to submit auto and home claims, produce a joint
report, make an inventory of property and track
vehicle repairs via Body Shop Direct
4. Promote the use of our
online services among
our insured members
• Usage of online services
• The use of our online services is constantly growing
• Access to online claims offered to 100% of group
insurance customers from groups offering this
service to their members
• Nearly 60% increase in group insurance members
who use online claims
• Nearly 30% of members use direct deposit for their
claim reimbursements
5. Promote the efficiency
and speed of SSQ Mobile
Services for submitting
claims
• Identification of the
objectives of online
services by business
sector
• Objectives to develop in Group Insurance,
Investment and Retirement and SSQ Insurance
• Increased usage of SSQ
Mobile Services
• 34% increase in group insurance claims submitted
using the mobile application
• Objectives defined by SSQauto
• Increase in number of online quotes at SSQauto
38
Action 2 – E
ncourage employees to become agents of change
in sustainable development
Gestures
Indicators
2014 Report
1. Make employees aware of
sustainable development
principles
• Activities to make
employees aware of
the SDSR principles
• Regular employee updates from the 27 employees
responsible for SDSR plan in the various sectors
• Conference on energy efficiency and water
presented by the young members of the
Sustainable Development Caravan as part
of the training program of the Quebec network
of CFERs (business and recycling training centres)
• SSQ’s SDSR plan presented to all new employees
2. Build a shared company
vision through a
communications platform
dedicated to attracting
and retaining employees
• Internal SDSR
communications plan
and employee
mobilization activities
• Development of internal communication plan to
mobilize and encourage employees to be key
players in achieving the company’s SDSR objectives
• Dissemination of annual results to all SSQ Financial
Group employees
Action 3 – M
aintain a high level of employee expertise
Gestures
Indicators
2014 Report
1. Encourage employees to
develop skills that help them
reach their potential and
meet the needs of our
customers
• Budget percentage
allocated to employee
training
• Percentage maintained at nearly 2.5% of SSQ
Financial Group’s payroll
2. Set up a leadership training
and professional
development program
for managers
• Training and professional
development programs
• Group leadership training followed by four groups
of new managers through the LEAD program—
a program for management staff development
3. Develop an internal
communications policy
that encourages dialogue
between management
and employees
• Internal communications
policy
• Policy implemented and communicated to all
new employees
4. Coach employees in change
management
• Provide support with
change management
• Services offered by the change management
expertise centre to key stakeholders involved in
change at SSQ
• Budget for individual employee training maintained
39
Action 4 – T ake sustainable development principles into
account when managing human capital and offer
an engaging work environment
Gestures
Indicators
2014 Report
1. Examine the results of the
different organizational
surveys and sustainable
development principles in
programs related to human
resources to offer an
engaging work environment
and become an employer
of choice that consistently
promotes equality and
employee diversity
• Integration of SDSR
principles with company
business practices
• Massive 90% of all employees participated in the
mobilization survey conducted in September, with
an overall mobilization score of 75%, corresponding
to the organization’s performance results
2. Promote health and support
employees
• Health promotion
and employee support
activities
• Important expression of recognition among
colleagues via the Recognition Place portal used
to email more than 1,800 recognition cards
• More than 2,000 consultations of the My Career
Path portal recorded. The portal provides employees
with tools and support for their professional career,
their employability and wellness at work
• SSQ Financial Group was awarded the “Prix Distinction”
in the large company category at the “Coming
together for company health and wellness” event
put on by the Healthy Enterprises Group last April
• Maintenance of diversified health programs and
initiatives: HealthWise, MobilizAction, Employee
Assistance Program (EAP), Recognition Time!
(workplace recognition program), My Career Path
• My Career Path program implemented at
SSQauto and SSQ Insurance
40
SOCIAL COMMITMENT
Action 5 – O
ffer products and services that promote
responsible behaviours
Gestures
Indicators
2014 Report
1. Promote online claims
to insureds
• User rates of
online services
• Access to online claims is available to individual
insurance customers and group insurance groups
offering this service to their insured members
• Nearly 60% more group insurance members use
online claims
• Nearly 30% of insured members receive their benefit
claim reimbursement by direct deposit
• Online claim service was launched by SSQauto in
September 2014
2. Incite and encourage
consumers to adopt
environmentally friendly
behaviours
• Adherence to
environmentally
responsible products
3. Increase the quantity of
environmentally responsible
products we offer
• Development of new
environmentally
responsible products
• Promotion of the Kilo Program and green discounts
via marketing on the ssqauto.com and ssq.ca
websites
• Customer service agents promote the importance of
accurately estimating mileage for the sake of savings
and reducing the environmental footprint
• In April, group insurance launched Compassion
Insurance, a product that allows insured members to
take time off work temporarily to care for gravely ill
loved ones and receive benefits to offset the loss of
income due to their absence from work—a world first
• Development of SSQ SMEs, a new, eco-friendly and
100% paperless group insurance product aimed at
small and medium-sized businesses offered online
• At SSQauto: Kilo program, green discounts and
Body Shop Direct
41
Action 6 – I ntegrate environmentally responsible criteria into policies
for donations and institutional sponsorships
Gestures
Indicators
2014 Report
1. Build on policies for
donations and institutional
sponsorships that take the
sustainable development
efforts of applicants into
account
• Integration of SDSR
criteria in the policies
for donations and
sponsorships
• Sustainable development criteria are being integrated
into policies since 2013
• Promotion of
our commitments
in the community
• Five-year renewal of partnership agreement between
SSQ Financial Group and Courir à Québec for the
SSQ Quebec City Marathon
• Important fundraising event that is part of the SSQ
Quebec City Marathon raised $106,423 for the
Seinbiose research project operated by the Quebec
City CHU Foundation (FCHUQ) for the development
of custom external breast prostheses for women
who have undergone a mastectomy
• Good media coverage has helped highlight initiatives
of SSQ Financial Group and its employees
2. Encourage employees to
volunteer in order to help
communities flourish
• Measures to encourage
employee volunteer work
• Very strong employee participation in the SSQ
Quebec City Marathon and the activities surrounding
the Seinbiose research project fundraiser
• Continuation of activities supporting the partnership
between SSQauto and Fondation des pompiers
du Québec pour les grands brûlés
• 40% more employees benefited from the employer’s
contribution to personal volunteer activities
• 10% increase in employee contributions to
3. Invest a portion of our net
income in donations
• Promotion of the
institutional donations
policy and the directive on
supporting the volunteer
work done by employees
• Presentation to all new employees of institutional
donations policy and directive on charitable
donations to match volunteer work
• Percentage of net gains is
invested in donations
• 1% of net gains given in donations to organizations
such as the Fondation de la Maison Michel-Sarrazin,
the Fondation du CHU Sainte-Justine, the MoniqueFitz-Back Foundation, SickKids Foundation of
Toronto, Centraide/United Way, and the Mouvement
RAIZE to name just a few
42
Action 7 – G
ive back to the community through the SSQ Foundation
Gestures
Indicators
2014 Report
1. Maintain support for the
SSQ Foundation
• Percentage of the
capitalization of
the SSQ Foundation
• Capitalization of more than $1.5 million to ensure
the longevity of the SSQ Foundation
Action 8 – I nvest in the next generation
Gestures
Indicators
2014 Report
1. Support the establishment
of a youth co-op with the
children of employees
• Establishment of a youth
co-op every year
• In the summer of 2014, a group of 14 young
cooperators aged 11 to 14 made up the 12th edition
of the SSQ youth co-op (CJSSQ). Two leaders,
both university students, were hired to accompany
the youngsters in their educational and
entrepreneurial venture
2. Consolidate succession
planning to ensure the lasting
success of operations
• Succession planning
• Launch of student succession initiative for all SSQ
Financial Group subsidiaries to support student
employees in their efforts to find their first job in
their field
• Presentation of SSQ Succession Plan to all
senior executives, senior directors and a number
of managers
• SSQ Financial Group participated as panelist at the
annual succession forum presented by the Conseil
québécois de la coopération et de la mutualité
3. Promote the SSQ employer
brand as employer of choice
• Promote the SSQ
employer brand
• SSQ Financial Group participated in the symposium
on employability in sustainable development at
Laval University
• SSQ Financial Group chosen by Laval University
students as a research project to assess our health
and wellness HealthWise program
• Organized networking activities in 75% of colleges
and CEGEPS offering property and casualty
insurance programs
• SSQ was featured on Mode d’emploi presented
on the MAtv channel as part of program on
insurance industry
• SSQ participated in the international human resources
congress (Congrès international francophone des
ressources humaines) as part of a conference
entitled SSQ Financial Group − When leadership
development becomes an objective [translation]
• Continuation of SSQauto programs for student
clercs and agents
43
ENVIRONMENTAL COMMITMENT
Action 9 – A
pply social and environmental considerations
when acquiring goods and services
Gestures
Indicators
2014 Report
1. Apply a policy on responsible
goods and services
acquisition and a directive
on calls for tenders and
responsible contracting
• Policy for responsible
acquisition of goods
and services
• Distribution of policy on responsible acquisition
of goods and services to all company employees
and providers/suppliers, notifying them that the
SDSR selection criteria would now be taken
into consideration
• Continued inclusion of policy criteria in the call for
tender process, such as compatibility of business
philosophies, cost-reduction mechanisms and
compliance with ISO standards
• Identification of responsible providers/suppliers and
standardization of practises for all SSQ enterprises
• Policy for responsible acquisition of goods and
services applied to calls for tender for office supplies
and ink cartridges
• New decision-making tool that takes a number of
criteria into consideration including certificates and
ISO standards obtained by providers/suppliers
2. Efficiently dispose of residual
materials according to
3R-D that make up
first principle of the
Quebec Residual Materials
Management Policy:
Reduction, Reuse, Recycling
and Disposal
• The 3R-D internal
management plan
for residual materials
• Reduction of office supply list generated savings of
more than 25%
• Installation of nearly 2,000 square metres of carpet
certified 100% carbon neutral at the Roland-Giroux
building in Quebec City and obtaining a certificate
for this initiative
• Old carpet was recycled, diverting some 2,000 kilos
of carpet away from landfills; certificate awarded to
SSQ for this initiative
• Certification of HERE WE RECYCLE! program
obtained for the Roland-Giroux building in
Quebec City
• 100% of paper waste is shredded and recycled
• Computer equipment such as monitors, keyboards
or laptops are given to OPEQ, a non-profit organization
that distributes used computer equipment to
schools in Quebec
44
Action 10 – R
educe our greenhouse gas emissions
Gestures
Indicators
2014 Report
1. Create an inventory of
greenhouse gases (GHGs)
produced every year
• Inventory and definition of
the greenhouse gas (GHG)
reduction objectives
• In development
2. Promote alternative means
of transportation to driving
alone
• Promote public
transportation and
carpooling
• 50% of cost of public transportation passes paid
by employer: more than 300 employees enrolled
in the public transportation program (L’abonne BUS)
• New initiatives
for alternative ways
of working
• Possibility of working from home for certain
groups of employees
3. Include a wider selection
of environmentally friendly
vehicles in SSQ’s
automobile fleet
•Environmental
performance of
the automobile fleet
• Annual improvement of more than 6% of the
automobile fleet’s performance, with addition of
new environmental standards
4. Hold carbon-neutral annual
meetings
• Carbon footprint of
the annual meeting
• Planting 200 trees on behalf of SSQ Financial Group
in Peru and in Quebec to offset greenhouse gas
emissions related to our annual meeting, support
reforestation efforts and fight climate change
• In development
Action 11 – R
educe our paper consumption
Gestures
Indicators
2014 Report
1. Encourage group insurance
intermediaries to register
for online services
• Intermediary registration
rates for direct deposit
• More than 50% of intermediaries registered for direct
deposit, an increase of almost 10%
• Usage rate of e-billing
• Nearly 95% of group insurance groups use e-billing
2. Implement a new employee
awareness program
to reduce the use
of photocopies
• Measure the reduction
in photocopy and
printer use
• Support for initiatives to reduce paper in various
areas of the company
3. Replace the My insurance at
a glance brochure distributed
to group insurance members
with an abridged version and
an online version
• Production and
distribution of an
abridged and online
version
• Summary of booklet given to insured members,
reducing paper use by 90% since the beginning of
2014, i.e., the equivalent of 1.2 million sheets of paper
• Management tools developed to generate statistics
and policies for printing to increase employee
awareness in different sectors
45
Action 11 – R
educe our paper consumption (cont’d)
Gestures
Indicators
2014 Report
4. Promote printing on both
sides as a standard for all
documents
• Percentage of printers
capable of printing on
both sides
• Printing on both sides programmed by default
on 100% of all printers
5. Ensure our Copy Centre
maintains its certification
• Certification of the Copy
Centre and a policy on
paper supply
• Purchase of FSC© Mixed Sources paper, consisting
of a mixture of recycled FSC© certified materials from
controlled sources
•FSC© certification of the Copy Centre renewed
for five years
Action 12 – R
educe our water and energy consumption
Gestures
Indicators
2014 Report
1. Obtain BOMA BESt©
certification for all SSQowned buildings to improve
their performance and their
environmental management
• BOMA BESt©
certification
• Obtain BOMA BESt© certification for the RolandGiroux building and the St. Lawrence tower of the
SSQ building in Quebec City
• Set a goal for water and
energy reduction
• Savings in the time the lights are on, heating and
cooling of approximately 25% at company
headquarters and the Roland-Giroux building through
changes in work schedule of housekeeping staff
2. Obtain LEED© certification
for all construction projects
built by SSQ Realty
•LEED© certification
•LEED© certification confirmed for St. Lawrence tower
of the SSQ building in Quebec City
3. The Cité Verte project is
raising awareness about the
prescribed building methods
and leading-edge products
used in energy and
environmental management:
sustainable architecture,
waste materials management
and storm water and
wastewater management
• Promotion of Cité Verte’s
environmental friendliness
• Aiming for LEED© certification for SSQ Tower in
Longueuil and all new buildings
• Quebec City was handed the keys for infrastructures
including the ponds, streets, sidewalks and terminal
for residual waste collection
• Excellence and innovation of Cité Verte recognized
again as it received Quebec City’s special jury prize
for architecture, two Cecobois awards, as well as
coming in as finalist at the 2014 Gala Habitation
• The Office municipal d’habitation de Québec
begins the construction of a 4-storey building
that will include 40 social housing units of the
AccèsLogis program
• Using an innovative waste collection process that
uses an underground transportation network
eliminating use and transport of waste containers
on Cité Verte site has led to reduction of over 80%
in greenhouse gas emissions
46
Action 12 – R
educe our water and energy consumption (cont’d)
Gestures
Indicators
2014 Report
3. The Cité Verte project is
raising awareness about the
prescribed building methods
and leading-edge products
used in energy and
environmental management:
sustainable architecture,
waste materials management
and storm water and
wastewater management
(cont’d)
• Promotion of Cité Verte’s
environmental friendliness
(cont’d)
• Installation of charging stations for electric cars
in the commercial parking lot
• Major landscaping that included the planting
of 4,874 shrubs and plants
• Production of a corporate video used to present
the unique nature of the project in competitions,
special events and to potential buyers
• Major TV, print media and Web ad campaign
in the fall promoting Cité Verte as a smart option
to potential buyers
ECONOMIC COMMITMENT
Action 13 – I ntegrate our sustainable development policy
into our business practices
Gestures
Indicators
2014 Report
1. Integrate sustainable
development indicators into
the policy’s progress chart
• Progress chart
• Production and sharing of progress chart
as a collaborative tool
2. Present an annual report that
integrates the SDSR report
• SDSR section integrated
in the annual report
• Since 2013 SDSR section has been part
of SSQ Financial Group’s annual report
47
Action 14 – B
uild on the sustainable and responsible profile of our investments
Gestures
Indicators
2014 Report
1. Promote the policy governing
socially responsible
investments adopted in 2006
and improved in 2008, by
endorsing the PRI (Principles
for Responsible Investment)
initiative
• Distribution of the policy
on socially responsible
investments and training
of employees involved
• The policy governing socially responsible investments
was revised and a new agreement was signed with
our external auditor for responsible investments
2. Establish targets for change
in response to the six PRI
principles
• Target the changes in
response to the six PRI
principles
• SSQ Financial Group participated in meetings of the
PRI Québec network and took part in the first issue
of “green” bonds in Canada
3. Continue with external audits
of the Canadian company
investment portfolio, with a
focus on the responsible
aspect of these investments
• External audits and
communications to the
investment committee
• External audit of our investments in Canadian
companies, with a focus on the responsibility aspect
performed in January and July of 2014
• SSQ Financial Group participated in events related
to financial markets and socially responsible
investments such as the international PRI in Person
event, sponsored by SSQ, a PRI and fixed income
webinar and conference on climate bonds
Action 15 – E
nsure the lasting success of the company through
sustained growth and reasonable profits
Gestures
Indicators
2014 Report
1. Determine reasonable and
responsible targets for overall
company performance
• Financial indicators
• General Insurance sales up by 4.3 %
• Insurance premiums in force up by 4.7 %
• Assets up by 2.9 %
• Improved expense ratio
• Successful withdrawal from the group product
offering with management of members
• Improved financial strength
SSQ, MUTUAL MANAGEMENT CORPORATION
Consolidated Financial
Statements as at
December 31, 2014
Together with Independent
Auditor’s Report
49
SSQ, MUTUAL MANAGEMENT
CORPORATION
Independent auditor’s report
To the members of
SSQ, Mutual Management Corporation,
We have audited the accompanying consolidated
financial statements of SSQ, MUTUAL MANAGEMENT
CORPORATION, which comprise the consolidated
statement of financial position as at December 31, 2014,
and the consolidated statements of excess of
revenues, comprehensive income, equity and cash
flows for the year then ended and a summary of
significant accounting policies and other explanatory
information.
Management’s Responsibility for the
Consolidated Financial Statements
Management is responsible for the preparation and
fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control
as management determines is necessary to enable
the preparation of consolidated financial statements
that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian
generally accepted auditing standards. Those standards require that we comply with ethical requirements
and plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures
selected depend on the auditor’s judgment, including
1
CPA auditor, CA, public accountancy permit No. A119429
the assessment of the risks of material misstatement
of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the
Mutual’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on
the effectiveness of the Mutual’s internal control. An
audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of
accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial
position of SSQ, Mutual Management Corporation as
at December 31, 2014, and its financial performance
and its cash flows for the year then ended in accordance with International Financial Reporting
Standards.
1
MALLETTE L.L.P.
Partnership of chartered professional accountants
Québec, Canada
February 26, 2015
50
CONSOLIDATED STATEMENT OF EXCESS OF REVENUES
For the year ended December 31,
(in thousands of dollars)
REVENUES
Share in net income of the associated companies (Note 4)
Interest (Note 5)
EXPENSES
Interest
EXCESS OF REVENUES
Excess of revenues attributable to non-controlling interests
EXCESS OF REVENUES ATTRIBUTABLE TO MEMBERS
2014
$
2013
$
16,409
76
14,728
78
16,485
14,806
70
69
70
69
16,415
7,041
14,737
6,335
9,374
8,402
2014
$
2013
$
16,415
14,737
5,056
3,513
(3,862)
4,550
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EXCESS OF REVENUES
OTHER COMPREHENSIVE INCOME
Share in other comprehensive income of the associated companies
Items that might be reclassified subsequently to net income
Items that will not be reclassified to net income
8,569
688
COMPREHENSIVE INCOME
24,984
15,425
Comprehensive income attributable to non-controlling interests
10,719
6,629
COMPREHENSIVE INCOME ATTRIBUTABLE TO MEMBERS
14,265
8,796
51
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31,
2014
$
2013
$
217,901
–
900
108,786
84,137
900
218,801
193,823
888
11
1,082
11
219,700
194,916
900
215
22
11
900
209
60
11
1,148
1,180
Non-controlling interests
106,076
95,525
Attributable to members
Accumulated net surplus
Accumulated other comprehensive income
119,182
(6,706)
109,808
(11,597)
Total equity attributable to members
112,476
98,211
TOTAL LIABILITIES AND EQUITY
219,700
194,916
ASSETS
Investments
Interests in the associated companies (Note 4)
SSQ, Life Insurance Company Inc.
SSQ Insurance Company Inc.
Note (Note 5)
Cash (Note 5)
Interest receivable
TOTAL ASSETS
LIABILITIES
Chattel mortgage (Note 5)
Advance from an associated company (Note 5)
Account payable to an associated company
Interest payable
TOTAL LIABILITIES
EQUITY
On behalf of the Board,
Pierre Genest
Émile Vallée
Vice-Chairman of the Board
52
CONSOLIDATED STATEMENT OF EQUITY
2013
$
Members
Accumulated net surplus
Balance, beginning of year
Excess of revenues
2014
$
109,808
9,374
101,406
8,402
Balance, end of year
119,182
109,808
Other comprehensive income
(11,597)
4,891
(11,991)
394
(6,706)
(11,597)
Total equity attributable to members
Non-controlling interests
Excess of revenus
Net capital injection
112,476
95,525
7,041
3,678
(168)
98,211
81,021
6,335
294
7,875
Total equity attributable to non-controlling interests
106,076
95,525
TOTAL EQUITY
218,552
193,736
53
CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM THE FOLLOWING ACTIVITIES:
2014
$
OPERATING
Cashed interest
Paid interest
INVESTING
Net investment in an associated company
DECREASE IN CASH
CASH, beginning of year
78
(64)
12
14
(8,194)
(206)
–
–
7,935
8,194
(7,990)
(206)
8,139
(194)
(41)
1,082
1,123
888
1,082
CASH, end of year
1
76
(64)
–
FINANCING
Net capital injection1
Advance from an associated company
Repayment to an associated company
2013
$
As at December 31, 2014, an amount of $22 (2013 – $60) is included in the account payable of the Mutual for net capital injection.
54
NOTES TO THE FINANCIAL STATEMENTS
For the year ended December 31, 2014
(in millions of dollars, unless otherwise indicated)
1. STATUS AND NATURE OF ACTIVITIES
SSQ, Mutual Management Corporation (the Mutual) is formed under the Act respecting health services
and social services, SSQ, Mutual Management Corporation and SSQ, Life Insurance Company Inc. Its main
activity is to hold an investment in SSQ, Life Insurance Company Inc. and SSQ Insurance Company Inc. (until
September 30, 2014). The Mutual’s head office is located at 2525 Laurier Blvd., Quebec City, Quebec, Canada.
The Mutual’s consolidated financial statements were approved by the Board of Directors on February 26, 2015.
2. SIGNIFICANT ACCOUNTING POLICIES
Presentation of consolidated financial statements
The consolidated financial statements were prepared in accordance with International Financial Reporting Standards
(IFRS). Consolidated financial statements include the accounts of the Mutual and those of its subsidiary, SSQ,
Mutual Holding Inc., owned at 57.08% (2013 – 57.00%), whose principal office is located in Quebec City, Quebec,
Canada, and holds an investment in SSQ, Life Insurance Company Inc. and SSQ Insurance Company Inc. (until
September 30, 2014). The Mutual’s consolidated financial statements are presented in Canadian dollars, which
is the functional currency of the Mutual.
Use of estimates and Management’s judgments
The preparation of consolidated financial statements in accordance with IFRS requires Management to rely
on best estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues
and expenses during the reporting year. Actual results may differ from estimates. These estimates are periodically
reviewed and adjustments are made, if needed, to the year’s results in which they are known. Management uses
its judgment to prepare the consolidated financial statements in particular, the value upon the disposal of the
interest in the associated company.
Revenue recognition
Revenues from investments are recognized when earned.
Investments in the associated companies
The investments of 28.91% (2013 – 28.91%) and 0% (2013 – 26.02%) in its associated companies SSQ, Life
Insurance Company Inc. and SSQ Insurance Company Inc. are accounted for using the equity method. Of
these ownerships, in interest, 16.50% (2013 – 16.48%) and 0% (2013 – 14.83%) are attributable to members.
Financial Instruments
Cash is made up of bank accounts. It is classified as Loans and receivables and is carried at amortized cost
according to the effective interest rate method.
Note is classified as Loans and receivables and is carried at amortized cost using the effective interest rate
method.
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Financial Instruments (cont’d)
Other financial assets and liabilities are recognized at amortized cost and classified as Loans and receivables
and Other liabilities, respectively.
3. CHANGES IN ACCOUNTING POLICIES
New accounting policies applied
Investment entities
In December 2012, the International Accounting Standards Board (IASB) published an amendment, Investment
Entities, which defines an investment entity and requires that an investment entity should not consolidate investments
in entities that it controls, but to measure those investments at fair value. This amendment modifies IFRS 10,
IFRS 12 and IAS 27. The application of the amended standard has no impact on the consolidated financial
statements of the Mutual since it does not qualify as an investment entity.
Impairment of assets
In May 2013, the IASB issued amendment to IAS 36, Impairment of Assets, which proposes the disclosure of
information about the recoverable amount of impaired assets, particularly if that amount is based on fair value
less costs of disposal. The amendment also clarifies the information to be disclosed regarding the recoverable
amount following the application of IFRS 13, Fair value measurement. The application of the amended standard
has no impact on the consolidated financial statements of the Mutual.
Levies
In May 2013, the IASB published IFRIC 21, Levies, which concerns the timing for the recognition of a liability
according to IAS 37, Provisions, Contingent Liabilities and Contingent Assets in regards to the payment of
levies. The application of the interpretation has no impact on the consolidated financial statements of the Mutual.
Changes in future accounting policies
Employee benefits
In November 2013, the IASB issued an amendment to IAS 19, Employee Benefits, which clarifies the accounting
requirements for employee or third party contributions to defined benefit plans. The provisions of this amendment
will apply prospectively to financial statements beginning on or after July 1, 2014. The Mutual is currently assessing the impact of this amendment on its consolidated financial statements.
Financial instruments
In July 2014, the IASB published IFRS 9, Financial Instruments, which aims to replace IAS 39, Financial Instruments:
Recognition and Measurement, for classification and measurement, impairment and hedge accounting of financial
assets and liabilities. These modifications are to be applied retrospectively for annual periods beginning on or
after January 1, 2018. The Mutual is currently assessing the impact of this new standard on its consolidated
financial statements.
56
3. CHANGES IN ACCOUNTING POLICIES (cont’d)
Changes in future accounting policies (cont’d)
Revenue recognition
In May 2014, the IASB published IFRS 15, Revenue from Contracts with Customers which aims to replace
IAS 18, Revenue and IAS 11, Construction Contracts. This new standard sets out the requirements for recognising
revenue that apply to all contracts with customers except for contracts that are within the scope of the Standards
on leases, insurance contracts and financial instruments. The standard is effective from January 1, 2017. Earlier
application is permitted. The Mutual is currently assessing the impact of this new standard on its consolidated
4. INTERESTS IN THE ASSOCIATED COMPANIES
2014
Total
$
SSQ
Insurance
Company
Inc.
$
Total
$
84,137
192,923
86,634
82,679
169,313
14,366
2,043
16,409
10,976
3,752
14,728
6,118
–
2,451
(88,631)
8,569
(88,631)
2,982
–
(2,294)
–
SSQ
Insurance
Company
Inc.
$
108,786
Share in net income
Share in other
comprehensive income
Disposal of the interest
Acquisition fees on an
additional interest
2013
SSQ, Life
Insurance
Company
Inc.
$
SSQ, Life
Insurance
Company
Inc.
$
688
–
88,631
–
88,631
8,194
–
8,194
217,901
–
217,901
108,786
84,137
192,923
57
4. INTERESTS IN THE ASSOCIATED COMPANIES (cont’d)
The following table provides a summary of the financial information of the associated companies, SSQ, Life
Insurance Company Inc. and SSQ Insurance Company Inc.
Statement of financial position
Cash and cash equivalents
Total assets
Total liabilities
Net Income
Interest revenues
Total revenues
Amortization of fixed assets and intangible assets
Interest expenses
Income tax
Net income
Comprehensive income
2014
$
2013
$
236,800
10,624,800
9,954,100
279,300
10,321,300
9,734,400
670,700
586,900
117,900
2,509,800
30,400
12,000
17,400
54,000
119,100
2,070,100
27,700
13,000
17,700
47,600
29,800
83,800
2,400
50,000
5. FINANCIAL INSTRUMENTS
2014
Carrying
value
$
Financial assets
Note, 7.09%, maturing May 1, 20201
2013
Fair value
$
Carrying
value
$
Fair value
$
900
1,014
900
993
Cash , bearing interest at prime rate less 1.75%
888
888
1,082
1,082
Financial liabilities
Chattel mortgage, 7.09 %, maturing
May 1, 20201
900
1,014
900
993
Advance from an associated company, 2.63%
215
215
209
209
2
The fair value of the note and the chattel mortgage, classified as Loans and receivables and Other liabilities, is evaluated according to a model
discounting the expected future cash flows and classified as Level 3. The discount rate used corresponds to the rate of return of the benchmark
that has a similar risk profile as the underlying assets and a term matching the maximum term for the loan and chattel mortgage.
1
The fair value of cash is classified as Level 1.
2
58
5. FINANCIAL INSTRUMENTS (cont’d)
Investment income - interest
Note
Cash
2014
$
2013
$
64
12
64
14
76
78
Financial instruments recorded at fair value in the Consolidated Statement of Financial Position are classified
using a hierarchy that reflects the significance of the inputs used in determining valuations and includes
three levels:
•
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2 – A
valuation based on inputs observable in markets for the asset or liability, obtained either directly
or indirectly;
•
Level 3 – A
valuation based on inputs other than inputs observable in markets for the asset or liability.
As at December 31, 2014 and 2013, no financial instrument is recognized at fair value in the Consolidated
Statement of Financial position.
6. FINANCIAL INSTRUMENTS RISK MANAGEMENT
The Mutual adopted control policies and procedures to manage risks related to financial instruments. The Board
of Directors approves the investment policy and its objective is to supervise investment decision-making. Risks
related to financial instruments consist of credit risk and liquidity risk.
The Mutual is exposed to credit risk in terms of the note. This risk is mitigated by the fact that the note is issued
to an associated company.
Liquidity risk refers to the risk that the Mutual may have difficulty generating sufficient cash flows to cover its
financial liabilities. The Mutual manages liquidity risk by matching cash flows from its note with those required
to cover its chattel mortgage. There is no liquidity risk related to the advance from an associated company.
59
6. FINANCIAL INSTRUMENTS RISK MANAGEMENT (cont’d)
The following tables present contractual maturities of the cash flows of the Mutual’s financial liabilities.
2014
Chattel mortgage
Accrued interest payable
Payable on demand
$
Over 5 years
$
Total
$
–
215
22
11
900
–
–
–
900
215
22
11
248
900
1,148
2013
Chattel mortgage
Accrued interest payable
Payable on demand
$
Over 5 years
$
Total
$
–
209
60
11
900
–
–
–
900
209
60
11
280
900
1,180
7. CAPITAL MANAGEMENT
In terms of capital management, the Mutual’s objective is to preserve its assets. The Mutual defines capital
as the chattel mortgage and members’ equity. The Mutual achieves its objective through careful management
of the capital generated by internal growth and by making optimal use of low-cost capital.
Composition of the capital
Chattel mortgage
Members’ equity
2014
$
2013
$
900
112,476
900
98,211
113,376
99,111
In April and September 2013, the Mutual’s interest in its subsidiary, SSQ, Mutual Holding Inc., was diluted
following the issuance of 727,502 Class C shares for an amount totalling $7,992.
60
8. RELATED PARTY TRANSACTIONS
In the normal course of operations, the Mutual carries out transactions with other entities within the group.
These transactions are measured at the exchange amount.
During the year, the Mutual received interests of $64 (2013 – $64) from an associated company, SSQ, Life
Insurance Company Inc. As at December 31, 2014, a balance of $11 (2013 – $11) is included under interest
receivable. This amount is not guaranteed and will be settled in cash.
During the year, the Mutual capitalized interest of $6 (2013 – $5) to the advance from an associated company,
On November 27, 2014, the Mutual received 7,380,750 Class A shares from the associated company, SSQ,
Life Insurance Company Inc., in exchange for all shares held in the associated company, SSQ Insurance
Company Inc. The transaction was recorded at book value established as at September 30, 2014.
The associated company, SSQ, Life Insurance Company Inc. offers to some of its employees to participate in
an investment fund. This investment fund owns a non-controlling interest in the Mutual.
During the year ended December 31, 2013, the Mutual bought back all the shares of the associated company
from the employees of this company for a total consideration of $8,194. These transactions were made at
a price agreed upon between the associated company and its employees. No amounts related to these
transactions are receivable or payable at year-end.
9. INTERESTS IN OTHER ENTITIES
The following table presents the impact of the consolidation of the subsidiary not wholly owned on the consolidated financial statements of the Mutual.
2014
$
2013
$
218,815
1,126
193,837
1,120
Statement of net income
Revenues
Net income
16,473
16,403
14,793
14,724
Statement of comprehensive income
8,569
24,972
688
15,412
Statement of financial position
Total assets
Total liabilities
Statement of cash flows
Operating
Investing
Financing
Decrease in cash
–
–
–
–
(4)
(8,194)
7,103
(1,095)
Excerpt from the
Consolidated Financial
Statements as at
December 31, 2014
63
Management’s Report
Preparation of the consolidated financial statements of
SSQ, LIFE INSURANCE COMPANY INC. (the Company)
is the responsibility of Management. These audited
financial statements, which have been approved by
the Board of Directors, are prepared in accordance
with International Financial Reporting Standards (IFRS)
and include certain amounts that are based on our best
judgements and estimations. The financial information
presented in this annual report is excerpted from
audited financial statements.
In order to carry out its responsibilities with respect to
the financial statements, Management maintains internal
systems of control aimed at providing a reasonable
degree of certitude that operations have been duly
authorized, that assets are well safeguarded and that
adequate and proper records have been kept. These
systems of control are reinforced by the work of a team
of internal auditors who regularly review all sectors of
activity within the Company.
In conformity with the Insurance Act, the Board of
Directors appoints the actuary, who is charged with
the responsibility of valuating the actuarial liabilities
of the Company in accordance with the standards
and practices of the Canadian Institute of Actuaries.
Moreover, independent auditors, appointed at the
Annual Meeting of shareholders, ensure the accuracy
of the data presented in the financial statements and
express their opinion on these.
Audits are carried out regularly by the Autorité des
marchés financiers to ascertain that the Company is
in compliance with the Act respecting insurance,
which aims primarily to protect policyholder interests
and maintain a sound financial position.
The Audit and Risk Management Committee of the
Board of Directors, the members of which are neither
from Management nor employees of the Company,
ensures that Management fulfills its responsibilities
with respect to financial information. The Committee
meets regularly with Management, internal auditors
and external auditors. The latter can, if they wish, meet
with said Committee in the presence or absence of
Management, to discuss questions regarding the audit
and the financial information.
René Hamel
Quebec City, Canada
February 26, 2015
64
CONSOLIDATED STATEMENT OF INCOME
REVENUES
2014
$
2013
$
Gross premiums (Note 15)
Premiums ceded to reinsurance
2,400.1
(381.6)
2,380.4
(370.0)
Net premiums
Change in unearned premiums
Investment income (Note 4)
Change in the fair value of financial assets at fair value
through profit or loss
Income on investment property
Administration fees and other revenues
2,018.5
0.7
125.7
2,010.4
(0.6)
123.5
261.4
23.9
79.6
(197.7)
26.5
108.0
2,509.8
2,070.1
1,540.1
(318.8)
331.6
510.9
(206.0)
7.5
1,451.5
(294.9)
378.2
(153.8)
68.8
0.8
1,865.3
1,450.6
323.1
7.2
19.2
141.3
48.2
322.8
6.6
21.2
134.3
46.0
2,404.3
1,981.5
105.5
34.1
88.6
23.3
INCOME BEFORE INCOME TAXES
Income taxes (Note 14)
71.4
17.4
65.3
17.7
NET INCOME
54.0
47.6
NET INCOME ATTRIBUTED TO:
Shareholders
Non-controlling interest
49.7
4.3
38.0
9.6
BENEFITS AND EXPENSES
Insurance and annuities
Gross benefits
Benefits recovered from reinsurers
Transfers to segregated funds
Change in actuarial reserve of life and health insurance contracts
Change in actuarial reserve of ceded reinsurance assets
Interest on deposits
Selling and administrative expenses
General fund investment expenses
Investment property expenses
Commissions and fees on sales
Premium taxes
INCOME BEFORE EXPERIENCE REFUNDS AND INCOME TAXES
Experience refunds
65
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2014
$
2013
$
54.0
47.6
29.1
(7.8)
(9.2)
2.5
(4.9)
1.2
(9.5)
2.8
Total items that might be reclassified subsequently to net income
17.6
(13.4)
Items that will not be reclassified to net income
Actuarial gains and losses arising from employee retirement benefits
Income tax recovery (expense)
16.6
(4.4)
21.5
(5.7)
Total items that will not be reclassified to net income
12.2
15.8
TOTAL OTHER COMPREHENSIVE INCOME
29.8
2.4
COMPREHENSIVE INCOME
83.8
50.0
COMPREHENSIVE INCOME ATTRIBUTED TO:
Shareholders
70.8
13.0
48.3
1.7
NET INCOME
OTHER COMPREHENSIVE INCOME
Items that might be reclassified subsequently to net income
Unrealized gains and losses on available-for-sale financial assets
Income tax recovery (expense)
Reclassification to net income of gains and losses on disposal or impairment
of financial assets
Income tax expense (recovery)
66
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31,
2014
$
2013
$
Investments (Notes 4 and 5)
Assets held for sale
Outstanding premiums
Ceded reinsurance assets
Investment property under development
Income taxes receivable
Other assets
Investment property
Fixed assets
Intangible assets
Goodwill
3,934.4
8.8
284.5
1,497.4
34.2
1.8
141.2
32.4
130.0
159.4
15.8
3,585.0
11.8
263.8
1,286.7
32.4
29.4
149.7
21.6
122.3
160.9
13.9
Total general fund assets
6,239.9
5,677.5
Segregated fund investments (Note 16)
4,382.4
4,643.8
10,622.3
10,321.3
4,892.8
249.2
0.3
144.5
20.2
175.0
62.7
37.3
4,397.9
249.7
0.2
148.4
–
190.0
65.0
39.4
ASSETS
TOTAL ASSETS
LIABILITIES
Life and health insurance contracts (Note 9)
Property and casualty insurance contracts (Note 10)
General fund investment contracts
Accounts payable
Income taxes payable
Subordinated debt (Note 11)
Other liabilities
Deferred income tax liability
Total general fund liabilities
5,582.0
5,090.6
Segregated fund insurance contracts (Note 16)
Segregated fund investment contracts (Note 16)
1,591.5
2,778.1
2,050.3
2,593.5
TOTAL LIABILITIES
9,951.6
9,734.4
EQUITY
Share capital (Note 12)
Retained earnings
343.2
353.9
(26.4)
–
36.6
374.7
(47.5)
223.1
TOTAL EQUITY
670.7
586.9
10,622.3
10,321.3
TOTAL LIABILITIES AND EQUITY
On behalf of the Board:
Pierre Genest
René Hamel
67
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2014
$
2013
$
36.6
306.6
36.6
–
343.2
36.6
Retained earnings
Net income
Repurchase of non-controlling interest (Note 12)
374.7
49.7
(70.5)
336.7
38.0
–
353.9
374.7
(47.5)
21.1
(57.8)
10.3
Shareholders
Share capital
Shares issued (Note 12)
Total equity attributed to shareholders
Net income
Repurchase of non-controlling interest (Note 12)
Total equity attributed to non-controlling interest
TOTAL EQUITY
(26.4)
(47.5)
670.7
363.8
223.1
4.3
8.7
(236.1)
221.4
9.6
(7.9)
–
–
223.1
670.7
586.9
68
CONSOLIDATED STATEMENT OF CASH FLOWS
CASH FLOWS FROM THE FOLLOWING ACTIVITIES:
2014
$
2013
$
71.4
17.2
65.3
(12.0)
OPERATING
Income before income taxes
Income taxes receive (paid), less refunds received
Items not affecting cash flows
Losses (gains) on investments
Amortization of discounts and premiums on bonds
Depreciation and amortization of investments property
Depreciation and amortization of fixed assets and intangible assets
Life and health insurance contracts
Other items
(261.8)
(34.8)
0.6
29.6
494.9
(2.4)
Net change in other operating assets and liabilities
314.7
(226.1)
88.6
INVESTING
Acquisition of investments
Sales, maturities and repayments of investments
Acquisition of investments property
Acquisition of fixed assets and intangible assets
Disposal of fixed assets and intangible assets
Business acquisitions
171.3
(36.8)
0.4
27.3
(125.4)
(4.7)
85.4
39.1
124.5
(1,051.7)
973.3
(11.4)
(40.7)
0.1
(0.7)
(1,468.9)
1,405.6
(1.7)
(32.8)
–
(10.3)
(131.1)
(108.1)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(42.5)
16.4
CASH AND CASH EQUIVALENTS, beginning of year
279.3
262.9
CASH AND CASH EQUIVALENTS, end of year
236.8
279.3
12.0
13.0
Cash flows from operating activities include:
Interest paid on subordinated debt
As at December 31, 2014, account payable include $3.3 fixed assets and intangible assets (2013 – $3.1).
69
EXCERPT FROM THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GOVERNING STATUTES AND NATURE OF ACTIVITIES
SSQ, Life Insurance Company Inc. (Company), majority owned by the Fonds de solidarité des travailleurs
du Québec (F.T.Q.), was established in accordance with An Act respecting insurance. The Company offers its
insureds a complete range of financial services including financial protection in the event of death, disability,
illness or retirement through a variety of individual and group insurance products as well as savings, retirement
and investment products. It is also active in property and casualty insurance and real estate management.
The Company’s head office is located at 2525 Laurier Boulevard, Quebec City, Quebec, Canada.
The Company’s consolidated financial statements were approved by the Board of Directors on February 26, 2015.
2. SIGNIFICANT ACCOUNTING POLICIES
Presentation of consolidated financial statements
The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial statements include the accounts of the Company and of its
wholly-owned subsidiaries. The following table presents the subsidiaries held by the Company:
SSQ General Insurance Company Inc.
SSQ Insurance Company Inc.1
SSQ Realty Inc.
6801188 Canada Inc.
Participation
Principal place
of business
%
100
100
100
100
Quebec City, Quebec, Canada
Montreal, Quebec, Canada
10% until September 30, 2014
1
Use of estimates and Management’s judgments
The preparation of financial statements in accordance with IFRS requires Management to rely on best estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses
during the reporting year. Actual results may differ from estimates. The most important estimates involve determining:
•
liabilities related to life and health insurance contracts, property and casualty insurance contracts and ceded
reinsurance assets
•
fair values of financial instruments in the general funds and segregated funds and insurance and investment
contracts liabilities in the segregated funds
•
assumptions used in determining provisions, income taxes and write-downs of financial instruments and
non-financial assets
•
retirement benefits asset and liability
70
Use of estimates and Management’s judgments (cont’d)
Management used its judgment to evaluate the exercise of control for consolidation purposes, to classify
insurance and investment contracts and financial instruments. Management’s judgment is also required in
the recognition of investment property, fixed assets and intangible assets.
Foreign currencies
The Company’s consolidated financial statements are presented in Canadian dollars, which is the functional
currency of the Company. Fund units denominated in U.S. dollars are converted at the exchange rate in effect
at the date of the financial statements.
Business acquisitions
Business acquisitions are accounted for using the acquisition method. The acquisition cost consists of the
fair value of the consideration transferred and measured at the acquisition date. Acquisition-related costs are
recognized directly in income in the period in which they are incurred.
Insurance contracts and investment contracts – classification
The Company issues contracts that transfer an insurance risk, a financial risk, or both. Insurance contracts are
contracts that involve a significant insurance risk. A significant insurance risk exists when the Company agrees
to indemnify policyholders or policy beneficiaries should a specified uncertain future event have an adverse
effect on the policyholder. Investment contracts are contracts that carry a financial risk with no significant insurance risk.
Life and health insurance contracts and segregated fund
Revenue recognition and related expenses
Life and health insurance premiums are recognized as revenues when they become due. Once premiums are
recognized, liability related to life and health insurance contracts is computed in a manner such that expenses
are matched with such revenues. Claims are recognized when a notice is received of an event that gives entitlement to compensation. Furthermore, commissions and premium taxes are recognized on the same basis as life
and health insurance premiums.
The Company collects commission revenues on individual contracts ceded to reinsurance. The commissions
are recorded when the contracts are ceded to reinsurance and are posted uniformly to the consolidated
statement of income over the term of the corresponding ceded contracts. Unearned reinsurance commissions
correspond to the portion of the commissions for the unexpired period of the corresponding contracts, prorated
over the remaining number of days. The portion attributable to subsequent periods is recognized in liabilities
related to life and health insurance.
71
Life and health insurance contracts and segregated fund (cont’d)
Life and health insurance contracts
The actuarial reserve, provisions for claims and experience refunds, and deposits related to life and health insurance contracts are established by the actuary in accordance with the standards of practice of the Canadian
Institute of Actuaries and reflect the amounts required to meet obligations resulting from insurance contracts in
force. The actuarial reserve is calculated according to the Canadian asset liability method, a recognized actuarial
method established by the Canadian Institute of Actuaries. This method requires the use of assumptions based
on best estimates of future experience, according to the Company’s own experience and that of the industry,
and includes additional amounts for plausible adverse deviations related to assumptions made on the different
factors considered.
Some insurance contracts may contain embedded derivative instruments. These derivative instruments either
meet the definition of insurance contracts themselves or correspond to an option to surrender an insurance contract for a fixed amount and are not valued separately from the host contract.
Segregated fund insurance contracts
Liabilities for segregated fund insurance contracts include the deposit portion of these contracts, recognized in
the same manner as investment contracts. The guaranteed portion recognized from the life and health insurance contracts liability, which is determined by an actuary in accordance with the practice standards of the
Canadian Institute of Actuaries, corresponds to the amount required to cover current insurance contract commitments. The insurance contract liabilities of segregated funds are calculated according to the Canadian asset
liability method, and include additional amounts for plausible adverse deviations related to assumptions made on
the different factors considered.
Segregated fund insurance premiums are recognized as revenue when they become due.
Liability adequacy test
On each date of the financial statements, a liability adequacy test is performed to ensure the adequacy of liability
related to life and health insurance contracts, net of deferred acquisition costs. Since the concept of liability adequacy is an integral part of the Canadian asset liability method, any inadequacy of provisions is immediately
carried to profit or loss in order to ensure compliance.
Property and casualty insurance contracts
Revenue recognition and related expenses
Property and casualty insurance premiums are recognized as revenue in prorata to the duration of the policies.
Unearned premiums entered in the consolidated statements of financial position represent the portion of written
premiums for the unexpired in-force policies, according to the daily prorata method. For some products, unearned
premiums are adjusted to account for changes in the related risks. Furthermore, commissions and premium
taxes are recognized on the same basis as property and casualty insurance premiums.
72
Property and casualty insurance contracts (cont’d)
Unpaid claims
Unpaid claims are charged to events associated with claims settled in property and casualty insurance. The
amount of unpaid claims is established in accordance with the standards of practice of the Canadian Institute
of Actuaries. It is presented on a discounted basis, based on the experience of the Company and the industry.
Claims are recognized when a notice is received of an event that gives entitlement to compensation.
Claims liability adequacy test
The claims liability adequacy analysis is done on each reporting date and reviewed as necessary, if an event
that could affect results occurs. To this end, past claims development by business sector are analyzed in order
to project anticipated claims at the time of the valuation. Assumptions regarding the rate of payment of liabilities
are necessary to value obligations on a discounted basis. Finally, margins for adverse deviations in interest rates,
materiality and reinsurance are added to consider the uncertainties related to the assumptions.
Premiums liability adequacy test
Premiums liability adequacy is evaluated on each reporting date. Unearned premiums are decreased by deferred
acquisition costs, reinsurance premium, claims and adjustment costs anticipated between the valuation date
and the expiry of the contracts, and expected maintenance costs to administer the contracts. In addition,
the impact of the time value of money is considered. Finally, margins for adverse deviations in interest rates,
materiality and reinsurance are added to consider the uncertainties related to the assumptions.
In the normal course of business, the Company uses reinsurance to manage its level of risk exposure. The
risk and the corresponding premium are transferred to duly registered reinsurers that are subject to the same
regulatory bodies as the Company. The ceded reinsurance assets are valued in a similar manner to the liabilities
related to life and health insurance contracts and property and casualty insurance contracts and in accordance
with the terms and conditions of each reinsurance contract. Ceded reinsurance assets represent amounts due
to the Company with respect to the liabilities of the ceded policies. Ceding a risk does not release the Company
from its obligation to fully comply with the commitments made to its insureds. These assets are subject to an
impairment test and, if they are impaired, their carrying value is reduced and the loss in value is carried to profit
and loss.
Investment contracts
Revenue recognition
Investment contracts fall under the scope of IAS 39, Financial Instruments: Recognition and Measurement. Deposit
accounting applies to these contracts, which involves recording the premiums received and benefits paid on
these contracts as deposits and withdrawals, with no impact on the income statement. Revenues from these
contracts consist of fees related to contract issue, administration and surrender as well as asset management,
and are recognized in Administration fees and other revenues.
73
Investment contracts (suite)
Investment contract liabilities
All investment contracts are designated at fair value through profit or loss, since changes in net income are
offset by changes in the value of investments related to the general funds and segregated funds and are
managed on a fair value basis.
Recognition of other income
Investment income is recorded on an accrual basis.
Income on investment property is recognized in profit or loss on a straight-line basis over the term of the lease.
Fees for the management of segregated funds and for the management of administrative service contracts are
recognized when earned in Administration fees and other revenues.
Financial Instruments – classification
On initial recognition of its financial instruments, the Company must classify financial assets into one of the
following categories: at fair value through profit or loss, held to maturity, loans and receivables and available-forsale. The “fair value through profit or loss” category includes financial assets held for trading and financial assets
designated at fair value through profit or loss. The Company must classify financial liabilities into one of the
following categories: designated at fair value through profit or loss and at amortized cost.
Financial instruments are classified upon initial recognition according to their nature and the Company’s use
of the financial instrument.
Bonds
Bonds backing liability related to life and health insurance contracts are designated at fair value through profit
or loss, since changes in their fair value on the income statement are offset by changes in liability related to life
and health insurance contracts.
Bonds backing investment contracts are designated at fair value through profit or loss, since they are managed
and measured on a fair value basis in accordance with a strategy for managing the risks in investment contracts.
Bonds not backing liability related to life and health insurance contracts and investment contracts are classified
as assets available-for-sale and are carried at fair value. Changes in fair value of these bonds are recorded in
other comprehensive income. On disposal of these bonds, or on any decline in value, the gain or loss is reversed
from Accumulated other comprehensive income and recorded in income. Reversals to losses in value may
occur and are recognized in profit or loss when there is objective evidence of recovery.
Interest income and the amortization of discounts and premiums on bonds are recorded in income according to
the effective interest rate method.
Purchases and disposals of bonds are recognized at trade date.
74
Loans
Loans are classified as loans and receivables and are carried at amortized cost according to the effective interest rate method, less the allowance for investment losses. Their fair value is established by discounting future
cash flows at the current market rate for this type of receivable and for a term equal to the term of the loan. The
allowance for investment losses is established on an individual and collective basis from the estimated realizable
value measured by discounting the expected future cash flows.
Commissions paid on issuance of new loans are recognized with loans and amortized according to the effective
interest rate method.
Fund units, shares and units
Fund units and shares backing liability related to life and health insurance contracts are designated at fair value
through profit or loss, since changes in their fair value on the income statement are offset by changes in liability
related to life and health insurance contracts.
Fund units, shares and units not backing liability related to life and health insurance contracts are classified as
asset available-for-sale. Purchases and disposals of fund units, shares and units are recognized at trade date.
They are carried at fair value and all changes in fair value are recorded in other comprehensive income. In occurrence, transaction costs paid upon purchase are capitalized at cost. On disposal of these funds units, shares
and units, or at any loss in value, the gain or loss is reversed from Accumulated other comprehensive income
and recorded in income. No reversal of losses in value is allowed. However, fund units, shares and units continue to be carried at fair value, even if a loss in value has previously been recognized.
Investment fund
The investment fund is held for trading and includes Canadian equity securities acquired with the proceeds from
the offering of certain debentures. In accordance with the debenture acts, the excess fair value of these securities over the capital of the debentures is recorded to the liability account of the Company. When fair value of the
securities is less than the capital value of the debentures, the Company records a receivable from the decline in
value equal to the difference.
Cash and cash equivalents are made up of bank accounts and short-term fixed income securities held with
financial institutions. The bank accounts are classified as loans and receivables and are carried at amortized
cost according to the effective interest rate method. Short-term money market securities are designated as held
for trading.
Other investment
The Company has made an investment in an associate. An associate is an entity over which the Company has
significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the
power to participate in the financial and operating decisions of the company held, but it is not control or joint
control over those policies. This investment is recognized according to the equity method.
75
Derivative financial instruments
Derivative financial instruments include foreign exchange contracts, stock index contracts and interest rate
swaps. These financial instruments are held for trading. Derivative financial instruments with a positive fair value
are presented as investments while derivative financial instruments with a negative fair value are presented as
other liabilities. The Company uses daily settlement foreign exchange contracts, stock index contracts and
interest rate swaps in support of certain obligations towards insureds. Gains and losses related to these contracts
are recognized in income under Investment income.
The Company also uses foreign exchange contracts under its currency risk management strategy. Such financial
instruments cover fair value of assets and their effectiveness is reviewed on a monthly basis. Exchange gains
and losses on forward contracts and fluctuations in fair value related to asset currency price are recognized
in income under Investment income.
Other financial assets and liabilities
Other financial assets and liabilities are recognized at amortized cost and classified as loans and receivables
and other liabilities, respectively.
Investments fair value
The best evidence of fair value is published price quotations in an active market. This value is observed in
the case of fund units, shares and futures contracts. Fair value of bonds and shares is based on their bid
price at year-end. Fair value of derivative financial instruments and when the market for an investment is
not active, is established by using a valuation technique that makes maximum use of inputs observed from
the markets.
Investment property under development
Investment property under development consists of portion of real estate properties under construction held for
resale. These properties are valued at the lower of cost and net realizable value. Cost is determined according
to the specific identification method, and net realizable value corresponds to the estimated disposal price of the
property less estimated completion costs and disposal costs.
Investment property
Investment property held by the Company, real estate properties held either to earn rentals or for capital
appreciation, are recognized at acquisition cost less losses in value. The cost of property is depreciated by
major component, using each component’s estimated useful life and according to the straight-line method.
Useful lives, residual values and the depreciation method are reviewed at the end of each year. The impact
of any change in estimates is recorded prospectively.
76
Investment property (cont’d)
The profit or loss on the disposal or retirement of an investment property, which is the difference between
proceeds on the asset’s disposal and its carrying value, is recognized in profit or loss.
Depreciation is calculated using the following useful lives:
Structure
Building envelope
Mechanical services
Land improvements
100 years
60 years
40 years
20 years
Government grants
The Company receives government grants to build properties under development and investment properties.
It recognizes the grants to reduce the carrying amount of these assets. The grants related to properties under
development are recognized in income when the assets are sold and are presented to reduce gains. The grants
related to investment properties are recognized in income in proportion to the depreciation of the assets, and
presented to reduce the depreciation expense.
Foreclosed assets
Property acquired by foreclosure and held for resale are recorded at the lower of either the investment in the
mortgage foreclosed or the estimated net proceeds from the disposal of the property. Gains and losses on
resale of these properties are recorded in income in the period in which they arise.
Fixed assets
Fixed assets are recognized at acquisition cost less impairment. The cost of these fixed assets is depreciated
by major component, using each component’s estimated useful life and according to the straight-line method
except for land, which is not depreciated. Useful lives, residual values and the depreciation method are reviewed
at the end of each year. The impact of any change in estimates is recorded prospectively.
The profit or loss on the disposal or retirement of a fixed asset, which is the difference between proceeds on the
asset’s disposal and its carrying value, is recognized in profit or loss.
Depreciation is calculated using the following useful lives:
Buildings
Structure
Building envelope
Mechanical services
Land improvements
IT equipments
Office furniture and equipment
Leasehold improvements
100 years
60 years
40 years
20 years
5 years
10 years
2 to 20 years
77
Intangible assets with finite useful lives
Intangible assets acquired separately
Intangible assets include application software and are recorded at acquisition cost less impairment losses.
Amortization is calculated according to the straight-line method over an estimated useful life of five years.
Useful life and the amortization method are reviewed at the end of each year, and the impact of any change
in estimates is recognized prospectively.
Intangible assets resulting from business combinations
Intangible assets resulting from business combinations include the portfolio of in-force policies, computer
systems, distribution networks, bargain option leases, and the trade name and are initially recognized at their
fair value at the date of the business combination.
Following their initial recognition, intangible assets resulting from business combinations are recognized at cost
less impairment losses. Amortization is calculated according to the straight-line method. The useful life of these
intangible assets ranges from five to twenty-seven years except for the trade name, which has an indefinite
useful life and thus is not amortized but is subject to an impairment test at least once a year.
Internally developed intangible assets
An intangible asset is recognized if it meets the criteria for deferral.
The amount initially recognized for an internally developed intangible asset is equal to the sum of expenses
incurred from the date that the asset first met the recognition criteria. When no internally developed intangible
asset can be recognized, development expenses are charged to income in the year in which they were incurred.
Following their initial recognition, internally developed intangible assets are recognized at cost less impairment
losses. Amortization is calculated according to the same method and term used for intangible assets that are
acquired separately.
Depreciation and amortization of investment property, fixed assets
and intangible assets with finite useful lives
At each reporting date, the Company reviews the carrying values of investment property, fixed assets and
intangible assets to determine whether there is any evidence that these assets are impaired. If such evidence
exists, an estimate is made of the recoverable amount of the asset to determine the amount of the impairment.
If the estimated recoverable value of an asset is less than its carrying value, the asset’s carrying value is reduced
to its recoverable value. An impairment is immediately recognized in profit or loss.
If an impairment is subsequently recovered, the carrying value of the asset is increased to the revised estimate
of its recoverable value up to a maximum of its amortized cost. The impairment recovery is immediately recognized
in profit or loss.
78
Depreciation and amortization of investment property, fixed assets
and intangible assets with finite useful lives (cont’d)
At each reporting date, intangible assets that are not available for use are reviewed for impairment under the
same method used as for goodwill and intangible assets that have an undefined useful life.
Goodwill and intangible assets with indefinite useful lives
Goodwill represents the excess of the fair value of the transferred consideration over the identifiable assets
acquired and liabilities assumed and is deemed to have an indefinite useful life. An intangible asset with an
indefinite useful life is classified as such when the Company determines that there is no foreseeable limit to
the period over which the asset is expected to generate net cash inflows. Goodwill and intangible assets with
indefinite useful lives are not amortized but are tested for impairment at least annually.
For purposes of the impairment test, goodwill and intangible assets with indefinite useful lives are allocated
to cash-generating units (CGU), which are the smallest groups of assets and liabilities for which the identifiable
cash inflows are independent.
Within each CGU, net carrying value is compared with the recoverable amount. The recoverable amount
corresponds to the higher of the fair value less costs to sell and the value in use. The value in use corresponds
to the anticipated future net assets and net revenues of existing portfolios and new business, taking the CGU’s
future cash flows into consideration, discounted with the current risk-free interest rate on the market, to which
a risk premium is added. Impairment losses related to the CGU are applied against the carrying value of the
goodwill and intangible assets with indefinite useful lives allocated to the CGU. No impairment loss reversal
is allowed.
Segregated fund investments
Segregated fund investments are the accumulated net assets of the segregated funds, including inter-fund
eliminations. They include bonds, shares, investment fund units and other assets and liabilities, including
derivative financial instruments.
The investments are designated at fair value through profit or loss since they are managed and valued on a fair
value basis in accordance with the investment strategy approved by Management.
Other assets and liabilities are classified as loans and receivables and other liabilities, respectively, and are
recognized at amortized cost except for derivative financial instruments, which are held for trading and recognized at their fair value.
Asset held for sale
An asset held for sale is classified as such if it is expected that its book value will mainly be recovered through a
sale rather than continuous usage. This is the case when an asset is immediately available for sale in its current
state and the sale is highly likely to occur. An asset held for sale is measured at the lower of book value and fair
value, net of sale fees.
79
Employee retirement benefits
The Company offers its employees pension plans and other retirement benefits such as severance pay and
life and health insurance coverage. The cost of pensions and other retirement benefits earned by employees
is actuarially determined according to the projected benefit method prorated on services and Management’s
best estimate of salary increases, retirement ages of employees and expected health care costs. Actuarial gains
or losses are recorded immediately in other comprehensive income. The cost of past services is included in
the statement of income when a modification arises. The plans’ assets are carried at fair values and are held
in separate trustee pension funds.
Income taxes
Income taxes include current and deferred taxes. Income taxes are recognized in profit or loss, except for
income taxes on items included under other comprehensive income or Equity. In these specific cases, the
income tax expense is recognized in other comprehensive income and Equity, respectively.
Income taxes receivable and payable are obligations to or claims by tax authorities for prior years or the current
year that have not been received or paid at the end of the year. Current income taxes are calculated based on
taxable income, which is different from net income. The calculation is made based on the tax rates and laws in
force at the end of the year.
The Company recognizes income taxes using the deferred tax asset and liability method. According to this
method, deferred tax assets and liabilities are determined based on the difference between the carrying value
and the taxable value of the assets and liabilities. Any change in the net amount of deferred assets and liabilities
is posted to income and Accumulated other comprehensive income. Deferred tax assets and liabilities are determined based on currently applicable or applied tax rates and laws which, to the extent that can be predicted,
will apply to the taxable income in the periods in which the assets and liabilities will be recovered or paid.
Deferred tax assets are recognized when it is probable that they will be realized.
Operating leases
Leases that do not transfer substantially all the risks and rewards of ownership to the Company are classified
as operating leases. Payments made under operating leases are presented on the income statement in Selling
and administrative expenses. The amounts of future rents under operating leases are presented in the note on
contingencies and commitments.
80
3. CHANGES IN ACCOUNTING POLICIES
New accounting policies applied
Investment entities
In December 2012, the International Accounting Standards Board (IASB) published an amendment, Investment
Entities, which defines an investment entity and requires that an investment entity should not consolidate
investments in entities that it controls, but to measure those investments at fair value. This amendment modifies
IFRS 10, IFRS 12 and IAS 27. The application of the amended standard has no impact on the consolidated
financial statements of the Company since it does not qualify as an investment entity.
Impairment of assets
In May 2013, the IASB issued amendment to IAS 36, Impairment of Assets, which proposes the disclosure of
information about the recoverable amount of impaired assets, particularly if that amount is based on fair value
less costs of disposal. The amendment also clarifies the information to be disclosed regarding the recoverable
amount following the application of IFRS 13, Fair Value Measurement. The application of the amended standard
has no impact on the consolidated financial statements of the Company.
Hedging
In June 2013, the IASB issued amendment to IAS 39, Financial Instruments: Recognition and Measurement,
which provides a strict exception where hedge accounting must be discontinued if a derivative financial instrument
must be replaced by a clearing house according to laws and regulations. The application of the amended
standard has no impact on the consolidated financial statement of the Company.
Levies
In May 2013, the IASB published IFRIC 21, Levies, which concerns the timing for the recognition of a liability
according to IAS 37, Provisions, Contingent Liabilities and Contingent Assets in regards to the payment of levies.
The application of the interpretation has no impact on the consolidated financial statements of the Company.
Changes in future accounting policies
Employee benefits
In November 2013, the IASB issued an amendment to IAS 19, Employee Benefits, which clarifies the accounting
requirements for employee or third party contributions to defined benefit plans. The provisions of this amendment
will apply prospectively to financial statements beginning on or after July 1, 2014. The Company is currently
assessing the impact of this amendment on its consolidated financial statements.
81
3. CHANGES IN ACCOUNTING POLICIES (cont’d)
Changes in future accounting policies (cont’d)
Financial instruments
In July 2014, the IASB published IFRS 9, Financial Instruments, which aims to replace IAS 39, Financial Instruments :
Recognition and Measurement, for classification and measurement, impairment and hedge accounting of
financial assets and liabilities. These modifications are to be applied retrospectively for annual periods beginning
on or after January 1, 2018. The Company is currently assessing the impact of this new standard on its consolidated
Revenue recognition
In May 2014, the IASB published IFRS 15, Revenue from Contracts with Customers, which aims to replace IAS 18,
Revenue and IAS 11, Construction Contracts. This new standard sets out the requirements for recognising
revenue that apply to all contracts with customers except for contracts that are within the scope of the Standards
on leases, insurance contracts and financial instruments. The standard is effective from January 1, 2017. Earlier
application is permitted. The Company is currently assessing the impact of this new standard on its consolidated
82
4.INVESTMENTS
A) Carrying value and fair value of general fund investments
2014
Bonds
Canada, Quebec and other
provinces
Municipal and subsidized
Canadian corporations
Loans
Residential mortgages
Non-residential mortgages
Other
Fund units, shares
and units
Canadian fund units
U.S. fund units
International fund
units
Preferred shares
Investment fund
Cash and cash
equivalents
Derivative financial
instruments
1
Held for
trading
Designated
at fair value
through
profit or
loss
Availablefor-sale
Loans and
receivables1
Total
Fair
value
$
$
$
$
$
$
–
–
–
1,464.0
321.7
786.8
285.0
63.0
109.0
–
–
–
1,749.0
384.7
895.8
–
2,572.5
457.0
–
3,029.5
–
–
–
–
–
–
–
–
–
338.7
16.3
107.3
338.7
16.3
107.3
–
–
–
462.3
462.3
–
–
19.2
24.1
35.3
8.7
–
–
54.5
32.8
–
–
5.2
19.1
–
22.3
–
–
5.2
41.4
–
67.6
66.3
–
133.9
133.9
52.2
–
–
–
52.2
52.2
116.3
–
–
120.5
236.8
236.8
3,029.5
468.5
19.7
–
–
–
19.7
19.7
188.2
2,640.1
523.3
582.8
3,934.4
3,940.6
The fair value provided for cash and cash equivalents and loans classified for loans and receivables is Level 1 and Level 3 respectively. Refer to Note 6 for
details of the fair value levels.
83
4.INVESTMENTS (cont’d)
A) Carrying value and fair value of general fund investments (cont’d)
2013
Bonds
Canada, Quebec and other
provinces
Loans
Residential mortgages
Non-residential mortgages
Other
Fund units, shares and
units
Canadian fund units
U.S. fund units
International fund
units
Preferred shares
Units in partnerships
Investment fund
Cash and cash
equivalents
Other investment 2
2
Held for
trading
Designated
at fair
value
through
profit or
loss
Availablefor-sale
Loans and
receivables1
Other
Total
Fair
value
$
$
$
$
$
$
$
–
–
–
1,318.7
273.6
685.3
225.4
71.6
89.5
–
–
–
–
–
–
1,544.1
345.2
774.8
–
2,277.6
386.5
–
–
2,664.1
–
–
–
–
–
–
–
–
–
332.8
16.9
92.0
–
–
–
332.8
16.9
92.0
–
–
–
441.7
–
441.7
–
–
32.8
21.3
30.9
7.8
–
–
–
–
63.7
29.1
–
–
–
5.5
17.4
–
–
9.5
0.1
–
–
–
–
–
–
5.5
26.9
0.1
2,664.1
445.6
–
77.0
48.3
–
–
125.3
125.3
69.4
–
–
–
–
69.4
69.4
172.8
–
–
106.5
–
279.3
279.3
–
–
–
–
5.2
5.2
–
242.2
2,354.6
434.8
548.2
5.2
3,585,0
–
The Company does not establish fair value for this investment.
84
5. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses daily settlement foreign exchange contracts, stock index contracts and interest rate swaps
in support of certain obligations towards insureds and under its currency risk management strategy.
Futures contracts, which are negotiated contracts in an organized market, represent firm commitments to buy
or sell financial instruments at a given date.
Swaps are contracts in which the Company and a third party commit to paying cash flows based on a notional
amount, during a set time period and frequency.
The following tables detail the notional principal amounts and remaining terms to expiration and the fair value
of the derivative financial instruments that belong to the Company:
2014
Notional
Foreign exchange contracts
Stock index contracts
Interest rate swaps
Fair value
Less than
1 year
$
1 to 5 years
$
Over 5 years
$
Total
$
Positive
$
46.2
89.3
–
–
–
37.3
–
–
159.0
46.2
89.3
196.3
–
–
19.7
(0.1)
–
–
135.5
37.3
159.0
331.8
19.7
(0.1)
Negative
$
2013
Notional
Foreign exchange contracts
Stock index contracts
Fair value
Less than
1 year
$
1 to 5 years
$
Over 5 years
$
Total
$
Positive
$
Negative
$
38.0
87.7
–
–
–
–
38.0
87.7
–
–
–
–
125.7
–
–
125.7
–
–
85
6. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Financial instruments recorded at fair value in the consolidated statements of financial position are classified
using a hierarchy that reflects the significance of the inputs used in determining valuations and includes three
levels:
Level 1 – Q
uoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – A
valuation based on inputs observable in markets for the asset or liability, obtained either
directly or indirectly
Level 3 – A
valuation based on inputs other than inputs observable in markets for the asset or liability
The following table shows financial assets classified using the fair value hierarchy:
2014
Financial assets at fair value through profit or loss
Bonds
Canada, Quebec and other provinces
Fund units and shares
Canadian fund units
U.S. fund units
International fund units
Preferred shares
Investment fund
Available-for-sale financial assets
Bonds
Canadian fund units
U.S. fund units
Preferred shares
Financial liabilities at fair value through profit or loss
Level 1
$
Level 2
$
Level 3
$
Total
$
9.2
0.3
4.0
1,454.8
321.4
782.8
–
–
–
1,464.0
321.7
786.8
19.2
24.1
5.2
19.1
52.2
–
–
–
–
–
–
–
116.3
19.7
–
–
–
–
–
–
–
19.2
24.1
5.2
19.1
52.2
116.3
19.7
133.3
2,695.0
–
2,828.3
46.9
1.4
20.3
238.1
61.6
88.7
–
–
–
285.0
63.0
109.0
35.3
8.7
22.3
–
–
–
–
–
–
35.3
8.7
22.3
134.9
388.4
–
523.3
–
–
0.1
–
–
0.3
0.1
0.3
–
0.1
0.3
0.4
The appraisal of the hierarchical levels of fair value is performed at the end of each financial year. During the
years ended December 31, 2014 and 2013, there were no transfers of financial assets between Levels 1 and 2.
86
6. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (cont’d)
2013
Financial assets at fair value through profit or loss
Bonds
Fund units and shares
Canadian fund units
U.S. fund units
International fund units
Preferred shares
Investment fund
Available-for-sale financial assets
Bonds
Canadian fund units
U.S. fund units
Preferred shares
Units in partnerships
Financial liabilities at fair value through profit or loss
Level 1
$
Level 2
$
Level 3
$
Total
$
9.0
0.2
4.1
1,309.7
273.4
681.2
–
–
–
1,318.7
273.6
685.3
32.8
21.3
5.5
17.4
69.4
–
–
–
–
–
–
172.8
–
–
–
–
–
–
32.8
21.3
5.5
17.4
69.4
172.8
159.7
2,437.1
–
2,596.8
34.7
1.0
15.8
190.7
70.6
73.7
–
–
–
225.4
71.6
89.5
30.9
7.8
9.5
–
–
–
–
–
–
–
–
0.1
30.9
7.8
9.5
0.1
99.7
335.0
0.1
434.8
–
–
0.2
0.2
87
7. FINANCIAL INSTRUMENTS RISK MANAGEMENT
The Company has adopted control policies and procedures to manage risks related to financial instruments.
An investment policy was approved by the Board of Directors to provide a framework for making investment
decisions. The control procedures arising from this policy ensure sound management of investment risks.
Segregated funds are excluded from the financial instruments risk management analysis since the policyholders
assume the risks and benefit from the rewards of the segregated fund contracts.
Risks related to financial instruments are credit risk, liquidity risk and market risk.
Credit risk
Credit risk is the risk of financial loss to the Company if a debtor fails to honour its obligations. The Company is
exposed to this type of risk through its investment portfolios and, in particular, through credit extended as loans.
The Company is also exposed to credit risk with regard to outstanding premiums and amounts receivable from
reinsurers. It manages credit risk by applying the following control procedures:
•
utilization guidelines that set minimum and maximum limits are established for each class of investment to
meet the specific needs of each business sector
•
the guidelines allocate liability among various quality Canadian issuers with credit ratings from recognized
sources of BBB or higher at trade date
•
an overall limit is established for each credit rating quality level
•
a detailed loan policy specifies the requirements for guarantees and credit
•
an overall limit is also established for investments of a related issuer or group of issuers to mitigate
concentration risk
•
the Investment Committee of the Board of Directors carries out regular reviews of the investment portfolio
and its transactions
•
when entering into reinsurance agreements, the Company monitors the financial position of the reinsurers
88
Credit risk (cont’d)
Maximum exposure to credit risk
Bonds
Designated at fair value through profit or loss
Available-for-sale
Loans
Mortgage loans
Other loans
Outstanding premiums
Investment income due and accrued
Other financial assets
2014
$
2013
$
2,572.5
457.0
2,277.6
386.5
355.0
107.3
349.7
92.0
236.8
19.7
175.3
1,497.4
14.9
46.2
279.3
–
151.0
1,286.7
13.3
76.4
5,482.1
4,912.5
2014
$
2013
$
1,749.0
384.7
1,544.1
345.2
36.0
115.6
532.6
211.6
34.0
75.6
501.9
163.3
3,029.5
2,664.1
2014
$
2013
$
285.7
176.6
272.7
169.0
462.3
441.7
Bond portfolio quality
Bonds
Canadian corporations, per credit rating
AAA
AA
A
BBB
Loan portfolio quality
Insured loans
Conventional loans
As at December 31, 2014, the current portion of bonds and loans amounted to $204.4 (2013 – $151.5) and
$110.1 (2013 – $82.9), respectively.
89
Allowance for investment losses
The allowance for investment losses is established based on the Company’s assessment of its financial assets,
considering all objective evidence of impairment. Such evidence stems from the financial difficulties of the issuer
or from defaults on principal or interest payments. Obligations towards insureds also include an allowance to
cover any potential loss on loans and investments in debt securities.
The Company maintains an allowance for credit losses relating to the carrying value of its loans. A loss provision
is established when the Company entertains doubt regarding the full recovery of the principal or interest on a
loan. For allowance purposes, estimated realizable loan value takes into account recovery forecasts, guarantee
valuations and market conditions.
The following table summarizes impaired loans and allowances for investment losses:
2014
2013
Impaired loans
$
Allowance for
investment
losses
$
Impaired loans
$
Allowance for
investment
losses
$
Residential mortgages loans
Other loans
0.7
30.0
0.2
1.7
–
34.4
–
1.8
General allowance on mortgage loans
30.7
–
1.9
1.7
34.4
–
1.8
2.0
30.7
3.6
34.4
3.8
2014
$
2013
$
Allowance for investment losses
Recovery
3.8
(0.2)
4.0
(0.2)
3.6
3.8
Past due financial assets
A financial asset is deemed past due when the counterparty has failed to make a payment when contractually
due. A financial asset that is past due is subject to a provision for loss to adjust its accounting value in relation
to its estimated net realizable value when the Company doubts its recovery. As at December 31, 2014,
the Company has financial assets past due for $3.5 (2013 – $7.3).
90
Securities lending
The Company engages in securities lending to generate additional income, which are recorded in investment
income. Some securities are lended to other institutions for a short period. The Company receives garantees
that represent a minimum of 102% of the fair value of the securities lent out. These garantees are deposited
by the borrower with a depository to be retained until the securities lent out are recovered by the Company.
The fair value of the securities on loan are monitored on a daily basis. Additional security is required depending
on fluctuations in the market value of the underlying securities on loan. As at December 31, 2014, the carrying
value of the securities on loan by the Company included in investments is of $202.1 (2013 – $0). There were
no securities lending at December 31, 2013.
Liquidity risk
Liquidity risk refers to the risk that the Company might experience cash flow difficulties arising from its
obligations and financial liabilities. The Company manages liquidity risk by applying the following control
procedures:
•
the Company manages its liquidities by matching cash flows from its operations and investments to those
required to meet its obligations
•
its cash position is analyzed on short and medium term horizons to meet the needs of the different
business sectors
The following table presents contractual maturities of the undiscounted cash flows of financial liabilities and
unsettled claims of the Company’s property and casualty insurance contracts.
2014
Unpaid claims
Accounts payable
Subordinated debt
Other financial liabilities
Payable on
demand
$
Less than
1 year
$
1 to 5 years
$
Over 5 years
$
Total
$
–
0.3
–
–
–
0.8
29.4
–
144.5
0.1
–
3.6
3.7
–
–
–
3.0
–
0.2
–
–
–
172.0
–
33.3
0.3
144.5
0.1
175.0
4.4
1.1
177.6
6.7
172.2
357.6
91
Liquidity risk (cont’d)
2013
Unpaid claims
Accounts payable
Subordinated debt
Other financial liabilities
Payable on
demand
$
Less than
1 year
$
1 to 5 years
$
Over 5 years
$
Total
$
–
0.2
–
–
0.8
29.1
–
151.8
15.0
4.5
3.3
–
–
–
–
0.6
–
–
175.0
–
33.0
0.2
151.8
190.0
5.3
1.0
200.4
3.3
175.6
380.3
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to market
factors. Market risk includes three types of risk: interest rate risk, market price risk and currency risk.
A) Interest rate risk
The Company matches its assets with liabilities from obligations in each of its business sectors. Interest rate risk
exists when interest rates fluctuate due to widening spreads in matching expected cash flows between assets
and liabilities.
In managing interest rate risk, the Company focuses on matching expected cash flows of assets and liabilities in
selecting the investments backing its obligations. It uses different measures and performs sensitivity analyses to
evaluate the spreads between the cash flows generated by investments held and those required to meet obligations according to various future interest rate scenarios. The Company’s investment policy sets maximum
spread limits for those measures as applied to assets and liabilities. This information is disclosed to the Investment Committee on a quarterly basis.
The results of the interest rate sensitivity analyses also serve to establish the amounts to be included in the valuation of obligations towards insureds for interest rate risk. A 1% change of the interest rate curve would have an
insignificant impact on income of 2014 and 2013.
For its available-for-sale financial assets not matched to obligations towards insured, the Company believes that
a 1% increase of the interest rate curve would result in a decrease of $21.3 (2013 – $18.5) in other comprehensive income.
B) Market price risk
The Company is exposed to market price risk through its available-for-sale equity investments and fund units.
The investment policy puts restrictions on equity investments and fund units and sets out their limits.
92
Market risk (cont’d)
B) Market price risk (cont’d)
Changes in the fair value of these investments are recognized in comprehensive income. A sudden 10%
decrease in the value of such investments would result in an estimated decrease of $4.8 (2013 – $3.5) in other
comprehensive income.
The Company is also exposed to market price risk through income from investment fund management fees and
expenses related to capital guarantees provided to segregated funds. A sudden 10% decrease in stock markets
would result in an estimated drop of $1.1 (2013 – $0.9) in income.
C) Currency risk
Currency risk exists when transactions in currencies other than the Canadian dollar are affected by unfavourable
exchange rate changes.
As at December 31, 2014 and 2013, the Company was not exposed to any significant currency risk in respect
of financial instruments.
8. RIGHT OF OFFSET, COLLATERAL HELD AND TRANSFERRED
The Company negotiates derivative financial instruments in accordance with the Credit Support Annex, which
forms part of the International Swaps and Derivatives Association’s (ISDA) Master Agreement. These agreements
require guarantees by the counterparty or by the Company. The amount of assets pledged is based on changes
in fair value of financial instruments. Under that agreement, the Company has the right to offset in the event of
default, insolvency, bankruptcy or other early termination. The Company does not offset financial instruments
due to conditional rights.
9. LIFE AND HEALTH INSURANCE CONTRACTS
Fair value of gross reserve
The fair value of the actuarial reserve is determined based on the fair value of the assets supporting the liabilities
it represents. Insofar as the assets supporting the actuarial reserve are recorded on the statement of financial
position at fair value, the carrying value of the actuarial reserve reflects fair value.
Nature of obligations
The liability related to life and health insurance contracts are amounts that, added to future premiums and
investment revenues, will allow the Company to respect its commitment to pay future claims, experience refunds
and corresponding expenses originating from contracts in force. The liability related to life and health insurance
contracts are periodically reviewed and allow for additional amounts required to cover risks originating from
plausible adverse deviations in experience as compared to the most probable assumptions. These amounts
take into account the uncertainty included in the valuation assumptions.
93
9. LIFE AND HEALTH INSURANCE CONTRACTS (cont’d)
Inherent uncertainty of the appraisal process
In order to estimate the liability related to life and health insurance contracts, assumptions are required regarding
future events related to mortality, morbidity, lapses, investment returns and operating expenses. These assumptions also include a provision for adverse deviations attributable to the inherent uncertainty of the appraisal
process.
Mortality
The mortality assumption is based on a combination of the Company’s most recent experience and the recent
industry experience published by the Canadian Institute of Actuaries.
Morbidity
The morbidity assumptions used are those published by the industry adjusted to consider the Company’s own
experience over a long period of time. Each year, the actual experience is compared to the one anticipated to
ensure that the morbidity assumptions used are adequate.
Investment returns
The investment returns considered in the valuation of liability related to life and health insurance contracts are
based mostly on those of the assets held to back these obligations. In this context, cash inflows from assets
are compared to those of the liability related to life and health insurance contracts to detect any mismatch taking
properly into account the reinvestment or disinvestment risks inherent to such situations. To ensure that the
amount of assets will be sufficient to cover all the obligations, a multi-scenario analysis is performed regarding
future evolution of interest rates when cash flow mismatches are expected.
Losses due to credit impairment have impacts on the future cash flows of assets backing the obligations. In
addition to the allowance for investment losses already deducted from the carrying value of investments, additional credit risk, whose level is close to the one experienced by the Company or determined through analysis
performed by the industry, is considered in the determination of future cash flows from invested assets.
Lapses
Policyholders may choose to let their contracts lapse by ceasing to pay their premiums. The Company bases
its estimate of the lapse rate on past results of each of its business portfolios. A business portfolio is considered
to be lapse-supported if an increase in the ultimate lapse rate is associated with increased profitability. On the
other hand, if a decrease in the ultimate lapse rate is associated with increased profitability, the business portfolio is not considered to be lapse-supported.
Operating expenses
The assumptions regarding operating expenses are drawn from internal analyses performed yearly by the Company, with adjustments for future inflation.
94
10. PROPERTY AND CASUALITY INSURANCE CONTRACTS
Nature of obligations
Liabilities related to property and casualty insurance contracts represent the amounts that, increased by
future investment income, will enable the Company to honour the appraised amount of future claims and
the corresponding fees under the terms of the contracts in force. Liabilities related to property and casualty
insurance contracts are periodically reviewed and include additional amounts representing possible adverse
deviations in relation to the most probable assumptions; these additional amounts vary based on the degree
of uncertainty inherent in the assumptions used.
Inherent uncertainty of the appraisal process
In calculating the liability related to property and casualty insurance contracts, assumptions are made regarding
probable future events related to materialization and the discount rate. These assumptions also include a
margin for adverse deviations attributable to the inherent uncertainty of the appraisal process.
Margin for claims development
The margin for claims development assumption is used to take several factors into account such as the
frequency and severity of claims. This assumption is based on the Company’s experience and on forecasts
made in accordance with the requirements of the Canadian Institute of Actuaries.
Discount rates
Discount rates are used in calculating the liability related to property and casualty insurance contracts to take
the time value of money into account.
95
11. SUBORDINATED DEBT
Debenture, 7.49%, maturing in 2022
and redeemable by the Company under certain conditions
Debenture payable to majority shareholder, 7.446%, maturing in 2032
Debenture, 6%, maturing in 2032
Debenture, 6.3%, maturing in 2030
Debenture, 6.675%, repaid January 31, 20141
Debenture, Series A, 7.75%, maturing in 20192
Subordinated notes, 7.09% semi-annual, maturing in 2020
Majority shareholder
Shareholder
2014
$
2013
$
50,0
50,0
30,0
30,0
20,0
20,0
20,0
–
15,0
10,0
3,0
20,0
15,0
15,0
10,0
3,0
148,0
163,0
6,1
0,9
6,1
0,9
7,0
7,0
20,0
20,0
2
Subordinated note payable to majority shareholder, maturing in 2023,
bearing interest at 5.93% compounded semi-annual until 2018, bearing
interest at the 3-month Canadian Dealer Offered Rate plus 2.50%
compounded quarterly until 2023
Fair value3
27,0
27,0
175,0
190,0
206,2
207,1
1
Repaid from investments.
2
Convertible at the discretion of the holder into shares under certain circumstances such as change in control, merger, public offering or default
in the payment of interest and principal at maturity.
3
The fair value provided for the subordinated debt is Level 3. Refer to Note 6 for details of the fair value levels.
The fair value of subordinated debt classified as other financial liabilities is assessed using a model based
on discounted expected cash flows. Cash flows are discounted at a rate equal to the rate of return of a
benchmark index with a risk profile that is similar to that of underlying assets and with a term whose duration
equals the maximum anticipated maturity of the subordinated debt.
96
12. SHARE CAPITAL
Authorized
Class A
150,000,000 shares, without par value, participating and voting right
Class B
150,000,000 shares, without par value, participating and voting right, redeemable by mutual agreement, convertible at the discretion of the holder in whole
or in part, into Class A shares, one Class A share for each Class B share
exchanged
Class C
100,000,000 shares, with a par value of one dollar each, non-voting, giving the
right to fixed preferred dividends to Class A and B shares, issuable in one or
several series. As at December 31, 2014 and 2013, no Class C shares were
issued.
Issued
20,615,293 Class A shares (2013 – 29,901,210)
50,690,905 Class B shares (2013 – 15,872,860)
2014
$
2013
$
95.4
247.8
24.0
12.6
343.2
36.6
On November 27, 2014, the Company converted 16,666,667 Class A shares which had a book value of
$17.2 into 16,666,667 Class B shares. The Company also issued 7,380,750 Class A shares to its minority
shareholder along with 18,151,378 Class B shares to its majority shareholder with book value of $88.6 and
$218.0 respectively, in exchange for the non-ownership stake in SSQ, Insurance Company Inc. The difference
of $70.5 between the issued share capital and the book value of $236.1 of the non-ownership stake was
adjusted to retained earnings. These book values were established as at September 30, 2014, in accordance
with any agreement between the parties.
13. CAPITAL MANAGEMENT
The Company’s capital management policy is designed to satisfy the laws, regulations, guidelines of
the Autorité des marchés financiers (Autorité) and applicable instructions regarding capital management.
To ensure sound and prudent capital management, the Company is required to comply with the guideline
on capital adequacy requirements.
The Company is subject to the requirements defined by the Autorité. According to the Autorité’s guideline
on capital adequacy requirements, the capital adequacy ratio is calculated by dividing available capital by
required capital. Available capital represents total capital, less the deductions prescribed by the Autorité.
Required capital is determined on the basis of certain risk factors.
97
13. CAPITAL MANAGEMENT (cont’d)
To maintain a capital amount that satisfies the criteria of the Autorité, the Company makes annual financial
forecasts for the next five years; among the data reviewed are the solvency ratio and changes to the solvency
ratio. The actuary, appointed by the Board of Directors in conformity with An Act respecting insurance,
prepares an annual assessment of the financial position of the Company; he carries out dynamic capital
adequacy testing (DCAT) of which one objective is to verify the capital adequacy of the Company despite
plausible unfavourable events. These documents are submitted and presented to the Board of Directors.
The Autorité guideline states that the Company must set a target level of available capital that exceeds the
minimum requirements. The Company’s current solvency ratio exceeds minimum requirements and is higher
than the set target.
Capital position as at December 31,
Equity
Equity attributed to non-controlling interest
Subordinated debt
Prescribed reductions and other adjustments
Capital available
2014
$
2013
$
670.7
–
175.0
(121.8)
586.9
(223.1)
190.0
(32.1)
723.9
521.7
Concerning its subsidiaries, SSQ Insurance Company Inc. and SSQ General Insurance Company Inc.,
the Company’s policy is to maintain a higher target level of capital than required under the Autorité guideline on
the capital available and the capital adequacy requirements (MCT) that apply respectively to the subsidiary.
The solvency ratios of the subsidiaries as at December 31, 2014 and 2013 exceed the level required under
the guideline.
14. INCOME TAXES
Income tax expense for the year – Income
Current income taxes
Deferred income taxes resulting from the origination or reversal
of temporary differences
2014
$
2013
$
23.9
18.7
(6.5)
(1.0)
17.4
17.7
98
15. COMPONENTS OF THE CONSOLIDATED STATEMENT OF INCOME
Gross premiums
Life and health insurance
Investment and retirement
Invested in general funds
Invested in segregated funds
Property and casualty insurance
2014
$
2013
$
1,816.5
1,739.7
35.7
327.8
220.1
40.3
386.0
214.4
2,400.1
2,380.4
16. SEGREGATED FUNDS
During the year, Management proceeded to a change in estimate for the measurement of the fair value of
the segregated fund investments. In accordance with IFRS 13, the closing price was deemed by Management
to be the most relevant basis of measurement when in the bid-ask spread. The change in estimate had no
impact on the Company’s net income for the year.
A) Carrying value of segregated fund investments
2014
$
2013
$
Investment fund units
Bonds and other fixed income investments
Shares
3,289.0
660.7
422.6
0.5
3,262.1
871.6
495.4
2.3
Total investments
Other assets and liabilities
4,372.8
9.6
4,631.4
12.4
4,382.4
4,643.8
99
16. SEGREGATED FUNDS (cont’d)
B) Fair value of segregated fund investments
The following table presents investments in segregated funds classified according to the fair value hierarchy
defined in Note 6 and excludes all other financial assets except derivative financial instruments:
2014
Segregated fund financial assets at fair value
Bonds
Money market
Shares
Segregated fund financial liabilities at fair value
Share purchase commitment
Level 1
$
Level 2
$
Level 3
$
Total
$
2,885.7
–
–
413.8
0.5
403.3
517.9
142.8
–
–
–
–
–
8.8
–
3,289.0
517.9
142.8
422.6
0.5
3,300.0
1,064.0
8.8
4,372.8
(7.8)
(9.2)
–
–
–
–
(7.8)
(9.2)
(17.0)
–
–
(17.0)
During the years ended December 31, 2014 and 2013, there were no transfers of investments related to
segregated funds between Levels 1 and 2.
2013
Segregated fund financial assets at fair value
Bonds
Money market
Shares
Segregated fund financial liabilities at fair value
Derivate financial instruments
Share purchase commitment
Level 1
$
Level 2
$
Level 3
$
Total
$
2,888.5
–
–
487.2
2.2
373.6
652.6
219.0
–
0.1
–
–
–
8.2
–
3,262.1
652.6
219.0
495.4
2.3
3,377.9
1,245.3
8.2
4,631.4
(2.6)
(9.4)
–
–
–
–
(2.6)
(9.4)
(12.0)
–
–
(12.0)
100
16. SEGREGATED FUNDS (cont’d)
C) Changes in segregated fund insurance contracts and investment contracts
2014
2013
Insurance
contracts
$
Investment
contracts
$
Insurance
contracts
$
Investment
contracts
$
Amounts collected from
policyholders
Investment income
Amounts paid to policyholders
Disposal of portfolios
2,050.3
2,593.5
1,813.8
2,301.9
1,591.5
344.0
121.3
(330.9)
(593.2)
300.3
365.7
(403.6)
(77.8)
2,778.1
398.0
178.8
(340.3)
–
2,050.3
438.1
208.4
(354.9)
–
2,593.5
In accordance with the contractual maturities of cash flows, segregated fund insurance contracts and
investment contracts are payable on demand.
17. CONTINGENCIES AND COMMITMENTS
Contingencies
The Company and its subsidiaries are subject to legal actions, including proposed class actions. The
Company does not expect that settlement of current legal actions will have a material adverse effect on
its consolidated financial position.
Letters of credit
In the normal course of business, banking institutions issue letters of credit on the Company’s behalf. As
at December 31, 2014, these letters of credit totalled $2.9 (2013 – $16.0). No assets were pledged against
these letters of credit.
Commitments
The Company leases vehicule, IT equipment and office space as lessee. These leases mature between
2015 and 2025. Lease payments, equal to the minimum payments expensed during the year, totalled
$10.1 (2013 – $8.8).
The expected payments on the leases are as follows:
Basic rents
Less than 1 year
$
10.8
1 to 5 years
$
12.8
Over 5 years
$
11.4
Total
$
35.0
101
18.LEASES
The Company leases, as lessor, certain investment properties and fixed assets under operating leases.
These leases mature between 2017 and 2030.
During the year, the Company’s rental income from its investment property and fixed assets totalled
$19.0 (2013 – $18.1), while direct operating expenses totalled $14.0 (2013 – $12.7).
Expected receipts on operating leases are as follows:
Basic rents
Less than 1 year
$
9.6
1 to 5 years
$
26.2
Over 5 years
$
25.7
19.COMPARATIVES
To standardize the disclosure of certain elements of its consolidated financial statements, the Company
adjusted the following financial statement items in its consolidated statement of income: gross premiums
and change in actuarial reserve of life and health insurance contracts.
Total
$
61.5
102
STRUCTURE
Fonds de solidarité FTQ
SSQ, Mutual
Management Corporation
SSQ Dedicated
Segregated Fund
SSQ, Mutual Holding Inc.
SSQ, Life Insurance
Company Inc.
SSQ Insurance
Company Inc.
SSQ General Insurance
Company Inc.
SSQ Foundation
SSQ Realty Inc.
103
SSQ, LIFE INSURANCE COMPANY INC. AND SSQ INSURANCE COMPANY INC.
Boards of Directors
Denyse
Paradis* / Terrebonne
Secretary and Treasurer
Fédération de la santé et des services sociaux
(FSSS) – CSN
Chairman
Pierre
Genest* / Quebec City
Vice-Chairman
Émile Vallée* / Gatineau
Retiree
Fédération des travailleurs et travailleuses
du Québec (FTQ)
Directors
Normand Brouillet* / Greenfield Park
Retiree
Confédération des syndicats nationaux (CSN)
Claude Choquette / Quebec City
President
HDG Inc.
René Hamel / Quebec City
Eddy
Jomphe* / Lévis
Union Representative
Canadian Union of Public Employees (CUPE) – FTQ
Andrew MacDougall* / Toronto
President
Spencer Stuart Canada
Jude Martineau / Quebec City
Corporate Director
Gaétan Morin / Terrebonne
President and Chief Executive Officer
Sylvain Paré / Montreal
Executive Vice-President, Finance
Alain Pélissier* / Montreal
Retiree
Centrale des syndicats du Québec (CSQ)
Jean Perron* / Quebec City
Corporate Director
Sylvain Picard* / Wendake
Executive Director
Régime des bénéfices autochtones
Chantal Doré / Boucherville
Vice-President – Information Technology,
Project Management and Administration
Alistair Angus H. Ross / Picton
President
L&A Concepts
Norman A. Turnbull / East Bolton
Corporate Director
Dominique Verreault* / Marieville
Retiree
Alliance du personnel professionnel et technique
de la santé et des services sociaux (APTS)
Corporate Secretary
Hélène Plante
*Member of the Board of Directors of
Michel Nadeau* / Longueuil
Executive Director
Institute for Governance of Private
and Public Organizations
Member of Mutualism Promotion Committee
Member of Executive and Human Resources Committee
Member of Audit and Risk Management Committee
Member of Investment Committee
Member of Ethics Committee
104
SSQ GENERAL INSURANCE COMPANY INC.
Chairman
Pierre Genest / Quebec City
Jacques Rochefort / Montreal
Chenelière Éducation
Directors
René Hamel / Quebec City
Josée Lachapelle / Laval
Senior Director, Investments
Financial Services, Services, Mining, Metal Products
and Social Economy
Lucie Martineau / Lévis
General President
Syndicat de la fonction publique et parapublique
du Québec (SFPQ)
Vice-Chairman
André L’Écuyer / Saint-Augustin-de-Desmaures
President
Rabaska
Bernard Piché / Montréal
Corporate Director
Jocelyn Tremblay / Quebec City
Union Representative
Canadian Union of Public Employees (CUPE) – FTQ
Pierre-Maurice Vachon / Sainte-Marie
Corporate Director
Corporate Secretary
Hélène Plante
Danielle Lallemand / L’Assomption
Accountant
Confédération des syndicats nationaux (CSN)
Member of Executive and Human Resources Committee
Member of Audit and Risk Management Committee
Member of Investment Committee
Member of Ethics Committee
105
SSQ FINANCIAL GROUP
Senior Management
René Hamel
Diane Gaulin
Vice-President – Sales, Public Sector
Serge Boiteau
Appointed Actuary and Strategic Advisor
to the Chief Executive Officer
Blair MacIntyre
Regional Vice-President – Corporate Accounts
Toronto Office
Patrick Cyr
Senior Vice-President
Finance and Realty
Cathy Perron
Vice-President – Sales, Private Sector
Carl Laflamme
Group Insurance
Ron Smitko
Regional Vice-President – TPA Sector
Toronto Office
Marie Lamontagne
Corporate Communications and E-business
Denis Légaré
Human Resources and Internal Communications
Martin Bédard
Regional Vice-President – Business Development
Institutional and Private Wealth
Michel Loranger
Information Technologies
Luc Bossé
Montreal Office
Sylvain Charbonneau
Vice-President – Actuarial and Marketing
Gilles Mourette
Jean Cinq-Mars
Vice-President – Client Services and Administration
Douglas Paul
Ontario, Western Canada and Atlantic Region
Marc Trépanier
Vice-President – National Business Development
Individual Insurance and Retirement
Bernard Tanguay
and SSQ Insurance Company Inc.
Éric Trudel
Corporate Services
Corporate Secretary
Hélène Plante
Corporate Services
Carl Cleary
Vice-President – Corporate Development
Hugo Drouin
Vice-President – Investments
France LeBlanc
Vice-President – Corporate Actuarial
Divisions
Group Insurance
Chantal Auger
Vice-President – Administration
Dany Caron
Regional Vice-President
Quebec City Office
Donald Cyr
Vice-President – Actuarial
Information Technologies
Pierre Beaudoin
Vice-President – Systems Development
Individual Insurance and Retirement and
Business Intelligence
Martin Paré
Vice-President – Infrastructure and Technological
Integration
Éric Savard
Vice-President – IT Governance
106
SSQ INSURANCE COMPANY INC.
Corporate Secretary
Hélène Plante
Divisions
Jean Cinq-Mars
Vice-President – Client Services and Administration
Sylvain Charbonneau
Vice-President – Actuarial and Marketing
Gilles Loiselle
Vice-President – Strategic Advisor
SSQ GENERAL INSURANCE
COMPANY INC.
Corporate Secretary
Hélène Plante
Divisions
Ginette Fortin
Vice-President – Insurance
Aurel Lessard
Vice-President – Sales and Marketing
Patrice Raby
Vice-President – Actuarial
Éric Thériault
Vice-President – Claims
SSQ REALTY INC.
France Rodrigue
Vice-President – Realty and Material Resources
107
ADDRESSES
SSQ Insurance Company Inc.
Head Office
800 6th Avenue SW, Suite 650
Calgary, AB T2P 3G3
Tel.: 403-592-8516
1-855-772-3082
2525 Laurier Blvd
Quebec City, QC G1V 2L2
Tel.: 418-651-7000
1-800-463-5525
1200 Papineau Avenue, Suite 460
Montreal, QC H2K 4R5
Tel.: 514-521-7365
1-800-361-8100
110 Sheppard Avenue East, Suite 500
Toronto, ON M2N 6Y8
Tel.: 416-221-3477
1-866-696-6001
1245 Chemin Sainte-Foy, Suite 1-210
Quebec City, QC G1S 4P2
Tel.: 418-688-4887
1-800-320-4887
Head Office
2515 Laurier Blvd
Tel.: 418-683-5515
1-888-683-5515
1010 Sérigny Street, Suite 800
Longueuil, QC J4K 5G7
Tel.: 450-321-0056
1-888-683-5515
SSQ Realty Inc.
1680 Bedford Row
P.O. Box 1001
Halifax, NS B3J 2X1
Tel.: 1-800-848-0158
2020 Robert-Bourassa Blvd, Suite 1800
Montreal, QC H3A 2A5
Tel.: 514-282-6064
1-855-233-7056
110 Sheppard Avenue East, Suite 500
Toronto, ON M2N 6Y8
Tel.: 416-928-8801
1-877-928-8801
701 Georgia Street West, Suite 1500
Vancouver, BC V7Y 1C6
Tel.: 604-681-9266
1-855-803-5797
CONTACT US
Corporate Communications
SSQ Financial Group
2525 Laurier Blvd
Tel.: 1-866-332-3806
communications@ssq.ca
You can also visit us at ssq.ca.
2525 Laurier Blvd, Suite 1000
Tel.: 418-682-1245
ISSN 1700-0688
Legal Deposit – 2nd quarter 2015
Bibliothèque et Archives nationales du Québec
National Library of Canada
BMG115A (2015-04)

2014 Annual Report

Transcription

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