Kingston, Ont.-based Empire Life Insurance Company reported mixed results for its second quarter earnings.
On the positive side, Empire Life reported common shareholders’ net income of $48 million in Q2 as compared to $20 million in Q2 2019. For the year to date, however, common shareholders’ net income was $16 million, a steep decline from $63 million in 2019.
“The low interest rate environment is a significant challenge for the life insurance industry,” said Mark Sylvia, president and chief executive officer, Empire Life, in a release. “We rely on fixed-income investments to build our reserves. Despite the impact we have seen on our investment income we are satisfied with our net income results in the second quarter.”
Q2 earnings increased year-over-year primarily as a result of lower claim expenses in the company’s employee benefits line as well as favourable asset liability trading gains in the individual insurance line.
The significant decline in year-to-date earnings was largely due to a significant increase in policy liabilities supporting segregated fund benefit guarantees, said the insurer.
The company’s expected profit on in-force business increased by 11% for Q2 and by 10% on a year-to-date basis.
The impact of new business saw a decline in the second quarter largely due to lower new business strain in the employee benefits line. (New business strain is the strain on the business created due to inadequate premium amounts in initial years.) Lower sales in 2020 meant that new business strain on the individual insurance line was nil in Q2 and negative on a year-to-date basis as compared to 2019.
Sylvia also noted that Empire’s recent investments in technology have helped the company weather the Covid-19 crisis.
“Our investments in technology enabled us to quickly pivot our business during the pandemic to ensure the safety of our employees and continue to provide superior service to our customers and their advisors,” Sylvia said.