Empire Life Insurance Company has reported lower earnings in the second quarter of this year, with common shareholders' net income of $20 million compared to $57 million the same time last year. Year-to-date common shareholders' net income was $63 million compared to $96 million in 2018, the company reported August 1.
Lower earnings stemmed primarily from the Individual Insurance, Wealth Management and Employee Benefits product lines, partially offset by higher income from Capital & Surplus, the company said in a statement.
"The continuing low level of interest rates in the second quarter proved to be a significant challenge for our Individual Insurance product line,” said Empire Life president and CEO Mark Sylvia.
LICAT position remains strong
“Our other product lines maintained profitability and we experienced net premium and fee revenue growth in the quarter. Our capital position, as measured by LICAT, continues to be very strong—above both supervisory and internal targets.”
The expected profit on in-force business for the second quarter decreased 12 per cent and 5 per cent on a year-to-date basis. This was driven mainly by lower profit on in-force business in the Individual Insurance product line and, to a lesser extent, by reduced margins on a lower asset base in the Wealth Management product line, the company said.
Drop in bond yields responsible for drop in experience gains
Experience gains for the second quarter of 2019 and year to date dropped from 2018 primarily due to decreases in bonds yields which contributed to an increase in policy liabilities that more than offset fair value gains on fixed-income investments in the Individual Insurance product line and less favourable claims experience in the Employee Benefits product line.
Empire Life's Life Insurance Capital Adequacy Test (LICAT) Total Ratio was 149% at June 30, 2019 compared to 149% at December 31, 2018, well above the requirements set by regulators.