Full report - SGI Canada

The asset mix strategy is formally documented in the Statement of Investment Policies and Goals. In
addition to capturing the asset mix strategy, this document provides guidance on permissible investments,
quality and quantity guidelines, conflicts of interest, related party transactions and investment
performance expectations, among others. Management monitors and enforces compliance with the
investment policy. No material compliance deviations were noted in 2010.
The Corporation’s investment portfolio is managed by external investment managers. The portfolio is
invested in short-term investments, bonds, mortgages and equities. Equities consist of Canadian, U.S. and
non-North American equities. The Corporation’s subsidiaries hold their Canadian and U.S. equities through
pooled funds, while all the Corporation’s non-North American equities are held through a pooled fund.
SGI CANADA Asset Mix
As at December 31
The investment policy review in 2010 resulted in changes to the policy asset mix guidelines and
benchmark portfolio weights for the SGI CANADA, SGI CANADA Insurance Services Ltd. and Coachman
investment portfolios. The fixed income portfolios within these companies were restructured to better
match investment assets to their associated liabilities and to reduce potential interest rate risk. For
SGI CANADA, the half of the fixed income portfolio holding long-term bonds was sold and subsequently
reinvested in bonds with shorter maturities as well as higher allocations to cash. Similarly in SGI CANADA
Insurance Services Ltd., longer-term bonds were sold and reinvested in short-term bonds and cash,
although with significantly higher allocations to cash due to its surplus of bond assets over its associated
liabilities. The Coachman fixed income portfolio was previously fully invested in short-term bonds, but it
was also determined to have surplus bond assets over its liabilities allowing for higher allocations to cash.
In all cases, the restructured portfolios showed better alignment between bond assets and interest rate
sensitive liabilities. The ICPEI portfolio required no changes in 2010 due to its already close alignment
between its assets and liabilities.
Cash and cash equivalents
Cash and cash equivalents at December 31, 2010, was $27.8 million (2009 – $16.9 million), an increase
of $10.9 million. The sources of the change in cash and cash equivalents for the year are discussed in
the above section Consolidated Statement of Cash Flows. Cash equivalents consist of money market
investments such as treasury bills, banker’s acceptances, discount notes or other liquid short-term
investments that have a maturity of 90 days or less from the date of acquisition.
Deferred policy acquisition costs
Deferred policy acquisition costs increased $3.8 million during the year. The increase is due to an increase
in prepaid commissions and prepaid premiums, a direct result of increased premium volume.
Accounts receivable
Accounts receivable increased $2.1 million, largely a result of a $12.0 million increase in financed premiums
receivable. The increase is commensurate with the growth in premiums written. Offsetting this increase
are investment proceeds receivable of $12.3 million outstanding at the end of 2009 related to investment
transactions in progress. There were no investment transactions in progress over the 2010 year end.
Additionally of note is an increase of $1.5 million included in amounts due from brokers for loans issued
during the year related to the sale of its equity accounted investments. These investments were related to
the Corporation through the minority shareholder in ICPEI. These loans are described in detail in note 17 to
the financial statements.
2010 2009 Change
(thousands of $)
Total liabilities $ 632,070 $ 599,246 $ 32,824
Non-controlling interest 2,428 1,879 549
Key liability account changes:
Unearned premium 242,497 218,893 23,604
Provision for unpaid claims 316,820 293,575 23,245
Dividend payable 15,462 22,199 (6,737)
Accounts payable and accrued
liabilities 29,292 39,476 (10,184)
Unearned premiums
Unearned premiums increased $23.6 million, a direct result of growth in premiums written.
42 | 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S DISCUSSION AND ANALYSIS 2010 | 43