Full report - SGI Canada

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Routine operating transactions with related parties are settled at prevailing market prices under normal trade terms. Transactions and amounts outstanding at year-end are as follows: Category 2010 2009 (thousands of $) Accounts receivable $ 747 $ 701 Deferred policy acquisition costs 8,676 8,207 Investments 6,013 7,767 Accounts payable and accrued liabilities 82 80 Dividends payable 15,462 22,199 Premium taxes payable 16,776 15,926 Unearned premiums 1,704 2,172 Provision for unpaid claims 4,833 3,084 Gross premiums written 3,476 4,800 Net premiums earned 3,711 4,737 Claims incurred 3,016 2,874 Administrative expenses 2,223 2,273 Premium taxes 16,307 15,316 Investment earnings 458 287 The Corporation acts as administrator of the Saskatchewan Auto Fund. Administrative and loss adjustment expenses incurred by the Corporation are allocated to the Corporation and the Saskatchewan Auto Fund directly or on the basis of specific distributions. Amounts incurred by the Corporation and charged to the Saskatchewan Auto Fund were $119,080,000 (2009 – $112,382,000) and accounts payable were $1,576,000 (2009 – $133,000). The Corporation has direct premiums brokered through Charlie Cooke Insurance Agency Ltd. (CCIA), pays claim adjusting fees to Atlantic Adjusting and Appraisals Ltd. (AAA) and has premiums financed for policyholders by Maritime Finance and Acceptance Corporation (MFAC). These companies are affiliated with the minority shareholder of ICPEI, who is a member of ICPEI’s senior management. The policies written and the claim adjusting expenses paid are routine operating transactions in the normal course of business. On June 1, 2010, the Corporation, through it’s subsidiary, ICPEI, loaned the primary shareholders of CCIA $1,146,000 (two loans of $605,000 and $541,000 with consistent terms and conditions) in order to fund their purchase of the Corporation’s minority interest in CCIA (note 5). Subsequent to the sale, the Corporation and CCIA are no longer related. The loans require 10 equal annual payments of $128,790, including principal and interest, beginning on March 31, 2011. The loans accrue interest at an effective annual rate of 2.25% and are secured by a general security agreement covering all assets of CCIA. During 2007 the Corporation provided CCIA a $450,000 loan for the purpose of purchasing a brokerage. The terms of the agreement provide for repayment in six annual instalments of $75,000 and require CCIA to maintain minimum premium limits. At December 31, 2010, the loan is recorded at its amortized cost of $206,000 (2009 – $268,000), calculated by discounting the scheduled instalments at an interest rate that reflects the term and credit risk associated with the loan. During the year, $75,000 (2009 – $75,000) was repaid and interest revenue of $13,000 (2009 – $17,000) was recorded through investment earnings. The above noted loans are included as a component of accounts receivable and their fair value approximates their book values. Transactions and amounts outstanding between the Corporation and CCIA, AAA and MFAC at year-end are as follows: Category 2010 2009 (thousands of $) Accounts receivable $ — $ 946 Accounts payable and accrued liabilities 56 1,131 Premiums written 4,620 11,320 Claims incurred 716 624 Commissions 1,054 2,659 Premiums financed 5,312 4,653 Certain board members are partners in organizations that provided $27,000 (2009 – $4,000) of professional services to the Corporation. These services were recorded in claims incurred and administrative expenses in the Statement of Operations. In addition, one board member owns an organization that sells insurance policies of the Corporation. Premiums written during the year from this organization amounted to $4,417,000 (2009 – $4,436,000) and the associated accounts receivable at December 31, 2010, was $775,000 (2009 – $887,000). Commissions related to these premiums were $824,000 (2009 – $792,000). The above noted transactions are routine operating transactions in the normal course of business. Other related party transactions are described separately in the notes to the consolidated financial statements. 18. Fair Values of Financial Assets and Liabilities The fair value of financial assets and liabilities, other than investments (note 5), net investment in capital lease (note 7), unpaid claims and unpaid claims recoverable from reinsurers (notes 8 and 10) approximate carrying value due to their immediate or short-term nature. On December 22, 2010, the Corporation, through it’s subsidiary, <strong>SGI</strong> CANADA Insurance Services Ltd. loaned the primary shareholders of MFAC and AAA $343,000 (two loans of $181,000 and $162,000 with consistent terms and conditions) in order to fund their purchase of the MFAC and AAA shares (note 5). The loans require seven equal annual payments of $57,000 including principal and interest, beginning on March 31, 2011. The loans accrue interest at an effective annual rate of 4.00% and are secured by a general security agreement covering all assets of MFAC and AAA, and guarantees from the purchaser. 92 | 2010 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2010 | 93
19. Facility Association Participation Through its subsidiaries, the Corporation is a participant in automobile residual market and risk-sharing pools, whereby companies in the industry are required by regulation to provide automobile insurance coverage to high-risk insureds. Facility Association transactions recorded in the Corporation’s financial results are as follows: 2010 2009 (thousands of $) Gross premiums written $ 3,948 $ 4,113 Net premiums earned $ 3,766 $ 3,705 Claims incurred 1,791 3,119 Commissions 298 129 Premium taxes 118 115 Administrative expenses 879 973 Total claims and expenses 3,086 4,336 Underwriting profit (loss) 680 (631) Investment earnings 106 149 2010 Saskatchewan Manitoba and Alberta Ontario (thousands of $) Maritimes Consolidation Adjustments Net premiums written $ 318,120 $ 46,475 $ 45,162 $ 20,803 $ — $ 430,560 Net premiums earned $ 308,879 $ 43,217 $ 35,995 $ 19,402 $ — $ 407,493 Claims incurred 175,080 27,286 27,078 10,573 — 240,017 Other expenses 120,630 14,873 11,907 7,004 — 154,414 Underwriting profit (loss) 13,169 1,058 (2,990) 1,825 — 13,062 Investment earnings 30,115 3,072 4,182 914 — 38,283 Income before the following: 43,284 4,130 1,192 2,739 — 51,345 Income taxes — 1,189 452 902 — 2,543 Non-controlling interest — — — — 446 446 Net income $ 43,284 $ 2,941 $ 740 $ 1,837 $ (446) $ 48,356 Total assets $ 598,783 $ 109,936 $ 148,767 $ 43,634 $ (28,305) $ 872,815 Province of Saskatchewan's equity $ 149,215 $ 39,242 $ 41,138 $ 11,150 $ (2,428) $ 238,317 Total Net income (loss) $ 786 $ (482) 2009 Saskatchewan Manitoba and Alberta Ontario Maritimes Consolidation Adjustments Total Facility Association receivable $ 4,051 $ 3,951 Unearned premiums 1,398 1,215 Provision for unpaid claims 4,530 4,730 Facility Association payable 3,504 3,504 20. Segmented Information The Corporation provides property and casualty insurance through four operating segments: Saskatchewan, Manitoba and Alberta, Ontario and the Maritimes (where Maritimes represents Prince Edward Island, New Brunswick and Nova Scotia). These operating segments correspond with the legal entities that make up the Corporation, as discussed in note 1. The performance of each operating segment is <strong>report</strong>ed separately to the Corporation’s Board of Directors. (thousands of $) Net premiums written $ 306,531 $ 40,015 $ 29,459 $ 17,909 $ — $ 393,914 Net premiums earned $ 293,721 $ 35,400 $ 25,452 $ 15,982 $ — $ 370,555 Claims incurred 139,634 18,965 21,516 9,496 — 189,611 Other expenses 116,765 13,726 9,331 7,307 — 147,129 Underwriting profit (loss) 37,322 2,709 (5,395) (821) — 33,815 Investment earnings 12,217 1,695 4,634 1,026 — 19,572 Income (loss) before the following: 49,539 4,404 (761) 205 — 53,387 Income taxes (recovery) — 1,190 (270) 83 — 1,003 Non-controlling interest — — — — 17 17 Net income (loss) $ 49,539 $ 3,214 $ (491) $ 122 $ (17) $ 52,367 Total assets $ 586,144 $ 114,504 $ 132,581 $ 38,233 $ (44,025) $ 827,437 Province of Saskatchewan's equity $ 144,842 $ 34,942 $ 39,335 $ 9,072 $ (1,879) $ 226,312 94 | 2010 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2010 | 95
Page 1 and 2: SGI CANADAANNUAL REPORT
Page 3 and 4: LeTTer of transmittal Regina, Saska
Page 5 and 6: President’s message In the insura
Page 7 and 8: We’re here for brokers SGI CANADA
Page 9 and 10: We’re here to be good corporate c
Page 11 and 12: Five-year review ManaGEMenT’S dis
Page 13 and 14: Recent disasters around the world h
Page 15 and 16: The following table summarizes the
Page 17 and 18: 2010 2009 Source: SGI CANADA and MS
Page 19 and 20: All jurisdictions were profitable i
Page 21 and 22: Due to the strength of the capital
Page 23 and 24: The asset mix strategy is formally
Page 25 and 26: Impact of New Accounting Standards
Page 27 and 28: Off-Balance Sheet Arrangements SGI
Page 29 and 30: Distribution channel - broker partn
Page 31 and 32: ANNUal STATEMenT of management resp
Page 33 and 34: Consolidated sTatement of operation
Page 35 and 36: Notes to the consolidated financial
Page 37 and 38: Property, plant and equipment Prope
Page 39 and 40: As at December 31, 2010, the cost o
Page 41 and 42: Gross Type of unpaid claims The pro
Page 43 and 44: 13. Financial Risk Management The n
Page 45 and 46: Carrying amount The Corporation’s
Page 47: The asset allocation of the defined
Page 51 and 52: National Policy 58-201 Corporate Go
Page 53 and 54: National Policy 58-201 Corporate Go
Page 55 and 56: oard of directors Vice- presidents
Page 57: SGI CANADA head office 2260 - 11th

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