2022-23 SGI CANADA Annual Report
The Corporation, as is common in the P&C insurance industry, is subject to litigation arising in the normal course of
its operations, primarily in claim settlements. The Corporation is of the opinion that current litigation will not have a
material impact on its operations, financial position or cash flows.
In addition, the effects of the COVID-19 pandemic related to emerging coverage issues and claims (class action
lawsuits related to business interruption coverage) could negatively impact the Corporation's provision for unpaid
claim liabilities. The Corporation's commercial insurance policies do not provide business interruption coverage in
the context of a closure due to COVID-19 as direct physical loss or damage is required to trigger this coverage. In
the event that these cases result in a significant judgment against the Corporation, the resulting liability could be
material. Based on information currently known, the Corporation does not believe that the outcome of these cases
will have a material impact on the consolidated financial statements.
Also, the Corporation and its subsidiaries, in the normal course of settling claims, settle some long-term disability
claims by purchasing structured settlements (annuities) from various financial institutions for its claimants.
This is a common practice in the P&C industry. The net present value of the scheduled payments was $59.4 million
(2022 $62.8 million). The Corporation provides a financial guarantee to the claimant in the event of default by the
financial institution on the payment schedule to the claimant. No default has occurred in the past on these payment
schedules and the Corporation considers the likelihood of such default remote.
Critical Accounting Estimates
This discussion and analysis of the Corporation's financial condition and results of operations is based upon its
consolidated financial statements as presented in this annual report. These consolidated financial statements
have been prepared in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee.
Significant accounting policies are contained in note 3 to the consolidated financial statements. Some of these
policies involve critical accounting estimates because they require management to make particularly subjective
or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially
different amounts could be reported under different conditions or by using different assumptions.
The Corporation has discussed the development, selection and application of its key accounting policies, and the
critical accounting estimates and assumptions they involve, with the Audit, Finance and Conduct Review Committee
of the Board of Directors. The Audit, Finance and Conduct Review Committee has reviewed the disclosures described
in this section. The most significant estimation processes are related to the actuarial determination of the provision
for unpaid claims and unpaid claims recoverable from reinsurers, the valuation of accounts receivable, employee
future benefits and the fair value of investments classified as Level 3.
Provision for unpaid claims
A provision for unpaid claims is maintained to cover the estimated ultimate liability for losses and loss adjustment
expenses for reported claims and claims incurred but not yet reported as at the end of each accounting period.
The initial provision is determined on the reported facts filed with the claim and then revised regularly, as more
information on the claim becomes known. The provision does not represent the exact calculation of the liability
owing to claimants, but is an estimate developed using Canadian accepted actuarial practices and Canadian
insurance regulatory requirements. The estimate reflects an expectation of the ultimate cost of settlement and
administration of claims. It involves an assessment based on the facts and circumstances of the events reported in
the claim, the Corporation's experience with similar claims, historical trends involving claim payments, claim severity,
the effect of inflation on reported and future claims, court decisions and the timeframe anticipated to settle and
pay the claim.
2022-23 SGI CANADA Annual Report 23View entire presentation