Profits could be more volatile under IFRS 17, insurers warn
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Canadian insurer iA Financial expects a near-neutral to slightly negative outlook on its book value as of end of September as the company transitions to IFRS 17 and 9. Meanwhile, Italian insurer Unipol predicts more profits volatility in its life business.
In the previous quarter, the iA Financial’s preliminary estimate was neutral to favourable.
Jacques Potvin, chief financial officer and chief actuary of the Canadian firm, told analysts on Wednesday the worsened outlook was due to macroeconomic factors.
He said there would be earnings volatility under IFRS 17. The increase in short to mid-term interest rates has a negative impact, but the rise in long-term rates makes for a positive outlook, he said.
Despite this somewhat mixed picture, the insurer predicted more than CAD$5bn (£3.2bn) of contractual service margin – the expected future profits over the lifetime of a contract. Potvin said while this could change under IFRS 17, the standard will not affect the firm’s earnings per share.
Unipol expects volatility in life profits
Meanwhile, Italian insurer Unipol also predicted higher volatility in its life business under IFRS 17.
Speaking to analysts today, Luca Zaccherini, chief financial officer of the Italian group, said the biggest change of the accounting standard is the contractual service margin element in the life business.
He stressed the standard does not change profit dynamics but added: “Quarter by quarter there may be higher volatility in the life business profits, because this will depend on the updates of the curve parameters that we have to implement in order to estimate them in the release of contractual service margins in every single quarter.”
Zaccherini also agreed no major changes are expected over the long term.
Do you expect to see earnings volatility on a quarterly basis under IFRS 17 and 9?