Actuarial Notes

P&C Core Financial Statement Quarterly Return (PC1)

By Office of the Superintendent of Financial Institutions · 2023 · PC1

Study guide: Exam 6C

The uniform quarterly return, approved by the Canadian Council of Insurance Regulators, in which P&C insurers file their core financial statements. This is the 2023 form (PC1) for Canadian and foreign property and casualty insurers: consolidated financial statements running from the statement of financial position through four liability roll-forwards, the statement of profit or loss, residual interest, comprehensive income, the head office account and reserves, cash flows, changes in equity and the notes, to a certification. Its table of contents marks which pages a Canadian insurer files and which a foreign insurer files.

On the syllabus

  • Exam 6C — objectives C1–C4; the whole return (2023), using the 2023 Return archived on the CAS website.

20.10 Assets

  • The assets side of the statement of financial position, for the current period, the prior period restated and the opening prior period restated, each with a column for assets vested in trust (for foreign insurers, excluding deposits of reinsurers held in special trust accounts).
  • Its lines run from cash and cash equivalents through investments, insurance contract assets and reinsurance contract held assets, property, intangible assets, goodwill and segregated funds to total assets, with a reference-page column naming the supporting exhibit (for example 40.08Q for investments, 20.12/20.14 for insurance contract assets).

20.11 Liabilities and Equity

  • Liabilities include insurance contract liabilities and reinsurance contract held liabilities (each split into excluding segregated funds, segregated fund guarantees and segregated funds net liabilities), investment contract liabilities, debt, deferred tax liabilities and policyholders' liabilities.
  • Equity is for Canadian insurers only: policyholders' equity, shareholders' equity (common and preferred shares, contributed surplus, other capital, retained earnings, nuclear and other reserves, accumulated other comprehensive income) and non-controlling interests.
  • Foreign insurers report instead a head office account, reserves and accumulated other comprehensive income.

20.12 Liability Roll Forward (Analysis by measurement component (Insurance contracts not measured under the PAA - excluding Segregated Funds))

  • Rolls the net insurance contract balance from opening to ending, in columns for the expected present value of future cash flows, the risk adjustment and the contractual service margin (the CSM split into modified retrospective, fair value and other).
  • The changes are grouped into current service provided, future service yet to be provided (including contracts initially recognized and changes in estimates that adjust the CSM or result in onerous contract losses), and past service, followed by net finance income or expenses, exchange rate effects and cash flows (premiums received, claims and other expenses paid, insurance acquisition cash flows).

20.14 Liability Roll Forward (Analysis by remaining coverage and incurred claims (all insurance contracts - excluding Segregated Funds))

20.16 Liability Roll Forward (Reinsurance contracts held analysis by measurement component (Contracts not measured under the PAA - excluding Segregated Funds))

  • The measurement-component roll-forward for reinsurance contracts held, in columns for the expected present value of future cash flows, the risk adjustment and the contractual service margin.

20.18 Liability Roll Forward (Reinsurance contracts held analysis by remaining coverage and incurred claims (all contracts - excluding Segregated Funds))

  • For all reinsurance contracts held, in columns for assets for remaining coverage (excluding the loss-recovery component, and the loss-recovery component) and assets for incurred claims (not under the PAA; and under the PAA).
  • The changes run through the allocation of reinsurance premiums paid, amounts recoverable from reinsurers, the effect of changes in non-performance risk of reinsurers, net finance income or expenses and cash flows (premiums paid, amounts received).

20.22 Statement of Profit or Loss

  • Insurance revenue (from PAA, GMM and VFA contracts) less insurance service expenses and net expenses from reinsurance contracts held gives the insurance service result.
  • The net investment result combines the investment return with net finance income or expenses from insurance and reinsurance contracts (insurance finance income or expenses); with other income and expenses and income taxes it leads to net income (loss) for the year, attributed among policyholders, non-controlling interests and equity holders.
  • The reference-page column points to supporting exhibits in the quarterly return (60.25Q, 80.25Q, 80.35Q) and to 40.72, 40.74 and 40.88.

20.41 Statement of Residual Interest

  • Statement of Residual Interest - Policyholders' Equity
  • Statement of Residual Interest - Liabilities
  • Filed by Canadian insurers; each statement runs from the opening balance of the prior year through adjustments, the share of net income (loss) and transfers from (to) the non-par account to the end of year.

20.42 Comprehensive Income(Loss) & Accumulated Other Comprehensive Income(Loss)

  • Comprehensive income is net income plus other comprehensive income, split into items that may be reclassified subsequently to net income (FVOCI loans and bonds, cash flow hedges, foreign currency translation, and the insurance finance income or expenses reserves from insurance contracts and from reinsurance contracts held) and items that will not (FVOCI equities, revaluation surplus, defined benefit plan remeasurements).
  • The second part reports the accumulated other comprehensive income balance by the same items.

20.45 Head Office Account and Reserves

  • Head Office Account
    • For foreign insurers: the balance at the beginning of the year, net income (loss), transfers from (to) head office and changes in reserves, to the balance at the end of the period.
  • Reserves
    • Earthquake reserves (a reserve component and a premium reserve), the mortgage reserve, the nuclear reserve and general contingency reserves.

20.52 Statement of Cash Flows

  • Insurers embed the statement of cash flows as prepared for the insurer's Annual Return financial statements; the page is submitted for the Q4 period only.

20.54 Statement of Changes in Equity

  • For Canadian insurers, the statement of changes in equity has columns for share capital, other capital, contributed surplus, retained earnings, nuclear and other reserves and each component of accumulated other comprehensive income, and rows for comprehensive income, share issues, transfers, changes in reserves, dividends and other changes, for the prior and current periods.
  • Memo items record the impact of initial application of IFRS 17 and of IFRS 9.

20.60 Notes to the Financial Statements

99.16 Certification

  • An officer certifies that, to the best of their knowledge, the return presents fairly the insurer's financial position and the results of its operations in accordance with generally accepted accounting principles, the primary source of which is the Handbook of the Chartered Professional Accountants of Canada, and the statutory provisions applied in its most recent Annual Return.

Related readings

  • OSFI Quarterly Return — the supervisory quarterly return (PC2), whose pages 40.08, 40.84, 60.25, 80.25 and 80.35 this return cites as supporting exhibits
  • OSFI Annual Return — the supervisory annual return (PC3), whose page 40.70 this return cites as a supporting exhibit
  • CCIR Instructions — the instructions the content outline assigns for these pages

Sources