VANCOUVER — British Columbia’s once-celebrated public auto insurer has become a financial train wreck, its critics say as studies into the beleaguered Crown corporation call for dramatic rate hikes and drastic structural changes to save it from ruin.But while everyone appears to agree the system is broken, there is disagreement over how the Insurance Corporation of British Columbia went off the rails in the first place and what must be done to fix it.The crisis at ICBC is shaping up to be the first major financial hurdle for B.C.’s new NDP government.Attorney General David Eby, who is also the minister responsible for ICBC, blames the previous Liberal government for problems at the corporation.“ICBC, as described to me by senior bureaucrats, is on the path to insolvency,” Eby said. “It’s very unfortunate that it’s been left for so long, because I think there was really an opportunity to address this much earlier.”ICBC was created in the early 1970s by the province’s first NDP government to provide affordable and universal auto insurance.All B.C. vehicle owners are required to purchase basic coverage through the corporation, though in 1976 the government began allowing private insurers to compete in offering additional optional coverage.Eby and other ICBC supporters single out the actions of former Liberal premier Gordon Campbell as marking the beginning of the corporation’s troubles.Campbell required ICBC to keep much higher amounts of backup capital. The resulting stockpile proved irresistible to politicians in 2010 following the global financial meltdown, critics say, when the government began siphoning hundreds of millions of dollars of “excess capital” almost every year.In all, the Liberals withdrew $1.2 billion from the lucrative optional side of ICBC’s business, and also transferred $1.4 billion to offset deficits on the compulsory side providing basic coverage beginning in 2012.“The reason we’re in a bind right now is that there’s no more money left in the optional piggy bank,” said retired civil servant Rick McCandless, who has written extensively on ICBC.“The music has stopped. You can’t play the game anymore. Somebody has to make some hard decisions. And that somebody is government.”Liberal member of the legislature John Yap said the New Democrats are playing politics in trying to lay blame for the problems at ICBC, which he largely attributed to the increasing number of collisions and claims year-over-year along with rising repair costs.The Liberals’ priority was to keep rates low and stable while improving the operations and finances of the corporation through a number of measures, including foregoing the dividends from the optional side of the business as of last year and rolling in a new information technology system that would save the corporation millions, he said.“Government did take action,” Yap said.He said the Liberals understood there were challenges and had ICBC commission a third-party report on the financial situation to make recommendations, which the new government will be responsible to act on.A recent report from Ernst & Young painted a dire picture at the Crown corporation, concluding that rates must increase by 30 per cent by 2019 to cover costs. A separate forecast released last November by ICBC indicated rates would need to increase by 42 per cent over the next five years to make up for expenses.McCandless pointed to a footnote in the ICBC report that an additional $1.5 billion is required in “capital from other sources” between 2017 and 2020. He calculated the cumulative rate hike to be closer to 117 per cent over four years.ICBC says an increase in accidents as well as both the number and cost of claims are contributing to its financial predicament. But experts say the insurance corporation has been slow to respond to the changes, which apply equally to other jurisdictions outside of B.C.Greg Basham, senior vice-president of ICBC in the late 1990s, said the Liberals’ decision to cut funding for the corporation’s road safety program undermined efforts to curb that trend.ICBC operates a full-tort legal system, as opposed to the no-fault model used in some other provinces that saves on pay-outs and legal fees by preventing victims from litigating for better compensation.It becomes a question of affordability versus treating victims fairly, McCandless said.“How much fairness can you afford?” he added.While the Liberal government withdrew money from ICBC coffers, they were not the only government to artificially depress rates, McCandless said. The NDP in the late 1990s also “started playing games” with the Crown corporation when they introduced a five-year rate freeze.While advocates tend to see ICBC as a good program gone awry, some free-enterprise proponents view it as fundamentally flawed, arguing it worked as well as it did for so long not because of the system but in spite of it.Scott Hennig of the Canadian Taxpayers’ Federation said consumers suffer because of B.C.’s mandatory basic insurance model, which he described as a monopoly that is vulnerable to political interference.“Private or public, monopolies are bad for consumers,” Hennig said.“Politicians can’t help themselves,” he added, describing ICBC as a cash cow. “When you’ve created a system that’s susceptible to it, it doesn’t matter what party is in power.”B.C. drivers pay some of the highest auto insurance rates in the country while receiving some of the lowest pay-outs, said Aaron Sutherland of the Insurance Bureau of Canada.Sutherland said a 2017 review of auto insurance in Ontario listed the average premium cost in B.C. in 2015 as $1,316, second only to Ontario. The report also said the average cost of an injury claim was $42,084, second last in the country ahead of only Nova Scotia.“If we want to have a real discussion and truly fix the auto insurance system, competition needs to be included,” Sutherland said.The NDP government has not released a comprehensive plan for addressing the crisis at ICBC, though Eby described the situation as urgent.The government faces an Aug. 31 deadline to submit filings ahead of ICBC’s rate-setting hearing at the B.C. Utilities Commission.— Follow @gwomand on Twitter
DH Corp. defends accounting practices, calls hedge fund report ‘misleading’ by Alexandra Posadzki, The Canadian Press Posted Oct 27, 2015 11:43 am MDT Last Updated Oct 27, 2015 at 2:40 pm MDT AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email TORONTO – Financial technology company DH Corp. is defending itself against what it calls a “false and misleading” report from a hedge fund that casts doubts on its growth prospects and past performance.The report by Lawton Park Capital Management alleges the Toronto-based company (TSX:DH) is making “desperate” acquisitions and playing “accounting games” in order to obscure its dwindling performance.The report takes issue with DH’s approach to accounting for its revenue and alleges that “numerous” insiders of the company have been selling their shares, which could indicate trouble brewing that the public isn’t aware of.DH released its quarterly earnings report earlier than planned and bumped up its conference call to discuss its results, originally slated for Wednesday, to Tuesday morning in order to address the allegations.The company, formerly known as Davis + Henderson in the days when it was primarily known for printing and supplying paper cheques for Canada’s big banks, says investors should rely on its public filings and not the analyst report.DH’s chief financial officer Karen Weaver said the company follows “disciplined accounting practices” that are in accordance with the International Financial Reporting Standards.Chief executive Gerrard Schmid called reports that company insiders have been dumping their shares “categorically untrue” and “highly misleading,” noting that while there have been a number of “individual, one-off transactions,” on a net basis insiders have accumulated more shares over the past three years.Schmid said that during the second quarter of 2015, company insiders — including board members and senior management — held roughly 580,000 shares, up from 215,000 shares in the second quarter of 2012.Lawton Park Management declined comment.In their earnings news release issued Tuesday, DH called Lawton Park’s allegations “self-interested attacks” and said it believes the hedge fund in question is engaged in short-selling its shares — an investment technique that depends on a stock value falling rather than rising.“We are deeply disturbed by the false and misleading allegations contained in the report, and intend to vigorously defend ourselves and D+H against these assertions,” Schmid said during the company’s third quarter earnings call.“D+H recommends that investors review its public filings as providing accurate information regarding the company and its performance, and not to rely on this report which contains misrepresentations and which may have purposes other than giving investors accurate information and impartial analysis.”The hedge fund report also alleges that a U.S. regulatory order imposed on Fundtech — a payment services firm that DH acquired for $1.25 billion earlier this year — has been hurting the segment’s ability to grow its business and retain existing customers.However, DH says it was aware of the regulatory order, which requires Fundtech to beef up its risk-management practices, before it made the acquisition and has been working to remedy the issue.“Our view is that the consent order has had no material impact on our ability to grow the Fundtech business, both within the United States and abroad,” said Schmid.Faced with the gradual decline of cheque usage, DH has been working over the past decade to transform itself into a technology business serving financial institutions, with cheques now comprising only 20 per cent of its revenue.The company reported net income of $30.7 million for the three months ended Sept. 30, down from $32.2 million a year ago, while adjusted net income was $65.2 million, up from $50.6 million.DH says revenue for the quarter was $415.1 million, up from $289.2 million during the same period last year. Adjusted revenue was $418.8 million, up from $292 million a year ago.The Fundtech acquisition, which has been rebranded as DH’s global transaction banking solution business, comprised a significant portion of the revenue increase. DH says the segment accounted for $87.9 million of its revenue in the third quarter, or $90.4 million on an adjusted based, compared with none last year.Follow @alexposadzki on Twitter.