Aviva Canada’s approach to navigating the economic recession

Whether or not an economic recovery in Canada is just around the corner — speculation of which is fuelled by the developments in researching a COVID-19 vaccine — Aviva Canada is committed to sticking to its three-year financial targets established last year.

“Our view at the moment is that late last year, we put out some three-year targets and tried to work within that,” Aviva Canada CEO Jason Storah commented Thursday. “We are still sticking to those three-year targets, but we are very aware of the fact that there is significant volatility in the short to medium term.”

Storah spoke about the impact of the economic fallout of the pandemic in an interview with Canadian Underwriter about the company’s half-year results.

Definitely, there is volatility in Canada’s commercial marketplace. Aviva plc, the parent company of Aviva Canada, noted in its half-year annual earnings results that, around the world, government-ordered closures to contain the spread of the virus did affect the company’s bottom line.

“COVID-19 had a dampening effect on premium volumes as government-enforced restrictions [globally] reduced demand, and this may continue depending on the economic effects from COVID-19,” Aviva plc announced in a statement about its half-year earnings Thursday. “However, we are under no illusions that the COVID-19 challenges are behind us. We are all still living with COVID-19 and a return to normality is likely to remain some way off.

“The recent global economic downturn is unprecedented and the fiscal response by governments around the world has been extraordinary. As protective measures are eased and government support withdrawn, economic headwinds and capital market volatility are likely to persist.”

In Canada, there were a record number of companies granted bankruptcy protection from March to July 2020 — 27 in total following the outbreak of the novel coronavirus pandemic. And as CBC has reported, the numbers may be suppressed because the federal government still has a number of financial relief measures in place for companies.

While Storah said Aviva Canada is staying the course on meeting a three-year target, he is aware that the path to get there may not be a straight one, depending on what happens with the Canadian economy.

“We are being quite conservative around, ‘What is the upside and what is the downside of achieving those targets?’” Storah told Canadian Underwriter. “We’re not racing out to change our outlook, because things do change. They are still quite fluid in a volatile environment, so we are taking a long-term view. We are looking to where we can be confident about being [a major player in the Canadian market]. We’re not rushing based on tomorrow’s news, or the next day’s headlines on employment numbers, but just trying to take a balanced view through it.”

Storah said he doesn’t know what to think about the chances of an economic recovery following a vaccine for COVID-19, based on what he can see for himself in the streets every day.

“About the economy, I am really intrigued,” he said. “Some analysts will tell you that people think a recovery, or the chance of a recovery, [will happen] when there is a virus vaccine out there. I really don’t know. I drive Queen Street and King Street in Toronto and I see all of the businesses that have been boarded up. Parts of Toronto look desolate. I’m sure that’s repeated in many cities across the country. That worries me.

“It worries me when you think about how people are going to deal with people coming off government assistance programs. I was talking last night to someone who was telling me that he just got a notice from the CRA telling him that he will be paying tax on some of the [government relief] money that he received. If you are directly affected, it really is a pretty dire outlook.”

That said, parts of Canada’s economy are still highly functioning, or they show great promise, even if the financial results have been temporarily suppressed by the pandemic. “There just seems to be a great divergence of companies and individuals and businesses that are well-positioned, but are unfortunately are feeling the pressure and the challenges right now,” said Storah. “I don’t know how it’s going to play out.”

Storah pointed out that as each day goes by, insurance companies will have gathered more and better information in order to be able to make assessments on how to navigate through the financial crisis wrought by the pandemic.

“We have more jobs information, we have more receipts and business and revenue information, and we know how different sectors of the economy are doing, and hopefully that will help [navigate] through all of this,” he said.