Desjardins posts $477 million in surplus earnings for the second quarter of 2022 and surpasses $400 billion in assets

LÉVIS, QC, Aug. 11, 2022 /CNW/ - For the second quarter ended June 30, 2022, Desjardins Group, North America's leading financial cooperative group, recorded surplus earnings before member dividends of $477 million, down $458 million from the same quarter of 2021. This decrease in surplus earnings was mainly due to a rise in the cost of claims in the Property and Casualty Insurance segment. This primarily reflected an increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic. In addition, the second quarter of 2022 was marked by a rare weather phenomenon known as a derecho, which affected Quebec and Ontario, and by a major event (windstorm and flooding) that had no equivalent in the second quarter of 2021. Surplus earnings also fell as a result of greater investment in particular in projects provided for in the strategic orientations, especially in relation to security and the digital shift, and to a rise in spending on personnel to support the growth of Desjardins Group's activities. This reduction in surplus earnings was partially offset by increase in net interest income and other operating income⁽¹⁾.

AN ACTIVE AND INVOLVED GROUP. Several innovative solutions were implemented to meet the needs of members and clients. Desjardins was honoured at the OCTAS Awards for best technological achievements, including the development of a virtual assistant using natural language processing in Quebec French. (CNW Group/Desjardins Group)

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(1) For more information on non-GAAP financial measures and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.

For the second quarter of 2022, the provision for member dividends was $109 million, up $19 million or 21.1% from the same period in 2021. Sponsorships, donations and scholarships come to $36 million, including $12 million from caisse Community Development Funds. This amounted to a total of $145 million returned to members and the community⁽¹⁾, up $35 million or 31.8% from the same period in 2021.

"This quarter was marked by a sustained increase in our operating income⁽¹⁾, as well as growth in our business sectors and in our assets, which have surpassed the $400 billion mark for the first time," said Desjardins Group President and CEO Guy Cormier, "Desjardins has a strong financial foundation that allows us to invest massively in strategic projects such as security and our digital shift. It also lets us develop innovative solutions to meet the needs of our members and clients, like our virtual assistant using natural language processing in Quebec French, which received the public's favourite award at the Octas 2022".

For the first half of fiscal 2022, Desjardins Group recorded surplus earnings before member dividends of $996 million, down $737 million from the same period of 2021. This decrease in surplus earnings was mainly due to a rise in the cost of claims in the Property and Casualty Insurance segment. This primarily reflected an increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic. This decrease in surplus earnings was mainly due to a rise in the cost of claims in the Property and Casualty Insurance segment. This primarily reflected an increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic. In addition, the first half of 2022 was marked by a rare weather phenomenon known as a derecho, which affected Quebec and Ontario, and by two major events (windstorm and flooding) that had no equivalent in the first half of 2021. Surplus earnings also fell as a result of greater investment in particular in project provided for the strategic orientations, especially in relation to security and the digital shift, and to a rise in spending on personnel to support the growth of Desjardins Group's activities. This reduction in surplus earnings was partially offset by an increase in net interest income and other operating income⁽¹⁾.

Supporting a green economic and social recovery

Desjardins is contributing to regional development and the economy through the GoodSpark Fund, which has set aside $250 million to stimulate social and economic activity in communities, and the Momentum Fund to support businesses.

Since the creation of the GoodSpark Fund, Desjardins has committed a total of $150 million to 689 projects. Meanwhile, the Momentum Fund has also supported 1,314 businesses for a total outlay of more than $8 million.

Desjardins is also working to help members and clients transition to a low-carbon economy. In May 2022, it announced the addition of 10 new fossil fuel-free responsible investment funds to its range of Desjardins  SocieTerra Funds. Desjardins now has nearly 30 SocieTerra products.

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(1) For more information on non-GAAP financial measures and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.

Giving back to the community

Desjardins has been more involved than ever in people's lives and continues to support initiatives on diversity, inclusion, cooperation, financial literacy and healthy lifestyle habits. Here are some ways that Desjardins has been making a positive difference in people's lives since the second quarter of 2022:

• Support for the Immigration Support Centre, which assists more than 2,000 temporary foreign employees with their immigration processes from the time when they are hired until they obtain Canadian citizenship.
• First economic web conference for the general public with Desjardins's Chief Economist (in French only) on economic and financial forecasts to help investors make more informed decisions.
• Participation in the Vehicube School Tour to get elementary school students moving, an initiative of Le Grand Défi Pierre Lavoie. The Vehicube bus has visited more than 1,200 schools.
• For the 9th year in a row, Desjardins is on Corporate Knights magazine's list of the Best 50 Corporate Citizens in Canada. This award recognizes Desjardins Group's commitment to reducing energy and water consumption, its efforts to increase diversity in management and its excellent pension plan.

Innovating

Desjardins is constantly innovating to meet the needs of its members and clients. Here are just a few examples of innovations for which Desjardins was recognized in the second quarter of 2022.

• Desjardins won awards at the 2022 OCTAS (in French only), organized by Réseau Action TI:
  – The People's Choice award for the virtual assistant using natural language processing in Quebec French;
  – The Jury's Choice award for the quality of the French used in all 3 technology solutions presented; and – The business solution award for its digital mortgage pre-approval platform.
• Once again, Desjardins Group's Economic Studies was ranked #1 worldwide for the accuracy of its economic and financial forecasts in Canada, according to international firm Focus Economics Economic Studies also took first place worldwide in this category in 2017 and 2018.

Financial highlights

Comparison of second quarter 2022 with second quarter 2021:

• Surplus earnings before member dividends of $477 million, down $458 million or 49.0%.
• Operating income⁽¹⁾ of $5,132 million, up $263 million or 5.4%:
  – Net interest income of $1,596 million, up $144 million or 9.9% due, in particular, to growth in average residential mortgages outstanding and loans to businesses as well as to higher interest rates.
  – Net premiums of $2,633 million, up $46 million or 1.8%, mainly due to business growth.
  – Other operating income⁽¹⁾ of $903 million, up $73 million or 8.8%, due in particular to an increase in business volumes from payment activities at Desjardins Card Services.
• The increase in the cost of claims, mainly in automobile and property insurance, primarily reflects the increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic. In addition, the second quarter of 2022 was marked by a rare weather phenomenon known as a derecho, which affected Quebec and Ontario, and by a major event that had no equivalent in the second quarter of 2021.
• Non-interest expenses of $2,712 million, up $335 million:
  – Greater investment to continue strategic projects, especially in relation to security and the digital shift;
  – An increase in personnel, technology and marketing expenses to support business growth and enhance the services offered to members and clients.
• $145 million returned to members and the community⁴⁽¹⁾, up $35 million or 31.8%.

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(1) For more information on non-GAAP financial measures and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.⁴ 

Other highlights:

• Tier 1A capital ratio⁽¹⁾ of 19.5%, compared to 21.1% as at December 31, 2021.
• Total capital ratio⁽¹⁾ of 20.4%, compared to 22.1% as at December 31, 2021.
• Total assets grew 1.7% since December 31, 2021, to $404.1 billion as at June 30, 2022.
• Issue, of $1.0 billion in Canadian medium-term notes subject to the bail-in regime on May 19, 2022.

Comparison of first half 2022 with first half 2021:

• Surplus earnings before member dividends of $996 million, down $737 million or 42.5%.
• Operating income⁽²⁾ of $10,182 million, up $530 million or 5.5%.
• – Net interest income of $3,102 million, up $247 million or 8.7%.
• – Net premiums of $5,283 million, up $111 million, mainly due to business growth.
• – Other operating income⁽²⁾ of $1,797 million, up $172 million or 10.6%, due to an increase in business
• volumes from payment activities at Desjardins Card Services.
• The increase in the cost of claims, mainly in automobile and property insurance, primarily reflects the increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic. In addition, the first half of 2022 was marked by a rare weather phenomenon known as a derecho, which affected Quebec and Ontario, and by 2 major events that had no equivalent in the first half of 2021.
• Non-interest expenses of $5,240 million, up $698 million:
• – Greater investment to continue strategic projects, especially in relation to security and the digital shift;
• – An increase in personnel, technology and marketing expenses to support the growth of activities and to
• enhance the services offered to members and clients.
• $263 million returned to members and the community⁽²⁾, up $51 million or 24.1% from the same period in 2021.

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(1) In accordance with the guideline on Capital Adequacy Guideline - Financial services cooperatives issued by the AMF and taking into account the applicable relief measures introduced by the AMF in response to the COVID-19 pandemic.

(2) For more information on non-GAAP financial measures and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.

FINANCIAL HIGHLIGHTS

(in millions of dollars and as a percentage)	As at and for the three-month periods ended			As at and for the six-month periods ended
	June 30, 2022	March 31, 2022	June 30, 2021	June 30, 2022	June 30, 2021
Results
Operating income^(1)	$         5,132	$         5,050	$         4,869	$        10,182	$         9,652
Provision for (recovery of) credit losses	66	6	(3)	72	1
Non-interest expense	2,712	2,528	2,377	5,240	4,542
Surplus earnings before member dividends^(2)	477	519	935	996	1,733
Contribution to combined surplus earnings by business segment^(3)
Personal and Business Services	$            290	$            315	$            397	$            605	$            811
Wealth Management and Life and Health Insurance	173	137	235	310	360
Property and Casualty Insurance	104	147	330	251	578
Other	(90)	(80)	(27)	(170)	(16)
	$            477	$            519	$            935	$            996	$         1,733
Return to members and the community^(1) Member dividends	109	102	90	$            211	$            180
Sponsorships, donations and scholarships^(4)	36	16	20	52	32
	$            145	$            118	$            110	$            263	$            212
Indicators
Net interest margin^(1)	2.17 %	2.09 %	2.09 %	2.13 %	2.09 %
Return on equity^(1)	5.8	6.2	11.5	6.0	10.9
Productivity index^(1)	79.1	78.5	66.3	78.8	66.5
Credit loss provisioning rate^(1)	0.11	0.01	(0.01)	0.06	0.00
Gross credit-impaired loans/gross loans and acceptances^(1)	0.44	0.46	0.55	0.44	0.55
Liquidity Coverage Ratio^(5)	135	134	151	135	151
Net Stable Funding Ratio^(5)	126	129	134	126	134
On-balance sheet and off-balance sheet
Assets	$      404,070	$        397,136	$       389,278	$        404,070	$        389,278
Net loans and acceptances	242,113	233,614	222,023	242,113	222,023
Deposits	252,671	242,692	238,670	252,671	238,670
Equity	32,794	33,184	32,719	32,794	32,719
Assets under administration^(1)	426,393	466,512	485,806	426,393	485,806
Assets under management^(1)	75,604	85,511	85,360	75,604	85,360
Capital measures
Tier 1A capital ratio^(6)	19.5 %	20.6 %	21.4 %	19.5 %	21.4 %
Tier 1 capital ratio^(6)	19.5	20.6	21.4	19.5	21.4 %
Total capital ratio^(6)	20.4	21.5	22.6	20.4	22.6 %
Leverage ratio^(6)	7.7	7.9	8.5	7.7	8.5 %
Risk-weighted assets^(6)	142,774	135,747	130,514	142,774	130,514
TLAC ratio^(7)	25.3 %	25.8 %	26.7 %	25.3 %	26.7 %
TLAC leverage ratio^(7)	9.7	9.7	10.4	9.7	10.4
Other information Number of employees	57,744	55,740	52,056	57,744	52,056

(1)	For more information on non-GAAP financial measures, and ratios and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.
(2)	The breakdown by line item is presented in the Statement of Income in the Interim Combined Financial Statements.
(3)	The breakdown by line item is presented in Note 11, "Segmented information", to the Interim Combined Financial Statements.
(4)	Including $12 million from the caisses' Community Development Fund ($6 million for the first quarter of 2022, $10 million for the second quarter of 2021, $18 million for the first half of 2022, and $15 million for the first half of 2021).
(5)	In accordance with the Liquidity Adequacy Guideline issued by the Autorité des marchés financiers (AMF).
(6)	In accordance with the guideline Capital Adequacy Guideline - Financial services cooperatives (in French only) issued by the AMF and taking into account the applicable relief measures introduced by the AMF in response to the COVID-19 pandemic.
(7)	Under the Total Loss Absorbing Capacity Guideline ("TLAC Guideline") issued by the AMF and based on risk-weighted assets and exposures for purposes of the leverage ratio at the level of the resolution group, which is deemed to be Desjardins Group, excluding Caisse Desjardins Ontario Credit Union Inc.

Assets of $404.1 billion as at June 30, 2022

As at June 30, 2022, Desjardins Group's total assets stood at $404.1 billion, up $7.0 billion, or 1.8%, since December 31, 2021.

Desjardins Group's outstanding loan portfolio, including acceptances and net of the allowance for credit losses, increased by $11.3 billion, or 4.9%. This growth was due to residential mortgages as well as business and government loans.

Desjardins Group's cash and deposits with financial institutions were down $4.0 billion, or 24.4%, and securities, including securities borrowed or purchased under reverse repurchase agreements, decreased by $1.6 billion, or 1.5%.

Very strong capital base

Desjardins Group maintains very good capitalization levels in accordance with Basel III rules. As at June 30, 2022, its Tier 1A and total capital ratios stood at 19.5% and 20.4%, respectively, compared to 21.1% and 22.1%, respectively, as at December 31, 2021. As at June 30, 2022, the Tier 1A capital ratio was down 161 basis points compared to December 31, 2021, mainly due to the decrease in the value of the bond portfolio because of higher interest rates and to the increase in risk-weighted assets as a result of growth in operations.

Analysis of business segment results

PERSONAL AND BUSINESS SERVICES SEGMENT

Results for the second quarter

For the second quarter of 2022, surplus earnings before member dividends were $290 million, down $107 million from the same period in 2021.This decrease was due to growth in non-interest expense, mainly as a result of greater investment in strategic projects, especially in relation to security and the digital shift, and a rise in spending on personnel to support business growth and enhance the services offered to members and clients. In addition, the decrease in surplus earnings resulted from a higher provision for credit losses, arising mainly from the reversal of provisions carried out in the second quarter of 2021. This reduction was partially offset by an increase in net interest income and other operating income⁽¹⁾.

WEALTH MANAGEMENT AND LIFE AND HEALTH INSURANCE SEGMENT
Results for the second quarter

For the second quarter of 2022, the segment posted $173 million in net surplus earnings, down $62 million from the same period of 2021. This decrease was mainly due to changes to actuarial assumptions related to the potential risk of default that favourably affected the comparative quarter of 2021. This decline was partially offset by the favourable impact of rising interest rates on actuarial liabilities in the second quarter of 2022, and by a generally more favourable experience than that in the comparative quarter, essentially in group insurance.

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(1) For more information on non-GAAP financial measures and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.

PROPERTY AND CASUALTY INSURANCE SEGMENT

Results for the second quarter

For the second quarter of 2022, the segment posted $104 million in net surplus earnings, down $226 million from the second quarter of 2021. The decrease was essentially due to a higher loss experience in automobile and property insurance, which primarily reflected an increase in road traffic, which had fallen considerably in the comparative period as a result of the pandemic. In addition, the second quarter of 2022 was marked by a rare weather phenomenon known as a derecho, or windstorm, which affected Quebec and Ontario, and a major event (windstorm and flooding in Quebec), which had no equivalent in the comparable second quarter of 2021. The decrease in surplus earnings was offset by an increase in investment income⁽¹⁾, excluding the change in the fair value of matched bonds.

OTHER CATEGORY

Results for the second quarter

The net deficit for the second quarter of 2022 was $90 million, compared to a net deficit of $27 million for the same period in 2021. The deficit was due to market rate fluctuations and changes in hedging positions for matching activities, which had an unfavourable overall impact on net interest income and investment income⁽¹⁾. The Other category also includes investments in the continued implementation of Desjardins-wide strategic projects, especially those aimed at creating innovative technological platforms, protecting privacy, ensuring security and improving business processes.

More detailed financial information can be found in Desjardins Group's interim Management's Discussion and  Analysis (MD&A) for the second quarter of 2022, available on the  Desjardins.com website or on the SEDAR  website at  www.sedar.com (under the Fédération des caisses Desjardins du Québec profile). 

About Desjardins Group

Desjardins Group is the largest cooperative financial group in North America and the fifth largest cooperative financial group in the world, with assets of $404 billion. It was named one of Canada's Top 100 Employers in 2022 by MediaCorp. To meet the diverse needs of its members and clients, Desjardins offers a full range of products and services to individuals and businesses through its extensive distribution network, online platforms and subsidiaries across Canada. Ranked among the world's strongest banks according to The Banker magazine, Desjardins has some of the highest capital ratios and credit ratings in the industry.

Caution concerning forward-looking statements

Desjardins Group's public communications often include oral or written forward-looking statements, as defined by applicable securities legislation, particularly in Québec, Canada and the United States. Certain statements made in this press release may be forward-looking statements that may be incorporated into other filings with Canadian regulators or any other communications.

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(1) For more information on non-GAAP financial measures and supplemental financial measures, see "Non-GAAP financial measures and other financial measures" on pages 10 to 12.

Forward-looking statements include, but are not limited to, comments about Desjardins Group's objectives regarding financial performance, priorities, operations, the review of economic conditions and financial markets, the outlook for the Québec, Canadian, U.S. and global economies, and the impact of the COVID-19 pandemic on its operations, its results and its financial position, as well as on economic conditions and financial markets. Such forward-looking statements are typically identified by words or phrases such as "target", "objective", "believe", "expect", "count on", "anticipate", "intend", "estimate", "plan", "forecast", "aim", "propose", "should" and "may", words and expressions of similar import, and future and conditional verbs.

By their very nature, such statements involve assumptions, uncertainties and inherent risks, both general and specific. Desjardins Group cautions readers against placing undue reliance on forward-looking statements because a number of factors, many of which are beyond Desjardins Group's control and the effects of which can be difficult to predict, could influence, individually or collectively, the accuracy of the assumptions, predictions, forecasts or other forward-looking statements in this MD&A. It is also possible that these assumptions, predictions, forecasts or other forward-looking statements as well as Desjardins Group's objectives and priorities may not materialize or may prove to be inaccurate and that actual results differ. Furthermore, the uncertainty created by the COVID-19 pandemic has greatly increased this risk by adding to the difficulty of making assumptions, predictions, forecasts or other forward-looking statements compared to previous periods.

The factors that may affect the accuracy of the forward-looking statements in this press release include those discussed in the "Risk management" section of Desjardins Group's 2021 Annual Report and MD&A for the second quarter of 2022, as well as under "COVID-19 pandemic" in Section 1.3, "Significant events" of Desjardins Group's 2021 annual MD&A and, in particular, credit, market, liquidity, operational, insurance, strategic and reputational risk, the risk related to pension plans, environmental or social risk, and legal and regulatory risk.

Such factors also include those related to the COVID-19 pandemic, the war in Ukraine, security breaches, government, corporate and household indebtedness, technological advancements and regulatory developments, interest rate fluctuations, climate change, and geopolitical uncertainty. Furthermore, there are factors related to general economic and business conditions in regions in which Desjardins Group operates; monetary policies; the critical accounting estimates and accounting standards applied by Desjardins Group; new products and services to maintain or increase Desjardins Group's market share; geographic concentration; acquisitions and joint arrangements; credit ratings and reliance on third parties. Other factors include interest rate benchmark reform, changes in tax laws, unexpected changes in consumer spending and saving habits, talent recruitment and retention for key positions, the ability to implement Desjardins Group's disaster recovery plan within a reasonable time, the potential impact of international conflicts on operations, public health crises, such as pandemics and epidemics, or any other similar disease affecting the local, national or global economy, as well as Desjardins Group's ability to anticipate and properly manage the risks associated with these factors despite a disciplined risk management environment. Additional information about these factors is found in the "Risk management" section of Desjardins Group's 2021 annual MD&A and its MD&A for the second quarter of 2022, and under "COVID-19 pandemic" in Section 1.3, "Significant events", of Desjardins Group's 2021 annual MD&A.

It is important to note that the above list of factors that could influence future results is not exhaustive. Other factors could have an adverse effect on Desjardins Group's results. Additional information about these and other factors is found in the "Risk management" section of Desjardins Group's 2021 annual MD&A and its MD&A for the second quarter of 2022.

Although Desjardins Group believes that the expectations expressed in these forward-looking statements are reasonable and founded on valid bases, it cannot guarantee that these expectations will materialize or prove to be correct. Desjardins Group cautions readers against placing undue reliance on forward-looking statements when making decisions, given that actual results, conditions, actions or future events could differ significantly from the targets, expectations, estimates or intentions advanced in them, explicitly or implicitly. Readers who rely on these forward-looking statements must carefully consider these risk factors and other uncertainties and potential events, including the uncertainty inherent in forward-looking statements.

The significant economic assumptions underlying the forward-looking statements in this document are described in the "Economic environment and outlook" section of the Group's 2021 annual MD&A and its MD&A for the second quarter of 2022. Readers are cautioned to consider the foregoing factors when reading this section. When relying on forward-looking statements to make decisions about Desjardins Group, they should carefully consider these factors, as well as other uncertainties and contingencies. To develop our economic growth forecasts in general, and for the financial services sector in particular, we mainly use historical economic data provided by recognized and reliable organizations, empirical and theoretical relationships between economic and financial variables, expert judgment and identified upside and downside risks for the domestic and global economies. Given how the COVID-19 pandemic and the war in Ukraine have developed and their impact on the global economy and financial market conditions, as well as on Desjardins Group's business operations, financial results and financial position, there is greater uncertainty associated with our economic assumptions compared with periods prior to the onset of these events, as these assumptions are based on uncertain future developments and it is difficult to predict the extent of the long-term effects of these events.

Any forward-looking statements contained in this report represent the views of management only as at the date hereof, and are presented for the purpose of assisting readers in understanding and interpreting Desjardins Group's financial position as at the dates indicated or its results for the periods then ended, as well as its strategic priorities and objectives as considered as at the date hereof. These forward-looking statements may not be appropriate for other purposes. Desjardins Group does not undertake to update any verbal or written forward-looking statements that may be made from time to time by or on behalf of Desjardins Group, except as required under applicable securities legislation.

Basis of presentation of financial information

The financial information in this document comes primarily from the Annual and Interim Combined Financial Statements. Those statements have been prepared by Desjardins Group's management in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and the accounting requirements of the Autorité des marchés financiers in Québec, which do not differ from IFRS. IFRS represent Canadian generally accepted accounting principles (GAAP). The Interim Combined Financial Statements of Desjardins Group have been prepared in accordance with International Accounting Standard (IAS) 34, "Interim Financial Reporting". All the accounting policies have been applied as described in Note 2, "Significant accounting policies", to the Annual Combined Financial Statements. Unless otherwise indicated, all amounts are presented in Canadian dollars ($) and are primarily from Desjardins Group's Annual and Interim Combined Financial Statements.

Non-GAAP financial measures and other financial measures

To measure its performance, Desjardins Group uses different GAAP (IFRS) financial measures and various other financial measures, some of which are Non-GAAP financial measures. Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure (Regulation 52-112) provides guidance to issuers disclosing specified financial measures, including those used by Desjardins Group below:

• Non-GAAP financial measures
• Non-GAAP ratios
• Supplementary financial measures

Non-GAAP financial measures

Non-GAAP financial measures used by Desjardins Group, and which do not have a standardized definition, are not directly comparable to similar measures used by other companies, and may not be directly comparable to any GAAP measures. Investors, among others, may find these non-GAAP financial measures useful in analyzing Desjardins Group's overall performance or financial position.

Income 

Operating income

The concept of operating income is used to analyze financial results. This concept allows for better structuring of financial data and makes it easier to compare operating activities from one period to the next by excluding the volatility of results specific to investments, particularly regarding the extent of life and health insurance and Property and Casualty (P&C) insurance operations, for which a very large proportion of investments is recognized at fair value through profit or loss. The analysis therefore breaks down Desjardins Group's income into two parts, namely operating income and investment income, which make up total income. This measure is not directly comparable to similar measures used by other companies.

Operating income includes net interest income, generated mainly by the Personal and Business Services segment and the Other category, net premiums and other operating income such as deposit and payment service charges, lending fees and credit card service revenues, income from brokerage and investment fund services, management and custodial service fees, foreign exchange income as well as other income. These items, taken individually, correspond to those presented in the Combined Financial Statements.

Investment income

Investment income includes net investment income on securities classified and designated as being at fair value through profit or loss, net investment income on securities classified as being at fair value through other comprehensive income, and net investment income on securities measured at amortized cost and other investment income, which are included under "Net investment income" in the Combined Statements of Income. Investment income also includes the overlay approach adjustment for insurance operations financial assets. The life and health insurance and P&C insurance subsidiaries' matching activities, which include changes in fair value, gains and losses on disposals and interest and dividend income on securities, are presented with investment income, given that these assets back insurance liabilities, which are recognized under expenses related to claims, benefits, annuities and changes in insurance contract liabilities in the Combined Financial Statements. In addition, this investment income includes changes in the fair value of investments for the Personal and Business Services segment, recognized at fair value through profit or loss.

The following table shows the correspondence of total income between the Press release and the Combined Financial Statements.

	For the three-month periods ended			For the six-month periods ended
(in millions of dollars)	June 30, 2022	March 31, 2022	June 30, 2021	June 30, 2022	June 30, 2021
Presentation of income in the Combined Financial Statements
Net interest income	$        1,596	$        1,506	$        1,452	$        3,102	$        2,855
Net premiums	2,633	2,650	2,587	5,283	5,172
Other income
Deposit and payment service charges	114	104	105	218	204
Lending fees and credit card service revenues	225	227	182	452	369
Brokerage and investment fund services	251	268	285	519	558
Management and custodial service fees	200	193	177	393	346
Net investment income (loss)^(1)	(2,209)	(2,336)	1,055	(4,545)	(547)
Overlay approach adjustment for insurance operations financial assets	371	153	(146)	524	(292)
Foreign exchange income	27	31	28	58	58
Other	86	71	53	157	90
Total income^(2)	$        3,294	$        2,867	$        5,778	$        6,161	$        8,813
Presentation of income in the Press release
Net interest income	$        1,596	$        1,506	$        1,452	$        3,102	$        2,855
Net premiums	2,633	2,650	2,587	5,283	5,172
Other operating income
Deposit and payment service charges	114	104	105	218	204
Lending fees and credit card service revenues	225	227	182	452	369
Brokerage and investment fund services	251	268	285	519	558
Management and custodial service fees	200	193	177	393	346
Foreign exchange income	27	31	28	58	58
Other	86	71	53	157	90
Operating income	5,132	5,050	4,869	10,182	9,652
Investment income (loss)
Net investment income (loss)^(1)	(2,209)	(2,336)	1,055	(4,545)	(547)
Overlay approach adjustment for insurance operations financial assets	371	153	(146)	524	(292)
Investment income (loss)	(1,838)	(2,183)	909	(4,021)	(839)
Total income^(2)	$        3,294	$        2,867	$        5,778	$        6,161	$        8,813

(1)	The breakdown of this line item is presented in Note 10, "Net interest income and net investment income (loss)", to the Interim Combined Financial Statements.
(2)	To take into account the matching activities of the life and health insurance and property and casualty insurance subsidiaries, the change in this item must be analyzed together with the item "Claims, benefits, annuities and changes in insurance contract liabilities" in the Combined Statements of Income.

Non-GAAP ratios

Non-GAAP ratios that are used by Desjardins Group and do not have a standardized definition, are not directly comparable to similar measures used by other companies, and may not be directly comparable to any GAAP measures. Regulation 52-112 states, among other things, that any ratio that has at least one non-GAAP financial measure meets the definition of a non-GAAP ratio. Non-GAAP financial measures can be useful to investors in analyzing Desjardins Group's financial position or performance.

Additional information on specified financial measures is incorporated by reference. It can be found in the "Non-GAAP financial measures and other financial measures" section of the MD&A for Desjardins Group's second quarter of 2022 on pages 7 to 10 . The MD&A is available on the SEDAR website at www.sedar.com (under the Fédération des caisses Desjardins du Québec profile).

Supplementary financial measures

In accordance with Regulation 52-112, supplementary financial measures are used to show historical or expected future financial performance, financial position or cash flow. In addition, these measures are not disclosed in the financial statements. Desjardins Group uses certain supplementary financial measures, and their composition is presented in the Glossary on pages 57 to 64 of the MD&A for Desjardins Group's second quarter of 2022.

SOURCE Desjardins Group

For further information (media inquiries only): Chantal Corbeil, Public Relations, 514 281-7229 or 1 866 866-7000, ext. 5557229, [email protected]; Alain Leprohon, Executive Vice-President and Chief Financial Officer of Desjardins Group