Olympia Financial Group Inc. Annual Report 2019

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FY2019 Annual Report · Olympia Financial Group Inc.

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ANNUAL REPORT

20
19

WITH US
IT’S

PERSONAL

2019 Annual Report | Olympia Financial Group Inc.

TABLE OF CONTENTS

03. President’s Message

05. Management’s Discussion and Analysis

17. Analysis of Results by Segment

35.

36.

Management’s Responsibility for the
Consolidated Financial Statements

Independent Auditor’s Report for the
Consolidated Financial Statements

39. Consolidated Financial Statements

43.

Notes to the Consolidated Financial Statements

73. Corporate Information

2019 Annual Report | Olympia Financial Group Inc.

TOTAL REVENUE BY
DIVISION (%)

2019

2018

• Registered Plans

64.4% 61%
• Private Health Services 17.1% 17%

• Foreign Exchange

16.4% 20%

• Corporate Shareholder

Services

• Exempt Edge

• Other

0.4%

1.5%

0.2%

FINANCIAL HIGHLIGHTS

from continuing operations

Results
the year ended
December 31, 2019, when compared to continuing operations
for the year ended December 31, 2018.

for

• Total net earnings and comprehensive income decreased 6%

to $9.33 million from $9.90 million.

• Total revenue decreased 2% to $49.08 million from $50.03
million mainly due to a decrease in spot trade volume and
transaction sizes in the Foreign Exchange division.

• Service revenue decreased 8% to $35.58 million from $38.60
million mainly due to a decrease in Foreign Exchange spot
trade volume and transaction sizes.

• Other gains and losses, net, amounted to $3.10 million for the
year ended December 31, 2019, compared to ($1.43) million,
mainly due to Olympia Trust’s Foreign Exchange division
recording a $2.23 million unrealized foreign exchange forward
contract gain stemming from an increase in the number and
sizes of forward exchange contracts. This compares to a
($1.38) million foreign exchange forward contract loss in the
prior year. In addition, Olympia also recognized an insurance
settlement of $0.84 million from the cyber incident claim.

• Olympia’s interest revenue and trust income is subject to
fluctuations depending on account balances and changes in
the Canadian prime rate. Interest revenue and trust income
increased 18% to $13.50 million from $11.43 million, mainly
due to the average Canadian prime rate for the year being
higher at 3.95% compared to an average of 3.58% in 2018.

• Direct and administrative expenses (excluding depreciation
and amortization) increased 10% to $37.79 million from
$34.26 million, mainly due to increases in salaries and wages,
enhanced cyber security measures, computer consultant fees
and computer maintenance fees.

• Income tax expense is recognized based on the estimated
average annual income tax rate for the full financial year.
A change in the Alberta corporate tax rate resulted in a rate
of 26.5% being used for the year ended December 31, 2019.
The rate used as at December 31, 2018 was 27%.

• Earnings before income tax decreased 5% to $12.86 million

from $13.59 million.

• Basic and diluted earnings per share attributable

to
shareholders of Olympia decreased 5% to $3.92 per share
from $4.14 per share.

2019 Annual Report | Olympia Financial Group Inc.

PRESIDENT’S MESSAGE

Last year I noted that Olympia’s pre-tax earnings had increased
by 40% and that was after a 20% increase in pre-tax earnings
the previous year. Obviously, we would have all liked that
trend to continue but to have earnings similar to last year is
an achievement. Much of our increase in earnings in the two
previous years was attributable to increases in the prime interest
rate and there were no increases in the prime interest rate this
past year. Shareholders did very well in 2019. The share price at
the beginning of the year was $38.50 and closed out the year at
$51.27. Those shareholders who owned shares at the beginning
of 2019 earned a 7% dividend and had share appreciation
of 33%.

It is always easy to look at the bottom line of an income statement
to compare one year with another. What I find interesting is that
this simple assessment does not usually provide a measure of
financial performance. For example, a simple look at Olympia’s
pre-tax earnings for the year would indicate that we are down
around $700,000. What should be noted is that included in
this $700,000 of lower earnings is $1,800,000 of losses in our
two newest divisions (Corporate and Shareholder Services
and Exempt Edge) This $1,800,000 in losses could easily be
described as investments. You may recall that in 2013 we
sold our Shareholder Services Division for $43 million and just
restarted the Division after the expiry of a 5 year non-compete
contract. We planned to lose a $1,000,000 in 2019 to start the
new division. Exempt Edge was started with the goal of providing
the exempt market (non- prospectus security offerings) with
a digital back office. It now has a substantial presence in that
market and by midyear should have its systems fully integrated
with Olympia Trust Company. When the integration is completed,
Exempt Edge will be in a position to reduce its development
expenditures and move toward profitability.

Olympia started out the year with a fabulous January only to
be hit with a major cyber-attack in early February. Our entire
computer system was frozen. Our efforts to protect us from a
major cyber-attack had failed. What we did learn is that our
employees in our IT department will work 24/7 when the chips
are down. They were fantastic!!! What we did learn is that the
work we had done planning for a cyber-attack helped us reduce
the impact and we also learned that the good insurance work
done by our Finance Department had us adequately covered
for our losses. There was no loss of customer information and
all of our Divisions did a great job in meeting our customer’s
expectations and needs even though they had to learn how to
go back to writing cheques and using paper.

As a consequence of the cyber-attack, the Board of Directors was
joined by Tony Balasubramanian who is an expert in computer
science. Tony is an active Director who meets regularly with IT
senior management. We also hired a specialist well versed in the
newest developments in cyber security to keep our IT systems

as safe as possible. While it is possible that we may be impacted
again, the processes and technology in place will help to greatly
reduce the impact and also provide much earlier detection.
Yes, it costs us more money, but we are already experiencing
benefits from our new system.

Olympia’s Registered Plans Division continues to be the
company’s major income earner. The Division has spent a
considerable amount of money developing a new phone and
computer application that allows customers to perform many
of the tasks that previously required the assistance of one of
our employees. Customers can now open accounts, transfer
funds, make contributions, check their accounts and purchase
exempt securities using their phone or personal computer. Now
that the app has been completed we do expect to see some
administrative cost savings while providing a better service
experience to our customers.

Olympia Benefits continued growing its business in 2019 and
introduced two new products. Telemedicine can now be added
to an employee health plan at a very affordable cost of $8 per
month. This product virtually gives you a doctor in your pocket.
You can call and get medical advice no matter where you are
in the world or what time of day it is. It is a great service for all
of us who carry our cell phones and hate line ups. The second
product is a wellness product. The customer decides the dollar
amount of the benefit and specifically what items are covered
but generally the emphasis is on supporting your employee’s
good health and wellness by having the company pay for green
fees, lift tickets for skiing, gym memberships, etc. Olympia
Benefits manages the program for employers. This Division has
tremendous potential. They have spent years developing their
presence online and are enjoying very good success even with
a very low conversion rate. They are now focusing on improving
the conversion rate.

Foreign Exchange had an excellent year with its earnings for
the year up 50%. While not trying to be too negative about
the prospects of the Division repeating the results in 2020,
Shareholders should be aware that some of these earnings were
attributable to the excitement in the Cannabis and Agriculture
sectors which have significantly slowed down. Earnings in this
Division are very dependent on what is happening in the local
economy. Neil McCullagh, who has been with Olympia Foreign
Exchange for 10 years, became Vice President of this Division
at midyear. Neil is very excited about the opportunity to develop
this Division.

We are very excited to be back in the shareholder services and
corporate trustee business. Much of our old team have rejoined
Olympia and we now have offices in Vancouver and Calgary. As
previously stated, we did plan to lose (invest) around $1,000,000
this first year in business but hope to be profitable on a monthly

2019 Annual Report | Olympia Financial Group Inc.

basis by late 2020. There continues to be a great need for
personal professional service in this area and we are very able
to provide that.

Exempt Edge had a great year. It ended the year by getting
commitments from two major companies. The Division has
exceeded our expectations and once it has completed its
integration with Olympia Trust Company it will provide the
exempt market with a truly revolutionary service. It has done
a great job of getting most of the Independent Exempt Market
Dealers many major issuers as customers. The entire industry
benefits from using Issuers Edge and Dealer’s Edge. If any of
the dealers see a need to change the system, chances are they
would all like the change and instead of having to each have
their own expensive proprietary system, they all save time and
money by using the Exempt Edge System.

In 2019 Craig Skauge, President of Olympia Trust Company and
Exempt Edge was named one of Canada’s Top 40 Under 40.
This prestigious Award has been won by many very recognizable
“who’s who” in the Canadian business community and I, as
his father am very proud of him as well. Craig has shown his
leadership skills in a number of ways. He is the founder of
the Western Exempt Market Association which later changed
its name to the National Exempt Market Association and then
with the help of Craig’s stick handling merged with the eastern
Canadian counterpart The Private Capital Markets Association
of which he is currently Vice-Chair. Craig was previously a
member of the Ontario Securities Commission Exempt Market
Advisory Committee, the Ontario Securities Commission Small
and Medium Enterprises Committee and is currently a member
of the Alberta Securities Exempt Market Dealer Advisory
Committee. Craig is also the President of Olympia Charitable
Foundation and has organized our Charity Golf Tournament for
the past 15 years. Well connected, often quoted in Canada’s
top business newspapers, we are fortunate to have him lead
Olympia Trust Company. An instant success after 16 years of
being with Olympia.

Olympia Charitable Foundation was created to have our giving
be more personal than just signing a cheque. Our employees
are involved in contributing money that is matched by Olympia
and they are also involved in picking the Charities we donate to.
Many of the charities we donate to are small and really appreciate
the $5,000 we give them. We have been so successful at raising
money that we now have several charities that we give $25,000
or more per year. Our most supported charities are Dreams
Take Flight and Stephen’s Backpack Society. In 2019 we raised
$67,000 from the golf tournament and $221,000 from employee
matched contributions for a total of $288,000. We are proud of
the contributions our employees make to the community.

Success has to be defined by more than just the bottom line.
One of the awards I most like to earn is being named one of the
Top 70 Employer for the Province of Alberta. We did it again in
2019 which was the seventh year in a row that we have won this
award. What it says is Olympia is a good place to work. We care
about our people. With us “it’s personal!!”

There are two main areas we would like to get Canadians to
focus on in the next few years. We currently administer about
20,000 registered accounts where the registered plan invests in
mortgages. The default rate is low for most of the mortgages and
the plan holder is earning a very good interest rate. Our goal is
to further educate the general public that this is another option
in which they can invest their cash and retirement savings. In
order to make mortgage investing easier, Olympia has created
a mortgage administration company that will look after all the
dirty work of investing in mortgages. We will chase down the
bounced cheques, make sure the insurance is in force, make
sure the taxes have been paid, and if need be foreclose on a
delinquent borrower. We believe that by taking care of these
things that many more individuals and mortgage brokers will
participate in this market space.

The other idea we would like to share with Canada’s business
owners is that if they are looking to raise money from private
sources, one of the first places they should look for cash if from
individual’s registered plans. Tax and securities laws in Canada
allow for many private companies to issue securities such as
preferred shares to a registered plan but it’s a fairly well-kept
secret. We intend to share that secret with entrepreneurs across
the country in multiple different ways.

We look forward to another good year.

2019 Annual Report | Olympia Financial Group Inc.

CRAIG SKAUGE AND RICK SKAUGECongratulations Craig on being one of Canada’s Top 40 Under 40MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) is
provided to enable a reader to assess the financial position and
results of operations of Olympia Financial Group Inc. (“Olympia”)
for the year ended December 31, 2019.

This MD&A should be read in conjunction with Olympia’s
audited consolidated financial statements
(“consolidated
financial statements”) for the year ended December 31, 2019,
as well as the MD&A found in Olympia’s 2018 Annual Report,
together with the audited consolidated financial statements
and accompanying notes found therein. Olympia’s audited
consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).

Amounts are presented
in Canadian dollars, Olympia’s
functional currency. All references to $ are to Canadian dollars
and references to US$ are to United States dollars.

This report, and the information provided herein, is dated as
at February 27, 2020. Additional information about Olympia,
including quarterly and annual reports, is available on Olympia’s
website at www.olympiafinancial.com and on SEDAR at
www.sedar.com.

Cautionary note regarding forward-looking
statements
Certain statements contained in this MD&A may constitute
forward-looking statements. These statements relate to future
events or Olympia’s future performance. All statements, other
than statements of historical fact, may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as “seek,” “anticipate,”
“plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,”
“predict,” “propose,” “potential,” “targeting,” “intend,” “could,”
“might,” “should,” “believe,” and similar expressions. These
statements involve known and unknown risks, uncertainties
and other factors that may cause actual results or events to
differ materially from those anticipated in such forward-looking
statements. Olympia believes that the expectations reflected
in those forward-looking statements are reasonable, but no
assurance can be given that these expectations will prove to
be correct. Any forward-looking statements included in this
MD&A should not be unduly relied upon by investors, as actual
results may vary. These statements speak only as of the date of
this MD&A and are expressly qualified, in their entirety, by this
cautionary statement.

With respect to forward-looking statements contained herein,
Olympia has made assumptions regarding, among other things:

• general business and economic conditions in Canada;

• fluctuations in interest rates and currency values;

• changes in monetary policy;

• changes in economic and political conditions;

• legislative and regulatory developments;

• results from legal proceedings and disputes;

• the level of competition in Olympia’s markets;

• the occurrence of weather related and other natural

catastrophes;

• changes in accounting standards and policies;

• the accuracy and completeness of information Olympia

receives about customers and counterparties;

• the ability to attract and retain key personnel;

• changes in tax laws;

• technological developments;

• cyber security risks;

• costs related to operations remaining consistent with

historical experiences;

• management’s ability to anticipate and manage risks

associated with these factors; and

• insurance claim payouts.

Olympia’s actual results could differ materially from those
anticipated in the forward-looking statements contained herein
as a result of the risk factors set forth herein.

Although Olympia’s management has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward-looking statements,
there may be other factors that cause results to not be as
anticipated, estimated or intended. Forward-looking statements
contained herein are made as of the date of this MD&A and
Olympia disclaims any obligation to update any forward-
looking statements if circumstances or management’s beliefs,
expectations or opinions should change, whether as a result of
new information, future events or otherwise, unless required by
applicable securities laws.

2019 Annual Report | Olympia Financial Group Inc.

Olympia’s business
Olympia was formed under the Business Corporations Act
(Alberta) and is headquartered in Calgary, Alberta. Olympia is
a reporting issuer in British Columbia, Alberta, and Ontario and
its common shares are listed on the Toronto Stock Exchange
(“TSX”). The majority of Olympia’s business is conducted
through its wholly owned subsidiary Olympia Trust Company
(“Olympia Trust”), a non-deposit taking trust corporation.

Olympia Trust received its letters patent on September 6, 1995,
authorizing the formation of a trust corporation to be registered
under the Loan and Trust Corporations Act (Alberta). Olympia
Trust is licensed to conduct trust activities in Alberta, British
Columbia, Saskatchewan, Manitoba, Québec, Newfoundland
and Labrador, Prince Edward Island, New Brunswick, and
Nova Scotia. The Registered Plans division, Foreign Exchange
division, and Corporate and Shareholder Services division
conduct business under Olympia Trust.

The Private Health Services Plan division conducts business
under Olympia Benefits Inc. (“OBI”), a wholly owned subsidiary
of Olympia. Olympia Benefits Inc. was incorporated on May 4,
2006, under the Business Corporations Act (Alberta).

The Exempt Edge division (“EEI”) conducts business under
Exempt Edge Inc. Exempt Edge Inc. was incorporated under
the Business Corporations Act (Alberta) on November 28, 2016.
Olympia holds an 80% controlling interest in Exempt Edge Inc.
and a third party holds a non-controlling interest of 20%. The
non-controlling interest is presented separately in the statements
of net earnings and comprehensive income and within equity in
the balance sheets, but separately from Olympia’s equity.

2019 Annual Report | Olympia Financial Group Inc.

SARA KING, JOHN HORTON, KALIE COX AND PIERRE WHALENOlympians taking part in the 2019 Corporate ChallengeSummary of financial results
Overview and financial highlights from continuing operations for
the year ended December 31, 2019, when compared to the year
ended December 31, 2018.

• Total net earnings and comprehensive income decreased 6%

to $9.33 million from $9.90 million.

• Total revenue decreased 2% to $49.08 million from $50.03
million mainly due to a decrease in spot trade volume and
transaction sizes in the Foreign Exchange division.

• Service revenue decreased 8% to $35.58 million from $38.60
million mainly due to a decrease in Foreign Exchange spot
trade volume and transaction sizes.

• Other gains and losses, net, amounted to $3.10 million
from ($1.43) million, mainly due to Olympia Trust’s Foreign
Exchange division recording a $2.23 million unrealized foreign
exchange forward contract gain stemming from an increase
in the number and sizes of forward exchange contracts.
This compares to a ($1.38) million foreign exchange forward
contract loss in the prior year. In addition, Olympia also
recognized an insurance settlement of $0.84 million from the
cyber incident claim.

• Earnings before income tax decreased 5% to $12.86 million

from $13.59 million.

• Basic and diluted earnings per share attributable

to
shareholders of Olympia decreased 5% to $3.92 per share
from $4.14 per share.

COMBINED NET EARNINGS
PER QUARTER ($ '000)

EPS PER QUARTER ($)

3,000

2,500

2,000

1,500

1,000

500

Q4 – 2019

Q3 – 2019

Q2 – 2019

Q1 – 2019

Q4 – 2018

1.25

1.00

0.75

0.50

0.25

Q4 – 2019 Q3 – 2019 Q2 – 2019 Q1 – 2019 Q4 – 2018

2019 Annual Report | Olympia Financial Group Inc.

SUMMARY OF QUARTERLY RESULTS

The following table sets forth a summary of Olympia’s quarterly results for each of the last eight quarters. The quarterly results have been
derived from financial information prepared in accordance with IFRS.

Quarterly Summary

($ thousands)

Service revenue

Interest revenue and trust income

Dec. 31
2019

Sep. 30
2019

Jun. 30
2019

Mar. 31
2019

Dec. 31

2018

Sep. 30
2018

Jun. 30
2018

Mar. 31
2018

9,192

3,589

8,670

9,188

8,530 *

9,738

9,452

10,308

9,099

3,424

3,441

3,048

2,966

2,963

2,874

2,630

Expenses

(10,066 )

(9,315 )

(9,556 )

(10,393 )

(8,831 )

(8,584 )

(9,268 )

(8,327 )

Other gains/(losses), net

489

(74 )

2,604 *

(310 )

(809 )

(189 )

(122 )

Earnings before income taxes

Earnings from continuing operations

Earnings/(loss) from discontinued

operations

Net earnings

Per share attributable to shareholders

2,800

1,998

3,268

2,999

3,789

2,294

2,295

2,739

3,563

2,591

3,022

3,725

3,280

2,200

2,725

2,386

(199 )

(244 )

1,998

2,294

2,295

2,739

2,621

2,225

2,526

2,142

of Olympia from continuing operations

0.85

0.96

0.97

1.14

1.09

0.92

1.14

0.99

– basic and diluted ($)

Per share attributable to discontinued

operations – basic and diluted ($)

0.01

(0.08 )

(0.09 )

Dividends per share ($)

0.69

0.63

0.60

0.6

0.54

0.51

*Presentation of Q1 2019 has been adjusted for the reclassification of the insurance settlement to align with the Q4 2019 presentation.

Quarterly results in 2019
Olympia’s total quarterly revenue for 2019 was, on average,
1% lower than Olympia’s quarterly revenue for 2018. This
decrease is largely due to a decrease in service revenue, but
is partially offset by an increase in interest revenue and trust
income earned. Service revenue had the largest year-over-
year decreases in the second and third quarters of 2019 when
compared to 2018. This was mainly due to a decrease in spot
trade volume and transaction sizes in the Foreign Exchange
division. Increases in quarterly interest and trust income
are attributable to the Canadian prime rate being at 3.95%
throughout 2019, whereas in 2018 the average rate was 3.58%.

(including
Quarterly direct and administrative expenses
depreciation and amortization) increased by an average of 10%,
mainly due to an increase in enhanced cyber security measures,
computer consultant fees and salaries and wages.

Fourth quarter results
Service revenue in the fourth quarter was $9.19 million, down
from $9.74 million in the fourth quarter of 2018, mainly due to
a decrease in spot trade volume and transaction sizes in the
Foreign Exchange division. Interest revenue and trust income
was $3.59 million, up from $2.97 million in the fourth quarter of
2018, due to interest being earned at a higher rate.

Total revenue in the fourth quarter for the Private Health Services
Plan division increased 4% to $2.29 million from $2.21 million
when compared to the fourth quarter of 2018. Total expenses
and depreciation remained the same at $1.39 million when
compared to the fourth quarter of 2018.

2019 Annual Report | Olympia Financial Group Inc.

Total revenue for the Registered Plans division increased 5%
to $8.28 million from $7.87 million when compared to the fourth
quarter of 2018. Total expenses and depreciation increased
14% to $5.77 million from $5.06 million when compared to the
fourth quarter of 2018. The increase in expenses is primarily due
to an increase in bonus expense as a result of higher revenue,
as well as an increase in allowance for bad debts.

The Foreign Exchange division’s total revenue decreased by
10% to $1.91 million from $2.13 million when compared to the
fourth quarter of 2018. Expenses, commissions, depreciation
and amortization increased by 7% to $1.91 million from
$1.78 million when compared to the fourth quarter of 2018, due
to an increase in enhanced cyber security, bank charges and
an accrual for a Canada Revenue Agency (“CRA”) employee
tax assessment.

The Exempt Edge division’s total revenue increased by 13% to
$0.17 million from $0.15 million when compared to the fourth
including depreciation,
quarter of 2018. Total expenses,
increased to $0.49 million from $0.30 million when compared
to the fourth quarter of 2018, due to an increase in computer
maintenance costs and development expenses as the Exempt
Edge division continues development of its software services.

2019 Annual Report | Olympia Financial Group Inc.

The Corporate and Shareholder Services division’s total revenue
was $0.10 million for the fourth quarter of 2019. Total expense,
including depreciation was $0.37 million. These costs relate to
salaries and wages and startup cost.

Objectives for 2020
Management has set the following major objectives for 2020:

• Grow the Corporate and Shareholder Services division;

• Continue to invest in Olympia’s online presence;

• Implement operational changes to the Foreign

Exchange division;

• Transition from cost reduction to revenue expansion in the

Health Services Plan division;

• Continue to grow the Exempt Edge division; and

• Further develop the Registered Plans division’s app and

online platform.

LISA CHIANG, JONATHAN LAWRENCE, SAMANTHA JOHNSON, KALIE COX AND GERHARD BARNARDOlympians taking part in the 2019 Corporate Challenge 10km runFinally, to keep pace with the competitive market, the division
will place an emphasis on advancing its core technology
infrastructure. The customer platform “My Olympia,” database
system, and mobile App will be refined to provide a sturdy and
flexible foundation for future growth.

Continue to grow the Exempt Edge division
The Exempt Edge division ended the 2019 fiscal year strongly
with the adoption of its Dealer’s Edge platform by one of the
largest exempt market dealers in Canada. In 2020, the Exempt
Edge division will continue to promote the adoption of its Issuer’s
Edge and Dealer’s Edge platforms and encourage the conduct
of transaction of exempt market securities through the Edgelink
ecosystem. Development efforts in 2020 will be focused on the
integration of the Dealer’s Edge and Issuer’s Edge platforms
with the trust services provided by the Registered Plan division
and the transfer agency services provided by the Corporate and
Shareholders Services division.

Further develop the Registered Plans division’s app
and online platform
The Registered Plans division has deployed and is marketing
version three of its app. Management believes this product
enhances the customer experience for those who prefer
online banking. In 2020, Olympia will continue to implement
technological integrations of the Registered Plans division’s
online platform and app, in addition to the integration of the
primary back office system with certain platforms of the Exempt
Edge division. This will create efficiencies for both end user and
Olympia entities.

Outlook for 2020
Olympia is confident that its current operations will be able to
generate sufficient amounts of cash and cash equivalents in the
short and long term to maintain and meet Olympia’s planned
growth and development activities. Olympia is well diversified,
with its Registered Plans, Private Health Services Plan, Foreign
Exchange, Exempt Edge, and Corporate and Shareholder
Services divisions.

Grow the Corporate and Shareholder
Services division
In 2020, the Corporate and Shareholder Services division
will continue to promote its transfer agent and corporate
trust services across Western Canada, with specific focus
on growing its market presence in Vancouver. The corporate
and shareholder division will also work on the integration of
its transfer agency services with the Issuer’s Edge platform
developed by the Exempt Edge division.

Continue to invest in Olympia’s online presence
Olympia continues to enhance its online platforms to better serve
its customers with performance and usability improvements.
Olympia has devoted specialized resources to application
development for the purpose of enhancing its online presence.
Olympia continues to invest in its cyber security initiatives to
ensure the safety and security of client information and prevent
malicious activity.

Implement operational changes to the Foreign
Exchange division
The focus for the Foreign Exchange division (to be renamed
“Currency & Global Payments” in 2020) is to improve operational
efficiency to increase client experience and retention. This will
include a focus on introducing new currency hedging and risk
mitigation products, as well as increasing available settlement
and payment options. As part of the strategy for 2020, Olympia
wants to optimize the PayFX online trading platform to allow
clients to self-service their currency transactions and payments.
Account managers will continue to work with clients to develop
customized currency and global payments solutions that fit their
business needs.

Transition from cost reduction to revenue expansion
in the Health Service Plan division
Olympia’s Private Health Services Plan division has three
strategic objectives for 2020 and beyond – increase sales,
strengthen the customer base, and advance technology
infrastructure.

2019 saw an increase of more than 100% in website traffic and
lead generation. Understanding the customer journey and the
conversion of leads is a top priority for improving sales. A new
website and an extension of current marketing endeavors is
anticipated to increase lead generation.

Customer success is crucial given the division’s transition to a
subscription model. The division will deepen its understanding
of the customer experience. A new customer model will be
developed to encourage customers not only renew their
plan, but purchase additional products such as the Wellness
Spending Account and Telemedicine.

2019 Annual Report | Olympia Financial Group Inc.

FINANCIAL ANALYSIS

Consolidated Balance Sheets as at

($)

ASSETS
Current assets

Cash & cash equivalents
Trade & other receivables
Inventory
Prepaid expenses
Derivative financial instruments

Total current assets

Non-current assets

Restricted cash & investments
Equipment & other
Intangible assets
Right-of-use assets
Financial asset at fair value through other comprehensive income
Long-term lease receivable
Promissory note receivable
Derivative financial instruments
Deferred tax assets
Total non-current assets

Total assets
LIABILITIES
Current liabilities

Trade & other payables
Deferred revenue
Other liabilities & charges
Revolving credit facility
Lease liabilities
Derivative financial instruments
Current tax liability
Total current liabilities
Other liabilities
Lease liabilities
Derivative financial instruments

Total liabilities
EQUITY

Share capital
Contributed surplus
Retained earnings

Equity attributable to owners of Olympia

Non-controlling interests

Total equity
Total equity & liabilities

December 31, 2019

December 31, 2018

13,754,089
3,105,766
56,518
1,270,284
2,177,020
20,363,677

2,500,000
1,120,955
2,748,214
1,073,064
38,574
55,156
1,400,000
1,840,389
786,200
11,562,552
31,926,229

1,456,166
486,655
1,732,886
6,655,347
907,066
657,259
176,795
12,072,174
-
1,038,286
887,020
13,997,480

7,886,989
86,373
10,164,595
18,137,957
(209,208 )
17,928,749
31,926,229

12,834,906
2,272,037
49,127
783,370
406,082
16,345,522

707,000
1,239,533
2,508,262
-
43,714
-
1,428,539
-
1,243,256
7,170,304
23,515,826

1,341,892
399,820
1,528,078
4,207,347
-
160,480
5,637
7,643,254
791,705
-
-
8,434,959

7,886,989
86,373
7,214,540
15,187,902
(107,035 )
15,080,867
23,515,826

2019 Annual Report | Olympia Financial Group Inc.

Cash, cash equivalents and restricted cash
and investments
Olympia continues to generate cash from its core businesses.
As at December 31, 2019, cash reserves increased by 7%
to $13.75 million (December 31, 2018 – $12.83 million). This
increase is mainly due to Olympia having a higher interest
receivable balance than the prior year due to the average
interest rate being higher than 2018.

Restricted cash and investments as at December 31, 2019,
of $2.50 million (December 31, 2018 – $0.71 million), consist
of cash held by a financial institution as collateral for the
performance of Olympia’s foreign exchange trading platform
obligations. Restricted cash and investments are not readily
accessible for use in operations and are reported separately
from cash and cash equivalents on the balance sheet.
Olympia used its revolving credit facility to fund the increased
collateral requirements.

Olympia’s cash is placed with a Canadian financial institution
where it generates interest. Cash and cash equivalents comprise
67% of the total current assets of Olympia at December 31,
2019, compared to 79% at December 31, 2018.

Trade and other receivables
Trade and other receivables are comprised largely of receivables
from the Registered Plans division’s clients. The increase in
trade receivables is mainly due to annual administration fees
charged by the Registered Plans division, which were billed on
January 1, 2019.

Olympia has made allowances for doubtful accounts of $0.98
million, compared to $0.57 million as at December 31, 2018.
Management is committed to a policy of closely monitoring risk
and exposure in this area and is actively pursuing past due
accounts through its internal collection process.

Included within receivables is the current portion of a lease
receivable of $0.04 million recognized based on the present
value of sublet property as required by the newly adopted
IFRS 16.

Promissory note receivable
On June 5, 2018, Olympia announced the sale to Tarman ATM
Inc. (“Tarman”) of the ATM business operated by Olympia ATM
Inc., as a going concern, for an amount equal to then current
net book value of all assets used in the ATM business less all
assumed liabilities; an amount estimated to be $1.4 million.

The sale of the ATM business to Tarman, a corporation owned
and controlled by Rick Skauge, was a related party transaction,
as defined in Multilateral Instrument 61-101 – [Protection of
Minority Security Holders in Special Transactions], but was
exempted from Olympia obtaining disinterested shareholder
approval and a formal valuation as the fair market value of the
proposed transaction was less than 25% of Olympia’s market
capitalization.

An ad hoc committee composed solely of the independent
members of Olympia’s Board of Directors was constituted to
consider and approve the sale of the ATM business to Tarman.
As part of its deliberations, the ad hoc committee of the Board
of Directors noted the continuing losses of approximately
$120,000 per month in the ATM business and acknowledged
that while the ATM business still had the potential to grow
and expand, it was unlikely to become profitable in the near
future. Given the immediate financial benefits that the sale of
the ATM business would have for Olympia and the uncertain
timelines to profitability, the ad hoc committee believed the
sale of the ATM business to be in the best interest of Olympia.
The ad hoc committee of the Board of Directors obtained a
fairness comfort letter stating that the proposed transaction
was fair to the disinterested shareholders of Olympia. In
addition, following the public disclosure of the transaction,
Olympia received an unsolicited expression of interest in
the ATM business from a third-party. Olympia permitted the
third-party to conduct a due diligence review and valuation
of the ATM business and received an offer to purchase the
ATM business from the third-party that was economically
comparable to the offer made by Tarman.

In conjunction with the sale of substantially all the assets of
Olympia ATM Inc. to a related party in 2018, the purchase price
was paid by the delivery of a secured demand promissory
note (the “promissory note”) for $1.40 million by Tarman. The
outstanding principal amount of the promissory note bears
interest at prime plus 0.25%. Subject to Canadian Western
Bank’s (“CWB”) consent (as discussed below), all interest
accrued under the promissory note shall be paid on an annual
basis on or before the 30th day of June of each calendar year
and, commencing June 30, 2020, Tarman is required to repay
the outstanding principal amount of the promissory note in
annual installments of $140,000 on or before the 30th day of
June of each calendar year, with the outstanding balance of the
principal amount to be repaid in full on or before June 30, 2023.
As at December 31, 2019, all interest has been fully paid. Interest
earned for the year ended December 31, 2019 was $58,800.

In connection with the financing of the vault cash used by
Tarman, Olympia agreed to postpone to CWB the receipt of all
amounts owed to it by Tarman and is required to obtain CWB’s
consent prior to accepting any amounts from Tarman. Olympia
has obtained the required consent. Olympia also agreed to
subordinate to CWB all security interests granted to Olympia by
Tarman.

Olympia has assessed the expected credit loss as it relates to
the promissory note and has determined it to be nominal.

Forward foreign exchange contracts
Olympia purchases forward exchange contracts when its
Foreign Exchange division enters into a transaction to buy or
sell foreign currency in the future. These contracts are both
short term and long term in nature, are in the normal course of

2019 Annual Report | Olympia Financial Group Inc.

business, and are used to manage foreign exchange exposure.
Forward foreign exchange contracts are not designated as
hedges and they are recorded at fair market value through profit
and loss.

Forward foreign exchange contracts are recorded on Olympia’s
balance sheet as either an asset or liability, with changes in
fair value included in net earnings. This accounting treatment
resulted in the recognition of a forward foreign exchange contract
asset of $4.02 million as at December 31, 2019, compared to
$0.41 million as at December 31, 2018, and a forward foreign
exchange contract liability of $1.54 million as at December 31,
2019, compared to $0.16 million as at December 31, 2018.
The movement in the derivative financial instruments asset and
liability is mainly due to the fluctuation of the Canadian and
United States dollar exchange rates, as the vast majority of the
Foreign Exchange division’s trades are in Canadian and United
States dollars. The number and size of outstanding forward
foreign exchange contracts largely impacts the movement in
the derivative financial instrument assets and liabilities, with the
resultant change to fair value being recorded in the statement of
earnings and comprehensive income.

Intangible assets
The capital additions of $0.78 million relates to the continued
development and enhancement of the Issuer’s Edge, Dealer’s
Edge and Edgelink systems by the Exempt Edge division and
the continued development of the Registered Plans division’s
mobile application.

Current liabilities
The breakdown of Olympia’s trade and other payables consists
of trade and other payables (57%), government taxes (21%),
amounts due to agents, clients and commission payable (13%)
and amounts due to related parties (9%).

Other liabilities and charges consists of bonus accruals,
deferred commissions and bonuses, professional fees payable,
and employee benefits payable.

Deferred revenue
At December 31, 2019, deferred revenue totaled $0.49 million
compared to $0.40 million as at December 31, 2018. This
is comprised of annual fees received by the Private Health
Service Plan division, the Corporate and Shareholder Services
division and the Registered Plans division. The unearned portion

of these annual fees is recognized as deferred revenue at the
time of billing and revenue is recognized on a straight-line basis
in relation to Olympia rendering these services.

Employee Share Ownership Plan (ESOP)
Olympia has established an Employee Share Ownership Plan
(“ESOP”). Under this plan, Olympia contributes $1 for each $1
contributed by an employee up to a maximum that is based on
the employee’s earnings and years of service. The employee
and Olympia’s contributions are used to purchase common
shares of Olympia through the facilities of the TSX. Olympia’s
contribution is included as an administrative expense in the
statements of net earnings and comprehensive income and
amounted to $0.28 million for the year ended December 31,
2019 (December 31, 2018 – $0.24 million).

Contingencies
Olympia is not a money lender, nor does it guarantee or
participate in loans or mortgages of any type, except in its
capacity as trustee of mortgages held on behalf of its clients.

Olympia is a defendant and plaintiff in a number of legal actions
that arise in the normal course of business, the losses or gains
from which, if any, are not anticipated to have a material effect
on the consolidated financial statements.

Related party transactions
Olympia’s president and CEO owns and controls 29.28%
of Olympia’s shares. During the year, Olympia entered into
transactions with the following related parties:

• Companies and businesses controlled by the president

and CEO of Olympia;

• Companies and businesses associated with the directors

of Olympia;

• Companies and businesses controlled by management

of Olympia;

• Family members of the president, management and

directors; and

• Key management and directors.

The following transactions with related parties were measured
at the exchange amount, which is the amount of consideration
agreed to by the parties:

Service revenue

Companies and businesses controlled by the president and CEO

December 31, 2019

December 31, 2018

34,330

11,639

Revenue from associated entities totaled $34,330 for the year ended December 31, 2019 (December 31, 2018 – $11,639). This mainly
consisted of revenue from legal services provided by Olympia’s in-house general counsel to Tarman ATM Inc. (“Tarman”), a company
controlled by the president and CEO, as well as sublease income ($24,000) from Exempt Experts Inc., a company controlled by the
president and CEO.

2019 Annual Report | Olympia Financial Group Inc.

Interest revenue

Companies and businesses controlled by the president and CEO

December 31, 2019

December 31, 2018

58,800

37,335

Interest revenue from associated entities totaled $58,800 for the year ended December 31, 2019, (December 31, 2018 – $37,335), and
consists of interest earned from the promissory note receivable.

Administrative expenses

December 31, 2019

December 31, 2018

Companies and businesses controlled by the president and CEO
(management fee)

Olympia Charitable Foundation

Companies and businesses controlled by the president and CEO

3,734,826

68,155

38,379

3,841,360

3,594,972

98,432

3,693,404

Administrative expenses paid to associated entities totaled $3.84
million for the year ended December 31, 2019 (December 31,
2018 – $3.69 million), and consisted of the following:

• The Olympia Charitable Foundation is funded by Olympia
and the employees of Olympia. Olympia’s matched donation
totaled $68,155 for the year ended December 31, 2019
(December 31, 2018 – $98,432).

• Management fees are paid to Tarman based on a percentage
of pre-tax profits of Olympia’s divisions, except for the Private

Health Services Plan division, where the management fee
is based on a percentage of health claims administered.
These fees are for services provided as president and
CEO of Olympia. For the year ended December 31, 2019,
this amounted to $3.73 million (December 31, 2018 –
$3.59 million).

Fees paid to Olympia ATM Ltd., a company owned and
controlled by Olympia’s president and CEO, of $38,379 relate
to maintenance services provided with respect to the Foreign
Exchange ATMs.

Trade and other receivables include amounts receivable
from related parties

Companies and businesses controlled by the president and CEO
(current)

Companies and businesses controlled by the president and CEO
(non-current)

December 31, 2019

December 31, 2018

49,966

1,400,000

1,449,966

57,522

1,428,539

1,486,061

Receivables from associated entities totaled $1.45 million for
the year ended December 31, 2019 (December 31, 2018 –
$1.49 million) and consisted mainly of the following:

• A receivable in the amount of $34,421 (December 31, 2018
– $57,488) from Tarman, a company controlled by Olympia’s
president and CEO, reflects legal services provided and cost
recoveries relating to accounting and other administration
services provided.

• A receivable in the amount of $15,545 (December 31, 2018
– $nil) from Olympia ATM Ltd., a company controlled by the
president and CEO of Olympia, for expense recoveries relating
to accounting and other administration services provided.

• On June 5, 2018, Olympia announced the sale to Tarman ATM
Inc. (“Tarman”) of the ATM business operated by Olympia ATM
Inc., as a going concern, for an amount equal to then current
net book value of all assets used in the ATM business less all
assumed liabilities; an amount estimated to be $1.4 million.

• The sale of the ATM business to Tarman, a corporation owned
and controlled by Rick Skauge, was a related party transaction,
as defined in Multilateral Instrument 61-101 – [Protection of
Minority Security Holders in Special Transactions], but was
exempted from Olympia obtaining disinterested shareholder
approval and a formal valuation as the fair market value of the
proposed transaction was less than 25% of Olympia’s market
capitalization.

2019 Annual Report | Olympia Financial Group Inc.

• An ad hoc committee composed solely of the independent
members of Olympia’s Board of Directors was constituted to
consider and approve the sale of the ATM business to Tarman.
As part of its deliberations, the ad hoc committee of the Board
of Directors noted the continuing losses of approximately
$120,000 per month in the ATM Business and acknowledged
that while the ATM business still had the potential to grow and
expand, it was unlikely to become profitable in the near future.
Given the immediate financial benefits that the sale of the ATM
business would have for Olympia and the uncertain timelines
to profitability, the ad hoc committee believed the sale of the
ATM business to be in the best interest of Olympia. The ad
hoc committee of the Board of Directors obtained a fairness
comfort letter stating that the proposed transaction was fair
to the disinterested shareholders of Olympia. In addition,
following the public disclosure of the transaction, Olympia
received an unsolicited expression of interest in the ATM
business from a third-party. Olympia permitted the third-party
to conduct a due diligence review and valuation of the ATM
business and received an offer to purchase the ATM business
from the third-party that was economically comparable to the
offer made by Tarman.

• In conjunction with the sale of substantially all assets of
Olympia ATM Inc. in 2018, the purchase price paid by Tarman
was equal to the aggregate net book value of the assets used
by the ATM division. The assets’ book value at June 5, 2018,
was estimated to be $1.40 million. The purchase price was
paid by the delivery of a secured demand promissory note (the
“promissory note”) for $1.40 million by Tarman. The outstanding
principal amount of the promissory note bears interest at prime
plus 0.25%. All interest accrued under the promissory note
the
shall be paid on an annual basis on or before
30th day of June of each calendar year. Subject
to
Canadian Western Bank’s consent, which Olympia
has obtained, commencing June 30, 2020, Tarman is
required to repay the outstanding principal amount of the
promissory note in annual installments of $140,000 on or
before the 30th day of June of each calendar year, with the
outstanding balance of the principal amount to be repaid in
full on or before June 30, 2023. As at December 31, 2019, all
interest has been fully paid. Interest earned for the year ended
December 31, 2019 was $58,800.

• Olympia has assessed the expected credit loss as it relates to

the promissory note and has determined it to be nominal.

Trade and other payables and provision for other liabilities
and charges include amounts payable to related parties

Companies and businesses controlled by the president and CEO

Directors’ fees

December 31, 2019

December 31, 2018

151,939

83,291

235,230

153,502

69,776

223,278

Payables to associated entities totaled $235,230 for the year
ended December 31, 2019 (December 31, 2018 – $223,278),
and consisted mainly of the following:

• A payable in the amount of $39,994 (December 31, 2018
– $37,070) to Tarman, a company controlled by the past
president and CEO of Olympia, for commissions related to the
sale of health plans offered by OBI.

and CEO of Olympia, for services provided to maintain Foreign
Exchange ATMs.

• A management fee payable in the amount of $108,850
(December 31, 2018 – $115,739) to Tarman, a company
controlled by the president and CEO of Olympia, based on a
percentage of pre-tax profits of Olympia’s divisions.

• A payable for directors’ fees of $83,291 (December 31, 2018

• A payable in the amount of $3,095 (December 31, 2018 – $nil)
to Olympia ATM Ltd, a company controlled by the president

– $69,776).

These payables are all current.

2019 Annual Report | Olympia Financial Group Inc.

Key management compensation

Compensation paid to key management is included in notes
22 and 32 of the consolidated financial statements. Key
management includes the Board of Directors and executive
team members from OBI, Olympia Trust, Exempt Edge Inc.,
and Olympia. Olympia uses management or employment

contracts as a means to incent certain executives to maximize
the profitability of their applicable business units and the
profitability of Olympia as a whole. The compensation paid or
payable to key management is shown in the following table:

Salaries, bonuses and profit sharing

Management fees

Directors’ fees

Short-term employee benefits

December 31, 2019

December 31, 2018

5,322,684

3,734,826

285,001

250,978

9,593,489

4,583,106

3,594,972

262,163

233,604

8,673,845

The increase in salaries, bonuses and profit sharing and management fees in the current year is attributable to an increase in divisional
earnings, resulting in higher management profit sharing entitlements to executive management.

Shareholders’ equity
As at December 31, 2019, Olympia had 2,406,336 outstanding
shares (December 31, 2018 – 2,406,352), with a carrying value
of $7.89 million. In April 2019, Olympia repurchased fractional
shares from former shareholders at $50 per share. The
repurchase was allocated to retained earnings.

Income taxes
Deferred income tax assets are recognized for loss carry-forward
and other deductible temporary differences to the extent that the
realization of the related tax benefit is probable through future
taxable profits or other tax planning opportunities. The average
corporate rate used for the year ended December 31, 2019,
was 26.5% (December 31, 2018 – 27%). On May 28, 2019, the
Alberta government introduced Bill 3, reducing the corporate
income tax rate to 11% (from 12%) effective July 1, 2019.

2019 Annual Report | Olympia Financial Group Inc.

ANALYSIS OF RESULTS BY SEGMENT

Registered Plans Division

Summary of divisional results for the year ended December 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other gains/(losses), net

Earnings before income tax

Income taxes

Net earnings

2019

18,784

12,812

(51 )

31,545

(20,814 )

(982 )

9,844

(2,627 )

7,217

The Registered Plans division (“RRSP”) specializes in the administration of
registered plan accounts, including RRSPs, RRIFs, LIRAs, LIFs and TFSAs. In
contrast to traditional registered plan account administrators, Olympia’s focus
is on exempt market securities and arm’s length mortgages. The holder of
a registered plan account with Olympia will typically hold multiple exempt
market securities or mortgages in their Olympia registered plan account.

RRSP’s service revenue decreased 6% to $18.78 million from $20.00 million
when compared to the year ended December 31, 2018. The decrease is a
result of a decrease in the number of account transactions due to a prior year
one-time fee charged in connection with the restructuring of a large exempt
market issuer.

Interest revenue and trust income increased 20% to $12.81 million from $10.69
million when compared to the year ended December 31, 2018, reflecting the
average Canadian prime rate of 3.95% for the year compared to an average
rate of 3.58% in 2018.

Direct, administrative, depreciation and amortization expenses increased
7% to $21.85 million from $20.50 million when compared to the year ended
December 31, 2018. This increase is due to an increase in operating expenses,
such as enhanced cyber security measures and computer maintenance. The
increase in depreciation relates to the adoption of IFRS 16, and the recognition
of right-of-use assets. This increase is offset by a decrease in rent expense.

Earnings before income tax decreased 3% to $9.84 million from $10.14 million
in 2018.

RRSP net earnings decreased 3% to $7.22 million from $7.45 million when
compared to the year ended December 31, 2018. RRSP is responsible for
64% of Olympia’s total revenue (including interest), an increase from 61%
when compared to the year ended December 31, 2018.

2018

Variation

20,004

10,694

(36 )

30,662

(19,951 )

(514 )

(54 )

10,143

(2,695 )

7,448

Service revenue decreased to
$18.78 million from $20.00 million

-6%

20%

42%

91%

>100%

-3%

-2%

-3%

Interest revenue and trust
income increased to

$12.81 million from $10.69 million 20%

Direct, administrative,
depreciation and amortization
expenses increased to
$21.85 million from $20.50 million

Earnings before income tax
decreased to $9.84 million
from $10.14 million

RRSP’s net earnings
decreased to $7.22 million
from $7.45 million

2019 Annual Report | Olympia Financial Group Inc.

ANALYSIS OF RESULTS BY SEGMENT

Private Health Services Plan Division

Summary of divisional results for the year ended December 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other gains/(losses), net

Earnings before income tax

Income taxes

Net earnings

2019

8,079

335

(1,708 )

6,706

(3,745 )

(153 )

2,821

(748 )

2,073

2018

7,959

234

(1,801 )

6,392

(3,745 )

(75 )

(2 )

2,570

(658 )

1,912

The Private Health Services Plan division (“Health”) markets, sells and
administers health and wellness benefits to business owners through OBI, a
wholly owned subsidiary of Olympia. Health’s current objectives are to improve
sales, increase the value of their customer base, and advance technology
infrastructure. While the business model shift from 2014 to 2019 focused on
cost reduction and streamlining operations, the next period will emphasize
growth through revenue expansion. The division is continuing to deepen its
understanding of the digital consumer and marketplace. The division is well
positioned to compete, with new digital assets, streamlined and reorganized
operations, and two exciting new products.

Health’s service revenue increased 2% to $8.08 million from $7.96 million
when compared to the year ended December 31, 2018.

Direct, administrative, depreciation and amortization expenses remained
unchanged at $5.61 million. Included in the current year are expenses for
cyber security enhancement and computer maintenance.

Earnings before income tax increased 10% to $2.82 million from $2.57 million
when compared to the year ended December 31, 2018.

Health’s net earnings increased 8% to $2.07 million from $1.91 million when
compared to the year ended December 31, 2018.

Health is responsible for 17% of Olympia’s total revenue (including interest),
an increase from 16% when compared to the year ended December 31, 2018.

Service revenue increased to
$8.08 million from $7.96 million

Direct, administrative,
depreciation and amortization
expenses remained unchanged
$5.61 million.

Earnings before income tax
increased to $2.82 million from

$2.57 million 10%

Health’s net earnings
increased to $2.07 million
from $1.91 million

Variation

43%

-5%

>100%

10%

14%

2019 Annual Report | Olympia Financial Group Inc.

ANALYSIS OF RESULTS BY SEGMENT

Foreign Exchange Division

Summary of divisional results for the year ended December 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other gains/(losses), net

Earnings before income tax

Income taxes

Net earnings

2019

7,779

253

(1,376 )

6,656

(7,308 )

(286 )

2,999

2,061

(542 )

1,519

The Foreign Exchange division (“FX”) allows corporations and private
clients to buy and sell foreign currencies at competitive rates. The division
offers its clients same-day transactions, as well as long-term forward
contracts. With offices in Vancouver, Calgary, Edmonton and Winnipeg, the
FX division is well situated to service Western Canada.

FX’s service revenue decreased 22% to $7.78 million from $9.92 million
when compared to the year ended December 31, 2018. The decrease
is largely due to a decrease in spot trade volume and transaction sizes.
Other gains/(losses), net, increased more than 100% to $3.00 million from
($1.38) million, mainly due to the recording of unrealized foreign exchange
forward contract gains arising from an increase in the number and sizes of
forward exchange contracts.

The increase is also attributable to a settlement amount received relating to an
insurance claim. The insurance claim stems from the cyber incident disclosed
in the press release on February 2, 2019.

Direct, administrative, depreciation and amortization expenses increased
22% to $8.97 million from $7.37 million when compared to the year ended
December 31, 2018. The increase is mainly due to increases in cyber security
enhancements and computer maintenance.

Earnings before income tax increased 49% to $2.06 million from $1.38 million
when compared to the year ended December 31, 2018.

FX’s net earnings increased 50% to $1.52 million from $1.01 million when
compared to the year ended December 31, 2018.

FX is responsible for 16% of Olympia’s total revenue (including interest), a
decrease from 20% when compared to the year ended December 31, 2018.

2018

9,922

207

(1,109 )

9,020

(6,177 )

(80 )

(1,384 )

1,379

(366 )

1,013

Variation

-22%

22%

24%

-26%

18%

>100%

49%

48%

50%

Service revenue decreased to

$7.78 million from $9.92 million 22%

Direct, administrative,
depreciation and amortization
expenses increased to

$8.97 million from $7.37 million 22%

Earnings before income
tax increased to $2.06 million

from $1.38 million 49%

FX’s net earnings increased to

$1.52 million from $1.01 million 50%

2019 Annual Report | Olympia Financial Group Inc.

ANALYSIS OF RESULTS BY SEGMENT

Exempt Edge Division

Summary of divisional results for the year ended December 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Other gains, net

Loss before income tax

Income taxes

Net loss

Non-controlling interest

Loss attributable to shareholders of Olympia

2019

731

(51 )

681

(1,297 )

(82 )

(695 )

183

(512 )

102

(410 )

2018

Variation

518

(166 )

353

(743 )

(75 )

(465 )

136

(329 )

(263 )

41%

-69%

93%

75%

100%

49%

35%

56%

55%

56%

The Exempt Edge division (“EEI”) focuses on the provision of information
technology services to exempt market dealers, registrants and issuers.

Service revenue increased 41% to $0.73 million from $0.52 million when
compared to the year ended December 31, 2018. This increase is largely due
to growth in EEI’s client base.

Direct, administrative, depreciation and amortization expenses increased
46% to $1.43 million from $0.98 million when compared to the year ended
December 31, 2018. This increase is mainly due to an increase in operating
expenses such as salaries, computer consultants fees, and promotion costs
to facilitate the growth in clients.

Loss before income tax for the year ended December 31, 2019, increased
49% to ($0.70) million from ($0.47) million when compared to the year ended
December 31, 2018.

EEI’s net loss attributable to shareholders of Olympia increased 56% to
($0.41) million from ($0.26) million when compared to the year ended
December 31, 2018.

Service revenue increased to

$0.73 million from $0.52 million 41%

Direct, administrative,
depreciation and amortization
expenses increased to

$1.43 million from $0.98 million 46%

Loss before income tax
increased to ($0.70) million

from ($0.47) million 49%

EEI’s net loss attributable
to shareholders increased to

($0.41) million from ($0.26) million 56%

2019 Annual Report | Olympia Financial Group Inc.

ANALYSIS OF RESULTS BY SEGMENT

Corporate and Shareholder Services Division

Summary of divisional results for the year ended December 31

($ thousands)

Service revenue

Interest revenue and trust income

Direct expenses

Administrative expenses

Depreciation and amortization

Loss before income tax

Income taxes

Net loss

2019

180

(3 )

180

(1,265 )

(33 )

(1,118 )

294

(824 )

2018

Variation

(257 )

(1 )

(258 )

(189 )

100%

>100%

The Corporate and Shareholder Services division (“CSS”)
provides transfer agent and registrar services to public and private
issuers across Canada. CSS is positioned as an alternative to
the large trust companies that are principally focused on Eastern
Canada. The services provided by CSS include administering
dividend reinvestment, acting as depository and disbursing
agent for corporate reorganizations, assisting with shareholder
solicitations, and scrutineering shareholder meetings. The
CSS management team comprises highly respected and
experienced individuals with a track record of success in the
provision of transfer agency and corporate trust services.

Service revenue was $0.18 million, which relates to client set-up
charges and the monthly portion of annual retainer fees.

Direct, administrative, depreciation and amortization expenses
were $1.30 million. These relate mainly to employee salaries,
computer maintenance, consulting fees and depreciation and
amortization.

Loss before income tax for the year ended December 31, 2019
was ($1.12) million.

CSS’s net loss was ($0.82) million for the year ended December
31, 2019.

2019 Annual Report | Olympia Financial Group Inc.

SARAH FOX, MATTHEW KELLY AND DEAN NAUGLER

ANALYSIS OF RESULTS BY SEGMENT

Corporate Division

Summary of divisional results for the year ended December 31

($ thousands)

Service revenue

Interest revenue and trust income

Administrative expenses

Depreciation and amortization

Other (losses)/gains, net

(Loss)/earnings before income tax

Income taxes

Net (loss)/earnings

2019

125

(175 )

(6 )

(56 )

(91 )

(147 )

2018

Variation

194

296

490

(278 )

(2 )

220

(173 )

-86%

-67%

-74%

-37%

-100%

>100%

-47%

>100%

The Corporate division carries out support functions in the areas of accounting, information technology, legal services, human resources,
payroll and internal audit. Support function remuneration is allocated, based on usage, to the various divisions.

Total revenue earned is incidental to Olympia’s activities. The decrease in service revenue is due to the Corporate division receiving
indemnification payments in the prior year from customers involved in the previously reported Canadian Revenue Agency dispute.

Interest revenue decreased from the prior year because the interest earned on Olympia’s loan to its discontinued ATM division in the
prior year was not eliminated.

Administrative, depreciation and amortization expenses for the year ended December 31, 2019, decreased 36% to $0.18 million from
$0.28 million when compared to the year ended December 31, 2018.

The Corporate division’s net loss was ($0.15) million for the year ended December 31, 2019.

2019 Annual Report | Olympia Financial Group Inc.

Off-balance sheet arrangements
During the normal course of operations, Olympia administers
client assets that are not reported on its balance sheet. The cash

component of these off-balance sheet arrangements represents
the cash and cash equivalents held in trust.

Off-balance sheet arrangements under administration

December 31, 2019

December 31, 2018

($ thousands)

Cash & public
securities at
estimated fair value

Private securities,
mortgages and mutual
funds at cost

Cash & public
securities at

estimated fair value

Private securities,
mortgages and
mutual funds at cost

Registered Plans

599,171 *

4,380,533

530,238

4,139,064

Private Health

Services Plan

Corporate and

Shareholder Services

Foreign Exchange

11,462

15,228

15,727

11,018

6,281

641,588

4,380,533

547,537

4,139,064

*The cash portion included in Registered Plans is $569.60 million.

Registered Plans division (“RRSP”)

At December 31, 2019, RRSP administered self-directed
registered plans consisting of private company securities and
mortgages with a cost value of $4.38 billion (December 31, 2018
– $4.14 billion) plus cash, public securities, term deposits and
outstanding cheques with an estimated fair value of $599.17
million (December 31, 2018 – $530.24 million). These assets
are the property of the account holders and Olympia Trust does
not maintain effective control over the assets. Therefore, the
assets are not reflected in the consolidated financial statements.
Olympia earned trust income from the cash portion of the assets
held in trust of $12.16 million for the year ended December 31,
2019 (December 31, 2018 – $10.28 million).

Private Health Services Plan division (“Health”)

At December 31, 2019, Health held funds in trust of $11.46
million (December 31, 2018 – $11.02 million) on behalf of its
self-insured private health clients. These assets are the property
of the plan holders and OBI does not maintain effective control
over the assets. Therefore, the assets are not reflected in the
consolidated financial statements.

Foreign Exchange division (“FX”)

outstanding payments. These assets are the property of the
contract holders and Olympia Trust does not maintain effective
control over the assets. Therefore, the assets are not reflected in
the consolidated financial statements.

Corporate and Shareholder Services division (“CSS”)

At December 31, 2019, CSS held funds in trust and outstanding
cheques of approximately $15.23 million (December 31, 2018
– $nil) for clients who have hired Olympia Trust to provide
trustee services. These assets are the property of the trust
clients and Olympia Trust does not maintain effective control
over the assets. Therefore, the assets are not reflected in the
consolidated financial statements.

Management of capital resources
Olympia includes shareholders’ equity, which comprises share
capital, contributed surplus, non-controlling interest and retained
earnings, in the definition of capital. Olympia’s main objectives
when managing its capital structure are to:

• Maintain sufficient cash and cash equivalents over the
short and medium term in order to finance its growth and
development, including capital expenditures;

• Maintain investor and creditor confidence to sustain future

development of the business;

• Maintain regulatory capital for Olympia Trust as required by the
Loan and Trust Corporations Act (Alberta) ($2 million). Similar

2019 Annual Report | Olympia Financial Group Inc.

regulatory capital is required by legislation in Nova Scotia ($5
million) and Saskatchewan ($5 million). Regulatory capital
is defined as share capital and retained earnings. Olympia
Trust has maintained these minimum capital requirements
throughout the year ended December 31, 2019; and

cash, its terms and availability, whether to issue equity and the
creation of value for the shareholders. Olympia works towards
managing its capital objectives to the extent possible while
facing the challenges of market conditions and the public’s
assessment of Olympia’s risk profile.

• Maintain compliance with financial covenants, which includes
maintaining a minimum equity of $12 million. The financial
covenants are reviewed, and controls are in place to maintain
compliance with the covenants. Olympia complied with its
financial covenants for the year ended December 31, 2018,
and for the year ended December 31, 2019.

In managing capital, Olympia estimates its future dividend
payments and capital expenditures, which are compared to
planned business growth for purposes of sustainability. The
capital structure of Olympia is managed and adjusted to reflect
changes in economic conditions. In order to maintain or adjust
the capital structure, adjustments may be made to the amount
of dividends (if any) to shareholders, in addition to the number
of new common shares issued or common shares repurchased.
Management reviews the financial position of Olympia on a
monthly and cumulative basis.

Financing decisions are set based on the timing and extent of
expected operating and capital cash outlays. Factors considered
when determining capital and the amount of operational cash
required are weighed against the costs associated with excess

Olympia maintains a strong capital base to maintain investor
and creditor confidence and to sustain future development of
the business.

Olympia has committed capital resources to its 2020 Objectives
(set out previously) and has sufficient capital through internally
generated cash flows and its credit facility to meet these
spending objectives.

Completing and fulfilling its 2020 Objectives will help Olympia
meet its growth and development activities. No other significant
expenditure is required to maintain growth and development
activities.

Olympia’s FX division maintains various foreign currency bank
accounts of which Canadian dollar and United States dollar
bank accounts are the most significant. It is Olympia Trust’s
policy to limit the amount of foreign currencies on hand to $1.50
million to reduce exposure to foreign currency risk.

Olympia’s capital management objectives have remained
substantially unchanged over the years presented.

2019 Annual Report | Olympia Financial Group Inc.

CRAIG SKAUGE, ANDREA GILLIS, JASON WAGNER AND KELLY REVOLCelebrating 3 years of dedicated serviceLiquidity
Liquidity risk is the risk that Olympia will encounter difficulties in
meeting its financial obligations. Olympia manages its liquidity
risk by keeping surplus cash with a highly rated financial
institution. This allows Olympia to earn interest on surplus cash
while having access to it within a short time. Olympia seeks to
ensure the security and liquidity of these investments.

Olympia has a current ratio (current assets: current liabilities)
of 1.70:1 as at December 31, 2019, compared to 2.14:1 as at
December 31, 2018. The ratio indicates that Olympia should not
have difficulty in meeting working capital requirements.

There are no legal or practical restrictions on the ability of
subsidiaries to transfer cash to Olympia.

Cash flows

Operating activities

The movement in cash flow from operating activities for the
year ended December 31, 2019, is mainly attributable to the
movement in foreign exchange (gain)/loss when compared
to 2018.

Investing activities

The movement in cash used in investing activities during the year
ended December 31, 2019, is mainly attributable to additional
collateral requirements for the FX division and capital asset
expenditure in the RRSP and EEI divisions when compared
to 2018.

Financing activities

Cash used in financing activities during the year ended
December 31, 2019, increased, mainly due to the discontinued
operation cash outflow in the previous year.

Cash
Cash is placed with a Canadian financial institution where it
generates interest. Cash and cash equivalents comprise 67%
of the total current assets of Olympia, compared to 79% as at
December 31, 2018.

One factor that affects Olympia’s profitability is effective
interest rates. Although Olympia Trust is a non-deposit taking
trust corporation, it does earn trust income on cash held in
trust. Cash held in trust generated trust income of $12.16
million, an 18% increase from $10.28 million when compared
to the year ended December 31, 2018, due to the average
Canadian prime rate being higher in 2019 than in 2018. The
Canadian prime rate was 3.95% on December 31, 2019, and
December 31, 2018.

Olympia, through its operational cash flow and line of credit, has
sufficient funds to meet its Objectives for 2020.

Liquidity risks associated with financial
instruments are
addressed in the notes to the accompanying consolidated

financial statements. Management understands that currency
markets are volatile and therefore subject to higher risk.
Olympia’s FX division mitigates currency risk through its
policy of limiting the amount of foreign currencies on hand to
$1.50 million.

Commitments

Olympia leases various offices under lease agreements. The
initial lease terms are between twelve months and fifty months
and the majority of lease agreements are renewable at market
rates when the lease period ends.

Future aggregate contractual minimum lease payments are
listed in the table below:

2020

2021

2022

December 31, 2019

1,013,885

923,397

147,932

2,085,214

Credit facility
As at December 31, 2019, Olympia has drawn $6.66 million on
its credit facility, compared to $4.21 million as at December 31,
2018. On March 15, 2019, Olympia increased the credit facility
amount from $8.50 million to $15 million. Amounts drawn in the
current year have been used to facilitate the additional trading
collateral requirements for the FX division and to finance the
growth of the Exempt Edge division. The credit facility provides
a maximum of $15 million and bears interest at the Canadian
prime rate plus 0.25%. The Canadian prime rate at December 31,
2019 and December 31, 2018 , was 3.95%. The credit facility is
subject to review at any time.

The credit facility contains a number of affirmative covenants,
including maintaining specific security, maintaining a specific
financial ratio, and maintaining a total equity of $12 million.
The financial ratio is a quarterly cash flow coverage ratio of
not less than 1.50:1. At December 31, 2019, Olympia’s cash
flow coverage ratio under the terms of the credit facility was
calculated to be 1.99:1 (December 31, 2018 – 3.23:1). Total
equity as at December 31, 2019 was $17.93 million, compared
to total equity of $15.08 million at December 31, 2018.

The cash flow coverage calculation is based on Olympia’s
previous four quarters’ revolving Earnings Before Interest, Tax,
and Depreciation and Amortization (“EBITDA”) less cash taxes
paid. This revolving EBITDA for the year ended December 31,
2019, has been calculated at $11.47 million (December 31,
2018 – $10.79 million) after adjusting for finance expenses of
$0.34 million (December 31, 2018 – $0.15 million). The coverage
required is based on an annualized average of the scheduled
facility principal of $15 million and interest payments calculated
at 5.13% (December 31, 2018 – 5.99%) over a period of 36

2019 Annual Report | Olympia Financial Group Inc.

months. As at December 31, 2019, this was calculated to be
$5.77 million (December 31, 2018 – $3.34 million). Should the
covenants and other limitations be breached, it could cause
a default, which might result in a requirement for immediate
repayment of all amounts outstanding.

Security for the credit facility includes a general security
agreement providing a first security charge over all present and
after acquired property.

Subsequent to year end, the credit facility was amended to
divide the facility between Olympia and Olympia Trust. The
new agreements provides Olympia with a $9 million facility and

Olympia Trust with a $6 million facility.

On May 16, 2016, Olympia Trust entered into a contingent credit
facility to be used only by the FX division. The contingent credit
facility had a maximum of $5 million, which was only to be used
to enter into spot, forward or foreign exchange transactions
with the issuing financial institution. For the year ended
December 31, 2019, the agreement has been replaced with a
new demand credit facility with a US$6 million limit.

As as December 31, 2019, no amounts have been drawn on
this facility.

Credit facility

Available balance at January 1

Drawn

Available at the end of the year

December 31, 2019

December 31, 2018

15,000,000

(6,655,347 )

8,344,653

8,500,000

(4,207,347 )

4,292,653

Risk framework
Olympia is exposed to various types of risks owing to the
nature of the commercial activities it pursues. Management has
identified the following risks:

Liquidity risk

Liquidity risk is the risk that Olympia will encounter difficulties in
meeting its financial obligations. Olympia manages its liquidity
risk by keeping surplus cash in liquid investments with a highly
rated financial institution. This allows Olympia to earn interest on
surplus cash while having access to it within a very short time.

Liquidity risk is associated with Olympia’s credit facility. The
credit facility is available to finance day-to-day operations to a
maximum principal amount of $15 million (December 31, 2018 –
$8.50 million) and bears interest at the Canadian prime rate plus
0.25%. For the year ended December 31, 2019, a balance of
$6.66 million is outstanding (December 31, 2018 – $4.21 million).
Olympia has determined the principal and interest to be current.

Security for the credit facility includes a general security
agreement providing a first security interest in all present and
subsequently acquired property.

The timing of cash outflows is outlined in the following tables:

At December 31, 2019

Current

31 to 60 days

61 to 90 days Over 90 days

Total

Trade and other payables

$ 1,388,733

67,433

Other liabilities and charges

Lease liabilities

Total

At December 31, 2018

Trade and other payables

Other liabilities and charges

Total

1,732,886

73,616

73,984

74,353

685,113

$ 1,456,166

1,732,886

907,066

$ 3,195,235

141,417

74,353

685,113

$ 4,096,118

$ 1,341,291

1,259,435

$ 2,600,726

601

$ 1,341,892

1,259,435

$ 2,601,327

At December 31, 2019, trade and other payables totaled $1.46 million (December 31, 2018 – $1.34 million). Olympia continues to meet
all of the obligations associated with its financial liabilities. Other liabilities and charges with a cash outflow are identified in Note 19 of the
consolidated financial statements, except for leasehold inducement, straight-line rent and onerous contract obligations in the prior year.

Olympia continues to meet all of the obligations associated with its financial liabilities.

2019 Annual Report | Olympia Financial Group Inc.

The aging of the undiscounted lease payments is outlined in the following table:

At December 31, 2019

Lease payments

Less than
one year

One to
two years

Two to
three years

More than
three years

Total
undiscounted
lease payments

$ 1,013,885

923,397

147,932

$ 2,085,214

The liquidity risk relating to derivative financial instruments payable is outlined in the following table:

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1–3 years)

Market risk

Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
prices, following variations in the parameters underlying their
evaluation, such as interest rates, exchange rates or quoted
stock market prices, and is comprised of foreign currency
exchange risk, interest rate risk, management’s assessment and
operational risks.

Foreign currency exchange risk

Olympia is exposed to changes in foreign exchange rates when,
and if, revenues or financial instruments fluctuate because of
changing rates. Transactions in the applicable financial market
are executed consistent with established risk management
policies. Olympia purchases forward contracts whenever it
enters into a transaction to buy or sell foreign currency in the
future. These contracts are both short term and long term in
nature and are in the normal course of business. Management
understands that the currency markets are volatile and therefore
subject to higher risk.

Olympia applies the following policy to mitigate the currency
risk:

• For forward contracts, a margin of 5% is payable on signature

of the contract;

• Olympia sets up a corresponding position with its currency

supplier; and

• If market rates vary by 4% or more, the client is required to
adjust their margin to match the variance by the end of the
trading day.

December 31, 2019

December 31, 2018

7,766

32,175

11,733

605,585

657,259

887,020

15,210

19,473

16,849

108,948

160,480

If the United States dollar to Canadian dollar exchange rate
at December 31, 2019, were to have increased by $0.10, it is
estimated that Olympia’s after-tax earnings for the year ended
December 31, 2019, based on amounts shown in Notes 11 and 13
of the consoidated financial statements, would have decreased
by approximately $232,876 (December 31, 2018 – $91,464).
A $0.10 decrease in the United States dollar to Canadian dollar
exchange rate would have had an equal but opposite effect.
The vast majority of Olympia’s Foreign Exchange division’s
trades are Canadian dollars traded for United States dollars
and vice versa, although it trades in various other currencies.
This sensitivity analysis assumes that all other variables
remain constant.

Interest rate risk

Interest rate risk is the risk that the value of a financial
instrument will fluctuate because of changes in market interest
rates. Olympia is exposed to interest rate risk as the cash
flows generated from Olympia’s own cash ($13.75 million)
and the cash portion of the off-balance sheet arrangements
($569.60 million), from which Olympia Trust earns trust income,
are held in interest bearing instruments that fluctuate in response
to changes in market interest rates.

If the interest rates were to have increased by 1%, it is
estimated that Olympia’s after-tax earnings for the year ended
December 31, 2019, would have increased by approximately

2019 Annual Report | Olympia Financial Group Inc.

$4.14 million (December 31, 2018 – $3.76 million). A 1%
decrease in interest rates would have had an equal but opposite
effect. This sensitivity analysis assumes that all other variables
remain constant.

Credit risk

Credit risk is the risk that the counterparty to a financial asset will
default, resulting in Olympia incurring a financial loss. Before
transactions begin with a new customer or counterparty, the
counterparty’s creditworthiness is assessed by the FX division.
The assessment practice considers both quantitative and
qualitative factors. Olympia constantly monitors the exposure
to any single customer or counterparty along with the financial
position of the customer or counterparty. If it is deemed that
a customer or counterparty has become materially weaker,
Olympia will work to reduce the credit exposure and lower the
credit limit allocated. Olympia is exposed to credit risk on its
cash and cash equivalents, restricted cash and investments,

trade and other receivables and derivative financial instruments
receivable. The maximum exposure to credit risk of Olympia
at the end of the year is the carrying value of cash and cash
equivalents, restricted cash and investments, trade and other
receivables and derivative financial instruments receivable.

Cash and cash equivalents

Olympia mitigates its exposure to credit risk by maintaining its
bank accounts with a highly rated financial institution.

Trade and other receivables

Olympia has policies and procedures in place to govern the
credit risk it will assume. Trade receivables over 90 days are
considered past due. As of December 31, 2019, net trade
receivables of $2.83 million (December 31, 2018 – $2.04 million)
were past due but deemed not impaired. The aging of trade and
other receivables is as follows:

Current

31 to 60 days

61 to 90 days

Over 90 days

Allowance for doubtful accounts

December 31, 2019

December 31, 2018

247,890

19,093

7,337

3,813,030

(981,584 )

3,105,766

196,911

12,657

24,234

2,609,598

(571,363 )

2,272,037

The allowance for doubtful accounts is based on an account portfolio analysis. Movements on Olympia’s provision for impairment of
trade receivables are as follows:

At January 1

Increase in provision

Receivables written off

Allowance for doubtful accounts

December 31, 2019

December 31, 2018

571,363

478,930

(68,709 )

981,584

613,822

269,437

(311,896 )

571,363

Included within receivables is the current portion of a lease
receivable of $0.04 million recognized based on the present
value of sublet property, as required by the newly adopted
IFRS 16.

The balance relates to a number of independent clients which
Olympia is actively pursuing through its internal collection
process. As a result, management considers the outstanding
amounts to be recoverable.

The provision for impaired receivables has been included in
administrative expenses in the consolidated statements of net
earnings and comprehensive income. Amounts charged to the
allowance account are generally written off when there is no
expectation of recovering additional cash.

Capital risk management

Olympia’s objectives when managing capital are to safeguard
Olympia’s ability to continue as a going concern in order to
provide returns and benefits to shareholders and to maintain
an optimal capital structure to reduce the cost of capital and
to meet minimum regulatory capital requirements. In order to
maintain or adjust the capital structure, Olympia may adjust
the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares, repurchase shares, sell assets
or make further use of its credit facility.

Olympia
includes shareholders’ equity of $17.93 million
(December 31, 2018 – $15.08 million) in the definition of capital.
Shareholders’ equity comprises share capital, contributed
surplus, non-controlling interest and retained earnings.

2019 Annual Report | Olympia Financial Group Inc.

Olympia’s main objectives when managing its capital structure
are to:

• The occurrence of weather related and other natural

catastrophes;

• Maintain sufficient cash and cash equivalents over the
short and medium term in order to finance its growth and
development, including capital expenditures;

• Maintain investor and creditor confidence to sustain future
development of the business. Olympia’s objective when
managing capital is to maintain adequate financial flexibility to
preserve its ability to meet financial obligations. In managing
capital, Olympia estimates its future dividend payments and
capital expenditures, which is compared to planned business
growth for purposes of sustainability;

• Maintain regulatory capital for Olympia Trust as required by
the Loan and Trust Corporations Act (Alberta) ($2 million).
Similar regulatory capital
in
Nova Scotia ($5 million) and Saskatchewan ($5 million).
is defined as share capital and
Regulatory capital
retained earnings. Olympia Trust has maintained these
minimum capital requirements throughout the year ended
December 31, 2019; and

is required by

legislation

• Maintain compliance with financial covenants, which includes
maintaining a minimum equity of $12 million. The financial
covenants are reviewed quarterly, and controls are in
place to maintain compliance with the covenants. Olympia
complied with its financial covenants for the year ended
December 31, 2019.

The capital structure of Olympia is managed and adjusted
to reflect changes in economic conditions. Capital structure
adjustments could include adjusting the level of dividends
and/or issuance or repurchase of common shares. In support
thereof, management reviews the financial position of Olympia
on a monthly and cumulative basis. Financing decisions are
set based on the timing and extent of expected operating and
capital cash outlays. Factors considered when determining
capital and the amount of operational cash requirements are
weighed against the costs associated with excess cash, its
terms and availability and whether to issue equity. Olympia
works towards managing its capital objectives to the extent
possible while facing the challenges of market conditions and
the public’s assessment of Olympia’s risk profile. Olympia’s
capital management objectives have remained substantively
unchanged over the periods presented.

Operational risks

Management has identified the following major operational risks
which could negatively affect Olympia’s future strategies and
objectives:

• The risk of fluctuations in interest rates and currency values

negatively affecting Olympia’s business;

• Legal developments and changes in tax laws;

• The risk that the regulatory environment in which Olympia

carries out commercial activities may change;

• The level of competition in Olympia’s markets;

• The risk that new markets may fail to produce estimated

revenues;

• The risk of changes in accounting standards and policies;

• The risk that negative stakeholder impressions about Olympia’s
business practices, actions or inaction, whether true or not,
could cause deterioration in Olympia’s value, brand, liquidity,
or customer base;

• The risk that general economic conditions could deteriorate
and any significant downturn in capital markets or the general
economy could negatively affect financial results;

• The cybersecurity risk that failure of computer hardware, data
processing systems, network access and software could
interrupt operations or materially impact Olympia’s ability to
deliver its services; and

• The accuracy and completeness of information Olympia

receives about customers and counterparties.

Olympia’s corporate insurance program further mitigates certain
operational risk exposures. Olympia looks to industry benchmarks
as well as legal, regulatory and contractual requirements when
deciding on types of coverage and limits. Coverage is placed
at limits considered appropriate for Olympia’s size, structure
and type of operations. Olympia reviews the insurance program
annually to ensure it remains well suited and compliant with
regulations and requirements.

Accounting policies
The financial information contained in the accompanying
financial statements and this MD&A is prepared in accordance
with IFRS as issued by the IASB. The accounting policies
adopted are consistent with those in the prior years except as
noted below. In addition, some accounting policies, due to their
nature, require further explanation.

A new amended standard became applicable for the current
reporting year and Olympia had to change its accounting
policies as a result of adopting the following standards:

• IFRS 16 “Leases”

The impact of the adoption of this standard and the new
accounting policy is disclosed as follows.

2019 Annual Report | Olympia Financial Group Inc.

approach does not require restatement of prior year financial
information, as it recognizes the cumulative effect as an
adjustment to opening retained earnings and applies the
standard prospectively. Therefore, comparative information in
the consolidated balance sheets, consolidated statements of
net earnings and comprehensive income and statements of
cash flows has not been restated.

On adoption, management elected to use the following practical
expedients permitted under the standard:

• Apply a single discount rate to a portfolio of leases with similar

characteristics;

• Account for leases with a remaining term of less than twelve

months as at January 1, 2019, as short-term leases;

• Account for lease payments as an expense and not recognize
a right-of-use asset if the underlying asset is of a low dollar
value (less than $8,000); and

• Use Olympia’s previous assessment under IAS 37, “Provisions,
Contingent Liabilities and Contingent Assets” (“IAS 37”) for
onerous contracts instead of reassessing the right-of-use
assets for impairment on January 1, 2019.

Impacts of the adoption of IFRS 16

Notes

As reported at
December 31, 2018

Adjustments

Balance on
adoption as at

January 1, 2019

Assets

Trade and other receivables

Right-of-use assets, net

Long-term lease receivable

Liabilities and shareholders’ equity

Current portion of lease liabilities

Non-current lease liabilities

Other liabilities

Non-current other liabilities

Retained earnings

iii

Notes:

i. Sublease contract

On transition, Olympia reassessed the classification of its
sublease contracts previously classified as operating leases
under IAS 17. Olympia concluded that its sublease is a
finance lease under IFRS 16, and as a result, $0.14 million net
investment in finance lease was recognized on adoption of
IFRS 16.

ii. Right-of-use assets

The associated right-of-use assets were measured at the
amount equal to the lease liability on January 1, 2019, less
any amount previously recognized under IAS 37 for onerous
contract provisions,
lease
inducement liabilities. This resulted in a $19,977 adjustment to
retained earnings.

less previously

recognized

2,272,037

(1,528,078 )

(791,705 )

(7,214,540 )

(7,262,286 )

41,741

2,680,497

(73,635 )

(999,876 )

99,467

(855,387 )

(1,946,341 )

281,806

791,705

(19,977 )

2,313,778

1,606,986

99,467

(855,387 )

(1,946,341 )

(1,246,272 )

(7,234,517 )

(7,262,286 )

iii. Onerous contract provisions

On initial adoption, management applied the practical expedient
to use Olympia’s previous assessment under IAS 37 for onerous
contracts. This resulted in a reduction of $0.07 million to other
liabilities and charges.

iv. Other liabilities

On transition, Olympia applied the remaining balance of the
previously recognized lease inducements provision and straight-
line rent liability against the right-of-use assets. This resulted in a
reduction of $0.28 million in other liabilities and charges, and an
adjustment of $0.79 million to non-current other liabilities.

v. Lease liabilities

On adoption of IFRS 16, Olympia recognized lease liabilities
in relation to leases which had previously been classified
as operating leases under the principles of IAS 17, “Leases”

2019 Annual Report | Olympia Financial Group Inc.

(“IAS 17”). Under the principles of the new standard, these leases
have been measured at the present value of the remaining lease
payments, discounted using Olympia’s incremental borrowing
rate at January 1, 2019. The incremental borrowing rate as at
January 1, 2019 was 5.99%. Leases with a remaining term of
less than twelve months and low-value leases were excluded.
Total lease liabilities of $2.8 million were recorded as at
January 1, 2019.

Reconciliation of commitments to lease liability

The following table provides a reconciliation of the commitments
as at December 31, 2018, to Olympia’s lease liabilities as at
January 1, 2019:

Reconciliation of lease
liabilities

Office space

Less: Short-term leases

Lease liabilities commitments
as at December 31, 2018

Impact of discounting

Lease liabilities as at
January 1, 2019

Total

3,105,795

(44,440 )

3,061,355

(259,627 )

2,801,728

Update to significant accounting policies

Leases

Olympia applied IFRS 16 using the modified retrospective
approach; therefore, the comparative information provided
continues to be accounted for in accordance with Olympia’s
previous accounting policy found in the annual consolidated
financial statements for the year ended December 31, 2018.

The following accounting policy is applicable from January 1,
2019:

Olympia assesses whether a contract is a lease based on
whether the contract conveys the right to control the use
of an underlying asset for a period of time in exchange for
consideration.

Lease payments are allocated between the liability and finance
costs. The finance cost is charged to net earnings over the
lease term.

The lease liability is measured at amortized cost using the
effective interest method. It is remeasured when there is a
change in the future lease payments arising from a change in
an index or rate.

When the lease liability is remeasured, a corresponding
adjustment is made to the carrying amount of the right-of-use
asset or an adjustment is recorded in the consolidated statement
of earnings if the carrying amount of the right-of-use asset has
been reduced to zero.

The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability and any initial
direct costs incurred, less any lease payments made at or before
the commencement date.

The right-of-use asset is depreciated, on a straight-line basis,
over the shorter of the estimated useful life of the asset or the
lease term. The right-of-use asset may be adjusted for certain
remeasurements of the lease liability and impairment losses.

Leases that have terms of less than twelve months or leases on
which the underlying asset is of low value are recognized as an
expense in the statements of net earnings and comprehensive
income on a straight-line basis over the lease term.

A lease modification will be accounted for as a separate
lease if the modification increases the scope of the lease
and if the consideration for the lease increases by an amount
commensurate with the stand-alone price for the increase in
scope. For a modification that is not a separate lease or where
the increase in consideration is not commensurate, Olympia will,
at the effective date of the lease modification, remeasure the
lease liability. Olympia will use its incremental borrowing rate
when the rate implicit to the lease is not readily available, and
will make a corresponding adjustment to the right-of-use asset.
A modification that decreases the scope of the lease will be
accounted for by decreasing the carrying amount of the right-
of-use asset and recognizing a gain or loss in net earnings that
reflects the proportionate decrease in scope.

As lessee

As lessor

Leases are recognized as a right-of-use asset and a
corresponding lease liability at the date on which the leased
asset is available for use by Olympia. Assets and liabilities
arising from a lease are initially measured on a present value
basis. Lease liabilities include the net present value of fixed
payments and payments of penalties for terminating the lease,
less any lease incentives receivable. These payments are
discounted using Olympia’s incremental borrowing rate when
the rate implicit in the lease is not readily available. Olympia uses
a single discount rate for a portfolio of leases with reasonably
similar characteristics.

As a lessor, Olympia assesses at inception whether a lease is
a finance or operating lease. Leases where Olympia transfers
substantially all of the risk and rewards incidental to ownership
of the underlying asset are classified as financing leases. Under
a finance lease, Olympia recognizes a receivable at an amount
equal to the net investment in the lease, which is the present
value of the aggregate of lease payments receivable by the
lessor. If substantially all the risks and rewards of ownership
of an asset are not transferred, the lease is classified as an
operating lease. Olympia recognizes lease payments received
under operating leases as other income on a straight-line basis
over the lease term.

2019 Annual Report | Olympia Financial Group Inc.

When Olympia is an intermediate lessor, it accounts for its
interest in the head lease and the sublease separately. It
assesses the lease classification of a sublease with reference to
the right-of-use asset from the head lease, not with reference to
the underlying assets. If the head lease is a short-term lease to
which Olympia applies the exemption for lease accounting, the
sublease is classified as an operating lease.

Impacts on financial statement

Impacts for the year

In relation to leases under IFRS 16, Olympia has recognized
depreciation and interest costs instead of recognizing an
operating lease expense. During the year ended December 31,
2019, Olympia recognized $0.53 million of depreciation charge
related to the right-of-use assets and $0.14 million in interest
costs related to the lease liabilities from these leases.

Critical accounting judgments and estimate
uncertainty

Critical judgments in determining the lease term

In determining the lease term, management considers all
facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination
option. The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this
assessment.

Critical accounting estimates
The preparation of financial statements requires management to
make judgments, estimates and assumptions based on currently
available information that affects the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Estimates and judgments are evaluated and
are based on management’s experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances.

However, actual results could differ from these estimates. By
their very nature, these estimates are subject to measurement
uncertainty, and the effect on the financial statements of
future periods could be material. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected.

In the process of applying Olympia’s accounting policies,
management has made the following judgments, estimates
and assumptions which have the most significant effect on the
amounts recognized in the consolidated financial statements.

(i) Discontinued operations

Olympia presents discontinued operations on a separate line in
the consolidated statements of net earnings and comprehensive
income if a major line of business has been disposed of or is
classified as held for sale.

Net loss from discontinued operations includes the net total of
operating profit and loss before tax. Net loss includes, net gain
or loss on sale before tax or measurement to fair value, less
costs to sell and tax expense. A major line of business comprises
operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest
of Olympia’s operations and cash flows. If a major line of business
is classified as a discontinued operation, Olympia restates
prior periods in the consolidated statements of net earnings.
Non-current assets classified as held for sale are measured at
the lower of carrying amount and fair value less costs to sell. These
measurement provisions do not apply to deferred tax assets
and liabilities, or financial assets. Non-current assets are
classified as held for sale if their carrying amount will be
recovered through a sale transaction rather than through
continuing use. This condition is regarded as met only when the
sale is highly probable and the asset is available for immediate
sale in its present condition, subject to terms that are usual
and customary for sales of such assets. Management must be
committed to the sale and must actively market the business for
sale at a price that is reasonable in relation to the current fair
value. The sale should be expected to qualify for recognition as
a completed sale within one year from the date of classification.

(ii) Allowance for doubtful accounts (Note 7)

Olympia regularly performs a review of outstanding accounts
receivable balances to determine eventual collectability. A
provision for bad debt is recorded based on historical information
or if an account is deemed uncollectable. Olympia analyzes the
bad debt provision regularly to determine if any of the accounts
provided for should be written off. Those accounts which are
deemed uncollectable could materially change as a result
of changes in a customer’s financial situation. This includes
risks associated with the gross receivable position on foreign
exchange forward contracts, which are all assessed regularly
for impairment.

(iii) Depreciation and amortization methods

(Notes 14 and 15)

Olympia estimates the useful lives of property, plant and
equipment and intangible assets, based on the period over
which the assets are expected to be available for use.

The estimated useful lives are reviewed periodically and are
updated if expectations differ from previous estimates due to
physical wear and tear, technical or commercial obsolescence
and legal or other limits on the use of the relevant assets. In
addition, the estimation of the useful lives is based on internal
technical evaluation, current facts and past experience with
similar assets, and takes into consideration the anticipated
expected life of the asset, existing long-term agreements and
contracts, current and forecasted demand and the potential
for technological obsolescence. It is possible, however, that
future results of operations could be materially affected by
changes in estimates brought about in turn by changes in the
factors mentioned above. The amounts and timing of recorded

2019 Annual Report | Olympia Financial Group Inc.

expenses for any period would also be affected by changes in
these factors and circumstances.

(iv) Impairments (Note 15)

Olympia performs impairment tests of assets when indications
of impairment exist. Application of judgment is required
in determining whether an impairment test is warranted.
Impairment exists when the carrying value of an asset or Cash-
Generating Unit (“CGU”) exceeds its recoverable amount, which
is the higher of (a) its fair value less costs of disposal and (b)
its value in use. The fair value less costs of disposal calculation
is estimated using valuation techniques such as a discounted
cash flow model adjusted to reflect the considerations of any
prospective third-party buyer. The value in use calculation is
based on the present value of expected cash flows. The cash
flows are derived from internal budgets and do not include
restructuring activities that Olympia is not yet committed to
or significant future investments that will enhance the asset’s
performance or the CGU being tested. The recoverable amount
is most sensitive to the discount rate used for the present value of
expected cash flows. It is also sensitive to expected transaction
volumes, future operating costs, tax rates, margins and the
growth rate used for extrapolation purposes. There is a certain
amount of subjectivity and judgment in the determination of the
recoverable amount calculation. Judgments and assumptions,
described in notes 7, 14 and 15, are subject to measurement
uncertainty, and the impact of differences between actual and
estimated amounts on the consolidated financial statements of
future periods could be material.

When indicators support that the asset is no longer impaired,
Olympia will reverse impairment losses. Similar to the
impairment, application of judgment is required to determine
whether a reversal should be considered.

(v) Income taxes (Note 21)

Olympia calculates an income tax provision in each of the
jurisdictions in which it operates. Estimation of income taxes
includes evaluating the recoverability of deferred tax assets
based on an assessment of the ability to use the underlying
future tax deductions against future taxable income before
the deductions expire. The assessment is based on existing
tax laws and estimates of future taxable income. Further,
there are transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of
business. Provisions are made using the best estimate of the
amount expected to be paid based on a qualitative assessment
of all relevant factors. Olympia reviews the adequacy of these
provisions at each reporting period. However, it is possible
that at some future date an additional liability could result from
audits by taxation authorities. Where the final outcome of these
tax-related matters is different from the amounts that were
initially recorded, such differences will affect the tax provisions
in the period in which such determination is made.

(vi) Revenue

Olympia applies judgment to determine whether fee revenue
should be recognized on a gross basis or net of fees paid to the
merchant or insurer for providing, processing, and maintaining
the service to a customer. Pursuant to the guidance in IFRS
15, Olympia has assessed whether to record such payments
as a reduction of associated service revenues or as a direct
expense. Olympia determines whether the nature of its promise
to customers is a performance obligation to provide the service
itself or to arrange for that service to be provided by another
party. Specific factors considered are, whether Olympia acts
as the principal and is the primary obligor in performance
obligations, provides the processing for the performance
obligations, has significant influence over pricing and has the
risks and rewards of ownership, including a variable earnings
component and the risk of loss for collection. Olympia has full
discretion over the price of the services and therefore has no
unfulfilled obligations that could affect clients acceptance of
the service. Olympia recognizes insurance fees on a net basis.
As a result, for agreements under which Olympia acts as the
principal, Olympia records the total amounts earned from the
underlying performance obligations as service revenues and
records the related merchant expense as a direct expense of
operating revenues. However, for those agreements in which
Olympia does not meet the criteria to qualify as the principal in a
performance obligation, Olympia does not record the related fee
revenue, as the rights associated with this revenue stream are
attributable to the benefit of the merchant. Olympia records fee
revenue under these arrangements on a net basis.

Whether Olympia is considered to be the principal or an
agent in a performance obligation depends on analysis
by management of both the legal form and substance of
the agreement between Olympia and the merchant. Such
the amount of reported revenue and
judgments
expenses, but do not impact reported assets, liabilities or
cash flows.

impact

(vii) Lease term

In determining the lease term, management considers all
facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination
option. The assessment is reviewed if a significant event or
a significant change in circumstances occurs which affects
this assessment.

Future accounting pronouncements
There are no new or amended accounting standards issued
during the year ended December 31, 2019, that are applicable
to Olympia in future periods.

2019 Annual Report | Olympia Financial Group Inc.

Evaluation of disclosure controls and procedures and
internal control over financial reporting
The President and Chief Executive Officer (“CEO”) and Vice
President, Finance and Chief Financial Officer (“CFO”) of
Olympia are responsible for establishing and maintaining
Disclosure Controls and Procedures (“DC&P”) and Internal
Control over Financial Reporting (“ICFR”) for Olympia.

DC&P are designed to provide reasonable assurance that
material information relating to Olympia is made known to the
CEO and CFO by others, particularly in the period in which the
annual filings are being prepared, and that information required
to be disclosed in documents filed with securities regulatory
authorities is recorded, processed, summarized and reported
within the time periods specified in securities legislation, and
includes controls and procedures designed to ensure that such
information is accumulated and communicated to Olympia’s
management, including the CEO and CFO, as appropriate,
to allow timely decisions regarding required disclosure. ICFR
is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS.

In accordance with the requirements of National Instrument
52-109 “Certification of Disclosures in Issuer’s Annual and
Interim Filings,” an evaluation of the effectiveness of DC&P and
ICFR was carried out under the supervision of the CEO and
CFO at December 31, 2019. Based on this evaluation, the CEO
and CFO have concluded that, Olympia’s DC&P and ICFR are
effective and operating as intended.

Olympia’s management, including the CEO and CFO, does not
expect that Olympia’s DC&P and ICFR will prevent or detect all
misstatements or instances of fraud. The inherent limitations in all
control systems are such that they can provide only reasonable,
not absolute, assurance that all control issues, misstatements or
instances of fraud, if any, within Olympia have been detected.

There was no change to Olympia’s ICFR during the most recent
annual period that has materially affected, or is reasonably likely
to materially affect, Olympia’s ICFR.

Outstanding share data
As at February 27, 2020, Olympia has an aggregate of
2,406,336 common shares issued and outstanding.

Additional information
Further information regarding Olympia can be accessed under
Olympia’s public filings found at www.sedar.com.

to contact Olympia’s

Shareholders seeking
independent
directors may do so by calling Rick Skauge, Olympia’s
President and CEO, at 403-261-7501 or by email at
ricks@olympiafinancial.com.

2019 Annual Report | Olympia Financial Group Inc.

MANAGEMENT’S RESPONSIBILITY FOR THE CONSOLIDATED
FINANCIAL STATEMENTS

For the years ended December 31, 2019, and
December 31, 2018
The accompanying consolidated financial statements and all
the data included in this report have been prepared by and are
the responsibility of the Board of Directors and management of
Olympia Financial Group Inc. (“Olympia”).

The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
as set out in the Handbook of the Chartered Professional
Accountants of Canada and reflect management’s best estimates
and judgments based on currently available information. In the
opinion of management, the consolidated financial statements
have been prepared within acceptable limits of materiality
and are in accordance with International Financial Reporting
Standards appropriate in the circumstances.

The Board of Directors has reviewed and approved the
accompanying consolidated financial statements for the years
ended December 31, 2019, and December 31, 2018.

The Audit Committee, comprised of non-management
directors, acts on behalf of the Board of Directors to ensure that
management fulfills its financial reporting and internal control
responsibilities. Management maintains appropriate systems of

internal control. Policies and procedures are designed to give
reasonable assurance that transactions are properly authorized,
records properly
assets are safeguarded and financial
maintained to provide reliable information for the preparation of
the consolidated financial statements.

Internal controls are further supported by an internal audit function
which conducts periodic audits of Olympia’s financial reporting
and internal controls. The internal audit function reports to the
Audit Committee. In performing its duties, the Audit Committee
acts only in an oversight capacity and necessarily relies on the
work and assurances of Olympia’s management.

Olympia’s independent auditor, PricewaterhouseCoopers LLP,
has performed an audit on these consolidated financial
statements in accordance with the standards established by
the Chartered Professional Accountants of Canada. Their report
outlines the scope of their examination and opinion.

Signed Rick Skauge

Signed Gerhard Barnard

Rick Skauge
President and Chief Executive Officer

Gerhard Barnard, CPA, CMA
Chief Financial Officer

Calgary, Canada, February 27, 2020

2019 Annual Report | Olympia Financial Group Inc.

Independent auditor’s report

To the Shareholders of Olympia Financial Group Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Olympia Financial Group Inc. and its subsidiaries (together, the Company) as at
December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards (IFRS).

What we have audited
The Company’s consolidated financial statements comprise:

●

the consolidated balance sheets as at December 31, 2019 and 2018;

the consolidated statements of net earnings and comprehensive income for the years then ended;

the consolidated statements of changes in equity for the years then ended;

the consolidated statements of cash flows for the years then ended; and

the notes to the consolidated financial statements, which include a summary of significant
accounting policies.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical
responsibilities in accordance with these requirements.

Other information

Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis and the information, other than the consolidated financial statements and our
auditor’s report thereon, included in the Annual Report.

PricewaterhouseCoopers LLP
111-5th Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3
T: +1 403 509 7500, F: +1 403 781 1825

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

2019 Annual Report | Olympia Financial Group Inc.

Our opinion on the consolidated financial statements does not cover the other information and we do not

express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the

other information identified above and, in doing so, consider whether the other information is materially

inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or

otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other

information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the

consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with IFRS, and for such internal control as management determines is necessary

to enable the preparation of consolidated financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to liquidate

the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with Canadian generally accepted auditing standards will always

detect a material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise

professional judgment and maintain professional skepticism throughout the audit. We also:

●

Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk

of not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the
consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

●

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

2019 Annual Report | Olympia Financial Group Inc.

●

Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
We communicate with those charged with governance regarding, among other matters, the planned scope
safeguards.
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
The engagement partner on the audit resulting in this independent auditor’s report is Peter Harris.

(Signed) “PricewaterhouseCoopers LLP”

Chartered Professional Accountants
Chartered Professional Accountants

Calgary, Alberta
Calgary, Alberta
February 27, 2020
February 27, 2020

2019 Annual Report | Olympia Financial Group Inc.

CONSOLIDATED BALANCE SHEETS

($)

ASSETS
Current assets

Cash & cash equivalents (note 11)
Trade & other receivables (note 7)
Inventory
Prepaid expenses
Derivative financial instruments (notes 7 and 13)

Total current assets

Non-current assets

Restricted cash & investments (note 10)
Equipment & other (note 14)
Intangible assets (note 15)
Right-of-use assets (note 16)
Financial asset at fair value through other comprehensive income
Long-term lease receivable (note 7)
Promissory note receivable (note 5)
Derivative financial instruments (notes 7 and 13)
Deferred tax assets (note 21)

Total non-current assets
Total assets
LIABILITIES
Current liabilities

Trade & other payables (notes 7 and 17)
Deferred revenue (note 18)
Other liabilities & charges (note 19)
Revolving credit facility (notes 12 and 29)
Lease liabilities (note 8)
Derivative financial instruments (notes 7 and 13)
Current tax liability
Total current liabilities

Other liabilities (note 19)
Lease liabilities (note 8)
Derivative financial instruments (notes 7 and 13)

Total liabilities
EQUITY

Share capital (note 20)
Contributed surplus (note 20)
Retained earnings

Equity attributable to owners of Olympia

Non-controlling interests

Total equity
Total equity & liabilities
Commitments and contingencies (notes 30 and 31)

December 31, 2019

December 31, 2018

13,754,089
3,105,766
56,518
1,270,284
2,177,020
20,363,677

2,500,000
1,120,955
2,748,214
1,073,064
38,574
55,156
1,400,000
1,840,389
786,200
11,562,552
31,926,229

1,456,166
486,655
1,732,886
6,655,347
907,066
657,259
176,795
12,072,174
-
1,038,286
887,020
13,997,480

7,886,989
86,373
10,164,595
18,137,957
(209,208 )
17,928,749
31,926,229

12,834,906
2,272,037
49,127
783,370
406,082
16,345,522

707,000
1,239,533
2,508,262
-
43,714
-
1,428,539
-
1,243,256
7,170,304
23,515,826

1,341,892
399,820
1,528,078
4,207,347
-
160,480
5,637
7,643,254
791,705
-
-
8,434,959

7,886,989
86,373
7,214,540
15,187,902
(107,035 )
15,080,867
23,515,826

See accompanying notes to the consolidated financial statements

Approved on behalf of the Board of Directors

Signed Rick Skauge

Rick Skauge
Director

February 27, 2020

Signed Brian Newman

Brian Newman, CPA, CA
Director

2019 Annual Report | Olympia Financial Group Inc.

CONSOLIDATED STATEMENTS OF NET EARNINGS AND COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31

2019

2018

35,580,126

Revenue

Service revenue (note 9)

Trust income (note 9)

Interest (note 9)

Expenses

Direct expenses (notes 9 & 23)

Administrative expenses (notes 9 & 22)

Depreciation and amortization (notes 9, 14, 15, & 16)

Other (gains)/losses, net (notes 9 & 25)

Earnings before income tax

Income tax expense (notes 9 & 21)

Current

Deferred tax expense

Total income tax expense

Net earnings and comprehensive income from continuing
operations attributable to:

Shareholders of Olympia

Non-controlling interests

Net loss and comprehensive loss from discontinued operations

Net earnings and comprehensive income from combined
operations for the year

Earnings per share attributable to shareholders of Olympia
– continuing operations

Basic and diluted (note 26)

Loss per share attributable to shareholders of Olympia
– discontinued operations

Basic and diluted (note 26)

Earnings per share attributable to shareholders of Olympia
– combined operations

Basic and diluted (note 26)

12,164,528

1,338,320

49,082,974

3,189,334

34,603,617

1,537,686

(3,104,741 )

36,225,896

12,857,078

3,074,041

457,056

3,531,097

9,428,154

(102,173 )

9,325,981

3.92

38,597,248

10,276,949

1,155,384

50,029,581

3,112,075

31,150,889

746,967

1,430,616

36,440,547

13,589,034

3,353,276

333,544

3,686,820

9,967,821

(65,607 )

(388,022 )

9,514,192

4.14

(0.16 )

3.98

See accompanying notes to the consolidated financial statements

2019 Annual Report | Olympia Financial Group Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of Olympia

Share Capital

Contributed
Surplus

Retained
Earnings

Non-controlling
Interest

Total Equity

Balance at January 1, 2018

$ 7,886,989

86,373

$ 3,048,996

(41,428 )

$ 10,980,930

Net earnings and comprehensive income
from combined operations

Dividends (note 27)

9,579,799

(65,607 )

9,514,192

(5,414,255 )

Balance as at December 31, 2018

$ 7,886,989

86,373

$ 7,214,540

(107,035 )

$ 15,080,867

Balance as at January 1, 2019

$ 7,886,989

86,373

$ 7,214,540

(107,035 )

$ 15,080,867

Adjustment on initial application of IFRS 16
(note 3)

19,977

Adjusted balance as at January 1, 2019

7,886,989

86,373

7,234,517

(107,035 )

15,100,844

Share repurchase (note 20)

Net earnings and comprehensive income
from combined operations

Dividends (note 27)

(800 )

9,428,154

(102,173 )

9,325,981

(6,497,276 )

Balance as at December 31, 2019

$ 7,886,989

86,373

$ 10,164,595

(209,208 )

$ 17,928,749

See accompanying notes to the consolidated financial statements

2019 Annual Report | Olympia Financial Group Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31

Cash flows from operating activities
Net earnings from continuing operations
Items not affecting cash

Depreciation of equipment & other (note 14)
Amortization of intangible assets (note 15)
Amortization of right-of-use assets (note 16)
Other
Loss on disposal of assets
Deferred income tax expense
Foreign exchange (gain)/loss (note 25)

Changes in non-cash working capital balances (note 28a)
Cash flows from operating activities from continuing operations
Cash flows used in operating activities from discontinued operations
Net cash from operating activities

Cash flows from investing activities

Purchase of equipment & other (note 14)
Purchase of intangible assets (note 15)
Purchase of restricted investment for collateral, net (note 10)
Cash flows used in investing activities from continuing operations
Cash flows used in investing activities from discontinued operation
Net cash used investing activities

Cash flows from financing activities

Borrowing/(repayment) on revolving credit facility
Loan repayment from discontinued operation
Receipt of lease receivable
Payment of lease liabilities (note 8)
Sale of assets for issuance of promissory note
Dividends (note 27)
Cash flows used in financing activities from continuing operations
Cash flows used in financing activities from discontinued operations

Net change in cash position
Cash, beginning of year
Cash, end of year
Cash is represented by:

Cash & cash equivalents (note 11)

Other information for continuing operations
Interest earned and received as trustee
Interest received
Income taxes paid

Non-cash financing and investing activities (note 28b)

$
$

$
$
$

2019

2018

9,325,981

9,902,214

461,097
542,667
533,922
(16,389 )
5,197
457,056
(2,227,529 )
(367,976 )
8,714,026
-
8,714,026

(355,313 )
(782,619 )
(1,793,000 )
(2,930,932 )
-
(2,930,932 )

2,448,000
-
41,741
(856,376 )
-
(6,497,276 )
(4,863,911 )
-
919,183
12,834,906
13,754,089

13,754,089
13,754,089

10,873,379
1,588,427
2,883,000

$
$

$
$
$

410,240
336,726
-
(27,998 )
59,948
333,544
1,381,682
(1,147,657 )
11,248,699
(637,292 )
10,611,407

(573,029 )
(1,080,139 )
(207,000 )
(1,860,168 )
-
(1,860,168 )

(605,000 )
325,000
-
-
(37,601 )
(5,414,255 )
(5,731,856 )
(4,148,110 )
(1,128,727 )
13,963,633
12,834,906

12,834,906
12,834,906

7,421,105
1,021,666
3,348,000

See accompanying notes to the consolidated financial statements

2019 Annual Report | Olympia Financial Group Inc.

1. NATURE OF BUSINESS
Olympia Financial Group Inc. (“Olympia”) is governed by the
Business Corporations Act (Alberta). Olympia is a reporting
issuer in British Columbia, Alberta and Ontario, and its common
shares are listed on the Toronto Stock Exchange (“TSX”).
Olympia’s registered and head office is 2300, 125 – 9th Avenue
SE, Calgary, Alberta T2G 0P6.

The majority of Olympia’s business is conducted through its
wholly owned subsidiary Olympia Trust Company (“Olympia
Trust”), a non-deposit taking trust corporation.

Olympia Trust received its letters patent on September 6, 1995,
authorizing the formation of a trust corporation to be registered
under the Loan and Trust Corporations Act (Alberta). Olympia
Trust acts as a trustee for self-directed registered plans and
provides foreign currency exchange services as well as corporate
and shareholder services. Olympia Trust is licensed to conduct
trust activities in Alberta, British Columbia, Saskatchewan,
Manitoba, Quebec, Newfoundland and Labrador, Prince
Edward Island, New Brunswick and Nova Scotia. The Private
Health Services Plan division conducts its business through
Olympia Benefits Inc. (“OBI”), a wholly owned subsidiary of
Olympia. Exempt Edge Inc. (“EEI”) was incorporated under the
Business Corporations Act (Alberta) on November 28, 2016, as
a subsidiary of Olympia.

2. BASIS OF PREPARATION
These consolidated financial statements for the year ended
December 31, 2019, have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”)
applicable to the preparation of the consolidated financial
statements. The accounting policies adopted are consistent
with those of the previous year, except as identified in Note 3.

These consolidated financial statements have been approved
and authorized for issuance by the Board of Directors on
February 27, 2020. The policies applied in these consolidated
financial statements are based on IFRS, issued, effective and
outstanding as of December 31, 2019.

Olympia’s consolidated financial statements are presented in
Canadian dollars, Olympia’s primary operating currency. All
references to $ are in Canadian dollars and references to US$
are in United States dollars.

The preparation of the consolidated financial statements
requires management to make judgments, estimates and
assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates.

Certain of the prior year comparative figures have been
reclassified to conform to the presentation adopted for the
current year.

2019 Annual Report | Olympia Financial Group Inc.

3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies used in the preparation of
these consolidated financial statements are described below.

Basis of measurement

The consolidated financial statements have been prepared
under the historical cost convention, except for the revaluation
of certain financial assets and financial liabilities to fair value,
including derivative instruments and financial assets at fair value
through Other Comprehensive Income.

Critical accounting estimates

The preparation of financial statements requires management to
make judgments, estimates and assumptions based on currently
available information that affects the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Estimates and judgments are evaluated and
are based on management’s experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. However, actual results
could differ from these estimates. By their very nature, these
estimates are subject to measurement uncertainty, and the
effect on the financial statements of future periods could be
material. Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and
in any future periods affected.

(i) Discontinued operations

Net loss from discontinued operations includes the net total of
operating profit and loss before tax. Net loss includes net gain or
loss on sale before tax or measurement to fair value, less costs
to sell and tax expense. A major line of business comprises
operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest
of Olympia’s operations and cash flows. If a major line of business
is classified as a discontinued operation, Olympia restates
prior periods in the consolidated statements of net earnings.
Non-current assets classified as held for sale are measured at
the lower of carrying amount and fair value less costs to sell.
These measurement provisions do not apply to deferred tax
assets and liabilities, or financial assets. Non-current assets
are classified as held for sale if their carrying amount will be
recovered through a sale transaction rather than through

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTScontinuing use. This condition is regarded as met only when the
sale is highly probable and the asset is available for immediate
sale in its present condition, subject to terms that are usual
and customary for sales of such assets. Management must be
committed to the sale and must actively market the business for
sale at a price that is reasonable in relation to the current fair
value. The sale should be expected to qualify for recognition as
a completed sale within one year from the date of classification.

(ii) Allowance for doubtful accounts (Note 7)

Olympia regularly performs a review of outstanding accounts
receivable balances to determine eventual collectability. A
provision for bad debt is recorded based on historical information
or if an account is deemed uncollectable. Olympia applies
the IFRS 9 simplified approach to measuring Expected Credit
Losses (“ECL”), which uses a lifetime expected loss allowance
for all trade and other receivables. Olympia holds trade
receivables that do not have a significant financing component.
To determine the amount of the ECL to be recognized in the
financial statements, Olympia has set up a provision matrix
based on its historically observed default rates. Olympia adjusts
the matrix for forward-looking estimates and has established
that the expected credit loss should be calculated as follows:

• less than 90 days: nominal;

• more than 90 days but less than two years past due: 20% of

carrying value;

• more than two years but less than three years past due: 65%

of carrying value; and

• three or more years past due: 100% of carrying value.

Those accounts which are deemed uncollectable could
materially change as a result of changes in a customer’s
financial situation. This includes risks associated with the gross
receivable position on foreign exchange forward contracts, all
assessed regularly for impairment.

(iii) Depreciation and amortization methods

(Notes 14 and 15)

Olympia estimates the useful lives of property, plant and
equipment and intangible assets, based on the period over
which the assets are expected to be available for use.

technological obsolescence. It is possible, however, that future
results of operations could be materially affected by changes
in the estimates brought about in turn by changes in the
factors mentioned above. The amounts and timing of recorded
expenses for any period would be affected by changes in these
factors and circumstances.

(iv) Impairments (Note 15)

Olympia performs impairment tests of assets when indications
of impairment exist. Application of judgment is required
in determining whether an impairment test is warranted.
Impairment exists when the carrying value of an asset or Cash-
Generating Unit (“CGU”) exceeds its recoverable amount, which
is the higher of (a) its fair value less costs of disposal and (b) its
value in use. The fair value less costs of disposal calculation is
estimated using valuation techniques such as a discounted cash
flow model adjusted to reflect the considerations of a prospective
third-party buyer. The value in use calculation is based on
the present value of expected cash flows. The cash flows are
derived from internal budgets and do not include restructuring
activities that Olympia is not yet committed to or significant
future investments that will enhance the asset’s performance or
the CGU being tested. The recoverable amount is most sensitive
to the discount rate used for the present value of expected cash
flows. It is also sensitive to expected transaction volumes, future
operating costs, tax rates, margins and the growth rate used for
extrapolation purposes. There is a certain amount of subjectivity
and judgment in the determination of the recoverable amount
calculation. Judgments and assumptions, described in notes
7, 14 and 15, are subject to measurement uncertainty, and the
impact of differences between actual and estimated amounts
on the consolidated financial statements of future periods could
be material.

When indicators support that the asset is no longer impaired,
Olympia will reverse impairment losses. Similar to the impairment,
application of judgment is required to determine whether a
reversal should be considered.

(v) Income taxes (Note 21)

Olympia calculates an income tax provision in each of the
jurisdictions in which it operates. Estimation of income taxes
includes evaluating the recoverability of deferred tax assets
based on a more likely than not assessment to use the
underlying future tax deductions against future taxable income
before the deductions expire. The assessment is based on
existing tax laws and estimates of future taxable income. Further,
there are transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of
business. Provisions are made using the best estimate of the
amount expected to be paid based on a qualitative assessment
of all relevant factors. Olympia reviews the adequacy of these
provisions at each reporting period. However, it is possible that

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSat some future date an additional liability could result from audits
by taxation authorities. Where the final outcome of these tax-
related matters is different from the amounts that were initially
recorded, such differences will affect the tax provisions in the
period in which such determination is made.

(vi) Revenue

Olympia applies judgment to determine whether fee revenue
should be recognized on a gross basis or net of fees paid to the
merchant or insurer for providing, processing, and maintaining
the service to a customer. Pursuant to the guidance in IFRS
15, Olympia has assessed whether to record such payments
as a reduction of associated service revenues or as a direct
expense. Olympia determines whether the nature of its promise
to customers is a performance obligation to provide the service
itself or to arrange for that service to be provided by another
party. Specific factors considered were, whether Olympia
acts as the principal and is the primary obligor in performance
obligations, provides the processing for the performance
obligations, has significant influence over pricing and has the
risks and rewards of ownership, including a variable earnings
component and the risk of loss for collection. Olympia has full
discretion over the price of the services and therefore has no
unfulfilled obligations that could affect clients acceptance of
the service. Olympia recognizes insurance fees on a net basis.
As a result, for agreements under which Olympia acts as the
principal, Olympia records the total amounts earned from the
underlying performance obligations as service revenues and
records the related merchant expense as a direct expense of
operating revenues. However, for those agreements in which
Olympia does not meet the criteria to qualify as the principal in a
performance obligation, Olympia does not record the related fee
revenue, as the rights associated with this revenue stream are
attributable to the benefit of the merchant. Olympia records fee
revenue under these arrangements on a net basis.

Whether Olympia is considered to be the principal or an agent in
a performance obligation depends on analysis by management
of both the legal form and substance of the agreement between
Olympia and the merchant. Such judgments impact the amount
of reported revenue and expenses, but do not impact reported
assets, liabilities or cash flows.

(vii) Lease term

In determining the lease term, management considers all
facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination
option. The assessment is reviewed if a significant event or
a significant change in circumstances occurs which affects
this assessment.

Functional and presentation currency

These consolidated financial statements are presented in
Canadian dollars, which is the functional currency of Olympia
and its subsidiaries. Transactions denominated in foreign
currencies are translated into Canadian dollars using the
exchange rates prevailing at the dates of the transactions.
Under this method, monetary assets and liabilities denominated
in foreign currencies are translated into Canadian dollars at
the rates in effect at the consolidated balance sheet dates.
Revenues and expenses are translated at the rates prevailing at
the respective transaction dates.

Basis of consolidation

The consolidated financial statements include the accounts of
Olympia and its subsidiaries. All inter-company balances and
unrealized income and expenses arising from inter-company
transactions have been eliminated.

The subsidiaries consist of Olympia Trust, OBI and EEI.

Olympia holds an 80% controlling interest in EEI and a third
party holds a non-controlling interest of 20%. The non-controlling
interest is presented separately in the consolidated statement of
net earnings and comprehensive income and within equity in
the consolidated balance sheets, but separately from Olympia’s
equity. Losses applicable to the non-controlling interest in excess
of their interest in the subsidiary’s equity is allocated against the
non-controlling interest, even if that results in a deficit balance.

Segment reporting

Management has determined Olympia’s operating segments
based on reports reviewed by the president and other executive
management to make strategic decisions. An operating segment
is a component of Olympia that engages in business activities
from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of
Olympia’s other components. Operating results are regularly
reviewed by the president and other executive management to
make decisions about resources to be allocated to the segment
and to assess its performance. Discrete financial information
is available for each operating segment. Segment results that
are reported to the president and other executive management
include items directly attributable to a segment, as well as those
that can be allocated on a reasonable basis.

the business

Considering
from a product and service
perspective, Olympia has identified six operating segments.
The Private Health Services Plan division, operated through
OBI, markets, sells and administers health and dental benefits
to business owners. The Registered Plans division, operated
through Olympia Trust, specializes in self-directed registered
plans administration. Exempt market securities and arm’s-
length mortgages continue to be the main focus of many of
the Registered Plans division’s clients. The Foreign Exchange

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSThe annual depreciation rates and methods are as follows:

• Trademarks

division, operated through Olympia Trust, provides corporations
and private clients a personalized service for buying and selling
foreign currencies. The Corporate and Shareholder Services
division, operated through Olympia Trust, provides transfer
agency and corporate trust services to public and private issuers
across Canada. The Exempt Edge division, operated through
EEI, focuses on the provision of information technology to
exempt market dealers, registrants and issuers. The Corporate
division is a cost centre and earns incidental revenue.

Equipment and other

Equipment and other is measured and accounted for at cost
less accumulated depreciation. Additions and subsequent
expenditures are capitalized only in the event that they enhance
the future economic benefits to be derived from the assets.

is provided on

Depreciation
the depreciable amount of
equipment and other on a straight-line basis over the estimated
useful economic life of each asset. The depreciable amount is
the gross carrying amount less the estimated residual value at
the end of its useful economic life.

• Furniture and fixtures

Straight-line over 5 years

• Leasehold improvements

Straight-line over the lease term

• Computer equipment

Straight-line over 3 years

• FX ATM equipment

Straight-line over 5 years

Depreciation rates, methods and residual values used to
calculate depreciation of items of equipment and other are kept
under review for any change in circumstances. The principal
factors Olympia takes into account when deciding on rates and
methods of depreciation are the pattern of usage for each asset,
the lease term, the expected rate of developments in technology
and expected market requirements.

When reviewing residual values, Olympia estimates the amount
that it would currently obtain for the disposal of the asset after
deducting the estimated cost of disposal if the asset were
already of the age and condition expected at the end of its
useful economic life.

Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognized in the
statements of net earnings and comprehensive income. Assets
are derecognized on disposal or when no future economic
benefits are expected from their use.

Intangible assets

Intangible assets consist primarily of internally developed
trademark
software, purchased computer software, and
agreements.

Internally developed software is stated at cost, less accumulated
amortization and impairment, if any. The identifiable and

directly associated external and internal costs of acquiring
and developing software are capitalized where the software
is controlled by Olympia and where it is probable that future
economic benefits will flow from its use over more than one year.

The cost of purchase of computer software that is separable
from an item of related hardware is capitalized separately.

Trademark agreements are recognized at fair value at the
acquisition date. These agreements have a finite useful life and
are carried at cost less accumulated amortization. Amortization
is calculated using the straight-line method over the expected
term of the agreement.

Impairments are recorded if the carrying amount of an asset
exceeds the recoverable amount.

The annual amortization rates and methods are as follows:

• Purchased computer software

• Internally developed software

Straight-line over
3 to 5 years

Straight-line over
3 to 7 years

Straight-line over the
term of the agreements

Research costs and costs associated with maintaining software
are recognized as an expense when incurred. Development
costs are capitalized under intangible assets if they can be
identified as an intangible asset that is expected to generate
probable future economic benefit and if the costs of this asset
can be reliably calculated. Development costs include those
costs directly attributable to the development of the asset.

Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognized for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs of disposal, or
value in use. For the purpose of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows. Non-financial assets that suffered
impairment are reviewed for possible reversal of the impairment
at each reporting date.

Olympia assesses all non-financial assets on an ongoing
basis for indications of impairment and to determine whether
a previously recognized impairment loss should be reversed.
If such indicators are found to exist, then detailed impairment
testing is carried out. Impairments and the reversal of previously
recognized impairments are recognized in the statement of net
earnings and comprehensive income.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSInventory

Inventory consists primarily of Foreign Exchange ATMs not
in service. Inventory is measured at the lower of cost and net
realizable value. The cost of inventory is based on the first-in
first-out valuation method and includes expenditures incurred in
acquiring the inventory, as well as other costs incurred in bringing
them to their existing location and condition. Net realizable value
is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses.

Financial instruments

Olympia’s financial instruments included in the consolidated
balance sheets are comprised of cash and cash equivalents,
restricted cash and investments, trade and other receivables,
promissory note receivable, derivative financial instruments,
financial assets at fair value through other comprehensive
income, trade and other payables, revolving credit facility and
other liabilities and charges.

A derivative is a financial instrument whose value changes
in response to a specified variable, requires little or no net
investment and is settled at a future date. An embedded
derivative is a derivative that is a part of a non-derivative contract
and not directly related to that contract. Under this standard,
embedded derivatives must be accounted for as a separate
financial instrument. A non-financial derivative is a contract that
can be settled net in cash or by other financial instruments.
Olympia does not apply hedge accounting to the derivative
financial instruments.

investments,

restricted cash and

Non-derivative financial instruments include cash and cash
equivalents,
restricted
cash in circulation, trade and other receivables, promissory
note receivable, financial assets at fair value through other
comprehensive income, revolving credit facility, trade and
other payables and other liabilities and charges. Non-derivative
financial instruments are recognized initially at fair value, plus
any directly attributable transaction costs, except for financial
assets at fair value through profit or loss, whereby any directly
attributable transaction costs are expensed as incurred.

Subsequent
initial recognition, non-derivative financial
instruments are designated into one of the following categories
and measured as described below:

(i) Financial assets and liabilities at fair value through

profit or loss

Financial assets and liabilities at fair value through profit or loss
are financial assets or financial liabilities held for trading. A
financial asset is classified in this category if acquired principally
for the purpose of selling in the short term. A financial liability is
classified in this category if acquired principally for the purpose
of repurchasing in the short term. Olympia’s derivative financial
instruments are designated as financial assets and liabilities at

fair value through profit and loss as they are not designated as
hedges for accounting purposes.

(ii) Financial assets measured at amortized cost

Financial assets measured at amortized cost are non-derivative
financial assets with fixed or determinable payments that are
not quoted in an active market. Financial assets measured at
amortized cost are initially recognized at fair value, including
direct and incremental transaction costs. They are subsequently
valued at amortized cost, using the effective interest method
where applicable,
for
impairment. Assets in this category include restricted cash and
investments, trade and other receivables and promissory note
receivable.

less allowances and write-downs

(iii) Financial assets at fair value through Other

Comprehensive Income (“OCI”)

Financial assets at fair value through OCI are non-derivative
financial assets that are not categorized into any of the
categories described previously. The classification depends on
Olympia’s business model for managing the financial assets and
the contractual terms of the cash flows.

Financial assets at fair value through other comprehensive
income are initially recognized at fair value, including direct
and incremental transaction costs. They are subsequently
recognized at fair value. Gains and losses arising from changes
in fair value are recorded in profit or loss or OCI. For investments
in equity instruments that are not held for trading, this will depend
on whether Olympia has made an irrevocable election at the
time of initial recognition to account for the equity investment
at Fair Value Through Other Comprehensive Income (“FVOCI”).

Olympia has elected to recognize its investment in a private
issuer at FVOCI.

(iv) Other financial liabilities

Items classified as other financial liabilities on Olympia’s
consolidated financial statements are accounted
for at
amortized cost using the effective interest method. Any gains or
losses in the realization of other financial liabilities are included
in earnings. Olympia’s trade and other payables, other liabilities
and charges and revolving credit facility are designated as
other financial liabilities. The fair value and charges approximate
their carrying values, due
the short-term nature of
to
these instruments.

Cash and cash equivalents

Cash and cash equivalents are comprised of cash on hand,
non-restricted cash in circulation, interest on term deposits held
with banks and other short-term highly liquid investments with
original maturities of three months or less. Non-restricted cash in
circulation refers to the aggregate amount of non-restricted vault
cash (cash in FX ATM cassettes) plus cash inventory (cash in

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTStransit from armoured car carriers). Cash and cash equivalents
are measured at amortized cost, which approximates fair
value. Cash and cash equivalents are reported separately from
restricted cash and investments.

Recognition and measurement

Regular purchases and sales of financial assets are recognized
on the trade date on which Olympia commits to purchase or
sell the asset. Investments are initially recognized at fair value
plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value
through profit or loss are initially recognized at fair value and
transaction costs are expensed in the statement of net earnings
and comprehensive income. Financial assets are derecognized
when the rights to receive cash flows from the investments have
expired or have been transferred and Olympia has substantially
transferred all risks and rewards of ownership. Financial assets
at fair value through profit or loss and financial assets at
amortized cost are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortized cost using
the effective interest method.

Gains or losses arising from changes in the fair value of the
financial assets at fair value through profit or loss are presented
in the statement of net earnings and comprehensive income
within the period in which they arise. When securities classified
as financial assets at fair value through other comprehensive
income are sold or impaired, the accumulated fair value
adjustments recognized in equity are included in the statement
of net earnings and comprehensive income as gains and losses.

Impairment of financial assets

Assets carried at amortized cost

At each balance sheet date, Olympia assesses whether there
is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets
is impaired and impairment losses are incurred if, and only if,
there is objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the asset
(a loss event), and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.

If a financial asset measured at fair value through OCI or through
profit or loss or at amortized cost has a variable interest rate,
the discount rate for measuring any impairment loss is the
current effective interest rate determined under the contract.
For practical reasons, Olympia may measure impairment of
an instrument’s fair value using an observable market price.
Calculation of the present value of estimated future cash flows
of a collateralized financial asset reflects the cash flows that may
result from foreclosure, less cost for obtaining and selling the
collateral, whether or not foreclosure is probable.

Trade receivables are written off when there is no reasonable
expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, among others, the failure of a
customer to make contractual payments for a period of greater
than 365 days past due, and the value of a customer’s asset
being assessed as close to nil.

Evidence of impairment

The amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses) discounted at
the financial asset’s original effective interest rate. The asset’s
carrying amount is reduced and the amount of the loss is
recognized in the statement of net earnings and comprehensive
income. If a loan or investment has a variable interest rate,
the discount rate for measuring any impairment loss is the
current effective interest rate determined under the contract.
For practical reasons, Olympia may measure impairment on
the basis of an instrument’s fair value, using an observable
market price.

Offsetting financial instrument

Financial assets and liabilities are offset and the net amount
reported in the balance sheet where there is a legally enforceable
right to offset the recognized amounts and there is an intention
to settle on a net basis, or realize the asset and settle the
liability simultaneously.

Foreign currency exchange forward contracts

Olympia Trust purchases forward contracts when it enters into
a transaction to buy or sell foreign currency in the future. These
contracts are in the normal course of business and are used
to manage foreign exchange exposures. Foreign exchange
forward contracts are not designated as hedges for accounting
purposes. They are initially recorded at fair value based on
Bank of Canada published rates and subsequently measured
at fair value based on published foreign currency curves. They
are recorded in Olympia’s balance sheet as either an asset or
liability, with changes in fair value recorded to net earnings. The
estimated fair value of all derivative instruments is based on
quoted market prices, or, in their absence, third-party indications
and forecasts. Foreign exchange translation gains and losses
on these instruments are recognized within the consolidated
statements of net earnings and comprehensive income when
the contract is signed.

Revenue recognition

Olympia has six operating segments, of which five are business
segments. Revenue is recognized through these five business
segments. The revenue of each business segment is distinctly
unique to that segment. Each business segment in return has
revenue streams that originate from different product and service
offerings. Olympia earns interest income and trust income from

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfunds held with financial institutions and from term deposits
and balances held in trust. Interest income and trust income is
recorded on an accrual basis.

(A) Self-Directed Registered Plans division

(i) Account set-up fees

Client set-up fees are recognized upon creation of a client
account in Olympia Trust’s records.

(ii) Annual administration fees

Annual fees for maintaining registered plan services are billed
once a year. The annual fees are recognized as deferred revenue
and recognized as revenue on a straight-line basis in relation
to Olympia Trust’s expenditure for rendering these services.
Where contractual services are terminated by the customer, the
unearned deferred revenue is recognized as revenue.

(iii) Transactional fees

Certain services are provided and billed on an ongoing basis.
Such fees are recognized when services are rendered.

(B) Private Health Services Plan division

(i) Travel medical benefit insurance brokerage fees

Commissions earned on the selling of short-term medical
insurance are recognized in full, on the basis that no underwriting
risks remain with OBI.

(ii) Monthly fees

Certain services are provided and billed on an ongoing monthly
basis. Such fees are recognized monthly at the time of billing,
subsequent to the completion of services.

(iii) Life insurance brokerage fees

Commissions earned on the selling of long-term insurance
related products are recognized in full, on the basis that no
underwriting risks remain with OBI.

(iv) Annual health spending account fees (“HSA fees”)

Fees for maintaining health spending accounts are billed
annually. The annual fees are recognized as deferred revenue
and recognized as revenue on a straight-line basis in relation to
OBI rendering these services. Where contractual services are
terminated by the customer, the unearned deferred revenue is
recognized as revenue.

(i) Trading profits and losses

Trading profits and losses from spot trading are recognized at
the time the trade transaction settles. Transaction fees from spot
trading are recognized at the time the transaction is entered into.

(ii) Unrealized profits and losses

Unrealized profits and losses in foreign exchange forward
contracts are recognized on a net basis at each period end,
are measured at fair value and are recorded in the consolidated
statement of net earnings and comprehensive income as other
gains, net.

(D) Exempt Edge division

(i) Onboarding fees

Client set-up fees are recognized upon creation of a client
account in EEI’s records.

(ii) Non-contractual service maintenance fee

Certain services are provided and billed on an ongoing basis.
Such fees are recognized at the time services are rendered.

(E) Corporate and Shareholder Services division

(i) Annual administrative fees

Certain services are invoiced on an annual basis. Such fees are
levied once a year on the contract anniversary date. The annual
fees are recognized as deferred revenue and recognized as
revenue on a straight-line basis in relation to service terms
performed by Olympia Trust. Where contractual services are
terminated, the unearned deferred revenue is recognized as
revenue.

(ii) Monthly program fees

Certain services are invoiced on a monthly basis over a one-year
period. These fees are recognized monthly.

(iii) Monthly basic fees

Certain services are provided and billed on an ongoing monthly
basis. Such fees are recognized monthly at the time of billing.

Finance costs

the principal

interest expense on borrowings
Finance costs comprise
from credit facilities, accrual of differences between amounts
advanced and
(i.e. discounted
obligations) and impairment losses recognized on financial
assets. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are
recognized in profit or loss using the effective interest method.

repayable

Common shares

Common shares are classified as equity. Incremental costs
directly attributable to the issue of common shares and share
options are recognized as a deduction from equity, net of any
tax effects. When Olympia repurchases its own common shares,
share capital is reduced by the average carrying value of the
shares purchased. The excess of the purchase price over the
average carrying value is recognized as a deduction from
retained earnings. Shares are cancelled upon repurchase.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSRestricted cash and investments

Restricted cash and investments are not readily accessible for
use in operations and are reported separately from cash and
cash equivalents on the balance sheet. Restricted cash and
investments consist of a restricted bond investment, which is
held as collateral securing Olympia Trust’s foreign exchange
trading platform.

Provisions and contingencies

Provisions are recognized for present obligations arising as
a consequence of past events where it is more likely than not
that a transfer of economic benefit will be necessary to settle
the obligation and it can be reliably estimated. Provisions are
determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessment of the
time value of money and the risks specific to the liability. The
unwinding of the discount is recognized as a finance cost.
Contingent liabilities are possible obligations whose existence
will be confirmed only by uncertain future events or present
obligations where the transfer of economic benefit is uncertain
or cannot be reliably measured. Contingent liabilities are not
recognized, but are disclosed unless they are remote.

Employee benefits

(i) Short-term employee benefits

Wages, salaries, employment insurance premiums, Canada
Pension Plan contributions, paid annual leave and sick leave,
bonuses, profit sharing and non-monetary benefits are accrued
for pursuant to contractual arrangements and in accordance
with the nature of the constructive benefits Olympia provides
in addition to remuneration upon an employee joining or in
the year in which the associated services are rendered by
employees of Olympia. The accruals of such constructive
benefits are derecognized pursuant
the contractual
arrangements and in accordance with the nature of constructive
benefits when employee services terminate or as provided for in
employee contracts.

(ii) Other long-term employee benefits

All employees are entitled to long-term service monetary awards
based on the number of years of service with Olympia. Olympia
recognizes long service award obligations on a straight-line
basis in accordance with the number of completed years of
service and in accordance with the qualifying criteria attached
to having earned these awards. The award expense is therefore
accrued and recognized in profit or loss based on completed
years of service.

Taxation

(i) Taxation and deferred taxation

Taxes, including deferred taxes, are income tax payable
on taxable profits (tax reporting), and are recognized as an

expense in the period in which the profits arise. Deferred
income tax on tax allowable losses is recognized as an asset
only to the extent that it is regarded as probable that taxable
profit or tax planning opportunities will be available in the future
against which the unused tax losses can be utilized before they
expire. Deferred income tax is provided in full, using the liability
method, on temporary differences arising from the differences
between the tax basis of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred
income tax is determined using tax rates and legislation enacted
or substantively enacted by the balance sheet date that is
expected to apply when the deferred tax asset is realized or the
deferred tax liability is settled. Deferred and current tax assets
and liabilities are only offset when they arise in the same tax
reporting group and where there is both the legal right and the
intention to settle on a net basis or to realize the asset and settle
the liability simultaneously.

(ii) Investment tax credits

for

Certain expenditures qualify
Investment Tax Credits
(“ITCs”) pursuant to the Scientific Research and Experimental
Development program, which is a federal tax incentive program
to encourage Canadian businesses of all sizes and in all sectors
to conduct research and development in Canada that will lead
to new, improved, or technologically advanced products or
processes. Based on this, Olympia could be entitled to ITCs on
certain research and experimental development costs incurred,
which currently consist of internally generated software.

Refundable cash credits stemming from the ITCs are in respect
of credits recognized in prior years when there is reasonable
assurance of their recovery using the cost reduction method.
ITCs are subject to assessment and approval by the CRA.
Adjustments required, if any, are reflected in the year when
such assessments are received. Investment tax credits and
other cost recoveries related to computer and equipment and
intangible assets are credited against the book value of such
assets. The credit is released to income on a straight-line basis
as a reduction of depreciation or as an amortization expense
over the previously mentioned estimated useful economic lives
of the relevant assets.

Leases

following accounting policy

The
January 1, 2019:

is applicable

from

Olympia assesses whether a contract is a lease based on whether
the contract conveys the right to control the use of an underlying
asset for a period of time in exchange for consideration.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAs lessee

As lessor

Lease payments are allocated against both the liability and
finance costs. The finance cost is charged to net earnings over
the lease term.

The lease liability is measured at amortized cost using the
effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an
index or rate.

2019 Annual Report | Olympia Financial Group Inc.

Related parties

Olympia enters into transactions with related parties, including
key management compensation, in the normal course of
business, except as otherwise noted in Note 32. Related party
transactions are recognized at the exchange amount. Olympia
considers the following as related parties:

• Directors, president, vice presidents and key management
(and post-employment benefit plans where

personnel
applicable);

• Associated entities;

• An entity controlled, jointly controlled or significantly being

influenced by any of the aforementioned; and

• Children, spouses or dependents related to any of the

aforementioned persons or entities.

Earnings per share (“EPS”)

The calculation of basic earnings per share is based on net
earnings attributable to shareholders of Olympia divided by
the weighted average number of common shares outstanding
during the period. For the calculation of diluted EPS, the weighted
average number of common shares is the same as for basic EPS,
with the addition of the weighted average number of common
shares that would be issued on conversion of all the dilutive
potential common shares. Dilutive potential common shares are
deemed to have been converted at the start of the period or at
the date of their issue, if later. The number of common shares
that would be issued on conversion of dilutive potential common
shares is determined from their terms of conversion. Where the
terms could vary, it is deemed that they would be exercised at
the rate or exercise price that would be most advantageous to
the holder of such potentially dilutive common shares.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDividends

Dividends on common shares are recognized in equity in the
period in which they are declared or approved by Olympia’s
Board of Directors.

Changes in Accounting Policies
Except as noted previously regarding IFRS 16, there were no
further new accounting policy changes made by Olympia in
2019.

The impact of this adoption is disclosed below.

IFRS 16 “Leases” – impact of adoption
Effective January 1, 2019, Olympia adopted IFRS 16, “Leases”
(“IFRS 16”). Olympia has applied the new standard using the
modified retrospective approach. The modified retrospective
approach does not require restatement of prior year financial
information, as it recognizes the cumulative effect as an
adjustment to opening retained earnings and applies the
standard prospectively. Therefore, comparative information in

the consolidated balance sheets, consolidated statements of
net earnings and comprehensive income and statements of
cash flows have not been restated.

On adoption, management elected to use the following practical
expedients permitted under the standard:

• Apply a single discount rate to a portfolio of leases with

similar characteristics;

• Account for leases with a remaining term of less than twelve

months as at January 1, 2019, as short-term leases;

• Account for lease payments as an expense and not recognize
a right-of-use asset if the underlying asset is of a low dollar
value (less than $8,000); and

Impacts of the adoption of IFRS 16

Notes

As reported at
December 31, 2018

Adjustments

Balance on
adoption as at

January 1, 2019

Assets

Trade and other receivables

Right-of-use assets, net

Long-term lease receivable

Liabilities and shareholders’ equity

Current portion of lease liabilities

Non-current lease liabilities

Other liabilities

Non-current other liabilities

Retained earnings

iii

Notes:

i. Sublease contract

On transition, Olympia reassessed the classification of its
sublease contracts previously classified as operating leases
under IAS 17. Olympia concluded that its sublease is a
finance lease under IFRS 16, and as a result, a $0.14 million
net investment in finance lease was recognized on adoption of
IFRS 16.

2,272,037

(1,528,078 )

(791,705 )

(7,214,540 )

(7,262,286 )

41,741

2,680,497

(73,635 )

(999,876 )

99,467

(855,387 )

(1,946,341 )

281,806

791,705

(19,977 )

ii. Right-of-use assets

2,313,778

1,606,986

99,467

(855,387 )

(1,946,341 )

(1,246,272 )

(7,234,517 )

(7,262,286 )

The associated right-of-use assets were measured at the
amount equal to the lease liability on January 1, 2019, less any
amount previously recognized under IAS 37 for onerous contract
provisions,
inducement
liabilities. This resulted in a $19,977 adjustment to retained
earnings.

less previously recognized

lease

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

iii. Onerous contract provisions

iv. Other liabilities

v. Lease liabilities

On adoption of IFRS 16, Olympia recognized lease liabilities
in relation to leases which had previously been classified as
operating leases under the principles of IAS 17, “Leases” (“IAS
17”). Under the principles of the new standard, these leases
have been measured at the present value of the remaining
lease payments, discounted using Olympia’s
incremental
borrowing rate at January 1, 2019. The incremental borrowing
rate as at January 1, 2019 was 5.99%. Leases with a remaining
term of less than twelve months and low-value leases were
excluded. Total lease liabilities of $2.8 million were recorded as
at January 1, 2019.

Reconciliation of commitments to lease liability

The following table provides a reconciliation of the commitments
as at December 31, 2018, to Olympia’s lease liabilities as at
January 1, 2019:

Reconciliation of lease
liabilities

Office space

Less: Short-term leases

Lease liabilities commitments
as at December 31, 2018

Impact of discounting

Lease liabilities as at
January 1, 2019

Total

3,105,795

(44,440 )

3,061,355

(259,627 )

2,801,728

Impacts on financial statement

Impacts for the year

4. FUTURE ACCOUNTING PRONOUNCEMENTS
There were no new or amended accounting standards issued
during the year ended December 31, 2019, that are applicable
to Olympia in future periods.

5. PROMISSORY NOTE RECEIVABLE
On June 5, 2018, Olympia announced the sale to Tarman ATM
Inc. (“Tarman”) of the ATM business operated by Olympia ATM
Inc., as a going concern, for an amount equal to then current
net book value of all assets used in the ATM business less all
assumed liabilities; an amount estimated to be $1.4 million.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the outstanding principal amount of the promissory note in
annual installments of $140,000 on or before the 30th day of
June of each calendar year, with the outstanding balance of the
principal amount to be repaid in full on or before June 30, 2023.
As at December 31, 2019, all interest has been fully paid. Interest
earned for the year ended December 31, 2019 was $58,800.

6. FUNDS IN TRUST

Registered Plans division (“RRSP”)

At December 31, 2019, RRSP administered self-directed
registered plans consisting of private company securities and
mortgages with a cost value of $4.38 billion (December 31,
2018 – $4.14 billion) plus cash, public securities, term deposits
and outstanding cheques with an estimated fair value of
$599.17 million (December 31, 2018 – $530.24 million). These
assets are the property of the account holders and Olympia Trust
does not maintain effective control over the assets. Therefore,
the assets are not reflected in these consolidated financial
statements. Olympia earned trust income from the cash portion
of the assets held in trust of $12.16 million for the year ended
December 31, 2019 (December 31, 2018 – $10.28 million).

Private Health Services Plan division (“Health”)

Foreign Exchange division (“FX”)

At December 31, 2019, FX held funds in trust of $3.69 million
(December 31, 2018 – $1.22 million) for clients who have paid
margin requirements on forward foreign exchange contracts,
and $12.04 million (December 31, 2018 – $5.06 million) of
outstanding payments. These assets are the property of the
contract holders and Olympia Trust does not maintain effective
control over the assets. Therefore, the assets are not reflected in
these consolidated financial statements.

Corporate and Shareholder Services division (“CSS”)

At December 31, 2019, CSS held funds in trust and outstanding
cheques of approximately $15.23 million (December 31, 2018 –
$nil) for clients who have hired Olympia Trust to provide trustee
services. These assets are the property of the trust clients and
Olympia Trust does not maintain effective control over the assets.
Therefore, the assets are not reflected in these consolidated
financial statements.

7. FINANCIAL INSTRUMENTS AND FINANCIAL

RISK FACTORS

Fair value of financial instruments

investments, trade and other receivables,

The fair value of cash and cash equivalents, restricted cash
and
long-term
lease receivable, promissory note receivable, trade and other
payables, lease liabilities, revolving credit facility and other
liabilities and charges approximate their carrying amounts.
Derivative financial instruments are measured at fair value
through profit or loss. The fair value of all forward foreign
exchange contracts is based on current bid prices for their
respective terms to maturity in an active market.

Risks associated with financial instruments

Olympia is exposed to financial risks arising from normal course
business operations and its financial assets and liabilities. The
financial risks include liquidity risk and market risk relating to
foreign currency exchange rates, interest rates and credit risk.

(i) Liquidity risk

Security for the credit facility includes a general security
agreement providing a first security interest in all present and
subsequently acquired property.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSThe timing of cash outflows is outlined in the following tables:

At December 31, 2019

Current

31 to 60 days

61 to 90 days Over 90 days

Total

Trade and other payables

$ 1,388,733

67,433

Other liabilities and charges

Lease liabilities

Total

At December 31, 2018

Trade and other payables

Other liabilities and charges(1)

Total

1,732,886

73,616

73,984

74,353

685,113

$ 1,456,166

1,732,886

907,066

$ 3,195,235

141,417

74,353

685,113

$ 4,096,118

$ 1,341,291

1,259,435

$ 2,600,726

601

$ 1,341,892

1,259,435

$ 2,601,327

(1) Other liabilities and charges excludes leasehold inducement, straight-line rent and onerous contract obligation.

As at December 31, 2019, trade and other payables totaled $1.46 million (December 31, 2018 – $1.34 million). Olympia continues to
meet all of the obligations associated with its financial liabilities.

The aging of the undiscounted lease payments is outlined in the following table:

At December 31, 2019

Lease payments

Less than
one year

One to
two years

Two to
three years

More than
three years

Total
undiscounted
lease payments

$ 1,013,885

923,397

147,932

$ 2,085,214

The liquidity risk relating to derivative financial instruments payable is outlined in the following table:

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1–3 years)

December 31, 2019

December 31, 2018

7,766

32,175

11,733

605,585

657,259

887,020

15,210

19,473

16,849

108,948

160,480

(ii) Market risk

Market risk is the risk that the fair value of future cash flows of
financial instruments will fluctuate because of changes in market
prices and is composed of the following:

Foreign currency exchange risk

Olympia is exposed to changes in foreign exchange rates when,
and if, revenues or financial instruments fluctuate because of

changing rates. Transactions in the applicable financial market
are executed consistent with established risk management
policies. Olympia purchases forward contracts whenever it
enters into a transaction to buy or sell foreign currency in the
future. These contracts are both short term and long term in
nature and are in the normal course of business. Management
understands that the currency markets are volatile and therefore
subject to higher risk.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Olympia applies the following policy to mitigate the currency
risk:

• For forward contracts, a margin of 5% is payable on signature

of the contract;

• Olympia sets up a corresponding position with its currency

Credit risk

supplier; and

• If market rates vary by 4% or more, the client is required to
adjust their margin to match the variance by the end of the
trading day.

If the United States dollar to Canadian dollar exchange rate
at December 31, 2019, were to have increased by $0.10, it is
estimated that Olympia’s after-tax earnings for the year ended
December 31, 2019 based on amounts shown in Note 11
and 13, would have decreased by approximately $232,876
(December 31, 2018 – $91,464). A $0.10 decrease in the United
States dollar to Canadian dollar exchange rate would have had
an equal but opposite effect. The vast majority of Olympia’s
Foreign Exchange division’s trades are Canadian dollars traded
for United States dollars and vice versa, although it trades in
various other currencies. This sensitivity analysis assumes that
all other variables remain constant.

Interest rate risk

If the interest rates were to have increased by 1%, it is
estimated that Olympia’s after-tax earnings for the year ended
December 31, 2019, would have increased by approximately

Current

31 to 60 days

61 to 90 days

Over 90 days

Allowance for doubtful accounts

Credit risk is the risk that the counterparty to a financial asset
will default, resulting in Olympia incurring a financial loss.
Before material transactions begin with a new counterparty, the
counterparty’s creditworthiness is assessed by the FX division.
The assessment practice considers both quantitative and
qualitative factors. Olympia constantly monitors the exposure
to any single customer or counterparty along with the financial
position of the customer or counterparty. If it is deemed that
a customer or counterparty has become materially weaker,
Olympia will work to reduce the credit exposure and lower the
credit limit allocated. Olympia is exposed to credit risk on its
cash and cash equivalents, restricted cash and investments,
trade and other receivables, promissory note receivable and
derivative financial
instruments receivable. The maximum
exposure to credit risk of Olympia at the end of the year is the
carrying value of cash and cash equivalents, restricted cash
and investments, trade and other receivables, promissory note
receivable and derivative financial instruments receivable.

• Cash and cash equivalents

Olympia mitigates its exposure to credit risk by maintaining its
bank accounts with a highly rated financial institution.

• Restricted cash and investments

Olympia limits its counterparty credit risk on these assets by
dealing with reputable counterparties and performing due
diligence to assess their credit worthiness.

• Trade and other receivables

December 31, 2019

December 31, 2018

247,890

19,093

7,337

3,813,030

(981,584 )

3,105,766

196,911

12,657

24,234

2,609,598

(571,363 )

2,272,037

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The allowance for doubtful accounts is based on an account portfolio analysis. Movements on Olympia’s provision for impairment of
trade receivables are as follows:

At January 1

Increase in provision

Receivables written off

Allowance for doubtful accounts

Included within receivables is the current portion of a lease
receivable of $0.04 million recognized based on the present
value of sublet property, as required by the newly adopted
IFRS 16.

Provision matrix

Olympia has set up a provision matrix based on its historically
observed default rates. Olympia adjusts the matrix for forward-

Current

31 to 60 days

61 to 90 days

Over 90 days

Non-current (1–3 years)

December 31, 2019

December 31, 2018

571,363

478,930

(68,709 )

981,584

613,822

269,437

(311,896 )

571,363

looking estimates. The minimum allowance has been calculated
based on the provision matrix, and the expected credit loss is
as follows:

• less than 90 days: nominal;

• more than 90 days but less than two years past due: $390,864;

• more than two years but less than three years past due:

$215,594; and

• three or more years past due: $148,527.

Derivative financial instruments receivable

The expected maturity relating to derivative financial instruments
receivable and foreign exchange contracts is outlined in the
following table:

December 31, 2019

December 31, 2018

11,005

55,658

19,742

2,090,615

2,177,020

1,840,389

17,926

30,960

45,029

312,167

406,082

The receivable can all be offset with one counterparty.

(iii) Capital risk management

Olympia’s main objectives when managing its capital structure
are to:

• Maintain sufficient cash and cash equivalents over the
short and medium term in order to finance its growth and
development, including capital expenditures;

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The current portion as at December 31, 2019, is $0.91 million,
with the non-current portion being $1.04 million. Included under
administrative expenses are interest expenses related to the
lease liabilities in the amount of $0.14 million for the year ended
December 31, 2019.

9. OPERATING SEGMENTS
Olympia has six operating segments or divisions, of which five
are business segments and offer different products and services
and are managed separately because they require different
technology and marketing strategies. The Corporate division
is a cost centre and earns incidental revenue. For each of the
divisions, Olympia’s president, chief financial officer and other
executive management review internal management reports on
a monthly basis.

Segment profit or loss is used to measure performance.
Olympia’s president and other executive management believe
that such information is the most relevant in evaluating the
results of certain segments relative to other entities that operate
within these industries. Inter-segmental transactions consist
mainly of cost recoveries, which are recognized at cost. In
addition, reportable segments are managed on a functional
basis through regular reporting to the president and other
executive management.

Olympia does not disclose a measure of segment assets,
because the president and other executive management do
not use this information to assess performance and allocate
for all
resources. Olympia reports net operating results
operating segments to the president and other executive
management. All other assets and liabilities are reported on
a consolidated basis. Costs are allocated to segments based
on usage.

• Maintain regulatory capital for Olympia Trust as required by
the Loan and Trust Corporations Act (Alberta) ($2 million).
Similar regulatory capital
in
Nova Scotia ($5 million) and Saskatchewan ($5 million).
Regulatory capital
is defined as share capital and
retained earnings. Olympia Trust has maintained these
minimum capital requirements throughout the year ended
December 31, 2019; and

is required by

legislation

• Maintain compliance with financial covenants, which
includes maintaining a minimum equity of $12 million. The
financial covenants are reviewed quarterly, and controls are
in place to maintain compliance with the covenants. Olympia
complied with its financial covenants for the year ended
December 31, 2019.

8. LEASE LIABILITIES
Olympia recognized lease liabilities on the initial application
of IFRS 16, which was implemented on January 1, 2019. The
movement of the lease liabilities is shown below

Lease liability

Balance at January 1

Lease repayment

Balance at December 31

2019

2,801,728

(856,376 )

1,945,352

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Net operations for the year ended December 31, 2019

Health

RRSP

EEI

CSS Corporate

Total

Service revenue

$ 8,078,679 $ 18,784,070 $ 7,778,903 $

731,397 $

180,330 $

26,747 $ 35,580,126

Interest revenue and
trust income

335,144

12,812,347

253,361

1,016

2,872

98,108

13,502,848

Direct expenses

(1,708,096 )

(51,189 )

(1,376,199 )

(50,672 )

(3,178 )

(3,189,334 )

6,705,727

31,545,228

6,656,065

681,741

180,024

124,855

45,893,640

Administrative expenses (3,744,574 )

(20,814,440 )

(7,307,531 )

(1,296,981 )

(1,265,249 )

(174,842 )

(34,603,617 )

Depreciation and
amortization

Other gains/(losses),
net (note 25)

Earnings/(loss) before
income taxes

Income taxes
(expense)/recovery(1)

(153,473 )

(982,418 )

(286,135 )

(82,339 )

(33,264 )

(57 )

(1,537,686 )

12,871

95,173

2,999,206

3,401

(5,910 )

3,104,741

2,820,551

9,843,543

2,061,605

(694,178 )

(1,118,489 )

(55,954 )

12,857,078

(748,490 )

(2,627,174)

(541,962 )

183,311

293,757

(90,539 )

(3,531,097 )

Net earnings/(loss)

$ 2,072,061 $ 7,216,369 $ 1,519,643 $

(510,867 ) $

(824,732 ) $

(146,493 ) $ 9,325,981

Net operations for year ended December 31, 2018

Health

RRSP

EEI

CSS Corporate

Total

Service revenue

$ 7,958,937 $ 20,004,171 $ 9,921,513 $

518,257 $

- $

194,370 $38,597,248

Interest revenue and
trust income

234,441

10,694,190

207,096

767

295,839

11,432,333

Direct expenses

(1,801,294 )

(36,062 )

(1,108,870 )

(165,826 )

6,392,084

30,662,299

9,019,739

353,198

(23 )

(3,112,075 )

490,209

46,917,506

Administrative expenses (3,745,167 )

(19,951,246 )

(6,176,542 )

(742,736 )

(257,476 )

(277,722 )

(31,150,889 )

Depreciation and
amortization

Other (losses)/gains,
net (note 25)

Earnings/(loss) before
income taxes

Income taxes
(expense)/recovery(1)

(75,218 )

(514,300 )

(80,151 )

(74,709 )

(780 )

(1,809 )

(746,967 )

(2,064 )

(54,440 )

(1,384,262 )

10,150

(1,430,616 )

2,569,635

10,142,313

1,378,784

(464,247 )

(258,279 )

220,828

13,589,034

(657,930 )

(2,694,538 )

(366,306 )

136,212

68,612

(172,870 )

(3,686,820 )

Net earnings/(loss)

$ 1,911,705 $ 7,447,775 $ 1,012,478 $

(328,035 ) $

(189,667 ) $

47,958 $ 9,902,214

(1) No income tax adjustment has been made regarding the elimination of intercompany transactions.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Service revenue per segment for year ended December 31, 2019

Health

RRSP

EEI

CSS Corporate

Total

- $

650,150 $

- $

227,493 $

68,475 $

- $

946,118

1,385,520

12,900,938

39,146

14,325,604

6,085,253

5,152,122

263,211

506,321

72,709

12,079,616

Account set-up fees and
onboarding fees

Annual administration
fee and annual health
spending account fees

Monthly and
transaction fees

Trading profits

Travel and life insurance
brokerage fees

546,827

225

7,568,004

Other

61,079

80,635

(52,312 )

(2,417 )

7,568,004

547,052

26,747

113,732

Service revenue

$ 8,078,679 $ 18,784,070 $ 7,778,903 $

731,397 $

180,330 $

26,747 $ 35,580,126

Service revenue per segment for the year ended December 31, 2018

Health

RRSP

EEI

CSS Corporate

Total

- $

469,700 $

- $

207,683 $

- $

677,383

Account set-up fees
and onboarding fees

Annual administation fee
and annual health
spending account fees

Monthly and
transaction fees

Trading profits

Travel and life insurance
brokerage fees

1,186,941

13,006,125

6,153,989

6,431,024

122,542

310,109

555,137

9,782,629

14,193,066

13,017,664

9,782,629

555,137

194,370

371,369

Other

62,870

97,322

16,342

465

Service revenue

$ 7,958,937 $ 20,004,171 $ 9,921,513 $

518,257 $

- $

194,370 $ 38,597,248

Revenue earned from one customer in the FX division represents more than 10% of the FX division’s revenue earned for the year ended
December 31, 2019 and December 31, 2018.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10. RESTRICTED CASH AND INVESTMENTS

Foreign exchange trading investments collateral provided

December 31, 2019

December 31, 2018

2,500,000

707,000

Restricted cash and investments are not readily accessible for
use in operations and are therefore reported separately from
cash and cash equivalents. Olympia utilized its revolving credit
facility to fund the increased collateral requirements.

11. CASH AND CASH EQUIVALENTS
Cash at bank and on hand is readily convertible to known
amounts of cash, which are subject to an insignificant risk of
changes in value.

Non-restricted cash in circulation refers to Olympia’s foreign
exchange cash in ATM cassettes and cash in transit.

Cash at bank and on hand

Non-restricted cash in circulation

12. REVOLVING CREDIT FACILITY
As at December 31, 2019, Olympia has drawn $6.66 million
(December 31, 2018 – $4.21 million) on its established credit
facility. On March 15, 2019, Olympia increased the credit facility
amount from $8.50 million to $15 million. Amounts drawn in the
current year have been used primarily to facilitate the additional
trading collateral requirements for the FX division and to finance
the growth of the Exempt Edge division. The credit facility in
place has a maximum amount of $15 million (December 31,
2018 – $8.50 million) which can be drawn and bears interest at
the Canadian prime rate plus 0.25%. The credit facility will be
reviewed quarterly based on these financial statements.

The credit facility is subject to certain covenants and other
limitations that, if breached, could cause a default, which might
result in a requirement for immediate repayment of all amounts
outstanding. The credit facility contains a number of affirmative
covenants, including maintaining specific security, maintaining
a specific financial ratio, and maintaining a total equity of $12
million. The financial ratio is a quarterly cash flow coverage
ratio of not less than 1.50:1. At December 31, 2019, Olympia’s
cash flow coverage ratio under the terms of the credit facility
was calculated to be 1.99:1 (December 31, 2018 – 3.23:1). Total

Available balance at January 1

Drawn

Available at the end of the year

December 31, 2019

December 31, 2018

13,080,249

673,840

13,754,089

11,827,579

1,007,327

12,834,906

equity as at December 31, 2019 was $17.93 million, compared
to total equity of $15.08 million at December 31, 2018. As at
December 31, 2019, Olympia was in compliance with all
covenants.

Security for the credit facility includes a general security
agreement providing a first security charge over all present and
after acquired property.

Subsequent to year end, the credit facility was amended to
divide the facility between Olympia and Olympia Trust. The
new agreements provides Olympia with a $9 million facility and
Olympia Trust with a $6 million facility.

As as December 31, 2019, no amounts have been drawn on
this facility.

December 31, 2019

December 31, 2018

15,000,000

(6,655,347 )

8,344,653

8,500,000

(4,207,347 )

4,292,653

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. DERIVATIVE FINANCIAL INSTRUMENTS

Fair value as at
December 31, 2019

Notional amount as at
December 31, 2019

Fair value as at
December 31, 2018

Notional amount as at
December 31, 2018

Current assets

Non-current assets
(1–3 years)

Current liabilities

Non-current liabilities
(1–3 years)

2,177,020

1,840,389

657,259

887,020

63,680,730

78,426,150

30,131,773

33,447,904

406,082

160,480

25,894,166

5,796,292

Olympia Trust has entered into foreign exchange contracts
with its customers and currency suppliers. The expiry dates
of the above derivatives vary between January 15, 2020,
and September 24, 2021. As a result, a portion of the foreign
exchange contracts is classified as non-current.

Forward foreign exchange contracts are measured at fair value
through profit or loss based on contractual maturities and are
presented at their fair value on the balance sheet. Changes in
fair values of forward foreign exchange contracts are recorded
in “Other (gains)/losses, net” in the consolidated statements of
net earnings and comprehensive income. The fair value of all
forward foreign exchange contracts is based on current bid

prices for their respective remaining terms to maturity in an
active market. As at December 31, 2019, Olympia has margins
held in Canadian dollars of $3.69 million (December 31, 2018 –
$1.22 million).

For the year ended December 31, 2019, there were no transfers
between Level 1 and Level 2 fair value measurements and no
transfers into or out of Level 3 fair value measurements.

The following table presents Olympia’s derivative financial
assets and liabilities measured at fair value and categorized by
level according to the significance of the inputs used in making
these measurements:

Recurring measurements

Financial assets –
derivative financial
instruments

Financial liabilities –
derivative financial
instruments

Recurring measurements

Financial assets –
derivative financial
instruments

Financial liabilities –
derivative financial
instruments

December 31, 2019

Level 1

Level 2

Level 3

4,017,409

(1,544,278 )

2,473,131

4,017,409

(1,544,278 )

2,473,131

December 31, 2018

Level 1

Level 2

Level 3

406,082

(160,480 )

245,602

406,082

(160,480 )

245,602

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. EQUIPMENT AND OTHER

December 31, 2019

Cost

At beginning of year

Additions

Disposals

Leasehold
improvements

Computers &
equipment

Furniture &
fixtures

FX ATM
equipment

Total

$ 3,226,243

643,135

$ 1,110,517

294,449

$ 5,274,344

61,905

200,548

91,887

(256,445 )

(229,519 )

(231,877 )

973

355,313

(717,841)

At end of year

$ 3,031,703

614,164

970,527

295,422

$ 4,911,816

Accumulated depreciation

At beginning of year

Disposals

$ 2,567,485

434,987

947,377

84,962

$ 4,034,811

(256,445 )

(216,989 )

(231,613 )

(705,047 )

Depreciation charge for the year

208,617

120,954

72,505

59,021

461,097

At end of year

Closing net book value

$ 2,519,657

512,046

338,952

275,212

788,269

182,258

143,983

$ 3,790,861

151,439

$ 1,120,955

December 31, 2018

Cost

At beginning of year

Additions

Reclassification

Disposals

At end of year

Accumulated depreciation

At beginning of year

Disposals

Leasehold
improvements

Computers &
equipment

Furniture &
fixtures

ATM
equipment

Total

$ 3,307,502

$ 2,497,727

$ 1,499,304

$ 1,467,560

$ 8,772,093

143,859

178,249

(1,677 )

(843 )

70,638

1,560

180,283

573,029

960

(223,441 )

(2,031,998 )

(460,985 )

(1,354,354 )

(4,070,778 )

$ 3,226,243

643,135

$ 1,110,517

294,449

$ 5,274,344

$ 2,579,050

$ 2,244,883

$ 1,247,936

467,828

$ 6,539,697

(211,205 )

(1,923,476 )

(421,097)

(531,090 )

(3,086,868 )

Depreciation charge for the year

199,640

113,580

120,538

148,224

581,982

At end of year

Closing net book value

$ 2,567,485

658,758

434,987

208,148

947,377

163,140

84,962

$ 4,034,811

209,487

$ 1,239,533

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. INTANGIBLE ASSETS

December 31, 2019

Cost

At beginning of year

Additions

Disposals

Internally
generated
software

Computer
software

ATM
processing
contracts

Other

Total

$ 2,110,319

$ 1,647,523

943,968

27,305

$ 4,729,115

279,454

503,165

(16,740 )

(431,442 )

(943,968 )

782,619

(1,392,150 )

At end of year

$ 2,373,033

$ 1,719,246

27,305

$ 4,119,584

Accumulated depreciation

At beginning of year

408,450

851,575

943,968

16,860

$ 2,220,853

Amortization charge for the year

255,921

277,620

9,126

542,667

(16,740 )

(431,442 )

(943,968 )

(1,392,150 )

Closing net book value

$ 1,725,402

$ 1,021,493

647,631

697,753

25,986

$ 1,371,370

1,319

$ 2,748,214

Disposals

At end of year

December 31, 2018

Cost

At beginning of year

Additions

Disposals

Internally
generated
software

Computer
software

ATM
processing
contracts

Other

Total

$ 1,850,960

$ 1,210,020

$ 1,082,968

41,032

$ 4,184,980

461,642

616,192

2,305

1,080,139

(202,283 )

(178,689 )

(139,000 )

(16,032 )

(536,004 )

At end of year

$ 2,110,319

$ 1,647,523

943,968

27,305

$ 4,729,115

Accumulated depreciation

At beginning of year

354,923

942,715

$ 1,015,216

22,433

$ 2,335,287

Amortization charge for the year

255,810

76,231

9,584

10,459

352,084

Disposals

At end of year

Closing net book value

Additions

(202,283 )

(167,371 )

408,450

$ 1,701,869

851,575

795,948

(80,832 )

943,968

(16,032 )

(466,518 )

16,860

$ 2,220,853

10,445

$ 2,508,262

The capital additions of $0.78 million relates to the continued development and enhancement of the Issuer’s Edge, Dealer’s Edge and
Edgelink systems by the Exempt Edge division and the continued development of the Registered Plans division’s mobile application.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16. RIGHT-OF-USE ASSETS

Balance at January 1

Amortization

Balance at December 31

2019

1,606,986

(533,922 )

1,073,064

The right-of-use leased assets recognition is related to the adoption of IFRS 16 and is depreciated over the term of the lease.

17. TRADE AND OTHER PAYABLES

Trade and other payables

Agents and commissions payable

Amounts due to related parties

Government taxes

18. DEFERRED REVENUE

Annual registered plan services administration fees

Annual health spending account fee

Annual corporate & shareholder services retainer fees

December 31, 2019

December 31, 2018

826,597

188,118

126,380

315,071

1,456,166

December 31, 2019

950

463,042

22,663

486,655

719,340

207,067

107,539

307,946

1,341,892

December 31, 2018

6,300

393,520

399,820

At December 31, 2019, deferred revenue totaled $0.49 million
compared to $0.40 million as at December 31, 2018. This is
comprised of annual fees that have been received by the Health
division, the CSS division, and the RRSP division. The unearned

portion of these annual fees is recognized as deferred revenue
at the time of billing and revenue is recognized on a straight-line
basis in relation to Olympia rendering these services.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

19. OTHER LIABILITIES AND CHARGES

Other liabilities and charges (current)

Bonuses and commission payable

General accruals

Medical benefits payable

CRA employee tax accrual

Scholarships and other

Vacation payable

Professional fees accrual

Severance accrual

Straight-line rent

Leasehold inducement

Onerous contract obligation

Legal fee accrual

December 31, 2019

December 31, 2018

925,422

275,926

124,436

111,306

100,130

89,236

63,930

42,500

597,426

223,235

124,436

85,996

69,595

132,558

122,483

85,688

73,635

13,026

General accruals primarily comprises enhanced cyber security
testing, computer maintenance and services and corporate
maintenance. In the prior year the non-current portion of other

liabilities of $0.79 million related to leasehold inducements. With
the transition to IFRS 16 on January 1, 2019, these were offset
with the right-of-use asset, as disclosed in Note 3.

1,732,886

1,528,078

20. SHARE CAPITAL AND CONTRIBUTED SURPLUS

At January 1, 2019

Shares repurchased
and cancelled

Balance at
December 31, 2019

At January 1, 2018

Balance at
December 31, 2018

Number of
common shares

Share capital

Contributed surplus

Total

2,406,352

7,886,989

86,373

7,973,362

(16 )

2,406,336

2,406,352

7,886,989

86,373

7,973,362

7,886,989

86,373

7,973,362

7,886,989

86,373

7,973,362

Olympia is authorized to issue an unlimited number of common
shares without nominal or par value. (December 31, 2018 –
unlimited common shares). All issued shares are fully paid.

During the year, Olympia repurchased fractional shares from
former shareholders at $50 per share. The full repurchase was
allocated to retained earnings.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21. INCOME TAXES
a) The significant components which give rise to deferred income tax assets and liabilities are as follows:

Bad debts provision and other

Non-capital losses

Carrying amount of equipment higher than the tax basis

December 31, 2019

December 31, 2018

501,728

595,604

(311,132 )

786,200

154,456

1,314,559

(225,759 )

1,243,256

b) Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected
for the full financial year. The average annual rate used for the year ended December 31, 2019, was 26.5% (December 31, 2018 –
27%). On May 28, 2019, the Alberta government introduced Bill 3, reducing the corporate income tax rate to 11% (from 12%) effective
July 1, 2019.

Earnings from continuing operations before income tax

12,857,078

13,589,034

December 31, 2019

December 31, 2018

Anticipated income tax expense

Non-deductible expenses

Adjustment in respect of prior years

Other

Remeasurement of deferred tax (change in provincial tax rate)

Current tax expense

Deferred tax recovery

22. ADMINISTRATIVE EXPENSES

3,407,126

60,027

5,630

12,064

46,250

3,531,097

3,074,041

457,056

3,669,039

28,833

(16,179 )

5,127

3,686,820

3,353,276

333,544

Salaries, management fees & bonuses

17,599,545

16,238,728

December 31, 2019

December 31, 2018

General administration

Rent

Management compensation (note 32)

Employee benefit expense (note 24)

Bad debts

23. DIRECT EXPENSES

Commission expense

Trailer health commissions

Service costs paid

2019 Annual Report | Olympia Financial Group Inc.

9,721,219

1,106,153

3,734,826

1,673,640

768,234

7,994,985

1,787,377

3,594,972

1,290,633

244,194

34,603,617

31,150,889

December 31, 2019

December 31, 2018

1,614,858

1,217,517

356,959

3,189,334

1,395,391

1,295,264

421,420

3,112,075

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. EMPLOYEE BENEFITS

Medical benefits

Parking and other benefits

Employee share ownership assistance scheme

Long-term service awards and education assistance

25. OTHER (GAINS)/LOSSES, NET

Unrealized foreign exchange (gain)/loss

(Gain)/loss on disposal of asset

Insurance settlement

December 31, 2019

December 31, 2018

788,106

507,707

278,626

99,201

1,673,640

December 31, 2019

(2,227,529 )

(39,680 )

(837,532 )

(3,104,741 )

556,484

379,704

239,146

115,299

1,290,633

December 31, 2018

1,381,682

48,934

1,430,616

The insurance settlement relates to amounts received as part of the insurance claim stemming from the cyber incident disclosed in
the press release on February 2, 2019.

26. EARNINGS PER SHARE

Basic and diluted

Basic earnings per share is calculated by dividing the profit attributable to equity holders of Olympia by the weighted average number
of common shares in issue during the period.

Year ended

December 31, 2019

December 31, 2018

Net earnings from continuing operations attributable to
shareholders of Olympia

Net loss from discontinued operations

Total net earnings

Weighted average number of shares (basic and diluted)

Basic and diluted earnings per share – continuing operations

Basic and diluted loss per share – discontinued operations

Basic and diluted earnings per share – combined operations

9,428,154

2,406,341

3.92

9,967,821

(388,022 )

9,579,799

2,406,352

4.14

(0.16 )

3.98

27. DIVIDENDS PER SHARE
The aggregate dividends declared and paid amounted to $6.50 million (December 31, 2018 – $5.41 million).

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28a. CHANGES IN NON-CASH WORKING CAPITAL

December 31, 2019

December 31, 2018

Trade & other receivables

Prepaid expenses

Promissory note receivable

Inventory

Trade & other payables

Deferred revenue

Current taxes payable

Other liabilities & charges

Other liabilities (non-current)

(761,393 )

(486,914 )

28,539

(7,391 )

114,275

86,836

171,158

486,914

(1,045,598 )

(87,467 )

74,212

215,954

86,564

(96,575 )

(17,676 )

(277,071 )

(1,147,657 )

(367,976 )

28b. NON-CASH FINANCING AND INVESTING ACTIVITIES

Lease receivable resulting from IFRS 16

Lease liability resulting from IFRS 16

December 31, 2019

$
$

141,208

282,106

423,314

29. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

Revolving credit facility

December 31, 2018

Cash flows

December 31, 2019

4,207,347

2,448,000

6,655,347

30. COMMITMENTS
Olympia leases various offices under lease agreements. The
initial lease terms are between twelve months and fifty months
and the majority of lease agreements are renewable at market
rates when the lease period ends.

Future aggregate minimum lease payments under leases are
listed in the table below:

2020

2021

2022

December 31, 2019

1,013,885

923,397

147,932

2,085,214

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

31. CONTINGENCIES
Olympia is not a money lender nor does it guarantee or
participate in loans or mortgages of any type, except in its
capacity as trustee of conventional and syndicated mortgages.

Olympia is defendant and plaintiff in a number of legal actions
that arise in the normal course of business, the losses or gains
from which, if any, are not anticipated to have a material effect
on the consolidated financial statements.

32. RELATED PARTY TRANSACTIONS
Olympia’s president and CEO owns and controls 29.28%
of Olympia’s shares. During the year, Olympia entered into
transactions with the following related parties:

• Companies and businesses controlled by management of

Olympia;

• Family members of the president, management and directors;

• Companies and businesses controlled by the president and

and

CEO of Olympia;

• Companies and businesses associated with the directors of

Olympia;

• Key management and directors.

The following transactions with related parties were measured
at the exchange amount, which is the amount of consideration
agreed to by the parties:

Service revenue

Companies and businesses controlled by the president and CEO

December 31, 2019

December 31, 2018

34,330

11,639

Revenue from associated entities totaled $34,330 for the year ended December 31, 2019 (December 31, 2018 – $11,639). This mainly
consisted of revenue from legal services provided by Olympia’s in-house general counsel to Tarman, a company controlled by the
president and CEO, as well as sublease income ($24,000) from Exempt Experts Inc., a company controlled by the president and CEO.

Interest revenue

Companies and businesses controlled by the president and CEO

December 31, 2019

December 31, 2018

58,800

37,335

Interest revenue from associated entities totaled $58,800 for the year ended December 31, 2019, (December 31, 2018 – $37,335), and
consists of interest earned from the promissory note receivable.

Administrative expenses

December 31, 2019

December 31, 2018

Companies and businesses controlled by the president and

CEO (management fee)

Olympia Charitable Foundation

Companies and businesses controlled by the president and CEO

3,734,826

68,155

38,379

3,841,360

3,594,972

98,432

3,693,404

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Administrative expenses paid to associated entities totaled $3.84
million for the year ended December 31, 2019 (December 31,
2018 – $3.69 million), and consisted of the following:

• The Olympia Charitable Foundation is funded by Olympia
and the employees of Olympia. Olympia’s matched donation
totaled $68,155 for the twelve months ended December 31,
2019 (December 31, 2018 – $98,432).

• Management fees are paid to Tarman based on a percentage
of pre-tax profits of Olympia’s divisions, except for the Private

Health Services Plan division, where the management fee
is based on a percentage of health claims administered.
These fees are for services provided as president and CEO
of Olympia. For the twelve months ended December 31,
2019, this amounted to $3.73 million (December 31, 2018 –
$3.59 million).

• Fees paid to Olympia ATM Ltd., a company owned and
controlled by Olympia’s president and CEO, of $38,379 relate
to maintenance services provided for Olympia’s Foreign
Exchange ATMs.

Trade and other receivables include amounts receivable
from related parties

Companies and businesses controlled by the president and CEO
(current)

Companies and businesses controlled by the president and CEO
(non-current)

December 31, 2019

December 31, 2018

49,966

1,400,000

1,449,966

57,522

1,428,539

1,486,061

Receivables from associated entities totaled $1.45 million for the
year ended December 31, 2019 (December 31, 2018 – $1.49
million) and consisted mainly of the following:

• A receivable in the amount of $34,421 (December 31, 2018
– $57,488) from Tarman, a company controlled by Olympia’s
president and CEO, reflects legal services provided and
cost recoveries relating to accounting and other administration
services provided.

of Directors noted the continuing losses of approximately
$120,000 per month in the ATM Business and acknowledged
that while the ATM business still had the potential to grow and
expand, it was unlikely to become profitable in the near future.
Given the immediate financial benefits that the sale of the ATM
business would have for Olympia and the uncertain timelines
to profitability, the ad hoc committee believed the sale of the
ATM business to be in the best interest of Olympia. The ad
hoc committee of the Board of Directors obtained a fairness
comfort letter stating that the proposed transaction was fair
to the disinterested shareholders of Olympia. In addition,
following the public disclosure of the transaction, Olympia
received an unsolicited expression of interest in the ATM
business from a third-party. Olympia permitted the third-party
to conduct a due diligence review and valuation of the ATM
business and received an offer to purchase the ATM business
from the third-party that was economically comparable to the
offer made by Tarman.

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

required to repay the outstanding principal amount of the
promissory note in annual installments of $140,000 on or
before the 30th day of June of each calendar year, with the
outstanding balance of the principal amount to be repaid in
full on or before June 30, 2023. As at December 31, 2019, all

interest has been fully paid. Interest earned for the year ended
December 31, 2019 was $58,800.

• Olympia has assessed the expected credit loss as it relates to

the promissory note and has determined it to be nominal.

Trade and other payables and provision for other liabilities
and charges include amounts payable to related parties

Companies and businesses controlled by the president and CEO

Directors' fees

Payables to associated entities totaled $235,230 for the year
ended December 31, 2019 (December 31, 2018 – $223,278),
and consisted mainly of the following:

• A payable in the amount of $39,994 (December 31, 2018 –
$37,070) to Tarman, a company controlled by the president
and CEO of Olympia, for commissions related to the sale of
health plans offered by OBI.

• A payable in the amount of $3,095 (December 31, 2018 – $nil)
to Olympia ATM Ltd, a company controlled by the president
and CEO of Olympia, for services provided to maintain Foreign
Exchange ATMs.

December 31, 2019

December 31, 2018

151,939

83,291

235,230

153,502

69,776

223,278

• A payable for directors’ fees of $83,291 (December 31, 2018

– $69,776).

These payables are all current.

Key management compensation

Compensation paid to key management is included in Note 22.
Key management includes the Board of Directors and executive
team members from OBI, Olympia Trust, Exempt Edge Inc.,
and Olympia. Olympia uses management and/or employment

Salaries, bonuses and profit sharing

Management fees

Directors’ fees

Short-term employee benefits

December 31, 2019

December 31, 2018

5,322,684

3,734,826

285,001

250,978

4,583,106

3,594,972

262,163

233,604

9,593,489

8,673,845

2019 Annual Report | Olympia Financial Group Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CORPORATE INFORMATION

Directors

Rick Skauge

Craig Skauge

Brenda Eprile 2

Brian Newman1 2 3 4

Diana Wolfe1 2 3 4

Gerard Janssen1 2 3 4

Tony Balasubramanian

Tony Lanzl

Board Committees

1 Audit Committee

2 Corporate Governance Committee

3 Executive Compensation Committee

4 Investment Committee

Head Office

2300, 125 – 9th Avenue SE

Calgary, AB T2G 0P6

Tel: 403-261-0900

Fax: 403-265-1455

www.olympiafinancial.com

info@olympiafinancial.com

Transfer Agent

Olympia Trust Company

2300, 125 – 9th Avenue SE

Calgary, AB T2G 0P6

Tel: 587-774-2340

Fax: 403-668-8307

Auditors

PricewaterhouseCoopers LLP

Chartered Professional Accountants

Suite 3100, 111 – 5th Avenue SW

Calgary, AB T2P 5L3

2019 Annual Report | Olympia Financial Group Inc.

THE EXECUTIVE TEAM

RICK SKAUGE

CRAIG SKAUGE

GERHARD BARNARD

ROBIN FRY

President and Chief Executive
Officer

Executive Vice President and
President, Olympia Trust Company
President, Exempt Edge Inc.

Chief Financial Officer and Vice
President, Finance

Chief Executive Officer,
Olympia Benefits Inc.

KEN FRY

NEIL MCCULLAGH

ANDREA GILLIS

KELLY REVOL

President, Olympia Benefits Inc.

Vice President, Foreign Exchange

Vice President, Securities
Registered Plans

Vice President, Mortgages
Registered Plans

STEPHEN PRESTON

DEAN NAUGLER

JONATHAN BAHNUIK

RYAN MCKENNA

Vice President, Exempt Edge Inc.

Vice President, Corporate and
Shareholder Services

General Counsel

Vice President, Information
Technology

2019 Annual Report | Olympia Financial Group Inc.

19202300, 125 – 9th Avenue SE, Calgary, Alberta T2G 0P6

Tel: 403.261.0900 Fax: 403.265.1455

www.olympiafinancial.com info@olympiafinancial.com

1920