Highlights
- Net operating income per share increased 4% to $1.44, with strong net investment income and
distribution results
- Strong premium growth of 8% was fuelled by improving
market conditions, with strong growth in commercial lines across
North America and accelerating
growth in personal lines
- Combined ratio of 97.0% reflects strong underlying
performance in personal auto offset by 3.7 points from an increase
in reserves for prior years; solid results in commercial lines in
Canada and the U.S.
- Strong financial position with $1.3
billion of total capital margin and operating ROE of
12%
(TSX: IFC)
(in Canadian dollars except as otherwise noted)
TORONTO, July 30, 2019 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"The fundamentals across all our businesses are strong. I was
disappointed to see more activity than anticipated on older auto
files which led us to prudently bolster reserves. At the same time
our action plans in auto are working, driving an excellent
underlying performance. Hard market conditions continue across the
business allowing us to capture growth opportunities."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q2-2019
|
Q2-20182
|
Change
|
YTD
2019
|
YTD
20182
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written1
|
3,152
|
2,908
|
8%
|
5,367
|
4,990
|
7%
|
Combined
ratio
|
97.0%
|
96.1%
|
0.9 pts
|
99.2%
|
97.6%
|
1.6 pts
|
Underwriting
income
|
75
|
93
|
(19)%
|
38
|
112
|
(66)%
|
Net investment
income
|
148
|
137
|
8%
|
288
|
262
|
10%
|
Distribution
EBITA
|
72
|
62
|
16%
|
108
|
92
|
17%
|
Net operating
income
|
212
|
201
|
5%
|
325
|
321
|
1%
|
Net income
|
168
|
161
|
4%
|
327
|
264
|
24%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
$1.44
|
$1.38
|
4%
|
$2.17
|
$2.19
|
(1)%
|
Earnings per share
(EPS)
|
$1.13
|
$1.10
|
3%
|
$2.19
|
$1.78
|
23%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
12.0%
|
11.9%
|
0.1 pts
|
|
|
|
ROE
|
10.6%
|
10.0%
|
0.6 pts
|
|
|
|
Book value per share
(in dollars)
|
$49.90
|
$48.64
|
3%
|
|
|
|
Total capital
margin3
|
1,269
|
1,243
|
26
|
|
|
|
Debt-to-total-capital
ratio
|
21.6%
|
22.5%
|
(0.9) pts
|
|
|
|
|
|
(1)
|
This press release
contains non-IFRS financial measures. Refer to Section 16 –
Non-IFRS financial measures in the Management's Discussion
and Analysis for further details. DPW change (growth) is presented
in constant currency. The impact of fluctuations in foreign
exchange rates was not material to our consolidated
results. Impact on the U.S. segment's performance is outlined
in the Insurance Business Performance section hereafter.
|
(2)
|
Refer to Section 14 –
Presentation changes in the Management's Discussion and
Analysis for further details on the reclassification of
comparatives.
|
(3)
|
Aggregate of capital
in excess of company action levels in regulated entities (170% MCT,
200% RBC) plus available cash in unregulated entities. Refer to
Section 12 – Capital management in the Management's
Discussion and Analysis for further details.
|
Dividend
- The Board of Directors approved the quarterly dividend of
$0.76 per share on the Company's
outstanding common shares. The Board also approved a quarterly
dividend of 21.225 cents per share on
the Company's Class A Series 1 preferred shares, 20.825 cents per share on the Class A Series 3
preferred shares, 27.392 cents per
share on the Class A Series 4 preferred shares, 32.5 cents per share on the Class A Series 5
preferred shares, 33.125 cents per
share on the Class A Series 6 preferred shares and 30.625 cents per share on the Class A Series 7
preferred shares. The dividends are payable on September 30, 2019, to shareholders of record on
September 16, 2019.
12-month Industry Outlook
- For the Canadian P&C industry, we expect
mid-to-upper single-digit premium growth. Market conditions
are hard as weak industry profitability in all lines of business
continues to put upward pressure on rates.
- In U.S. commercial, the pricing environment remains
competitive with improving upward trends. We expect mid
single-digit growth in the coming year.
- Overall, the Canadian industry's ROE is expected to improve,
but remain below its long-term average of 10% over the next 12
months.
Insurance Business Performance
(in millions of
Canadian dollars except as otherwise
noted)
|
Q2-2019
|
Q2-2018
|
Change
|
YTD
2019
|
YTD
2018
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written1
|
|
|
|
|
|
|
Canada
|
2,727
|
2,534
|
8%
|
4,580
|
4,295
|
7%
|
U.S.1
|
425
|
374
|
10%
|
787
|
695
|
9%
|
|
3,152
|
2,908
|
8%
|
5,367
|
4,990
|
7%
|
Combined
ratio
|
|
|
|
|
|
|
Canada
|
97.4%
|
96.6%
|
0.8 pts
|
100.1%
|
98.2%
|
1.9 pts
|
U.S.
|
94.8%
|
93.8%
|
1.0 pts
|
94.4%
|
94.5%
|
(0.1) pts
|
|
97.0%
|
96.1%
|
0.9 pts
|
99.2%
|
97.6%
|
1.6 pts
|
|
|
|
|
|
|
|
Underwriting
income
|
|
|
|
|
|
|
Canada
|
55
|
71
|
(16)
|
(4)
|
75
|
(79)
|
U.S.
|
18
|
21
|
(3)
|
39
|
36
|
3
|
Corporate &
other2
|
2
|
1
|
1
|
3
|
1
|
2
|
|
75
|
93
|
(18)
|
38
|
112
|
(74)
|
1
|
DPW change (growth)
is presented in constant currency. Refer to
Section 16 – Non-IFRS financial measures in the Management's
Discussion and Analysis for further details. In the U.S., DPW
change (growth) as reported was 14% for the quarter and 13%
year-to-date.
|
2
|
Reflects the impact
of our internal catastrophe reinsurance treaty.
|
- Premiums grew 8% in the quarter and year-to-date (or 8%
and 7% respectively on a constant currency basis), reflecting
strong growth across all lines of business. In Canada, premiums grew 8% in Q2-2019 supported
by improving competitive positioning. Strong double-digit growth in
commercial lines and the acceleration of growth in personal lines
are fueling topline momentum. With hard market conditions in
Canada we saw average rate
increases of 7% overall. U.S. commercial lines grew 14% in the
quarter (or 10% on a constant currency basis) mainly driven by
strong new business.
- Combined ratio of 97.0% in the quarter increased 0.9
points over last year. The combined ratio of 97.4% in Canada reflected strong underlying performance
in personal auto. The 0.8 points increase versus Q2-2018 was driven
by the unfavourable prior year claims development in personal auto
offset by lower catastrophe losses. U.S. performance remained solid
at 94.8% in the quarter.
- Year-to-date, IFC's combined ratio of 99.2% was 1.6
points higher than H1-2018, as improved underlying performance and
expense management were more than offset by unfavourable prior year
claims development.
Lines of Business
P&C Canada
- Personal auto premiums increased 6% in the quarter,
driven by rate increases in hard market conditions. The combined
ratio increased 3.9 points over last year to 99.5% in Q2-2019. The
underlying current year loss ratio of 66.8% was strong, improving
2.9 points over last year driven by the success of our action
plans. This was more than offset by an unfavourable 7.6 point
change in prior year claims development mostly related to reserve
increases on Alberta and
pre-reform Ontario files.
- Personal property premiums grew 6% in Q2-2019 driven by
rate increases and accelerating unit growth supported by hardening
market conditions. The combined ratio of 99.6% improved 3.1 points
reflecting lower catastrophe losses compared to last year. However,
the underlying current year loss ratio of 59.0% increased 5.3
points over last year's strong performance mainly due to higher
non-catastrophe weather and fire losses.
- Commercial lines (P&C and auto) premiums increased
11% in the quarter with contributions from all segments, led by
rate increases deployed in hard market conditions. The combined
ratio of 92.8% in the quarter was solid and remained stable over
last year. Catastrophe losses were 4 points lower than last year's
elevated level, while favourable prior year claims development was
lower by 3.9 points.
- Distribution EBITA grew 16% to $72 million in Q2-2019 due to growth and improved
profitability in our broker network.
P&C U.S.
- Premiums grew to $425
million or 10% in constant currency, with all lines showing
strong growth except lines under profitability improvement plans.
Strong new business, rate increases and higher retention levels are
driving growth as market conditions remain favourable across most
business lines.
- Combined ratio of 94.8% was solid, but 1.0 point higher
than last year. The positive impact of our profitability actions
and continued growth in profitable lines were more than offset by
higher large losses. The expense ratio increased by 1.8 points,
driven by higher commissions. We continue to make steady progress
on OneBeacon's profitability improvement plan and remain on track
to achieve a sustainable low-90s combined ratio by the end of
2020.
Investments
- Net investment income of $148
million was particularly strong increasing 8% in the
quarter, largely reflecting higher reinvestment yields captured in
2018.
Net Income
- Net operating income increased 5% to $212 million (or $1.44 per share) largely due to strong
distribution EBITA and net investment income growth offset by lower
underwriting income.
- Earnings per share of $1.13 improved 3% driven by operating
performance.
- Operating ROE for the last 12 months was 12.0% as at
June 30, 2019 and below our
historical track record due to personal auto challenges in 2019, as
well as severe weather.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $1.3
billion. MCT in Canada was
estimated at 191%.
- IFC's book value per share was $49.90 as at June 30,
2019, increasing 3% from a year ago mainly driven by
earnings.
- The debt-to-total capital ratio was 21.6% as at
June 30, 2019 and we expect to
achieve our goal of 20% by the end of the year.
Analysts' Estimates
- The average estimate of earnings per share and net
operating income per share for the quarter among the analysts
who follow the Company was $1.65 and
$1.79, respectively.
Management's Discussion and Analysis (MD&A) and
Consolidated Financial Statements
This Press Release, which was approved by the Company's Board of
Directors on the Audit Committee's recommendation, should be read
in conjunction with the Q2-2019 MD&A as well as the Q2-2019
Consolidated Financial Statements, which are available on the
Company's website at www.intactfc.com and later today on SEDAR at
www.sedar.com.
For the definitions of measures and other insurance-related
terms used in this Press Release, please refer to the MD&A and
to the glossary available in the "Investors" section of the
Company's website at www.intactfc.com.
Conference Call
Intact Financial Corporation will host a conference call to
review its earnings results tomorrow at 11:00 a.m. ET. To listen to the call via live
audio webcast and to view the Company's Financial Statements,
MD&A, presentation slides, Supplementary financial information
and other information not included in this press release, visit the
Company's website at www.intactfc.com and link to "Investors". The
conference call is also available by dialing 647-427-7450 or
1-888-231-8191 (toll-free in North
America). Please call 10 minutes before the start of the
call. A replay of the call will be available on July 31st, 2019 at 2:00
p.m. ET until midnight on August
7th. To listen to the replay, call 1- 855- 859-2056
(toll-free in North America),
passcode 6729129. A transcript of the call will also be made
available on Intact Financial Corporation's website.
About Intact Financial Corporation
Intact Financial Corporation (TSX: IFC) is the largest provider
of property and casualty (P&C) insurance in Canada and a leading provider of specialty
insurance in North America, with
over $10 billion in total annual
premiums. The Company has approximately 14,000 full- and part-time
employees who serve more than five million personal, business and
public-sector clients through offices in Canada and the U.S. In Canada, Intact distributes insurance under the
Intact Insurance brand through a wide network of brokers, including
its wholly-owned subsidiary BrokerLink, and directly to consumers
through belairdirect. In the U.S., OneBeacon Insurance Group, a
wholly-owned subsidiary, provides specialty insurance products
through independent agencies, brokers, wholesalers and managing
general agencies.
Forward Looking Statements
Certain statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to the outlook for the property and casualty
insurance industry in Canada and
the U.S., the Company's business outlook and the Company's growth
prospects. All such forward-looking statements are made pursuant to
the 'safe harbour' provisions of applicable Canadian securities
laws.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements as a result of various factors,
including those discussed in the Company's most recently filed
Annual Information Form and annual MD&A. As a result, we cannot
guarantee that any forward-looking statement will materialize, and
we caution you against relying on any of these forward-looking
statements. Except as may be required by Canadian securities laws,
we do not undertake any obligation to update or revise any
forward-looking statements contained in this news release, whether
as a result of new information, future events or otherwise. Please
read the cautionary note at the beginning of the MD&A.
SOURCE Intact Financial Corporation