Highlights
- Net operating income per share of $1.38, reflecting solid underlying
performance and strong net investment income offset by elevated
catastrophe losses
- Premiums grew 16% bolstered by OneBeacon and strong
growth in commercial lines in Canada
- Combined ratio of 96.1% reflects improvement in personal
auto and solid results for OneBeacon at 93.8%
- Operating ROE of 12% and a 15% increase in book value per
share over the last twelve months, with over $1.2 billion of total capital margin
(TSX: IFC)
(in Canadian dollars except as otherwise noted)
TORONTO, July 31, 2018 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"Our business once again demonstrated its resilience despite
higher than expected catastrophe losses. Actions in personal auto
are gaining momentum and results are trending towards a mid-90's
combined ratio run-rate by year-end. The fundamentals of our
Canadian property and commercial lines remain very strong and
results in our U.S. Specialty business continue to
improve."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as
|
|
|
|
|
|
|
otherwise
noted)
|
Q2-2018
|
Q2-2017
|
Change
|
YTD
2018
|
YTD
2017
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written
|
2,908
|
2,497
|
16%
|
4,990
|
4,234
|
18%
|
Combined
ratio
|
96.1%
|
95.0%
|
1.1
pts
|
97.6%
|
96.6%
|
1.0
pts
|
Underwriting
income
|
93
|
103
|
(10)
|
112
|
138
|
(26)
|
Net investment
income
|
134
|
105
|
29
|
256
|
210
|
46
|
Net distribution
income
|
52
|
50
|
2
|
76
|
74
|
2
|
Net operating
income
|
201
|
193
|
4%
|
321
|
316
|
2%
|
Net income
|
161
|
243
|
(34)%
|
264
|
389
|
(32)%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
1.38
|
1.44
|
(4)%
|
2.19
|
2.34
|
(6)%
|
|
Earnings per share
(EPS)
|
1.10
|
1.82
|
(40)%
|
1.78
|
2.90
|
(39)%
|
Operating ROE for the
last 12 months
|
11.9%
|
12.1%
|
(0.2) pts
|
|
|
|
Book value per share
(in dollars)
|
48.64
|
42.16
|
15%
|
|
|
|
Total capital
margin2
|
1,243
|
1,014
|
229
|
|
|
|
Debt-to-total-capital
ratio
|
22.5%
|
22.8%
|
(0.3) pts
|
|
|
|
(1)
|
This table contains
non-IFRS financial measures. Please refer to Section 14 – Non-IFRS
financial measures in the Management's Discussion and Analysis for
further details.
|
(2)
|
Aggregate of capital
in excess of company action levels in regulated entities (170% MCT,
200% RBC) plus available cash in unregulated entities. Please refer
to Section 11– Capital management in the Management's Discussion
and Analysis for further details.
|
Dividend
- The Board of Directors approved the quarterly dividend of
$0.70 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, 24.9535 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 41.62 cents per share on the Class A Series 7
preferred shares. The dividends are payable on September 28, 2018, to shareholders of record on
September 14, 2018.
Industry Outlook
- In personal auto, industry profitability remains
challenged while the market continues to firm. In personal
property, firm market conditions are expected to continue, as
companies adjust to changing weather patterns. Commercial
lines remain competitive, while benefiting from continued signs
of firming market conditions. Overall in Canada we expect mid-single-digit premium
growth in the coming year.
- In U.S. commercial, the pricing environment remains
competitive, with modest upward trends and low-to-mid single-digit
growth expected in the coming year.
- Overall, the 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)
|
Q2-2018
|
Q2-2017
|
Change
|
YTD
2018
|
YTD
2017
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written
|
|
|
|
|
|
|
|
Canada
|
2,534
|
2,497
|
2%
|
4,295
|
4,234
|
1%
|
|
U.S.
|
374
|
-
|
n/a
|
695
|
-
|
n/a
|
|
2,908
|
2,497
|
16%
|
4,990
|
4,234
|
18%
|
Combined
ratio
|
|
|
|
|
|
|
|
Canada
|
96.6%
|
95.0%
|
1.6 pts
|
98.2%
|
96.6%
|
1.6 pts
|
|
U.S.
|
93.8%
|
-
|
n/a
|
94.5%
|
-
|
n/a
|
|
96.1%
|
95.0%
|
1.1 pts
|
97.6%
|
96.6%
|
1.0 pts
|
Underwriting
income
|
|
|
|
|
|
|
|
Canada
|
72
|
103
|
(31)
|
76
|
138
|
(62)
|
|
U.S.
|
21
|
-
|
21
|
36
|
-
|
36
|
|
93
|
103
|
(10)
|
112
|
138
|
(26)
|
|
|
|
|
|
|
|
Current year
catastrophe claims
|
142
|
105
|
37
|
178
|
193
|
(15)
|
- Premiums grew 16% in the quarter and 18% in the first
half of 2018, reflecting our acquisition of OneBeacon. In
Canada, premium growth of 2% in
the quarter was driven by strong growth in commercial lines,
tempered by the impact of our profitability actions in personal
auto, including rate increases.
- Combined ratio of 96.1% in the quarter deteriorated by
1.1 points over last year, as OneBeacon's solid 93.8% performance
was offset by higher catastrophe losses in Canada. The combined ratio of 96.6% in
Canada also reflected good
progress on our personal auto action plan and solid underlying
performance in property lines.
- Year-to-date, IFC's combined ratio of 97.6% was 1.0
points worse than H1-2017, as a healthy performance from OneBeacon
was offset by higher non-catastrophe weather-related losses in
Canada, mainly in Q1-2018.
Lines of Business
P&C Canada
- Personal auto premiums declined 2%. Ongoing
profitability actions including rate increases ahead of the market
and segmentation initiatives impacted unit growth. The combined
ratio improved 2.2 points over last year to 95.6% driven by current
accident year improvement from our auto action plan. This was
tempered by unfavourable prior year claims development. We remain
on track to achieve our mid-90's combined ratio run-rate target by
year end.
- Personal property premiums grew 2% driven by rate
increases in firm market conditions, but were tempered by slowing
unit growth related to our profitability actions in personal auto.
The combined ratio of 102.7% included 18.1 points of catastrophe
losses driven by three severe weather events. Despite the impact of
severe weather in 2017 and 2018, the year-to-date combined ratios
were resilient, at a mid-90s level for both years.
- Commercial lines (P&C and auto) saw strong growth of
7% as both segments continued to benefit from rate momentum in
firming market conditions and robust growth in specialty lines.
Performance in the quarter was strong with a combined ratio of
92.9% despite close to 7 points of catastrophe losses.
- Net distribution income increased 4% to $52 million versus Q2-2017. Full year net
distribution income is still expected to grow by approximately 10%
in 2018 relative to 2017.
P&C U.S.
- Premiums of $374 million
reflected organic growth of 2% in the quarter. Business lines not
undergoing profitability improvement delivered low double-digit
growth.
- Underwriting income of $21
million resulted in a solid 93.8% combined ratio. Results
have continued to improve since closing and we remain on track to
achieve a sustainable low-90s combined ratio within 24 months.
Investments
- Net investment income of $134
million increased 28% in the quarter reflecting the
integration of the OneBeacon portfolio, optimization initiatives,
and higher yields.
Net Income
- Net operating income of $201
million for the quarter increased 4% over last year
reflecting robust growth in net investment income and solid
underwriting results in the U.S., which offset higher catastrophe
losses in Canada. Despite a
positive contribution from OneBeacon, NOIPS of $1.38 was down slightly, driven by $0.16 of higher catastrophe losses compared to
last year.
- Non-operating losses of $45
million in the quarter related mainly to the acquisition of
OneBeacon, whereas gains of $57
million in Q2-2017 were driven by currency derivative
gains.
- Earnings per share of $1.10 for the quarter decreased 40% from a year
ago impacted by the items discussed above.
- Operating ROE for the last 12 months was 11.9% as at
June 30, 2018 essentially unchanged
from a year ago.
Balance Sheet
- The Company ended the quarter in a strong financial
position, with a total capital margin of over $1.2 billion. MCT in Canada was estimated at 201%.
- IFC's book value per share was $48.64, increasing 15% from a year ago driven by
earnings and the equity financing of OneBeacon.
- The debt-to-total capital ratio decreased to 22.5% as at
June 30, 2018, and continues to track
towards our goal of 20% in 2019.
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 $1.13 and
$1.21, 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 Q2-2018 MD&A as well as the Q2-2018
Consolidated Financial Statements, which are available on the
Company's website at www.intactfc.com and 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 August 1, 2018 at 2:00
p.m. ET until midnight on August
8. To listen to the replay, call 1-855-859-2056 (toll-free
in North America), passcode
2555499. 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
close to $10 billion in total annual
premiums. The Company has over 13,000 full- and part-time employees
who serve more than five million personal, business, public sector
and institutional 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