Highlights
- Net operating income per share of $1.62, driven by a solid combined ratio of
93.8% across North America and
strong net investment income
- Premiums grew 23% fuelled by OneBeacon and strong
organic growth in commercial lines
- Combined ratio of 93.9% in Canada with significant improvement in
personal auto, and solid OneBeacon results at 93.5%
- Operating ROE of 11.6% and a 6% increase in book value per
share over the last twelve months, with $1.2 billion of total capital margin
(TSX: IFC)
(in Canadian dollars except as otherwise
noted)
TORONTO, Nov. 6, 2018 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"Our businesses delivered solid results this quarter, and we
made further progress on our near-term objectives. Personal auto
continues to improve and remains on track for a mid-90's combined
ratio run-rate by year-end. The anniversary of the OneBeacon
acquisition marks a year of delivering tangible results towards
creating a leading North American specialty insurer. Market
conditions across North America
continue to evolve favourably and should support stronger organic
growth in the coming year."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2018
|
Q3-2017
|
Change
|
YTD
2018
|
YTD
2017
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written
|
2,708
|
2,203
|
23%
|
7,698
|
6,437
|
20%
|
Combined
ratio
|
93.8%
|
91.8%
|
2.0
pts
|
96.3%
|
95.0%
|
1.3
pts
|
Underwriting
income
|
152
|
170
|
(18)
|
264
|
308
|
(44)
|
Net investment
income
|
133
|
101
|
32
|
389
|
311
|
78
|
Net distribution
income
|
34
|
30
|
4
|
110
|
104
|
6
|
Net operating
income
|
237
|
219
|
8%
|
558
|
535
|
4%
|
Net income
|
199
|
171
|
16%
|
463
|
560
|
(17)%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
1.62
|
1.61
|
1%
|
3.80
|
3.95
|
(4)%
|
|
Earnings per share
(EPS)
|
1.34
|
1.25
|
7%
|
3.12
|
4.14
|
(25)%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
|
Operating
ROE
|
11.6%
|
13.3%
|
(1.7) pts
|
|
|
|
|
ROE
|
9.8%
|
12.7%
|
(2.9) pts
|
|
|
|
Book value per share
(in dollars)
|
49.27
|
46.56
|
6%
|
|
|
|
Total capital
margin2
|
1,177
|
1,155
|
22
|
|
|
|
Debt-to-total-capital
ratio
|
21.7%
|
24.7%
|
(3.0) 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 Class A Series 1 preferred shares, 20.825 cents per share on the Class A Series 3
preferred shares, 26.2705 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 December 31, 2018, to shareholders of record on
December 14, 2018.
Industry Outlook
- Overall for the Canadian P&C industry, we expect
mid-single-digit premium growth in the coming year,
reflecting firming market conditions. In personal auto,
industry profitability is putting upward pressure on auto rates. In
personal property, companies continue to adjust to changing
weather patterns. While commercial lines remain competitive,
market conditions are improving.
- In U.S. commercial, the pricing environment is
competitive with modest upward trends, and the economic backdrop is
favourable. We expect low-to-mid single-digit growth 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)
|
Q3-2018
|
Q3-2017
|
Change
|
YTD
2018
|
YTD
2017
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written
|
|
|
|
|
|
|
|
Canada
|
2,239
|
2,203
|
2%
|
6,534
|
6,437
|
2%
|
|
U.S.
|
469
|
-
|
n/a
|
1,164
|
-
|
n/a
|
|
2,708
|
2,203
|
23%
|
7,698
|
6,437
|
20%
|
Combined
ratio
|
|
|
|
|
|
|
|
Canada
|
93.9%
|
91.8%
|
2.1 pts
|
96.7%
|
95.0%
|
1.7 pts
|
|
U.S.
|
93.5%
|
-
|
n/a
|
94.2%
|
-
|
n/a
|
|
93.8%
|
91.8%
|
2.0 pts
|
96.3%
|
95.0%
|
1.3 pts
|
|
|
|
|
|
|
|
Underwriting
income
|
|
|
|
|
|
|
|
Canada
|
129
|
170
|
(41)
|
204
|
308
|
(104)
|
|
U.S.
|
22
|
-
|
22
|
58
|
-
|
58
|
|
Corporate &
other1
|
1
|
-
|
1
|
2
|
-
|
2
|
|
152
|
170
|
(18)
|
264
|
308
|
(44)
|
|
1
Corporate & other segment reflects the impact of our internal
reinsurance treaty.
|
|
- Premiums
grew 23% in the quarter and 20% year-to-date, with OneBeacon
contributing 21 points and
18 points, respectively. In Canada, premium growth of 2% in the
quarter and year-to-date reflected strong
growth in commercial lines tempered by the impact of our
profitability actions in personal auto.
- Combined
ratio of 93.8% in the quarter was driven by solid underlying
performances in both Canada and the
U.S. The year-over-year deterioration of 2.0 points is largely
related to the 2017 net reserve change recorded
in Q3‑2017. The combined ratio of 93.9% in Canada reflects strong
underlying performance in personal lines
including significant year-over-year improvement in personal auto
results. This was offset by elevated large
losses in commercial lines. OneBeacon delivered another solid
quarter with a 93.5% combined ratio.
- Year-to-date, IFC's
combined ratio of 96.3% deteriorated by 1.3 points compared
to the same period last
year, as solid results from OneBeacon and progress in personal auto
were offset by elevated large losses in
Canadian commercial lines and personal property.
|
Lines of Business
P&C Canada
- Personal auto premiums declined 2% compared to the same
quarter last year, as rate increases taken ahead of the market and
segmentation initiatives impacted unit growth. The combined ratio
of 99.0% improved 6.1 points over last year driven by significant
improvement in underlying performance. Results included 1.9 points
of unfavourable prior year claims development. Our profitability
actions are yielding results and we remain on track to achieve our
mid-90s combined ratio run-rate target by year-end.
- Personal property premiums grew 2% driven by rate
increases in firm market conditions, tempered by the impact of our
profitability actions in personal auto. The combined ratio of 83.8%
was strong and improved 1.2 points over last year driven by lower
catastrophe losses. The year-to-date combined ratios remain
resilient at a low-90s level for both years, despite severe weather
in 2017 and 2018.
- Commercial lines (P&C and auto) premiums saw strong
growth of 8% as both segments continued to benefit from rate
momentum in firming market conditions. The combined ratio of 94.9%
increased year-over-year by 18.4 points, of which about 8 points
related to the 2017 net reserve change recorded in Q3-2017.
Elevated large losses and catastrophe losses were each roughly 5
points higher than last year.
- Net distribution income of $34
million grew 13% versus last year, driven by continued
growth of our broker network.
P&C U.S.
- Premiums of $469 million
reflected organic growth of 5% in the quarter. Growth initiatives
are generating strong new business. Business lines not undergoing
profitability improvement again delivered low double-digit
growth.
- Combined ratio was a solid 93.5%. Since closing the
OneBeacon acquisition one year ago, we have made good progress in
improving profitability. We are well on track to achieve a
sustainable low-90s combined ratio within 24 months.
Investments
- Net investment income of $133
million increased 32% compared to the same quarter last
year, reflecting the integration of the OneBeacon portfolio,
investment optimization initiatives, and higher yields.
Net Income
- Net operating income of $237
million for the quarter increased 8%, driven by strong
growth in net investment income and a solid underlying underwriting
performance including improved results in personal auto. On a per
share basis, net operating income of $1.62 was slightly higher than last year, after
reflecting the impact of the common shares issued as part of the
financing of OneBeacon.
- Earnings per share of $1.34 for the quarter increased 7% from a year
ago. This reflects the items discussed above, as well as lower net
investment losses and lower integration costs related to
OneBeacon.
- Operating ROE for the last 12 months was 11.6% as at
September 30, 2018 reflecting weak
personal auto results in the past year.
Balance Sheet
- The Company ended the quarter in a strong financial
position, with a total capital margin of $1.2 billion. MCT in Canada was estimated at 196%.
- IFC's book value per share was $49.27 as at September 30,
2018, increasing 6% from a year ago largely driven by
earnings.
- The debt-to-total capital ratio decreased to 21.7% as at
September 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 $1.48 and
$1.61, 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 Q3-2018 MD&A as well as the Q3-2018
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 November 7, 2018 at 2:00
p.m. ET until midnight on November
14. To listen to the replay, call 1-855-859-2056 (toll-free
in North America), passcode
9792999. 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 approximately 14,000 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