Highlights
- Net operating income per share up 46% to $2.78, driven by solid underwriting
performance across all lines, driven in part by benign weather, and
strong distribution results
- Healthy premium growth of 8% driven by strong retention and
new business and including The Guarantee Company of
North America ("The Guarantee")
acquisition
- Relief efforts helped more than 1.2 million customers,
with $510 million provided
year-to-date, including the recently launched $50 million targeted relief program for our most
vulnerable small business customers
- OROE of 16.9% and BVPS up 4% in the quarter to
$56.22
- Strong capital position with $1.9
billion of total capital margin available to manage
potential further shocks and capture strategic opportunities
(TSX: IFC)
(in Canadian dollars except as otherwise
noted)
TORONTO, Nov. 3, 2020 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"We entered this crisis in a position of strength, which
enabled us to provide relief to over 1.2 million customers, while
protecting our employees and maintaining our excellent service
levels. Our small business customers have been significantly
impacted by this crisis. We are continuing to support them with
targeted relief and policy adjustments, and will help throughout
the economic recovery period. Our resilient operations, coupled
with the benefit of our action plans over time and benign weather,
led to solid underwriting results this quarter. Our balance sheet
remains strong, ready to absorb potential further shocks and
capture strategic opportunities."
|
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2020
|
Q3-2019
|
Change
|
YTD
2020
|
YTD
2019
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written1
|
3,264
|
3,012
|
8%
|
9,167
|
8,379
|
9%
|
Combined
ratio
|
87.1%
|
92.3%
|
(5.2) pts
|
90.3%
|
96.9%
|
(6.6)
pts
|
Underwriting
income
|
369
|
198
|
86%
|
812
|
236
|
nm
|
Net investment
income
|
143
|
146
|
(2) %
|
434
|
434
|
-%
|
Distribution EBITA
and Other
|
81
|
56
|
45%
|
203
|
164
|
24%
|
Net operating
income
|
411
|
277
|
48%
|
1,004
|
602
|
67%
|
Net income
|
334
|
187
|
79%
|
704
|
514
|
37%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
2.78
|
1.91
|
46%
|
6.74
|
4.08
|
65%
|
Earnings per share
(EPS)
|
2.25
|
1.26
|
79%
|
4.65
|
3.45
|
35%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
16.9%
|
12.4%
|
4.5 pts
|
|
|
|
ROE
|
11.5%
|
10.2%
|
1.3 pts
|
|
|
|
Book value per share
(in dollars)
|
56.22
|
51.20
|
10%
|
|
|
|
Total capital
margin2
|
1,871
|
1,116
|
755
|
|
|
|
Debt-to-total-capital
ratio
|
21.2%
|
19.3%
|
1.9 pts
|
|
|
|
(1)
|
This press release
contains non-IFRS financial measures. Refer to Section 20 –
Non-IFRS financial measures in the Management's Discussion
and Analysis for further details. DPW change (growth) is presented
in constant currency.
|
(2)
|
Aggregate of capital
in excess of company action levels in regulated entities (165% MCT
effective April 1, 2020, previously 170% MCT, 200% RBC) plus
available cash in unregulated entities. Refer to Section 14 –
Capital management in the Management's Discussion and
Analysis for further details.
|
Common Share Dividend
- The Board of Directors approved the quarterly dividend of
$0.83 per share on the Company's
outstanding common shares. The dividends are payable on
December 31, 2020, to shareholders of
record on December 15, 2020.
- With a strong balance sheet, low payout ratio and resilient
operating income, IFC has capacity to support its customers and pay
its dividends, while continuing to invest in its strategy.
Industry Outlook
- Given that the Canadian industry combined ratio was above 100%
and the industry ROE of 5% was well below historical averages in
H1-2020, we believe industry corrective measures will resume once
the impacts from the COVID-19 crisis decline.
- The prevailing hard market conditions in personal auto have
been tempered as claims frequency remained below historical levels.
Hard market conditions in personal property are expected to
continue, while hard market conditions in commercial lines have
returned to pre-crisis levels. In the U.S., hardening market
conditions in commercial lines are expected to continue.
Insurance Business Performance
|
|
|
|
|
|
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2020
|
Q3-2019
|
Change
|
YTD
2020
|
YTD
2019
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written1
|
|
|
|
|
|
|
Canada
|
2,724
|
2,491
|
9%
|
7,745
|
7,071
|
10%
|
U.S.
|
540
|
521
|
3%
|
1,422
|
1,308
|
7%
|
|
3,264
|
3,012
|
8%
|
9,167
|
8,379
|
9%
|
Combined
ratio
|
|
|
|
|
|
|
Canada
|
86.0%
|
91.8%
|
(5.8) pts
|
89.4%
|
97.2%
|
(7.8) pts
|
U.S.
|
94.5%
|
95.9%
|
(1.4) pts
|
96.0%
|
94.9%
|
1.1 pts
|
|
87.1%
|
92.3%
|
(5.2) pts
|
90.3%
|
96.9%
|
(6.6) pts
|
Underwriting
income
|
|
|
|
|
|
|
Canada
|
347
|
183
|
90%
|
762
|
179
|
nm
|
U.S.
|
21
|
14
|
50%
|
46
|
53
|
(13)%
|
Corporate &
other
|
1
|
1
|
-%
|
4
|
4
|
-%
|
|
369
|
198
|
86%
|
812
|
236
|
nm
|
1 DPW
change (growth) is presented in constant currency.
Refer to Section 6 –U.S. in the Management's
Discussion and Analysis for further details. In the U.S., DPW
change (growth) as reported was 4% for the quarter and 9%
year-to-date.
|
- Premiums grew 8% in the quarter reflecting strong growth
in Canada. In Canada, premium growth of 9% in the quarter
was driven by strong retention and new business and included the
benefit of The Guarantee acquisition. In the U.S., topline growth
of 4%, or 3% on a constant currency basis, including the benefit of
The Guarantee acquisition, reflected lower volumes in lines
impacted by the COVID-19 crisis despite strong organic growth in
other lines of business. Overall, premium relief measures impacted
growth by an estimated 5 points.
- Combined ratio of 87.1% in the quarter was strong. Our
provision for direct COVID-19 losses remains adequate. The combined
ratio in Canada was strong at
86.0%, reflecting strong underlying performance across all lines
and a low level of CAT losses. In the U.S., the combined ratio of
94.5% reflected the seasonality of our operations and improved 1.4
points, driven by our profitability actions.
Lines of Business
P&C Canada
- Personal auto premiums grew 8% in the quarter driven by
robust new business and high retention levels. Premium relief
measures impacted growth by an estimated 8 points in the quarter.
The Q3-2020 combined ratio of 84.9% improved 8.5 points over last
year. The underlying current year loss ratio of 60.9% improved 9.4
points from Q3-2019, reflecting lower claims frequency due to the
benefit of our profitability actions, as well as reduced driving,
partly offset by increased claims severity and relief. Benign
weather conditions in the quarter led to a catastrophe loss ratio
of 0.2 points.
- Personal property premiums increased 10% in the quarter,
driven by strong unit growth, market conditions and The Guarantee
acquisition. The combined ratio improved 5.4 points year-over-year
to 83.7%. The underlying current year loss ratio of 49.2% improved
6.1 points compared to last year, driven by strong fundamentals and
lower non-catastrophe weather-related losses. Catastrophe loss
ratio of 1.8 points, versus 4.2 points last year, reflected benign
weather conditions.
- Commercial lines (P&C and auto) premium growth of
11% in the quarter, including 10 points from The Guarantee
acquisition, was tempered by the economic slowdown, customer relief
measures and from issuing six-month policy renewals to businesses
most impacted by the COVID-19 crisis. The combined ratio of 89.4%
in the quarter improved 2.4 points over last year. The underlying
current year loss ratio of 53.2% improved 3.0 points from Q3-2019,
mainly driven by lower claims frequency and our profitability
actions.
- Distribution EBITA and Other grew 45% to
$81 million reflecting the strong
performance of our broker network and the acquisitions of On Side
and Frank Cowan.
P&C U.S.
- Premiums grew 3% in constant currency to $540 million in Q3-2020, including 5 points from
The Guarantee acquisition, reflecting lower volumes in lines
impacted by the COVID-19 crisis, such as ridesharing and
entertainment, despite strong organic growth in other lines of
businesses.
- Combined ratio of 94.5% in the quarter improved 1.4
points compared to last year, reflecting strong underlying
performance in most lines. The underlying current year loss ratio
of 57.3% improved 0.8 points compared to last year, driven by our
profitability actions, despite higher weather-related losses.
Investments
- Net investment income of $143
million for the quarter decreased 2% compared to last year,
mainly due to lower reinvestment yields, partially offset by the
benefit of higher invested assets.
- Net losses excluding FVTPL bonds were $2 million for the quarter. Equity impairments
were immaterial.
Net Income and ROE
- Net operating income increased 48% to $411 million in Q3-2020, reflecting strong growth
in underwriting income and Distribution EBITA and Other.
- Earnings per share increased by 79% to $2.25 in Q3-2020 driven by growth in net
operating income.
- Operating ROE for the last 12 months improved 4.5 points
year-over-year to 16.9% as at September 30,
2020.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $1.9
billion. MCT in Canada was
estimated at 205%.
- IFC's book value per share of $56.22 as at September 30,
2020, increased 4% since June 30,
2020, driven by strong operating performance and
mark-to-market gains in the investment portfolio.
- The debt-to-total capital ratio was 21.2% as at
September 30, 2020, compared to 22.1%
as of June 30, 2020. We expect to
return to our 20% target level over the next 6-12 months.
Preferred Share Dividends
- The Board of Directors 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, 17.65225 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, 30.625 cents per share on the Class A Series 7
preferred shares and 33.75 cents per
share on the Class A Series 9 preferred shares. The dividends are
payable on December 31, 2020, to
shareholders of record on December 15,
2020.
M&A Update
- The integrations of The Guarantee, Frank Cowan and On Side acquisitions are on
track, and we continue to expect to deliver mild NOIPS accretion in
2020 and mid-single digit NOIPS accretion by 2021.
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 $2.01 and
$2.13, 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 Q3-2020 MD&A as well as the Q3-2020
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 November 4th, 2020 at 2:00
p.m. ET until midnight on November
11th. To listen to the replay, call 416 849-0833 or 1 855
859-2056 (toll-free in North
America), passcode 6595826. 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 $11 billion in total annual
premiums. The Company has approximately 16,000 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. Frank Cowan Company, a
leading MGA, distributes public entity insurance programs including
risk and claims management services in Canada.
In the U.S., Intact Insurance Specialty Solutions provides a
range of specialty insurance products and services through
independent agencies, regional and national brokers, wholesalers
and managing general agencies. Products are underwritten by the
insurance company subsidiaries of Intact Insurance Group
USA, LLC.
Forward Looking Statements
The information linked from this press release may contain
forward-looking statements. These statements may include, without
limitation, statements relating to claims, catastrophe losses and
non-catastrophe losses, the anticipated effect on combined ratio as
well as on a per share basis and by line of business, the
anticipated effect of applicable and future federal and provincial
tax regulations and the impact on the Company of the occurrence of
and response to the coronavirus (COVID-19) pandemic and ensuing
events. All such forward-looking statements are made pursuant to
the 'safe harbour' provisions of applicable Canadian securities
laws.
Forward-looking statements are based on estimates and
assumptions made by management based on management's experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Many factors could
cause the Company's actual results, performance or achievements or
future events or developments to differ materially from those
expressed or implied by the forward-looking statements. In the case
of estimated claims and losses, due to the preliminary nature of
the information available to prepare estimates, future estimates
and the actual amount of claims and losses associated with events
described above may be materially different from current
estimates.
All of the forward-looking statements linked from this press
release are qualified by these cautionary statements and those made
in our Q3-2020 Management's Discussion and Analysis (including in
its "Risk Management" sections (Section 17-18), and our 2019 Annual
Management's Discussion and Analysis, in Notes 10 and 13 of our
Consolidated Financial Statements for the year ended December 31, 2019 and in our Annual Information
Form dated March 30, 2020. These
factors are not intended to represent a complete list of the
factors that could affect the Company. These factors should,
however, be considered carefully. Although the forward-looking
statements are based upon what management believes to be reasonable
assumptions, the Company cannot assure investors that actual
results will be consistent with these forward-looking statements.
When relying on forward-looking statements to make decisions,
investors should ensure the preceding information is carefully
considered. Undue reliance should not be placed on forward-looking
statements made in this press release. The Company has no intention
and undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
SOURCE Intact Financial Corporation