(TSX: IFC)
(in Canadian dollars except as otherwise
noted)
Highlights
- Net operating income per share of $3.18 in Q4-2020 and OROE of 18.4%, driven by
strong underwriting performance and distribution results
- Premiums grew 8% in the quarter and 9% for the full year
with solid growth in all lines and The Guarantee Company of
North America ("The Guarantee")
acquisition
- Combined ratio of 85.6% in Q4-2020 included
$74 million of CAT losses, with
$23 million related to the COVID-19
crisis
- Our COVID-19 related relief has helped more than 1.2
million customers, with $530 million
of support provided in 2020
- Full year EPS of $7.20 and
BVPS up 9% in 2020 to $58.79
- RSA acquisition is progressing well and on track for Q2-2021
closing
TORONTO, Feb. 9, 2021 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"Our solid results and resilient operations have enabled us
to provide much needed relief to over 1.2 million customers since
the COVID-19 pandemic began. Our Canadian business is performing
very well, and our U.S. business is positioned for low-90s
performance. We are assessing additional relief options given wave
two of the pandemic. At the same time, we continue to enhance our
strategies across the business to best protect people and support
our most impacted customers. The RSA transition and integration
planning are progressing well and provide increased confidence in
the strategic and financial merits of the transaction."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q4-2020
|
Q4-2019
|
Change
|
2020
|
2019
|
Change
|
Direct premiums
written1
|
2,872
|
2,670
|
8%
|
12,039
|
11,049
|
9%
|
Combined
ratio
|
85.6%
|
91.5%
|
(5.9)
pts
|
89.1%
|
95.4%
|
(6.3) pts
|
Underwriting
income
|
415
|
229
|
81%
|
1,227
|
465
|
164%
|
Net investment
income
|
143
|
142
|
1%
|
577
|
576
|
nm
|
Distribution EBITA
and Other
|
72
|
45
|
60%
|
275
|
209
|
32%
|
Net operating
income
|
467
|
303
|
54%
|
1,471
|
905
|
63%
|
Net income
|
378
|
240
|
58%
|
1,082
|
754
|
44%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
$3.18
|
$2.08
|
53%
|
$9.92
|
$6.16
|
61%
|
Earnings per share
(EPS)
|
$2.55
|
$1.63
|
56%
|
$7.20
|
$5.08
|
42%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
18.4%
|
12.5%
|
5.9 pts
|
|
|
|
ROE
|
12.8%
|
10.0%
|
2.8 pts
|
|
|
|
Book value per share
(in dollars)
|
$58.79
|
$53.97
|
9%
|
|
|
|
Total capital
margin2
|
2,729
|
1,222
|
1,507
|
|
|
|
Debt-to-total-capital
ratio
|
24.1%
|
21.3%
|
2.8 pts
|
|
|
|
1
This press release contains non-IFRS financial measures. Refer to
Section 36 – 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 and investments in
unregulated entities. Refer to Section 25 – 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
March 31, 2021, to shareholders of
record on March 15, 2021.
- With a strong financial position and confidence in earnings
growth, we will continue to protect our people, support our
customers and advance on our strategic objectives. We intend to
increase our dividend this year as we have in the past 15 years.
However, given the current regulatory environment, we are
postponing our dividend increase to a later quarter in 2021.
Industry Outlook
- Given that the Canadian industry combined ratio was
approximately 100% for the first three quarters of 2020 and the
industry ROE was slightly above 7% for the last twelve months to
September 30, 2020, we believe
continued industry corrective measures are required and are likely
to resume as the impact of the crisis eases.
- In commercial lines on both sides of the border, hard market
conditions are expected to continue. In personal lines, firm market
conditions are expected in personal property, while personal auto
market conditions are temporarily softening.
Insurance Business Performance
|
|
|
|
|
|
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q4-2020
|
Q4-2019
|
Change
|
2020
|
2019
|
Change
|
Direct premiums
written3
|
Canada
|
2,471
|
2,328
|
6%
|
10,216
|
9,399
|
9%
|
U.S.
|
401
|
342
|
19%
|
1,823
|
1,650
|
9%
|
Total
|
2,872
|
2,670
|
8%
|
12,039
|
11,049
|
9%
|
Combined
ratio
|
Canada
|
84.0%
|
92.0%
|
(8.0) pts
|
88.0%
|
95.9%
|
(7.9) pts
|
U.S.
|
92.0%
|
88.8%
|
3.2 pts
|
94.9%
|
93.2%
|
1.7 pts
|
Total
|
85.6%
|
91.5%
|
(5.9) pts
|
89.1%
|
95.4%
|
(6.3) pts
|
Underwriting
income
|
Canada
|
392
|
184
|
113%
|
1,154
|
363
|
218%
|
U.S.
|
35
|
44
|
(20)%
|
81
|
97
|
(16)%
|
Corporate &
other
|
(12)
|
1
|
nm
|
(8)
|
5
|
nm
|
Total
|
415
|
229
|
81%
|
1,227
|
465
|
164%
|
3
DPW change (growth) is presented in constant currency. Refer
to Section 7 –U.S. in the Management's Discussion and Analysis for
further details. In the U.S., DPW change (growth) as reported was
17% for the quarter and 11% for 2020.
|
- Premium growth of 8% in the quarter was solid and
included the benefit of The Guarantee acquisition. In Canada, premium growth of 6% in the quarter
was driven by market conditions and unit growth. In the U.S.,
topline growth was very strong at 19%.
- Combined ratio was 85.6% in the quarter after increasing
our provision for COVID-19 CAT losses by $23
million and providing $50
million of targeted relief in commercial lines. The combined
ratio in Canada was strong at
84.0%, reflecting strong underlying performance across all lines.
In the U.S., the combined ratio of 92.0% reflected solid underlying
performance, offset by unfavourable prior year development and
higher weather-related losses. For the full year 2020, IFC's
overall combined ratio of 89.1% included 0.9 pts of COVID-19 CAT
losses and was 6.3 points better than last year, driven by strong
underlying performance in Canada
and the U.S.
Lines of Business
P&C Canada
- Personal auto premiums grew 5% in the quarter driven by
unit growth. The Q4-2020 combined ratio of 82.6% improved 13.9
points over last year, reflecting lower claims frequency due to the
benefit of reduced driving, our profitability actions and lower
non-CAT weather-related losses, partly offset by increased claims
severity and customer relief. For the full year 2020, the combined
ratio improved 11.1 points to 86.6%, reflecting lower claims
frequency partly driven by our effective profitability action
plans.
- Personal property premiums increased 10% in the quarter,
driven by solid unit growth, market conditions, and The Guarantee
acquisition. The combined ratio improved 8.8 points year-over-year
to 73.2%, driven by strong fundamentals, market conditions and a
lower level of weather-related losses. The catastrophe loss ratio
of 2.4 points, versus 8.5 points last year, was in-line with
expectations. For full year 2020, the combined ratio of 81.7%
improved 10.8 points year-over-year reflecting strong fundamentals
and lower weather-related losses.
- Commercial lines (P&C and auto) premium growth of 5%
in the quarter, was driven by market conditions and the benefit of
The Guarantee acquisition, offset by 6 points due to the
$50M targeted relief program for
small business customers and lower volumes related to the sharing
economy. The combined ratio of 95.3% in the quarter was solid, as
lower claims frequency and our profitability actions were offset by
6 points from our targeted customer relief program and 2 points of
direct COVID-19 related CAT losses. For the full year 2020, the
combined ratio of 95.1% was solid as strong underlying performance
was offset by direct COVID-19 related CAT losses of $64 million, customer relief actions and
increased bad debt provisions.
- Distribution EBITA and Other grew 60% to $72 million in the quarter, and 32% to
$275 million for the full year 2020,
reflecting better than expected performance of our broker network,
including successful expense management and revenue growth. Recent
acquisitions also added to year-over-year growth.
P&C US
- Premiums grew 19% in constant currency to $401 million in Q4-2020, including 6 points from
The Guarantee acquisition, driven by hard market conditions and
strong new business growth and retention.
- Combined ratio of 92.0% in the quarter reflects strong
underlying performance, offset by 1.3 points of unfavourable prior
year development and 1 point of higher weather-related losses. For
the full year 2020, the combined ratio was 94.9%, as strong
underlying performance was more than offset by 2.0 points of
COVID-19 related CAT losses. This business is now well positioned
to run in the low 90s going forward.
Investments
- Net investment income of $143
million for the quarter was in line with last year, as the
benefit of higher invested assets was offset by the impact of lower
reinvestment yields.
- Net gains excluding FVTPL bonds were $53 million for the quarter driven by favourable
equity markets. Equity impairments of $22
million were largely related to energy stocks.
Net Income and ROE
- Net operating income of $467
million in Q4-2020, reflects strong growth in underwriting
income and Distribution EBITA and Other.
- Earnings per share of $2.55 in Q4-2020 was driven by growth in net
operating income.
- Operating ROE improved 5.9 points year-over-year to
18.4% for the 12 months to December 31,
2020 driven by strong operating performance.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $2.7
billion. MCT in Canada was
estimated at 224%.
- IFC's book value per share (BVPS) of $58.79 as at December 31,
2020, increased 5% since September
30, 2020, driven by strong operating performance and
mark-to-market gains in the investment portfolio.
- The debt-to-total capital ratio was 24.1% as at
December 31, 2020, compared to 21.2%
as of September 30, 2020. Included in
the debt-to-total capital ratio is $600
million (3.8 points) of medium-term notes to fund the RSA
transaction. We expect the leverage ratio to be 26% at closing of
the RSA acquisition and return to 20% within 36 months following
closing.
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, 17.06925 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 March 31, 2021, to
shareholders of record on March 15,
2021.
M&A Update
- The announced acquisition of RSA is progressing well and on
track for Q2-2021 closing. We have received clearance from the
Canadian Competition Bureau on January 12,
2021 and RSA shareholders voted in favour of the acquisition
on January 18, 2021, to be made
effective by a Court-sanctioned scheme of arrangement. As well, on
December 18, 2020, Tryg shareholders
voted in favour of a rights issue to finance their portion of the
transaction. Other regulatory approval processes are on track.
- During the quarter, a significant portion of the approximate
$5.2 billion (£3.0 billion) purchase
price and $0.7 billion of expected
related transaction costs was financed with $4.45 billion of private placement subscription
receipts, €392 million ($0.6 billion)
bank term loan facility and $0.6
billion of medium-term notes.
- Non-operating transaction costs related to the RSA acquisition
in the quarter were $42 million,
which are largely related to M&A and legal fees.
- The RSA acquisition is expected to generate over 15% internal
rate of return, high single digit NOIPS accretion in the first
year, increasing to upper teens within 36 months, and a 25%
increase in BVPS on completion. As well, operating ROE is expected
to be maintained at a mid-teens level in the medium term.
- RSA is scheduled to release its 2020 full year results on
February 26, 2021.
- The integrations of The Guarantee, Frank Cowan and On Side acquisitions are on
track, and we continue to expect to deliver mid-single digit NOIPS
accretion by the end of 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 $1.92 and
$2.35, 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 Q4-2020 MD&A as well as the Q4-2020
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 Details
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 February 10, 2021 at 2:00
p.m. ET until midnight on February
17, 2021. To listen to the replay, call 416 849-0833 or 1
855 859-2056 (toll-free in North
America), passcode 6977038. 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 $12 billion in total annual
premiums. The Company has over 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
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, the Company's growth
prospects, the impact on the Company of the occurrence of and
response to the coronavirus (COVID-19) pandemic and ensuing events,
and the Company's proposed acquisition of RSA and the completion of
and timing for completion of the RSA acquisition. 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 dated March 30,
2020 and those made in our Q4-2020 Management's Discussion
and Analysis (including in its "Risk Management" sections (Sections
28-33)), in Notes 10 and 13 of our Consolidated Financial
Statements for the year ended December 31,
2020 and the additional risk factors of the Company related
to the proposed RSA acquisition as described at pages 24-28 of the
Company's Presentation entitled "Building a Leading P&C Insurer
- Acquisition of RSA's Canada and
UK&I operations," dated November 18,
2020. 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