(in Canadian dollars except as otherwise noted)
Highlights
- Net operating income per share up 39% to $3.26 driven by strong underwriting
performance and distribution results
- Premiums grew 29%, bolstered by the RSA acquisition and
strength in Commercial Lines in both Canada and the U.S.
- Combined ratio of 86.7% included Canada at 85.0%
and the U.S. at 90.3%, and was driven by strong underlying
performance across all lines
- BVPS up 25% from Q1-2021, driven by the RSA financing
and strong EPS of $3.59 for
the quarter
- OROE of 19.8% and robust financial position with
$2.6 billion of total capital margin
and debt-to-total capital of 24.1%
- RSA acquisition closed on June
1 and was immediately high single-digit accretive to net
operating income per share
TORONTO, July 27, 2021 /CNW/ - (TSX: IFC)
Charles Brindamour, Chief
Executive Officer, said:
"Our strong results this quarter and year to date were driven
by excellent operating performance across the business. After
several months of integration and transition planning, on
June 1st we welcomed RSA's
employees to Intact and increased our premium base by 70%. This
added scale enhances our ability to invest in our core capabilities
of data, risk selection and claims. We remain focused on growing
net operating income per share by 10% annually over time and
outperforming the industry ROE by 500 bps every year. With
significant momentum in our business, we are well-positioned to
emerge from the COVID-19 crisis in a strong position to continue to
support our employees and communities, while delivering value for
our shareholders."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q2-2021
|
Q2-2020
|
Change
|
H1-2021
|
H1-2020
|
Change
|
Direct premiums
written1
|
4,297
|
3,382
|
29%
|
6,819
|
5,903
|
17%
|
Combined
ratio
|
86.7%
|
89.5%
|
(2.8) pts
|
87.8%
|
91.9%
|
(4.1) pts
|
Underwriting
income
|
464
|
284
|
63%
|
761
|
443
|
72%
|
Net investment
income
|
154
|
141
|
9%
|
295
|
291
|
1%
|
Distribution EBITA
and Other
|
118
|
78
|
51%
|
180
|
122
|
48%
|
Net operating
income
|
515
|
350
|
47%
|
872
|
593
|
47%
|
Net income
|
573
|
263
|
118%
|
1,087
|
370
|
194%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
$3.26
|
$2.35
|
39%
|
$5.69
|
$3.96
|
44%
|
Earnings per share
(EPS)
|
$3.59
|
$1.74
|
106%
|
$7.10
|
$2.40
|
196%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
19.8%
|
15.6%
|
4.2 pts
|
|
|
|
ROE
|
19.6%
|
10.1%
|
9.5 pts
|
|
|
|
Book value per share
(in dollars)
|
$77.67
|
$53.95
|
44%
|
|
|
|
Total capital
margin2
|
2,558
|
1,707
|
851
|
|
|
|
Debt-to-total-capital
ratio
|
24.1%
|
22.1%
|
2.0
pts
|
|
|
|
__________________________________
|
1 This press release contains
non-IFRS financial measures. Refer to Section 22 – Non-IFRS
financial measures in the Q2-2021 Management's Discussion and
Analysis for further details. DPW change (growth) is presented in
constant currency.
|
2 Refer to Section 16 – Capital
management in the Q2-2021 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 dividend is payable on September 30, 2021, to shareholders of record on
September 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 each of the past 15
years.
Industry Outlook
- Industry profitability improved in the twelve months to
March 31, 2021, helped in part by
lower catastrophe losses, favourable prior year development and
temporarily lower auto claims frequency.
- In personal lines in Canada,
we expect firm market conditions to continue in personal property,
while personal auto rates remain tempered in the current
environment.
- In both the U.S. and Canada,
hard market conditions in commercial lines are expected to
continue.
- In the UK, hard market conditions are prevailing across
commercial lines while UK personal lines growth remains muted in
the current environment.
Insurance Business Performance
(in millions of
Canadian dollars except as otherwise noted)
|
Q2-2021
|
Q2-2020
|
Change
|
H1-2021
|
H1-2020
|
Change
|
Direct premiums
written
|
Canada
|
3,051
|
2,896
|
5%
|
5,176
|
5,021
|
3%
|
U.S.
|
512
|
486
|
19%
|
909
|
882
|
13%
|
RSA Canada and
UK&I*
|
734
|
n/a
|
nm
|
734
|
n/a
|
nm
|
Total
|
4,297
|
3,382
|
29%
|
6,819
|
5,903
|
17%
|
Combined
ratio
|
Canada
|
85.0%
|
89.0%
|
(4.0) pts
|
86.5%
|
91.2%
|
(4.7) pts
|
U.S.
|
90.3%
|
93.2%
|
(2.9) pts
|
93.3%
|
96.7%
|
(3.4) pts
|
RSA Canada and
UK&I*
|
90.7%
|
n/a
|
nm
|
90.7%
|
n/a
|
n/a
|
Total
|
86.7%
|
89.5%
|
(2.8) pts
|
87.8%
|
91.9%
|
(4.1) pts
|
Underwriting
income
|
Canada
|
374
|
257
|
117
|
656
|
415
|
241
|
U.S.
|
37
|
26
|
11
|
51
|
25
|
26
|
RSA Canada and
UK&I*
|
57
|
n/a
|
n/a
|
57
|
n/a
|
n/a
|
Corporate and
Other
|
(4)
|
1
|
nm
|
(3)
|
3
|
nm
|
Total
|
464
|
284
|
180
|
761
|
443
|
318
|
*For the period from
closing on June 1, 2021 to June 30, 2021.
|
- Premium growth of 29% in constant currency reflected the
RSA acquisition and strong 7% organic growth led by commercial
lines. In particular, U.S. commercial lines growth was very strong
at 19%.
- Combined ratio of 86.7% was strong, despite a 2.0 point
impact from earned relief. The combined ratio was excellent in
Canada at 85.0% driven by strong
underlying performance across all lines. In the U.S. the combined
ratio was a solid 90.3%, also reflecting a strong underlying
performance. RSA's combined ratio of 90.7% was strong, despite
including 4.1 points of CAT losses.
Lines of
Business
P&C Canada (excludes RSA Canada
results)
- Personal auto premiums increased by 1% mainly reflecting
the current muted rate environment. The combined ratio of 82.4% was
very strong, despite 4.6 points of total earned relief in the
quarter. The 2.3 point improvement over last year was driven by
strong favourable prior year claims development.
- Personal property premiums increased by 5%, driven by
firm market conditions. The combined ratio of 83.3% was driven by
strong underlying performance. Compared to last year, the 5.3 point
improvement reflected lower catastrophe losses and higher
favourable prior year claims development.
- Commercial lines (P&C and auto) premium growth of
12% mainly reflected hard market conditions. The combined ratio of
89.6% was strong, improving 5.5 points over last year driven by
strong favourable prior year claims development and our
profitability actions, partially offset by a higher expense
ratio.
- Distribution EBITA and Other grew 51%, driven by higher
variable commission revenues, as well as accretive acquisitions and
continuing expense management.
P&C U.S.
- Premium growth was very strong at 19% on a constant
currency basis, driven by hard market conditions, strong growth in
lines most impacted by the COVID-19 crisis, as well as the impact
from recent expansion of MGA relationships.
- Combined ratio of 90.3% was solid, reflecting strong
underlying performance. The 2.9 point improvement compared to last
year was driven by milder weather conditions and higher earned
rates, in part due to our profitability actions. This business is
well-positioned to run in the low 90s sustainably.
Investments
- Net investment income of $154
million for the quarter increased 9% year-over-year, mainly
due to the RSA acquisition. Excluding the impact of RSA, net
investment income was flat driven by the impact of lower
reinvestment yields and a weaker U.S. dollar, partly offset by the
benefit of higher invested assets.
- Net gains excluding FVTPL bonds were $16 million for the quarter reflecting favourable
equity markets.
Net Income and ROE
- Net operating income of $515
million in Q2-2021, reflected strong growth in underwriting
income and distribution and other income.
- Earnings per share of $3.59 in Q2-2021 was driven by strong operating
results.
- Operating ROE improved 4.2 points year-over-year to
19.8% for the 12 months to June 30,
2021 driven by strong underwriting and distribution
earnings.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $2.6
billion.
- IFC's book value per share (BVPS) of $77.67 as at June 30,
2021, increased 44% since June 30,
2020, driven by strong earnings and the RSA
acquisition.
- The debt-to-total capital ratio of
24.1% as at June 30, 2021
reflects the completion of the transaction financing and the
closing of the RSA acquisition. We expect the debt-to-total-capital
ratio to return to 20% within 36 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, 17.4485 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 September 30, 2021, to
shareholders of record on September 15,
2021.
RSA Acquisition Update
- The acquisition of RSA closed on June
1, 2021, and was immediately accretive, in-line with our
target of high single-digit accretion in the first 12 months and
upper teens within 36 months.
- In June 2021, RSA contributed
$734 million of written premiums and
$57 million of underwriting
income. In future quarters, the RSA Canada underwriting results
will be included as part of our Canada lines of business results, while the
UK&I division will be reported separately.
- In pre-tax non-operating income, we recorded a $200 million gain reflecting the difference
between the RSA purchase price and fair value of net assets, as
well as $108 million of
acquisition and integration related expenses.
- We remain on track to realize $250
million of pre-tax annual run-rate synergies within 36
months.
- On June 11, 2021 we announced the
sale of RSA's Denmark P&C business to Alm. Brand A/S
Group, representing proceeds of DKK 6.3
billion (~$1.26 billion) for
Intact's 50% stake. The transaction is expected to close in
H1-2022, with a portion of the proceeds intended to be used to
repay short-term debt borrowed to partly finance the acquisition of
RSA.
- On July 27, 2021, we entered into
a reinsurance agreement providing protection for adverse
development on UK&I claims liabilities for 2020 and prior
accident years. The agreement covers 50% of up to £400 million of
adverse development, subject to certain exclusions and
limitations.
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 $1.86 and
$2.37, 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 Q2-2021 MD&A as well as the Q2-2021
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 416 764-8659 or 1 888
664-6392 (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 28, 2021 at 2:00 p.m.
ET until midnight on August 4,
2021. To listen to the replay, call 416 764-8677 or 1 888
390-0541 (toll-free in North
America), entry code 603688. 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, a leading provider of global specialty
insurance, and, with RSA, a leader in the U.K. and Ireland. Our business has grown organically
and through acquisitions to over $20
billion of total annual premiums.
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. Intact also provides
affinity insurance solutions through the Johnson Affinity
Groups.
In the U.S., Intact Insurance Specialty Solutions provides a
range of specialty insurance products and services through
independent agencies, regional and national brokers, and
wholesalers and managing general agencies.
Outside of North America, the
Company provides personal, commercial and specialty insurance
solutions across the U.K., Ireland, Europe and the Middle East through the RSA brands.
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,
the acquisition of RSA, the sale of Codan Forsikring A/S's
Danish business (the "Sale"), and the completion of and timing
for completion of the Sale. 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 31,
2021 and those made in our Q2-2021 Management's Discussion
and Analysis (including in its "Risk Management" in sections
19-20), our 2020 Annual Management's Discussion and Analysis
(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 and the risk factors included in the Company's Business
Acquisition Report dated June 16,
2021 and available on SEDAR at www.sedar.com. 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