(in Canadian dollars except as otherwise noted)
Highlights
- Net operating income per share of $2.87 driven by strong underwriting
performance and an accretive contribution from RSA
- Premiums grew 68%, reflecting the first full quarter of
RSA in our results and continued strength in commercial lines
- Combined ratio of 91.3%, driven by strength in all
business segments despite an elevated 7.5 pts of catastrophe
losses
- OROE of 18.3% with a total capital margin of
$2.7 billion
- EPS of $1.60 reflects
strong operating results tempered by an investment loss and
integration costs
- Quarterly dividend increased by 10% to $0.91 per common share
TORONTO, Nov. 9, 2021 /CNW/ - (TSX: IFC)
Charles Brindamour, Chief
Executive Officer, said:
"The strength of our business was again evident this quarter,
with robust operating performance across the platform, despite an
elevated level of catastrophes. Our people have worked hard to get
customers back on track following many severe weather events. We
are making great progress on the integration of RSA, with synergies
being realized as expected. The acquisition is already delivering
high single-digit accretion to NOIPS since closing on June 1, and we remain on track to generate upper
teens accretion within 36 months. With a strong and resilient
balance sheet and momentum in all segments, we are increasing
dividends to our common shareholders for the sixteenth consecutive
year."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2021
|
Q3-2020
|
Change
|
YTD
2021
|
YTD
2020
|
Change
|
Direct premiums
written1
|
5,447
|
3,264
|
68%
|
12,266
|
9,167
|
35%
|
Combined
ratio
|
91.3%
|
87.1%
|
4.2 pts
|
89.3%
|
90.3%
|
(1.0) pts
|
Underwriting
income
|
426
|
369
|
15%
|
1,187
|
812
|
46%
|
Net investment
income
|
191
|
143
|
34%
|
486
|
434
|
12%
|
Distribution EBITA
and Other
|
105
|
81
|
30%
|
285
|
203
|
40%
|
Net operating
income
|
519
|
411
|
26%
|
1,391
|
1,004
|
39%
|
Net income
|
300
|
334
|
(10)%
|
1,387
|
704
|
97%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
$2.87
|
$2.78
|
3%
|
$8.56
|
$6.74
|
27%
|
Earnings per share
(EPS)
|
$1.60
|
$2.25
|
(29)%
|
$8.46
|
$4.65
|
82%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
18.3%
|
16.9%
|
1.4 pts
|
|
|
|
ROE
|
16.5%
|
11.5%
|
5.0 pts
|
|
|
|
Book value per share
(in dollars)
|
$79.21
|
$56.22
|
41%
|
|
|
|
Total capital
margin2
|
2,693
|
1,871
|
822
|
|
|
|
Adjusted
debt-to-total capital ratio
|
23.9%
|
21.2%
|
2.7 pts
|
|
|
|
__________
|
1 This press release contains
non-IFRS financial measures. Refer to Section 23 – Non-IFRS
financial measures in the Q3-2021 Management's Discussion
and Analysis for further details. DPW change (growth) is presented
in constant currency.
|
2 Refer to Section 18 – Capital
management in the Q3-2021 Management's Discussion and Analysis
for further details.
|
Common Share Dividend
- The Board of Directors approved a $0.08 per share increase in the quarterly
dividend to $0.91 per share on the
Company's outstanding common shares. This represents a 10% increase
and marks the sixteenth consecutive annual increase in our dividend
since our IPO in 2004.
Industry Outlook
- Canadian industry profitability improved in the twelve months
to June 30, 2021, helped in part by
benign weather, favourable PYD and reduced driving activity.
However, high pre-pandemic combined ratios, potential inflation,
and a relatively low interest rate environment support continuation
of favourable market conditions.
- 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 commercial lines in both the US and Canada, hard market conditions are expected to
continue.
- In the UK, hard market conditions are also prevailing across
commercial lines, while UK personal lines growth remains muted
pending new pricing regulations effective from Q1-2022.
Segment Results
|
|
|
|
|
|
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2021
|
Q3-2020
|
Change
|
YTD 2021
|
YTD 2020
|
Change
|
Direct premiums
written
|
Canada
|
3,564
|
2,724
|
31%
|
8,740
|
7,745
|
13%
|
UK&I
|
1,264
|
n/a
|
nm
|
1,264
|
n/a
|
nm
|
U.S.
|
619
|
540
|
21%
|
1,528
|
1,422
|
16%
|
Corporate (RSA for
June 2021)
|
n/a
|
n/a
|
nm
|
734
|
n/a
|
nm
|
Total
|
5,447
|
3,264
|
68%
|
12,266
|
9,167
|
35%
|
Combined
ratio
|
Canada
|
89.2%
|
86.0%
|
3.2 pts
|
87.6%
|
89.4%
|
(1.8) pts
|
UK&I
|
93.9%
|
n/a
|
nm
|
93.9%
|
n/a
|
nm
|
U.S.
|
92.8%
|
94.5%
|
(1.7) pts
|
93.0%
|
96.0%
|
(3.0) pts
|
Corporate (RSA for
June 2021)
|
n/a
|
n/a
|
nm
|
90.7%
|
n/a
|
nm
|
Total
|
91.3%
|
87.1%
|
4.2 pts
|
89.3%
|
90.3%
|
(1.0) pts
|
Underwriting
income
|
Canada
|
356
|
347
|
9
|
1,012
|
762
|
250
|
UK&I
|
72
|
n/a
|
72
|
72
|
n/a
|
72
|
U.S.
|
30
|
21
|
9
|
81
|
46
|
35
|
RSA – June
2021
|
n/a
|
n/a
|
nm
|
57
|
n/a
|
57
|
Group Reinsurance,
Corporate and Other
|
(32)
|
1
|
(33)
|
(35)
|
4
|
(39)
|
Total
|
426
|
369
|
57
|
1,187
|
812
|
375
|
Insurance Business Performance.
- Premium growth of 68% in constant currency mainly
reflected the RSA acquisition which contributed 61 points of
growth. Commercial lines organic growth was robust across all
segments.
- Combined ratio of 91.3% was solid and included
$365 million (7.5 points) of
catastrophe losses, well above expectations and impacting all
segments. The combined ratio in Canada was a strong 89.2%, driven by improved
underlying performance. In the UK&I, the combined ratio was a
solid 93.9%, despite including 10.3 points of CAT losses. In the
U.S., the combined ratio was 92.8%, also reflecting strong
underlying performance.
Lines of
Business
P&C Canada (includes RSA Canada
results)
- Personal auto premiums grew by 27%, driven by RSA while
we continue to operate in a muted rate environment. The combined
ratio was similar to last year at 85.1%, with strong underlying
performance and healthy favourable prior year development.
- Personal property premiums grew by 34%, mainly driven by
RSA and continued firm market conditions. The combined ratio of
93.5% was 9.8 points higher than last year while reflecting 15.3
points of higher CAT losses. Underlying performance improved 4.4
points from a year ago.
- Commercial lines (P&C and auto) premium growth of
33% was mainly driven by RSA and continued hard market conditions.
The combined ratio of 91.2% was 1.8 points higher than a year ago,
as improved underlying performance was offset by higher commission
expenses and a 2.7 point increase in catastrophe losses.
- Distribution EBITA and Other grew by 30%, driven by
higher variable commission revenues, as well as accretive
acquisitions and continuing expense management.
P&C UK&I
- Personal lines premiums were $582
million with competitive market conditions in auto. The
combined ratio of 97.9% included an elevated 4.4 points of
catastrophe losses.
- Commercial lines premiums were $682 million with hard market conditions
continuing. The combined ratio was a strong 90.5% despite including
15.3 points of catastrophe losses, significantly above
expectations.
P&C U.S.
- US Commercial premium growth was very strong at 21% on a
constant currency basis, driven by hard market conditions and
strong new business in most lines. The combined ratio improved 1.7
points to 92.8%, despite including 3.9 points of CAT losses mainly
driven by Hurricane Ida, reflecting the benefit of our
profitability actions.
Investments
- Net investment income of $191
million for the quarter increased 34% year-over-year, mainly
driven by the RSA acquisition. Excluding the impact of RSA, net
investment income was flat reflecting the impact of lower
reinvestment yields and a weaker U.S. dollar, partly offset by the
benefit of higher invested assets.
- Net losses excluding FVTPL bonds of $45 million for the quarter included a loss of
$183 million on a venture investment,
for which in Q1-2021 we recorded a $273
million gain following its IPO.
Net Income and ROE
- Net operating income of $519
million is up 26% from a year ago, reflecting the
contribution of RSA, strong growth in underwriting, investment and
distribution earnings.
- Earnings per share of $1.60 in Q3-2021 was driven by strong operating
results, tempered by a venture investment loss and integration
costs.
- Operating ROE improved 1.4 points year-over-year to
18.3% for the 12 months to September 30,
2021. This is better than our historical average and
reflects strong performance across the business.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $2.7
billion.
- IFC's book value per share (BVPS) of $79.21 as at September 30,
2021, increased 41% since September
30, 2020, driven by strong earnings and the financing of
RSA.
- The adjusted debt-to-total capital ratio of 23.9%
as at September 30, 2021 reflects the
financing and closing of the RSA acquisition. With proceeds from
the sale of Codan Denmark expected in H1-2022, we expect the
adjusted debt-to-total-capital ratio to return to 20% well within
our objective of 36 months following closing.
RSA Acquisition Update
- RSA contributed 8% accretion to Q3-2021 NOIPS, bringing
accretion to 9% for the four-month period since closing. Given the
overall strength of Intact's results, immediate high single-digit
accretion is evidence of the quality of the acquired portfolio. We
have increased confidence in achieving our target of high
single-digit accretion in the first 12 months and upper teens
within 36 months of closing.
- We remain on track to realize at least $250 million of pre-tax annual run-rate synergies
within 36 months of closing.
- Integration activities are progressing as planned. In
Canada, policy conversion to
Intact systems is already well underway. Customer retention is
ahead of expectations and engagement with brokers and affinity
partners is very strong.
- In the UK, we are continuing RSA's improvement plan and
mobilizing workstreams to leverage Intact expertise in areas of
opportunity including UK auto pricing, underwriting processes and
Commercial lines.
- Planning for the integration of RSA's capabilities into our now
global specialty lines platform is well underway across
geographies.
- Closing of the announced sale of Codan Forsikring A/S's P&C
business to Alm. brand A/S Group is on track for H1-2022. This
represents proceeds of DKK 6.3
billion (~$1.26 billion) for
Intact's 50% stake.
- The reinsurance agreement entered into on July 27 to provide protection for adverse
development on UK&I claims liabilities for 2020 and prior years
was approved by regulators and will be recorded in the 4th quarter,
effective as of October 6, 2021.
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, 21.60625 cents per share on the Class A Series 3
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, 2021, to shareholders of record on
December 15, 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 $1.04 and
$1.75, 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 Q3-2021 MD&A as well as the Q3-2021
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 November 10, 2021 at 2:00
p.m. ET until midnight on November
17, 2021. To listen to the replay, call 416-764-8677 or
1-888-390-0541 (toll-free in North
America), entry code 107779. 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, the
U.S. and the UK, 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 Q3-2021 Management's Discussion
and Analysis (including in its "Risk Management" in section 21),
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