(in Canadian dollars except as otherwise noted)
Highlights
- Net operating income per share of $3.78 in Q4-2021 and $12.41 for the full year increased 19% and
25%, respectively, driven by robust underwriting and distribution
income, and meaningful accretion from RSA
- EPS growth of 51% in the quarter and 72% in 2021
reflected strong operating results and investment gains
- Operating DPW1 grew 75% in the quarter and 45% in
2021, mainly due to RSA, with healthy organic growth in
commercial lines
- Operating combined ratio of 87.8% in Q4-2021 as
strong underlying performance outweighed elevated catastrophe
losses
- OROE of 17.8% and ROE of 17.0%, with BVPS growth of 40%
to $82.34
- Quarterly dividend increased by 10% to $1.00 per common share and initiating share
buyback program
TORONTO, Feb. 8, 2022 /CNW/ - (TSX: IFC)
Charles Brindamour, Chief
Executive Officer, said:
"We had a milestone year, successfully closing our largest
acquisition to date, and delivering strong results for both the
fourth quarter and full year. We achieved mid-teens organic growth
in net operating income per share, while RSA delivered 12%
accretion in the seven months since the transaction closed. The
acquisition has clearly enhanced our leadership position in
Canada, and we are focused on
achieving outperformance in the UK&I. The RSA integration
remains on track thanks to our people, who have shown extraordinary
commitment in supporting our customers amid a new wave of the
COVID-19 pandemic. With momentum across all segments, we are
pleased to increase dividends to common shareholders for the
seventeenth consecutive year."
Consolidated
Highlights
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q4-2021
|
Q4-2020
|
Change
|
2021
|
2020
|
Change
|
Operating direct
premiums written1
|
5,017
|
2,872
|
75%
|
17,283
|
12,039
|
45%
|
Direct premiums
written
|
5,318
|
2,928
|
82%
|
17,994
|
12,143
|
48%
|
Operating combined
ratio1
|
87.8%
|
85.6%
|
2.2 pts
|
88.8%
|
89.1%
|
(0.3) pts
|
Underwriting income
1
|
600
|
415
|
45%
|
1,787
|
1,227
|
46%
|
Net investment
income
|
220
|
143
|
54%
|
706
|
577
|
22%
|
Distribution
income1
|
77
|
72
|
7%
|
362
|
275
|
32%
|
Net operating
income1
|
679
|
467
|
46%
|
2,070
|
1,471
|
41%
|
Net income
|
701
|
378
|
85%
|
2,088
|
1,082
|
93%
|
Per share measures (in
dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)1
|
$3.78
|
$3.18
|
19%
|
$12.41
|
$9.92
|
25%
|
Earnings per share
(EPS)
|
$3.85
|
$2.55
|
51%
|
$12.40
|
$7.20
|
72%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE1
|
17.8%
|
18.4%
|
(0.6) pts
|
|
|
|
ROE
|
17.0%
|
12.8%
|
4.2 pts
|
|
|
|
Book value per share
(in dollars)1
|
$82.34
|
$58.79
|
40%
|
|
|
|
Total capital
margin
|
2,891
|
2,729
|
6%
|
|
|
|
Adjusted debt-to-total
capital ratio1
|
23.0%
|
24.1%
|
(1.1) pts
|
|
|
|
_________________________________
|
1 This
press release contains non-GAAP financial measures and other
specified financial measures under National Instrument 52-112,
including NOIPS, Operating combined ratio, Underwriting income,
Distribution income, Net operating income, Operating ROE, BVPS, and
adjusted debt-to-total capital ratio. See "Non-IFRS financial
measures" below in this press release and refer to Section 38 –
Non-GAAP and other financial measures and Section 42 – Glossary and
definitions in the Q4-2021 Management's Discussion and Analysis for
further details, which sections are incorporated by reference
herein. DPW change (growth) and Operating DPW change (growth) is
presented in constant currency. Non-GAAP financial measures and
Non-GAAP ratios do not have a standardized meaning under IFRS and
may not be comparable to similar financial measures disclosed by
other issuers.
|
Common Share Dividend
- The Board of Directors approved a $0.09 per share increase in the quarterly
dividend to $1.00 per share on the
Company's outstanding common shares. This represents a 10% increase
and marks the 17th consecutive annual increase in our
dividend since our IPO in 2004.
Normal Course Issuer Bid
- The Board has authorized a normal course issuer bid ("NCIB").
Subject to TSX approval, the Company may purchase for cancellation
up to 5,282,458 common shares during the 12-month period following
approval, or until the maximum amount of shares have been
repurchased. This represents approximately 3% of the Company's
issued and outstanding common shares as at February 8, 2022.
Industry Outlook
- Canadian industry profitability improved in the twelve months
to September 30, 2021, helped in part
by favourable PYD and reduced driving activity during the pandemic.
However, high pre-pandemic combined ratios, emerging inflation, and
the still relatively low interest rate environment support
continuation of favourable market conditions.
- In Canada, we expect firm
market conditions to continue in personal property, while personal
auto rates remain tempered in the pandemic environment.
- In commercial lines in both US and Canada, hard market conditions are expected to
continue.
- In the UK&I, hard market conditions are expected to
continue across commercial lines. In personal lines, near term
industry growth levels are uncertain as companies navigate the
recently introduced pricing reforms in the UK.
Segment Results
(in millions of
Canadian dollars except as otherwise noted)
|
Q4-2021
|
Q4-2020
|
Change
|
2021
|
2020
|
Change
|
Operating direct
premiums written
|
Canada
|
3,283
|
2,471
|
33%
|
12,023
|
10,216
|
18%
|
UK&I
|
1,274
|
n/a
|
nm
|
2,538
|
n/a
|
nm
|
U.S.
|
460
|
401
|
19%
|
1,988
|
1,823
|
17%
|
Corporate (RSA for June
2021)
|
n/a
|
n/a
|
nm
|
734
|
n/a
|
nm
|
Total
|
5,017
|
2,872
|
75%
|
17,283
|
12,039
|
45%
|
Operating combined
ratio
|
Canada
|
84.4%
|
84.0%
|
0.4 pts
|
86.7%
|
88.0%
|
(1.3) pts
|
UK&I
|
93.0%
|
n/a
|
nm
|
93.4%
|
n/a
|
nm
|
U.S.
|
92.5%
|
92.0%
|
0.5 pts
|
92.9%
|
94.9%
|
(2.0) pts
|
Corporate (RSA for June
2021)
|
n/a
|
n/a
|
nm
|
90.7%
|
n/a
|
nm
|
Total
|
87.8%
|
85.6%
|
2.2 pts
|
88.8%
|
89.1%
|
(0.3) pts
|
Underwriting
income
|
Canada
|
513
|
392
|
121
|
1,525
|
1,154
|
371
|
UK&I
|
80
|
n/a
|
nm
|
152
|
n/a
|
nm
|
U.S.
|
36
|
35
|
1
|
117
|
81
|
36
|
RSA – June
2021
|
n/a
|
n/a
|
nm
|
57
|
n/a
|
nm
|
Group Reinsurance,
Corporate and Other
|
(29)
|
(12)
|
(17)
|
(64)
|
(8)
|
(56)
|
Total
|
600
|
415
|
185
|
1,787
|
1,227
|
560
|
Q4-2021 Insurance Business Performance
- Operating DPW growth of 75% in constant currency
mainly reflected the RSA acquisition, which contributed 69 points
of growth. Commercial lines organic growth was healthy across all
segments.
- Operating combined ratio of 87.8% was solid and
included $186 million (3.8 points) of
catastrophe losses, which exceeded expectations. The operating
combined ratio in Canada was a
strong 84.4%, reflecting solid underlying performance across the
business. In the UK&I, the operating combined ratio was a solid
93.0%, despite including 3.5 points of CAT losses. In the U.S., the
operating combined ratio of 92.5% reflected solid underlying
performance.
Lines of Business
P&C Canada (includes RSA Canada results)
- Personal auto premiums grew by 25%, driven by RSA, while
we continue to operate in a muted rate environment. The operating
combined ratio was very strong at 87.5%, reflecting strong
underlying performance and higher prior year development. Although
up from the prior year, driving activity remains below pre-pandemic
levels.
- Personal property premiums grew by 33%, mainly driven by
RSA and 5 points of organic growth due to firm market conditions.
The operating combined ratio remained very strong at 79.5%, but was
6.3 points higher than last year, reflecting 4.4 points of higher
CAT losses.
- Commercial lines premium growth of 41% was mainly driven
by RSA. Strong organic growth of 11% reflected continued
profitability actions in hard market conditions. The operating
combined ratio was strong at 84.3%, improving 11 points from a year
ago. This was driven by higher PYD and solid underlying
performance, with an estimated 6-point impact from customer relief
measures offered last year.
- Distribution income grew by 7% compared to a strong
prior-year quarter, driven by accretive acquisitions.
P&C UK&I
- Personal lines operating DPW was $517 million, with continued rate momentum and
high retention levels in personal property and pet. The personal
auto market remained very competitive, muting premium growth ahead
of recent pricing reforms. The operating combined ratio of 96.1%
reflected solid underlying performance and strong prior year
development.
- Commercial lines operating DPW was $757 million in hard market conditions. The
operating combined ratio was a strong 90.4%, driven by strong
underlying performance and favourable prior year development,
tempered by elevated catastrophe losses.
P&C U.S.
- US Commercial premium growth was strong at 19% on a
constant currency basis, driven by a combination of new business
growth, new products, and hard market conditions.
The operating combined ratio was stable at 92.5% as
strong underlying performance was offset by higher catastrophe
losses.
Investments
- Net investment income of $220
million for the quarter increased 54% year-over-year, mainly
driven by the RSA acquisition and a special dividend of
$23 million from one of our
investments.
- Net gains excluding FVTPL bonds of $262 million primarily reflected realized gains
resulting from favourable equity markets and unrealized gains on
Venture investments.
Net Operating Income, EPS and ROE
- Net operating income of $679
million is up 45% from a year ago, reflecting the
contribution of RSA, as well as strong growth in underwriting and
investment income.
- Earnings per share of $3.85 in Q4-2021 grew 51%, driven by strong
operating results and investment gains, partly offset by the net
cost of adverse development cover for the UK&I segment.
- Operating ROE of 17.8% and ROE of 17.0% for the
12 months to December 31, 2021
reflected strong performance across the business.
Balance Sheet
- The Company ended the year in a strong financial position, with
a total capital margin of $2.9
billion.
- IFC's book value per share (BVPS) of $82.34 as at December 31,
2021 increased 40% since December 31,
2020, driven by strong earnings and the RSA financing.
- The adjusted debt-to-total capital ratio of 23.0%
as at December 31, 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%.
RSA Acquisition
- RSA contributed close to 16% accretion to Q4-2021
NOIPS and 12% for the seven-month period since closing. Given
the overall strength of Intact's results, double-digit accretion
for the first seven months is evidence of the quality of the
acquired businesses.
- We remain on track to realize at least $250 million of pre-tax annual run-rate synergies
within 36 months of closing. As at December 31, 2021 we have delivered $85 million in run-rate synergies.
- Ken Norgrove was appointed to
the role of CEO of UK&I, subject to regulatory approval. He was
formerly CEO of RSA Scandinavia from 2019 until deal completion,
and led the very successful turnaround of the Irish business as CEO
of RSA Ireland from 2014 to 2019. Ken brings more than 35 years of
experience in the insurance industry, with 30 years at RSA.
- Integration activities are progressing as planned. In
Canada, policy conversion in the
broker channel is well underway. Over 40% of Personal Lines broker
policies, and nearly 40% of Commercial Lines small business and
fleet policies have converted to Intact systems to date.
- 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.
- On October 6, 2021, we entered
into a reinsurance agreement to provide protection for adverse
development in UK&I claims liabilities for 2020 and prior
years. The associated expense of $71
million was included in Acquisition, integration and
restructuring costs in Q4-2021.
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 March 31, 2022, to shareholders of record on
March 15, 2022.
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 $1.73 and
$2.58, 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 Q4-2021 MD&A as well as the Q4-2021
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 February 9, 2022 at 2:00
p.m. ET until midnight on February
16, 2022. To listen to the replay, call 416-764-8677 or
1-888-390-0541 (toll-free in North
America), entry code 501798. 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.
Non-GAAP and other financial measures
Non-GAAP financial measures and Non-GAAP ratios (which are
calculated using non-GAAP financial measures) do not have
standardized meanings prescribed by IFRS (or GAAP) and may not be
comparable to similar measures used by other companies in our
industry. Non-GAAP and other financial measures are used by
management and financial analysts to assess our performance.
Further, they provide users with an enhanced understanding of our
financial results and related trends, and increase transparency and
clarity into the core results of the business.
Non-GAAP financial measures and Non-GAAP ratios used in this
Press Release and other Company's financial reports include
measures related to our consolidated performance, our underwriting
performance and our financial strength.
Operating performance
NOIPS, OROE, NOI and PTOI
- Our operating performance is measured based on NOIPS and
OROE, which are non-GAAP ratios. These ratios are calculated using
Non-GAAP financial measures that exclude elements that are not
representative of our operating performance (referred to as
"Non-operating results"). Non-operating results include elements
that arise mostly from changes in market conditions, relate to
acquisition-related items or special items, or that are not part of
our normal activities (see Non-operating results hereafter). We
believe that analyzing our consolidated performance excluding these
elements reflect more accurately our underlying business
performance over time.
- We note that investors, financial analysts, rating agencies and
media organizations use NOIPS, OROE and other components of
operating income (such as underwriting income, net investment
income and distribution income) to evaluate and report our
financial performance, and make investment decisions and
recommendations. These measures are widely used as they represent a
reliable, representative and consistent measure of our financial
performance over time.
- NOIPS is also used in incentive compensation as one of our
financial objectives is to grow NOIPS by 10% yearly over time.
NOIPS and OROE are calculated as follows, using the following
non-GAAP financial measures (marked with an asterix*).
NOIPS for
a specific period
|
NOI* attributable to
common shareholders
____________________
WANSO1
|
OROE
for a 12-month period
|
NOI*
attributable to common shareholders
________________________________
Adjusted average
common shareholders' equity
(excluding AOCI)*
|
1
Weighted-average number of common shares outstanding on a daily
basis during the period.
|
- Net operating income (NOI)* represents the Net income
attributable to shareholders (most directly comparable GAAP
measure), excluding the after-tax impact of Non-operating results.
NOI is net of net income (loss) attributable to non-controlling
interests.
- Pre-tax operating income (PTOI)*, which is used in the
calculation of NOI, represents the Income before income taxes (most
directly comparable GAAP measure), including the Share of income
tax expense (benefit) of broker associates (accounted for using the
equity method – net of tax – under IFRS), and excluding the pre-tax
impact of Non-operating results. PTOI is comprised of the following
items:
-
- Underwriting income (loss)* is an operating measure
calculated as Operating NEP* less Operating net claims*, less
Operating net underwriting expenses*. Underwriting income (loss)
represents Net earned premiums, Other underwriting revenues, Net
claims incurred and Underwriting expenses, all of which are
reported under IFRS, excluding the impact of MYA on underwriting
results, non-operating pension expense and underwriting results
from exited lines
- Net investment income – calculated as Investment income
less Investment expenses, as reported under IFRS.
- Distribution income* is the measure used to report the
performance of our distribution channel, which includes operating
income before interest and taxes from our consolidated brokers,
broker associates, Intact Public Entities, On Side, Coast
Underwriters and Johnson Group Benefits. Distribution income is
calculated using components of Other income and Other expenses (for
our consolidated entities) and Share of profit from investments in
associates and joint ventures (for those that we do not
consolidate) under IFRS.
- Total financing costs* are comprised of Finance costs
(most directly comparable GAAP measure), adjusted to include
finance costs from our broker associates, which are accounted for
using the equity method under IFRS (included in Share of profit
from investments in associates and joint ventures under IFRS).
- Other operating income (expense)* includes general
corporate expenses related to the operation of the group and our
public company status, consolidation adjustments, and other
operating items. Other income (expense) is calculated using
components of Other income and Other expenses under IFRS.
- PTOI on a segment basis, which is determined in the same manner
as PTOI, increases transparency and clarity of the core results of
the business.
Non-operating results
- Non-operating results* include elements that arise
mostly from changes in market conditions, relate to
acquisition-related items or special items, or that are not part of
our normal activities. They are comprised of the following
items:
-
- Net gains (losses), as reported under IFRS, arise
mostly from changes in market conditions and investment decisions,
which can be volatile to earnings.
- Positive (negative) impact of MYA on underwriting arise
mostly from movements in interest rates, which can be volatile to
earnings. Claims liabilities are discounted at the estimated market
yield of the assets backing these liabilities. The impact of
changes in the discount rate used to discount claims liabilities
based on the change in the market-based yield of the underlying
assets is referred to as MYA. MYA is included in Net claims
incurred under IFRS.
- The non-operating pension expense represents the
difference between the asset return (interest income on plan
assets) calculated using the expected return on plan assets versus
the IFRS discount rate on Intact's Canadian pension plan assets.
The expected return better reflects our operating performance given
our internal investment management expertise and the composition of
our pension asset portfolio. The non-operating pension expense is
included in Net claims incurred and Underwriting expenses under
IFRS
- Acquisition, integration and restructuring costs, as
reported under IFRS. Acquisition and integration costs incurred in
connection with an acquired business do not represent an ongoing
operating expense of the business.
-
- Acquisition costs include professional fees and stamp
duties related to the closing of an acquisition.
- Integration costs include restructuring costs related to
an acquisition such as severances, retention bonuses and system
integration, the initial net impact of a reinsurance coverage for
the purpose of an acquisition, as well as changes in the fair value
of the contingent considerations. With respect to the RSA
Acquisition, ADC costs represent the net impact of a reinsurance
coverage pursuant to which a third-party reinsurer will assume 50%
of negative reserve development in excess of an agreed retention
with respect to certain of RSA's UK&I and other claims
liabilities for accident years 2020 and prior.
- Restructuring and other costs include restructuring
costs not related to an acquisition and expenses related to the
implementation of significant new accounting standards.
- Gain on the RSA Acquisition (gain on bargain purchase),
as reported under IFRS, is non-taxable and represents the
difference between the purchase price paid for RSA and the fair
value of the identifiable net assets acquired less the amount of
NCI. It is reported in non-operating results, consistent with other
gains and losses, and given its special nature.
- Underwriting results from exited lines included the
underwriting results of the US Commercial's business Programs,
Architects and Engineers, Healthcare (effective July 1, 2019), BC auto exit (effective in
Q4-2020), as well as UK&I exited lines as of the closing date.
Underwriting results from exited lines are included in NEP, Net
claims incurred and Underwriting expenses under IFRS. We believe
that such results could obscure the ability to compare period over
period results for our ongoing businesses.
Table 1 Reconciliation of NOI, NOIPS and OROE
to Net income attributable to shareholders, as reported under
IFRS
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
|
|
|
|
|
Net income
attributable to shareholders, as reported under IFRS
|
692
|
378
|
2,067
|
1,082
|
Remove: Pre-tax
non-operating losses (gains)
|
(17)
|
125
|
70
|
535
|
Remove: Non-operating
tax expense (benefit)1
|
4
|
(36)
|
(67)
|
(146)
|
NOI
|
679
|
467
|
2,070
|
1,471
|
Remove: preferred share
dividends
|
(13)
|
(13)
|
(53)
|
(52)
|
NOI attributable to
common shareholders
|
666
|
454
|
2,017
|
1,419
|
Divided by
weighted-average number of common shares (in millions)
|
176.1
|
143.0
|
162.4
|
143.0
|
NOIPS, basic and
diluted (in dollars)
|
3.78
|
3.18
|
12.41
|
9.92
|
NOI to common
shareholders for the last 12 months
|
2,017
|
1,419
|
|
|
Adjusted average common
shareholders' equity, excluding AOCI
|
11,357
|
7,697
|
|
|
OROE for the last 12
months
|
17.8%
|
18.4%
|
|
|
Table 2 Reconciliation of PTOI to Income
before income taxes, as reported under IFRS
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
|
|
|
|
|
Income before income
taxes, as reported under IFRS
|
871
|
470
|
2,568
|
1,359
|
Add: share of income
tax expense of broker associates
|
4
|
5
|
30
|
22
|
Remove: Pre-tax
non-operating losses (gains)
|
(17)
|
125
|
70
|
535
|
PTOI
|
858
|
600
|
2,668
|
1,916
|
PTOI
|
858
|
600
|
2,668
|
1,916
|
Add: operating income
tax expense
|
(170)
|
(133)
|
(577)
|
(445)
|
Netted with: net income
(loss) attributable to NCI
|
(9)
|
-
|
(21)
|
-
|
NOI
|
679
|
467
|
2,070
|
1,471
|
Table 3 Reconciliation of Distribution income,
Total finance costs, Other operating income (expense), Total income
taxes and Underwriting income with the Consolidated financial
statements
MD&A
captions
|
Pre-tax
|
|
|
As presented in the
Financial statements
|
Distribution
income
|
Total finance
costs
|
Other
operating
income
(expense)1
|
Total income
taxes
|
Non-operating
losses
|
Underwriting
income
|
Total F/S
caption
|
For the quarter
ended December 31, 2021
|
|
|
|
|
|
|
|
Underwriting
income1
|
-
|
-
|
-
|
-
|
21
|
600
|
621
|
Other
revenues
|
98
|
-
|
10
|
-
|
-
|
-
|
108
|
Net gains
(losses)
|
-
|
-
|
-
|
-
|
194
|
-
|
194
|
Gain on bargain
purchase
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Share of profits from
invest. in ass. & JV
|
27
|
(1)
|
-
|
(4)
|
(6)
|
-
|
16
|
Finance
costs
|
-
|
(42)
|
-
|
-
|
-
|
-
|
(42)
|
Acquisition,
integration and restructuring costs
|
-
|
-
|
-
|
-
|
(133)
|
-
|
(133)
|
Other
expenses
|
(48)
|
-
|
(6)
|
-
|
(59)
|
-
|
(113)
|
Income tax benefit
(expense)
|
-
|
-
|
-
|
(170)
|
-
|
-
|
(170)
|
Total, as reported
in MD&A
|
77
|
(43)
|
4
|
(174)
|
17
|
600
|
|
For the quarter
ended December 31, 2020
|
|
|
|
|
|
|
|
Underwriting
income1
|
-
|
-
|
-
|
-
|
(75)
|
415
|
340
|
Other
revenues
|
82
|
-
|
9
|
-
|
-
|
-
|
91
|
Net gains
(losses)
|
-
|
-
|
-
|
-
|
46
|
-
|
46
|
Share of profits from
invest. in ass. & JV
|
32
|
(3)
|
-
|
(5)
|
(7)
|
-
|
17
|
Finance
costs
|
-
|
(29)
|
-
|
-
|
-
|
-
|
(29)
|
Acquisition,
integration and restructuring costs
|
-
|
-
|
-
|
-
|
(53)
|
-
|
(53)
|
Other
expenses
|
(42)
|
-
|
(7)
|
-
|
(36)
|
-
|
(85)
|
Income tax benefit
(expense)
|
-
|
-
|
-
|
(92)
|
-
|
-
|
(92)
|
Total, as reported
in MD&A
|
72
|
(32)
|
2
|
(97)
|
(125)
|
415
|
|
For the year ended
December 31, 2021
|
|
|
|
|
|
|
Underwriting
income1
|
-
|
-
|
-
|
-
|
109
|
1,787
|
1,896
|
Other
revenues
|
389
|
-
|
32
|
-
|
-
|
-
|
421
|
Net gains
(losses)
|
-
|
-
|
-
|
-
|
249
|
-
|
249
|
Gain on bargain
purchase
|
-
|
-
|
-
|
-
|
204
|
-
|
204
|
Share of profits from
invest. in ass. & JV
|
146
|
(9)
|
-
|
(30)
|
(20)
|
-
|
87
|
Finance
costs
|
-
|
(153)
|
-
|
-
|
-
|
-
|
(153)
|
Acquisition,
integration and restructuring costs
|
-
|
-
|
-
|
-
|
(429)
|
-
|
(429)
|
Other
expenses
|
(173)
|
-
|
(57)
|
-
|
(183)
|
-
|
(413)
|
Income tax benefit
(expense)
|
-
|
-
|
-
|
(480)
|
-
|
-
|
(480)
|
Total, as reported
in MD&A
|
362
|
(162)
|
(25)
|
(510)
|
(70)
|
1,787
|
|
For the year ended
December 31, 2020
|
|
|
|
|
|
|
|
Underwriting
income1
|
-
|
-
|
-
|
-
|
(430)
|
1,227
|
797
|
Other
revenues
|
309
|
-
|
18
|
-
|
-
|
-
|
327
|
Net gains
(losses)
|
-
|
-
|
-
|
-
|
182
|
-
|
182
|
Share of profits from
invest. in ass. & JV
|
121
|
(11)
|
-
|
(22)
|
(36)
|
-
|
52
|
Finance
costs
|
-
|
(115)
|
-
|
-
|
-
|
-
|
(115)
|
Acquisition,
integration and restructuring costs
|
-
|
-
|
-
|
-
|
(115)
|
-
|
(115)
|
Other
expenses
|
(155)
|
-
|
(55)
|
-
|
(136)
|
-
|
(346)
|
Income tax benefit
(expense)
|
-
|
-
|
-
|
(277)
|
-
|
-
|
(277)
|
Total, as reported
in MD&A
|
275
|
(126)
|
(37)
|
(299)
|
(535)
|
1,227
|
|
|
|
|
|
|
|
|
|
|
1 Comprised of the following captions
in the Consolidated statements of income: Net earned premiums,
Other underwriting revenues, Net claims incurred and Underwriting
expenses.
|
Relative performance
Acquisition-related items
- Acquisition-related items, which are reported in
Non-operating results*, include amortization of intangible
assets recognized in business combinations, as well as acquisition
and integration costs.
The following table provides the breakdown of non-operating
results between acquisition-related items and other non-operating
results, showing the pre-tax and after-tax amount by line item.
Table 4 Acquisition-related gains (losses) and
other non-operating gains (losses)
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
|
Pre-tax
|
After-tax
|
Pre-tax
|
After-tax
|
Pre-tax
|
After-tax
|
Pre-tax
|
After-tax
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets recognized in business combinations
|
(63)
|
(48)
|
(40)
|
(30)
|
(199)
|
(151)
|
(154)
|
(117)
|
Acquisition and
integration costs
|
(117)
|
(93)
|
(48)
|
(41)
|
(375)
|
(297)
|
(97)
|
(79)
|
Net gain (loss) on
currency derivative hedges (acquisitions)
|
(34)
|
(25)
|
19
|
16
|
(31)
|
(23)
|
19
|
16
|
Tax adjustment on
acquisition-related items
|
-
|
13
|
-
|
-
|
-
|
(1)
|
-
|
(3)
|
Acquisition-related
gains (losses)
|
(214)
|
(153)
|
(69)
|
(55)
|
(605)
|
(472)
|
(232)
|
(183)
|
Other net gains
(losses)
|
228
|
164
|
27
|
31
|
280
|
232
|
163
|
148
|
Positive (negative)
impact of MYA on underwriting
|
72
|
55
|
(23)
|
(18)
|
226
|
169
|
(315)
|
(235)
|
Non-operating pension
expense
|
(16)
|
(12)
|
(13)
|
(10)
|
(64)
|
(47)
|
(53)
|
(39)
|
Gain on the RSA
Acquisition
|
-
|
-
|
-
|
-
|
204
|
204
|
-
|
-
|
Underwriting income
(loss) from exited lines
|
(35)
|
(28)
|
(39)
|
(30)
|
(53)
|
(43)
|
(62)
|
(49)
|
Restructuring and other
non-operating costs
|
(18)
|
(13)
|
(8)
|
(7)
|
(58)
|
(46)
|
(36)
|
(31)
|
Other non-operating
gains (losses)
|
231
|
166
|
(56)
|
(34)
|
535
|
469
|
(303)
|
(206)
|
|
|
|
|
|
|
|
|
|
Non-operating gains
(losses)
|
17
|
13
|
(125)
|
(89)
|
(70)
|
(3)
|
(535)
|
(389)
|
Consolidated performance
ROE and Adjusted average common shareholder's equity
- Our consolidated performance is measured based on EPS
(GAAP measure) and ROE, a Non-GAAP ratio. ROE is the closest
GAAP-based measure, as it is based on Net income attributable to
common shareholders. However, the denominator is adjusted to
reflect the weighted-impact of significant capital transactions,
when appropriate.
- EPS and ROE are calculated as follows. Non-GAAP financial
measures are marked with an asterix*.
EPS
for a specific period
|
As reported
in the accompanying Consolidated statements of
income Net income
attributable to common shareholders
______________________________
WANSO
|
ROE
for a 12-month period
|
Net income
attributable to common shareholders
_____________________________
Adjusted
average common shareholders' equity*
|
- Net income attributable to common shareholders is
determined in accordance with IFRS excludes the dividends declared
on preferred shares.
Table 5 Reconciliation of ROE to Net income
attributable to shareholders, as reported under IFRS
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
Net income
attributable to shareholders
|
692
|
378
|
2,067
|
1,082
|
Remove: preferred share
dividends
|
(13)
|
(13)
|
(53)
|
(52)
|
Net income
attributable to common shareholders
|
679
|
365
|
2,014
|
1,030
|
Divided by
weighted-average number of common shares (in millions)
|
176.1
|
143.0
|
162.4
|
143.0
|
EPS, basic and
diluted (in dollars)
|
3.85
|
2.55
|
12.40
|
7.20
|
Net income
attributable to common shareholders for the last 12
months
|
2,014
|
1,030
|
|
|
Adjusted average common
shareholders' equity
|
11,826
|
8,064
|
|
|
ROE for the last 12
months
|
17.0%
|
12.8%
|
|
|
Table 6 Reconciliation of AEPS and NOIPS to
EPS, as reported under IFRS
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
|
After-tax
|
Per share
|
After-tax
|
Per share
|
After-tax
|
Per share
|
After-tax
|
Per share
|
Net income
attributable to common shareholders (EPS)
|
679
|
3.85
|
365
|
2.55
|
2,014
|
12.40
|
1,030
|
7.20
|
Add back:
acquisition-related losses (gains)
|
153
|
0.87
|
55
|
0.39
|
472
|
2.92
|
183
|
1.28
|
Adjusted net income
attributable to common shareholders (AEPS)
|
832
|
4.72
|
420
|
2.94
|
2,486
|
15.32
|
1,213
|
8.48
|
Add back: Other
non-operating losses (gains)
|
(166)
|
(0.94)
|
34
|
0.24
|
(469)
|
(2.91)
|
206
|
1.44
|
NOI attributable to
common shareholders (NOIPS)
|
666
|
3.78
|
454
|
3.18
|
2,017
|
12.41
|
1,419
|
9.92
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rates
- Our effective income tax rates are measured based on
Total effective income tax rate and Operating effective
income tax rate, which are Non-GAAP ratios. These ratios take
into account the impact of income taxes from our broker associates,
which are accounted for using the equity method (net of tax) under
IFRS.
Total effective income tax rate and Operating effective income
tax rate are calculated using the following non-GAAP financial
measures (marked with an asterix*).
Total effective
income tax rate
for a specific
period
|
Total income tax
expense (benefit)* ______________________ Pre-tax income*
|
Operating
effective income tax rate
for a specific
period
|
Operating income tax
expense (benefit)* ______________________ PTOI*
|
- Total income tax expense (benefit) and Operating income tax
expense (benefit) include the impact of income taxes from our
broker associates, which are accounted for using the equity method
(net of tax) under IFRS. Pre-tax income and PTOI are
presented on a consistent basis. These Non-GAAP financial measures
are aligned with how management analyzes the operating performance
of our broker associates (recorded in Distribution income), which
is on a pre-tax basis.
Table 7 Reconciliation of effective income tax
rates
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
Income before income
taxes, as reported under IFRS
|
871
|
470
|
2,568
|
1,359
|
Add: share of income
tax expense of broker associates
|
4
|
5
|
30
|
22
|
Pre-tax income, as
reported in the MD&A
|
875
|
475
|
2,598
|
1,381
|
Total income tax
benefit (expense)
|
(174)
|
(97)
|
(510)
|
(299)
|
Net
income
|
701
|
378
|
2,088
|
1,082
|
Total effective
income tax rate, as reported in the MD&A
|
20.1%
|
20.4%
|
19.6%
|
21.7%
|
Pre-tax operating
income (PTOI)
|
858
|
600
|
2,668
|
1,916
|
Operating income tax
benefit (expense)
|
(170)
|
(133)
|
(577)
|
(445)
|
NOI
|
688
|
467
|
2,091
|
1,471
|
Operating effective
income tax rate
|
19.8%
|
22.1%
|
21.6%
|
23.2%
|
Premiums volume
Change in operating DPW and Change in operating DPW in
constant currency
- Our top line consolidated performance (in terms of
premiums written) is measured based on Change in operating
DPW in constant currency, which is a non-GAAP ratio. This ratio
represents the growth (or decline) in Operating DPW calculated by
applying the exchange rate in effect for the current year to the
Operating DPW of the previous year.
- With the RSA Acquisition, approximately 65% of our operating
DPW are denominated in CAD, 19% in GBP, 10% in USD, and the
remaining, mainly in Euro. Constant currency is widely used by
multinational companies to highlight the economic performance. Like
our peers, we believe that this measure enhances the analysis of
our top line performance with comparative periods as it excludes
the impact of foreign exchange fluctuations.
- The top line segmented performance of our non-Canadian
operating segments, as applicable, is also measured based on the
Change in operating DPW in constant currency, which reflects
the Operating DPW growth, as reported and managed at the segment
level (in the functional currency).
- In our MD&A or other financial reports, we also present
Change in operating DPW, which is a Non-GAAP ratio. This
ratio represents the growth or decline in Operating DPW calculated
by applying the respective exchange rates in effect for the current
year and previous year. When relevant, we disclose both ratios to
highlight the impact of foreign currency fluctuations on our top
line performance.
Change in
operating DPW
|
Operating DPW for a specified
period – Operating DPW for the previous
year _____________________ Operating DPW for the previous year
|
Change in
operating DPW in constant
currency
|
Operating DPW (in
CAD) for a specified period – Operating DPW
(in CAD) for the previous year, using the current foreign exchange
rate _____________________ DPW (in CAD) for the previous year, using the current
foreign exchange rate
|
Change in operating DPW in constant currency and Change in
operating DPW are calculated using Operating DPW, a non-GAAP
financial measure.
- Operating DPW represents the total amount of premiums
for new and renewal policies written during the reporting period,
normalized for the effect of multi-year policies, excluding
industry pools, fronting and exited lines. This measure matches
premiums written to the year in which coverage is provided, whereas
under IFRS, the full value of multi-year policies is recognized in
the year the policy is written. DPW is the most comparable GAAP
measure to Operating DPW.
- We consider that this measure better reflects the operating
performance of our core operations, and that it is the most useful
measure in terms of measuring growth and volume of business.
- To calculate the Company's performance relative to the Canadian
industry for incentive compensation purposes, our DPW growth is
based on financial statements presentation.
Table 8 Reconciliation of Operating DPW to
DPW
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
DPW, as reported
under IFRS
|
5,318
|
2,930
|
17,994
|
12,143
|
Remove: impact of
industry pools and fronting
|
(260)
|
(41)
|
(605)
|
(119)
|
Remove: DPW from exited
lines
|
(70)
|
(17)
|
(161)
|
(21)
|
Add: impact of the
normalization for multi-year policies
|
29
|
-
|
55
|
36
|
Operating DPW, as
reported in the MD&A
|
5,017
|
2,872
|
17,283
|
12,039
|
Operating DPW
growth
|
75%
|
8%
|
44%
|
9%
|
Operating DPW growth
(in constant currency)
|
75%
|
8%
|
45%
|
9%
|
|
|
|
|
|
Change in operating NEP and Change in operating NEP in
constant currency
- Our consolidated operating NEP growth is measured based
on Change in operating NEP, which is a non-GAAP ratio.
- The segmented operating NEP growth of our non-Canadian
operating segments, as applicable, is measured based on Change
in operating NEP in constant currency, which is a non-GAAP
ratio, that reflect the Operating NEP growth, as reported and
managed at the segment level (in the functional currency). We
believe that this ratio enhances the analysis of our financial
performance with comparative periods as it excludes the impact of
foreign currency fluctuations. When relevant, as we do for
Operating DPW, we disclose both ratios to highlight the impact of
foreign currency fluctuations on our Operating NEP growth.
- Change in operating NEP and Change in operating NEP in constant
currency are calculated using the same methodology as for Change in
operating DPW and Change in operating DPW (in constant currency)
but using Operating NEP, a non-GAAP financial measure.
- Operating NEP represents NEP (most directly comparable
GAAP measure), excluding those from exited lines. We believe that
this measure better reflects the operating performance of our core
operations.
Table 9 Reconciliation of Operating NEP to
NEP, as reported under IFRS
|
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
NEP, as reported
under IFRS
|
5,003
|
2,899
|
16,238
|
11,241
|
Remove: NEP from exited
lines
|
(72)
|
(20)
|
(195)
|
(21)
|
Operating NEP, as
reported in the MD&A
|
4,931
|
2,879
|
16,043
|
11,220
|
Operating NEP
growth
|
71%
|
7%
|
43%
|
10%
|
|
|
|
|
|
|
|
Underwriting profitability
Underwriting income (loss) and Operating combined
ratio
- Our underwriting performance is measured based on
Operating combined ratio, Claims ratio (including underlying
current year loss ratio, CAT loss ratio and PYD ratio) and Expense
ratio (including commissions ratio, general expenses ratio and
premium taxes ratio), which are non-GAAP ratios (as
defined below).
- Our underwriting performance is consistently managed and
measured on an operating basis, in line with how we report
NOI and NOIPS. Non-operating items excluded from our
underwriting performance icomprised the underwriting
results from exited lines, the non-operating pension expense
and the impact of MYA on underwriting results. We
believe that this basis provides investors and financial analysts
with a valuable measure of our ongoing underwriting performance in
terms of underwriting discipline and profitability.
- While the Operating combined ratio and components of
underwriting performance are commonly used across the industry,
they do not have standardized meanings prescribed by IFRS (or GAAP)
and may not be comparable to similar measures used by other
companies in our industry.
- Our underwriting ratios are calculated are calculated using the
following Non-GAAP financial measures (marked with an
asterix*).
Operating combined
ratio
|
An operating combined
ratio below 100% indicates a profitable underwriting result. An
operating combined ratio over 100% indicates an unprofitable
underwriting result.
|
• Claims ratio (see
below) + Expense ratio (see below)
|
Claims
ratio
Operating net
claims* ____________________ Operating NEP*
|
Expense
ratio
Operating net
underwriting expenses* ____________________ Operating NEP*
|
Underlying current
year loss ratio
|
Operating net
claims excluding current year CAT losses and
PYD1 _____________________ Operating NEP* before the impact of reinstatement
premiums
|
Commissions
ratio
|
Commissions1 _____________________ Operating NEP*
|
CAT loss
ratio
|
Net current year CAT
losses plus net reinstatement premiums
_____________________ Operating NEP* before the impact of reinstatement
premiums
|
General expenses
ratio
|
General
expenses1 _____________________ Operating NEP*
|
PYD
ratio
|
PYD1 _____________________ Operating NEP*
|
Premium
taxes ratio
|
Premium
taxes1
_____________________ Operating
NEP*
|
1 These
supplementary measures, which are defined hereafter,
are disclosed on a quarterly basis in our MD&A and other
financial reports to provide more details on claims ratio and
expense ratio.
|
- Underwriting income (loss)* which is used in
the calculation of the Operating combined ratio, is an operating
measure calculated as Operating NEP, less Operating net claims and
Operating net underwriting expenses. The most directly comparable
GAAP measure is Underwriting income comprised of the following
captions in the Consolidated statements of income: Net earned
premiums, Other underwriting revenues, Net claims incurred and
Underwriting expenses.
Operating net claims are used in the calculation of
the Claims ratio. Operating net claims represent Net claims
incurred (most comparable GAAP measure), excluding the impact
of MYA on underwriting results, an adjustment for Non-operating
pension expense and Net claims from exited lines.
- To provide more insight into our underlying current year
performance, the impact of CAT losses (which can be volatile), and
PYD, we further analyse Operating net claims as follows in our
MD&A and other financial reports.
-
- Operating net claims excluding current year CAT losses and
PYD are used in the calculation of the Underlying current
year loss ratio. CAT losses and PYD are not predictable and subject
to volatility, and as such, excluding them provides clearer insight
into our analysis of underlying current year performance.
- Net current year CAT losses are used in the
calculation of the CAT loss ratio. A CAT loss represents any
one claim, or group of claims, equal to or greater than a
predetermined CAT threshold, before reinsurance, related to a
single event for the current accident year. Effective July 1, 2021, our CAT threshold is as follows by
segment: P&C Canada: $10 million,
P&C UK&I: £7.5 million and P&C US: US$5 million. Reported CAT losses can either be
weather-related or not weather-related and exclude those from
exited lines.
- Prior year claims development (PYD) is used in the
calculation of the PYD ratio. PYD represents the change in total
prior year claims liabilities during the period, net of
reinsurance, excluding the PYD related to exited lines. A decrease
to claims liabilities is referred to as favourable prior year
claims development. An increase in claims liabilities is referred
to as unfavourable prior year claims development.
- Operating net underwriting expenses are comprised of
commissions (including regular and variable commissions), premium
taxes and general expenses related to underwriting activities, net
of other underwriting revenues. Operating net underwriting
expenses are used in the calculation of the Expense ratio
(including commissions ratio, general expenses ratio and premium
taxes ratio).
-
- Operating net underwriting expenses represent Underwriting
expenses (most comparable GAAP measure), net of other
underwriting revenues and excluding an adjustment for non-operating
pension expense and underwriting expenses from exited lines.
- Other underwriting revenues include fees collected from
policyholders in connection with the costs incurred for the
Company's yearly billing plans, as well as fees received for the
administration of a portion of the Facility Association and other
policies.
Table 10 Reconciliation of Underwriting income to
Underwriting income as reported under IFRS
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
Net earned premiums, as
reported under IFRS
|
5,003
|
2,899
|
16,238
|
11,241
|
Other underwriting
revenues, as reported under IFRS
|
79
|
36
|
236
|
135
|
Net claims incurred, as
reported under IFRS
|
(2,796)
|
(1,663)
|
(8,967)
|
(6,883)
|
Underwriting expenses,
as reported under IFRS
|
(1,665)
|
(932)
|
(5,611)
|
(3,696)
|
Underwriting income
(loss), as calculated under IFRS
|
621
|
340
|
1,896
|
797
|
Remove: impact of MYA
on underwriting results
|
(72)
|
23
|
(226)
|
315
|
Remove: non-operating
pension expense
|
16
|
13
|
64
|
53
|
Remove: underwriting
loss of exited lines
|
35
|
39
|
53
|
62
|
Underwriting income
(loss), as reported in the MD&A
|
600
|
415
|
1,787
|
1,227
|
Operating
NEP
|
4,931
|
2,879
|
16,043
|
11,220
|
Operating combined
ratio
|
87.8%
|
85.6%
|
88.8%
|
89.1%
|
Table 11 Reconciliation of Operating net claims to
net claims incurred, as reported under IFRS
|
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
Net claims incurred,
as reported under IFRS
|
2,796
|
1,664
|
8,967
|
6,883
|
Remove: positive
(negative) impact of MYA on underwriting results
|
72
|
(23)
|
226
|
(315)
|
Remove: adjustment for
non-operating pension expense
|
(6)
|
(5)
|
(24)
|
(20)
|
Remove: net claims from
exited lines
|
(83)
|
(51)
|
(172)
|
(71)
|
Net with: other
underwriting revenues
|
(6)
|
-
|
(24)
|
-
|
Operating net
claims, as reported in the MD&A
|
2,773
|
1,585
|
8,973
|
6,477
|
Remove: net current
year CAT losses
|
(186)
|
(74)
|
(676)
|
(359)
|
Remove: favourable
(unfavourable) PYD
|
160
|
28
|
594
|
100
|
Operating net claims
excluding current year CAT losses and PYD
|
2,747
|
1,539
|
8,891
|
6,218
|
Operating
NEP
|
4,931
|
2,879
|
16,043
|
11,220
|
Remove: reinstatement
premiums ceded (recovered)
|
-
|
-
|
1
|
1
|
Operating
NEP before reinstatement premiums
|
4,931
|
2,879
|
16,044
|
11,221
|
Underlying current year
loss ratio1
|
55.7%
|
53.5%
|
55.5%
|
55.5%
|
CAT loss ratio
(including reinstatement premiums) 1
|
3.8%
|
2.6%
|
4.2%
|
3.2%
|
(Favourable)
unfavourable PYD ratio2
|
(3.3)%
|
(1.0)%
|
(3.8)%
|
(0.9)%
|
Claims
ratio2
|
56.2%
|
55.1%
|
55.9%
|
57.8%
|
|
|
|
|
|
|
1 Calculated using Operating NEP
before reinstatement premiums.
|
2
Calculated using Operating NEP.
|
Table 12 Reconciliation of Operating net underwriting
expenses to Underwriting expenses as reported under IFRS
|
Q4-2021
|
Q4-2020
|
2021
|
2020
|
Underwriting
expenses, as reported under IFRS
|
1,665
|
932
|
5,611
|
3,696
|
Net with: other
underwriting revenues
|
(73)
|
(36)
|
(212)
|
(135)
|
Remove: adjustment for
non-operating pension expense
|
(10)
|
(8)
|
(40)
|
(33)
|
Remove: underwriting
expenses from exited lines
|
(24)
|
(9)
|
(76)
|
(12)
|
Operating net
underwriting expenses
|
1,558
|
879
|
5,283
|
3,516
|
Commissions
|
829
|
461
|
2,885
|
1,842
|
General
expenses
|
591
|
330
|
1,914
|
1,289
|
Premium
taxes
|
138
|
88
|
484
|
385
|
Operating
NEP
|
4,931
|
2,879
|
16,043
|
11,220
|
Commissions
ratio
|
16.8%
|
16.0%
|
18.0%
|
16.4%
|
General expenses
ratio
|
12.0%
|
11.4%
|
11.9%
|
11.5%
|
Premium taxes
ratio
|
2.8%
|
3.1%
|
3.0%
|
3.4%
|
Expense
ratio
|
31.6%
|
30.5%
|
32.9%
|
31.3%
|
|
|
|
|
|
|
Financial strength
Total capital margin and regulatory capital ratios
- The capital strength of the group is measured by the Total
capital margin.
- Each regulated insurance jurisdiction has its own supervisory
capital ratio that is used to evaluate the ability of insurance
companies to meet all policyholder liabilities.
Total capital margin as at the end of a specific
period
|
Total capital margin
includes capital in excess of the internal
CALs1 for regulated insurance entities in Canadian,
US, UK and other internationally regulated jurisdictions and the
funds held in non-regulated entities, less any ancillary own funds
committed by the Company.
|
Regulatory capital
ratios as at the end of a
specific period
|
Minimum capital test
(as defined by OSFI and the AMF in Canada), Risk-based capital (as
defined by the NAIC in the US) and Solvency Capital Requirement (as
defined by the PRA in the UK&I)
|
1 The
average CAL for all regulated Canadian insurance entities is 173%
MCT. The CAL varies by legal Canadian entity. The CAL is 200% RBC
for regulated insurance entities in the US and 120% SCR for those
in the UK.
|
Book value per share (BVPS)
- The evolution of our book value is measured using BVPS (as
defined below), which is calculated using GAAP measures. BVPS is an
important valuation measure used by investors and is consistently
disclosed in our MD&A and other financial reports.
BVPS
as at the end of a
specific period
|
Common shareholders'
equity
_____________________________
Number of common
shares outstanding at the same date
|
Table 13 Calculation of BVPS
As at December
31,
|
|
|
2021
|
2020
|
Equity attributable to
shareholders, as reported under IFRS
|
|
|
15,674
|
9,583
|
Remove: Preferred
shares, as reported under IFRS
|
|
|
(1,175)
|
(1,175)
|
Common shareholders'
equity
|
|
|
14,499
|
8,408
|
Number of common shares
outstanding at the same date (in millions)
|
|
|
176.082
|
143.018
|
BVPS
|
|
|
82.34
|
58.79
|
|
|
|
|
|
|
Adjusted average common shareholders' equity
- Adjusted average common shareholders' equity* is a
Non-GAAP financial measure used in the calculation of ROE and AROE.
It is the mean of the shareholders' equity at the beginning and the
end of the period, adjusted on a prorata basis (number of days) for
significant capital transactions. Equity attributable to
shareholders and Preferred shares are determined in accordance with
IFRS.
- We believe that adjusting for common share issuance on prorata
basis based on the number of days is a better reflection of our
average common shareholders' equity base used to calculate ROE and
OROE.
Table 14 Adjusted average common shareholders' equity and
Adjusted average common shareholders' equity (excluding AOCI)
|
2021
|
2020
|
Ending common
shareholders' equity
|
14,499
|
8,408
|
Remove: common shares
issued during the year
|
(4,311)
|
-
|
Ending common
shareholders' equity, excluding common shares issued during the
year
|
10,188
|
8,408
|
Beginning common
shareholders' equity
|
8,408
|
7,719
|
Average common
shareholders' equity, excluding common shares issued during the
year
|
9,298
|
8,064
|
Weighted impact of
June 1, 2021 common shares issuance
|
2,528
|
-
|
Adjusted average
common shareholders' equity
|
11,826
|
8,064
|
Ending
common shareholders' equity (excluding AOCI)
|
13,970
|
7,999
|
Remove: common shares
issued during the year
|
(4,311)
|
-
|
Ending common
shareholders' equity, excluding AOCI and common shares issued
during the year
|
9,659
|
7,999
|
Beginning common
shareholders' equity, excluding AOCI
|
7,999
|
7,394
|
Average common
shareholders' equity, excluding AOCI and common shares issued
during the year
|
8,829
|
7,697
|
Weighted impact of
June 1, 2021 common shares issuance
|
2,528
|
-
|
Adjusted average
common shareholders' equity, excluding AOCI
|
11,357
|
7,697
|
Adjusted total capital and Adjusted debt-to-total capital
ratio
Adjusted debt-to-capital ratio and Total leverage ratio, which
are Non-GAAP ratios, are calculated using the following non-GAAP
financial measures (marked with an asterix*).
Adjusted
debt-to-capital ratio
as at the end of a
specific period
|
Debt outstanding
(excluding hybrid debt)*
__________________
Adjusted total
capital*
|
Total leverage
ratio
as at the end of a
specific period
|
Debt outstanding and
preferred shares
(including
NCI)*
__________________
Adjusted total
capital*
|
- Debt outstanding (excluding hybrid debt) represents the
debt outstanding (most comparable GAAP measure), excluding hybrid
subordinated notes. We classify hybrids with the preferred
shares since they are convertible to preferred shares pari passu to
our existing preferred shares in case of default or
bankruptcy.
- Adjusted total capital* represents the sum of Debt
outstanding, Equity attributable to shareholders, Restricted Tier 1
notes and preferred shares instruments held by subsidiaries, at the
same date. The restricted Tier 1 notes and preferred shares
instruments held by subsidiaries are included in Equity
attributable to NCI.
Table 15 Reconciliation of Debt outstanding (excluding
hybrid debt) and Adjusted total capital to Debt outstanding, Equity
attributable to shareholders and Equity attributable to NCI, as
reported under IFRS
As at
|
Dec. 31,
2021
|
Sept. 30,
2021
|
Dec. 31,
2020
|
Debt outstanding, as
reported under IFRS
|
5,229
|
5,323
|
3,041
|
Remove: hybrid
subordinated notes
|
(247)
|
(247)
|
-
|
Debt outstanding
(excluding hybrid debt)
|
4,982
|
5,076
|
3,041
|
|
|
|
|
Debt outstanding, as
reported under IFRS
|
5,229
|
5,323
|
3,041
|
Equity attributable to
shareholders, as reported under IFRS
|
15,674
|
15,122
|
9,583
|
Equity attributable to
NCI, as reported under IFRS
|
|
|
|
Include: RSA Insurance
Group plc, as reported under IFRS
|
|
|
|
Tier 1
notes
|
510
|
510
|
-
|
Preferred
shares
|
285
|
285
|
-
|
Adjusted total
capital
|
21,698
|
21,240
|
12,624
|
|
|
|
|
Debt outstanding
(excluding hybrid debt)
|
4,982
|
5,076
|
3,041
|
Adjusted total
capital
|
21,698
|
21,240
|
12,624
|
Adjusted
debt-to-total capital ratio
|
23.0%
|
23.9%
|
24.1%
|
Debt outstanding, as
reported under IFRS
|
5,229
|
5,323
|
3,041
|
Preferred shares, as
reported under IFRS
|
1,175
|
1,175
|
1,175
|
Equity attributable
to NCI: RSA Insurance Group plc, as reported under
IFRS
|
|
|
|
Tier 1
notes
|
510
|
510
|
-
|
Preferred
shares
|
285
|
285
|
-
|
Debt outstanding and
preferred shares (including NCI)
|
7,199
|
7,293
|
4,216
|
Adjusted total capital
(see above)
|
21,698
|
21,240
|
12,624
|
Total leverage
ratio
|
33.2%
|
34.3%
|
33.4%
|
Adjusted debt-to-total
capital ratio
|
23.0%
|
23.9%
|
24.1%
|
Preferred shares and
hybrids
|
10.2%
|
10.4%
|
9.3%
|
Consolidated financial statements
For the year ended December 31,
2021
Consolidated balance sheets
(in millions of Canadian dollars, except as otherwise
noted)
As at
December 31,
|
2021
|
2020
|
Assets
|
|
|
|
|
Investments
|
|
|
|
|
Cash and cash
equivalents
|
$
|
2,276
|
$
|
917
|
Debt
securities
|
|
25,307
|
|
14,098
|
Preferred
shares
|
|
1,847
|
|
1,552
|
Common
shares
|
|
5,686
|
|
3,779
|
Investment
property
|
|
634
|
|
-
|
Loans
|
|
930
|
|
284
|
Total
investments
|
|
36,680
|
|
20,630
|
Premiums
receivable
|
|
7,838
|
|
3,822
|
Reinsurance
assets
|
|
5,616
|
|
1,533
|
Income taxes
receivable
|
|
198
|
|
7
|
Deferred tax
assets
|
|
584
|
|
179
|
Deferred acquisition
costs
|
|
2,024
|
|
1,089
|
Investments in
associates and joint ventures
|
|
760
|
|
811
|
Property and
equipment
|
|
774
|
|
520
|
Intangible
assets
|
|
4,636
|
|
2,514
|
Goodwill
|
|
3,066
|
|
2,813
|
Other assets
|
|
3,331
|
|
1,201
|
Asset held for
sale
|
|
842
|
|
-
|
Total
assets
|
$
|
66,349
|
$
|
35,119
|
Liabilities
|
|
|
|
|
Claims
liabilities
|
$
|
25,116
|
$
|
12,780
|
Unearned
premiums
|
|
11,703
|
|
6,256
|
Financial liabilities
related to investments
|
|
265
|
|
89
|
Income taxes
payable
|
|
131
|
|
149
|
Deferred tax
liabilities
|
|
698
|
|
279
|
Debt
outstanding
|
|
5,229
|
|
3,041
|
Other
liabilities
|
|
6,424
|
|
2,942
|
Total
liabilities
|
|
49,566
|
|
25,536
|
Equity
|
|
|
|
|
Common
shares
|
|
7,576
|
|
3,265
|
Preferred
shares
|
|
1,175
|
|
1,175
|
Contributed
surplus
|
|
211
|
|
187
|
Retained
earnings
|
|
6,183
|
|
4,547
|
Accumulated other
comprehensive income (loss)
|
|
|
|
|
Available-for-sale
securities
|
|
513
|
|
412
|
Translation of foreign
operations, net of hedges
|
|
1
|
|
(2)
|
Other
|
|
15
|
|
(1)
|
Equity attributable to
shareholders
|
|
15,674
|
|
9,583
|
Equity attributable to
non-controlling interests
|
|
1,109
|
|
-
|
Total
equity
|
|
16,783
|
|
9,583
|
Total liabilities
and equity
|
$
|
66,349
|
$
|
35,119
|
Consolidated statements of income
(in millions of Canadian dollars, except as otherwise noted)
For the years ended
December 31,
|
|
2021
|
|
2020
|
Direct premiums
written
|
$
|
17,994
|
$
|
12,143
|
Premiums
ceded
|
|
(1,322)
|
|
(527)
|
Net premiums
written
|
|
16,672
|
|
11,616
|
Changes in unearned
premiums
|
|
(434)
|
|
(375)
|
Net earned
premiums
|
|
16,238
|
|
11,241
|
Other underwriting
revenues
|
|
236
|
|
135
|
Investment
income
|
|
740
|
|
600
|
Other
revenues
|
|
421
|
|
327
|
Total
revenues
|
|
17,635
|
|
12,303
|
Net claims
incurred
|
|
(8,967)
|
|
(6,883)
|
Underwriting
expenses
|
|
(5,611)
|
|
(3,696)
|
Investment
expenses
|
|
(34)
|
|
(23)
|
Net gains
(losses)
|
|
249
|
|
182
|
Gain on bargain
purchase
|
|
204
|
|
-
|
Share of profit from
investments in associates and joint ventures
|
|
87
|
|
52
|
Finance
costs
|
|
(153)
|
|
(115)
|
Acquisition,
integration and restructuring costs
|
|
(429)
|
|
(115)
|
Other
expenses
|
|
(413)
|
|
(346)
|
Income before income
taxes
|
|
2,568
|
|
1,359
|
Income tax benefit
(expense)
|
|
(480)
|
|
(277)
|
Net
income
|
$
|
2,088
|
$
|
1,082
|
Net income
attributable to:
|
|
|
|
|
Shareholders
|
|
2,067
|
|
1,082
|
Non-controlling
interests
|
|
21
|
|
-
|
|
$
|
2,088
|
$
|
1,082
|
|
|
|
|
|
Weighted-average number
of common shares outstanding (in millions)
|
|
162.4
|
|
143.0
|
Earnings per common
share, basic and diluted (in dollars)
|
$
|
12.40
|
$
|
7.20
|
|
|
|
|
|
Dividends paid per
common share (in dollars)
|
$
|
3.40
|
$
|
3.32
|
Consolidated statements of comprehensive income
(in millions of Canadian dollars, except as otherwise noted)
For the years ended
December 31,
|
|
2021
|
|
2020
|
Net
income
|
$
|
2,088
|
$
|
1,082
|
Other comprehensive
income (loss)
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities:
|
|
|
|
|
net changes in
unrealized gains (losses)
|
|
445
|
|
204
|
income tax benefit
(expense)
|
|
(154)
|
|
(41)
|
reclassification of
net losses (gains)
|
|
(289)
|
|
(27)
|
income tax (benefit)
expense
|
|
99
|
|
1
|
|
|
|
|
|
|
|
101
|
|
137
|
Cash flow
hedges:
|
|
|
|
|
net
changes in unrealized gains (losses)
|
|
(26)
|
|
-
|
reclassification of net losses (gains)
|
|
32
|
|
-
|
|
|
|
|
|
|
|
6
|
|
-
|
Foreign exchange
gains (losses) on:
|
|
|
|
|
translation of foreign operations
|
|
(11)
|
|
(105)
|
net
investment hedges
|
|
23
|
|
55
|
income tax benefit (expense)
|
|
(1)
|
|
2
|
|
|
|
|
|
|
|
11
|
|
(48)
|
Other, net of
tax
|
|
16
|
|
(5)
|
Items that may be
reclassified subsequently to net income
|
|
134
|
|
84
|
Actuarial gains
(losses) on employee future benefits, net of other surplus
remeasurement
|
|
352
|
|
59
|
income tax benefit (expense)
|
|
(80)
|
|
(15)
|
Items that will not
be reclassified subsequently to net income
|
|
272
|
|
44
|
Other comprehensive
income (loss)
|
|
406
|
|
128
|
Total comprehensive
income
|
$
|
2,494
|
$
|
1,210
|
Total comprehensive
income attributable to:
|
|
|
|
|
Shareholders
|
|
2,459
|
|
1,210
|
Non-controlling
interests
|
|
35
|
|
-
|
|
$
|
2,494
|
$
|
1,210
|
Consolidated statements of changes in equity
(in millions of Canadian dollars, except as otherwise noted)
|
|
Equity attributable
to shareholders
|
|
|
|
|
|
Common
shares
|
Preferred
shares
|
Contributed
surplus
|
Retained
earnings
|
Accumulated other
compre-hensive income (loss)
|
Equity attributable
to non-controlling interests
|
|
Total
Equity
|
Balance as at
January 1, 2021
|
|
$
|
3,265
|
$
|
1,175
|
$
|
187
|
$
|
4,547
|
$
|
409
|
$
|
-
|
$
|
9,583
|
Net income
|
|
|
-
|
|
-
|
|
-
|
|
2,067
|
|
-
|
|
21
|
|
2,088
|
Other comprehensive
income (loss)
|
|
|
-
|
|
-
|
|
-
|
|
272
|
|
120
|
|
14
|
|
406
|
Total comprehensive
income (loss)
|
|
-
|
|
-
|
|
-
|
|
2,339
|
|
120
|
|
35
|
|
2,494
|
Common shares
issued
|
|
|
4,311
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
4,311
|
Dividends declared
on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shares
|
|
|
-
|
|
-
|
|
-
|
|
(626)
|
|
-
|
|
-
|
|
(626)
|
preferred
shares
|
|
|
-
|
|
-
|
|
-
|
|
(53)
|
|
-
|
|
-
|
|
(53)
|
Share-based
payments
|
|
|
-
|
|
-
|
|
24
|
|
(22)
|
|
-
|
|
-
|
|
2
|
Non-controlling
interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dividends
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(27)
|
|
(27)
|
business
combination
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,101
|
|
1,101
|
Other
|
|
|
-
|
|
-
|
|
-
|
|
(2)
|
|
-
|
|
-
|
|
(2)
|
Balance as at
December 31, 2021
|
|
$
|
7,576
|
$
|
1,175
|
$
|
211
|
$
|
6,183
|
$
|
529
|
$
|
1,109
|
$
|
16,783
|
Balance as at
January 1, 2020
|
|
$
|
3,265
|
$
|
1,028
|
$
|
170
|
$
|
3,959
|
$
|
325
|
$
|
-
|
$
|
8,747
|
Net income
|
|
|
-
|
|
-
|
|
-
|
|
1,082
|
|
-
|
|
-
|
|
1,082
|
Other comprehensive
income (loss)
|
|
|
-
|
|
-
|
|
-
|
|
44
|
|
84
|
|
-
|
|
128
|
Total comprehensive
income (loss)
|
|
-
|
|
-
|
|
-
|
|
1,126
|
|
84
|
|
-
|
|
1,210
|
Preferred shares
issued
|
|
|
-
|
|
147
|
|
-
|
|
-
|
|
-
|
|
-
|
|
147
|
Dividends declared
on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shares
|
|
|
-
|
|
-
|
|
-
|
|
(475)
|
|
-
|
|
-
|
|
(475)
|
preferred
shares
|
|
|
-
|
|
-
|
|
-
|
|
(52)
|
|
-
|
|
-
|
|
(52)
|
Share-based
payments
|
|
|
-
|
|
-
|
|
17
|
|
(11)
|
|
-
|
|
-
|
|
6
|
Balance as at
December 31, 2020
|
|
$
|
3,265
|
$
|
1,175
|
$
|
187
|
$
|
4,547
|
$
|
409
|
$
|
-
|
$
|
9,583
|
Consolidated statements of cash flows
(in millions of Canadian dollars, except as otherwise noted)
For the years ended
December 31,
|
|
2021
|
|
2020
|
Operating
activities
|
|
|
|
|
Income before income
taxes
|
$
|
2,568
|
$
|
1,359
|
Income taxes received
(paid), net
|
|
(783)
|
|
(348)
|
Adjustments for
non-cash items
|
|
191
|
|
255
|
Changes in other
operating assets and liabilities
|
|
1,153
|
|
1,086
|
Net cash flows provided
by (used in) operating activities
|
|
3,129
|
|
2,352
|
Investing
activities
|
|
|
|
|
Business combination,
net of cash acquired
|
|
(11,076)
|
|
-
|
Proceeds from the
disposal of certain RSA assets
|
|
7,209
|
|
-
|
Proceeds from sale of
investments
|
|
16,442
|
|
11,170
|
Purchases of
investments
|
|
(18,118)
|
|
(13,262)
|
Purchases of brokerages
and other equity investments, net
|
|
(102)
|
|
(187)
|
Purchases of
intangibles and property and equipment, net
|
|
(327)
|
|
(163)
|
Net cash flows provided
by (used in) investing activities
|
|
(5,972)
|
|
(2,442)
|
Financing
activities
|
|
|
|
|
Payment of lease
liabilities
|
|
(97)
|
|
(59)
|
Proceeds from
(repurchase of) securities sold under repurchase
agreements
|
|
-
|
|
(20)
|
Payment of contingent
consideration related to a business combination
|
|
(15)
|
|
(94)
|
Proceeds from issuance
of debt, net
|
|
1,815
|
|
894
|
Repayment of
debt
|
|
(1,429)
|
|
(47)
|
Borrowing (repayment)
on the credit facility and commercial paper, net
|
|
439
|
|
(165)
|
Proceeds from issuance
of common shares and preferred shares, net
|
|
4,263
|
|
146
|
Repurchase of common
shares for share-based payments
|
|
(64)
|
|
(49)
|
Payment of dividends on
common shares and preferred shares
|
|
(679)
|
|
(527)
|
Payment of dividends to
non-controlling interests
|
|
(27)
|
|
-
|
Net cash flows provided
by (used in) financing activities
|
|
4,206
|
|
79
|
Net increase (decrease)
in cash and cash equivalents
|
|
1,363
|
|
(11)
|
Cash and cash
equivalents, beginning of year
|
|
917
|
|
936
|
Exchange rate
differences on cash and cash equivalents
|
|
(4)
|
|
(8)
|
Cash and cash
equivalents, end of year
|
$
|
2,276
|
$
|
917
|
Composition of cash
and cash equivalents
|
|
|
|
|
Cash
|
|
901
|
|
844
|
Cash
equivalents
|
|
1,375
|
|
73
|
Cash and cash
equivalents, end of year
|
|
2,276
|
|
917
|
Other relevant cash
flow disclosures – operating activities
|
|
|
|
|
Interest
paid
|
|
191
|
|
115
|
Interest
received
|
|
445
|
|
353
|
Dividends
received
|
|
323
|
|
268
|
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 and integration of RSA, and the completion
of and timing for completion of the sale of Codan Forsikring A/S's
Danish business (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 February 8,
2022 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
Q4-2021 MD&A.
SOURCE Intact Financial Corporation