Highlights
- Net operating income per share increased 18% to $1.91 driven by strong performances across
the business
- Premium growth of 11% fuelled by rate increases across
North America and unit growth
momentum
- Strong combined ratio of 92.3% driven by solid
underlying results in Canada and
lower catastrophe losses
- Strong financial position with $1.1
billion of total capital margin and operating ROE of
12%
- On track to close the acquisitions of The Guarantee and Frank
Cowan Company by year end
(TSX: IFC)
(in Canadian dollars except as otherwise
noted)
TORONTO, Nov. 5, 2019 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"We delivered strong results in the third quarter with
double-digit topline growth and low-90s underwriting performance.
Our ability to concurrently drive higher rates while increasing our
customer base reflects the favourable market conditions across all
our businesses. As our competitive position continues to improve,
we are maintaining our focus on portfolio quality as we drive
towards a return to our historical mid-teens ROE. We are pleased to
have completed the acquisition of On Side and the integration
planning with The Guarantee and Frank Cowan Company is already
underway. We look forward to welcoming our new colleagues into the
Intact family."
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2019
|
Q3-20182
|
Change
|
YTD
2019
|
YTD
20182
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written1
|
3,012
|
2,708
|
11%
|
8,379
|
7,698
|
8%
|
Combined
ratio
|
92.3%
|
93.8%
|
(1.5)
pts
|
96.9%
|
96.3%
|
0.6 pts
|
Underwriting
income
|
198
|
152
|
30%
|
236
|
264
|
(11%)
|
Net investment
income
|
146
|
136
|
7%
|
434
|
398
|
9%
|
Distribution
EBITA
|
56
|
41
|
37%
|
164
|
133
|
23%
|
Net operating
income
|
277
|
237
|
17%
|
602
|
558
|
8%
|
Net income
|
187
|
199
|
(6%)
|
514
|
463
|
11%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
$1.91
|
$1.62
|
18%
|
$4.08
|
$3.80
|
7%
|
Earnings per share
(EPS)
|
$1.26
|
$1.34
|
(6%)
|
$3.45
|
$3.12
|
10%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
12.4%
|
11.6%
|
0.8 pts
|
|
|
|
ROE
|
10.2%
|
9.8%
|
0.4 pts
|
|
|
|
Book value per share
(in dollars)
|
$51.20
|
$49.27
|
4%
|
|
|
|
Total capital
margin3
|
1,116
|
1,177
|
(61)
|
|
|
|
Debt-to-total-capital
ratio
|
19.3%
|
21.7%
|
(2.4)
pts
|
|
|
|
(1)
|
This press release
contains non-IFRS financial measures. Refer to Section 16 –
Non-IFRS financial measures in the Management's Discussion
and Analysis for further details. DPW change (growth) is presented
in constant currency. The impact of fluctuations in foreign
exchange rates was not material to our consolidated results. Impact
on the U.S. segment's performance is outlined in the Insurance
Business Performance section hereafter.
|
(2)
|
Refer to Section 14 –
Presentation changes in the Management's Discussion and
Analysis for further details on the reclassification of
comparatives.
|
(3)
|
Aggregate of capital
in excess of company action levels in regulated entities (170% MCT,
200% RBC) plus available cash in unregulated entities. Refer to
Section 12 – Capital management in the Management's
Discussion and Analysis for further details.
|
Dividend
- The Board of Directors approved the quarterly dividend of
$0.76 per share on the Company's
outstanding common shares. The Board 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, 27.08325 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 and 30.625 cents per share on the Class A Series 7
preferred shares. The dividends are payable on December 31, 2019, to shareholders of record on
December 16, 2019.
12-month Industry Outlook
- For the Canadian P&C industry, we expect upper
single-digit premium growth. Market conditions are hard as weak
industry profitability in all lines of business continues to put
upward pressure on rates.
- In U.S. commercial, the market is hardening. We expect
mid single-digit premium growth.
- Overall, the Canadian industry's ROE is expected to improve,
but remain below its long-term average of 10% over the next 12
months.
Insurance Business Performance
(in millions of
Canadian dollars except as otherwise noted)
|
Q3-2019
|
Q3-2018
|
Change
|
YTD
2019
|
YTD
2018
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written1
|
|
|
|
|
|
|
Canada
|
2,491
|
2,239
|
11%
|
7,071
|
6,534
|
8%
|
U.S.
|
521
|
469
|
10%
|
1,308
|
1,164
|
9%
|
|
3,012
|
2,708
|
11%
|
8,379
|
7,698
|
8%
|
|
|
|
|
|
|
|
Combined
ratio
|
|
|
|
|
|
|
Canada
|
91.8%
|
93.9%
|
(2.1)
pts
|
97.2%
|
96.7%
|
0.5 pts
|
U.S.
|
95.9%
|
93.5%
|
2.4 pts
|
94.9%
|
94.2%
|
0.7 pts
|
|
92.3%
|
93.8%
|
(1.5)
pts
|
96.9%
|
96.3%
|
0.6 pts
|
|
|
|
|
|
|
|
Underwriting
income
|
|
|
|
|
|
|
Canada
|
183
|
129
|
54
|
179
|
204
|
(25)
|
U.S.
|
14
|
22
|
(8)
|
53
|
58
|
(5)
|
Corporate &
other2
|
1
|
1
|
0
|
4
|
2
|
2
|
|
198
|
152
|
46
|
236
|
264
|
(28)
|
1 DPW
change (growth) is presented in constant currency.
Refer to Section 16 – Non-IFRS financial
measures in the Management's Discussion and Analysis for
further details. In the U.S., DPW change (growth) as reported was
11% for the quarter and 12% year-to-date.
2 Reflects
the impact of our internal catastrophe reinsurance
treaty.
|
- Premiums grew 11% in the quarter and 8% year-to-date on
a constant currency basis, reflecting strong growth across all
lines of business. In Canada,
topline growth was 11%, reflecting ongoing robust rate increases
and improving units. We continue to see hard market conditions,
with average rate increases of 7% overall. In the U.S., topline
grew 11% in the quarter (or 10% on a constant currency basis)
driven by strong new business and rate increases.
- Combined ratio of 92.3% in the quarter improved 1.5
points over last year. The combined ratio in Canada of 91.8% improved 2.1 points versus
Q3-2018 reflecting a solid performance in personal auto and lower
catastrophe losses. U.S. combined ratio of 95.9% deteriorated by
2.4 points mainly due to increased claims activity.
- Year-to-date, IFC's combined ratio of 96.9% deteriorated
slightly, as improved underlying performance and expense management
were more than offset by lower favourable prior year claims
development.
Lines of Business
P&C Canada
- Personal auto premiums' growth accelerated to 12% in the
quarter, driven by rate increases and unit momentum in hard market
conditions. The combined ratio improved 5.6 points over last year
to 93.4% in Q3-2019. Prior year development was muted. The
underlying current year loss ratio of 70.3% was strong, improving
2.2 points over last year driven by rate increases and improved
portfolio quality driven by our action plans.
- Personal property premiums increased 8% in the quarter
driven by rate increases in hard market conditions and improving
unit growth. The combined ratio of 89.1% was solid with lower than
average catastrophe losses partially offset by elevated
non-catastrophe weather-related losses.
- Commercial lines (P&C and auto) premiums increased
13% in the quarter with strong contributions from all lines led by
rate increases deployed in hard market conditions. The combined
ratio of 91.8% in the quarter was solid and improved 3.1 points
over last year, largely driven by lower catastrophe losses.
- Distribution EBITA grew 37% to $56 million in Q3-2019, bolstered by rate
momentum across all regions, as well as broker acquisitions.
P&C U.S.
- Premiums grew 10% in constant currency to $521 million, driven by lines not under
profitability improvement plans. Strong new business, rate
increases, and higher retention levels are driving growth as market
conditions are favourable and continue to improve across most
business lines.
- Combined ratio of 95.9% was 2.4 points higher than last
year due to increased claims activity, which can fluctuate from
quarter to quarter.
- As of July 1, 2019, OneBeacon
exited the Healthcare business representing about US$75 million in DPW in the 12 months to
June 30, 2019. Excluding the results
of this business, the year-to-date 2019 combined ratio of 94.9%
would have improved just over two points to 92.8%.
- We continue to make steady progress on our profitability
improvement plan and remain on-track to achieve a sustainable
low-90s combined ratio by the end of 2020.
Investments
- Net investment income of $146
million for the quarter grew 7% largely reflecting higher
invested assets and the timing of dividends. Year-to-date net
investment income increased 9% to $434
million, mainly driven by higher reinvestment yields
captured in 2018 and higher invested assets.
Net Income
- Net operating income growth increased 17% to
$277 million (or $1.91 per share), reflecting robust growth in
underwriting income, as well as strong distribution EBITA and net
investment income performance.
- Earnings per share of $1.26 declined 6% driven by non-operating items
largely related to equity impairments.
- Operating ROE for the last 12 months was 12.4% as at
September 30, 2019 and below our
historical track record due to severe winter weather and personal
auto challenges in H1-2019.
Balance Sheet
- The Company ended the quarter in a strong financial position,
with a total capital margin of $1.1
billion. MCT in Canada was
estimated at 195%.
- IFC's book value per share was $51.20 as at September 30,
2019, increasing 4% from a year ago mainly driven by
earnings.
- The debt-to-total capital ratio was 19.3% below our 20%
target level.
M&A update
- On October 1, we completed the
acquisition of On Side Developments Ltd. (On Side Restoration),
having received all required regulatory approvals. Starting in
Q4-2019, On Side Restoration results will be reported in
Distribution EBITA and Other in IFC's MD&A.
- On August 15, we announced the
acquisition of The Guarantee Company of North America and Frank Cowan Company Limited
(the "Proposed Acquisition"). During the quarter, a portion of the
$1 billion purchase price, as well as
related transaction expenses, was secured by the completion of a
$461 million common equity financing
in the form of subscription receipts. The remaining balance is
expected to be financed through excess capital and short-term debt
upon closing.
- The Proposed Acquisition is progressing well and on track to
close in Q4-2019, subject to customary regulatory approvals. IFC
has received Canadian and U.S. competition approval as well as U.S.
state insurance approval from Michigan, where The Guarantee's U.S.
subsidiary is domiciled. Applications have been filed with OSFI
which are in various stages of approval.
- The financing structure of the Proposed Acquisition preserves
Intact's strong capital position at closing with an estimated total
capital margin of approximately $1.3
billion, an estimated MCT of 197% and a debt-to-total
capital ratio slightly above 20% at year end.
- Together the above transactions are expected to be immediately
mildly accretive to net operating income per share and deliver
mid-single digit NOIPS accretion by 2021.
Analysts' Estimates
- The average estimate of earnings per share and net
operating income per share for the quarter among the analysts
who follow the Company was $1.58 and
$1.78, 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 Q3-2019 MD&A as well as the Q3-2019
Consolidated Financial Statements, which are available on the
Company's website at www.intactfc.com and later today on SEDAR at
www.sedar.com.
For the definitions of measures and other insurance-related
terms used in this Press Release, please refer to the MD&A and
to the glossary available in the "Investors" section of the
Company's website at www.intactfc.com.
Conference Call
Intact Financial Corporation will host a conference call to
review its earnings results tomorrow at 11:00 a.m. ET. To listen to the call via live
audio webcast and to view the Company's Financial Statements,
MD&A, presentation slides, Supplementary financial information
and other information not included in this press release, visit the
Company's website at www.intactfc.com and link to "Investors". The
conference call is also available by dialing 647-427-7450 or
1-888-231-8191 (toll-free in North
America). Please call 10 minutes before the start of the
call. A replay of the call will be available on November 6th, 2019 at 2:00
p.m. ET until midnight on November
13th. To listen to the replay, call 1- 855- 859-2056
(toll-free in North America),
passcode 8090287. A transcript of the call will also be made
available on Intact Financial Corporation's website.
About Intact Financial Corporation
Intact Financial Corporation (TSX: IFC) is the largest provider
of property and casualty (P&C) insurance in Canada and a leading provider of specialty
insurance in North America, with
over $10 billion in total annual
premiums. The Company has approximately 14,000 full- and part-time
employees who serve more than five million personal, business and
public-sector clients through offices in Canada and the U.S. In Canada, Intact distributes insurance under the
Intact Insurance brand through a wide network of brokers, including
its wholly-owned subsidiary BrokerLink, and directly to consumers
through belairdirect. In the U.S., OneBeacon Insurance Group, a
wholly-owned subsidiary, provides specialty insurance products
through independent agencies, brokers, wholesalers and managing
general agencies.
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 timing related to the completion of the
Proposed Acquisition, the timing and details related to the
financing of the Proposed Acquisition, the payment of any dividend
equivalent amount on the Company's subscription receipts and the
Company's growth prospects. 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 and annual MD&A and
prospectus supplement dated August 19,
2019 related to the issuance of the Company's subscription
receipts. 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