Net operating income per share of $0.94, down 8% excluding a
non-recurring favourable tax item in Q1-2013
Combined ratio of 97.1% as the harsh winter conditions resulted in 4.3
points of catastrophe losses and higher claims frequency
Book value per share increased 3% during the quarter
TORONTO, May 7, 2014 /CNW/ - Intact Financial Corporation (TSX: IFC)
today reported net operating income for the quarter ended March 31,
2014 of $129 million, down $46 million compared to the corresponding
quarter of last year. On a per share basis, net operating income
decreased 8% to $0.94 after adjusting for a non-recurring favourable
tax item of $0.25 recorded in the first quarter of last year. The
decrease reflects the impact of harsh winter weather conditions, which
led to a combined ratio of 97.1%, up 2 percentage points from the same
quarter last year. Net income amounted to $160 million compared to $174
million for the same period last year. Adjusted earnings per share of
$1.23 compared to $1.36 in the first quarter of 2013. Direct premiums
written remained largely unchanged at $1.5 billion.
"Our financial performance during the quarter was significantly impacted
by severe weather conditions," said Charles Brindamour, Chief Executive
Officer of Intact Financial Corporation. "Our home insurance portfolio
performed very well despite significant property damages incurred as a
result of extreme cold temperatures and rapid thaw events. The
performance of our auto insurance portfolio remained healthy despite
the increased number of automobile accidents due to icy driving
conditions. However, commercial insurance results were disappointing
and we continue our efforts to improve the performance of this
The Board of Directors declared a quarterly dividend of 48 cents per
share on the Company's outstanding common shares. The Board also
declared a quarterly dividend of 26.25 cents per share on the Company's
Class A Series 1 and Class A Series 3 preferred shares. The dividends
are payable on June 30, 2014 to shareholders of record on June 16,
12-Month Industry Outlook
The Company expects that industry premiums will grow at a low single
digit rate. In personal property, the current hard market conditions
should accelerate meaningfully as the magnitude of 2013 catastrophe
losses negatively impacted industry results. The Company expects that
future reductions in Ontario auto premiums will be commensurate with
governmental cost reduction measures. In commercial lines, continued
low interest rates and the impact on commercial lines loss ratios from
the recent elevated catastrophe losses could translate into firmer
conditions over time. The level of catastrophe losses is likely to
diminish in 2014 from the record levels of the past year. This should
lead to improvements in the industry's combined ratio in 2014. Overall,
the industry's ROE is expected to trend back toward its long-term
average of 10% in 2014.
IFC is well-positioned to continue outperforming the P&C insurance
industry due to its pricing and underwriting discipline, claims
management capabilities, prudent investment and capital management
practices and solid financial position. Given these attributes, the
Company believes that it will outperform the industry's ROE by at least
500 basis points over the next 12 months.
In millions of dollars,
except as otherwise noted
Direct premiums written (excluding pools)
Net operating income1
Earnings per share
Basic and diluted (dollars)
Adjusted earnings per share
Basic and diluted (dollars) 1
Net operating income
per share (dollars) 1
ROE for the last 12 months
Adjusted ROE for the last 12 months 1
Operating ROE for the last 12 months 1
Book value per share (dollars)
1This is a non-IFRS financial measure, which does not have a standardized
meaning prescribed by IFRS and may not be comparable to similar
measures used by other companies in our industry. Please refer to
Section 5 - Non-IFRS financial measures in the Management's Discussion and Analysis for further details.
2 Excludes market yield adjustment (MYA) which is the impact on claims
liabilities due to movements in discount rates.
Net operating income for the quarter was $129 million, down $46 million from a year ago as a
result of a $32 million decline in underwriting income due to severe
weather conditions and an increase of $28 million in taxes from last
year's unusually low level. The operating ROE for the last twelve
months was 9.9% despite $586 million in pre-tax net catastrophe losses.
Direct premiums written remained relatively stable in the quarter at $1.5 billion but were
impacted by the decision to no longer offer 2-year policies in Québec
as part of the Company's plans to improve the performance of its home
insurance portfolio. The underlying growth in direct premiums written
at 1% was tempered by the continued reduction in the Company's
earthquake exposure in British Columbia and its actions to target rate
increases for the least profitable segments of its commercial lines
Underwriting income for the quarter was $51 million compared to $83 million during the same
period a year ago. The active weather season across the country
resulted in $75 million in catastrophe losses and a 2.5 percentage
point increase in the underlying current year loss ratio, as extreme
cold temperatures and a few occurrences of rapid thaw led to an
increase in automobile accidents, fires, burst pipes, water damage and
sewer backups. Favourable prior year claims development was $31 million
higher than the same period last year.
Personal property reported underwriting income of $32 million compared
to $24 million in the corresponding quarter of the previous year. The
combined ratio improved by 1.7 points to 91.8% despite 12 percentage
points of catastrophe losses resulting from the harsh winter
conditions. The underlying current year loss ratio experienced a
significant 6 point improvement year-over-year as the benefits of the
Company's home improvement plan began to materialize.
Personal auto underwriting income decreased nearly 50% to $25 million as
the increased frequency of claims due to icy driving conditions
resulted in a 2.9 point deterioration in the combined ratio to 97.0%.
Favourable prior years claims development remained healthy at $61
Commercial auto underwriting income increased to $15 million compared to
$4 million a year ago. The combined ratio improved 8.0 percentage
points to 89.3% as a result of higher favourable prior year claims
development. The underlying current year loss ratio deteriorated by 2.7
percentage points year-over-year as a result of winter conditions.
Commercial P&C insurance combined ratio was up 7.4 percentage points to
105.6% resulting in an underwriting loss of $21 million. Wide
fluctuations in temperatures led to catastrophe losses of $28 million
and an increase in both frequency and severity. A meaningful portion of
the claims were weather related, which led to an 8.4% deterioration of
the underlying current year loss ratio.
Net investment income of $105 million during the quarter was up 9% from a year ago as a result of
a high level of dividend income, which contributed to a market-based
yield of 3.76%, up from 3.44% a year ago.
Net investment gains, excluding fair-value-through-profit-and-loss fixed
income securities, amounted to $67 million in the quarter, almost twice
the $34 million recorded a year ago as a result of favourable market
conditions and gains on derivatives.
The Company's financial position was strong at the end of the quarter
with an estimated Minimum Capital Test of 213% and $670 million in
excess capital. The Company's book value per share was $34.80, up 3%
during the quarter.
The average estimate of earnings per share and net operating income per
share for the quarter among the analysts who follow the Company was
$1.19 and $1.16, respectively.
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 Management's Discussion and Analysis as well as
the Consolidated financial statements, which are available on our
website at www.intactfc.com and later today on SEDAR at www.sedar.com.
Intact Financial Corporation will host a conference call to review its
earnings results later today at 11:00 a.m. ET. To listen to the call
via live audio webcast and to view the Company's Financial Statements,
Management's Discussion & Analysis, presentation slides, the
statistical supplement and other information not included in this press
release, visit our website at www.intactfc.com and link to "Investor Relations".
The conference call is also available by dialling (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 later today at 2:00 p.m. ET until
midnight on May 14. To listen to the replay, call 1 (855) 859-2056,
passcode 28320994. A transcript of the call will also be available on
Intact Financial Corporation's website.
Annual and Special Meeting of Shareholders
Intact Financial Corporation will hold its Annual and Special Meeting of
Shareholders at 2:00 p.m. PT later today at the Pan Pacific Hotel, 999
Canada Place, Suite 300 in Vancouver. At the meeting, shareholders will
be asked, among other things, to reconfirm the Shareholder Rights Plan
of the Company, to consider the amendment to the Company's by-law
dealing with the quorum required at shareholders' meetings and to
approve the advisory resolution on the Company's executive
compensation. There will also be a live webcast of the shareholders'
meeting on the Company's website at www.intactfc.com.
About Intact Financial Corporation
Intact Financial Corporation is the largest provider of property and
casualty insurance in Canada. Intact offers home, auto and business
insurance through Intact Insurance, belairdirect, Grey Power,
BrokerLink and Jevco.
This document may contain forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially
from these forward- looking statements as a result of various factors,
including those discussed in the Company's most recently filed Annual
Information Form and annual Management's Discussion & Analysis. Please
read the cautionary note at the beginning of the MD&A.
SOURCE: Intact Financial Corporation
For further information:
Vice President, Corporate Communications
+1 (416) 217-7206
Vice President, Investor Relations
+1 (416) 344-8004