TORONTO, Feb. 6, 2013 /CNW/ -
Net operating income per share up 25% to $1.42 in the fourth quarter,
reflecting a combined ratio of 92.1%
Premium growth of 7% in the fourth quarter, bolstered by the addition of
Operating ROE of 16.8% with an 11% increase in book value per share in
Quarterly dividend raised 10% to $0.44 per share
AXA Canada and JEVCO integrations on track
Intact Financial Corporation (TSX: IFC) today reported net operating
income for the quarter ended December 31, 2012 of $194 million, or
$1.42 per share up 25% compared to the same quarter last year, driven
by improved underwriting performance. Net income was $181 million
compared to $84 million for the corresponding quarter last year due to
improved operating results and higher investment gains. Adjusted
earnings per share, which excludes integration-related costs, was up
32% to $1.51. The exceptional performance in personal property resulted
in an overall combined ratio of 92.1%. Direct premiums written
increased 7% year-over-year to reach $1.7 billion, reflecting the
acquisition of JEVCO and organic growth.
Net operating income for the year was $675 million, up $215 million from
the previous year. On a per share basis, net operating income increased
28% to $5.00 on higher underwriting and investment income. Net income
was $587 million compared to $465 million in the prior year, while
adjusted earnings per share was up 7% to $5.15 as greater operating
income more than offset the decline in investment gains. The combined
ratio improved 1.3 percentage points versus last year to 93.1%. Direct
premiums written for the year increased 35% to reach $6.9 billion,
reflecting the acquisitions of AXA Canada and JEVCO. The book value per
share was up 11% during the year to $33.03.
"Our excellent fourth quarter underwriting performance is indicative of
the progress that we achieved in 2012," said Charles Brindamour, Chief
Executive Officer of Intact Financial Corporation. "Throughout the
year, we continued to strengthen our operating performance despite the
low yield environment and the impact of weather events which challenged
"Given our solid financial position and strong operating earnings, we
are increasing our dividend for the eighth consecutive year. As we
begin another year, we are confident that we will outperform the
industry and continue to build a world-class P&C insurer."
The Board of Directors increased the company's quarterly dividend by
10%, or 4 cents, to 44 cents per share on its 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 shares.
All dividends are payable on March 28, 2013 to shareholders of record
on March 14, 2013.
The company expects that industry premium growth is likely to evolve at
a similar pace to that of the last 12 months. Furthermore, the
continued low interest rate environment could support firmer market
At an industry level, we do not expect a significant improvement in
personal auto as Ontario reforms have largely brought about the
expected cost savings. Results in personal property may benefit from
continued hard market conditions and potential initiatives aimed at
mitigating losses from future catastrophes. In commercial lines, the
company does not anticipate loss ratio improvements but conditions
should improve at a moderate pace over time.
Overall, the industry's ROE is likely to progress at the same upper
single digit rate that it recorded in the first nine months of 2012,
and will likely remain slightly below its long-term average of 10% in
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 in the next 12 months.
In millions of dollars, except as otherwise noted
Direct premiums written (excluding pools)
Net operating income
Earnings per share Basic and diluted (dollars)
Adjusted earnings per share Basic and diluted (dollars)
Net operating income per share (dollars)
ROE for the last 12 months 2
Adjusted ROE for the last 12 months 2
Operating ROE for the last 12 months 2
Combined ratio (excluding MYA)
Book value per share (dollars)
1 Underwriting income is defined as underwriting income excluding market
yield adjustment (MYA). The MYA is the impact on claims liabilities due
to movement in discount rates.
2 For ROE, Adjusted ROE and Operating ROE in 2012, the average equity
calculation has been adjusted on a pro rata basis to account for the
$229 million of common shares issued as at September 4, 2012. The 2011
calculation was adjusted for the $921 million of common shares issued
as at September 23, 2011.
Net operating income for the quarter was $194 million, up $42 million from the equivalent
quarter in 2011. The 28% increase is attributable to improved
underwriting income driven by an exceptional performance in home
insurance. The operating ROE for the last twelve months improved by 1.5
percentage points to 16.8%.
Net operating income for the year was $675 million, up 47% from $460
million recorded in 2011. The increase reflects the contribution of AXA
Canada to both underwriting and investment income as well as an
improvement in the combined ratio.
Direct premiums written increased 7% in the fourth quarter to $1.7 billion, as a result of the
addition of JEVCO and organic growth.
For the year, total direct premiums written increased by $1.8 billion to
$6.9 billion. The increase is mainly attributable to the additions of
AXA Canada and JEVCO.
Underwriting income in the quarter increased by $20 million to $138 million compared to the
same period a year ago, led by unusually strong results in home
insurance. Overall, the combined ratio improved by 0.6 percentage
points to 92.1%.
Personal property combined ratio improved 21.5 percentage points to an
exceptional 67.1% from the very strong underwriting performance
recorded in the fourth quarter of 2011. The improvement was the result
of unusually high favourable prior year claims development, a decline
in catastrophe losses, our continued actions to improve profitability
and benign weather. Excluding the impact of the catastrophes and prior
year claims development, the loss ratio improved by 5.8 percentage
Personal auto combined ratio increased by 9.8 percentage points to
103.1% compared to the same period last year, primarily due to
unfavourable prior year claims development related to actions that we
took to protect against early signs of deterioration in bodily injury
claims in Alberta and uncertainty in Ontario.
Commercial auto combined ratio improved 8.8 percentage points from a
year ago to 84.2%, reflecting higher favourable prior year claims
Commercial P&C combined ratio of 95.9% was largely unchanged from the
corresponding quarter of last year. Improvements in the claims ratio
were offset by an increase in the expense ratio due to higher variable
commissions related to improved profitability.
Despite catastrophe losses that reached $245 million, total underwriting
income for the year was up $178 million to $451 million, largely
reflecting the addition of AXA Canada. Overall, the combined ratio
improved 1.3 percentage points during the year to 93.1%.
Investment income of $102 million remains relatively flat from the corresponding period
in 2011 as an increase in investments resulting from the acquisition of
JEVCO was offset by the impact of declining yields. For the year, total
investment income was up 19% to $389 million, as a result of increased
investments. The market-based yield was 3.6% for both the quarter and
the year, down from the comparable periods.
Net investment gains, excluding fair-value-through-profit-or-loss bonds,
were $30 million in the fourth quarter compared to a loss of $7 million
a year ago due to lower equity impairments. In 2012, the company had
investment gains of $72 million compared to $140 million in 2011. Total
investments amounted to $13.0 billion at the end of the year, up $1.1
billion from a year ago as a result of the acquisition of JEVCO.
The company's financial position at the end of 2012 remained solid with
a minimum capital test of 205% and $599 million in excess capital. The
company's book value per share was $33.03 at the end of the year, 11%
higher compared to twelve months ago.
AXA Canada Acquisition
After completing the renewal of all one-year policies in personal lines
and non-specialty commercial lines, the company is now in the process
of converting commercial specialty lines and two-year policies. Once
all policies have been converted, the company expects to decommission
AXA systems in the first part of 2014. As such, the company maintains
its $100 million in after-tax synergies target which it expects to
achieve after the AXA system shutdown is complete in the early part of
2014. At the end of the fourth quarter, an annual synergies run-rate of
$52 million had been recorded. Integration expenses, which typically
occur earlier in the integration process than synergies, amounted on a
pre-tax basis to $71 million in 2011 and $79 million in 2012.
On September 4, 2012, the company completed its $530 million acquisition
Insurance Company. The conversion of the acquired book of business has
begun for all lines of business. The company expects to progressively
reach annual expense synergies of approximately $15 million after-tax,
largely by the end of 2014. In 2012, the company recorded pre-tax
integration expenses of $29 million.
The average estimate of earnings per share and net operating income per
share for the quarter among the analysts who follow the company was
$1.28 and $1.34 respectively.
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." All of these documents are available
on our website.
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
through 11:59 p.m. ET on Wednesday, February 13. To listen to the
replay, call 1 (855) 859-2056, passcode 87223420. A transcript of the
call will also be available on Intact Financial Corporation's website.
About Intact Financial Corporation
Intact Financial Corporation (www.intactfc.com) 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.
Forward Looking Statements
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 end 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) 341-1464 ext. 45122