Net operating income per share of $0.89, despite a $0.79 per share
impact related to the Alberta storms and flooding
Combined ratio of 97.5% with solid underlying results in our auto
Premium growth of 10%, bolstered by the addition of Jevco's product
suite and solid organic growth
Book value per share increased 9% from a year ago
Integration of acquisitions remains on track; our estimate of Jevco
synergies increased by 50%
TORONTO, July 31, 2013 /CNW/ - Intact Financial Corporation (TSX: IFC)
today reported net operating income for the quarter ended June 30, 2013
of $123 million, down $57 million compared to the corresponding quarter
of last year. On a per share basis, net operating income decreased by
$0.46 to $0.89. The decrease reflects a pre-tax loss of $143 million
net of reinsurance (an after-tax loss of $105 million or $0.79 per
share) incurred as a result of the storms and flooding in Alberta. Net
income was $103 million compared to $129 million for the same period
last year and adjusted earnings per share, which excludes
integration-related costs, was $0.81 compared to $1.08. Solid
underlying results in auto were outweighed by higher catastrophe losses
and less favourable current year results for an overall combined ratio
of 97.5%. The change in current year results was largely due to
increased claims severity in the commercial P&C and personal auto lines
of business. Direct premiums written increased 10% to $2.2 billion,
reflecting the addition of Jevco and solid organic growth.
Net operating income for the first six months of the year was $298
million versus $359 million in the previous year. On a per share basis,
net operating income decreased 20% to $2.16. Net income was $277
million compared to $302 million for the first half of 2012 and
adjusted earnings per share was $2.17 compared to $2.63. The combined
ratio increased by 4 percentage points to 96.3%. Direct premiums
written for the first half of the year increased 10% versus 2012 to
reach $3.7 billion. The book value per share was up 9% from a year ago
"Our operating performance remained sound this quarter, despite
providing approximately $300 million to help our customers in Alberta
recover from one of the worst catastrophes in Canadian history," said
Charles Brindamour, Chief Executive Officer of Intact Financial
"The strength of our financial performance demonstrates our resilience
to the Alberta events as we benefited from our reinsurance program,
which meaningfully reduced our exposure."
"The devastating events of recent weeks serve as a stark reminder that
weather events are becoming more extreme and frequent. An open and
transparent dialogue will need to occur between governments, the
industry and other stakeholders to ensure that the home insurance
product is adapted to today's climate reality and remains available and
affordable for consumers."
"In the quarter, customers and brokers continued to embrace our product
and service offering as we continued to record impressive growth in
terms of direct written premiums and written insured risks."
The Board of Directors declared a quarterly dividend of 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 preferred shares. The dividends are
payable on September 30, 2013 to shareholders of record on September
The company expects that industry premium growth is likely to evolve at
a similar pace to that of the last 12 months. At an industry level, we
do not expect further loss ratio improvement in personal auto as the
2010 Ontario reforms have already largely brought about the expected
cost savings. While government initiatives in Ontario auto may reduce
premium growth, we expect premium reductions to be commensurate with
additional cost reduction measures and, as such, we do not foresee
material margin deterioration. We expect the current hard market
conditions in personal property to accelerate meaningfully as the
active summer catastrophe season negatively impacts industry results.
In commercial lines, the company believes that the elevated level of
catastrophes in recent months will negatively impact the loss ratio and
could translate into firmer market conditions over time. Overall, the
industry's combined ratio is expected to deteriorate and its ROE is not
likely to reach its long term average of 10% in the next 12 months.
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 2013, 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 2012
calculation was adjusted for the $921 million of common shares issued
as at September 23, 2011.
Net operating income for the quarter was $123 million, down $57 million from the same quarter
in 2012 due to lower underwriting income primarily resulting from the
elevated losses in Alberta, which amounted to a pre-tax loss of $143
million net of reinsurance (a loss of $105 million after tax). The
operating ROE for the last twelve months was 14.4%.
Net operating income for the first six months of the year was $298
million, down from the $359 million recorded during the same period in
2012. The decrease is attributed mainly to the catastrophe losses
experienced in the second quarter of 2013.
Direct premiums written increased 10% in the second quarter to $2.2 billion, driven by strong
personal and commercial auto results, reflecting the addition of Jevco
and solid organic growth. Direct written premiums in personal insurance
increased by 11% from a year ago, while commercial insurance premiums
were up by 8% during the same period.
For the first two quarters of the year, total direct premiums written
also increased by 10% to reach $3.7 billion.
Underwriting income in the quarter decreased from $123 million to $42 million compared to
the same period a year ago. The Alberta storms and flooding accounted
for a pre-tax loss of $143 million net of reinsurance, which impacted
all lines of business. The underlying performance of our portfolio,
which excludes catastrophes and prior year claims development, was
higher by 1.6 points year-over-year in part due to higher claims
severity in our personal auto and commercial P&C businesses.
Personal property incurred an underwriting loss of $49 million. The
113.3% combined ratio increased 8.8 percentage points from last year
and primarily resulted from the severe flooding that impacted southern
Alberta communities in June. The extended winter season also
contributed to the higher combined ratio.
Personal auto underwriting income increased to $106 million from the $82
million recorded in the second quarter of 2012. The combined ratio
improved 1.8 percentage points from last year to 87.2% as higher
favourable prior year claims development and a reduction in the expense
ratio were partly offset by an increase in catastrophe losses following
the devastating Alberta weather event.
Commercial auto underwriting income of $16 million was down from the $26
million recorded in the second quarter of 2012. The combined ratio of
89.6% increased 10 percentage points from last year's exceptional
performance, primarily due to unfavourable prior year claims
development and an increase in catastrophe losses.
Commercial P&C recorded an underwriting loss of $31 million. The
combined ratio was up 16.9 percentage points to 108.2% mainly as a
result of higher catastrophe losses and lower favourable prior year
development. Excluding the impact of catastrophes and prior year claims
development, the loss ratio increased 2.1 points year-over-year partly
due to higher claims severity reflecting an elevated level of large
For the first six months of the year, total underwriting income was $125
million, down from $246 million in the corresponding period of 2012.
The decrease reflects the impact of the Alberta catastrophe losses in
the second quarter of 2013 and more seasonal weather conditions in the
first quarter of 2013.
Net investment income of $102 million was up 7% from a year ago. The change was due to additional
investments from the Jevco acquisition resulting in more
dividend-paying common shares. Unrealized losses from higher bond
yields and weak equity markets decreased investment values but
positively impacted the market-based yield, which increased 10 basis
points to 3.8%.
For the first six months of the year, total net investment income
increased 2% to $198 million from the previous period and the
market-based yield was 3.6%.
Net investment gains, excluding fair-value-through-profit-and-loss
bonds, were $7 million in the second quarter compared to a loss of $27
million a year ago. Since the beginning of the year, the company has
recorded investment gains of $41 million compared to $27 million for
the same period last year. Total investments amounted to $12.3 billion
at the end of the quarter, up $0.6 billion from one year ago.
The company's financial position remained solid at the end of the
quarter with a minimum capital test of 197% and $486 million in excess
capital. The company's book value per share was $33.15 at the end of
the quarter, 9% higher compared to a year ago.
During the quarter, the company acquired 1.4 million common shares under
its normal course issuer bid, launched in May 2013, at an average price
of $59.40 per share for a total consideration of $81 million.
AXA Canada and Jevco integration update
The integration of AXA Canada continues to progress very well. The
company maintains its $100 million in after-tax synergies target which
it expects to achieve once the integration of policies are complete and
the AXA system is decommissioned in the first part of 2014. At the end
of the second quarter, an estimated run-rate of $87 million in annual
synergies had been achieved.
With respect to the Jevco integration, the company expects to
progressively reach initial annual expense synergies of $15 million
after-tax by the end of 2013, a year earlier than anticipated, with $23
million in after-tax synergies targeted for the end of 2014.
On July 22, we announced that the Lac-Mégantic train derailment, the
July 8 Greater Toronto Area rain storm and early July hail storms in
Alberta will negatively impact our results in Q3-2013 by approximately
$134 million after tax or $1.01 per share, net of reinsurance.
The average estimate of earnings per share and net operating income per
share for the quarter among the analysts who follow the company was
$0.76 and $0.71 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 Tuesday, August 6. To listen to the replay,
call 1 (855) 859-2056, passcode 11292411.
A transcript of the call will also be available on Intact Financial
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