Premium growth of nearly 50% in the fourth quarter, bolstered by the
acquisition of AXA Canada and a rebound in organic growth
Net operating income per share up 61% to $1.14 in the fourth quarter,
leading to an operating ROE of 15.3%
Strong performance across all lines of business leading to a combined
ratio of 92.7% in the fourth quarter
Book value per share increased 12% in 2011
Quarterly dividend raised 8% to $0.40 per share
AXA Canada integration on-track
TORONTO, Feb. 8, 2012 /CNW/ - Intact Financial Corporation (TSX: IFC)
today reported net operating income for the quarter ended December 31,
2011 of $152 million, up $72 million from the same quarter of last
year. On a per share basis, net operating income increased 61% to
$1.14. The increase was driven by excellent underwriting results and
higher investment income. Net income was $84 million, or $0.62 per
share, compared to $107 million, or $0.95 per share, for the same
period last year. The decrease reflects $42 million of integration
costs and a $41 million provision for the contingent consideration to
be paid for the acquisition of AXA Canada. Direct premiums written
increased 49% over the same quarter a year ago to reach $1.6 billion,
reflecting the contribution of AXA Canada and a rebound in organic
Net operating income for the year was $460 million, up $58 million from
the previous year. On a per share basis, net operating income increased
12% to $3.91. Net income was $465 million, or $3.96 per share, compared
to $498 million, or $4.32 per share in 2010. The decrease was related
to integration costs and an increase in the fair value of the
contingent consideration. The combined ratio improved by one percentage
point to 94.4% compared to last year. Direct premiums written for the
year increased 13% versus 2010 to reach $5.1 billion. The book value
per share was up 12% during the year to $29.73.
"Our excellent fourth quarter results rounded off a strong year for our
company as we recorded our best underwriting performance in the past
five years," said Charles Brindamour, Chief Executive Officer of Intact
Financial Corporation. "Despite another challenging year for the
industry, we demonstrated our strength and resilience and executed on
our growth strategy."
"With the acquisition of AXA Canada now complete, we are beginning to
reap the positive benefits of our enhanced leadership position. We look
forward to continuing to outperform the industry and pursuing our
efforts towards building one of the best P&C insurers in the world."
"As we enter 2012, our solid financial position and the quality of our
operating earnings enabled us to increase our dividend, for the seventh
The Board of Directors increased the company's quarterly dividend by 8%,
or 3 cents, to 40 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 30, 2012 to shareholders of record on
March 15, 2012.
Industry premiums are likely to increase in the next 12 months at a pace
similar to last year. It is expected that growth in personal auto will
be in the mid-single digit range, driven by Ontario. Growth is expected
to be in the upper single digits in personal property, due to the
impact of water-related losses and more frequent and severe storms.
Commercial line premiums are expected to grow at a low single digit
rate. The low interest rate environment and reinsurance market
conditions should support firmer industry premium levels.
At an industry level, while the combined ratio might improve modestly as
a result of the better pricing environment and Ontario auto reforms,
the industry's ROE is unlikely to improve materially in the near term
as the low interest rate environment will continue to put pressure on
The company is well-positioned to continue outperforming the P&C
insurance industry in the current environment 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 strongly 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
Net operating income2
Earnings per share
Basic and diluted (dollars)
Adjusted earnings per share
Basic and diluted (dollars)2
Net operating income per share (dollars)
ROE for the last 12 months 2,3
Adjusted ROE for the last 12 months 2,3
Operating ROE for the last 12 months 2,3
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 key performance indicator definitions, please see pages five and
six of the Management's Discussion and Analysis for the year ended December 31, 2011.
3 For ROE, adjusted ROE and Operating ROE in Q4-2011, the average equity
calculation has been adjusted on a pro rata basis to account for the
$921 million of common shares issued as at September 23, 2011.
Net operating income for the quarter was $152 million, up $72 million from the same quarter
in 2010. The 90% increase is attributable to improved underwriting
results and higher investment income. The operating ROE for the last 12
months was 15.3%.
Net operating income for the year was $460 million up 14% from $402
million recorded in 2010.
Direct premiums written increased 49% in the fourth quarter to $1.6 billion, as a result of the
acquisition of AXA Canada and a rebound in organic growth from 2% in
the third quarter to an estimated 4% in the last three months of the
year. The organic growth benefited from the much improved sales
performance of the company's direct auto business in Ontario.
For the year, total direct premiums written increased by 13% to $5.1
Underwriting income in the quarter increased by $97 million to $118 million compared to the
same period a year ago. The combined ratio improved by 5.3 percentage
points to 92.7% driven by a significant improvement in personal auto.
The underlying performance of our portfolio, which excludes
catastrophes and prior year claims development, improved 8.3 percentage
Personal auto underwriting income amounted to $52 million up from a loss
of $18 million recorded in the fourth quarter of 2010. The combined
ratio improved 9.7 percentage points to 93.3% primarily as a result of
an improvement in Ontario.
Personal property underwriting income reached $41 million up from $21
million recorded in the corresponding period last year, as a result of
our home improvement action plan and relatively mild winter conditions.
The very strong combined ratio of 88.6% improved 3.1 percentage points
from the fourth quarter of 2010. Excluding the impact of the
catastrophes and prior year claims development, the loss ratio for home
insurance improved by 5.3 percentage points year-over-year.
Commercial auto underwriting income results increased to $10 million
from the $6 million recorded in the fourth quarter of 2010. The 93.0%
combined ratio improved slightly from last year's 93.9% due to better
current accident year results.
Commercial P&C underwriting income improved to $15 million from $12
million recorded in the last three months of 2010. The combined ratio
in commercial P&C insurance increased by 1.9 percentage points to
95.7%, as a result of lower favourable prior year claims development
and higher catastrophe losses.
For the year, total underwriting income was up 41% to $273 million
despite a $113 million increase in catastrophe losses resulting from
the Slave Lake wildfires, Tropical Storm Irene and a number of other
Investment income of $103 million was up 45% from the same period in 2010 as a result of
an increase in assets. The market-based yield declined 20 basis points
to 3.9% due to the low yield environment.
For the year, total investment income was up 11% to $326 million from
the previous year and the market-based yield was 4.0%.
Net investment losses, excluding fair-value-through-profit-or-loss
bonds, were $6 million in the fourth quarter compared to a gain of $50
million a year ago due to equity impairment losses. In 2011, the
company had investment gains of $140 million compared to $161 million
in 2010. Cash and investments amounted to $11.8 billion at the end of
the year, up $3.2 billion from a year ago as a result of the
acquisition of AXA Canada.
The company's financial position at the end of 2011 remained solid with
a minimum capital test of 197% and $435 million in excess capital. The
company's book value per share was $29.73 at the end of the year, 12%
higher compared to 12 months ago.
AXA Canada Acquisition
The integration of AXA Canada activities is on track and it is
anticipated to be completed within 18 months of the closing of the
transaction. The company remains confident that it will progressively
reach its $100 million in after-tax synergies by the second half of
2013. The acquisition is expected to be accretive to net operating
income per share in 2012 and to provide up to 15% accretion in the
Integration expenses amounted to $42 million in the fourth quarter and
$71 million for the year. The company estimates that nearly half of its
total integration costs were recorded in 2011 and expects the majority
of future expenses to occur in 2012. The purchase agreement entails a
performance-based contingent consideration of up to $100 million based
on the development of AXA Canada's consolidated reserves. At the end of
2011, the fair value of this contingent consideration was $89 million.
To ensure the company continues to offer an outstanding customer
experience and top-notch service to brokers, most of AXA Canada's
products and services were integrated into Intact's offering and nearly
all of its front-line employees joined Intact.
On January 1, 2012, the company completed the sale of AXA Canada's life
insurance business to SSQ Life Insurance Company Inc. for proceeds of
Net operating income per share for the fourth quarter amounted to $1.14
compared to the consensus analyst estimate of $1.10. Earnings per share
of $0.62 and adjusted earnings per share of $1.14 compare to the
average analyst estimate of $1.01, which is a blend of both earnings
per share and adjusted earnings per share estimates.
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 15. To listen to the
replay, call 1 (855) 859-2056, passcode 42475261. 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, Novex Group Insurance, belairdirect, GP Car and Home and
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
Director, Investor Relations
+1 (416) 341-1464 ext. 45122