Net operating income per share of $0.97, driven by underwriting results
in auto insurance
Combined ratio of 94.2%, despite $53 million in catastrophe losses
Operating ROE of 14.0% with a 13% increase in book value per share in
the last 12 months
Integration well under way: AXA Canada policies now written on Intact's
TORONTO, Nov. 2, 2011 /CNW/ - Intact Financial Corporation (TSX: IFC)
today reported net operating income for the quarter ended September 30,
2011 of $111 million, up $21 million from the same quarter of last
year. On a per share basis, net operating income increased 23% to
$0.97. The increase was driven by improved underwriting performance in
personal auto insurance. The combined ratio improved by 2.4 percentage
points year-over-year to 94.2%, despite elevated catastrophe losses due
to Tropical Storm Irene and a number of wind and hailstorms. Direct
premiums written increased 2% over the same quarter a year ago to reach
$1,226 million. Net income was $101 million, or $0.87 per share,
compared to $109 million, or $0.96 per share, for the same period last
year. The decrease reflects $29 million of integration-related costs
recorded in the quarter.
Net operating income for the first nine months was $308 million compared
to $322 million last year, despite a $107 million increase in
catastrophe losses. Net income decreased by 3% to $381 million from a
year earlier. Net operating income per share and earnings per share
were $2.75 and $3.41 respectively. The combined ratio remained
relatively unchanged compared to last year at 95.2% for the first nine
months of the year. Direct premiums written for the same period were
$3,523 million, up 2% year-over-year. The book value per share
increased by 13% to $28.97.
"Our underwriting performance continued to be strong this quarter as
personal auto results improved significantly," said Charles Brindamour,
Chief Executive Officer of Intact Financial Corporation. "We are
increasingly optimistic that the initiatives adopted by the Ontario
government in curbing the inflation of medical costs will be effective
over time and will result in a more stable environment for consumers."
"For the second consecutive quarter, severe weather conditions brought
greater volatility to our results. In the quarter, Tropical Storm Irene
and a number of wind and hailstorms impacted our performance. Despite
the unpredictable weather patterns that continue to challenge personal
property, we remain committed to making this a profitable business."
"With the closing of the AXA Canada transaction behind us, the
integration is well under way as our new team is now in place and ready
to deliver on our strategic initiatives and as AXA policies renew on
our systems. With our combined skills, energy and talent, I am
confident that we will accelerate our efforts towards building a
world-class P&C insurance company."
The Board of Directors declared a quarterly dividend of 37 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 shares. All dividends are payable
on December 30, 2011 to shareholders of record on December 15, 2011.
Industry premiums are likely to increase in the next 12 months at a pace
similar to last year. It is expected that percentage growth in personal
auto will be in the mid single digits, driven by rate inadequacies in
Ontario auto insurance. Percentage 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.
At an industry level, loss ratios are expected to improve in personal
auto. In home insurance, loss ratios should benefit from continued
premium increases. Loss ratios are expected to remain stable in
commercial lines but pricing conditions may improve at a moderate pace
over time. The industry's return on equity was approximately 7% in 2010
and 8% in the first half of 2011. The profitability of the industry is
unlikely to improve materially in the near term, as any increase in
underwriting income will be largely offset by a decline in investment
income, resulting from lower yields.
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 strong 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 (excluding pools)
Net operating income2
Earnings per share
Basic and diluted (dollars)
Adjusted earnings per share
Basic and diluted (dollars)3
Net operating income per share (dollars)
ROE for the last 12
months / YTD annualized 4
Adjusted ROE for the last 12 months / YTD annualized 3,4
Operating ROE for the last 12 months / YTD annualized 4
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 Net operating income is defined as the sum of underwriting income,
interest and dividend income and other income, after tax.
3Adjusted earnings to common shareholders per share and adjusted return
on common shareholders equity exclude the impact of integration and
restructuring costs, as well as the amortization of intangible assets
recognized in business combinations. The company believes that these
metrics more accurately reflect its underlying business performance.
4 Return on common shareholders' equity (ROE) is defined as net income for
a 12-month period less preferred share dividends divided by the average
shareholders' equity net of preferred shares. Operating ROE is defined
as net operating income for a 12-month period less preferred share
dividends divided by the average shareholders' equity excluding
accumulated other comprehensive income and preferred shares. The
average shareholders' equity is calculated by adding the beginning
balance and the ending balance and dividing by two. In Q3-2011, 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. There were no impacts to prior comparative figures due to
this adjustment. The Q3-2010 comparative ratio has been omitted from the table as the
2009 results were not restated to IFRS. ROE, adjusted ROE and Operating ROE as reported in Q3-2010 under Canadian
GAAP were 14.2%, 14.3% and 14.1% respectively.
Net operating income for the quarter was $111 million, up $21 million from the same quarter
in 2010 as a result of improved personal auto underwriting results. The
operating ROE for the last 12 months was 14.0%.
Net operating income for the first nine months of the year was $308
million down from $322 million during the same period last year due to
elevated weather-related losses which reached $176 million.
Direct premiums written increased 2% in the third quarter to $1,226 million. Commercial
insurance premiums were up 5% as a result of improving unit growth in
both auto and P&C, while personal insurance premiums grew by 1%
reflecting slower growth in our direct businesses.
For the first three quarters of the year, total direct premiums written
increased by 2% to $3,523 million compared to the same period in 2010.
Underwriting income in the quarter increased 76% to $65 million compared to the same period
a year ago. Overall, the combined ratio improved by 2.4 percentage
points to 94.2% as a result of significant improvements in personal
auto and favourable prior year claims development. The improvement took
place despite $53 million in catastrophe losses associated with
Tropical Storm Irene and numerous wind and hail storms across the
country in the quarter. The underlying performance of our portfolio,
which excludes catastrophes and prior year claims development, improved
by 2.5 percentage points during the quarter.
Personal auto underwriting income increased to $76 million from $20
million recorded in the same period last year as the combined ratio
decreased 9.9 percentage points to 86.4% given the meaningful
improvement notably in Ontario and Alberta.
Home insurance incurred a $27 million net underwriting loss, down $12
million from the same period last year. Losses from catastrophes in the
quarter resulted in a combined ratio of 110.3%. Excluding the impact of
the catastrophes and prior year claims development, the loss ratio for
home insurance worsened by 1.3 percentage points year-over-year.
Overall, commercial insurance generated a $15 million underwriting
profit. Commercial auto results continued to be strong with a combined
ratio of 82.8% while the combined ratio in commercial P&C insurance
deteriorated by 8 percentage points to 100.0%.
Total underwriting income for the first nine months of the year was $155
million, down from $172 million in the corresponding period of 2010.
Investment income of $74 million was in line with the same period last year, but included
an incremental $2.1 million related to AXA Canada. Our market-based
yield declined more than 30 basis points as the low yield environment
continued to impact our investment income. Total investment income for
the first nine months remained unchanged at $223 million.
Net gains on invested assets, excluding
fair-value-through-profit-or-loss bonds, were down $14 million to $19
million mainly due to impairment losses. Since the beginning of the
year, the company has had investment gains of $147 million compared to
$111 million for the same period last year. Cash and invested assets
amounted to $11.8 billion at the end of the quarter, including $3.6
billion from the addition of AXA Canada's investment portfolio, up $3.2
billion from a year ago.
The company's book value per share at the end of the quarter rose 13%
over the last 12 months to $28.97. The company's financial position
remains strong with a minimum capital test of 202% and $534 million in
Since the announcement of the acquisition of AXA Canada, IFC secured
long-term financing at attractive rates, despite a volatile capital
market environment. The $2.6 billion acquisition was financed with
proceeds from the issuance of subscription receipts, preferred shares
and medium term notes in an aggregate amount of approximately $1.8
billion under five separate financings. The balance was funded from the
company's excess capital and $400 million drawn down under the terms of
a credit facility.
AXA Canada Acquisition
The company expects the deal to be accretive to net operating income per
share in 2012 and provide 15% accretion annually in the mid-term. It
also continues to expect annual synergies amounting to $100 million
In the quarter, a $3.8 million benefit from the addition of AXA Canada's
underwriting results for the week ended September 30 has been reflected
in other income (net), while net investment income for the quarter
includes $2.1 million related to AXA Canada. In subsequent quarters,
the AXA Canada acquisition underwriting results will be included as
part of the company's underwriting results. We recorded $29 million of
integration-related expenses in the current quarter as part of net
During the quarter, the company entered into a share purchase agreement
to sell AXA Canada's life insurance business to SSQ, Life Insurance
Company Inc. for $300 million. The company intends to allocate a
portion of the $300 million proceeds from the sale of AXA Canada's life
insurance business towards the term loan facility used to partially
finance the acquisition. As a result, the debt to total capital ratio
of the company is expected to be back in line with its target of 20%
once the transaction closes in early 2012.
Earnings per share and net operating income per share for the third
quarter amounted to $0.87 and $0.97 respectively compared to average
estimates of $1.10 and $1.01 respectively among the analysts who follow
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, November 9. To listen to the
replay, call 1 (855) 859-2056, passcode 15915238. 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