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Intact Financial announces Q3 results
Higher-than-expected catastrophe losses lower net operating income.
Staff on November 2, 2016
Intact Financial has released its Q3 results, reporting net operating income per share of $1.01 despite $0.93 of catastrophe losses from severe weather. It also posted premium growth of 5% due to growth initiatives and improved market conditions; a combined ratio of 97.0%, and an operating ROE of 13.4%.
“Our business once again demonstrated its resilience despite higher than expected catastrophe losses from severe weather,” said Charles Brindamour, chief executive officer, in a statement. “We continue to adapt the protection we offer customers to reflect this new climate reality and to support those affected as they recover from the recent storms.”
The company expects that industry premiums will grow at a low to mid single-digit rate. In personal auto, Intact expects claims cost inflation will lead to rate increases in all markets. In personal property, the company expects the current firm market conditions to continue, as companies are adjusting to changing weather patterns. While commercial lines remain competitive, Intact believes that continued low interest rates and elevated loss ratios of the past years support firm market conditions.
Overall, the industry’s ROE is expected to improve but remain slightly below its long-term average of 10% over the next twelve months.
Solid premium growth of 5% was driven by personal lines and commercial auto, as customers responded positively to new product offerings, improved digital experiences, distribution and branding initiatives. In commercial P&C, growth was impacted by our profitability actions and difficult conditions in Western Canada. For the first nine months of 2016, the company delivered premium growth of 5%.
Underwriting income was $61 million, despite absorbing $166 million in catastrophe losses. This result was driven by strong performance in commercial lines following the Intact’s profitability initiatives. For the first nine months of 2016, the Company generated $222 million of underwriting income as improved underlying underwriting results were outweighed by elevated catastrophe losses due to the Fort McMurray event and severe weather.
Overall, Intact delivered a combined ratio of 97.0%, as solid underlying performance was more than offset by 8.1 points of catastrophe losses. Similar factors drove a combined ratio of 96.2% for the first nine months of 2016, which included 6.2 points of catastrophe losses.
Personal auto premiums grew 5% on the Company’s growth initiatives, including telematics, distribution, branding and improved digital experiences. The combined ratio of 104.3% was impacted by 6.2 points of catastrophe losses, 2.3 points of non-catastrophe weather losses, low favourable prior year claims development and cost inflation. This resulted in an underwriting loss of $41 million compared to income of $51 million last year. Intact is accelerating its initiatives to improve results through rate action and tighter underwriting rules.
Personal property premiums grew 8%, as growth initiatives were supported by favourable market conditions. The combined ratio was 99.7%, as strong underlying underwriting results were offset by 18.8 points of catastrophe losses, significantly higher than the catastrophe losses last year. This resulted in underwriting income of $2 million compared to $11 million last year.
Commercial P&C premium growth was flat, as rate increases were offset by competitive markets and difficult conditions in Western Canada. The combined ratio was very strong at 81.3%, due to profitability actions and lower catastrophe losses. This resulted in underwriting income of $79 million compared to $64 million last year.
Commercial auto premiums grew 7% on the introduction of innovative products for the sharing economy. The combined ratio improved substantially to 88.6%, driven by ongoing profitability actions, favourable prior year claims development and lower large losses. This resulted in underwriting income of $21 million compared to $5 million last year.
Investments
Net investment income of $102 million was $3 million lower than last year as the low rate environment continued to contribute to a mild reduction in income as expected. Net investment gains of $17 million were driven by a rebound in equity markets. For the first nine months of 2016, Intact delivered net investment income of $310 million, $4 million lower than last year. Net investment gains of $25 million were driven by higher equity and bond prices.
Net distribution income of $30 million was $2 million higher than last year due to growth in Intact’s broker network and improved profitability. Similar factors drove an increase of $5 million in net distribution income to $87 million on a year-to-date basis.
Intact Financial announces Q3 results
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