Intact Financial Corporation reports Q3-2022 results

(in Canadian dollars except as otherwise noted)

TORONTO, Nov. 8, 2022 /CNW/ - (TSX: IFC)

• Net operating income per share1 decreased 6% to $2.70, reflecting a slight increase in operating combined ratio, offset in part by higher investment and distribution income
• Operating DPW2 grew 2% as continued solid growth in specialty lines was partially offset by profitability actions, including strategic exits
• Operating combined ratio1 was robust at 92.6%, with very strong results in commercial lines and Canada personal auto performing as expected
• EPS increased 26% to $2.02with solid operating and non-operating performance, while last year's results were impacted by an impairment charge on an investment
• OROE1 and ROE1 were strong at 15.0% and 19.1%, respectively, reflecting continued strong performance
• BVPS was stable year-over-year, as strong earnings were offset by significant mark-to-market losses on investments

Charles Brindamour, Chief Executive Officer, said:

"We achieved solid operating performance across the platform despite active weather and ongoing cost pressures. Our people are working hard to get customers back on track after the devastation caused by recent hurricanes. At the same time, our balance sheet remains resilient in the context of volatile capital market conditions which we continue to monitor closely. Finally, we continued to make progress on the integration of RSA, with synergies tracking towards our recently increased target of a $350 million run-rate in 2024."

• The Board of Directors approved the quarterly dividend of $1.00 per share on the Company's issued and outstanding common shares. The dividend is payable on December 30, 2022, to all shareholders of record as at December 15, 2022.

• As at September 30, 2022, the Company had repurchased and cancelled 817,790 common shares for approximately $149 million under its normal course issuer bid ("NCIB") program. The NCIB program allows the Company to purchase for cancellation up to 5,282,458 common shares until February 15, 2023, representing approximately 3% of the Company's issued and outstanding common shares as at February 8, 2022.

• Over the next twelve months, we expect firm-to-hard insurance market conditions to continue in most lines of business, driven by inflation and climate change.
  
  
• In Canada, we expect firm market conditions to continue in personal property. Personal auto premium growth is expected to be in the mid-single-digit range over the next 12 months, to reflect inflation and evolving driving patterns.
  
  
• In commercial and specialty lines across all geographies, hard market conditions are expected to continue.
  
  
• In the UK&I, we expect the personal property market to firm as it reacts to inflationary pressures and adapts to reform measures. Personal motor has begun to firm and we anticipate this to increase over time.

• Excluding strategic exits, operating DPW grew 4% on a constant currency basis, reflecting solid rate increases and strong growth in specialty lines, tempered by the impact of pricing discipline and footprint optimization in the UK&I.
  
  
• Operating combined ratio of 92.6% was 1.3 points higher than last year. The operating combined ratio in Canada was 92.7%, 3.5 points above last year, mainly owing to inflation and higher claims frequency in personal auto. In the UK&I, the operating combined ratio was down 0.4 points to 93.5%, with strong performance in commercial lines. In the US, the operating combined ratio improved 2.3 points to 90.5%, in line with expectations.

• Personal auto premiums decreased 1% from the prior year. This reflected new business pressures from reduced policy shopping in a muted rate environment, and rate actions taken ahead of competitors. The operating combined ratio of 93.0% was 7.9 points higher than last year, due to inflation and higher claims frequency. We expect to deliver a sub-95 combined ratio in the next 12 months as a result of our ongoing rate and underwriting actions.
  
  
• Personal property premiums grew by 7% in firm market conditions. The operating combined ratio of 98.4% was 4.9 points higher than last year, primarily due to higher weather-related losses, compared to a particularly strong quarter last year.
  
  
• Commercial lines premium growth of 4% reflected robust rate actions in hard market conditions. The operating combined ratio was a strong 87.9%, reflecting a robust underlying performance.
  
  
• Distribution income grew 6% to $111 million, driven by the addition of Highland Insurance Solutions to our portfolio, partially offset by lower variable commission revenues compared to an elevated amount in the prior-year quarter.

• Personal lines premiums declined 13% on a constant currency basis, almost 8 points of which was due to the sale of our Middle East business. We remained disciplined in competitive market conditions, with pricing reforms impacting UK home and motor. The operating combined ratio of 105.5% was up 7.6 points from the prior year, and higher than expectations. This was largely due to elevated subsidence claims, driven by unusually dry conditions in the UK, and additional reserves to reflect the latest inflation expectations.
  
  
• Commercial lines premiums grew 3% on a constant currency basis. Excluding impacts from the sale of our Middle East business and the optimization of our delegated portfolio, top line grew 9%, reflecting hard market conditions and strong retention levels. The operating combined ratio was 85.0%, due to profitability actions over the past 12 months, as well catastrophe losses in line with expectations.

• US Commercial premiums grew 10% on a constant currency basis. Excluding the impact of strategic exits, growth was 14%, driven by new business, increased exposures, and rate increases in favourable market conditions. The operating combined ratio improved 2.3 points to 90.5%, due to our profitability actions, including the exit from Public Entities.

• Operating net investment income of $232 millionfor the quarter increased 21% year-over-year, mainly driven by higher reinvestment yields.
  
  
• Net losses excluding FVTPL bonds of $2 million, included losses on common shares, partially offset by net foreign currency gains in UK&I.

• Net operating income attributable to common shareholdersof $473 millionfell 6% from Q3-2021, reflecting inflation pressures and higher weather-related losses in personal lines, partially offset by strong investment and distribution results.
  
  
• Earnings per shareof $2.02 was 26% higher than last year, reflecting solid operating and non-operating performances, while last year's results were impacted by an impairment on a venture investment.
  
  
• Operating ROE of 15.0% and ROE of 19.1% for the 12 months to September 30, 2022 reflected strong performance across the business.

• The Company ended the quarter in a strong financial position, with a total capital margin of $2.5 billion and solid regulatory capital ratios in all jurisdictions, despite challenging capital markets.
  
  
• The adjusted debt-to-total capital ratio increased temporarily to22.5% as at September 30, 2022, mainly reflecting the issuance of the Series 14 unsecured medium-term notes in USD as well as the impact of volatile capital markets. The net proceeds from this offering will be used to repay the principal amount of debt maturing subsequent to quarter-end. On a pro-forma basis, this reimbursement will decrease our adjusted debt-to-total capital ratio by 1.5 points.
  
  
• IFC's book value per share(BVPS) was $78.90 at September 30, 2022, largely unchanged from prior year. Strong earnings were offset by mark-to-market losses on our investments due to the increase in interest rates and the recent volatility in capital markets.

• RSA contributed approximately 15% accretion to NOIPS for the sixteen-month period since closing.
  
  
• We are on track to realize at least $350 million of pre-tax annual run-rate synergies in 2024. As at September 30, 2022 we estimate that we delivered $235 million in annualized run-rate synergies.
  
  
• Integration activities are progressing well. In Q3, we started the conversion of Johnson's retail policies to belairdirect. To date, over 95% of policies outside of Johnson and specialty lines have converted to Intact systems. Retention continues to be aligned with, or better than, historical RSA experience.
  
  
• On July 7, 2022 we completed the sale of our 50% stake in RSA Middle East B.S.C. (c) (the "Sale of Middle East") to National Life & General Insurance Company (NLGIC), majority owned by Oman International Development and Investment Co. (OMINVEST) for proceeds of $175 million (USD135 million).

• The Board of Directors also approved a quarterly dividend of 21.225 cents per share on the Company's Class A Series 1 preferred shares, 21.60625 cents per share on the Class A Series 3 preferred shares, 32.50 cents per share on the Class A Series 5 preferred shares, 33.125 cents per share on the Class A Series 6 preferred shares, 30.625 cents per share on the Class A Series 7 preferred shares, 33.75 cents per share on the Class A Series 9 preferred shares, and 32.8125 cents per share on the Class A Series 11 preferred shares. These dividends are payable on December 31, 2022, to shareholders of record as at December 15, 2022.

• The average estimates of earnings per share and net operating income per share for the quarter among the analysts who follow the Company were $2.60 and $2.76, respectively.

This Press Release, which was approved by the Company's Board of Directors on the Audit Committee's recommendation, should be read in conjunction with the Q3-2022 MD&A as well as the Q3-2022 Interim Consolidated Financial Statements, which are available on the Company's website at www.intactfc.com and later today on SEDAR at www.sedar.com.

For the definitions of measures and other insurance-related terms used in this Press Release, please refer to the MD&A and to the glossary available in the "Investors" section of the Company's website at www.intactfc.com.

Intact Financial Corporation will host a conference call to review its earnings results tomorrow at 11:00 a.m. ET. To listen to the call via live audio webcast and to view the Company's Financial Statements, MD&A, presentation slides, Supplementary financial information and other information not included in this press release, visit the Company's website at www.intactfc.com and link to "Investors". The conference call is also available by dialing 416-764-8659 or 1-888-664-6392 (toll-free in North America). Please call 10 minutes before the start of the call. A replay of the call will be available on November 9, 2022 at 2:00 p.m. ET until midnight on November 16, 2022. To listen to the replay, call 416-764-8677 or 1-888-390-0541 (toll-free in North America), entry code 663122 . A transcript of the call will also be made available on Intact Financial Corporation's website.

Intact Financial Corporation (TSX: IFC) is the largest provider of property and casualty (P&C) insurance in Canada, a leading provider of global specialty insurance, and, with RSA, a leader in the U.K. and Ireland. Our business has grown organically and through acquisitions to over $20 billion of total annual premiums.

In Canada, Intact distributes insurance under the Intact Insurance brand through a wide network of brokers, including its wholly-owned subsidiary BrokerLink, and directly to consumers through belairdirect. Intact also provides affinity insurance solutions through the Johnson Affinity Groups.

In the US, Intact Insurance Specialty Solutions provides a range of specialty insurance products and services through independent agencies, regional and national brokers, and wholesalers and managing general agencies.

Outside of North America, the Company provides personal, commercial and specialty insurance solutions across the U.K., Ireland, and Europe through the RSA brands.

Non-GAAP financial measures and Non-GAAP ratios (which are calculated using Non-GAAP financial measures) do not have standardized meanings prescribed by IFRS (or GAAP) and may not be comparable to similar measures used by other companies in our industry. Non-GAAP and other financial measures are used by management and financial analysts to assess our performance. Further, they provide users with an enhanced understanding of our financial results and related trends, and increase transparency and clarity into the core results of the business.

Non-GAAP financial measures and Non-GAAP ratios used in this Press Release and the Company's financial reports include measures related to our consolidated performance, our underwriting performance and our financial strength.

For more information about these supplementary financial measures, Non-GAAP financial measures, and Non-GAAP ratios, including definitions and explanations of how these measures provide useful information, refer to Section 23 – Non-GAAP and other financial measures in the Q3-2022 MD&A dated November 8, 2022, which is available on our website at www.intactfc.com and on SEDAR at www.sedar.com.

Certain statements made in this news release are forward-looking statements. These forward-looking statements include, without limitation, statements relating to the outlook for the property and casualty insurance industry in Canada, the US and the UK, the Company's business outlook, the Company's growth prospects, the impact on the Company in relation to the occurrence of and in response to the coronavirus (COVID-19) pandemic and ensuing events, the acquisition and integration of RSA Insurance Group PLC ("RSA"), the sale of the Company's 50% stake in RSA Middle East B.S.C. (c) to National Life & General Insurance Company (NLGIC) (the "Sale of Middle East"), and the realization of expected strategic, financial and other benefits of the Sale of Middle East. All such forward-looking statements are made pursuant to the 'safe harbour' provisions of applicable Canadian securities laws.

Forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements as a result of various factors, including those discussed in the Company's most recently filed Annual Information Form dated February 8, 2022 and available on SEDAR at www.sedar.com. As a result, we cannot guarantee that any forward-looking statement will materialize and we caution you against relying on any of these forward-looking statements. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise. Please read the cautionary note at the beginning of the Q3-2022 MD&A.

SOURCE Intact Financial Corporation

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