- Net operating income per share of
$1.37 despite$0.70 per share in catastrophe losses - Combined ratio of 93.2% in Q3-2014, leading to an operating ROE of 14.3%
- Efforts to improve profitability in property lines and rate reductions in
Ontario auto limited underlying DPW growth to 1.3% - Commercial P&C action plan ongoing despite Q3 underwriting results
- Strong financial position with
$497 million of excess capital and 10% growth in book value per share over the past 12 months
Net operating income for the first nine months of the year was
CEO's Comments
"Our operating and financial results continued to significantly improve during the quarter despite the high cost of damage caused by severe weather," said
Dividend
The Board of Directors declared a quarterly dividend of
Current Outlook
The Company expects that industry premiums will grow at a low single digit rate. In personal property, the current hard market conditions should continue as the magnitude of recent catastrophe losses negatively impacts industry results. The Company expects that future reductions in
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 strong financial position. Given these attributes, the Company believes that it will outperform the industry's ROE by at least 500 basis points over the next 12 months.
Consolidated Highlights
In millions of dollars, except as otherwise noted |
Q3-2014 |
Q3-2013 |
Change |
YTD 2014 |
YTD 2013 |
Change |
Direct premiums written (excluding pools) |
1,913 |
1,911 |
- |
5,589 |
5,617 |
- |
Underwriting income (loss)1 |
124 |
(50) |
nm |
303 |
75 |
304% |
Net operating income2 |
185 |
59 |
214% |
520 |
357 |
46% |
Net income |
202 |
47 |
330% |
577 |
324 |
78% |
Earnings per share Basic and diluted (dollars) |
1.49 |
0.32 |
366% |
4.27 |
2.33 |
83% |
Adjusted earnings per share Basic and diluted (dollars) 2 |
1.55 |
0.39 |
297% |
4.44 |
2.56 |
73% |
Net operating income per share (dollars)2 |
1.37 |
0.41 |
234% |
3.84 |
2.57 |
49% |
ROE for the last 12 months |
14.5% |
11.2% |
3.3 pts |
|||
Adjusted ROE for the last 12 months 2 |
15.2% |
12.5% |
2.7 pts |
|||
Operating ROE for the last 12 months2 |
14.3% |
12.7% |
1.6 pts |
|||
Combined ratio1 |
93.2% |
102.8% |
(9.6) pts |
94.4% |
98.6% |
(4.2) pts |
Book value per share (dollars) |
36.44 |
33.25 |
10% |
1 Excludes market yield adjustment (MYA) which is the impact on claims liabilities due to movements in discount rates. |
2 This is a non-IFRS financial measure, which does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies in our industry. Please refer to Section 5 – Non-IFRS financial measures in the Management's Discussion and Analysis for further details. |
Operating Highlights
- Net operating income for the quarter was
$185 million , up$126 million from the same quarter in 2013 as a result of a significant improvement in underwriting income despite the continued high cost of catastrophe losses during the quarter.
Net operating income for the first nine months of the year was$520 million , up 46% from the corresponding period of 2013, also reflecting an increase in underwriting income. The operating ROE for the last twelve months was 14.3% despite incurring$289 million in pre-tax net catastrophe losses during that period. - Direct premiums written remained stable in the quarter at
$1.9 billion . The underlying growth in premiums amounted to 1.3%. Total direct premiums written also remained stable during the first nine months of the year at$5.6 billion while the underlying growth in premiums totalled 1.2%. The growth in premiums since the beginning of the year has been tempered by the Company's initiatives aimed at improving the performance of its property portfolios and by government-mandated auto insurance rate reductions inOntario . - Underwriting income for the quarter was
$124 million compared to a loss of$50 million during the same period a year ago, which was impacted by severe storms in theGreater Toronto Area as well as in Québec andAlberta . The increase was attributable to a$145 million decline in catastrophe losses and a 0.6 point improvement in the underlying loss ratio, which were partly offset by less favourable prior year claims development. However, catastrophe losses remained high at$125 million . Overall the combined ratio improved by 9.6 percentage points to 93.2%.
Personal property reported a resilient underwriting income of$10 million compared to a loss of$95 million in the corresponding quarter of the previous year. The combined ratio improved by 27 percentage points to 97.7% as the cost of catastrophe losses, while higher than expected, were$70 million lower than in the same period of 2013. The beneficial impact of the Company's rate and product actions and a lower frequency of claims resulted in a 5 percentage point improvement in the underlying current year loss ratio.
Personal auto underwriting income declined from$60 million to $36 million as the combined ratio increased 2.8 percentage points to 95.8%, reflecting the high costs of damage resulting from this summer's hail storms inAlberta . Less favourable prior year claims development and the negative impact from industry pools also contributed to the decline in underwriting income. Excluding these pools, the underlying current year loss ratio improved from a year ago.
Commercial auto underwriting income remained solid at$16 million compared to$21 million a year ago. The combined ratio increased 3.4 percentage points to 89.4% as unfavourable prior year claims development more than offset a 4 point improvement in the underlying current year loss ratio.
Commercial P&C results were strong, with underwriting income of$62 million compared to a loss of$36 million in the third quarter of last year. The combined ratio improved 24.3 percentage points to 84.7% as a result of a$92 million decline in catastrophe losses and a$7 million increase in favourable prior year claims development. The underlying loss ratio remained strong at 53.4%.
For the first nine months of the year, total underwriting income was$303 million , a significant improvement from$75 million in the same period of last year, due mainly to lower losses from catastrophes. - Net investment income of $106 million during the quarter was up 2% from a year ago. The increased level of investments more than offset the decline in yields.
For the first nine months of the year, total net investment income increased 5% to$316 million as a result of the growth in investments and an unusually high level of dividend income in the first quarter, which more than offset declining yields.
Investment Gains
Net investment gains excluding fair-value-through-profit-and-loss fixed income securities amounted to
Unrealized gains on securities available for sale declined during the quarter by
Total investments amounted to
Capital Management
The Company's financial position remained strong at the end of the quarter with an estimated Minimum Capital Test of 203% and
Analysts' Estimates
The average estimate of earnings per share and net operating income per share for the quarter among the analysts who follow the Company were
MD&A and Consolidated Financial Statements
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 Management's Discussion and Analysis as well as the Consolidated financial statements, which are available on our website at www.intactfc.com and later today on SEDAR at www.sedar.com.
Conference Call
The conference call is also available by dialling (647) 427-7450 or 1 (888) 231-8191 (toll-free in
A replay of the call will be available later today at
About
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 beginning of the MD&A.
SOURCE