-
Net operating income per share of
$0.41 , despite$1.52 per share in previously announced catastrophe losses - Combined ratio of 102.8%, including 15.2 points of catastrophe losses
- Premium growth of 6%, bolstered by the addition of Jevco's product suite
- Book value per share 5% higher than a year ago
- Integration of acquisitions in final stages and on track for completion in early 2014
Net operating income for the first nine months of the year was
CEO's Comments
"Despite reporting our first underwriting loss in the last ten years as
a result of substantial catastrophe losses incurred by our customers,
our underlying operating performance remained sound", said
"As severe weather events become more extreme and frequent, we will continue to pursue our efforts to ensure that the protection we offer reflects our country's new climate reality and that governments, consumers, businesses and all stakeholders pursue their efforts to better adapt to climate change."
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. The proposed auto rate 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 solid financial position. Given these attributes, the Company believes that it will outperform the industry's ROE by at least 500 basis points in the next 12 months.
Consolidated Highlights
In millions of dollars, except as otherwise noted |
Q3-2013 | Q3-2012 | Change |
YTD 2013 |
YTD 2012 |
Change |
Direct premiums written (excluding pools) |
1,911 | 1,798 | 6% | 5,617 | 5,178 | 8% |
Underwriting income (loss)1 | (50) | 67 | n/a | 75 | 313 | (76)% |
Net operating income | 59 | 122 | (52)% | 357 | 481 | (26)% |
Net income | 47 | 92 | (49)% | 324 | 394 | (18)% |
Earnings per share Basic and diluted (dollars) |
0.32 | 0.67 | (52)% | 2.33 | 2.91 | (20)% |
Adjusted earnings per share Basic and diluted (dollars) |
0.39 | 0.90 | (57)% | 2.56 | 3.53 | (27)% |
Net operating income per share (dollars) |
0.41 | 0.89 | (54)% | 2.57 | 3.58 | (28)% |
ROE for the last 12 months | 11.2% | 11.7% | (0.5) pts | |||
Adjusted ROE for the last 12 months |
12.5% | 15.5% | (3.0) pts | |||
Operating ROE for the last 12 months |
12.7% | 16.4% | (3.7) pts | |||
Combined ratio (excluding MYA) |
102.8% | 95.9% | 6.9 pts | 98.6% | 93.5% | 5.1 pts |
Book value per share (dollars) | 33.25 | 31.81 | 5% |
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.
Operating Highlights
-
Net operating income for the quarter was
$59 million , down$63 million from the same quarter in 2012 as a result of a$117 million decline in underwriting income due to elevated catastrophe losses in the quarter, which amounted to an after tax loss of$201 million net of reinsurance ($273 million pre-tax loss). The operating ROE for the last twelve months was 12.7%.
Net operating income for the first nine months of the year was$357 million , down from the$481 million recorded during the same period in 2012. The decrease is attributed mainly to the elevated catastrophe losses experienced in the last six months.
-
Direct premiums written increased 6% in the third quarter to
$1.9 billion mainly as a result of the addition of Jevco's product suite, which represented approximately four percentage points of growth. Direct premiums written in personal insurance increased by 7% from a year ago, while commercial insurance premiums were up by 4% during the same period.
For the first three quarters of the year, total direct premiums written increased by 8% to reach$5.6 billion .
-
Underwriting activities in the quarter resulted in a loss of
$50 million compared to an underwriting income of$67 million during the same period a year ago as a result of pre-tax catastrophe losses of$273 million net of reinsurance mainly from severe weather events inQuebec ,Ontario andAlberta . Altogether, the catastrophe losses during the quarter account for 15 percentage points of the 102.8% combined ratio. The underlying underwriting performance during the quarter, which excludes catastrophes and prior year claims development, remained strong with a current year loss ratio of 62.2%, only 0.2% higher than last year's performance.
Personal property incurred an underwriting loss of$96 million . The 124.7% combined ratio increased 4.9 percentage points from last year and primarily resulted from severe weather events and the Lac-Mégantic train derailment. These catastrophes contributed 35.8percentage points to the combined ratio. Current year loss ratio excluding catastrophes experienced a significant 7.2 percentage point improvement year-over-year.
Personal auto underwriting income increased to$60 million from the$39 million recorded in the third quarter of 2012. The combined ratio improved 1.9 percentage points from last year to 93.0% as higher favourable prior year claims development and a reduction in catastrophe losses offset an increase in the expense ratio.
Commercial auto underwriting income of$22 million was down from$31 million in the third quarter of 2012. The combined ratio of 86.0% increased 9 percentage points from last year's exceptional performance, primarily due to less favourable current year results and an increase in the expense ratio.
Commercial P&C recorded an underwriting loss of$36 million . The combined ratio was up 27.6 percentage points to 109.0% as a result of significantly higher catastrophe losses and lower favourable prior year claims development. Excluding the$95 million catastrophe losses and the lower favourable prior year claims development, the loss ratio increased by only 1.1 points year-over-year.
For the first nine months of the year, total underwriting income was$75 million , down from$313 million in the corresponding period of 2012. The decrease reflects the impact of theAlberta floods in June and the high number of catastrophe losses in the third quarter.
-
Net investment income of
$104 million was up 13% from a year ago. The improvement was the result of migrating the investments of Jevco into our higher-yielding asset mix. The low yield environment continues to offset the underlying growth of our portfolio although the market-based yield of 3.8% was slightly up from a year ago.
For the first nine months of the year, total net investment income increased 5% to$302 million as a result of the additional investments from Jevco while the market-based yield remained unchanged at 3.7%.
Investment Gains
Net investment gains, excluding fair-value-through-profit-and-loss
bonds, were
Capital Management
The Company's financial position remained solid at the end of the
quarter with an estimated Minimum Capital Test of 199% and
During the quarter, the Company repurchased 422,500 common shares under
its normal course issuer bid, launched in
AXA Canada and Jevco integration update
The integrations of AXA Canada and Jevco continue to progress very well.
We have now reached the final stages of these integrations which should
be completed early next year. The Company maintains its
With respect to the Jevco integration, the Company expects to reach its
initial annual expense synergies of
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 was
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 end of the MD&A.
SOURCE
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