-
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 systems
Net operating income for the first nine months was
CEO's Comments
"Our underwriting performance continued to be strong this quarter as
personal auto results improved significantly," said
"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."
Dividends
The Board of Directors declared a quarterly dividend of
Current Outlook
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
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.
Consolidated Highlights
In millions of dollars, except as otherwise noted | Q3-2011 | Q3-2010 | Change |
YTD 2011 |
YTD 2010 |
Change |
Direct premiums written (excluding pools) | 1,226 | 1,206 | 2% | 3,523 | 3,438 | 2% |
Underwriting income1 | 65 | 37 | 76% | 155 | 172 | (10)% |
Net operating income2 | 111 | 90 | 23% | 308 | 322 | (4)% |
Net income | 101 | 109 | (7)% | 381 | 391 | (3)% |
Earnings per share Basic and diluted (dollars) |
0.87 | 0.96 | (9)% | 3.41 | 3.37 | 1% |
Adjusted earnings per share Basic and diluted (dollars)3 |
1.11 | 0.98 | 13% | 3.69 | 3.42 | 8% |
Net operating income per share (dollars) | 0.97 | 0.79 | 23% | 2.75 | 2.78 | (1)% |
ROE for the last 12 months / YTD annualized 4 |
16.8% | 17.2% | 18.0% | (0.8) pts | ||
Adjusted ROE for the last 12 months / YTD annualized 3,4 | 17.8% | 18.5% | 18.2% | 0.3 pts | ||
Operating ROE for the last 12 months / YTD annualized 4 | 14.0% | 14.6% | 16.1% | (1.5) pts | ||
Combined ratio (excluding MYA) | 94.2% | 96.6% | (2.4) pts | 95.2% | 94.5% | 0.7 pts |
Book value per share (dollars) | 28.97 | 25.61 | 13% |
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
Operating Highlights
-
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 inOntario andAlberta .
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 .
Investment Gains
Net gains on invested assets, excluding
fair-value-through-profit-or-loss bonds, were down
Capital Management
The company's book value per share at the end of the quarter rose 13%
over the last 12 months to
Since the announcement of the acquisition of AXA Canada, IFC secured
long-term financing at attractive rates, despite a volatile capital
market environment. The
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
In the quarter, a
During the quarter, the company entered into a share purchase agreement
to sell AXA Canada's life insurance business to SSQ,
Analysts' Estimates
Earnings per share and net operating income per share for the third
quarter amounted to
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.
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