Intact Financial Corporation Reports Fourth Quarter and Year-End Results

Date February 17, 2010
  • Net operating income per share up 30% on strong underwriting results
  • Premium growth accelerates to 4.5%
  • Book value per share up 13 % for the year with $859 million in excess capital
  • Quarterly dividend to increase by 6% to 34 cents

Intact Financial Corporation (TSX: IFC) today reported net operating income for the quarter ended December 31, 2009 of $98.1 million, or $0.82 per share, up 30.2% compared to the same quarter last year. The increase was driven mainly by a strong underwriting performance in personal insurance. Overall, the combined ratio improved by 4.3 percentage points during the quarter to 94.6%. Direct written premiums increased 4.5% to $1,011 million, continuing the trend of accelerating growth seen throughout 2009. Net income for the quarter was $96.7 million, or $0.81 per share, compared to a loss of $64.1 million, or $0.53 per share, for the same period last year.

Net income for 2009 was $126.7 million, nearly unchanged from the previous year, while net operating income for the year declined 21.9% to $281.6 million. The combined ratio increased1.6 percentage points to 98.7% for the year due to the deterioration of the underwriting results in commercial P&C. The performance of all other lines of business improved during the year. Direct written premiums for the year were $4,275 million, up 3.1%. Earnings per share and net operating income per share for 2009 were $1.06 and $2.35 respectively.

CEO’s Comments

“This was a particularly strong quarter with much improved underwriting performance,” said Charles Brindamour, President and CEO, Intact Financial Corporation. “The return to profitability of our home insurance business was a significant achievement, which reflects the positive outcome of our comprehensive improvement plan and more moderate weather conditions. Our top-line is also gaining momentum, reflecting the impact of more favourable pricing conditions and the success of our organic growth initiatives.”

“While the industry pricing environment is unfolding as we anticipated, the unpredictability of weather patterns and the high cost of medical claims in Ontario may continue to impact the industry’s performance in the short term. “

“Our strong financial position with nearly $860 million in excess capital and the quality of our operating earnings is allowing us to increase our quarterly dividend for the fifth consecutive year since our initial public offering. Over that period our dividend has more than doubled.”


The Board of Directors increased the company’s quarterly dividend by 6.25%, or 2 cents, to 34 cents per share on its outstanding common shares. The dividend will be payable on March 31, 2010 to shareholders of record on March 15, 2010.

Current Outlook

Home insurance premiums are increasing across the industry as a result of severe storms and water-related damage, which is now the leading cause of home insurance claims. Personal auto insurance premiums are also increasing primarily in Ontario, reflecting medical cost inflation in the province. The Ontario Government announced a number of positive changes last November to the auto insurance regime to better control the costs of the product while offering consumers some of the best protection in the country. These changes are expected to become effective in the summer of this year. In business insurance, there are clear signs that pricing is firming up, particularly in Ontario. The company expects that similar conditions will develop across the country over time.

Consolidated Highlights

In millions of dollars, except as otherwise noted







Direct premiums written (excluding pools)







Underwriting income1







Net operating income2







Net income (loss)







Net operating income per share (dollars)







Earnings per share
Basic and diluted (dollars)







Return on equity (ROE) for the last 12 months



0.1 pts

Operating ROE for the last 12 months3



(2.1) pts

Combined ratio (excluding MYA)



(4.3) pts



1.6 pts

1 Underwriting income is defined as underwriting income excluding market yield adjustment (MYA).
2 Net operating income is defined as the sum of underwriting income, interest and dividend income and corporate and distribution income after tax.
3 Operating ROE is defined as net operating income for the last 12 months divided by the average shareholders equity (excluding accumulated other comprehensive income) for the same 12-month period. The average shareholders equity is calculated by adding the beginning balance and the ending balance and dividing by two.

Operating Highlights

  • Net operating income for the quarter was $98.1 million, up $23.0 million from the same quarter in 2008, mainly due to a significant improvement in the profitability of personal insurance. Net operating income for the year was $281.6 million, down from the previous period, as a result of lower underwriting profitability in the earlier quarters of the year and a decrease in interest and dividend income.
  • Direct premiums written increased 4.5% in the fourth quarter to $1,011million, continuing the trend of accelerated growth seen throughout the year. Home and personal auto insurance premiums grew 5.2%. Business insurance premiums also gained momentum, increasing 2.7%, with moderate premium rate increases and unit growth, as there are clear signs that the pricing is firming up.

For the year, total direct premiums written increased 3.1% to $4,275 million.

  • Underwriting income in the quarter increased to $56.0 million from $11.0 million in the same period of the previous year, as the combined ratio improved by 4.3 percentage points to 94.6%. Performance improved significantly in all lines of business except commercial P&C.

The robust underwriting performance in home insurance, with a combined ratio of 87.8%, reflects a significant improvement in that line of business resulting from the company’s home insurance action plan and more favourable weather conditions in the quarter. Personal auto underwriting income also improved significantly with a combined ratio of 98.0%.The improvement reflects better current accident year results and the release of a provision associated with minor injury cap reforms which had a $22.4 million positive impact on underwriting income.

The combined ratio in business insurance deteriorated during the quarter due to a number of large fire losses and the costs of claims associated with a number of unprofitable group accounts which have been cancelled. However, the combined ratio remains strong at 93.8%. While the results were disappointing in commercial P&C, commercial auto results were excellent. The significant improvement in this line of business was the result of an improved claims experience during the quarter and higher favourable development from previous years.

Total underwriting income for 2009 was $54.0 million, down from $117.0 in 2008, as a result of the decline in the profitability of business insurance.

  • Interest and dividend income, net of expenses remained robust at $77.3 million and nearly unchanged from the same period of the previous year. Total interest and dividend income, net of expenses, for the year were down 11% to $292.7 million as a result of a change in the asset mix of the company’s investments and the low interest rate environment.

Investment Gains

Net gains on invested assets, excluding held-for-trading bonds, were modest at $4.6 million reflecting healthier capital market conditions compared to a year ago. For 2009, the company had investment losses of $169.5 million, the majority of which were associated with the implementation of a hedging program as well as non-cash embedded derivative losses resulting from a substantial appreciation of the preferred share portfolio.

Capital Management

During the year, the company’s book value per share rose 13.3% to $24.88, mainly as a result of the substantial appreciation in the market value of its investment portfolio.
The company’s financial position remains strong at the end of the year with $858.7 million in excess capital. The increase in the excess capital position reflects the issuance of $400 million of debt instruments during the year and an increase in the value of the company’s investment portfolio. The minimum capital test of 231.9% at the end of the year was up 12.7 percentage points from the end of the third quarter of 2009 and 26.9 percentage points for the year.

Analysts Estimates

The average estimate of earnings per share and net operating income per share for the fourth quarter among the analysts who follow the company was $0.70 and $0.62 respectively.

Conference Call

Intact Financial Corporation will host a conference call to review its earnings results later this morning at 10:00 a.m. ET. To listen to the call via live audio webcast and to view the company’s Annual Financial Statements, Management’s Discussion & Analysis, presentation slides, the statistical supplement and other information not included in this press release, visit our website at and link to “Investor Relations.” All of these documents are available on our website.

The conference call is also available by dialling (647) 427-7450 or 1 (888) 231-8191 (toll-free in North America). Please call ten minutes before the start of the call.

A replay of the call will be available at 12:00 p.m. ET February 17 through 11:59 p.m. ET on Wednesday, February 24. To listen to the replay, call 1 (800) 642-1687, passcode 48282494. A transcript of the call will also be available on Intact Financial Corporation’s website.

About Intact Financial Corporation

Intact Financial Corporation ( ) is the largest provider of property and casualty insurance in the country with over $4 billion in premiums. Its 7,000 employees offer home, auto and business insurance under the Intact Insurance, Novex Group Insurance, belairdirect and Grey Power brands.

Media Inquiries:
Ian Blair
Director, External Communications
+1 (416) 341-1464 ext. 45251

Investor Inquiries:
Louis Marcotte
Vice President, Finance & Treasurer
+1 (514) 350-8620

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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