What’s driving Intact’s high personal property combined ratio?

Intact Financial Corporation (IFC) saw an elevated combined ratio (undiscounted) of 119.2% in its Canadian personal property segment in 2023 Q2, driven in part by twice the expected level of Cat losses. 

The 119.2% combined ratio in Intact’s personal property segment included 27 points in Cats, while an increase in severity driven by large losses and inflation also weighed on the results by close to five points, Intact CEO Charles Brindamour said during an earnings call Thursday.  

“[Personal property] premium growth was 5%, mostly driven by our rate actions and supportive market conditions,” Brindamour said. “Though the operating environment proved challenging due to the number of fire, flood and freeze events, we delivered an operating ROE of 13%.” 

Brindamour did not specifically mention the catastrophes, but Canada has seen major flooding in Nova Scotia recently.  

Wildfires continue to rage across the country, with Nova Scotia also experiencing more than $165 million in insured damage from the Tantallon wildfire, 90% of which was related to personal property claims, Catastrophe Indices and Quantification (CatIQ) reported. 

Canada’s record-breaking wildfire season that began in Q2 has seen losses in Quebec, British Columbia, Alberta and the Northwest Territories, among other areas. 

Louis Marcotte, Intact’s executive vice president and chief financial officer, reported the carrier’s Cat losses in the quarter as $421 million, “driven by wildfires, floods and storms in Canada, as well as non-weather commercial lines losses in the U.S. and U.K. and [Ireland].” Cat losses in Canada for the quarter totalled $335 million. 

“No single event led the threshold for reinsurance under our catastrophe treaty,” Marcotte said during the earnings call. “Although Cat losses were double the expected level in the quarter, we have seen similar or higher levels of Cats as a percentage of net earned premium four times over the past 10 years.” 

Despite the active quarter for severe weather events, Brindamour said “the personal property business in Canada is positioned to generate sub-95[%] combined ratio, even in bad times, as demonstrated in the past 12 months. Given our track record in the upper 80s over the past 10 years, I’m confident we’ll make the most of this environment in this segment.” 

When asked to elaborate, the insurer said its track record speaks for itself.  

“We’ve seen elevated levels of Cats in the past,” said Guillaume Lamy, Intact’s senior vice president of personal lines. “This quarter doesn’t change our expectation of Cats… We’re already pricing prudently under those weather events…” 

Overall, Intact saw a 96.3% combined ratio (undiscounted) in the second quarter (92.2% discounted).  

In Canada, personal property’s combined ratio of 119.2% was by far the worst. Personal auto’s undiscounted combined ratio was 91.2%, while commercial lines stood at 89.5%. 

Feature image: A helicopter carrying water flies over heavy smoke from an out-of-control fire in a suburban community outside of Halifax that spread quickly, engulfing multiple homes and forcing the evacuation of local residents on Sunday May 28, 2023.THE CANADIAN PRESS/Darren Calabrese