Intact’s combined ratio improves 5.2 points but personal auto has $31M in unfavourable prior-year development

Intact Financial Corp.’s personal auto results were “disappointing” during the three months ending Sept. 30, chief executive officer Charles Brindamour said Tuesday in press release, but the Toronto-based insurer reported that across all lines, underwriting income more than doubled from $61 million in Q3 2016 to $170 million in the latest quarter.

Net earn premiums were up 2%, from $2.036 billion in Q3 2016 to $2.082 billion in the three months ending Sept. 30 of this year. For the first nine month of the year, net earned premiums rose 4%, from $5.903 billion in 2016 to $6.13 billion this year.

Intact provides property and casualty insurance through Intact Insurance Company,  Belair Insurance Company Inc. and Jevco Insurance Company, and also owns Canada Brokerlink Inc.

In the most recent quarter, Intact reported net earned premiums of $962 million in personal auto, $517 million in personal property, $414 million in commercial p&c and $189 million in commercial auto.

The combined ratio in personal auto deteriorated four-fifths of a point, from 104.3% in Q3 2016 to 105.1% in the latest quarter.

“Our personal auto results were disappointing,” Brindamour said. “We took a more cautious reserve position following detailed file-by-file and actuarial reviews and we are increasing our actions to address higher than expected physical damage inflation. Our discipline in this line should bring the combined ratio to a mid-90’s level in the coming year.”

Company wide, Intact reported a combined ratio of 91.8% in Q3 2017, down 5.2 points from 97% in Q3 2016.

This included the “impact of accounting and reserving harmonization” under International Financial Reporting Standards (IFRS) following the closing Sept. 28 of the acquisition of OneBeacon Insurance Group Ltd., Intact said Tuesday. This, Intact said, “led to a reduction in claims liabilities to reflect increased diversification.” Most of that benefit, Intact added, “was offset by increases in claims liabilities from a more cautious approach mainly in auto lines.”

Intact initially announced May 2 it agreed to acquire Plymouth, Minn.-based OneBeacon, which was publicly-traded and majority-owned by White Mountains Insurance Group Ltd. Among other things, OneBeacon owns International Marine Underwriters of New York City. In addition to marine, OneBeacon also writes professional liability for architects and civil engineers and cyber.

Company-wide, Intact reported its underlying current year loss ratio was 62.1% in the most recent quarter, down 0.7 points from 62.8% in Q3 2016.

For the first nine months of the year, the underlying current-year loss ratio was 64.4% in 2017, down half a point from 64.9% in 2016 while the combined ratio was 95% in 2017, down 1.2 points from 96.2% in 2016. That improvement reflected “the benefit of milder weather and lower expenses,” Intact stated.

The catastrophe loss ratio was 4.3% in the latest quarter, a 3.8-point improvement from 8.1% in Q3 2016. Catastrophe losses of $89 million were “below the historical average” for a third quarter, while catastrophe losses of $282 million, for the first nine months of this year, “were above expectations” but lower than in the same period of 2016. Last year, wildfires affecting Fort McMurray, Alberta gave rise to the most expensive natural disaster in Canadian history of more than $3 billion industry-wide.

Intact recorded $37 million unfavourable prior year development in personal auto during the first nine months of this year, of which $31 million was recorded in the third quarter.

Across all lines, Intact recorded $53 million in favourable prior year development, including $67 million in favourable prior year development in commercial.

For the first nine months of the year, Intact reported underwriting income of $308 million, up from $222 million in Q3 2016.

The combined ratio in personal lines was 98.1% in the latest quarter, down 4.6 points from 102.7% in Q3 2016. In personal property, Intact reported a combined ratio of 85% in the latest quarter, down 14.7 points from 99.7% in Q3 2016.

Intact’s combined ratio in commercial lines dropped 7 points, from 83.5% in Q3 2016 to 76.5% in Q3 2017.

Net income rose 37%, from $125 million in Q3 2016 to $171 million in the latest quarter.