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Intact Financial Corporation reports 8% increase in net operating income in third quarter of 2015, unchanged combined ratio


November 4, 2015   by Canadian Underwriter


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Toronto-based Intact Financial Corporation has reported a net operating income for the third quarter of 2015 of $199 million, 8% higher than last year, and a combined ratio of 93.2% – unchanged from 2014.

Underlying direct premiums written for the first nine months of the year increased by 6% to $6 billion

The improvement in net operating income mainly reflects higher underwriting and distribution income, Intact said in a press release on Wednesday. Intact noted that the combined ratio remained unchanged, as lower catastrophe losses were offset by multiple non-catastrophe weather events and an increase in large losses. Underlying direct premiums written also increased by 8% to $2.1 billion in the quarter, benefitting from growth strategies and the acquisition of Canadian Direct Insurance Inc.

The release said that net operating income for the first nine months of the year increased 14% from the same period last year to $595 million. Underlying direct premiums written for the first nine months of the year increased by 6% to $6 billion. The combined ratio improved by 1.7 percentage points to 92.7% compared to the same period last year, due to “profitability initiatives, higher favourable prior year claims development, and lower catastrophe losses.” Net income was $508 million compared to $577 million in 2014.

“Our business continues to deliver sound results,” said Intact CEO Charles Brindamour in the release. “Our brand investments, digital strategies and product development are generating strong top line growth without compromise to the quality of our portfolio. Our multi-channel distribution approach has also proven to be effective. Our financial position remains strong and we continue to pursue disciplined growth.”

Intact said that underwriting income for Q3 2015 grew 6% from last year to $131, reflecting an improvement in all lines of business except for commercial auto. Although Intact incurred lower catastrophe losses compared to last year, its underlying current year loss ratio was impacted by non-catastrophe weather events, an increase in large losses and slightly higher frequency.

Personal auto underwriting income grew 42% to $51 million this quarter compared to the same period last year. The combined ratio improved by 1.4 percentage points to 94.4% as Intact experienced a mild increase in frequency, less catastrophe losses and continued to see favourable prior year claims development, the release noted.

Personal property underwriting income grew 10% to $11 million compared to the corresponding quarter of the previous year. The combined ratio of 97.4% is consistent with last year’s result of 97.7% as lower catastrophe losses were offset largely by an increase of non-catastrophe weather events, higher large losses, and the remaining impact from the Atlantic winter storms earlier this year. [click image below to enlarge]

Underlying direct premiums written increased by 8% to $2.1 billion in the quarter, benefitting from growth strategies and the acquisition of Canadian Direct Insurance Inc., Intact said

Commercial auto underwriting income declined 69% to $5 million compared to 2014. The combined ratio deteriorated by 7.6 percentage points to 97% due to an increase in large losses and unfavourable prior year claims development. Intact reports that it is taking corrective actions and targetting a sustainable combined ratio in the low 90s.

Commercial P&C underwriting income was strong and improved by 3% to $64 million compared to last year, delivering a combined ratio of 84.6%, the release said. This line of business continues to benefit from profitability initiatives and favourable prior year claims development.

For the first nine months of the year, total underwriting income was $407 million, a 34% improvement over the same period of last year, due mainly to profitability initiatives, lower cat losses and an increase in favourable prior year claims development. Intact reported a 92.7 % combined ratio for the first nine months of 2015, 1.7 points better than last year.

As for its current outlook, the company expects that industry premiums will grow at a low single digit rate over the next 12 months. “In personal property, the current hard market conditions should continue as the magnitude of catastrophe losses in recent years negatively impacts industry results,” the release said. “In personal auto, the company expects that the upcoming rate reductions in Ontario will be commensurate with government cost reduction measures.”

Minimal growth is expected in personal auto. In commercial lines, continued low interest rates and limited underwriting profitability at the industry level have translated into firmer conditions.

“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 strong financial position,” the release said.

Intact is the largest provider of property and casualty insurance in Canada. The company distributes insurance under the Intact Insurance brand through a wide network of brokers, including its wholly owned subsidiary, BrokerLink, and directly to consumers through belairdirect.