Intact Q2 net income down after Alberta floods

Intact Financial Corp. has reported a net operating income for the second quarter of the year of $123 million, down by $57 million over the comparable quarter of 2012.

That decrease reflects a pre-tax loss of $143 million net of reinsurance (an after-tax loss of $105 million) following the storms and flooding in Alberta in June, the company said.

Net income for the quarter ending June 30 was $103 million, down from $129 million in Q2 last year.

Underwriting income in the quarter decreased from $123 million to $42 million, compared with the same period last year. Personal property saw an underwriting loss of $49 million, though personal auto underwriting income increased to $106 million (from $82 million in Q2 2012).

Commercial auto underwriting income of $16 million was down from the $26 million recorded in the second quarter of 2012, while commercial P&C recorded an underwriting loss of $31 million.

“Solid underlying results in auto were outweighed by higher catastrophe losses and less favourable current year results for an overall combined ratio of 97.5%,” Intact noted.

“The change in current year results was largely due to increased claims severity in the commercial P&C and personal auto lines of business. Direct premiums written increased 10% to $2.2 billion, reflecting the addition of Jevco and solid organic growth.”

For the first half of the year, net operating income was $298 million, down from $359 million last year. Net income was $277 million compared to $302 million for the first half of 2012.

“Our operating performance remained sound this quarter, despite providing approximately $300 million to help our customers in Alberta recover from one of the worst catastrophes in Canadian history,” said Charles Brindamour, Intact’s CEO.

“The strength of our financial performance demonstrates our resilience to the Alberta events as we benefited from our reinsurance program, which meaningfully reduced our exposure,” he noted.

“The devastating events of recent weeks serve as a stark reminder that weather events are becoming more extreme and frequent. An open and transparent dialogue will need to occur between governments, the industry and other stakeholders to ensure that the home insurance product is adapted to today’s climate reality and remains available and affordable for consumers.”

On July 22, the company also announced that the Lac-Mégantic train derailment, the July 8 Greater Toronto Area rainstorm and early July hail storms in Alberta, will have a negative impact on its results in Q3 2013 by approximately $134 million after tax, net of reinsurance.

The insurer said it expects industry premium growth to “evolve at a similar pace” to that over the past year, although it isn’t expecting further loss ratio improvement in personal auto insurance “as the 2010 Ontario reforms have already largely brought about the expected cost savings.”

In commercial lines, the company said it believes that the number of catastrophes in recent months will negatively impact the loss ratio and could translate into firmer market conditions over time.

Overall, the industry’s combined ratio is expected to deteriorate and its ROE is not likely to reach its long term average of 10% in the next 12 months, Intact said.