Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intact Financial Corp (IFCZF, Financial) reported its best quarter on record with a net operating income per share of $4.93, up 23% from the previous year.
- The company achieved a strong combined ratio of 86.5%, which is 4 points better than last year, indicating strong underlying performance across all lines of business.
- Intact Financial Corp (IFCZF) increased its dividend for the 20th consecutive year, with a 10-year compounded annual growth rate of 10%.
- The company has a robust capital margin of $2.9 billion, positioning it well for future growth opportunities.
- Intact Financial Corp (IFCZF) is advancing its AI capabilities, with over 500 models to optimize underwriting performance and customer experience, contributing to $150 million in run rate underwriting profit.
Negative Points
- The company incurred $1.5 billion in catastrophe losses for the year, reflecting ongoing challenges with severe weather events.
- In the US, premium growth was flat in the quarter due to corrective actions in underperforming segments, indicating potential challenges in maintaining growth.
- The integration of Direct Line in the UK&I created a 4-point drag on growth in Q4, highlighting challenges in integrating acquisitions.
- The Alberta auto insurance market remains challenging due to increased litigation on injury claims, impacting profitability despite recent regulatory changes.
- Intact Financial Corp (IFCZF) increased its retention of catastrophe treaty in Canada from $250 million to $350 million, indicating higher exposure to potential losses.
Q & A Highlights
Q: The market has been able to push through decent price increases in Ontario auto. Should we expect prices to stabilize, and are there any pressures due to upcoming elections?
A: Charles Brindamour, CEO, explained that rates increased double digits in the quarter, fueling 12% growth. Inflation has stabilized in the mid-single digits, and rates are expected to normalize to mid- to high-single digits. The industry remains unprofitable, indicating more catch-up is needed. Elections are not seen as a significant risk currently.
Q: How would a potential tariff war impact physical damage costs and inflation in auto insurance?
A: Charles Brindamour, CEO, noted that a tariff war could affect the supply chain and inflation, but Intact is well-positioned to navigate this. Patrick Barbeau, COO, added that only about a third of the parts used in repairs cross the US-Canadian border, minimizing impact. The company can manage within existing guidance due to its pricing capability.
Q: Can you provide more details on the UK&I business growth and the impact of the Direct Line acquisition?
A: Kenneth Anderson, EVP and CFO of UK&I, stated that the integration of Direct Line is progressing well, adding more premium than anticipated. The acquisition caused a 4-point drag on growth in Q4, but underlying performance improved. The UK&I business is expected to grow in line with the industry at mid-single digits, with remediation of Direct Line driving combined ratio improvements.
Q: What corrective actions are being taken in the US business, and are any lines being considered for exit?
A: Darren Godfrey, EVP of Global Specialty Lines, mentioned that less than 10% of the US premium base is undergoing corrective actions, which should dissipate by the second half of 2025. The focus is on profitability in financial services, environmental, and entertainment lines, with no plans to exit these segments.
Q: How does the new aggregate cover affect CAT loss figures and book value growth?
A: Louis Marcotte, CFO, explained that the aggregate cover limits exposure to cumulative CAT losses, keeping them close to guidance. The increased retention in Canada reflects reinsurers' appetite, and the strategy aims to manage risk while maintaining book value growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
