Highlights
- Net operating income per share up 19% to $1.93 in Q4-2018 driven by solid operating
results
- Premiums grew 4% in the quarter and 16% for the full year
fuelled by commercial lines across North
America
- Strong combined ratio of 91.7% in Q4-2018 with significant
improvement in personal auto
- Full year NOIPS of $5.74 drove
Operating ROE of 12.1%, with over $1.3
billion of total capital margin
- Quarterly dividend increased by 9% to $0.76 per common share
(TSX: IFC)
(in Canadian dollars except as otherwise
noted)
TORONTO, Feb. 5, 2019 /CNW/ -
Charles Brindamour, Chief
Executive Officer, said:
"We delivered strong earnings performance across our
businesses in the fourth quarter, with growth momentum building. In
personal auto, we reached our mid-90's combined ratio run-rate and
are focused on sustaining that performance. OneBeacon remains on
track towards a low 90's combined ratio and becoming a leading
North American specialty insurer. In the past year we made
substantial investments in digital and artificial intelligence as
we continue our customer-driven transformation and position
ourselves for continued outperformance. Our balance sheet
remains strong and we are pleased to again increase dividends to
our common shareholders."
|
Consolidated
Highlights1
|
(in millions of
Canadian dollars except as otherwise noted)
|
Q4-2018
|
Q4-2017
|
Change
|
2018
|
2017
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written
|
2,392
|
2,293
|
4%
|
10,090
|
8,730
|
16%
|
Combined
ratio
|
91.7%
|
92.6%
|
(0.9)
pts
|
95.1%
|
94.3%
|
0.8
pts
|
Underwriting
income
|
210
|
178
|
18%
|
474
|
486
|
(2)%
|
Net investment
income
|
140
|
121
|
16%
|
529
|
432
|
22%
|
Net distribution
income
|
36
|
28
|
29%
|
146
|
132
|
11%
|
Net operating
income
|
281
|
236
|
19%
|
839
|
771
|
9%
|
Net income
|
244
|
232
|
5%
|
707
|
792
|
(11)%
|
Per share measures
(in dollars)
|
|
|
|
|
|
|
Net operating income
per share (NOIPS)
|
1.93
|
1.63
|
19%
|
5.74
|
5.60
|
3%
|
Earnings per share
(EPS)
|
1.67
|
1.60
|
4%
|
4.79
|
5.75
|
(17)%
|
Return on equity for
the last 12 months
|
|
|
|
|
|
|
Operating
ROE
|
12.1%
|
12.9%
|
(0.8) pts
|
|
|
|
ROE
|
9.9%
|
12.8%
|
(2.9) pts
|
|
|
|
Book value per share
(in dollars)
|
48.73
|
48.00
|
2%
|
|
|
|
Total capital
margin2
|
1,333
|
1,135
|
198
|
|
|
|
Debt-to-total-capital
ratio
|
22.0%
|
23.1%
|
(1.1) pts
|
|
|
|
|
(1) This press release contains
non-IFRS financial measures. Refer to Section 27 – Non-IFRS
financial measures in the Management's Discussion and Analysis for
further details. The impact of fluctuations in foreign exchange
rates was not material to our consolidated results.Impact on the
U.S. segment's performance is outlined in the Insurance Business
Performance section.
|
|
(2) Aggregate of capital in excess of
company action levels in regulated entities (170% MCT, 200% RBC)
plus available cash in unregulated entities. Refer to
Section 18– Capital management in the Management's Discussion
and Analysis for further details.
|
|
Dividend Increase
- The Board of Directors approved a 6
cent per share increase in the quarterly dividend to
76 cents per share on the Company's
outstanding common shares. This represents a 9% increase in our
dividend and the fourteenth consecutive annual increase in our
dividend since our IPO in 2004.
- The Board also approved a quarterly dividend of 21.225 cents per share on the Company's Class A
Series 1 preferred shares, 20.825
cents per share on the Class A Series 3 preferred shares,
26.95675 cents per share on the Class
A Series 4 preferred shares, 32.5
cents per share on the Class A Series 5 preferred shares,
33.125 cents per share on the Class A
Series 6 preferred shares and 30.625
cents per share on the Class A Series 7 preferred shares.
The dividends are payable on March 29,
2019, to shareholders of record on March 15, 2019.
Industry Outlook
- Overall for the Canadian P&C industry, we expect
mid-single-digit premium growth in the coming year,
reflecting firm market conditions. In personal auto and
commercial lines, industry profitability challenges are putting
upward pressure on rates while in personal property,
companies continue to adjust to changing weather patterns.
- In U.S. commercial, the pricing environment remains
competitive with modest upward trends, and the economic backdrop is
favourable. We expect low-to-mid single-digit growth in the
coming year.
- Overall, the industry's ROE is expected to improve but remain
below its long-term average of 10% over the next 12 months.
Insurance Business Performance
(in millions of
Canadian dollars except as
otherwise noted)
|
Q4-2018
|
Q4-2017
|
Change
|
2018
|
2017
|
Change
|
|
|
|
|
|
|
|
Direct premiums
written
|
|
|
|
|
|
|
Canada
|
2,067
|
1,986
|
4%
|
8,601
|
8,423
|
2%
|
U.S.
|
325
|
307
|
|
1,489
|
307
|
|
Growth as
reported
|
|
|
6%
|
|
|
nm
|
Growth in constant
currency
|
|
|
2%
|
|
|
nm
|
|
2,392
|
2,293
|
4%
|
10,090
|
8,730
|
16%
|
Combined
ratio
|
|
|
|
|
|
|
Canada
|
90.8%
|
91.9%
|
(1.1) pts
|
95.2%
|
94.2%
|
1.0 pts
|
U.S.
|
96.7%
|
97.4%
|
(0.7) pts
|
94.8%
|
97.4%
|
nm
|
|
91.7%
|
92.6%
|
(0.9) pts
|
95.1%
|
94.3%
|
0.8 pts
|
|
|
|
|
|
|
|
Underwriting
income
|
|
|
|
|
|
|
Canada
|
196
|
170
|
26
|
400
|
478
|
(78)
|
U.S.
|
13
|
8
|
5
|
71
|
8
|
nm
|
Corporate &
other1
|
1
|
-
|
1
|
3
|
-
|
3
|
|
210
|
178
|
32
|
474
|
486
|
(12)
|
|
|
|
|
|
|
|
1
Corporate & other segment reflects the impact of our internal
reinsurance treaty.
|
- Premiums grew 4% in the fourth quarter and 16% for the
full year. In Canada premiums grew
4% in the quarter with double digit growth in commercial lines,
tempered by profitability actions in personal auto. U.S. commercial
premiums grew by 6% in the quarter (or 2% on a constant currency
basis).
- Combined ratio of 91.7% improved 0.9 points driven by
strong underlying performances in both Canada and the U.S. In Canada, significant improvement in personal
auto was partially offset by a deterioration in commercial
lines.
- For the full year, IFC's overall combined ratio of 95.1%
was 0.8 points higher than last year. Improvement in personal
lines, particularly in auto, was more than offset by higher large
losses and catastrophe losses in commercial lines.
Lines of Business
P&C Canada
- Personal auto premiums declined by 1% in the quarter, as
rate increases taken ahead of the market continued to impact unit
growth. The combined ratio of 97.3% improved 3.9 points over last
year as a result of our action plan initiatives and lower claims
frequency. Prior year claims development was minimal at 0.3 points
unfavorable in the quarter. Our profitability actions have yielded
results, and we remain well positioned to capture growth
opportunities as market conditions continue to improve.
- Personal property premiums grew 2% in Q4-2018 driven by
rate increases in firm market conditions, tempered by slower unit
growth related to our profitability actions in personal auto on
bundled products. The combined ratio was strong at 78.5%, 1.2
points better than Q4-2017. For the full year 2018, the combined
ratio remained solid at 88.3%, 0.8 points better than 2017, despite
the impact of severe weather.
- Commercial lines (P&C and auto) premiums saw very
strong growth of 11% with contributions from all segments, aided by
rate momentum in firm market conditions. The combined ratio of
91.6% was solid, though 4.2 points higher than last year's very
strong result. For the full year 2018, the combined ratio of 94.6%
deteriorated 8.1 points compared to last year driven by higher
large losses and catastrophe losses.
- Net distribution income was $36
million in the quarter and $146
million for the year, an increase of 29% and 11%
respectively over the prior year. Continued growth and improved
profitability of our broker network drove this increase.
P&C U.S.
- Premiums grew 6% (or 2% on a constant currency basis) to
$325 million for the quarter, with
solid progress in our growth focus lines, tempered by the impact of
our profitability improvement actions in other lines.
- Combined ratio of 96.7% improved marginally over
Q4-2017, despite 5.9 points of catastrophe losses. The full year
2018 combined ratio was solid at 94.8%, reflecting good progress on
improving OneBeacon's profitability. We are well on track to
achieve a sustainable low-90s combined ratio within 18 to 24
months.
Investments
- Net investment income of $140
million increased 16% compared to the same quarter last year
from investment optimization initiatives and higher yields. For the
full year, net investment income increased 22% to $529 million from the growth in our investment
portfolio following the acquisition of OneBeacon, optimization
initiatives, and higher yields.
Net Income
- Net operating income of $281
million for the quarter ($1.93
per share) increased 19%, driven by an improved underwriting
performance and strong growth in both net investment income and net
distribution income. For the full year 2018, net operating income
increased 9% to $839 million,
reflecting a full year of OneBeacon results.
- Earnings per share of $1.67 for the quarter improved 4% from a year
ago, driven by solid operating earnings. For the year ended 2018,
earnings per share of $4.79 was 17%
lower than last year, despite higher operating earnings. In 2017,
we had benefited from one-time non-operating gains of $0.69 per share relating to the OneBeacon
acquisition.
- Operating ROE for the 12 months ending December 31, 2018 was 12.1%, due to weak personal
auto results in the earlier part of 2018, as well as elevated large
losses in commercial lines. Our OROE remains well above the
industry, though below our historical track record.
Balance Sheet
- The Company ended the quarter in a strong financial
position, with a total capital margin of over $1.3 billion. MCT in Canada was estimated at 201%.
- IFC's book value per share was $48.73 as at December 31,
2018, a $0.73 increase from a
year ago. Profitability from operations was partially offset by the
impact of volatile capital markets on our investment portfolio.
- The debt-to-total capital ratio was 22.0% as at
December 31, 2018 and continues to
track towards our goal of 20% in 2019.
Analysts' Estimates
- The average estimate of earnings per share and net
operating income per share for the quarter among the analysts
who follow the Company was $1.47 and
$1.75, respectively.
Management's Discussion and Analysis (MD&A) and
Consolidated Financial Statements
This Press Release, which was approved by the Company's Board of
Directors on the Audit Committee's recommendation, should be read
in conjunction with the Q4-2018 MD&A as well as the Q4-2018
Consolidated Financial Statements, which are available on the
Company's website at www.intactfc.com and on SEDAR at
www.sedar.com.
For the definitions of measures and other insurance-related
terms used in this Press Release, refer to the MD&A and to the
glossary available in the "Investors" section of the Company's
website at www.intactfc.com.
Conference Call
Intact Financial Corporation will host a conference call to
review its earnings results tomorrow at 11:00 a.m. ET. To listen to the call via live
audio webcast and to view the Company's Financial Statements,
MD&A, presentation slides, Supplementary financial information
and other information not included in this press release, visit the
Company's website at www.intactfc.com and link to "Investors". The
conference call is also available by dialing 647-427-7450 or
1-888-231-8191 (toll-free in North
America). Please call 10 minutes before the start of the
call. A replay of the call will be available on February 6, 2019 at 2:00
p.m. ET until midnight on February
13. To listen to the replay, call
1-855-859-2056 (toll-free in North America), passcode 4279984. A transcript
of the call will also be made available on Intact Financial
Corporation's website.
About Intact Financial Corporation
Intact Financial Corporation (TSX: IFC) is the largest provider
of property and casualty (P&C) insurance in Canada and a leading provider of specialty
insurance in North America, with
over $10 billion in total annual
premiums. The Company has approximately 14,000 full- and part-time
employees who serve more than five million personal, business and
public sector clients through offices in Canada and the U.S. In Canada, Intact 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. In the U.S., OneBeacon Insurance Group, a
wholly-owned subsidiary, provides specialty insurance products
through independent agencies, brokers, wholesalers and managing
general agencies.
Forward Looking Statements
Certain statements made in this news release are forward-looking
statements. These statements include, without limitation,
statements relating to the outlook for the property and casualty
insurance industry in Canada and
the U.S., the Company's business outlook and the Company's growth
prospects. All such forward-looking statements are made pursuant to
the 'safe harbour' provisions of applicable Canadian securities
laws.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements as a result of various factors,
including those discussed in the Company's most recently filed
Annual Information Form and annual MD&A. As a result, we cannot
guarantee that any forward-looking statement will materialize and
we caution you against relying on any of these forward-looking
statements. Except as may be required by Canadian securities laws,
we do not undertake any obligation to update or revise any
forward-looking statements contained in this news release, whether
as a result of new information, future events or otherwise. Please
read the cautionary note at the beginning of the annual
MD&A.
SOURCE Intact Financial Corporation