Definity Financial Q2 2026 Earnings Report

Definity Financial EPS Results

• Actual EPS: C$0.97
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Definity Financial Revenue Results

• Actual Revenue: $2.05 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Definity Financial Announcement Details

• Quarter: Q2 2026
• Date: 7/30/2026
• Time: After Market Closes
• Conference Call Date: Friday, July 31, 2026
• Conference Call Time: 11:00AM ET

Definity Financial (TSE:DFY) Corp is a multi-channel, property, and casualty insurance company. It offers auto, property, liability, and pet insurance products to individual customers.

Definity Financial Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 results were strong, with gross written premiums up 34.7% to CAD 1.8 billion, a 93.9% combined ratio, and operating EPS up 15.5% to CAD 0.97. Trailing operating ROE was 12.5%, at the high end of the company’s target range.
• Positive Sentiment: The Travelers integration is progressing ahead of schedule, with CAD 52 million in run-rate expense synergies achieved after six months and CAD 17 million already reflected in first-half underwriting results. Definity raised its annual synergy target by 25%, from CAD 100 million to CAD 125 million, while reporting strong policy and talent retention.
• Positive Sentiment: Management reaffirmed its CAD 6.5 billion full-year premium target, supported by underlying growth above 10% and expected second-half growth in the mid-to-upper 30% range, particularly in commercial insurance. Personal auto and property are also expected to maintain solid growth, aided by rate increases, unit gains, and acquired-book retention.
• Negative Sentiment: The acquired Travelers portfolio continues to weigh temporarily on results, including personal auto and commercial combined ratios, before the full benefit of synergies and platform conversion is realized. Management expects the acquired book to improve toward low-90s combined ratios by the end of the integration period, with the full CAD 125 million synergy benefit largely reflected by 2028.
• Positive Sentiment: Definity ended the quarter with more than CAD 1.2 billion of financial capacity and a debt-to-capital ratio of 26.5%, approaching its 25% long-term target. Management said this supports organic investment, broker acquisitions, and potential accretive carrier acquisitions as it pursues its goal of becoming a top-three Canadian P&C insurer.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the Definity Financial Corporation second quarter of 2026 financial results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Friday, July 31st, 2026. I would now like to turn the conference over to Dennis Westfall, VP of Investor Relations. Please go ahead.

[Dennis Westfall, VP of Investor Relations at Definity Financial]

Thanks. Good morning, everyone. Thank you for joining us on the call today. A link to our live webcast and background information for the call is posted on our website at definity.com under the Investors tab. As a reminder, the slide presentation contains a disclaimer on forward-looking statements, which also applies to our discussion on the conference call. Joining me on the call today are Rowan Saunders, President and CEO; Philip Mather, Chief Financial Officer; Fabi Richenberger, Chief Operating Officer; Paul MacDonald, EVP of Personal Insurance and Digital Channels; and Obaid Rahman, EVP of Commercial Insurance. We'll start with formal remarks from Rowan and Phil, followed by a Q&A session, during which Fabi, Paul, and Obed will also be available to answer your questions. With that, I will ask Rowan to please begin his remarks.

[Rowan Saunders, President and CEO at Definity Financial]

Thanks, Dennis. Good morning, everyone. Our second quarter results demonstrate the continued momentum of our business under our expanded scale. Having successfully attained our top five objective as a leading property and casualty insurer in Canada, we are delighted with our integration progress so far as we continue building a Canadian champion. If you turn to slide five, we have provided a detailed update on our Travelers integration progress and the critical milestones we've achieved over the first six months of the year. Much of this early success is a direct result of the proactive transition planning we conducted prior to close. We've also been impressed by the benefits from the scalability of our platforms and the extent to which we've been able to leverage AI to improve both the efficiency of the conversion process and overall speed of integration. Financially and strategically, we have executed with high discipline.

[Rowan Saunders, President and CEO at Definity Financial]

This began with our transaction financing, which included the rapid repayment of our term loan five months ahead of schedule, saving CAD 15 million in interest expense. We also aligned the acquired reinsurance structure with Definity's risk appetite from day one, freeing up regulatory capital while reducing volatility in a favorable renewal market. Furthermore, this transaction has expanded our specialized talent and capabilities, increasing our total addressable market and commercial lines by nearly CAD 7 billion. Operationally, the integration has been equally successful to date. We have efficiently onboarded our new teammates under a unified leadership team with excellent cultural alignment. Within just one month of closing, we harmonized our new business intake so that all new broker business was being written as a single Definity offering. We are particularly pleased with our customer retention so far as policies began to renew on Definity systems in the second quarter.

[Rowan Saunders, President and CEO at Definity Financial]

We essentially haven't seen any unexpected revenue leakage to date. This early success is a direct reflection of exceptional broker support, with over 40,000 policies successfully converted to Definity systems so far. Moving forward, we expect our broader product offerings and enhanced underwriting capabilities to drive sustained premium growth and profitability. While rationalizing our systems and platforms will achieve meaningful economies of scale. This momentum has translated directly into accelerated progress on our synergy plan, which is running well ahead of our initial schedule, as illustrated on slide six. Six months in, we have already reached CAD 52 million of run rate expense synergies. Of this, CAD 11 million earned into our second quarter underwriting results, bringing our year-to-date realized total to CAD 17 million.

[Rowan Saunders, President and CEO at Definity Financial]

Our strong execution reflected in our rapid pace of synergy capture has led us to increase our synergy expense target by 25%, raising our post-integration commitment from CAD 100 million-CAD 125 million annually. We expect 1/3 of these increased synergies to earn into our results in 2026, approximately double our original expectations. Turning to our performance in the second quarter on slide seven, we delivered strong results across the board. From a top-line perspective, gross written premiums grew 34.7% to CAD 1.8 billion, representing continued progress towards our full year guidance of CAD 6.5 billion. Our overall underwriting profitability remained highly resilient as we successfully managed the initial integration phases of the Travelers transaction, delivering an impressive consolidated combined ratio of 93.9% in the quarter, inclusive of the acquired book.

[Rowan Saunders, President and CEO at Definity Financial]

Our diversified earnings power was also on full display, generating operating EPS of CAD 0.97, representing a 15.5% increase over the prior year. The strong profitability supported an 11.5% increase in our book value per share, while our trailing 12-month operating ROE was 12.5%, inclusive of ongoing capital generation. We ended the quarter with a robust capital position with our financial capacity exceeding CAD 1.2 billion, providing us with the financial flexibility to support our organic growth and fund accretive acquisitions of both brokers and carriers. Turning to the industry outlook on slide eight. We expect conditions in personal auto to remain firm overall, with some variability between provinces as insurers aim to keep pace with the combined impact of loss cost trends, ongoing regulatory constraints in Alberta, and uncertainty related to the extent and impact of macroeconomic factors.

[Rowan Saunders, President and CEO at Definity Financial]

We expect market conditions to remain firm in personal property over the next 12 months as the industry continues to remain diligent, taking underwriting and pricing actions required to fund weather event losses amid persistent climate change. In commercial insurance, while we expect overall commercialized markets to remain attractive, we continue to see intense competition in the large account space. We maintain our expectation for overall industry growth to be in the low to mid-single digits over the next 12 months, varying by segment. Against this backdrop, our portfolio mix, sophisticated pricing models, modern technology platforms, and disciplined underwriting give us a distinct advantage. Leveraging our strong strategic position and broker support, we are confident in our ability to navigate these industry trends effectively, select the right risks, and price our products appropriately to deliver sustained profitable growth.

[Rowan Saunders, President and CEO at Definity Financial]

In summary, our performance this quarter demonstrates that we're executing exactly as intended. We have maintained our strong underwriting profitability, made rapid progress on our integration and synergy capture, and delivered robust operating results in a dynamic market. With that, let me turn the call over to our CFO, Phil Mather, to discuss the results in more detail.

[Philip Mather, CFO at Definity Financial]

Thanks, Rowan. Building on that theme, our financial results highlight the benefits of our increased scale and the discipline of our execution as we continue to integrate the acquired business. Slide 10 summarizes our consolidated insurance results. Gross written premiums for the quarter reached CAD 1.8 billion, representing a 34.7% increase compared to Q2 2025, driven by 24.5% growth from the acquired renewal book as retention rates continue to converge with the underlying Definity book. Our underlying growth, representing the renewal of the Definity business and new business written across the entire platform, exceeded 10% and included contributions from all three lines. This underlying pace of growth increased sequentially from the 8% generated in the first quarter, driven by double-digit levels in personal insurance and a pickup from increased commercial underwriting capacity. Our Q2 combined ratio was 93.9%, inclusive of the acquired business.

[Philip Mather, CFO at Definity Financial]

Performance was driven by the strength of our operations, the initial capture of synergies, and catastrophe losses that were somewhat lower than expectations. I'll now provide some more detail on our lines of business, starting with personal auto on slide 11. Gross written premiums grew by 35.1% in the second quarter, inclusive of 22.6% growth from the continued strong retention of the acquired renewal book, as well as robust underlying growth of 12.5%. Looking ahead, we expect the growth trajectory in personal auto to remain relatively consistent through the second half of the year. The combined ratio of 95.1% was above the 94.2% from a year ago as we absorbed the temporary and expected impact of the acquired business prior to fully realizing synergy benefits, partially offset by a reduction in the expense ratio.

[Philip Mather, CFO at Definity Financial]

In personal property on slide 12, we delivered top-line growth of 37.1%, inclusive of 25.5% growth in the quarter from the strong retention of the acquired renewal book. Continued unit growth and rate achievement led to underlying growth of 11.6%. We expect growth in personal property to be in the mid-30s in the back half of 2026, reflecting the smaller relative size of the acquired renewal book. We delivered a combined ratio of 92.8% in Q2, improved from the prior year's 94.3%, driven by lower catastrophe losses. This line of business generated excellent profitability in the first half of 2026 with a combined ratio in the upper 80s. Turning to slide 13 and commercial insurance. Top-line growth was 32.2% from a year ago, inclusive of 26.3% growth from the continued strong retention of the acquired renewal book in what is its comparatively lowest quarter of volume.

[Philip Mather, CFO at Definity Financial]

As the integration progresses, we expect the larger volume of scheduled renewals to lead to mid to upper 30s premium growth in the second half of the year. Through disciplined execution and an increase in underwriting capacity, we achieved ongoing pricing increases and market share gains in small business and specialty lines. These gains successfully offset continued elevated competition in large accounts, resulting in sequentially higher underlying growth of 5.9%. As expected, the combined ratio of 93.1% in the second quarter of 2026 increased compared to 89.6% in the second quarter of 2025. As in the first quarter, this result was driven primarily by the inclusion of the acquired business and its associated expenses, which we expect will temporarily increase the claims and expense ratios prior to the full benefits of future planned synergies, as well as a modest increase in catastrophe losses. Turning to slide 14.

[Philip Mather, CFO at Definity Financial]

Our strong profitability was supported by our impressive underwriting results, while net investment income grew to CAD 79.5 million, driven by our larger post-acquisition investment portfolio. Our distribution income reached CAD 24.5 million, demonstrating solid organic growth in our broker channel. In total, our operating net income reached CAD 118 million, or CAD 0.97 per share, which represents a 15.5% increase in operating EPS over the prior year. Our trailing 12-month operating ROE was 12.5% at the high end of our target range and supported by lower than expected catastrophe losses in Q3 of 2025. Slide 15 illustrates the performance and market position of our national broker platform, which continues to deliver as a key strategic pillar, ranking among the top 10 brokers in Canada with approximately CAD 1.6 billion in gross written premiums under management.

[Philip Mather, CFO at Definity Financial]

This momentum positions us well to achieve our target of CAD 2 billion in GWP by the end of 2027. When combining the CAD 24.5 million of distribution income I just discussed with CAD 11.2 million of intercompany commission income, our total broker operating income reached CAD 35.7 million in the second quarter. This represents a 20.2% increase over the prior year, keeping our national broker platform on track to achieve our 20% annual growth guidance.

[Philip Mather, CFO at Definity Financial]

The benefits of our strong operating performance are also clearly visible on our balance sheet, as shown on slide 16. Our debt-to-capital ratio is already down to 26.5%, approaching our long-term target of 25%, well ahead of our initial 24-month guidance. Even after funding the Travelers transaction, our total financial capacity remains robust at more than CAD 1.2 billion, putting us in an enviable position to fund future growth and deliver on our capital priorities.

[Philip Mather, CFO at Definity Financial]

With that, I will turn the call back over to Rowan.

[Rowan Saunders, President and CEO at Definity Financial]

Building on the strong results Phil just detailed, this quarter provides a powerful proof point of our disciplined strategic, operational, and financial execution. We set out to integrate a transformational acquisition, capture significant synergies, and continue to drive profitable growth across our business, and we are delivering on all fronts. Our integration success to date validates the business case we established for the Travelers transaction, which is expected to deliver a more than 200 basis point improvement in our operating ROE on top of our organic plans. With this powerful accelerator, we are highly confident in our progress toward our midterm objective of a sustainable mid-teens operating ROE.

[Rowan Saunders, President and CEO at Definity Financial]

Furthermore, our proven ability to execute on this complex transaction and our integration success to date gives us increased confidence in our capacity to successfully identify and integrate future acquisitions as we pursue our updated goal of becoming a top three P&C insurer. Our robust capital position continues to provide us with the financial flexibility to support our organic growth fund, accretive acquisitions, and deliver on our capital priorities. We remain highly confident in our ability to build on this scale to deliver sustainable long-term value for our shareholders. With that, I'll turn the call back over to Dennis to begin the Q&A.

[Dennis Westfall, VP of Investor Relations at Definity Financial]

Thanks, Rowan. With that, we are now ready to take questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Bart Dziarski with RBC Capital Markets, please go ahead.

[Bart Dziarski, Analyst at RBC Capital Markets]

Great. Good morning. Thanks for taking the questions. I wanted to ask around top line GWP. Year to date, you're tracking about CAD 3.2 billion. You've got the CAD 6.5 billion plus guidance. That presumably implies a back half ramp. I think, Phil, you had mentioned commercial should accelerate. Could you unpack that in terms of what you expect in the back half from premium growth, the details, and how that ties into the guide for the year? Thanks.

[Philip Mather, CFO at Definity Financial]

Happy to do that. Overall, for the full year, as you say, CAD 6.5 billion is the target. In order to get to that, we effectively have to deliver about a 35% growth rate for the full year. As you've noted, we're already at that level year to date. What you'll see in the second half, we expect is pretty much a consistent overall growth rate. When you look at the relative sizes of the books of business that we're acquiring from Travelers, that's the key. That moves up a little bit, particularly in commercial lines. When you look at the individual lines of business, what we'd anticipate is a pretty good continuance of the underlying growth rates that we've seen. You'll see a little bit more in terms of the impact of that acquired book in commercial lines.

[Philip Mather, CFO at Definity Financial]

That should tick that up a little bit

[Rowan Saunders, President and CEO at Definity Financial]

Into the mid to upper 30s growth rate. In personal lines, also should say pretty consistent with where it's delivered year to date from a growth rate standpoint. Personal property might tick down a point or two, and again, that's representative of the relative sizes of the acquired book. I think our message overall is we're pretty much bang on our expectations year to date. We're pretty much bang on our guidance view for the second half of the year, and we're very pleased with what we're seeing from the level of retention on the Travelers book. I think steady as she goes is the overall message.

[Bart Dziarski, Analyst at RBC Capital Markets]

Got it. Thanks for that, Phil. Very helpful. Then on the Travelers integration, again, another quarter of solid execution, and we saw the expense synergy target increased. As you get more familiar with the business, are there other areas that you're potentially seeing where things are conservative and could lead to future upside over time? Thanks.

[Rowan Saunders, President and CEO at Definity Financial]

Well, Bart, thanks for the question there on that one. Maybe just to kind of kick that off, we're delighted with the progress that we're making, and really, from our perspective, this couldn't be going better. If you step back just for a moment, we always said this was going to be a very strategic transaction for us. It helped us get into the top five. We said it was going to be financially compelling, and there's a lot of confidence we have about the 200+ basis points improvement to the operating ROE. I think the new news for us here is that operationally, this integration is going really well, particularly for the size and transformational nature of the deal. When we step back, we look at the retention of customers that are going really well. The retention of talent is excellent.

[Rowan Saunders, President and CEO at Definity Financial]

It's a smooth experience for our brokers who are incredibly supportive. Then we're now nicely into the actual heavy lifting of the conversion, and that the team is doing an outstanding job on. When you step back and look at all of that gives us the confidence to increase energy by 25%, as you mentioned, CAD 100 million-CAD 125 million run rate. Don't forget, this is when we're talking about the cost synergies of the business. What's still to come is as we transfer this portfolio onto the Definity platform, we do think that there'll be further loss ratio improvements that'll come over time. As I said, operationally, this is going really well, and maybe it'll help for Fabi just to give you a bit more insights into the integration.

[Fabi Richenberger, COO at Definity Financial]

Yeah, certainly, Rowan. Glad to do that. I would say from a big picture point of view, that we are really pleased with both the financial and operational progress that we've been achieving as respects to that big scale Travelers integration. We have incredibly talented teams in place that are working pretty much 24/7, as you would expect. It's a big undertaking. We are extremely pleased with the talent that we have, the dedication, and the discretionary effort that we have from our employees. As we disclosed, we started the conversion of the acquired business outside of Ontario in Q2, and now in Ontario, the conversion started in Q3 as well, and the conversion process is working really well. Both the loss ratio and retention numbers that we're achieving are in line with our expectations, and obviously we're pleased with that.

[Fabi Richenberger, COO at Definity Financial]

We're also getting great support from our broker partners across Canada. As a result of this transaction, we added a little over 100 new broker relationships, and that allows us to be comfortable in the growth guidance that Phil mentioned at CAD 6.5 billion. We are also leveraging the additional capabilities that we have in place now with especially a heavy focus on the expanded commercial specialty capabilities, the cross-border capabilities. We are leveraging that to support additional growth traction with our broker partners. Maybe the last point I want to mention is that the TSA, the transition service agreement with Travelers, is working very well, and we are also making the point to exit and in-source as many of those transition services as possible, which will give us an additional financial benefit as well.

[Fabi Richenberger, COO at Definity Financial]

Overall, very confident that we are achieving the expected financial and operational benefits out of this transaction.

[Rowan Saunders, President and CEO at Definity Financial]

Well, I guess when I summarize that, I think we went into this with Definity growing nicely and really running in the low 90s. We've picked up Travelers, which was early around 100% break-even business. When we now look at this, not only just the synergies that come from cost, but where we think the loss ratios will move, we've got a high degree of confidence that by the end of the transition integration period, we will have Travelers portfolio running in the low 90s as well, and I think that was the ultimate outcome. So far, that's definitely where we think we will end up.

[Bart Dziarski, Analyst at RBC Capital Markets]

Thanks, Rowan and Fabi. Appreciate the wholesome response.

[Operator]

Thank you. Paul Holden with CIBC, please go ahead.

[Paul Holden, Analyst at CIBC]

Thank you. Good morning. A few questions. I guess I want to start on potential for more broker acquisitions. I guess two parts to the question. One is, you've talked about increased balance sheet capacity. Does that influence the pace that you might execute broker transactions at, i.e., increasing? Two, can you give us a flavor sort of what the opportunity set looks like today? Has it changed at all? Has it improved, or is it slowing? Thanks.

[Rowan Saunders, President and CEO at Definity Financial]

I think, Paul, on that perspective, we're very happy, firstly, I would say, with our broker platform. As you can see, the revenue is growing nicely. The new acquisitions we made keep kind of flowing through. The guidance was ultimately 20% growth in our national broker platform operating income, and we're on that and comfortable with the forecast there. What we see here is that there is still a healthy pipeline of activity. Sometimes, this is less about do we have the financial capacity and more about the opportunity and timing. Sometimes things happen in different quarters. I would say that we feel very comfortable with that opportunity ahead of us on the broker side. What really is happening, if you step back for a moment, is the consolidation continues to happen.

[Rowan Saunders, President and CEO at Definity Financial]

The top 10 brokers in Canada today control something like 60% of the market share, up from 40% about a decade ago. You could see there is absolutely a trend towards size and scale. The need for scale, the need for specialization is driving part of the opportunity. There's also aging demographics, which also is driving an opportunity, and I think that means that the pipeline is heavy. We like it, and we think that we're happy to go. There is no operational hesitancy. It's really just about timing that happens in the marketplace. You do point out the fact that we're generating capital rapidly, and that's a good position to be. It goes back to our overall M&A strategy. We have a goal of top three. We still like to put that to work in carriers. We do like the broker space.

[Rowan Saunders, President and CEO at Definity Financial]

We see opportunity. That programmatic approach is going to continue.

[Paul Holden, Analyst at CIBC]

That's good. Maybe, hopefully it's a quick one. Obviously, wildfires in the headlines pretty much every day. Doesn't look like it's touched any major population centers, which is good news. Just wondering if you can make any comments sort of on cat losses or cat events and how they might have been impacting losses quarter to date.

[Paul MacDonald, EVP of Personal Insurance and Digital Channels at Definity Financial]

Yeah, thanks, Paul. It's Paul here. I'll keep really my comments to Q2, specifically around the cat activity countrywide. It was more of a flooding event across the board than it really was a wildfire event. As you've pointed out, the wildfires, although many of them were more in the northerly areas and less populated areas, from an insurance perspective, they have been less impactful. Obviously, we've been watching the space very carefully. There are some rainfall that has helped mitigate some of the expansion of those wildfires. As you can tell from our results, it has been certainly within expectations, and we're pleased with the overall quarter and with our performance.

[Paul Holden, Analyst at CIBC]

Okay. Last one from me. I do want to talk about personal auto a bit. Obviously, all of us can go to the FSRA website and just see the rate approvals. It at least suggests to me a deceleration in rate for the industry. Be it, I don't see it in your results. You've also given an outlook that PM growth should maintain around the same level in the second half. I'm just trying to square those two things. Is that an indication that rates overall remain pretty strong despite the FSRA data, or is it Definity's gaining market share? Just help me sort of parse that out if you can.

[Rowan Saunders, President and CEO at Definity Financial]

Let me start that one, Paul, I think when we look at our personal auto results, you look at the quarter, 35% growth, the underlying growth at 12.5%, actually slightly better than Q1. We're very happy where we are with our portfolio, with our rating positions, we're happy to take growth. What you're seeing in our portfolio is a nice balance between market share gains, that's unit count growth, as well as rate going through the portfolio. If you think about the pricing, I'm talking about our portfolio here, we've had significant rate over the last year coming through, there still is mid-single-digit rate flowing through the portfolios. What's also helping us, of course, is the strong retention from Travelers.

[Rowan Saunders, President and CEO at Definity Financial]

That's where it leads us to be very consistent with the forecast being in the mid-30s for the rest of the years. There is definitely change in the marketplace, there's a number of things. There's reforms going on. There's other competitors that have done significant price increases in the past. A lot of trends have kind of stabilized. I think when you look at a sample of rate filings, it doesn't really tell the full story. I know Paul was just mentioning recently we've just done another filing. It's a segmentation filing. Sometimes it's not just about taking rate. It's about how you are managing and optimizing your portfolio. I think when we step back, we think that's an attractive marketplace. We think we're going to continue to gain unit share. Of course, the broker experience really likes the Vyne platform.

[Rowan Saunders, President and CEO at Definity Financial]

Our proposition, as long as we're competitive, bodes well.

[Paul Holden, Analyst at CIBC]

Okay. That's it for me. Enjoy your long weekend. Thank you.

[Operator]

Thank you. Doug Young with Desjardins, please go ahead.

[Doug Young, Analyst at Desjardins]

Hi, good morning. Maybe going back to Travelers? Can you dig into a little bit more about what's driving the additional cost synergies? Can you maybe quantify the retention rates that you're seeing by business line relative to expectations? Hoping to get a little bit more color on those items.

[Rowan Saunders, President and CEO at Definity Financial]

Well, Phil, why don't you start with the cost synergies?

[Philip Mather, CFO at Definity Financial]

Yeah, sure. Thanks, Doug. Overall, what we've seen so far to date is the CAD 52 million that have been triggered. Because we had a really good early start in Q1 and we've continued with good momentum into the second quarter, you see about CAD 17 million of that has now earned into the underwriting results in the first half. We've seen larger capture and earlier capture, which has helped drive the support. What's behind those numbers? If you look at the three areas that we talked to, about 2/3 of those triggered synergies are coming from the elimination of parent company charges, combined with technology savings. About a third is coming through leveraging the economies of scale of our business and just disciplined attrition management that we started pretty early on through the process. Overall, we're seeing very good capture there.

[Philip Mather, CFO at Definity Financial]

I think, looking forward, part of the reason we've been able to increase to that CAD 125 million is as we've been able to bring the businesses together, onboard the individuals, and importantly, as we're utilizing our tech stacks and capabilities, we're seeing that we don't need to add as much run rate cost to our underlying business to capture the integration of Travelers. Effectively, we're not out having to add back to our own cost base to capture the elimination of the parent support that's happening. That gives us good conviction to drive the 25% increase from a synergy standpoint. You'll also see that we're pretty positive about the timing of that. We reckon about 1/3 of that CAD 125 million is going to earn into 2026 results. We think about a half is going to earn into 2027.

[Philip Mather, CFO at Definity Financial]

The reason for that is that you've got a sizable lump of the savings that come at the back end of the integration process. As Fabi said, we're working hard to get off the TSA support from the U.S. parent. A decent lump of the CAD 125, close to half of it, will therefore come at the end of 2027. You'll really get that full earnings impact coming through into 2028. That's really how we've got the conviction and the confidence behind the increase in the synergy capture. Then just from a retention standpoint, what we're seeing there is already very good progress. Actually in the second quarter, we've seen a convergence from the customer retention stats in pretty much all the lines of business. I mean, if you look at personal lines overall, I think we're around the mid-80s there.

[Philip Mather, CFO at Definity Financial]

It's a little lower in auto, as you'd normally see, a little higher in personal property, but both of those buckets are pretty much at the same convergence level already. Then when you look at commercial lines, we've actually started to close the gap. You might remember in the first quarter, we were four or five points gap between the two renewal books. We've seen that close in a couple of points already as we're starting to kind of roll that business over, and we've got conviction in the second half you'll see that gap close even further. Overall, I think we're in that mid-80s range. Very good convergence across the whole business. Really that's ahead of our expectations when we would have planned this out.

[Doug Young, Analyst at Desjardins]

All right. Appreciate the color. Then just, Paul, maybe on back to the CAT this quarter, and I think, Phil, you said this, or maybe it was Rowan, you said this in your prepared remarks, that CATs were lower than you expected. I know they were lower than last year. Is there a structural reason why you kind of weathered the storm better than peers on the CAT front this quarter? Just hoping if you have some thoughts on that.

[Rowan Saunders, President and CEO at Definity Financial]

I think when we think about CATs, I mean, obviously there is some variability here, and it depends on the seasons. It also depends on where they are, the geographic location. We do have a strategy where in some parts of Canada, we are naturally underweight. Primarily that is in the west, in Alberta. That is by design in our personal property and commercial property portfolio. We have been well rewarded for doing that. I think the other thing for us is that, particularly in personal property, we have finished now a couple of years of really working hard in terms of portfolio management and watching aggregation limits in higher CAT zone areas. If you remember that we had lower unit count growth for a couple of years as we were repopulating growth in more attractive areas and managing CAT accumulation in higher CAT-prone areas.

[Rowan Saunders, President and CEO at Definity Financial]

I think that is another item that helped us. Part of this, quite frankly, is I think the capability and the skill sets of the teams, but also it is where these CATs tend to happen if you have a higher or lower natural market share.

[Doug Young, Analyst at Desjardins]

This was not reinsurance, like your CAT reinsurance coverage kind of kicking in to a better degree than maybe others. This was more kind of business segmentation structurally that kind of was intended to help you on this front. Is that the way to kind of think about it?

[Rowan Saunders, President and CEO at Definity Financial]

Correctly. Absolutely correct, yeah. That did not get near our CAT limits.

[Doug Young, Analyst at Desjardins]

Okay. Just one last quick one, just on personal auto. There was deterioration in the current accident year loss ratio, and I think there was mention that there was a drag from the Travelers business. Is that all from just the drag of the Travelers business? Are you seeing any other kind of pressures on the loss ratio coming through?

[Paul MacDonald, EVP of Personal Insurance and Digital Channels at Definity Financial]

Thanks, Doug. It's Paul here. Yeah, no, you're absolutely right. That's purely the drag of the portfolio that was coming in. We had previously indicated it was close to breakeven prior to us purchasing it. As you naturally put on a sizable portfolio, it has a drag impact, and we expect it to be a bit persistent as we continue to bring that portfolio over to ours onto the Definity rating. By the end of next year, it should be fully completed. We don't see any other issues that are impacting it. We're quite pleased with the underlying results, actually, given the acquisition. We continue to optimize that portfolio as we go.

[Doug Young, Analyst at Desjardins]

Great. Appreciate the color. Thank you.

[Operator]

Thank you. Jaeme Gloyn with National Bank Capital Markets, please go ahead.

[Jaeme Gloyn, Analyst at National Bank Capital Markets]

Thank you. Just on the expense ratio improvement from last year, even with the Travelers. Some of that might be just the synergies flowing through, but is there any that you would attribute to just the cost optimization plans that you had in previously? Can you kind of break a little bit of that out for us?

[Philip Mather, CFO at Definity Financial]

Yeah. Thanks, Jaeme. We're very happy with how that's going. If you look at the total expense ratio, we're about 30% on a year-to-date basis, which you might have anticipated, and we did, would push up a little bit because when you put the two businesses together, we expected about a two-point impact on combined ratios overall, with about half of that hitting the expense ratio and the rest pushing up the loss ratio. That was the anticipation. You're right in terms of causation behind that. We do have favorable support coming through from the ongoing initiatives that we've been doing for some while. You'll recall one of those operating ROE levers was the expense efficiency. We've been leaning into that consistently over the last couple of years, and a lot of those actions we took in 2025 are now earning through.

[Philip Mather, CFO at Definity Financial]

That's driving good support. I would say another contributing factor is the early timing of the synergy capture, as you also point out. Because we've been able to get after that early and we're ahead of expectations, that's also provided a little bit of support there as well. I think where we feel today is that's a very good number for the first half of the year. We think that's quite sustainable for the second half. It varies a little bit by line of business. You've seen a little bit more of a push-up in commercial lines that's really representative more of the business model. You've got a lot of high degree of automation and technology base behind personal lines. You've got more of a people business structure in commercial lines.

[Philip Mather, CFO at Definity Financial]

Overall, I think it's the combination of that disciplined management, and actions that we've been taking on the overall business, combined with the early synergy progress that we've made. That's really what's feeding through.

[Jaeme Gloyn, Analyst at National Bank Capital Markets]

Great. Financial capacity rebuilding, as was discussed earlier. Rowan mentioned you still prefer carrier acquisition over Well, maybe not over, but still would like to continue on that front for reaching strategic goals. What's the appetite? Maybe it's too soon, but if something was on the table, what's the appetite? What's the resource commitment at this stage?

[Rowan Saunders, President and CEO at Definity Financial]

Well, look, Jaeme, we go back to our strategic goal here of becoming a top three, it wasn't that long ago we went public at the eighth largest insurance company. We organically grew to number six. With Travelers, we've got to number four. We still do need, in addition to our organic growth plans, which are above the market rate, to do M&A to get into the top three. We look at strategic fit. We want to make sure it's a decent business and of course, financially supportive of our mid-teens operating ROE. We think the marketplace is coming towards us a bit on this. You need to be big. You have to have scale these days. Parts of commercial lines, like that upper end market is more difficult, and that may create some opportunities. In personal lines, you see the need for data, tech, brand, AI investments.

[Rowan Saunders, President and CEO at Definity Financial]

That may create opportunities. We think about that. I think your question around operational readiness when you consider the Travelers deal, because it's going really well and we're now into the integration, and because acquisitions do take some time, and when you think about the regulatory approval perspective, you're at least, what, nine to 12 months before you get there. We're now in a position where operationally, that isn't going to put us on the sidelines. I think we're good. I think Phil talked a bit about the financial capacity that we have and we keep building, and that's without raising any equity. We're very confident that should there be opportunities, we'd like to participate in them. I think you go back to, we really felt good about building the Definity organic business and being able to perform well.

[Rowan Saunders, President and CEO at Definity Financial]

We needed to convince ourselves and the market that we can do an integration well. We're not finished yet, but very good momentum and a lot of confidence about that. I think we consider that as we think about the inorganic part of our strategy.

[Jaeme Gloyn, Analyst at National Bank Capital Markets]

Last one, just on the Sonnet, I might be confusing some of these numbers, but direct-to-consumer growth in the top line was about 3%. I assume that's entirely Sonnet. I'd expect that. Maybe do a little bit better. Maybe you can provide some comments as to where you see that growth in the Sonnet platform, and how it's performed against your expectations.

[Paul MacDonald, EVP of Personal Insurance and Digital Channels at Definity Financial]

Yeah, Jaeme, thanks. It's Paul here. You're absolutely right about the growth within the Sonnet platform. We're actually quite pleased with that. Just taking you back a little bit, you may recall that our major priority over the last couple of years was to bring this portfolio to profitability, and we're delighted that we've been able to maintain that. Now that we have, as I mentioned probably two quarters ago, we were turning our attention to prudently growing that platform, and we have. Each quarter, it's a little bit of additional growth. Really what that represents is much better quality underneath. We are increasing the retention levels. We're getting a higher proportion of group and affinity accounts, which for us are better long-term, long-tenured customer base. We're doing very well with our UBI product, and we're pushing a little bit more on geographic representation. We're quite pleased with it.

[Paul MacDonald, EVP of Personal Insurance and Digital Channels at Definity Financial]

I have said before, what we wouldn't do is dramatically increase top line disproportionately, because if you have too much new business initially, it does tend to drag down the loss ratio in the first year. We want to be a bit prudent around how we move forward with that. At the same time, we're building an incredible amount of capabilities underneath the platform, both to service all of these emerging areas. Also as we think about the consumer change, in terms of how they consume information, where they access information, how they want to be served, whether it's self-serve or a combination of self-serve and assisted sales. I think you've accurately described it. We would expect a modest increase as we keep going and with the goal eventually to keep growing this business.

[Jaeme Gloyn, Analyst at National Bank Capital Markets]

Okay. Thank you.

[Operator]

Thank you. Mario Mendonca with TD Securities, please go ahead.

[Mario Mendonca, Analyst at TD Securities]

Good afternoon or good morning. Phil and Rowan, I'm not sure how much detail you want to get into this, but you're at CAD 125 million of pre-tax synergies. You've earned CAD 17 million, so it still leaves a good, meaningful CAD 108 million to go. Is there any way you could help me understand what lines that really falls into? Like the extent to which you'd call it segment expenses, segment claims, and then those expenses outside of the segments. With those three in mind, is there any way you could sort of portion out that CAD 108 million?

[Philip Mather, CFO at Definity Financial]

Yeah, thanks, Mario. I would say that's the right lens on the CAD 125 million, and the variability to what we've got so far. Maybe if I just step back, in terms of how the total emerges. You've got the CAD 125 million to date. By the end of this year, within our 2026 numbers, we think that's in the CAD 40 million-CAD 45 million range that's supporting 2026 underwriting income. For 2027, that's going to increase to about half of the CAD 125 million. And the reason it doesn't increase faster than that is because there's a big chunk of TSA support from the U.S. parents that only comes off at the end of 2027. By the time you hit 2028, you should then have pretty much the full CAD 125 million earning into results.

[Philip Mather, CFO at Definity Financial]

In terms of how that supports, generally speaking, the synergy piece is a combination of both claims-related expenses, so not indemnity managed, but claims infrastructure, claims technology, and then across the broader business. About half of that, roughly speaking, will go to operating expenses. The other half maps into the loss ratio, because that's kind of attached to the kind of claims allocations that we do. And then when you look at each line of business, in just the same way that there's a disproportionate impact on commercial, there'll be a disproportionate benefit from the go-forward synergies that occur. As you're able to kind of roll that over, that's why we think that three-point drag kind of comes back more in line.

[Philip Mather, CFO at Definity Financial]

If you step back from it all, what we'd anticipate once you get through the acquisition is you get a pretty similar, and through the full integration, you get a pretty similar outlook between the three lines. Commercial lines should be in that kind of lower nineties range. You put the two together. Personal lines, auto is more in that mid-nineties range from a regulatory standpoint, and personal property we'd expect to do a little bit better than that in that lower to mid-range. You've got inflation at the moment, that should come down pretty much commensurate with how it's gone up effectively overall.

[Mario Mendonca, Analyst at TD Securities]

Putting it all together, it sounds like half expenses, half loss ratio, you wouldn't apportion any of that to the top of the house, like the other income and expenses, no portion really. You're not allocating anything to that.

[Philip Mather, CFO at Definity Financial]

No, that's right, Mario. It's very much a underwriting income story.

[Mario Mendonca, Analyst at TD Securities]

Right.

[Philip Mather, CFO at Definity Financial]

You're not seeing it spill out into the other areas. Of course, when we put the two businesses together, we got a big lift in the investment portfolio. You do see that.

[Mario Mendonca, Analyst at TD Securities]

Yeah.

[Philip Mather, CFO at Definity Financial]

I think the one thing to just bear in mind with the CAD 125 million, that's the kind of pure expense target. We do think over time there'll be some improvement opportunity within the non-expense elements of the loss ratio, things like body shops, contracts with third-party lawyers, our segmentation, our underwriting capabilities. Beyond that, longer term, there's opportunities in optimizing reinsurance structures with the increased size of the base. There's opportunities perhaps on the capabilities we've added through the Commercial Insurance business and the bigger use of data. We think this is quite transformational for us in the longer term, but certainly in the nearer term, it's about getting that cost structure well-aligned, and there's a lot of intense focus on making sure we do a good job of that in the next couple of years.

[Mario Mendonca, Analyst at TD Securities]

My second question is more specific to this quarter. One of your peers referred to large losses in their property segment, in their Commercial Insurance segment. Is that a notion something you think about internally, this large loss category? You didn't call it out this quarter. Is there something different about your business that would not have resulted in large losses? It's my understanding that it was not specific to that player, but rather an industry issue.

[Philip Mather, CFO at Definity Financial]

I mean, we clearly follow large losses. When we start looking at our portfolio, we look at the attritional, we look at the large, we look at the weather, we look at the PYD, we do it by segment. We didn't see anything in the area, so it's business as usual for our portfolio.

[Mario Mendonca, Analyst at TD Securities]

Thank you.

[Operator]

Thank you. Next question, Tom MacKinnon with BMO Capital Markets. Please go ahead.

[Tom MacKinnon, Analyst at BMO Capital Markets]

Yeah, thanks. Tom MacKinnon here. My question is on net investment income, kind of flat to almost modestly down quarter-over-quarter. Talked about before proactively trading into higher yields. Happening, I mean, yields went up modestly quarter-over-quarter. Is that still necessarily the case? How should we be thinking about net investment income going forward? Thanks.

[Philip Mather, CFO at Definity Financial]

Yeah, thanks, Tom. Yeah, we're pretty happy with how that's played out. As you'll know, we were pretty proactive in the first quarter in putting the two portfolios together. In Q1, we actually for about a month, we were carrying a higher investment portfolio balance because we were holding the invested assets in order to pay down the excess capital loan. You had a little bit of inflation in Q1 of the level of invested assets as we carried that CAD 1 billion+. Actually, if you look at it comparatively Q1 to Q2, normalizing out for the fact that you were holding that extra CAD 1 billion, you'd actually see a slight pickup in the overall levels of investment income. Then when you look out to the full year, it gives us good conviction on the CAD 320 million.

[Philip Mather, CFO at Definity Financial]

Overall, we're pretty much halfway there, we'd expect to kind of hold that level of pace in the second half. I think what the team are doing is they're proactively looking to do a couple of things. Capture yield on the fixed income portfolio when the opportunity arises. Then the other thing they're doing is they're trying to capture that in a way that pushes out the natural reinvestment cycle. It's not just about driving the absolute number, it's about then trying to retain the book yield capture for an extended period of time. They've done a really good job of that, I think in the first half of the year. That gives us good comfort on second-year targets. It gives us good comfort on the outlook going forward.

[Philip Mather, CFO at Definity Financial]

I think the last thing you'll see is we're being very disciplined, from a risk perspective. We're not chasing yield at the purpose of undue risk. The capital position of the organization's in a great spot, and ideally, we'd like to deploy that proactively through organic growth, investment in the core business, dividend expansion, and M&A. We're very satisfied with the way that portfolio's being managed to date, and we do like the trends overall.

[Tom MacKinnon, Analyst at BMO Capital Markets]

All right. Thanks for the detailed response.

[Philip Mather, CFO at Definity Financial]

No problem.

[Operator]

Thank you. We have no further questions. I will turn the call back over to Dennis Westfall for closing comments.

[Dennis Westfall, VP of Investor Relations at Definity Financial]

Thank you everyone for participating today. The webcast will be archived on our website for one year. A telephone replay will be available at 2:00 P.M. today until August 7th, and a transcript will be made available on our website. Please note that our third quarter results for 2026 will be released on November 5th. That concludes our conference call for today. Thank you and have a great weekend.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Participants

Executives

• Dennis Westfall, VP of Investor Relations
• Rowan Saunders, President and CEO
• Philip Mather, CFO
• Fabi Richenberger, COO
• Paul MacDonald, EVP of Personal Insurance and Digital Channels

Analysts

• Bart Dziarski, Analyst at RBC Capital Markets
• Paul Holden, Analyst at CIBC
• Doug Young, Analyst at Desjardins
• Jaeme Gloyn, Analyst at National Bank Capital Markets
• Mario Mendonca, Analyst at TD Securities
• Tom MacKinnon, Analyst at BMO Capital Markets