Definity Financial Q3 Earnings Call Highlights

Key Points

• Gross written premiums rose 36.2% to CAD 1.7 billion, boosted by the acquired Travelers renewal book. Severe weather losses of CAD 190 million drove the combined ratio up to 100.6% from 89.4% a year earlier.
• Travelers integration is progressing, with more than one-third of the portfolio converted and CAD 56 million in annualized synergies achieved—nearly 45% of the CAD 125 million target. Definity expects to complete conversions and exit transition services by late 2027.
• Year-to-date premiums reached CAD 4.9 billion, keeping the company on track for its CAD 6.5 billion full-year guidance. Net investment income climbed 46.6% to CAD 79.3 million, and management maintained its outlook for at least CAD 320 million in investment income for 2026.

Definity Financial TSE: DFY reported higher third-quarter premiums as it integrated the acquired Travelers business, but severe weather losses pushed its combined ratio above 100%.

Gross written premiums rose 36.2% from a year earlier to CAD 1.7 billion, while operating earnings per share were CAD 0.36. The insurer recorded CAD 190 million in weather-driven catastrophe losses, compared with an unusually benign period a year earlier.

The consolidated combined ratio, a measure of claims and expenses relative to premiums, increased to 100.6% from 89.4%. Catastrophe losses accounted for 12.8 percentage points of the ratio, up from 1.9 points a year earlier. Book value per share rose 3.3% year over year to CAD 34.53.

President and CEO Rowan Saunders said the company’s underlying results remained nearly flat year over year despite the expected near-term effect of adding the acquired portfolio before realizing all planned synergies. Trailing 12-month operating return on equity was 10.3%, reflecting elevated weather losses and the averaging in of an expanded equity base, he said.

Travelers Integration Advances

More than one-third of the acquired Travelers portfolio has been converted to Definity’s platforms, with customer retention tracking in line with expectations, Saunders said. Conversion is underway across all product lines, and new claims from converted policies are being managed in Definity’s system.

The company expects to complete business conversions and exit its remaining transition services agreements by late 2027. Chief Operating Officer Fabian Richenberger said the acquired business’s loss ratio is also in line with expectations.

Definity has achieved CAD 56 million in annual run-rate synergy savings, almost 45% of its CAD 125 million target. Its underwriting results included CAD 31 million of earned synergies year to date. Saunders said the company remains confident it can realize at least one-third of the target by the end of 2026.

Integration costs remain on track for a total of CAD 150 million to CAD 170 million, with approximately one-third expected in 2027. Saunders said the transaction is expected to improve operating return on equity by more than 200 basis points on top of organic plans, supporting a midterm objective of sustainable mid-teens returns.

Weather Weighs on Insurance Results

Personal property was the hardest-hit major business line. Its combined ratio rose to 112.1% from 83.6% as catastrophe losses reached 32.6 percentage points, an increase of 29 points. Gross written premiums in the segment increased 35.3% to CAD 486 million.

Personal auto premiums grew 38.1% to CAD 714 million, and its combined ratio increased to 96% from 94%. Commercial premiums rose 34.2% to CAD 472 million, while the segment’s combined ratio climbed to 96.1% from 88.1%, primarily because of higher catastrophe losses.

Chief Financial Officer Philip Mather said 25.7 percentage points of the company’s overall premium growth came from the acquired renewal book. The underlying growth contribution, which includes renewals of the legacy Definity business and new business across the expanded platform, was 10.5%.

Year-to-date gross written premiums reached CAD 4.9 billion, keeping Definity on track for its full-year guidance of CAD 6.5 billion, Saunders said.

Auto Reforms and Commercial Competition

Executives expect Alberta’s transition to a no-fault auto insurance system on Jan. 1, 2027, to reduce average industry premiums in the province by a mid-teens percentage. Mather said Definity has approximately CAD 300 million in personal auto premiums in Alberta.

Paul MacDonald, executive vice president of personal insurance and digital channels, said the reduction in premiums should be accompanied by lower liabilities without a meaningful lag. He expects a slightly positive effect on Definity’s bottom line.

In Ontario, MacDonald said moderating claims trends have reduced the need for additional industry rate increases in the near term. He expects insurers to begin taking additional rate increases to cover trends in the second half of next year.

Definity expects commercial insurance industry growth in the low single digits over the next 12 months, with competition most intense for large accounts. Obaid Rahman, executive vice president of commercial insurance, said less than 20% of Definity’s commercial portfolio is exposed to that segment. He said pricing remained in the mid- to high-single digits for small and medium-sized enterprises and in the low- to mid-single digits for middle-market accounts.

Investment Income and Capital Plans

Net investment income rose 46.6% to CAD 79.3 million, helped by the larger post-acquisition portfolio and trading into higher yields. Mather maintained the company’s outlook for at least CAD 320 million in investment income for 2026 and said he expects the fourth quarter to be the year’s highest.

Total broker operating income, including intercompany commissions, rose 10.2% to CAD 29.3 million in the quarter. Mather said the company expects to be at or near its approximately 20% full-year growth target, which includes contributions from acquisitions.

Saunders said Definity remains active in evaluating acquisitions as it pursues its goal of becoming a top-three Canadian property and casualty insurer. The company reported nearly CAD 1.2 billion in total financial capacity.

Definity has also introduced an agentic artificial intelligence tool for broker-submitted first notices of loss. Saunders said early results showed a 50% reduction in claims administration effort for those claims.

About Definity Financial (TSE:DFY)

Definity Financial Corporation ('Definity', which includes its subsidiaries where the context so requires) is one of the leading property and casualty insurers in Canada, with approximately $6.4 billion in gross written premiums (pro forma with the Travelers Transaction 1 ) for the 12 months ended June 30, 2026 and $4.2 billion in equity attributable to common shareholders as at June 30, 2026.

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