Intact Financial TSE: IFC reported third-quarter net operating income of CAD 3.63 per share and a 94% combined ratio, as catastrophe losses exceeded expectations but premium growth improved across its businesses.
The insurer’s top-line growth rose to 5%, while operating return on equity was 16%, marking the 10th consecutive quarter above 15%, Chief Executive Officer Charles Brindamour said on the November 4 earnings call. Excess capital reduced the return by 2 percentage points, he said.
Catastrophe losses totaled CAD 660 million, or 4 points above expectations, Chief Financial Officer Ken Anderson said. The combined ratio measures claims and expenses against premiums; a figure below 100% generally indicates an underwriting profit.
Canadian Auto Growth and Alberta Reform
Canadian personal auto premiums grew 10%, including 2 points of unit growth, and the business recorded a 91.2% combined ratio. Brindamour said Intact had outgrown the Canadian auto market by 4 points in the first half of the year and expects to continue outperforming industry growth over the next 12 months.
The company expects industry growth in the mid-single digits over that period, reflecting the effect of Alberta’s auto insurance reforms. Under the province’s Care-First system, new claims from January 1 will move to a model focused on care rather than litigation, said Achraf Louitri, senior vice president of personal lines.
Louitri said the changes should meaningfully lower new claim costs and lead to lower rates in Alberta in 2027. Brindamour said he expects Intact’s auto combined ratio to remain in line with its current performance but cautioned against assuming margin expansion from the reform. Chief Operating Officer Patrick Barbeau said the timing of cost benefits and premium changes would be aligned.
Canadian personal property premiums increased 7%, with a 105% combined ratio that included 33 points of catastrophe losses. Over the past 12 months, the home insurance combined ratio was 92.5%, Brindamour said.
Canadian commercial lines premium growth improved to 2%, while the combined ratio was 91.9%, despite catastrophe losses running 7 points above expectations. Brindamour said pricing in small and midsize accounts remained firm, even as the company reduced its exposure to some larger accounts.
U.S. Profitability and U.K. Improvement Plan
U.S. growth was 3%, and the combined ratio was 85.2%, the business’s 13th consecutive quarter below 90%. Brindamour said Intact expects a sub-90% U.S. combined ratio over the next year and faster growth from profitable business lines, geographic expansion and newer products, including fine arts and excess and surplus casualty coverage.
In the U.K. and Ireland, premiums were flat and the combined ratio was 94.1%. Anderson said the result reflected management’s view of the business’s current performance, following unusually large losses in the second quarter.
Intact is targeting a combined ratio toward 90% in the region through more sophisticated pricing and lower technology costs. Anderson said the company expects the technology transition to take up to about 36 months, with overlapping old and new systems contributing to higher costs in the meantime. Brindamour cautioned that quarterly growth could be uneven during integration and pricing changes.
AI Investment and Capital Deployment
Brindamour said Intact currently earns close to CAD 250 million in recurring annual pretax earnings from measured artificial intelligence deployments and expects to double that amount within 24 months. Barbeau said approximately 60% of the expected benefit would relate to the loss ratio, with the remainder helping the expense ratio. Some savings will fund further AI investment, he said.
Operating net investment income rose 5% to CAD 422 million, and distribution income increased 16% to CAD 171 million. Anderson reiterated expectations for investment income above CAD 1.7 billion in 2026 and above CAD 1.8 billion in 2027.
Intact repurchased approximately CAD 200 million of shares during the quarter and ended the period with a CAD 3.6 billion capital margin. Management said it intends to remain active in buybacks while retaining capacity for acquisitions, its preferred use of excess capital.
Asked what would constitute a large deal, Anderson said a transaction north of CAD 15 billion could push equity financing toward the upper limit of what is feasible. Brindamour said CAD 10 billion would be large, while CAD 15 billion would require the company to use its financing options to their maximum.
About Intact Financial (TSE:IFC)
Intact Financial Corp is a property and casualty insurance company that provides written premiums in Canada. The company distributes insurance under the Intact Insurance brand through a network of brokers and a wholly-owned subsidiary, BrokerLink, and directly to consumers through Belairdirect. Most of the company's direct premiums are written in the personal automotive space. Intact directly manages its investments through subsidiary Intact Investment Management. The vast majority of these invested assets are fixed-income securities.
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