- Net Operating Income per Share: $4.86, doubled since last year.
- Top Line Momentum: 6%, led by double-digit growth in personal lines.
- Combined Ratio: 87.1%, 9 points better than last year.
- Operating ROE: 17%, up 4 points year-over-year.
- Total Capital Margin: $2.9 billion.
- Personal Auto Premium Growth: 11% in the quarter.
- Personal Auto Combined Ratio: 91.4%.
- Personal Property Premium Growth: 9% in the quarter.
- Personal Property Combined Ratio: 78%.
- Commercial Lines Premium Growth: 1% in the quarter.
- Commercial Lines Combined Ratio: 83.6%.
- UK&I Premium Growth: 42% in the quarter.
- UK&I Combined Ratio: 92.2%.
- US Premium Growth: 1% in the quarter.
- US Combined Ratio: 88.5%.
- BrokerLink Annual Premiums: $4 billion, with nine acquisitions closed this quarter.
- Catastrophe Losses: $96 million in Q2, $193 million for the first half of 2024.
- Favorable Prior Year Development: 4.7%.
- Consolidated Expense Ratio: 34.1% in the quarter.
- Operating Net Investment Income: $387 million in the quarter, up 19%.
- Distribution Income: $169 million in the quarter, up 23%.
- Operating Effective Tax Rate: 19.45% in the quarter.
- Net Operating Income per Share Growth: 108% in the quarter.
- Book Value per Share: $88, up 4% in the quarter and 15% year-over-year.
- Adjusted Debt to Total Capital Ratio: 19.8%.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net operating income per share doubled to $4.86, driven by strong underwriting performance and growth in distribution and investment income.
- Combined ratio improved significantly to 87.1%, reflecting a 2-point improvement in underlying performance.
- Operating ROE increased to 17%, up 4 points year-over-year.
- Premium growth in personal auto and personal property was strong at 11% and 9%, respectively.
- The UK & Ireland business saw a 42% premium growth, mainly due to the direct line transaction, with a healthy combined ratio of 92.2%.
Negative Points
- Increased competition in commercial lines, particularly for large accounts, led to only 1% premium growth in this segment.
- Catastrophe losses, although lower than last year, still totaled $96 million in Q2 and $193 million for the first half of 2024.
- The US business saw only 1% premium growth, with corrective actions needed in underperforming segments like entertainment and financial lines.
- The Alberta market remains challenging due to an artificial cap on rates, impacting growth potential in this region.
- Integration of the recently acquired direct line business in the UK is progressing cautiously, which may temporarily drag on near-term performance.
Q & A Highlights
Q: How sustainable is the high level of premium growth in personal auto as we go into 2025? Can you provide context on auto rate approvals and premium growth in less regulated markets?
A: (Guillaume Lamy, Senior Vice President, Personal Lines) The industry is still not profitable in personal auto, with combined ratios above 100%. We are writing rates in the low double digits and expect to maintain this level for the rest of the year, with some residual flowing into 2025. The sustainability of this growth will depend on how loss trends evolve. We are rate adequate nationally, except in Alberta, where we face challenges due to regulatory caps.
Q: What is the rationale behind increasing investment allocation to common equity by 4 percentage points by the end of the year?
A: (Louis Marcotte, CFO) This move is not to enhance net investment income or offset short-term fixed income yield pressure. We have been underweight on equities due to market volatility and strategic acquisitions. Now, with a strong balance sheet, we are moving back to our targeted allocation based on long-term return expectations.
Q: Can you provide more details on the potential losses from the Toronto floods and Jasper fires?
A: (Patrick Barbeau, COO) The Toronto floods were the first significant weather event this year, and our teams responded quickly. We have a good view of the volume of claims, and most emergency work is done. For the Jasper fires, we estimate around 250 families and businesses suffered significant damage. We remain comfortable with our $900 million annual CAT loss guidance.
Q: What is the impact of the CrowdStrike outage on your business, particularly in terms of business interruption and cyber policies?
A: (Patrick Barbeau, COO) Business interruption from system outages like CrowdStrike is not covered under commercial base products. For cyber insurance, there is some coverage, but with waiting periods and high attachment points. We do not expect significant costs from this event.
Q: What corrective actions are being taken in US specialty lines, and how important are these segments to Intact?
A: (Darren Godfrey, EVP, Global Specialty Lines) We are re-underwriting portfolios and pushing aggressive rates in entertainment and financial lines to improve profitability. These actions have impacted growth, but we expect strong growth in our most profitable lines. These segments are not the largest but are important for sustainable growth.
Q: How should we think about policy count growth in personal auto and personal lines over the next several quarters?
A: (Guillaume Lamy, Senior Vice President, Personal Lines) We are seeing strong growth in our digital channels, with sales up 84% year-to-date. We expect unit growth to trend positively in the next few quarters, driven by our competitive position and strong retention in most markets.
Q: What is the mid to long-term target range for the underlying combined ratio in personal auto?
A: (Guillaume Lamy, Senior Vice President, Personal Lines) We are comfortable with our sub-95 guidance for personal auto. While we see downward inflation trends, especially in physical damage, we are cautious about liability trends. We aim to beat our guidance but will not risk lowering it prematurely.
Q: How much of the $2.9 billion capital margin is deployable, and are there constraints on its mobility across jurisdictions?
A: (Louis Marcotte, CFO) About 10% to 15% of the capital margin is deployable. There are some expected uses in the second half, such as redeeming preferred shares and re-risking the equity portfolio. Generally, we can pull out dividends and deploy capital where needed.
Q: What is the outlook for US specialty lines, and is the market still firm?
A: (Charles Brindamour, CEO) We love the specialty lines business in the US. The competitive environment is very good, with average rate increases of 4% in Q2. While some lines like management liability and cyber have softened, the overall environment remains excellent, and we aim to grow in this market.
Q: How do you plan to improve specialty lines using digital and AI, and can you quantify the impact?
A: (Charles Brindamour, CEO) We aim to maintain specialty lines performance in the 80s on a sustainable basis. We are deploying segmentation models and investing in modern systems to improve data quality and pricing sophistication. While the current performance is good, we see significant upside in increasing our sophistication outside of Canada.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
