Intact Financial Corporation

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q4 2023 Results Conference Call. At this time, all lines are in the listen-only mode. Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on February 14, 2024. And I would like to turn the conference over to Shubha Khan, Vice President, Investor Relations. Please go ahead.

Thank you, CTV. Hello, everyone, and thank you for joining the call to discuss our fourth quarter financial results. A link to our live webcast and materials for this call have been posted on our website at impactfc.com under the Investors tab. Before we start, please refer to slide two for cautionary language regarding the use of forward-looking statements, which form part of this morning's remarks. and slide three for a note on the use of non-GAAP financial measures, and important notes on adjustments, terms, and definitions used in this presentation. To discuss your results today, I have with me our CEO, Charles Brindamore, our CFO, Louis Macbeth, Patrick Beauvau, Executive Vice President and Chief Operating Officer, Darren Godfrey, Executive Vice President, Global Specialty Lines, Guillaume Lamy, Senior Vice President, Personal Lines, and Ken Anderson, Executive Vice President and CFO, UKNI. We will begin with prepared remarks followed by Q&A. With that, I will turn the call over to Charles.

Good morning, everyone, and thank you for joining us today. 2023 was a challenging year for society. Inflation continued to exert pressure on the cost of living, and natural disasters took a heavy toll on the communities we serve. But true at all, our people work tirelessly to ensure customers get back on track as quickly as possible. And against this backdrop, our business demonstrated remarkable resilience. Yesterday evening, we announced net operating income per share of $4.22 for the fourth quarter, up 45% from last year, driven by strong underwriting, investment, and distribution results the undiscounted combined ratio was 90.1 percent in the quarter which reflected strong underlying performance across all regions and our exit of uk purse lines and top line momentum is strong and improving organic growth was eight percent for the quarter driven by red actions across all segments. Hard market conditions continue to provide a significant tailwind for a majority of our businesses. Overall, we delivered an operating ROE of 14.2% in 2023 and maintain a strong balance sheet with $2.7 billion of capital margin. We're therefore pleased to raise the quarterly dividend by 10% our 19th consecutive annual increase. Let's now look at each of our lines of business, starting with Canada. In personal auto, premiums grew 12% in the quarter, driven by our rate actions and continued momentum and unit growth. Premium growth has been accelerating for the past year, driven by our improved competitive position leading brand awareness and continued investment in digital marketing and customer experience. With a combined ratio of 95.2 in the quarter and 94.7 for the full year, underwriting performance was in line with guidance. Inflation, as expected, abated in the past year and appears to have stabilized in the mid-single-digit range for the past couple of quarters. We expect rate increases to continue to cover inflation, and as a result, we remain comfortable with our sub-95 guidance and with capturing growth in this environment. Moving to personal property, premium growth was 8% in the quarter due to our rate actions and supportive market conditions. The combined ratio for the quarter was very strong at 75.8%, reflecting robust underlying performance and mild weather across Canada. For the full year, the combined ratio was 100.7%, which included 11 points of CAAT losses above expectations. Despite this, our average combined ratio for the past 5 and 10 years remained below 90%, thanks to adapting our value proposition and operating model in the last decade. Given double-digit rate increases in a hard market, as well as our expanding claims and supply chain capabilities, we're well positioned to sustain this track record. Our expectations take rising cap losses into account, which we will cover in more detail. In commercial lines, premium growth was 4% in the quarter and reflected targeted exits to enhance profitability in our specialty lines portfolio, as well as increase competition for large accounts. As the market remains hard across most lines, we expect growth in 24 to be generally consistent with upper single-digit increases for the industry. We then avert a combined ratio of 84.4% in this segment, reflecting our profitability actions over time. and the business remains well-positioned to deliver sustainable, low 90s or better performance. Moving now to our UK&I business. Premium growth in our now commercial lines-focused business was 26% in the quarter, thanks largely to the direct line transaction. Organic growth was 6%, driven by our rate actions in a hard market. The combined ratio of 104.6% for the quarter included 11 points of CAT losses above what we would have expected. We expect to run this business in the low 90s and 24, and we see this improving to approximately 90% within two years as we improve performance and realize synergies from the direct line transaction. In the U.S., our business grew 9% in the quarter, led by strong growth across our most profitable lines. For the full year, growth of 14% also included the benefit of an MGA acquisition in late 2022. The combined ratio of 86.4% for the quarter reflects our profitability actions over time, which were partially offset by unfavorable prior year development from one specific trend. In the next 12 months, we expect hard market conditions across most lines to persist, given higher reinsurance costs, rising cash losses, and inflation. And we remain well positioned to maintain low 90s or better performance in this business as well. Let me now highlight some of our strategic milestones and initiatives in the past few months. In Canada, BrokerLink continued to consolidate the market. Despite a slow start to the year, the business closed 20 acquisitions, representing $375 million of premiums. Total premiums exceeded $3.5 billion in 2023 and were therefore on our way to achieving our $5 billion ambition in the midterm. On the digital front, our mobile app saw over 23 million visits by customers in 2023. With the ease of use of our self-serve tools, one in five policy transactions are now fully completed online. And we continue to invest in our supply chain capabilities, a key driver of our underwriting outperformance over time here in Canada. Four new claims service centers were opened in Q4. bringing the number of total locations across Canada to 31. Service centers reduce the claim cycle time by 30% on average. They're an increasingly important part of our value proposition to customers, generating higher net promoter scores and driving premium growth. In global specialty lines, we launched a new global renewable energy segment in addition to expanding underwriting capacity for cyber coverage across all our markets. We're also accelerating the transformation of our pricing capabilities and deployed six new AI-driven pricing models in this segment in the quarter. In 2023, premiums exceeded the $6 billion mark in specialty lines, and we then averaged a solid combiner ratio of 88%. we're making excellent progress towards our ambition of 10 billion of premiums by 2030 while operating at a sub-90 combined ratio. In our UK&I business, we've taken a lot of action over the last 12 months to drive out performance. We de-risked the pension plan through a buy-in transaction. We exited the UK motor market. We acquired direct lines, brokered commercial lines business. We sold the direct UK home and pet platforms to Admiral and announced the exit of UK First Lines Partnerships. A lot of hard work has gone into refocusing the business, but I'm very pleased with where we stand today. There's still work to be done, but I'm confident that we'll have one of the best P&C businesses in the UK market within 24 months. Investing in our people is critical to our success and an important pillar of our strategic roadmap. As a best employer in both Canada and the U.S., and with meaningful progress in 23 towards becoming a best employer in the U.K., I'm proud that Impact is a place where our people can grow and thrive as we win in the marketplace as a team. And I'd like to thank our people for all they've accomplished in the past year. They certainly didn't falter in assisting our customers through multiple natural disasters. And we were able to deliver on key strategic initiatives, investing in our performance across all our businesses. It's clear we entered 24 with a lot of momentum. Growth is in the high single digits. our underwriting performance in the low 90s, our operating ROE in the mid-teens. With our strong balance sheet, we're ready to capture growth opportunities as they emerge. The business is in very good shape to grow net operating income per share by 10% a year over time and to continue to outperform the industry ROE by at least 500 basis points every year. And with that, I'll turn the call over to our CFO, Louis Mascotte.