Intact Financial Corporation

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q1 2024 Results Conference Call. At this time, note that all participants are in a 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 May 8, 2024. And now, I would like to turn the conference over to Shubha Khan, Vice President, Investor Relations. Please go ahead.

Thank you, Sylvie. 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 Marcotte, Patrick Barbeau, 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, We will begin with prepared remarks followed by Q&A. With that, I will turn the call over to Charles.

Thanks, Shubhap. Good morning, everyone, and thank you for joining us today. The strength of all of our platforms was evident in the first quarter as we once again delivered strong results and made important progress on the strategic front. It is a good start to 24. Yesterday evening, we announced net operating income per share of $3.63 for the first quarter, up 19% from last year, driven by strong underwriting and investment results. Our undiscounted combined ratio was 91.2%, which reflected solid underlying performance across all geographies. Top-line momentum continued to be strong at 6%, driven by favorable conditions across most markets. Overall, we delivered an operating ROE of 15%, and we maintained a strong balance sheet with $2.7 billion of total capital margin, even after significant deleveraging in the quarter. Let me provide some color on the results and outlook by line of business, starting with Canada. In personal auto, premiums grew 11% in the quarter, up six points from a year ago. Top line momentum was a function of both rate actions in a hard market and customer growth. As the industry further pursues corrective rate measures, we're making the most of our improved competitive position, leading brand awareness and strong digital proposition. The combined ratio was 98.6% in the quarter, which included a two-point impact from seasonality and two points of one-offs from pools and employee compensation driven by strong outperformance in 2023. The underlying performance was otherwise in line with expectation. Inflation has moderated significantly since peaking in late 2022. and has stabilized in the mid-single-digit range for the past couple of quarters. At the same time, earned rates and insured values remain at high single digits during the quarter. As a result, we're confident that our strong rate actions will support our sub-95 guidance in the next 12 months, and we're happy to grow at this profitability level. Moving now to personal property, Premium growth was 9% in the quarter, driven by our rate actions in a favorable market and continued unit growth. The combined ratio was strong at 82.5%, with no cash losses reported. We expect weather-related volatility, though, and inflation to sustain hard market conditions over the next 12 months. In commercial lines, Premium growth was 5% in the quarter, as rate actions and strong retention in most lines were tempered by increased competition for large accounts. The combined ratio of 87.3% was strong as a result of our profitability actions over time and favorable prior year development in the quarter. With the market remaining hard across most lines, we expect premium growth in 24 to be in the mid to high single digits for the industry. As a result, the business remains well-placed to deliver sustainable low 90s or better performance going forward. Moving now to our UK&I business. Premium growth was 29% in the quarter, mainly due to the direct line transactions. The overall combined ratio was 94.6% solid for a first quarter after absorbing seven points of CATS, more than two points higher than expected. The direct line business is generating stronger growth than anticipated when we announced the acquisition. While early, bottom line performance is heading in the right direction, and the integration is progressing very well. We welcome the direct line employees on May 1st, and processing of policy renewals on the RSA platform will begin in Q2. Synergies are on track to be realized in the coming 24 months, and overall, the UK&I business is positioned to run in the low 90s. In the U.S., our business grew 6% in the quarter, reflecting healthy rate increases across most lines of business. The combined ratio of 88% reflects our continued focus on growing our profitable lines, as well as underwriting discipline. In the next 12 months, we expect hard market conditions to remain and continue across most lines. Overall, the business remains very well positioned to maintain low 90s or better performance. As I mentioned at the outset, we made meaningful progress on strategic initiatives in the past few months across all our business units. In Canada, BrokerLink continues to consolidate the market and successfully closed four acquisitions this quarter, representing roughly 190 million of premium. The business remains well on track to achieve its ambition of 5 billion in annual premiums by 2025. Our distribution business remains an important and growing earnings driver. On the digital front, our investments have resulted in increased web traffic with new business sales up 81% in 2024. We're therefore capitalizing on increased shopping activity across first lines as competitors take corrective redaction. We also continue to leverage data and AI to improve pricing and risk selection. We recently deployed machine learning models in commercial property with commercial liability to follow in the coming months. And the nationwide rollout of our fourth generation usage-based insurance platform is on track. In aggregate, our data and AI initiatives have helped deliver north of $120 million in annual run rate earnings benefits so far. Building resilient communities and achieving net zero are two important pillars of our strategic roadmap. In April, we published our 2023 social impact report, which details our progress on both objectives. On the climate file, we remain on track to achieve our emissions reduction targets. In 23, for example, the emissions intensity of our investment portfolio was down 35% compared to our 2019 baseline. And yesterday morning, we announced a new initiative to build resilience, launching a partnership with Wildfire Defense Systems, a world leader in wildfire prevention and suppression. This offering will provide personal property customers in Western Canada with additional protection at no extra cost. This also contributes to our ability to sustain our long-term sub-90 track record in personal property. Overall, we're well positioned to deliver on our financial and strategic objectives this year. Top-line momentum is strong. The business is operating at a low 90s combined ratio, and the outlook for investment and distribution income remains positive. But our strong balance sheet and business fundamentals We're on course to grow net operating income per share by 10% annually over time and to outperform the industry ROE by at least 500 basis points every year. With that, I'll turn the call over to our CFO, Louis Marcotte.