Intact Financial Corporation

Good morning, ladies and gentlemen, and welcome to the Impact Financial Corporation Q4 2024 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 Wednesday, February 12, 2025. And now I would like to turn the conference over to Jeff Kwan, Chief Investor Relations Officer. Please go ahead, sir.

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 intactfc.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 our 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 and Chief Underwriting Officer for Global Specialty Lines, Guillaume Lamy, Senior Vice President, Personal Lines, and Ken Anderson, Executive Vice President and CFO of UKNI. We will begin with prepared remarks followed by Q&A. And with that, I will turn the call over to Charles.

Thanks, Jeff. Good morning, everyone, and thank you for joining us today. We finished 2024 with our best quarter on record. with a net operating income per share of $4.93, up 23% from last year. All of our businesses contributed to this result, including strong underwriting across all regions, investment, and distribution income. The strength and diversification of our platform is evident, as is our ability to grow earnings and outperform. In the context of economic and climate uncertainties, we've proven that our organization is very resilient and well positioned to thrive operationally and financially. Now, let me provide a bit more details on the fourth quarter. Our combined ratio was excellent at 86.5%, four points better than last year with strong underlying performance across all lines of business. Top line growth was solid at 5%, led by continued momentum in purse lines with growth in the double-digit range. Within commercial lines, while rates remain in the mid-single-digit range across most of our portfolio, and conditions remain favorable overall. We did avert an operating ROE of 16.5% in 2024, and ended the year with $2.9 billion of total capital margin. This is after incurring $1.5 billion of catastrophe losses reflecting the resilience of our results. In addition, we did not slow down on the strategic front during the year, and we're really well positioned to continue delivering on our roadmap in 2025. We're pleased to increase dividends for the 20th year in a row, representing a 10-year compounded annual growth rate of 10%. Let's now look at each of our lines of business, starting right here in Canada. In personal auto, premiums grew 12% in the quarter, driven both by customer growth and rates. Our investments in digital marketing and customer experience are really paying off and we're well positioned to continue to deliver strong growth in 2025. We expect hard market conditions to persist over the next 12 months and our competitive positioning to further improve. The combined ratio in auto was 94.2 in the quarter, driven by strong underlying results. The full year combined ratio of 95.4 was within expectations, especially after excluding half a point of negative impact from excess cat losses. We remain very comfortable to grow in this environment and are well positioned to deliver a combined ratio in line with our sub 95 guidance in 2025. Moving now to personal property. Premium growth was 9% in the quarter, also driven by both rates and continued customer growth. As the industry responds to recent severe weather events, we expect hard market conditions to persist over at least the next 12 months, with growth in the low double digits. The combined ratio for the quarter was very strong at 77.1%. reflecting our profitability actions over the last 18 months. For the full year, the combined ratio was 96.5, a positive result given the 20 points negative impact from CAT losses. In the last 5 and 10 years, this line generated a 90% combined ratio on average. As we look ahead, we maintain our guidance of the sub-95 combined ratio even with severe weather. In commercial lines, premiums were up 4% in the quarter, driven by mid-single-digit rates other than in large accounts, where we continue to see increased competition. The market remains favorable across most lines, and we expect industry growth in the mid-single-digit range over the next 12 months. We delivered a very strong combined ratio of 78.8 in the quarter, with an improvement of 6 points year over year. We also ended the year in a solid position at 86% as we continue to see the benefits of our underwriting discipline and sophistication. We remain well positioned to capture growth opportunities and deliver a sustainable low 90s or better performance. Now let's look at our UK&I business. The direct line broker commercial lines integration is progressing well. This acquisition has added 30% to our premium base in the UK&I. As expected, we're working on improving its performance. This created a four-point drag on growth in Q4 as direct line is now in the comparative period. And we're already seeing the benefits as the underlying performance in the UK&I has improved by more than two points, mainly coming from these actions. In the rest of the UK&I business, conditions remain conducive to appropriate trade actions. Over the next 12 months, we expect mid-single-digit premium growth for the industry. The combined ratio of 92.7 for the quarter and 92.8 for the year were strong, considering the elevated CAT losses. Our refocused UK&I segment is well-positioned to evolve the combined ratio towards 90%. In the U.S., our premium growth was flat in the quarter. This is reflective of ongoing corrective actions taken in underperforming segments. If we exclude these, growth was 4%, with healthy rate increases across the rest of our book. Given the current market conditions, we expect industry premium growth to be in the mid to high single digits over the next 12 months. We'll continue to focus on deepening our broker partnerships to capitalize on growth opportunities. And the combined ratios remain strong at 86.1% for the quarter and 87.5% for the year, proof of our continued underwriting discipline. Going forward, we remain well positioned to continue to run this business in the low 90s or better. Let me now highlight some of our notable strategic milestones and initiatives. First, building scale and distribution is key to our success. In Canada, BrokerLink closed another eight acquisitions in Q4 alone and continued to deliver solid organic growth. This brings its total premiums under management to $4.3 billion for the year, and we're well on our way to achieving our target of $5 billion in 2025. We're accelerating our pricing sophistication within global specialty lines and anchor of our strategic roadmap. Pricing governance tools and enhanced segmentation were implemented across nine new verticals in Q4, representing 21% of our global specialty lines volume. We're maintaining our competitive edge and continuously enabling more efficient underwriting decisions in real time. As said before, we aim to be the best AI insurance shop in the world. We bolster our data and AI capabilities this year again and have over 500 models to help us optimize underwriting performance and customer experience. This represents over $150 million of run rate underwriting profit. Within our commercial lines portfolio, we deployed a new generative AI solution. Nearly three out of four quotes go through our new tool, eliminating duplicate entries for brokers and increasing our speed of new business submissions. Investing in our people is an important pillar of our strategic roadmap. We were once again named as a best employer in both Canada and the U.S. for the ninth and sixth consecutive year, respectively. I'm very proud of all we've accomplished in the past year, and none of it would be possible without the dedicated work from each and every one of our people. And we're looking forward to bringing the same passion and commitment this year. Overall, we're entering 25 with a lot of positive momentum. Growth is in the mid-single digits, our underwriting performance in the low 90s, our operating ROE in the high teens. We're well positioned to execute on our strategy and achieve our target of 10% noise growth annually over time and outperform the industry ROE by at least 500 basis points every year. Finally, as this is Louis Marcotte's last call as our CFO, I wanted to take a moment to thank him for his relentless dedication to helping grow Intact into a leader in the global P&C industry, including the last 11 years as our CFO. The market capitalization of the company saw a five-fold increase to over $50 billion with an annual total shareholder return of 16%. over his tenure but more than that louis exemplifies our values every single day and i look forward to continuing to work closely with him in his role as vice chair of intact with that thanks louis and mike is to you thanks charles and good morning everyone i'm obviously very happy to end the year on such a positive note