Intact Financial Corporation

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q3 2025 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 November 5, 2025. And I now 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 third 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 a disclaimer 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 and other terms used in this presentation. To discuss the results today, I have with me our CEO, Charles Brindamore, our CFO, Ken Anderson, Patrick Barbeau, our Chief Operating Officer, and Guillaume Lamy, Senior Vice President, Personal Lines. We will begin with a pair of remarks, followed by Q&A, and with that, I will turn the call over to Charles.

Well, good morning, everyone. Thank you for joining us today. I'm very pleased with the quarterly results we reported yesterday evening. Net operating income per share of $4.46 was the result of strong underwriting performance across all geographies and lines of business. Topline growth increased 6% in the quarter while we delivered another sub-90 combined ratio. This highlights our ability to grow while not compromising our margins. Our operating ROE is outperforming across all regions and has improved in the last year by four points to 20%.

The industry environment is constructive in every market where we operate.

We're gaining market share in personal lines, in commercial and specialty lines, we benefit from being predominantly exposed to the SME and mid-market space. In large accounts, where we continue to see elevated competition, our sophistication in pricing and risk selection, as well as more than 20 specialty verticals, enable us to choose where we play.

This environment really plays to our strengths.

The quality of this quarter's performance gives me a lot of confidence about the future, whether it's next quarter, next year, or next decade. Now let me provide some color on the results and outlook by line of business, starting with Canada. In Canada, our business is firing on all cylinders. Our round performance has never been stronger. We closed two points on growth and 10 points on combined ratio. And keep in mind, this is two-thirds of our business globally. In personal auto, premiums grew 11% in the quarter, including a 3% increase in units. As profitability for the industry remains challenged, we expect hard market conditions to persist. Our underlying loss ratio improved 1.6 points year-over-year, contributing to an overall combined ratio of 91.5%. This is a strong result. We're positioned to continue to deliver a sub-95 combined ratio in line with our objectives. Moving to personal property, premium growth was 10% in the quarter. supported by a 2% increase in units. Given the elevated level of weather and climate-related claims over the past few years, we expect current hard market conditions to persist. The combined ratio was healthy at 92.4, and we're well positioned to maintain a sub-95 combined ratio, even with severe weather. Overall, in personal lines, which is nearly half of our business, we continue to see industry growth in the high single-digit to low double-digit range over the next 12 months. With strong absolute and relative performance in the first half of the year, we're really well-placed to sustain growth and combine ratios going forward. In commercial lines, premium growth increased to 3% in the quarter. a clear sign that our growth initiatives are gaining traction. We see overall market conditions as constructed, with industry premium growth in the mid-single-digit range over the next 12 months. With 85% of our business in SME and mid-market, where pricing is favorable, there's significant opportunity for us to further improve top-line growth. That's in addition to our ability to choose where we grow for large accounts and in specialty lines. Profitability remains very strong with a combined ratio of 82.8%, reflecting continued underwriting discipline, emerging AI benefits, and prudent reserving. We remain well positioned to deliver a low 90s or better combined ratio going forward. Moving now to our UK and I business, premium in the quarter were 5% lower year over year. Remediation efforts within the DLG portfolio continue to temper top line growth, but driving improvement in the combined ratio. As remediation papers off towards the end of 25, I expect growth to move in positive territory. Our teams in the UK are focused on integrating our products, raising the bar on service, and expanding our distribution relationships. The fruits of their effort will become more visible in the new year. When it comes to the industry, we see premium growth in the UK in the low to mid single digit range over the next 12 months.

The combined ratio of 95.5 was solid as it included three points of excess cash.

Our pricing and risk selection actions are gaining traction, and we remain focused on evolving our UK and I combined ratio towards 90% by the end of 2016. In the U.S., premiums were up 8% year-over-year, with our growth initiatives leading to higher new business and improved retention. And this growth is driven by our strategy to grow in our most profitable lines. Indeed, the fastest growing segments, or those that grew by more than 20%, are the ones that have sustainable low 80s combined ratio. That's the beauty of specialty lines. You can choose where you grow, regardless of the environment in which you operate. In the U.S., we see industry-proven growth in the mid-single digit over the next 12 months. The combined ratio of 83.6% in the quarter improved by four points year over year. Our steady deployment of predictive models in pricing and underwriting allows us to grow while not compromising our margin. This was the ninth quarter in a row with a sub-90 combined ratio, and the business is built to maintain this performance going forward. Our team also continued to execute on our strategic priorities in the quarter. Let me highlight a few achievements. In global specialty lines, our team is making good progress on our growth agenda. We're both expanding our distribution footprint and deepening our existing broker relationships. Additionally, our teams are collaborating to export product expertise and verticals across geography. On the back of our technology and entertainment products having successfully grown in Canada from the U.S., we've recently added life sciences in Canada. There are many of these growth opportunities that we're pursuing. Marine, renewable energy, surety, and trade credit are all examples of cross-border opportunities that we've launched or are working on. The sandbox we play is 10 times larger than it was a decade ago.

There's a lot of opportunities for growth.

The investments we've made in AI over the past decade are currently generating more than 150 million in annual recurring benefits. We've accomplished this primarily from optimizing our pricing, risk selection, and how we leverage data. Recently, we competed the rollout of our third generation machine learning models and personal property and commercial fleet. Our AI investments are also helping us to grow our top line faster. The recent expansion of our underwriting advisor from Canadian commercial into one of our specialty lines has already resulted in our ability to quote 20% more than before due to faster data ingestion and processing. We expect this level to significantly increase over time. This quarter, we officially rebranded RSA, NIG, and FarmWeb to Intact Insurance across the UK, Ireland, and Europe. This unites our global operations under one brand, a significant milestone for Intact 15 years after its birth. The reaction of brokers, partners, and employees across our markets was exceptional. And so when combined with raising the bar on service, broadening our product range, and expanding our distribution relationships, this will drive profitable commercial growth and support our ambition of becoming the leading commercial and specialty lines insurer in the UK. Our most recent employee engagement survey has again placed our Canadian and US businesses as best employers for the 10th and 7th years in a row. We've also made huge gains in the UK and Europe, placing in the top quartile of employers within short distance of best employer status. No doubt, this is where our teams are going in both UK and Europe. Engaged employees are crucial to delivering superior experiences for our customers and brokers. The strong performance we're posting again this quarter is the result of their contributions. And I want to thank all of our employees for that. I also want to highlight the tremendous efforts our people have made supporting communities in Atlantic Canada that were impacted by wildfires this quarter. It really was impressive to watch many regions mobilize together, including our teams at Onsite. Intact responsiveness is a demonstration of our values being put into action and the strong employee engagement we foster as an organization. The engines driving our outperformance have never been better. Operating ROE has clearly shifted into a higher zone and has been above 16% for the past four quarters. We view this shift as sustainable. as it is underpinned by our competitive advantages in pricing, risk selection and claims, but it's also supported by our mixed shift towards commercial and specialty lines and our growth in distribution, coupled with very strong capital management. As we look ahead, we're well positioned to achieve both our key financial objectives of outperforming the industry ROE by at least 500 basis points every year, but also delivering noise growth of 10% annually. On that, I'll turn the call over to our CFO, Ken Anderson.

Thanks, Charles, and good morning, everyone. This quarter, again, underscored the earnings power of our business. Net operating income per share for the third quarter reached $4.46. which was $3.45 higher than last year. Both our top-line growth and our bottom-line underwriting performance were strong. We delivered double-digit earnings growth in our distribution business and our investment portfolio continued to provide healthy and consistent returns. Our operating ROE at 20% highlights our ability to successfully navigate market cycles and continue to compound earnings growth. Let me add some color on the third quarter results. We reported a strong underlying loss ratio of 54%, one point better than last year, with improvement in all regions and lines of business. This is a testament to our rigorous focus on growing our competitive advantages in pricing, risk selection, and claims. Catastrophes in the quarter totaled $394 million, primarily due to the wildfires in Newfoundland. weather events in Canada, and some large commercial fires in both the US and the UK and I. While this quarter wasn't as heavily impacted as last year, catastrophe losses were broadly in line with third quarter expectations. Favorable prior year development was solid at 5.2% in the quarter. This aligns with our near-term expectation of being around the upper end of the 2% to 4% range and continues to reflect prudent reserving across all segments. The consolidated expense ratio was 34.2% for the quarter, a 1.7 point increase versus last year. This was largely driven by increases in variable broker commission and employee incentive compensation reflecting our improved profitability and increased outperformance versus the industry. Overall, the year-to-date expense ratio at 34% remains in line with full year expectations. Operating net investment income increased 2% to $402 million in the quarter. This reflected higher invested assets. Our reinvestment yields are broadly in line with book yields. and we remain on track to deliver approximately $1.6 billion of net investment income for the full year. Distribution income continues to grow at a healthy pace, increasing 11% to $147 million. This reflected higher variable commissions, as well as the benefits from our continued capital deployment. On that note, I'm proud to highlight that the broker link BrokerLink outpaced its year-end goal by reaching $5 billion in annual premiums during the third quarter. With over 200 locations nationwide, BrokerLink continues to build scale and distribution through both organic and inorganic growth in personal and commercial lines. This positions us to grow distribution income by 10% on an annual basis. Non-operating gains totaled 83 million in the quarter, and our ROE increased to 17.3% in the 12 months to September 30th. This fueled a 5% sequential growth and a 14% year-over-year growth in our book value per share to $103.16. Over the last decade, our book value per share has compounded at an annualized rate of 11%. Our financial position continues to be strong, with total capital margin of $3.3 billion and solid regulatory capital ratios in all jurisdictions. Our capital management framework is robust. We've positioned our balance sheet to deal with any external shocks that may arise, while also maintaining significant capacity to capture growth opportunities. Our profitability profile means capital generation is also very strong, and this will continue to provide fuel for M&A, be it distribution or manufacturing. Given the level of capital generation, we will utilize our open share buyback program opportunistically when we see our shares are significantly undervalued. This past quarter, we deployed $145 million to repurchase 535,000 shares Even after these repurchases, our debt to capital ratio was 17.9%, well below our 20% target. We're positioned to continue to pursue inorganic growth opportunities. In conclusion, Charles mentioned that our operating ROE has moved into a higher zone. This will support us maintaining are even beating our impressive track record of 650 basis points of annual ROE outperformance over the past decade. It will also support our delivery on our other key financial objectives to compound net operating income per share growth by 10% annually over time. And the pillars of NOIT's growth are strong. Our top-line initiatives across personal, commercial, and specialty line platforms are gaining traction. We continue to invest in our competitive advantages in data, AI, and claims, and this will drive further margin expansion. And strong capital generation will continue to provide fuel for growth opportunities. We're in a great position to deliver on both financial objectives for our stakeholders in the years ahead. With that, I'll give it back to Jeff.

Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to two questions per person. You can certainly re-queue for follow-ups, and we'll do our best to accommodate if there's time at the end. So, Sylvie, we're ready to take questions now.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. You will hear a prompt acknowledging your request. And if you would like to withdraw from the question queue, please press star followed by two. And if you're using a speakerphone, please lift the handset first before pressing any keys.

One moment, please, for your first question. First, we will hear from Bart Buzarski at RBC Capital Markets.

Please go ahead, Bart.

Good morning. Morning. Wanted to ask around the core loss ratio. So I'm thinking current accident year plus PYD, it's coming really strong. It's sub 49%. And when I look at the LTM kind of run rate, like there's been sequential improvement in that number for eight quarters running. So wondering sort of at the top of the house, what are some of the key drivers there in terms of that strong performance? And then how are you thinking about the sustainability of that? Yeah.

So, you know, broadly speaking, because I think your question is on the overall performance. I think the first order of business, Bart, for us is to make sure that we stay on top of inflation. We do that and we're very focused on that and tend to move before the market moves. Second, Ken talked about the ROE outperformance track record. this is not something we take for granted. And at all times, we have multiple initiatives to expand the outperformance. And that goes straight to the underlying loss ratio, whether it is AI, whether it is insourcing, claims, management, and so on. And so that feeds straight into that, in my mind. Thirdly, It is about footprint. And so we have a sophisticated view of where margins are beyond cost of capital. We equip the field with that information. And our growth is over indexed toward areas where we feel that we're more than well rewarded for the risk. And I'd say, Bart, this is the sum of those three things. that lead us to see an improvement in the underlying performance. It's not even across the board, but it's certainly a very deliberate game plan to continue to grind out performance and hopefully absolute performance. And on the footprint point, I want to point out that if you look at... the shift in mix of business over the past five, six years, there's a bigger portion of our business that is in a sustainable low 90s, sub 90s zone than it was before. So when you look at our overall performance in aggregate, the growth in those segments will also lead to an overall improvement in performance.

Great, that's very helpful. Thanks, Charles. And then just one other one for me is, we're hearing lots on this sort of AI infrastructure thematic around the required CapEx that's needed. Is there an opportunity for insurance to play a role here? Like, could you guys, could this be a new source of sort of premium growth opportunities as we see the build-out in other sectors?

Yes, it is, and it's primarily through Our specialty lines segment in the construction and engineering segments in particular, there are opportunities in the energy segments. We have very strong verticals, whether it's traditional or renewable energy, and our teams in those verticals are focused on finding opportunities where we feel that we can achieve strong performance, and that's clearly an area of growth.

Great. Thanks so much. Thanks, Mark.

Next question will be from Doug Young at Desjardins Capital Markets. Please go ahead.

Hi. Good morning. Morning, Doug. Morning. I wanted to dig a little bit into the pricing cycle and the deacceleration that we're kind of seeing. And I get your comments around commercial markets. and that you're more SME-focused and personal is hardening. Hoping to dig a little bit further into what you're seeing. Why is this time potentially different? And I know it's been a long time since we've seen a turn in the cycle, but why would it be different this time around versus the last time? And I guess specifically on the personal side, we're seeing softening in the U.S. And I know the U.S. market is very different than Canada on the personal property and auto. But why wouldn't we start to see some softening after many years of really hardening pricing and personal auto and personal property? So I know it's a big question. I know there's lots in there. And I promise this will be my only question. But I'm just hoping to get a little more detail.

Yeah, sure. Let's see how we take your four questions. No, seriously, I think we're not saying this cycle in commercial lines will be different than previous cycles. I mean, all cycles are different. But, Doug, you've been following our story for a long time. You know that we're pretty stable throughout cycles, actually, and that includes in commercial lines. And I don't see this being very different. this time around, just to put things in perspective. And I think we're highlighting that more than 70% globally of our portfolio in CL and SL is in the SME and mid-market space. It tends to be a more stable space, and that's an advantage we have as a firm, not just because of the cycle, but because the law of large numbers works in the small, mid-sized business. And therefore, our pricing acumen can be put to work, that makes it even better to navigate those cycles.

You know, we've been flagging for well over a year that large accounts, initially we said cyber and financial lines were softer. And that's been true for the last year

year and a half. We've seen earlier this year an acceleration in large property schedule. That is still true. It hasn't changed this quarter, but it certainly took place this spring. And we're just watching where that's going. But it's really happening more at the top end of the market in larger accounts than at the bottom end of the market. And so our job here is to basically make sure that we grow in the SME and mid-market space where conditions are quite constructive, and then use our toolbox in pricing, risk selection, our broad product range that we can export from market to market to basically find ways to grow even in large accounts where I think we've got an excellent value proposition. compared to many of our competitors. So we're not calling a different cycle or this time it'll be different. The difference between now and say 10, 15 years ago is we have way more tools to navigate the environment in which we operate. With regards to TL, which is in a whole different zone in a hard market, I'll ask Guillaume to give a perspective on the market But I think your question is also about why is it different or is it different than what's happening in the U.S.? We think it is. So go ahead, Guillaume.

Yeah, so in personal auto, yes, there's been lots of rates. But when we look at the industry, it remains unprofitable with a combined ratio above 100 percent both last year and this year. So the industry needs to continue to take rates. So, we expect our market condition to persist and our growth momentum to flow into 26. As you pointed out, it's a contrast with the U.S. where the industry has reached profitability with key player posting pretty strong year-to-date results. We need to understand there's key differences between Canadian and U.S. markets and personal models. Canada product is more heavily weighted towards liability coverage. So the cost equation is quite different. Secondly, regulatory framework in Canada and the US are different with Canada generally being more stringent. So both those factors are driving very different competitive dynamics. Maybe coming back to Canada, we're really at that point in the cycle where we're outperforming on both top line and bottom line. And that's currently true in every region. So our growth was in the double digit for the eighth quarter in a row at 11%. That's fueled by three points of unit growth, an increase over Q2. And really every metric is painting a positive picture. Retention is the highest it's been in two years. Quotes are up double digit from increased marketing investments. Our competitive position is improving with competitors still catching up. So the net results is that our new business sales are up 15% year over year. Thank you. We're also touching on personal property. We do expect our market conditions to persist in property as the industry is pressing in the weather trends. So despite 2025 being a milder year so far, cat activity was well in excess of expectation in the last two years. So when it comes to pricing, cats are expected to be volatile from one year to the next, and it's crucial to look at really deeper and longer-term trends. So the market in Canada is behaving quite rationally, so we expect industry to continue to reflect those long-term trends in pricing and the market to remain constructive, even if we were to have a few good cat years in a row. So here again, I'd say both our absolute and relative performance is strong. and we maintain a positive outlook on this product.

Yeah, and Doug, if we go back to Bart's earlier question, which is how do you grind an improvement here, the first thing I said was to stay on top of inflation. And I think in first lines, let alone that we're on third-generation machine learning models in the field, us dealing with inflation, both from a pricing and a supply chain management, has made a huge difference here. And I'll take you back just two years where we shrank our units in personal automobile by 0.5%, thinking that the industry was not seeing the inflation that was coming. Fast forward today, our performance, massive in personal lines from a bottom line point of view, and we're making the most from a top line point of view in this environment. And I think It really plays to our strength, and kudos to Guillaume and his team to have navigated this so well.

I appreciate all the callers. It's quite helpful. Thank you.

Good. Question will be from James Lloyd at National Bank Capital Markets.

Please go ahead.

Morning, James. Yeah, thanks. Good morning. First question related to Canada commercial lines and the commentary that some of the growth initiatives are starting to take hold. But growth at 3% is still below the industry. And so I look at some of the commentary in the MD&A around AI and machine learning and the new broker platform. is the view that these new initiatives which are maybe gaining traction now will allow intact to outperform the mid single digit industry growth rate that you're expecting i think uh clearly all these initiatives um help us outperform from the bottom line point of view by a big margin

I'd say one portion of the headwind is mix. You look at our growth in commercial lines in Canada, 3% into three. You know, right there, you had a point drag of mix, and this has fluctuated this year between one and three points. And it's a function of uneven competition across the board. So, look, we're not forecasting outperformance on growth on a 12-month horizon compared to the industry, but we have lots in the toolbox to generate more growth without compromising margins. Just leveraging specialty lines across our distribution channel is one of those initiatives. The other one is we're in the process of deploying our technology, the broadest technology from a product and from a transaction point of view to brokers in the field, in addition to working on the funnel, which shows that we're also growing in units at the moment. It's hard to tell whether we'll outperform from a growth standpoint, point of view, the Canadian industry? I don't know. Ken, do you have anything?

Well, just to add a bit of context, I guess, you know, at an industry level, you know, when we look at MSA, the data at Q2, we have seen at an industry level you know, growth tempering in the second quarter relative to the first quarter in commercial P&C. I think that's aligned with the large account pressure at an industry level. At the same time, we've moved the 3% growth from

And we're using all the tools we have in the toolbox. We don't do that at the expense of margin.

Understood.

And then in the U.S., you know, obviously a good result up 8%. And it sounds like there are certain segments that are really driving that. that that growth at plus 20%. Can you can you give us a little bit more color as to what segments those are that are driving that extra or excess growth rates? And then in terms of winning new business, you know, what are some of the factors that are allowing Intacct to win that new business? Is it just new products or is it, you know, something else within existing lines?

I think in the U.S., You know, we have a very good business, it's outperforming, but it's small in relationship with the opportunities that exist in this market. And so distribution management is one big lever of growth. Investing in the lines that are most profitable is another big lever of growth, whether it is people or technology. In a number of our segments, we're adding products. And that is making a difference. We're a big push on, for instance, cargo and our marine units. And there's lots of levers we're pulling at the moment to make sure that we're capturing the growing opportunities that exist in this market. Patrick, do you want to highlight maybe some of the areas of growth in the U.S.?

Yeah, and it will also highlight what you were describing, Charles, earlier on how the mix in specialty in particular helps also the bottom line. But if you take the top three or four lines that are growing the fastest right now in the U.S., and examples of that would be surety, cyber, and some of the accident and health. Overall, that's about 40%. of the book of business, it's growing north of 20% in the quarter, and it has produced a combined ratio in the 80 to 82% range over the past three years on average. So good for momentum on growth, but also sustaining a very good profitability on the book overall due to mixed change.

And just on how you're winning new business is, Just a quick comment on that.

Yeah, how we're winning new business. First is we're expanding the reach to the number of brokers we're dealing with. Second, we're leveraging more verticals per brokers within their operation.

Third, we're adding products on the shelves.

And Ford, we've also bought a number of MGAs, and we're interested in deploying capital in the U.S., and that expands, so to speak, the shelf on which we can put our products. And that's really how we're winning new business in the U.S.

Thank you.

Next question comes from John Aiken at Jefferies.

Please go ahead.

Good morning. I just wanted to drill down a little bit more on the U.S. You know, if you take a look at the reported claims ratio or the underlying current year loss ratio for the quarter, exceptional. And I get the commentary that you're talking about product mix. But was there anything unusual that was driving the lower combined claims ratio this quarter? I guess the flip to that is how sustainable is this moving forward in terms of do you think that you're going to be able to continue to outpace growth in these higher profitable lines?

Well, it's certainly the plan.

But let's just keep in mind that when growth was a little more tepid in the U.S., is because we were into meaningful remediation efforts. And as I said last quarter, I expected that the tempering effect of this remediation would slow down in the second half of this year, and that's what we're seeing in Q3. And I expect that to continue into next year. You know, remediation, to keep in mind, is something that you continually should do, but sometimes there's more than others. And I think in the last year, year and a half, there was. And therefore, we're seeing now the potential of the business emerge more clearly without that noise.

Thanks, Charles. And, you know, when we talk about remediation, are you as excited about the prospects with remediation falling off in the UK as what we saw this quarter in the U.S.? ?

Yeah, I think the UK is a different ballgame from the perspective that we're integrating the NIG portfolio, which we've acquired in 24. And what it means in practice is we're trying to improve its performance, which we have. We're bringing segmentation as well. And I do expect that the impact of the integration, which is almost a full five points, this quarter will taper off as we enter into 2026 and towards the end of this year and as we enter into 2026. In the UK, we're investing massively in technology in our regional presence. We're broadening our footprint and I do expect that this will be a growth engine for us over time, but It's a meaningful transformation at the moment.

Thanks, Charles. Over to you. Thank you.

Next question will be from Paul Holden at CIBC.

Please go ahead.

Good morning, Paul. Thank you. Good morning. Maybe sort of a follow-up to that, Charles, on the UK business, so some good color around the DLG integration. Maybe you can talk about the business X, the DLG, and

how uh how that's growing and the profitability there yeah so the business x blg is doing well i would say the area that's still in remediation in the uk is what we call uh the um delegated authority business where we're shrinking that footprint a bit to make sure that it's our price, our product, and our claims that we're using to the greatest extent possible in that segment of the market. That is creating a bit of a drag. Otherwise, the rest of the business would be in the low single-digit range. And we haven't really seen the impact of expanded distribution. That takes a while, and I'm confident we'll start seeing that in 2026. And we haven't really seen the full impact of broadening our product range, specialties in particular, across a much broader distribution channel in the UK than we had before the NIG transaction. In the UK, if I take you back three, four years, RSA was focused on tens of brokers. Following the NIG integration, we're dealing with over 1,000 brokers. We're deepening the relationship by about 100 brokers a year. Anyway, this year, the idea is to deepen the relationship with 100 brokers with whom we didn't have a deep relationship before. You just get a sense of the scale of opportunity that this can bring. And you layer over that a broader range of product, whether it is distributing marine, financial lines, et cetera, across those distributions. So there's a fair bit of upside there. I don't know, Patrick, if there's anything you want to add.

No, there's some good momentum also in specialty lines and the combination of the DLG And existing RSA products, to your point, as we get into Q4 and early Q1, will also extend the offer through the broker. So RSA broker getting some of the offers that were only offered by DLG and vice versa.

And I guess the second part of that question was also with respect to margin. So if you suggest that DLG is roughly a five-point drag on margin, it suggests you're getting your low 90s in that RSA book. Is that correct?

Well, yeah, I think if you look at the quarter performance at 95.5, firstly, there's three points of excess cap losses in there, eight points of caps in the quarter. So you strip out the three, I think you're back to a low 90s performance, which right now, that's where we would expect to be. I think the continued, you know, if that remediation tapers off, it will start to earn through into 26 and 27. And that's the further improvement that you'll see emerging in the, if you like, underlying combined ratio for the UK and I over the next 12 to 18 months.

Got it. And then the second question for me is just going back to Canada and personal auto. So good growth in written assured risks. It seems like you are building some momentum there. We can see it's a quarter over quarter over quarter. What should we expect over the next few quarters? My impression is you're saying competitors are still catching up to where you are in pricing. So that would suggest, if anything, and you seem to like the margins, so if anything... maybe we can assume that written assured risk growth accelerates from here.

Is that a reasonable expectation?

Yeah, so I think when we look at personal auto and our rates, inflation is stabilizing in the mid-single digit. Our rates are also stabilizing I would say just below 7%, and we expect to stay in that range in the foreseeable future as we're pricing for the inflation that we're observing. When you look at the industry that still has some catch up to do, I think we're very comfortable in our competitive position. We've seen that improve. We've seen our retention improve. So we expect to stay in a kind of market share growth going forward. So will it keep increasing from 3%? I think time will tell, but we're certainly expecting the current momentum to continue into the next 12 months. Yeah.

And I think, Paul, brands, the direct channel, the digital channel, these are all levers that we're pushing really hard in this environment. Nothing to do with rates. Everything to do with building on those margins to gain market share where we can.

Understood. Okay. Thank you.

Next question will be from Tom McKinnon at BMO Capital Markets.

Please go ahead.

Yeah, thanks. Good morning. Charles, when we look back at your investor day, you talked about how you could accelerate your NOIPs growth without any strategic capital deployment. And that was 2% NOIPs CAGR. And with strategic capital deployment would get up to four. But what's interesting is sort of without any M&A, it would have just been 1% through distribution income, which I assume just augmenting that with some bolt-on distribution acquisitions, smaller ones. And then it also said 1% through share buyback capacity. The last 10 years, you added 1% growth to NOIPs through share buybacks. if I annualize what you did in the quarter, 0.3% of your shares you bought back in the quarter, so that's over 1% annualized right there. Is this sort of the base case, or should we sort of think about, hey, if you don't see anything major on the M&A front, that a 1% share buyback that you've demonstrated in this quarter would kind of be, I mean, it seems to be consistent with what you outlined laid out in your investor day earlier this year and consistent with what you've done in the past. So, any comments around that? Thanks.

Thanks, Tom. I'll ask Ken maybe to share his perspective on that.

Yeah. Well, I would say, firstly, Tom, in relation to the capital deployment component of the NOIT growth compounding ambition, When it comes to distribution, yes, certainly we feel with regular ongoing distribution, capital deployment, that will generate one point. I would say in an adverse, if you like, scenario where we didn't do M&A, that was the scenario where we were just, I think, demonstrating that share buybacks are a tool in the toolbox to deliver a 1% noise growth. But to be clear, that's in a scenario where there are no M&A opportunities, and that's not the scenario we're in today, to be clear. The earnings power and earnings growth is really strong. I think what we did this quarter was you know, were opportunistic in deploying 145 million to buy back a little over half a million shares. But you will have seen that the capital margin has grown from 3.1 to 3.3 billion. The debt to capital ratio has come down. The dry powder has increased in the quarter in terms of what's available to deploy on M&A opportunities. And it's in that context that we're very happy to have the dry powder that we do.

Yeah. And I think the point I made at the Investor's Day was that the denominator is much bigger than it was a decade ago. So we proved to ourselves that you know, we have the earnings power to grow at that clip prospectively. I think the point we made is organically we'd get in the zone, but then when you look at capital deployment opportunities, you know, we would comfortably, we think, be north of 10%. And so when you look at the landscape from an M&A point of view, the first thing that matters to us as a firm is where do you outperform? And frankly, today, we outperform everywhere we operate, which therefore means that the sandbox for capital deployment is 10 times bigger than what it was a decade ago. And within that, there are manufacturing opportunities in Canada, in global specialty lines, and in the UK. and our distribution investment opportunities, in particular in North America. And so for me, the M&A landscape is actually quite good. The sandbox is much bigger, but timing matters. We have very clear financial objectives, and that drives timing for us.

Okay, thanks for the color.

Next question will be from Mario Mendonca at PD Securities.

Please go ahead.

Good morning. This might be a request that you put a finer point on some of the things you've already said on this call. Charles and Ken, you talked about this higher new level of ROE. Now, this quarter was special in some respects. The trailing 12-month increased significantly because the Q3 24 cats fell off and a more modest level of cats fell into the trail in 12 months. So what I'm asking is, when you say this higher level of ROE is sustainable, are you talking about the 19, nearly 20% plus this quarter? Or are you referring more to what you've historically referred to around the 17% range?

Well, I think what we're saying, what we are saying, Mario, is that we've moved into a zone above mid-teens. Yes, Q3 was close to 20%, but as Charles mentioned in his remarks, it's been above 16 for the last four quarters. And I think that's what we were referring to. And we view that as sustainable in the context of the continued investments that we're making in the competitive advantages, pricing, risk selection, and claims. And as Charles has also pointed out, you know, the tilt of our business towards commercial and specialty lines gives us more room and coupled with, you know, the potential growth now, not just from manufacturing, but also from distribution, we feel we're very well positioned to sustain above mid-teens, yeah.

So beyond the drive to expand the ROE outperformance in the business in which we operate, you've got two structural changes if you look forward 10 years compared to the last decade. The first one is distribution income is bigger, more stable, and contributes positively to our forward ROE. And second, and that's very important, is the mix of business has pushed us in zones where we can earn meaningfully higher ROE than what we were able to earn a decade ago. So as you know, Mario, I never pinpoint a specific ROE. This is an industry with a certain degree of volatility. But what's clear to me is that we're in a different zone. And in a decade from now, when we look back 10 years, it'll be a better ROE than when we look back 10 years today. I understand.

But that sort of brings me to the next question. When you're talking mix, I suspect you're talking about global specialty markets. Right. It sounds to me like this business really suits you looking forward. Is there something about the business that makes... growth through acquisition more challenging? Is it such a relationship-driven business that acquisitions generally don't work and this has to be done organically or can this business grow through acquisition?

This business can grow through acquisition, Mario. We've entered the U.S. in specialty lines through an acquisition. We've kept all our teams, all of our people but we've taken the combined ratio from 100% to something that starts with an eight. And how have we done that? Well, that's the old recipe. Define success well, make sure the values are in place, and then it's about pricing sophistication, strong governance in the field, insourcing of claims, and good capital management. We then, in 2021, did the same exact thing as we acquired RSA, which had a pretty big specialty lines business, both in Canada, in the London market, as well as in Europe. We've taken the playbook and we've done the same thing. I think there are meaningful M&A opportunities in global specialty lines, whether it is manufacturing or distribution, and we're very focused on those. But you know how we define success when it comes to an acquisition. This needs to generate at least 15% IRR at the long-term capital structure. And it's an area that we're active in finding opportunities.

My last question is about the 10% annual NOIPs growth that you've described over the years. What I'm trying to figure out here is whether that actually applies to 2026. And I'm asking about 2026 specifically because there are a couple of reasons why it wouldn't apply. There are potential declines in reserve development, potentially higher CAT losses against a rather low year. So the question is this, does the tent apply each year and does it apply to 2026 or is that more of a medium term objective?

So to be clear, The objective is to grow at a compound of 10% annually over time. You know, it will, you know, by virtue of catastrophe losses, etc., there will be some lumpiness. Also, M&A, when it comes, can tend to shift your ROE into a new zone. But over time, the objective, to be clear, is over time. I think if you look at 2025, specifically Mario, you know, obviously, we'll see where the year ends. At the nine months, the cap losses are a little below our you know, our expectation on a year-to-date basis. So I think that would be the one item that would contextualize how you would think about 2026.

That's clear. Thank you. Thanks, Mario.

Question will be from Steven Boland at Raymond James.

Please go ahead.

I guess good afternoon now. Thanks for taking my question. Just one question. I don't want to delay this. Have you had any preliminary conversations with your reinsurance partners with renewal coming up? I'm just curious the outlook, if pricing is going to be rational, if there's going to be softness.

Yeah.

So I would say in relation to the 1-1 renewal, you know, reinsurers have had strong profitability since 2022 when the market hardened. and you know that was the result of some structural changes and sedans taken higher retentions and and pricing levels have gone up since then um but we would expect reinsurer capacity will exceed demand um you know across the business as we head into the renewal so i would say favorable conditions uh

Yeah, I think it should be a favorable renewal cycle. We manage our risk very tightly. This gives us an edge when it comes to buying reinsurance. We're not huge buyers of reinsurance also. We do that pretty much for tail risk purposes, but this should be a good renewal season for us.

Okay. And Charles, I'll sneak one in. I know we're late, but have you ever considered a stock split in the prices?

been elevated now for a while I don't think you've ever done one is that something you'd consider yeah I would say it it does hit the radar from time to time we evaluate it but we haven't acted on it to date on the basis that in substance it's not it's not really changing anything in substance. And I think that's the conclusion that we've reached.

Yeah, it's debated from time to time. I mean, if you guys think this is something we should seriously consider, we'll look at it. I'm of the view that I don't know if it's a needle mover and therefore we concentrate on other things, but we're open to feedback.

Okay, thanks very much. Thank you.

Ladies and gentlemen, this is all the time we have today. I would now like to turn the call back over to Jeff Kwan.

Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for one week, and the webcast will be archived on our website for one year. A transcript will also be available on our website in the financial report section. And of note, our 2025 fourth quarter results are scheduled to be released after market close on Tuesday, February 10, 2026. with the earnings call starting at 11 a.m. Eastern Time the following day. Thank you again, and this concludes our call.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.