Intact Financial Corporation

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q1 2026 Results Conference Call. At this time, all lines 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 needed assistance, please press star 0 for the operator. Also note that this call is being recorded on May 6, 2026. And now, I would like to turn the conference over to Jeff Kwan, Chief Investor Relations Officer. Please go ahead.

Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our first 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 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 measures and other terms used in this presentation. To discuss our results today, I have with me our CEO, Charles Brindamore, our CFO, Ken Anderson, and Patrick Barbeau, Chief Operating Officer. We will begin with prepared remarks followed by Q&A, and with that, I will turn the call over to Charles.

Good morning, and thanks for joining us. Last night, we announced another very strong quarter. Net operating income per share increased 8% to $4.33, our highest ever in Q1. Norwich has grown at a compounded rate of 14% in the past five years and 12% over a decade. Just as important, our operating ROE came in at 19.4%, the third consecutive quarter above 19%, despite a very strong balance sheet. For 25, we estimate that our REO performance reached 740 basis points, well above our 500 basis points objective, and higher than our 670 basis points track record in the last decade. Our capital generation engine continues to strengthen our balance sheet, giving us a lot of optionality on capital deployment. Our top-line growth in Q1 was 4%, and 5% when used through the non-recurring items and personal property. I'm encouraged to see continued strength in personal lines, as well as sequential improvements in commercial and specialty lines in both the UK and in Canada. The combined ratio for Q1 of 91.3 was in line with last year. This was an excellent result, reflecting our continued disciplined underwriting. Looking ahead in 26, I expect the platform overall to continue to deliver top and bottom line industry health performance. Let me now provide some color in the results and outlook by line of business, starting with Canada. In personal auto, premiums grew 9% in the quarter. With the industry remaining unprofitable in 2025, we expect industry premium growth to remain in the high single digits throughout the year. Over the next 12 months, when it comes to the industry, reforms will take place in both Ontario and Alberta. We view those as positive for drivers and for the vibrancy of the automobile insurance market in these provinces. In Alberta in particular, these reforms will go a long way to stabilize what's today a loss-making market with severe capacity shortages. Overall in personal auto in Canada, our underlying loss ratio improved 2.2 points year over year. The overall combined ratio of 94.4 was a strong result for a first quarter, and we remain very well positioned to sustain our sub-95 annual guidance. In personal property, premium growth was 3%, driven by a 2% increase in units. As I mentioned on our call last quarter, Q1 premium growth was impacted by five points from one-time items in our affinity and travel business. Adjusting for this, growth is running in the upper single-digit range, a level we expect to return to in Q2. The combined ratio of 84.4 was strong, reflecting a robust underlying performance and lower catastrophe losses. Personal property is really set up to operate at a sub-95 combined, even with severe weather. In commercial lines, premium growth was 2%, a one-point improvement sequentially, driven by further momentum in our growth initiatives, despite close to two-point drag due to mix, as competition is more intense for large accounts. This mixed drag is intentional. It results from discipline across all segments, the deployment of machine learning models in pricing, and picking the right verticals to grow in in specialty lines. Given these are geared to drive combined ratio improvement, a drag-and-mix doesn't translate in a drag in absolute earnings growth. Talking about growth, we still expect the industry premium growth in the low to mid single digit range over the next 12 months. On the combined ratio front in commercial in Canada, it's very strong at 86.2%, despite more large losses year over year. Looking ahead, our business remains very well positioned to deliver a sustainable, low 90s or better performance, and we expect to continue to outperform the industry, both from a top and bottom line, point of view. Moving now to our UKI business. Premiums increased 2% in the quarter, a four-point improvement sequentially, as expected. While our top-line growth may vary quarter to quarter, we expect it to gradually improve in 2026 as we leverage growth opportunities and focus on service to our brokers and customers. We still expect industry premium growth in the low to mid single-digit range over the next 12 months. The combined ratio of 103.2 was disappointing and included eight points of elevated tax and large losses. And so as we continue to enhance our pricing and risk selection models, our technology capabilities, and the expense base in the coming months, we're confident that this business is on track to evolve towards a 90% combined ratio. In the U.S., premiums increased 4% year over year, and we continue to grow faster in our most profitable lines. Our broader product offering, combined with continued momentum in expanding and strengthening broker relationships, is delivering positive results. From an industry perspective, we expect premium growth to continue in the mid single over the next 12 months. The combined ratio of 83.4% in the quarter improved three points year over year, reflecting continued underwriting discipline and lower catastrophe losses. Our focus on profitable growth helped us deliver the 11th successive quarter in a row with a sub 90% combined ratio. Our team, also continue to execute on our strategic priorities in the first quarter. Let me highlight a few of these achievements. First, we're a global leader in leveraging data and AI within the P&C industry. We're now realizing $220 million in annual recurring benefits, up from $150 million we announced at the Investors Day last year. We're well on our way to exceeding our $500 million target. In global specialty lines, we continue to expand our product offering as we began writing in both the U.S. construction liability through Shepard and MGA. We have a minority stake in, as well as European trade credit, the carton trade, and MGA, where we have a controlling stake. We've also extended our marine offer globally and recently launched a surety business in the U.K. tremendous momentum in global specialty lines. In our UK commercial lines business, our UK rebrand continues to gain traction. Broker advocacy continues to improve quarter over quarter, and brokers are increasingly recognizing the product and service improvements we've made since the launch. With best or better than industry scores improving on a sequential basis by 17 points, on consistency of service, seven points on ease of contact, and 10 points on quality of cover. I'm pleased with the progress we're making in the UK. Overall, our track record of delivering for shareholders through the cycle is really solid. Our net operating income per share has grown at a compounded rate of 14% over the last five years and 12% over the last 10, and 15 years. Our REL performance has been almost 700 basis points on a 5-, 10-, and 15-year basis. Our book value per share grew at a compounded rate of 13% over the last five years and 10% in the last 10 and 15 years. That consistency of delivery shows that external factors, including industry pricing cycles, did not inhibit our ability to deliver both REO performance and double-digit earnings growth annually over time. Remaining focused on profitable growth, protecting underwriting margins, and allocating capital with discipline wins the game. If I look prospectively, there are a number of very specific reasons why our track record can be maintained, despite investor concerns about broader industry pricing cycles. First, the vast majority of our business operates where market conditions are constructed, north of 80%. Second, across all segments, we leverage our pricing and risk selection advantage to navigate even the toughest markets. These tools are available in the field to help underwriters grow in the right segments with the right accounts. Third, our sandbox is 10 times bigger than a decade ago and offers tremendous growth optionality. Our footprint today is not only much larger, but it's diversified across geographies and specialty verticals. Our game plan obviously targets most profitable segments, regions, and customers. And finally, beyond a diversified footprint, an advantage in risk selection. We've built an ROE advantage by leveraging claims, supply chain, distribution, and asset management. This allows us to ensure the ROE is solid in all phases of the so-called industry pricing cycle. Ultimately, the sum of these attributes has not only allowed us to shift the ROE in an opportune zone, It's also resulted in a lower ROE volatility versus our peers. In fact, since 2011, the standard deviation of our ROE was half that of our peers. We've demonstrated in past decades that the impact machine is built to create value in good and in bad times. And I'd say we're even better positioned today. That's why we've decided to accelerate buying back our own shares. While our priority remains capital deployment through acquisitions, the big disconnect between our share price and the underlying performance and earnings power of the firm is too good an opportunity to pass up. So finally, I want to thank our employees for their efforts in delivering yet another record quarter. and for positioning us to deliver exceptional returns to shareholders in the years ahead. It's your contributions day in, day out, that allows us to build such an outstanding machine. I've no doubt we'll continue to deliver at least 10% annual net operating income per share growth over time, and at least 500 basis points of ROEL performance every year. With that, I'll turn the call over to our CFO, Ben Anderson. Thanks, Charles, and good morning, everyone.

Our record performance in 2025 has carried into the first quarter of 2026 with an excellent start to the year. A strong combined ratio of 91.3% and higher investment income helped drive an 8% year-over-year increase in net operating income per share to $4.33, our highest ever for the first quarter. Operating ROE remained above 19% for the third consecutive quarter and drove a 13% year-over-year increase in our book value per share to $108.78. Let me add some color on first quarter results. The underlying current accident year loss ratio of 61.5% was solid overall and up marginally from last year. Underlying performance in our Canadian personal lines business was again very strong, improving by nearly two points year over year. This was offset by higher large losses in Canada commercial lines and in UK and high. Favorable prior year development was excellent at 7.1%. Favorable development is typically higher in the first quarter, and this quarter was in line with Q1 of last year. Our near-term expectation remains for PYD to hover around the upper end of our 2% to 4% long-term guidance range. Since our IPO in 2004, we've had favorable PYD every single year. Our 5- and 10-year annual average has been 4.8% and 3.5% respectively, evidence of our disciplined, prudent reserving philosophy. This is also why we focus on the combined picture of both the current accident year performance and prior year development. Capacity losses in the quarter were benign at $141 million, driven primarily by winter storms and large property losses in the UK and Ireland. At the consolidated level, we continue to expect approximately $1.2 billion of annual catastrophe losses, with about one-third anticipated in each of Q2 and Q3. Moving to expenses, the consolidated expense ratio was 34.5%, up one point year over year, but flat sequentially and in line with first quarter expectations. The year-over-year increase was partly due to growth in business lines in the U.S. that have higher commissions but lower loss ratios, which results in a positive impact on the U.S. combined ratio. In Canada and the U.K., higher expenses reflect continued investments in marketing, technology, and growth initiatives to drive top-line and customer service levels. We expect the UK and I expense ratio to improve by approximately two points in the second half of the year, and for the IFC consolidated full-year expense ratio to be in line with our annual guidance of 33% to 34%. Operating net investment income of $457 million increased 10% year-over-year, reflecting an increase in special dividends and higher assets under management. In today's interest rate environment, we now expect approximately $1.7 billion of investment income for the full year, compared to our prior $1.6 billion guidance. Distribution income was in line with expectations, still down 2% from last year's very strong first quarter. Over both the past five and 10 years, distribution income has grown at a compounded annual rate in the mid-teens. And while quarterly results may vary, we continue to expect distribution income growth of at least 10% annually. Moving to our balance sheet, we continue to operate with significant financial flexibility. Total capital margin increased $300 million to end the quarter at $4 billion, well in excess of what we need to manage volatility. And our adjusted debt-to-total capital ratio improved to 16.4%. Our balance sheet strength, low leverage ratio, and strong capital generation means we are ready to capitalize on M&A opportunities. and the landscape for M&A continues to improve. It also means we can take opportunities to buy our own shares when they are meaningfully undervalued. In 2025, we bought back approximately $200 million of our shares. In 2026, we repurchased $150 million in the first quarter and have accelerated that to a $200 million run rate in the second quarter. deploying $217 million in total year-to-date. To be clear, the M&A landscape is evolving favorably and remains our preferred choice for capital deployment. But we have ample capacity to do both, and we will continue to deploy capital in share buybacks when our shares are well below our view of fair value. Lastly, our track record of delivering on our financial objectives positions us as a leader within our industry, having one of the highest ROEs and also one of the most stable ROEs. This is a testament to the resilient global platform we have built and the outstanding work of our teams to successfully execute on our strategies. As Charles has set out, our track record shows that we can deliver consistent earnings growth across cycles. Our continued investment in our competitive advantages means they are getting stronger. This positions us to continue to deliver on our financial objectives to compound net operating income per share by 10% annually over time and to exceed industry ROE by at least 500 basis points every year. With that, I'll turn it back to Jeff.

Thank you, Ben. 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 reach you 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 do have any questions at this time, please press star followed by one on your touchtone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from James Lloyd at National Bank Capital Markets. Please go ahead.

Yeah, good morning. Good morning. First question, just Just on the Canadian commercial lines front, you talked about growth initiatives having some success. Can you talk about what's been working, what's not working, and should we expect to see a little bit more acceleration in the success of those initiatives?

I do expect it to be the case. What's working, technology deployment to brokers working really well. we're quoting more of the submissions than we used to. That's driving, you know, very good new business generation, actually. Very good growth there. Retention is really good, so I'm very pleased with the progress I'm seeing in the Canadian landscape. Making excellent progress in specialty lines as well in Canada. I think, you know, if you just look at the top line, the drags coming from Mix, which I've addressed in my remarks, is the thing that is driven by the fact that, you know, we have more success at the smaller end of commercial lines. We're deploying many initiatives to optimize pricing, and for us, it's good. It's intentional, and we think that it's good for earnings growth as well. I don't know, Patrick, if you want to add color in terms of the actions that are working well. But, you know, high level, that's kind of it.

No, the only other thing is we're leveraging more than before the cross-selling between also our commercial lines and specialty lines. So that's also producing a bit of an upside. But technology, pricing, sophistication, and completing more quotes are the key elements. Yeah.

Other questions?

Okay, so sound. Yes, I was just going to confirm that. It sounds like it's more, I'll call them non-price actions that's driving the growth there as opposed to just purely getting rate on some different lines.

Correct. And this is where the mix comes in when competition is uneven. But the math on mix, we think, is excellent. Actually, so we're very comfortable that this is contributing to earnings growth.

And then sticking with commercial lines, you talked about large losses being a drag in Canada and the UK. Can you quantify the impact of large losses on the current accident year loss ratios?

Yeah, Ben? Yeah, so, Jane, in the first quarter, you know, we talked about cats being benign, but we did have elevated large losses which show up in the current accident year, an impact of about two points on IFC overall. In Canada, you know, most of the impact was in commercial lines, probably impacted by about five points there with a bit of a higher frequency impact. on fire losses contributing most to that. In the UK and I, there's about four points of impact there. A combination, I would say, of storms and a few individual large claims. But all in, when you look at the lower cap losses in the quarter, are balanced out by a bit of the higher large loss activity. So net at an IFC level, those two things neutralize. Yeah, that's a good point.

We don't think there's a pattern there. We've looked at every one of those large losses and so on. And this happens. It's monthly, and we think that you probably have a two-point drag there. That's the business we're in, just like tax.

Yeah, so if I think about that, the two-point drag on an overall IFC basis, current accident year, you know, improved year over year from first quarter of 2025.

That's exactly right, James. When you look at, we talk about looking at PYD and the current accident year, you normalize for those large losses, we are indeed improved by one point year over year.

Thank you very much.

Thank you.

Next question will be from John Aiken at Jefferies. Please go ahead.

Good morning. Charles, in your commentary, you're very transparent about a desire to pursue M&A. Can you discuss what your wish list is? And with seeing a little bit of stabilization in the U.K. and I, does that make Europe a little bit more attractive moving forward?

I'll go name by name, John. Just kidding. I think, you know, as a principle, when I look at the environment in which we operate, and I look at our track record for not only very strong strategic fit, but very strong financial outcomes, as we've done in the past, we're looking for complexity. This is where the best opportunities exist. That means, you know, time matters here, but that's the lens we're taking in this environment. I think in terms of opportunities, you know, we would love to grow our Canadian franchise by 50%, and there are no constraints of any substance that would prevent us from doing that If you look at the Canadian franchise performance, three points, top line out performance, eight points, bottom line out performance. If you do a transaction here, this is massive value creation. Second, I was really pleased to see the industry's performance compared to our performance in the U.S. Where in Q4, you've also seen now that we're starting to outperform from a top line point of view, while outperforming by 70 points from a combined ratio point of view in the U.S. Same thing. You know, there's a lot of room to grow in the U.S. We would love to increase our footprint in the specialty line space in the U.S. and replicate that advantage on a much bigger base. And so this is right at the top of what we're keen on and actively working working on to a certain extent. I think, John, we like the progress we're making in the U.K. We like our performance also in the London market and in Europe. We're open to opportunities there, no doubt. But to be transparent with you, the transformation we're leading in the U.K., massive investments in technology. We're integrating to business, because remember, we exited the P.L., We doubled down on the SME and mid-market space in the UK, a space we love because performance is really good. There's lots going on operationally in the UK, and if you want to kill it from an M&A point of view, you need to be ready from an operational point of view. So I'd put capital in the UK if an opportunity came up, but I'm also very conscious that value creation goes through operations, and we still have some work to do in the UK. And that's why, you know, we take the trajectory of the combined ratio there is towards 90%. We're not yet there. 2026 is a big year. I don't want to disrupt the team too much on that journey. And lastly, yeah, John, lastly, I don't want to skip over distribution because We don't talk about it so much in terms of M&A because it's multiple smaller transactions, but it's created a very good machine of earnings and stable earnings over time. It's helpful strategically to the insurance operations, and we're deploying capital in that space as well.

Thanks, Josh. That actually was going to be my follow-on. Is the pipeline still fairly robust on the distribution side? It is.

Yeah, it is. And whether it's through BrokerLink or the brokers which we support and invest in to consolidate, the pipeline is actually very good, to be clear. BrokerLink, very active. We've done... you know, a large percentage of transactions in Canada last year. And we're also looking at MGAs to support our specialty lines business. We've taken a majority position in carton trade in the last quarter, which is our trade credit business in Europe, and indexing in MGAs as well, when it makes sense from a global specialty lines point of view.

That's great, Charles. Thank you. I'll reach you.

Thank you, John.

Next question is from Doug Young at Desjardins. Please go ahead.

Hi. Good morning. Just wanted to start with a personal property morning. It sounds like in the personal property, you know, you quantified and you lost, I think, an affinity or travel account. I guess, can you confirm, was this a property business or travel business? I assume this was due to pricing, but maybe you can elaborate on that. And are you starting to see, like, competition in the affinity market heat up? Is that what you're seeing? Just hoping to get a little color on that.

Patrick?

Yeah. It's really one account, as you say, Doug, and that triggered a four-point drag during the quarter.

We knew about it at the end. You know, in the last call, we said it would impact Q1. Travel is a fairly small part of our overall personal property. In fact, if you exclude that one account, we're still growing that line of business and we offer single digits plus two points of units, and that's the trajectory you should see us going back to starting in the future.

Yeah, and just to put things in perspective, Doug, the difference with the rest of the book there is that you have those relationships with, you know, a small number of large accounts, and they renew every so often. And sometimes it's a question of, you know, product offering. It's a question of technology support. It's a question that somebody else might be, you know, competing for the account. And once in a while, you lose some, and sometimes you gain some. We view this very much as a one-off.

Okay. So this was travel. This wasn't property-related. This was travel-related. Correct. Okay. That's what I was hoping to hear. Okay. And then, Cheryl, just, you know, over 19% operating ROV again this quarter. You know, you obviously talked a lot about your advantage on that side. You know, is this a – maybe help me think about it. Is this a reasonable through-the-cycle ROV for intact now? I know you talked about – before, I know what the range was, and you kind of upped that range to – upper teams, you know, is this a reasonable through the cycle level or what are the puts and takes that change the ROE from here?

Yeah. I think, Doug, the standard deviation of ROE is 3.5%, you know, give or take. And we think structurally we're in the upper teams, you know, is it 19? Is it 18? I'm not sure. It's a business that you know, some degree of volatility. But I think with the standard deviation in mind, yeah, I would say it's reasonable. And right now, the 19 has a bit of upside because there's been less tax in the last year, but there's way more capital. And I think those two upset each other in our minds. So 19 is 19 right now. And if you look at our track record, Doug, our ROE hasn't swung that much through cycle. I mean, the issues have been sometimes cost pressure in automobile insurance, where we have much less options than we have today in the past 10, 15, and 20 years. We're less exposed to those sort of cost fluctuations. We're in control of the rest, really. You just need to be comfortable with seeing mixed change. bit of threshold units, and we're completely comfortable when that happens. Because we're managing for earnings growth. Perfect.

I appreciate the color. Thank you.

Our question will be from Tom McKinnon at BMO Capital Markets. Please go ahead.

Yeah, thanks. Good morning. Question on personal auto. We've certainly seen a deceleration in the level of rate hike approvals in Ontario. Any thoughts about that and your continued to hold to the sub-95 annual guidance? And if in answering that question, you can talk a little bit about the impact of some of the reforms in Ontario. I think you said they were positive. So some of your thoughts there. Thanks. Thanks, Tom. We'll ask Patrick to share his perspective.

Yes. So Q1 combined ratio is 94.4 in a quarter. That is usually seasonality adverse. So very much within the sub-95 guidance. Our current year-loss ratio has improved two points year over year, given, you know, our strong underwriting discipline and pricing sophistication. We're growing and outperforming from both a top-line and bottom-line perspective, including Unipro. We think rates are enough to cover inflation.

No change in guidance, really. No change in guidance. We feel pretty good about that. On Ontario per se, the government is introducing options. or drivers, and that's good. Patrick, color, maybe, on Ontario?

Yeah, the Ontario reform will start to apply on July this summer. It provides more optionality for consumers. We see these options that are as neutral from a bottom-line perspective. They're properly priced. The optionality is a small portion of the premium in Ontario, roughly 4%, and we think that the pickup rates will increase would be fairly high, so we think it's actually also almost neutral from a tough line perspective. So, it shouldn't change much, the outlook in Ontario, that reform in particular.

I think, Tom, to your question on the approvals in Ontario, you know, if you look at the past 24 months, the industry has taken more rates than we have. Why? Because we've acted... early on what was inflation and the industry caught up. You'll remember a few years back, units were shrinking. Now we're all performing from a growth point of view. This is the playbook sort of playing out. And the trajectory of rate, I think, is a function of inflation in the Ontario marketplace. There's a regulator that's principle-based and that has created a very dynamic marketplace And so we'll see where great trajectory goes, but it's a function of inflation. And so we feel very good about the Ontario marketplace.

And as a follow-up, Charles, I mean, the market seems to be fixated on the accident-year ex-cat ratio. And so you always have such good favorable reserve development, and you're way above your guide, and the street just kind of chucks it away. What do you say to that practice? And most of this stuff, even seasonality, would suggest that it comes back pretty quickly.

Yeah, when I say done, honestly, I mean, you know, you're an actuary, so you understand these things. The favorable development you see is a function of what you've booked in your current accident year. And when there's no change in practice, which is the case for us, we like to look at current and PYD together at the underlying performance. Because if you have a track record of favorable PYD like we have, you know, which is in the four-ish zone over a long period of time, it assumes to a certain extent that there's a caution of that nature embedded in your current accident tier. And our practice on current accident tier hasn't changed. And it turns out that, you know, we've been cautious. It shows up in PYD. And we look at it combined. Because I think if you strip the PYD, you don't really have a perfect view of the underlying performance of the organization when there's a certain pattern of being cautious. Because keep in mind, we're pricing for a product we deliver over time. We encourage pricing. people to have a degree of caution both in pricing and in reserving, and that's how it materializes. So for me, I look at these things together unless a pattern changes, which is not the case right now. Thanks for that.

Next question will be from Bartoszewski at RBC Capital Market.

Great, thanks, and good morning, everyone. Wanted to ask around Canada personal property. So we saw strong volume growth, 2%. It's been accelerating now for five quarters. So could you just unpack what's driving that volume growth and do you expect that to continue?

That's good.

Yeah, strong unit growth. We have, you know, there's good rates. There's hard market conditions. And we're successful on a new business perspective. We are competitive. In the markets, we have our digital and direct distribution in particular showing good growth from a new business perspective, and we also have very good retention. The industry continues to price for both inflation and climate trends, so market transitions are good for us, and we maintain our positive offerings.

Great, thanks. And then on the distribution income, so I know it's in line with your expectations and there's a tough comp year over year, but at the same time, you guys have been busy acquiring brokers kind of throughout the year, so why wouldn't that have shown up in stronger growth? And then maybe as we look forward, when do you expect to get back to that kind of 10% CAGR outlook? Thanks.

Ben? Sure. Yeah, so I mean, Looking back over the last five and ten years, you know, that distribution income has compounded in the mid-teens, you know, provides a lot of stability and also contributes a bit to that ROE stability that Charles spoke about earlier. Yes, the first quarter, it was in line with our expectations, to be clear, albeit at minus two. Last year, as I said, had very strong results. We have been investing in service levels, you know, in BrokerLink and across the distribution investments that we own. And, you know, that will start to reap some benefits in the second half of the year. So when it comes to investment income, Bart, Our full year expectation for 10% growth still holds for 2026, sitting here today. So a bit of lumpiness in the first quarter, a tough comp, as you said, but sitting here today on track to deliver 10% growth, which reflects that investment in distribution that you've referenced.

Great. Thanks for that.

Next question will be from Paul Holden at CIBC. Please go ahead.

Thanks. Good morning. I just want to follow up on a couple of discussions that have already taken place. And I guess the first one is you came on, as you pointed out, you know, disappointing results of the quarter. You've been very clear for, I don't know how many years now, you're driving down towards the low 90s by, you know, improving underwriting processes, technology, risk selection, et cetera. Just, I guess, a question I want to ask. Like, is there anything that happened this quarter where you're now changing an approach? Maybe there's certain risks you decided you no longer like, or there's room for more improvement, I guess is what I'm getting at as a result of this quarter, or you're fully just taking it as, well, it's part of the business and it's going to happen from time to time.

It's 100% part of the business and it's going to happen from time to time. There's no doubt in my mind we've done so much repositioning in the past five years. We're comfortable where we're operating, and the indicators of profitability that we manage, which are perspective and nature, are, you know, suggesting we're at the right place. We've looked at these large losses to figure out whether there was a pattern we were uncomfortable with. Some of it are from segments we've exited, actually, just to be clear, Paul, and therefore, this has not triggered a change in direction in the U.K.

Thank you. And then next question, I want to follow up on sort of the personal auto pricing discussion and rates increasing sort of now in line with claims inflation. Maybe you can remind us where claims inflation currently is. And I guess I'm curious. I would suspect it's Probably trending lower, but maybe I'm wrong. Maybe it's stable in the single digits. But an update there would be helpful. Thank you.

Yeah. Patrick, why don't you cover inflation?

Yeah, it is sustainable in the mid-single digits. And, in fact, we see that level in both physical damage and in the injury-slash-liability part of the product. In physical damage, it is driven by technology in cars. we see cost of parts going up. Because of the technology, we also see the length and the complexity of the repairs taking a bit longer, and that's driving disinflation and making it sustain the fiscal damage part. It also puts more total loss. As these costs go up, we reach the threshold of total losses faster. From an injury liability perspective, it is mainly driven by the situation in Alberta with the tort system. We've seen it over the past couple of years. There's reform coming that will be implemented in January that should address a portion of that. But when you combine all of this, it's been stable at the mid-single digit for, I would say, six, seven quarters in a row now.

Yeah, that's the coast-to-coast picture. Alberta, I think, is the issue. You're in double-digit range there. And I think, you know, you look at those reforms, I think the government has done an awesome job to go to the heart of the issue, to go from cash to care, and to really improve the system. So we're really looking forward to the improvement in the system in 2027. And this will help create more vibrancy in Alberta because it's a tough market right now.

Sorry, just a real quick follow-up, Ben. If Alberta is double digits and coast-to-coast is mid-single digits, does that mean Canada at Alberta might be more low single digits?

It's less than mid-single digits, yeah.

Yeah, a bit less. The double-digit, just quoted, is on the VI piece, not on the physical damage. Right.

That makes sense. Okay. All right. Thank you. Thanks for the time. Thank you.

Next question is from Brian Meredith at UBS. Please go ahead.

Yeah, thanks. Charles, just sticking with personal auto, I noticed that policy sports actually declined in the first quarter, fourth quarter. Is that Alberta-related, or is there something else going on?

It is Alberta-related. Yeah.

I mean, it's still up, but... going up at a slightly lower pace than where we were in Q3, and it is because we've taken some defensive measures in Alberta until the reforms are effective.

So you should arguably be gaining some market share ex-Alberta?

Yes. And to be here, Brian, in terms of market share and personal automobile, right now, we are outperforming the market in terms of growth for the full year 25 by 4.3% in terms of top line. So we are gaining market share for sure in premium firms, and I do think the improvements in the Alberta marketplace will help the trajectory. Thank you.

Excellent. That's great. And then one other, just curious, the large losses that you saw in the commercial line space, was that in kind of the large or global specialty businesses or was that your kind of traditional SME type business where you're seeing that?

It was more in the large specialty space. You know, one-off sort of hits, quite frankly. Rail and some segments we've exited before, but at the large end of things.

Great. Very helpful. Thank you.

Thanks, Brian.

Thank you. Ladies and gentlemen, a reminder to press number one if you have additional questions. And at this time, Mr. Kwan, we have a follow-up from James Boyne. Please go ahead.

Yeah, thanks. Just wanted to quickly follow up on the shared buyback and capital deployment on that front. A little bit, you know, you spoke about it accelerating to a $200 million run rate. Is that about the level you're comfortable with to obviously retain some dry powder for M&A? Or is that something you could see accelerate in this, you know, current backdrop for where the share price is trading?

Yes. So, look, James, firstly, You know, the financial position is very strong, as I said. You know, we ended the quarter with $4 billion of capital margin, debt-to-capital sub-17%, and, you know, the capital generation forecast looks really good. So, you know, I would say ample capacity to pursue large-scale M&A. Today, we could execute... on a $6 billion transaction without needing to issue equity. So that's the backdrop where we are saying that we have the capacity to do both. We can pursue the M&A opportunities, but when the shares are meaningfully, significantly undervalued, we're in a position to support them. With the capital generation outlook moving to a 200 million a quarter run rate makes a lot of sense. And, you know, you can expect us to continue to be in that zone if the shares are in the same zone as they are today.

Yeah. I think, you know, what you look when you do that, there's the M&E environment, 200 million, we're protecting the dry powder. Obviously, it's a drag on the ROE. And, you know, it's the delta between the intrinsic, the argue of intrinsic value and the share itself. You also need to look, at least we do, in terms of book value per share dilution that buyback at the high level can create. So we put all that in the mix. We think $200 million is the right pace. It might go up. It might go down. But it's a good way to think about the midpoint. Thank you. Thank you.

And at this time, Mr. Deloy, Mr. Kwon, I apologize. We have no further questions. Please proceed.

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. Of note, our 2026 second quarter results are scheduled to be released after market close on Tuesday, July the 28th, 2026, with an 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 the conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your line.