Intact Financial Q2 Earnings Call Highlights

Intact Financial (TSE:IFC) reported second-quarter net operating income per share of C$3.17, supported by a 94.9% combined ratio despite elevated catastrophe and large-loss activity. Operating return on equity was 17%, while book value per share rose 13% year over year to C$111.73.

Chief Executive Officer Charles Brindamour said the quarter included roughly four points of excess catastrophe and large losses, while consolidated top-line growth reached 4%, led by continued momentum in personal lines. The company reported C$3.7 billion of excess capital, which Brindamour said positions it to pursue opportunities in what management views as an attractive merger-and-acquisition environment.

Chief Financial Officer Ken Anderson said catastrophe losses totaled C$416 million during the quarter, largely reflecting water-damage storms in Alberta, Ontario and Quebec, along with property-related fires in the U.K. and Ireland. Intact maintained its annual catastrophe-loss guidance of C$1.2 billion, saying year-to-date losses remained in line with expectations.

Large losses viewed as discrete

Management said the quarter had a higher level of large losses than expected, particularly in the U.K. and Ireland, where several large property fires affected commercial and specialty lines. Canadian commercial and personal-property operations also saw increased large-loss frequency, primarily from property fires.

Brindamour said Intact conducted a detailed review and found no common driver or systemic pattern. “We view what happened in Q2 as an anomaly,” he said, adding that management remains confident in the business’s underlying performance and fundamentals.

The underlying current accident-year loss ratio was 59.1%, including three points of excess large losses. Favorable prior-year development contributed 6.1 points in the quarter. Anderson said Intact’s conservative reserving practices have supported consistently favorable development over time.

The consolidated expense ratio was 34.9%, up about half a percentage point, mainly because of a non-recurring premium-tax item. Intact reiterated its expectation for a 2026 consolidated expense ratio of 33% to 34%.

Canada personal lines continue to grow

Canadian personal auto premiums increased 9%, including 1% unit growth, as hard-market conditions, marketing investment and digital-channel expansion supported results. The personal-auto combined ratio improved 1.5 points from a year earlier to 88.8%, helped by a current accident-year improvement of more than two points.

Brindamour said the company expects industry personal-auto premium growth to remain in the high single digits during the next 12 months. He also cited early developments in Ontario and Alberta auto-insurance reform, saying optional protections in Ontario could support growth and that Alberta’s proposed direction for 2027 is encouraging.

Personal-property premiums rose 7%, including 1% unit growth. The segment’s 103% combined ratio included 22 points of catastrophe losses. Despite severe weather in the quarter, Intact’s year-to-date personal-property combined ratio was 93.9%.

Achraf Louitri, senior vice president of personal lines, said the first-quarter property-growth rate had been affected by a one-time impact in Intact’s travel business. Excluding that item, first-quarter growth was in the upper single digits. Louitri said retention remained high and stable, while pricing actions continued amid inflation, loss severity and longer-term climate trends.

Commercial-lines premium growth was 1%, with growth initiatives adding about three points but partly offset by a mix shift toward smaller accounts as Intact remained selective in the more competitive large-account market. The commercial combined ratio was 85.7%.

U.K. transformation remains a multiyear effort

In the U.K. and Ireland, premiums declined 1% as solid specialty-lines growth was offset by pressure in domestic U.K. commercial lines. The segment recorded a 112% combined ratio, including 15 points of excess catastrophe and large losses.

Management said the company is consolidating products acquired through NIG into a single Intact Insurance proposition while deploying pricing, risk-selection and technology tools. Brindamour said the effort is “heavy lifting” and described the path toward a 90% combined ratio as a roughly 24- to 36-month effort.

He said the company is not relying on an underwriting cycle to achieve that improvement. Instead, Intact is pursuing better pricing and risk selection, a multiyear technology re-platforming, improved broker service, product consolidation and expense reductions.

Anderson said the U.K. business averaged about a 94% combined ratio in 2024 and 2025, which he described as the more relevant baseline than one quarter’s results. He added that the business is producing a mid-teens operating return on equity on capital deployed in the region.

U.S. specialty operations and capital deployment

U.S. premiums increased 4%, with growth driven by new business and expansion in profitable verticals. The U.S. combined ratio improved nearly three points from a year earlier to 85%, marking the company’s 12th consecutive quarter below 90%.

Brindamour said Intact’s U.S. operation focuses exclusively on specialty lines across 12 verticals. About two-thirds of the portfolio operates at combined ratios in the 70s to low 80s and is growing at more than 5%, he said, while the remaining portfolio operates in the mid-90s and was largely flat in the quarter.

Intact increased its expected recurring benefits from data and artificial-intelligence initiatives to C$500 million by 2028, about two years sooner than previously anticipated. The company said it has generated more than C$220 million of recurring benefits to date.

The company also highlighted claims-management capabilities during June catastrophes in Canada. Brindamour said Intact closed 47% of nearly 9,000 claims from those events, supported by analytics capabilities and its On Side restoration business.

Anderson said operating net investment income rose to C$405 million, and Intact maintained its C$1.7 billion 2026 investment-income outlook. Distribution income increased 4% to C$172 million, held back in part by near-term investments to support service levels ahead of Ontario auto reform. Management expects distribution income growth to return to at least 10% in coming quarters.

Intact finished the quarter with C$3.8 billion of total capital margin and an adjusted debt-to-capital ratio of 16.2%. It repurchased more than C$180 million of shares during the quarter, bringing year-to-date buybacks to about C$350 million. Management said acquisitions remain its preferred capital-deployment option, and Anderson said the company could complete a C$6 billion acquisition without issuing new shares.

About Intact Financial (TSE:IFC)

Intact Financial Corp is a property and casualty insurance company that provides written premiums in Canada. The company distributes insurance under the Intact insurance brand through a network of brokers and a wholly-owned subsidiary, BrokerLink, and directly to consumers through Belairdirect. Most of the company's direct premiums are written in the personal automotive space. Intact directly manages its investments through subsidiary Intact Investment Management. The vast majority of these invested assets are fixed-income securities.

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