Wednesday, February 8, 2012

IFC - <span class="simulate_din_font">Intact Financial Corporation Reports Fourth Quarter and Year-End Results</span> (CAD 0.2625)

Company: Intact Financial Corporation
Stock Name: IFC
Amount: CAD 0.2625
Announcement Date: 08/02/2012
Record Date: 13/03/2012

Dividend Detail:





  • Premium growth of nearly 50% in the fourth quarter, bolstered by the
    acquisition of AXA Canada and a rebound in organic growth







  • Net operating income per share up 61% to $1.14 in the fourth quarter,
    leading to an operating ROE of 15.3%







  • Strong performance across all lines of business leading to a combined
    ratio of 92.7% in the fourth quarter







  • Book value per share increased 12% in 2011






  • Quarterly dividend raised 8% to $0.40 per share






  • AXA Canada integration on-track



TORONTO, Feb. 8, 2012 /CNW/ - Intact Financial Corporation (TSX: IFC)
today reported net operating income for the quarter ended December 31,
2011
of $152 million, up $72 million from the same quarter of last
year. On a per share basis, net operating income increased 61% to
$1.14. The increase was driven by excellent underwriting results and
higher investment income. Net income was $84 million, or $0.62 per
share, compared to $107 million, or $0.95 per share, for the same
period last year. The decrease reflects $42 million of integration
costs and a $41 million provision for the contingent consideration to
be paid for the acquisition of AXA Canada. Direct premiums written
increased 49% over the same quarter a year ago to reach $1.6 billion,
reflecting the contribution of AXA Canada and a rebound in organic
growth.



Net operating income for the year was $460 million, up $58 million from
the previous year. On a per share basis, net operating income increased
12% to $3.91. Net income was $465 million, or $3.96 per share, compared
to $498 million, or $4.32 per share in 2010. The decrease was related
to integration costs and an increase in the fair value of the
contingent consideration. The combined ratio improved by one percentage
point to 94.4% compared to last year. Direct premiums written for the
year increased 13% versus 2010 to reach $5.1 billion. The book value
per share was up 12% during the year to $29.73.



CEO's Comments



"Our excellent fourth quarter results rounded off a strong year for our
company as we recorded our best underwriting performance in the past
five years," said Charles Brindamour, Chief Executive Officer of Intact
Financial Corporation. "Despite another challenging year for the
industry, we demonstrated our strength and resilience and executed on
our growth strategy."



"With the acquisition of AXA Canada now complete, we are beginning to
reap the positive benefits of our enhanced leadership position. We look
forward to continuing to outperform the industry and pursuing our
efforts towards building one of the best P&C insurers in the world."



"As we enter 2012, our solid financial position and the quality of our
operating earnings enabled us to increase our dividend, for the seventh
consecutive year."



Dividends



The Board of Directors increased the company's quarterly dividend by 8%,
or 3 cents, to 40 cents per share on its outstanding common shares. The
Board also declared a quarterly dividend of 26.25 cents per share on
the Company's Class A Series 1 and Class A Series 3 shares. All
dividends are payable on March 30, 2012 to shareholders of record on
March 15, 2012.



Current Outlook



Industry premiums are likely to increase in the next 12 months at a pace
similar to last year. It is expected that growth in personal auto will
be in the mid-single digit range, driven by Ontario. Growth is expected
to be in the upper single digits in personal property, due to the
impact of water-related losses and more frequent and severe storms.
Commercial line premiums are expected to grow at a low single digit
rate. The low interest rate environment and reinsurance market
conditions should support firmer industry premium levels.



At an industry level, while the combined ratio might improve modestly as
a result of the better pricing environment and Ontario auto reforms,
the industry's ROE is unlikely to improve materially in the near term
as the low interest rate environment will continue to put pressure on
investment income.



The company is well-positioned to continue outperforming the P&C
insurance industry in the current environment due to its pricing and
underwriting discipline, claims management capabilities, prudent
investment and capital management practices and solid financial
position. Given these attributes, the company strongly believes that it
will outperform the industry's ROE by at least 500 basis points in the
next 12 months.



Consolidated Highlights

























































































































In millions of dollars, except as otherwise noted

Q4-2011

Q4-2010

Change

2011

2010

Change

Direct premiums written

(excluding pools)

1,576

1,060

49%

5,099

4,498

13%

Underwriting income1

118

21

462%

273

193

41%

Net operating income2

152

80

90%

460

402

14%

Net income

84

107

(21)%

465

498

(7)%

Earnings per share

Basic and diluted (dollars)

0.62

0.95

(35)%

3.96

4.32

(8)%

Adjusted earnings per share

Basic and diluted (dollars)2

1.14

0.96

19%

4.82

4.38

10%

Net operating income per share (dollars)

1.14

0.71

61%

3.91

3.49

12%

ROE for the last 12 months 2,3

14.3%

16.9%

(2.6) pts







Adjusted ROE for the last 12 months 2,3

17.4%

17.2%

0.2 pts







Operating ROE for the last 12 months 2,3

15.3%

15.1%

0.2 pts







Combined ratio (excluding MYA)

92.7%

98.0%

(5.3) pts

94.4%

95.4%

(1.0) pt

Book value per share (dollars)

29.73

26.47

12%








1 Underwriting income is defined as underwriting income excluding market
yield adjustment (MYA). The MYA is the impact on claims liabilities due
to movement in discount rates.



2 For key performance indicator definitions, please see pages five and
six of the Management's Discussion and Analysis for the year ended December 31, 2011.



3 For ROE, adjusted ROE and Operating ROE in Q4-2011, the average equity
calculation has been adjusted on a pro rata basis to account for the
$921 million of common shares issued as at September 23, 2011.






Operating Highlights




  • Net operating income for the quarter was $152 million, up $72 million from the same quarter
    in 2010. The 90% increase is attributable to improved underwriting
    results and higher investment income. The operating ROE for the last 12
    months was 15.3%.



    Net operating income for the year was $460 million up 14% from $402
    million
    recorded in 2010.




  • Direct premiums written increased 49% in the fourth quarter to $1.6 billion, as a result of the
    acquisition of AXA Canada and a rebound in organic growth from 2% in
    the third quarter to an estimated 4% in the last three months of the
    year. The organic growth benefited from the much improved sales
    performance of the company's direct auto business in Ontario.



    For the year, total direct premiums written increased by 13% to $5.1
    billion
    .




  • Underwriting income in the quarter increased by $97 million to $118 million compared to the
    same period a year ago. The combined ratio improved by 5.3 percentage
    points to 92.7% driven by a significant improvement in personal auto.
    The underlying performance of our portfolio, which excludes
    catastrophes and prior year claims development, improved 8.3 percentage
    points year-over-year.



    Personal auto underwriting income amounted to $52 million up from a loss
    of $18 million recorded in the fourth quarter of 2010. The combined
    ratio improved 9.7 percentage points to 93.3% primarily as a result of
    an improvement in Ontario.



    Personal property underwriting income reached $41 million up from $21
    million
    recorded in the corresponding period last year, as a result of
    our home improvement action plan and relatively mild winter conditions.
    The very strong combined ratio of 88.6% improved 3.1 percentage points
    from the fourth quarter of 2010. Excluding the impact of the
    catastrophes and prior year claims development, the loss ratio for home
    insurance improved by 5.3 percentage points year-over-year.



    Commercial auto underwriting income results increased to $10 million
    from the $6 million recorded in the fourth quarter of 2010. The 93.0%
    combined ratio improved slightly from last year's 93.9% due to better
    current accident year results.



    Commercial P&C underwriting income improved to $15 million from $12
    million
    recorded in the last three months of 2010. The combined ratio
    in commercial P&C insurance increased by 1.9 percentage points to
    95.7%, as a result of lower favourable prior year claims development
    and higher catastrophe losses.



    For the year, total underwriting income was up 41% to $273 million
    despite a $113 million increase in catastrophe losses resulting from
    the Slave Lake wildfires, Tropical Storm Irene and a number of other
    severe storms.






  • Investment income of $103 million was up 45% from the same period in 2010 as a result of
    an increase in assets. The market-based yield declined 20 basis points
    to 3.9% due to the low yield environment.



    For the year, total investment income was up 11% to $326 million from
    the previous year and the market-based yield was 4.0%.



Investment Gains



Net investment losses, excluding fair-value-through-profit-or-loss
bonds, were $6 million in the fourth quarter compared to a gain of $50
million
a year ago due to equity impairment losses. In 2011, the
company had investment gains of $140 million compared to $161 million
in 2010. Cash and investments amounted to $11.8 billion at the end of
the year, up $3.2 billion from a year ago as a result of the
acquisition of AXA Canada.



Capital Management



The company's financial position at the end of 2011 remained solid with
a minimum capital test of 197% and $435 million in excess capital. The
company's book value per share was $29.73 at the end of the year, 12%
higher compared to 12 months ago.



AXA Canada Acquisition



The integration of AXA Canada activities is on track and it is
anticipated to be completed within 18 months of the closing of the
transaction. The company remains confident that it will progressively
reach its $100 million in after-tax synergies by the second half of
2013. The acquisition is expected to be accretive to net operating
income per share in 2012 and to provide up to 15% accretion in the
mid-term.



Integration expenses amounted to $42 million in the fourth quarter and
$71 million for the year. The company estimates that nearly half of its
total integration costs were recorded in 2011 and expects the majority
of future expenses to occur in 2012. The purchase agreement entails a
performance-based contingent consideration of up to $100 million based
on the development of AXA Canada's consolidated reserves. At the end of
2011, the fair value of this contingent consideration was $89 million.



To ensure the company continues to offer an outstanding customer
experience and top-notch service to brokers, most of AXA Canada's
products and services were integrated into Intact's offering and nearly
all of its front-line employees joined Intact.



On January 1, 2012, the company completed the sale of AXA Canada's life
insurance business to SSQ Life Insurance Company Inc. for proceeds of
$300 million.



Analysts' Estimates



Net operating income per share for the fourth quarter amounted to $1.14
compared to the consensus analyst estimate of $1.10. Earnings per share
of $0.62 and adjusted earnings per share of $1.14 compare to the
average analyst estimate of $1.01, which is a blend of both earnings
per share and adjusted earnings per share estimates.



Conference Call



Intact Financial Corporation will host a conference call to review its
earnings results later today at 11:00 a.m. ET. To listen to the call
via live audio webcast and to view the company's Financial Statements,
Management's Discussion & Analysis, presentation slides, the
statistical supplement and other information not included in this press
release, visit our website at www.intactfc.com and link to "Investor Relations." All of these documents are available
on our website.



The conference call is also available by dialling (647) 427-7450 or 1
(888) 231-8191 (toll-free in North America). Please call 10 minutes
before the start of the call.



A replay of the call will be available later today at 2:00 p.m. ET
through 11:59 p.m. ET on Wednesday, February 15. To listen to the
replay, call 1 (855) 859-2056, passcode 42475261. A transcript of the
call will also be available on Intact Financial Corporation's website.



About Intact Financial Corporation



Intact Financial Corporation (www.intactfc.com) is the largest provider of property and casualty insurance in Canada.
Intact offers home, auto and business insurance through Intact
Insurance, Novex Group Insurance, belairdirect, GP Car and Home and
BrokerLink.



Forward Looking Statements



This document may contain forward looking statements that involve risks
and uncertainties. The company's actual results could differ materially
from these forward looking statements as a result of various factors,
including those discussed in the company's most recently filed Annual
Information Form and annual Management's Discussion & Analysis. Please
read the cautionary note at the end of the MD&A.















For further information:

Media Inquiries:
Gilles Gratton
Vice President, Corporate Communications
+1 (416) 217-7206
gilles.gratton@intact.net

Investor Inquiries:
Dennis Westfall
Director, Investor Relations
+1 (416) 341-1464 ext. 45122
dennis.westfall@intact.net









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