Mr. Charles Brindamour reports

INTACT FINANCIAL CORPORATION REPORTS Q4 2023 RESULTS

Intact Financial Corp. has released its fourth quarter and full year 2023 results.

Highlights

• Net operating income per share (1) up 45 per cent to $4.22, driven by strong underwriting, investment and distribution results;
• Undiscounted combined ratio (1) was solid at 90.1 per cent (85.0-per-cent discounted), reflecting strong underlying performance across all geographies and the company's exit from the United Kingdom personal lines market, tempered by catastrophe losses in the UK&I (U.K. and Ireland);
• Operating DPW (direct premiums written) (1,2) increased 4 per cent, with organic growth of 8 per cent, led by double-digit growth in personal lines;
• BVPS (book value per share) (1) up 6 per cent from Q3 2023, driven by strong EPS (earnings per share) of $2.78 (with a 48-per-cent increase year over year) and favourable capital markets;
• Adjusted ROE (return on equity) (1) of 11.7 per cent (and ROE (1) of 8.8 per cent) after absorbing elevated catastrophe losses and U.K. personal lines exit costs. Operating ROE (1) increased to a solid 14.2 per cent from 12.2 per cent in Q3 2023;
• Quarterly dividend increased by 11 cents to $1.21 per common share, representing a 10-year compound annual growth rate of 10 per cent.

Charles Brindamour, chief executive officer, said:

"The past year has been challenging for society, particularly in the face of numerous natural disasters. Through it all, our people worked relentlessly to ensure customers get back on track quickly. Despite shouldering elevated catastrophe losses as a result, the business demonstrated tremendous resilience. We achieved mid-teens operating ROE and maintained a strong balance sheet with $2.7-billion of total capital margin. As we look ahead to 2024, we are well positioned for outperformance, given strong top line momentum, continued underwriting discipline and a refocused UK&I segment. We are pleased to increase dividends to common shareholders for the 19th consecutive year."

12-month industry outlook

• Over the next 12 months, the company expects hard insurance market conditions to continue in most lines of business, driven by inflation and catastrophe losses.
• In Canada, both personal property and auto premiums are expected to grow by high single digits.
• In commercial and specialty lines across all geographies, the company expects hard market conditions to continue in most lines of business, with high-single-digit premium growth on average.

(1) This release contains non-GAAP (generally accepted accounting principles) financial measures, non-GAAP ratios and other financial measures.

(2) DPW change (growth) is presented in constant currency.

(3) Underwriting income includes the company's underlying performance, catastrophe losses, prior-year development as well as the discount build on claims liabilities. The discount build is largely offset with the net unwind of discount on claims liabilities presented within operating net investment result.

(4) Comparatives were restated for IFRS (international financial reporting standards) 17 but not for IFRS 9.

Q4 2023 consolidated performance

• Overall operating DPW increased 4 per cent, with organic growth of 8 per cent (excluding exits and acquisitions), led by strong momentum in Canada personal lines and continued rate actions across all geographies.
• Overall combined ratio of 90.1 per cent (undiscounted) improved by 3.1 points compared with last year, with strong underlying performance across all regions and reflecting the company's exit from the U.K. personal lines market.
• Operating net investment income of $376-million for the quarter increased 35 per cent year over year, benefiting from higher book yields and the increased turnover of the company's portfolio over the last 12 months.
• Distribution income increased by 16 per cent to $109-million, mainly driven by BrokerLink's recent acquisitions paired with solid organic growth.

Lines of business (5)

P&C Canada

• Personal auto premium growth accelerated to 12 per cent, reflecting the benefit of the company's rate actions in hard market conditions and continued momentum in unit growth. The combined ratio of 95.2 per cent for the quarter reflected a two-point improvement in the company's current year loss ratio from higher earned rates, tempered by lower favourable prior-year development. The company's performance on a full-year basis was 94.7 per cent, in line with expectations. The company continues to expect a seasonally adjusted sub-95 combined ratio over the next 12 months.
• Personal property premiums grew by 8 per cent, driven by rate increases in hard market conditions and unit growth momentum. The combined ratio was very strong at 75.8 per cent for the quarter, reflecting continued underwriting discipline and mild weather. The combined ratio for the year was 100.7 per cent, mainly on account of 11 points of catastrophe losses in excess of expectations. With pricing, risk selection, product, claims and supply chain actions already under way, the company remains well positioned to deliver sub-95 performance, even with severe weather.
• Commercial lines premiums grew by 4 per cent, as continued rate discipline was partially offset by targeted actions to optimize the portfolio and increased competition for large accounts within specialty lines. The combined ratios were strong at 84.4 per cent for the quarter and 89.3 per cent for the year, primarily reflecting robust underlying performance, which largely offset elevated catastrophe losses during the year. Intact remains well positioned to continue delivering a low 90s or better combined ratio as a result of the company's profitability actions.

P&C U.K. and Ireland (UK&I)

• Excluding the impact of the U.K. personal lines exit, operating DPW growth in constant currency was 26 per cent, bolstered by the recent acquisition of Direct Line Insurance Group PLC's brokered commercial lines operations in the U.K. Factoring out this transaction and the end of a large commercial motor contract, organic growth was 6 per cent for the quarter, mainly due to rate actions in supportive market conditions.
• The combined ratio of 104.6 per cent for the quarter reflected 11 points of catastrophe losses in excess of expectations. Adjusted for the impact of personal lines results in the first three quarters, as well as higher-than-expected catastrophe losses, the full-year combined ratio was also in the low 90s. The company expects to run the commercial-lines-focused continuing business at a combined ratio of approximately 92 per cent in 2024, and see this improving to roughly 90 per cent in the subsequent 12 to 24 months.

P&C (property and casualty) U.S.

• Commercial lines premiums grew 9 per cent on a constant currency basis, with hard market conditions in most of the company's lines of business. The combined ratio was strong at 86.4 per cent for the quarter and at 88.7 per cent for the year, driven by growth in profitable business lines and continued underwriting discipline. The company is well positioned to maintain a low 90s or better combined ratio going forward.

(1) This release contains non-GAAP financial measures, non-GAAP ratios and other financial measures.

(2) DPW change (growth) is presented in constant currency.

(3) Comparatives were restated for IFRS 17.

(4) On a pro forma basis (which excludes U.K. personal lines results) growth in constant currency was of 26 per cent for Q4 2023 and 7 per cent for 2023. Combined ratio was of 104.6 per cent for Q4 2023 (95.4 per cent in Q4 2022) and of 94.3 per cent for 2023 (89.7 per cent in 2022).

(5) Combined ratios within the lines of business are reported on an undiscounted basis.

Net operating income, EPS and ROE

• Net operating income attributable to common shareholders of $752-million was 48 per cent higher than in Q4 2022, driven by top-line growth, solid underwriting performance, as well as strong investment and distribution results.
• Earnings per share of $2.78 was up 48 per cent, driven by higher operating income and market-related gains, offsetting increased costs related to the strategic exit from the U.K. personal lines market. These included underwriting losses of $138-million, of which $65-million was driven by Storms Babet and Ciaran in the UK&I segment.
• Operating ROE was solid at 14.2 per cent for the 12 months to Dec. 31, 2023, reflecting strong operating performance across the business, tempered by a three-point impact from catastrophe losses in excess of expectations over the year.
• Adjusted ROE and ROE also remained healthy at 11.7 per cent and 8.8 per cent, respectively, after absorbing higher exited lines and restructuring costs as a result of the exit from the U.K. personal lines market.

Balance sheet

• The company ended the quarter in a strong financial position, with a total capital margin of $2.7-billion and solid regulatory capital ratios in all jurisdictions.
• The adjusted debt-to-total capital ratio of 22.4 per cent was relatively stable compared with last quarter, as the growth in capital from strong earnings was tempered by financing issued for our strategic initiatives. The adjusted debt-to-total capital ratio is expected to return to our long-term target of 20 per cent by the end of 2024.
• IFC's book value per share (BVPS) of $81.71 at Dec. 31, 2023, was 6-per-cent higher than in Q3 2023, driven by strong operating results and favourable capital markets. BVPS was in line with Q4 2022 as strong earnings fully offset the impact of the U.K. pension buy-in transaction, which closed in Q1 2023.

M&A (mergers and acquisitions) update

• On Dec. 7, 2023, the company announced the sale of its U.K. direct personal lines (home and pet) operations to Admiral Group PLC, as well as the exit of home and pet partner and broker contracts in the U.K. The company's exit from the U.K. personal lines market accelerates the path to sustainable outperformance for the continuing UK&I business.
• The acquisition of Direct Line Insurance Group's brokered commercial lines operations in the U.K. closed on Oct. 26, 2023. Substantially all of the future economics of the business were transferred to RSA effective Oct. 1, 2023.

Common share dividend

• The board of directors approved the quarterly dividend of $1.21 per share on the company's outstanding common shares. The common share dividends are payable on March 29, 2024, to shareholders of record on March 15, 2024. This represents an 11-cent increase and marks the 19th consecutive annual increase in Intact's common share dividend since its IPO (initial public offering) in 2004.

Preferred share dividends

• The board of directors also approved a quarterly dividend of 30.25625 cents per share on the company's Class A Series 1 preferred shares, 21.60625 cents per share on the Class A Series 3 preferred shares, 32.50 cents per share on the Class A Series 5 preferred shares, 33.125 cents per share on the Class A Series 6 preferred shares, 37.575 cents per share on the Class A Series 7 preferred shares, 33.75 cents per share on the Class A Series 9 preferred shares and 32.8125 cents per share on the Class A Series 11 preferred shares. The dividends are payable as of March 31, 2024, to shareholders of record on March 15, 2024.

Normal course issuer bid

• As at Dec. 31, 2023, the company had repurchased and cancelled 2,000 common shares under its normal course issuer bid (NCIB) program. The board has authorized, subject to TSX approval, the renewal of the NCIB to purchase for cancellation up to 3 per cent of the company's issued and outstanding common shares commencing Feb. 17, 2024.

Analysts' estimates

The average estimate of earnings per share and net operating income per share for the quarter among the analysts who follow the company was $2.79 and $3.38, respectively.

Management's discussion and analysis (MD&A) and consolidated financial statements

This press release, which was approved by the company's board of directors on the audit committee's recommendation, should be read in conjunction with the Q4 2023 MD&A, as well as the Q4 2023 consolidated financial statements, which are available on the company's website and later today on SEDAR+.

For the definitions of measures and other insurance-related terms used in this press release, please refer to the MD&A and to the glossary available in the investors section of the company's website.

Conference call details

Intact Financial will host a conference call to review its earnings results tomorrow at 11 a.m. ET. To listen to the call via live audio webcast and to view the company's consolidated financial statements, MD&A, presentation slides, supplementary financial information and other information not included in this press release, visit the company's website. The conference call is also available by dialling 416-764-8659 or 1-888-664-6392 (toll-free in North America). Please call 10 minutes before the start of the call. A replay of the call will be available on Feb. 14, 2024, at 2 p.m. ET until midnight on Feb. 21, 2024. To listen to the replay, call 416-764-8677 or 1-888-390-0541 (toll-free in North America), entry code 042559. A transcript of the call will also be made available on Intact Financial's website.

About Intact Financial Corp.

Intact Financial is the largest provider of property and casualty (P&C) insurance in Canada, a leading provider of global specialty insurance, and, with RSA, a leader in the U.K. and Ireland. The company's business has grown organically and through acquisitions to over $21-billion of total annual premiums.

In Canada, Intact distributes insurance under the Intact Insurance brand through a wide network of brokers, including its wholly owned subsidiary, BrokerLink, and directly to consumers through belairdirect. Intact also provides affinity insurance solutions through the Johnson Affinity groups.

In the United States, Intact Insurance Specialty Solutions provides a range of specialty insurance products and services through independent agencies, regional and national brokers, and wholesalers and managing general agencies.

In the U.K., Ireland and Europe, Intact provides personal, commercial and specialty insurance solutions through the RSA brands.

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