Intact hikes dividend following strong Q4
TORONTO - Intact Financial Corp. (TSX:IFC), Canada's largest provider of property and casualty insurance, says its industry should be helped this year by firmer market conditions and low interest rates as well as continued premium growth.
In announcing stellar fourth-quarter earnings and a higher dividend for shareholders, Intact CEO Charles Brindamour said the industry's return on equity "will likely remain slightly below its long-term average of 10 per cent in 2013."
However, Intact's fourth-quarter earnings soared $181 million or $1.32 per share, up 115 per cent from $84 million or 62 cents in the same prior-year period as the insurer benefited from improved operating results and higher investment gains.
Intact's net operating income, which is another measure of profitability used by analysts, was up 25 per cent to $1.42 per share or $194 million.
The company announced Wednesday that its quarterly dividend will rise by 10 per cent to 44 cents per share. On an annualized basis, that's $1.76 per share — providing investors with a yield of nearly 2.7 per cent.
Brindamour said the industry's returns in the coming year will likely be about the same as in the first nine months of 2012 — in the high single digits.
Auto insurance premiums have come under pressure in Ontario recently, with NDP Leader Andrea Horwath demanding a 15 per cent cut to compensate for dramatically reduced payouts as a result of changes to the province's auto insurance regulations in 2010, under the McGuinty Liberal government.
Horwath said if the industry won't cut premiums voluntarily, the government should mandate it through the provincial regulator, the Financial Services Commission. She made the pitch as Kathleen Wynne takes over leadership of a minority government after Dalton McGuinty stepped aside as Ontario premier.
Brindamour said Wednesday that the personal auto insurance segment of the industry won't likely see a significant improvement this year "as Ontario reforms have largely brought about the expected cost savings."
Results in personal property insurance "may benefit from continued hard market conditions and potential initiatives aimed at mitigating losses from future catastrophes," he said.
He added that in commercial lines — types of insurance sold to businesses — Intact doesn't expect to improve its loss ratio quickly but said conditions should improve at a moderate pace over time.
The Insurance Bureau of Canada has said 95 to 97 per cent of every dollar raised in premiums paid for claims in 2011, with the auto insurance sector showing a profit of $233 million compared with losses of $1.76 billion in 2010 and $824 million in 2009.
For all of 2012, Intact reported a 26 per cent increase in net income to $587 million, or $4.33 per share, from $465 million, or $3.96 per share, in 2011.
The company says its strong results included improved underwriting, with seven per cent more in premium revenue following an acquisition.