Definity Financial Corporation president and chief executive Rowan Saunders (pictured) anticipates Canada’s personal property lines market to harden following more than $7 billion in industry catastrophe losses during the summer, as carriers face potentially higher reinsurance attachment points during the Jan. 1 renewals.
In a company earnings call, Saunders said that the industry experienced historic levels of catastrophe losses across Canada. These events had a significant impact on Definity’s own personal property business, accounting for more than 17 points of the 103.4% combined ratio in the third quarter of the year.
The expected move to higher reinsurance attachment points and industry participants adjusting their risk appetites, he said, will prolong challenging market conditions in home and auto insurance. Despite an active catastrophe period, the insurance group gave a “resilient performance” in Q3 2024, Saunders said.
Definity reported a 9.9% increase in gross written premium (GWP) to $1.14 billion, with GWP growth across all its lines of business for the quarter. Net income attributable to common shareholders rose significantly to $104.8 million, compared to a $48.3 million net loss Definity reported in 2023.
“This summer, Canada experienced historic levels of wildfires, flooding, and storms, impacting communities as they worked to rebuild,” said Saunders. “Despite this, we achieved solid underlying performance across all lines of business, supported by ongoing expense efficiencies, healthy net investment income, and strong contributions from our insurance broker platform.”
Despite the significant catastrophe losses, the company's core accident year results in personal property improved by 1.9 points from Q3 2023. In terms of top-line growth, personal property gross written premiums grew by 6.9% in Q3 2024, benefiting from ongoing firm market conditions and driving increases in average rate.
Moving forward, the insurance group is focusing on leveraging its underwriting expertise, pricing strategies, and product expansion, along with disciplined expense management, to buffer the impact of catastrophe losses and drive growth in both the personal auto and broker segments.
In personal auto, the insurance group will pursue additional rate and segmentation actions to maintain target profitability, despite the exit of Sonnet’s personal auto business in Alberta.
Personal auto gross written premium growth was up 15.8% in Q3 2024, driven by double-digit increases in risk rates, unit county increases, and portfolio transfer activity. Losses from Sonnet impacted Definity’s growth in auto by 5.5 points in Q3, according to executives. Personal auto saw a combined ratio of 98.3% during the quarter.
“Withdrawing from (Alberta) reinforces our confidence in achieving our break-even target for the remaining Sonnet portfolio by the end of the year,” said Definity CFO Philip Mather. “We expect our broker business to benefit from strong retention, portfolio transfers, and the scalability of our buying platform, supporting a double-digit underlying growth pace for the remainder of 2024.”
Saunders also said he anticipated firm conditions to continue in auto lines as insurers respond to increased theft, cost pressures, and regulatory constraints in Alberta.
“Looking ahead to 2024, our key financial targets reflect strong top-line growth and resilient underwriting profitability, which align us with our goals,” Saunders said. “After nine months, our operating ROE has reached 10.7% over the past twelve months. We are committed to maintaining this progress over the next few years and aim to reach the upper end of our target range prior to capital optimization.
“Our national broker platform has developed significantly over the past two years, providing a diversified and strengthened earnings profile through repeatable distribution income that complements our underwriting operations.
“We anticipate ongoing M&A activity and organic growth to lead to $1.5 billion in managed premiums within the next few years. This growth has been supported by additional deals completed this year, giving us confidence in reaching our 2024 operating income target for this segment.”
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