Intact Financial Corporation’s CEO Charles Brindamour has stressed that catastrophe losses in the second quarter of 2023 were “within range,” but said that he expected a trend of large cat losses to continue.
Intact’s financial results for the second quarter of 2023 reflected the tremendous impact of natural catastrophes. The P&C insurer saws its net operating income drop by more than 30% on-year, while cat losses jumped $176 million. Its combined ratio rose 6.1 points to 96.3%.
“I think it's the third worst second-quarter in the last decade, but it is within the range,” Brindamour said during a fireside chat organized by RBC Capital Markets on Friday. “Our view is the trend will continue, and we see this as a source of growth.”
However, he stressed that one quarter won’t exert an outsized influence on the insurer’s guidance on cat losses, and that the company is focused on its customers and “making the most of what the market has to offer.”
“We take into account how the product evolves, the size of the organisation, the retention, the weather patterns,” the CEO said. “Obviously, if you have the third worst quarter in a decade, this will likely add some pressure in our cat guidance.”
Brindamour also reflected on the broader changes his company has made over the last ten years to adapt to the impacts of extreme weather.
“A decade ago, we changed our value proposition to make sure that we could grow into a world where weather patterns would change,” he said. “Our performance and our growth make the most of that environment.”
For Brindamour, one factor that has impacted the insurance industry’s ability to weather the increasing perils posed by climate change is consolidation.
“I do think that consolidation, where better players take over weaker ones, has brought a bit more discipline to the marketplace. Players are more sophisticated,” the Intact CEO said.
“I feel very strongly about our ability to outperform as we have in the past, even if we're competing with better players in general, because we're much better than we were a decade ago.”
Asked whether he was worried cat losses would bite further in Q3, when the hurricane and wildfire seasons in North America typically peak, Brindamour said he wasn’t too concerned.
“I think the organisation is stepping up,” he said. “We want to make sure that we can grow the business, help de-risk society, and do that in a fashion where we generate returns the way we have in the past.”
Both personal property and auto premiums are expected to grow by high single-digits to adapt to inflation and evolving driving patterns, Intact’s guidance said.
“I think this is a reminder that [catastrophe losses] volatile and they can swing, but we're already pricing prudently,” said Guillaume Lamy, senior vice president, personal lines at Intact, during an earnings call with analysts. “Weather events increase in frequency and severity, but our average premium has kept pace, rising by more than 50% over the last decade.”
On the underlying side, Lamy noted that Intact has seen an increase in the severity of claims this quarter.
“We are seeing more severe damage, more expensive water claims,” Lamy added. “We're monitoring the trend and taking advantage of the supporting market conditions to increase rates by two to three points to match that severity trend that we’re observing.”
Brindamour, for his part, said he expected hard market conditions to persist in personal and commercial property for the next few years.
“The reinsurers sent a very strong signal at the start of the year that prices need to reflect this environment that has contributed to what is a firm-to-hard market environment,” the CEO said. “My view is that this will persist for a number of years.”
What do you think of Intact’s catastrophe losses in Q2 2023? Do you agree with Brindamour’s perspective that hard market conditions in property will continue for the foreseeable future? Tell us in the comments below.
