Definity Financial Corporation announced that net income was down 48% for the fourth quarter of 2024 compared to the same quarter of the previous year. However, it reported a 23% increase in net income for the full fiscal year compared to the previous year.
Net income attributable to common shareholders reached $117 million in the fourth quarter of 2024, compared with $226 million in the fourth quarter of 2023.
For the full year 2024, the company reported net income attributable to shareholders of $430 million, up 23% from the $350 million reported a year earlier.
For the fourth quarter, “the decrease was due primarily to mark-to-market losses on bonds and lower gains on common stocks consistent with changes in overall market valuations,” the company stated in its press release.
For the full year, the increase was “due primarily to an increase in operating net income and higher mark-to-market gains on common and preferred stocks,” the company added.
Underwriting income
Net underwriting revenue was $97 million in the fourth quarter of 2024, compared with net underwriting revenue of $87 million for the same period of 2023.
For the full year, underwriting revenue amounted to $212 million in 2024, compared with $145 million in 2023. This is an increase of 47%, “reflecting strong performance across all lines of business,” stated the company.
For the full year, catastrophe losses had an impact of 6.4 percentage points on the company's combined ratio, compared with 6.2 percentage points in 2023.
Premiums
Gross written premiums (GWP) in the fourth quarter of 2024 totaled $1.1 billion, up 7.4% over the same period of 2023.
For the full year, GWP totaled $4.4 billion, up 11% from the $4 billion reported at the end of fiscal 2023.
Personal lines GWP were $734 million in the fourth quarter of 2024, compared with $694 million for the same period of 2023. This is an increase of 6%.
For the full year, this segment's GWP totaled $3.1 billion, representing a 10% increase over GWP in 2023, which stood at $2.8 billion.
In its management report, the company points out that 59% of premium volume was written in Ontario. Some 14% of the company's premium volume comes from Alberta and the other two Prairie provinces, followed by British Columbia (12%), Quebec (8%) and the Atlantic region (7%).
The broker distribution channel accounts for 91% of Definity's GWP volume, compared with 9% for direct insurance. The latter’s percentage was 11% in 2023.
The company’s Sonnet subsidiary stopped distributing automobile insurance in Alberta on Dec. 13, 2024. Regarding its direct distribution subsidiary, Definity reiterates that Sonnet will achieve break-even and even possibly a profit in 2025. The subsidiary generated an operating surplus in the fourth quarter of 2024.
Commercial lines
The company recorded an 11% increase in GWP in commercial lines, which reached $376 million in the fourth quarter of 2024, compared with $339 million in the same quarter of 2023.
For the full year, commercial insurance GWP totaled $1.4 billion in 2024, an increase of $162 million or 13% compared with GWP in 2023.
Combined ratio
In terms of claims experience, the combined ratio reached 90.3% in the fourth quarter of 2024, compared with 90.6% in the same quarter of 2023. This is a difference of 0.3 percentage points.
For the full year, Definity's combined ratio was 94.5% in 2024, compared with 95.9% in 2023. This is a difference of 1.4 percentage points.
In personal lines, the combined ratio was 90.9% in the last quarter of 2024, and 96.5% for the full year. In 2023, the combined ratio was 89.5% in the fourth quarter and 98.7% for the full year.
In commercial lines, the combined ratio was 89% in the fourth quarter of 2024, compared with 93.3% in the fourth quarter of 2023. This is a difference of 4.3 percentage points.
For the full year 2024, the commercial lines combined ratio was 89.4%, compared with 88.8% the previous year. This is a decline of 0.6 points.
Further details
In the conference call with analysts, Definity CEO Rowan Saunders highlighted the results achieved in 2024, despite a natural catastrophe ratio of 6.4% in 2024.
The company was projecting a 4.5% catastrophe loss target but increased it to 5% by revising its definitions of catastrophe losses, not all of which are weather-related. The limit was raised from $3 million to $5 million for a single claim.
Since 2021, the combined ratio has averaged 94.4%, below the 95% target. Over the same period, GWP volume increased by $1.2 billion, or 36%.
“In a year where the industry faces historic levels of losses from catastrophes, the resilience of our people and business model enabled Definity to deliver on its commitment to be there for our customers, while generating robust results for shareholders,” noted Saunders.
Philip Mather, Executive Vice-President and Chief Financial Officer, also points out that the company has nearly $1.7 billion available for further acquisitions, not only in the brokerage network, but also by targeting insurers. This desire for growth was behind the decision to go public in autumn 2021. When questioned by analysts, Rowan Saunders reiterated that this intention was still present.
The company continues to foster the growth of its national brokerage platform. The 72 locations operated by its subsidiary in Alberta and Ontario reported a premium volume of $1.2 billion in 2024. Broker investments generated operating income of $76 million in 2024, and the company expects this return to increase by 15% in 2025.
In home insurance, the company is particularly pleased with its combined ratio of 82.8% in the fourth quarter, despite a catastrophe loss ratio of 7 percentage points due to flooding in British Columbia.
Catastrophe losses in the summer of 2024, with forest fires in Jasper and hail in Calgary, resulted in a high number of claims in Alberta. In this province, Definity's market share is 3% in home insurance and 4.7% in auto insurance, said Paul McDonald, Executive Vice President of Personal Insurance and Digital Channels.
Despite this, the company received only 1.5% of the claims related to the hailstorm in Calgary and 1% of the claims related to the disaster in Jasper, he added.
Philip Mather points out that the company is aiming to achieve a 30% expense ratio, about half of which is commissions ratios, the remainder being operating expenses and premium taxes.
