In a wide-ranging discussion covering auto insurance, the beauty of specialty lines business, growth, reinsurance markets, natural catastrophes, inflation and the company’s investment mix, to name a few topics, TD Securities’ managing director of equity research, Mario Mendonca discussed the latest quarterly results from Intact Financial Corporation with the company’s CEO, Charles Brindamour.
There are a lot of headwinds in the environment, the CEO says, but goes on to state how the company plans to take advantage of these conditions in 2023.
In commercial insurance, for instance, he says there are capacity constraints currently, because there is a great degree of dependency on reinsurance carriers. He adds that an explosion in property and casualty (P&C) managing general agencies (MGAs) and specialized distributors who are themselves reliant on third party capital and reinsurance means there is not enough capacity in the reinsurance marketplace to meet the demands of primary writers.
“We’re not overly reliant on reinsurance. We feel we’re really well positioned to take advantage of the tightness that is taking place,” he says.
Catastrophe loss guidance, meanwhile, he says has been increased from $600-million to $700-million to reflect the organizations’ growth, retention policies and the fact that there are simply more natural disasters occurring today. In a discussion about inflation, he says he expects double digit inflation numbers to recede to single digits through 2023, while frequency will revert in part to more normal patterns. (Frequency, although driving is back to normal, he says is still meaningfully lower than it was prior to the pandemic.)
Despite challenges, he says outperformance remains the objective for the company. Interestingly, in a discussion about the company’s asset mix, he says the company is currently in a conservative position, given that cash is delivering the returns that it is at the moment, to make sure the company is not squeezed by capital market swings.
Going forward, Brindamour says one big area he is focused on is bringing science into the global specialty lines business. The company is also investing in marketing again, after pulling back from that effort while consumers were not shopping. In efficiency efforts, the company is also focused on improving the consumer funnel. “Just there, in my mind, there’s a fair bit of upside,” he says.
As for Canada, he says organic growth upside exists and the company plans to flex the muscles it’s built over time. He says there is also “lots of room to grow” in distribution, as well.
“I see customer experience upside, bottom line upside and we’re now starting to gain market share outside our own customer base at a pretty good clip, as well,” Brindamour says. “I would say (there is) plenty of room left to grow in Canada.”
