In a virtual meeting held to discuss the company’s first quarter results, Charles Brindamour, CEO of Intact Financial Corporation, joined CIBC analyst, Paul Holden, to discuss the company’s United States business in some detail, and about mergers and acquisitions activity, competition, natural disasters, inflation and cyber insurance.
“Cyber is clearly one of the segments we think can be a global specialty line. We have today north of $100-million of cyber business,” Brindamour told Holden. “The performance is quite good. It’s a very strong combined ratio. The key there is to manage your tail risk, because unlike a natural disaster, the diversification of cyber risk is much trickier. That’s why reinsurers are nervous about cyber because the whole model of country diversification does not apply in similar ways.”
He adds: “You’ve got to keep the tail risk in check, and that’s the main challenge.”
Much of the discussion focused on automobile insurance in the United States. There, he says results are good because of the actions the company has taken. These include the creation of body shop capacity by opening service centers and creating capacity in its preferred provider network. He says properly pricing the business is a challenge because of the related moving parts. “We’ve been really focused to understand the difference between claims coming in today and the claims we’re actually settling today,” he says. “If you use traditional techniques, you’d miss out because there were so many moving pieces.” In addition, he says the company employs close to 500 lawyers on its payroll to defend customers there. “That goes straight to the cost equation – better indemnity outcomes, then better cost.”
He adds that since the second half of 2020 the company has been operating under the assumption that inflation would exist and it would be stubborn. “We’re still in that camp today,” he adds. “We’re operating the business assuming, in fact, that (interest) rates will stay there for longer, or potentially go up still.” (In Canada he says the company is not seeing similar inflationary pressures but adds that he doesn’t believe the company or the industry can count on the phenomenon continuing forever.)
Finally, in Canadian business, he discusses acquisition opportunities, saying there are a number in distribution, which has been contributing to the company’s business. “We would put our first dollar of capital in Canada today to take advantage of the outperformance that we have, but we’re in no rush,” he says. “But nothing prevents us from doing an acquisition at this stage.” He continues saying the Canadian team won’t admit it, but they’re also ready for another acquisition, operationally speaking. “It is a long game. We’re choosing our timing carefully.”
