Intact Financial Corp. reported that its second-quarter catastrophe losses reached approximately $416 million on a pre-tax basis and net of reinsurance, driven by severe weather events across Canada and commercial fires in the United Kingdom and Ireland.
Losses Exceed Expectations
The property and casualty insurance provider described the losses as an "unusually high level" of catastrophe and large losses, which were higher than anticipated. The company estimated total elevated losses at $247 million above expectations on a pre-tax basis and net of reinsurance, or $1.08 per diluted common share after-tax.
Weather Events in Canada
Catastrophe losses in Canada were driven by weather events, including torrential storms causing flooding, water, and wind damage across several regions. The total catastrophe losses for the quarter were approximately $416 million on a pre-tax basis and net of reinsurance, according to the company.
CEO Comments
“At an industry level, these events reinforce firm market conditions,” said chief executive Charles Brindamour in a news release. “Our claims teams and extensive supply chain network are mobilized to provide our customers fast, local support.”
International Operations
The catastrophe losses miss was mainly driven by United Kingdom and Ireland operations, which were primarily due to commercial fires. This was offset by United States catastrophe losses which were null and better than expected. The Canadian loss ratio was only 10 basis points above the U.S.
Large Losses
In addition, the insurer saw an "unusually high level" of large losses, with the impact above expectations in the quarter on the underlying current year loss ratio of three points overall. The losses included a higher frequency of fire claims and other property losses across various geographies and risk segments, but no discernable patterns were identified.
Analyst Reaction
In a note, Jefferies analyst John Aiken said he anticipates the market will shrug off the impact of the higher than anticipated catastrophe losses, with the second quarter a seasonally higher quarter. However, he said the additional large losses will likely give investors a pause. He noted that the losses were more likely a factor of bad timing than a degradation of the operating environment. “While near term profitability is impeded, we suspect that this will further the hard domestic pricing and, ironically, can be viewed positively,” Aiken wrote.
