26 March, 2019 09:30
In the words of its chief executive officer, Charles Brindamour, Intact financial Corporation has been outperforming the industry of property and casualty insurance by a large margin. Despite this, the insurer is not satisfied with its performance.
Mr. Brindamour made the remarks on the 6th of February last, when the leaders of Intact responded to questions from financial analysts following the publication of the results of the fourth quarter of 2018 to the insurer. The Journal of insurance has taken notice of the transcript of this conference in the past few days.
Why the leaders of Intact, are they not satisfied ? Since the results that they present, although they are higher than those of the industry, are not aligned with those that Intact has shown historically, that is to say, with a return on shareholders ‘ equity of around 15 %.
Good shots of 2018
Mr. Brindamour was then made state of good shots Intact in 2018. One of the first that he cited : the growth of the insurance business insurance, the premiums of which are in growth of 11 %, with the increase attributable to the strengthening of the market, but also to a “strong momentum” in the specialized segments.
Then come the progress of the transformation of intact in its client-centric approach, which establishes, among others, on the digital and artificial intelligence. Intact launched its new self-service application, which uses telematics.
“We also continue to test our most recent pricing algorithm, which relies heavily on machine learning. We also see clear signs that our investments in artificial intelligence will lead to growth and expansion in our margins for the coming years, ” said Mr. Brindamour.
Distribution : an investment always profitable
On the side of the distribution, Intact reported a profit of $ 146 million in 2018. It is the double of what Intact is generated five years ago. This includes all the investments Intact in brokerage firms. Intact expects a slowdown in this segment since the consolidation is slow in the distribution of the brokerage.
Questioned by analysts, Mr. Brindamour has noted that the transaction multiples have barely budged over the last 24 months. “We carry dozens of transactions each year. The synergies realized are also on the rise on our side, which will improve our profitability in the future. “
Mr. Brindamour has also revealed that Intact was reluctant to participate in bidding process for purchase of investments in brokerage firms, relying instead on the relations built with brokers over the years for conducting such transactions.
“This is the best way to conduct a transaction. This is what we will continue to do in the course of the next decade, ” said Mr. Brindamour.
The United States : next target for acquisition ?
An analyst also asked Mr. Brindamour had been thinking of acquiring distributors in the United States. The chief executive officer of Intact has not closed the door on such an avenue, but stressed that the profile of the distributors is not the same south of the border than it is in Canada.
We find there that Mr. Brindamour called independent agents, but also dedicated wholesalers. Intact should then adopt a strategy different from that in Canada, which is to build a entity mass distribution in individual insurance.
“We look at the opportunities that present themselves to us. Gains of the trust. We do strive, however, not the same capital than in Canada. Our priority continues to be Canada with respect to the deployment of our capital in distribution. We will begin certainly to explore opportunities to deploy our capital in the United States, but on a smaller scale. It includes certainly distribution. “
Friendly market to acquire competitors
Another analyst pointed out to Mr. Brindamour that most of the acquisitions made by Intact, over the years the have been at a time when the profitability of some players were a problem, as is currently the case, what Mr. Brindamour has acquiesced. This was particularly the case for Zurich at the beginning of 2000, or Allianz in the middle of the same decade.
“This kind of environment is right for consolidation, and that assets change hands. People change their points of view on what they have in this type of conditions. It is good for us, especially considering that our performance is better than that of our competitors. I am positive as to the cycle in which we are entering, ” said Mr. Brindamour.
Louis Marcotte, chief financial officer (CFO) of Intact, has stated that the war chest of the insurer to pursue acquisitions amounted to a billion dollars. Without counting that the listed company can raise on the capital markets to finance a possible acquisition.