How Intact’s personal auto segment fared in 2023 Q1

Intact Financial Corporation grew its Canadian personal auto premium volume 5% in 2023 Q1 from one year ago, and continues to see positive growth in the segment, CEO Charles Brindamour said during a 2023 Q1 earnings call last week.

“Top-line momentum was function of both rate actions as well as our improving competitive position,” Brindamour said. “Retention levels remain strong, and we see positive signs and new business volumes. We’re comfortable growing in this environment.”

Usage-based insurance (UBI) — where driving habits influence an insured’s premiums — “is another area where we’re investing quite a lot of effort from the team,” added Guillaume Lamy, Intact’s senior vice president of personal lines.

“From a pure segmentation perspective, this is very powerful,” Lamy said. “We’re seeing between the best third of the drivers and the worst third of the drivers, a 65% loss ratio difference. We’re going to leverage more and more of that predictive power and drive segmentation benefits through retention.”

UBI is currently available in several provinces, including Alberta, New Brunswick, Nova Scotia, Ontario, Prince Edward Island and Quebec, according to rate aggregator LowestRates.ca. Up until 2020, there were no penalties for UBI customers who engaged in dangerous driving behaviours. But in November 2020, the Financial Services Regulatory Authority of Ontario allowed surcharges if telematics data showed motorists displayed risky driving behaviour.

iStock.com/NickyLloyd

For Intact, personal auto premiums in the Canadian segment rose 5% to about $1.17 billion in direct premiums written (DPW) in 2023 Q1 from about $1.12 billion (restated) in 2022 Q1, improving three points from the preceding quarter. This was “driven by high single-digit rate increases in a firming market, while retention remains strong,” the insurer said in its Management’s Discussion and Analysis (MD&A) for the quarter ending March 31, 2023.

The underlying current year loss ratio of 78.4% (up 4.5 points from 73.9% in 2022 Q1) reflected “winter seasonality and higher-than-expected theft claims,” Intact said in its MD&A. “Increased severity compared to last year was driven by elevated, but moderating, inflation while frequency remained lower than pre-pandemic averages.”

Brindamour added that Intact’s “underwriting discipline resulted in a combined ratio of 97.1% [in personal auto] in the quarter….We remain very comfortable with our sub-95 [combined ratio] guidance,” he said.

For one, inflation pressures have continued to abate, with the increase in claims severity slowing to 9% in the latest quarter, down two points from the previous quarter.

“This was driven by improvement in the cost of repairs, which in part reflects the benefits of our integrated supply chain, where two-thirds of repairs are handled by our preferred network,” Brindamour said, referring to Intact’s On Side Restoration Services business. “Furthermore, we’ve yet to see any meaningful signs of inflation in long-tail coverage.

“As such, the environment is evolving as expected. At the same time, claims frequency remains benign relative to pre-pandemic levels, though our pricing assumes it’ll gradually increase and our rate actions are paying off.”

In personal property, DPW grew 6% from $716 million in 2022 Q1 to $760 million in 2023 Q1, “driven by our rate actions in a favourable market,” Brindamour said during the earnings call.

“The combined ratio of 84.5% in the quarter was better than the sub-90s average over the last five years. I do expect challenging weather over time and inflation to sustain firm market conditions over the next 12 months.”

For the Canadian P&C segment as whole, DPW in the latest quarter were nearly $3 billion, up 4% from $2.89 billion in the first quarter of 2022. The combined ratio was 91.7% on an undiscounted basis and 87.4% discounted. Underwriting income was down 4% to $279 million in 2023 Q1 from $292 million in 2022 Q1.

Feature image by iStock.com/bagi1998