As Intact Financial Corp., Canada's biggest home, auto and business insurer, enters 2010, it is, in many ways, unrecognizable from the company it was a year ago.
It has a new name. It trades on the TSX. It has shed the oversight of its former Dutch parent. And the fundamentals of its business are starting to look a whole lot better.
"Industry conditions are moving up," chief executive officer Charles Brindamour says. "We're seeing rates move up in home insurance, we see rates moving up in automobile insurance, and when I look at the commercial or business insurance sector I see concrete signs of change there."
That's good news for all of the participants in Canada's $36-billion property and casualty insurance sector, a fragmented industry where the top five players hold only about one-third of the market.
But, in Mr. Brindamour's opinion, the timing is especially auspicious for Intact. The ability to charge higher premiums that will garner thicker profit margins is coming at a time when the company is ready to churn out new business. Many competitors, in contrast, are being forced to shrink their capacity as they shore up their capital levels.
Just one year ago, Intact was ING Canada, operating under the wing of the struggling ING Group, which had already gone hat-in-hand to the Dutch government for help and was in the midst of cutting thousands of jobs.
Mr. Brindamour will never forget the day in early February when the company announced that ING Group was going to sell its ownership stake, creating one of the largest non-governmental offerings in Canadian history.
"In those few weeks before that the markets had been falling dramatically," he says. "There was incredible nervousness, and the tension when we issued our press release for the $2.2-billion secondary offering was tremendous.
"The memorable moment was when I was sitting with the bankers after pressing on the button to send the press release and hearing, within half an hour, that there was 2.5 times more demand for our offer than we were supplying."
Asked if it was a difficult year for him personally, Mr. Brindamour says far from it - in fact, it was probably the most rewarding. "To have the opportunity to live through and make the most of a volatile period like this one to me is worth a lot," he says. "I would say if you asked my team, there was a lot of fun in 2009."
Clearly, there were challenges - not the least of which was ensuring that the company kept its customer base as it carried out a full fledge name change and rebranding. But he is happy with Intact's performance during the past year, and expects its growth to improve further in the months ahead.
Mr. Brindamour saw three main themes in 2009 that not only defined the year for his industry, but also set the stage for the months ahead: the global capital markets crunch that marked the start of last year, increasing evidence that the weather is becoming less predictable, and the return to optimism in capital markets.
"We have seen, over the years, increased precipitation whether it's snow, whether it's water, and the first part of 2009 was just terrible. And then beyond increased precipitation we've seen an abnormal level of storm activity last summer. B.C. fires, hail in Alberta, tornadoes in Ontario, rain storms in Ontario, tornadoes in Quebec, rainstorms in Quebec. Overall, $150-million worth of catastrophes in three months and it was probably the worst sequence of storms for us in 10 years, going back to the ice storm [of 1998] It's a significant issue for the industry in general, and I think it will be significant for consumers, and it has a connection with climate change. We've done much work here on pricing, products and equipping our customer service operations to deal with storms and water damage. And we're doing a lot of work with our clients on prevention as well as climate change adaptation."
Capital markets "Clearly, [the impact of optimism]has helped our balance sheet. Our excess capital position at the end of September was about $640-million. And we tapped the debt market both in August for a 10-year-note and in October for a 30-year-note for $150-million, a rare feat for a property and casualty insurer. So, a total of $400-million in the past few months. We decided to take advantage of the incredible optimism and ample liquidity in the marketplace to raise debt at a moment when there was no immediate need for it, which is the best time to go out and do it."
The outlook for 2010
"We remain cautious for a number of reasons. First, the recovery is not very strong, in fact it's anemic. Second, we think there's a fair bit of digestion still to take place in the financial sector. The IMF talks about $3-trillion of impairments when it comes to credit losses, and there's a trillion and a half that's gone through already. The third thing is that there could still be debt shocks that will catch the world by surprise and lead to contagion. So our business is very defensive. Our capital position is strong and we've been disciplined. People are raising money to insulate themselves, but the best way to insulate yourself is to run your business conservatively and in a disciplined fashion."