Charles Brindamour, president and CEO of Intact Financial Corp.CHRISTINNE MUSCHI/Reuters
Analysts have been predicting a wave of consolidation through the property and casualty insurance market for more than a year. Intact Financial Corp., the country's largest home, auto and business insurer has not disappointed, paying more than $3-billion for two companies in two years. And the company's chief executive officer hints Intact may not be done yet.
On an earnings call Wednesday, after Intact reported fourth-quarter results that beat expectations, CEO Charles Brindamour was asked whether he was still thinking about share buybacks. After all, the insurer is sitting on about $600-million in excess capital. But before a share buyback can be considered, there are some questions the company must answer, Mr. Brindamour said.
For example, Intact must question how it feels about volatility in the marketplace. On that front, Mr. Brindamour said that while people still have concerns, there's a greater sense of comfort and stability globally. And the property and casualty industry should be propelled this year by more stable conditions and low interest rates. So that's not what would stop him from executing a buyback.
After assessing the market, Intact must also ask whether there are opportunities to use the excess capital. "I feel pretty good about the latter at the moment," Mr. Brindamour said.
"I think this is an environment that presents opportunity within a reasonable period of time. And on that basis, there's no buyback activity at this stage," he said. "But rest assured, it's a question that's debated every quarter."
More takeovers in the P&C insurance industry is an idea analysts have mulled over before. About a year ago, onlookers were eyeing Westaim Corp. as well as Intact. GMP Securities analyst Stephen Boland, for example, highlighted that both companies had money to play with, and he predicted a consolidation of P&C insurers that echoed the way giants such as Great-West Lifeco Inc. and Manulife Financial Corp were formed.
Intact bought one of Westaim's assets, Jevco Insurance Co., for $530-million in May of 2012. This was an effort to diversify into higher-risk insurance. Jevco sells insurance for vehicles such as snowmobiles, motorcycles and taxis.
That takeover is still in the early phases of integration, but seems to be playing out well – the Jevco business helped drive up Intact's premiums written to $1.7-billion, a 7 per cent increase.
And even before Jevco, Intact was looking to grow through acquisitions, as well as organically. In May of 2011, Intact bought AXA Canada, the Canadian arm of the French insurer, for a $2.6-billion. AXA was the sixth-largest home, auto and business insurer in the country at the time.
But while further deals are a possibility, Intact chief financial officer Mark Tullis remains cautious. "We're settling down from the acquisitions," he said on the call Wednesday, noting that while the company will continue to evaluate opportunities, the focus for this quarter was all on the dividend increase.
The company hiked its payout by 10 per cent to 44 cents per share. This move was expected by the market, given that it's the eighth consecutive year the company has raised the quarterly payments. Eight years ago, Intact's dividend was just 18 cents.
Intact, which holds a market share of about 17 per cent in the P&C space, manages about $13-billion in investments. The company announced a fourth-quarter profit of $181-million for 2012, compared to $84-million in 2011.