TORONTO, Feb. 15, 2024 /CNW/ – (TSX: DFY)
(in Canadian dollars except as otherwise noted)
Highlights
Gross written premiums1 increased 8.5% in Q4, benefitting from a rebound in personal auto growth; full year growth of 9.4% was supported by ongoing firm market conditions in personal property and commercial lines
Combined ratio1 of 90.6% in Q4 reflected solid performance across our portfolio, with particularly strong results in personal property; full year combined ratio of 95.9%, despite 6.2 points of catastrophe losses1
Operating net income1 of $100.7 million in Q4, compared to $76.6 million in 2022, resulted in operating EPS1 of $0.86 per share. Operating ROE1 was 9.2% over the last twelve months
Full year net income attributable to common shareholders of $350.1 million drove an 11.1% increase in book value per share1 to $24.78
Quarterly dividend increased by over 16% to $0.16 per share, supported by our robust financial position and confidence in our operational outlook
Completion of Definity Financial Corporation’s continuance to the Canada Business Corporations Act on January 1, 2024
Executive Messages
“I am proud of our company’s delivery of results to shareholders, while at the same time having been there for our customers and brokers. We continued to leverage our strong broker proposition and digital platforms to drive solid overall premium growth of 9.4%, ending the year with GWP exceeding $4 billion for the first time. Our full year COR of 95.9% demonstrates the strength of our operating model which enabled us to deliver on our mid-90s combined ratio target despite 6.2 points of catastrophe losses. In the fourth quarter, strong underwriting income combined with robust net investment income and growing contributions from our insurance broker platform resulted in record operating net income of $100.7 million or $0.86 per share. We leveraged our M&A expertise in 2023, completing two notable broker acquisitions which enabled us to deploy excess capital in an accretive manner. I am excited by the additional opportunities ahead for Definity to continue building on our growing track record of success.”
– Rowan Saunders, President & CEO
“We enter 2024 in a robust financial position. Our resilient operations generated a full year operating ROE of 9.2% with 11.1% growth in book value per share. Continued strength in underwriting profitability combined with expansions in investment and distribution income are expected to increase operating ROE to 10% or more in 2024. Our confidence in the company’s outlook is demonstrated by a 16.4% increase in our quarterly dividend, which delivers on our objective to consistently grow our dividend over time. With substantial financial capacity, exceeding $1.2 billion, reflecting our continuance to the CBCA on January 1, 2024, there is significant flexibility available to support the ongoing growth of our business.”
– Philip Mather, EVP & CFO
Consolidated Results
(in millions of dollars, except as otherwise noted)
Q4 2023
Q4 2022
(Restated)
Change
2023
2022
(Restated)
Change
Insurance revenue
1,003.8
911.7
10.1 %
3,850.3
3,485.7
10.5 %
Gross written premiums1
1,033.2
951.9
8.5 %
4,005.2
3,662.3
9.4 %
Net underwriting revenue1
922.4
850.4
8.5 %
3,542.6
3,251.2
9.0 %
Claims ratio1
61.1 %
59.5 %
1.6 pts
65.1 %
61.7 %
3.4 pts
Expense ratio1
29.5 %
32.7 %
(3.2) pts
30.8 %
32.5 %
(1.7) pts
Combined ratio1
90.6 %
92.2 %
(1.6) pts
95.9 %
94.2 %
1.7 pts
Insurance service result
147.9
133.2
14.7
424.4
441.9
(17.5)
Underwriting income1
87.0
66.7
20.3
144.9
189.4
(44.5)
Net investment income
49.4
39.5
9.9
179.5
133.1
46.4
Distribution income1
8.8
4.8
4.0
39.3
14.1
25.2
Net income attributable to common shareholders
225.9
185.0
40.9
350.1
110.9
239.2
Operating net income1
100.7
76.6
24.1
246.5
236.8
9.7
Q4 2023
Q4 2022
(Restated)
Change
2023
2022
(Restated)
Change
Per share measures (in dollars)
Diluted EPS
1.94
1.59
0.35
3.00
0.95
2.05
Operating EPS1
0.86
0.66
0.20
2.11
2.03
0.08
Book value per share (“BVPS”)1
24.78
22.30
2.48
Return on equity
Return on equity (“ROE”)1
13.0 %
4.3 %
8.7 pts
Operating ROE1
9.2 %
9.4 %
(0.2) pts
Gross written premiums (“GWP”) for Q4 increased by $81.3 million or 8.5% compared to 2022, with growth across all our lines of business. Personal lines GWP was up 6.0%, driven by growth in our broker channel. Commercial lines GWP increased 14.1% as we continued to drive significant profitable growth in this line of business. For the full year, GWP increased by $342.9 million or 9.4% compared to 2022.
Underwriting income for Q4 was $87.0 million and the combined ratio was 90.6%, compared to underwriting income of $66.7 million and a combined ratio of 92.2% in 2022. The combined ratio improved due to decreases in both the expense ratio and the core accident year claims ratio across all lines of business. The expense ratio reduction was driven by lower contingent profit commission accruals and our ongoing focus on disciplined expense management. These improvements were partially offset by an increase in catastrophe losses and lower favourable prior year claims development. Our full year combined ratio was 95.9% compared to 94.2% in 2022, driven by the increased level of catastrophe losses in 2023, partially offset by the improvement in the consolidated expense ratio. Catastrophe losses amounted to 6.2 percentage points in 2023 compared to 3.7 percentage points in 2022.
Net investment income increased $9.9 million in Q4 and $46.4 million for the year driven primarily by higher interest income that was enhanced by our active management of the investment portfolio in the rising interest rate environment.
Distribution income was $8.8 million in Q4 and $39.3 million for the year, compared to $4.8 million and $14.1 million respectively in 2022. The increase was due primarily to the increased ownership position in McDougall Insurance Brokers Limited (“McDougall”), along with McDougall’s acquisitions of McFarlan Rowlands Insurance Brokers Inc. (“McFarlan Rowlands”) and Drayden Insurance Ltd. (“Drayden”) during 2023.
Net Income and Operating Net Income
Net income attributable to common shareholders was $225.9 million in Q4 compared to $185.0 million in 2022. The increase was due primarily to higher mark-to-market gains on investments and increases in underwriting income, net investment income, and distribution income. These were partially offset by the impact of discounting, as well as a restructuring charge of $11.1 million. Net income in Q4 of 2022 included a revaluation gain of $67.0 million on our previous ownership interest in McDougall.
Full year net income attributable to common shareholders was $350.1 million compared to $110.9 million in 2022 due primarily to mark-to-market gains on investments in 2023 compared to significant losses in 2022, as well as increases in net investment income and distribution income. These were partially offset by the impact of discounting and a decrease in underwriting income due primarily to the impact of higher catastrophe losses.
Operating net income was $100.7 million in Q4 compared to $76.6 million in 2022. The increase was due to higher underwriting income, net investment income, and distribution income. Full year operating net income was $246.5 million compared to $236.8 million in 2022.
Operating ROE was 9.2% in 2023 compared to 9.4% in 2022.
1 This is a supplementary financial measure, non-GAAP financial measure, or a non-GAAP ratio. Refer to Supplementary financial measures and non-GAAP financial measures and ratios in this news release, and Section 13 – Supplementary financial measures and non-GAAP financial measures and ratios in the 2023 Q4 Management’s Discussion and Analysis dated February 15, 2024 for further details, which is hereby incorporated by reference and is available on the Company’s website at www.definityfinancial.com and on SEDAR+ at www.sedarplus.ca.
Line of Business Results
(in millions of dollars, except as otherwise noted)
Q4 2023
Q4 2022
(Restated)
Change
2023
2022
(Restated)
Change
Personal insurance
Gross written premiums1
Auto
416.0
386.6
7.6 %
1,657.1
1,579.1
4.9 %
Property
278.0
268.0
3.7 %
1,113.1
1,012.7
9.9 %
Total
694.0
654.6
6.0 %
2,770.2
2,591.8
6.9 %
Combined ratio1
Auto