The trend on the ratings of
KEY RATING CONSIDERATIONS
The change in the trend to positive reflects the successful integration of
The confirmation of the ratings reflects the Company's franchise strength as the largest provider of property and casualty (P&C) insurance in
RATING DRIVERS
The ratings would be upgraded if the Company continues to show strong earnings while maintaining a similar risk profile and appropriate capital buffers.
Given the trend change to Positive, a rating downgrade is unlikely. However, the Company would be downgraded if it experiences a persistent material decline in underwriting results or weakening in regulatory capital buffers combined with a sustained deterioration in financial leverage.
RATING RATIONALE
Intact is the largest provider of property and casualty (P&C) insurance in
The Company's risk profile reflects its prudent approach to risk management, and its high-quality investment portfolio is based on a high proportion of readily marketable bonds and equities. Derivatives are utilized strictly for hedging purposes. Intact's approach to managing its investment portfolio has allowed it to earn significant investment returns over the years and to withstand market volatility reasonably well. The commercial products portfolio is well diversified, but DBRS Morningstar notes that it is exposed to systemic risk arising from its cyber insurance offerings. In addition to traditional catastrophic risk exposures, which it mitigates primarily through reinsurance and policy terms and conditions, the Company has undertaken actions to reduce its earthquake risk exposure in
Intact's earnings ability reflects its strong underwriting and pricing discipline across its business segments and geographies, combined with solid revenue generation from its distribution businesses. The Company's net earnings have proven to be strong and resilient over time with a very good combined ratio of 90%, based on a three-year weighted average, as calculated by DBRS Morningstar.
The Company maintains ample liquidity resources to deal with potential cash demands under reasonably severe stress scenarios. Its investment portfolio consists of a high proportion of marketable bonds and equities, in addition to its substantial cash and short-term investment holdings. Reinsurance cover is available to limit the impact of losses that exceed retention thresholds.
Intact's regulatory capital ratios for its standalone entities reflect appropriate buffers above required solvency levels, allowing the Company to handle reasonably adverse events. Fixed charge coverage ratios are high as a result of Intact's consistently strong net earnings. Financial leverage has also returned to its pre-acquisition level.
ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) CONSIDERATIONS
Environmental Factors
Environmental concerns regarding Climate & Weather Risks are relevant to the rating of Intact as a P&C insurer but did not affect the assigned rating or trend. As part of its P&C product offering, Intact is exposed to weather-related losses from natural catastrophic events such as wind, wildfire, hail, flooding, and other extreme weather events. These events can lead to earnings volatility and increased reinsurance cost. DBRS Morningstar considers this ESG factor as part of product risk when assessing the Company's risk profile.
There were no Social or Governance factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings>. (
The Grid Summary Grades for Intact are as follows: Franchise Strength - Strong; Risk Profile - Strong/Good; Earnings Ability - Very Strong/Strong; Liquidity - Strong/Good; Capitalization - Strong/Good.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This rating is endorsed by
Each of the principal methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. Specifically, the 'Global Methodology for Rating Insurance Companies and Insurance Organizations' (
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are monitored.
For further information on DBRS Morningstar historical default rates published by the
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Initial Rating Date:
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