Q4 2020 Intact Financial Corp Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the intact Financial Corporation Q4, 'twenty and 'twenty results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press the star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance, please press star zero and I.
I'd now like to hand, the conference over to your Speaker today can't Anderson Senior Vice President Investor Relations and corporate development intact Financial Corporation. Thank you. Please go ahead.
Thank you Mike Good morning, everyone and thank you for joining the call to date and linked to our live webcast and published information for this call is posted on our website is intact at the C dot com under the investors tab.
Usual before we start please refer to slide two for cautionary language regarding the use of forward looking statements, which form part of this morning's remarks on slide three for of note from the use of non <unk> financial measures and important notes on the adjustments terms and definitions used in this presentation.
Our executives are again, joining virtually today from across the country and Toronto, we have our CEO Charles bring tomorrow here in Montreal, or Louis Marcotte, CFO, Isabelle Girard SVP of personal lines and Patrick Barbeau SVP of claims and from Calgary, We're joined by Darren Godfrey SVP of commercial lines.
As usual, we will begin with prepared remarks, followed by the Q&A with that I'll turn the call to our CEO Charles for anymore.
Yeah.
Good morning, everyone and thank you very much for joining us today.
So we're in the second wave of the COVID-19 pandemic and the hardship on the society continues to be significant.
Health care professionals, and frontline workers of shoulder and the luxe and we're very grateful for their dedication.
And the vaccine rollout provides the glimmer of hope it's important that the businesses continue to protect and support their employees and communities through these difficult times, we have stepped up by providing $530 million of relief to one 2 million customers. This year.
And we will continue to embed longer term relief measures and to our offerings, including rate strategies and product enhancement.
To protect and support our most impact of customers our relief measures remain the risk and need space.
Our outperformance and strong capital and management over the years enables us to provide substantial support to our customers.
Now, let's turn to results.
Yesterday evening, we announced fourth quarter net operating income per share of $3 and 18, a significant increase over Q4 2019.
For the full year net operating income per share was up 61% to $9 92 on strong underwriting and distribution performance.
Our strong results translated into an operating ROE of 18, 4%.
Or are we outperformance versus the industry continues to exceed our 500 basis point objective.
600 basis points for the first nine months of 2020 and closer to 700 basis points over the last three years.
Top line growth was solid.
8% in the quarter with tented up six and the U S up 19% the.
A strong combined ratio of 85, 6% included $74 million of cats with $23 million related to COVID-19.
The increase of our COVID-19 provision is related to our exposure and liability and entertainment and reflects the intensity of the second wave and.
In Canada, and the combined ratio of 84% for strong while our U S commercial lines delivered solid 92%.
Let's now look at our results by the line of business starting right here in Canada.
And the personal auto premium growth was solid at 5% our competitive position remains strong with north of 3% unit growth after adjusting for our exit from British Columbia.
The combined ratio of 82, 6% benefited from reduced driving our profitability actions and more favorable weather.
Upset and part by customer relief measures and increased severity.
Overall, our personal auto business is solid and I expect it to operate and the low end of the mid Ninety's range and 'twenty 'twenty, one as claims activity activity.
Gradually returns to normal and as our customer relief is earned.
Looking at the industry rate momentum has been impacted by the crisis and we've seen some short short term softening.
However, with an industry combined ratio close to 100% for the first nine months of 'twenty and 'twenty.
We expect corrective rate measures to resume as claims frequency of returns to historical levels.
And the personal property premiums grew 10% driven by unit growth for.
Market conditions, and the GCN acquisition the can.
And bind ratio at 73, 2% of the quarter and 81, 7% for the year was exceptionally strong and driven by our profitability actions overtime and benign weather.
The segment to continue to operate.
<unk> 95, and both good and in Bad times.
And commercial lines premiums grew 5% with the GCN acquisition, adding five points offset by six points from our 50 million targeted relief program.
The 95, 3% combined ratio and commercial lines were solid considering it included the six point impact from that relief program and two points of COVID-19 tests.
The commercial lines industry is entering its third year of hard market condition.
Which supports our view that this segment.
Should run in the low nineties moving to our U S commercial business premiums grew <unk>.
Very strong 19% with the GCN acquisition, adding six points.
Hard market conditions.
And high customer retention and drove the top line this quarter.
The combined ratio of 92 was solid with continued profitability actions in place. This business is positioned to deliver sustainable low ninety's performance.
Turning to strategy and we're moving diligently on the RSA acquisition and currently focusing on three areas closing the deal value.
Value creation and engaging with our colleagues at RSA.
First we're progressing well towards the schedule of closing in the second quarter. We received approval from the Canadian competition Bureau, as well as from RSA shareholders. It's all hands on deck as we continue to work with regulators and different countries for the remaining approvals.
Second we're gaining clear visibility on the value creation of fortunate. These as we work on the integration and transition planning.
We're reaffirming our neupest accretion targets, which of us reaching high single digit and the first 12 months.
And increasing to upper teens within 36 months as well we continue to expect mid teens operating ROE in the medium term and book value per share is expected to be up 25% at closing.
Finally, and most importantly, we are engaging with our colleagues at RSA.
With.
Most of the senior management team as we understates strategic reviews of the business.
I'm pleased with the engagement of our shared pursuit of outperformance and I look forward to welcoming our RSA colleagues into the impact family in the coming months.
Well, we're working to ensure we hit the ground running with RSC and we continue to strengthen our competitive advantages at home.
Great example of this is onsite restoration.
Business, we acquired over a year ago.
We've grown its top line by over 20%.
Making it the clear leader and home restoration and Canada.
With the expanded operations and seven provinces, we've improved margins by a third and we've significantly increased customer satisfaction with judge cycle times, Scott by 15%.
The onsite team is executing and theres lots of momentum and this business. We're also of strengthening our digital and data advantages are in fact and better direct apps I've seen the number of months of users more than doubled this year as well our data led the team has grown by over 40% and 2020.
And as they continue to deploy.
Close to one and drilling 40 of advanced models and the field to improve segmentation support of our telematics strategy and contribute to better customer experience overall strengthening of our competitive advantages is core to our outperformance mindset as it allows us to deliver value to our customers.
And create capabilities that are quite hard to replicate these industry, leading capabilities were built over a decade and will be particularly important as we integrate RSC.
Before I conclude I'll mentioned that February is typically when we increased our dividend, which we've done for the past 15 years, we fully intend to raise our dividend. This year the maintain the track record and given the current and regulatory environment, we've postponed the increase to our future quarter in 2021 and conclusion.
Delivered outstanding results throughout the year provided relief to over a million customers and continued to advance our strategy, we accelerated our diversity and inclusion initiatives and our people are more engaged than ever before <unk> as becoming an integral part of our business and.
We announced the acquisition of RSA, which accelerates our strategy and certainly strengthens our ability to outperform.
And so to our people across North America, it's been a challenging year and I want to thank you you guys really stepped up and as.
As we enter into 'twenty and 'twenty, one I know we have the best teams and we've shown that our business is tremendously resilient and we have.
Have strong momentum to surpass our financial objectives, and with that I'll turn the call over to our CFO Louis Marcotte.
Thanks, Charles and good morning, everyone.
We continue to see the profound the impact of pandemic is having on communities around the world and it's during these unprecedented times that our purpose has never been the cleaver to help people businesses and society Prosper and good times and be resilient and bad times.
The fourth quarter was marked by the emergence of the steep second wave of COVID-19 cases, and the application of new Lockdowns work from home orders and curfews.
At the same time, the weather was fairly benign interest rates were generally stable, but capital markets were strong.
With this backdrop in mind. It is important that we keep our focus on delivering strong operating results and maintaining a strong balance sheet, allowing us to continue providing support to our customers through the crisis and completing the RSA transaction as soon as it is approved.
And we've now provided more than $1 2 million customers with premium relief, where it's $530 million. The vast majority of the premium relief has already flowed through our written premiums. However, the unearned portion of these measures, which stood at $203 million at year and with lower net earned premiums.
And in future quarters.
Setting the impact of reduced claims frequency.
The intensity of the second wave and has also led us to increase our COVID-19 provisions by $23 million, mainly related to liability exposure in Canada and entertainment cancellations in the U S.
On the results.
Net operating income was up 54% versus last year to $467 million driven by strong underwriting and distribution performances and underwriting income grew 81% over last year as better weather reduced claims activity in the personal lines and our ongoing profitability actions drove lower claims frequency and Canada.
And all of which were partially offset by our customer relief measures.
Net investment income of $143 million and the quarter was unchanged from last year as the benefit of higher invested assets was offset by lower reinvestment yields on a full year basis investment income was flat for the same reasons and we expect a similar result, and 2021 before reflecting the impact of RSV.
<unk>.
Distribution EBITDA and other income grew 60% and the quarter and 32% for the year.
And this was better than expected thanks to solid organic growth disciplined expense management higher variable commissions as well as continuing M&A.
The additions of onside and Frank Cowan and also had a meaningful positive impact on this earnings stream.
On the back of the very strong 2020 performance distribution income and other is expected to grow 10% and 2021.
Now, let me move the volumes of business.
Personal auto premium growth was 6% for the full year after reflecting six points of relief measures.
Market conditions helped drive for points of rate for the year, while units were up two points as our action plans and relief measures generated strong customer retention.
The personal property at a strong year growing 11% and 2020, despite two points for them relief.
Current market conditions, <unk> and unit growth drove top line throughout the year.
Turning to Canada commercial lines, the solid growth of 10% and 2020 was driven by hard market conditions and the acquisitions of <unk> <unk>.
Both of which were offset by four points of customer relief.
The overall Canadian expense ratio of 29, 5% for the quarter increased one seven points from last year.
This was mainly driven by the impact of relief measures on net earned premiums as well as the higher variable commissions and increased investments and technology during the quarter for.
For the full year of the expense ratio was 32% and we expect a similar level and 2021.
Looking at the U S commercial 9% topline growth for the year was driven by a hard market conditions and the GC and the acquisition, partially offset by our discipline on lines under profit improvement plans and lines impacted by Covid.
The U S expense ratio of 38, 4% for the year increased by close to one point, mainly driven by higher commissions, resulting from our expanding surety business.
For 2021, the expense ratio is expected to be in line with 2020.
Since we acquired Onebeacon and three years ago, delivering a sustainable low <unk> combined ratio has been our main focus.
We've taken several actions to get there, namely the exit of unprofitable lines of business. The implementation of profit improvement plans and others the realization of synergies as well as claims and underwriting actions.
While we reported a 95% combined ratio in 2020 with elevated cat activity, including Covid losses, We believe our U S business is very well positioned to run and the low ninety's going forward.
Moving to our balance sheet.
We ended the quarter and a strong financial position with a total capital margin of $2 7 billion and a debt to total capital ratio of 24, 1% <unk>.
Included in these figures and $600 million of medium term notes issued to finance the RSC acquisition.
When I exclude this our leverages essentially at a at our 20% target.
And remember the proceeds from our $4 five private placements of subscription receipts are not yet reflected on our balance sheet.
Our book value per share increased 9% year over year to 58 and 79, thanks to strong operating performance and favorable capital markets.
Let me now provide a few comments on the RSA deal a transaction that moves the needle for IFC, both strategically and financially.
Firstly, we have largely secured financing with a with $65 6 billion already raised and the remainder will be raised in the coming months.
Secondly, as we worked through integration and transition planning, we are gaining further visibility on our $250 million of free tax synergies. We are confident we can deliver the synergies within the three year time frame. We originally planned.
And finally, we continue to expect upper single digit accretion in the first year after close.
I mean, we closed the transaction at the end of Q2, we expect this level of accretion to begin and to begin in the second half of 2021.
On the topic of 2021 and light of the uncertainty it is worth giving you a sense of what to expect for the existing IFC business and.
In summary, we anticipate overall top line growth to be in the mid single digit range and.
Our combined ratio to be at a low ninety's levels.
And closing during 2020, we maintained the position of strength throughout this crisis and our business remains solid on both sides of the border.
We are well positioned to execute on our objectives, including adding meaningful value for all stakeholders with the RSA transaction.
This would not be possible without our most important asset our amazing people. They really stepped up this year to support our customers and communities as we continue to deliver value for our shareholders.
And for another solid year with that I'll turn the call back to Ken.
Thank you Louis and order to give everyone a chance to participate in the Q&A, we would kindly ask that you limit yourselves to two questions per person. If there's time at the and you can certainly re queue for follow ups. So Mike we're ready to take questions now.
And as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or cash key.
Please standby will be compile the Q&A roster.
Your first question comes from Geoff Kwan from RBC capital markets.
Hi, good morning.
My first question was for the.
The COVID-19 cat loss reserves and that you had and can.
Can you give some examples of what types of claims for going through I think liability was one of the areas and then separately like what would need to happen for you to have the reserves more COVID-19 related charges.
Why don't we thanks.
Thanks, I'll, just ask but I think to give you of perspective.
On the.
And the profile so to speak.
And what we would need to get the reserve more go ahead.
And that's it.
Jeff.
As we mentioned I think Charles mentioned it in his remarks, there's two main sources that led us to increase R. R.
Overall provision for Covid losses by 23 million in Q4, we had provisions that $83 million at the end of Q1 and the prudent way.
But in light of the intensity of the second wave there are two areas, where we're seeing a little bit of pressure coming from debt we do.
Where we wanted to.
Be on the prudent side, so entertainment and the U S.
The cost on our policies and entertainment is much higher when events are canceled and when Theyre. Postpone initially there was a lot of the evidence that we're more postpone and we're anticipating that some of them would be canceled but in light of the intensity of weeks two we've seen a bit more of that was and is being cancelled and we are.
<unk> for that trend going forward as well and that's what we know at the moment and and liability and Canada. There is a few different types.
Types of liability that cannot and and our portfolio. This is nothing around business interruption just to be clear, it's really liabilities or some of our clients.
Being sued for negligence.
Duty to defend and our policy of the plant is still need to prove negligence and.
And so but theyre just a little more activity on the liability side, it's not really linked to specific cases, just the increase of activity given the.
The the intensity of the wave that lets us decide.
The site to add a little bit of reserves and Canada as well.
With the need for us to need to increase the reserves again, well start to see but I will share debt sitting here looking at the situation going forward I think we are on the conservative side, meaning that it would have to.
The significant.
First the <unk>.
Allotment of the situation globally for us to need the additional reserves. We don't expect we will have to move it this year.
And.
Yeah, and if I can add a bit of color Jeff.
You that picture.
The third wave with the same intensity of the second wave.
Severe lockdown measures potentially to be in the zone, where we would look again, but even then.
The pressure that comes from entertainment.
I won't be at the same level, even if we go into the third wave because we've moved from postponement or cancellation and there's much less of that left and the system and I would say in aggregate the.
Odds.
Are very very small at this stage as far as we're concerned that we see and need to increase the ultimate.
Okay. That's helpful and just my other question was just the metro miles of the stack just started trading today and I'm wondering how we should kind of think about with the valuation of upside relative to your original investment and the company, but also to like with the New Tech ventures like are there other investment you would want to highlight and interesting and or ones that the meaning.
Lee surface value.
Ah well first congratulations to the metro miles team and Dan that the Metro miles.
For a job well done and where we are quite pleased with the developments there.
Last week to give his perspective on on that specifically, we've got a number of other meaningful stakes and the venture portfolio, but nothing that I want to highlight at this stage, Jeff, but I think we will take your interest into account here and and potentially into.
Great that and.
And I'm coming quarters for the investors day sort of.
On the Metro line.
Yes, so a very successful transaction.
The second place in the last two days, so very happy about that it will trigger a significant gain for the company.
And our cautious here.
And on valuations of course.
And.
And so were.
There will be recorded at fair value as soon as the trade so it should be and Q1 of.
This year, it will be meaningful, but we consider it a non operating gain as we put all of our other.
The similar gains and those will be booked in Q1, where it will land depends on the market value.
And of the of the share as they trade on the market now, but we expect that to have a.
At this point of a positive impact on non operating earnings in Q1, and then we will carry that fair value. So the ups and downs will flow through.
The earnings until.
We decided what we do with the with the shares.
Did you have the number of shares that you're owning on with the fact and training.
So we haven't shared that information.
And obviously, it's a.
Small share of the overall corporation, but we have not shared the the numbers there.
The.
Jeffrey.
Okay alright, thank you.
Your next question comes from Mario Mendonca from TD Securities.
Good good morning, Charles This is obviously, a very special year for the company I'm just looking at things like the underlying claims ratio on personal auto and and personal property.
The improvement we saw this year and he's looked like record years in terms of where these ratios are falling out.
And how does that influence your thinking.
About further premium relief.
Or.
The rate reductions and 2021 and does that inform you in any way about.
The capacity to drive higher pricing when.
When the COVID-19 is behind us.
So and Mario.
Clearly it's been.
A very strong year, there is no no doubt about it with and overall combined ratio in Canada.
And the upper eighties, all lines combined including the provisions we've taken for COVID-19, the whether it's helped.
A little bit.
Macro level.
We are and the.
Tight.
And the marketplace I mean, the industry's combined ratio.
100% at.
At the end of Q3 this year automobile insurance.
It was in and around 100% for the industry and <unk>.
So we're in that.
Phase of the cycle again at the macro level.
The outperformance is really strong.
But the industry has yet to catch up on the actions we've been taking over the past you know true.
<unk> for years, and so I do think that 2021 remains a year, where we can take advantage of market conditions.
Maintained solid outperformance.
And grow the business and a very healthy.
Very healthy fashion, and I see that and personal property still.
Don't see personal prop softening I think theres, a fair bit of work that's needed still at the industry level and one year of favorable weather its not going to slow that down and commercial lines were in year three of what started as a firm market to what is now a hard market and Covid has not been helpful.
And I continue to see a fair bit of digestion needed.
In commercial lines, and certainly true and the U S.
Sure.
We've got strong performance and first line. So I think the the run rate performance is really strong and we intend to grow our positions, there and and hopefully expand the margins and the hard market.
But the but grow the top line as well automobile isn't of different zone.
Clearly.
And it isn't the zone, where the cost equation as change probably for a bit of bit longer than what we anticipated and March and April and that's why we've gone from relief to rates and I think.
You've seen the industry moving and that in that direction as well to a certain extent and when I look at great sitting here today and automobile insurance.
Not really rate increases flowing through the system on a written basis at the stage I think if you look at the industry you see rate increases and some parts you see rate decreases another.
Other parts I do think it's temporary I think that there is the industry's performance is not that great.
And I think the trends, we recognized and 16 and 17.
Are creating pressure for a number of players you see this and the prior year adverse development nine months into.
2020. So my view is you are probably in the flat environment from a rate point of view and automobile.
But one way or the cost equation and warrants it and my view, but I think as.
Driving gets closer to normal.
I do think that will be and a fairly rationale.
The environment hard to tell you know along the return to normal will be I suspect you've got at least the year of that but I.
I think we can we can win in the near term and capitalize on strong performance and automobile and hopefully grow that platform.
And sort of as a follow up could you talk a little bit about.
I think and you're in your MD&A you talk about further premium relief beyond what the company has already announced is there any way you can help size that and maybe I'll ask it and this way you have got $203 million left to.
To be earned.
Would you see the premium relief new premium relief in 2021.
Rivaling, the 400 and some odd million.
That was written in 2020, because that's conceivable for 2021.
I don't think so.
I think that.
I would be the.
Very very surprised that we would be in that range Mario because.
First of all the difference and driving in the second wave.
It's very different from the driving and the first wave driving and the first wave at one point and time was down 50% driving and the second wave.
And as dropped but nowhere near these levels and as such I don't see.
A logic for relief to that same extent second point is far more people of embraced UBI.
And then rates reflects to a certain extent that expectation of less driving sort of.
I, just don't see relief to that extent Mario.
In 2021.
Thank you.
Your next question comes from Jamie Your line is from National Bank financial.
Hi, Jamie.
Right.
Sorry, good morning, I was on mute.
And there.
My question is around the the distribution EBITDA and the solid results. We saw in 2020 and Louis Your guidance I believe is for 10% growth and in 2021.
Can you can you maybe breakdown.
And that growth rate forecast in terms of organic growth and M&A growth.
And how you see the underlying biz.
Businesses are of business as it's constructed today with the revenue coming from onside revenue coming from Brian Cowen and and let's say out of there.
Pre existing brokers and the distribution channel.
Sure.
And so.
What what Youre seeing this year, whereas I mentioned earlier was the organic growth the profitability of the underwriting some expense management.
And as an example during the crisis the brokers pulled back on some of the <unk>.
Marketing spend as an example.
And there is a bit of M&A and there. So this is like the ongoing M&A, where the the consolidate the market for aggressively and then the addition of onsite and Frank Cowan.
Led to the 32% overall next year, we're guiding to 10, so firstly, we're off to a very we're comparing ourselves to a very strong 2020.
So I guess, we're a bit of ahead of the game here in terms of the earnings where they stand today and given what we delivered in 2020.
And then next year, it's a share of.
And mostly organic on the part of the brokers.
Growing.
So if you take the 10% I would say probably.
40% of it is the organic growth of the brokers and other.
<unk> 40 would be the Frank Cowen and <unk>.
On site and growing and then the rest of would be a bit of M&A activity that will flow in.
If I split it out that's roughly the makeup of the so it's mostly organic.
There is some M&A momentum coming in but mostly it's a it's driven by our brokers and.
<unk> growth as well as the addition of onsite and the Frank Cowan.
Yeah, no and I think worth mentioning.
On side, a little bit here just the.
The strategic progress that the team has done there under the leadership of Craig hold guard and <unk>.
And I think who has joined the team has been outstanding.
And in my remarks, the cycle time that is the time needed to get customers back on track down, 15% and short and it.
The very short period of time, we're targeting 50% got.
And and cycle time the grille.
There is impressive I think the margin as improved meaningfully as well and I see a fair bit of upside, but we're just starting and.
And my own view of the upside there theres a big capacity issue.
In that space.
There is a quality issue in that space of Super fragmented.
So our thought process on onsite is very much consistent with what we've tried to do with broker link a decade ago.
Bill capacity at scale and the.
Then the profitably and I would say.
And we're probably ahead of where I thought we'd be in this acquisition and so we'll put more capital there and certainly leverage this platform and the RSC integration, which will really help the platform.
As well and the customer experience. So I'd say this and say a second.
The source of business, that's first of all inversely correlated with the underwriting performance that.
And we should that investors should keep an eye on and the next three to five years.
Okay and is.
The is onsite at our out of size.
At this stage, where youre able to breakout and its contribution.
Not yet.
Okay, otherwise great answer thank you very much.
Thank you.
Your next question comes from Doug Young of properties that need capital.
Good morning.
First question, maybe just back to good morning back to the outlook Charles.
And I think and correct me, if I'm wrong, the outlook for personal property and might've changed a little bit I think you're now looking at mid single digits down from mid to high single digit growth.
And I'm, just wondering what informed that that shift down or are we at that pivot point, where I mean, you've had a few great years and that business line or should we be anticipating and a bit of a slowdown in.
And the pricing cycle here of just hoping to get a little bit more color.
Yes, very perceptive.
Indeed, I think between rates and some insured.
And I look at what's running.
In the in the systems these days and.
You know youre, a little bit north of the.
Mid single digit I think it's been many years of correction the performance is outstanding.
Our outperformance is outstanding and we want to make sure that debt.
And we're in a very good position.
Two to growth that segment.
While continuing to expand the margin.
I don't think the industry's necessarily.
They're just yet but.
But it's not at the same sort of level as what we've seen last year or the or the past few years, you said and you want to provide a bit more color on that if there's a need.
I wouldn't be agile.
Even if and personal property.
And net net there Ian and fact that line of business we have seen.
And from some insurers tempering also the rates and that line of business as well. So I think that's why and we now expect.
And the growth to be in the mid single digit range.
And.
Yes, that's the very good point.
As we deploy our segmentation strategies the during.
During the and they make we tried to tame the.
The increase is that the.
And we're the largest force some segments of customers and that plays into the outlook as well.
And so you're not you're not anticipating the softening cycle and just more of a tempering of the cycle at this point, we're not at the pivot point no I don't think so I don't think so.
Okay and then just.
The follow up.
And it relates to the to the exited lines and the adverse.
The development coverage I mean exited lines and this quarter had 39 million of underwriting loss.
Had a $5 million of negative prior year reserve developments and the U S and the coverage has gone for the business and I think the coverages for prior to 2017 on the Onebeacon business.
Should we be worried that we're going to see a lot more.
Balances and this and and I guess, what I'm trying to get out of us.
Especially on the exited lines when does that number go to zero because I think that's been excluded from operating because it's anticipated that this is going to run off and go to zero and we haven't seen that so just hoping to get some color on all of that yet.
When we close the transaction, Doug we exited right then.
Three lines of business.
Or two lines of business and then health care, maybe a year later and.
And.
Our view is that this should not be of drag going forward, we tried to make sure the wouldn't be.
And it certainly reinforces our view of that.
The call to exit those lines of business was the right.
The right call and I think we need to be so I don't expect the drag and when I look at the ongoing lines of business I'm quite pleased with the trajectory of the performance there and you've seen a strong 92% and Q4.
Yeah.
And a market that's very supportive and.
And I think from a reserving point of view, we've put ourselves and are positioned to avoid that surprises from those lines.
So so we shouldn't be anticipating and I mean.
2020, there was some significant losses I think it was in the 60 million of underwriting if im correct. So that that should essentially go and <unk>.
21, and 2022 towards zero and maybe you can just if you can provide color on the what produced the loss and that exited lines.
And that.
I think do you want to give.
Net of color on that or or Darren.
Yes, I can I can jump in and shall I mean, what I mean, that's consistent with the past what we've seen.
He is obviously the exited line activity with respect to the ADC I mean in terms of the exited lines themselves. The the the predominant line that is health care.
That took up the vast majority of.
All of the activity that we saw in <unk>.
And in Q4, and also a little bit on the architects and engineers.
Obviously.
Consistent with reserving practices, we expect zero.
Of the impact in 2021 from an exit of the line standpoint.
Otherwise we would of take.
<unk> taken a more prudent position on the reserves when we closed in 2020.
And so we do expect zero purely from a reserving standpoint in 2021.
Doug I think you know a chunk of that is I b and our.
And in other words it's.
Aggregate provisioning and then there was one large loss and.
And health care of significant large loss and healthcare, where we have strengthened the case reserves.
Yes.
Okay, great. Thank you.
As a reminder to ask the question Press Star one for our next question comes from Tom Mackinnon from BMO capitals.
Yes, thanks very much good morning good.
Good morning.
Yeah good morning.
The for the contemplated the relief measures and Canada I assume these are.
All incorporated into the guidance.
For the.
The Canadian or the existing impact business.
For.
For 2021 of the low Ninety's combined the mid singles.
The top line growth am I correct the loss.
Yes, you are.
Okay, So and then.
And just with respect to the RSA acquisition and the call.
And there's further visibility into value creation and certainly for the impression that there is for further.
Further visibility into the 200 and marine.
One of the teams.
And what are you seeing while that maybe that you can see.
And the due diligence what are the discovery here that gives you further.
And then the more clear visibility into the value creation of this acquisition.
And we we why don't you take this one.
Sure. So of course, our initial estimates were based on the preliminary due diligence on I would say limited the.
Information and the past experience and in terms of our own integrations and.
And now that we're a couple of months in.
We have.
I guess more visibility on the structure of the organization, where there where the pockets of synergies we saw can actually be harvested.
We have more people involved too.
And are basically confirming the level of synergies we can achieve so I think what we're seeing here is the visibility it gives us more confidence and the numbers and we shared.
A couple of months ago. So this is really the essence of of what we're saying a bit the same on the integration side.
Being able to do identify what what we have to do and how much it will cost. So it's more of reaffirming a bit the value is now that we're three months in.
And that we had the stated at the outset of the transaction when we were somewhat limited in terms of information sharing with the target.
Yeah, and I think Todd.
A big difference.
I would say between you know pre deal of pre announcement and post the announcement as debt do you go from a top down approach to what is much more of a bottom up.
Approach at this stage, we've got 27 teams transition teams.
That are looking at various parts of the business working with the.
With RSA each of those teams.
As the specific.
The target that's informed by the information that the that we've had access to and therefore, we gained confidence and our ability to deliver the goods I would say the other area that we feel good about.
Is the loss ratio improvement potential that our debt I think we will be available across the platform and as we discover.
Some of the assets.
In the UK and I pair of meters we see.
Fair bit of value and some of the assets that we didn't know.
As well so for all of these reasons were pretty.
The confidence.
And the guidance we provided.
And I believe the $250 million of expense synergies does not include the benefit of risk selection improvements of revenue synergies.
The loss ratio improvement for assets and the U K. These are things that are not.
And the 250 million in terms of expense synergies and is that correct.
Correct.
Okay. Thanks very much.
Okay.
There are no further questions I will turn the call back over to Ken Anderson.
Well, thanks to everyone for joining us today following the call a telephone replay will be available for one week and the webcast will be archived on our website for one year. The transfer of transcript will also be available on our website and the financial reports and filings section and closing our first quarter 2021 results are scheduled to be released.
After market close on Tuesday May 11, and thank you again and this concludes our call for today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Jack.
Yeah.
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