Q2 2026 Intact Financial Corp Earnings Call

July 29, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q2, 2026 results conference call. At this time, our lines are in a listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q2 2026 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on 29 July 2026. I would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead, sir.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require me to assistance, please press star zero for the operator.

Speaker #1: Also note that this call is being recorded on July 29, 2026. And I would like to turn the conference over to Jeff Kwan, Chief Investor Relations Officer.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our second quarter financial results. I'll link to our live webcast and materials for this call have been posted on our website at intactfc.com under the Investors tab.

Geoff Kwan: Thank you, Sylvie. Hello everyone, and thank you for joining the call to discuss our Q2 financial results. A link to our live webcast and materials for this call have been posted on our website at intactfc.com under the Investors tab. Before we start, please refer to slide two for a disclaimer regarding the use of forward-looking statements, which form part of this morning's remarks, and slide three for a note on the use of non-GAAP financial measures and other terms used in this presentation. To discuss our results today, I have with me our CEO, Charles Brindamour; our CFO, Ken Anderson; Patrick Barbeau, and Achraf Loutfi, our Senior Vice President, Personal Lines. We will begin with prepared remarks followed by Q&A. With that, I will turn the call over to Charles.

Speaker #2: Before we start, please refer to slide 2 for a disclaimer regarding the use of forward-looking statements, which form part of this morning's remarks, and to slide 3 for a note on the use of non-GAAP financial measures and other terms used in this presentation.

Speaker #2: To discuss our results today, I have with me our CEO, Charles Brindamour; our CFO, Ken Anderson; Patrick Barbeau, our Chief; and Ashraf Luitri, our Senior Vice President, Personal Lines.

Speaker #2: We will begin with prepared remarks, followed by Q&A. And with that, I will turn the call over to Charles.

Speaker #3: Thanks, Jeff. Welcome, Ashraf, to your first earnings call. And good morning, everyone. And thanks for joining us. Last night, we released our second quarter results, which generated net operating income per share of $3.17, driven by a combined ratio of 94/9, which included approximately 4 points of excess catastrophes and large losses.

Charles Brindamour: Thanks, Geoff. Welcome, Achraf, to your first earnings call. Good morning, everyone, and thanks for joining us. Last night, we released our Q2 results. We generated net operating income per share of CAD 3.17, driven by a combined ratio of 94.9, which included approximately 4 points of excess catastrophes and large losses. Our top line grew 4% in the quarter, driven by continued strength in Personal Lines. Our ROE was in the upper teens at 17%. Our book value per share grew 13% year over year to CAD 111.73. Our balance sheet is very strong with CAD 3.7 billion of excess capital, and that positions us well in an attractive M&A environment. Now, this quarter was marked by a higher level of large losses than we've experienced historically, and than we expected. Given that, we conducted a detailed and thorough review.

Speaker #3: Our top line grew 4% in the quarter, driven by continued strength in personal lines. Our ROE was in the upper teens, at 17%.

Speaker #3: Our book value per share grew 13% year over year, to $111.73. Our balance sheet is very strong, with $3.7 billion of excess capital, and that positions us well in an attractive M&A environment.

Speaker #3: Now, this quarter was marked by a higher level of large losses than we've experienced historically, and then we expected. Given that, we conducted a detailed and thorough review.

Speaker #3: We did not find any common driver or systemic pattern. We view what happened in Q2 as an anomaly, and we're confident that the underlying performance and the fundamentals of our business is very strong.

Charles Brindamour: We did not find any common driver or systemic pattern. We view what happened in Q2 as an anomaly. We're confident that the underlying performance and the fundamentals of our business is very strong. Let me now provide some color on each of our segments, beginning with Canada. In Personal Auto, premiums grew 9% in the quarter, including 1% of unit growth. This reflects sustained hard market conditions, supported by our investments in marketing and in the digital channel. With the industry remaining unprofitable still at the end of Q1 2026, we expect industry premium growth to remain in the high single digits over the next 12 months. Our combined ratio in Personal Auto improved 1.5 points year over year to 88.8%, a strong result in a seasonally favorable quarter. This performance was driven by an improvement in the current accident year of more than 2 points.

Speaker #3: Let me now provide some color on each of our segments, beginning with Canada. In personal auto, premiums grew 9% in the quarter, including 1% of unit growth.

Speaker #3: This reflects sustained hard market conditions, supported by our investments in marketing and in the digital channel. With the industry remaining unprofitable still at the end of Q1 2026, we expect industry premium growth to remain in the high single digits over the next 12 months.

Speaker #3: Our combined ratio in Personal Auto improved 1.5 points year over year to 88.8%, a strong result in a seasonally favorable quarter. This performance was driven by an improvement in the current accident year of more than 2 points.

Speaker #3: On the reform front, we're encouraged by the developments in both Ontario and Alberta. In Ontario, while early, customers are choosing the optional protection, which should help support growth.

Charles Brindamour: On the reform front, we're encouraged by the developments in both Ontario and Alberta. In Ontario, while early, customers are choosing the optional protection, which should help support growth. In Alberta, we like the direction being set for 2027. We'll provide an update later this fall as the reform package is finalized. In both cases, we think these reforms are excellent for consumers and support a healthy and competitive automobile industry. They should also contribute to bring the industry closer to a more sustainable performance level. In Personal Property, premiums grew 7%, including a 1% increase in units. We see continued strength in this segment. We expect industry premium growth to be in the upper single to low double-digit range over the next 12 months. A combined ratio of 103 included 22 points of cat losses in the quarter.

Speaker #3: In Alberta, we like the direction being set for 2027. We'll provide an update later this fall as the reform package is finalized. But in both cases, we think these reforms are excellent for consumers and support a healthy and competitive automobile industry.

Speaker #3: They should also contribute to bring the industry closer to a more sustainable performance level. In personal property, premiums grew 7%, including a 1% increase in units.

Speaker #3: We see continued strength in this segment. We expect industry premium growth to be in the upper single to low double-digit range over the next 12 months.

Speaker #3: The combined ratio of 103 included 22 points of CAT losses in the quarter. This is a reminder of the impact on industry profitability from severe weather events.

Charles Brindamour: This is a reminder of the impact on industry profitability from severe weather events. We believe this will contribute to sustaining hard market conditions. Despite the elevated level of catastrophes in Q2, our year-to-date combined ratio of 93.9% shows our personal property business is positioned to deliver a sub 95% performance, even with severe weather. We view this segment as very attractive and a solid source of growth. Our track record of close to 90% combined ratio over 5 and 10 years is quite strong and gives us confidence in our growth strategy in that segment. In commercial lines, premium growth was 1% in the quarter. We see continued traction for our growth initiatives, which drove roughly 3 points of growth. This was partially offset by 2 points of mix shift towards smaller account sizes as we remain selective in the competitive large account space.

Speaker #3: We believe this will contribute to sustaining hard market conditions. Despite the elevated level of catastrophes in Q2, our year-to-date combined ratio of 93.9% shows our personal property business is positioned to deliver a sub-95 performance, even with severe weather.

Speaker #3: We view this segment as very attractive and a solid source of growth. Our track record of close to 90% combined ratio over 5 and 10 years is quite strong, and gives us confidence in our growth strategy in that segment.

Speaker #3: In commercial lines, premium growth was 1% in the quarter. We see continued traction for our growth initiatives, which drove roughly three points of growth.

Speaker #3: This was partially offset by two points of mixed shift toward smaller account sizes, as we remain selective in the competitive large account space. I'm encouraged not only by the strength of the SME portfolio, but also by sequential improvements in production stats in the mid-market space.

Charles Brindamour: I'm encouraged not only by the strength of the SME portfolio, but also by sequential improvements in production stats in the mid-market space. We expect industry growth in the low to mid-single digits over the next 12 months. The combined ratio was strong at 85.7% in commercial. This result reflects our continued discipline in applying pricing sophistication and advanced risk selection techniques to retain higher quality accounts. We continue to expect a combined ratio in the low 90s% or better. Moving now to our UK&I segment. Our top line decreased by 1% in the quarter.

Speaker #3: We expect industry growth in the low to mid-single digits over the next 12 months. The combined ratio was strong at 85.7% in commercial. This result reflects our continued discipline in applying pricing sophistication and advanced risk selection techniques to retain higher-quality accounts.

Speaker #3: We continue to expect a combined ratio in the low 90s or better. Moving now to our UK&I segment. Our top line decreased by 1% in the quarter.

Speaker #3: While growth was solid in specialty lines, our domestic UK commercial lines business saw pressure driven by the consolidation of products following the NIG acquisition into one intact value proposition.

Charles Brindamour: While growth was solid in specialty lines, our domestic UK commercial lines business saw pressure driven by the consolidation of products following the NIG acquisition into one Intact value proposition. We continue to expect top line to improve in 2026 as we complete this exercise, and we expect the industry premium growth in the low to mid-single digit range over the next 12 months. The combined ratio of 112% included 15 points of excess cat and large losses. We're committed and confident in bringing the combined ratio towards 90%. We're making good progress and expect further improvements as we continue to roll out our pricing sophistication tools, but also improve the expense ratio over time. In the US, premiums increased by 4%, driven by solid new business and strong growth in some of our most profitable verticals.

Speaker #3: We continue to expect top line to improve in 2026, as we complete this exercise. And we expect the industry premium growth in the low to mid-single digit range over the next 12 months.

Speaker #3: The combined ratio of 112% included 15 points of excess cat and large losses. And we're committed and confident in bringing the combined ratio towards 90%.

Speaker #3: We're making good progress and expect further improvements as we continue to roll out our pricing sophistication tools but also improve the expense ratio over time.

Speaker #3: In the US, premiums increased by 4%, driven by solid new business and strong growth in some of our most profitable verticals. Our top-line growth is benefiting from the wider product lineup and continued gains in expanding and deepening broker relationships.

Charles Brindamour: Our top-line growth is benefiting from a wider product lineup and continued gains in expanding and deepening broker relationships. At the industry level, we expect premium growth to be in the mid-single digits over the next 12 months. The combined ratio of 85% in the US this quarter improved nearly 3 points year-over-year, reflecting the benefits of our strategy of focusing on profitable growth. This marks our 12th consecutive quarter with a combined ratio below 90%. As we look ahead across all of our lines of business, we're operating in an environment that plays to our strengths, where pricing sophistication and risk action are paramount. We significantly expanded our ROE outperformance in 2025 to 740 basis points as we continue to execute on our strategic roadmap.

Speaker #3: At the industry level, we expect premium growth to be in the mid-single digit over the next 12 months. The combined ratio of 85% in the US this quarter improved nearly 3 points year over year, reflecting the benefits of our strategy of focusing on profitable growth.

Speaker #3: This marks our 12th consecutive quarter with a combined ratio below 90%. As we look ahead, across all of our lines of business, we're operating in an environment that plays to our strengths.

Speaker #3: Where pricing sophistication and risk selection are paramount, we significantly expanded our ROE outperformance in 2025 to 740 basis points, as we continue to execute on our strategic roadmap.

Speaker #3: That includes investments in data and AI, as well as leveraging our scale to build an extensive supply chain network that allows us to internalize over 90% to 95% of our claims globally.

Charles Brindamour: That includes investments in data and AI, as well as leveraging our scale to build an extensive supply chain network that allows us to internalize over 95% of our claims globally. On the AI front, for instance, this includes realizing recurring benefit from investments faster than expected. Indeed, while our initiatives generate north of CAD 220 million recurring benefits to date, we now expect to achieve CAD 500 million in benefits in 2028, roughly two years earlier than we previously announced. On the claims side, the recent catastrophes in Canada illustrated our competitive advantage. In June, there were five catastrophes. Our advanced claims and analytics capabilities and in-house restoration business On Side Restoration were instrumental in helping us close 47% of the almost 9,000 claims from the June cat. An impressive result. It demonstrates how we're able to get our customers back on track faster while building a loss ratio advantage.

Speaker #3: On the AI front, for instance, this includes realizing recurring benefits from investments faster than expected. Indeed, while our initiatives generate north of $220 million in recurring benefits today, we now expect to achieve $500 million in benefits in 2028, roughly two years earlier than we previously announced.

Speaker #3: On the claims side, the recent catastrophes in Canada illustrated our competitive advantage. In June, there were 5 catastrophes. Our advanced claims analytics capabilities and in-house restoration business on site were instrumental in helping us close 47% of the almost 9,000 claims from the June cat.

Charles Brindamour: In June, there were five catastrophes. Our advanced claims and analytics capabilities and in-house restoration business On Side Restoration were instrumental in helping us close 47% of the almost 9,000 claims from the June cat. An impressive result. It demonstrates how we're able to get our customers back on track faster while building a loss ratio advantage.

Speaker #3: An impressive result. It demonstrates how we're able to get our customers back on track faster while building a loss ratio advantage. We also remain focused on helping build more resilient communities.

Charles Brindamour: We also remain focused on helping build more resilient communities. Initiatives like the Keep It Intact prevention ecosystems are driving proactive risk mitigation. Since the launch of the initiative last year, our customers have recorded over 140,000 prevention actions in our apps, which help them better protect their homes. These actions also enhance the resilience of our personal property portfolio. On top of that, Jiffy, Canada's number one home maintenance hub and only owned by Intact, is well-positioned to benefit from increased prevention activity by homeowners. Jiffy's revenues increased 24% year over year. In closing, although Q2 was a difficult quarter for many of our customers, our teams continued to do outstanding work getting impacted customers back on track as fast as possible. I want to thank all our employees for their dedication to living our values and delivering for our customers.

Speaker #3: Initiatives like the Keep It Intact Prevention Ecosystems are driving proactive risk mitigation. Since the launch of the initiative last year, our customers have recorded over 140,000 prevention actions in our apps.

Speaker #3: Which helped them better protect their homes. These actions also enhanced the resilience of our personal property portfolio. And on top of that, Jiffy Canada's number 1 home maintenance hub and only owned by Intact, is well positioned to benefit from increased prevention activity by homeowners.

Speaker #3: Jiffy's revenues increased 24% year over year. So, in closing, although Q2 was a difficult quarter for many of our customers, our team continued to do outstanding work getting impacted customers back on track as fast as possible.

Speaker #3: I want to thank all our employees for their dedication to living our values and delivering for our customers. Our track record demonstrates that external factors, such as natural disasters and industry pricing cycles, didn't impact our ability to consistently deliver on our two financial objectives.

Charles Brindamour: Our track record demonstrates that external factors, such as natural disasters and industry pricing cycles, didn't impact our ability to consistently deliver on our two financial objectives. With our net operating income per share growing at a compounded growth rate of 16% over the last three years and 12% over the last 10 years, we've exceeded our goal of at least 10% growth annually over time, both near and long term. Our average ROE outperformance has been 600 basis points over the last three years and almost 700 basis points over the last 10 years, well above our objective of at least 500 basis points outperformance. Given the environment in which we operate, our focus on outperformance, and our commitment to profitable growth, there's no doubt in my mind that we'll exceed our financial objectives in the next decade as we have in the last decade.

Speaker #3: With our net operating income per share growing at a compounded growth rate of 16% over the last 3 years, and 12% over the last 10 years, we've exceeded our goal of at least 10% growth annually over time in both the near and long term.

Speaker #3: Our average ROE outperformance has been 600 basis points over the last 3 years, and almost 700 basis points over the last 10 years. Well above our objective of at least 500 basis points outperformance.

Speaker #3: Given the environment in which we operate, our focus on outperformance, and our commitment to profitable growth, there's no doubt in my mind that we'll exceed our financial objectives in the next decade as we have in the last decade.

Speaker #3: Thank you. And now I'll turn the call over to our CFO, Kenneth Anderson.

Charles Brindamour: Thank you, now I'll turn the call over to our CFO, Ken Anderson.

Speaker #2: Thanks, Charles. And good morning, everyone. While the second quarter was active from a catastrophe and large loss perspective, our results demonstrate the resilience of our platform.

Ken Anderson: Thanks, Charles, and good morning, everyone. While Q2 was active from a catastrophe and large loss perspective, our results demonstrate the resilience of our platform. Net operating income per share for Q2 was CAD 3.17, while operating ROE was strong at 17%, driving a 13% year over year increase in our book value per share to CAD 111.73. Let me add some color on Q2 results. The underlying current accident year loss ratio of 59.1% included 3 points of excess large losses. The large losses primarily occurred in our UK&I segment, with several large property fires occurring across different segments of commercial and specialty lines. Canadian commercial and personal property also experienced increased frequency of large losses, primarily driven by property fires. Importantly, we view these losses as discrete in nature. Our underlying performance remains strong.

Speaker #2: Net operating income per share for the second quarter was $3.17, while operating ROE was strong at 17%, driving a 13% year-over-year increase in our book value per share to $111.73.

Speaker #2: Let me add some color on second quarter results. The underlying current accident year loss ratio of 59.1% included 3 points of excess large losses.

Speaker #2: The large losses primarily occurred in our UK&I segment, with several large property fires occurring across different segments of commercial and specialty lines. Canadian commercial and personal property also experienced increased frequency of large losses, primarily driven by property fires.

Speaker #2: Importantly, we viewed these losses as discrete in nature; our underlying performance remained strong. Catastrophe losses in the quarter were $416 million, driven mostly by storms related to water damage in Alberta, Ontario, and Quebec, as well as property-related fires in the UK&I.

Ken Anderson: Catastrophe losses in the Q2 were CAD 416 million, driven mostly by storms related to water damage in Alberta, Ontario, and Quebec, as well as property-related fires in the UK&I. On a year-to-date basis, cat losses remain consistent with our expectations, and our annual cat guidance remains unchanged at CAD 1.2 billion. Quarterly cat activity can create variability, but we manage the business with this in mind, and our overall view of long-term climate trends remains unchanged. Our prudent current year reserving practices over time means prior year development remains strong, and we posted favorable PYD of 6.1 points in Q2. As always, any assessment of underwriting performance should combine the current accident year and prior year development. Our PYD track record is consistently strong, averaging 4.8%, 3.5%, and 4.1% over the last five, 10, and 15 years.

Speaker #2: On a year-to-date basis, cat losses remain consistent with our expectations, and our annual cat guidance remains unchanged at $1.2 billion. Quarterly cat activity can create variability, but we manage the business with this in mind, and our overall view of long-term climate trends remains unchanged.

Speaker #2: Our prudent current year reserving practices over time means prior year development remains strong, and we posted favorable PYD of 6.1 points in the second quarter.

Speaker #2: As always, any assessment of underwriting performance should combine the current accident year and prior year development. But our PYD track record is consistently strong, averaging 4.8%, 3.5%, and 4.1% over the last 5, 10, and 15 years.

Speaker #2: Of note, the introduction of IFRS 17 in 2022 increased PYD by roughly 1 to 2 points, with a corresponding offset increase in the current accident year loss ratio.

Ken Anderson: Of note, the introduction of IFRS 17 in 2022 increased PYD by roughly 1 to 2 points with an offset corresponding increase in the current accident year loss ratio. Given our strong long-term track record, the impact of IFRS 19, and the stability of our PYD, we believe recent PYD experience provides the most relevant reference point in assessing near-term PYD levels. Moving to expenses, the consolidated expense ratio was 34.9% for Q2, an increase of roughly half a point, mainly coming from a non-recurring premium tax item. We expect our 2026 consolidated expense ratio to be in line with our annual guidance of 33% to 34%. Operating net investment income increased to CAD 405 million in Q2, driven by growth in our investment portfolio from strong capital generation. Our expectation for CAD 1.7 billion of investment income in 2026 is unchanged.

Speaker #2: Given our strong long-term track record, the impact of IFRS 17 and the stability of our PYD, we believe recent PYD experience provides the most relevant reference point in assessing near-term PYD levels.

Speaker #2: Moving to expenses, the consolidated expense ratio was 34.9% for the quarter, an increase of roughly half a point, mainly coming from a non-recurring premium tax item.

Speaker #2: We expect our 2026 consolidated expense ratio to be in line with our annual guidance of 33 to 34%. Operating net investment income increased to 405 million dollars in the quarter, driven by growth in our investment portfolio from strong capital generation.

Speaker #2: Our expectation for $1.7 billion of investment income in 2026 is unchanged. Distribution income increased 4% to $172 million, supported by robust organic and inorganic growth, somewhat tempered by our investments to support service levels ahead of the Ontario auto reform.

Ken Anderson: Distribution income increased 4% to CAD 172 million, supported by robust organic and inorganic growth, somewhat tempered by our investments to support service levels ahead of the Ontario auto reform. This represents a targeted near-term expense with no change to our expectation for distribution income growth of at least 10% annually over time. The operating effective tax rate of 22.9% was in line with our guidance of 22% to 23%. Non-operating gains increased by CAD 274 million year over year, supported by favorable capital market movements as well as lower acquisition and integration costs as these expenses continue to decline. Moving to our balance sheet, we continue to operate with significant financial flexibility, with CAD 3.8 billion of total capital margin well in excess of what is required to manage volatility. Our adjusted debt to capital ratio improved again to 16.2%.

Speaker #2: This represents a targeted near-term expense with no change to our expectation for distribution income growth of at least 10% annually over time. The operating effective tax rate of 22.9% was in line with our guidance of 22 to 23%.

Speaker #2: Non-operating gains increased by 274 million dollars year over year, supported by favorable capital market movements as well as lower acquisition and integration costs as these expenses continue to decline.

Speaker #2: Moving to our balance sheet, we continue to operate with significant financial flexibility, with 3.8 billion dollars of total capital margin well in excess of what is required to manage volatility.

Speaker #2: Our adjusted debt-to-capital ratio improved again to 16.2%. Overall, our balance sheet strength, low leverage, and strong capital generation provide significant financial flexibility to capitalize on attractive M&A opportunities and that landscape continues to improve.

Ken Anderson: Overall, our balance sheet strength, low leverage, and strong capital generation provides significant financial flexibility to capitalize on attractive M&A opportunities, that landscape continues to improve. Share buybacks also remain an important tool when our shares are undervalued, we completed over CAD 180 million in share buybacks in the Q2, bringing the year-to-date total to approximately CAD 350 million. We continue to view our shares as undervalued. We calibrate the pace of buybacks based on excess capital levels, the outlook for inorganic growth opportunities, and our view of the size of the discount to fair value. With our strong track record of delivering significant value, M&A remains our preferred choice for capital deployment. We are well-positioned to continue to deliver on our financial objectives. Over the last decade, we've exceeded our 500 basis point ROE outperformance target by delivering an average of 670 basis points of annual outperformance.

Speaker #2: Share buybacks also remain an important tool when our shares are undervalued, and we completed over $180 million in share buybacks in the second quarter, bringing the year-to-date total to approximately $350 million.

Speaker #2: We continue to view our shares as undervalued. We calibrate the pace of buybacks based on excess capital levels, the outlook for inorganic growth opportunities, and our view of the size of the discount to fair value.

Speaker #2: With our strong track record of delivering significant value, M&A remains our preferred choice for capital deployment. We are well positioned to continue to deliver on our financial objectives.

Speaker #2: Over the last decade, we've exceeded our 500 basis point ROE outperformance target by delivering an average of 670 basis points of annual outperformance. We've also surpassed our 10% noise growth objective by delivering compounded annual growth of 12% over the same period.

Ken Anderson: We've also surpassed our 10% NOIC growth objective by delivering compounded annual growth of 12% over the same period. Our discipline and focus has shifted operating ROE into an upper teen zone while we maintain one of the lowest levels of ROE volatility amongst our global peers. These results reflect the durability of our competitive advantages and the strength of our platform. We are positioned to continue creating significant value over time. With that, I'll turn it back to Geoff.

Speaker #2: Our discipline and focus has shifted operating ROE into an upper-teen zone, while we maintain one of the lowest levels of ROE volatility amongst our global peers.

Speaker #2: These results reflect the durability of our competitive advantages and the strength of our platform. We are positioned to continue creating significant value over time. With that, I'll turn it back to Jeff.

Speaker #1: Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to two questions per person.

Geoff Kwan: Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to two questions per person. You can certainly re-queue for follow-ups, we'll do our best to accommodate if there's time at the end. Sylvie, we're ready to take some questions now.

Speaker #1: You can certainly re-queue for follow-ups, and we'll do our best to accommodate if there's time at the end. So, Sylvie, we're ready to take some questions now.

Speaker #3: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your touch-tone phone. You will then hear a prompt acknowledging your request.

Operator: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. You will then hear a prompt acknowledging your request. If you would like to withdraw from the question queue, simply press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. First, we will hear from John Aiken at Jefferies. Please go ahead, John.

Speaker #3: And if you would like to withdraw from the question queue, simply press star, followed by 2. If you are using a speakerphone, you will need to lift the handset first before pressing any keys.

Speaker #3: Please go ahead and press star 1 now. If you have any questions. First, we will hear from John Aiken at Jefferies. Please go ahead, John.

Speaker #4: Good morning. Charles, you described it as an attractive M&A environment, and Ken saying your preferred choice of capital deployment is M&A. I guess two-part question for you.

John Aiken: Good morning. Charles, you describe it as an attractive M&A environment and Ken saying your preferred choice of capital deployment is M&A. I guess two-part question for you. What is making this so attractive in an environment? Secondarily, what's holding you back from pulling the trigger on M&A outside of distribution?

Speaker #4: What is making this so attractive an environment? And secondarily, what's holding you back from pulling the trigger on M&A outside of distribution?

Speaker #5: Thanks, John. Yes, I think it's a favorable M&A environment. There are, in my mind, three vectors that you ought to pay attention to when you qualify the M&A environment.

Charles Brindamour: Thanks, John. Yes, I think it's a favorable M&A environment. There are, in my mind, three vectors that you ought to pay attention to when you qualify the M&A environment. From our perspective, the first vector is strategic fit. In our case, very keen on North American Global Specialty Lines. Second vector is the economics. Does the target on its own generate an internal rate of return in excess of 15%, first and foremost? Second, does it increase your earnings power per share once integrated? Third, actionability. I would say, sitting here today, John, I think there are more options that tick all those boxes today than a year ago, and that's why I think it is a favorable M&A environment.

Speaker #5: From our perspective, the first vector is strategic fit. So in our case, very keen on North America and global specialty lines. Second vector is the economics.

Speaker #5: Does the target on its own generate an internal rate of return in excess of 15%, first and foremost? And second, does it increase your earnings power per share once integrated?

Speaker #5: And third, actionability. And I would say, sitting here today, John, I think there are more options that tick all those boxes today than a year ago.

Speaker #5: And that's why I think it is a favorable M&A environment. One point I would add is that you need operational readiness when you tackle these things, because it's in the integration that the value gets created.

Charles Brindamour: One point I would add is you need operational readiness when you tackle these things because it's in the integration that the value gets created. I would say from a GSL and North American point of view, the operational readiness is definitely there. Lastly, I think the balance sheet is very supportive of strong economics, but acquisitions need to stand on their own. What's holding us back? First, you want to see options that hit those three vectors, then it's discipline, prudence, and making sure you pace yourself, we like the environment in which we operate.

Speaker #5: And I would say from a GSL in North America point of view, the operational readiness is definitely there. Lastly, I think the balance sheet is very supportive of strong economics, but acquisitions need to stand on their own.

Speaker #5: So, what's holding us back? First, you want to see options that hit those three vectors. And then, it's discipline, prudence, and making sure you pace yourself.

Speaker #5: But we like the environment in which we operate.

Speaker #4: You're through. Thanks, Charles. I'll re-queue.

John Aiken: You're through. Thanks, Charles. I'll re-queue.

Speaker #3: Next question will be from Alex Scott at Barclays. Please go ahead, Alex.

Operator: Question will be from Alex Scott at Barclays. Please go ahead, Alex.

Speaker #6: Hey, thanks for taking the question. I was wondering if you could provide a little more insight into some of the remediation efforts in the UK Commercial, and that progress towards the 90 combined ratio.

Alex Scott: Hey, thanks for taking the question. I was wondering if you could provide a little more insight into some of the remediation efforts in the UK commercial and progress towards the 90 combined ratio. Can you help us think about, I don't know, how many underwriting cycles it might take to get there? What you'd expect from top-line growth as you're doing that? Any kind of bigger pruning that you got to do? If you can help us out on how to model some of that kind of stuff and how to think about it'd be great.

Speaker #6: Can you help us think about, I don't know, how many underwriting cycles it might take to get there? What you'd expect from top-line growth as you're doing that?

Speaker #6: Any kind of bigger pruning that you got to do? If you can help us out on how to model some of that kind of stuff and how to think about it, it'd be great.

Speaker #5: Yeah, thanks for your question, Alex. We're not banking on underwriting cycles to improve the performance. In the UK, we're aiming to get towards 90% in the mid-terms.

Charles Brindamour: Yeah. Thanks for your question, Alex. We're not banking on underwriting cycles to improve the performance in the UK. We're aiming to get towards 90% in the midterms. There are a number of levers that we are pulling. Pricing and risk selection would be at the top of the list. Deploying science and deploying tools and governance, we're making really good progress there. Second, we're re-platforming from a technology point of view, that environment. That is a multi-year process. It impacts the speed of the transition, but we want to build a great P&C business, and that requires a modernization effort, which is reflected in the performance. Third, we're focused on making sure that the service for brokers in the UK commercial line space is second to none. Making excellent progress there. We're seeing broker advocacy being up meaningfully.

Speaker #5: There are a number of levers that we are pulling. Pricing and risk selection. Would be at the top of the list. Deploying science and deploying tools and governance.

Speaker #5: We're making really good progress there. Second, we're re-platforming from a technology point of view that environment. That is a multi-year process. It impacts the speed of the transition, but we want to build a great P&C business, and that requires a modernization effort, which is reflected in the performance.

Speaker #5: Third, we're focused on making sure that the service for brokers in the UK commercial line space is second to none. Making excellent progress there.

Speaker #5: We're seeing broker advocacy being up meaningfully fourth. We're bringing the various products that were on the shelves in the UK into what we think is a top market product now branded Intact Insurance.

Charles Brindamour: Fourth, we're bringing the various products that were on the shelves in the UK into what we think is a top market product, now branded Intact Insurance. I would say, lastly, it's about improving the expense base as well. My perspective is this is a midterm effort, think two, 24 to 36 months, but I'm pleased with the progress we're making. It's heavy lifting, Alex. I'll be very clear, it's heavy lifting, and when you do such transformation, there are bumps in the roads from time to time, but I'm very confident with the trajectory we're on.

Speaker #5: And I would say lastly, it's about improving the expense base as well. My perspective is this is a mid-term effort. I think two, 24 to 36 months, but I'm pleased with the progress we're making.

Speaker #5: It's heavy lifting, Alex. I mean, I'll be very clear—it's heavy lifting, and when you do such transformation, there are bumps in the road from time to time, but I'm very confident with the trajectory we're on.

Speaker #6: Got it. That's helpful. And as a follow-up, if I could ask about the U.S. market, I think there's probably a bit more competition there.

Alex Scott: Got it. That's helpful. As a follow-up, if I could ask about the US market. I think there's probably a bit more competition there, particularly in some of the products you're in the US. How are you approaching that market? What are the ways you're trying to achieve profitable growth there?

Speaker #6: Particularly in some of the products you're in in the US. So how are you approaching that market? What are the ways you're trying to achieve profitable growth there?

Speaker #5: Thanks, Alex. I'll first say, I love the U.S. market. Our platform is really strong, and if you look at industry results today, we're outperforming our specialty lines peers by close to 8 points on the combined ratio.

Charles Brindamour: Thanks, Alex. I'll first say I love the US market. Our platform is really strong, if you look at industry results today, we're outperforming from a combined ratio our specialty lines peers by close to 8 points, and we're outperforming from a top-line point of view by about a bit less than 1 point at this stage. First, our US business is specialty lines only. It's 12 verticals. The first order of business is you double down on the lines of business that are very profitable. If I'm to frame this for you, Alex, about two-thirds of our portfolio operates in the 70s to low 80s combined ratio, and that's the book that we're growing north of 5%. The remainder of the portfolio operates in the mid-90s, and that was largely flat this quarter.

Speaker #5: And we're outperforming from a top-line point of view by about a bit less than a point at this stage. And so our approach in first, our US business is specialty lines only.

Speaker #5: It's 12 vertical. So the first order of business is you double down on the lines of business that are very profitable. And so if I'm to frame this for you Alex, about two-thirds of our portfolio operates in the 70s to low 80s combined ratio.

Speaker #5: And that's the book that we're growing north of 5%. The remainder of the portfolio operates in the mid-90s, and that was largely flat this quarter.

Speaker #5: So you don't need to be a rocket scientist here to see that. Because you have optionality across 12 verticals, the growth is coming from the low combined ratio verticals.

Charles Brindamour: You don't need to be a rocket scientist here to see that because you have optionality across 12 verticals, the growth is coming from the low combined ratio verticals. It is about distribution management. It is about going deeper in the relationships that we have. It's about distributing our 12 verticals to the brokers where we have relationships, and it is about expanding the number of brokers we operate with in the US. One thing we do on the distribution side is we're also buying MGAs in extensions of segments in which we operate. Lastly, we're bringing global capabilities to our offer in the US market. Now, following the RSA acquisition, as you know, we have not only strong cross-border capabilities with Canada, a major trading partner of the US, but also global capabilities with our global network.

Speaker #5: Then it is about distribution management. It is about going deeper in the relationships that we have. It's about distributing our 12 verticals to the brokers where we have relationships.

Speaker #5: And it is about expanding the number of brokers we operate with in the US. One thing we do on the distribution side is we're also buying MGAs.

Speaker #5: We are extending our segments in which we operate. And lastly, we're bringing global capabilities to our offer in the US market now, following the RSA acquisition.

Speaker #5: As you know, we have not only strong cross-border capabilities with Canada, a major trading partner of the US, but also global capabilities with our global network.

Speaker #5: And I would say these are the levers we are pulling. Now, when a vertical goes off the rail for some reason or another, we put the brakes and put remediation in place with the 12 verticals.

Charles Brindamour: I would say these are the levers we are pulling. Now, when a vertical goes off the rail for some reason or another, we put the brakes and put remediation in place. With 12 verticals, you can expect you always have one or two that needs more work, and in aggregate, that's our approach in the US. We really like what we see. We like the outperformance, we like the optionality, and if I could deploy capital there in the near term, we would have no hesitation to do so.

Speaker #5: You can expect you always have one or two that needs more work. And in aggregate, that's our approach in the US. We really like what we see.

Speaker #5: We like the outperformance. We like the optionality. And if I could deploy capital there in the near term, we would have no hesitation to do so.

Speaker #6: Very helpful. Thank you.

Alex Scott: Very helpful. Thank you.

Speaker #1: Next question will be from Tom McKinnon at BMO Capital Markets. Please go ahead, Tom.

Operator: Next question will be from Tom MacKinnon at BMO Capital Markets. Please go ahead, Tom.

Speaker #4: Yeah, thanks very much. Good morning. Just digging a little bit deeper in the UK and I, if you take the 112 and subtract 15 points from the hire and expected cats and large losses, you're at a 97.

Tom MacKinnon: Yeah, thanks very much. Good morning. Just digging a little bit deeper in the UK&I, if you take the 112 and subtract 15 points from the higher-than-expected CATs and large losses here, you're at a 97. Last year, you were running this thing in the 93, 94, 95-ish range. The year prior to that was even a little bit better now. Maybe you can talk about what's happening in this commercial alliance marketplace in 2026. Is it a tougher rate cycle you're trying to navigate here? I get some of the decommissioning efforts you speak to, but that's kind of a little bit more expense ratio stuff. Perhaps you can delve a little bit more into what's happened with this line just over the last six months, and are those losses, is that higher combined we're seeing there, is that just the normal course?

Speaker #4: Last year, you were running this thing in the 93, 94, 95-ish range. And prior to the year prior to that, it was even a little bit better.

Speaker #4: Now, maybe you can talk about what's happening in this commercial lines marketplace in 2026. Is it a tougher rate cycle you're trying to navigate here?

Speaker #4: I get some of the decommissioning efforts you speak to, but that's kind of a little bit more expense ratio stuff. Perhaps you can delve a little bit more into what's happened with this line just over the last six months, and are those losses—is that higher combined?

Speaker #4: What we're seeing there—is that just the normal course? And maybe, when would you be able to hit that 90% target? Thanks.

Tom MacKinnon: Maybe when would you be able to hit that 90% target? Thanks.

Speaker #5: Yeah. Thanks, Tom. Good observation. That segment run rate, 93, 94-ish, as we've seen in the past couple of years. I'll let Ken share a bit of perspective on trajectory.

Charles Brindamour: Yeah. Thanks, Tom. Good observation. That segment run rate 93, 94-ish, as we have seen in the past couple of years. I will let Ken share a bit of perspective on trajectory, then Patrick and I will pick up the market observation question. Ken?

Speaker #5: Then Patrick and I will pick up the market observation question. So, Ken, thanks.

Ken Anderson: Yeah. Thanks, Tom. I guess maybe the first thing, I would not use one quarter to sort of anchor on the overall run rate performance. Beyond the CATs and large losses, you will have a bit of volatility in other things. I think, for example, in Q2, in H1 of the year, indeed, the expense ratio is a little higher. I would go back to the 2024 and 2025 combined ratio, which overall for those two years was about a 94. That is our view of the most relevant reference point to start from. Clearly, as Charles has laid out, the focus is to drive performance towards the 90%, pricing sophistication. Firstly, the expense improvements from modernizing technology, over time, top-line benefits from the improved broker service proposition and the specialty product expansion, which will also improve the expense base and the expense ratio.

Speaker #6: Tom, I guess maybe the first thing—I wouldn't use one quarter to sort of anchor on the overall run rate performance. Beyond the cats and large losses, you'll have a bit of volatility in other things.

Speaker #6: I think, for example, in the second quarter, in the first half of the year, indeed, the expense ratio is a little higher. But I would go back to the '24 and '25 combined ratio, which overall, for those two years, was about a 94.

Speaker #6: That's our view of the most relevant reference point to start from. And clearly, as Charles has laid out, the focus is to drive performance towards the 90% pricing sophistication, firstly, the expense improvements from modernizing technology, and then over time, top-line benefits from the improved broker service proposition and the specialty product expansion, which will also improve the expense base and the expense ratio.

Speaker #6: And those are really the elements that, over time, will drive towards 90%. The team in the UK are very focused on what they can control and are executing on it.

Ken Anderson: Those are really the elements that over time will drive towards 90%. The team in the UK are very focused on what they can control and are executing on it. Market conditions can slow down or speed up that timeline, I would not anchor on a specific quarterly roadmap here. We certainly should see progress and visible progress year over year.

Speaker #6: Market conditions can slow down or speed up that timeline, but I wouldn't anchor on a specific quarterly roadmap here. We certainly should see progress, and visible progress, year over year.

Speaker #5: Patrick, do you want to provide a bit of color on the marketplace in response to Tom's question?

Charles Brindamour: Patrick, do you want to provide a bit of color on the marketplace to Tom's question?

Speaker #2: Yeah, I don't think

Patrick Barbeau: Yeah. I don't think we're saying from a rates perspective a ton of difference compared to the observations we communicated in the past couple of quarters. We've seen more competition in the larger size of accounts. From a top-line perspective, we're having good momentum from a specialty lines perspective. It's really an offset in the regular commercial that's really driven by the significant transformation we're doing in the field with the systems and some of the other points that Charles mentioned earlier. Overall, by the way, on top line, the remaining remediation we're applying on the books, plus the drag from the consolidation of the NIG and RSA offer is a drag of about 3 points on the overall UK&I Q2 top line. We expect that we'll see sequential improvement going forward.

Speaker #4: We're seeing, from a rates perspective, a ton of difference compared to the observations we communicated in the past couple of quarters. We've seen more competition in the larger size of accounts.

Speaker #4: From a top-line perspective, we're having good momentum from a specialty lines perspective, and it's really an offset in the regular commercial. That's really driven by the significant transformation we're doing in the field with the systems and some of the other points that Charles mentioned earlier.

Speaker #4: Overall, by the way, on top line, the remaining remediation we're applying on the books, plus the drag from the consolidation of the NIG and RSA offer, is a drag of about three points on the overall UK and I Q2 top line.

Speaker #4: And we expect that we'll see sequential improvement going forward. There's mix in that as well, given pricing sophistication and the fact that we are prudent in the large accounts.

Patrick Barbeau: There's mix in that as well, given pricing sophistication and the fact that we are prudent in the large accounts. I wouldn't see the 97 once you remove 15 points of excess CATs and large losses as a new starting point or deterioration from prior years. It can be bumpy from one quarter to the.

Speaker #4: I wouldn't see the 97, once you remove 15 points of excess CATs and large losses, as a new starting point or deterioration from prior years. But it can be bumpy from one quarter.

Speaker #5: Yeah, I think the specialty lines growing really well. It's the UK CL franchise that is shrinking a bit and the connection between the market and the transformation, I view it as follows, Tom.

Charles Brindamour: Yeah, I think the specialty line's growing really well. It's the UK CL franchise that is shrinking a bit. The connection between the market and the transformation, I view it as follows, Tom. When you integrate products, that creates dislocation, okay, from a price point of view. Second, we're deploying science on top of that change. The amount of dislocation that is taking place on the portfolio is meaningful. In a competitive environment, the more competitive environment, the bigger the hit when you've got that dislocation. I think that's the 3 points that Patrick is talking about. We're focused on the mid to long term, and we think bringing science and integrating products is more important than status quo just to avoid dislocation. I think, bump in the road here and there, trajectory I'm comfortable with.

Speaker #5: When you integrate products, that creates dislocation. Okay? From a price point of view, second, we're deploying science on top of that change. So the amount of dislocation that is taking place on the portfolio is meaningful.

Speaker #5: And in a competitive environment—the more competitive the environment, the bigger the hit when you've got that dislocation. And I think that's the three points that Patrick is talking about.

Speaker #5: But we're focused on the mid to long term, and we think bringing science and integrating products is more important than maintaining the status quo just to avoid dislocation.

Speaker #5: And I think bumping the road here and there in the trajectory, I'm comfortable with.

Speaker #4: Okay. And then one quick one on the you're down year over year, in terms of top line in the UK, constant currency. You had some momentum maybe in the first quarter, but now you're talking about the rebranding initiative is contributing to that slowdown.

Tom MacKinnon: Okay. One quick one on the, you're down year-over-year in terms of top line in the UK constant currency. You had some momentum maybe in Q1, but now you're talking about the rebranding initiative as contributing to that slowdown. I thought the rebranding initiative is actually going to be helpful in terms of a better service proposition to the brokers. Was this expected, and how long would this slowdown in top line as a result of the rebranding initiative play out?

Speaker #4: I thought the rebranding initiative is actually going to be helpful in terms of a better service proposition to the brokers. I mean, was this expected?

Speaker #4: And how long would this slowdown in top line, as a result of the rebranding initiative, play out?

Speaker #5: Yeah, I don't think it's the rebranding initiative. It's the migration towards one product that creates a bit of dislocation. To that, you add the pricing sophistication initiatives that we're deploying.

Charles Brindamour: Yeah. I don't think it's the rebranding initiative. It's the migration towards one product that creates a bit of dislocation to which you add the pricing sophistication initiatives that we're deploying in the field in a marketplace that is competitive, I think, in the upper mid space in particular. Timeline, I think the heavy lifting in my mind has probably a 12-month horizon in terms of the amount of dislocation we will likely see. Near term, in my mind, and the trajectory, think 24, 36 months. It's funny.

Speaker #5: In the field, in a marketplace that is competitive. I think in the upper mid space in particular. And so timeline, I think the heavy lifting in my mind as probably a 12 sort of month horizon in terms of the amount of dislocation we will likely see.

Speaker #5: And so near term, in my mind, and the trajectory thing 24, 36 months. Towards money.

Speaker #6: I'd maybe add, Tom, if you look at the growth in 2025, you were in the minus 3, minus 4, minus 5 zone. We certainly made a move in the early part of '26 into more of a flat growth position.

Ken Anderson: I'd maybe add, Tom, if you look at the growth in 2025, you were in the -3, -4, -5 zone. We certainly made a move in the early part of 2026 into more of a flat growth position. Progress there, and looking ahead, you should see improvement over time.

Speaker #6: So progress there and looking ahead we should see improvement over time.

Speaker #4: Okay, thanks.

Tom MacKinnon: Okay, thanks.

Speaker #3: Next question will be from James Loyd at National Bank Capital Markets. Please go ahead, James.

Operator: Next question will be from Jaeme Gloyn and National Bank Capital Markets. Please go ahead, Jaeme.

Speaker #7: Yeah, thanks. Just a first quick follow-up on the M&A and the balance sheet today. I think you've previously talked about being able to deploy about $6 billion, or complete a $6 billion acquisition, without other sources of equity capital.

Jaeme Gloyn: Yeah, thanks. Just first quick follow-up on the M&A and the balance sheet today. I think you've previously talked about being able to deploy about CAD 6 billion or complete a CAD 6 billion acquisition without other sources of equity capital. Can you just refresh us on where that sits today?

Speaker #7: Can you just refresh us on where that sits today?

Speaker #5: Yeah, thanks, James. I'll ask Ken to share his perspective on the balance sheet.

Charles Brindamour: Yeah. Thanks, Jim. I'll ask Ken to share his perspective on the balance sheet.

Charles Brindamour: Yeah. Thanks, Jaeme. I'll ask Ken to share his perspective on the balance sheet.

Speaker #6: Yeah. So as I said earlier, the financial position is very strong and continues to improve, providing a lot of flexibility. The capital margin is $3.8 billion, and debt to capital improved to 16.2%.

Ken Anderson: Yeah. As I said earlier, financial position very strong and continues to improve and provides a lot of flexibility. The capital margin, CAD 3.8 billion. Debt to capital improved at 16.2%, and capital generation outlook moving forward is very strong. Ample capacity on the M&A front. To your point, today, we could deploy CAD 6 billion without issuing new shares on M&A. The outlook, very good and continues to improve. Obviously, with the track record, IRR north of 20% on the CAD 10 billion plus that we've deployed over the last decade. That's the priority.

Speaker #6: And capital generation outlook moving forward is very strong, so ample capacity on the M&A front. And to your point, today we could deploy $6 billion without issuing new shares on M&A.

Speaker #6: So the outlook is very good, and it continues to improve. Obviously, with the track record—an IRR north of 20% on the $10 billion-plus that we've deployed over the last decade—that's the priority.

Speaker #7: Okay, great. And then the second one, just on the personal property market: growth is 7%. Nice to see it rebound from the sort of one-time blip last quarter.

Jaeme Gloyn: Okay, great. Second one just on the personal property market. Growth is 7%. Nice to see it rebound from the sort of one-time blip last quarter, but underperforming, let's say, the industry growth expectation of around 10%. Is there still some lingering impacts from the previous quarter, or can you dig into that run rate for us a little bit more?

Speaker #7: But underperforming, let’s say, the industry growth expectation of around 10%. So, is there still some lingering impact from the previous quarter, or can you dig into that run rate for us a little bit more?

Speaker #5: Ashraf, why don't you take this one?

Charles Brindamour: Achraf, why don't you take this one?

Speaker #2: Sure. Thanks, Charles. So James, maybe back just to the Q1 that you referred to. You're right, looking back at Q1 personal property growth was negatively impacted by a one-time impact from our travel business.

Achraf Loutfi: Sure. Thanks, Charles. Jaeme, maybe back just to the Q1 that you referred to. You're right, looking back at Q1, personal property growth was negatively impacted by a one-time impact from our travel business. When we adjust for that one-time impact from travel, we were in the upper single-digit range in Q1. That was the range that we were expecting to be at for the remainder of 2026. When you look at Q2, growth was strong at +7% with 1 point of unit. Retention remained high and stable, so is our new business competitiveness. From a pricing perspective, we are maintaining our strong rate action. When you zoom out from an industry perspective, industry needs to price for inflation severity in addition to the long-term climate trend.

Speaker #2: And when we adjust for that one-time impact from travel, we were in the upper single-digit range in Q1. That was the range we were expecting to be at for the remainder of 2026.

Speaker #2: Now, when you look at Q2, growth was strong at plus 7%, with one point of unit. Retention remained high and stable, so with our new business competitiveness.

Speaker #2: And from a pricing perspective, we are maintaining our strong rate action. And when you zoom out from an industry perspective, the industry needs to price for inflation severity, in addition to the long-term climate trend.

Speaker #2: And June, we just saw multiple CAT events that hit both the West and East of the country. And these are a reminder of the volatility of the product and we expect will continue to support the current hard market conditions.

Achraf Loutfi: In June, we just saw multiple cat events that hit both the west and east of the country, these are a reminder of the volatility of the product, and we expect will continue to support the current hard market conditions. All things considered, we remain comfortable with our growth profile in the upper single-digit range and maintain a positive outlook from the industry perspective.

Speaker #2: So, all things considered, we remain comfortable with our growth profile in the upper single-digit range and maintain a positive outlook from an industry perspective.

Speaker #5: Yeah, I don't think we'll be far from the industry. If you look at it quarter by quarter, obviously Q1 had this one-time travel thing.

Charles Brindamour: Yeah. I don't think we'll be far from the industry if you look at it quarter by quarter. Obviously, Q1 had this one-time travel thing. We're in the zone and big bottom-line outperformance as well. One of the growth segment performing really well. Tanaji.

Speaker #5: But we're in the zone and big bottom line outperformance as well. Want to grow this segment performing really well.

Speaker #7: Can I?

Operator: Thank you. Next question will be from Mario Mendonca at TD Securities. Please go ahead, Mario.

Speaker #3: Next question will be from Mario Mendonza at TD Securities. Please go ahead, Mario.

Speaker #4: Good morning. Charles, if we could go to the UK business one more time, I can see from a financial perspective that this year at least—and presumably you'd expect a lot more from this in the future.

Mario Mendonca: Good morning. Charles, if we could go to the UK business one more time. I can see from a financial perspective that like this year at least, presumably you'd expect a lot more from this in the future, it's not making a big financial contribution to the company. Like sub CAD 100 million in earnings this year likely, relative to maybe CAD 4 billion consolidated earnings. Help me understand how the UK fits into the total company. Is having this UK business important as you pursue global specialty? Is it important to have a UK business, or is this just a business that stands on its own, like a standalone, it has the merits of belonging inside Intact? Help me understand this business.

Speaker #4: It's not making a big financial contribution to the company, like sub $100 million in earnings this year likely relative to maybe $4 billion consolidated earnings.

Speaker #4: So help me understand how the UK fits into the total company. Is having this UK business important as you pursue global specialty? Is it important to have a UK business, or is this just a business that stands on its own?

Speaker #4: Like a standalone, it has the merits of belonging to Intact. Help me understand this business.

Speaker #5: Mario, you're talking about the UK domestic commercial lines business, correct?

Charles Brindamour: Mario, you're talking about the UK domestic commercial alliance business, correct?

Speaker #4: Yeah, does it play a bigger role for this company, or is it just a standalone? It lives on its own merits.

Mario Mendonca: Yeah. Like, does it play a bigger role for this company or is it just a standalone, it lives on its own merits?

Speaker #5: So, I think, first of all, the UK commercial lines market is a big market. It's bigger than Canada. It's an attractive market, and the competitive set and the type of business the domestic UK business is doing is very consistent with what we do in Canada.

Charles Brindamour: I think first of all, the UK commercial alliance market is a big market. It's bigger than Canada. It's an attractive market. The competitive set and the type of business the domestic UK business is doing is very consistent with what we do in Canada and our skill set in Canada. We view this as a business opportunity where we're capable to win because we know that space. That's the first point. Is it existential to Intact to pursue that business opportunity? No, but it's a business opportunity where we think we can win. Therefore, that's what we're working on. Second, that footprint in the UK, that regional business in the UK opens up hundreds of distribution relationships that otherwise would not be available to distribute some of our specialty lines product.

Speaker #5: And our skill set in Canada. So we view this as a business opportunity where we're capable to win because we know that space. So that's the first point.

Speaker #5: Is it existential to Intact to pursue that business opportunity? No. But it's a business opportunity where we think we can win, and therefore, that's what we're working on.

Speaker #5: Second, that footprint in the UK—that regional business in the UK—opens up hundreds of distribution relationships that otherwise would not be available to distribute some of our specialty lines products.

Speaker #5: Embedded in the UK commercial lines domestic business is a number of local specialties, like regional marine, as well as regional, what we call profin, or what they call management liability.

Charles Brindamour: Embedded in the UK commercial alliance domestic business is a number of local specialties like regional marine, as well as regional, what we call Pro-Fin or call that management liability. I think, Mario, this is a business opportunity where we think we've got the skills to outperform. It is an extension of our ability to distribute our specialty lines product, it makes sense to be there. Lastly, I think if people had to pick a business profile to operate P&C insurance in the UK, and you ask them to design from a white page what they'd like their business to look like, they would design the business we're building now. Therefore, we add capital, we add competencies. This is a business opportunity. We're investing and trying to make the most out of it, and I think we will outperform. It's not existential. No. That's clear.

Speaker #5: So I think, Mario, this is a business opportunity where we think we've got the skills to outperform. It is an extension of our ability to distribute our specialty lines product. It makes sense to be there.

Speaker #5: Lastly, I think if people had to pick a business profile to operate TNC Insurance in the UK, and you asked them to design from a white page what they'd like their business to look like, they would design the business we're building now.

Speaker #5: And therefore, we add capital, we add competencies. This is a business opportunity. We're investing and trying to make the most out of it, and I think we will outperform.

Speaker #5: It's not existential. No, that's clear. But it's a very good business opportunity, and it complements nicely our specialty lines operation.

Charles Brindamour: It's a very good business opportunity, and it complements nicely our specialty lines operation.

Speaker #4: I think that's clear. Thank you.

Mario Mendonca: I think that's clear. Thank you.

Speaker #5: Thank you, Mario.

Charles Brindamour: Thank you, Mario.

Speaker #3: Next question will be from Paul Holden at CIBC. Please go ahead, Paul.

Operator: Next question will be from Paul Holden at CIBC. Please go ahead, Paul.

Speaker #6: Thank you. Good morning. My first question is going back to M&A and Charles. You're very clear on where you stand and why, and the opportunity set.

Paul Holden: Thank you. Good morning. First question is going back to M&A, Charles, you're very clear on where you stand and why the opportunity set you view as rich. One question I think about is, you'll recognize it, more broadly across the industry, you are seeing soft pricing conditions, obviously more so in certain lines of products versus others. How does that impact your appetite for M&A? Specifically, I guess I'm thinking about timing. Why is now the right time if there is soft pricing conditions to do an acquisition?

Speaker #6: You view us as rich. Well, one question I think about is—and you'll recognize it—more broadly across the industry, you are seeing soft pricing conditions.

Speaker #6: Obviously, more so in certain lines of products versus others. But how does that impact your appetite for M&A? And specifically, I guess I'm thinking about timing.

Speaker #6: Why is now the right time if there is soft pricing conditions to do an acquisition?

Speaker #5: I think it's a great question, Paul. We're cycle-agnostic when we look at acquisitions. And why are we cycle-agnostic when we look at acquisitions?

Charles Brindamour: I think it's a great question, Paul. We're cycle agnostic when we look at acquisitions. Why are we cycle agnostic when we look at acquisitions? Because it all depends of the price, first and foremost. Second, if you outperform, which we do in the segments where we want to deploy capital, bear in mind, Canada, 8 points of combined ratio outperformance, US, 8 points of combined ratio outperformance. You can absorb pressure with that sort of outperformance because it takes a short period of time when you already have a footprint, which we do, to generate that outperformance across a larger platform. What are the practical realities of being in a competitive marketplace when you look at M&A? You might take a slightly different stance on top line in the near term as you integrate, just as we've shown in the case of the UK.

Speaker #5: Because it all depends on the price, first and foremost. And second, if you outperform—which we do in the segments where we want to deploy capital—bear in mind: Canada, 8 points of combined ratio outperformance; U.S., 8 points of combined ratio outperformance. You can absorb pressure with that sort of outperformance, because it takes a short period of time—when you already have a footprint, which we do—to generate that outperformance across the larger platform.

Speaker #5: And so, what are the practical realities of being in a competitive marketplace when you look at M&A? You might take a slightly different stance on top line in the near term as you integrate.

Speaker #5: Just as we've shown in the case of the UK. Dislocation can be a bit higher. You bake that in your DCF. Upfront. You model a couple of years' worth of disruption that might be greater in a softer market than in a hard market.

Charles Brindamour: Dislocation can be a bit higher. You bake that in your DCF upfront. You model a couple of years' worth of disruption that might be greater in a softer market than in a hard market. Then you sit back and you look at the IRR first. You look at the accretion, earnings power accretion. You look at what it does to your book value, look at what it does to ROE. If things hang together, you can pull the trigger. So we've done very good transactions in hard markets. We've done very good transactions in softer markets. In aggregate, you really need the outperformance to make a difference. That's why we're really keen on the North American sort of landscape to deploy capital. For me, it's a little bit like you. We look at DCF.

Speaker #5: And then you sit back and you look at the IRR first. Then you look at the accretion earnings power accretion. You look at what it does to your book value.

Speaker #5: You look at what it does to ROE. And if things hang together, you can pull the trigger. And so we've done very good transactions in hard markets.

Speaker #5: We've done very good transactions in softer markets, and, in aggregate, you really need the outperformance to make a difference. That's why we're really keen on the North American landscape to deploy capital.

Speaker #5: But for me, I mean, it's a little bit like you. We look at DCF; we bake in the near- to mid-term conditions in which we operate.

Charles Brindamour: We bake in the near to midterm conditions in which we operate. If the numbers work, we pull the trigger. I would say in my framework as described earlier of strategic fit, economic threshold, and availability, in this environment, we think there are more options that tick the three boxes than a year ago.

Speaker #5: And if the numbers work, we pull the trigger. And I would say, in my framework, as described earlier—of strategic fit, economic threshold, and availability—in this environment, we think there are more options that tick the three boxes than a year ago.

Speaker #6: Understood. Okay. Okay. That's a good answer. Second question is going back to the UK and I don't want to beat this one to death, but you're talking about reaching your profit objective of low 90s.

Paul Holden: Okay. That's a good answer. Second question is going back to the UK. I don't want to beat this one to death, but you're talking about reaching your profit objective of low 90s 24 to 36 months from now. If I go back in time and I think, look at the original timeline, it would have been earlier than that. Maybe you can just help us understand sort of better why it's taking a little bit longer to get to that low 90s objective. Are there certain things that have come up that have been unexpected? Are there certain things that are just taking longer to execute on than originally planned? Anyways, any color you could provide there would be helpful. Thanks.

Speaker #6: Twenty-four to thirty-six months from now. Now, if I go back in time and look at the regional timeline, it would have been earlier than that.

Speaker #6: So maybe you can just help us understand a bit better why it's taking a little bit longer to get to that low-90s objective, or if certain things have come up that have been unexpected?

Speaker #6: Are there certain things that are just taking longer to execute on than originally planned? Anyway, any color you can provide there would be helpful.

Speaker #6: Thanks.

Speaker #5: Yeah. I think, first of all, you have to look at the fact that we have bought NIG to double down on the space we like, and then we've exited personal lines.

Charles Brindamour: Yeah. I think first of all, you have to look at the fact that we have bought NIG to double down on the space we like, then we've exited personal lines. We're conducting a disposal and an integration at the same time while we're investing in modern system and in pricing and risk selection environment. It's heavy lifting. It's taking time. Is it taking a bit longer than what we thought? Maybe. Directionally speaking I don't view the UK as materially different than I did 12, 24 months ago. Lots has happened in the past 24 months. As I said, broker advocacy is up, experience is up, engagement is up. I like the trajectory. It's heavy lifting. That's for sure. It's a material transformation. Ken, maybe you want to add a bit of color.

Speaker #5: And we're conducting a disposal and an integration at the same time, while we're investing in modern systems, and in pricing and risk selection environment.

Speaker #5: It's heavy lifting. It's taking time. Is it taking a bit longer than what we thought? Maybe. But directionally speaking, I don't view the UK as materially different than I did 12 or 24 months ago.

Speaker #5: A lot has happened in the past 24 months. As I said, broker advocacy is up, experience is up, engagement is up. I like the trajectory.

Speaker #5: It's heavy lifting, I mean, that's for sure. It's a material transformation. Again, maybe you want to add a bit of color.

Ken Anderson: One other point, just going back to where we're starting from in 2024, 2025, average combined ratio at 94%. With the capital we have deployed in the UK, that 94% combined is a mid-teens operating ROE on the capital that's at work in the UK. The starting point, obviously we're aiming to get to 90%, make no mistake, but with a run rate performance in the mid-90s, the operating ROE is not a significant drag on our overall performance.

Speaker #6: One other point, and just going back to where we're starting from: in 2024–25, the average combined ratio is at 94. With the capital we have deployed in the UK, that 94 combined is a mid-teens operating ROE on the capital that's at work in the UK.

Speaker #6: So, the starting point, obviously, we're aiming to get to 90—make no mistake—but with a run-rate performance in the mid-90s, the operating ROE is not a significant drag on our overall performance.

Speaker #6: Okay, that's it for me. Thanks for your time.

Paul Holden: Okay. That's it for me. Thanks for your time.

Speaker #1: Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next will be Bart Desarsky at RBC Capital Markets.

Operator: Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next will be Bart Dziarski at RBC Capital Markets. Please go ahead, Bart.

Speaker #1: Please go ahead, Bart.

Speaker #2: Great. Thanks for taking the question. Good morning, everyone. Just wanted to stick out as well with the UK and I and maybe to clarify so Charles you talked about the trajectory being a two to three year one.

Bart Dziarski: Great. Thanks for taking the question. Good morning, everyone. Just wanted to stick as well with the UK&I, and maybe to clarify, Charles, you talked about the trajectory being a two to three-year one. Do we have that right to understand 2028 is when we should see that combined ratio hit 90%? If so, does that impact when the business may be operationally ready for a bolt-on acquisition in that geography?

Speaker #2: So do we have that right to understand 2028 is when we should see that combined ratio hit 90%? And if so, does that impact when the business may be operationally ready for a bolt-on acquisition in that geography?

Speaker #5: I think that you should see a migration towards 90% over that period. That's the first point. As Ken said, if this business is running then at an ROE in the upper teens, and it has oxygen from an operational point of view, we would deploy capital, even if it's not at 90.

Charles Brindamour: I think you should see a migration towards 90% over that period. That's the first point. As Ken said, this business is running, Ben, in the ROE in the upper teens, and it has oxygen from an operational point of view. We would deploy capital even if it's not at 90, to be clear. Bart, the most important thing for me right now is I don't doubt the trajectory. I doubt the team's ability to absorb another acquisition in the near term, and that's the element that would lead me to say, ideally, you don't add inorganic opportunities in the near term in that space. We would deploy capital if operationally the team is ready to handle it, and that could be before 24 to 36 months. Why? Because this would be ROE accretive likely.

Speaker #5: To be clear, the most important thing for me right now is I don't doubt the trajectory. I doubt the team's ability to absorb another acquisition in the near term.

Speaker #5: And that's the element that would lead me to say, ideally, you don't add inorganic opportunities in the near term in that space. But we would deploy capital if, operationally, the team is ready to handle it.

Speaker #5: And that could be before 24 to 36 months. Why? Because this would likely be ROE-accretive.

Speaker #2: Got it. That's helpful. Thanks, Charles. And then maybe one on distribution income. So, 4% growth—I think year to date it's tracking below the 10%.

Bart Dziarski: Got it. That's helpful. Thanks, Charles. Then maybe one on distribution income. 4% growth, I think year to date it's tracking below the 10%. You talked about investments in the business. Could you maybe quantify how much that impacted the growth and, maybe more importantly, when we should expect a resumption to that 10% long-term growth target? Thanks.

Speaker #2: Can you talk about investments in the business? Could you maybe quantify how much that impacted the growth, and, maybe more importantly, when we should expect a resumption to that 10% long-term growth target?

Speaker #2: Thanks.

Speaker #6: Yeah. So, Bart, the Q2 distribution income growth was about 4%. It was tempered by investments that BrokerLink made to improve service levels, somewhat related to the Ontario reforms.

Ken Anderson: Yeah. Bart, the Q2 distribution income growth was about 4%. It was tempered by investments that BrokerLink made to improve service levels somewhat related to the Ontario reforms. We certainly expect the growth to return to at least the 10% level in the coming quarters. Why do we say that? Well, firstly, that impact from the volume on the Ontario reform was not as high as we anticipated, so expenses should normalize in the H2 of this year. The growth pipeline continues to be strong at BrokerLink, so there's opportunities to grow both organically and inorganically. Also in the context of broader distribution income, MGAs remain an attractive avenue for growth. Recall since 2020, we've put over CAD 600 million to work in MGAs. They collectively are writing a billion and a half of premium today, and we're continuing to deploy capital in that space.

Speaker #6: But we certainly expect the growth to return to at least the 10% level in the coming quarters. Why do we say that? Well, firstly, the impact from the volume on the Ontario reform was not as high as we anticipated.

Speaker #6: So, expenses should normalize in the second half of this year. The growth pipeline continues to be strong at BrokerLink, so there's opportunity to grow both organically and inorganically.

Speaker #6: And also, in the context of broader distribution income, MGAs remain an attractive avenue for growth. Recall, since 2020, we've put over $600 million to work in MGAs.

Speaker #6: They collectively are writing $1.5 billion of premium today, and we're continuing to deploy capital in that space. And maybe lastly, OnSide, which is a countercyclical restoration business, will benefit in the coming quarters from that elevated level of cat losses.

Ken Anderson: Maybe lastly, On Side, which is counter-cyclical restoration business, that will benefit in the coming quarters from that elevated level of cat losses that we've seen in the Q2. Over the past five and 10 years, we've compounded distribution income in the mid-teens. We very much expect to get back to at least a 10% rate in the coming quarters.

Speaker #6: That we've seen in the second quarter. So over the past five and ten years, we've compounded distribution income in the mid-teens, so we very much expect to get back to at least a 10% rate in the coming quarters.

Speaker #2: Very helpful. Thanks for taking my questions.

Bart Dziarski: Very helpful. Thanks for taking my questions.

Speaker #1: Number two. Ladies and gentlemen, this is all the time we have today. I would now like to turn the call back over to Geoff Kwan.

Operator: Thank you. Ladies and gentlemen, this is all the time we have today. I would now like to turn the call back over to Geoff Kwan.

Speaker #7: Thank you, 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.

Geoff Kwan: Thank you everyone for joining us today. Following the call, a telephone replay will be available for 1 week, and the webcast will be archived on our website for 1 year. A transcript will also be available on our website in the financial report section. Of note, our 2026 Q3 results are scheduled to be released after market close on Tuesday, 3 November 2026, with the earnings call at 11:00 AM Eastern the following day. Thank you again. This concludes our call.

Speaker #7: A transcript will also be available on our website in the Financial Report section. Of note, our 2026 third quarter results are scheduled to be released after market close on Tuesday, November 3, 2026, with the earnings call at 11:00 a.m. Eastern the following day.

Speaker #7: Thank you again, and this concludes our call.

Speaker #1: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines.

Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.

Q2 2026 Intact Financial Corp Earnings Call

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