Q4 2025 Intact Financial Corp Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q4 2025 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 11 February 2026. Now I would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead.

Speaker #2: 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 #2: Also note that this call is being recorded on February 11th, 2026. And now I would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer.

Speaker #2: Please go ahead.

Speaker #1: Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our fourth quarter 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.

Geoff Kwan: Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our fourth quarter financial results. A link to our live webcast and materials for this call have been posted on our website at intactafc.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. 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, and Patrick Barbeau, our Chief Operating Officer. We will begin with prepared remarks followed by Q&A. With that, I will turn the call over to Charles.

Speaker #1: 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.

Speaker #1: To discuss our results today, I have with me our CEO, Charles Brindamour, our CFO, Ken Anderson, and Patrick Barbeau, our Chief Operating Officer. We will begin with prepared remarks followed by Q&A.

Speaker #1: And with that, I will turn the call over to Charles.

Speaker #2: Good morning and thank you for joining us. Last night, we announced another very strong quarter. Net operating income per share for the quarter was up 12%.

Charles Brindamour: Good morning, and thank you for joining us. Last night, we announced another very strong quarter. Net operating income per share for the quarter was up 12% to CAD 5.50, and for the full year was up 33% to CAD 19.21. This brings our compounded annual net operating income per share growth to 18% over the last three years and 12% over the past decade, exceeding our 10% growth objectives. This track record is driven by three levers: solid organic growth, margin expansion, and accretive capital deployment. As I look ahead, given our opportunity set as expanded by a factor of 10 in the last decade, I see plenty of runway for each of these levers. The strength of these results is driven by a combined ratio for Q4 of 85.9%, a 0.6-point improvement from last year, and the full-year combined ratio of 88.2% improved by 4 points.

Speaker #2: To $5.50. And for the full year was up $33% to $19.21. This brings our account-pounded annual net operating income per share growth to 18% over the last three years, and 12% over the past decade.

Speaker #2: Exceeding our 10% growth objective, this track record is driven by three levers: solid organic growth, margin expansion, and accretive capital deployment. And as I look ahead, given our opportunity set has expanded by a factor of 10 in the last decade, I see plenty of runway for each of these levers.

Speaker #2: The strength of these results is driven by a combined ratio for Q4 of 85.9%, a 0.6 point improvement from last year, and the full year combined ratio of 88.2% improve by four points.

Speaker #2: This underwriting performance is a function of our superior risk selection machine and our unique market positions, where we have a massive scale advantage in Canada and a commercial and specialty lines portfolio that is 70% in DSME and mid-market space.

Charles Brindamour: This underwriting performance is a function of our superior risk selection machine and our unique market positions where we have a massive scale advantage in Canada and a commercial and specialty lines portfolio that is 70% in the SME and mid-market space. Our capital generation is impressive. Yet despite a very strong capital base, the operating ROE reached 19.5%, another proof point that our ROE has structurally shifted in the upper teens. It is strong in both absolute and relative terms. Indeed, at the end of Q3 2025, we estimate that our ROE outperformance reached 750 basis points, well above our 500 basis points objective. When I look at our growth profile, I'm encouraged to see that we were outperforming the industry in Q3 on top-line growth in personal lines in Canada and in commercial lines across North America.

Speaker #2: And our capital generation is impressive. Yet despite a very strong capital base, the operating ROE reached 19.5%. Another proof point that our ROE has structurally shifted in the upper teens.

Speaker #2: It is strong in both absolute and relative terms, indeed at the end of the third quarter of 2025, we estimate that our ROE outperformance reached $750 basis points well above our $500 basis points objective.

Speaker #2: And when I look at our growth profile, and encouraged to see that we were outperforming the industry in Q3 on top line growth in personal lines in Canada and in commercial lines across North America.

Speaker #2: As I look ahead to 2026, I expect the platform overall to continue to deliver top line industry outperformance. Let me provide some color on the results and outlook by line of business, starting with Canada.

Charles Brindamour: As I look ahead to 2026, I expect the platform overall to continue to deliver top-line industry outperformance. Let me provide some color on the results and outlook by line of business, starting with Canada. In personal auto, premiums grew 9% in the quarter, including a 2% increase in units. Profitability for the industry remains challenged, with the combined ratio above 100% for the first nine months ended September. As a result, we expect hard market conditions to persist. Our underlying loss ratio improved 1.3 points year-over-year despite severe winter conditions. The overall combined ratio of 94.2 was very strong results as Q4 is a higher seasonality quarter. With our full-year combined at 93.3, we met our sub-95 guidance and we remain well positioned to continue delivering on that objective. Moving to personal property, premium growth was 6% in the quarter.

Speaker #2: In personal auto, premiums grew 9% in the quarter, including a 2% increase in units. Profitability for the industry remains challenged with the combined ratio above 100% for the first nine months ended September.

Speaker #2: As a result, we expect hard market conditions to persist. Our underlying loss ratio improved 1.3 points year over year, despite severe winter conditions. The overall combined ratio of 94.2 was very strong results as Q4 is a higher seasonality quarter.

Speaker #2: With our full year combined at 93.3, we met our sub-95 guidance and we remain well positioned to continue delivering on that objective. Moving to personal property, premium growth was 6% in the quarter. Growth was supported by a 2% increase in units, but was offset by a nearly 3-point drag from a one-time item in our affinity and travel business.

Charles Brindamour: Growth was supported by a 2% increase in units but was upset by a nearly 3-point drag from a one-time item in our affinity and travel business. We do expect a similar one-time but unrelated impact on our Q1 growth. Adjusting for this, growth is running in the upper single-digit range, a level we expect to return to in Q2. At 76.4, the combined ratio was strong and we're positioned to deliver a sub-95 combined ratio even with severe weather. And our 10-year average combined ratio is still solid sub-90%. Overall, in personal lines, which is nearly half of our business, we expect to see industry growth in the high single-digit to low double-digit range over the next 12 months, driven by continued industry profitability challenges. And we're well placed to continue to gain market share in this environment while also outperforming on combined ratio.

Speaker #2: We do expect a similar one-time but unrelated impact on our Q1 growth. Adjusting for this, growth is running in the upper single-digit range, a level we expect to return to in Q2.

Speaker #2: At 76.4, the combined ratio was strong and we're positioned to deliver a sub-95 combined ratio even with severe weather. And our 10-year average combined ratio is still solid sub-90%.

Speaker #2: Overall, in personal lines, which is nearly half of our business, we expect to see industry growth in the high single-digit to low double-digit range over the next 12 months, driven by continued industry profitability challenges.

Speaker #2: And we're well placed to continue to gain market share in this environment, while also outperforming on combined ratio. In commercial lines in Canada, premium growth was 1% in the quarter, although top-line growth is being tempered by elevated competition in large accounts and an average reduction in account size as a result.

Charles Brindamour: In commercial lines in Canada, premium growth was 1% in the quarter. Although top-line growth is being tempered by elevated competition in large accounts and an average reduction in account size as a result, our growth initiatives in the SME and mid-market space continue to gain traction. We're growing our customer base in this environment. In fact, in commercial P&C, competed quotes are up 24% and new business is up 8% year over year. We expect industry premium growth in the low to mid-single-digit range over the next 12 months. Profitability was really excellent with a combined ratio of 77.1% in the quarter. Our pricing and risk selection advantage, which includes our investments in data and AI, allow us to grow while maintaining margins. We remain well positioned to deliver a low 90s or better combined ratio going forward.

Speaker #2: Our growth initiatives in DSME and mid-market space continue to gain traction. And we're growing our customer base in this environment. In fact, in commercial P&C, competed quotes are up 24% and new business is up 8% year over year.

Speaker #2: We expect industry premium growth in the low to mid single-digit range over the next 12 months. Profitability was really excellent with the combined ratio of 77.1% in the quarter.

Speaker #2: Our pricing and risk selection advantage, which includes our investments in data and AI, allow us to grow while maintaining margins. We remain well positioned to deliver a low-90s or better combined ratio going forward.

Speaker #2: Moving now to our UK and I business, premiums in the quarter were 2% lower year over year but that's a three-point improvement from the past two quarters as expected.

Charles Brindamour: Moving now to our UK and Ireland business, premiums in the quarter were 2% lower year-over-year, but that's a 3-point improvement from the past two quarters as expected. We see top-line growth continue to improve in 2026 as we unite the commercial lines business under the Intact brand and as the remediation of the Direct Line book tapers off. We expect industry premium growth in the low to mid-single-digit range over the next 12 months. The Combined Ratio in the UK was 93.5% in the quarter. This business is on track to evolve towards 90% over the next 12 months. In the US, premiums were up 5% year-over-year, driven by our growth initiatives as new business increased 11%. Our diversified product range, coupled with progress in expanding and deepening our broker relationships, is really paying off.

Speaker #2: We see top line growth continue to improve in '26 as we unite the commercial lines business under the intact brands and as the remediation of the direct line book tapers off.

Speaker #2: We expect industry premium growth in the low- to mid-single-digit range over the next 12 months. The combined ratio in the UK was 93.5% in the quarter.

Speaker #2: This business is on track to evolve towards 90% over the next 12 months. In the US, premiums were up 5% year over year, driven by our growth initiatives, as new business increased 11%.

Speaker #2: Our diversified product range coupled with progress in expending and deepening our broker relationships is really paying off. While we've seen industry premium growth for US specialty lines in the mid single digit over the next 12 months, our growth initiatives position us to outperform.

Charles Brindamour: While we see industry premium growth for US specialty lines in the mid-single-digit over the next 12 months, our growth initiatives position us to outperform. The combined ratio of 82.8% in the quarter in the US improved by more than 3 points year-over-year, reflecting a very strong underwriting discipline. Our strategy there is to grow faster in our most profitable lines and customer profiles. In 2025, our business lines with a sub-90 combined ratio grew 7 points faster than those with a combined ratio above 90%. This focus on profitable growth helped us deliver the 10th quarter in a row with a sub-90 combined ratio in the US. Overall, across the platform, our team continues to execute on our strategic priorities. Let me highlight a few achievements in Q4. First, we aim to be a global leader in leveraging data and AI.

Speaker #2: The combined ratio of 82.8% in the quarter in the US improved by more than three points year over year, reflecting very strong underwriting discipline.

Speaker #2: Our strategy there is to grow faster in our most profitable lines and customer profiles. In 2025, our business lines with a sub-90 combined ratio grew seven points faster than those with a combined ratio above 90%.

Speaker #2: This focus on profitable growth helped us deliver the 10th quarter in a row with a sub-90 combined ratio in the US. Overall, across the platform, our team continues to execute on our strategic priorities.

Speaker #2: Let me highlight a few achievements in Q4. First, we aim to be a global leader in leveraging data and AI. Up to now, our teams have deployed AI models generating north of $200 million of recurring benefits, with a primary focus on pricing and risk selection.

Charles Brindamour: Up to now, our teams have deployed AI models generating north of CAD 200 million of recurring benefits with a primary focus on pricing and risk selection. At this pace, we're on track to exceed our ambition of at least CAD half a billion dollars by 2030. Our AI investments continue to be concentrated where they move the needle the most. In 2026, for example, we're investing in four distinct areas: advancing our risk selection advantage as we have in the last decade, improving customer journeys to drive organic growth, significantly accelerating software development, and improving operational efficiency. In software engineering, for instance, we've increased our output by close to 20% per dollar of investment in less than 24 months. Within the UK and Ireland, we seek to deliver a leading broker and customer experience as well as optimize underwriting and claims to drive outperformance.

Speaker #2: At this pace, we're on track to exceed our ambition of at least half a billion dollars by 2030. Our AI investments continue to be concentrated where they move the needle the most.

Speaker #2: In '26, for example, we're investing in four distinct areas. Advancing our risk selection advantage as we have in the last decade improving customer journeys to drive organic growth, significantly accelerating software development, and improving operational efficiency.

Speaker #2: In software engineering, for instance, we've increased our output by close to 20% per dollar of investment in less than 24 months. Within the UK and I, we seek to deliver a leading broker and customer experience as well as optimize underwriting and claims to drive outperformance.

Speaker #2: In the UK, we launched three new products in the quarter. In addition, Intact Insurance was voted by brokers as the number one insurer in the UK for commercial claims.

Charles Brindamour: In the UK, we launched three new products in the quarter. In addition, Intact Insurance was voted by brokers as the number one insurer in the UK for commercial claims. This is a recognition of the improvements we've made in customer and broker service, which, coupled with expanding our distribution footprint, will really help us achieve our ambition of doubling the size of the business by 2030. In global specialty lines, our strategy focuses on having a profitable and growing mix of verticals. During the quarter, we launched a number of products, including a new marine cargo quarter-share offering in the London market. This allows us, for instance, to offer a comprehensive solution in cargo, thereby making it easier for brokers and customers to do business with us.

Speaker #2: This is a recognition of the improvements we've made in customer and broker service, which, coupled with expanding our distribution footprint, will really help us achieve our ambition of doubling the size of the business by 2030.

Speaker #2: In global specialty lines, our strategy focuses on adding a profitable and growing mix of quarter, we launched a number of products verticals. During the including a new marine cargo quarter-share offering in the London market.

Speaker #2: This allows us, for instance, to offer a comprehensive solution in cargo thereby making it easier for brokers and customers to do business with us.

Speaker #2: This is an example of the types of initiatives that help support our goal of reaching $10 billion in direct written premium by 2030 while sustaining a sub-90 combined ratio.

Charles Brindamour: This is an example of the types of initiatives that help support our goal of reaching CAD 10 billion in direct written premium by 2030 while sustaining a sub-90s combined ratio. The strength of our 25 results, coupled with our confidence in delivering our financial objectives, means that we're pleased to increase dividends by 11% to CAD 1.47 per quarter, our 21st annual dividend increase. Our quarterly and full-year results demonstrate the strength and resilience of our platform. In 2025, we generated mid-single-digit top-line growth, margin improvement, double-digit earnings growth, and a 20% ROE. Sitting here today, we're very confident in our ability to sustain annual ROE in the upper teens and deliver at least 500 basis points of ROE outperformance every year. There is no doubt we'll continue to deliver double-digit net operating income per share growth on an annual basis in the next decade.

Speaker #2: The strength of our 25 results coupled with our confidence in delivering our financial objectives means that we're pleased to increase dividends by 11% to $1.47 per quarter our 21st annual dividend increase.

Speaker #2: Our quarterly and full-year results demonstrate the strength and resilience of our platform. In 2025, we generated mid-single-digit top-line growth, margin improvement, double-digit earnings growth, and a 20% ROE.

Speaker #2: Sitting here today, we're very confident in our ability to sustain annual ROE in the upper teens and deliver at least 500 basis points of ROE outperformance every deliver double digit net operating income per share growth on an annual basis in the next decade.

Speaker #2: Before concluding, I want to thank our employees for their exceptional dedication and execution this past year. Your discipline, commitment, and drive to do better every day has positioned us to continue to deliver in the years ahead.

Charles Brindamour: Before concluding, I want to thank our employees for their exceptional dedication and execution this past year. Your discipline, commitment, and drive to do better every day has positioned us to continue to deliver in the years ahead. With that, I'll turn the call over to our CFO, Kenneth Anderson.

Speaker #2: With that, I'll turn the call over to our CFO, Ken Anderson. Thanks, Charles. And good morning, everyone. We've ended 2025 on a very strong note.

Ken Anderson: Thanks, Charles, and good morning, everyone. We've ended 2025 on a very strong note. Fourth quarter performance was excellent, with a combined ratio of 85.9%, driving a 12% increase in net operating income per share to CAD 5.50. Operating ROE was 19.5% over the past 12 months, which fueled a 16% increase in book value per share to CAD 107.35. Let me add some color to our fourth quarter results. The underlying current accident year loss ratio improved by half a point year-over-year to 55.9% in the fourth quarter. This measure was particularly strong across North America, where the ratio was 1.4 points better in Canada and 1.7 points better in the US. In the UK and Ireland, improvements in the Direct Line portfolio were tempered by higher large losses in specialty lines, which can be volatile quarter-to-quarter.

Speaker #2: Fourth quarter performance was excellent, with a combined ratio of 85.9%, driving a 12% increase in net operating income per share to $5.50. Operating ROE was 19.5% over the past 12 months, which fueled a 16% increase in book value per share to $107.35.

Speaker #2: Let me add some color to our fourth quarter results. The underlying current accident year loss ratio improved by half a point year over year to 55.9% in the fourth quarter.

Speaker #2: This measure was particularly strong across North America, where the ratio was 1.4 points better in Canada and 1.7 points better in the US. In the UK and I, improvements in the direct line portfolio were tempered by higher large losses in specialty lines, which can be volatile quarter to quarter.

Speaker #2: Fourth-quarter favorable prior year development was 5.5% and aligned with our expectation of hovering around the upper end of our 2% to 4% guidance in the near term.

Ken Anderson: Fourth quarter favorable prior year development was 5.5% and aligned with our expectation of hovering around the upper end of our 2% to 4% guidance in the near term. Our long track record of favorable PYD reflects the ongoing prudent approach we take in reserving the current accident year, which continued throughout 2025. This is why we assess overall underlying performance by focusing on the total of the current accident year loss ratio and the prior year development ratio. On this measure, for the full year across IFC, we delivered close to a point improvement. In commercial and specialty lines globally, we've seen year-over-year improvement for the past 12 quarters. This illustrates the margin expansion the platform is producing. Catastrophe losses in the quarter totaled CAD 69 million and CAD 844 million for the full year.

Speaker #2: Our long track record of favorable PYD reflects the ongoing prudent approach we take in reserving the current accident year which continued throughout 2025. And this is why we assess overall underlying performance by focusing on the total of the current accident year loss ratio and the prior year development ratio.

Speaker #2: On this measure, for the full year across IFC, we delivered close to a point improvement. And in commercial and specialty lines globally, we've seen year-over-year improvement for the past 12 quarters.

Speaker #2: This illustrates the margin expansion the platform is producing. Catastrophe losses in the quarter totaled $69 million, and $844 million for the full year. Looking ahead to 2026, reflecting longer-term trends, the revision to our catastrophe event threshold, as well as growth in our premium base, we are maintaining our overall annual catastrophe loss expectations at $1.2 billion for the year ahead, with 75% allocated to Canada, of which 70% is in personal lines.

Ken Anderson: Looking ahead to 2026, reflecting longer-term trends, the revision to our catastrophe event thresholds, as well as growth in our premium base, we are maintaining our overall annual catastrophe loss expectations at CAD 1.2 billion for the year ahead, with 75% allocated to Canada, of which 70% is in personal lines. Mentioning catastrophes, I'll provide an update on reinsurance. The 1 January renewals were favorable. We maintained our cap retentions at similar levels to 2025 while improving our aggregate coverage for multiple loss events. Our approach to reinsurance remains unchanged. We use it to protect our balance sheet from tail risk. Moving to expenses, the consolidated expense ratio was 34.4% for the quarter, a 0.8-point increase versus last year. This was driven by higher variable broker commissions and higher incentive compensation, reflecting our profitability in North America.

Speaker #2: Mentioning catastrophes, I'll provide an update on reinsurance. The January 1st renewals were favorable. We maintained our cap retentions at similar levels to 2025 while improving our aggregate coverage for multiple loss events.

Speaker #2: Our approach to reinsurance remains unchanged. We use it to protect our balance sheet from tail risk. Moving to expenses, the consolidated expense ratio was 34.4% for the quarter at 0.8 point increase versus last year.

Speaker #2: This was driven by higher variable broker commissions and higher incentive compensation, reflecting our profitability in North America. This also contributed to the full-year expense ratio of 34%, which is aligned with our annual guidance of 33% to 34%.

Ken Anderson: This also contributed to the full-year expense ratio of 34%, which is aligned with our annual guidance of 33% to 34%. Operating net investment income increased 4% to CAD 415 million in the quarter, reflecting higher assets and special distributions. For 2026, we expect investment income to be more than CAD 1.6 billion, as growth in invested assets should offset reinvestment yields being slightly below our current book yield. Distribution income decreased 5% in the quarter. BrokerLink remained very active across 2025, completing over 20 transactions and acquiring CAD 570 million in premiums to surpass the CAD 5 billion mark. Overall distribution income growth was tempered by the favorable weather throughout 2025, which meant financial results at our countercyclical on-site restoration operation were lower compared to 2024. Our distribution income has grown at a compounded annual growth rate in the mid-teens over the last 5 and 10 years.

Speaker #2: Operating net investment income increased 4% to $415 million in the quarter. Reflecting higher assets and special distributions. For 2026, we expect investment income to be more than $1.6 billion.

Speaker #2: As growth in invested assets should offset reinvestment yields being slightly below our current book yield. Distribution income decreased 5% in the quarter. Broker link remained very active across 2025, completing over 20 transactions and acquiring 570 million in premiums to surpass the $5 billion mark.

Speaker #2: Overall distribution income growth was tempered by the favorable weather throughout 2025, which meant financial results at our countercyclical onsite restoration operation were lower compared to 2024.

Speaker #2: Our distribution income has grown at a compounded annual growth rate in the mid-teens over the last five and 10 years. And while quarterly results may vary, we expect at least 10% annual growth in distribution in 2026 and beyond.

Ken Anderson: While quarterly results may vary, we expect at least 10% annual growth in distribution in 2026 and beyond. In non-operating results, we reported non-operating losses of CAD 55 million for the quarter and CAD 139 million for the year, a significant improvement compared to the prior period. In 2026, we expect acquisition, integration, and restructuring costs to be lower than 2025, as UK rebranding as well as RSA, and DLG integration activities will be largely behind us. Moving to our balance sheet, our financial position has never been stronger. In 2025, total capital margin grew by CAD 800 million to CAD 3.7 billion, while our adjusted debt-to-total capital ratio improved by almost three points to 16.5%. All this while delivering close to a 20% operating ROE.

Speaker #2: In non-operating results, we reported non-operating losses of $55 million for the quarter and $139 million for the year. A significant improvement compared to the prior period.

Speaker #2: In 2026, we expect acquisition integration and restructuring costs to be lower than 2025, as UK rebranding as well as RSA and DLG integration activities will be largely behind us.

Speaker #2: Moving to our balance sheet, our financial position has never been stronger. In 2025, total capital margin grew by $800 million to $3.7 billion, while our adjusted debt-to-total-capital ratio improved by almost 3 points to 16.5%.

Speaker #2: All this while delivering close to a 20% operating ROE. Our capital management framework is robust, and the balance sheet is positioned to deal with any external shocks, while also providing significant capacity to support both organic and inorganic growth opportunities, which remain our priority.

Ken Anderson: Our capital management framework is robust, and the balance sheet is positioned to deal with any external shocks while also providing significant capacity to support both organic and inorganic growth opportunities, which remain our priority. Within our framework, we will be renewing our normal course issuer bid on 17 February, allowing us to repurchase up to 3% of shares outstanding. Capital generation is very strong, and we will utilize our share buyback program opportunistically when we see our shares as significantly undervalued, as we do currently. In the last six months, we deployed CAD 200 million for share buybacks, and we will remain active and prepared to do more. But with the attractive opportunity set we see on the M&A front in the near term, both in manufacturing and distribution, we are content to maintain dry powder, especially given our improving ROE outperformance trajectory.

Speaker #2: Within our framework, we will be renewing our normal course issuer bid on February 17, allowing us to repurchase up to 3% of shares outstanding.

Speaker #2: Capital generation is very strong, and we will utilize our share buyback program opportunistically when we are significantly undervalued, as we do see our shares as currently.

Speaker #2: In the last six months, we deployed $200 million for share buybacks, and we will remain active and prepared to do more. But with the attractive opportunity set we see on the M&A front in the near term, both in manufacturing and distribution, we are content to maintain dry powder, especially given our improving ROE outperformance trajectory.

Speaker #2: In conclusion, I want to thank our team for the rigorous execution in 2025. Your drive for outperformance has delivered results which showcase our capacity to drive earnings growth.

Ken Anderson: In conclusion, I want to thank our team for the rigorous execution in 2025. Your drive for outperformance has delivered results which showcase our capacity to drive earnings growth. It has also shifted our operating ROE into the upper teens. We are proud to be a leader among our global peer group, having among the highest ROE and the lowest ROE volatility. It is a testament to the platform we have built and the successful execution of our profitable growth strategy. This positions the organization to continue to deliver on our financial objectives, to compound net operating income per share growth by 10% annually over time, and exceed industry ROE by at least 500 basis points every year. With that, I'll turn it back to Geoff.

Speaker #2: It is also shifted our operating ROE into the upper teens. We are proud to be a leader among our global peer group, having amongst the highest ROE and the lowest ROE volatility.

Speaker #2: It is a testament to the platform we have built and the successful execution of our profitable growth strategy. This positions the organization to continue to deliver on our financial objectives to compound net operating income per share of growth by 10% annually over time and exceed industry ROE by at least 500 basis points every year.

Speaker #2: With that, I'll turn it back.

Speaker #2: to Jeff. Thank you,

[Analyst] (Aiera): Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to 2 questions per person. You can certainly requeue 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 questions now.

Speaker #1: 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.

Speaker #1: You can certainly requeue 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 questions.

Speaker #1: now. Thank you.

Operator: Thank you. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchscreen phone. You will hear a prompt that your hand has been raised. Should you like to withdraw from the question queue, please press star followed by two. If you're using a speakerphone, you will need to lift the handset before pressing any keys. Thank you. The first question comes from the line of John Aiken at Jefferies. Please go ahead.

Speaker #3: Ladies and gentlemen, if you do have any questions, please press star followed by 1 on your touchstone phone. You will hear a prompt at your hand has been raised.

Speaker #3: And should you like to withdraw from the question queue, please press star followed by 2. And if you're using a speakerphone, you will need to lift the handset before pressing any keys.

Speaker #3: Thank you. And the first question comes from the line of John Aken at Jefferies. Please go ahead.

Speaker #4: Good morning, Charles. Recently, there's been a lot of speculation about AI and disruption in the industry. Now, you guys have been very vocal about the benefits that you're receiving in terms of deploying AI in your systems.

Geoff Kwan: Good morning, Charles. Recently, there's been a lot of speculation about AI and disruption in the industry. Now, you guys have been very vocal about the benefits that you're receiving in terms of deploying AI in your systems. But can you discuss the impact or maybe the lack of impact that AI may have in terms of the manufacturers of insurers, if not in Canada, then globally?

Speaker #4: But can you discuss the impact or maybe the lack of impact that AI may have in terms of the manufacturers of insurers, if not in Canada then globally?

Speaker #5: Did you say the manufacturing of insurers?

Ken Anderson: Did you say the manufacturing of insurers?

Speaker #4: Manufacturing of insurance. AI disrupting the current players.

Geoff Kwan: Manufacturing of insurance. AI disrupting the current players.

Speaker #5: Yeah. I think indeed, John, we've been very focused on AI for about a decade. And we've made massive investments in the risk selection side of things.

Ken Anderson: Yeah. I think, indeed, John, we've been very focused on AI for about a decade. We've made massive investments in the risk selection side of things. As I mentioned in my remarks, we're doubling down on that, but we're also deploying AI in the digital funnel, in software engineering, as well as in efficiency. I do think that large language models will certainly have an impact on our ability to capture traffic and shopping in the digital channel. This is an area that we're very, very focused on at this stage. In terms of manufacturing the product per se, keep in mind that the purpose of the organization is to get people back on track. We've created probably 1/3 of our ROE advantage coming out of getting people back on track. I see this is happening in the physical world. I see little change there.

Speaker #5: And as I've mentioned in my remarks, we're doubling down on that, but we're also deploying AI in the digital funnel. In software engineering, as well, as an efficiency.

Speaker #5: I do think that large language models will certainly have an impact on our ability to capture traffic and shopping in the digital channel. This is an area that we're very focused on at this stage.

Speaker #5: In terms of manufacturing the product per se, keep in mind that the purpose of the organization is to get people back on track. And we've created probably a third of our ROE advantage coming out of getting people back on track.

Speaker #5: And I see this is happening in the physical world. I see little change there. But I would say when it comes to predicting risk, AI is a fair bit of upside.

Ken Anderson: But I would say when it comes to predicting risk, AI has a fair bit of upside. And I think the nature of advice will evolve over time. And I think we've been focused on disruption in distribution for over a decade. This is one more source of potential change that we need to keep an eye on. We're very focused on that. We want to make sure, as a firm, that through LLMs, people find our leading brands first, in particular in retail insurance, and that we win in that channel as well as we win in other channels.

Speaker #5: And I think the nature of advice will evolve over time. And I think, you know, we've been focused on disruption in distribution for over a decade.

Speaker #5: This is one more source of potential change that we need to keep an eye on. We're very focused on that. We want to make sure as a firm that true LLMs people find our leading brands first in particular in retail insurance and that we win in that channel as well as we win in other channels.

Speaker #4: That's great, Charles. Thanks for the caller. I'll requeue.

Geoff Kwan: That's great, Charles. Thanks for the caller. I'll requeue.

Speaker #5: Thank

Speaker #5: Thank you. Question is

Ken Anderson: Thank you.

Operator: Question is from Stephen Boland at Raymond James. Please go ahead.

Speaker #3: From Stephen Boland at Raymond James. Please go ahead.

Speaker #3: ahead. I guess I'll ask this

Charles Brindamour: I guess I'll ask this question since I'm at the front of the queue. But you mentioned now for a couple quarters about, obviously, competition in large account. As the sector kind of is under pressure, is there a buffer of that softness? Does it move into the middle or the SME space that you mostly play in? And if yes or no, why or why not, I guess, is the question.

Speaker #4: question since I'm at the front of the queue. But you mentioned now for a couple of quarters about obviously competition in large account. I'm just as the sector kind of is under pressure, how is there a buffer that softness?

Speaker #4: Does it move into the middle or the SMED space that you mostly play in? And if yes or no, why or why not, I guess is the question.

Speaker #5: Yeah. Stephen, thanks for your question. I think if you look at the earnings base of intact, half of it is first lines and we're in a hard pricing environment.

Ken Anderson: Yeah. Stephen, thanks for your question. I think if you look at the earnings base of Intact, half of it is first lines, and we're in a hard pricing environment. You see us outperform from both top and bottom line point of view. When you then look at the rest of the platform, which is commercial lines and specialty lines, about 70% of the portfolio is in the SME and mid-market space. So in large account, there is ongoing pressure. Then as you move from the smallest account to the largest account in the SME and mid-market space, competition is uneven as well. This is not a new phenomenon. This is something we've seen over the past decades. The nature of that business tends to be far more service-oriented, speed-oriented, and ease of doing business-oriented, and as a result, tends to be stickier. We've got two advantages.

Speaker #5: And you see us outperform from both top and bottom line point of view. When you then look at the rest of the platform, which is commercial lines and specialty lines, about 70% of the portfolio is in the SME and mid-market space.

Speaker #5: So, in large accounts, there is ongoing pressure. And then, as you move from the smallest account to the largest account in the SME and mid-market space, competition is uneven.

Speaker #5: As well. This is not a new phenomenon. This is something we've seen over the past decades. And the nature of that more service-oriented, tends to be stickier.

Speaker #5: We've got two advantages. First, we're a big leader in that space in Canada. Second, in our specialty lines operation, in particular in North America, we can pick and choose where we decide to grow.

Ken Anderson: First, we're a big leader in that space in Canada. Second, in our specialty lines operation, in particular in North America, we can pick and choose where we decide to grow. Some segments are more competitive than other segments. And that's another, I think, big advantage. So could it come down? I mean, we're seeing that the competition in the SME and mid-market space is highly uneven. But it's nowhere near what we see in the large accounts. And if I judge by our experience in the past 20 years, this is far less sensitive. And I'm not losing much sleep over that, Stephen. I think one of the things that is important, when you look, say, at the Canadian growth in commercial lines, which was about 1%, you have two to three points of change in mix. That is, the average size of account, not rates, it's mix.

Speaker #5: Some segments are more competitive than other segments, and that's another, I think, big advantage. So, could it come down? I mean, we're seeing that the competition in the SME and mid-market space is highly uneven.

Speaker #5: But it's nowhere near what we see in the large accounts. And if I judge by our experience in the past 20 years, this is far less sensitive and I'm not losing much sleep over that, Stephen.

Speaker #5: I think one of the things that is important when you look, say, at the Canadian growth in commercial lines, which was about 1%, you have two to three points of change in mix that is the average size of account, not rates, it's mix.

Speaker #5: It's the average size of account is down a bit that is a function of the fact large, competition increases as you go up the size curve.

Ken Anderson: The average size of account is down a bit. That is a function of the fact that from small to very large, competition increases as you go up the size curve. We have tools to figure out where we grow. This change in mix is not just a change in size. It's also a change in profitability profile. And while it puts pressure on the top line, we think this is very good for our bottom line and margins. And frankly, when you look at our performance, you get a sense that our risk selection strategy is working really well.

Speaker #5: We have tools to figure out where we grow. This changes mix is not just a change in size. It's also a change in profitability profile.

Speaker #5: And while it puts pressure on the top line, we think this is very good for our bottom line and margins. And frankly, when you look at our performance, you get a sense that our risk selection strategy is working really well.

Speaker #4: Okay, that's great. I appreciate that. And maybe just a second question: on personal auto, we all track the filings that happen here in Ontario.

Charles Brindamour: Okay. That's great. I appreciate that. And maybe just a second question on personal auto. We all track the filings that happen here in Ontario. The pace of rate increases has slowed. And your guidance remains it's going to be a firm to hard market for 2026. So I'm just curious about the confidence that it continues to be firm. And there was a couple of insurers that rate decreases approved. So I'm just wondering if you could talk about that, please.

Speaker #4: The pace of rate increases has slowed. So and your guidance remains it's going to be a firm to hard market for 2026. So I'm just curious about the confidence that it continues to be firm and there was a couple of insurers that got rate decreases approved.

Speaker #4: So I'm just wondering if you could talk about that, please.

Speaker #5: Yeah. Stephen, Canada is a big country. And I understand when we're based in Toronto, we look at Ontario. And I think it's important—I'll give Patrick—maybe Patrick can give his perspective on where the automobile market is going in aggregate. And go ahead, Patrick.

Ken Anderson: Yeah. Stephen, Canada is a big country. I understand when we're based in Toronto, we look at Ontario, and I think it's important. I'll give Patrick, maybe Patrick can give his perspective on where the automobile market is going in aggregate. Go ahead, Patrick.

Speaker #4: Yeah.

Patrick Barbeau: Yeah. Well, overall, when we look at the first three quarters of 2025, which is information we have about the industry, it grew by high single digits overall Canada-wide. The combined ratio, if I look both at 2024 for the industry, was above 100% and was still above 100% in the first quarter, first three quarters of 2025. When we look at specific regions, there might be fluctuations one quarter, especially from a rates approval perspective. But overall, there's still pressure in the system. We've talked about Alberta in particular, where we see pressure in the liability lines. There's a reform that will come on 1 January. But until then, there's pressure on the Alberta market.

Speaker #5: Well, overall,

Speaker #5: when we look at the first three quarters of 2025, which is information we have about the industry, it grew by high single digits overall Canada-wide.

Speaker #5: And the combined ratio, if I look both at 2024 for the industry, was above 100% and was still above 100% in the first three quarters of 2025.

Speaker #5: When we look at specific regions, there might be fluctuations one quarter to the next, especially from a rates approval perspective. But overall, there is still pressure in the system. We've talked about Alberta in particular, where we see pressure in the liability lines.

Speaker #5: There's a reform that starts on January 1st. But until then, there's pressure on the Alberta market. So overall, the combination of the industry not being profitable overall, inflation stabilizing in the 5% or mid-single digit type of range overall for the country, is by no means that the industry overall will not need to continue to take rates to be profitable.

Patrick Barbeau: So overall, the combination of the industry not being profitable overall, inflation stabilizing in the 5- or mid-single-digit type of range overall for the country, means that the industry overall will need to continue to take rates to be profitable.

Speaker #5: Yeah. I think our outlook in personal automobile, I mean, there's not it's simple math. Combined ratio above 100%, inflation 5. If you want to bring back in the industry in a reasonable zone, I mean, the industry needs to grow in the upper single digit sort of range and our view is that this is true for the next 12 months.

Ken Anderson: Yeah. I think our outlook in personal automobile, I mean, it's simple math. Combined ratio above 100%, inflation 5%. If you want to bring back the industry in a reasonable zone, I mean, the industry needs to grow in the upper single digit sort of range. And our view is that this is true for the next 12 months. Now, you have reforms coming in 2027. And in Alberta in particular, I think that'll be really important because that's a market that is dragging the industry's performance more so than Ontario at the moment. And I would very much welcome in 2027 an industry performance that would be better. And we'll see what it does to the environment. But for the next 12 months, I think we're in a hard market environment in auto.

Speaker #5: Now, you have reforms coming in 2027. And in Alberta in particular, I think that'll be really important because that's a market that is dragging the industry's performance more so than Ontario at the moment.

Speaker #5: And I would '27 an industry performance that would be better. And we'll see what it does to the environment. But for the next 12 months, I think we're in a hard market environment in

Speaker #5: auto. Okay.

Charles Brindamour: Okay. Thanks very much.

Speaker #4: Thanks very

Speaker #4: much. Next question will be from

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

Speaker #1: Paul Holden at CIBC. Please go ahead.

Speaker #6: Hi. Thanks. Good morning. Just want to ask on the expense ratio. We don't and I'm referring to the general expense ratio. We don't talk about that ratio too much.

Paul Holden: Hi. Thanks. Good morning. Just want to ask on the expense ratio. I'm referring to the general expense ratio. We don't talk about that ratio too much. I'm asking about it because it's been roughly around the same level for three years now despite strong premium growth. I might expect, from particularly an Intact with your scale advantages, that that is a ratio that might improve over time. Maybe two parts to the question. One is, why is it not improving? Is it just simply investments in technology or otherwise? Should we expect it to improve at some point in time as you continue to grow top line?

Speaker #6: And I'm just I'm asking for about it because it's been roughly around the same level for three years now despite strong premium growth. So I might expect from particularly an intact with your scale advantages that that is a ratio that might improve over time.

Speaker #6: So maybe two parts to the question. One is, why is it not improving? Is it just simply investments in technology or otherwise? And should we expect it to improve at some point in time as you continue to grow top—

Speaker #6: line? Yeah.

Ken Anderson: Yeah. Thanks, Paul. Maybe just a few comments near term, and then we can look a bit more longer term. We've guided towards 33 to 34 zone at the overall IFC level for, I guess, that's the combination of Gen X and commission. Overall, for Q4, I would say, and the full year, a bit higher than last year. But again, driven by variable commission and variable comp, which really is reflecting the improved profitability. So you are seeing as the profitability profile has improved over time, the Gen X is picking up a variable comp component in that. It's equally true, I would say, on the commission ratio as well. I think it is fair to say, as you look over time, particularly in Canada, I would say that as we've scaled up, you will see an improvement in the Gen X ratio.

Speaker #5: Thanks, Paul. Maybe just a few comments near term, and then we can look a bit more longer term. We've guided towards 33 to 34 zone at the overall IFC level for, I guess that's the combination of Gen X and commission.

Speaker #5: Overall, for Q4, I would say—and the full year—a bit higher than last year, but again, driven by variable commission and variable comp, which really is reflecting the improved profitability.

Speaker #5: So you are seeing as the profitability profile has improved over time, the Gen X is picking up a variable comp component in that. It's equally true I would say on the commission ratio as well.

Speaker #5: I think it is fair to say as you look over time, particularly in Canada, I would say that as we've scaled up, you will see an improvement in the Gen X ratio.

Speaker #5: I think in the US, it's a bit different because you have different lines of business. Depending on whether you're dealing with MGAs or dealing with regular brokers, the level of internal costs that you will have versus external will also be a factor.

Ken Anderson: I think in the US, it's a bit different because you have different lines of business. Depending on whether you're dealing with MGAs or dealing with regular brokers, the level of internal costs that you will have versus external will also be a factor. So I think the shift in the lines of business within specialty is certainly a driver in the US, I would say. And in the UK, we know that we're investing in technology. There's a need to renew the technology stack there. So that's going to show up in that Gen X ratio in the UK.

Speaker #5: So I think the shift in the lines of business within specialty is certainly a driver in the US. I would say. And in the UK, we know that we're investing in technology.

Speaker #5: There's a need to renew the technology stack there so that's going to show up in that Gen X ratio in the

Speaker #5: There's a need to renew the technology stack there, so that's going to show up in that Gen X ratio in the UK. So,

Charles Brindamour: So Paul, I guess you're saying you're closing 2025 with 14.6 Gen X. You closed 2024 at 14.6 Gen X. You closed 2023 at 14.6, 2022 at 14.2. What are you guys doing? And I think it's a fair statement. And frankly, we're challenging ourselves to do that. But I do think, Paul, that the strong growth in the direct channel is putting upward pressure on Gen X more so than anything else. And as Ken is saying, the lines that are growing the fastest in specialty and commercial lines would put upward pressure as well on Gen X. That's why I'm very focused myself on the combined ratio and the combination of both. That being said, we've given ourselves internally a number of pretty steep performance improvement targets in terms of expenses and productivity in the next three years. And I'm certainly hoping that this ratio is coming down.

Speaker #4: Paul, I guess you're saying you're closing 25.

Speaker #1: With 14 six . Jenks , you close 24 at 14 . Six . Jenks , you close 23 at 14 . Six . 22 .

Speaker #1: Three at 14 . Six . 22 at 14 . Two . What are you guys doing ? And I think it's a fair statement .

Speaker #1: And frankly , we're challenging ourselves to do that . But I do think that the , Paul , strong growth in the direct channel is putting upward pressure X Gen on than anything else .

Speaker #1: And as Ken is saying , the strong , the lines that are growing , the fastest in specialty and commercial lines would put upward pressure as well on Gen X , that's why I'm very myself on the combined ratio and the combination of both .

Speaker #1: That being said , we've given ourselves internally a number of , you know , pretty steep performance improvement targets of in terms expenses and productivity in the next three years .

Speaker #1: And I'm certainly hoping that this ratio is coming down .

Paul Holden: Understand. It's helpful. Part of the reason I asked the question is just kind of, should we really be looking at the combined ratio, as you call it, expense ratio? Because it seems like there's a little bit of puts and takes there. And I think part of your answer helps answer that mix, right? So specialty lines might have a lower loss ratio, but maybe a higher expense ratio. And so maybe I should be paying more attention to the total combined. But either way, the combined is getting better.

Speaker #2: Understand ? It's helpful . the reason I You know , part of asked the question is just kind of , you know , should we really be looking at the the k ratio , as you call it , x , the expense ratio , because it seems like there's a little bit of puts and takes there .

Speaker #2: And I think part of your answer helps answer that . Like mix . Right . So especially lines might have a lower loss ratio but maybe a higher expense ratio .

Speaker #2: So, and maybe I should be paying more attention to the total combined. But either way, 'and combined' is getting better.

Ken Anderson: Yeah. No, exactly. And on the theme of investments in technology and all of that, I mean, the reality, Paul, is we've been investing massively in technology and AI over the last decade. And frankly, we're making trade-offs. I mean, if you're investing more in technology, you have to manage your investment envelope. And I don't expect that this will put meaningful pressure prospectively. And as Ken is saying, we're working really hard on the UK Combined Ratio following the focus, following the fact that we've refocused that business on commercial lines completely where we think we can win.

Speaker #1: Yeah I know exactly . You know and on the T theme of investments in technology and all of that , I mean the reality , Paul , is we've been investing massively in technology and AI over the last decade .

Speaker #1: And frankly , we're making trade mean , if offs . I you're investing more in technology , you have to manage your investment envelope .

Speaker #1: And I don't expect that this will put meaningful pressure prospectively . And as Ken is saying , we're working really hard on the UK combined ratio following the focus , following the fact that we've refocused that business on commercial lines completely , where we think we can win .

Paul Holden: Okay. Okay. And then my second question, Charles: you talked about a structurally higher ROE a number of times in your prepared remarks. I guess my follow-on question there, just so I completely understand that. I get that mix has changed over time and mix has changed favorably. Is there also an argument that your, let's call it, legacy businesses or traditional businesses, you've also been able to expand your ROE advantage? Is that second point fair also?

Speaker #2: Okay , okay . And then my second question , Charlie , you talked about a higher structurally ROE . A number of times in your prepared remarks .

Speaker #2: I guess my follow up question there just just so I completely understand that I get that mix has changed over time and mix has changed favorably .

Speaker #2: Is there also an argument that your, let's call it, legacy businesses or traditional businesses—you've also been able to expand your ROE advantage?

Speaker #2: Is that second point fair ? Also ?

Ken Anderson: Absolutely, Paul. I mean, you look at the Canadian outperformance at Q3. I've never seen that level of outperformance. It's 2 points from a top line point of view, but 8 points of combined ratio. And frankly, in my mind, it is a function of the massive investments we've made in bringing science, the latest science in the field when it comes to risk prediction, and the fact that the claims muscle is making a big difference. And so yes, the mix itself, what GSL, Global Specialty Lines, representing a much bigger portion of the pie, and that's running sub-90 solid, that is a higher ROE business to start with.

Speaker #1: Paul Absolutely . , I think I mean , you look at the Canadian outperformance at Q3 , I've never seen that level of outperformance .

Speaker #1: You know , it's two points from a top line point of view . But eight points of combined ratio and and frankly , in my is a mind it function of the massive investments we've made in bringing science .

Speaker #1: The latest science in the field when it comes to risk prediction and the fact that the claims muscle is making a a big difference .

Speaker #1: And so , yes , the mix itself , what GSL Global Specialty lines representing a much bigger portion of the pie and that's running sub 90 solid .

Speaker #1: That is a higher ROE business to start with . But I think the we've made investments in risk selection and in claims are also helping the trajectory of our what you call legacy business .

Ken Anderson: But I think the investments we've made in risk selection and in claims are also helping the trajectory of what you call legacy business and what I would call outstanding businesses that we want to grow as much as we can.

Speaker #1: And what I would call , you know , outstanding businesses that we want to grow as much as we can .

Paul Holden: Yeah. Okay. Okay. Thank you for that. I'll leave it there. Thanks.

Speaker #2: Yeah . Okay . Okay . Thank you for that . I'll leave it there . Thanks .

Charles Brindamour: Thanks, Paul.

Operator: Thank you. Next question will be from Tom McKinnon at BMO Capital. Please go ahead.

Speaker #1: Thanks , Paul .

Speaker #3: Thank you .

Speaker #4: Next question will be from Tom MacKinnon at BMO Capital. Please go ahead.

Tom MacKinnon: Yeah. Thanks. Good morning. My question's around you used to give an industry ROE outlook. It was around 10% for the last couple of quarters. I assume that that is still your outlook for the industry ROE?

Speaker #5: Yeah . Thanks . Good morning . My question is around . You used to give an industry ROE outlook . It was around 10% for the last couple of quarters .

Speaker #5: assume I that that is still your outlook for the industry . Roe .

Charles Brindamour: Go ahead, Ken.

Ken Anderson: Yeah, Tom, you're correct. In the MD&A, we used to give a perspective on the industry ROE. We streamlined a bit our disclosure around that, but there's no real change in our expectation of it being around 10%. And I would just call out that we refined its refined disclosure, and we feel that speculating on where the industry ROE is going forward is a bit challenging. As you know, there can be non-operating items that go into the ROE. Very difficult to project where they will end up. But I go back to, at September, after 3 quarters, outperformance 750 basis points. So, the trajectory, and we talk about expanding the ROE outperformance beyond the 10-year track record of 650 basis points, that's certainly the zone that we're in after 9 months. And we would expect to be in as we close out the year.

Speaker #1: Go ahead Ken .

Speaker #6: Tom . Yeah . You know you're correct . You know in the MDA we used to give a perspective on the on the industry .

Speaker #6: ROE streamlined a bit . Our disclosure around that . But there's no real change in our expectation of it being around 10% . You know .

Speaker #6: And I would just call out that , you know , we refine it's refined disclosure and we fill that speculating on where the industry ROE is going forward is bit a challenging .

Speaker #6: As you there can know , be nonoperating goes items that into the ROE very difficult to project where where they will end up .

Speaker #6: But I go back to at September after three quarters outperformance , 750 basis points . So to trajectory and we talk about expanding the ROE outperformance the ten year track beyond record of 650 basis points .

Speaker #6: That's certainly the zone that we're in after nine months, and we would expect to be in as we close out the year.

Tom MacKinnon: Yeah. Just following up on that, I noticed that if you kind of look at the premium growth outlook since this time last year, you've lowered it for essentially every line of business. But if I look at the industry ROE outlook, you've increased it from high single digits to being around 10. Are you suggesting then that despite the fact that we're getting pressure in terms of industry premium growth, that the industry still should be able to maintain an ROE around 10, which is, in fact, higher than what you would have suggested before you started revising down these premium growth outlooks? Just curious as to what your thinking is around that.

Speaker #5: Yeah , just following up on that , I noticed that if you kind of at look the outlook premium growth outlook , since this time last you've lowered it for essentially every line of business .

Speaker #5: But if I look at the industry ROE outlook . You've increased it from high single digits to being around ten . Are you suggesting then that despite the fact that we're getting pressure in terms of industry premium growth , that the industry still should be able to maintain , you know , a is in ten , which would what ROE around higher than fact have suggested before you started revising down these premium growth outlooks .

Speaker #5: Just curious as to what you're thinking is around that .

Ken Anderson: Yeah. Well, I would say, Tom, when it comes to the industry ROE, that's an all-in measure. It picks up premium, combined ratio, and also investment income, but also investment gains and losses. And again, those can be lumpy. We look at where the industry unrealized position is and assess how much of that will come through the P&L over time to form our view on where the industry ROE will be. But our view is focused on our own margins. And we talked about our own ability to expand margins and also to grow and outperform the industry on growth.

Speaker #7: Yeah .

Speaker #6: Well , I say , Tom , when it comes to the industry , Roe that's an all in measure . It picks up premium combined ratio and also investment income , but also investment gains and losses .

Speaker #6: And again those can be lumpy . We look at where the industry unrealized position is . And assess how much of that will come through the PNL over time to form our view on where the industry Roe will be .

Speaker #6: But our view is focused on our own margins , and , you know , we talked about our own ability to expand margins and also to grow and outperform the industry .

Charles Brindamour: Yeah. And I think, Tom, let's just not forget that in personal lines, you have an industry that is running above 100%. We expect that to come down. And so it's a blend of things. But I think to start putting point estimate for a weighted average of industries' performance where we operate, we think we want to streamline our guidance there.

Speaker #6: On growth .

Speaker #1: Yeah . And I think , Tom , let's just not forget that in first lines , you have an industry that is running above 100% .

Speaker #1: We expect that to come down . You know , and so it's a blend of things . But I think to start putting point estimate a for weighted average of industry's performance where we operate , we think , you know , we want to streamline our guidance .

Tom MacKinnon: Yeah. Okay. And you've talked about wanting to exceed the industry ROE by at least 500 basis points for decades now. And you've accomplished that. And now you've moved into this mid-teens to higher. You've moved up higher. Why not suggest that this number would not be 500 but might be 600 or something like that, or broaden out this outlook? Just thoughts there. Thanks.

Speaker #1: There .

Speaker #5: Yeah, okay. And you've talked about wanting to exceed the industry ROE by at least 500 basis points for now decades.

Speaker #5: And you've accomplished that then . Now you've moved into , you know , this mid-teens to higher . You've moved up higher . Why not suggest that you know , this number would not be 500 , but might be 600 or something like that , or broaden out this outlook .

Charles Brindamour: Yeah. I think it's a very valid point, Tom. And one, we probably should debate one more time inside. On one hand, you're right. I mean, the track record and the machine is spitting out more than 500 basis points in the long run. I mean, that's just a fact. This is an objective that says every year, you need to be 50% more profitable than the industry if you assume the industry is in 9% to 10% range. And we're in the US for less than a decade. We're in the UK and Europe for less than 5 years. We think we're starting to really understand what's going on in those places, but we want to outperform there as well, which we now do. I think we just want to make sure that we have objectives that are really stretched compared to our peers.

Speaker #5: Just There . Thanks .

Speaker #1: Yeah , I think it's a very valid point . And one we probably should debate . You know , one more time inside on on one hand you're right .

Speaker #1: I mean the track record and the machine is spitting out more than 500 basis points in the long run . I mean , that's just a fact .

Speaker #1: This is an objective that says every year you need to be 50% more profitable than the industry . If you if you assume the industry is a 9 to 10% range , and we're in the US for less than a decade , we're in the UK and Europe for less than five years .

Speaker #1: You know , we think we're starting to really understand what's going on in those places . But we want to outperform there as well , which we now do .

Speaker #1: I think we just want make sure that we're we have objectives that are really stretch compared to our peers . But at the same time , you know , we want to master those markets a bit more .

Charles Brindamour: But at the same time, we want to master those markets a bit more. But I won't hide the fact, Tom, that it's a live debate whether that 500 basis points ROE outperformance objective should be more stretched.

Speaker #1: But I won't hide the fact , Tom , that it's a live debate whether that 500 basis point are we outperformance objective is should be more stretched .

Tom MacKinnon: Okay. Thanks.

Speaker #5: Okay . Thanks .

Operator: Thank you. Next question will be from James Lloyd at National Bank Capital Markets. Please go ahead.

Speaker #4: Thank you . Next question will be from James Lloyd at National Bank Capital Markets . Please go ahead .

Jaeme Gloyn: Yeah. Good morning. Wanted to go back to the Investor Day where you talked about 8% organic growth, about 6 points from premium growth, about 2 points from operating margin. But there's flexibility to optimize that. So as you're thinking about the current market and maybe this ongoing softening in some areas, how do you think about optimizing that roughly 8% organic growth you would expect to achieve through 2030?

Speaker #8: Yeah . Thanks . Good morning . I wanted to go back to to the Investor Day where you talked about 8% organic growth , about six points premium from growth , about two points from operating margin .

Speaker #8: But there's flexibility to optimize that . And so as you're thinking about the current market and you know maybe , this ongoing softening in some areas , you know , think about optimizing that roughly 8% organic growth you would expect to achieve through 2030 ?

Charles Brindamour: Ken, do you want to provide a perspective?

Speaker #1: Ken , do you want to provide a perspective

Ken Anderson: Yeah. Well, I guess if you look at this year, growth is in the mid-single digit range. The margin expansion has been beyond, I would say, the 2 points that we've signaled. So I think heading into 2026, we certainly see growth in the zone of what we've signaled as a longer-term objective. Clearly, on margin expansion with the initiatives we're doing in terms of deploying our pricing and risk selection capabilities, improving our claims operation, the ability to deliver 2+ points of margin expansion is clearly there. In fact, I think that's where we have opportunity to leverage that pricing sophistication to reinvest in the top line growth. So that's why, James, when you look at how we described it at Investor Day, we did combine the 6 of growth and 2 of margin into an overall view of 8 points.

Speaker #1: ?

Speaker #6: Well , I guess if you look at in this you the mid Yeah . year , growth is single digit range . The margin expansion has been beyond , I would say the two points that we've signaled .

Speaker #6: So I think . Heading into 2026 , we certainly see . Growth in in the zone of of of what we've signaled as a longer term objective .

Speaker #6: Clearly, on margin expansion, with the initiatives we're doing in terms of deploying our pricing and risk capabilities, improving our claims operation, the ability to deliver two-plus points of margin expansion is clearly there.

Speaker #6: fact , In I think that's where we have opportunity to to leverage that pricing sophistication to reinvest in the top line growth . So that's why , James , when you when you look at how we described it at Investor Day , you know , we did combine the Six of growth and two of margin into an overall view of eight points .

Ken Anderson: I think that certainly the machine is set up to deliver that 8 points. Then with distribution roll-up that we're doing in BrokerLink and we're now looking at in the MGA space in North America, that's giving at least another point. And as we've said, in a worst-case scenario, the buybacks would deliver a further point. Again, to be very clear, the M&A outlook is quite strong, and that's what pushes us beyond that 10% zone overall. But all in, I think the 8 points of organic is we're well.

Speaker #6: And you know I think that certainly the machine is is set up to deliver that eight points . Then with distribution roll up that we're doing in broker link .

Speaker #6: And we're now looking at in the MGA space in North that's America , , that's giving at least another point . And as we've said in a , in a worst case scenario , the would deliver a further point .

Speaker #6: Again , to be very clear , the the M&A outlook is quite is quite strong . And that's what pushes us beyond that .

Speaker #6: 10% zone overall . But all in , I think the eight points of organic is , you know .

Jaeme Gloyn: Organic plus margin delivering that 8 points is well set up.

Speaker #1: We're well

Speaker #1: organic .

Speaker #6: Plus

Speaker #6: Margin delivering that 8 points is well set up.

Charles Brindamour: Yeah. I think that's exactly right. I mean, it's not historically. If you go back a decade, it was more 4, 4, 4 when you break down the 12% track record. I think our sandbox is 10 times bigger today than it was at the start of the last decade. That's why I think from an organic growth point of view, the odds of beating what we've done historically, I think, are pretty good. But we're really finding out that the investments we've made in risk selection are paying off a bit more than what we thought even a year ago. And so we'll ride on all these levers. And as Ken says, I mean, the capital deployment lever in what I think is a very constructive M&A environment, I mean, bodes well to outperform the 10 points of earnings growth in the next decade.

Speaker #1: Yeah, I think that's exactly right. I mean, it's not—as a historically, if you go back a decade, it was more for... for... for, when you break down the 12% track record. I think our sandbox is ten times bigger today than it was at the start of the last decade.

Speaker #1: That's why I think, from an organic growth point of view, the odds of doing what we've done historically, I think, are pretty good.

Speaker #1: But we're really finding out that the investments we've made in risk selection are paying off a bit more than what we thought, even a year ago.

Speaker #1: And so we'll ride on all these levers . And as Ken says , I mean , the capital deployment lever and what I think is a very constructive M&A environment , I mean , bodes well to outperform the ten points of earnings growth in the next decade .

Jaeme Gloyn: Great. And then as you talk about the structurally higher ROE in the upper teens, the balance sheet today currently is underlevered as I can remember. How much of that upper teens ROE is dependent on that balance sheet deployment? Can you achieve that upper teens base case with a leverage ratio sub-17%?

Speaker #8: Great . And then as you as you talk about the higher structurally higher ROE in the upper teens , the balance sheet today currently has under levered as I can remember , how much of that upper teens ROE is dependent on that balance sheet deployment .

Speaker #8: Can you achieve that upper teens you know base case with a with a leverage or ratio sub 17% ?

Charles Brindamour: Well, we are there now. But our target is 20 debt to total cap. And we'll get there as soon and as fast as we can when we find a highly accretive transaction. And we'll buy back shares in the meantime.

Speaker #1: Well we are there now . But our target is , you know , 20 debt to total cap . And we'll get there as as soon and as fast as we can .

Speaker #1: When we find a highly accretive a transaction . And we'll buy back shares . In the meantime .

Ken Anderson: Exactly. 19.5 operating ROE is with a balance sheet that's, as you said, underoptimized, if you want, from a leverage point of view. And that's the lens we look at when we say that we're comfortable and happy to hold dry powder on the M&A front to be able to continue to outperform well north of the 500 basis points and maintain the dry powder on the M&A side. That's the equation, if you like, that we look at when we assess where the balance sheet is positioned.

Speaker #6: Exactly . 19.5 operating ROE is with the balance sheet . That's that's under that's you know as you said , under optimized . If you want from a from a leverage point of view .

Speaker #6: So and and that's you know , the lens we look at when we say that we're comfortable and happy to hold dry powder on the M&A front , to be able to continue to outperform , you know , north of well north of the 500 basis points and maintain the powder dry for on the on the M&A side , that's that's a the equation if you like that we look at when we assess where the balance sheet is positioned .

Charles Brindamour: James, my pedestrian perspective on this is that when you look at 2025, we've printed an OROE of 20%, 19.5, and we've printed an adjusted ROE of 21. I think the cats came in a bit below guidance. Our balance sheet is stronger than our target makeup of the capital base. Those two things largely offset each other, is my take. Therefore, the guidance of upper teens, we don't sweat when we put that guidance out.

Speaker #1: Jamie you know my pedestrian perspective on this is that when you look at 25 we've printed up an o roe of 20% 19.5 .

Speaker #1: And we've printed an adjusted ROE of 21%. You know, I think the CATs came in a bit below guidance. And then our balance sheet is stronger than our target.

Speaker #1: Makeup of the capital base, and those two things largely offset each other, is the take. And therefore, the guidance of upper teens.

Speaker #1: You know, we don't sweat when we put that guidance out.

Jaeme Gloyn: That's great. Thank you.

Speaker #8: That's great . Thank you .

Operator: Next question will be from Doug Young at Desjardins. Please go ahead.

Speaker #4: Next question will be from Doug Young at Desjardins. Please go ahead.

Doug Young: Hi. Good morning. Ken, Charles, you both have talked just about a constructive M&A environment right now in Canada. You talked about manufacturing and on the distribution side. I'm hoping you can unpack what you're seeing there. Is it more in the manufacturing, more in the distribution side? And maybe what has been the impediment to more M&A right now, specifically maybe in the Canadian market?

Speaker #9: Hi . Good morning , Ken Charles , you both have talked just about a constructive M&A environment right now in Canada . You talked about manufacturing and on the distribution side , I'm hoping you can unpack what you're seeing .

Speaker #9: There . Is it more in the manufacturing , more in the distribution side . And and maybe , you know , what has been the impediment to to more M&A right now , specifically in the maybe in the Canadian market ?

Charles Brindamour: I think the distribution environment is active, very active. BrokerLink has been very active. Some of the consolidators we support in consolidation are also very active. I would say the competitive pressure, the demand for assets in distribution is probably down compared to what it was a year ago. And therefore, this is a place where we continue to deploy capital meaningfully. On the manufacturing front, it is a constructive environment in my mind globally. You've seen a number of transactions. I do think that there'll be near-term opportunities here. True in the US, true on the other side of the pond. And I think in Canada as well, maybe not as near-term as I can see in some of the other jurisdictions. But I think that this is a highly fragmented marketplace. Strategies are changing with the owners of some of these assets.

Speaker #1: I think the distribution environment is active , very active broker link has been very active . Some of the broker , the Consolidators , we support in consolidation are also very active .

Speaker #1: I would say the competitive pressure, the demand for assets, and distribution is probably down compared to what it was a year ago.

Speaker #1: And and therefore , you know , this is a place where we continue to deploy capital meaningfully on the manufacturing front . It is a constructive environment in my mind , globally .

Speaker #1: You've seen a number of transactions . You know , I do think that there'll be near opportunities here . In the US . True .

Speaker #1: On the other side of the pond , and I think in Canada , you know as well , maybe not as , as near-term as I can see in some of the other jurisdictions , but I think that this is a fragmented highly marketplace .

Speaker #1: Strategies are changing with the owners of some of these assets, and you'll see more consolidation in Canada now. We're, you know, we're patient and strategic as a buyer.

Charles Brindamour: And you'll see more consolidation in Canada. Now, we're patient and strategic as a buyer. And therefore, we find the opportunities at the best moments. And the position we're in today, Doug, which we've never really been in before, is the fact that we can fish in the US, we can fish in the UK and Europe, as well as Canada. Why? Because outperformance exists pretty much everywhere at this stage. And that's why I'm thrilled about the M&A prospects. And it's an environment that is constructive, no doubt about that. People are open to talk.

Speaker #1: And therefore , you know , we find the opportunities at the best moments and the position we're in today . Doug , which we've never really been in before , is the fact that we can fish in the US .

Speaker #1: We can fish in the UK and Europe , as well as Canada . Why ? Because outperformance exists pretty much everywhere at this stage .

Speaker #1: And that's why I'm thrilled about the M&A prospects . And and it's an environment that is constructive , no doubt about that . People are open to talk .

Doug Young: Okay. So just on the European side, I mean, the UK and Ireland division, I mean, if you look at it on a current accident year basis and there's been some challenges there, I guess the question I often get from people is, "You're comfortable doing" I think global specialty, MGAs, Canada, obviously. But would you do something more specifically in the UK on the M&A side near-term?

Speaker #9: Okay . And so just on the European side , I mean , you UK and I Division , I mean , if you look at it on a current accident year basis , and there's been some challenges there , I guess the question I often get from people is you're comfortable doing like I think global specialty Mgas Canada , obviously , but would you do something more , specifically in the UK on the M&A side , near term ?

Charles Brindamour: I think the performance in UK and Europe is not bad. It's not where we want it to be, to be clear. But 93.5 for that business, given where it was when we took it, I like the trajectory. You have an expense ratio drag there that comes from the fact that we have taken a multiline business, and we've made it a commercial lines business, which we love as an environment. We like the trajectory. So would we put more capital there? Yes, no doubt. The only caveat, Doug, is that in the UK commercial lines business, we are integrating the acquisition of Direct Line, which we've done in 2024. And it is the real first acquisition by my team in the UK. I'd be careful to drop a second integration. Because by the way, it's not just that they're integrating Direct Line. We're investing massively in systems.

Speaker #10: I think the performance .

Speaker #1: In UK , in Europe is not bad . It's not where we want it to be . To be clear . But you know , 93 five .

Speaker #1: For that business , given where it was when we took it , I like the trajectory . You have an expense ratio drag there that comes from the fact that we have taken multi-line a business and we've it a commercial lines made business , which we love as as an environment .

Speaker #1: We like the trajectory . So would we put more capital there ? Yes . No doubt . The only caveat , Doug , is that in the UK , commercial lines business , we are integrating the acquisition of Direct Line , which we've done in 24 , and it is the first acquisition by my team in the UK .

Speaker #1: I'd be careful to drop a second integration because, by the way, it's not just that they're integrating Direct Line. We're investing massively in systems.

Charles Brindamour: We're investing in risk selection techniques and data. We're investing in our claims strategy. There's so much bandwidth an organization can have to deliver the goods in an acquisition. But as an attractive marketplace, I would put capital in the UK commercial lines, yes. Ken, that was a high-level perspective. I don't know if you want to add some color.

Speaker #1: We're investing in risk selection techniques and data . We're investing in our claims strategy , and there's so much bandwidth . An deliver goods in an the have to organization can acquisition .

Speaker #1: But as an attractive marketplace , I would put capital in the UK commercial lines . Yes , Ken , that was a high level perspective .

Ken Anderson: Well, no, I mean, certainly not on the M&A front. But just on the quarterly performance, the 93.5 was solid. CATs were slightly lower by 2 points. But on the other side, we had the large losses. And those large losses didn't reach the CAT threshold. So that's kind of part of the story why the current accident year loss ratio was a bit higher. But overall, as you've said, we're in the 92, 93 zone, so broadly in line with expectation, but not where we're aiming to get to, which is trending down towards that 90% over the next 12 or so months.

Speaker #1: I don't know if you want to add some color . Well .

Speaker #6: No , I mean certainly not on the M&A front , but you know , just on the quarterly performance , the 93 five was solid .

Speaker #6: You know, cats were slightly lower by two points. But on the other side, we had the large losses. And those large losses didn't reach the cat threshold.

Speaker #6: So that's kind of part of the story . Why the current accident year loss ratio was a bit higher . But overall , as as you've said , we're in the 9293 zone .

Speaker #6: So broadly in line with expectation but not where we're aiming to get to , which is trending down towards that 90% over the next 12 or so months .

Charles Brindamour: Doug, I'll take you back to 2022 when that business ran at 93, printing Q4, 93.4, 95 for the year. That's why I'm saying I like the trajectory there. I like the dynamic of that marketplace.

Speaker #1: Doug , I'll And take you back to 2022 . You know , when that business ran at 99 three . Printing Q4 93 495 for the year .

Speaker #1: That's why I'm saying I like the trajectory there . And I think performance might be lumpy a bit , but I like where this is going .

Speaker #1: And I like the dynamic of that marketplace.

Doug Young: Perfect. And just one last one, just Ken, probably for you. What is the deployable capital you have right now? I can do the math on how much debt you could raise. But not the capital margin, but what's the amount that you could use for buybacks?

Speaker #9: Perfect . And just one last one . Just again , probably for you . Like what is the deployable capital you have right now ?

Speaker #9: I can do the math on how much debt you could raise, but what's not the margin or capital—what's the amount that you could use for buybacks?

Ken Anderson: Well, we have CAD 3.7 billion of capital margin at the end of the year. And obviously, then from a look-forward point of view, significant capital generation in the year ahead, net of dividends and even regular distribution roll-up investments. If you think about the capital margin, you're right. It's there to cover volatility. And from that point of view, you can think of CAD 2.5 to 3 billion of that margin would be retained in order to deal with volatility. The excess over that is certainly deployable. Of course, we're also underlevered. So when we think about deployable capital from an M&A point of view, you start to get up into the CAD 4 to 5 billion zone in terms of the capital or the M&A size that we can execute on before we would need to raise equity.

Speaker #6: Well , you know , we have 3.7 billion of of capital margin at the end of the year . And you know , obviously then from a look forward point of view , capital significant generation in the year ahead net of dividends and even regular distribution roll up investments .

Speaker #6: If you think about the capital margin , It's there to cover . Volatility . And from that point of view , you can think of , you know , two and a half to 3 billion of that margin would be retained in order to deal with volatility .

Speaker #6: The excess over that is is certainly deployable . Of course , we're also under levered . So you know , when we think about deployable capital from an M&A point of view , you know , you start to get up into the 4 or 5 billion zone in terms of the capital or the M&A size that we can execute on .

Speaker #6: Before, we would need to raise equity.

Charles Brindamour: Yeah. We've never been in that position, Doug. And I'm glad the M&A environment is constructive. But this is serious deployable capital before we issue shares. And I think at the end of the day, Doug, when I wake up in the morning and show up to work, I look at the ROE. And so we balance ROE, the intrinsic value of our share price, the M&A environment. And I think everything is attractive today. And therefore, we're thrilled with our prospects to deploy capital, including our own shares.

Speaker #10: Yeah ,

Speaker #1: We've never been in that position . Doug glad the and M&A you environment is constructive . But this is this is serious deployable capital .

Speaker #1: Before we issue shares . And I think at the end of the day , Doug , you know , when I wake up in the morning and show up to work , I look at the ROE .

Speaker #1: And so we balance ROE, the intrinsic value of our share price, the M&A environment, and I think everything is attractive to me.

Speaker #1: And therefore, we're thrilled with our prospects to deploy capital, including our own shares.

Doug Young: Yeah. I would echo and I'd just say you're sitting on excess capital. So it's not that you're only underlevered, but you also have excess capital, which weighs on ROE. But anyways, no, I appreciate all the color. Thank you very much.

Speaker #9: Yeah , I would echo and I just say like you're sitting on excess capital . So it's not that you're only under levered , but you also have excess capital which weighs on ROE .

Speaker #9: But, but anyways, yeah. No, I appreciate all the color. Thank you very much.

Operator: Next question will be from Bart Dziarski at RBC Capital Markets. Please go ahead.

Speaker #4: Next question will be from Bart Zasowski at RBC Capital Markets. Please go ahead.

Doug Young: Hi. Good morning. Thanks for taking my question. I wanted to ask around the margin expansion dynamic. So you called it out as one of the factors of the NOIPS growth track record, and AI is helping you with margin expansion, and then commercials got 12 quarters in a row. And we seem to keep underestimating the positive impact on PYD. So is it not time to revisit that 2% to 4% sort of guidance, or are there other factors that keep you from doing so?

Speaker #11: morning . Hi . Good Thanks for taking my question . wanted to ask I around the the margin expansion dynamic . So you called it out as one of the factors of the growth track record and AI's helping you with margin expansion .

Speaker #11: And then commercials got 12 quarters in a row , and we seem to keep underestimating the positive impact on PYD . So is it not time to revisit that 2 to 4% sort of guidance or are there other factors that keep you from doing so ?

Ken Anderson: Yeah. Go ahead, Ken. Yeah. Well, thanks, Bart. Going back to the PYD, first and foremost, the favorable PYD is a function of the prudent reserving of the current accident year. 5.5% in the quarter, I would say, aligned with expectations around being at the upper end of the 2 to 4 range that you mentioned. And again, reflective of that current accident year prudence that we've been taking over many years. If you look in the recent past three and five years, it's hovered around 5%. And again, when we look out near-term, we're saying not to be surprised if we're in that 4 to 5% range. It's more when you look out longer term, very difficult to predict where things will be 5+ years out.

Speaker #1: Yeah . Go ahead .

Speaker #6: Yeah . Well thanks , Bart . You know , going back to the PYD . First and foremost , the favorable PYD is a function of the prudent reserving of of the current accident year .

Speaker #6: And 5.5% in the quarter. I would say aligned with expectations, around being at the upper end of the 2% to 4% range that you.

Speaker #6: And again , reflective of that current accident year , prudence that we've been taking over many years . If you look in the recent past , you know , three and five years , it's hovered around 5% .

Speaker #6: And , you know , again , when we look out near term , we're saying not to be surprised if we're in that four 5% range .

Speaker #6: It's more when you look out longer term , very difficult to predict where where things will be . Five plus out . And years that's why the long term average of 2 to 4 , which , you know , if you go back and look over 15 years , that's where we're where we are .

Ken Anderson: And that's why the long-term average of 2 to 4, which if you go back and look over 15 years, that's where we are. And that's why we maintain the 2 to 4 range. But certainly, looking in the recent past, we're hovering around the upper end. And that's why we and we think and as we look out in the near term, 12, 24 months, that's the zone we're expecting to be in.

Speaker #6: And that's why we maintain the 2 to 4 range. But certainly, looking at the recent past, we're hovering around the upper end.

Speaker #6: And that's why we and think we and you know , as we look out in the near term , 12 , 24 months , that's the zone we're expecting to be in .

Charles Brindamour: Yeah. We're not that surprised by the sort of PYD we're seeing this quarter. And Bart, when we say, when you look at results, don't strip the PYD. Look at the combined. This is not just because it's convenient for us. It's because that's how the math works. When you build reserves, the actuary looks at the current accident year, and they put reserves aside. And they make sure that for the prior years, the reserves are adequate. But the PYD really is a function of how much reserves you build in the current accident year. And so when we say, "Guys, you should look at both combined," it's because we think that our actuaries have not changed their approach on the current accident year compared to what they used to do. And therefore, our view is, look at both combined.

Speaker #1: Yeah , we're not that surprised by the sort of PYD we're seeing this quarter . And and Bart , you know , when we say when you look at results , don't strip the PYD , look at the combined , this is not just because it's convenient for us .

Speaker #1: It's because that's how the math works. When you build reserves, you actually look at the current accident year and they put reserves aside, and they make sure that for the prior years, the reserves are adequate.

Speaker #1: But the PYD really is a function of how much reserves you build in the current accident year so when . And we say , guys , you should look at both combined .

Speaker #1: It's because we think that our actuaries have not changed their approach on the current accident year compared to what they used to do.

Speaker #1: And therefore, our view is to look at both combined. Yes, the track record in recent years has been above the top end of the range.

Charles Brindamour: Yes, the track record in recent years has been above the top end of the range. We think it'll be above the top end of the range in the near to mid-term. But one really should look at both combined. And when that changes, we'll be explicit about that as we have been over the past decades.

Speaker #1: We think it will be above the top end of the range in the near to mid-term. But one really should look at both combined, and when that changes, we'll be explicit about that.

Speaker #1: As we have been over the past decades.

Doug Young: Okay. Great. That's helpful color. Thanks, Charles. And then just on the UK and Ireland, the -2% sounds like it's turning a corner. Is there a rough timeframe as to when you would expect that growth to resume to the industry growth outlook of, call it, low to mid-single digits?

Speaker #11: Okay , great . That's helpful color . Thanks , Charles . And then just on the UK and I the -2% sounds like it's turning a corner .

Speaker #11: Is there a rough time frame as to when you would expect that growth to resume to the industry growth outlook of, call it, low to mid-single digits?

Charles Brindamour: In 2026? I mean, Bart, we told you guys it would be gradual. We were in the -5-ish sort of zone. Q4 came in at -2. That's where we're wanting to see it. And then in 2026, you need to be in positive territory. And frankly, I think that's where this is headed. Our work is not done in the UK, to be clear. There might be lumpiness and so on. But I think we'll be in positive territory this year and not too far from the industry as the year closes.

Speaker #1: In 26 , I mean , Bart , you know we told you guys it would be gradual . We had you know , we weren't a minus five ish sort of zone .

Speaker #1: Q4 came in at minus two . That's where we're wanting to see it . And then in 26 you need to be in positive territory .

Speaker #1: And frankly , I think that's where that's where this is headed . Our work is not done in the UK . To be clear , there might be lumpiness and so on , but I think we'll be in positive territory this year .

Speaker #1: And not too far from the industry as the year closes.

Doug Young: Awesome. Thanks. That's it for me.

Speaker #11: Awesome. Thanks. That's it for me.

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

Speaker #4: Next question will be from Mario Mendoza at TD Securities. Please go ahead.

Mario Mendonca: Good afternoon. Charles, as you can tell from the nature of the questions, capital is on everybody's mind. The context, of course, is that every other large-cap financial services company in Canada is fairly actively buying back stock while they also talk about potential M&A opportunities. It's with that background that I want to just pursue this a little further. The CAD 800 million in capital that was generated in the year that added to the capital margin, was that a special number, or is CAD 800 million doable for Intact on a go-forward basis?

Speaker #12: Good afternoon Charles . You can tell from the nature of the questions , capitalise on everybody's mind and the context . Of course , is that every other large cap financial services company in Canada is is fairly buying back actively stock , while they also talk about potential M&A opportunities .

Speaker #12: So it's with that background that I want to just pursue this a little further . The 800 million in capital that was generated in the in the year that added to the capital margin , was that a special number or is 800 million doable for intact on a go forward basis ?

Ken Anderson: Well, yeah, not a special number. And to be clear, that's net of a CAD 200 million buyback, which we actually did over the last six months. So we talked at Investor Day about the capital generation of the capital that we're generating. Between organic growth and dividends, we consume about half of the capital that we're generating. And that includes the ongoing roll-up that BrokerLink is doing on the distribution side as well. So to answer your question specifically, no, not a specific number. And probably it's net, as I say, of the buybacks that we've done.

Speaker #6: Well , yeah . Not a not a special number . And to be clear , that's net of a 200 million buyback , which we actually did in over the last six months .

Speaker #6: So, you know, we talked at Investor Day about the capital generation, of the capital that we're generating between organic growth and dividends.

Speaker #6: We consume about all of the capital that we're generating, and that includes the ongoing roll-up that BrokerLink is doing on the distribution side as well.

Speaker #6: So to answer your question specifically , no , not a specific number . And probably , you know , it's net , as I say , of of the buybacks that we've done .

Charles Brindamour: So Mario, I'll give you my holistic perspective on this. I might be wrong. We have debates about that all the time and with the board again yesterday. When I look at our track record in share buyback over the last decade, I think the return on that capital deployed hovered, depending on the buyback, in the 12% to 15%-ish zone, which is good. I mean, no debate there. When I look at the track record of the capital deployed in M&A, that was north of 20%. Frankly, when I look at the environment in which we operate today, I think there will be opportunities to deploy in that zone, trying to strike that balance.

Speaker #1: So Mario , I'll give .

Speaker #12: You my I'll .

Speaker #1: Give . you I'll give you my holistic perspective on this . And I might be wrong . And you know , we have debates about that all the time .

Speaker #1: And , and with the board again yesterday when I look at our track record in share buyback over the last decade , I think the return on that capital deployed over depending on the buyback , you know , in the 12 to 15 ish percent zone , which is good .

Speaker #1: I mean , no , no debate there . When I look at the track record of the capital deployed in M&A , that was north of 20% and frankly , when I the in which environment we look at operate I today , there will be opportunities to deploy in that zone trying to strike that balance and then lastly , I do think intact as a firm as a range of opportunities to deploy in capital organically , that is unmatched compared to what we're being compared against in the Canadian landscape .

Charles Brindamour: And then lastly, I do think Intact as a firm, as a range of opportunities to deploy capital inorganically, that is unmatched compared to what we're being compared against in the Canadian landscape. Our footprint is 10x what it was, and we largely outperformed everywhere. I take your point. It's an important point. And it's one we'll keep debating. But at least you get my perspective on this sitting here today.

Speaker #1: Our footprint is ten x what it was , and we largely outperformed everywhere . I take your point . It's an important point and and it's one we'll keep debating .

Speaker #1: But at least you get my perspective on this, sitting here today.

Mario Mendonca: Yeah, I do. And I think those are all important points. The reason why it's so topical right now is the market just doesn't share your enthusiasm for the robustness of the results, not this quarter or, frankly, not over the last few quarters. And I think that's why it's become so topical, because of that dichotomy between, I mean, arguably, one of your strongest quarters and then the market's reaction to it. But let me flip over to something a little different.

Speaker #12: Do — and I think, yeah, those are all important points. The reason why it's so topical right now is the market. I just share your enthusiasm for the robustness of the results.

Speaker #12: Like, not this quarter, frankly, not over the other quarters. And last few, so that's why I think it's topical because of that dichotomy between arguably one of your strongest quarters and then the market's reaction to it.

Speaker #12: But let me flip over to something a little different.

Ken Anderson: I agree with you on that. We'll take that under advice.

Speaker #13: I agree with you .

Speaker #1: On that .

Speaker #13: I'll take that under advice .

Mario Mendonca: Understood. Sort of a different question is, I think the first question on this call was about AI and disruption. I think you got part of the way there to answering the question. Let me be a little more direct. The UK market was harmed, if you will. I mean, it hurt a lot of the manufacturers when distribution became essentially the brokers became intermediaries. The manufacturers were impacted. The question is, the market's concerned that AI could do precisely the same thing to Canada, to the US. Are there structural or regulatory reasons why that wouldn't be the case, or is it entirely plausible?

Speaker #12: Under understood . Sort of a different question is early . I was about AI and disruption . Disruption . And I think you got part of the way there to answering the question .

Speaker #12: But let me be a little more direct . The UK market was harmed , if you will . It hurt a lot of the manufacturers when distribution became essentially the brokers became disintermediated .

Speaker #12: The manufacturers were impacted. The question is: the market's concerned that AI could do precisely the same thing to Canada, to the US. Are there structural or regulatory reasons why that wouldn't be the case?

Speaker #12: Or is it entirely plausible?

Charles Brindamour: I think one big difference with the UK, and we spend a lot of time looking at personal lines in the UK, is that the manufacturers just went along with it, basically. The relationship shifted with the distributor. I do think that the brand and the credibility of our offers in personal lines, and the importance of getting people back on track in backing those brands, for me, is a big differentiator between the UK market and what's happening here in North America. I do think that this will change the nature of advice. I do think that this could contribute to the fact that the direct world today is growing faster than the broker-distributed world in personal lines. We've built optionality to win on both sides. For me, this is a potential disruptor.

Speaker #1: I think one one big difference with the UK and and you know , we spent a lot of time looking at first lines in the UK is that the manufacturers just went along with it basically .

Speaker #1: And the relationship shifted with the distributor. I do think that the brand and the credibility of our offers in purpose lines, and the importance of getting people back on track in backing those brands.

Speaker #1: For me, it's a big differentiator between the UK market and what's happening here in North America. I do think that this will change the nature of advice.

Speaker #1: I do think that this contributes, or could contribute, to the fact that the direct world today is growing faster than the broker-distributed world in personal lines.

Speaker #1: But we've built optionality to to win on both sides . For me , this is a potential disruptor , but I think that the manufacturers , their brand and their value proposition does not disappear here might .

Charles Brindamour: But I think that the manufacturers, their brand and their value proposition does not disappear here. Distribution might shift as a result of that. But I think the opportunity for strong manufacturers is really there.

Speaker #1: Distribution shift as a result of that . But I think the opportunity for strong manufacturers is , is really there .

Mario Mendonca: And are you doing anything right now to make sure that you don't become a victim the way the UK manufacturers did?

Speaker #12: And are you doing anything right now to make sure that you don't become a victim the way the UK manufacturers did?

Charles Brindamour: 100%. I mean, Mario, we've been focused on that sort of disruption for over a decade. That's why we have built the brands we've built. That's why we've invested massively in the physical world. And that's why we're investing also heavily in our digital channel, which have been our fastest-growing channels in the past 24 months. And right now, we're doing a fair bit of work to make sure that when it comes to search, that we show up prominently in all channels, including in GEO or in LLM distribution channels.

Speaker #1: 100% . I mean , Mario , we've been focused on that sort of disruption for over a decade . That's why we have built the brands we've built .

Speaker #1: That's why we've invested massively in the physical world . And that's why , you know , we're investing also heavily in our digital channel , which have our fastest growing channels in the been the past 24 months .

Speaker #1: And we're doing, right now, a fair bit of work to make sure that when it comes to search, we show up prominently in all channels, including in geo or in LM channels.

Mario Mendonca: Got it. Thank you for your help.

Charles Brindamour: Okay.

Speaker #12: Thank God you for your help.

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

Speaker #7: Okay .

Speaker #4: Thank you, ladies and gentlemen. This is all the time we have today. I would like to turn the call back over to Geoff Kwan.

Doug Young: 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. A transcript will also be available on our website in the financial report section. Of note, our 2026 Q1 results are scheduled to be released after market close on Tuesday, 5 May 2026, with the earnings call starting at 11:00AM Eastern the following day. Thank you again. This concludes our call.

Speaker #1: 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.

Speaker #1: A transcript will also be available on our the website in financial section . Of note , our 2026 first quarter results are scheduled to be released after market close on Tuesday , May the 5th , with the earnings call starting at eastern the day .

Speaker #1: 11 a.m. following Thank you again . And this concludes our call .

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.

Speaker #4: Thank you sir . Ladies and gentlemen , this does conclude your conference call for today . Once again , thank you for attending .