Intact Financial Aktie

Ladies and gentlemen, [Foreign Language], good afternoon. My name is Bill Young, and I'm the Chair of the Board of Directors of Intact Financial Corporation. On behalf of the directors, I would like to welcome you to the 2026 Annual Meeting of Shareholders of the company.

Welcome to the Annual Meeting of Shareholders of Intact Financial Corporation. It is a privilege for me to chair this meeting and address our shareholders. Please note that this meeting will take place in both English and French. Simultaneous translation is being provided through our webcast, and we welcome questions in either language. In addition, closed captioning is available by clicking on the CC button located on the top right side of your screen when you are in the English or French channel. Should you have any technical issues during the meeting, please e-mail [email protected].

As Chair of the Board of Directors of the company, I will act as Chair of this meeting as per the company's bylaws. I now call the meeting to order.

I would like to draw your attention to the forward-looking statements and disclaimer currently displayed on the webcast page. Certain forward-looking statements may be made during this meeting and actual results could differ from these statements.

Joining me today are Charles Brindamour, Chief Executive Officer of the company, who will deliver his report later in the meeting; and Stephanie Lee, Senior Vice President and General Counsel, who will act as Secretary of the meeting. My fellow directors as well as members of the senior management of the company have also joined for today's meeting.

Timothy Lee, representative of Computershare will act as a scrutineer of the meeting. At this time, I would like the secretary of the meeting to review the procedures for voting and for asking questions.

[Interpreted] Thank you, Bill. If you have already voted by proxy prior to the meeting and do not wish to change your vote, you do not need to vote again. Here are the steps to follow for shareholders and proxy holders attending the meeting today who wish to vote during the meeting. Only shareholders and proxy holders who have logged in as shareholders with a user name provided by Computershare will be able to vote during the meeting.

If you are a shareholder or a proxy holder who has not yet voted or if you wish to change your existing vote, you may do so by clicking on the voting button at the top left of your screen. Voting is now open and will remain open until all voting matters have been presented. Those attending the meeting as guests are not able to vote. Following the closing of voting, I will announce voting results for each matter and these voting results will be available on SEDAR+ following the meeting.

We encourage you to ask questions during the meeting. Shareholders and proxy holders attending the meeting can ask questions in writing or alternatively live via telephone by clicking on the Questions button at the top left of your screen. Please note that to be able to ask questions, you must be logged into the meeting as a shareholder using the username provided by Computershare. Those attending the meeting as guests will not be able to ask questions.

If you wish to ask a question in writing, type the question in the text box, indicate whether it relates to a specific item on the meeting agenda or is of a more general nature, and then click the Send button at the right side of the text box. I will read questions received in writing out loud at the appropriate time.

If you wish to ask a question in real time via telephone, type your full name and phone number in the message box as well as the topic of your question, and then click the Send button at the right side of the text box. An operator will contact you with the number you have provided, and we'll connect your call to the meeting. I will then invite you at the appropriate moment to ask your question.

We will address questions regarding specific agenda items at the time these items are presented, but please feel free to send your questions at any time. General questions will be addressed following remarks by our CEO and questions of a similar nature may be grouped together in a single question. If your question concerns a client matter, please include your contact information and a member of our customer service team will be in touch with you following the meeting. Finally, if there are any questions we are not able to answer today, we will reach out to you personally after the meeting to ensure we answer your question.

[Interpreted] Thank you in advance for complying with these procedures.

Thank you, Stephanie. I have received satisfactory proof that the notice calling this meeting was duly sent to all shareholders of the company under the Notice and Access regime, the whole in conformity with the bylaws of the company and with the corporate and security laws of Canada. We have received proxies representing more than 77% of the over 177 million common shares outstanding.

I hereby declare that notice requirements have been met, that a quorum is present and that this meeting is properly constituted for the transaction of business. I further direct that the Secretary maintain the proxies and record of attendance with the official records of this meeting. The meeting is now open.

At this time, I would like to remind everyone attending that the minutes of last year's Annual Meeting of Shareholders, along with the meeting agenda and other documents, including the management proxy circular and the annual financial statements are available by clicking the Documents button at the top left of your screen as well as under the Investors tab on the company's website. For the purpose of this meeting, I will ask Stephanie Lee, who is a shareholder, to move all proposals.

The first order of business is the receipt of the company's financial statements for the year 2025. Copies of these financial statements were made available to shareholders who requested them, along with the annual meeting documentation. Copies are also available on our website and may be obtained from the Secretary's office or the Investor Relations Department of the company. Can the secretary confirm whether any questions have been received with respect to this matter?

There's no questions on this topic, Bill.

Thank you. I confirm that the consolidated financial statements of Intact Financial Corporation for the year ended December 31, 2025, and the auditor's report related to these financial statements have been hereby received by this meeting.

The next item of the meeting is the appointment of the auditor. Management, the Audit Committee and the Board of Directors and the company have recommended that the appointment of Ernst & Young LLP as the company's auditor for the 2026 fiscal year and until the next annual meeting. Can the secretary confirm whether any questions have been received with respect to this matter?

No questions on this topic, Bill.

Thank you. May I have a proposal in this regard?

My name is Stephanie Lee, and I am a shareholder of the company. I would like to move that Ernst & Young LLP be appointed as auditor of the company for the year 2026 and until the next annual meeting.

Thank you. I would like to remind all shareholders and proxy holders in attendance that voting is currently open and will remain open until the last voting matter has been presented. We will now proceed with the election of the directors of the company. 13 directors are nominated for election at this meeting. All directors proposed by management of the company were elected by shareholders at last year's annual meeting except for Mr. Thomas Flynn, our new Director Nominee.

Please also note that in accordance with the company's advanced notice bylaw, it has been confirmed that no other director nominations were received by the company. Can the secretary confirm whether any questions have been received with respect to the election of the directors?

No questions, Bill.

Thank you. May I have a proposal in this regard?

My name is Stephanie Lee, and I am a shareholder of the company, and I hereby propose the following persons as directors of the Board of Directors of Intact Financial Corporation as of this meeting and to remain in that function until the next annual meeting. Charles Brindamour, Thomas Flynn, Michael Katchen, Stephani Kingsmill, Jane Kinney, Rob Leary, Mike Miller, Sylvie Paquette, Stuart Russell, Indira Samarasekera, Frederick Singer, Carolyn Wilkins and Bill Young.

Thank you. Voting is currently open if you wish to do so and will remain open until the last voting matter has been presented.

The next item on the agenda is the vote on the resolution relating to the confirmation, ratification and approval of the amended and restated shareholder rights plan without changes, last confirmed at the Annual and Special Meeting of Shareholders on May 11, 2023, and most recently approved by the Board of Directors at its meeting of February 10, 2026. Can the secretary confirm whether any questions have been received with respect to this matter?

No questions on this topic, Bill.

Thank you. May I have a proposal in this regard?

My name is Stephanie Lee, and I am a shareholder of the company. I propose that the following resolution be approved. Be it resolved that the amended and restated shareholder rights plan agreement dated April 19, 2017, between the company and Computershare Investor Services Inc., be and is hereby ratified, reconfirmed and reapproved. Also that any director or officer of Intact Financial Corporation is authorized to do all such acts and things and to execute and deliver all such instruments, agreements and other documents as in such person's opinion may be necessary or desirable in connection with the foregoing to give full effect to this resolution.

Thank you. Voting remains open if you wish to vote on any of the matters presented and will close following the presentation of the next matter.

The next item on the agenda is the advisory resolution relating to the company's approach to executive compensation. The Board of Directors believes that shareholders should have the opportunity to fully understand the objectives, philosophy and principles that it is used and integrated to make executive compensation decisions.

It is the Board of Directors' intention that this shareholder advisory vote will form an important part of the ongoing process of engagement between shareholders and the Board of Directors concerning compensation. The Board of Directors has recommended that shareholders approve the nonbinding advisory resolution. Can the secretary confirm whether any questions have been received with respect to this matter?

There are no questions on this matter.

Thank you. May I have a proposal in this regard?

My name is Stephanie Lee, and I am a shareholder. I move that the following resolution be approved. Be it resolved on a nonbinding and advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the company's proxy circular made available in advance of the 2026 Annual Meeting of Shareholders.

Thank you. We'll now be closing voting. I invite those shareholders or proxy holders who have not yet cast their votes but wish to do so, to complete voting now.

[Voting]

Voting is now closed. I will now ask the Secretary to report the voting results.

Thank you. I have received the scrutineer's report. The voting results will be filed on SEDAR+ following this meeting. The following are the voting results. Ernst & Young has been appointed as auditor of the company for the year 2026 and until the next annual meeting by at least 94% of votes cast. All directors nominated for election have been duly elected by an average of at least 98% of votes cast and will hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. The company's amended and restated shareholder rights plan was ratified, reconfirmed and reapproved by at least 96% of votes cast, and the advisory resolution on our approach to executive compensation was approved by at least 52% of votes cast.

Thank you, Stephanie. Concerning our advisory resolution on our approach to executive compensation, the level of support is below our historical results. We take this outcome seriously, and we appreciate the feedback we heard from shareholders. We recognize that this year's vote took place in the context of the CEO's one-time special 2025 performance stock option grant.

The Board approved this grant for 2 core reasons: managing CEO retention as a strategic priority and incentivizing the CEO to continue driving record performance for shareholders. It reflects the Board's confidence in Charles' leadership, which was echoed by shareholders voting close to 100% for his reelection as a director.

The value of this grant is entirely contingent on the achievement of highly demanding share price performance requirements. It delivers value to the CEO only have shareholders first experience significant and sustained share price appreciation. Shareholders' feedback on key topics, including executive compensation is extremely important to us. Over several years of constructive and supportive shareholder engagement, shareholders consistently highlighted Charles' exceptional performance as CEO and the importance of his retention.

The Board and the Human Resources and Compensation Committee remain committed to an executive compensation program that is strongly aligned with the performance and long-term shareholder interest. We will continue to engage with shareholders on this and other key topics through the company's established shareholder engagement program. Thank you.

We have now completed the official business of the meeting, and we'll now hear reports from myself and the Chief Executive Officer. This will be followed by a question-and-answer period. As a reminder, if you are a shareholder or a proxy holder and wish to ask a question, you can submit a written question or enter your name and phone number to be contacted and ask a question in real time via telephone by clicking the Questions button at the top left of your screen.

I'll now deliver my report. In 2025, Intact once again helped customers get back on track, delivering strong financial results and advanced our long-term global strategy. We continue to build on our market-leading position in Canada. We advanced our global strategy in specialty lines. With the rebranding of our UK&I business to Intact Insurance. We became a global company under one unified brand, strengthening our position in the U.K. and Ireland.

Intact's 2025 financial results show both resilience and long-term strength. The business remains well positioned to absorb both near-term and long-term pressures and to manage and deploy capital with discipline. We achieved these results against the backdrop of disruptive global trends including geopolitical tensions, accelerated AI evolution, significant market volatility and the continued impact of climate change.

Our success in navigating risk exposure is supported by strong governance. As cyber and AI risks have grown in prominence, the board has spent significant time assessing these risks, and we continue to do so with climate. We are confident in Intact's proactive approach to navigating these market realities. Having the right people on the Board is key to effective oversight and risk management. We are pleased that Tom Flynn, former CFO and Chief Risk Officer at a large Canadian bank is joining us on the board.

Tom's experience in risk management and his long-standing relationships with regulators strengthen our bench. This addition enhances our ability to oversee strategy and risk with rigor.

Now a few words about shareholder engagement, which is core to the Board's mandate. Throughout the year, our engagement with shareholders focused on 6 themes. First, executive compensation and CEO retention; second, capital deployment and M&A; third, climate and sustainable investing; fourth, board composition and planning and priorities: fifth, strategy and growth; and sixth, data and AI. The shareholders we met with were highly engaged. They were keen to understand how our early investments in AI helped make Intact a global leader in pricing and risk selection. They expressed continued satisfaction with our disciplined approach to capital deployment and M&A.

And as I touched on earlier, their constructive feedback over the last several years has helped to inform our plans for executive retention and compensation with the importance of retaining Charles a CEO being consistently raised as a strategic priority for our shareholders. Leadership continuity is essential to Intact's execution of our strategy. This succession pipeline becomes more and more important as our organization grows.

Our approach is working. Across the business, Intact has an average of 5 successors for 250 of our senior executive roles to ensure continued outperformance. Our strength in the market also helps us attract top external talent globally across our business units. To further support our leaders development in 2025, we launched EDGE. Edge stands for executive, development, global, experience. It's a training program for senior leaders across our markets.

The goal of EDGE is simple: to continue to future-proof Intact's track record of outperformance which we recognize as driven by our people. Our focus on leadership development reflects our broader commitment to investing in our people who are key to our success. On behalf of the Board, I want to thank each of Intact's 32,000 employees for advancing our strategy and delivering for customers, brokers and our shareholders. I also want to thank the Intact leadership team especially our CEO, Charles Brindamour, for delivering the calm, focused leadership that disruptive times demand.

To my fellow board members, I'd like to express my gratitude for your engagement, counsel and thoughtful oversight. In a complex world that has tested every business, your stewardship has helped Intact thrive and maintain the trust of our shareholders.

Finally, to our shareholders, customers and brokers, on behalf of everyone at Intact, thank you for your trust in this year of constant change. With your support, we entered 2026 with momentum, a strong balance sheet and a winning team. As the new world order is rewritten, Intact continues to transform from Canadian champion to a global player, strengthening Canada's future and contributing to overall stability. We are proud of the role Intact is playing, and we are grateful that you are with us on this path. Thank you.

I will now invite Charles Brindamour to deliver his remarks.

[Interpreted] Hello, everyone, and thank you for joining us today. 2025 was certainly a year of remarkable disruption. We saw trade wars, redefined geopolitical alliances and a new world order. AI moved from novelty to necessity, starting to reshape the economy and workforce. And the climate emergency continued to break records. While Intact was not immune to these changes, like many businesses, we faced volatility in the markets and pressure on operations and supply chains. And our teams were on the front lines of extreme weather. And yet, against this backdrop, Intact had another strong year.

Our success in 2025 was not luck or coincidence. It's the result of a deliberate long-term strategy. And today, I want to talk you through the 4 principles that anchor our strategy. First, you need to be very clear on what success looks like. Second, you must build a game plan that's outside in. It should cut the noise and focus on the long term. Third, your plan needs to build on your strengths. And finally, strategy is nothing without a winning team. And it's important to leverage your people and over-index on talent.

So let's start with that first principle, clarity on success. To succeed as a business, you need to know where you're going. And for Intact, success means 3 things.

[Interpreted] First, we want our customers to be our advocates. Ultimately, it is our customers who decide who wins in the marketplace. Second, we want our employees to be engaged. We cannot succeed if our employees are not proud of their work or motivated to give their best. And third, success means being one of the most respected companies wherever we operate, not just for our financial results, but also for our investments in communities.

We aim to outperform the industry's return on equity by 500 basis points and grow our net operating profit per share at an annual rate of 10% over the long term. We are committed to achieving net zero emissions by 2050, which means cutting emissions from our operations in half by 2030. And we want 3 out of our 4 stakeholders to recognize us as a leader in building resilient communities.

When objectives are clear, they guide every decision and that drives outperformance. The second principle of a good game plan is that it must be outside in. By that, we mean that we focus on deep trends that will matter for decades, not quarters. Let me highlight the ones we're most focused on.

Let's begin with geopolitics. Last year, we saw a change in the global trade agenda. And while tariffs had less of an impact than anticipated, they'll persist for years. This will slow economic growth and put pressure on inflation. As of early May, the Middle East conflict is ongoing and will likely last for at least a number of months. This conflict will exacerbate the pressure on growth and inflation that we're already building in the system.

And so as a firm, remaining focused on facing inflationary pressures will be paramount. And further, making sure we're prepared for a range of scenarios, including heightened cyber attacks is also part of our response. But beyond cost pressure, the geopolitical environment is increasing business risk and financial market volatility. Changes in U.S. policy have brought long-standing social and political tensions to the surface. And so uncertainty is up, which means that the cost of doing business and deploying capital also goes up. The U.S., though, is still a tremendous place to invest in, but we must adapt to these changes.

This brings me to the next trend. As geopolitical and economic conditions evolve, so do customer expectations. Customers want value for money, speed, simplicity and a personalized digital experience. That's why we invest heavily in our digital channels.

[Interpreted] More digital activity means more data, and that's good news for Intact because it's one of our core competencies. This explosion of data is also accelerating the use of artificial intelligence, including generative AI. For over 10 years, Intact has been using data and AI to strengthen its competitive advantage in pricing and risk segmentation.

Today, we are also investing in AI to improve customer service, software engineering and efficiency, but more AI also mean more cybercrime. The global cyber risk insurance market is expected to double by 2030. We have, therefore, redoubled our efforts to protect our systems and customer data. At the same time, this environment presents a significant business opportunity, and this is why we continue to offer cybersecurity and insurance solutions across all of our markets.

Another trend is the changing landscape of competition, general management agencies, wholesalers, and brokerage firms continue to grow faster than the industry as a whole. Our global specialty solutions positions us well to capitalize on this trend. We are also paying attention to the major trends shaping the retail landscape, AI-powered assistants such as ChatGPT are changing the way consumers search for information and make purchasing decisions. Thanks to the strength of our brands, our advanced AI capabilities, our robust digital channels and our extensive distribution networks. We know we can adapt and emerge stronger than ever.

Insured losses from natural catastrophes exceeded USD 100 billion. Addressing this crisis requires an all of society approach with both the public and private sectors, playing a role. We need to invest more in adaptation, because every dollar invested can prevent $2 to $10 in direct losses. Intact has been leading on this front for over a decade. Climate is a deep trend where we can win while helping society.

Now to the third principle of a good game plan, it must be built on your strength. Our strategy is centered on where long-term trends and our strengths intersect.

[Interpreted] We are a global leader in the use of data and AI for risk selection. Our hundreds of AI experts have developed nearly 600 models. These models generate over $220 million in profits each year, and we are on the track to exceed $500 million by 2030. Our in-depth expertise in claims management and our robust supply chain also gives us a significant advantage. We have the largest claims team in Canada, 38 Intact service centers and on-site or restoration company has nearly 2,000 specialists. In 2025, we expanded on-site presence in Quebec through the acquisition of Excellence Renovation. This should enable us to increase our operations in this market by nearly 50%.

We also own Jiffy, Canada's #1 app for home improvement projects. Jiffy for its part, doubled its presence across the country in 2025. Another of our unique strength is our solid expertise in capital and investment management. We manage over $42 billion in assets ourselves. In 2025, our investment return increased -- our investment returns rather increased by 5% over 12 months. Over the past 5 years, our investment portfolio has outperformed those of our industry peers by approximately 100 basis points and strong performance means opportunities.

Since Intact was founded in 2009, our footprint has grown tenfold. We see many areas where we can leverage our strengths. We want to strengthen our leadership position in Canada. We are already the largest property and casualty insurer in Canada with a market share of nearly 20%, and we believe we can grow our Canadian operations by 50% by 2030. So focusing on distribution is essential to achieving this goal. BrokerLink is a powerful driver of broker-led growth. The company reached $5.1 billion in annualized premiums in 2025 and is targeting $10 billion by 2030.

As for direct-to-consumer distribution, belairdirect is gaining momentum, thanks to the strength of digital channels. It reached $4 billion in direct premiums in 2025. The strength of our brands also matters. Intact Insurance remains the most recognized insurance brand in Canada and belairdirect ranks the third. Overall, we delivered an exceptional performance in Canada in 2025. We outperformed our peers in both revenue and net income, demonstrating our ability to grow and deliver strong results at the same time.

Our next opportunities in the U.K. and Ireland. We have access to a GBP 25 billion U.K. commercial lines market, and we own just 6% of it. So the room to grow is significant. In 2025, RSA and NIG rebranded to Intact Insurance, bringing more than 5,000 employees under our global brand. Our ambition is to double the UK&I business by 2030. And to get there, we focused on making it easier for brokers to do business with us. They're noticing. They voted us the #1 insurer in the U.K. for commercial lines claims and 90% say they value our specialized expertise, up 5 points year-over-year.

[Interpreted] In the Global Specialty Solutions segment, the opportunity is significant. We have access to a market worth over $500 billion. We aim to reach $10 billion in annual direct premiums by 2030. Currently, we are already approaching $7 billion. By leveraging our strength, we have maintained strong performance across all our business segments. But our greatest strength is our people. Now 32,000 people worldwide. Our strategy on this front is built on 3 pillars: being a best employer, attracting top talent, and enabling our people to thrive.

In '25, we achieved best employer status in Canada, the U.S. and in the U.K. and Ireland. Over 25% of employees were promoted or changed roles internally and 70% of leadership roles were filled from within. And thanks to our people and a strong game plan. Intact is now better positioned than ever to be there for customers and deliver for shareholders in good and bad times. Overall, we've built a machine that can withstand risks, shocks and industry pricing cycles.

Our track record over the past 15 years through the cycle is solid. Our net operating income per share has grown at a compounded rate of 14% over the last 5 years, 12% over the last 10 and 15 years. Our ROE outperformance has been almost 700 basis points on a 5-, 10- and 15-year basis. Our book value per share grew at a compounded rate of 13% over the last 5 years and 10% in the last 10 and 15 years. That consistency of delivery shows that external factors did not inhibit our ability to deliver ROE outperformance or double-digit earnings growth annually over time.

Remaining focused on profitable growth, protecting underwriting margins and allocating capital with discipline wins the day. This gives me a high level of confidence for what's ahead. And it's with that mindset that we closed a successful 2025 and face into the next decade.

So I'd like to end by thanking our teams because you dedicated execution of our game plan has brought us the strong position we're in today. Also like to thank brokers, customers, investors, for your ongoing trust. And there's no doubt in my mind that with your support, we'll continue to help people, business and society prosper in good times and be resilient in bad times. Thank you.

Thank you, Charles. We will now address any general questions from shareholders and proxy holders. As a reminder, if you wish to ask questions, you can submit a written question or enter your name and phone number to be contacted and ask a question in real time via telephone by clicking the Questions button on the top left-hand side of your screen.

Questions of a similar nature may be grouped together in a single question. If your question concerns a client matter, please indicate your contact information and a member of our customer service team will get in touch with you following the meeting. Finally, if there are any questions we are not able to answer today, we will reach out to you personally after the meeting to ensure we answer your question. Can the secretary confirm whether any questions have been received?

Yes, Bill, we have a shareholder on the telephone, Matt Price, who has a question.

Can you hear me?

Yes.

Good afternoon, everyone. My name is Matt Price. I'm the Executive Director with Investors for Paris Compliance. We've been analyzing and reporting on Intact's net zero activities for a number of years. And thank you for the opportunity to pose a question today. We'd like to first congratulate Intact on continuing to reduce its finance emissions in absolute terms with over $50 billion in investments. Intact has a unique opportunity and responsibility in this regard, and we hope to see similar progress for Intact on the underwriting side, measuring and setting targets for insurance-related emissions.

My question relates to Mr. Brindamour's statements about Intact's positioning, including its lobbying activities around adaptation. Indeed, with climate damages already amounting to tens of billions in Canada each year, adaptation is an urgent necessity. But what is the company's position on the state we're adapting to. Missing from Intact's public statements is anything about societal emissions reductions without which adaptation becomes a losing proposition. This extends to the Insurance Bureau of Canada, which Intact support its views.

Without economy-wide reductions, not only do we not know where, how and what scale to make adaptation investments, but there is a point at which the world becomes uninsurable. You'll note that when you watch Mad Max movies, you won't see any insurance brokers. My question to Mr. Brindamour, given the Intact's business fundamentally depends on a stable climate, why the relative silence on the need for societal emissions reductions?

Matt, thank you very much for your question. The energy transition and the importance of going to net zero is very high for us. That's why we're committed to get to net zero by 2050. We're committed to reducing our emissions by 50% by 2030, and we've made good progress on this front. Investment emissions down 44% over 2019. Operations emission, down 33%, again over 2019. We've launched a range of products that support the energy transition. We're engaged with emitters. We're also building a renewable energy global business to be an agent of change on the energy transmission or the energy transition or on mitigation.

So for me, the actions we're taking are, I think, more important than what we're actually saying. We are part of many discussions on the energy transition and the importance of going to net zero with elected officials, provinces, the federal government and on global platforms. We're also part of research on this front. But one thing that is clear to us is that the need to adapt has never been more important and not enough people talk about that, and that's why we choose to concentrate on adaptation.

If you look, Matt the amount of energy that is going to the mitigation side and to the energy transition per se, you'll notice that for every dollar invested in adaptation and preparing our country for the burden of natural disasters that will increase, there's about $24 invested in climate mitigation and the energy transition. We think that is very good that we're investing in the energy transition, and then moving society to net zero. But I think not enough people are focused on adaptation and that is the area we choose to focus on because a strong voice is needed on adaptation.

And so we absolutely believe in both as proven by the actions that we're taking. But when it comes to public statements and the space we want to occupy in terms of advocacy, we feel more energy needs to go from adaptation because not enough people are talking about adaptation. Thank you for your question, Matt.

Stephanie, are there any other questions?

No further questions, Bill.

Thank you. We have now completed our agenda for this meeting. I declare the meeting closed, and thank you for attending. Have a great day. [Foreign Language]

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q1 2026 Results Conference Call. [Operator Instructions] Also note that this call is being recorded on May 6, 2026. And now I would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead.

Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our first 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. Before we start, please refer to Slide 2 for a disclaimer regarding the use of forward-looking statements, which form part of this morning's remarks and Slide 3 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, Chief Operating Officer. We will begin with prepared remarks followed by Q&A.

And with that, I will turn the call over to Charles.

Good morning, and thanks for joining us. Last night, we announced another very strong quarter. Net operating income per share increased 8% to $4.33, our highest ever in Q1. NOIPS has grown at a compounded rate of 14% in the past 5 years and 12% over a decade. Just as important, our operating ROE came in at 19.4%, the third consecutive quarter above 19% despite a very strong balance sheet. For '25, we estimate that our ROE outperformance reached 740 basis points, well above our 500 basis points objective and higher than our 670 basis points track record in the last decade.

Our capital generation engine continues to strengthen our balance sheet, giving us a lot of optionality on capital deployment. Our top line growth in Q1 was 4% and 5% when you exclude the nonrecurring items in personal property. I'm encouraged to see continued strength in Personal Lines as well as sequential improvements in Commercial and Specialty Lines in both the U.K. and in Canada. The combined ratio for Q1 of 91.3% was in line with last year. This was an excellent result, reflecting our continued disciplined underwriting. Looking ahead in '26, I expect the platform overall to continue to deliver top and bottom line industry outperformance.

Let me now provide some color on the results and outlook by line of business, starting with Canada. In personal auto, premiums grew 9% in the quarter. With the industry remaining unprofitable in '25, we expect industry premium growth to remain in the high single digits throughout the year. Over the next 12 months, when it comes to the industry, reforms will take place in both Ontario and Alberta. We view those as positive for drivers and for the vibrancy of the automobile insurance market in these provinces. In Alberta, in particular, these reforms will go a long way to stabilize what's today a loss-making market with severe capacity shortages. Overall, in personal auto in Canada, our underlying loss ratio improved 2.2 points year-over-year. The overall combined ratio of 94.4% was a strong result for a first quarter, and we remain very well positioned to sustain our sub-95% annual guidance.

In personal property, premium growth was 3%, driven by a 2% increase in units. As I mentioned on our call last quarter, Q1 premium growth was impacted by 5 points from onetime items in our affinity and travel business. Adjusting for this, growth is running in the upper single-digit range, a level we expect to return to in Q2. The combined ratio of 84.4% was strong, reflecting our robust underlying performance and lower catastrophe losses. Personal property is really set up to operate at a sub-95% combined even with severe weather.

In Commercial Lines, premium growth was 2%, a 1-point improvement sequentially, driven by further momentum in our growth initiatives despite close to 2 points drag due to mix as competition is more intense for large accounts. This mix drag is intentional. It results from discipline across all segments, the deployment of machine learning models and pricing and picking the right verticals to grow in, in Specialty Lines. Given these are geared to drive combined ratio improvement, a drag in mix doesn't translate in a drag in absolute earnings growth.

Talking about growth, we still expect the industry premium growth in the low to mid-single-digit range over the next 12 months. On the combined ratio front in Commercial in Canada, very strong at 86.2% despite more large losses year-over-year. Looking ahead, our business remains very well-positioned to deliver a sustainable low 90s or better performance, and we expect to continue to outperform the industry, both from a top and bottom line point of view.

Moving now to our UK&I business. Premiums increased 2% in the quarter, a 4-point improvement sequentially as expected. While our top line growth may vary quarter-to-quarter, we expect it to gradually improve in 2026 as we leverage growth opportunities and focus on service to our brokers and customers. We still expect industry premium growth in the low to mid-single-digit range over the next 12 months. The combined ratio of 103.2% was disappointing and included 8 points of elevated CATs and large losses. And so as we continue to enhance our pricing and risk selection models, our technology capabilities and the expense base in the coming months, we're confident that this business is on track to evolve towards a 90% combined ratio.

In the U.S., premiums increased 4% year-over-year, and we continue to grow faster in our most profitable lines. Our broader product offering, combined with continued momentum in expanding and strengthening broker relationships is delivering positive results. From an industry perspective, we expect premium growth to continue in the mid-single digit over the next 12 months. The combined ratio of 83.4% in the quarter improved 3 points year-over-year, reflecting continued underwriting discipline and lower catastrophe losses. Our focus on profitable growth helped us deliver the 11th successive quarter in a row with a sub 90% combined ratio. Our team also continued to execute on our strategic priorities in the first quarter.

Let me highlight a few of these achievements. First, we're a global leader in leveraging data and AI within the P&C industry. We're now realizing $220 million in annual recurring benefits, up from $150 million we announced at the Investors Day last year. We're well on our way to exceeding our $500 million target. In Global Specialty Lines, we continue to expand our product offering as we began writing in both the U.S. construction liability through Shepherd, an MGA, we have a minority stake in, as well as European trade credit via Carton Trade, an MGA where we have a controlling stake. We've also expanded our marine offer globally and recently launched a Surety business in the U.K., tremendous momentum in Global Specialty Lines.

In our U.K. Commercial Lines business, our U.K. rebrand continues to gain traction. Broker advocacy continues to improve quarter-over-quarter and brokers are increasingly recognizing the product and service improvements we've made since the launch. With best or better than industry scores improving on a sequential basis by 17 points on consistency of service, 7 points on ease of contact and 10 points on quality of cover. I'm pleased with the progress we're making in the U.K.

Overall, our track record of delivering for shareholders through the cycle is really solid. Our net operating income per share has grown at a compounded rate of 14% over the last 5 years and 12% over the last 10 and 15 years. Our ROE outperformance has been almost 700 basis points on a 5-, 10- and 15-year basis. Our book value per share grew at a compounded rate of 13% over the last 5 years and 10% in the last 10 and 15 years. That consistency of delivery shows that external factors, including industry pricing cycles did not inhibit our ability to deliver both ROE outperformance and double-digit earnings growth annually over time. Remaining focused on profitable growth, protecting underwriting margins and allocating capital with discipline wins the day.

And if I look prospectively, there are a number of very specific reasons why our track record can be maintained despite investor concerns about broader industry pricing cycles. First, the vast majority of our business operates where market conditions are constructive, north of 80%. Second, across all segments, we leverage our pricing and risk selection advantage to navigate even the toughest markets. These tools are available in the field to help underwriters grow in the right segments with the right accounts. Third, our sandbox is 10x bigger than a decade ago and offers tremendous growth optionality. Our footprint today is not only much larger, but it's diversified across geographies and specialty verticals.

Our game plan obviously targets most profitable segments, regions and customers. And finally, beyond a diversified footprint and advantage in risk selection, we've built an ROE advantage by leveraging claims, supply chain, distribution and asset management. And this allows us to ensure the ROE is solid in all phases of the so-called industry pricing cycle. Ultimately, the sum of these attributes has not only allowed us to shift the ROE in an upper teen zone, it's also resulted in a lower ROE volatility versus our peers.

In fact, since 2011, the standard deviation of our ROE was half that of our peers. We've demonstrated in past decades that the Intact machine is built to create value in good and in bad times. And I'd say we're even better positioned today. That's why we've decided to accelerate buying back our own shares. While our priority remains capital deployment through acquisitions, the big disconnect between our share price and the underlying performance and earnings power of the firm is too good an opportunity to pass up.

So finally, I want to thank our employees for their efforts in delivering yet another record quarter and for positioning us to deliver exceptional returns to shareholders in the years ahead. It's your contributions day in, day out that allows us to build such an outstanding machine. I have no doubt we'll continue to deliver at least 10% annual net operating income per share growth over time and at least 500 basis points of ROE outperformance every year.

With that, I'll turn the call over to our CFO, Ken Anderson.

Thanks, Charles, and good morning, everyone. Our record performance in 2025 has carried into the first quarter of 2026 with an excellent start to the year. A strong combined ratio of 91.3% and higher investment income helped drive an 8% year-over-year increase in net operating income per share to $4.33, our highest ever for a first quarter. Operating ROE remained above 19% for the third consecutive quarter and drove a 13% year-over-year increase in our book value per share to $108.78.

Let me add some color on first quarter results. The underlying current accident year loss ratio of 61.5% was solid overall and up marginally from last year. Underlying performance in our Canadian Personal Lines business was again very strong, improving by nearly 2 points year-over-year. This was offset by higher large losses in Canada Commercial Lines and in UK&I. Favorable prior year development was excellent at 7.1%. Favorable development is typically higher in the first quarter, and this quarter was in line with Q1 of last year. Our near-term expectation remains for PYD to hover around the upper end of our 2% to 4% long-term guidance range.

Since our IPO in 2004, we've had favorable PYD every single year. Our 5- and 10-year annual average has been 4.8% and 3.5%, respectively, evidence of our disciplined prudent reserving philosophy. This is also why we focus on the combined picture of both the current accident year performance and prior year development. Catastrophe losses in the quarter were benign at $141 million, driven primarily by winter storms and large property losses in the UK&I. At the consolidated level, we continue to expect approximately $1.2 billion of annual catastrophe losses with about 1/3 anticipated in each of Q2 and Q3.

Moving to expenses. The consolidated expense ratio was 34.5%, up 1 point year-over-year, but flat sequentially and in line with first quarter expectations. The year-over-year increase was partly due to growth in business lines in the U.S. that have higher commissions, but lower loss ratios, which results in a positive impact on the U.S. combined ratio. In Canada and the U.K., higher expenses reflect continued investments in marketing, technology and growth initiatives to drive top line and customer service levels. We expect the UK&I expense ratio to improve by approximately 2 points in the second half of the year and for the IFC consolidated full year expense ratio to be in line with our annual guidance of 33% to 34%.

Operating net investment income of $457 million increased 10% year-over-year, reflecting an increase in special dividends and higher assets under management. In today's interest rate environment, we now expect approximately $1.7 billion of investment income for the full year compared to our prior $1.6 billion guidance. Distribution income was in line with expectations, down 2% from last year's strong first quarter. Over the past 5 and 10 years, distribution income has grown at a compounded annual rate in the mid-teens. And while quarterly results may vary, we continue to expect distribution income growth of at least 10% annually.

Moving to our balance sheet. We continue to operate with significant financial flexibility. Total capital margin increased $300 million to end the quarter at $4 billion, well in excess of what we need to manage volatility. And our adjusted debt to total capital ratio improved to 16.4%. Our balance sheet strength, low leverage ratio and strong capital generation means we are ready to capitalize on M&A opportunities. And the landscape for M&A continues to improve. It also means we can take opportunities to buy our own shares when they are meaningfully undervalued.

In 2025, we bought back approximately $200 million of our shares. In 2026, we repurchased $150 million in the first quarter and have accelerated that to a $200 million run rate in the second quarter, deploying $217 million in total year-to-date. To be clear, the M&A landscape is evolving favorably and remains our preferred choice for capital deployment, but we have ample capacity to do both, and we will continue to deploy capital in share buybacks when our shares are well below our view of fair value.

Lastly, our track record of delivering on our financial objectives positions us as a leader within our industry, having one of the highest ROEs and also one of the most stable ROEs. This is a testament to the resilient global platform we have built and the outstanding work of our teams to successfully execute on our strategy. As Charles has set out, our track record shows that we can deliver consistent earnings growth across cycles. Our continued investment in our competitive advantages means they are getting stronger. This positions us to continue to deliver on our financial objectives to compound net operating income per share by 10% annually over time and to exceed industry ROE by at least 500 basis points every year.

With that, I'll turn it back to Geoff.

Thank you, Ken. [Operator Instructions] So Sylvie, we're ready to take questions now.

[Operator Instructions] First, we will hear from Jaeme Gloyn at National Bank Capital Markets.

First question, just on the Canadian Commercial Lines front. You talked about growth initiatives having some success. Can you talk about what's been working, what's not working? And should we expect to see a little bit more acceleration in the success of those initiatives?

Brokers working really well. We're quoting more of the submissions than we used to. That's driving very good new business generation, actually, very good growth there. Retention is really good. So I'm very pleased with the progress I'm seeing in the Canadian landscape, making excellent progress in Specialty Lines as well in Canada. I think if you just look at the top line, the drag coming from mix, which I've addressed in my remarks is the thing that is driven by the fact that we have more success at the smaller end of Commercial Lines. We're deploying many initiatives to optimize pricing. And for us, it's good. It's intentional, and we think that it's good for earnings growth as well. I don't know, Patrick, if you want to add color in terms of the actions that are working well, but high level, that's kind of it.

No. The only other thing is we're leveraging more than before the cross-selling between also our Commercial Lines and Specialty Lines. So that's also producing a bit of an upside. But technology, pricing sophistication and completing more quote are the key elements.

Other question, Jaeme?

Yes, I was just going to confirm that it sounds like it's more, I'll call them, non-price actions that's driving the growth there and as opposed to just purely getting rate on some different lines.

Correct. And this is where the mix comes in when competition is uneven. But the math on mix, we think, is excellent actually. And so we're very comfortable that this is contributing to earnings growth.

Okay. And then sticking with Commercial Lines, you talked about large losses being a drag in Canada and the U.K. Can you quantify the impact of large losses on the current accident year loss ratios?

Yes, Ken?

Yes. So Jaeme, in the first quarter, we talked about CATs being benign, but we did have elevated large losses, which show up in the current accident year, an impact of about 2 points on IFC overall. In Canada, most of the impact was in Commercial Lines, probably impacted by about 5 points there with a bit of a higher frequency on fire losses contributing most to that. In the UK&I, there's about 4 points of impact there, a combination, I would say, of storms and a few individual large claims. So -- but all in, when you look at the lower CAT losses in the quarter are balanced out by a bit of the higher large loss activity. So net-net, at an IFC level, those 2 things neutralize.

Yes. That's a good point. We don't think there's a pattern there. We've looked at every one of those large losses and so on. And this happens. It's lumpy, and we think that we probably have a 2-point drag there. But that's the business we're in, just like CATs.

Yes. So if I think about that, the 2-point drag on an overall IFC basis, current accident year improved year-over-year from first quarter of 2025.

That's exactly right, Jaeme. When you look at -- we talk about looking at PYD and the current accident year, if you normalize for those large losses, we are indeed improved by 1 point year-over-year.

Next question will be from John Aiken at Jefferies.

Charles, in your commentary, you're very transparent about a desire to pursue M&A. Can you discuss what your wish list is? And with -- we're seeing a little bit of stabilization in UK&I, does that make Europe a little bit more attractive moving forward?

I'll go name by name, John, just to. I think as a principle, when I look at the environment in which we operate, and I look at our track record for not only very strong strategic fit, but very strong financial outcomes as we've done in the past. We're looking for complexity right now. This is where the best opportunities exist. That means time matters here, but that's the lens we're taking in this environment. I think in terms of opportunities, we would love to grow our Canadian franchise by 50%. And there are no constraints of any substance that would prevent us from doing that. If you look at the Canadian franchise performance, 3 points top line outperformance, 8 points bottom line outperformance. If you do a transaction here, this is massive value creation.

Second, I was really pleased to see the industry's performance compared to our performance in the U.S., where in Q4, you've also seen now that we're starting to outperform from a top line point of view, while outperforming by 7, 8 points from a combined ratio point of view in the U.S., same thing. There's a lot of room to grow in the U.S. We would love to increase our footprint in the Specialty Line space in the U.S. and replicate that advantage on a much bigger base. And so this is right at the top of what we're keen on and actively working on to a certain extent.

I think, John, we like the progress we're making in the U.K. We like our performance also in the London market and in Europe. We're open to opportunities there. No doubt. But to be transparent with you, the transformation, we're leading in the U.K., massive investments in technology. We're integrating 2 business because, remember, we exited PL. We doubled down on the SME and mid-market space in the U.K., a space we love because performance is really good. There's lots going on operationally in the U.K. And if you want to kill it from an M&A point of view, you need to be ready from an operational point of view. So I'd put capital in the U.K. if an opportunity came up, but I'm also very conscious that value creation goes through operations, and we still have some work to do in the U.K. And that's why we think the trajectory of the combined ratio there is towards 90%. We're not yet there. 2026 is a big year. I don't want to disrupt the team too much on that journey.

Yes, John, lastly, I don't want to skip over distribution because we don't talk about it so much in terms of M&A because it's multiple smaller transactions. But it's created a very good machine of earnings and stable earnings over time. It's helpful strategically to the insurance operations, and we're deploying capital in that space as well.

That actually was going to be my follow-on. Is the pipeline still fairly robust on the distribution side?

It is. Yes, it is. And whether it's through BrokerLink or the brokers which we support and invest in to consolidate, the pipeline is actually very good, to be clear. BrokerLink, very active. We've done a large percentage of transactions in Canada last year. And we're also looking at MGAs in -- to support our Specialty Lines business. We've taken a majority position in Carton Trade in the last quarter, which is our trade credit business in Europe and investing in MGAs as well when it makes sense from a Global Specialty Lines point of view.

Next question is from Doug Young at Desjardins.

Just wanted to start on personal property. It sounds like in the personal property, you quantified and you lost, I think, an affinity or travel account. I guess, can you confirm, was this like property business or travel business? I assume this was due to pricing, but maybe you can elaborate. And are you starting to see like competition in the affinity market heat up? Is that what you're seeing? Just hoping to get a little color on that.

Patrick?

Yes. It's really one account, as you say, Doug, and that triggered a 4-point drag during the quarter. We knew about it at the end -- in the last call, we said it would impact Q1. Travel is a fairly small part of our overall personal property, and you shouldn't expect necessarily that being a drag going forward. In fact, if you exclude that one account, we're still growing that line of business in the upper single digit plus 2 points of units, and that's the trajectory you should see us going back to starting in Q2.

Yes. And just to put things in perspective, Doug, the difference with the rest of the book there is that you have those relationships with a small number of large accounts, and they renew every so often. And sometimes it's a question of product offering. It's a question of technology support. It's a question that somebody else might be competing for the account. And once in a while, you lose some and sometimes you gain some. We view this very much as a one-off.

So this was travel. This wasn't in -- this wasn't property related. This was travel related.

Right.

That's what I was hoping to hear. Okay. And then, Charles, just over 19% operating ROE again this quarter. You obviously talked a lot about your advantage on that side. Is this -- maybe help me think about, is this a reasonable through-the-cycle ROE for Intact now? I know you talked about before, I know what the range was and you've kind of upped that range to upper teens. Is this a reasonable through-the-cycle level? Or what are the puts and takes that change the ROE from here?

Yes. I think, Doug, the standard deviation of our ROE is 3.5%, give or take. And we think structurally, we're in the upper teens. Is it 19%? Is it 18%? I'm not sure. It's a business that has some degree of volatility. But I think with the standard deviation in mind, yes, I would say it's reasonable. And right now, the 19% has a bit of upside because there's been less CATs in the last year, but there's way more capital. And I think those 2 offset each other in our mind. So 19% is 19% right now.

And if you look at our track record, Doug, our ROE hasn't swung that much through cycle. I mean the issues have been sometimes cost pressure in automobile insurance, where we had much less options than we have today in the past 10, 15 and 20 years. We're less exposed to those sort of cost fluctuations, and we're in control of the rest really. We just need to be comfortable seeing mix change, a bit of pressure on units, and we're completely comfortable when that happens because we're managing for earnings growth.

Next question will be from Tom MacKinnon at BMO Capital Markets.

Question on personal auto. We've certainly seen a deceleration in the level of rate hike approvals in Ontario. Your thoughts about that and you continue to hold the sub-95% annual guidance. And if in answering that question, you can talk a little bit about the impact of some of the reforms in Ontario. I think you said they were positive. So some of your thoughts there.

Thanks, Tom. I'll ask Patrick to share his perspective.

Yes. Tom, so Q1 combined ratio 94.4% in a quarter that is usually seasonality adverse. So very much within the sub-95% guidance, our current year loss ratio has improved 2 points year-over-year, given our strong underwriting discipline and pricing sophistication. We're growing and outperforming from both a top line and bottom line perspective, including unit growth. We think rates are enough to cover inflation.

So no change in guidance, really.

No change in guidance.

We feel pretty good about that. On Ontario, per se, the government is introducing options for drivers, and that's good. Patrick, color maybe on Ontario.

Yes, the Ontario reform will start to apply in July this summer. It provides more optionality for consumers. We see these options that are as neutral from a bottom line perspective, they're properly priced. The optionality is a small portion of the premium in Ontario, roughly 4%, and we think that the take-up rates will be fairly high. So we think it's actually also almost neutral from a top line perspective. So it shouldn't change much the outlook in Ontario, that reform in particular.

I think, Tom, to your question on the approvals in Ontario, if you look at the past 24 months, the industry has taken more rates than we have. Why? Because we've acted early on what was inflation as the industry caught up. You'll remember a few years back, units were shrinking. Now we're outperforming from a growth point of view. This is the playbook sort of playing out. And the trajectory of rate, I think, is a function of inflation in the Ontario marketplace. There's a regulator that's principal based and that has created a very dynamic marketplace. And so we'll see where rate trajectory goes, but it's a function of inflation. And so we feel very good about the Ontario marketplace.

And as a follow-up, Charles, I mean, the market seems to be fixated on the accident year ex CAT ratio. And so you always have such good favorable reserve development, and you're way above your guide and the Street just kind of chucks it away. What do you say to that practice? And most of the stuff, even seasonality would suggest that it comes back pretty quickly. So comment...

Yes. When I say, Tom, honestly, I mean, you're an actuary, so you understand these things. The favorable development you see is a function of what you've booked in your current accident year. And when there's no change in practice, which is the case for us, we like to look at current and PYD together as the underlying performance because if you have a track record of favorable PYD like we have, which is in the 4-ish zone over a long period of time, it assumes to a certain extent that there's a caution of that nature embedded in your current accident year.

And our practice on current accident year hasn't changed, and it turns out that we've been cautious. It shows up in PYD, and we look at it combined because I think if you strip the PYD, you don't really have a perfect view of the underlying performance of the organization when there's a certain pattern of being cautious. Because keep in mind, we're pricing for product we deliver over time, we encourage people to have a degree of caution, both in pricing and in reserving, and that's how it materializes. So for me, I look at these things together unless a pattern changes, which is not the case right now.

Our next question will be from Bart Dziarski at RBC Capital Markets.

I wanted to ask around Canada Personal Property. So we saw strong volume growth, 2%. It's been accelerating now for 5 quarters. So could you just unpack what's driving that volume growth? And do you expect that to continue?

Patrick?

Yes. Strong unit growth. We have -- there's good rates. There are -- there's hard market conditions and direct distribution, in particular, showing good growth from a new business perspective. And we also have very good retention. The industry continues to price for both inflation and climate trends. So market conditions are good for us, and we maintain our positive outlook.

Great. And then on the distribution income. So I know it was in line with your expectations and there is a tough comp year-over-year. But at the same time, you guys have been busy acquiring brokers kind of throughout the year. So why wouldn't that have shown up in stronger growth? And then maybe as we look forward, when do you expect to get back to that kind of 10% CAGR outlook?

Sure. Yes. So I mean, just looking back over the last 5 and 10 years, that distribution income has compounded in the mid-teens, provides a lot of stability and also contributes a bit to that ROE stability that Charles spoke about earlier. Yes, the first quarter, it was in line with our expectations to be clear, albeit at minus 2%. Last year, as I said, had very strong results. We have been investing in service levels in BrokerLink and across the distribution investments that we own. And that will start to reap some benefits in the second half of the year.

So when it comes to investment income, Bart, our full year expectation for 10% growth still holds for 2026 sitting here today. So a bit of lumpiness in the first quarter, a tough comp, as you said, but sitting here today on track to deliver 10% growth, which reflects that investment in distribution that you've referenced.

Next question will be from Paul Holden at CIBC.

Just want to follow up on a couple of discussions that have already taken place. And I guess the first one is UK&I. As you pointed out, disappointing results for the quarter. You've been very clear for, I don't know, how many years now you're driving down towards the low 90s by improving underwriting processes, technology, risk selection, et cetera. Just I guess the question I want to ask, like is there anything that happened this quarter where you're now changing an approach, maybe there are certain risks you decided you no longer like or there's room for more improvement, I guess, is what I'm getting at as a result of this quarter? Or you're fully just taking it as, well, it's part of the business and it's going to happen from time to time.

It's 100% part of the business, and it's going to happen from time to time. There's no doubt in my mind. We've done so much repositioning in the past 5 years, we're comfortable where we're operating and the indicators of profitability that we manage, which are prospective in nature, are suggesting we're at the right place. We've looked at these large losses to figure out whether there was a pattern we were uncomfortable with. Some of it are from segments we've exited, actually, just to be clear, Paul. And therefore, this has not triggered a change in direction in the UK&I.

Got it. And then next question, I want to follow up on sort of the personal auto pricing discussion and rates increasing sort of now in line with claims inflation. Maybe you can remind us where claims inflation currently is? And I guess I'm curious, I would suspect it's probably trending lower, but maybe I'm wrong, maybe it's stable in mid-single digits. But an update there would be helpful.

Yes. Patrick, why don't you cover inflation?

Yes, it is sustained, Paul, in the mid-single digit. And in fact, we see that level in both physical damage and in the injury/liability part of the product. In physical damage, it is driven by technology in cars. We see cost of parts going up because of the technology. We also see the length and the complexity of the repairs taking a bit longer, and that's driving this inflation and making it sustained in the physical damage part. It also puts more total loss. As these costs go up, we reach the threshold of total losses faster.

From an injury liability perspective, it is mainly driven by the situation in Alberta with the tort system. We've seen it over the past couple of years. There's reform coming that will be implemented in January that should address a portion of that. But when you combine all of this has been stable at the mid-single digit for, I would say, 6, 7 quarters in a row now.

Yes. That's the coast-to-coast picture. Alberta, I think, is the issue. You're in the double-digit range there. And I think you look at those reforms, I think the government has done an awesome job to go to the heart of the issue to go from cash to care and to really improve the system. So we're really looking forward to the improvement in the system in 2027. And this will help create more vibrancy in Alberta because it's a tough market right now.

Sorry, just a real quick follow-up then. If Alberta is double digits and coast-to-coast is mid-single digits, does that mean Canada ex Alberta might be more low single digits?

It's less than mid-single digit, yes.

Yes, a bit less. The double-digit quote -- Charles quoted is on the BI piece, not on the physical damage.

Next question is from Brian Meredith at UBS.

Charles, just sticking with personal auto. I noticed that policy in force actually declined in the first quarter, fourth quarter. Is that Alberta related? Or is there something else going on?

It is Alberta related.

Yes. I mean it's still up, but going up slightly -- at a slightly lower pace than where we were, let's say, in Q3, and it is because we've taken some defensive measures in Alberta until the reforms are effective.

So you'd be arguably be gaining some market share ex Alberta?

Yes.

Yes. And to be clear, Brian, in terms of market share in personal automobile, right now, we are outperforming the market in terms of growth for the full year '25 by 4.3% in terms of top line. So we are gaining market share for sure, in premium terms. And I do think the improvements in the Alberta marketplace will help the trajectory.

Excellent. That's great. And then one other just curious, the large losses that you saw in the Commercial Line space, was that in kind of the large Global Specialty businesses? Or is that your kind of traditional SME type business where you're seeing that?

It was more in the large Specialty space. One-off sort of hits, quite frankly, Rail and some segments we've exited before, but at the large end of things.

[Operator Instructions] And at this time, Mr. Kwan, we have a follow-up from Jaeme Gloyn.

Just wanted to quickly follow up on the share buyback and capital deployment on that front, a little bit. You spoke about it accelerating to a $200 million run rate. Is that about the level you're comfortable with to obviously retain some dry powder for M&A? Or is that something you could see accelerate in this current backdrop for where the share prices trade?

Yes. So look, Jaeme, firstly, the financial position is very strong, as I said, we ended the quarter with $4 billion of capital margin, debt to capital sub 17% and the capital generation forecast looks really good. So I would say ample capacity to pursue large-scale M&A. Today, we could execute on a $6 billion transaction without needing to issue equity. So that's the backdrop where we are saying that we have the capacity to do both. We can pursue the M&A opportunities. But when the shares are meaningfully, significantly undervalued, we're in a position to support them. With the capital generation outlook, moving to a $200 million a quarter run rate makes a lot of sense. And you can expect us to continue to be in that zone if the shares are in the same zone as they are today.

Yes. I think what you look when you do that, there's the M&A environment at $200 million, we're protecting the dry powder. Obviously, it's a drag on the ROE. And it's the delta between the intrinsic -- our view of intrinsic value and the shares itself. You also need to look, at least we do in terms of book value per share dilution that buyback at a high level can create. So we put all that in the mix. We think $200 million is the right pace. It might go up, it might go down, but it's a good way to think about the midpoint.

And at this time, Mr. Kwan, I apologize. We have no further questions. Please proceed.

Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for 1 week, and the webcast will be archived on our website for 1 year. A transcript will also be available on our website in the Financial Reports section. Of note, our 2026 second quarter results are scheduled to be released after market close on Tuesday, July 28, 2026, with an earnings call starting at 11:00 a.m. Eastern Time the following day. Thank you again, and this concludes our call.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your line.

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q4 2025 Results Conference Call. [Operator Instructions] Also note that this call is being recorded on February 11, 2026. And now I would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead.

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. Before we start, please refer to Slide 2 for a disclaimer regarding the use of forward-looking statements, which form part of this morning's remarks and Slide 3 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. And with that, I will turn the call over to Charles.

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 $5.50 and for the full year was up 33% to $19.21. This brings our compounded annual net operating income per share growth to 18% over the last 3 years and 12% over the past decade, exceeding our 10% growth objective. This track record is driven by 3 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. 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. 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.

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. 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.

And 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. 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 9 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% is 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. 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. 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 is 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. 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, 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. 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. Moving now to our UK&I business. Premiums in the quarter were 2% lower year-over-year, but that's a 3-point improvement from the past 2 quarters as expected.

We see top-line growth continue to improve in '26 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 U.K. was 93.5% in the quarter. This business is on track to evolve towards 90% over the next 12 months. In the U.S., 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. While we see industry premium growth for U.S. 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 U.S. 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 profile.

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 U.S. 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.

And 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. At this pace, we're on track to exceed our ambition of at least $0.5 billion by 2030. Our AI investments continue to be concentrated where they move the needle the most. In '26, for example, we're investing in 4 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&I, we seek to deliver a leading broker and customer experience as well as optimize underwriting and claims to drive outperformance. In the U.K., we launched 3 new products in the quarter. In addition, Intact Insurance was voted by brokers as the #1 insurer in the U.K. 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 quota 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. 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-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 $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.

And 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. Before concluding, I want to thank our employees for their exceptional dedication and execution this past year. Your disciplined 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, 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 $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. Let me add some color to our fourth quarter results. The underlying current accident year loss ratio improved by 0.5-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 U.S. In the UK&I, improvements in the direct line portfolio were tempered by higher large losses in Specialty lines, which can be volatile quarter-to-quarter. 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. 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. On this measure for the full year across IFC, we delivered close to 1 point improvement. And in Commercial and Specialty lines globally, we have 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 $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. Mentioning catastrophes, I'll provide an update on reinsurance.

The January 1 renewals were favorable. We maintained our cat 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.

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 $415 million in the quarter, reflecting higher assets and special distributions. For 2026, we expect investment income to be more than $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 $570 million in premiums to surpass the $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.

And while quarterly results may vary, we expect at least 10% annual growth in distribution in 2026 and beyond. In non-operating results, we reported nonoperating losses of $55 million for the quarter and $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 U.K. 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 $800 million to $3.7 billion, while our adjusted debt to total capital ratio improved by almost 3 points to 16.5%. 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.

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. 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 6 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. 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 amongst 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.

Thank you, Ken. [Operator Instructions] So Sylvie, we're ready to take questions now.

[Operator Instructions] And the first question comes from the line of John Aiken at Jefferies.

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 than globally?

Did you say the manufacturing of insurers?

Manufacturing of insurance, AI disrupting the current players.

Yes. 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. And 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 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. And we've created probably 1/3 of our ROE advantage coming out of getting people back on track. And I see -- this is happening in the physical world. I see a little change there. But I would say when it comes to predicting risk, AI is 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, and 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.

Question is from Stephen Boland at Raymond James.

I guess I'll ask this 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 of that softness? Does it move into the middle or the SME space that you mostly play in? And if yes or no, like why or why not, I guess, is the question?

Yes. Stephen, thanks for your question. I think if you look at the earnings base of Intact, half of it is Personal lines, and we're in a hard pricing environment, 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. So in large account, 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 as well. This is not a new phenomenon. This is something we've seen over the past decades. And 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 2 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. 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 2 to 3 points of change in mix. That is the average size of account, it's not rates, it's mix. It's 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 changes 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.

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. So -- and your guidance remains like 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 were a couple of insurers that got rate decreases approved. So I'm just wondering if you could talk about that, please.

Yes. 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.

Yes. Well, overall, when we look at the first 3 quarters of 2025, which is information we have about the industry, it grew by high single digits overall Canada-wide. And 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 3 quarters of 2025. When we look at specific regions, there might be fluctuations 1 quarter to -- especially on -- from a rate 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 Jan 1. 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 no means that the industry overall will need to continue to take rates to be profitable.

Yes. 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 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 will be really important because that's a market that is that is dragging the industry's performance more so than Ontario at the moment. And I would very much welcome in '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 auto.

Next question will be from Paul Holden at CIBC.

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. And I'm just -- I'm asking for -- about it because it's been roughly around the same level for 3 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. So maybe 2 parts to the question. One is like 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 line?

Yes. 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 Ex 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 Ex 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 Ex ratio.

I think in the U.S., 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 U.S., I would say. And in the U.K., 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 Ex ratio in the U.K.

So Paul, I guess you're saying you're closing '25 with 14.6 Gen Ex, you closed '24 at 14.6 Gen Ex. You closed '23 at 14.6, '22 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 Ex more so than anything else.

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 Ex. 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 3 years. And I'm certainly hoping that this ratio is coming down.

Understand. That's helpful. Part of the reason I asked the question is just kind of should we really be looking at the K-ratio, as you call it, ex-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 like 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, either way lines is getting better.

Yes. 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 U.K. combined ratio following the focus -- following the fact that we've refocused that business on Commercial lines completely where we think we can win.

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?

Absolutely, Paul. I think -- 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 with 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. But I think the investments we've made in risk selection and in claims are also helping the trajectory of our, what you call legacy business and what I would call outstanding businesses that we want to grow as much as we can.

Next question will be from Tom MacKinnon at BMO Capital.

My question is 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.

Go ahead, Ken.

Yes, 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 -- it's 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 nonoperating items that goes 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.

Yes. Just following up on that. I noticed that if you kind of look at the outlook, 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.

Yes. 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.

Yes. 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 or a weighted average of industry's performance where we operate, we think is we want to streamline our guidance there.

Yes. Okay. And you've talked about wanting to and 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? Thoughts there?

Yes. 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 U.S. for less than a decade. We're in the U.K. 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're -- we have objectives that are really stretched compared to our peers. 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 point ROE outperformance objective is -- should be more stretched.

Next question will be from Jaeme Gloyn at National Bank Capital Markets.

I 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. And 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?

Ken, do you want to provide a perspective?

Yes. 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-plus 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, Jaeme, 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. And 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 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 organic plus margin delivering that 8 points is well set up.

Yes. 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 10x 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 bodes well to outperform the 10 points of earnings growth in the next decade.

Great. And then as you -- as you talk about the higher -- 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 of sub 17%?

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.

Exactly. 19.5% operating ROE is with the balance sheet that's -- that's, as you said, underoptimized, if you want, from a leverage point of view. So -- 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 north of -- well north of the 500 basis points and maintain the dry powder for -- 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.

Jaeme, my pedestrian perspective on this is that when you look at '25, we printed an OROE of 20% -- 19.5% and we printed an adjusted ROE of 21%. I think the cats came in a bit below guidance. And then our balance sheet is stronger than our target makeup of the capital base. And those 2 things largely offset each other is my take. And therefore, the guidance of upper teens, we don't sweat when we put that guidance out.

Next question will be from Doug Young at Desjardins.

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

I think the distribution environment is active, very active. BrokerLink has been very active. Some of the broker -- the consolidators we support in consolidation are also very active. I would say the competitive pressure, the demand for assets and 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 will be near-term opportunities here, true in the U.S., 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, 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 U.S., we can fish in the U.K. 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.

Okay. And so just on the European side, I mean, the UK&I division, I mean, if you look at it on a current accident year basis, it's -- 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 U.K. on the M&A side near term?

I think the performance in U.K. 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 U.K. Commercial lines business, we are integrating the acquisition of Direct Line, which we've done in '24.

And it is the real first acquisition by my team in the U.K. 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, we're investing in risk selection techniques and data, we're investing in our claims strategy. And 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 U.K. Commercial lines, yes. Ken, that was a high-level perspective. I don't know if you want to add some color.

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 expectations, but not where we're aiming to get to, which is trending down towards that 90% over the next 12 or so months.

And Doug, I'll take you back to 2022 when that business ran at [indiscernible] Q4 93.4%, 95% for the year. 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, and I like the dynamic of that marketplace.

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

Well, we have $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 $2.5 billion 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 $4 billion, $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.

Yes. 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.

Yes, I would echo and I just say like 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 -- no, I appreciate all the color.

Next question will be from Bart Dziarski at RBC Capital Markets.

I wanted to ask around the margin expansion dynamics. 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 commercial has 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?

Yes. Go ahead, Ken.

Yes. 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 taken over many years. If you look in the recent past 3 and 5 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%, 5% range.

It's more when you look out longer term, very difficult to predict where things will be 5-plus years out. And that's why the long-term average of 2% to 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.

Yes. 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.

Yes, the track record in recent years has been above the top end of the range. We think it will be above the top end of the range in the near to midterm. 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.

Okay. Great. That's helpful color. And then just on the UK&I, minus 2% sounds like it's turning a corner. 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?

In '26, I mean, Bart, we told you guys it would be gradual. We had -- we were in the minus 5-ish sort of zone. Q4 came in at minus 2%. That's where we're wanting to see it. And then in '26, you need to be in positive territory. And frankly, I think that's where this is headed. Our work is not done in the U.K., 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.

Next question will be from Mario Mendonca at TD Securities.

Charles, as you can tell from the nature of the questions, capital is on everybody's mind. And 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. 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 year that added to the capital margin, was that a special number? Or is $800 million doable for Intact on a go-forward basis?

Well, yes, not a special number. And to be clear, that's net of a $200 million buyback, which we actually did in -- over the last 6 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.

So Mario, I'll give you my holistic perspective on this, and I might be wrong, and 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 hover depending on the buyback in the 12% to 15-ish percent 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% and 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.

And then lastly, I do think Intact as a firm has 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.

Yes, 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, like not this quarter, frankly, not over the last few quarters. And I think that's why it's become so topical because of that dichotomy between arguably one of your strongest quarters and then the market's reaction to it. But let me flip over to something a little different.

I agree with you on that. We'll keep that under advice.

Understood. Sort of a different question is early -- I think the first question on this call was about AI and disruption. And I think you got part of the way there to answering the question. But let me be a little more direct. The U.K. market was harmed, if you will.

I mean it hurt a lot of the manufacturers. When distribution became -- essentially, the brokers became disintermediated, the manufacturers were impacted. The question is, the market is concerned that AI could do precisely the same thing to Canada, to the U.S. Are there structural or regulatory reasons why that wouldn't be the case? Or is it entirely plausible?

I think one big difference with the U.K., and we spend a lot of time looking at Personal lines in the U.K. is that the manufacturers just went along with it, basically, and 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 U.K. 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 contributes -- could contribute to the fact that the direct world today is growing faster than the broker distributed world in Personal lines, but we built optionality 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. Distribution might shift as a result of that. But I think the opportunity for strong manufacturers is really there.

And are you doing anything right now to make sure that you don't become a victim the way the U.K. manufacturers did?

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.

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.

Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for 1 week, and the webcast will be archived on our website for 1 year. A transcript will also be available on our website in the Financial Reports section. Of note, our 2026 first quarter results are scheduled to be released after market close on Tuesday, May 5, with the earnings call starting at 11:00 a.m. Eastern the following day. Thank you again, and this concludes our call.

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

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q3 2025 Results Conference Call. [Operator Instructions]

Also note that this call is being recorded on November 5, 2025. And I now would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead, sir.

Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our third 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.

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

To discuss the results today, I have with me our CEO, Charles Brindamour; our CFO, Ken Anderson, Patrick Barbeau, our Chief Operating Officer; and Guillaume Lamy, Senior Vice President, Personal Lines. We will begin with prepared remarks followed by Q&A.

And with that, I will turn the call over to Charles.

Well, good morning, everyone. Thank you for joining us today. I'm very pleased with the quarterly results we reported yesterday evening. Net operating income per share of $4.46 was the result of strong underwriting performance across all geographies and lines of business.

Top line growth increased 6% in the quarter, while we delivered another sub-90 combined ratio. This highlights our ability to grow, while not compromising our margins. Our operating ROE is outperforming across all regions and has improved in the last year by 4 points to 20%.

The industry environment is constructive in every market where we operate. We're gaining market share in personal lines. In commercial and specialty lines, we benefit from being predominantly exposed to the SME and mid-market space. In large accounts where we continue to see elevated competition our sophistication in pricing and risk selection as well as more than 20 specialty verticals enable us to choose where we play. This environment really plays to our strengths. The quality of this quarter's performance gives me a lot of confidence about the future, whether it's next quarter, next year or next decade.

Now let me provide some color on the results and outlook by line of business, starting with Canada. In Canada, our business is firing on all cylinders. Our outperformance has never been stronger. We closed 2 points on growth and 10 points on combined ratio. And keep in mind, this is 2/3 of our business globally.

Personal auto premiums grew 11% in the quarter, including a 3% increase in units. As profitability for the industry remains challenged, we expect hard market conditions to persist. Our underlying loss ratio improved 1.6 points year-over-year, contributing to an overall combined ratio of 91.5%, this is a strong result. We're positioned to continue to deliver a sub-95 combined ratio, in line with our objective.

Moving to personal property. Premium growth was 10% in the quarter, supported by a 2% increase in units. Given the elevated level of weather and climate-related claims over the past few years, we expect current hard market conditions to persist. The combined ratio was healthy at 92.4% and we're well positioned to maintain a sub-95% combined ratio even with severe weather.

Overall, in Personal Lines, which is nearly half of our business, we continue to see industry growth in the high single-digit to low double-digit range over the next 12 months. With strong absolute and relative performance in the first half of the year, we're really well placed to sustain growth and combined ratios going forward.

In Commercial Lines, premium growth increased to 3% in the quarter, a clear sign that our growth initiatives are gaining traction. We see overall market conditions as constructed with industry premium growth in the mid-single-digit range over the next 12 months.

With 85% of our business in SME and mid-market where pricing is favorable, there's significant opportunity for us to further improve top line growth. That's in addition to our ability to choose where we grow for large accounts and in specialty lines. Profitability remains very strong with a combined ratio of 82.8%, reflecting continued underwriting discipline, emerging AI benefits and prudent reserving. We remain well positioned to deliver a low 90s or better combined ratio going forward.

Moving now to our UK&I business. Premium in the quarter were 5% lower year-over-year. Remediation efforts within the DLG portfolio continue to temper top line growth by driving improvement in the combined ratio. As remediation tapers off towards the end of '25, I expect growth to move in positive territory.

Our teams in the U.K. are focused on integrating our products, raising the bar on service and expanding our distribution relationships. The fruits of their efforts will become more visible in the new year. When it comes to the industry, we see premium growth in the U.K. in the low to mid-single-digit range over the next 12 months.

The combined ratio of 95.5% was solid as it included 3 points of excess cash. Our pricing and risk selection actions are gaining traction and we remain focused on evolving our UK&I combined ratio towards 90% by the end of '26.

In the U.S. premiums were up 8% year-over-year with our growth initiatives leading to higher new business and improved retention. And this growth is driven by our strategy to grow in our most profitable lines. Indeed, the fastest-growing segments or those that grew by more than 20% are the ones that have sustainable low 80s combined ratio.

That's the beauty of specialty lines. You can choose where you grow, regardless of the environment in which you operate. In the U.S., we see industry premium growth in the mid-single digits over the next 12 months. The combined ratio of 83.6% in the quarter improved by 4 points year-over-year.

Our steady deployment of predictive models and pricing and underwriting allows us to grow, while not compromising our margin. This was the ninth quarter in a row with a sub-90% combined issue, and the business is built to maintain this performance going forward. Our team also continued to execute on our strategic priorities in the quarter.

Let me highlight a few achievements. In the overall Specialty Lines, our team is making good progress on our growth agenda. We're both expanding our distribution footprint and deepening our existing broker relationships. Additionally, our teams are collaborating to export product expertise and verticals across geographies.

On the back of our technology and entertainment products having successfully grown in Canada from the U.S., we've recently added Life Sciences in Canada. There are many of these growth opportunities that we're pursuing: Marine; renewable energy; surety; and trade credit are all examples across-border opportunities that we've launched or are working on.

The sandbox we play is 10x larger than it was a decade ago. There's a lot of opportunities for growth. The investments we've made in AI over the past decade are currently generating more than $150 million in annual recurring benefits. We've accomplished this primarily from optimizing our pricing, risk selection and how we leverage data. Recently, we completed the rollout of our third-generation machine learning models and personal property and commercial fee.

Our AI investments are also helping us to grow our top line faster. The recent expansion of our underwriting adviser from Canadian Commercial into one of our specialty lines has already resulted in our ability to quote 20% more than before due to faster data ingestion and processing. We expect this level to significantly increase over time.

This quarter, we officially rebranded RSA, NIG and FarmWeb to Intact Insurance across the U.K., Ireland and Europe. This unites our global operations under one brand, a significant milestone for Intact 15 years after its birth. The reaction of brokers, partners and employees across our markets was exceptional. And so when combined with raising the bar on service, broadening our product range, and expanding our distribution relationships, this will drive profitable commercial growth and support our ambition of becoming the leading commercial and specialty lines insurer in the U.K.

Our most recent employee engagement survey has again placed our Canadian and U.S. businesses as best employers for the tenth and seventh year in a row with, respectively. We've also made huge gains in the U.K. and Europe, placing in the top quartile of employers within short distance of best employer status. No doubt, this is where our teams are going in both U.K. and Europe. Engaged employees are crucial to delivering superior experiences for our customers and brokers. The strong performance we're posting again this quarter is a result of their contributions. And I want to thank all of our employees for that.

I also want to highlight the tremendous efforts our people have made supporting communities in Atlantic Canada that were impacted by wildfires this quarter. It really was impressive to watch many regions mobilize together, including our teams at on-site.

Intact's responsiveness is a demonstration of our values being put into action and the strong employee engagement we foster as an organization. The engines driving our outperformance have never been better. Operating ROE has clearly shifted into a higher zone and has been above 16% for the past 4 quarters.

We view this shift as sustainable as it is underpinned by our competitive advantages in pricing, risk action and claims, but it's also supported by our mix shift towards commercial and specialty lines and our growth in distribution, coupled with very strong capital management.

As we look ahead, we're well positioned to achieve both our key financial objectives of outperforming the industry ROE by at least 500 basis points every year, but also delivering NOIPS growth of 10% annually.

On that, I'll turn the call over to our CFO, Ken Anderson.

Thanks, Charles, and good morning, everyone. This quarter again underscored the earnings power of our business. Net operating income per share for the third quarter reached $4.46, which was $3.45 higher than last year, both our top line growth and our bottom line underwriting performance were strong. We delivered double-digit earnings growth in our distribution business and our investment portfolio continued to provide healthy and consistent returns. Our operating ROE at 20% highlights our ability to successfully navigate market cycles and continue to compound earnings growth.

Let me add some color on the third quarter results. We reported a strong underlying loss ratio of 54%, 1 point better than last year, with improvement in all regions and lines of business. This is a testament to our rigorous focus on growing our competitive advantages in pricing, risk selection and claims.

Catastrophes in the quarter totaled $394 million, primarily due to the wildfires in Newfoundland, weather events in Canada and some large commercial fires in both the U.S. and the UK&I. While this quarter wasn't as heavily impacted as last year, catastrophe losses were broadly in line with third quarter expectations. Favorable prior year development was solid at 5.2% in the quarter. This aligns with our near-term expectation of being around the upper end of the 2% to 4% range and continues to reflect prudent reserving across all segments.

The consolidated expense ratio was 34.2% for the quarter, a 1.7 point increase versus last year. This was largely driven by increases in variable broker commissions and employee incentive compensation, reflecting our improved profitability and increased outperformance versus the industry.

Overall, the year-to-date expense ratio at 34% remains in line with full year expectations. Operating net investment income increased 2% to $402 million in the quarter. This reflected higher invested assets. Our reinvestment yields are broadly in line with book yields and we remain on track to deliver approximately $1.6 billion of net investment income for the full year.

Distribution income continues to grow at a healthy pace, increasing 11% to $147 million. This reflected higher variable commissions as well as the benefits from our continued capital deployment. On that note, I'm proud to highlight that BrokerLink outpaced its year-end goal by reaching $5 billion in annual premiums during the third quarter.

With over 200 locations nationwide, BrokerLink continues to build scale and distribution through both organic and inorganic growth in personal and commercial lines. This positions us to grow distribution income by 10% on an annual basis.

Nonoperating gains totaled $83 million in the quarter, and our ROE increased to 17.3% in the 12 months to September 30. This fueled a 5% sequential growth and a 14% year-over-year growth in our book value per share to $103.16. Over the last decade, our book value per share has compounded at an annualized rate of 11%.

Our financial position continues to be strong with total capital margin of $3.3 billion and solid regulatory capital ratios in all jurisdictions. Our capital management framework is robust. We have positioned our balance sheet to deal with any external shocks that may arise, while also maintaining significant capacity to capture growth opportunities.

Our profitability profile means capital generation is also very strong, and this will continue to provide fuel for M&A, be it distribution or manufacturing. Given the level of capital generation, we will utilize our open share buyback program opportunistically when we see our shares are significantly undervalued. This past quarter, we deployed $145 million to repurchase 535,000 shares. Even after these repurchases, our debt-to-capital ratio was 17.9%, well below our 20% target. We're positioned to continue to pursue inorganic growth opportunities.

In conclusion, Charles mentioned that our operating ROE has moved into a higher zone. This will support us maintaining or even beating our impressive track record of 650 basis points of annual ROE outperformance over the past decade. It will also support our delivery on our other key financial objectives to compound net operating income per share growth by 10% annually over time and the pillars of NOIPS growth are strong.

Our top line initiatives across personal, commercial and specialty lines platforms are gaining traction. We continue to invest in our competitive advantages in data, AI and claims, and this will drive further margin expansion. And strong capital generation will continue to provide fuel for growth opportunities. We are in a great position to deliver on both financial objectives for our stakeholders in the years ahead.

With that, I'll give it back to Geoff.

[Operator Instructions]

So Sylvie, we're ready to take questions now.

[Operator Instructions]

First, we will hear from Bart Dziarski at RBC Capital Markets.

I wanted to ask around the core loss ratio. So I'm thinking current accident year plus PYD, it's come in really strong. It's sub-49%. And when I look at the LTM kind of run rate, like there's been sequential improvement in that number for 8 quarters running. So wondering sort of at the top of that, what are some of the key drivers there in terms of that strong performance? And then how are you thinking about the sustainability of that?

Yes. So broadly speaking, because I think your question is on the overall performance. I think the first order of business, Bart, for us is to make sure that we stay on top of inflation. We do that in -- we're very focused on that and tend to move before the market moves.

Second, Ken talked about the ROE outperformance track record. This is not something we take for granted. And at all times, we have multiple initiatives to expand the outperformance. And that goes straight to the underlying loss ratio, whether it is AI, whether it is in-sourcing, claims management and so on. And so that feeds straight into that in my mind.

Thirdly, it is about footprint. And so we have a sophisticated view of where margins are beyond cost of capital. We equip the field with that affirmation and our growth is over-indexed towards areas where we feel that we're more than well rewarded for the risk.

And I'd say, Bart, this is the sum of those 3 things that lead us to see an improvement in the underlying performance. It's not even across the board. But certainly a very deliberate game plan to continue to grind out performance and hopefully, absolutely important.

And on the footprint point, I want to point out that if you look at the shift in mix of business over the past 5, 6 years, there is a bigger portion of our business that is in a sustainable low 90s, sub-90 zone than it was before. So when you look at our overall performance in aggregate, the growth in those segments will also lead to an overall improvement in performance.

Great. That's very helpful. And then just one other one for me is we're hearing lots on this sort of AI infrastructure thematic around the required CapEx that's needed. Is there an opportunity for insurance to play a role here? Like could you guys -- could this be a new source of sort of premium growth opportunities as we see the build-out in other sectors?

Yes. It is, and it's primarily true our specialty lines segment in the construction and engineering segments, in particular. There are opportunities in the energy segments. We have very strong verticals, whether it's traditional or renewable energy. And our teams in those verticals are focused on finding opportunities where we feel that we can achieve strong performance, and that's clearly an area of growth.

Next question will be from Doug Young at Desjardins Capital Markets.

Wanted to dig a little bit into the pricing cycle and the deacceleration that we're kind of seeing. And I get your comments around commercial and that you're more SME focused and personal is hardening. Hoping to dig a little bit further into what you're seeing, why is this time potentially different?

And I know it's been a long time since we've seen a turn in the cycle, but why would it be different this time around versus the last time? And I guess, specifically on the personal side, we're seeing softening in the U.S., and I know the U.S. market is very different than Canada on the personal property and auto.

But why wouldn't we start to see some softening after many years of really hardening pricing in personal auto and personal property. So I know it's a big question. I know there's lots in there, and I promise this will be my only question, but I was just hoping to get a little more detail.

Yes, sure. Let's see how we take your four questions. Seriously, I think we're not seeing this cycle in commercial lines will be different than previous cycles. I mean all cycles are different.

But Doug, you've been following our story for a long time. You know that we're pretty stable throughout cycles actually, and that includes in commercial lines. And I don't see this being very different this time around, just to put things in perspective. And I think we're highlighting that more than 70% globally of our portfolio in CL NSL is in the SME and mid-market space. It tends to be a more stable space, and that's an advantage we have as a firm, not just because of the cycle, but because the law of large numbers works in the small, midsized business. And therefore, our pricing acumen can be put to work. That makes it even better to navigate those cycles.

We've been flagging for well over a year that large accounts -- initially, we said cyber and financial lines were softer. And that's been true for the last year, 1.5 years, we've seen earlier this year an acceleration in large property schedule that is still true. It hasn't changed this quarter, but it certainly took place this spring and we're just watching where that's going. But it's really happening more at the tough end of the market in larger accounts than at the bottom end of the market.

And so our job here is to basically make sure that we grow in the SME and mid-market space where conditions are quite constructive and then use our toolbox in pricing risk selection, our broad product range that we can export from market to market to basically find ways to grow even in large accounts, where I think we've got an excellent value proposition compared to many of our competitors.

So we're not calling a different cycle or this time, it will be different. The difference between now and, say, 10, 15 years ago, is we have way more tools to navigate the environment in which we operate. With regards to PL, which is in a whole different zone in a hard market. I'll ask Guillaume to give a perspective on the market. But I think your question is also about why is it different? Or is it different than what's happening in the U.S. We think it is. So go ahead, Guillaume.

Yes. So in personal auto, yes, there's been lots of rates. But when we look at the industry, it remains unprofitable with a combined ratio above 100%, both last year and this year. So the industry needs to take -- continue to take rates. So we expect our market conditions to persist and our growth momentum to flow into '26.

As we pointed out, it's a contrast with the U.S. where the industry has reached profitability with key player posting pretty strong year-to-date results. We need to understand there's key differences between Canadian and U.S. market and personal auto. So Canada product is more heavily weighted towards liability coverage, so the cost equation is quite different. Secondly, regulatory framework in Canada and the U.S. are different with Canada generally being more stringent. So both those factors are driving very different competitive dynamics.

Maybe coming back to Canada, we're really at that point in the cycle where we're outperforming on both top line and bottom line, and that's currently true in every region. So our growth was in the double digit for the 8 quarters in a row at 11%. That's fueled by 3 points of unit growth, an increase over Q2. And really, every metric is painting a positive picture.

Retention is the highest it's been in 2 years. Quotes are up double digit from increased marketing investments. Our competitive position is improving with competitors still catching up. So the net result is that our new business sales are up 15% year-over-year.

Think you were also touching on personal property. We do expect hard market conditions to persist in property as the industry is pricing in the weather trends. So despite 2025 being a milder year so far, CAT activity was well in excess of expectations in the last 2 years. So when it comes to pricing, CATs are expected to be volatile from one year to the next, and it's crucial to look at really deeper and longer-term trends.

So the market in Canada is behaving quite rationally. So we expect industry to continue to reflect those long-term trends in pricing and the market to remain constructive even if we were to have a few good CAT years in a row. So here again, I'd say both our absolute and relative performance is strong, and we maintain a positive outlook on this product.

And Doug, if we go back to Bart's earlier question, which is how do you grind an improvement here. The first thing I said was to stay on top of inflation. And I think in first line, let alone that were on third-generation machine learning models in the field, us dealing with inflation, both from a pricing and a supply chain management has made a huge difference here.

And I'll take you back just 2 years, where we shrank our units in personal automobile by 0.5%, thinking that the industry was not seeing the inflation that was coming. Fast forward today, outperformance, massive in personal lines. From a bottom line point of view, we're making the most from a top line point of view in this environment. And I think it really plays to our strength and kudos to Guillaume and his team to have navigated this so well.

Question will be from Jaeme Gloyn at National Bank Capital Markets.

First question related to Canada Commercial Lines and the commentary that some of the growth initiatives are starting to take hold, but growth at 3% is still below the industry. And so I look at some of the commentary in the MD&A around AI and machine learning and the new broker platform. Is the view that these new initiatives, which are maybe gaining traction now will allow Intact to outperform the mid-single-digit industry growth rate that you're expecting?

I think nearly all these initiatives help us outperform from a bottom line point of view by a big margin. I'd say one portion of the headwind is mixed. If you look at our growth in commercial lines in Canada, 3% in Q3, you -- right there, you had a point drag of mix, and this has fluctuated this year between 1 and 3 points, and it's a function of uneven competition across the board.

So I -- look, I'm -- we're not forecasting outperformance on growth on a 12-month horizon compared to the industry. But we have lots in the toolbox to generate more growth without compromising margins, just leveraging specialty lines across our distribution channel, it's one of those initiatives. The other one is we're in the process of deploying our technology, the broadest technology from a product and from a transaction point of view, to brokers in the field in addition to working on the funnel, which shows that we're also growing in units at the moment. It's hard to tell whether it will outperform from a growth point of view, the Canadian industry. I don't know, Ken, do you have anything additional you want to...

Just to add a bit of context, I guess, at an industry level, when we look at MSA, the data at Q2, we have seen at an industry level growth tempering in the second quarter relative to the first quarter in commercial P&C. I think that's in line with the large account pressure at an industry level.

At the same time, we've moved the 3% growth from a 1% growth in -- from Q2 to Q3. And that's where our trajectory is moving in a different direction to the industry overall. And that's what we've observed at the second quarter.

Purely. And we're using all the tools we have in the toolbox. We don't do that at the expense of margin.

Okay. Understood. And then in the U.S., obviously, a good result, up 8%, and it sounds like there are certain segments that are really driving that growth at plus 20%. Can you give us a little bit more color as to what segments those are that are driving that extra or excess growth rates? And then in terms of winning new business, what are some of the factors that are allowing Intact to win that new business? Is it just new products? Or is it something else within existing lines?

I think in the U.S., we have a very good business. It's outperforming, but it's small in relationship with the opportunities that exist in this market. And so distribution management is one big lever of growth. Investing in the lines that are most profitable is another big lever of growth, whether it's people or technology.

In a number of our segments, we're adding products and that is making a difference. We're big push on, for instance, cargo in our marine units. And there's lots of levers we're pulling at the moment to make sure that we're capturing the growth opportunities that exist in this market. Patrick, do you want to highlight maybe some of the areas of growth in the U.S.?

Yes. And it will also highlight what you were describing, Charles, earlier on how the mix in specialty in particular, help us with the bottom line. But if you take the top 3 or 4 lines that are growing the fastest right now in the U.S., and examples of that would be Surety, Cyber and some of the Accident and Health.

Overall, that's about 40% of the book of business. It's growing north of 20% in the quarter, and it has produced a combined ratio in the 80% to 82% range over the past 3 years on average. So good for momentum on growth, while also sustaining very good profitability on the book overall due to mix change.

And just on how you're winning new business is -- just a quick comment on that.

Yes. How we're winning new business? First is we're expanding the reach to the number of brokers we're dealing with. Second, we're leveraging more verticals for brokers within their operation. Third, we're adding products on the shelves. And fourth, we've also bought a number of MGAs and you know, we're interested in deploying capital in the U.S., and that expands, so to speak, the shelf on which we can put our products. And that's really how we're winning new business in the U.S.

Next question comes from John Aiken at Jefferies.

I just wanted to drill down a little bit more on the U.S. If you take a look at the reported claims ratio, where the underlying current year loss ratio for the quarter exceptional. And I get the commentary that you're talking about product mix. But was there anything unusual that was driving the lower combined claims ratio this quarter. I guess the flip to that is, how sustainable is this moving forward in terms of do you think that you're going to be able to continue to outpace growth in these higher profitable lines?

Well, that's certainly the plan, but let's just keep in mind that when growth was a little more tepid in the U.S., it's because we were into meaningful remediation efforts. And as I said last quarter, I expected that the tempering effect of this remediation would slow down in the second half of this year, and that's what we're seeing in Q3, and I expect that to continue into next year.

Remediation to keep in mind, is something that you continually should do, but sometimes there's more than others. And I think in the last year, 1.5 years, there was, and therefore, we're seeing now the potential of the business emerge more peerie without that noise.

And when we talk about remediation, are you as excited about the prospects with remediation flowing off in the U.K. as what we saw this quarter in the U.S.?

Yes. I think the U.K. is a different ball game from the perspective that we're integrating the NIG portfolio, which we've acquired in '24 and what it means in practice is we're trying to improve its performance, which we have. We're bringing segmentation as well.

And I do expect that the impact of the integration, which is almost a full 5 points this quarter will taper off as we enter into 2026 and towards the end of this year and as we enter into 2026. In the U.K., we're investing massively in technology in our regional presence. We're broadening our footprint. And I do expect that this will be a growth engine for us over time. But it's a meaningful transformation at the moment.

Next question will be from Paul Holden at CIBC.

Maybe sort of a follow-up to that, Charles, on the U.K. business. So some good color around the DLG integration. Maybe you can talk about the business ex the DLG and how that's growing and the profitability there.

So the business ex DLG is doing well, I would say the area that's still in remediation in the U.K. is what we call the delegated authority business where we're shrinking that footprint a bit to make sure that it's our price, our product and our claims that we're using for the greatest extent possible in that segment of the market. That is creating a bit of a drag. Otherwise, the rest of the business would be in the low single-digit range.

And we haven't really seen the impact of expanded distribution. That takes a while and I'm confident we'll start seeing that in 2026. And we haven't really seen the full impact of broadening our product range specialties, in particular, across a much broader distribution channel in the U.K. than we had before the NIG transaction.

In the U.K., if I take you back 3, 4 years, RSA was focused on tens of brokers. Only the NIG integration, we're dealing with over 1,000 brokers. We're deepening the relationship by about 100 brokers a year. Anyway, this year, the idea is to deepen the relationship with 100 brokers with whom we didn't have a deep relationship before. You just get a sense of the scale of opportunity that this can bring. And you layer over that, a broader range of products, whether it is distributing marine, financial lines, et cetera, across those distributions. So there's a fair bit of upside there. I don't know, Patrick, if there's anything you want to add.

No. There's some good momentum also in specialty lines and the combination of the DLG and the existing RSA products, to your point, as we get into Q4 and early Q1 will also expand the offer through the broker. So RSA getting -- RSA broker getting some of the offers that were only offered by DLG and vice versa.

And I guess the second part of that question was also with respect to margin. So if you suggest the DLG is roughly a 5-point drag on margin. It suggests you're getting your low 90s in that RSA book. Correct?

Ken?

Well, yes, I think if you look at the quarter performance at 95.5%, firstly, you would -- there's 3 points of excess CAT losses in their 8 points of CATs in the quarter. So if you strip out the 3, I think you're back to a low 90s performance, which right now, that's where we would expect to be.

I think the continued -- if that remediation tapers off, it will start to earn through into '26 and '27 and that's the further improvement that you'll see emerging in the, if you like, underlying combined ratio for the UK&I over the next 12 to 18 months.

Got it. And then the second question for me is just going back to Canada and personal auto. So good growth in written insured risks. It seems like you are building some momentum there. We can see it quarter-over-quarter-over-quarter.

What should we expect over the next few quarters? Like it's my impression is you're saying competitors are still catching up to where you are on pricing. So that would suggest, if anything -- and you seem to like the margins. So if anything, maybe we can assume that written insured risk growth accelerates from here? Is that a reasonable expectation?

Yes. So I think when we look at personal auto and our rates, inflation is stabilizing in the mid-single digit. Our rates are also stabilizing, I would say, just below 7% and we expect to stay in that range in the foreseeable future. As we're pricing for the inflation that we're observing. So when you look at the industry that still has some catch-up to do, I think we're very comfortable in our competitive position.

We've seen that improve. We're seeing our retention improve. So we expect to stay in kind of market share growth going forward. So will it keep increasing from 3%? I think time will tell, but we're certainly expecting the current momentum to continue into the next 12 months.

Yes. And I think, Paul, the direct channel, the digital channel, these are all levers that we're pushing really hard in this environment. Nothing to do with rates, everything to do with building on those margins to gain market share where we can.

Next question will be from Tom MacKinnon at BMO Capital Markets.

Charles, when we look back at your Investor Day, you talked about how you could accelerate your NOIPS growth without any strategic capital deployment, and that was 2%. NOIPS CAGR and with DJ Capital deployment, we get up to 4%. But what's interesting is sort of without any M&A, it would have just been 1% through distribution income, which I assume just augmenting that with some bolt-on distribution acquisitions, smaller ones.

And then it also said 1% through share buyback capacity. The last 10 years, you added 1% growth to NOIPS through share buybacks. If I annualize what you did in the quarter, 0.3% of your shares you bought back in the quarter, so that's over 1% annualized right there.

Is this sort of the base case? Or should we sort of think about, hey, if you don't see anything major on the M&A front? That a 1% share buyback that you've demonstrated in this quarter would kind of be -- I mean, it seems to be consistent with what you laid out in your Investor Day earlier this year and consistent with what you've done in the past. So any comments around that?

Thanks, Tom. I'll ask Ken maybe to share some perspective on that.

Yes. Well, I would say, firstly, Tom, in relation to the capital deployment component of the NOIPS growth compounding ambition. When it comes to distribution, yes, certainly, we feel with regular ongoing distribution capital deployment that will generate 1 point.

I would say in an adverse if you like, scenario where we didn't do M&A, that was the scenario where we were just, I think, demonstrating that share buybacks are a tool in the toolbox to deliver a 1% NOIPS growth. But to be clear, that's been a scenario where there are no M&A opportunities. And that's not the scenario we're in today, to be clear.

The earnings power and earnings growth is really strong. I think what we did this quarter was we're opportunistic in deploying $145 million to buy back a little over 0.5 million shares. But you will have seen that the capital margin has grown from $3.1 billion to $3.3 billion. The debt-to-capital ratio has come down. The dry powder has increased in the quarter in terms of what's available to deploy on M&A opportunities. And it's in that context that we're very happy to have the dry powder that we do.

Yes. And I think the point I made at the Investors Day was that the denominator is much bigger than it was a decade ago. So we proved to ourselves that we have the earnings power to grow at that clip prospectively. I think the point we made is, organically, we get in the zone. But then when you look at capital deployment opportunities, we would comfortably, we think, be north of 10%.

And so when you look at the landscape from an M&A point of view, the first thing that matters to us as a firm is where do you outperform. And frankly, today, we outperform everywhere we operate. What therefore means that the sandbox for capital deployment is 10x bigger than what it was a decade ago. And within that, there are manufacturing opportunities in Canada, global specialty lines and in the U.K. and our distribution investment opportunities, in particular, in North America. And so for me, the M&A landscape is actually quite good. The sandbox is much bigger. But timing matters. We have very clear financial objectives, and that drives timing for us.

Next question will be from Mario Mendonca at TD Securities.

This might be a request that you put a finer point on some of the things you've already said on this call. Charles and Ken, you talked about this higher new level of ROE. Now this quarter was special in some respects, the trailing 12 month increased significantly because the Q3 '24 CATs fell off and a more modest level of CATs fell into the trailing 12 months.

So what I'm asking is, when you say this higher level of ROE is sustainable. Are you talking about the 19% nearly 20% plus this quarter? Or are you referring more to that what you've historically referred to around the 17% range?

Well, I think what we're saying -- what we are saying, Mario, is that we've moved into a zone above mid-teens. Yes, Q3 was close to 20%. But as Charles mentioned in his remarks, it's been above 16% for the last 4 quarters. And I think that's what we were referring to. And we view that as sustainable in the context of the continued investments that we're making in the competitive advantages, pricing, risk selection and claims.

And as Charles has also pointed out, the tilt of our business towards commercial and specialty lines gives us more room and coupled with the potential growth now, not just from manufacturing, but also from distribution, we feel we're very well positioned to sustain above mid-teens.

So beyond the drive to expand the ROE outperformance in the business in which we operate, you've got 2 structural changes. If you look forward 10 years compared to the last decade. The first one is distribution income is bigger, more stable and contributes positively to our forward ROE. And second, and that's very important, is the mix of business has pushed us in zones where we can earn meaningfully higher ROE than what we were able to earn a decade ago.

So as you know, Mario, I never pinpoint a specific ROE. This is an industry with a certain degree of volatility. But what's clear to me is that we're in a different zone. And in a decade from now, when we look back 10 years, it will be a better ROE than when we look back 10 years today.

But that sort of brings me to the next question. You've -- when you're talking mix, I suspect you're talking about global specialty markets. It sounds to me like this business really suits you looking forward. Is there something about the business that makes growth through acquisition more challenging? Is it such a relationship-driven business that acquisitions generally don't work and this has to be done organically? Or can this business grow through acquisition?

This business can grow through acquisition, Mario. We've entered the U.S. in specialty lines through an acquisition. We've kept all our teams, all of our people, but we've taken the combined ratio from 100% to something that starts with an 8%. And how we done that? Well, that's the old recipe. Define success well, make sure the values are in place and then it's about pricing, sophistication, strong governance in the field, in-sourcing of claims and good capital management.

We then, in 2021, did the same exact thing as we acquired RSA, which had a pretty big specialty lines business, both in Canada and London market as well as in Europe. We've taken the playbook, and we've done the same thing. I think there are meaningful M&A opportunities in global specialty lines, whether it is manufacturing or distribution, and we're very focused on those.

But you know how we define success when it comes to an acquisition, this needs to generate at least 15% IRR at the long-term capital structure and it's an area that we're active in finding opportunities.

My last question is about the 10% annual NOIPS growth that you've described over the years. What I'm trying to figure out here is whether that actually applies to 2026. And I'm asking about 2026, specifically because there are a couple of reasons why it wouldn't apply. There are potential declines in reserve development, potentially higher CAT losses against a rather low year. So the question is this, does the 10% apply each year? And does it apply to 2026? Or is that more of a medium-term objective?

So to be clear, the objective is to grow at a compound of 10% annually over time. It will -- by virtue of catastrophe losses, et cetera, there will be some lumpiness also M&A when it comes, can tend to shift your ROE into a new zone. But over time -- the objective be clear is over time.

I think if you look at 2025 specifically, Mario, obviously, we'll see where the year end. At the 9 months, the CAT losses are a little below our expectation on a year-to-date basis. So I think that would be the one item that would contextualize how you would think about 2026.

Question will be from Stephen Boland at Raymond James.

Just one question, I don't want to delay this. Have you had any preliminary conversations with your reinsurance partners with renewal coming up? I'm just curious the outlook that pricing is going to be rational as there's going to be softness.

Yes. So I would say, in relation to the [ 1/1 ] renewal reinsurers have had strong profitability in 2022 when the market hardened and that was a result of some structural changes and seasons taken higher retentions and pricing levels have gone up since then. But we would expect reinsurer capacity will exceed demand across the business as we head into the renewal. So I would say favorable conditions from our perspective as we head into the renewal season.

Yes, I think it should be a favorable renewal cycle. We manage our risk very tightly. This gives us an edge when it comes to buying reinsurance. We're not huge buyers of reinsurance also. We do that pretty much for tail risk purposes, but this should be a good renewal season for us.

Okay. And Charles, just I'll sneak one in. I know I'm a bit late. But have you ever considered a stock split, the price has been elevated now for a while. I don't think you've ever done one. Is that something you could consider?

Yes. I would say it does hit the radar from time to time, we evaluate it, but we haven't acted on it to date on the basis that. In substance, it's not really changing anything in substance and I think that was the conclusion that we've reached.

Yes. It's abated from time to time. I mean if you guys think this is something we should seriously consider. We'll look at it. I'm of the view that I don't know if it's a needle mover and therefore, we concentrate on other things, but we're open to feedback.

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

Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for 1 week, and the webcast will be archived on our website for 1 year. A transcript will also be available on our website in the Financial Reports section, and of note, our 2025 fourth quarter results are scheduled to be released after market close on Tuesday, February 10, 2026, with the earnings call starting at 11 Eastern Time the following day. Thank you again, and this concludes our call.

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

Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q2 2025 Results Conference Call. [Operator Instructions] Also note that this call is being recorded on Wednesday, July 30, 2025. I would now like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead.

Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our second 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.

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

To discuss our results today, I have with me our CEO, Charles Brindamour, our CFO, Ken Anderson; Patrick Barbeau, our Chief Operating Officer; and Guillaume Lamy, Senior Vice President, Personal Lines. We will begin with prepared remarks followed by Q&A.

And with that, I'll turn the call over to Charles.

Thanks, Geoff. Good morning, everyone, and thank you for joining us today. Yesterday evening, we announced net operating income per share of $5.23, driven by strong underwriting performance across all geographies and lines of business. Our book value per share increased 12% year-over-year driven by an operating ROE running above 16%. Top line growth was 4%, an improvement of 1 point quarter-over-quarter. This was attributable to continued growth in personal lines through both rate actions and an increase in units.

Commercial lines remain challenged as we continue to see elevated competition in large accounts. As profitability remains very strong, we're actively positioning ourselves to benefit from growth opportunities. We're entering new verticals in the U.S. and Europe. We're expanding broker relationships in the U.K., leveraging technology to deliver a more streamlined experience for customers and brokers in Canada.

Overall, our combined ratio is very strong at 86.1%. A 1 point improvement year-over-year despite higher CAT losses this quarter, a clear proof point that our advances in pricing, risk selection and portfolio management are really paying off.

Let me provide some color on the results and outlook by line of business, starting with Canada. In personal auto, premiums grew 11% in the quarter, reflecting both rate action and a 2% increase in units. As profitability for the industry remains challenged, we expect hard market conditions to persist over the next 12 months.

Based on this, we see industry growth in the high single-digit range. Our combined ratio improved 1 point to 90.3%. Even in what tends to be a seasonally favorable quarter, this was a very strong result. We remain confident with our guidance of sub-95 combined ratio for this business.

Moving to personal property. Premium growth was 10% in the quarter, driven by both rate actions and a 2% increase in units. Given the elevated level of weather and climate-related claims over the past few years, we expect current hard market conditions to persist. We see industry growth in the low double digits over the next 12 months. And the combined ratio here was also very strong at 84.5%.

In Commercial Lines in Canada, premium growth was 1% in the quarter, reflecting low to mid-single-digit rates and sustained competition in large accounts. But despite the competitive environment, we're growing our customer count. We continue to see a drag from mix shift as we gain an SME in the mid-market space. While we remain keen to grow large accounts, we are very deliberate and disciplined where we go. Overall market conditions are favorable and constructive, and we see industry growth in the mid-single-digit range over the next 12 months. The combined ratio in this line was robust at 74%, reflecting strength in both commercial and specialty lines.

Moving now to our UK&I business. Premiums in the quarter were 5% lower year-over-year due to continued remediation in the direct line portfolio and some delegated arrangements. Excluding this, premiums were up 3% year-over-year. With elevated competition continuing in large account market, we see industry growth in the U.K. and in Europe in the low to mid-single-digit range over the next 12 months. The combined ratio of 92.9% was marginally higher year-over-year due to a modest increase in the expense ratio and large losses. We remain focused on pricing and risk selection and see our UK&I combined ratio evolving towards 90% by the end of '26.

In the U.S., premiums were flat year-over-year, marking an improvement from prior quarter. While growth was positive across most of our alliance, we experienced a 5-point drag from accounts in large property. We see industry growth for U.S. specialty in the mid-single-digit over the next 12 months. The combined ratio in the U.S. was also very strong at 87.8% in the quarter, an improvement of nearly 1 point over a year ago, driven by the underlying loss ratio. The business is positioned to maintain a low 90s or better combined ratio moving forward.

Our team continued to execute on our strategic priorities during the second quarter across the world. Let me highlight a few important achievements. While we did not experience significant CAT losses this quarter, the deep trend of increased natural disasters over the last few years has not changed. And that's why in Canada, we launched "Keep it intact," a national long-term program aimed at empowering Canadians to make informed decisions and take actions to protect their homes from climate threats.

We also recently announced additional funding for our municipal climate resiliency grant program, increasing...

[Technical Difficulty]

through these grants, we're supporting 19 municipalities across Canada, which will implement proven solutions that help protect communities from flooding and wildfires.

In the U.K., we started renewing Direct Line's policy onto our platform in June 2024. This has allowed us to deploy our sophisticated pricing models across the portfolio. This is already contributing to an improved combined ratio.

Our new initiative, One Commercial, launching later this year will deliver a single compelling proposition to brokers on service, product and price in the U.K.

As we highlighted at our Investor Day, the competitive advantage in data and AI that we've built in personal lines and commercial lines is also now being leveraged within global specialty line. Advanced pricing models now cover close to 40% of our GSL premium base. Our values, strong sense of purpose and long-term perspective keep us anchored as we navigate this period of economic and geopolitical uncertainty.

On top of that, our healthy balance sheet positions us to capitalize on future opportunities. And so as we look ahead, we're really well positioned to continue to achieve a net operating income per share growth of 10% annually over time and to outperform the industry ROE by at least 500 basis points every year.

And with that, I'll turn the call over to our CFO, Ken Anderson.

Thanks, Charles, and good morning, everyone. Our second quarter results again demonstrated the strength and earnings power of our business. Net operating income per share increased 8% from last year, reaching $5.23. This reflected solid underwriting performance across all segments in a light catastrophe quarter and a healthy contribution from investment and distribution income. .

Operating return on equity was above 16% for the third straight quarter, and our balance sheet is strong, with a total capital margin of $3.1 billion.

Let me provide some color on our underwriting results. We reported a solid underlying loss ratio of 56.8% in the quarter. In both Canada and the U.S., our underwriting fundamentals are strong. In the UK&I, the underlying ratio increased by 3 points for higher large loss activity more than offset improvements in the DLG portfolio.

Moving to catastrophe. Second quarter losses totaled $137 million from storms in Canada and a few large commercial fires across our regions. While cat losses were $41 million higher than last year, it was less than half of what we would expect in the second quarter. As Charles mentioned, the deep trend of increased natural disasters over time has not changed. And as we have seen, catastrophe losses can fluctuate significantly from one quarter to the next.

Favorable prior year development continued to be strong at 7.4% in the quarter, particularly in commercial lines with favorable development on prior year catastrophe losses in Canada and in the Direct Line book in the UK&I. We continue to apply prudent reserving practices across our business. Therefore, combining current accident year and prior year development is the best way to assess the evolution of our underlying performance.

On that measure, the year-over-year improvement overall was 1.8 points, reflecting our ongoing focus on underwriting fundamentals. The consolidated expense ratio was 34.3% for the quarter, comparable with last year and on a year-to-date basis, it remains in line with full year expectations. Operating net investment income increased 3% from last year with slightly higher book yields and favorable foreign currency movements. Our reinvestment yields are broadly in line with book yields and with a little over $800 million of investment income year-to-date, we remain on track to reach approximately $1.6 billion for the full year.

Distribution income of $165 million reflected a strong contribution from BrokerLink, including continued M&A activities. This was offset by slower growth in other parts of our business, such as our MGAs. In addition, mild weather over recent quarters lowered the contribution from on-site, in line with the countercyclical attributes of this business. We remain well positioned to grow distribution income by at least 10% annually going forward. Our operating effective income tax rate was 22.1% for the quarter, in line with expectations.

Turning to the balance sheet. We continue to maintain a very strong financial position. Total capital margin held steady at a robust $3.1 billion, and our adjusted debt total capital ratio decreased by close to 1 point in the quarter to 18.4%. Additionally, book value per share grew 3% sequentially to $98.67. Our balance sheet strength means we can handle impact from economic uncertainty, while also being ready to capitalize on growth opportunities as they arise.

In closing, despite the macro environment of the past 6 months, our business has demonstrated its strength and resilience. We had a solid first half of 2025 with net operating income per share up 9% to $9.25. With the strength of our people, our platform and our strategy, we're well positioned to continue to execute on our financial objectives to outperform the industry ROE by 500 basis points each year and grow net operating income per share by 10% annually over time.

With that, I'll turn it back to Geoff.

Thank you, Ken. So 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 re-queue for follow-ups, and we'll do our best to accommodate if there's time at the end. So Sylvie, we're ready to take some questions now.

[Operator Instructions] And your first question will be from Jaeme Gloyn of National Bank Financial.

First question, wanted to touch on the, let's say, softening in commercial lines growth across all geographies. Can you dig into what you're seeing on the ground, specifically? And perhaps what are some of the strategies you put in place to offset some of that softening in the broader industry?

Thanks. Let me give a perspective on what we're seeing across the markets in which we operate in some of the operational metrics that we would have looked at in the past few days, basically. So a fresh view on what's happening overall.

So the first point I would make is that this is still very much a constructive marketplace. In aggregate, if you look at rates and exposures, which is really what's important in light of where there's inflation, we're in the mid-single-digit range. That's what I'm seeing in the field all in.

Conditions in the SME and mid-market space are pretty healthy, actually. And keep in mind, this is the bulk of our portfolio. The pressure continues to be observed for larger risks as we've talked about in the last year and some specialty segments, such as ML or management liability, cyber. I'd say the thing, Jaeme, that we've seen in the last 3 months, 4 months is that large commercial property risks is where we've seen a bit of weakness this quarter, really at the larger end of commercial prop, not across the board in commercial prop.

And so when I sort of put that together and I look 12 months out, my perspective is the industry premium growth in North America should be in the mid-single-digit range. And in U.K. and Europe in the low to mid-single-digit range. When you look at that the question you then ask yourself is when you look at rate and exposure, we're growing that more than inflation. So despite the fact that the performance is really strong, we're not in a zone as a firm where we're anywhere near margin erosion to be clear.

Let alone the fact that we're actively investing in pricing, risk selection, deploying with, I'd say, intensity, new pricing models, in particular in the U.S. as well as in the U.K. given that these are areas where we're less mature from that point of view. The performance in both absolute and relative terms is really strong, and so we're super keen to grow our position in that environment.

If I maybe go by markets. As I said, if you look at Canada, for instance, in Q2, rates and exposure were close to 4 points. If you look at the U.S. rates and exposure were in the 3-ish sort of zone, and that's including the pressure we saw in large property.

And then in U.K. and Europe, [rate and exposure] near 5% in the last quarter. Again, pressure at the top end pressure in some segment. But in aggregate, I'd say, constructive and an environment that plays to our strength. I think one thing I would observe, Jaeme, in particular in the context of Canada, the biggest headwind is mix, and that's just a top line headwind. What does that mean in practice? Yes, there's pressure in large commercial but then we're winning at the lower end. We're winning at the lower end of mid-market. We're winning at the lower end of the SME space. And frankly, if you look at the profitability curve, we're pretty comfortable with that mix shift. And this is where, I think, top line tells a story. Bottom line tells another story to a certain extent, and I think we're building serious economic value as we navigate this cycle.

Okay. That's a very good answer. As I'm thinking about some of the pressures and where those pressures are coming from other companies that are reporting, it sounds like it's coming from the reinsurance side, specifically. Are you catching any of that or starting to see any of that competition or demand from the reinsurance side pushing into the personal property area or is this still entirely focused on commercial at this point?

We don't see that pressure, Jaeme, just to be clear. We're not big users of reinsurance. We use reinsurance for tail risk purposes. Otherwise, we're really not using reinsurance much, quite frankly. And therefore, don't feel any of that pressure. We're very clear about the ROE targets we can achieve. That's deployed in the field. And that's really what drives our underwriters' behavior account by account because people know where the margin exists and what posture they have to take in this environment.

And frankly, that includes large accounts as well. I think we're -- in terms of pricing and risk selection, one of the calls we've made about 3 years ago was to go pedal to the metal in terms of deploying the best science we could, not only in Canada, where we're in great shape, but in the U.S. and in the U.K. Now those tools are in the field and people can navigate even the choppy environment, knowing that their stance on rate is the right one.

Next question will be from Bart Dziarski at RBC Capital Markets.

Just wanted to dive into distribution income a little bit. You talked about some of the weakness driven by on-site growth down to 2% year-over-year. Curious on your thoughts around how do you get back to that 10% growth outlook over the long term?

Yes. We're quite -- I'm quite bullish about the distribution growth profile. I'll let Ken unpack that.

Yes. So in the quarter, $165 million of distribution earnings, $282 million in the first 6 months of the year. So yes, the 2% decline in the quarter were up 5% year-to-date. I would say, consolidation of distribution continued at pace in the first 6 months. BrokerLink closed 13 transactions with north of $300 million of premium and BrokerLink are on track to hit $5 billion of premium before the end of this year.

Earnings growth was a bit more tempered in a few segments. I'd point to MGAs in the U.S., which are operating in a competitive environment. And then as you pointed out, on site, we really like the countercyclical attributes of that business. Margins are improving there. But obviously, with benign cap levels that meant a little less revenue for on-site.

But I would go back to the deep trend that we've talked about and on-site being very well positioned in that context. So all in, I would say, very pleased with the development of the distribution platform. We've generated over $500 million of income in the last year, and we compounded at 20% over the last 5 years. So we still see a lot of opportunities in distribution and particularly the continued consolidation of at BrokerLink but also in the MGA space in North America. So we would expect to quickly return to that objective of 10% growth. And in fact, if we look at where we stand right now in relation to the third quarter, we'd expect to be back in line with that objective.

Yes. That's good. Ken, I think it provides good perspective. Mid- to long term, Bart, there are a number of things that give me confidence about the trajectory that Ken is talking about.

The first one is that I see margin improvement opportunities in our distribution footprint, including on-site. The second one is the fact that consolidation in distribution is a big source of growth. I'd say this year compared to where we were a year ago, the competitive environment is better than it was a year ago in terms of who we're competing with to consolidate distribution.

BrokerLink has been probably the most active consolidator in the first part of the year and the pipeline is really, really solid. And then the third element is the fact that we're building an organic growth muscle with the digital channel in a number of those units, BrokerLink, first. And then on-site has a lot of room to grow. And so it can be choppy from quarter-to-quarter, but the trajectory is north of 10% there, and we've got good visibility on that.

Super. Very helpful and clear. Just one follow-up on Jaemes' lines of questioning. With the softening pricing environment in the U.S., like how are you thinking about taking advantage of that opportunity in terms of you've got excess capital. It's a highly fragmented market. You talked about on your Investor Day, trying to capture more of that market. So is your thinking evolving on that front in the U.S. as a result of what's going on in the broader environment?

So the U.S. and our U.S. business and our U.S. team doing a great job, the combined ratio outperformance, Bart, in the U.S., I start there because that's the key input in terms of how much appetite you should have to grow. At least that's how we think. .

You're north of 7 points of combined ratio outperformance in the U.S. Most of the lines of business are outperforming with the exception of a few which are being remediated and that's where the drag is coming from. And so what's in the pipeline to grow our U.S. platform? One, we're expanding the product set within the 12 verticals, within which we operate.

Second, we're investing in distribution management. In other words, we want to go deeper for each of those verticals and the relationships that we have with brokers, but there's a fair bit of upside to leverage the relationships that each vertical has to cross-sell between the verticals.

Thirdly, we're investing in MGAs in the U.S. We had expertise in managing distribution. We like to build distribution profit. But if you invest in an MGA in the U.S., you expand your distribution relationship in the exercise. And therefore, this is an area that we're really focused on.

And then lastly, it's tapping into the international capabilities of impact. Now we have a great global network. We have a very strong presence in -- on the other side of the Atlantic. And we've demonstrated in North America that we can export some verticals, I'll take the example of technology for instance, or entertainment in Canada, verticals can be exported.

And for me, that is a big source of growth as well. And so when I look at all that, you've got a pretty robust organic growth game plan. And obviously, if you outperform the market by 7-ish points of combined ratio, combined ratio and ROE outperformance in the U.S. probably in that zone, you should be ready to deploy capital through acquisitions as well. We're clearly in that mindset, but it needs to be on strategy. It's not deploying capital just to deploy capital. It needs to be on strategy. And second, our track record of deploying capital in M&A is an IRR north of 20. Our objective is to hit for north of . So the numbers need to work as well. But if there was an opportunity now, well, we'd be on it.

Next question will be from Paul Holden at CIBC.

First question I want to ask about the increasing claims pressure you highlighted in Alberta auto. So I guess the question really is a, I think, if I remember correctly, the 2027 reforms or reforms effect of 2027, will tackle some of these issues. But I want to get a better understanding of how you're going to manage that between now and end 2027?

Guillaume, do you want to take a crack at that?

Yes. So nothing really changed in Alberta, just to be clear, there's still pressure in the market. The industry is unprofitable. But we have strong defensive measures in place to control the quality, and we're comfortable with the new business that we're writing.

The main issue remains the rate cap that's not linked to the overall claims inflation and that affected profitability of the renewal portfolio. That's a continuation of the trend we talked about in the past, and the solution is clear there. The cap really has to be removed. The inflation itself is product-driven, and the problem is specific to the Alberta market. So we don't see or expect similar pressure in other jurisdiction.

Ontario, for example, where the product is much tighter. And when we look at Alberta, it's less than 20% of personal auto and the remaining [80% isn't very ]good. And when we take a step back, I think Alberta Auto has been and still is a strong source of performance for IFC. And while the absolute performance is not where it should be. We believe the reform that is, as you pointed out, 18 months away is tackling the right fundamental issues to restore profitability. So we really want to hang on to that book. I think we have good hope that come the reform, the profitability will be restored. And that will happen kind of Jan 1, 2027.

So in the interim, sorry, we don't see the current pressure having any impact on our overall sub-95 guidance. So that's an outperforming book. We want to keep it, and we have a view to profitability in 2027.

Okay, good. Maybe a little bit more of a broader question on personal auto. So we have been through a period of robust rate renewals and modifying claims inflation. So maybe an update on where we stand there. And in particular, I'm just wondering if those the rate renewals are starting to slow, so maybe a perspective on sort of where we are on a year-over-year basis?

Guillaume, do you want to provide a perspective on that?

Yes. So I'll start maybe at the industry level. So industry took a lot of rates in the past few years, double digit last year. And we've seen the industry growth slightly come down in the last couple of quarter, which kind of drives the change in outlook that you might have seen.

But industry is still unprofitable. And we're expecting hard market conditions to persist with industry growth still strong in the high single digit. And there is still work to do for the industry. When we compare that to our own growth, which is double digit, we're gaining market share in a favorable market condition.

So we're now in that part of the cycle where as anticipated, we're outperforming on both top line and bottom line. When we look at our rates, so growth has been double digit, 7 quarters in a row despite the written rates coming down quarter-over-quarter, with unit growth continuing to contribute favorably at 2%. So Inflation is stabilizing in the mid-single-digit range. Our rates are normalizing also in the mid- to high single-digit rate, down about the 1.5 points from Q1. But that doesn't really show in the growth as we have strong unit momentum and also favorable mix from higher growth in our direct channel and in Ontario, in particular. So really happy to be in that environment and continue investing in our growth there.

Ballpark would be in the 8-ish percent zone at this stage, which is a good zone to be in. And I think key point that Guillaume is making here is that -- the outperformance from a combined ratio or loss ratio point of view in automobile is very strong. It's been strong for a while. Now we're getting in the zone where we're outperforming on growth as well, and we're really keen to pursue that while making sure we protect quality in the Alberta marketplace.

Next question will be from Tom MacKinnon at BMO.

With respect to the UK&I you mentioned some large losses. And if you can maybe elaborate on where those might be, what your outlook would be with respect to the UK&I.?

And generally, as you've changed slightly more muted industry premium growth for those for U.K. and for the U.S. Is there anything you can comment on in terms of terms and conditions or some other things other than just rate? I mean you're still being able to -- and -- does this change in -- or muted premium growth have any impact on your ability to continue to do, I guess, it's low 90s or better in the U.S.? Or trend to low 90s by 2026 for the U.K. So a bit of a mouthful of question, but hopefully, you can tackle it.

We'll try to tackle your 6 questions, Tom. So Patrick, why don't you start with the large losses, and then we'll get to combined ratio trajectory, maybe in the U.K. and the U.S.

Some the UK&I business overall is really performing largely as we expected at this point. The Q2 combined ratio of 92.9%, included, as we mentioned, higher than usual large losses mainly coming from some portions of the specialty lines in the UK&I.

On the other hand, the favorable PYD was also stronger probably than normal. So overall, I'd say with the 92.9%, it largely reflects the range of the run rate of that business in the UK&I and in line with the expectations we had for this portfolio at this point in time.

Just like the Charles mentioned for the U.S., we are outperforming as well on a combined ratio perspective now in the UK&I. So with the traction we're seeing from our actions and adjusting the footprint, adding pricing sophistication tools and the overall improvement in the portfolio. Our confidence level is the same to be able to run that business at around 90% by the end of next year. Yes.

I think, Tom, if I step back here and I look -- there's a lot of focus on the comments we make on large pressure in large commercial lines. But if you step back and you look at the UK&I, the rate and exposure in Q2 near 5%. Yes. But the 2 things that I would highlight. This business is running at 92.9%. You're already in the mid-teens ROE in the U.K. or UK&I. There's 2 big things that are happening in the U.K. that will eat up the pressure we might see on the top line in terms of what it means for the bottom line. The first one is the fact that in the 92.9%, you have the NIG performance -- if you look over the last year and in the run rate, which is sort of in that zone, which is not at the level we want it to be.

There's a drag on the top line but that will translates into meaningful improvement in the NIG performance, which will then translate into improving the run rate of the UK&I business, which is about in the 92%, 93% zone. And just I think the improvement in the NIG performance is in the 6 to 7 points.

Year-on-year. .

Year-on-year. Just to put things in perspective Tom. And we only...

Yes. Sorry, NIG, what's NIG...

Sorry. It's the Direct Line acquisition that we've done last year. And that segment of Direct Line is called NIG. And so which is the pressure point on top line. I mean, it's -- it's costing close to 5 points of top line at this stage. Why? Because we're wanting to make sure that, that acquisition which basically doubles our commercial lines position in U.K. CL is performing like the rest of the book. We haven't seen that yet. And that is a big portion of how we go from 92.9% to 90%.

The other thing that's happening in the UK&I is the deployment of risk selection tools and some of the science that's been exported there. That is paying us for sure, but there's a fair bit of upside in my mind and the usage of those tools in the next couple of years.

And that's why, frankly, at 92.9% today, given what's in the pipeline. What's happening in the market is interesting, but more interesting to me is the upside of the actions we're taking, which we have yet to see. So we feel very confident about the guidance we're giving in the U.K., which is to get to 90-ish percent.

The U.S. in U.S. 87.8% this quarter, you go back in time, I mean this is a business that we said should run 90% or better. It's running below 90% for a while now. And there's a fair bit of remediation still in that portfolio. So a point or 2 of pressure from the market for me does not take us off course or off track one bit in terms of the trajectory of performance.

Ken, anything you want to add?

No, I think you've covered all of Tom's questions.

Just maybe with respect to overall what you're seeing in some terms and conditions or -- I mean you talk about overall premium growth, but that may not necessarily be the key thing, but any color on that?

Yes. I think first point, high level, the mix shifting means that you're moving towards somewhat smaller customer in average and likely simpler terms and condition in the exercise. There is movement on terms and conditions, but I would say, in aggregate, for the U.K. or the U.S., nothing substantial to be concerned about. That is true at the top end of commercial lines, where when there's pressure on rates, people find ways to upset that with deductible and limits and other elements of terms and conditions, but not true across the portfolio.

Next question will be from Lemar Persaud at Cormark.

I'm going to just ask a very basic high-level question on this elevated competition in large accounts and commercial. Like, why are peers willing to push so hard on these large accounts across geographies? Should we think about this as just one of those times where our peers are willing to accept a lower ROE than Intact, and you're just going to wait for the market to come back to you? Or is there some other underlying reason? Very high level.

No. I think that's it. I think you're coming off many years of hard markets. So there's very good profitability at the top end of Commercial Lines. And with rates sort of decelerating the desire to protect one's portfolio or to grow goes up in a way. And in large commercial lines, and that's why I like the fact that we have very good large commercial lines capabilities, but the mix of our book is far more mid-market, where a lot of large numbers and systems play a much bigger role in pricing.

In large commercial lines, the reason why it's more cyclical and the institute of the cycles are wider because there's a fair bit of delegation in the field. And the pressure that comes with writing large accounts, which tend to be more complex, and the fact that there's more delegation at this end of the market means that you see some irrational behavior faster there than in other parts of the market.

And I think that's the zone we're in at the moment. We think there's no inflation in property that climate change won't have an impact in property, no, obviously. But it's been profitable, quite profitable, and there's a fair bit of demand there. And so it's supply that's driving what we're seeing in large property schedules.

And as I said, we're not seeing that sort of behavior across property. We're seeing it at the top end of commercial lines in property. And so what do you do in this environment, our teams in property know exactly where the margin is and how much room they have to compete and operate with that book, and we monitor that behavior, and we've got a pretty tight tool in governance at the top end.

Accounts are reviewed with the actuaries individually and as a result, I'm very confident that our teams are navigating these conditions very well. But obviously, in a success rate. From a growth point of view, it's not what it was a year ago, and we're fine with that. There's lots of opportunities here to grow. We want to make sure we grow where it makes sense.

That's very helpful. And then if I could just kind of follow up on that. Is there -- are these large accounts, large multinationals because it's impacting other geographies outside of Canada? Is that the way to think about it?

Yes. Not only large multi-national, but I think it's a good way to generalize at what part of the market are you seeing the most pressure?

Okay. Okay. And then my second question, just kind of on distribution income here. Can you guys quantify -- I don't think you have in the past, but I'll try it anyways. But trying to understand that $165 million. How much came from on-site this quarter versus Q2 last year? Just to help understand that dynamic between how much on-site would contribute in a heavier cat quarter versus a quarter like we saw in Q2. Is there any context or numbers you guys can provide just to help us understand that dynamic?

Lemar, I think this is a good question. It's a complex one. We'll take it and make sure that we have an answer that is insightful. I'm not sure we're well equipped to give you a sense of sensitivity of on site on distribution income as a result of natural disasters. This is an exercise we could see, how easy it is to disclose, but we'll take your question under consideration.

[Operator Instructions] Next question will be from Mario Mendonca at TD Securities.

I went back over the last 3 years, so 12 quarters and looked for how many quarters that we in fact, reported where the PYD relative to net earned premium was sub-4%. And I found one. So it's not common to be sub-4%, but yet your guidance remains to 2% to 4%. Perhaps Charles, you can speak to what are the conditions that would cause PYD to fall back into that 2% to 4% range? Or are there some structural reasons why it could remain well above 4% in the near term?

Yes. I think, Mario, I'll just start by saying, we're not selling widgets. And as a result, the range of outcome is something we're very conscious about. And if you go back 10 years, you see that there's a degree of volatility around this, and therefore, that calls for caution. That's the first point I would make. I have to say the mix of business over time has changed, and we're in businesses that might be a bit less volatile than where we were in the past and mainly focused on commercial as well as specialty lines.

Look, our guidance really is indeed 2% to 4%, but I think what we're seeing is that we expect that in the near term, PYD will [oscillate] around the top end of our guidance. And maybe, Patrick, I don't know if you want to provide a bit more color on PYD.

Maybe just on the higher level of this quarter, I think it's while solid across all lines of business, it was, in particular, higher than expected, I would say, in 2 main areas: Commercial Lines, Canada and the DLG book in the UK&I. And in Canada, Mario, I would point to 2 main things. There was additional PYD on prior year cats, given the elevated amounts we had and also on other short-tail property claims in particular. And I think that's important to illustrate why we focus so much on the importance of looking at PYD and current accident year together because in that specific example, these 2, by the way, represented about 1.5 points overall at PYD at the IFC level.

And there's a very short period of time between current accident year in the PYD when it's in such short tail lines. So that's one important point to note. In UK&I, I mean, this is recent acquisition data that we had at the time was not very credible. So we were particularly prudent in it, and we've seen some of that coming back this quarter as favorable PYD. This is an additional 0.5 point overall for IFC. These are some of the elements specific to this quarter that illustrates some of the points.

And in the case of the U.K., we're still building caution in the current accident year. So that's why I wouldn't dismiss that and look at those things together. So Mario, I mean, the way I think about the PYD range here and keep in mind, the appointed actuary decides where they book the reserves, and that's their business. And our view is that PYD should [oscillate] around the top end of that range in the near term. Your question is what could take this back in the middle or at the lower end of the range?

Well, inflation in automobile insurance is something I would keep an eye on. We're not overly concerned about that. But automobile insurance is a 4-year duration product and if you go back in time, that's where there's been pressure. Now we have much less automobile insurance in relative terms than we did a decade ago. But that is one thing I would watch for.

The other thing I would watch for is inflation in commercial lines liability. It's been good so far, but we're prudent about that. And my analogy with the widget is that when you're in the liability business, you got to be cautious. So far, I think what we're building in the current accident year and what we're seeing in the PYD shows that we've been conservative in relationship with the inflation that is materializing. But we want to make sure that we don't get surprises the other way.

And that's why we think you should look at current accident year and prior year together and you should expect in the near term to see PYD at the top end of that range, [oscillating] around the top end of that range. But I think prudence in our space is really important because we're in the risk-taking business.

Helpful. So second question, I was reading an article and this was about the U.S. market. And related to a survey where the respondents, 1 in 4 respondents said they were downgrading or dropping their auto insurance and the dropping makes no sense to me, but downgrading or dropping. It seems to be in response to just how much more expensive it's become to insure your automobile in certain parts of the U.S. Is there any trend that you're observing in personal auto where folks are downgrading their coverage, perhaps not dropping, but changing their coverage to save money?

Yes. No, Mario, we're not seeing any of that, like we're seeing a good penetration of our dual line concentration, so people buy auto property piece together a lot more than they did a few years ago. But within auto, we're not seeing anything. The mix is actually positive to our top line. So that's not a trend we observed.

I think, Mario, the highly competitive marketplace in Canada, highly segmented from a pricing point of view. And Canadians who shop can really manage the size of their automobile insurance premium. And in fact, in an inflationary period, like the one we've been in over the past couple of years, we've seen shopping go up dramatically. And that's why if you look at the growth in our direct channel, it's even higher than the growth in the broker channel. So very healthy marketplace. I'd say that when it comes to what you call downgrading or under insurance in automobile insurance, Alberta is the province where we need to keep a very close eye on that because access is challenged at the moment.

And I think the government knows that.

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

Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for 1 week and the webcast will be archived on our website for 1 year. A transcript will also be available on our website in the Financial Reports section. And of note, our 2025 third quarter results are scheduled to be released after market close on Tuesday, November 4, with an earnings call starting at 11:00 a.m. Eastern the following day. Thank you again, and this does conclude our call.

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