Definity Financial (DFY) Q3 2024 earnings summary

Executive summary

• Gross written premiums grew 9.9% year-over-year in Q3 2024, or 12.2% adjusted for the exit of Sonnet Alberta personal auto, with strong momentum in personal auto and commercial insurance.

• Operating net income was CAD 14.6 million (CAD 0.13 per share), down from CAD 18.0 million in Q3 2023, with operating ROE at 10.7% for the trailing 12 months.

• Book value per share increased 17.9% year-over-year to $26.96, reflecting strong capital markets and net income.

• Financial capacity stood at approximately $1.4 billion, supporting ongoing growth and acquisitions.

• Combined ratio rose to 103.4% in Q3 2024, up less than a point year-over-year, mainly due to record catastrophe losses of 17.3 percentage points.

Financial highlights

• Insurance revenue rose 11.3% year-over-year to $1,095.5 million in Q3 2024; gross written premiums reached $1,143.3 million, up 9.9%.

• Net investment income increased by $2.7 million year-over-year to $49.0 million in Q3 2024, with full-year net investment income expected to exceed $190 million.

• Distribution income reached $15.8 million in Q3 2024, up from $11.2 million a year ago, mainly from acquisitions and organic growth.

• Net income attributable to common shareholders was $104.8 million in Q3 2024, compared to a net loss of $48.3 million in Q3 2023, due to mark-to-market gains.

• Expense ratio improved to 28.9%, 0.7 points better than last year, driven by expense management and broker platform consolidation.

Outlook and guidance

• Management expects firm conditions in auto and commercial insurance, with personal property markets hardening after significant catastrophe events.

• Commercial insurance is expected to generate low double-digit growth for 2024, aiming to grow at twice the industry rate.

• Personal property line targeted for a mid-90s combined ratio annually, with growth expected at a mid to upper single-digit pace.

• Sonnet portfolio expected to reach break-even on a run rate basis for 2025.

• Operating ROE targeted to move toward the upper end of the range over the next couple of years, with 12% ROE seen as achievable by 2026.