Intact Financial (TSX:IFC) Q3 2026 Earnings Call

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7:33 Thank you for watching. Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q3 2026 Results Conference Call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question and answer

9:03 session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on November 4, 2026. And now, I would like to turn the conference over to Geoff Kwan, Chief Investor Relations Officer. Please go ahead.

9:24 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 two for a disclaimer regarding the use of forward-looking statements which form part of this morning's remarks, and slide three for a note on the use of non-GAAP financial measures and other terms used in this presentation. To discuss our results today, I have with me our CEO, Charles Brindamour, our CFO, Ken Anderson, Patrick Barbeau, a Chief Operating Officer, and Ashraf Louitri, 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.

10:14 Thanks, Geoff. Good morning, everyone. Thank you for joining us today. Yesterday evening, we announced net operating income per share of $3.63 with a combined ratio of 94%, including four points of CAAT losses above our expectations. Our top line growth increased to 5%. This was driven by sequential improvements in personal lines as well as commercial and specialty lines. reflecting continued traction in our growth initiatives. Our operating ROE was 16% despite a two point drag from excess capital. This marked the tenth consecutive quarter that our ROE was above 15%.

10:59 Let me now provide some color on each of our segments beginning with Canada. In personal auto, our premiums grew 10% in the quarter including two points of unit growth. Our combined ratio was strong at 91.2% despite close to two points more cats than last year. Our pricing and risk selection strategy is really working and we continue to gain market share with premium growth now outperforming the industry for seven consecutive quarters. We outperformed the Canadian market in H1 by four points of growth and five points of combined ratio.

11:47 This environment really plays to our strength. In Ottawa, we operate in a market where capacity is fairly tight. Inflation in the past couple of years has been in the mid single digit range, driven by physical damage, stable accident benefit cost equation, but very high inflation involving injury liability. This has put a fair bit of pressure on the industry profitability. With product reforms reducing claims inflation and improving affordability for consumers, we expect industry growth in the mid single digit range in the next 12 months. We expect to continue outperforming the industry in terms of growth and to maintain our combined ratio in line with our current performance.

12:42 We're keen to grow in this environment. In personal property, our premiums grew 7% in the quarter, including one point of unit growth. The combined ratio of 105 included 33 points of cats. Underlying results continue to improve. And if you look at the past 12 months, our combined ratio in home insurance was 92.5%, Consistent with our sub-95 guidance and close to our 90% average track record in the past decade. Over the next 12 months, we expect hard market conditions to persist. And we're really well positioned to continue gaining market share in this environment.

13:34 In commercial lines in Canada, premium growth improves sequentially to 2%. This reflected four points from increased units and rates, partly upset by a mixed shift towards smaller accounts. Our game plan to deploy technology, expand our product range, and broaden our distribution, especially in specialty lines, is really paying off. Submissions are up close to 10% in the quarter. With this momentum, we expect to outperform the industry growth in the next 12 months. We then avert a strong combiner issue in commercial as well of 91.9%, despite catastrophes being seven points higher than expected.

14:24 Excluding this, the 85% combiner ratio is right in line with our five-year average. We continue to target a combiner ratio in the low 90s or better. Moving now to our UK and I segment, Our top-line growth improved sequentially and was flat in the quarter, supported by solid new business, particularly in specialty lines. Over the next 12 months, our quarterly growth rate will be uneven given the dislocation associated with the integration of NIG and the deployment of new pricing models in a competitive environment. But over time, we expect a positive trajectory driven by new product, Launches, Distribution Expansion, and Continued Improvements in Broker Service.

15:16 The combined ratio of 94.1 was in line with our view of the current run rate. The UK team is executing on the action plan targeting a combined ratio towards 90%. This will be achieved by accelerating deployment of advanced AI models in pricing and risk selection, modernizing our technology platform, and decommissioning legacy systems in addition to improving our productivity. In the U.S., growth came in at 3% driven by our focus on expanding the best performing verticals. Roughly two-thirds of the portfolio operates sub-mid 80s in the U.S. These are the segments which drive our growth.

16:03 And it's no surprise that we delivered another strong combined ratio of 85.2% The 13th consecutive quarter below 90%, and 18th consecutive quarter outperforming the industry benchmark. While our objective is to deliver low 90s or better, over the next year we expect our combined ratio to be sub 90%. And over that period, we see our top line growth gaining momentum, driven by doubling down on our most profitable verticals, Expanding geographic footprint in addition to adding verticals such as fine arts, US construction liability, and ENS casualty.

16:50 Overall, as we look ahead, we're confident that our competitive advantages will help us make the most of a changing environment. And with the rapid development of AI being no exception. We firmly see ourselves as relative and absolute winners in an AI world. We've built our AI muscle in-house since creating the IntacLab over 12 years ago, and today we're a global leader in AI in the insurance space. It is in our view a tailwind to both our key financial objectives. Over the past decade, We've outperformed the industry ROE by an average of 670 basis points.

17:39 A third of that comes from pricing and risk selection and another third from claims and supply chain. Frankly, AI is making them both stronger. Pricing is where it matters the most and where we've been expanding our lead for years. We've built and engineered over the past decades vast proprietary data sets, structured and unstructured, of customer interactions ranging from shopping, claims, in addition to using public and contextual data. Given we're two times larger than the next closest competitor, this is a huge advantage.

18:24 And this is combined with a team of over 600 AI experts using the latest data science to feed our prediction models. Today, machine learning prices 94% of our Canadian personalized business and 75% of our commercial lines. When including our operations in the US and UK and I, we have more than 600 of our own models in productions. Some believe generative AI will level the playing field. We strongly believe the opposite. Simply put, you can't prompt your way to a sophisticated pricing model without the ingredients that we have at scale. In claims, our second area of outperformance, we spent years internalizing our supply chain.

19:17 AI multiplies the value of that choice. We handle more than 95% of claims in-house, so we see every step of the claims journey from first notice Final Repair. That gives us data no one else has. It sharpens our fraud detection, reduces indemnity leakage, and helps our adjusters and lawyers close files faster. And when a basement floods or a car needs repair, it's our own people and supply chain network, like Onsite, and our auto service centers that get the job done. Frontier models can't replicate that, as disadvantage is rooted in the physical world.

20:02 And now to growth. Over the past decade, we've grown net operating income per share at a 12% tigger ahead of our objective, driven by organic growth, margin expansion, and capital deployment. There's no doubt that AI has already expanded our margins, and that'll continue and accelerate. As AI changes how retail customers shop, Our distribution advantages become even more valuable. Customers choose insurers they trust based on reputation, reviews, claims experience, and price. I've laid out how we outperform on price. Then we own Canada's number one and number three brands with Intact and BidAir Direct, and three out of four customers are advocates.

20:53 A very strong digital platform, including the country's Most Downloaded Insurance App. Because we own our platforms across brokers, direct to consumers and agencies, we have the optionality to win however customers choose to interact with us. We're obviously actively focused on ensuring we win in LLMs as well as with agents in time. All of this is already translating into financial results. This is not just a promise. We earned today close to $250 million in recurring pre-tax earnings and expect to double that in the next 24 months from our AI deployment, which we measure.

21:40 And we see a substantial runway beyond that. So in closing, Qtree once again demonstrated not only the strength, but also the resilience of our platform to deliver strong growth and outperformance in good, and in bad times. Our teams did outstanding work supporting customers through multiple weather events and I want to thank all of our employees for their dedication and commitment to helping customers get back on track. Thank you and on that I'll turn the call over to our CFO, Ken Anderson.

22:17 Thanks Charles and good morning everyone. Last night we reported strong third quarter results demonstrating the earnings power and robustness of our platform. Net operating income per share was $3.63, our second highest result for a third quarter. This performance sustained operating ROE at 16% and at 18% when adjusting for under-leverage and excess capital. Book value per share increased 8% year-over-year to $111.11 and reached double-digit growth excluding AOCI. Let me add some colour on the strong performance in the quarter. The overall underlying current accident year loss ratio was solid at 55.4%.

23:05 Our consistent track record of healthy favourable prior year development continued, contributing six points in the quarter. This was close to our quarterly average PYD over the past two years and broadly consistent with the second quarter. If you want to estimate near-term EYD levels, our recent experience provides the most relevant guide. But our view remains that the current accident year result and prior year development should be assessed together when evaluating performance. You also need to keep in mind that we increase the threshold for losses to be categorized as catastrophes on January 1st this year. This keeps Close to one point of losses in the current accident year ratio in Q3 compared to last year. So all in, the combined current accident year and PYD measure is improved year over year, reflecting our continued profitability actions.

24:09 Catastrophe losses were $660 million in the quarter, four points above expectations. Over the past 12 months, have been close to our $1.2 billion annual guidance. As usual, we will provide our cap loss expectations for 2027 when we release fourth quarter results. Moving to expenses, the consolidated expense ratio was 33.9% for the quarter, a small improvement year over year. We continue to invest in data, AI, and technology to strengthen our competitive advantages and in our brands to drive profitable growth. At the same time, we maintain discipline on the overall cost base.

24:54 We expect our consolidated expense ratio to be at the higher end of the 33% to 34% range for the full year 2026. Beyond underwriting, this quarter also highlighted the strength of our diversified and recurring sources of earnings. Operating net investment income increased 5% to $422 million, supported by growth in assets and higher yields. Our reinvestment yield is now 4.6%, 50 basis points above our portfolio book yield. This momentum supports our expectation for net investment income of over $1.7 billion this year, rising to over $1.8 billion in 2027.

25:42 Distribution income was another strong contributor in the third quarter, increasing 16% year-over-year to $171 million. BrokerLink delivered solid organic growth and improved margins. Onside, our counter-cyclical restoration business was very active following the recent CAT events and grew revenues by more than 30% in the quarter. We continue to expect distribution income to grow by 10% annually over time. Moving to our balance sheet. We are operating from a position of significant financial strength and flexibility. Adjusted debt to total capital of 16.3% was largely unchanged from the second quarter.

26:31 Our total capital margin was $3.6 billion, well in excess of what we need to manage volatility and leaving us with significant capacity to deploy capital. During the third quarter, we repurchased approximately $200 million of our shares, bringing total buybacks over the past 12 months close to $600 million. At current valuation levels, share repurchases represent an attractive use of capital. We intend to remain active while balancing strategic flexibility with our core objective to maintain a strong and outperforming ROE. Our M&A track record over the last decade shows an IRR north of 20% and the landscape continues to improve.

27:20 We're sometimes asked about buying back even more shares given how undervalued they are and the strong shareholder support we can expect to finance an acquisition. In theory, that makes sense. But in practice, there is a limit to the amount we can expect to raise from investors for larger transactions. Therefore, given how constructive the M&A environment is, we're being deliberate about preserving capital for opportunities that can create significant shareholder value. Overall, we continue to deliver on our two financial objectives. The first is to outperform the industry on ROE by at least 500 basis points every year. We've consistently exceeded this objective with outperformance of 740 basis points in 2025 and an annual average close to 700 basis points over 5 and 10 years.

28:22 Our second objective is to grow net operating income per share by 10% annually over time. Here too, we've exceeded the bar, delivering compound annual growth of 14% over the last five years and 12% over the last 10 years. And we have all the levers to continue compounding in excess of 10% going forward. First, organic premium growth is supported by an addressable market now 10 times larger than a decade ago and a robust multi-channel distribution strategy. Second, Operating margin expansion is fueled by our industry-leading capabilities in AI and our deep expertise in claims and supply chain management.

29:10 These two levers, coupled with continuing to invest in distribution and share buybacks, provide a clear path to compound NOIPs at 10% annually over time. And that is before the significant upside from M&A, which Given our track record and the opportunities we see remains our preferred use of excess capital. We're in a strong position and focused on continuing to deliver long term value for our shareholders. With that, I'll turn it back to Geoff.

29:44 Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to two questions per person. You can certainly reach you for follow ups and we'll do our best to accommodate if there's time at the end. So Sylvie, We're ready to take questions now. Thank you. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touchstone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Thank you. Please go ahead and press star one now if you have any questions. First, we will hear from James Loyne at National Bank Capital Markets. Please go ahead.

30:32 Yeah, thanks.

30:33 First question, just maybe on personal auto and just wanted to dig into your views of outperformance versus the industry. Saw that the industry outlook lowered just a bit on Alberta reforms, but what gives you that confidence that you'll continue to outperform industry growth rates and deliver still in, let's say, the high single-digit range.

31:01 Thanks, Jim, for your question. That's exactly right. Our view is that we'll outperform the industry and that the change in outlook is essentially driven By reforms, Alberta, namely, where come January 1st, all new claims will be subject to a new regime. I'll ask Ashraf to give perspective on the new Alberta regime, which I think is excellent for Albertans. But what it means in practice is that the severity on all new claims come January 1st. will drop meaningfully because we're moving towards an all-care model. And I think that premiums will follow accordingly.

31:55 That's how the industry works. The cost equation changes. Premiums follow. And I think there will be a one-time impact in 2027 because of the deployment. All new claims come January 1st. And that's pretty much the only reason why we have modified our outlook. Ashraf, why don't you give a bit of color on Alberta and then I'll come back on outperforming.

32:22 Thank you, Jimmy, for the question. That's exactly right, Charles. So maybe first I'll start by saying the reform itself is called Care First because it puts the needs of Albertans first. And the way it does that is by limiting the tort access allowed, which is crucial in our view to containing the cost and keeping the system focused on care rather than litigation. Consumers will also benefit from not only more affordable and stable insurance prices, but also faster treatment that's focused on recovery and free from the delayed or prolonged legal process. So as a result, a bit as Charles you explained, the reform lowers meaningfully all new claim costs starting January 1st. You should expect to see negative year-over-year claim cost inflation in the province, which translates to lower inflation in total Canada.

33:09 and this will drive lower rates in the province in 2027. And more importantly, the care first reform brings back the system to sustainability after industry lost close to one billion over the last two years. In other words, after the one year reset in 2027, we should expect to see controlled level of inflation. And we are optimistic that the reform will have a positive outcome for Albertans and we remain committed to working closely with the government and regulator to ensure a successful delivery.

33:37 Yeah, I think, Jamie, the issue In Alberta, it was so litigated that you had massive amounts of cash settlements, a big chunk of which didn't go to injured parties. I think the government took the bull by the horn and basically said, we will put all the resources towards getting Albertans back on track following an accident. Very good reform in my mind, not only for victims, but for all drivers in Alberta. and I think that everybody benefits in that context. And so we're very positive on the outcome for Albertans. And, you know, if you look more specifically at the inflation equation, you know, that we're operating under now pre-reform, there's probably, you know, Three elements in there you want to think about.

34:37 The first one is the inflation, all this mid-single digit now anchored in physical damage inflation. We don't think that's going away. Liability inflation, driven by a number of provinces, Alberta being the biggest one, was double digit. And then at the other end, Accident Benefit as a product across Atlanta hasn't shown much inflation. So in aggregate, you're in the mid-teens. Alberta's tackling the high inflation, mid-single digit. Sorry, did I say mid-teens? I don't know, mid-single digit. Alberta's tackling the high inflation.

35:24 There'll be this one-time impact in 2027, hence the change in outlook. And the product they're putting in place will also contain inflation. respectively. Now, you've seen us over time shrink our market share as people were behind on inflation. And as people are now catching up, we've outperformed now by close to four points in the recent past. It's still a tight pricing environment. We're putting our brand to work. Our service to work, our digital channels to work. We don't see the outperformance changing in the near to midterms.

36:16 And that 4% was Canada overall?

36:21 Yeah. Just to clarify.

36:22 Canada overall.

36:25 and then you know on this on the same theme and and perhaps you can relay it over to personal property as well if bundling is a component of this of course but looking at you know policies and force growth unit growth so kind of in like the one ish percent range you know is it is it really like Alberta and pulling back on Alberta that's been a drag on seeing acceleration or further or higher growth rates in in that unit perspective or is this something we could see start to inflect now that Alberta's back online and you're broadly more comfortable with with the pricing environment?

37:11 Enforce The enforced picture is a lagging indicator. I think your written unit growth is, in my view, a more relevant indicator. We have good growth in most of the markets in which we operate at different levels. We pick our spots depending on the health of the market. Clearly, as we saw these reforms heading in the right direction in Alberta and as the industry was really in a real tough spot, Being a leader in the marketplace, we chose to grow in that environment. And I think this turned out to be the absolute right call. I don't know, Ashraf, if there's anything else to add on that.

37:57 No, I think Jamie touched on the bundling. Oh, the bundling. It's relatively stable. It has been stable, slightly higher than 50% in both products, slightly higher on the personal product and personal order. and I think to your point, Charles, the unit growth is at 1.5% year-to-date. It's in that zone, it's in that range. Of course, there are areas where we're more careful and others where we're more bullish from the growth, but overall, that has been stable

38:27 since the start of the year. Yeah, so the bundling, a big thing at our end, I think depending on the province and the line of business, You're in the 50, but there are provinces where it's close to 70%, actually. And it's been a good retention tool for us. Thank you. Thank you. Next question comes from John Aiken at Jefferies. Please go ahead, John.

39:00 Good morning. In terms of the combined ratio in the UK and I, we've seen in previous quarters some large losses negatively impacting that, but we saw improvements this quarter. Was there a fundamental shift that we saw in the quarter, or were there actually some tailwinds that helped the combined ratio this quarter?

39:19 Yeah, sure.

39:21 No, look, fundamentally, John, you look at the performance in 2024 and 2025, You see an average of 94. And I think, you know, last quarter, we called out that what we saw in terms of large losses in the second quarter was very much anomalous. And our view was that the underlying performance was sub 95. And that's what you're seeing in the third quarter. That's our view of where the performance is. And I think absent a surprise, we would anticipate In the near term, being in that zone. So no excess or unusual large loss activity in the third quarter and nothing unusual to call out. I think the performance in the third quarter reflects our view of where we are today. To be clear, our objective is to push towards the 90%.

40:22 and many more. Thank you. 36 months or so the aim is to improve particularly the technology cost in the UK where we're embedding new technology but until it's fully embedded you can't switch off the existing technology so you end up with an outsized technology cost in the near term and that's what we're working hard on over the next three years.

41:17 And can you remind me how long you think that process is going to take in terms of the conversion of the technology?

41:23 Yeah, I think we talk about the outer end in around 36 months, so that's our view today. In terms of the performance, though, clearly 27 should be better than 26, particularly given the first half of 26.

41:41 Yeah, I mean, we've been deploying new systems since last year. There are multiple products and lines of business in that region, CL, as well as SL. And the challenge is that RSC had multiple legacies. We don't operate like that, so we're unpicking those one by one. And while we're deploying technology now, your policies need to have migrated before you can get rid of the old technology and the 24 to 36 months window.

42:19 Thanks for the call. I'll reach you.

42:22 Thank you. Next question comes from Tom McKinnon at BMO Capital. Please go ahead, Tom.

42:30 Yeah, thanks very much. I wonder if you can give some color with respect to what you're seeing with commercial lines. Largely in Canada, you've talked about pressures in some of the bigger accounts, but not necessarily in SME. Why do you believe that's the case and As we continue to see rate pressure in North America on commercial lines, when do you expect that theme to dip into the SME in Canada? And if you don't, why?

43:08 Yeah, no signs of that in the SME space. You're seeing retentions north of 90%, very stable, some of the metrics. are even improving in that space. And when it comes to price change per se, you're seeing almost mid-single-digit price changes in that space, very steady. It's a growing portion of our portfolio, Tom. That's why I've talked about the two points of mixed shift downward in our remarks. It's a sign that we're growing in that space at a much faster clip than we are for larger accounts where we're shrinking.

43:58 But we're not seeing a migration. I don't know, Patrick, if there's any color you want to add there.

44:06 No, that's right. When you combine rates and exposure, we're really on the mid-single digit for SME and for a good portion of

44:16 And Sam, that would be consistent with what we've seen in the past 25 years. And I'd like to talk about before that, but we were not as present people around the table today. But certainly, it feels very much like what I've seen before and maybe a little bit better.

44:47 And what's the mix in terms of net premiums for commercial lines in Canada between large and SME?

45:01 I think we say in commercial lines in Canada, you're looking at 80 to 80 plus percent is in the SME mid-market space. SME mid-market.

45:15 Mid-market, yeah. Okay, thank you. Next question comes from Doug Young at Desjardins Capital Markets. Please go ahead, Doug.

45:29 Hi, good morning. Just want to go back to the Alberta reform and the personal lotto and it sounds like the claims inflation and the benefits you get kind of happen January 1st and pricing gets adjusted over the next year and then earned premiums will be reflected. Are we going to go through a period actually where you get margin expansion through 2027, a bit of 2028, and then it kind of stabilizes? Because it seems like that might be the case, but I just want to understand that.

46:02 And is that what you saw with the Ontario reforms as well?

46:13 I think that what we're seeing, Doug, is You looked at our performance today. It's a very good indicator, combined ratio-wise, of what to expect next year. You know, it's at the lower end of what we call sub-95. That's why we're specifying what to expect next year. I think, in aggregate, at the industry level, clearly, the performance of the industry Thank you very much. We'll be translated into better premiums for Albertans.

47:16 But when it comes to us, I feel like looking at the performance right now is probably the right way to think about our performance next year, which is better than mid-90s. But I don't want to telegraph margin expansion.

47:34 No, I don't. Specifically about Alberta, if you were alluding to a potential mismatch between the timing of where the cost benefit would happen and the premium, both will be aligned. So there won't be a mismatch there.

47:52 Okay, so it's not like the cost comes down immediately and the earned premium comes through or the reduction comes down later. That's more matched through 2027.

48:02 Yeah, I think we're in the last Stretch, you know, before the reforms become effective. But think in symmetric terms here. That's probably the best way to think about it.

48:15 Okay. And then I had some on the UK and I, but I think most of that's been answered. But on the US, it feels like you're more optimistic on both the margins and the growth, you know, over the coming year and and maintaining your combined ratio in around mid 80s or below 90%, I think is what you said. I mean, what gives you the confidence given obviously the competitive trends? You talked about new products, you talked about distribution relationships, like what is really kind of turning that confidence to be more positive on the outlook in the US?

48:56 I think it's the fact that the growth is all coming from the best lines of business. You know, As I mentioned in my remarks, you have almost two-thirds of the portfolio that operates sub-mid-80s, and that's where the bulk of the growth is coming from. So at the very basic level, just simple math, we feel good about the way we're building the U.S. business, and we're investing in teams. We're deploying new products and obviously the products we pick are products that will be accretive to our performance. Patrick, I don't know if there's additional color you want to... No, that's right.

49:45 Some of the new lines that you've talked about as well, Fine Arts, CNS Casualty, are just starting. So I think they'll gain momentum as well to support the top line. That's why we see an acceleration in top line growth while maintaining very good profitability in 27. Yeah.

50:04 We've got 12 verticals in the U.S., Doug, and we can really calibrate the growth where we want, and that's what we've been doing, and that's working well. I'm pleased with that. I mean, it's surprising to me that we're outperforming the specialty lines benchmark in the U.S. by seven points of combined ratio and growing marginally faster. I think... The denominator is not huge, and therefore it's easier to grow in that space. Ken, did you have any color you wanted to add there?

50:41 No, but as you also said in your remarks, we've had 13 quarters sub-90 combined ratio, and in the recent past it's mid-80s, so the confidence in maintaining that as sub-90 for the next 12 months is fairly strong.

51:01 Yeah, yeah. The lines where there's most competition, Doug, I mean, there are lines where performance is really good. I'd say what we call special property, large property accounts. There's good performance there, no doubt. But, you know, prices are down double digit. We're shrinking that portfolio, even though we love that business. And that goes to, you know, why growth? was only three-ish percent in the quarter, but the engine can generate more than that. Appreciate the call, thank you. Thanks. Next question comes from Bart Dzorsky at RBC Capital Markets.

51:47 Please go ahead, Bart.

51:50 Great, thanks for taking the questions and good morning. I wanted to ask around the AI benefits you mentioned and the prepared remarks scaling to 500 million. How should we be thinking about that? falling to the bottom line versus reinvesting over the next two years. And then I think you mentioned it could grow beyond $500 million past that. So what could those benefits scale up to? Thanks.

52:12 Patrick? Yeah.

52:16 You know, we anchor where we put our investments in AI with the financials of the business. That's why our top priority is still to invest a good portion of AI into the pricing and reselection area. That's the first order of priority. The second one is improving customer experience, so reducing cycle times and claims and accelerating our service to brokers and clients in the quoting and renewal process. The third objective is a multiplier to the first two, which is AI can really accelerate the speed at which we build and deploy software. And we build a lot of software ourselves, so that's the third area of priority. And finally, the fourth one is efficiency gains, especially in the non-customer facing areas, given the second pillar will tackle that. When we go from close to 250 million today to 500 million, it's probably around 60% of that that will still be in more than the loss ratio, and then the other part will help the expense ratio. We want to continue to invest in AI going forward, so that will fund some of it, but we definitely think it will expand Our combined ratio of performance over the next two years.

53:49 And I would say, Bart, when I look at the combined ratio of performance where the AI deployment is the greatest, the expansion of the outperformance is bigger than what we measure, to be clear. And the numbers we're talking about are the numbers we measure. Control Sample versus the rest. And so I think this is clear margin expansion here. It's not just a theoretical number that will disappear by higher spending in other parts of the organization.

54:34 Okay, got it. Thanks. That's very helpful, Conor. And then The tone sounds a lot more constructive on M&A opportunities, maybe just a capital allocation question. How should we think about the pace of buybacks going forward? And with respect to M&A, where are those opportunities that seem to be accelerating, if you will? Any color there would be great. Thanks.

54:59 Ken, do you want to provide some color?

55:01 Yeah, look, I mean, the balance sheet, as I've said, is in an excellent position, leverage, debt to capital just over 16%, 3.6 billion of capital margin, so clearly a lot of flexibility. Our shares are undervalued. We're active on the buyback. We've deployed 200 in the quarter. We will continue to be active, but as I said in the remarks, we're also balancing that with an attractive M&A environment. We're conscious of the ROE drag that comes from maintaining the flexibility, but we're also looking at a range of opportunities, and some of those opportunities are large, and large opportunities could require large equity raises. And that's where there's a limit in terms of the capital markets debt to the equity that you can raise. And then in that context, having the dry powder increases the overall scale of M&A that you can do.

56:17 And then there's transactions that can involve issuing shares to the target and that also creates a different dynamic in terms of how much equity you can raise from shareholders. So those are considerations that we factor into the balancing of buyback and retaining that flexibility. But you can expect us to continue to be active when we see the shares undervalued.

56:51 Correct. Assume the pace. that you've seen in the last quarter continues. But this theoretical idea that you should be more aggressive because you'll have shoulder support when you issue shares, in practice, depending on the size of the transaction, there's a limit for that argument to be true. Now, 200-point drag on the ROEs, big. and our first financial objective is are we outperforming? So in practice, what we're doing now is we're shooting ourselves in the foot by 40% of the objective. If we didn't have a very good reason to calibrate what we're doing the way we're doing it now, we wouldn't be doing that. We'd be more aggressive.

57:43 Very helpful. Thanks for taking the questions. Next question comes from Paul Holden at CIBC. Please go ahead, Paul.

57:54 Thank you. Good morning. Sorry, another question for you on Alberta. Thinking of the sequencing of the profit improvement, and Charles, you're very clear for new claims as of Gen 1 will be under the new regulation. Just wondering how we want to think about Prior claims and how they're working through the system. Obviously, those will develop over time, so could continue to be somewhat of a drag on margins. How long does it take for that to roll off, I guess, is really my question.

58:34 Well, these are long tail type claims, right? And so you should think... Thank you very much. There would be drag from those only if there was no caution on our balance sheet.

59:20 And I would argue that there's caution on our balance sheet, so it's really not on the list of the risks that I'm concerned about. Achraf, is there any additional color? Nothing else to add. All right.

59:39 Understood. That's helpful. Thank you for that. And then, Charles, you're talking about, I think, four points of outperformance versus the industry on personal auto. And I think that was a reference to premium growth. So if I think about your premium growth being 10, suggest the industry's six. And then you have the Alberta drag coming next year. So six goes to something lower. Am I thinking about that correctly, just again, in terms of that math and industry growth heading into next year?

1:00:19 Yeah, I think the industry, I mean, it varies. The industry's growth varies by quarter, but I think directionally, it's probably a good way to think about that. Yes. And we think we'll continue to outperform.

1:00:39 Understood. Okay, I guess those are my two questions. Thank you.

1:00:43 Thanks, Paul. Next question comes from Mario Mendoza at TD Securities. Please go ahead, Mario.

1:00:50 Good morning. I want to go back to the M&A discussion. Both Charles and Ken, you made reference to a deal being large, so large in fact that the equity market was wouldn't fund it. There would be some limit on how much equity markets could fund it. And the moment I heard you two say that, my first thought was, well, what's large then? What is a large deal for Intact? Is it like a $5 billion deal, a $10 billion deal? Just size what large means in this context.

1:01:19 I think in this context, large means north of $15 billion in terms of size. I mean, that's where, you know, the equity component, you know, would get up into the upper single digit of billions and that's where the combination of cornerstone and a bought deal would be probably getting to the upper bound of what's doable.

1:01:52 I think 10 is large, 15 is where you push all the levers to the max.

1:02:00 That's a third of your market cap. For those keeping track, 15 billion is a third of your market cap. That's meaningful. Perhaps it's something we can take offline. I just want to pursue this a little further. The next thing I wanted to ask about was you said, Charles, in your comments that you expected UK and I to be choppy. Going forward, and I guess I want to understand what you mean by that. First of all, did I understand you correctly? You meant that profitability could be choppy going forward.

1:02:35 No, no, no, top line.

1:02:37 Top line could be choppy. Top line growth could be choppy. Okay, as in, like, is there a seasonality thing you want to point us to? Is there particular quarters where it'd be soft? What are you referring to?

1:02:49 I think that, you know, what goes in the top line equation in... and the UK&I is two things. You have the UK commercial lines platform and then you have the London market and specialty lines platform. The growth in specialty lines and London market and Europe tends to be choppy. It's good. It's positive. Sometimes it's very high. Sometimes it's not as high. And then when you look at The UK commercial lines market, sometimes you get off accounts in the delegated authority space, for instance. Sometimes you deploy a pricing and risk selection algorithm in a product. When you do that, it creates a bump.

1:03:37 You put all that together, it's not like there's a straightforward trajectory. That's why I'm saying from a top line point of view, which is different from how you earn and therefore combine ratio. But from a top line point of view, you can have bumps in the road, yes. That's very clear. Thank you. Next question comes from Brian Meredith at UBS. Please go ahead, Brian.

1:04:10 Yeah, thanks. Charles, you mentioned earlier in your comments about how AI is going to affect, I guess, customer kind of shopping. and clearly these AI personal agents could have an impact. I'm just curious your view on how this will roll out, potential impact in the industry and particularly focused also on your distribution, right? Is there risk here that we're gonna see some disintermediation within your distribution system from these?

1:04:41 I think when you look at our distribution system, Brian, one of the things we've done Starting more than 10 years ago, is we have built two of the strongest brands in the Canadian marketplace, including our broker distributed offer in personalized. Impact Insurance is the number one PNC brand in the country. Yes, it is distributed by brokers. It is distributed also by our own brokers, which is as large, if not larger than a number of the direct insurers in the country.

1:05:30 And it has a digital channel. Unlike many broker distributed business, supported by a strong brand, which competes and rivals any direct digital channel. So, yeah, I think that Look, people do price, product, experience, discovery through LLMs. Agents will come. Fundamental, in my view, is the quality of your digital experience and your digital channel. And our digital channels, wall to wall, cover our distribution footprint. Because we've invested in putting a digital experience Impact Branded on top of the broker channel. And so, yeah, I think there'll be pressure in some parts of the distribution channel, especially where a broker might not have scale. But I think between our brand, our digital channel, and then the pricing sophistication and personal lines, we're in really good shape to make the most out of that environment. And as I said, in distribution in the broker channel.

1:06:53 We own a broker that has close to $6 billion of premium in the Canadian marketplace, a bit bigger than our direct business, which has $5 billion. And therefore, we feel that we've got really good optionality, but also a digital offer that covers all parts of our distribution footprint. And I think that is key. That's why we're doubling down on our digital channel. Appreciate that. Thank you. Thank you. At this time, we have no other questions registered. I would like to turn the meeting over to Geoff Kwan.

1:07:33 Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for one week, and the webcast will be archived on our website for one year. A transcript will also be available on our website in the financial report section. Of note, our 2026 fourth quarter results are scheduled to be released after market close on Tuesday, February the 9th, 2027, with the earnings call starting at 11 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. At this time, we ask that you please disconnect your lines. Enjoy the rest of your day.