Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of Intact Financial Corporation's (Toronto: IFC; Intact) insurance subsidiaries at 'AA-' (Very Strong).

Fitch has also affirmed Intact's senior unsecured debt at 'A-', preferred shares at 'BBB,' and Issuer Default Rating (IDR) at 'A'. All of the ratings have a Stable Rating Outlook.

Key Rating Drivers

Acquisition Adds Scale: Intact recently acquired RSA Insurance Group Plc (RSA). The acquisition enhances Intact's leading Canadian property/casualty (P/C) market share to approximately 21% from 17% and gives the company an entry into the UK and Ireland at scale with an anticipated CAD 5 billion in premiums. Demonstration of continued favorable performance with greater geographic and product diversification will reflect positively on company profile.

Very Strong, Consistent Profitability: Underwriting and risk management prowess contribute to a track record of consistent, strong underwriting profits and favorable returns on capital. The company reported an underwriting profit in each of the last 13 years, including 2016, when the Fort McMurray wildfire generated industry insured losses of approximately CAD4 billion. Consolidated ROE averaged 13% from 2017 to 2021.

Inflationary Pressures Manageable: The company's liabilities are comprised mainly of short duration reserves, and therefore sustained long-term spikes in inflation can be repriced into the insurance product; however, sharp temporary spikes in inflation are harder for the company to adjust. This is most prevalent in automobile physical damage insurance where replacement parts can have sizeable price shifts depending on supply constraints. Short-term spikes, though, either self-correct or can be priced for over time if trends are sustained.

Very Strong Capital Metrics: The company maintains very strong traditional and risk-adjusted risk metrics. Financial leverage temporarily increased for the RSA acquisition, but the company was able to reduce financial leverage ahead of previously stated targets. Intact's long-term target for financial leverage is approximately 20%, but Fitch expects this ratio may temporarily increase for strategic reasons.

Redundant Loss Reserves: Fitch believes Intact's loss reserves are moderately redundant, and the company has a history of favorable prior-year reserve development. Reserves for RSA's 2020 and prior accident years are partially covered by an adverse development cover, which reduces downside risk from those accident years for RSA's legacy reserves. RSA's reserves have an average duration of just under three years.


Factors that could, individually or collectively, lead to positive rating action/upgrade:

Sustained combined ratio in the low 90's;

A change to capital navigator factor of 'aa' or better.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Sustained increase in financial leverage of 28% or higher;

Sustained reduction in fixed-charge coverage below 5.0x.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit

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