DBRS Morningstar Finalizes Provisional Rating of BBB (high) with a Positive Trend on Intact Financial Corporation's Limited Recourse Capital Notes

DBRS Limited (DBRS Morningstar) finalized its provisional rating of BBB (high) with a Positive trend on Intact Financial Corporation's (Intact or the Company) Limited Recourse Capital Notes Series 1.

KEY RATING CONSIDERATIONS
Per DBRS Morningstar's Global Methodology for Rating Insurance Companies and Insurance Organizations, hybrid capital instruments that convert to preferred shares issued by an insurance holding company are rated two notches below its Issuer Rating.

RATING DRIVERS
The ratings would be upgraded if the Company continues to show strong earnings while maintaining a similar risk profile and appropriate capital buffers.

Given the trend change to Positive, a rating downgrade is unlikely. However, the Company would be downgraded if it experiences a persistent material decline in underwriting results or weakening in regulatory capital buffers combined with a sustained deterioration in financial leverage.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS

Environmental (E) Factors
Environmental concerns regarding Climate & Weather Risks are relevant to the rating of Intact as a P&C insurer but did not affect the assigned rating or trend. As part of its P&C product offering, Intact is exposed to weather-related losses from natural catastrophic events such as wind, wildfire, hail, flooding, and other extreme weather events. These events can lead to earnings volatility and increased reinsurance cost. DBRS Morningstar considers this ESG factor as part of product risk when assessing the Company's risk profile.

There were no Social or Governance factor(s) that had a significant or relevant effect on the credit analysis

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at www.dbrsmorningstar.com/research/396929. (May 17, 2022)

The Grid Summary Grades for Intact are as follows: Franchise Strength – Strong; Risk Profile – Strong/Good; Earnings Ability – Very Strong/Strong; Liquidity – Strong/Good; Capitalization – Strong/Good.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (August 31, 2022; https://www.dbrsmorningstar.com/research/402220). In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022; https://www.dbrsmorningstar.com/research/396929) in its consideration of ESG factors.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument, and represents the finalization of the provisional rating previously issued on March 1, 2023.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are monitored.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.
Lead Analyst: Nadja Dreff, Senior Vice President, Head of Canadian Insurance
Rating Committee Chair: Marcos Alvarez, Senior Vice President, Global Head of Insurance
Initial Rating Date: February 20, 2006

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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