DBRS Morningstar Assigns Provisional Rating of BBB (high) to Intact Financial Corporation’s Fixed-to-Fixed Rate Subordinated Notes Series 1 due 2081; Stable Trend

DBRS Limited (DBRS Morningstar) assigned a provisional rating of BBB (high) with a Stable trend to Intact Financial Corporation’s (Intact or the Company) Fixed-to-Fixed Rate Subordinated Notes Series 1 due 2081 (the Fixed-to-Fixed Rate Subordinated Notes). The rating is consistent with DBRS Morningstar’s notching approach for capital instruments issued by insurance companies.

RATING DRIVERS
Intact’s ratings would be upgraded if the RSA Insurance Group Plc acquisition is successfully executed by achieving the expected financial results, while maintaining a similar risk profile. This would include strengthened market positions that result in a sustained improvement in profitability, and lowering financial leverage to below 30%. Material strengthening of capital buffers would also have positive rating implications.

Conversely, the Company would be downgraded if there were material integration issues, or if Intact experienced a persistent decline in underwriting results or significant unfavourable reserve developments. The ratings would also be downgraded if Intact experienced a material decline in capital buffers above regulatory target ratios together with a sustained deterioration in financial leverage over 35%.

ESG CONSIDERATIONS
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 https://www.dbrsmorningstar.com/research/373262.

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

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

The principal methodology is the Global Methodology for Rating Life and P&C Insurance Companies and Insurance Organizations (July 21, 2020, https://www.dbrsmorningstar.com/research/364260). Other applicable methodologies include DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021, https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

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

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