Intact executives are assured the corporate is well-positioned to endure a potential trade war with the USA, given their low use of U.S.-sourced supplies and provides in auto and property traces.
Traders requested the corporate’s executives a number of questions on Intact’s publicity to U.S. tariffs throughout a 2024 Q4 earnings call Wednesday.
U.S. President Donald Trump Monday introduced a 25% tariff on Canadian metal and aluminum exports to the U.S., beginning Mar. 12. Trump officers have since instructed media the proposed 25% tariff on metal and aluminum would stack on high of an preliminary 25% across-the-board tariff Trump proposed for Canada throughout his election marketing campaign. (Vitality exports from Canada would face a diminished 10% tariff.)
On Feb. 3, Trump paused implementing his 25% across-the-board tariff for a month after Canada promised to undertake border safety measures. Canada has promised to launch counter-tariffs on U.S. items exported into Canada.
Intact mentioned the danger of a cross-border commerce struggle precipitated the insurer to overview its provide chain in granular element. In doing so, the corporate discovered their publicity to U.S.-supplied auto elements was their best threat relative to different enterprise traces, though the general affect of a commerce struggle on the corporate’s earnings could be low.
“We’ve studied in-depth the affect {that a} tariff struggle would have on us as a agency, and we predict we’re in a extremely, actually robust place to navigate the storm, each operationally in addition to financially,” Intact Monetary Company CEO Charles Brindamour mentioned in response to an investor’s query in the course of the earnings name. “We’ve explored a complete vary of situations, and I feel we might do nicely in in these situations.”
Brindamour famous the corporate can use pricing as a lever to handle the affect of tariffs on the auto provide chain.
“Operationally talking, the factor to look at…is the provision chain in private vehicle, and the affect [of tariffs] on service and inflation, which, as you understand, we will worth for, as a result of our product is simply 12 months period. So, we will reprice after we need.”
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However the publicity to tariffs within the auto provide chain isn’t that giant to start with, added IFC chief working officer Patrick Barbeau.
“There are three most important parts in our [auto] claims [costs],” Barbeau defined. “The primary one is accidents and liabilities, the place we shouldn’t see a lot affect from the tariffs.
“After which you have got the labour portion of the restore course of. That can be not a lot impacted by the tariffs.
“After which you have got the automobiles themselves and the automotive elements, which is the place inflation might come from. If I look particularly at auto, greater than half of the fee comes from the lengthy tail coverages. After which the labour and elements is one other 10%.
“So, what stays, after we have a look at the automobiles we insure as we speak, solely 38% or so had been assembled within the U.S. After which on the elements themselves, lower than a 3rd of the elements we use within the restore course of cross the U.S.-Canadian border.
“In order that’s why, general, we really feel that we will handle, between our shut involvement with the provision chain and the potential to cost the product, throughout the similar [financial] steerage [to investors] that we shared earlier than.”
One other investor requested concerning the potential affect of tariffs on property traces as nicely.
“The affect on property traces — and right here not solely private property, however industrial property — could be even lower than what we simply described on the auto traces,” Barbeau replied. “To present you a really feel, two thirds of the price of property is for labour, legal responsibility, and non permanent relocations or enterprise interruptions, if you happen to have a look at the industrial line facet.
“So, at the very least one-third of the general price is for supplies. And as we speak, it’s solely one-fourth of that third we supply from the U.S. The remaining is sourced and manufactured right here in Canada. And we now have alternatives to additional cut back the utilization of U.S.-manufactured items at On Aspect and throughout the provide chain, so even much less of a priority there.”
On Aspect, a property restoration agency, is a subsidiary firm of Intact Monetary.
Function picture courtesy of iStock.com/ranckreporter
