Intact - - PowerPoint PPT Presentation

• Intact Financial Corporation (TSX: IFC)

Wednesday, November 2nd 2016

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Chief Executive Officer

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Important notes:

• Unless otherwise noted, DPW refers to DPW normalized for the effect of multi-year policies, excluding industry pools (referred to as “DPW” in this presentation and previously referred to as “DPW

(underlying)”). This normalized measure is not significantly different from the comparable IFRS-based measure given that the impact of multi-year policies is no longer material to our results. See Table 27 for the reconciliation.

• All underwriting results and related ratios exclude the MYA, but include our share of the underwriting results of jointly held insurance operations, unless otherwise noted.
• The expense and general expense ratios are presented herein net of other underwriting revenues.
• Net investment income includes our share of the net investment results of jointly held insurance operations, unless otherwise noted.
• Catastrophe claims are any one claim, or group of claims, equal to or greater than $7.5 million, related to a single event.
• A large loss is defined as a single claim larger than $0.25 million but smaller than the CAT threshold of $7.5 million.
• A non-catastrophe weather event (“non-CAT weather event”) is a group of claims which is considered significant but that is smaller than the CAT threshold of $7.5 million, related to a single weather event.
• All references to “total excess capital” in this presentation include excess capital in the P&C insurance subsidiaries at 170% MCT plus excess capital outside of the P&C insurance subsidiaries, unless
• therwise noted.
• Unless otherwise noted, market share and market related data are based on the latest available data (Q2 2016) from MSA Research Inc. (“MSA”) and excludes LIoyd’s Underwriters Canada, Insurance

Corporation of British Columbia, Saskatchewan Government Insurance, Saskatchewan Auto Fund, Genworth Financial Mortgage Insurance Company Canada and Canada Guaranty Mortgage Insurance

• Company. MSA data excludes certain Quebec regulated entities. Market share and market positioning reflect the impact of announced or completed acquisitions and are therefore presented on a

proforma basis.

• Certain totals, subtotals and percentages may not agree due to rounding. Not meaningful (nm) is used to indicate that the current and prior year figures are not comparable, not meaningful, or if the

percentage change exceeds 1,000%.

• Net operating income per share of $1.01 despite $0.93 of catastrophe losses from

severe weather

• Solid premium growth of 5% due to growth initiatives and improved market

conditions

• Combined ratio of 97.0%, as solid underlying performance was more than offset

by 8.1 points of catastrophe losses

• Operating ROE of 13.4% and a 10% increase in book value per share year-over-

year

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$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00

LTM Q3-12 LTM Q3-13 LTM Q3-14 LTM Q3-15 LTM Q3-16

Our net operating income per share over the past 12 months represents a 5-year compound growth rate of almost 9%. We target NOIPS growth of 10% per year over time.

NOIPS growth

We have regularly exceeded our 500 bps ROE

• utperformance target versus the industry.

ROE outperformance

Industry data: IFC estimate based on MSA Research Inc. Please refer to Important Notes on slide 3

• f this presentation for further information.

IFC’s ROE corresponds to the AROE, which excludes the after-tax impact of acquisition-related items.

100 200 300 400 500 600 700 800

5-year avg. H1-2016 500 bps target

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We remain well-positioned to continue &*), the Canadian P&C insurance industry in the current environment

• In the current interest rate environment, we estimate that the industry’s pre-

tax investment yield will decline slightly, given its asset mix and duration.

• Industry capital levels could be negatively impacted if volatility resulting from

global events puts downward pressure on market values.

• Global capital requirements are continuing to influence the asset allocation

decisions of many companies.

• We expect low to mid single-digit growth in personal auto, as we expect

claims cost inflation will lead to rate increases in all markets.

• We expect mid to upper single-digit growth in personal property in current

firm market conditions, as companies are adjusting to changing weather patterns.

• We expect low single-digit growth in commercial lines, as the economy in

Western Canada continues to pressure industry growth.

• We expect growth at a low to mid single-digit rate.
• Overall, we expect the industry’s ROE to improve but remain slightly below

its long-term average of 10%.

Market environment Overall Capital markets

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1.5% 0.7% 1.1% 2.1% 6.4% 9.5% 10.0% 10.5% 7.0% 5.8%

Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16

Personal Lines

Year-over-year DPW growth

Commercial Lines

Year-over-year DPW growth

2.0% 2.7% 5.7% 4.1% 4.9% 4.0% 2.9%

• 0.8%

0.0% 1.7%

Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Contribution from CDI

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Personal Auto Personal Property

(in $ millions, except as otherwise noted)

Q3-2016 Q3-2015 Change DPW 569 527 8% Underwriting income 2 11 (82)% Combined ratio 99.7% 97.4% 2.3 pts

• DPW grew 5% on a combination of unit growth and rate increases, as our growth initiatives continued to pay off.
• Combined ratio of 104.3% was impacted by higher CAT and non-CAT weather losses, low favourable PYD, as well

as cost inflation. We are accelerating our actions to improve results through rate increases and tighter underwriting rules.

• DPW grew 8%, in continued favourable market conditions, driven by new product offerings, distribution and

branding initiatives.

• Combined ratio of 99.7%, as an 11.9 point increase in CAT losses more than offset an improvement in our

underlying underwriting performance.

80.1% 70.0% 24.2% 24.4% Q3-2016 Q3-2015

Combined Ratio Breakdown Expense Ratio Claims Ratio

66.2% 63.7% 33.5% 33.7% Q3-2016 Q3-2015

Combined Ratio Breakdown Expense Ratio Claims Ratio

(in $ millions, except as otherwise noted)

Q3-2016 Q3-2015 Change DPW 1,032 987 5% Underwriting income (loss) (41) 51 nm Combined ratio 104.3% 94.4% 9.9 pts

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Commercial P&C

• DPW was consistent with last year, as rate increases were neutralized by headwinds in Western Canada and

competitive market conditions.

• Combined ratio of 81.3% improved by 3.3 points over last year due to our profitability actions.

(in $ millions, except as otherwise noted)

Q3-2016 Q3-2015 Change DPW 420 421

• Underwriting income

79 64 23% Combined ratio 81.3% 84.6% (3.3) pts

43.0% 46.3% 38.3% 38.3% Q3-2016 Q3-2015

Combined Ratio Breakdown Expense Ratio Claims Ratio

Commercial Auto

• DPW grew 7%, positively impacted by the introduction of innovative products for the sharing economy, offset in part

by our profitability actions.

• Combined ratio improved by 8.4 points, due to our ongoing profitability actions, favourable prior year development,

and lower large losses.

(in $ millions, except as otherwise noted)

Q3-2016 Q3-2015 Change DPW 172 160 7% Underwriting income 21 5 320% Combined ratio 88.6% 97.0% (8.4) pts

61.9% 69.7% 26.7% 27.3% Q3-2016 Q3-2015

Combined Ratio Breakdown Expense Ratio Claims Ratio

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Innovative Products We continue to develop products that meet changing customer needs. Insurance regulators in Alberta and Ontario approved new ride-sharing insurance products

• ffered by Intact to Uber which will provide coverage to every driver operating on

the Uber platform. Customer experience This quarter we reached an important milestone – 1,000,000 Quick Quotes! Leveraging our experience in personal auto, we recently launched our Quick Quote for Homeowners tool for belairdirect in Ontario and Quebec. Our customer-centric approach is a great example of how we embrace change and innovative thinking. Brands Our objective to build household names for our core brands is progressing well, supported by new advertising campaigns and sports sponsorships for Intact Insurance and belairdirect. We continue to make significant progress on co-branding with brokers showing an increasing appetite to be aligned with the Intact Insurance brand.

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We continue our $""#%%#( approach to capital management Our $*,#)$*enables us to take advantage

• f growth opportunities

We have a $&$*/#)**%*,versus the industry due to our disciplined approach and operational strength

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SVP Finance & Chief Financial Officer

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• Solid premium growth of 5% driven by personal lines and commercial auto, as customers responded

positively to new product offerings, improved digital experiences, distribution and branding initiatives.

• We delivered a combined ratio of 97.0%, as solid underlying underwriting performance was offset by

8.1 points of CATs.

1 Refer to Section 14 - Non-IFRS financial measures of the MD&A

(in $ millions, except as otherwise noted)

Q3-2016 Q3-2015 Change Direct premiums written1 2,193 2,095 5% Underwriting income1 61 131 (70) Net investment income 102 105 (3) Combined ratio 97.0% 93.2% 3.8 pts Net operating income per share to common shareholders1 $1.01 $1.47 (31)% Earnings per share to common shareholders $0.91 $0.95 (4)% Operating return on common shareholders equity for the last 12 months1 13.4% 16.9% (3.5) pts

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• 98% of fixed-income securities are rated ‘A-’ or

better.

• 85% of preferred shares are rated at least ‘P2L’.
• No exposure to leveraged securities.

Investment mix

(net of hedging positions and financial liabilities related to investments)

$14.3 billion – strategically managed

Net investment gains (losses)

(in $ millions, except as otherwise noted)

Q3-16 Q3-15 Change

Gains (losses) on fixed-income strategies 1 (13) (22) 9 Gains (losses) on equity strategies and related derivatives 1 25 (42) 67 Other gains (losses) 2 5

• 5

Net investment gains (losses) 17 (64) 81

Fixed - income strategies 69% Common equity strategies 14% Preferred shares 9% Cash and short-term notes 5% Loans 3%

1 Excluding foreign currency impact. 2 Including net gains on investments in associates and joint ventures related to a change of control.

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Maintain leverage ratio

(target 20% debt-to-total capital)

Increase dividends Debt-to-capital ratio Quarterly common share dividends (per share) Manage volatility Invest in growth

• pportunities

Share buybacks

$0.16 $0.25 $0.27 $0.31 $0.32 $0.34 $0.37 $0.40 $0.44 $0.48 $0.53 $0.58

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3-16

11.8% 14.3% 22.9% 18.9% 18.7% 17.3% 16.6% 19.0%

2009 2010 2011 2012 2013 2014 2015 Q3-16

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• We ended the quarter in a very strong capital

position, with an MCT of 23and total excess capital of 455##.

• Healthy Operating ROE of 673 for the last 12

months.

• Debt-to-capital ratio of 863, close to our target

level of 20%, after issuing $250 million of medium term notes in the first quarter of 2016.

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Stephanie Sorensen Director, External Communications 1 (416) 344-8027 stephanie.sorensen@intact.net

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Intact Financial Corporation 700 University Avenue Toronto, ON M5G 0A1 1 (416) 341-1464 1-877-341-1464 (toll-free in N.A.) info@intact.net

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ir@intact.net 1 (416) 941-5336 1-866-778-0774 (toll-free in N.A.) Samantha Cheung Vice President, Investor Relations 1 (416) 344-8004 samantha.cheung@intact.net Maida Sit Director, Investor Relations 1(416) 341-1464 ext. 45153 maida.sit@intact.net

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To visit our online annual report to see how “big ideas, disciplined approach” shaped our business in 2015, please scan the QR code or visit )*$6**6<2.

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Certain of the statements included in this presentation about the Company’s current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely”, “potential” or the negative or other variations of these words or other similar or comparable words or phrases, are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by management based on management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Many factors could cause the Company’s actual results, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors: the Company’s ability to implement its strategy or operate its business as management currently expects; its ability to accurately assess the risks associated with the insurance policies that the Company writes; unfavourable capital market developments or other factors which may affect the Company’s investments, floating rate securities and funding obligations under its pension plans; the cyclical nature of the P&C insurance industry; management’s ability to accurately predict future claims frequency and severity, including evaluation of losses relating to the Fort McMurray wildfires; catastrophe losses caused by severe weather and other weather-related losses; government regulations designed to protect policyholders and creditors rather than investors; litigation and regulatory actions; periodic negative publicity regarding the insurance industry; intense competition; the Company’s reliance on brokers and third parties to sell its products to clients; the Company’s ability to successfully pursue its acquisition strategy; the Company’s ability to execute its business strategy; the Company’s ability to achieve synergies arising from successful integration plans relating to acquisitions, including its acquisition of Canadian Direct Insurance Inc. (“CDI”), as well as management's estimates and expectations in relation to resulting accretion, internal rate of return and debt-to-capital ratio; the Company’s participation in the Facility Association (a mandatory pooling arrangement among all industry participants) and similar mandated risk-sharing pools; terrorist attacks and ensuing events; the occurrence

• f catastrophe events, including a major earthquake; the Company’s ability to maintain its financial strength and issuer credit ratings; access to debt financing

and the Company's ability to compete for large commercial business; the Company’s ability to alleviate risk through reinsurance; the Company’s ability to successfully manage credit risk (including credit risk related to the financial health of reinsurers); the Company’s ability to contain fraud and/or abuse, the Company’s reliance on information technology and telecommunications systems and potential failure of or disruption to those systems, including evolving cyber-attack risk; the Company’s dependence on key employees; changes in laws or regulations; general economic, financial and political conditions; the Company’s dependence on the results of operations of its subsidiaries; the volatility of the stock market and other factors affecting the Company’s share price; and future sales of a substantial number of its common shares. All of the forward-looking statements included in this presentation are qualified by these cautionary statements and those made in the section entitled Risk Management at page 37 to 53 of our MD&A for the year ended December 31, 2015. These factors are not intended to represent a complete list of the factors that could affect the Company. These factors should, however, be considered carefully. Although the forward-looking statements are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking

• statements. When relying on forward-looking statements to make decisions, investors should ensure the preceding information is carefully considered. Undue

reliance should not be placed on forward-looking statements made herein. The Company and management have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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This Presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. The information contained in this Presentation concerning the Company does not purport to be all-inclusive or to contain all the information that a prospective purchaser or investor may desire to have in evaluating whether or not to make an investment in the Company. The information is qualified entirely by reference to the Company’s publicly disclosed information. No representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its the directors, officers or employees as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any person for such information or opinions. In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the attendees with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation that may become apparent. The information and opinions contained in this Presentation are provided as at the date of this Presentation. The contents of this Presentation are not to be construed as legal, financial or tax advice. Each prospective purchaser should contact his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice. The Company uses both International Financial Reporting Standards (“IFRS”) and certain non-IFRS measures to assess performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are unlikely to be comparable to any similar measures presented by other companies. Management analyzes performance based on underwriting ratios such as combined, expense, loss and claims ratios, MCT, and debt-to-capital, as well as

• ther non-IFRS financial measures, namely DPW, Underlying current year loss ratio, Underwriting income, NOI, NOIPS, OROE, ROE, AROE, Non-operating

results, AEPS, Cash flow available for investment activities, and Market-based yield. These measures and other insurance related terms are defined in the Company’s glossary available on the Intact Financial Corporation web site at www.intactfc.com in the “Investor Relations” section. Additional information about the Company, including the Annual Information Form, may be found online on SEDAR at www.sedar.com.