INVEST INVESTOR OR PRESENT PRESENTATION TION Intact Financial Corporation (TSX: IFC) Updated: August 1st, 2019
Page 2 | Investor Presentation Canada’s largest home, auto and business insurer Largest market share 2018 DPW by line of Distinct brands in a fragmented industry 1 business IFC 16% 15% Commercial #2 10% Lines U.S. 15% Personal Auto #3 9% 37% Commercial Lines Canada 26% #4 6% Top 5 represent U.S. platform 47% Personal Property 22% #5 6% market share 85% Industry data: IFC estimates based on MSA Research Inc. Please refer to Important notes on page 2 of the Q2-2019 MD&A for further information. 1 All market share data as at December 31, 2018.
Page 3 | Investor Presentation What we are aiming to achieve Our 3 out t of f 4 customers Our Be a best st emp mploye yer are our advocates people customers are are our Be a destination for top 3 out t of f 4 customers actively engaged talent and experts advocates engage with us digitally Our Specialty Our company Exceed industry ROE Achieve combined ratio in Solutions by 5 points ts is one of the the low 90s business is a most lead leader er in Grow NOIPS 10% % ye yearl rly y Generate $3 billion in respected ove ver r ti time me annual DPW N.A.
Page 4 | Investor Presentation Unique strategic advantages to achieve our objectives 10% 10% Every year beat industry ROE by 500 bps 500 NOIPS growth per bps year over time Leading N. Amer Leading N. American ican Scaled & Div Scaled & Diver ersified sified P& P&C Oper C Operator tor Core Op Cor e Oper eration tion Seamless Sophisticated Deep Claims Distribution Data & Analytics Expertise & Strategy Capabilities Network Engaged & Talented Teams Proven Tailored Digital First Consolidator Investment Experiences & Integrator Management
Page 5 | Investor Presentation Strong track record of achieving our financial objectives Quarterly common Net operating income ROE outperformance dividend per share versus the industry per share $5.74 CAGR CAGR 10-yr avg $0.70 890 10.4% 9.1% 650 bps bps $0.32 $2.35 2009 2018 2009 2018 We have consistently exceeded our 500 bps ROE outperformance target versus the industry 4 th CONSECUTIVE YEAR #2 GOVERNANCE OUT OF FY2018 AON PLATINUM AWARD AND BEST 242 COMPANIES IN CANADA EMPLOYER Industry data: IFC estimates based on MSA Research. Please refer to Important notes on page 2 of the Q2-2019 MD&A for further information. IFC’s ROE corresponds to the AROE.
Page 6 | Investor Presentation Broad based outperformance Five-year average loss ratio Historical outperformance outperformance gap in Canada versus the Canadian P&C industry 5 year 9.5 pts -0.5 pts 10 year Premium 7.3 pts growth 1 4.3 pts 6.2 pts Combined ratio 2 5.7 pts 2.7 pts 1.7 pts 7.0 pts Return on equity 3 6.5 pts Personal Personal Commercial Commercial Auto Property P&C Auto Industry data: IFC estimates based on MSA Research Inc. as at Dec. 31, 2018. Please refer to Important notes on page 2 of the Q2-2019 MD&A for further information in FY2018 industry results. 1 Premium growth includes the impact of industry pools. Calculated on a CAGR basis. IFC’s outperformance versus the industry benchmark. 2 Combined ratio includes the market yield adjustment (MYA). IFC’s outperformance versus the industry benchmark. 3 IFC's ROE is adjusted return on common shareholders' equity (AROE).
Page 7 | Investor Presentation How we will outperform in the next decade Drivers of growth Consolidate Further Leading Scale in fragmented Build consolidation distribution specialty North in Canada fortress in market American Canada specialty Digital (insure 1 in 3 Low 90’s Leading engagement Canadians) combined customer insurer (3 of 4 ratio experience customers) Become the Attract Going best insurance and retain deeper AI shop in Transform into Claims talent world The future competitive of work advantages Help Optimize employees investment adapt to AI & platforms automation
Page 8 | Investor Presentation P&C industry 12-month outlook 1 We expect growth at a mid-to- We expect mid-to-upper single- upper single-digit level in digit growth in personal property personal auto We expect that the severe winter weather will lead to further hardening of market conditions The market is hard with rate actions continuing, tightening of capacity and further increases in residual market volumes We expect upper single-digit to We expect single-digit growth in low-double digit growth in U.S. commercial lines commercial lines Canada The market remains competitive but is firming, with improving upward pricing trends continuing Market conditions are hard, with industry combined ratios above 100% in 2018 and Q1-2019 Volatility in capital markets may put some pressure on investment market values and capital levels Overall the Canadian industry’s ROE is expected to improve but remain below its long-term average of 10% over the next 12 months 1 Refer to Section 6 – P&C Insurance Industry Outlook of the Q2-2019 MD&A
Page 9 | Investor Presentation Strong financial position Our balance sheet is Low BVPS sensitivity to strong 1 capital markets volatility 2 $1.3B 21.6% ($0.98) ($1.53) ($0.31) in total capital debt-to-total per 100 bps per 10% decrease per 5% decrease margin capital ratio increase in in common share in preferred share (returning to 20% by the end interest rates prices prices of 2019) Credit ratings 3 Moody’s A.M. Best DBRS Fitch Financial strength ratings of IFC’s principal Canadian P&C A+ AA (low) A1 AA- insurance subsidiaries Senior unsecured debt ratings of IFC a- A Baa1 A- Financial strength ratings of OneBeacon U.S. regulated entities A+ - A2 AA- 1 As of June 30, 2019. 2 Refer to Section 24 – Sensitivity analyses of the Q4-2018 MD&A for additional commentary and break outs. Data as of December 31, 2018. 3 Refer to Section 11.2 – Credit ratings of the Q2-2019 MD&A for additional commentary.
Page 10 | Investor Presentation Proven and consistent capital management strategy Capital structure Maintain leverage ratio (20% debt-to-total capital by the end of 2019) 68.8% 67.7% 70.0% 73.2% 75.3% 76.2% 74.8% Increase dividends 8.1% 10.3% 10.0% 8.0% 7.4% 6.5% 7.1% 23.1% 22.0% 20.0% 18.7% 18.6% 17.3% 16.6% 2013 2014 2015 2016 2017 2018 Target Debt-to-total capital ratio Preferred shares-to-total capital ratio Equity-to-total capital ratio Manage volatility Yearly common share dividends $3.04 (per share) $2.80 $2.56 Invest in growth $2.32 opportunities $2.12 $1.92 $1.76 $1.60 $1.48 $1.36 $1.28 $1.24 $1.08 $1.00 $0.65 Share buybacks 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* * Annualized quarterly dividend declared
Page 11 | Investor Presentation People advantage We continue to in inves est t in peo in people ple and create a strong and diverse workplace Depth of talent with an average of 8 8 16 years of experience, successors for each Senior Leadership role on average, that Executive Committee members have with the organization in various roles * As of December 31, 2018 Culture is aligned with goals 90 85 80 75 70 65 60 55 50 IFC Engagement 2018 Canadian Financials Sector Source: Aon Hewitt
Page 12 | Investor Presentation Key takeaways Sustainable competitive edge driven by strong fundamentals, scale and discipline 1 Customer driven with diversified offers to 2 meet changing needs 3 Solid financial position and proven track record of consolidation 4 Deep, diverse, engaged, loyal talent pool
Appendices
Page 14 | Investor Presentation P&C insurance in Canada A $54 billion market representing approximately 3% of GDP • Fragmented market: Industry DPW by line of business – Top five represent 47%, versus bank/lifeco Commercial Personal markets which are closer to 65-75% P&C and Property, – IFC is largest player with approximately 16% other, 31% 24% market share, versus largest bank/lifeco with 22- 25% market share – P&C insurance shares the same regulator as the banks and lifecos • Home and commercial insurance rates Personal Commercial unregulated; personal auto rates regulated in Auto, 37% Auto, 7% many provinces. • Capital is regulated nationally by OSFI* and by Industry – premiums by province provincial authorities in the case of provincial insurance companies. Alberta, Quebec, 17% 18% • Distribution in the industry is currently close to two thirds through brokers and 40% through direct writers. Other • Industry has grown at ~5% CAGR and provinces delivered ROE of ~10% over the last 30 years. and territories, Ontario, 19% Industry data: IFC estimates based on MSA Research Inc. and Insurance Bureau of Canada. 46% Please refer to Important notes on page 2 of the Q2-2019 MD&A for further information. All data as at December 31, 2018. * OSFI = Office of the Superintendent of Financial Institutions Canada
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