Intact Financial Corporation · TSX:IFC
Intact Financial — Investor Presentation (September 2011)
26 slides from Intact Financial's investor presentation, September 2011
Slide 1: Intact Financial Corporation Investor Presentation September 2011
Intact Financial Corporation (TSX: IFC) Investor Presentation September 2011
Slide 2: Canada's leader in auto, home and business insurance
Canada’s leader in auto, home and business insurance Who we are1 Distinct brands • Largest P&C insurer in Canada • $6.5 billion in direct premiums written • #1 in Ontario, Quebec, Alberta, Nova Scotia • $11.4 billion cash and invested assets • Proven industry consolidator Scale advantage Industry ou
Slide 3: Consistent industry outperformance
Consistent industry outperformance Significant Sophisticated In-house claims Broker Multi-channel Proven scale pricing and expertise relationships distribution acquisition advantage underwriting strategy 2010 combined ratios Five-year average loss ratios Industry Intact 107% 80% 105.0% 75.1% Cdn. P&
Slide 4: We continued to outperform the industry in H1-2011
We continued to outperform the industry in H1-2011 Operating highlights: Comparison with Canadian P&C Q2-2011 results industry1 benchmark +AXA Top 20 • Net operating income per share of $0.87, 102% 100.4% despite $0.84 in losses from natural 99% catastrophes 96.7% • Q2 combined ratio of 97.0% driven
Slide 5: Q2-2011 Financial highlights
Q2-2011 Financial highlights (in $ millions, except as otherwise noted) Q2-2011 Q2-2010 Change YTD-2011 YTD-2010 Change Direct premiums written $1,354 $1,318 3% $2,297 $2,232 3% Net underwriting income $33 $66 (50)% $91 $135 (33)% Combined ratio 97.0% 93.7% 3.3 pts 95.8% 93.5% 2.3 pts Net operating
Slide 6: Strong financial position and excess capital
Strong financial position and excess capital Strong balance sheet $11.4 billion in cash and invested assets1 • Excess capital of $758 million, based on 170% MCT as at Q2-2011, of which ~$400 million was used to finance the acquisition of AXA Canada Loans Cash and short Common 4% term notes 3% • Debt
Slide 7: 12-month industry outlook
12-month industry outlook We remain well-positioned to continue outperforming the Canadian P&C insurance industry in the current environment • Industry premiums likely to increase at a similar rate as in 2010, with mid- Premium growth single digit growth in personal auto (driven by ON), upper single
Slide 8: Four distinct avenues for growth
Four distinct avenues for growth Benefit from firming market conditions Develop existing platforms Personal lines • Continue to expand support to • Industry premiums remain inadequate in ON auto our broker partners • Home insurance premiums also on the rise • Expand and grow belairdirect Commercial
Slide 9: Conclusion: Intact Financial
Conclusion: Intact Financial Disciplined pricing, underwriting, investment and capital management have positioned us well for the future • Largest P&C insurance company in Canada • Consistent track record of industry outperformance • Strong financial position • Excellent long-term earnings power • O
Slide 10: IFC's acquisition of AXA Canada: Building a world-class P&C insurer
IFC’s acquisition of AXA Canada: Building a world-class P&C insurer
Slide 11: Acquisition of AXA Canada: Building a world-class P&C insurer
Acquisition of AXA Canada: Building a world-class P&C insurer Strong strategic fit Financially compelling • Strengthens IFC’s premiums by over 40% • Management estimates IRR1 of 20% • Bolsters our risk selection and claims management • Acquisition is accretive to NOIPS2,3 in 2012; annual capabilitie
Slide 12: Leading position…
Leading position… Top 10 Canadian P&C insurance 6.5 companies by 2010 direct premiums written ($ billions) 3.3 2.4 2.4 2.3 2.0 2.0 1.9 1.7 1.6 PF Intact + Aviva TD RSA Co-operators AXA Wawanesa State Farm Economical Desjardins AXA Assurance Rank 1 2 3 4 5 6 7 8 9 10 Share 16.5% 8.4% 6.1% 6.0% 5.9% 5
Slide 13: …Leading performance
…Leading performance Return on equity (2010) Combined ratio (2010) Intact pro forma 14.9% Intact pro forma 94.8% Top 20 adjusted* 3.2% Top 20 adjusted* 105.0% Outperformance 11.7% Outperformance 10.2% *Excludes AXA *Excludes AXA Expands our outperformance versus the Top 20 P&C insurance industry ben
Slide 14: IFC + AXA: A winning combination
IFC + AXA: A winning combination • Greater earnings stability as a result of increased diversification: Higher exposure to commercial lines accomplishes an important strategic objective Less reliance on personal automobile insurance Improves geographic footprint in underrepresented areas (Quebec, Br
Slide 15: AXA Canada: Acquisition financing in place
AXA Canada: Acquisition financing in place Original structure $1,300 million financing Funding from excess capital $500 million Proceeds from subscription receipts $800 million Acquisition credit facilities $1,300 million Term loan* $300 million $2,600 million Preferred shares $500 million 10-yr med
Slide 16: Appendices
Appendices [intact ] =
Slide 17: P&C insurance is a $40 billion market in Canada
P&C insurance is a $40 billion market in Canada 3% of GDP in Canada Industry DPW by line of business Home Commercial • Fragmented market1: insurance, P&C, 26.6% 19.0% •Top five represent 43%, versus bank/lifeco markets which are closer to 65-75% •IFC is largest player with 16.5% market share, Commer
Slide 18: Economic uncertainties will affect industry profitability
Economic uncertainties will affect industry profitability • Slow global recovery with significant The Canadian P&C industry can no longer downside risks count on high investment income • Continued volatility in financial, currency and commodity markets 14% • Financial systems still somewhat 12% vuln
Slide 19: P&C industry 10-year performance versus IFC
P&C industry 10-year performance versus IFC IFC’s competitive advantages Combined ratio 115% • Significant scale advantage Industry1 • Sophisticated pricing and underwriting discipline 105% 10-year avg. = 99.0% • In-house claims expertise 95% • Broker relationships 10-year avg. • Solid investment re
Slide 20: Historical financials
Historical financials IFRS Canadian GAAP (in $ millions, except as otherwise noted) 2010 2009 2008 2007 2006 Income statement highlights Direct written premiums $4,498 $4,275 $4,146 $4,109 $3,994 Underwriting income 194 54 117 189 404 Net operating income 402 282 361 457 531 Net operating income per
Slide 21: Strategic capital management
Strategic capital management • Strong capital base has allowed us to pursue our growth objectives while returning capital to shareholders Quarterly dividend Capital priorities 8.8% 6.3% 3.2% • Acquisitions 0.40 14.8% $0.370 $0.340 • Dividends 0.35 8.0% $0.310 $0.320 0.30 53.8% • Share buybacks $0.25
Slide 22: Cash and invested assets
Cash and invested assets Asset class Fixed income Preferred shares Corporate 34.3% Perpetual and callable floating 50.3% Federal government and agency 28.2% and reset Cdn. Provincial and municipal 28.2% Fixed perpetual 32.5% Supranational and foreign 7.2% Fixed callable 17.2% ABS/MBS 2.0% TOTAL 100%
Slide 23: Long-term track record of prudent reserving practices
Long-term track record of prudent reserving practices Rate of claims reserve development • Quarterly and annual (favourable prior year development as a % of opening reserves) fluctuations in reserve 9% development are normal 7.9% 8% • 2005/2006 reserve development 7% was unusually high due to the 6%
Slide 24: Investor Relations contact information
Investor Relations contact information Dennis Westfall Director, Investor Relations Phone: 416.341.1464 ext 45122 Cell: 416.797.7828 Email: Dennis.Westfall@intact.net Email: ir@intact.net Phone: 416. 941.5336 or 1.866.778.0774 (toll-free within North America) Fax: 416.941.0006 www.intactfc.com/Inves
Slide 25: Forward-looking statements and disclaimer
Forward-looking statements and disclaimer 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-l
Slide 26: Forward-looking statements and disclaimer
Forward-looking statements and disclaimer All of the forward-looking statements included in this presentation are qualified by these cautionary statements and those made in the “Risk Management” section of our MD&A for the year ended December 31, 2010. These factors are not intended to represent a c
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