Intact Financial Corporation · TSX:IFC
Intact Financial — Investor Presentation (November 2011)
25 slides from Intact Financial's investor presentation, November 2011
Slide 1: Intact Financial Corporation Investor Presentation November 2011
Intact Financial Corporation (TSX: IFC) Investor Presentation November 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 • $11.8 billion cash and invested assets • Proven industry consolidator Scale advantage Industry out
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: A strong base from which to build
A strong base from which to build Enhanced Business Mix Stronger Capacity To Outperform Pro Line of Business IFC Combined Ratio 2010 H1 2011 Forma Personal Auto 50% 46% IFC* 94.8% 94.9% Personal Property 24% 22% Top 20 Industry* 105.0% 100.4% Commercial 26% 32% Outperformance 10.2 pts 5.5 pts Pro Ge
Slide 5: Strong financial position and excess capital
Strong financial position and excess capital Strong balance sheet $11.8 billion in cash and invested assets • Strong financial position with $534 million in excess capital; despite allocating ~$400 million toward the AXA acquisition. Loans Cash and short term We ended the quarter with an MCT of 202%
Slide 6: Declining yields impacting investment income
Declining yields impacting investment income ($M) Annual Investment Data 450 5.5% Net investment income Expenses Pre-tax yield 400 5.0% 350 4.5% 300 4.0% 250 3.5% 200 3.0% 2005 2006 2007 2008 2009 2010 2011e 2012e Invested Assets $7.1 $7.4 $7.3 $6.9 $7.1 $8.0 $9.0 $11.6 (avg, in billions) • Investme
Slide 7: Industry growth outlook
Industry growth outlook We expect growth in the next 12 months at a pace similar to 2010 and the first half of 2011 Personal auto • Despite ~27% increase in Ontario auto rates since January 2008, the 2010 growth*: industry’s combined ratio at June 2011 was approximately 110% Industry 4.7% • Should r
Slide 8: Ontario auto: reforms & claims initiatives
Ontario auto: reforms & claims initiatives Components of Our Action Plan Reform Savings Improving • Increased capacity of Accident Benefit handling team • >50% reduction in assessments and treatment plan • Strengthening our controls requests since January, 2011 − Tighter acceptance of treatment plan
Slide 9: Ensuring profitability in personal property
Ensuring profitability in personal property Loss Ratios Impacted by Cats Home Improvement Plan to Date Composition of Loss Ratios Reported • YTD-2011 impacted by double normal Cat activity 68.6% 80.2% 75.2% 61.7% 75.4% Loss Ratio • CAY results trending towards 15pts improvement 3.1% 8.7% 8.6% • Curr
Slide 10: Now the largest player in Commercial P&C
Now the largest player in Commercial P&C Commercial Lines Value Proposition Added Benefits of Specialty Lines • Industry leading commercial lines offering Our extensive specialty lines product offering • Broader new product suite and appetite provides many benefits: • Maintaining the outer boundary
Slide 11: Near-term themes to monitor
Near-term themes to monitor Impact on Industry from Low Yields Reinsurance 14% • Major catastrophes in the world in 2011 have 12% impacted reinsurer’s capital levels 10% 8% P&C Industry • The Canadian industry one of the most profitability 6% conservative markets in the world in terms of 3-5 year 4%
Slide 12: Four distinct avenues for growth
Four distinct avenues for growth Firming market conditions (0-24 months) Develop existing platforms (0-3 years) 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 belairdirec
Slide 13: Conclusion
Conclusion 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 • Organic growth plat
Slide 14: Appendices
Appendices [intact] —
Slide 15: 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% Top five represent 43%, versus bank/lifeco 19.0% markets which are closer to 65-75% IFC is largest player with 16.5% market share, Commer
Slide 16: Economic uncertainties will affect industry profitability
Economic uncertainties will affect industry profitability • Slow global recovery with significant downside risks The Canadian P&C industry can no longer count on high investment income • Continued volatility in financial, currency and commodity markets 14% • Financial systems still somewhat 12% vuln
Slide 17: 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 105% 10-year avg. = 99.0% discipline 95% • In-house claims expertise 10-year avg. • Broker relationships 85% = 95.3% • Solid i
Slide 18: 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 19: 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 20: Further industry consolidation ahead
Further industry consolidation ahead Our acquisition strategy Canadian M&A environment • Targeting large-scale acquisitions of $500 million or Environment more conducive to acquisitions now than more in direct premiums written in recent years: • Pursuing acquisitions in lines of business where we •
Slide 21: Cash and invested assets
Cash and invested assets Asset class Fixed income Preferred shares Corporate 37.3% Perpetual and callable floating 58.0% Federal government and agency 26.3% and reset Cdn. Provincial and municipal 27.8% Fixed perpetual 24.5% Supranational and foreign 6.8% Fixed callable 17.5% ABS/MBS 1.9% TOTAL 100%
Slide 22: 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 23: 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 24: 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 25: 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 presentation for the year ended December 31, 2010. These factors are not intended to repre
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