Intact Financial Corporation · TSX:IFC
Intact Financial — ING Canada — Investor Presentation (April 2005)
38 slides from Intact Financial's investor presentation, Apr 5, 2005
Slide 1: ING Canada Inc. Analyst Meeting
ING Canada Inc. An Overview of the Canadian P&C Industry Analyst Meeting Toronto Hilton, April 5, 2005
Slide 2: Forward-Looking Statement Disclaimer
Forward-Looking Statement Disclaimer Certain of the statements contained in this presentation about our 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 stateme
Slide 3: Agenda
Agenda 9 Welcome Brian Lynch Investor Relations Consultant 9 Perspective on 2004 Results Charles Brindamour Executive Vice President 9 Personal Lines Insurance Overview Martin Beaulieu Senior Vice President – Personal Lines 9 Commercial Lines Insurance Overview Pete Weightman Senior Vice President –
Slide 4: Perspective on 2004 Industry Results
Perspective on 2004 Industry Results
Slide 5: 2004 – Strong Industry Results
2004 – Strong Industry Results Combined Ratio Return on Equity 120% 20% 18.1% 110.4% 110% 108.4% 15% 105.8% 11.3% 98.7% 100% 10% 6.2% 90.7% 90% 5% 3.0% 1.7% 80% 0% 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Direct Written Premiums Net Income ($ billions) ($ billions) 5 40 35 4 30 25 3 20 2 15
Slide 6: 2004 Industry Results: Key Drivers
2004 Industry Results : Key Drivers • Automobile insurance drives underwriting improvement Loss Ratio by Line of Business Return on Equity of the Top 10 Writers in Each Line of Business 90% 40.00% 80% 70% 30.00% 60% 50% 20.00% 40% 30% 10.00% 20% 10% 0.00% Auto Personal property Commercial Commercial
Slide 7: Personal Lines Insurance Overview
Personal Lines Insurance Overview
Slide 8: Agenda
Agenda • Marketplace • An Overview • Residual Market • Regulatory Environment • Trends • Reforms • Pressure Points • Frequency • Opportunities • Underwriting Discipline • Leverage size www.ingcanada.com 8
Slide 9: Marketplace – An Overview
Marketplace – An Overview Distribution by line of business (2003 Direct written premiums) P e rs o na l pro pe rt y 14 .2 % C o m m e rc ia l pro pe rt y 14 .4 % A ut o ( inc luding c o m m e rc ia l v e hic le ) Lia bilit y 13 .0 % 5 0 .2 % O t he r 5 .4 % A c c ide nt , s ic k ne s s 2 .8 % Source
Slide 10: Marketplace – An Overview (Automobile)
Marketplace – An Overview (Automobile) Distribution by Insurer Distribution by Province (2003 Direct written premiums) (2003 Direct written premiums) 60% 57.6% Public* 23.8% 40% 20% 16.4% 15.7% 8.4% 2.0% Private 0% Atlantic Quebec Ontario Alberta Others *: Insurers owned by provincial governments in
Slide 11: Marketplace – An Overview (Automobile)
Marketplace – An Overview (Automobile) By Insurer Top 3 Insurers (2003 Direct written premiums) (2003 Direct written premiums) 15% 1 2 Other 27.7% 10% 1 2 3 3 5% Brokers 72.3% Brokers Other 0% ING Aviva Economical Co-operators State Farm Desjardins Source: Canadian Underwriter Source: Canadian Under
Slide 12: Marketplace – The Product
Marketplace – The Product • Physical damage vs. Bodily injury • Physical damage - Mostly optional coverage • Third party liability : Only mandatory coverage that covers damage to others belongings • All perils: Covers damage to the car from any perils subject to exclusions • Collision : Covers damag
Slide 13: Marketplace – Residual Market (Automobile)
Marketplace – Residual Market (Automobile) Facility Association Risk Sharing Pool Grey Market Insurers that specialize in Mandatory mechanism that identifies Voluntary mechanism for risks that do not providing non-standard or and describes what risks are eligible to fall within the description of th
Slide 14: Marketplace – Regulatory Environment (Automobile)
Marketplace – Regulatory Environment (Automobile) Rate Filing Role of the Regulator: Definition Territory Alberta • Affordability : Buying automobile Rates have to be filed New Brunswick insurance required by law. Regulators File and with the regulator before control the rating in several provinces
Slide 15: Trends – Reforms in Atlantic (Automobile)
Trends – Reforms in Atlantic (Automobile) Before the Reform 25 000 120% 100% 600 CLAIMS COST BY TYPE 20 000 Number of Written Vehicles (millions of dollars) 500 80% Loss Ratio % 15 000 400 60% 300 10 000 40% 200 5 000 20% 100 0 0 0% 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 19
Slide 16: Trends – Reforms in Ontario (Automobile)
Trends – Reforms in Ontario (Automobile) 250 000 100% Before the Reform 90% 200 000 80% 4000 Number of Written Vehicles 3500 CLAIMS COST BY TYPE 70% (millions of dollars) Loss Ratio % 150 000 60% 3000 2500 50% 2000 100 000 40% 1500 30% 1000 50 000 20% 500 10% 0 0 0% 1986 1987 1988 1989 1990 1991 199
Slide 17: Trends – Reforms in Alberta (Automobile)
Trends – Reforms in Alberta (Automobile) 100% Before the Reform 90% 80% 1000 CLAIMS COST BY TYPE 70% (millions of dollars) 800 Loss Ratio % 60% 50% 600 40% 400 30% 20% 200 10% 0 0% 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1999-12 2000-06 2000-12 2001-
Slide 18: Trends – Pressure Points (Automobile)
Trends – Pressure Points (Automobile) • Favourable results of the industry could lead to further rate reductions • Some pricing and underwriting variables under scrutiny • Take all comers rule and fair practices www.ingcanada.com 18
Slide 19: Trends – Frequency (Automobile)
Trends – Frequency (Automobile) 9,000 16 8,000 14 7,000 Frequency per 100 Vehicles 12 6,000 Cost per Claim ($) 10 5,000 8 4,000 6 3,000 4 2,000 1,000 2 0 0 1998 1999 2000 2001 2002 2003 2004* Severity Frequency * estimate for 2004 www.ingcanada.com 19
Slide 20: Trends – Frequency (Automobile)
Trends – Frequency (Automobile) • External factors • Price of gas • Precipitation (rain & snow) • Unemployment rate • Reforms • Internal factors • Deductibles • Demographic (consumer profiles) • Age of drivers • Age of cars • Fear to claim www.ingcanada.com 20
Slide 21: Winning in Personal Lines
Winning in Personal Lines • Risk based pricing • Underwriting discipline in risk selection • Segmentation • Leverage size • large database • relationships with claims service providers • operational efficiencies www.ingcanada.com 21
Slide 22: Commercial Lines Insurance Overview
Commercial Lines Insurance Overview
Slide 23: Agenda
Agenda • Marketplace • An Overview • Client Profile • Insurers • Issues & Trends • Risk Management • Results • Frequency, Inflation, Rates • Opportunities • ‘Stick to your knitting’ • Profitable Growth • Measure to Manage www.ingcanada.com 23
Slide 24: Marketplace – An Overview
Marketplace – An Overview Compound annual growth rate in Commercial Non Auto of 9.4% over ten years compared to 5.7% for Auto and 4.9% for Personal Property over that same period Commercial Property and Liability Combined - Net Premium Growth 0.3 0.2 Premium Change 0.1 0 -0.1 1987 1989 1991 1993 199
Slide 25: Marketplace – An Overview
Marketplace – An Overview Although the statistics for property and liability are reported separately, these coverages are generally provided under a single policy 2003 Commercial Lines Net Written Premium Distribution by Line Surety Fidelity Boiler and Machinery 1% 3% Marine 3% 2% Liability 43% Prop
Slide 26: Marketplace – An Overview
Marketplace – An Overview Commercial Non Auto is more provincially diversified than Auto and Personal Property with 60% share in Ontario and Quebec compared to share of 74% and 65% respectively for Auto and Personal Property 2003 Commercial Property and Liability Lines Direct Written Premiums Distri
Slide 27: Marketplace – An Overview
Marketplace – An Overview Retail, Wholesale, Real Estate, Contractors and Manufacturing represent about 60% of a typical Commercial Non Auto Portfolio Commercial Lines Premium Distribution by Class Others 9% Retail & Wholesale Farms & Forests 18% 6% Institutions 7% Services 8% Real Estate 16% Entert
Slide 28: Marketplace – Client Profile
Marketplace – Client Profile • Commercial database in Canada lacking in both size and quality, which leads to market driven pricing • Those with scale can develop proprietary databases and rating models Business Type Small Medium Large Definition* Less than 99 employees; Between 100 and 500 Over 500
Slide 29: Marketplace – Insurers
Marketplace – Insurers • With about $300 million in Commercial Auto, ING is the #1 commercial lines writer in Canada • Marine leaders are Royal and Lloyds with about 14% market share each • Surety leaders are St Paul and Guarantee with about 19% market share each • Boiler & Machinery leaders are St
Slide 30: Issues – Risk Management
Issues – Risk Management • Regulatory Environment • Commercial lines not subject to the same rate filing requirements as personal lines; means more pricing flexibility • Some concern among regulators regarding ‘availability’, particularly in non-profit / volunteer sector • Legal Environment • Class
Slide 31: Issues - Results
Issues - Results • Growth varies with results; and, in general, prices are market driven and highly subjective compared to personal lines • Cycle also impacted by the availability of capital and the number of new entrants Commercial Property and Liability Combined - Net Premium Growth and Net Loss &
Slide 32: Trends - Frequency
Trends - Frequency The reduction in frequency has been a key contributor to the favourable results; although the trend has begun to slow Commercial Lines Frequency Change 4% 2% 0% 1998 1999 2000 2001 2002 2003 2004 -2% Frequency (%) -4% -6% -8% -10% -12% Year Source: ING Canada - Internal Data www.i
Slide 33: Trends – Inflation in Construction Costs
Trends – Inflation in Construction Costs Construction costs have increased by more than 8% in 2004 which is 6 points above average inflation Price Index 12 Months Rolling Growth 0.1 Non-Residential Construction Price Index 0.08 0.06 0.04 0.02 0 2000 2001 2002 2003 2004 2005 Year Source: Statistics C
Slide 34: Softening in Commercial Lines
Softening in Commercial Lines (U.S.) Source: Council of Insurance Agents and Brokers www.ingcanada.com 34
Slide 35: Winning in Commercial Lines
Winning in Commercial Lines • ‘Stick to your knitting’ • Scale • Control underwriting, pricing and claims • Broker Role • Measure to Manage • Focus on return on capital • Emphasis on unit count growth • Actively manage/monitor pricing deviations www.ingcanada.com 35
Slide 36: 2005 Outlook
2005 Outlook ING *®
Slide 37: 2005 Outlook
2005 Outlook • Capital is flowing back into the market place • MCT reaches 235% in 2004 • More than $5 billion of capital in excess of 170% • All major lines of business performing above cost of capital • Automobile • Reforms are stabilising accident benefit and bodily injury costs • Sustainability
Slide 38: Questions and Answers
Questions and Answers ING *®