Intact Financial Corporation · TSX:IFC
Intact Financial — Debt Investor Presentation (May 2013)
28 slides from Intact Financial's debt investor presentation, May 2013
Slide 1: Intact Financial Corporation 2013 Fixed Income Investor Presentation
Intact Financial Corporation (TSX: IFC) 2013 Fixed Income Investor Presentation
Slide 2: 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 3: Forward looking statements and disclaimer
Forward looking statements and disclaimer Disclaimer 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 inducem
Slide 4: Agenda
Agenda Overview of Intact Financial Corporation Industry Overview Financial Highlights & Capital Structure Summary Complementary information 4
Slide 5: Canada's P&C insurance leader
Canada’s P&C insurance leader Who we are1 Distinct brands • Largest P&C insurer in Canada • #1 in BC, Alberta, Ontario, Quebec, Nova Scotia • $12.5 billion in cash and invested assets • Proven industry consolidator • Solid Bond Credit Ratings: A (low) by DBRS, Baa1 by Moody’s Leader in a fragmented
Slide 6: Sustainable competitive advantages
Sustainable competitive advantages Significant Sophisticated In-house Broker Multi- Proven In-house scale pricing and claims relationships channel acquisition investment advantage underwriting expertise distribution strategy management 2012 Metrics Five-year average loss ratios Industry Industry 76.
Slide 7: Strategic capital management
Strategic capital management Integrated decision making process Capital management framework Strong capital base has allowed us to pursue our growth objectives while returning capital to shareholders Maintain leverage ratio Target Leverage & (target 20% debt-to-total capital) Cap Structure Maintain
Slide 8: Conservative capital structure
Conservative capital structure Q1 2013 YE 2012 YE 2011 Medium Terms Notes 1,143 1,143 893 • Management has a track record of maintaining a strong balance Term Credit Facility 0 0 400 sheet and disciplined financial Revolving Credit Facility 0 0 0 management Total Debt Outstanding 1,143 1,143 1,293 •
Slide 9: Quality of investment portfolio
Quality of investment portfolio Investment portfolio Bonds – Credit Rating Loans AAA 3% 42% Cash and Fixed income short term 74% BBB notes 1% 1% Cdn. Federal 29% Common Cdn. Provincial A shares AA 12% & Municipal 16% 41% 32% Corporate & other Preferred 39% Preferred Shares – Credit Rating shares 10%
Slide 10: Insurance liabilities & reinsurance
Insurance liabilities & reinsurance Reserve development Rate of claims reserve development (favourable prior year development as a % of opening reserves) 10.0% 7.9% 8.0% Our consistent track record of positive 6.0% 4.9% 4.8% 4.9% 5.7% reserve development reflects our 4.0% 3.3% 4.0% 3.2% preference t
Slide 11: Committed to strong credit ratings
Committed to strong credit ratings Long term issuer Financial strength ratings credit ratings (principal operating insurance Outlook subsidiaries) Baa1 A1 Stable “The IFS ratings are based on excellent market position in the highly fragmented Canadian P&C industry…. Intact’s market leading position
Slide 12: Well positioned for the future
Well positioned for the future • Largest P&C insurance company in Canada • Consistent track record of industry outperformance • Superior long-term earnings power Focus on Performance • Organic growth platforms easily expandable • Excellent customer satisfaction • Best-in-class team in place to reach
Slide 13: Agenda
Agenda Overview of Intact Financial Corporation Industry Overview Financial Highlights & Capital Structure Summary Complementary information 13
Slide 14: P&C industry characteristics
P&C industry characteristics Canadian P&C Intact Canadian Life Insurance • Short-tailed risks which are • Focus on short term risk • Longer term risk duration re-priced every 12-24 months duration products products • Commercial lines are small and medium size • Long term track record of • Underwriti
Slide 15: P&C industry overview
P&C industry overview 3% of GDP in Canada DPW by line of business Industry IFC • Fragmented market1: – IFC largest player with an estimated 17% 7% 8% 31% 41% 24% 45% market share, versus largest banks/lifecos with 22-25% market share 21% 23% • Barriers to entry: scale, regulation, manufacturing capa
Slide 16: P&C industry 10-year performance versus IFC
P&C industry 10-year performance versus IFC Direct premiums written growth Combined ratio 240 105% 220 10-year avg. 200 100% Industry1 10-year = 8.4% avg. = 97.1% 180 Industry1 95% 160 10-year avg. 140 = 4.2% 90% 10-year avg. 120 = 93.8% 100 85% Return on equity IFC’s competitive advantages 40% • Si
Slide 17: Four distinct avenues for growth
Four distinct avenues for growth Firming market conditions (0-2 years) Develop existing platforms (0-3 years) • Continue to expand support to Personal lines our broker partners • Build on outperformance in auto to accelerate growth • Leverage addition of AXA • Industry premiums likely to be bolstere
Slide 18: Counterparty risk
Counterparty risk Derivatives portfolio Counterparty - Location Source of Canada Exposure ($M) Europe counterparty risk 10% 83% Over the counter derivatives 1,251 United Securities lending 275 States 7% Total 1,526 • Requirements to deal with any given counterparty: Counterparty – Credit Rating – Le
Slide 19: Embedded risk management culture
Embedded risk management culture Enterprise risk management framework Enterprise • Build sustainable competitive advantage by fully integrating enterprise risk management Risk Management into business activities and strategic planning Strategic Risk • Prevent and mitigate risks related to various ar
Slide 20: Solid capital base
Solid capital base Excess capital at 170% $1,000 859 809 744 $800 702 599 C$ Millions $600 428 435 Low sensitivity to capital $400 markets volatility: $200 • 1% increase in rates ~ 4 $0 pts of MCT 2007 2008 2009 2010 2011 2012 Q1 2013 • 10% decline in equity Minimum Capital Test (%) markets ~ 3 pts
Slide 21: Leverage below target level
Leverage below target level Debt-to-total Capitalization Ratio Continued debt-to-capital reduction since AXA 25% acquisition 22.9% 19.1% 19.8% 19.5% 18.9% 20% IFC target 18.5% 15% 14.3% 10% 2010 2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 Earnings Coverage Ratio Historically strong 18.7x 20x earnin
Slide 22: Debt maturity profile
Debt maturity profile $400 Preferred shares Notes Series 4 4.70% $300 Preferred Share Series 1 Series 2 Series 5 Series 1 & 3 5.41% 6.40% 5.16% (C$ millions) $200 Series 3 $300 $250 $250 $250 $250 $250 6.20% $100 $100 $0 13 14 15 16 17 18 19 20 21 22 39 40 41 42 43 61 20 20 20 20 20 20 20 20 20 20 2
Slide 23: Financial and operating metrics
Financial and operating metrics Millions $Cad 2007 2008 2009 2010 2011 2012 Unless otherwise noted (CGAAP) (CGAAP) (CGAAP) (IFRS) (IFRS) (IFRS) Direct written premiums 4,108 4,146 4,275 4,498 5,099 6,868 Combined Ratio 95.2% 97.1% 98.7% 95.4% 94.4% 93.1% NOIPS $3.61 $2.96 $2.35 $3.49 $3.91 $5.00 EPS
Slide 24: Recent acquisitions are on track
Recent acquisitions are on track AXA Canada – closed September 2011 Jevco – closed September 2012 • Strong strategic fit which bolstered our • Strengthened product offering across IFC risk selection and claims management distribution to include: capabilities – Recreational vehicles • Represented $2
Slide 25: A young brand with 200 years of experience
A young brand with 200 years of experience 25
Slide 26: Glossary
Glossary • Catastrophe: A single event resulting in $7.5 million or more in aggregate claims • Claims expenses: The direct and indirect expenses of settling claims. • Claims ratio: Claims incurred, net of reinsurance, during a specific period and expressed as a percentage of net premiums earned for
Slide 27: Glossary
Glossary • Market yield effect: The difference between the MYA and the gains and losses on fair value through profit and loss (FVTPL) fixed-income securities (the objective is that these two items offset each other with a minimal overall impact to income). • Market yield adjustment: The impact of ch
Slide 28: Contact Information
Contact Information Ken Anderson, CA Vice President, Finance & Treasurer Phone: 514.282.6817 ext 5735 Cell: 514.234.3551 Email: Kenneth.Anderson@intact.net Dennis Westfall, CFA Vice President, Investor Relations Phone: 416.341.1464 ext 45122 Cell: 416.797.7828 Email: Dennis.Westfall@intact.net Gener
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