Intact Financial Corporation · TSX:IFC
Intact Financial — ING Canada — Investor Day (2006)
79 slides from Intact Financial's investor day presentation, 2006
Slide 1: ING Canada Investor Day
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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 7:45 – 8:25 a.m. Registration/Buffet Breakfast 8:25 – 8:30 a.m. Welcome 8:30 – 9:00 a.m. Strategic Overview 9:00 – 9:45 a.m. Progress in Claims Management 9:45 – 10:00 a.m. Coffee Break 10:00 – 11:00 a.m. Product Development/ Marketing 11:00 – 11:30 a.m. Outperforming through the Cycle
Slide 4: Strategic Overview
Strategic Overview Claude Dussault, President and CEO
Slide 5: Our Goal
Our Goal To create a sustainable, superior performance gap, as measured by return on equity, relative to the Canadian property and casualty industry of not less than 500 basis points (5%). Continued superior profitability will be deployed in part to reinvest in strategies designed to expand the ROE
Slide 6: A Track Record of ROE Outperformance
A Track Record of ROE Outperformance ROE Performance of our Insurance Subsidiaries Compared to Canadian P&C Insurance Industry Our 40% OurROE ROE performance performance has hasexceeded exceeded 11-year avg. 30% Canadian Canadianindustry industry = 17.4% by 750 bps by 750 bps on 20% onaverage averag
Slide 7: Key Strategies: ING Canada
Key Strategies: ING Canada Expand ROE gap with competition by leveraging scale Strengthen market position through organic growth Strengthen market position through value-creating acquisitions 7
Slide 8: Expand ROE Gap with Competition by Leveraging Scale
Expand ROE Gap with Competition by Leveraging Scale Pricing and underwriting − Sophisticated pricing strategy − Large proprietary experience database − Focus on economic value drivers and proprietary tools to exploit market inefficiencies (CVI, EVI) − Disciplined risk selection process − Strengthe
Slide 9: Expand ROE Gap with Competition: Investments
Expand ROE Gap with Competition: Investments ING Canada has Historically Outperformed the Competition 10.0% 9.0% Annualized Returns 8.0% 7.0% 6.0% 5.0% 1 year 2 years 3 years 4 years 5 years Annualized Periods Ending December 31, 2005 Median 75th Percentile ING Canada Source: CanadianMgrSearch.com P
Slide 10: Optimize Capital and Investment Management
Optimize Capital and Investment Management ING Canada has a strong capital position as at June 30, 2006 − Excess capital at insurance companies of $264 million (at 175% MCT) − $806 million in liquid investments at holding company − $1 billion shelf filing remains untapped We remain focused on ut
Slide 11: Strengthen Market Position
Strengthen Market Position ING Canada Premium Growth vs. Industry Premium Growth1) ING INGCanada’s Canada’s YOY YOYpremium premiumgrowth growth 400% isis1.4% 1.4% YTD in‘06 YTD in 10-year CAGR ‘06 despite rate declines = 13.5% despite rate declines 300% 200% Industry 2) 10-year CAGR = 7.0% 100% 0% 9
Slide 12: Strengthen Market Position: Organic Growth
Strengthen Market Position: Organic Growth Strengthen relationship with brokers − Ease of doing business for distributors and customers (Accel, Savers) − Services to help brokers grow their business (e.g. marketing programs, Quest) − A customer-centric culture − Support broker partners in acquisit
Slide 13: Our Goal
Our Goal To exceed the annual organic growth rate in direct premiums written of the Canadian property and casualty industry by at least 300 basis points (3%). 13
Slide 14: Strengthen Market Position: Acquisitions
Strenthen Market Position: Acquisitions Approximate Size of Acquisition Proven integration Acquisition Year of Acquisition (DPW) 1) ($ millions) capabilities Allianz Canada (Personal and Small to Medium 2004 600 Successfully Commercial Lines) Zurich (Personal and Small Commercial Lines) 2001 510
Slide 15: Fragmented Industry Provides Growth Opportunities
Fragmented Industry Provides Growth Opportunities $5.0 Direct Premiums Written ($ Billions) 55largest $4.0 largestfirms firms== 36% 3.9 36%ofofthe themarket market Top Top10 10==55% 55% $3.0 3.1 $2.0 2.0 1.8 1.8 $1.0 $0.0 Aviva Co-operators The Economical Northbridge Canada General Insurance Group M
Slide 16: Questions and Discussion
Questions and Discussion ING 4
Slide 17: Progress in Claims Management
Progress in Claims Management Louis Héroux, Sr. Vice President, Claims 17
Slide 18: Our Mission
Our Mission Our mission is to help ING Canada maintain a competitive advantage by leveraging our scale of operations through: Client service/satisfaction – “customer centricity” Preferred provider networks Indemnity control and expense management Technology 18
Slide 19: ING Claims Department
ING Claims Department 1700 employees located in 8 provinces We assist clients with approximately 328,000 claims per year Financial responsibility for managing $2.2 billion in expenditures annually 19
Slide 20: Claims settlement is the main product
Claims settlement is really the main product an insurance company provides to its customers. 20
Slide 21: Customer Centricity
Customer Centricity Our goal is to provide customers with a highly satisfactory, differentiated claims experience through: Product innovation – DUO Line (Tell your story once to the broker and to your adjuster) – “We believe in you” (Establishing fault based on customer’s statement) – Rely Program
Slide 22: Customer Centricity: Satisfaction Survey
Customer Centricity Customer satisfaction survey – 94% of our claimants in 2005 were satisfied with the claims process and the payments they received – We rigorously survey claimants monthly and use the information to continuously improve our service 22
Slide 23: Customer Centricity: ISO Certification
Customer Centricity ISO Certification In 2006, ING Canada’s Quebec Claims Service earned the distinction of becoming the first claims service in the world certified ISO 9001:2000. 23
Slide 24: Customer Centricity: Common Processes
Customer Centricity Common Processes Common processes and new service model: – Deployment across Canada underway – Strive to more effectively increase the level of penetration of our preferred provider networks – Customer value proposition designed to make optimal use of our people, technology and
Slide 25: Preferred Provider Networks: Auto Rely Network
Preferred Provider Networks Auto Rely Network National program comprising: – More than 300 repair shops selected on the basis of work quality, customer centricity and compliance with ING values – Penetration level increased by roughly 10% since last year to approximately 55% currently Distinctiv
Slide 26: Preferred Provider Networks: Property Rely Network
Preferred Provider Networks Property Rely Network Rolled out in Q4/05 to serve residential property clients National network of more than 150 high quality property restoration contractors including specialty repairers (water damage) ING guarantee of repairs – 5 years on workmanship Increases
Slide 27: Preferred Provider Networks: Health Rely Network
Preferred Provider Networks Health Rely Network Newest Rely program, currently underway in Alberta and Ontario – Physicians, occupational therapists, chiropractors etc. – Aligned with ING’s commitment to superior quality service • Adapts our value proposition to provincial accident benefits legisl
Slide 28: Next Steps: Supply Chain Management
Preferred Provider Networks Next Steps: Supply Chain Management Goal is to: 1. Integrate the various services provided by our preferred providers 2. “Move up the chain” to leverage purchasing power to reduce procurement costs while maintaining preferred provider margins Pilot underway (used auto
Slide 29: Indemnity Control and Expense Management: Property Focus
Indemnity Control and Expense Management Property Focus ING has launched a number of Property initiatives in 2006: Property Rely Program Property and contents specialist roles Property building appraisal tool: standardisation, enriched proprietary data base 6 Sigma initiative focusing on pro
Slide 30: Technology
Technology OPUS System – Deployed in 2006 for personal lines – Supports claims initiatives, especially call centres, new service model and preferred provider programs – Paper-free environment – Next steps: commercial lines, fraud detection assistance, workflow management, tools to support our adju
Slide 31: Questions & Discussion
Questions & Discussion ING 4
Slide 32: ING Canada Investor Day
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Slide 33: Product Development/Marketing
Product Development/Marketing Alister Campbell, Sr. Vice President, Marketing, Communications & Government Relations Martin Beaulieu, Sr. Vice President, Personal Lines Pete Weightman, Sr. Vice President, Commercial Lines 33
Slide 34: Marketing
Marketing Alister Campbell, Sr. Vice President, Marketing, Communications & Government Relations 34
Slide 35: The Environment in Which We Work to Develop ING Canada Brands
The Environment in Which We Work to Develop ING Canada Brands Not without its challenges • P & C industry cycles • Consumer cynicism / industry image issues • Some regulatory obstacles to innovation • Commodity products defined by others: – Government – Industry standard • Price driven competition •
Slide 36: Evolving Our Value Propositions: 2005-2007
Evolving Our Value Propositions: 2005 - 2007 A structured approach • Comprehensive quantitative market research program to track: – Customer satisfaction – Claims satisfaction – Brand awareness – Perception of brand attributes • Qualitative and quantitative research to test options for product and/o
Slide 37: Evolving Our Value Propositions: Objectives
Evolving Our Value Propositions: 2005 - 2007 With specific objectives • Determination of Canadian consumer’s preferred positioning of the “ideal insurance company” • Determination of key brand attributes • Determination of key loyalty drivers of high value segment customers • Identification of “dis-
Slide 38: The ING Insurance Brand
The ING Insurance Brand Key attributes: • We deliver on promises (#1) • We make it easy to do business • We treat you fairly Supporting attributes: • We act in your best interests • We provide unique and different offers 38
Slide 39: Guarantee-Backed Promises
Guarantee-Backed Promises Claims Service Guarantee – money back refund if we fail to meet our claims service commitments Responsible Driver Guarantee guaranteeing premium stability even in the case of an at-fault accident 39
Slide 40: Guarantee-Backed Promises
Guarantee-Backed Promises belairdirect’s Two-year and Crash Proof Policies – guaranteeing premium stability (even in the case of an at-fault accident) Rely Network – lifetime repair guarantee if our recommended vendor (mechanic, contractor) is used 40
Slide 41: We'll Make it Easy to Do Business
We’ll Make it Easy to Do Business • Re-engineering customer policy documents – starting with dramatically improved billing statement • My Home & Auto – Integrated Policy for auto and residential • Streamlined claims processes • Simpler, more relevant communications – phone, web, and print 41
Slide 42: We'll Treat You Fairly
We’ll Treat You Fairly • “why do I have to pay twice when I’ve had an accident?” – the Zero deductible option • “what happens when I have a claim?” – Claims Promise Letters (clear communication regarding the steps in the claims process) • “I pay for 20 years, never have a claim and get nothing” - Re
Slide 43: The ING-AEROPLAN Loyalty Program
The ING-AEROPLAN Loyalty Program • Aeroplan “Protect and Collect” Loyalty Program – “get something from your insurance even when you don’t claim” • Exclusive access to 4.1 million members with attractive demographics (inc. 1.8 million e-mail addresses) 43
Slide 44: AEROPLAN Loyalty Program
AEROPLAN Loyalty Program • Multi-channel marketing strategy (Belairdirect and ING Insurance) • New INGInsurance.ca site provides quote and access to select group of brokers who have signed service level agreements regarding response time, etc. 44
Slide 45: Personal Lines
Personal Lines Martin Beaulieu, Sr. Vice President, Personal Lines 45
Slide 46: Product Development Checklist
Product Development Checklist Generate new business Sell more to existing clients Increase loyalty Price with adequate margins 46
Slide 47: Key Indicators
Key Indicators # of clients with new product % penetration Loss ratios Retention Distribution of our target customers 47
Slide 48: My Home & Auto
My Home & Auto Combine your automobile and home insurance and save 48
Slide 49: 2-Year Policy
2-Year Policy Guaranteed premium stability for the next 2 years 49
Slide 50: Responsible Driver Guarantee / Crash Proof Policy
Responsible Driver Guarantee / Crash Proof Policy Protect your clean driving record and get premium stability even in the case of an at-fault accident 50
Slide 51: Zero Deductible
Zero Deductible Why pay twice? 51
Slide 52: Water Damages
Water Damages Better protection in case of water damages 52
Slide 53: Commercial Lines
Commercial Lines Pete Weightman, Sr. Vice President, Commercial Lines 53
Slide 54: Defining Customer Value
Defining Customer Value… Emotional (brand, trust, image) • The gap between benefits and price determines the value to the customer…the greater the gap the greater the value (either real or perceived) Functional Economic (product features, (price) service, workflow) Customer = Benefits (functional +
Slide 55: Commercial Lines Customer Value Proposition Positioning
Commercial Lines Customer Value Proposition Positioning • Emphasis on functional benefits tied to our three brand attributes: – Treats me fairly – Delivers on promises – Easy to do business with 55
Slide 56: The Product Development Process
The Product Development Process Commercial Lines Idea Filter Local Pilots Monitor Generation •First Mover •Test •Phased •Product •Sustainability •Modify Refinements •Service •Core Skills •Process 56
Slide 57: AcceL: Key Deliverables
Key Deliverables AcceL AcceLerate your small business 57
Slide 58: Key Deliverables
Key Deliverables 9XAY i A the support you need. 2-Year Policy aM N fq 30 MINUTES. GUARANTEED. SERVICE GUARANTEE Synchro Insurance Easy fill out, easy fuel up From June 12 to September 17, get a weekly chance to win a $50 gas card from Petro-Canada® One chance for every quote submitted to ING with Ea
Slide 59: Questions & Discussion
Questions & Discussion ING 4
Slide 60: Outperforming through the Cycle
Outperforming through the Cycle Charles Brindamour, Executive Vice President 60
Slide 61: Agenda
Agenda Why is the P&C industry cyclical? Understanding the industry results beyond the cycle Outperforming the industry The rewards of outperformance Current outlook 61
Slide 62: Why is the P&C Industry Cyclical?
Why is the P&C Industry Cyclical? 62
Slide 63: P&C Industry Mature, Stable in the Long Term
P&C Industry Mature, Stable in the Long Term ROE over past 30 years has averaged 10.1% In each 10 year period, ROE has averaged 9.5% to 10.5% Premium growth has typically tracked GDP plus inflation 63
Slide 64: P&C Results Can Vary Significantly in the Short Term
P&C Results Can Vary Significantly in the Short Term Property & Casualty Industry Return on Equity (1975 – 2004) Average ROE Average 20% ROE 11.2% Average ROE 8.3% Average ROE 9.9% 10.6% 10% 0% 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 Source: IBC Fact
Slide 65: Many Industries Are Cyclical to Some Extent
Many Industries Are Cyclical to Some Extent All Industries, Canadian Industry Earnings Cycle Return on Equity 15% Length of cycle: 5 years 5% -5% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 Source: Statistics Canada 65
Slide 66: What Drives P&C Cyclicality?
What Drives P&C Cyclicality? Supply-driven industry with inefficient capital management Decentralized decision making Time lag between pricing, product design and confirmation of final costs is long and not well understood by all players in the system Regulatory and political process tends t
Slide 67: Understanding the Industry Results Beyond the Cycle
Understanding the Industry Results Beyond the Cycle 67
Slide 68: Adding to the Complexity
Adding to the Complexity Net catastrophe losses Net realized gains 5% as a % of NPE as a % of annual revenue 4% 6% 5% 3% 4% 2% 3% 2% 1% 1% 0% 0% 1999 2000 2001 2002 2003 2004 2005 1997 1998 1999 2000 2001 2002 2003 2004 2005 -1% Note: Pro forma, pre-tax, net of reinsurance per 2006 program Note: Pre
Slide 69: Outperforming the Industry
Outperforming the Industry 69
Slide 70: A Track Record of ROE Outperformance
A Track Record of ROE Outperformance ROE Performance of our Insurance Subsidiaries Compared to Canadian P&C Insurance Industry Our 40% OurROE ROE performance performance has hasexceeded exceeded 11-year avg. 30% Canadian Canadianindustry industry = 17.4% by 750 bps by 750 bps on 20% onaverage averag
Slide 71: Key Strategies to Outperform
Key Strategies to Outperform Expand ROE gap with competition by leveraging scale: Pricing and underwriting Claims and efficiency Capital and investment management Strategies are geared towards sustainability of the advantage At the end of June 2006, our P&C subsidiaries outperformed by 1
Slide 72: The Rewards of Outperformance
The Rewards of Outperformance 72
Slide 73: The Importance of Outperforming
The Importance of Outperforming Building a sustainable advantage over the industry from an ROE point of view is essential: Continuously providing return in excess of cost of capital Ensures sound financial position to capitalize on opportunities throughout the cycles Delivering our organic g
Slide 74: Outperformers Grow Faster
Outperformers Grow Faster DPW growth by combined ratio performance quartile, 1995-2005 40 largest P&C(1) insurers Fourth quartile 5.10% Third quartile 4.24% Second quartile 6.37% Top-performing 12.85% quartile 7.75 points ____________________ (1) Refers to Canadian companies Source: Scor Report 74
Slide 75: P&C Leaders Tend to Remain Leaders
(1) P&C Leaders Tend to Remain Leaders 1979-1993 1994-2002 5 A winner The best 5 underwriting 3 1979-1993 Above average companies 1 2 Those Below average 3 underwriting companies 11 below Acquired average 2 ____________________ Out of business (1) Refers to US companies Source: AM Best; McKinsey ana
Slide 76: Current Outlook
Current Outlook ING 4
Slide 77: Current Outlook
Current Outlook Industry returns likely to exceed historical levels over the next year Industry top-line growth rate likely to be below historical levels over ING’s ING’sscale, scale, underwriting underwritingdiscipline, the next twelve months pricing discipline, pricingsophistication sophistica
Slide 78: Questions & Discussion
Questions & Discussion ING 4
Slide 79: Thanks for Coming Today
Thanks for Coming Today ts ING 4