Slide 1: Intact Financial Corporation: Building a world-class P&C insurer
Intact Financial Corporation (TSX: IFC) Building a world-class P&C insurer Investor Presentation August 2012
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 BC, Alberta, Ontario, Quebec, Nova Scotia • $11.7 billion cash and invested assets • Proven industry consolidator Scale advantage Industr
Slide 3: Consistent industry outperformance
Consistent industry outperformance Significant Sophisticated In-house Broker Multi- Proven Solid scale pricing and claims relationships channel acquisition investment advantage underwriting expertise distribution strategy returns 2011 combined ratios Five-year average loss ratios Canadian P&C indust
Slide 4: A strong base from which to build
A strong base from which to build Enhanced Business Mix Strong Capacity To Outperform Line of Business H1-2011 H1-2012 Combined Ratio1 Q1/2012 Personal Auto 49% 46% IFC 90.7% Personal Property 23% 22% Top 20 Industry2 94.8% Commercial 28% 32% Outperformance 4.1 pts Geography H1-2011 H1-2012 Return o
Slide 5: Solid financial position and excess capital
Solid financial position and excess capital Solid balance sheet $11.7 billion in cash and invested assets • Solid financial position at Q2-2012: – $649 million in excess capital – Estimated MCT of 205% Loans 4% – Debt-to-total-capital ratio of 19.8% * Fixed income – Book value per share increased 13
Slide 6: 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 8.1% 0.45 8.8% • Dividends 0.40 3.2% 6.3% $0.37 $0.40 • Acquisitions 0.35 14.8% $0.32 $0.34 8.0% $0.31 • Share buybacks 0.30
Slide 7: Industry outlook for 2012
Industry outlook for 2012 We remain well-positioned to continue outperforming the Canadian P&C insurance industry in the current environment • Industry premiums are likely to grow at the same rate in H2-2012 – Mid single digit growth in personal auto – Upper single digit growth in personal property
Slide 8: Four distinct avenues for growth
Four distinct avenues for growth Firming market conditions (0-2 years) 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 Commercial lines • Evidence of
Slide 9: AXA integration on track
AXA integration on track • Integration is on track − Approximately three-quarters of policies have been converted • Retention has been strong, and is expected to continue − Customer attrition and broker cancellations, in total, have been what we would expect in a ‘normal’ year • We continue to targe
Slide 10: Summary
Summary Disciplined pricing, underwriting, investment and capital management have positioned us well for the future • Largest P&C insurance provider in Canada • Consistent track record of industry outperformance • Solid financial position • Excellent long-term earnings power • Organic growth platfor
Slide 11: IFC's acquisition of JEVCO: Continuing our journey towards building a world-class P&C insurer
IFC’s acquisition of JEVCO: Continuing our journey towards building a world-class P&C insurer
Slide 12: IFC's acquisition of JEVCO
IFC’s acquisition of JEVCO: Continuing our journey towards building a world-class P&C insurer Strategic Fit Financially Compelling • Strengthens offer for brokers and customers • IRR1 estimated above 20% • Expands existing product offering: • Book value per share accretion estimated at 2.6% • Recrea
Slide 13: Leading position in Canadian P&C insurance
Leading position in Canadian P&C insurance Top 10 Canadian P&C Insurance Companies by 2011 Direct Premiums Written ($ billions) 7.0 3.4 2.6 2.5 2.4 2.4 1.9 1.8 1.7 1.3 0.3 PF Intact + Aviva RSA TD Co- Wawanesa State Farm Desjardins Economical Northbridge JEVCO AXA + Insurance operators JEVCO Rank 1
Slide 14: Broadening our offer to brokers and customers
Broadening our offer to brokers and customers − JEVCO Insurance Company is a leading provider of specialty and niche insurance products for individuals and businesses across Canada − Insurance products are distributed through a network of independent insurance brokers; JEVCO had approximately $350 m
Slide 15: A financially compelling transaction
A financially compelling transaction Purchase Price $530 million cash consideration1 Key Components Specialty lines | Recreational vehicles | Non-standard auto Purchase Metrics P/BV2 = 1.3x | P/E3 = 13.2x Transaction Economics Estimated IRR above 20%4 | Accretive to BVPS by 2.6% Financing Excess cap
Slide 16: Strong financial position maintained
Strong financial position maintained Ultimate Sources of Funding* IFC excess capital + debt $205 million Equity proceeds $225 million JEVCO excess capital $100 million $530 million * Represents funding structure following the close of the acquisition. Debt-to-total-capital ratio estimated to remain
Slide 17: Conclusion
Conclusion Strong strategic fit • Strengthens offer for brokers and customers • Expands existing product offering into complementary lines • Strengthens commercial and specialty lines capabilities Opportunity to acquire a leading specialty and niche insurer in a financially compelling manner • Estim
Slide 18: Appendices
Appendices
Slide 19: 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 • Fragmented market1: −Top five represent 43%, versus bank/lifeco markets which are closer to 65-75% −IFC is largest player with 16.5% market share, versus largest bank/lifeco with 22- 25% market sha
Slide 20: P&C industry 10-year performance versus IFC
P&C industry 10-year performance versus IFC IFC’s competitive advantages Combined ratio 110% • Significant scale advantage 105% • Sophisticated pricing and underwriting Industry1 10-year avg. = 98.0% discipline 100% • In-house claims expertise 95% 10-year avg. • Broker relationships 90% = 94.6% • So
Slide 21: Near-term themes to monitor
Near-term themes to monitor Impact on Industry from Low Yields Reinsurance • Major catastrophes in the world in 2011 have impacted reinsurer’s capital levels P&C Industry • The Canadian industry one of the most profitability 3-5 year conservative markets in the world in terms of Government of Canada
Slide 22: 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 more in direct premiums written than in recent years: • Pursuing acquisitions in lines of business where we •
Slide 23: Historical financials
Historical financials IFRS Canadian GAAP (in $ millions, except as otherwise noted) 2011 2010 2009 2008 2007 Income statement highlights Direct written premiums $5,099 $4,498 $4,275 $4,146 $4,109 Underwriting income 273 193 54 117 189 Net operating income 460 402 282 361 457 Net operating income per
Slide 24: Cash and invested assets
Cash and invested assets Asset class Fixed income Preferred shares Corporate 30% Perpetual and callable floating 64.4% Federal government and agency 29% and reset Cdn. Provincial and municipal 33% Fixed-rate perpetual 24.5% Supranational and foreign 5% Retractable 11.1% ABS/MBS 3% TOTAL 100% Private
Slide 25: Track record of prudent reserving practices
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 development are normal • 2005/2006 reserve development was unusually high due to the favourable effects of cert
Slide 26: Investor Relations contact information
Investor Relations contact information Dennis Westfall, CFA Vice President, 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
Slide 27: 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 28: 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