Intact Financial Corporation · TSX:IFC
Intact Financial — Q2 2011 Earnings Presentation
29 slides from Intact Financial's earnings presentation, August 2011
Slide 1: Intact Financial Corporation Investor Presentation August 2011
Intact Financial Corporation (TSX: IFC) Investor Presentation August 2011
Slide 2: Canada's leader in auto, home and business insurance
Canada’s leader in auto, home and business insurance Who we are Distinct brands • Largest P&C insurer in Canada • $4.5 billion in direct premiums written • #1 in Ontario, Quebec, Alberta, Nova Scotia • $8.6 billion cash and invested assets Scale advantage Industry outperformer 2010 Direct premiums w
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 106% 80% 104.3% Cdn. P&C 75.1
Slide 4: We continue to outperform the industry
We continue to outperform the industry Operating highlights: Comparison with Canadian P&C Q2-2011 results industry1 benchmark • Net operating income per share of $0.87, 102% Intact Top 20 despite $0.84 in losses from natural 99% 98.3% catastrophes 96% • Q2 combined ratio of 97.0% driven by 93% 93.2%
Slide 5: Q2-2011 Financial highlights
Q2-2011 Financial highlights (in $ millions, except as otherwise noted) Q2-2011 Q2-2010 Change YTD-2011 YTD-2010 Change Direct premiums written $1,354 $1,318 3% $2,297 $2,232 3% Net underwriting income $33 $66 (50)% $91 $135 (33)% Combined ratio 97.0% 93.7% 3.3 pts 95.8% 93.5% 2.3 pts Net operating
Slide 6: Strong financial position and excess capital
Strong financial position and excess capital Strong balance sheet $8.6 billion in cash and invested assets • Excess capital of $758 million, based on 170% MCT • As at the end of Q2-2011, the debt to total Cash and short Loans term notes 1% capital ratio was 14.4%. 4% • Solid ratings from A.M. Best,
Slide 7: 12-month industry outlook
12-month industry outlook We remain well-positioned to continue outperforming the Canadian P&C insurance industry in the current environment • Industry premiums likely to increase at a similar rate as in 2010, with mid- Premium growth single digit growth in personal auto (driven by ON), upper single
Slide 8: Four distinct avenues for growth
Four distinct avenues for growth Benefit from firming market conditions Develop existing platforms Personal lines • Continue to expand support to • Industry premiums remain inadequate in ON auto our broker partners • Home insurance premiums also on the rise • Expand and grow belairdirect Commercial
Slide 9: Conclusion: Intact Financial
Conclusion: Intact Financial Disciplined pricing, underwriting, investment and capital management have positioned us well for the future • Largest P&C insurance company in Canada • Strong financial position • Excellent long-term earnings power • Organic growth platforms easily expandable • AXA acqui
Slide 10: IFC's acquisition of AXA Canada: Building a world-class Canadian P&C insurer
IFC’s acquisition of AXA Canada: Building a world-class Canadian P&C insurer
Slide 11: IFC's acquisition of AXA Canada: Building a world-class Canadian P&C insurer
IFC’s acquisition of AXA Canada: Building a world-class Canadian P&C insurer Strong strategic fit Financially compelling • Strengthens IFC’s premiums by over 40% • Management estimates IRR1 of 20% • Bolsters our risk selection and claims management • Acquisition is accretive to NOIPS2,3 in 2012; ann
Slide 12: Leading position…
Leading position… Top 10 Canadian P&C insurance 6.5 companies by 2010 direct premiums written ($ billions) 3.3 2.4 2.4 2.3 2.0 2.0 1.9 1.7 1.6 PF Intact + Aviva TD RSA Co-operators AXA Wawanesa State Farm Economical Desjardins AXA Assurance Rank 1 2 3 4 5 6 7 8 9 10 Share 16.5% 8.4% 6.1% 6.0% 5.9% 5
Slide 13: …Leading performance
…Leading performance Return on equity (2010) Combined ratio (2010) Intact pro forma 14.9% Intact pro forma 94.8% Top 20 adjusted* 3.2% Top 20 adjusted* 105.0% Outperformance 11.7% Outperformance 10.2% *Excludes AXA *Excludes AXA Expands our outperformance versus the Top 20 P&C insurance industry ben
Slide 14: AXA Canada: Expanding our expertise
AXA Canada: Expanding our expertise − Offers a range of P&C and Life & Health insurance products through its relationships with 1,300 insurance brokers and 2,700 independent insurance advisors − The sixth largest P&C insurer in Canada with a 5.1% share in 2010 − Strong presence in provinces of Quebe
Slide 15: IFC + AXA: A winning combination
IFC + AXA: A winning combination • Greater earnings stability as a result of increased diversification: ‒ Higher exposure to commercial lines accomplishes an important strategic objective ‒ Less reliance on personal automobile insurance ‒ Improves geographic footprint in underrepresented areas (Queb
Slide 16: IFC + AXA: Building a world-class Canadian P&C insurer
IFC + AXA: Building a world-class Canadian P&C insurer Strong strategic fit: combining sophisticated underwriting and claims management, while enhancing our multi-channel distribution • Increased scale advantage bolsters our risk selection and claims management capabilities • Enhanced commercial lin
Slide 17: AXA Canada acquisition on-track
AXA Canada acquisition on-track • Integration planning process initiated immediately following the announcement • Numerous task forces established, comprised of employees from both IFC and AXA, charged with: − Reviewing activities, processes and systems of both companies − Identifying potential syne
Slide 18: Appendices
Appendices [intact] —
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 Home Commercial • Fragmented market: insurance, P&C, 26.6% 19.0% •Top five represent 37%, versus bank/lifeco markets which are closer to 65-75% •IFC is largest player with 11% market share, Commercia
Slide 20: Economic uncertainties will affect industry profitability
Economic uncertainties will affect industry profitability • Slow global recovery with significant The Canadian P&C industry can no longer downside risks count on high investment income • Continued volatility in financial, currency and commodity markets 14% • Financial systems still somewhat 12% vuln
Slide 21: 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 discipline 105% 10-year avg. = 99.0% • In-house claims expertise 95% • Broker relationships 10-year avg. • Solid investment re
Slide 22: 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 23: 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 24: Cash and invested assets
Cash and invested assets Asset class Fixed income Preferred shares Corporate 34.3% Perpetual and callable floating 50.3% Federal government and agency 28.2% and reset Cdn. Provincial and municipal 28.2% Fixed perpetual 32.5% Supranational and foreign 7.2% Fixed callable 17.2% ABS/MBS 2.0% TOTAL 100%
Slide 25: 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 26: Experienced and united leadership team
Experienced and united leadership team Years In Years With Industry IFC Brindamour, Charles President & CEO 18 18 Beaulieu, Martin SVP, Personal Lines 23 23 Black, Susan SVP, Chief HR Officer 3 3 Blair, Alan SVP, Atlantic Canada 27 27 Coull-Cicchini, Debbie SVP, Ontario 6 6 Désilets, Claude Chief Ri
Slide 27: 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 28: Forward-looking statements and disclaimer
Forward-looking statements and disclaimer Certain of the statements included in this MD&A 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-looking s
Slide 29: Forward-looking statements and disclaimer
Forward-looking statements and disclaimer All of the forward-looking statements included in this MD&A are qualified by these cautionary statements and those made in the “Risk Management” section of our MD&A for the year ended December 31, 2010. These factors are not intended to represent a complete