Intact Financial Corporation · TSX:IFC
Intact Financial — ING Canada — Scotia Capital Financials Summit 2005
28 slides from Intact Financial's conference presentation, Sep 14, 2005
Slide 1: Scotia Capital Financials Summit 2005
Scotia Capital Financials Summit 2005 Charles Brindamour, Executive Vice President September 14, 2005 Scotia Capital Financials Summit 2005 Charles Brindamour 1
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 Who is ING Canada? Why is the Property & Casualty (P&C) industry cyclical? What is ING Canada doing to ensure consistent industry outperformance throughout the cycle? Scotia Capital Financials Summit 2005 Charles Brindamour 3
Slide 4: Who is ING Canada?
Who is ING Canada? Scotia Capital Financials Summit 2005 Charles Brindamour 4
Slide 5: Defining Attributes
Defining Attributes Largest Canadian P&C insurer Track record of industry outperformance Diverse business portfolio Underwriting discipline and claims expertise Successful acquisition and business integration history Scotia Capital Financials Summit 2005 Charles Brindamour 5
Slide 6: Market Profile
Market Profile Listing: Toronto Stock Exchange Symbol: IIC.LV Shares Outstanding: 133,732,000 (1) (2) Market Capitalization : $6.0 billion Annual Dividend: $0.65/share, payable quarterly Ownership: 70% ING Groep NV 30% Publicly held (3) Book Value per Share : $18.92 __________________ (1) As at Sept
Slide 7: Largest P&C Insurance Provider in Canada
Largest P&C Insurance Provider in Canada $ billions premiums(1) ($ billions) $5.0 (2) 4.1 Our Ourleading leading $4.0 Acquired business market marketshare share 0.5 of Allianz Canada provides providesaa 3.6 Acquired business of competitive Allianz Canada competitive $3.0 advantage advantage 3.0 $2.0
Slide 8: Strong Premium Growth
Strong Premium Growth ING Canada Premium Growth vs. Industry Business Businessgrowth growthrate rate has exceeded has exceeded Premium Growth(1) the the industrytwo-fold industry two-fold 600% 10-year CAGR = 17.7% 500% 400% 300% Industry (2) 200% 10-year CAGR 100% = 8.0% 0% 1994 1995 1996 1997 1998
Slide 9: A Diversified Business Portfolio
A Diversified Business Portfolio Focus on personal lines and small to medium-sized commercial lines Geographic Footprint Business Lines as a % of 2004 Direct Written Premiums(1) as a % of 2004 Direct Written Premiums(2) Other Atlantic 8% Commercial 6% Other 24% Ontario Alberta 41% Personal Auto 18
Slide 10: Customer Focused Distribution Strategy
Customer Focused Distribution Strategy Broker channel is our primary distribution channel • $3.2 billion (90%) of direct premiums written in 2004 • Approximately 2,800 P&C brokers across We Weprovide provideour ourcustomers customers Canada with with flexibilityand flexibility and • Provide techno
Slide 11: Why is the P&C industry cyclical?
Why is the P&C industry cyclical? Scotia Capital Financials Summit 2005 Charles Brindamour 11
Slide 12: 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 + inflation Scotia Capital Financials Summit 2005 Charles Brindamour 12
Slide 13: 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 14: Many Industries Are Cyclical to Some Extent
Many Industries Are Cyclical to Some Extent Return on Equity Agriculture and Forestry Industry Utility Industry 15% Length of cycle: 10 years Length of cycle: 3.5 years 25% 15% 5% 5% -5% -5% 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 19 19 19 19 1
Slide 15: 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% Average ROE 1998-2003 = 8.3% -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 Sco
Slide 16: 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 17: How Should the Industry Address These Key Drivers of the Underwriting Cycle?
How Should the Industry Address These Key Drivers of the Underwriting Cycle? Continuously improve risk and capital management skills Target returns that reflect the cost of capital and risk/ volatility of the business Emphasize execution in pricing, underwriting, claims and asset management
Slide 18: What is ING Canada doing to ensure consistent industry outperformance?
What is ING Canada doing to ensure consistent industry outperformance throughout the cycle? Scotia Capital Financials Summit 2005 Charles Brindamour 18
Slide 19: Risk and Capital Management at ING
Risk and Capital Management at ING Achieve organic growth where returns > cost of capital Ongoing acquisition strategy to efficiently deploy excess capital and free-up seller’s capital Pay dividends, buy back shares if these are better alternatives Subsidiary pooling arrangements Use of le
Slide 20: Superior Underwriting & Claims Expertise
Superior Underwriting & Claims Expertise Driven by scale Sophisticated pricing strategy - Large proprietary experience database Disciplined risk selection process We Weprovide high provideefficient, efficient, high qualityclaims quality claims service to our customers National claims operati
Slide 21: Superior Underwriting Performance
Superior Underwriting Performance ING Canada Combined Ratio vs. Industry 115 110 Combined Ratio (%) 105 100 Outperformed Outperformed industry industry 95 Industry (1) by by4% 4% on average 10-year Avg. on average = 103.8% 90 85 10-year Avg. 995 996 997 998 999 000 001 002 003 004 = 99.5% 1 1 1 1 1
Slide 22: Government Relations at ING
Government Relations at ING Regulators need to be aware of the changing cost and supply of insurance ING utilizes dedicated in-house government relations resources Our key messages for government are Encourage risk adjusted pricing Free market competition Products with a stable cost base
Slide 23: We Have a Track Record of Outperformance Throughout the Cycle
We Have a Track Record of Outperformance Throughout the Cycle ROE Pe rformance of our Insurance Subsidiarie s Compare d to Canadian P&C Insurance Industry 40.0 10-year avg. = 15.7% 30.0 Our OurROE ROEperformance performance has exceeded has exceeded the the Canadianindustry Canadian industry (%) 20.
Slide 24: We Have a Track Record of Outperformance Throughout the Cycle
We Have a Track Record of Outperformance Throughout the Cycle ROE Performance of our Insurance Subsidiaries Compared to 40.0 U.S. P&C Insurance Industry 5-year avg. 35.0 = 16.7% 30.0 Our OurROE ROEperformance performance 25.0 has exceeded has exceeded (%) U.S. U.S.peers peersby bymore more 20.0 than
Slide 25: Current Outlook
Current Outlook Sustainability of regulatory reform benefits and potential rate reductions key short term drivers ING’s ING’sscale, scale, underwriting underwritingdiscipline Industry returns likely to and pricing discipline sophistication and pricing sophistication exceed historical levels over
Slide 26: For P&C Investors, Greater Rewards For Investing In Top Performers
For P&C Investors, Greater Rewards For Investing In Top Performers Return on statutory surplus by performance quintile, 1988-2002 35 largest P&C insurers (1) 35 largest life insurers (1) Top-perform ing quintile 20.8% 19.8% Second quintile 13.1% 15.4% Third quintile 9.3% 13.1% 2.1% Fourth quintile 1
Slide 27: 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 28: Questions?
Questions? Scotia Capital Financials Summit 2005 Charles Brindamour 28