AUTO HOME BUSINESS Investor Presentation Intact Financial Corporation (TSX: IFC) February 2018
Canada’s largest home, auto and business insurer Largest market share 10-year outperformance Distinct brands versus the industry in a fragmented industry IFC 17.3% Premium 4.1 pts growth 1 #2 10.4% #3 9.1% Combined 3.3 pts ratio 2 #4 6.4% Top 5 represent New U.S. platform 49% Return on 5.4 pts equity 3 #5 5.9% market share Industry data: IFC estimates based on MSA Research Inc. Please refer to Important notes on page 3 of the Q4-2017 MD&A for further information. All market share and outperformance data as at December 31, 2016. 1 Premium growth includes the impact of industry pools. 2 Combined ratio includes the market yield adjustment (MYA). 3 ROEs reflect IFRS beginning in 2010. Since 2011, IFC's ROE is adjusted return on common shareholders' equity (AROE). 2
Consistent outperformance YTD Q3-2017 performance vs. Five-year average loss ratio Canadian P&C industry outperformance gap (for the period ended Sept. 30, 2017) (for the period ended December 31, 2016) IFC Industry 7.4 pts 2.2% Premium growth 1 4.6% 4.1 pts 3.6 pts 3.1 pts 94.2% Combined ratio 2 100.2% 13.6% Return on equity 3 7.6% Personal Auto Personal Commercial Commercial Property P&C Auto Industry data: IFC estimates based on MSA Research Inc. Please refer to Important notes on page 3 of the Q4-2017 MD&A for further information. 1 Premium growth includes the impact of industry pools. 2 Combined ratio includes the market yield adjustment (MYA). 3 IFC's ROE is adjusted return on common shareholders' equity (AROE). 3
What we are aiming to achieve • 3 out of 4 customers are our advocates Our customers are • 3 out of 4 customers actively engage with our advocates us digitally • Be a best employer Our employees are engaged • Be a destination for top talent and experts • Achieve combined ratio in the low 90s Our Specialty Solutions business is a leader in North America • Generate US$3 billion in annual DPW • Exceed industry ROE by 5 points in Our company is one of the Canada and the U.S. most respected • Grow NOIPS 10% yearly over time 4
Progress on key financial objectives $7.00 700 500 bps target $6.00 600 500 $5.00 400 $4.00 300 $3.00 200 $2.00 100 $1.00 0 $0.00 5-year avg. FY2016 YTD Q3-17 2009 2010 2011 2012 2013 2014 2015 2016 2017 NOIPS growth ROE outperformance We have regularly exceeded our 500 bps ROE Since we became a widely held Canadian company outperformance target versus the industry. in 2009 our net operating income per share has grown at a compound growth rate of 11.5%. We Industry data: IFC estimates based on MSA Research. Please refer to Important notes on page 3 of the Q4-2017 MD&A for further information. target NOIPS growth of 10% per year over time. IFC’s ROE corresponds to the AROE. 5
Sustaining performance going forward NOIPS growth of 10% 10% Beat industry ROE by 5 points 5 points every year per year over time Capital management and Claims 3 pts 3-5% deployment management Organic Pricing & 2 pts 2-4% growth Segmentation Margin Investments and 2 pts 2-4% improvement capital mgmt. * Leaves 2 points to reinvest in customer experience (price, product, service, brand) 6
P&C industry 12-month outlook 1 • We expect growth at a mid single-digit level in personal auto, as claims inflation remains a headwind on profitability in all markets, leading to rate actions across the country, and expansion of the risk sharing pools and non-standard auto. P&C • We expect mid single-digit growth in personal property in current firm market Canada conditions, as companies adjust to changing weather patterns. • We expect low-to-mid single-digit growth in commercial lines in Canada, as these lines of business remain competitive, mainly in the larger risks. • In U.S. commercial lines, while the pricing environment is competitive, there are U.S. early signs of upward trends in certain specialty lines with low single-digit growth Commercial expected. • Investments While there is upward momentum on interest rates, investment yields remain low by historical standards. & Financial • Global capital requirements are continuing to influence the asset allocation decisions Strength of many companies. • We expect growth at a mid single-digit rate in 2018. Overall P&C • Overall, we expect the Canadian P&C insurance industry’s ROE to improve but Canada remain below its long-term average of 10% over the next 12 months. 1 Refer to Section 9 - Outlook of the Q4-2017 MD&A for more details 7
Four avenues of growth Multiple levers for profitable growth Near term Medium term Firming market 01 conditions Develop existing 02 platforms Consolidate 03 Canadian market 04 Further expansion outside Canada 8
Building a leading N.A. speciality lines business Creation • With the addition of the OneBeacon team we have created a leading North American specialty lines insurer Value focused on small to medium sized enterprises. • We expect the acquisition to deliver mid-single digit accretion to net operating income per share by the end of 2019. • Actions are in progress to grow the many profitable OneBeacon specialty lines by harnessing existing Profitable broker relationships and the momentum created by the stability of our ownership. Growth • Additional growth pipelines have been opened with commercial lines underwriting desks on each side of the border to support customers with businesses in both countries. • In Q4-2017, we started offering OneBeacon's tailored specialty products and services in Canada, beginning with the launch of tailored products for technology and entertainment risks. • The profitability action plan for OneBeacon is on track to achieve a low-90s combined ratio within 24-36 months of closing and mid-single digit accretion to NOIPS by the end of 2019. Improvement Profitability • The profitability action plan comprises: Underwriting : We have exited Programs and Architects & Engineers and are leveraging Intact’s 1 analytics and segmentation expertise to take underwriting actions in select other lines. Deploy proven claims practices: We are increasing internalization of claims handling and 2 implementing further indemnity control procedures. Expense synergies : We expect US$25 million in expense synergies over three years. On an 3 annualized run-rate basis, we have achieved approximately one-third of these expense synergies at the end of 2017. 9
Driving cross market opportunities Financial Accident Environmental Institutions First tailored specialty Technology Entertainment products launched in Canada Import expertise and expand product offering in Canada Cross-Border 1. Ability for both Intact and OneBeacon to service domestic clients that do business in both countries 2. Better compete with other North American insurers by offering a seamless cross-border experience Small to Mid-Size Commercial & Specialty Lines Leverage Intact underwriting and pricing expertise to broaden offering in the US and drive profitable growth 10
Strong financial position Our balance sheet is Low BVPS sensitivity to capital markets volatility 2 strong $1.1B ($0.40) ($1.45) ($0.35) 23.1% in total capital debt-to-total per 100 bps per 5% decrease per 10% decrease margin capital ratio increase in in preferred share in common share (returning to 20% in 2019) interest rates prices prices Credit ratings 1 Moody’s DBRS A.M. Best Fitch Financial strength ratings of IFC’s principal Canadian P&C A+ AA (low) A1 AA- insurance subsidiaries Senior unsecured debt ratings of IFC a- A Baa1 A- Financial strength ratings of OneBeacon U.S. regulated entities A - A2 AA- * All data as of December 31, 2017 1 Refer to Section 17.2 – Ratings of the Q3-2017 MD&A for additional commentary. 2 Refer to Section 24 – Sensitivity analyses of the Q4-2017 MD&A for additional commentary. 11
Strategic capital management Debt-to-total capital ratio Maintain leverage ratio 23.1% 22.9% (20% debt-to-total capital 18.9% 18.7% 17.3% 16.6% 18.6% within 24 months) 14.3% 11.8% Increase dividends 2009 2010 2011 2012 2013 2014 2015 2016 2017 Manage volatility Quarterly common share dividends (per share) $0.70 $0.64 $0.58 $0.53 Invest in growth $0.48 opportunities $0.44 $0.40 $0.37 $0.34 $0.32 $0.31 $0.27 $0.25 $0.16 Share buybacks 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1-18* * Declared 12
Our people advantage We continue to in invest est in in pe peop ople le and create a strong and diverse workplace Depth of talent with an average of 7 For a third year in a row, we were successors for each Senior Leadership role recognized as one of Aon’s Platinum Level Best Employers and as one of Canada’s Top 100 Employers, reflecting our strong employee offering and our high levels of engagement. Two more than in 2015 16 years of experience, on average, that Executive Committee members have with the organization in various roles * As of December 31, 2017 13
Key takeaways We have a sustainable competitive edge driven by strong fundamentals, scale and discipline 1 We are customer driven with diversified offers 2 to meet changing needs 3 We have a strong financial position and a proven track record of consolidation 4 Deep bench in place and growing talent reflective of the evolving environment 14 14
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