Investor Presentation November 2018
About us Echelon is a Canadian Property & Casualty insurer, offering Personal and Commercial products exclusively through insurance brokers. Head Office Mississauga, ON Regional Offices Burnaby, BC Kelowna, BC Laval, QC Montreal, QC Charlottetown, PE *As at September 30, 2018 YTD Gross Written Premium* Stock ticker* Market capitalization* Book value* EFH $149M $154M $297M 2
2018 Third Quarter Highlights Q3 2018 Q3 2017 Change ↑ 6.2% Book Value Per Share $12.89 $12.14 ↑ 34.6% Direct Written Premium $105.0M $78.0M ↓ 6.4% Personal Lines Combined Ratio 94.0% 100.4% ↓ 3.5% Commercial Lines Combined Ratio 105.9% 109.4% ↓ 5.0% Total Company Combined Ratio 97.8% 102.8% ↑ 0.72% Total Return on Invested Assets 0.42% -0.30% ↑ 77.3% Net Operating Income $2.1M $1.2M 3
2018 YTD Year Highlights Q3 2018 Q3 2017 Change ↑ 6.2% Book Value Per Share $12.89 $12.14 ↑ 36.5% Direct Written Premium $297.1 $217.7M ↓ 2.1% Personal Lines Combined Ratio 95.3% 97.4% ↑ 3.1% Commercial Lines Combined Ratio 99.4% 96.3% ↓ 0.4% Total Company Combined Ratio 96.7% 97.1% ↑ 0.01% Total Return on Invested Assets 1.21% 1.20% ↑ 25.6% Net Operating Income $8.6M $6.9M 4
Strong growth and consistent profitability Direct Written Premiums | $ millions Combined Ratio 130% Personal Lines 381* Commercial Lines 120% Total Company 110% 286 297 100% 217 199 Q3 187 178 175 90% YTD 80% 70% 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 Q3 YTD *2018 Projection Personal Lines performance has been consistently profitable, while Commercial Lines has stabilized following actions taken in 2013 5
What we offer Echelon underwrites a range of Personal and Commercial insurance products under the Echelon Insurance and ICPEI brands. Personal Automobile Personal Property Commercial Property Commercial and Liability Automobile • Specialty automobile • Homeowners, insurance condominium and • Market-leading • Commercial vehicle tenant coverage mid-market property coverage • Standard coverage and liability coverages in select regions for various vehicles Surety Bonds Specialty Programs Long Haul Trucking • Various bonds for the • MGA-sold warranty • Coverage for owner construction industry programs operators and fleets New in 2016 6
How we set ourselves apart With our responsive service, deep underwriting expertise, and a long-standing commitment to the broker channel, Echelon is a convenient market alternative. Canadian Company Broker Exclusive Underwriting Expertise Echelon and ICPEI operate Our products are only sold by Our local, in-house out of six offices across licensed insurance brokers. underwriters are seasoned Canada, where our local As one of the few remaining experts. Collaborating with teams draw on their deep insurance carriers dedicated our brokers, Echelon’s understanding of their solely to the broker channel, underwriters work to regional market to serve our Echelon benefits from strong understand the unique risks brokers and customers. broker support and faced by our customers and partnerships. offer insurance solutions to meet their needs. 7
Setting the stage for profitable growth Echelon has recently embraced a new strategy to increase market share , regain profitability and refocus on our core Canadian business . Our efforts over the past two years have been focused on divesting our European operations, and on setting the company up for success in these key areas: Building our team Expanding our Enhancing our Strengthening and expertise product offering technology broker relations • We have brought • Echelon expanded • We adapted and • We expressed our expertise in-house into new product enhanced our commitment to to support growth lines where brokers Passport System brokers as other were underserved to support our markets went direct • Our new leaders and unsatisfied new business lines have the skills and • Brokers are and improve ease experience to write • We are already reciprocating with of doing business complex risks, and receiving strong support, and we are for our brokers relationships with support from brokers gaining traction with key brokers that will in Surety, and our “convenience accelerate growth have seen an store” model, overwhelming rooted in flexibility response in Long and ease Haul Trucking of doing business 8
Setting the stage for profitable growth Building our team and expertise Strengthening broker relations • To support our new lines of business and • As one of the few remaining insurers strengthen our existing operations, we have dedicated solely to the broker channel, brought together a team of industry experts. strong broker relationships are essential to Echelon’s success. • With decades of experience, long-standing broker relationships, and nuanced technical • We have strengthened our relationships with expertise, our new team is well-positioned existing brokers and formed new partnerships to drive Echelon’s profitable growth. to support our newest business lines. We To learn about our seasoned leaders, continue to work to better understand the visit echeloninsurance.ca/leadership. needs of our brokers and their clients, so to better respond to gaps in the marketplace. 9
Setting the stage for profitable growth Enhancing our technology Expanding our product offering • Echelon is committed to adopting more agile • In 2016, Echelon introduced Surety and technology to better support our brokers. Long Haul Trucking divisions to meet a In 2017, we recently our Passport System to growing demand for these products. brokers across Canada to support enhanced • Our Surety division was formed in connectivity and a more seamless workflow. March, 2016, and now operates out of three offices in Burnaby, BC, • Ontario: Launched in Summer 2017 Mississauga, ON, and Montreal, QC. • Quebec: Launched in Summer 2017 • Our Long Haul Trucking (LHT) division was formed in early 2016, and currently • Alberta: Launching in Fall 2018 operates in Quebec and Ontario. Our • British Columbia: Launching in 2018 LHT product is offered exclusively through specialty brokers who have a deep understanding of the trucking business. • By streamlining our policy administration process with full upload and download • Moving into the second half of 2018, we will capabilities, brokers are receiving more timely continue to expand these new products responses to submissions, with which they across the country. can better serve their customers. • We will also continue to grow our Commercial Lines Portfolio. 10
Ready to deliver With a solid foundation in place – including an experienced leadership team , an enhanced system and in-demand products , Echelon is positioned for profitable future growth. After launching our new system, we’ll work to extend the reach of our products and deepen our broker partnerships. Expanding Writing larger, Offering complete More strategic geographically complex risks account solutions partnerships • Growing our • We are increasing • We will leverage • Refocusing business Commercial Lines our risks base and synergies between development efforts business in Ontario capitalizing on our Commercial on our committed, and Western market conditions Property, Trucking supportive brokers Canada by insuring and Surety lines • Minimum volume reasonable shares to write complete • Introducing our LHT commitments have of larger accounts accounts whenever product in Ontario been set for new possible and Alberta, initially and existing brokers through specialty • With new in-house trucking brokers expertise, we will begin to rely less on MGA relationships 11
Solid balance sheet Echelon’s balance sheet is solid, with no debt, consistently redundant reserves (an average of 8% from 2014-2017) and minimal level 3 assets. 231% * 298% * B++ $28M Echelon MCT ICPEI MCT A.M. Best Rating Excess capital (Stable) *Q3, 2018 12
Investment philosophy $286M * $138M * Policyholders’ Shareholders’ Pool Pool • Comprised of assets belonging economically • Compromised of residual investment assets to policyholders and claimants that are paid after Echelon’s fiduciary obligations when due • Follows an investment strategy that is more • Investment strategy is primarily capital aggressive than that of the PHP portfolio preservation, with appropriate volatility levels Allows for investments in high yield bonds, • and asset diversification lower rated preferred shares, equities and Primarily comprised of investment grade other asset classes • bonds and preferred shares with high credit ratings • The PHP assets closely match the duration of the offsetting policyholder liabilities to lower both mismatch risk and associated MCT * excludes holding company assets capital charge for interest rate margin Echelon utilizes a balance-sheet-based model for asset allocation of the consolidated investment portfolio 13
Conservative and diversified portfolio Preferred Fixed Share Income Portfolio Credit Credit Weighting Rating Rating 66% Fixed income 41% AAA 86% P2 16% Cash & Short-term deposits 19% AA 14% P3 10% Preferred shares 25% A 6% Pooled Funds 11% BBB 2% Common shares 4% BB or lower Average rating Average duration AA 2.8 14
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