10 YEARS OF OUTPERFORMANCE & THE NEXT DECADE€¦ · INVESTOR PRESENTATION 4.3 5.7 650 #5 6% #4 6%...

Intact Financial Corporation (TSX: IFC)

Updated: February 5, 2020

10 YEARS OF OUTPERFORMANCE

& THE NEXT DECADE

1

INVESTOR PRESENTATION

4.35.7 650

#56%

#46%

#39%

#210%

IFC17%

SCALE ADVANTAGE

Premium Growth Combined Ratio Return on Equity

AVERAGE ANNUAL TSR4

INDUSTRY OUTPERFORMANCE2

DIVIDEND AND NOIPS GROWTH

ptsbps1

1Industry data: IFC estimates based on MSA Research Inc. and proforma FY 2018 + GCNA acquisition. Please refer to Important notes on page 2 of the Q4-2019 MD&A for further information.

2 Figures based on FY 2009-FY 20183 Figures based on FY 2010-FY 20194 TSR = Total shareholder return, figures from 04/02/2009 to 31/12/2019

pts

PROVEN 10 YEAR TRACK RECORD

IFC is 17x the size of average

competitor

47%- TOP 5 -

MARKETSHARE

PROVEN INDUSTRY CONSOLIDATOR

2

Canada’s World Class P&C Insurer

+ 10% 10-yr NOIPS

CAGR2

+ 9% 10-yr dividend

CAGR3

MULTI-CHANNELDISTRIBUTION

TSX6010%

IFC19%


A decade of meeting our financial objectives

ORGANIC GROWTH MARGIN EXPANSIONSTRATEGIC CAPITAL

DEPLOYMENT

NO

IPS

Gro

wth

25%

NORTH

AMERICAN SPECIALTY

1

…

10% 36%

21%

…

PERSONAL AUTO

PERSONAL PROPERTY

COMMERCIAL

18%

15%

1 IFC total FY 2019 DPW including proforma The Guarantee Company of North America results (estimate based on Q3-2019 MSA Research Inc.)2 Industry data: IFC estimates based on MSA Research Inc. and proforma FY 2018 + GCNA acquisition. Please refer to Important notes on page 2 of the Q4-2019 MD&A for further information.3 2018 5-year average Combined Ratio vs. 2010 5-year average Combined Ratio, ex-Cat 410 year average (FY 2008 to FY 2018) based on MSA Research Inc. 5 Period from Jan 1/2010 to Sept 30/2019, estimated

3

RO

E

Ou

tpe

rfo

rma

nce

4.1 pts 5.2 pts 4.8 pts 5.2 pts

Personal Auto Personal Property Commercial P&C Commercial Auto

1465

bps+I N V E S T M E N TM A N A G E M E N TOUTPERFORMANCE

~2 ptsIFC

Combined Ratio

Improvement3

CLAIMS MANAGEMENT

$9.5B OF TOTAL CAPITAL

DEPLOYED SINCE 2009

PRICING & RISK SELECTIONINVESTMENT & CAPITAL

MANAGEMENT

2 0 1 9MARKET SHARE217%2 0 0 9

MARKET SHARE211%

19%+M&A INTERNALR A T E O F R E T U R N

Dividends Organic Growth

M&A* Buybacks

*Includes Manufacturing, Distribution and Ventures


3 out of 4 customers actively

engage with us digitally

Be a destination for top talent and

experts

Generate $6 billion in annual DPW Grow NOIPS 10% yearly over time

3 out of 4 customers are

our advocates

Our

customers

are our advocates

Our

people

are engaged

Our

Specialty

Solutions

business is a leader in

N.A.

Our

company

is one of the most

respected

Be a best employer

Achieve combined

ratio in the low 90sExceed industry ROE by 5 points

4

What we are aiming to achieve

INVESTOR PRESENTATION 5

Our Strategic Roadmap for the next decade

Deep Claims expertise & strong supply chain network

Become the best insurance AI shop in the world

Strong capital & investment management expertise

T R A N S F O R M O U R C O M P E T I T I V E A D V A N T A G E S

B U I L D A N O R T H A M E R I C A N

S P E C I A L T Y L E A D E R

Scale in

distribution

Leading

customer

experience

Low 90’s

combined

ratio

Further

consolidation

in Canada

Consolidate

fragmented

market

Digital

engagement

Optimize

distribution

S T R E N G T H E N O U R L E A D E R S H I P

P O S I T I O N I N C A N A D A

Be a best employerAnticipate the future of work & help employees adapt to AI & automation

I N V E S T I N O U R P E O P L E

Build on

strength in

sharing economy

Be a destination for top talent & experts

500bps

ROEOUTPERFORMANCE

ANNUAL

10%NOIPSGROWTH

O VER T I ME

ANNUALLY


500bps ROE Outperformance – An input to Strategy

INVESTMENT AND

CAPITAL DEPLOYMENT

PRICING & RISK

SELECTION

CLAIMS

MANAGEMENT300 bps300 bps

TRANSFORMING OUR COMPETITIVE ADVANTAGES

DISCIPLINED DEPLOYMENTOF CAPITAL GENERATED

CANADA DISTRIBUTION

NORTH AMERICA

SPECIALTY L INES

CANADA MANUFACTURING


DEEP CLAIMS

EXPERTISE

DIGITAL

ENGAGEMENT

DATA

ADVANTAGE

SCALE IN

DISTRIBUTION

CAPITALIZE ON CURRENT MARKET CONDITIONS

ORGANIC GROWTH MARGIN EXPANSION CAPITAL DEPLOYMENT

SHARE

BUYBACKS

MANAGE

LEVERAGE

INCREASE

DIVIDENDS

MANAGE

VOLATILITY

INVEST IN

GROWTH10% Organic Growth

Q4-2019

+6% Personal LinesRate increase

Q4-2019

+10% Can Com. LinesRate increase

Q4-2019

10% NOIPS Growth annually over time


50%

60%

70%

80%

90% IFC Engagement 2019

Can insurance sector

US insurance sector

Maintaining our people advantage

Depth of talent with average of 8 successors

for each senior leadership role.

8

LEADING ON ENGAGEMENT DRIVERS

Be a best

employer

Future proof

our people

to succeed

Be a

destination

for top talent

IFC EMPLOYEE ENGAGEMENT

PEOPLE IN MANAGEMENT ROLES

65%

69%68%

72%

74%76% 75%

74%

79%

69%

62%

2010 2012 2013 2014 2015 2016 2017 2018 2019

US Insurance

Sector

Canada Insurance

Sector

IFC a Canada

Best Employer

8

54% 46%


Climate Change Adaptation

We Restore We Manage RiskWe Protect

• Climate change is

integrated into our strategy

• Transforming our products

to account for new climate

realities

• Being a destination for top

talent enables us to have in-

house meteorological

expertise to translate

weather and climate data

• Actively invested in applied

research at the Intact

Centre on Climate

Adaptation (“Intact Centre”)

at the University of Waterloo

Climate change is integrated into our strategic approach and it enables us to

protect what matters, restore customers and manage climate risks effectively.

• Designated catastrophe

response teams across the

country to deal efficiently

with catastrophic events

• 4,000 claims professionals

solely dedicated to helping

customers get back on track

• Investing in our supply

chain to avoid capacity

shortages in the event of a

catastrophe

• Acquired On Side, the

largest restoration operation

in Canada, to enhance

customer experience and

have capacity control

• Segmentation enables us

to understand our risks

• Continue to evolve our

pricing to reflect the scope

of risks related to climate

change

• Reinsure certain risks to

limit our losses in the event

of significant losses

• Risk Management

Committee monitors

occurrence and severity of

natural disasters

• Evaluate strategic fit of

potential acquisitions

given climate exposure

We joined the TCFD pilot to

develop climate-related

disclosure framework for

insurance industry

We invested $2.3 million in

16 Canadian charities that

are protecting Canadians from

the impacts of climate change

We signed The Principles for

Sustainable Insurance

global framework for insurers

to address ESG risks

We Advocate for classifying

natural infrastructure as

critical infrastructure with the

Prime Minster & various levels

of government


P&C industry 12-month outlook1

Overall the Canadian industry’s ROE is expected to improve but remain below its long-term average of 10% over the next 12 months

1 Refer to Section 10 – Outlook of the Q4-2019 MD&A

0% 5% 10%

Premium Growth

Upper Single

Digit

Personal

Auto

The market is hard with rate actions

continuing, tightening of capacity and

increasing residual market volumes

Mid-to-Upper

Single Digit

Personal

Property

Challenging weather over time

continues to support hard market

conditions

Double

Digit

Commercial

Lines

Estimated Industry combined ratios

were above 100% in the first nine

months of 2019. Market conditions

remain hard

Upper Single

Digit

P&C

Canada

Market conditions are hard as

weak industry profitability in all

lines of business continues to put

upward pressure on rates

Mid-to-Upper

Single Digit

US

Commercial

Lines

Hardening market conditions,

including ongoing upward pricing

trends, have resulted in continued

growth momentum throughout 2019


Key Takeaways

Sustainable competitive edge

driven by strong fundamentals, scale

and discipline

Solid financial position and proven

track record of consolidation

Deep, diverse, engaged, loyal

talent pool

Customer driven with diversified offers

to meet changing needs

APPENDICES


Substantial runway in fragmented markets where M&A

can play a role

1 MSA 2018 excluding Lloyds, government owned corporations, mortgage insurance2 proforma FY 2018 + GCNA acquisition3 SNL 2018 including commercial & specialty lines

BrokerLink

• Continue to build scale in distribution

• Be the ‘got to’ solution for brokers looking

for economic exit form their business

Broker Financial Solutions (BFS)

• Continue to support brokers financially,

providing innovative solutions for their

varied needs

New MGA platform

vironment conducive to acquisitions

• IFC outperforms the industry

• Scale drives sustainability

• Demutualization = opportunities

Top 5 P&C = 47% of market

Environment Conducive

to Acquisitions

~C$53B1

TOP 20 = 84% OF P&C MARKET2

Many avenues to pursue specialty lines

growth

~US$130B3

INTERMEDIARIESMGU, MGA, Wholesaler

RETAIL DISTRIBUTION

MANUFACTURINGOneBeacon Today +

+

89123 134

158175

209250

2014 2015 2016 2017 2018 2019 2020P

Distribution EBITA & Other - $M

+20%

+20%

CANADA DISTRIBUTIONCANADA MANUFACTURINGNORTH AMERICA

SPECIALTY LINES


Successful M&A has become a core competency

Synergies

Achieved

$200M

+

Employees

Onboarded

6,700

DWP

Added

$5B

Average

IRR

19%

$200M+REVENUES

2019

$2.0BDPW

2011

$350MDPW

2012

$143MDPW

2015

US$1.2BDPW

2017

$99MDPW

2016

INNOVASSUR ASSURANCES GÉNÉRALES

$27MDPW

2014

$568MDPW

2019


A.M. BEST DBRS MOODY’S FITCH

Financial strength ratings of IFC’s principal Canadian P&C insurance

subsidiaries

A+ AA (low) A1 AA-

Senior unsecured debt ratings of IFC a- A Baa1 A-

Financial strength ratings of OneBeacon U.S. regulated entities A+ - A2 AA-

in total capital

margin

debt-to-total

capital ratio

1 As of December 31, 2019.2 Refer to Section 27 – Sensitivity analyses of the Q4-2019 MD&A for additional commentary and break outs. Data as of December 31, 2019.3 Refer to Section 19.2 – Credit ratings of the Q4-2019 MD&A for additional commentary.

LOW BVPS SENSITIVITY TO CAPITAL MARKETS VOLATILITY2

per 100 bps

increase in

interest rates

per 5% decrease

in preferred share

prices

per 10% decrease

in common share

prices

21.3%

CREDIT RATINGS3

OUR BALANCE SHEET IS STRONG1

($0.60) ($1.66) ($0.37)$1.2B

15

Strong financial position


CAPITAL STRUCTURE

YEARLY COMMON SHARE DIVIDENDS (PER SHARE)

$0.6

5

$1.0

0

$1.0

8

$1.2

4

$1.2

8

$1.3

6

$1.4

8

$1.6

0

$1.7

6

$1.9

2

$2.1

2

$2.3

2

$2.5

6

$2.8

0

$3.0

4

$3.3

2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

18.7% 17.3% 16.6% 18.6% 23.1% 22.0% 21.3% 20.0%

8.0% 7.4% 7.1% 6.5%8.1% 10.3% 9.3% 10.0%

73.2% 75.3% 76.2% 74.8% 68.8% 67.7% 69.5% 70.0%

2013 2014 2015 2016 2017 2018 2019 Target

Debt-to-total capital ratio Preferred shares-to-total capital ratio Equity-to-total capital ratio

* Annualized quarterly dividend declared

CAPITAL

DEPLOYMENT

16

Proven and consistent capital management strategy

SHARE

BUYBACKS

MANAGE

LEVERAGE

INCREASE

DIVIDENDS

MANAGE

VOLATILITY

INVEST

IN GROWTH


Personal Auto37%

Personal Property

24%

Commercial P&C and

other31%

Commercial Auto8%

A ~$53 billion market representing approximately 3% of GDP

Industry DPW by line of business

Industry premiums by province

• Fragmented market:

– Top five represent 47%, versus bank/lifeco markets which are closer to 65-75%

– IFC is largest player with approximately 17% market share, versus largest bank/lifeco with 22-25% market share

– P&C insurance shares the same regulator as the banks and lifecos

• Home and commercial insurance rates unregulated; personal auto rates regulated in many provinces.

• Capital is regulated nationally by OSFI* and by provincial authorities in the case of provincial insurance companies.

• Distribution in the industry is currently close to two thirds through brokers and 40% through direct writers.

• Industry has grown at ~5% CAGR and delivered ROE of ~10% over the last 30 years.

Industry data: IFC estimates based on MSA Research Inc. and Insurance Bureau of Canada. Please refer to Important notes on page 2 of the Q4-2019 MD&A for further information.

All data as at December 31, 2018.

* OSFI = Office of the Superintendent of Financial Institutions Canada

Ontario46%

Quebec18%

Alberta17%

Other provinces

and territories19%

17

P&C insurance in Canada


IFC’s competitive advantages

• Scale advantage

• Sophisticated pricing and underwriting discipline

• In-house claims expertise

• Broker relationships & multi-channel distribution

• Tailored internal investment management

1 Industry data: IFC estimates based on S&P Global Market Intelligence and MSA Research excluding Lloyd’s, ICBC, SGI, SAF, MPI, Genworth and IFC. All data as at Dec 31, 2018. 2 ROEs reflect IFRS beginning in 2010. Since 2011, IFC's ROE is adjusted return on common shareholders' equity (AROE).

Return on equity

CAD Industry1

10-year avg.

= 6.7%

10-year avg.

= 13.2%2

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

US Industry1

10-year avg.

= 7.2%

Combined ratio

CAD Industry1

10-year avg.

= 99.7%

10-year avg.

= 95.4%

90%

95%

100%

105%

110%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

US Industry1

10-year avg.

= 101.0%

90

110

130

150

170

190

210

230

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Direct premiums written growth

10-yr CAGR

= 7.6%

CAD Industry1

10-yr CAGR

= 4.2%

(Base 100 = 2008)

US Industry1

10-yr CAGR

= 3.1%

18

P&C industry 10-year performance versus IFC


• DPW growth accelerated to a strong 15%, in the quarter driven by

average rate increases of across all regions, continued unit growth

and change in mix.

• DPW growth was up 8% for the full year driven by rate increases. Our

competitive position is improving and driving unit momentum, as the

industry continues to raise rates.

• Given the usual Q4 seasonality impact, the combined ratio was strong

at 96.5%.

• PYD was in line with expectations.

(in C$ millions, except as otherwise noted) Q4-2019 Q4-2018 Change

DPW 941 818 15%

Written insured risks (in thousands) 886 866 2%

NEP 1,007 934 8%

Underwriting income (loss) 35 26 35%

Claims ratio 73.8% 74.7% (0.9) pts

Expense ratio 22.7% 22.6% 0.1 pts

Combined ratio 96.5% 97.3% (0.8) pts

Personal auto commentary:

• DPW growth was strong at 9% in the quarter and 7% for the full year,

driven by rate increases and continued unit growth.

• Combined ratio was strong at 82.0% after absorbing 8.5 points of

CAT losses, mainly due to the late October storm in Central Canada

• Underlying current year loss ratio improved by 3.6 points to a solid

43.5% mainly due to the impact of higher earned rates and lower non-

CAT weather-related losses.

Personal property commentary:(in C$ millions, except as otherwise noted) Q4-2019 Q4-2018 Change

DPW 566 517 9%

Written insured risks (in thousands) 562 547 3%

NEP 566 534 6%

Underwriting income 102 115 (11)%

Claims ratio 50.2% 46.3% 3.9 pts

Expense ratio 31.8% 32.2% (0.4) pts

Combined ratio 82.0% 78.5% 3.5 pts

19

Q4-19 Personal Lines Performance


• Strong DPW growth of 12% in the quarter and 12% for the full year,

with contributions from all lines, led by continued rate increases. In

Q4-2019, commercial auto premiums were tempered by profitability

measures and slower growth from the sharing economy.

• Combined ratio deteriorated to 93.5%, mainly due to lower level of

favourable PYD as improved underlying performance was offset by

higher CAT losses.

• CAT loss ratio of 7.5% was above expectations, with roughly two third

of losses non-weather related.

• DPW growth of 5% in the quarter and 8% for the full year on a constant

currency basis was driven by rate increases and strong growth in

profitable lines. Market conditions are favourable and continue to

improve.

• Combined ratio of 88.8% reflected the seasonality of our operations

and improved 7.9 pts driven by our profitability actions, including

improved business mix.

• CAT loss ratio of 1.0% was lower than last year’s elevated level, which

reflected the impact of Hurricane Michael and large commercial fires.


DPW 821 732 12%

Commercial P&C 574 502 14%

Commercial auto 247 230 7%

NEP 729 661 10%

Underwriting income (loss) 47 55 (15%)

Claims ratio 61.8% 58.7% 3.1 pts

Expense ratio 31.7% 32.9% (1.2) pts

Combined ratio 93.5% 91.6% 1.9 pts

Commercial lines commentary:

P&C United States1commentary:

1 P&C U.S. excludes the results of exited lines


DPW 342 325 5%

NEP 389 379 3%

Underwriting income 44 13 31

Claims ratio 52.8% 63.0% (10.2) pts

Expense ratio 36.0% 33.7% 2.3 pts

Combined ratio 88.8% 96.9% (8.1) pts

20

Q4-19 Commercial Lines Performance


P277%

P323%

AAA41%

AA30%

A19%

BBB8%

Fixed-income securities credit quality

Preferred shares credit quality

BB and lower (including not rated)

2%

• $18.6 billion in invested assets

• 90% of fixed-income securities are rated ‘A-’ or better.

• The weighted-average rating of our preferred share portfolio is ‘P2’

• We seek to optimize the composition of our investment portfolio, taking into account factors including risk, return, capital, regulation and tax legislation changes.

• Our in-house investment management team seeks to maximize after-tax returns while preserving capital and limiting volatility.

Fixed-income70%

Common equity14%

Preferred shares

8%

Cash and short-term notes

6%

Loans2%

All data as at December 31, 2019. 21

Strategically Management High quality investment portfolio

Investment mix by asset class

(net exposure)


• PYD can fluctuate from quarter to quarter and year to year and, therefore, should be evaluated over longer periods of time.

• We expect average favourablePYD as a percentage of opening reserves to be in the 1-3% range over the long-term.

• In the near-term, we expect to be at the lower end of the range.

• Our consistent track record of positive reserve development reflects our preference to take a conservative approach to establishing and managing claims reserves.

Annualized rate of favourable PYD – P&C Canada(as a % of opening reserves)

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

15-yr avg. 10-yr avg. 5-yr avg. 2018 2019

Please see Section 18 – Claims liabilities and reinsurance of the Q4-2019 MD&A for details 22

Track record of prudent reserving practices

INVESTOR PRESENTATION* All references to “total capital margin” include the aggregate of capital in excess of company action levels in regulated entities (170% MCT, 200% RBC) plus available cash in unregulated entities (see

Section 19.4 - Capital position of the Q4-2019 MD&A for details). Dollar figures in C$millions

Total capital margin is maintained to ensure a very low probability of breaching company

action levels

$859 $809

$435

$599 $550$681 $625

$970

$1,135

$1,333$1,222

232% 233%

197%205% 203%

209%203%

218%

205%201% 198%

80%0

200

400

600

800

1000

1200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total capital margin MCT (Canada)

23

Strong capital base


(in millions of Canadian dollars, except as otherwise noted) 2019 2018 2017 2016 2015 2014Annual Annual Annual Annual Annual Annual

Financial results

Direct premiums written 11,049 10,090 8,730 8,277 7,901 7,441

Net earned premiums 10,211 9,715 8,530 7,946 7,535 7,207

Underwriting income 465 474 486 375 628 519

Net investment income 576 541 448 429 439 438

Distribution EBITA & Other 209 175 158 134 123 89

Net operating income (NOI) 905 839 771 660 860 767

Net income attributable to shareholders 754 707 792 541 706 782

Underwriting results

Claims ratio 66.0% 65.3% 65.4% 64.9% 61.3% 62.6%

Expense ratio 29.4% 29.8% 28.9% 30.4% 30.4% 30.2%

Combined ratio 95.4% 95.1% 94.3% 95.3% 91.7% 92.8%

Per share (basic and diluted) (in $)

Net operating income per share (NOIPS) 6.16 5.74 5.60 4.88 6.38 5.67

Adjusted EPS (AEPS) 5.75 5.70 5.82 4.53 5.54 6.01

Earnings per share to common shareholder (EPS) 5.08 4.79 5.75 3.97 5.20 5.79

Return on equity (for the last 12 months)

Operating ROE (OROE) 12.5% 12.1% 12.9% 12.0% 16.6% 16.3%

Adjusted ROE (AROE) 11.4% 11.8% 13.0% 11.0% 14.3% 16.8%

Return on equity (ROE) 10.0% 9.9% 12.8% 9.6% 13.4% 16.1%

Financial position

Total investments 18,608 16,897 16,774 14,386 13,504 13,440

Debt outstanding 2,362 2,209 2,241 1,393 1,143 1,143

Common shares 3,265 2,816 2,816 2,082 2,090 2,090

Total capital margin 1,222 1,333 1,135 970 625 681

Book value per share (in $) 53.97 48.73 48.00 42.72 39.83 37.75

24

Historical financials


Media Inquiries

Hazel Tan

Manager, External Communications

1 (416) 341-1464 ext. 48073

[email protected]

General Inquiries

Intact Financial Corporation

700 University Avenue

Toronto, ON M5G 0A1

1 (416) 341-1464

1-877-341-1464 (toll-free in N.A.)

[email protected]

Investor Inquiries

[email protected]

1 (416) 941-5336

1-866-778-0774 (toll-free in N.A.)

Ken Anderson

SVP Investor Relations & Corporate Development

1 (855) 646-8228 ext. 87383

[email protected]

Ryan Penton

Director, Investor Relations

1 (416) 341-1464 ext. 45112

[email protected]

25

Contact us


Forward-looking statements

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-looking statements. The words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely”, “potential” or the negative or other variations of these words or other

similar or comparable words or phrases, are intended to identify forward-looking statements. Unless otherwise indicated, all forward-looking statements in this Presentation are made as at December 31, 2019, and are subject to change after that date.

This Presentation contains forward-looking statements with respect to the acquisition (the “Acquisition”) of The Guarantee and Frank Cowan Company Limited.

Forward-looking statements are based on estimates and assumptions made by management based on management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that

management believes are appropriate in the circumstances. Many factors could cause the Company’s actual results, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-

looking statements, including, without limitation, the following factors:

• expected competition and regulatory processes and outcomes in

connection with the Acquisition;

• the Company’s ability to implement its strategy or operate its business as

management currently expects;

• its ability to accurately assess the risks associated with the insurance

policies that the Company writes;

• unfavourable capital market developments or other factors which may

affect the Company’s investments, floating rate securities and funding

obligations under its pension plans;

• the cyclical nature of the P&C insurance industry;

• management’s ability to accurately predict future claims frequency and

severity, including in the personal auto line of business;

• government regulations designed to protect policyholders and creditors

rather than investors;

• litigation and regulatory actions;

• periodic negative publicity regarding the insurance industry;

• intense competition;

• the Company’s reliance on brokers and third parties to sell its products to

clients and provide services to the Company;

• the Company’s ability to successfully pursue its acquisition strategy;

• the Company’s ability to execute its business strategy;

• the Company’s ability to achieve synergies arising from successful

integration plans relating to acquisitions;

• the terms and conditions of the Acquisitions;

• the Company’s expectations in relation to synergies, future economic and

business conditions and other factors in relation to the Acquisition and

resulting impact on growth and accretion in various financial metrics;

• various other actions to be taken or requirements to be met in connection

with the Acquisition and integration post-closing of the Acquisition;

• the Company’s profitability following the acquisition of OneBeacon

Insurance Group, Ltd. (“OB Acquisition”);

• the Company’s ability to improve its Combined Ratio in the United States

in relation to the OB Acquisition and the Acquisition;

• the Company’s ability to retain business and key employees in the United

States in relation to the OB Acquisition and the Acquisition;

• undisclosed liabilities in relation to the OB Acquisition and the Acquisition;

• the Company’s participation in the Facility Association (a mandatory

pooling arrangement among all industry participants) and similar

mandated risk-sharing pools;

• terrorist attacks and ensuing events;

• the occurrence and frequency of catastrophe events, including a major

earthquake;

• catastrophe losses caused by severe weather and other weather-related

losses, as well as the impact of climate change;

• the Company’s ability to maintain its financial strength and issuer credit

ratings;

• the Company’s access to debt and equity financing;

• the Company's ability to compete for large commercial business;

• the Company’s ability to alleviate risk through reinsurance;

• the Company’s ability to successfully manage credit risk (including credit

risk related to the financial health of reinsurers);

• the Company’s ability to contain fraud and/or abuse;

• the Company’s reliance on information technology and

telecommunications systems and potential failure of or disruption to those

systems, including in the context of evolving cybersecurity risk;

• the impact of developments in technology and use of data on the

Company’s products and distribution;

• the Company’s dependence on and ability to retain key employees;

• changes in laws or regulations;

• general economic, financial and political conditions;

• the Company’s dependence on the results of operations of its subsidiaries

and the ability of the Company’s subsidiaries to pay dividends;

• the volatility of the stock market and other factors affecting the trading

prices of the Company’s securities;

• the Company’s ability to hedge exposures to fluctuations in foreign

exchange rates;

• future sales of a substantial number of its common shares; and

• changes in applicable tax laws, tax treaties or tax regulations or the

interpretation or enforcement thereof.

All of the forward-looking statements included in this Presentation, the Q4-2019 MD&A and the quarterly earnings press release dated February 4, 2020 are qualified by these cautionary statements and those made in the section entitled Risk

management (Sections 22-27) of our MD&A for the year ended December 31, 2019. These factors are not intended to represent a complete list of the factors that could affect the Company. These factors should, however, be considered carefully.

Although the forward-looking statements are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. When relying on

forward-looking statements to make decisions, investors should ensure the preceding information is carefully considered. Undue reliance should not be placed on forward-looking statements made herein. The Company and management have no

intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Disclaimer

Important notes:

➢ Effective in Q1-2019, we improved the way we report the performance of our distribution channel and investment/other expenses, to better align our reporting with how management views the results of our business. We have reclassified comparative figures in order to ensure comparability and consistency with this new presentation. For further details, see Section 29 - Presentation changes of the Q4-2019 MD&A.

➢ Unless otherwise noted, DPW refer to DPW normalized for the effect of multi-year policies, excluding industry pools, fronting and exited lines (referred to as “DPW” in this Presentation). See Section 30 for details on exited lines and Table 29 for the reconciliation to DPW of the Q4-2019 MD&A, as reported under IFRS. All underwriting results and related ratios exclude the MYA and the results of our U.S. Commercial exited lines, unless otherwise noted. The expense and general expense ratios are presented herein net of other underwriting revenues.

➢ When relevant, we present measures on a proforma basis. 2019 DPW (proforma) include the 2019 annual premiums of The Guarantee Company of North America (“The Guarantee”) to better reflect our premiums level going forward. Combined ratio (proforma) for the U.S. exclude the impact of the Healthcare business in both years to enhance the analysis of trends (see Section 7.2 – P&C U.S.) market share reflects the impact of announced or completed acquisitions and are therefore presented on a proforma basis.

➢ When relevant, we present changes in constant currency, which exclude the impact of fluctuations in foreign exchange rates from one period to the other, to enhance the analysis of our results with comparative periods. See Section 31 – Non-IFRS financial measures of the Q4-2019 MD&A.

➢ Regulatory Capital Ratios refer to MCT (as defined by OSFI and the AMF in Canada) and RBC (as defined by the NAIC in the U.S.). All references to “total capital margin” in this Presentation include the aggregate of capital in excess of company action levels in regulated entities (170% MCT, 200% RBC and other CALs in other jurisdictions) plus available cash in unregulated entities.

➢ Unless otherwise noted, market share and market related data for P&C Canada are based on the latest available annual market data (2018) from MSA Research Inc. (“MSA”) and excludes LIoyd’s Underwriters Canada, Insurance Corporation of British Columbia, Saskatchewan Government Insurance, Saskatchewan Auto Fund, Genworth Financial Mortgage Insurance Company Canada and Canada Guaranty Mortgage Insurance Company. MSA data excludes certain Québec regulated entities.

➢ Certain totals, subtotals and percentages may not agree due to rounding. Not meaningful (nm) is used to indicate that the current and prior year figures are not comparable, not meaningful, or if the percentage change exceeds 1,000%.

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 inducement to enter into, any contract or commitment whatsoever.

The information contained in this Presentation concerning the Company does not purport to be all-inclusive or to contain all the information that a prospective purchaser or investor may desire to have in

evaluating whether or not to make an investment in the Company. The information is qualified entirely by reference to the Company’s publicly disclosed information.

No representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its the directors, officers or employees as to the accuracy, completeness or fairness of the

information or opinions contained in this Presentation and no responsibility or liability is accepted by any person for such information or opinions. In furnishing this Presentation, the Company does not undertake

or agree to any obligation to provide the attendees with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation that may become

apparent. The information and opinions contained in this Presentation are provided as at the date of this Presentation. The contents of this Presentation are not to be construed as legal, financial or tax advice.

Each prospective purchaser should contact his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice.

The Company uses both International Financial Reporting Standards (“IFRS”) and certain non-IFRS measures to assess performance. Non-IFRS measures do not have any standardized meaning prescribed by

IFRS and may not be comparable to any similar measures presented by other companies. Management analyzes performance based on underwriting ratios such as combined, expense, loss and claims ratios,

MCT, RBC and debt-to-total capital, as well as other non-IFRS financial measures, namely DPW, change or growth in constant currency, Underlying current year loss ratio, Underwriting income (loss),

Underwriting expenses, NEP, NOI, NOIPS, OROE, ROE, AROE, Non-operating results, Net distribution income, Adjusted net income, AEPS, Total net claims, and Total capital margin. These measures and

other insurance related terms are defined in the Company’s glossary available on the Intact Financial Corporation website at www.intactfc.com in the “Investors” section. Additional information about the

Company, including the Annual Information Form, may be found online on SEDAR at www.sedar.com.

10 YEARS OF OUTPERFORMANCE & THE NEXT DECADE€¦ · INVESTOR PRESENTATION 4.3 5.7 650 #5 6% #4 6%...

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