Intact Financial Corp Fireside Chat Hosted by RBC Capital Markets Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : First off, I wanted to start off on CAT losses. It's been something at least here for us in Canada. It looks like it's shaping up to be another active year in terms of CAT losses at least so far. But there is obviously other lingering factors that have been kind of keeping claims costs under pressure like auto part supply chain delays and whatnot. But my question here is, do you think that we could see hard market conditions on pricing over the near term across your various business segments? And at least maybe in Canada, do you think the industry has evolved through in part consolidation where pricing in the industry is maybe more rational today than what it would have been, let's say, a decade ago.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : I wanted to follow up just in terms of where, I guess, a little over a month into Q3, we've already seen what seem like a number of CAT loss events, whether or not it's the floods in Nova Scotia, continued kind of wildfire activity across Canada. And then more recently, there was the hailstorm in Ottawa, I think as most people know, Q3 from a seasonality standpoint, tends to also be one of your high CAT loss quarters. But just wondering any color you have some are in terms of -- obviously, there's still going at a couple of months ago, but how has Q3 shaped up so far from a CAT loss versus your expectations?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : And then I just want to ask one last question on this topic before moving over to auto. Currently, your CAT loss guidance on an annual basis is $700 million per year. And are you still kind of comfortable with that guidance? Or are there trends that you're seeing that could see a change in that sometime in the near term? I think Louis was saying on the conference call earlier this week is it's kind of an annual exercise in terms of how you look at the annual CAT loss guidance?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect. I like I said, I want to switch over to next just talking about everyone's talking thing these days is personal auto and I wanted to start in with Alberta, right? In terms of the rate freeze that they've got, which seems to be through the end of this year. I just wanted to get, I guess, an understanding of how Intact has kind of their level of activity in Alberta that you're doing today. So maybe looking at it from a number of auto policy standpoint, how much are you doing in Alberta today? And would that number look like before they put in the rate freeze would have been much difference?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : And I think there was some news out of Alberta, where it looks like they're maybe looking to add some sort of reforms on the insurance, whether the product or on the claims side. Just wondering if you're able to kind of talk about your understanding of what they may be looking to try to accomplish...

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Okay. I wanted to just switch over to auto theft. It's something that seems to come up in the news more often than it has used to in the past. +quitT Association, they estimate that auto theft in Canada is, I think, over $1 billion a year now. Just was wondering from -- when you look at the accident year finance amounts, approximate how much of that would come from auto theft? And how has that moved materially from what you would consider kind of normal market conditions? Because it does seem like it's come up in the past couple of years in particular. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 04, 2023 / 2:00PM, RY.TO - Intact Financial Corp Fireside Chat Hosted by RBC Capital Markets

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Maybe to expand on that because I think when you're talking about some of the tracking stuff, is the relationship you have with Key tracking, there may be other ways that you might have there. And I mean to the success rate you've had so far, is that something that you feel like you could push further into your customer base kind of across Canada? Or are there other limitations that can kind of like a limit the ability to have that across your auto pipe base?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : I want to talk about on the claims inflation side because if I remember correctly from the conference call, I think you were saying it's up about 8% year-over-year. I think it was 9% last quarter and the peak was 12%. I was wondering if you're able to dissect that a little bit mine. Again, I know you talked about late on the conference call, but just a reminder for people maybe that either haven't listened or if there's other data that you can provide. I mean what are the parts that you're still seeing as on a relative basis, problematic, what are the areas that you're seeing kind of more normalized inflation in one of the areas that maybe you're seeing reduced costs on the claims front.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Right. You do a lot of your claims through your own network of preferred auto body shops. You have your own service centers and whatnot to help manage the claims experience for your clients. Can you talk about, I guess, what percentage of the auto claims are going through that kind of preferred network? Is there a target that you'd like to get to? Obviously, there's going to be certain geographies that may be less practical to be able to do it. I'm just wondering if you can talk about that. And then the other part I was going to ask on that question is, I mean, you've heard integrated on the property side with on site. Is there any merit to doing something similar on the auto side.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Got it. I wanted to just talk on the sub-95% combined ratio that you've talked about targeting in the auto business. When I think back to your Q1 earnings call, I mean, you sounded relatively confident that over the next 12 months or whatever it is that you feel like you can do it. And listening to you on the Q2 call, it sounded to me at least that confidence or that conviction was even higher than what it was in Q1. Just wondering if that is a fair statement. And do you feel like we've kind of seen maybe the peak, I'm not going to hold you to it necessarily, but do you feel like from an excellent year claims ratio that we might have hit the peak.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Maybe one last question before I switch over to personal property. And just on the rate side, Intact generally tends to move early when you see signs of claims inflation or pressure on the claims side. We've seen various competitors that have been putting through are getting approved, meaningful rate increases. Just how do you think you are positioned today relative to your peers? Do you think they have to kind of catch up on rates and therefore, when we kind of think about policies in force growth and how that might trend over the next year?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Got it. I want to switch over to the personal property. I only had a couple of questions, and I think you actually answered lot of them earlier just on the rate side, just given what the cat losses we've had that, I guess, people can expect pretty meaningful rate increases over the next year. I want to switch it over then is on the claims inflation side. I think you talked about on the call, there's still some pressure there, whether or not it's labor issues. I think it's specifically you're talking about. There's other areas within the supply chain. But just wondering if you could can talk about where we are today on claims inflation, what are the areas that are maybe still store points and where are areas that you're kind of seeing some relief.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : I wanted to switch over now just on the commercial lines part of your business. You've been integrating your global commercial special lines business. If we use the baseball analogy, kind of what inning are you in terms of integrating the global platform? And what inning would you say you are in terms of optimizing the cross-border business opportunities to grow claimings written? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 04, 2023 / 2:00PM, RY.TO - Intact Financial Corp Fireside Chat Hosted by RBC Capital Markets

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Yes. That is correct. Last time I check it was 9.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : If we happen to have a recession, are there certain business lines within the commercial portfolio that maybe investors should keep a closer eye on or one that they shift would kind of be wondering about in that type of environment? And are there certain business lines that maybe tend to do better in that sort of environment?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : I want to pass next is on claims inflation. We normally talk about claims inflation in the auto business and the property business. Are the things that we kind of be thinking about on the commercial side, whether or not things that have been more favorable or less favorable.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Last question I had is on the commercial side. It's just on the M&A. Obviously, you bought OneBeacon many years ago. You've done, I think, a couple of bolt-on or a few bolt-on type deals. Just wanted to get a sense in terms of what does the environment look like today? And also your appetite for M&A, both on the manufacturing side as well as on the distribution.

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : I wanted to switch over next on reinsurance. Obviously, we saw rates went up a lot for this year. And then I talk about Intact specifically, but it does kind of seem like within the industry. One of the ways that insurers have kind of coped with the higher rate increases has been to like reduce coverages, increase retention, those sorts of things. How should investors and your shareholders kind of thinking about the impact of these elevated reinsurance costs? In other words, like can these cost increases be effectively passed on to customers? Or is there some higher risk that may have to be retained or absorbed by the insurers?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : I know we're starting to get close to time, and I know we've got a couple of questions that have come in from listeners. Maybe we can go to those and to be so if we have some time I can ask you maybe another couple of questions that I had. So the first question that came in was, do you think it's going to be more difficult to price risk, especially with the impact of climate change going forward? Can you really rely on historical data sets -- the historical data set to guide future patterns?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : The second question that came in was they thought that the expenses in Q2 were maybe a bit elevated. Is this higher level what we should continue to expect given the continued tech investments? When do you expect the investments to result in better earnings growth?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Got it. I wanted to go back and maybe ask a question or so on the UK&I business. On the personal property side, I think you guys have talked about exporting the Canadian playbook, so to speak, to optimize the results in the U.K. Can you kind of talk about what you've done so far? What are the things that still kind of remain in your to-do list?

Question: Geoffrey Kwan - RBC Capital Markets, Research Division - Analyst : Perfect and perfect timing that does take us to an hour. I want to let you get on to your vacation now. So Charles, I wanted to thank you so much for joining us today and for the listeners that connected. Thank you for taking time of new schedules to listen to us today. And that does end this session. And so you now may disconnect. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 04, 2023 / 2:00PM, RY.TO - Intact Financial Corp Fireside Chat Hosted by RBC Capital Markets