Intact Financial Corp Fireside Chat with CIBC Capital Markets (Virtual) Transcript

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

Question: Paul Holden - CIBC Capital Markets - Analyst : For sure, and we'll dive into that. I'm going to start on a topic that I don't view as particularly impactful for Intact itself, but it is the key talking point in the market, which of course is US tariff risk. I think you gave us some very interesting data points on the conference call last week, but maybe you want to reiterate those data points in terms of why it's not that impactful for Intact for maybe anyone that missed the call last week. But really what caught my attention, which I think is interesting, is despite the fact that it's not that impactful for Intact, you're still thinking long term planning around this to reduce your dependence on imports across the border. So again, managing risk, right, thinking long term strategically and so maybe you can talk a little bit about that as well.

Question: Paul Holden - CIBC Capital Markets - Analyst : So I want to go back to sort of I guess your lead and in terms of a good environment or good conditions for Intact to be growing, and maybe you can start on that sort of theme in terms of personal auto, right? It seems like to me you're a little bit of a sweet spot in the cycle where rates are hard, competitors are trying to catch up to rate actions you've previously taken, claims inflation has cooled, so what should we expect from Intact in terms of market share gains in the personal auto space? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, CM.TO - Intact Financial Corp Fireside Chat with CIBC Capital Markets (Virtual)

Question: Paul Holden - CIBC Capital Markets - Analyst : Okay. You made a reference last week during our conference call to Intact success in the affinity channel. It's, I know it's an important channel. That's why obviously I don't talk about that often when it comes to Intact and maybe I should talk about it more. So I want to ask you about sort of the success Intact is having in the affinity channel and what the go for growth opportunity might look like there.

Question: Paul Holden - CIBC Capital Markets - Analyst : Okay. So if I think about the numbers you just gave, 10 billion of personal, 1 billion of which is affinity. How does that proportion roughly look for Intact? I'm assuming the history; you're probably a little bit underweight affinity relative to the industry. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, CM.TO - Intact Financial Corp Fireside Chat with CIBC Capital Markets (Virtual)

Question: Paul Holden - CIBC Capital Markets - Analyst : You talked about the acceleration and growth in the direct channel. I'm not surprised that -- hear that given, well, every day I take the Go train and every day, everyone's head down on their phone, right? So more mobile shopping for sure. And then I think as you said, more price shopping, which I think makes sense in the context of a hard rate environment. How do I think about like the financial impact as an analyst? Like how do I think about the financial impact of accelerated growth in direct channel to impact? Is it margin equivalent to what you're getting through the broker channel? Does it maybe in some of the underlying pieces it looks a little bit different where obviously you don't have the commission ratio? But maybe you can walk us through how you're thinking about that? Like can this actually be beneficial to margins over time or not?

Question: Paul Holden - CIBC Capital Markets - Analyst : I feel like given past calls, we've almost kind of beaten the topic of CAT losses to death, but it's still something that people ask me all the time. And I'm going to take -- maybe I'll take a little bit of a different approach to it because we can look to the US examples where you've seen, like I'd call it sad stories of people in Florida and LA lose their homes to these big weather events, right, with the fires, hurricanes. And they're underinsured, or maybe not even insured at all, right? It becomes a little bit of a societal problem. But it's one that I would say is relevant for Intact. So I guess the question I want to ask is how do you think about getting rate adequacy within personal property, but at the same time, balancing that against customer affordability and making sure Canadians still can afford the coverage they need?

Question: Paul Holden - CIBC Capital Markets - Analyst : Continuing on the same topic. So in Intact has increased its risk retention in Canada over a number of years, but increased it again going into 2025, right, from $250 million to $350 million. You talked a little bit about this on, again, on last week's call, but I think it's worth sort of reiterating sort of the reasons why this is expected to be earnings neutral, right? So you're retaining more risk, but clearly, there's some offsets, price being, I think probably the most obvious ones, but what are the other factors that come into play here in terms of why more risk retention is expected to be earnings neutral?

Question: Paul Holden - CIBC Capital Markets - Analyst : Sure. So I do have -- I mean we have a fair amount of time left and I do have a number of questions left. But I want to remind the audience, please do participate, encourage your questions. So I think you can lob them in through the chat on Teams or email me at paul.holden@cibc.com and I'll try to keep a look on my email for any inbound questions. So with that, Charles, you also -- in your opening remarks, you made a reference to the UK business and success you've had there. I think that acquisition closed roughly four years ago, give or take, maybe not quite four years, but close to four years now.

Question: Paul Holden - CIBC Capital Markets - Analyst : 3.5 years. There we go. You did a lot. Like since buying that business, you've made a lot of changes, right, bought some additional business, sold some a couple of different businesses, a lot of profit improvement. Like a lot of heavy lifting too. And the results are pretty good, right? Well, pretty good. The results are good, right? You're well on target, I think, to where you want to --

Question: Paul Holden - CIBC Capital Markets - Analyst : Yeah. So I guess really my question is what still needs to be achieved? Like what can we expect in 2025 and then what do the results look like after that?

Question: Paul Holden - CIBC Capital Markets - Analyst : Then in terms of the growth outlook for that business, again, you're doing doing some profit rationalization, let's call it, right, sort of cutting off less profitable books of business. But obviously, with the investments in digital, with the combined ratio you're targeting, I'd like to think you're -- it sounds like you're going to have a competitive advantage in that SME market. So obviously growth starts picking up the market share gains, right? You can -- we kind of talked about some other lines of business. It's going to start coming into play. When roughly reasonably should we expect that to accelerate and it -- and you probably have a long runway there I imagine as well.

Question: Paul Holden - CIBC Capital Markets - Analyst : So let's continue on the topic of commercial, but maybe broaden it out just geographically a little bit. I mean something that's being asked to me and I think to you as well a lot over the last year is sort of the slowing or I guess, I don't even know, call it the softening of the rate conditions in certain pockets. How should we think about that in terms of margins for Intact? Because maybe it's a little bit of a slowdown premium growth is one thing. But the thing that people are always going to worry about is really the margins you earn. So how are you balancing the pricing dynamics with your margin targets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, CM.TO - Intact Financial Corp Fireside Chat with CIBC Capital Markets (Virtual)

Question: Paul Holden - CIBC Capital Markets - Analyst : Let's talk about that a little bit more, right? Like that's fascinating topic. The sophistication of your pricing models. I mean AI is a dominant theme that we hear about again, every day like tariffs. Is this kind of where the sophistication is coming from? Is it AI related or maybe it's driven by some other kind of technology developments? So maybe expand a little bit on that.

Question: Paul Holden - CIBC Capital Markets - Analyst : So I do have an audience question. So thanks for the question. It's a good one. So they're curious about this -- on this topic the sophistication level you see in US and UK versus Canada. So how do you view how sophisticated is the industry? And then how do you view Intact's competitive advantages in that sophistication versus the industry in each of the three markets?

Question: Paul Holden - CIBC Capital Markets - Analyst : Have to ask you about potential capital deployment. We talked about your balance sheet being at a good position. It's been an important part of Intact's growth story over time. You've generally talked about Canada being first priority for acquisition. So one is, is that still the case assuming it is, but maybe address that. And if we think about potential acquisitions domestically, what would be your key criteria?

Question: Paul Holden - CIBC Capital Markets - Analyst : Another question I have to ask on this topic is how would you characterize sort of the M&A environment, right? So clearly, your demand is there for. How does the other side of the transaction needs to be there too, right, sort of the supply you talked a little bit about. Where the industry is at in personal auto in Canada and the results aren't great. So does that create maybe some pressure or willingness to sell? Anyways, sort of broader picture, anything you can give us on sort of the M&A environment, hot, cold, lukewarm?

Question: Paul Holden - CIBC Capital Markets - Analyst : I want to talk to you about talent development. I think it's been very important to the success of Intact. You probably agree with that. And then I watch some of the other Canadian financials I cover where they've had a few different twists in terms of senior leadership appointments that haven't worked out so well, right? And the most obvious one for Intact would be, you have Louis Marcotte retiring after many years with the organization, but a very smooth orderly appointment internally for Intact. So talk to us about talent management, and what makes Intact sort of I would call a world class leader on this front.

Question: Paul Holden - CIBC Capital Markets - Analyst : We're almost out of time. But Charles, I do want to give you an opportunity to leave us with any closing thoughts and remarks.

Question: Paul Holden - CIBC Capital Markets - Analyst : Charles, always a pleasure. That was excellent. I really appreciate it. And everyone, thanks for taking the time again to listen in and look forward to the next time. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, CM.TO - Intact Financial Corp Fireside Chat with CIBC Capital Markets (Virtual)