Executive Messages

CEO’s Letter


Charles Brindamour Chief Executive Officer

At Intact, we believe insurance is not about things. Insurance is about people. That is why we have made it our purpose to help people, businesses and society prosper in good times and be resilient in bad times. It drives everything we do and gives meaning to our work.

In building a leading North American property and casualty (P&C) insurer, our work starts with the customer. Our teams are working hard to provide customers with an experience that is second to none. One where customers know, what matters to them matters to us. We believe this is the best way to have customers as advocates.

Our people know they make a difference and their work matters. To build on that, we aim to be one of Canada’s best employers and a destination for top talent. We are creating an environment that people are proud to be a part of and enjoy coming to work every day.

With satisfied customers and engaged employees, we aim to be one of the most respected companies in Canada. By leading in the marketplace with our values, consistently outperforming the industry in terms of profitability and growing our earnings by more than 10% per year over time, we are well on our way. Our success allows us to give back to communities where we operate and help make a difference to society at large.

Year in review

2017 was a pivotal year for Intact. Our entry into the U.S. specialty lines market was a major step forward. The OneBeacon acquisition combines Intact's leading commercial lines track record and deep data, claims and digital expertise with OneBeacon's high calibre team and specialty lines capabilities.

It also bolsters Intact's Canadian business with new products and cross-border capabilities, and better positions us to compete with international insurers. Beyond strong growth prospects in Canada, this transaction creates a significant new growth pipeline to leverage Intact's consolidation expertise in a fragmented specialty lines market. We are working with our new colleagues in the U.S. and Mike Miller, an exceptional leader, to leverage their expertise and bring the underwriting performance in specialty lines to the low 90s in the next 24 months. We expect the acquisition to contribute to earnings growth within two years.

Our financial performance in 2017 delivered a return on equity (ROE) of 13%. However we are not satisfied with that performance which was tempered by some setbacks in personal automobile. Despite this, we have made excellent progress on many fronts. We have improved customer experience across all our channels, maintained strong employee engagement, opened a massive new pipeline of earnings growth in the U.S. and made meaningful strides in artificial intelligence, technology and claims management.

We delivered a solid combined ratio of 94.3% in 2017, resulting in net operating income of $771 million while growing our top line by more than 5%. I am pleased with the strong performance and continued momentum in personal property and commercial lines, with combined ratios of 89.1% and 86.5% respectively.

Although our performance in personal auto was challenging and remains unacceptable at a combined ratio of 101.7%, we have made important strides in curbing claims inflation, improving risk selection and increasing rates. With increased cost of repairs in the past year, we are executing on our action plan with discipline and remain committed to bring personal auto’s combined ratio back to the mid-90s. We are confident this is a short to mid-term issue and our actions should bring us back to our long-term track record of performance. For seven of the last 10 years, we have operated personal auto in the mid-90s and have averaged a combined ratio in the mid-90s over five and 10 years. We will keep at it until we achieve our goal.

We ended 2017 in a very strong financial position with a total capital margin of over $1.1 billion and debt-to-total capital at 23%. Our book value per share grew 12% in 2017 to $48. Coupled with good earnings momentum, we have increased our dividend per share by 9% in 2018, the 13th consecutive annual increase since our IPO. We believe we are well positioned to capture growth opportunities that the market will offer in the coming years.

Being customer driven

Consumers’ expectations are changing rapidly. Software and data are transforming the way we interact, gather and share information, and how we live. Ninety per cent of Canadians use the Internet and 50% do so through a mobile device. We have focused on digital transformation for many years. 2017 was no exception.

We’ll continue to invest in products, tools and training to make the customer experience simpler, faster and more convenient. Leveraging data, artificial intelligence and technology, our Intact Lab and Data Lab are instrumental in helping us improve and become better at what we do, and enhance the experience we offer customers and brokers.

Our mobile telematics offer is now available across the country. We have transformed how Canadians can buy home insurance online and expanded our services to mobile users. We have also introduced some of these functionalities to commercial lines.

On the distribution front, we are making it easier for customers and brokers to connect with us. Intact Insurance’s Buy Online strategy continues to grow and generate new business for brokers.

Within weeks of closing the One Beacon acquisition, we deployed cross-border capabilities in the U.S. and in Canada. We also introduced a new product suite for technology and entertainment customers in Canada. We are now able to tailor our offer to the specific needs of commercial lines customers.

Committed to outperform

To become one of the most respected companies in Canada, we are committed to outperform our industry every year in terms of profitability. In the last decade, we have outperformed our competitors by 550 basis points (bps) in terms of ROE, above our 500 bps objective. We closed 2017 with an outperformance of 690 bps.

We continue to invest in people, systems and partnerships to expand that advantage. We are deploying new technology platforms in claims, as well as in personal and commercial lines. We are also building on our actuarial and data management capabilities, investing heavily in artificial intelligence and establishing partnerships with leading universities in data science.

We remain focused on integrating the supply chain in claims by insourcing the delivery of customer experience. Our four claims service centres across Canada translate into a better customer experience, greater satisfaction and lower cost.

Our quest for outperformance doesn’t stop at the fundamentals of insurance. Our investment management team, considered one of the best in Canada by its peers, manages a wide range of asset classes across North America. Working closely with our insurance, treasury, tax and capital teams, they optimize our asset allocation to match the unique nature of our P&C activities. With $20 billion of assets under management, they are focused on delivering superior after tax returns. On that front, they have a tremendous track record delivering nearly 160 bps of ROE outperformance since 2010.

Favourable market conditions ahead

We are entering 2018 in a changing marketplace across our product lines in Canada and the U.S.

2017 was a difficult year for the Canadian industry, with a ROE slightly above 6%, but we are starting to see meaningful corrective actions taking shape and as a result a firmer rate environment.

In personal lines, we expect to see mid-single digit revenue growth in the industry. Claims inflation in personal automobile driven by physical damage and the escalating cost of automobile repairs are putting severe strain on the industry’s performance. In home insurance, the industry is still adapting its offer and prices to better reflect the cost of natural disasters.

In Canada, the commercial lines market remains very competitive, but we are starting to see capacity constraints in certain sectors. As a result, pricing continues to firm up. We expect low-to-mid-single digit revenue growth in this segment for the industry.

We are new to the U.S. market but a number of segments in which we operate are showing clear signs of rate momentum. We like the direction it is heading.

We expect the industry’s ROE to remain below its long-term performance in 2018 but we are maintaining our 500 bps industry outperformance objective. We are confident that the growth opportunities will be stronger in the coming year. Our people, who have shown great discipline over time, stand ready to take advantage of this environment.

Making a difference

Creating an environment where our people can contribute and make a real difference is important to our success. For the past three years, we have been recognized as one of Canada’s Best Employers and a Top 100 Employer. We were also named a Top Employer for Young People for a second time.

We are fortunate to have loyal people and a group of best-in-class leaders that lives our values and leads by example. Today’s leaders are strong, engaged and constantly trying to improve every day. Tomorrow’s leaders are equally impressive. We have close to five successors ready within three years for the top 120 leaders of the organization. When I see these emerging leaders in action, I am thrilled about our long-term prospect.

We are passionate about helping people. We are empowering Canadians to protect themselves from the impacts of severe weather. The Intact Centre on Climate Adaptation (Intact Centre) is establishing standards and advising governments on building homes to help Canadians adapt to climate change. We are also investing in a number of meaningful employee-focused partnerships including the Roméo Dallaire Child Soldiers Initiative. The work being done by the Intact Senior Fellow LGen Roméo Dallaire and his team is inspiring. They have formed strong partnerships and delivered results. Partnering with the United Nations (UN) and the Government of Canada, they have developed the Vancouver Principles – to prioritize the prevention of recruiting child soldiers in the context of UN peacekeeping missions.

2018 and beyond

We have started 2018 on a sound strategic footing: a bold customer driven transformation, expanding distribution, massive technology, digital and artificial intelligence deployments coupled with robust measures to improve underwriting fundamentals. Our employees are engaged and excited about building our business and recognize the opportunities. Combined with favourable marketplace conditions, we are in a strong position to expand our leadership and build momentum for years to come. We’ll continue to build on our success as a customer driven organization. By leading with our values, improving what we do every day and driving change, we will succeed.

I am very proud to work with such a strong and talented team. I want to thank our 13,000 people for their loyalty, commitment and contributions. Our board of directors, strong and dedicated, has been a key to our success. My team and I are grateful for their contributions.

I am convinced that our engaged employees who are committed to our customer driven mindset will get us to where we want to be – one of Canada’s most respected companies.

Thank you for your support.

Charles Brindamour
Chief Executive Officer

Quarterly dividends per share
In building a leading North American property and casualty (P&C) insurer, our work starts with the customer. Our teams are working hard to provide customers with an experience that is second to none. One where customers know, what matters to them matters to us. We believe this is the best way to have customers as advocates.

Chairman’s Letter

for growth

Claude Dussault Chairman of the Board

Intact’s 2017 results were solid. Under the strong leadership of Charles Brindamour and the management team, the Company stayed focused on its strategy and executed its plans with a disciplined approach. Intact’s acquisition of One Beacon Insurance Group and expansion into the U.S. was a milestone in the Company’s history and will create new growth opportunities.

The Company has again delivered great value to shareholders and increased its common share dividend for the 13th consecutive year. Through enhanced risk selection, segmentation, leveraging data analytics, machine learning and artificial intelligence, Intact is well poised to continue to outperform. With a comprehensive integration plan for OneBeacon already underway, the Company is on its way to achieve its goal of creating a leading specialty solutions insurer in North America.

The Company has been positioned to succeed in a changing environment. Intact is accelerating its development in digital technology, software engineering and artificial intelligence to design relevant products and provide options for our customers to interact with us.

Succession planning and talent development are important elements that continue to contribute to Intact’s success. The Board is confident that the Company’s new organizational structure adopted following the OneBeacon transaction will accelerate its customer driven transformation, optimize distribution of services to Canadians across all channels, build on outstanding talent and further enable its North American scope.

Intact’s commitment to help people and businesses extends beyond protecting what’s important to them. Protecting North Americans from the impacts of extreme weather caused by climate change has increased in urgency in recent years. The frequency of severe weather events in Canada has increased seven times in the past 20 years. Intact’s leadership in establishing the Intact Centre on Climate Adaptation at the University of Waterloo to make Canada more resilient to climate change is gaining good momentum. This partnership plays a key role in establishing standards and influencing how homes and communities will be built, and gives homeowners tools to make their homes more flood resilient.

Upholding a high standard of governance, compliance and ethics is integral to delivering on the Company’s goal of being one of the most respected companies in Canada. This effort has culminated in Intact attaining top marks for good governance in The Globe and Mail’s 2017 Board Games report card. Intact ranked second out of 242 companies. Additionally, Intact was awarded Best Financial Reporting by IR Magazine Awards – Canada.

In 2017, we welcomed Sylvie Paquette to the Board of Directors. Ms. Paquette brings with her vast experience and knowledge of Canada’s P&C insurance industry. Her achievements are well recognized. Ms. Paquette was one of Canada’s Top 100 Most Powerful Women (2009) and received the “Inspiration – Andrée Corriveau” Award from the Association of Québec Women in Finance (2014). Ms. Paquette’s strengths and expertise contributes positively to the Company’s strategic objectives and further strengthens the collective expertise of the Board.

To the management team and employees at Intact, on behalf of my colleagues I thank you for another strong and outstanding year. Your striving for excellence, your dedication to being customer driven and your passion to make a difference continue to differentiate Intact from its competitors in a rapidly changing marketplace. I also want to thank customers, brokers and shareholders for their continued support and trust.

Claude Dussault
Chairman of the Board

The Company has been positioned to succeed in a changing environment. Intact is accelerating its development in digital technology, software engineering and artificial intelligence to design relevant products and provide options for our customers to interact with us.