Intact Financial Corporation (IFC) Earnings Call Transcript & Summary

Thank you. May I have a proposal in this regard?

My name is Stephanie Lee, and I'm a shareholder of the company. I propose that the following resolution be approved. Be it resolved that the amended and restated shareholder rights plan agreement dated April 19, 2017, between the company and Computershare Investor Services Inc. be and is hereby ratified, reconfirmed and reapproved. Any director or officer of Intact Financial Corporation is authorized to do all such acts and things and to execute and deliver all such instruments, agreements and other documents as in such person's opinion may be necessary or desirable in connection with the foregoing to give full effect to this resolution.

Thank you. Voting remains open if you wish to vote on any of the matters presented and will close following the presentation of the next matter. The next item on the agenda is the advisory resolution relating to the company's approach to executive compensation. The Board of Directors believes that shareholders should have the opportunity to fully understand the objectives, philosophy and principles that the Board of Directors has used and integrated to make executive compensation decisions. It is the Board of Directors' intention that this shareholder advisory vote will form an important part of the ongoing process of engagement between shareholders and the Board of Directors on compensation. The Board of Directors has recommend that shareholders approve the nonbinding advisory resolution. Can the secretary confirm whether any questions have been received with respect to this matter?

No questions.

Thank you. May I have a proposal in this regard?

My name is Stephanie Lee, and I'm a shareholder. I move that the following resolution be approved. Be it resolved on a nonbinding and advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in the company's management proxy circular made available in advance of the 2023 Annual and Special Meeting of Shareholders.

Thank you. We will now be closing voting. I invite those shareholders and proxy holders who have not yet cast their votes but wish to do so, to complete voting now. Voting is now closed. I will now ask the Secretary to report the preliminary voting results.

Thank you. I have received the preliminary scrutineer report and the final results will be filed on SEDAR and made available on the company's website as well as via press release following this meeting. The following are the preliminary results. Ernst & Young has been appointed as auditor of the company for the year 2023 and until the next annual meeting by at least 85% of votes cast. All directors nominated for election have been duly elected with at least 98% of votes cast and will hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. The company's amended and restated shareholder rights plan was ratified, reconfirmed and reapproved with at least 92% of votes cast, and the advisory resolution to accept the approach to executive compensation was approved by at least 97% of votes cast.

Thank you. We have now completed the official business of the meeting and will now hear reports from myself and the Chief Executive Officer. This will be followed by a question-and-answer period. As a reminder, if you are a shareholder or a proxy holder and wish to ask a question, you can submit it by clicking the messaging button in the middle of your screen at the top of the page. And now my report. 2022 is an important year of growth and adaptation for Intact. We made significant progress towards fully integrating the RSA business, and we continue to be in a solid financial position despite an ongoing backdrop of inflation, natural catastrophes and volatile capital markets. Our teams have a long history of adapting to grow the business even in challenging times, and our strategy remains focused on 3 main things: first, having 3 out of 4 customers be our advocates. Second, being seen as the best employer and having engaged employees who represent the communities we serve. And third, leading the way by being seen as one of the most respected companies by our stakeholders. Our strength and success begins with our customers. If shareholders want to win, customers must win first. When we're helping people, that means we're understanding them and providing services that are well suited to their needs. And it's when it's driven by a workforce that is talented, diverse and inclusive, it's a recipe for success. We made meaningful progress in meeting customer needs in 2022 through continued investment in digital engagement and AI. In Canada, 1 out of every 2 customers is now engaging with us digitally, and we're making significant strides towards our goal of having 3 out of 4 customers being digitally engaged. We're also continuing to focus on attracting, retaining and developing high-performing employees who represent the communities we serve. Being a diverse organization where everyone can recognize themselves, allows us to tap into the largest pool of skills and capabilities. It's good business, but it's also mapped directly to the core values we hold as an organization. The Board is proud to recognize that Intact was once again named a Best Employer in Canada, the United States and North America. We were an early adopter of gender diversity, and we far exceeded our initial 30% commitment for Board representation. Right now, we have 6 women on our Board of 13, and we will continue to strive for gender parity. It feels right to have that balance. Having diverse perspectives at the Board table is critical to one of the Board's principal roles to be an effective sounding board to management on strategy. The best way we can do that is by ensuring Board members have different backgrounds, histories and ways of thinking about big issues. As we approach 50% parity on the Board, we're focusing now on a longer-term trajectory to be more diverse in dimensions beyond gender. Strength in the market also comes from being a recognized leader and a force for good in our industry. We've been able to prove to ourselves and our customers over the years that being focused on helping society also enables us to provide the best service, and that enables us to win in the marketplace. There's value in really understanding the challenges that people, including our customers are facing on a day-to-day basis. When your purpose explicitly states that you're there to build resilience, we have an imperative to step up and focus on building resilient communities, and this is more critical than ever. Last year, Intact released its global climate strategy, which is a significant step to strengthen our ongoing commitment to climate action. It takes a long-term view to 2050 across our whole value chain while maintaining a focus on near-term emissions reductions in our corporate operations. We invite you to read more about how Intact manages climate change and works to build a resilient society in our social impact and ESG report. The Board is proud of Intact's leadership and climate change adaptation. As climate change manifests itself into increasing incidences of extreme weather, we've stepped up to help. Our efforts have built incredible momentum in Canada, and we're now going global. In recognition of our strong governance, purpose and values, I'm really pleased to share that Intact was recognized once again as one of Canada's most respected companies in the Globe and Mail's 2022 Board Games rankings. Another priority for us is communication between shareholders and the Board and management. Last year, I participated in stakeholder engagement and met with shareholders who represented approximately 34% of our investor base. Intact also held its first in-person Investor Day since 2019, where we shared with investors our strategy and ambitions for the markets in which we operate. Stakeholder interest in our ESG performance is high. Because we are a purpose-driven company, ESG is already largely embedded into our strategy. So it's useful for us to hear from shareholders on what their expectations are to inform our thinking. The Board is moving quickly. The world is moving quickly on these issues and society's expectation of the business response to ESG is evolving rapidly. Over the past year, I've met with at least 10 of our principal shareholders and about half our discussions are focused on in tax position on ESG topics, including climate change and DEI. As the Board looks to the future, overseeing the implementation of our strategy will be a priority, and we will also focus on the succession of senior management team members. Happily, the bench strength at Intact is deep with 7 successors available to step into each of the top 250 positions. I want to sincerely thank all the members of the Board for their expertise and unwavering dedication in guiding intact through an area of economic and sociopolitical challenges. I'm also pleased to welcome our newest board member, Mike Katchen, who was appointed last July. As Co-Founder and CEO of WealthSimple, Mike is a rising star in tech innovation, and I know the Board will benefit immensely from his expertise. 2022 also marked my first year as Chair of the Board of Directors. I must say it's been a privilege to lead this highly committed group of individuals. I want to thank Charles Brindamour and his executive team who have done an extraordinary job of growing Intact into the leading company that it is today. Charles was honored as Canada's Outstanding CEO of 2022 by Caldwell and Bennett Jones. This is a tremendous and well-deserved honor given its consistent track record of outperforming in the industry and providing value to shareholders. I have great confidence that Charles and his team will continue to outperform while serving the interest of all our stakeholders. In conclusion, I would like to thank all intact employees, customers, brokers and shareholders for their continued loyalty and support. I am confident that together, we will continue to both help and win in the years ahead. Thank you. I will now invite Charles Brindamour to deliver his remarks.

Thanks, Bill. Good afternoon, and thank you for joining us today. Intact's purpose is to help people, businesses and society prosper in good times and be resilient in bad times. Over the last 3 years, we've redefined resilience by withstanding adversity, helping our customers and society while massively growing our business. That adversity included a pandemic war and stubbornly high inflation. Further, we've continued to observe the increasing destruction of natural disasters. The last few weeks alone with floods in Quebec, ice storm and wildfires in Alberta continue to be a reminder of the importance of fighting climate change. While we've navigated well in that context, it's the impact on people and communities that galvanized the Intact team together with 29,000 people strong. We've built an organization with an incredible spirit, one that's transforming a strong Canadian champion into an international force. And our road map is very much centered on areas where our strengths can be put to work to win and help society at the same time. It's our strong financial foundation and outperformance mindset that provides us with the ability to do just that. Our long-term track record speaks for itself. We've generated 14% total shareholder return on average per year over the past decade, outperforming the TSX 60 by 600 basis points. And in '22, we've generated a 21% total return for our shareholders when the TSX 60 was down 6% on the same basis. But the success for us really starts with the customer. 70% of customers here in Canada who had a transaction with us last year would be willing to recommend us to friends and family. Our goal though is to have 3 out of 4 customers as advocates, and I think it's within sight. If we want to provide a customer experience that's second to none, we need to make sure that our employees are engaged and representative of the communities we serve, as Bill mentioned. And we're making good progress. We were voted a concentric Best Employer in '22 for the seventh time in Canada and the fourth time in the U.S. We also aspire to be one of the most respected companies where we operate. We do that by outperforming our competitors day in and day out with close to 750 basis points ROE advantage in the last 5 years as well as growing our operating earnings by close to 16% annually over the same period. But with respect to where we operate also, and more importantly, requires using our strengths to build resilient communities. Now how we go about achieving that success is deeply connected to how we see the world evolving. We think that having a good understanding of how the deep trends are shaping society really impact our customers, employees and our communities and is, therefore, fundamental to helping and winning at the same time. So let me highlight 5 trends we're focused on. [Foreign Language] [Interpreted] So how are we using our competitive advantages to turn these deep trends into growth opportunities? So let me elaborate on those by highlighting the progress we've made in 23. Let's start with Canada, where we continue to focus on expanding our leadership position. So far this year, we're deepening our relationships with customers by doubling down on the customer experience, both digitally and in person. An example, in the past few months is we've launched a new feature in our mobile apps to encourage eco-friendly driving habits. These features have increased active engagement with customers by nearly 50%. Following on the success of the RS acquisition and integration, we see much further consolidation opportunities in the marketplace over the next 5 to 10 years. And our goal is to ensure 1 in 3 Canadians. In the U.K. and Ireland, we're focused on building a strong, sustainable and profitable business. In March, we announced our exit from the U.K. personal lines motor business. This represents an important step in optimizing our footprint around home and pet and our commercial and specialty lines business. This speeds up our progress towards achieving a sustainable low 90s operating combined ratio across the U.K. and Ireland by the end of next year, a full year ahead of schedule. We're also making substantial progress in building a global specialty lines insurer. With our global platform, we can now service customers all over the world, offering services and handling claims locally in more than 150 countries and territories. We've increased our sandbox in the past 5 years by tenfold. Marine, for instance, has been established as our first truly global franchise. And we've identified cyber and renewable energy as 2 emerging and important specialty underwriting segments. So with a solid growth plan in place, we've raised our ambitions in global specialty lines to reach $10 billion in annual premium by the end of the decade, while further deepening our outperformance in this sector to operate at a sustainable sub-90% operating combined ratio. A key part of the road map is about transforming our competitive advantages. As I mentioned earlier, our use of data and AI for pricing and risk selection, our deep claims expertise and strong supply chain and then our capital and investment management expertise is what sets us apart. We continue to invest heavily to strengthen our performance in these areas. It's really about doubling down on what we're good at. In data and AI, we're supported by more than 500 specialists in our team in our data lab. This team is focused on improving risk selection and making our operations as efficient as possible, while creating outstanding interactions with customers. This is not just [ stop ]. We've delivered nearly 300 AI models in production today. We can now better predict losses and customer behavior, and we'll be leveraging this expertise to a greater extent than our commercial and specialty lines operation over the next 3 years. Our strong supply chain networks helped us better manage our supply chain, dislocation and inflation and minimize disruption for our customers last year. We've expanded our capacity by opening up 13 new Intact service center across the country with 2 new partner-operated centers in Q1. On-site, our property restoration business is continuing to grow across Canada while testing climate-friendly techniques to address property damage. With extreme weather on the rise, demand will only continue to increase. Our aim is to double on site over the next few years. On capital and investment management, our scope and opportunity set continues to grow. Our diverse geography, strong balance sheet and capital position underpin our ability to optimize asset allocation decisions, capture opportunities and manage headwinds. And with continued market volatility and little GDP growth, our team is continuing to navigate this investment environment conservatively. In the first quarter, this group also led efforts to strengthen Intact's balance sheet by completing a GBP 6.5 billion U.K. pension buy an agreement with Pension Insurance Corporation. This largely eliminates exposure to pension risk in the U.K. and significantly improves our capital efficiency. And finally, our game plan is powered by our people and the importance to invest in them. They're at the heart of our ability to deliver on our purpose. Being the best employer, a destination for top talent and enabling our people to thrive are the key areas of our focus. [Foreign Language] [Interpreted] While helping communities adapt to climate change is where we want to lead, seizing the opportunity to help and win in the climate transition is an important part of our game plan. Our climate strategy has 5 big intentions commit, adapt, shape, enable and collaborate. Let me provide you a quick update on how we're performing. First of all, we've committed to being net zero by 2050 and cutting in half our operations emissions by 2030. Last year alone, we've achieved a 23% reduction in our operations emissions from our 2019 baseline. Second, we're doubling down on adaptation. In the first quarter of '23, we've announced, for instance, a new partnership in the U.K. with the Gloucestershire Wildlife Trust to help communities downstream protect against flooding. We're also helping to shape customer behaviors with the recent launch of eco-driving and fuel efficiency features and our usage-based insurance apps. Fourth, in our role as risk managers, we aim to do our part to enable the transformation of industries that are key to the transition and support new one. About half of our energy portfolio is in renewables, and we see opportunity to continue to grow this business. And the fifth element of our climate game plan is to collaborate with governments and industry to speed up climate action, and that is ongoing. And on that note, we've seen excellent progress on the part of the federal government with the launch of the National adaptation strategy and the emission reduction plan right here in Canada. We think though now with a really good game plan at the national level. We need to turn commitments into action. And certainly, the recent federal budget supports, in my view, important next steps. While a funding gap remains on climate adaptation and therefore, resilience, I want to congratulate the government on the $21 billion in tax credits to drive investment in low-carbon technology. While we applied the climate transition initiatives in the federal budget, the proposed removal of the dividend received deduction or DRD is a concern. In fact, already faces a tax imbalance in Canada right here at home compared to nonresident competitors. Most Canadian equity investments held by property and casualty insurers like Intact are routine, simple, unhedged and for our own account. The loss of income from the DRD essentially raises our effective tax rate by close to 2 points. This could have a knock-on effect on premiums and where insurers invest their money. And so while we're sensitive to the need for additional revenue, we encourage the government to consult widely on this proposed change to make sure that it supports market champions and it's good for the economy overall. In concluding, I want to reiterate our focus on transforming a strong Canadian champion into an international force. Our track record demonstrates our ability to outperform and grow while managing in difficult times. Our competitive advantage, I think, is stronger today than it was a decade ago. This strength really fuels our ability to take the help-and-win approach in everything we do. I want to thank our shareholders for backing us for more than a decade. But rest assured, we do not take your support for granted. I also want to congratulate Bill on his first year as Chair of the Board, a very good one, in my view, certainly, if we look at the TSR and the entire Board for your continued guidance and oversight. I want to thank our employees for their commitment to living our values, delivering second to nonservice to our customers and brokers and demonstrating their generosity in the communities where they live and work day in and day out. Thank you.

Thank you, Charles. We will now address any general questions that have been submitted. As a reminder, shareholders and proxy holders wishing to ask questions are encouraged to pose their question by clicking the messaging button in the middle of your screen at the top of the page. The Secretary of the meeting will read the questions received. Questions of a similar nature will be grouped together in a single question. If your question concerns a client matter, please include your contact information and a member of our customer service team will get in touch with you following the meeting. Finally, if there are any questions we are not able to answer today, we will reach out to you personally after the meeting to ensure we answer your question. Can the secretary confirm whether we have any questions?

We have not received any questions, Bill.

Thank you. We have now completed our agenda for this meeting. I declare the meeting closed. Thank you for attending. Have a great day. [Foreign Language] [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]