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Claude Dussault– Chairman and President

Charles Brindamour – Chief Executive Officer


Intact Financial Corporation (OTCPK:IFCZF) Annual General Meeting May 8, 2013 2:00 PM ET

Claude Dussault

Good afternoon ladies and gentlemen and it is now 2 o’clock and the 2013 Annual Meeting of Shareholders of Intact Financial Corporation will now begin. On behalf of the directors it is a pleasure to welcome you to this annual meeting of the company. My name is Claude Dussault, and I am the Chairman of the Board of Directors of Impact Financial. In that capacity I will chair this meeting and I feel I should ask Françoise Guénette, the Senior Vice President, Corporate and Legal Services, and Secretary of the Company to act as Secretary of this meeting. Before proceeding further I would like to introduce our Chief Executive Officer of the company Mr. Charles Brindamour who will be speaking to you in a moment.

Votes shall be taken by show of hands unless a ballot is demanded by a shareholder or a proxy holder entitled to vote at this meeting. A holder of the common shares of record at the record date namely March 20, 2013, at 5:00 p.m. Eastern Time, is entitled to cast one vote for each common share held on all matters proposed to come before the meeting. I also inform you that between 92% and 99.9% of the shares voted by proxy depending on the matter had been voted in favor of the appointments of the auditor and the election of the directors proposed in the management proxy circular, as well as for the approval of the advisory resolution to accept the approach to executive compensation.

All these matters have been disclosed in the company’s management proxy circular delivered in advance of this 2013 annual meeting of shareholders. We have appointed Paul Teez [ph] and Graham Sheward of Computershare Investor Services, our transfer agent, as scrutineers of this meeting. So may I ask Mr. Teez and Mr. Sheward to stand up and to confirm. Thank you. So the secretary has filed the confirmation from Computershare and Broadridge that the notice calling this meeting has been sent to all shareholders entitled to receive same in conformity with the bylaws of the company and with the securities laws of Canada. So I can say that the meeting is now open.

So, will the secretary advice us of the number of shares represented in person or by proxy at this meeting please.


I confirm that the number of shareholders and proxy holders physically present in this meeting is 53. I further confirm that 82.42% of the issued and outstanding common shares as of March 20, 2013, have been voted. And that between 92% and 99% of the shares voted by proxy depending on the matter allow management to vote on behalf of the shareholders of this entity.

Claude Dussault

Thank you. I hereby declare that notice requirements have been met that a quorum is present and that this meeting is properly constituted for the transaction of business. I further direct that the secretary maintain the proxies and records of attendants with the official records of this meeting. We may now proceed.

But before we go any further I would like to remind you that a copy of the minutes of last year annual meeting of shareholders are available along with the agenda of this meeting. You can find it on your chair and the management proxy circular with respect to this meeting is also available upon request. The first order of business is the receipt of the company’s financial statements for the year 2012. Copies of these statements were mailed to shareholders who requested them along with the annual meeting documentation. Copies are also available on our website and may also be obtained from the secretary’s office and the investor relations department of the company.

Our CEO and I will be happy to answer any question concerning the statements later in the meeting. So may I have a proposal regarding the reception of these statements by the shareholders.

Unidentified Participant

My name is D. Smith, [ph] I am shareholder of the company. I would like to move that the consolidated financial statements of Intact Financial Corporation for the year ended December 31, 2012, and the auditor’s report on these statements be received by this meeting.

Claude Dussault

Can I have someone to second this motion? Those in favor of this motion please raise your hand. Anyone against? So the motion is carried.

The next item of the meeting is the appointment of the auditor. Management, the audit and risk review committee, and the board of directors of the company have recommended the appointment of Ernst & Young as the company’s auditor for the 2013 fiscal year. I would therefore ask for a motion in this regard.

Unidentified Participant

My name is Ulia Shan [ph] and I am a shareholder of the company. I would like to move that Ernst & Young be appointed as the auditor of the company for the year of 2013 and until the next general meeting.

Claude Dussault

Thank you. Can I have a shareholder second this motion?

Unidentified Participant

My name is Denise Thompson [ph], I am a shareholder of the company, and I second this motion.

Claude Dussault

Thank you. Those in favor of this motion please raise your hand. Anyone against? So I declare the motion carried and that Ernst & Young is duly appointed as auditor of the company until the next annual meeting of the shareholders or until their successors have been appointed.

We will now proceed with the election of directors of the company. Please note that except for Ms. Janet De Silva and Mr. Frederick Singer who are being proposed to fill the vacancies left by Mr. Paul Cantor and Mr. Marcel Cote all directors proposed by management of the company, are the same directors elected by the shareholders of last year’s annual meeting. May I have a proposal in this regard?

Unidentified Participant

My name is Dennis [ph] and I am a shareholder of this company. I hereby propose the following persons as directors or the board of directors of Intact Financial Corporation as of this meeting and to remain in that function until the next annual meeting. Charles Brindamour, Yves Brouillette, Robert W. Crispin, Janet De Silva, Claude Dussault, Eileen Mercier, Timothy H. Penner, Louise Roy, Frederick Singer, Steven G. Snyder, and Carol Stephenson.

Claude Dussault

So, may I have a shareholder to second this motion?

Kathy Wilson

My name is Kathy Wilson, I am a shareholder of the company. I second this motion.

Claude Dussault

Thank you. Those in favor please. Anyone against? Are there any further nomination? So there being no further nomination. I would like the secretary to register the election of those nominated. I declare the motion carried and I declare the following 11 persons to be duly elected directors of the company to hold office until the next annual meeting of shareholders or until their successors are elected or appointed.

So they are Charles Brindamour, Yves Brouillette, Robert Crispin, Janet De Silva, Eileen Mercier, Timothy Penner, Louise Roy, Frederick Singer, Stephen Snyder, Carol Stephenson, and myself. So I ask the members of the Board of Directors of Intact Financial Corporation to stand up so that we can recognize you. This is your board of directors.

The next item on the agenda is the advisory resolution relating to the company’s approach to executive compensation. The board of directors believe that the 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 decision.

It is the Board of Director’s 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 recommend that shareholders approve the non-binding advisory resolution. So I would therefore ask for a motion in this regard please.

Unidentified Participant

My name is Al J. Kung [ph] and I am a shareholder of the company. I propose that the following resolution be approved. Be it resolved on a non-binding and advisory basis and not to diminish the role and responsibility of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the company’s management proxy circular delivered in advance of the 2013 annual meeting of shareholders.

Claude Dussault

Thank you. May I have a second for this motion?

Unidentified Participant

My name is Elena Kurkovich [ph] and I am a shareholder of the company. I second the motion.

Claude Dussault

Thank you. So those in favor of this motion please raise your hand. Anyone against? So I declare the motion carried and the advisory resolution relating to the approach to executive compensation approved. So we have now completed the subject matters that needed to be acted upon at this meeting. We would now like to present to you reports from the directors and then from management. So I will first say a few words on behalf of your boards of directors.

On behalf of the board I am pleased to report that 2012 was another successful year for your company. Your board is appreciative that the executive team and employees delivered strong financial results as the business accelerated and operating earnings improved in 2012. The sound strategic direction, disciplined approach and prudent management of your company enabled it to successfully pursue its growth objective and outperformed the industry. This happened as you know in a transformational year as your company continued to integrate people, products, processes following the recent acquisition of AXA Canada, and JEVCO.

As your board of directors we are responsible for answering that your company pursued its strategy and conduct its business affairs by adhering to the highest ethical standards in corporate governance best practices. In 2012, we continued to provide strategic guidance to management as new opportunities arose and challenges emerged. We are convinced that your company fulfilled its business activities within a sound and effective corporate governance framework.

Your board continued to represent your interest as shareholders. Last year we build upon our integrated corporate risk management framework by adopting a risk appetite statement that clearly and systematically identified the risk that your directors and executives are prepared to assume operationally and strategically. This new statement will guide executives and board members to ensure that we continue to take a prudent approach to risk management, adhere to our principles and protect the value of your investment.

Throughout the year we continued to keep abreast of best practices in the areas of governance, reviewed executives and board compensation, and expanded a disclosure of our practices. Looking ahead we will continue to evaluate the advantages of adopting policies regarding the length of director’s tenure, and the interrelated relationship of your directors.

I would like at this time to acknowledge the dedicated service of two valued board members, Marcel Cote and Paul Cantor who retired from your board today. Mr. Cote provided unconventional thinking and a fresh perspectives to our board room discussions. And Mr. Cantor offered wise counsel and sound judgment notably in the area of governance over the course of his tenure. I would like to thank them both for their immense contribution. They have served you with enormous distinction.

I am also pleased to extend warm welcome to our newest board members, Ms. Janet De Silva and Mr. Frederick Singer. Both members are seasoned professionals who have been at the helm of successful companies. Apart from their leadership and international experience Ms. De Silva and Mr. Singer bring additional breadth and depth of experience to your board, you have been joining our board. Your company has an impressive track record, and has achieved numerous accomplishments since it started on its journey. When it became independent and widely held Canadian public company.

It’s important to reflect on how far your company has come in a relatively short period of time and acknowledge the dedication and hard work of our 11,000 employees and the strength of our executive team. I would like to take this opportunity to thank them for their efforts. I would also like to recognize my fellow board members for their outstanding service once again this year.

With a strong team, clear vision, disciplined approach, and sound strategy, I am very confident that we have a bright future that is full of promise as we continue to build a world class P&C insurer. I would like now to invite our CEO Charles Brindamour to talk to you about the past year as well as the most recent development. Thank you, and we’ll take questions afterwards.

Charles Brindamour

Thank you very much Claude. Good afternoon everyone. Ladies and gentlemen and fellow shareholders. It’s a pleasure to be with you today to share the progress we’ve made over the past year and our journey to become a world class property and casualty insurance company. 2012 was another remarkable year for your company as we reap the benefits of the acquisitions of AXA Canada, as well as JEVCO Insurance Company. These two acquisitions allowed us to accelerate our strategic initiatives by bolstering our offer to brokers as well as customers. Expanding our distribution network and strengthening the depth of our teams.

Thanks for the efforts of our people, we expanded our top-line, delivered a superior underwriting performance, and achieved our objective of outperforming the industry in terms of growth as well as combined ratio. More importantly the combination of our superior underwriting performance and the productive deployment of our capital led to an adjusted return on equity of 16.5%, more importantly 6.2 points better than our peers.

Despite the significant investments towards our two recent acquisitions which amounted to more than $3 billion we concluded the past year in a strong financial position with a solid cushion of $600 million in excess capital and a comfortable debt to capital ratio of 19.9% in line with our long term target.

As a result of our strong operating performance and our solid financial position our total return to shareholders in the past year amounted to more 13% bringing nearly 90% of the value we created for you over the past three years. Given our track record of performance and our strong financial position, your board of directors increased earlier this year for the eighth consecutive time and as many years, your dividend by an additional 10%. And yesterday consistent with our capital management philosophy and our confidence in the long term growth potential of the business your board authorized a normal course issuer bid. As a result we now have the opportunity, a very good opportunity in my view. We further re-distribute capital to shareholders by buying back 5% of our own shares over the next 12 months.

The outstanding performance of the organization in the past year is a good indication that our strategies are starting to pay off. At the heart of these strategies is our commitment to offer or customers an outstanding experience that exceed better expectations. But more importantly, that will be second to none. An important part of this commitment is the unique experience and choice we offer consumers on how they can shop for our products through our distinctive brands. Our strategy is debatable to customers whenever and wherever they want us to be. And to offer them the solutions that they requires to protect the things that they cherish the most. Home, car, and their business.

Throughout the year we leverage the intimate knowledge we built over the years on consumers, evolving purchaser’s behavior, by further expanding our online presence. Intact Insurance continue to deploy its unique digital solution that allows consumers to buy their car insurance online while having the opportunity to reach out at the same time to an insurance broker or his or her advice. If I were in better [inaudible] both built upon their online capabilities and presence throughout the year with better developing, easy to use online functionalities for consumers looking for home insurance quotes on the web. And finally, brokerage continued to build – a brokerage that offer consumers both the choice and the advice they receive from a trusted broker as well as the convenience of a direct writer.

Our commitment to consumers was also reflected by the acquisition of AXA Canada as well as JEVCO. These transactions resulted in expanding offering of products as well as solutions which are gaining traction among our customers and brokers. Individuals and businesses can now rely on us to offer them most of the protection they may require for an insurer.

Over the past year over 5 million Canadians and businesses relied on us for protecting their home, their vehicle, and their business more than any other insurer in the country. And while we appreciate their business we don’t take it for granted as we continue to offer and improve our unparalleled customer service.

Thanks to our team of 3200 skill claims professional and our sophisticated call center technologies. Our people answered last year more than 2.2 million calls within seconds and helped these customers get back on track with their cars, residences and their businesses that were damaged. Despite this massive operation our surveys continue to show that these customers are ranking us amongst the best in North America for the quality of the claims experience they receive.

While our customer orientation is paramount to our growth and sustainability in years to come we could not succeed without constantly striving for excellence in our underwriting and pricing activities, as the current economic and financial environment severely impacts the revenues that insurance companies may expect from their investment portfolio.

The continuing recession in Europe, the accelerated fiscal consolidation in the US, the easing of growth in China and here in Canada all point towards a continuation of the current monetary policies and no investment return for the next two or three years. In such a context, our historical competitive advantages, namely, the quality of our underwriting and pricing expertise, and our discipline, are becoming even more important than ever, and it will allow us to continue to outperform the industry.

Throughout the year we did indeed outperformed the industry with a combined ratio of 5 percentage points lower than our peers as we advance our segmentation techniques as well as our claim practices to face emerging and new realities. This is most evidenced in personal property where our underwriting performance has been mostly impacted by climate change over the last few years.

Whatever the reasons driving the changes in our environment we cannot ignore our new reality. Severe weather events which occurred once every 40 years are now happening every 5 or 6 years in many regions across Canada. Last year only Montreal, Toronto, Thunder Bay, Hamilton, Steinbach in Manitoba, all experienced a 1 in 100 year event. Here in Toronto over the last 20 years, we have experienced four 1 in 100 year events, and eight 1 in 50 year events. As a result we are building up on our action plans of the past years and are expanding our base pricing, redesigning our products, and refining our underwriting criteria to better take into consideration the emerging reality, to which each of our customers are exposed.

We are also offering our customers discounts and incentives to endorse mitigation measures and working on increasing awareness prevention as well as education,both among our customers as well as our brokers.

While the impact of climate change is significant for our industry, we should not forget its impact on society and our fellow citizens.So, really quite significant, and might likely hinder our collective prosperity as well as the wellbeing of the country overtime.

While mitigation measures may prove beneficial for future generations, we need to act now to adapt to our changing weather patterns. That’s why we have been collaborating with the University of Waterloos since 2010. In identifying the most vulnerable sectors of our ecosystems, communities, as well as the actions that we should take as a society to better protect ourselves. Our joint efforts led last June to the publication of a comprehensive report of lining concrete recommendations touching city infrastructures, land use policies, as well as home resiliency.

The report further stresses the need to protect biodiversity as well as our fresh water resources.So we are now pursuing our collaboration with the university to take action on a number of these recommendations by promoting cost effective demonstration project that would reduce the pressure on our water infrastructures through the use of green infrastructures.These demonstration projects will involve the active participation of citizens, local NGOs, municipal officials, as well as conservation authorities realizing these adaption initiatives that has in our view a high potential of repetition across the country.

Turning now to auto insurance, much attention will be devoted - and has been devoted to Ontario where the Governor has announced last week its intention to adapt a number of initiatives in depth reducing both premiums as well as cost of providing the automobile insurance protection. The measures announced by the government build upon the reforms adopted back in 2010 which have been overall quite effective. They provided more charge to consumers, provided a more stable cost environment, and maintained the availability of insurance in Ontario.

However, the cost of auto insurance remained high in the province.This is why we support the government’s decision to tackle the fraud issue head on and adopt a number new cost containment measures. These measures are most important in our view as they will build momentum for action that will bring meaningful improvement both in the short as well as in the long run. The government understands in our view that without such measures the proposed reduction in premium will be very difficult to implement as it would put undue pressure on the industry and lead to availability issues in the province.

Despite its challenges auto insurance in Ontario remains an attractive market for Intact in the long run. Given the complexity of this market though we’ve adopted a perpetual improvement strategy as demonstrated by our own pricing, segmentation, and claims action over the past few years. As a result we’ve demonstrated the ability to maximize our performance in periods of market turmoil. Our teams are approaching the current environment with the same level of determination.

As we look forward we are confident that our journey towards becoming a world class P&C insurer where our customers will be advocates, our people will be most engaged and will be recognize as the most respected insurer will be successful.Our people can be proud of what they have achieved this year.

Throughout this transformative year which was really quite demanding they proved day in and day out that they were the best insurance team in the country. Without their engagement we would not have been able to deliver another stellar performance to our shareholders. And we would not have been able to provide our customers the outstanding experience they deserve and our brokers a high quality of service they came to expect from us. Thanks to the efforts of our people, the support we received from brokers is at an all-time high. And I also like to thank them, the brokers, and reiterate our unwavering support and commitment to help them prosper and succeed in a highly competitive environment.

Well, we are here to help our customers get back on track after an unexpected event. We all realize that there is more to it.We also play an essential role in helping people, business and society prosper by providing them confidence, security, and the freedom to prosper, innovate, as well as progress. So I am confident that by continuing to live our values and integrity, respect, excellence, customer driven, as well as being socially responsible all of us at Intact will make a real difference and a greater contribution to society.

In closing I would like to thank all our shareholders for their support, and reiterate our commitment to ensure that we’ll continue to deserve your confidence for years to come, thank you very much.

Claude Dussault

At this time Charles and I would welcome any question you might have regarding the business of this meeting.There are microphones in the each of these independent seats. Go ahead if you have any questions.

Question-and-Answer Session

Unidentified Participant

My name is Edwin Conner [ph] and I am a proxy for my children who are shareholders.Can you be specific what you are going to be doing for fraud protection, relative to the Ontario auto premiums activity? Thanks.

Charles Brindamour

So when it comes to fraud prevention, I think an area of focus at the industry level and then I will get to Intact level, is basically to make sure that consumers in Ontario and Ontario drivers understand the risk of being taken advantage of when an accident happens.We work with the industry in that regard to make sure that we are doing our utmost to help the population understand that risk. And from my perspective that’s a really important point here,to make sure that consumers and the industry work together to ensure that the premiums that are being paid actually end up in the right hands, which has been an issue in the past as we have seen fraud in Ontario in the range of a billion dollar, pre-reforms in 2010. Then to assess how to tackle fraud you need to understand why it exists in the first place.Part of the reason why fraud emerged in the system in Ontario is in part because the product was excessively rich which therefore attracted let’s call these entrepreneurs to develop businesses on the fringe of the automobile product, and this ballooned in 2009 at which point the government said, enough is enough.We need to make sure that automobile insurance remains affordable in Ontario.

So, what the government did at that point in time is ensured that the level coverage was inline with the needs of Ontario driver, and that formed the foundation for the reforms that took place in 2010. So that’s sort of the macro picture of where fraud is coming from and what the government is focused on.

In Ontario in part because of fraud Ontarians spend above 5% of their disposable income on automobile insurance and that compares to 3% in other jurisdictions. So it really highlights the issue that the government is focused on at the moment.What have we done internally as an organization to fight fraud.First of all we try to understand in parts of the supply chain fraud came from.Because the thing in the context of Ontario is that it’s not consumers who are fraudulent in large part it’s those third parties that have built businesses around the automobile insurance product.

So our fraud efforts have really been focused on making sure that our supply chain was acting with the highest level of integrity.And therefore, we modified our claims processes to make sure that operators and the supply chains who had bad intentions would be treated by certain group of employees and customers who were in periods of distress and needed help were treated by a different group of employees in particular.

The other thing that we are pushing on at the moment is leveraging our [inaudible] ability by deploying neuron networks through our databases to identify schemes of fraudulent activities. In areas that would otherwise have been very difficult to identify, and that’s the big portion of the activities on which we are focused on at the moment.And I would say this sort of covers why there is fraud and what the industry is doing, what the government is doing and some of the things that we are doing as an organization. I don’t know if it answers your question.

Claude Dussault

Are there other questions?If not, we have now completed our agenda for this annual meeting, and so may I have proposal to terminate the meeting please.

Unidentified Participant

My name is [inaudible].

Claude Dussault

Thank you, may I have a second?

Unidentified Participant

My name is Michael [inaudible] the company, I second this motion.

Claude Dussault

Thank you. So I now declare that the meeting to be terminated and thank you for attending, I would ask that you exit by the door at the back of the room where refreshments are available. You will have the opportunity to meet the directors and the management team who will be here. Finally, I would like to inform you that the you are also invited to visit the collections of the art gallery if you wish free access has been granted to all attendees of this annual meeting.Thank you.

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