Intact Financial Corporation

Dennis Westfall - Vice President of Investor Relations Charles Brindamour - Chief Executive Officer Louis Marcotte - Senior Vice President and Chief Financial Officer Patrick Barbeau - Senior Vice President of Personal Lines Alain Lessard - Senior Vice President of Commercial Lines Mario Mendonca - TD Securities Mathieu Lamy - Senior Vice President of Claims

Geoffrey Kwan - RBC Capital Markets John Aiken - Barclays Shubha Khan - National Bank Financial Paul Holden - CIBC Doug Young - Desjardins Capital Markets Tom MacKinnon - BMO Capital Markets

Thanks, Jonathan. Good morning, everyone.

Thank you for joining us on the call today. A link to our live webcast and background information for the call is posted on our website at www.intactfc.com under the Investor Relations tab.

As a reminder, the slide presentation contains a disclaimer on forward-looking statements, which also applies to our discussion on the conference call. Here with me today are Charles Brindamour, CEO; Louis Marcotte, CFO; Patrick Barbeau, SVP of Personal Lines; Alain Lessard, SVP of Commercial Lines; and Mathieu Lamy, Senior VP of Claims.

We will start with formal remarks from Charles and Louis, followed by a Q&A session. The others will also be available to answer your questions during the Q&A.

With that, I would like to ask Charles to begin his remarks.

Thanks, Dennis. Good morning, everyone and thank you for taking the time to join us today.

Earlier this morning, we announced a first quarter net operating income per share of the $1.37 well ahead of last year, as a repeat of challenging winter conditions was offset by lower catastrophe losses and the benefits of our action plan. From an underwriting perspective, our combined ratio of 93.4% reflects the negative impact of weather on our auto businesses, but also the strong results in our two property and liability lines.

Our efforts to grow our distribution activities also contributed to the earnings growth in the quarter. In combination, these factors led to an operating ROE of 17.2% well ahead of last year.

Turning to our two primary financial objectives, 2014 significantly down [ph] net operating per share, put our trends back on track with an average annual growth rate of 13% since 2011 above our target of 10% per year growth overtime. From an ROE perspective, we target to outperform the industry by at least 500 basis points every year.

We done so by 703 basis points an average since 2011 and did so 820 basis points last year. When I look at the results we generated in the first quarter, I am pleased overall but disappointed that we didn’t make an underwriting profit in our personal auto line of business.

We do not view this result as the beginning of a troubling trend, but rather the impact of a severe winter particularly in Québec and Atlantic Canada. Our home improvement plan was fully rolled out 2014 and contributed to the very strong 80.7% combine ratio for personal property in Q1 2015.

Our commercial P&C action plan also contributed positively to result and help lead to a 90.9% combine ratio during the quarter. In auto, the Ontario government’s rate and cost reduction mandate as resulted in an average production of approximately 7.1% for the industry as of the end of the quarter.

Governments cost reduction measures to-date include tightening of the minor injury guidelines, licensing of healthcare clinics to reduce fraud and Bill 15 which was passes late last year and is becoming effective as regulations are defined. The savings from Bill 15 include a reduction in prejudgment interest the levels closer to current interest rates as streamlining of the dispute resolution system and protection for consumers against trustworthy towing and storage providers.

In recognition of Ontario Bill 15, we elected to take additional rate reductions bringing our accumulative rate decrease to 9.6% since August 2013. Two weeks ago, the Ontario government released a budget on planning additional actions to reduce costs.

These include abating the catastrophic impairment definition and reducing the standard duration of medical and rehabilitation benefits to be more in line with that of other provinces. The budget also outlined some ways to translate cost savings to lower rates for consumers.

As expected, these changes will go long way to improve affordability of the product, though the precise impact will become more authored as regulations are defined in the coming months. We feel comfortable with the changes taking place in Ontario auto and will continue to pursue growth in that market.

Overall for IFC, under relying growth of approximately 3% in Q1 maintained the similar pace to the prior quarter as mid-single digit growth in commercial lines and personal property, offsets our growth in personal auto. The industry continues to move in property lines as market conditions affirmed and our relative position has improved.

Units were up 1% in personal property during the quarter, despite the headwind from our full product changes and rate actions. When it comes to our outlook for the industry, we expect continued hard market conditions in personal property to drive upper single digit growth in that line of business, helping to offset our expectation of slightly negative growth in personal auto.

Commercial P&C and firmed in the past year, rate increases at renewal in this segment were again close to 5% in the first quarter. Think that the low interest rate environment and minimal profits at the industry level give us comfort in projecting a mid-single digit level of growth for the commercial lines industry in 2015.

Overall, we expect low single digit industry growth across all lines. As for IFC, our growth ambitions have not changed.

Our financial position remains strong with approximately 600 million of excess capital after financing our acquisition of CDI solely with excess capital. Our objective is to leverage our underwriting performance by reinvesting our capital to expand our position here in Canada.

Our multichannel distribution strategy is gaining momentum and the industry outlook is conducive to organic growth despite rate decreases in Ontario Auto. I mentioned a more focused branding approaching on our last call.

One of our major objectives is to see Intact Insurance and Belairdirect our two core brand become household names for Canadians. We’ll focus in that coming months and years our efforts on showcasing these brands with significant investments in marketing.

We’ve also been very clear that our direct and distribution operations are key areas of focus for growth in the near term. Our acquisition of Canadian Direct broadens our direct to consumer platform from coast-to-coast and facilitates our goal of doubling our direct capabilities in the coming year.

All this while proving an immediate earnings accretion and surpassing our target of a 15% internal rate of return. I welcome the CDI team to Intact and look forward to shaping a strong platform Western Canada together.

In conclusion, we are energized by our prospects for 2015 and beyond and believe that the discipline approach we take towards operating our business will continue to serve us well. I believe that we’re well positioned to excel in the current environment aided by a strong capital position which enables us to execute upon opportunities for profitable growth.

As we look forward, we are confident in our ability to grow our platform and become one of the most respected companies in Canada. With that I’ll turn the call over to our CFO, Louis Marcotte.

Thanks Charles. Good morning, everyone.

I’ll focus my remarks on three topics this morning, our operating results, our lines of business and our balance sheet. First our operating results.

From a top line point of view, our underlying direct premiums written grew by 3% for a second quarter in a row on the back of continued hard market conditions and personal property, firmer conditions and commercial lines and low single digit growth in auto. Our combined ratio improved 3.7 points to 93.4% in the quarter, as benefits from our actions to improve profitability help offset the impact of a long and cold winter particularly in the Eastern Canada.

As weather related losses tended not to reach the catastrophe threshold this quarter, our underlying current year loss ratio increased 2 points to 73.1%, while catastrophe losses were lower by 3.7 points. As usual, favorable prior year development this Q1 is higher than other quarters of the year and helped mitigate the weather effect on our results.

Net investment income of a 105 million in the quarter was unchanged from a year ago as the benefit of higher average investments was offset by lower yield. This is in line with our expectations and there is a reasonable run rate for the rest of the year.

Net distribution income in the quarter increased by 9 million from last year to 20 million, due to growth of our distribution operations, as well as higher profitability. We remain on track to hit our run rate of a 100 million in distribution income in 2015 and are happy to report that BrokerLink has now hit the 1 billion mark in terms of annual direct premiums written.

Finally, our expense ratio of 3.2% was 0.4 higher than last year, which has benefited from a lower level of variable compensation. Moving to our lines of business, personal auto premiums increased 1% in the quarter on a 1% increase in units as growth in other markets offset the impact of rate reductions in Ontario.

The combined ratio in the first quarter was 100.3% in the winter marked by record cold temperatures which led to a higher underlying current year loss ratio. This was partly offset by an increase in favorable prior year claims development, due partly to our increasing comfort with the effectiveness of auto reforms.

Personal property premiums grew by 5% on an underlying basis, while the units grew by 1%, reflective of continued hard market conditions. All planned actions under out home improvement plan will have completed one year renewal cycle in May of this year and we estimate that the ultimate benefits were roughly 90% earned in Q1 2015.

We’ve reported a combined ratio of 80.7% in the quarter 11 points better than last year, helped by an absence of catastrophe losses and by actions under our home improvement plan. On the commercial side, auto premiums were up 8% year-over-year as we continue to benefit from strong growth in trucking fleets.

As with personal auto, commercial auto was also heavily impacted by challenging winter conditions which drove the combined ratio 7 points high the 96.4%. The commercial P&C business a decent top line growth of 3% benefiting from higher rates.

Units declined slightly in the quarter due to timing of contracts though retention levels and new business activity of serving the quarter continue to support our view that the commercial lines market is firming. The combined ratio improved by 15 points to 90.9% helped by rate increases, low catastrophe losses and high favorable prior year development.

As such, we are continuing our commercial P&C action plan with a goal of running this business in the low 90s on a sustainable basis. Finally a few comments on our balance sheet, our investment portfolio is of high quality and well diversified.

At quarter end, investments amounted to 13.4 billion, 9% higher than the year ago. Our portfolio generated net investment gains of 101 million in the quarter as higher bond prices more than offset 30 million of impairments on equity investments.

The energy sector which represents approximately 7% of our total portfolio represented half of the impairments. The federal budget released in April included items which could affect the tax treatment of certain dividends.

Although the rules are not yet final, they could increase our annual tax bill by approximately $12 million to $15 million starting in November of this year. However, we believe we can offset most of these lost earnings through mix, strategy or other portfolio changes while maintaining our prudent risk management approach.

We ended the quarter in a strong financial position with an estimated MCT of 213%, an excess capital of 763 million. Pro forma, our CDI acquisition which closed on May 1st, we remained in a strong position with excess capital of 600 million.

Our book value per share at quarter end was 12% higher than a year ago, and we delivered an operating ROE of 17.2% over the last 12 months. The planning process for the CDI integration is already well underway and we continue to expect the acquisition to be 2% accretive in the near term.

This acquisition expands our direct-to-consumer presence from coast-to-coast and is expected to deliver $10 million in annual synergies ones this run rate has reached in mid-2017. In conclusion, we are happy with the strength of our operations through this challenging winter and are looking forward to the prospect of addition CDI with its track record of solid underwriting results into our platform.

We’ve remained in a strong financial position to pursue further strategic investments which coupled with our talented group of employees and robust operating platforms should allow us to continue to outperform the industry’s ROE by at least 500 basis points every year. With that I will turn the call to Dennis.

Thanks Louis. Jonathan, we are now ready to take questions.

Hi. Good morning.

First question I had was just on the Ontario auto, obviously I can appreciate it may not be kind of quality the impact what came out from the budget, but directionally the way that you think about and what might happen is how much more or if any do you think might still need to come on the cost reduction side if the 15% premium hits are going to get achieved?

I’ll ask Patrick to give you his perspective on this.

So on the 15% to start with is net-net only a target and more that is present in our discussions that recent budget of Ontario contains a good reforms that will reduce cost. We - it will have to go through regulation then in more detail for us to be able to exactly estimate the cost savings, but it’s probably a few points based on the high level information we have, it could be something like four points probably and it could vary with final regulations.

In terms of timing for rate decrease, the next steps are we expect in the next few days to get a more detailed description what those reforms will look like and then it will take a few months to go through details regulation. After than the industry so in collaboration with government will have to estimate precisely how much its work and we’ll probably then go to the filing process to reflect that into our rates.

But we don’t expect that those rates could be effective before first part of 2016.

I think Geoff, if you look at the budget, it is setting very pure direction for the regulations to come out. And they are really focused on what I think are important items.

I think a stronger cap definition and we taught to investors about that in the past year. It looks like it’s materializing now.

I think to include attendant care with medical rehabilitation both at the catastrophic level and in the base product are also I think pretty effective measure and then to reduce the time line on the med rehab front from ten to five years. These are all step that move the product somewhat closer to other jurisdictions.

It remains, let’s be very clear a richer product then in any other jurisdiction in the country, but I think the government is really focused on the right things here to bring back affordability of the product into system. It will take some time as Patrick saying, but there is meet in this budget and we’ll corporate with the government to get the best regulation possible to achieve their objecting.

Timing, early ‘16 in this care, we think but we’ll see as things of out this summer.

Okay and then just second on the Ontario auto front, the change slight weaken noting on your outlook on Ontario - sorry personal auto slight a negative growth for the industry level versus low digit and I think reporting from last quarter, was that just related maybe to what happened with the Ontario budget and the likelihood of - further cost reductions and further kind of the revenue?

Yeah, I think Geoff, you know we’ve been talking about flat low single digit in part because of the Ontario reductions that were in the system. We’ve seen the second half of 2014 industry results come out the few weeks ago where basically there is milled negative growth after one year of almost - maybe not one year, a little less than a year of Ontario auto rate decrease.

We’re now seeing a budget with meaningful cost reduction and I think we’re taking a cost here. To say, in aggregate I think you can expect a best of flat automobile industry growth lightly low single digit negative growth for that line of business driven by Ontario automobile.

Okay. And last question I had was just on the M&A landscape, maybe an update on anything that domestic international and given the strong valuation notably you guys trading at, you know does that change if at all your appetite in terms of doing acquisitions?

A review of the environment has not changed on the contrary. I think that what we’ve been talking about for a number of years keeps materializing.

And there is no external forces that would lead us to think that this perspective that 15 to 20 points of market share will change hands has changed. As you know we used to say 25 to 30 point there is more than 15 points that I have changed hands.

We think there is much left and the forces actually should see that happen in the near mid and right up to 60 month horizon, our view has not changed there. And you know regardless of our valuations, I mean we look at deals for what they are and they have to make sense regardless of the financing.

So I would say no, this doesn’t really change our perspective, these deals have to be financial home runs, they have to be strategic and that’s where it stops.

Okay and then sorry, on the international side?

Well, the international side, as you know is positioning for the longer term. We’ve done a small transaction in Brazil last year; I think one can expect to see some activity in the coming 12 months.

It is positioning for the longer term. Our focus is really to expand our platform here integrate CDI and continue to bluster our distribution because the growth opportunity and the capital deployment opportunities are I think very attractive right where we’re leading.

So that’s where the focus is.

Okay, great. Thank you.

Good morning. I would to explode the how your claims recoveries that you had this quarter now, I know that there is the seasonality in the first quarter.

You mentioned in the MD&A confidence in terms of the Ontario auto cost reductions. As when although it does look like you’ve had some significant recoveries as well on the personal property and commercial P&C lines.

When does this flow through in terms of ongoing claims that in terms of the Ontario auto, when we will see this actually go through into the lower claims ratios if you actually are confident in the lower cost associated with auto. And can we extrapolate that out as well in terms of the property lines?

So you are absolutely right, John that that the first quarter is always stronger in terms of prior year development, it’s normal because it’s the quarter that’s the closest to the prior year. So if you look at the activity in Q1, half of the activity comes from 2014.

If you go back in time, you see that last year for incidence our prior year development in Q1 is 7.6% and if you go back two years, it’s about 6%, there is well utility. I think what the and usually strong prior year development this quarter is there is probably a two, three points beyond what one should expect in Q1.

And I think there is a number of areas where we’re seeing maybe items that are not recurrent in nature. First, we’ve seen more favorable development on short tail type claims for a number of reasons, but ranging from weather driven right up to the positioning that are actually took at the end of last year on short term claims.

We’re seeing indeed a drop in uncertainty as a result of reforms from coast-to-coast Ontario being the most important obviously, coupled with court decisions that have been rendered recently which adds to our comfort. So you probably have a point there more than what one would expect.

And finally in commercial lines indeed you probably have another point above what otherwise would have been a normal favorable development in the quarter. There are volatility and a bit related to large losses.

So Charles, if in 2014 there were some embedded conservatives in the claims development that if it’s related to the Ontario auto reforms. At some point going forward, are the actuaries going to reduce the claims, so the claims cost associated with that or we going to see recurring call it one percentage point higher recoveries in prior years on an ongoing basis?

You know if you look at the underlying current year loss ratio in automobile insurance in aggregate then I don’t want to start focusing on provinces per se. I mean for the past four of five years, they’ve been into low 70s you know 70% to 73%.

And indeed there’s been favorable development probably higher than what one should expect the reforms are one element of that, the AXA transaction are also one element of that. And so I don’t want to guide folks towards a lower current accident year loss ratio or more favorable development.

I think we are taking a cautious stand at running the business. Sometimes it goes above our historical pattern of 3% to 4% which has been the case in the past few year, but I wouldn’t want people to be - too excited past 4-ish percent going forward.

Thanks, I appreciate the color. I’ll be in queue.

Thanks.

Thanks, good morning. So just a follow-up to Geoff’s question on Ontario auto there, should we think of the government’s initial previous target of hitting rate reduction 15 rate reduction by August 15 has longer a firm deadline so it’s - that’s pushed out to 2015, it’s been made contingent upon further clarity on what the budget proposals might look like in regulation?

I think the government’s objective has not changed and I think they’ve created a lot of momentum. I mean if you look at our own situations, rates have dropped by more than or dropping by more than 9% into these reform on the back of the number of initiatives that the government has ruled out.

So there is lot of momentum in this system. And I think the point we are making is, we are seeing in the budget now other meaningful reforms that have the potential of limiting inflation in the system and bringing as Patrick said I don’t three, four or five point, we’ll see what the rags will be in a few months from now.

I think momentum is in the system and there is lots to show for. Now when it will be effective?

I think it’s indeed later in ‘15, early in ‘16. It’s just a practicality, but I think we’ve done what they have to do to come up with meaningful reforms.

This is a pretty complex product that the government has to deal with. And I think we’ve gone as fast as we could in the current context.

Don’t forget that they’ve had to go to an election last spring which basically obviously slow down and I am not sure it was their decision to go through an election process. So I think stakeholders understand that, they are goings as fast as they can and I think they are focused on the right things.

And they are headed in the right direction definitely towards their objective.

Okay. And just a follow-up to that, may I look at your rate reductions that I have seen delivered so far, so 9.6%, is does any of that relate to your telematics rollout or is that immaterial so far?

Yes, there is about two points of that nine plus that is linked to the launch of our UBI initiatives or telematics. We already reflected part of the penetration that we expect with that that product and the average discount is about 10% so for clients and yes it’s part of the total nine.

And that would reflect the higher than industry rate reduction that you delivered so far, right?

Yeah and I think the other things is that when Bill 15 came out, which is and the process have been finalized, we looked at that decided to take a leadership position and reflect I think the good work that the government has done on Bill 15 before the others.

Okay. Final question on commercial P&C, you are looking another four points in combined ratio improvement under your action plan, will those four points mainly come from product changes or you contemplating a rate increases as well.

I mean it looks like UNICOR suffered because of the action plan. So I am just wondering whether you will be looking to deemphasize pricing actions right now?

I would say that there is no plan to deemphasize the pricing action that we have and what we are seeing is there is about four point to be earned because as the price increase are going they are not effective immediately on the loss ratio, they need to earned over a 12 month period. So basically what we are seeing is that with all the action we’ve done so far and what we’re continue to do, we’re looking at still four points to be earned in the next 12 months coming from our current action plan, although the impact on the unit and the growth is immediate on the top line.

Although I would have one comment that on the unit on commercial lines because commercial lines we have average premium that can range from $500 to a few million dollar. So we track the growth mostly on the premium situation.

And in fact in our current first quarter result, the reduction in unit more than half of it is related to a very small program that we cancelled where we have a lot of certificate that very, very low premium. So the impact on the premium is much less than the impact on the unit.

Okay, that’s very helpful. Thank you.

Thank you. Just a couple of question for you, first one with respect to Ontario auto, just wondering how your loss experience is trending there and particular what the experience was in Q1 given that the overall result was up but you attributed to poor weather in Québec and Atlantic provinces.

So just wondering how Ontario trending if you are actually seeing the margin stability you expected?

I’ll let Patrick comment on that.

Yeah, so our Q1 Ontario results are really driven, so if I start with the mainly the underlying loss ratio is really driven by the weather that we experience in the Eastern part of the country. Overall if you look at it by region starting from Atlantic, the underlying loss ratio that audited by a significant margin in Atlantic by also important one in Québec, Ontario just a slight deteriorations when we compared to last year and it’s less than the Alberta.

So Ontario was slightly impacted by the weather but not as much as Québec and Atlantic. And when you look overall in all those places, it’s really physical damage or small collusion, it’s not driven by any BI or AB trend.

Okay. And then in terms of your rate decrease of 9.6, so the industry at 7.1, would you expect that gap to narrow going forward or do you think that gap will be persistent.

And then if it is going to be persistent, how should we look at that?

We expect that gap to narrow of course player make their own decisions, it’s super competitive, Ontario there is 25 active players very few industries that I think are competitive like that. People are waking to see the color of Bill 15, I think then we’ll get more color on rags and I think it’s question of month as far as I am concerned where people will reflect that into their rate positions.

And just one final question is with respect to progress on growing specialty lines, cyber risk, long haul trucking et cetera, maybe can provide some commentary on those growth initiative?

Paul, I’ll ask Alain Lessard to comment on that just to clarify that cyber risk is part as an initiative for the main product, so and then we’ll comment on specialty lines as well.

Well, I can maybe start with cyber risk. We just launched our offer on cyber risk basically April 1st, so it’s just after the end of the first quarter.

So far we are very pleased with the response either from broker and from clients. Like I said our product is first venture into that product, it’s adapted to the type of clients we have.

We are not looking at international clients, we are looking at basically simple risk commercial line. So our offer is targeted to that.

But so far we are pleased with the response. We will be in a better position to comment on numbers and growth probably in a quarter or two quarter to see what’s the pickup rate.

On the trucking side and the specialty lines, I would say we’re - the trucking is basically, when we look at the growth in commercial auto which is in the range of about 7.8% in the quarter, half of the growth is coming from the commercial to auto, half of the growth in commercial auto is coming from trucking. And we’re pleased because what we’re seeing right now some of that growth is associated with account that we lost a few years ago at much lower premium and it’s probably although the commercial auto it’s still very competitive.

The trucking piece in the commercial auto is a sector which we are now seeing a little bit firming up and some of those accounts are coming back to us. At the same kind of pricing, we had when we lost them to lower price.

So we’re quite happy to the response. And then in fact I think we are now being in a position to leverage the acquisition we did with Jevco acquisition on the trucking side, okay.

On the specialty line, this is a more long term objection to growth it’s a much more complex market, lots of lines and everything. Our focus right now is basically making sure we are growing the trucking and we are looking at seeing how we can improve our presence on the Ontario side.

So there is good growth in specialty lines upward single digit, low double digit depending on the segment you are looking at. This is - we could bigger in specialty lines, I find our progress in slow on that font and more efforts will be put on that front in think in the coming months in 2016, but a good performance overall and good organic growth, just not enough.

Got it. Thank you.

Good morning. I think Charles you may have addressed this or someone sorry may have addressed this in the previous question.

But specifically on page 13 of the MD&A, you refereed to the Ontario superior court decision related to prejudgment interest. And my first part of the question is I would assume I went through reserve development in personal auto and if so, could you just describe that dynamic how that actually affects the company and if you could quantify?

Absolutely, so I’ll ask Mathieu to give you the operational perspective and what that means in practice.

Okay that in Bill 15, there was a reduction of the prejudgment interest from 5% to 1.3%. The question is in the implementation, does that apply to open cases or to interest earned on open cases that’s of Jan 1st.

On new cases.

On new cases. Recently we had a court decision on April 15 that stated that this would apply to all open cases.

So this is more let’s say turn position for us compared to what was in the expected. So it is reflected in our Q1 results, a small portion of it.

There is uncertainty, this is be appealed or will probably be appealed. And so that’s why there is a margin of conservatives on how much be reflected in Q1.

Could you tell us how much that affected Q1 and if there may be a sense for what’s remaining?

Yeah, when I talk about the reduction and uncertainty and confidence in reform, I mention there probably was a point there, part of that point a little more than 15 million bucks is related to this decision.

But presumably there is more than 15 million remaining if you became fully confident?

Yeah, indeed Mario, because this was a court decision post quarter which we felt needed to be partially reflected in the quarter result. And it’s - it’s early, there is uncertainty, there is various threshold that this will need to go through and it has to be.

But 15 million pretax is the right number to think about?

Yes.

Okay. And then if you could provide some context around the $22 million gain on investment is associate and just it’s a number I haven’t paid too much attention to, but sort of it moved this quarter, so some context there will be helpful?

And so Mario, as we are growing our broker network and increasing our equity stakes in them, we basically have step acquisitions if you want. And when we increase the ownership that triggers a gain from the historical cost to the current value and those are the gains that you are seeing through in on operating earnings.

The $22 million is that fairly meaningful number in a given quarter. Should we just assume that’s going to be lumpy and every ones in a while was be a gain like this.

Ones in a while. It’s been active as you know we’ve been very active last year, so you are seeing a couple of transactions close in Q1 which triggers these gains, but I would say it’s lumpy going forward.

Okay, thanks very much.

Hi. Most of my questions have been asked.

But one thing, I want to go back to was just the impact of weather in this quarter. If I look at your current year, accident year combined ratio deterioration year-over-year it look like it was around 2.5 point and maybe Louis, I think then you mentioned that weather had a two point in the quarter, is that right?

So essentially if we’re to exclude weather, the current accident year combined ratio would be relatively flat. Am I thinking about that correctly?

I guess my two points was the overall underlying loss deterioration and we think most of it is weather.

It’s the right way to think about it Doug and in fact if you look at where the current accident year deterioration is taking place, it’s essentially in personal and commercial lines automobile which from our perspective is largely weather driven.

Okay and as you are coming back to the prior year reserve development question, I guess presumably once you get some comfort with the new reforms in the budget, there would be an additional release of reserves that would come through, I would presume that you are holding some conservatives around that as well. I guess is that correct and can you kind of talk about, if you could quantify and talk about what that could mean.

But where I am trying to go with that is essentially we’re talking about positive reserve development for Intact over the few years sustain in this 7% to 9% range versus maybe the 3% to 5% that you target that you’ve mentioned is more the historical average?

Couple of points Doug, if you look at the past four year, it’s been on an annual basis closer to 4% or 5% which is above the range we’ve guided towards historically. When you say 7 to 9, I would say this is a Q1 observation.

And therefore it’s very important to understand the seasonality that exit there. I think that the fact that we’ve been above our 3% to 4% range in the past four or five years, AXA came on board with a stronger financial position than we have assumed.

When we bought that business that contributed to the excess of 3% to 4% or the excess of 4% a year. Accurately reforms were another factor.

I wouldn’t plan four or five necessarily going forward, I think 3 to 4 with a stronger on 4 is probably closer to what one should think about longer term. We’re in a transition period, we had about ten different types of reforms that have taken place in the past 18 months, so clearly a transition.

As you know on bottle injury in particular in Ontario, these are long tail type claims. And you’ve got still even though the reforms were in - at the end of 2010, you have still a few years’ worth of transition.

We think that what we observe in the environment is coming along, our expectation sometimes better. We need to keep an eye on inflation at the same time and integrate the impact of the reforms that have been rolled out in the past 18 months plus what’s coming in the budget.

There is a lot of vectors crushing each other here hence are cautioned.

Okay. And then just lastly, the new MCT guidelines, you mentioned in the release that it’s two point positive impact quarterly through 2015, so presumably two points was in Q1, six points is still yet to come.

And but I think that’s been faced in through ‘15, ‘16 and ‘17, is there - is this front end loaded or is there additional benefit that come in ‘16 and ‘17?

You are absolutely right, it is faced in over three years. We are very cautious over the prediction after 2015, because rules change, tend to change more frequently.

So I think it’s baked in for 2015 at nearly two points a quarter then there is more to come in the two years, but we’re cautious with other changes that could occur that would offset this - the rest of the phase of it.

Is it specific or is just being conservative or there is specific issues of changes that you see that would like everything state the same what would be the benefit in ‘16, ‘17 and what would cause that not to be?

This thing is a straight line amortization, have two points a quarter, basically 21 points roughly over the entire gain and amortizing over three year. Again we’re just being a bit prudent into the impact of future changes that might come and we are not sort of counting on the increases on the next two years.

Yeah, I think there will still be changes in the MCT likely in the coming two, three years and I think we need to pace ourselves.

Is that in particular you are just been out of within conservative?

Yes, not overly, that’s conservative.

This conservative and embedded overly in there. Okay, thank you.

Yeah, this question has been asked and answered but maybe you just elaborate a little bit about the tax impact on the treatment of the dividends, what - and particularly would that relate to how you might be able to mitigate that?

Sure. So firstly important to note that it’s uncertain, we don’t know the final outcome, they might be changed.

What it really relates to is some of the dividends basically on the alpha strategies were tax free for us. And given the changes that are coming out, they would become taxable.

And that where we calculate, we estimate the impact of 12 to 15 million a year of lost earnings because these dividends would become certainly taxable and this starts at the end of this year if there are no changes.

We’re market natural and jump outside type strategies.

Yeah, so it’s actually the outcomes that are mostly impacted. And then in terms of changing it, you know it’s fairly new, so our team is looking at what kind of actions they can take.

But I think it’s important to reiterate that what action we take to offset will be done in the measured way within our current risk management approach. So we’re not going to be chasing yield here, it’s just a matter of finding something.

This was a very effective strategy and now trying to find something as effective as what we’re trying to do, but within the same sort of risk management approach.

How should we look at this going forward, should we assume a 12 million to 15 million annual increase in your tax bill or to what extend we should assume some of this is mitigated?

Yeah, I think that, so this is a recent decision. We are working with the investment guys.

We relocate the capital that will be freed up as a result of this change. So I don’t think one should assume that the tax bill goes up by 12 and 15, that’s not what we assume anyways and we’ll try to bridge the gap working within our existing resemble.

Okay, thanks very much.

We are looking at options now, yeah.

Well maybe I understand that Brian Meredith from UBS had tough time logging in and one of his question which I thought was very procumbent was related to frequency and whether there was more kilometers driven as has been absorbed in the U.S. here in Canada.

So I’ll Patrick comment on your observations on frequency in the quarter and maybe take about what BI will allow us to do going forward with that sort of information.

Yeah, so when results in automobile are affected by weather, we are talking about frequency of smaller claim, so we are seeing this frequency go up slightly in Q1. Regarding UBI or telematics situation, we have now reached above 90,000 clients enrolled that’s together all those clients have driven something like 250 million kilometers that we can analyze our database.

So that’s where we are for UBI and I will let Charles, the link that you were in between two.

Well, the exercise we haven’t been able to do Brian, because UBI is a recent full allow is to compared, what the pool was driving last year versus what the pool is driving this year. The upside is well you relied on indirect statistical information in the past.

Now we have the date to have an actual direct comparison in driving. And I must admit we were not necessarily focused on that in aggregate but I think your question is a good one and we’ll try to tackle that in the coming weeks just to get a better grasp on this.

I think it’s very good point. Thank you.

And I am sorry about that.

So, thanks everyone for participating today. The webcast will be archived on our website for one year.

The telephone replay will be available at 2 p.m. today until Wednesday, May 13.

And a transcript will be made available on our website. Please note that our Annual Meeting of Shareholders will be held at 2 p.m.

Eastern Time at the Art Gallery of Ontario in Toronto. Our second quarter results for 2015 will be released on July 29.

That concludes our conference call for today. Thank you and have a great day.