Mr. Charles Brindamour reports

INTACT FINANCIAL CORPORATION AND RSA ANNOUNCE SALE OF UK DIRECT PERSONAL LINES OPERATIONS TO ADMIRAL GROUP PLC

Intact Financial Corp. and its subsidiary, Royal & Sun Alliance Insurance Ltd., have reached an agreement to sell RSA's United Kingdom direct personal lines operations, representing approximately 165 million British pounds of annual premiums, to Admiral Group PLC. The transaction will result in the transfer of renewal rights, brands and employees. RSA will retain the claims reserves, which will be run off over time.

The sale has been approved by the boards of directors of both Intact and Admiral and is expected to close at the end of Q1 2024.

RSA will also exit its U.K. home and pet partner and broker contracts, representing annual premiums of approximately 515 million British pounds, and is exploring options to either transfer these arrangements to other parties or let the contracts expire over time. This step completes RSA's exit of the U.K. personal lines market and marks the conclusion of the strategic review announced on Sept. 6, 2023.

The sale price for RSA's direct home and pet operations includes an initial cash consideration of 82.5 million British pounds, with a potential additional payment of up to 32.5 million British pounds, subject to the fulfilment of certain retention thresholds. In aggregate, the proceeds from the sale to Admiral and the release over time of capital backing the U.K. personal lines business are expected to total approximately 350 million British pounds, including the benefit of earnout provisions.

"The exit from the U.K. personal lines market sharpens RSA's focus as a leading U.K. commercial and specialty lines player, accelerating our ability to deliver sustainable outperformance in the UK&I [United Kingdom and Ireland] segment," said Charles Brindamour, chief executive officer of Intact Financial.

Ken Norgrove, chief executive officer of RSA, added: "We recognize the important work of our personal lines colleagues in building RSA's leading home and pet businesses. I'm confident that Admiral's shared values and track record in delivering excellence for customers makes them a perfect fit for our U.K. direct personal lines business. Our focus is on ensuring an orderly transition that supports our customers, colleagues and partners."

Although it is exiting the U.K. personal lines market, RSA will continue to maintain its personal lines presence in Ireland, where it is recognized as a leading provider of motor and home insurance, in addition to commercial insurance.

Strong strategic rationale:

• Exit of U.K. personal lines accelerates the company's ability to deliver outperformance in the UK&I operations, consistent with Intact's objective to outperform wherever it operates;
• RSA will focus its resources on its leading commercial and specialty lines platform, which has consistently been delivering combined ratios of low 90s;
• RSA's technology investments will now be redirected to commercial lines, thereby accelerating the company's ability to modernize its platforms and build outperformance;
• Refocuses RSA's distribution model on brokered commercial lines, where the economics are more attractive.

Financial impact:

• Underwriting income (including any catastrophe losses) from U.K. personal lines will be reported in exited lines from Q4 2023 onward; the impact on NOIPS (net operating income per share) attributable to the exit of U.K. personal lines is not expected to be material;
• The overall exposure to U.K. personal lines will gradually diminish as approximately 6,803 million British pounds of annual premiums run off starting in mid-2024;
• Approximately 240 million British pounds of capital is expected to be released over time, which will partly be used to reduce leverage; the pro forma adjusted debt-to-total capital ratio is expected to return to approximately 20 per cent by the end of 2024, though release of capital is expected to continue beyond that date until both direct and partnership business is fully run off;
• RSA expects to incur costs related to the exit of U.K. personal lines over the next three years, the majority of which is non-cash; the ultimate amount of these costs is contingent on the nature and timing of the transfer of partnership arrangements; proceeds from the sale of U.K. direct personal lines are expected to mostly offset these costs;
• The impact on book value per share (BVPS) is not expected to be material.

Additional details related to the U.K. personal lines exit:

• The sale of RSA's direct personal lines operations in the U.K. entails the transfer of the new business franchise and certain operations, brands, employees, data and renewal rights to Admiral, with the transfer expected to take place at the end of Q1 2024;
• The transfer of policies will be completed through a renewal migration over 12 months expected to start from Q3 2024, minimizing impact on customers;
• Around 300 RSA employees will move to Admiral to provide continuing support and service delivery;
• RSA is exploring options to transfer to other parties its home and pet partner and broker contracts, which will otherwise expire over the next two to three years; RSA will work closely with partners and brokers to ensure a smooth transition process;
• RSA will retain the claims reserves related to all of its U.K. personal lines business, which have recorded favourable prior-year development over the last two years.

Outlook for the continuing UK&I business

On Oct. 26, 2023, Intact and RSA completed the acquisition of Direct Line's brokered commercial lines operations, representing annual written premiums of approximately 530 million British pounds. This transaction significantly strengthened RSA's outperforming commercial lines business:

• Following the subsequent exit of U.K. personal lines, Intact's continuing UK&I operations are expected to generate 2.8 billion British pounds of premiums in 2024, representing approximately 20 per cent of Intact Financial direct premiums written;
• Approximately 95 per cent of UK&I direct premiums written will be attributable to commercial and specialty lines, with the remainder coming from personal lines in Ireland;
• The pro forma UK&I combined ratio is expected to be in the low 90s in 2024; this is expected to improve by approximately two points in the subsequent 12 to 24 months through both loss and expense ratio synergies related to the direct line acquisition;
• The direct line brokered commercial lines transaction is expected to generate an IRR (internal rate of return) in excess of 15 per cent.

Advisers

J.P. Morgan Securities PLC is acting as financial adviser to Intact Financial. Skadden Arps Slate Meagher & Flom LLP is acting as legal adviser to Intact Financial in this transaction.

About Intact Financial Corp.

Intact Financial is the largest provider of property and casualty (P&C) insurance in Canada, a leading provider of global specialty insurance, and, with RSA, a leader in the U.K. and Ireland. The company's business has grown organically and through acquisitions to over $21-billion of total annual premiums.

In Canada, Intact distributes insurance under the Intact Insurance brand through a wide network of brokers, including its wholly owned subsidiary, BrokerLink, and directly to consumers through belairdirect. Intact also provides affinity insurance solutions through the Johnson Affinity Groups.

In the United States, Intact Insurance Specialty Solutions provides a range of specialty insurance products and services through independent agencies, regional and national brokers, wholesalers, and managing general agencies.

In the U.K., Ireland and Europe, Intact provides a range of personal, commercial and specialty insurance solutions through a wide network of brokers, third party partners and directly to customer under the RSA brands.

About Royal & Sun Alliance Insurance Ltd. (RSA Insurance)

RSA Insurance is a multinational insurance group. It is one of the world's oldest general insurers, providing peace of mind to individuals and protecting small businesses and large organizations from uncertainty. RSA Insurance uses its capabilities to anticipate and improve outcomes for customers through its direct channel, its strong broker relationships or partner organizations. RSA Insurance has established businesses in the U.K., Ireland and continental Europe.

In 2021, the former RSA Group PLC came under new ownership and is now a wholly owned subsidiary of Intact Financial.

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