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OUR MEMBERSOUR PEOPLEOUR COMMUNITIES2020 Q2 Leadership Report
3ROI 2.8%EXPENSE RATIO 39.1%ROE 16.6%CLAIMS RATIO 42.1%INVESTEMENTS $31.9MCOMBINED RATIO 81.2%MCT 486%March 31, 2020Company Profile as of June 30, 2020NEW MEMBERS 707AGENTS 3EMPLOYEES 39BROKERS 20Broker–84%Agent–16%Digital–0%DISTRIBUTION SPLITAutomobile–29%Commercial–21%Farm–16%Residential–34%LINE OF BUSINESS SPLITANNUAL GWP 10 YEAR GROWTH$102010$13.0$14.3$14.6$14.4$14.3$15.0$16.3$18.5$21.4$25.2$31.2 (plan)2011 2012 2013 2014 2015 2016 2017 2018 2019 2020$15$20$25$30$35
Our PurposeOur Values“TO PROTECT THE UNIQUE LIFESTYLES OF EACH OF OUR MEMBERS BY EMPOWERING OUR PEOPLE TO PROVIDE SOLUTIONS THAT ARE CREATIVE, TRANSPARENT AND MEMBER CENTRIC.”INTEGRITYWe are open, honest and ethical. We hold authenticity and transparency in the highest regard.RESPECTWe treat others the way they want to be treated. We show empathy for others by listening and keeping an open mind.COURAGEWe believe it takes courage to lead. We respond, adapt and embrace the changing world in which we operate.EMPOWERMENTWe have the autonomy to find solutions that benefit our members. We have the liberty to create our work-life harmony.SERVICEWe lead and act with a member-first mind-set. We’re accountable to our members, partners and to each other.COMMUNITYWe value and actively support the communities in which we operate. We have deep roots in tradition and will continue to create our legacy of care.1 4253 6
5Our Culture1) We will be fanatically committed to our Purpose and Metrics which will in turn earn us member loyalty and trust.2) High performance comes from sharing information, not hoarding it. It is about being open with our discussions.3) We will trust ourselves and each other by three simple words: Use good judgment.4) Fighting for simplicity takes courage and commitment to cut out complexity.5) Life is short, so it should be fulfilling and fun. Work is a big part of life, so it should be fulfilling and fun.#WheneverWhereverWhatever
CEO ThoughtsIn keeping with our Infinite mindset as noted in our Q1 report, Q2 has led us to item #3 of our 5 principles - “find worthy rivals”. The Infinite game recognizes that competitors are not adversaries to be defeated, but instead worthy rivals who will push us to be the best we can be. Rather than playing to win, it is understood that more than one organization can succeed in parallel. There is no winning. There is only ahead or behind. This will give us the significant flexibility in responding to strategy or product disruptions as they become evident. While this may seem risky to those playing the finite game, the infinite game player understands that there is far more risk to continue down a safe path only to become stagnate. A great example of this is how Kodak was disrupted by the digital camera. Ironically Kodak’s Research & Development division first invented the digital camera. With laser-like focus on short-term revenues, Kodak did not risk their profitable businesses to pioneer their own invention. As a result, patents expired, and their competitors came from behind to pass Kodak which inevitably led to Kodak filing for bankruptcy. Our worthy rivals for the time being have selected from our insurance industry. In the future I see that we will include companies from outside our industry to stretch us in areas that we may not see among our peers to help us grow. The list is as follows:• Intact• Aviva• Travelers• The Co-operators• Wawanesa• Ayr Farmers Mutual• Erie Mutual• Dumfries Mutual• Halwell Mutual• Town & Country MutualOur report will provide current comparisons to these worthy rivals to give you an understanding of where we are ahead or behind in the Infinite Game.As noted in our Q1 report, the first two essential practices of the Infinite mindset are “Further a Just Cause” and Building Trusting teams”. Our employees have clearly demonstrated alignment with these principles as reflected in the recent results of our Employee Engagement Survey.
7 7Our overall favourable result score came in at 90%. You may recall that in our Transition year, our score was 84%. This 6% increase is astonishing considering we are currently in our Transformation year and changes are the norm. Our team is committed and are truly on the right path to becoming high performance, self-managing teams!I hope the content of this report gives you an informed insight as to how we are doing as a company and if there are any questions, please do not hesitate to contact me. Thank you,
Strategic Direction 2020-2022We will provide our members substantially more value than the competition while operating profitably enabling us to give back to our communities. This section will be a reminder as to the foundation of our strategic focus. Building upon the research of McKinsey’s “Strategy Beyond the Hockey Stick”, we are adopting the theme of “strategy is about playing the odds. Not every decision is going to result in a win—but companies that increase their batting average, so to speak, are more likely to succeed. Strategy is probabilistic, not deterministic. Their study revealed that “insurers can take concrete, evidence-backed actions to move them in the right direction and, cumulatively, improve their odds of long-term success.” These purposeful, concrete and evidence-backed actions are referred to as Bold Moves. Their study found that insurers who did the following dramatically improved their odds of reaching the top quintile of economic profit over a ten-year period: • Dynamically shift resources between businesses.• Reinvest a substantial share of capital in organic growth opportunities.• Pursue thematic and programmatic M&A.• Enhance underwriting margins.• Make game-changing function improvements in productivity.The bold moves we will undertake in parallel will give us an opportunity to move into the top quintile of the Power Curve and substantially increase the amount of value creation.
9OKR #1 – Attract and Retain Top TalentLEADERSHIPEMPLOYEE ENGAGEMENT SURVEYSatori Consulting was engaged in conducting our 2nd annual Employee Engagement Survey. Our 2019 results during our Transition year were categorized as world class, however it was thought that our Transformation year would be more of a challenge. New employees were coming aboard and some of our existing employees were retiring, leaving for other opportunities, or simply being dismissed had potential of disrupting our Culture of High-performance, self-managing teams. Any anxiety that did exist over this challenge were soon dismissed as our results came in.Our 2020 survey had 100% participation and yielded am employee engagement satisfaction score of 90. This is 6 percentage points greater than 2019. Certainly, a cause for celebration.Leadership will be reviewing the results and recommendations from the consultant report in Q3 to work on the areas that need refinement.KEVIN SULLIVANLoss prevention OcerKevin is an accomplished 309A Journeyman Electrician and we are delighted he is breaking into the insurance biz with us. Loss Prevention is part of the enhanced services we oer our Members and is a critical component of what makes our business successful.EngagementCommunicationPerformanceServiceEmpowermentRespectIntegrityLeadershipCourageCommunity
OKR #1 – Attract and Retain Top TalentLEADERSHIPWORK FROM HOME EXPENSEWith the onset of COVID-19, we were clearly ahead of the curve in executing on our business continuity plan as all employees were already well versed in working from home. While employees were familiar with the process, we did not plan on it being more of a permanent operation. We soon found that employees were asking about various equipment they could take home in order to perform o premises more eciently. Leadership decided to implement a “Work from Home” tech top up valued at $500 for each employ to purchase equipment (monitor, chair etc.) to use at home. Employee feedback was extremely positive and work performance did not suer at all.VACATION POLICY Our vacation policy was also introduced in this quarter. It was important for Nova Mutual to continually dierentiate ourselves from our worthy rivals. We strongly believe this will be extremely attractive to any potential employee candidate.We elected not to treat vacation as a commodity whereby its value is lowered to something that needed to be accumulated over time. Our approach was to have our vacation needs be “open” and peer governed by our self-managing teams.For employment legal requirements, each employee would all be assessed at 4 weeks’ vacation upon their leaving or dismissal regardless of years of service. This time-o method works when Team Members act professionally and practice good judgment and common sense.BRANDSETTING OUR CAREER POSTINGS APART As we set out to attract top talent we need to look (and sound) our best. We not only refreshed the entire format of our job postings, we also made sure that the content was targeted at our ideal candidates. We avoided traditional platforms (like Indeed or Service Canada) and focused on LinkedIn, Facebook, and Instagram. With our latest posting, this approach both increased our engagement online and saved hundreds of dollars in the process. HR INFORMATION SYSTEM Part of oering an exceptional Employee Experience is setting systems in place to manage/automate our employee data. Q2 saw the programming and launch of our new HRIS software, Deluxe. STARTING A NEW TRADITION The EA Role was replanted to the Brand department as this better suits the nature of the role; supporting the Senior Leadership Team and Board through embodying our
11OKR #1 – Attract and Retain Top Talentvalues and purpose, and acting a role model for the entire Nova Team. The EA Role had also expanded to take on some duties within the Brand department so this was a natural next step.LETTING GO OF WHAT’S NOT WORKING... After several weeks it became clear that though the candidate selected as Member Experience & Communications Coordinator had great energy and a positive attitude, they were just not a fit for Nova Mutual and as such, we parted ways at the end of April. Oboarding ineective roles is a key component to retaining only top talent....AND GETTING CLEAR ABOUT OUR NEEDSThe Member Experience & Communications role was re-evaluated, and it was determined that Brand required a more experience team member and such, the role was reframed as Brand Ambassador and we were delighted to welcome Emily Gibson in the very last week of Q2.EDUCATION ACHIEVEMENTGloria Field has completed a 1-year Professional Certificate in Marketing Management with Western University as of the end of June 2020. This program featured cutting-edge industry information on digital marketing, marketing and social media strategy, research and planning. Nova Mutual was pleased to support the enhancement of her skillset as it ultimately benefits our company many times over. Congrats, Gloria!
ITWith the addition of our new Business Analyst and Project Leader, Nova IT has started to empower our business users with self-service support. Socialization of our new Wiki How-Tos library is underway providing training snip-its for common issues plaguing our users.As well, when a more personal touch is required to explain more complicated topics, Nova IT has embraced Video How-Tos. This project is on-going as we encounter new opportunities to share knowledge amongst teams.OKR #1 – Attract and Retain Top Talent
13OPERATIONSUNIVERSITY TENANTS PROGRAM The Underwriting team has created a new product/service in conjunction with Morison Insurance known as the University Tenants program and launched in May 2020. This program will have Nova Mutual be the sole insurer for the personal property of university students while attending university in Kitchener. We are well priced for this exposure as premiums are fully earned upon issuance of the certificate. Our program premium projection is $125,000 for 2020. PROFARMS PROGRAM The Underwriting and Brand Teams collaborated to develop and introduce a new Farm Program called ProFarms. The idea to create a niche product/service came from our underwriters researching protection systems for large farm processing risks. Further collaborating with Tech firm PrevTech, our teams came up with a substantial coverage, rate and loss prevention program to oer. We have soft launched this with Morison Insurance Brokers with the intention of using Schuyler Farms as our flagship. Working with the Broker and Farm Member will position us well within this niche. BRAND GOOGLE PRESENCE OPTIMIZATION We hired PPL Solutions to manage and optimize our Google Ad campaigns and provide thorough reporting on our Google Performance Data so we can ensure our advertising dollars are working eciently for us as well as ensure our webpage is performing well. We can also understand the groups that are looking for our services as well and thus, be better equipped to move them through the Marketing Funnel.For example, of the data relevant to compare (since this monitoring did not exist last year and neither did Google Ads):Our website users have increased…a lot… same with the number of sessions. Our bounce rate has decreased significantly (which means people are spending more time on our website before leaving) and they’re viewing more content while on our website than before. Quite a bit more. OKR #2 – Increase ProfitabilityUsers27,000.00% 1,674 vs 6Bounce Rate10.17% 67.37% vs 75.00%Sessions19,591.67% 2,363 vs 12Pages/Session42.84% 1.92 vs 1.33
OKR #3 – Enhance Member & Broker ExperienceBRAND#WORKINGTOGETHERMATTERSOur COVID Response initiative, #workingtogethermatters continued to engage people and organizations in our communities facing the pandemic head-on. As some insurers opted to provide their clients with nominal financial rebates, Nova made the decision that our Members would understand that by coming together as a collective, we can point those dollars right at those fighting COVID first-hand.SOME OF THE INITIATIVES CARRIED OUT THIS QUARTER UNDER #WTM WERE• Anson Place – partnership with Twisted Lemon to provide meals for 1 full work week for the entire sta. Valued at over $5K. • 6 iPads to the West Haldimand Hospital so patients can stay in touch with their families. • Brand new outdoor playground equipment for a Day Care in London caring for children of essential medial workers (and lunch for the entire sta catered by one of our Members, Wich is Wich.) • Bath robes for every resident of the Delhi Long Term Care Facility! • BBQ and meats dropped o to Sabor Espresso for migrant farm workers aected by the Scottlyn outbreak. Photos featured in Snap’d. A key component of the success of #WorkingTogetherMatters is speaking directly with the prospective groups and asking them, “what is your immediate need?” This way, our gifts are meaningful, timely, and support the organization with an urgent need. At the end of Q2, #WorkingTogetherMatters has donated over $25,000.00 to local groups.
15OKR #3 – Enhance Member & Broker ExperienceSPROUT SOCIALAfter much research, Brand implemented Sprout Social – a social media management software that allows us to manipulate all our platforms from one place. It provides data on competitors, trending topics, and profile performance to help optimize our time and eorts online.GRAPHICS PROFESSIONAL With great joy that we enlisted Shane Drever of Defiant Creative as our graphics vendor to take over and enhance our Brand through professional graphics & document design. This has proved to be an incredibly eective move in a short period of time. FB LIVE BROADCASTS One of the positives coming out of the #safeathome lockdown was our Nova Mutual LIVE Broadcasts on Facebook. These LIVE sessions allow a fun and valuable opportunity for us to engage our social following by providing excellent content through supporting the arts. We’ve featured Princess Anna from Frozen (a Brantford Small Business) which happened to be our top 2 post by lifetime engagements for the quarter, local yoga instructor Martha Atkins led a live yoga class, Graemazing the magician gave a fun performance, and local well-known artist, Felicia McMinn serenaded us on one of May’s most beautiful Friday evenings bringing some joy to folks everywhere while we were still in Phase I.MEMBER SNAPSHOTS This feature focuses on promoting our small business and agribusiness Members. This involves a 1. Site visit/interview 2. Blog Write-Up 3. Social Post. Posts are co-branded with Brokers as well. This program acts as a double positive because it encourages us to engage with Brokers about our Membership and leverages our social voice to lift up both the Broker AND the Member’s business or farm. By having a blog post tied with this, it also increases trac to our website.
OKR #3 – Enhance Member & Broker ExperienceMEMBER INSURANCE DOCUMENTATION INVENTORY AND OVERHAULBrand and IT collaborated on this project. The first step was seeking out and compiling every piece of insurance communication sent out to Members into a central location. We then examined each document for accuracy, relevance, and reworked as needed. Everything was rebranded and where applicable, put into a digitized format/fillable PDF. Additionally, all the current versions of these documents are now stored within Teams and kept up to date/easily accessed by all team members. These documents/forms are now user-friendly, on brand, and organized well.IF U BUILD IT, THEY WILL COME.We are a society driven by digital technology. Such is its impact that there are countries where citizens don’t have running water, but own smartphones. Digital marketing has an incredible influence on people’s interactions, work, purchases and life habits. Social Media plays a critical role in laying the foundation for sales conversions in a digital space. Customers need to trust and understand the company they are buying from, and they expect Brands to have well-established social profiles and helps to legitimize the company through transparency and honest marketing. Social media is the most important place where Brand Awareness is created, Brand Equity is built and maintained, and is also a place where we get to learn a lot about our audience demographics & psychographics in order to create content that is targeted right to them. Nova Mutual’s social presence is performing well above our mutual peers, and percentage-wise, also well above our top competitors such as Intact Insurance. Social Media is also the principal platform on which we engage with and lift up community groups that we support. Staying true to our values and keeping our social strategy at the heart of our messaging lays the foundation to achieve our goal of providing our Members substantially more value than the competition while operating profitably so that we can give back to our communities.AwarenessInterestDesireActionLoyaltyTOFUMOFUBOFU8,201Q2 Engagements2,045Q2 Engagements182Q2 Engagements100Q2 Engagements
17POLICY AND CLAIMS ADMINISTRATION SOFTWARE IMPLEMENTATION The cNude (Nude Solutions for Carriers) project has progressed rapidly through the requirements phase. The project has been divided into delivery pillars:• Policy Administration• Policy Submission and Portal• Renewals• Claims• ReInsurance• Administration• Accounting• Reporting• Stakeholder Management• Insurance Product Delivery and DesignNova IT has worked closely with the business users from each department to collect, consolidate and represent Nova Mutual’s requirements for each pillar to Nude Solutions. With the Agile approach, there will be refinement of requirements throughout the project, however, Nova IT in conjunction with Nude Solutions and our Mutual partners in this project has delivered sucient requirements for an initial development and deployment of cNude towards the end of July 2020 including Policy Admin, Renewals and some basic Accounting. This release will not be deployed to production but rather used by Nova IT to validate the initial requirements and provide refined direction.In Q2, Nude Solutions has demonstrated a wireframe for their new Insurance Product Design and Delivery solution. This will be included in the July release against which Nova IT will start to build-out our existing insurance products to test its completeness.OKR #4 – Optimize Capital & Support ScalabilityStakeholder Management Reporting Renewals Reinsurance Product Design & Delivery Policy Submission & Portal Policy Admin Migration Claims Administration AccountingCayuga Mutual MILNCOMy Mutual Nova Mutual0REQUIREMENTS PER PILLAR & STAKEHOLDER20 40 60 80 100 120 140
OKR #4 – Optimize Capital & Support ScalabilityMERGER CANDIDATESThree mutual companies were identified in Q2 that had succession opportunities for Nova Mutual to explore. They were Grenville Mutual, Town & Country Mutual and Dumfries Mutual. In speaking with CEO Ross Lincoln of Grenville Mutual, he confirmed that he was retiring however his company was already committed to recruiting a CEO as his replacement. He did not think Grenville has any appetite for a merger under these plans that had been set in motion. In speaking with CEO Rob Pearson, he was very interested in the concept as he was planning on retiring soon and he was very impressed on our presence on social media and felt our brand was very professional. In the end however, he had to decline and stated there were very good reasons that he could not move forward with any related discussions. It was later learned that Town & Country were already in amalgamation talks with Hay Mutual. That Amalgamation has been agreed to in principle and they are currently going through that process. In speaking with CEO Shelley Sutton, she too advised she would soon retire. I asked if I could speak to her board about the possibility of a merger between our two mutuals. Shelley arranged for me to address her board in a Zoom Meeting. The meeting went extremely well as they asked a lot of good questions. In the end however, Dumfries feel that there is no real need for them to amalgamate and that it is not included in their strategic plan. In retrospect with Leadership, our revised approach will be to continue with our strong presence within the mutual community as well as online with our member community. In other words, we won’t go hunting for a partner, but rather have the partner approach us. In that way, we can feel confident that the candidate is committed to having Nova Mutual as a partner.
19OVERVIEWThe second quarter of 2020 was indeed an interesting quarter for the Nova Mutual Teams. The Province of Ontario declared a complete shut-down of non-essential services due to the COVID 19 pandemic mid-March 2020. Insurance was deemed an essential service. Nova Mutual Teams deployed many programs to assist our Policyholders, Team members and Communities throughout the quarter with more to come in Q3 2020. Policyholders were oered premium deferral arrangements, of which about a dozen of such arrangements were put in place. NSF fees were waived in all cases where clients experienced financial challenges where funds were tight and not available at the required time. Team members began working from home in mid-March as a result of COVID 19 continuing to provide outstanding service to Agents, Brokers and Policyholders. This work from home arrangements continues today and has been a huge success. Virtual meetings and discussions are now the norm.From a Community perspective, Farm Mutual Re distributed just over $2.0M to the Mutual Community equating to $41K for each voting member. Nova Mutual will deploy these funds into the communities over the remainder of 2020 helping members and the communities at large where possible. In addition, Nova Mutual has made over $25K in donations within the communities during the quarter relating to COVID 19 support. More about this in the Brand update below.Financial Results Q2 2020UNDERWRITING PROFIT Up $1.3M from 2019 Up $4.0M from plan0.920192.32020-1.7Plan
GROSS WRITTEN PREMIUM Up 23% from 2019 Down 1% from planNET CLAIMS INCURRED Down 1% from 2019 Down 44% from planFinancial Results Q2 2020PREMIUMSYTD premiums are up 23% versus the same period last year. Although this is a significant increase year over year it is consistent with our expectations. The increase is primarily in our specialty lines of businesses where there is a strong focus. Agribusiness premiums are up 31% over last year in part by a single large case (Sandy Shore Farm in Q1). Commercial premiums are up 32% over the prior year due in part to larger average policy sizes and the impact of the rate increase of 9% eective August 2019. Specialty lines accounted for 37% of premiums YTD versus 35% in the prior year.CLAIMSThere were 127 new claims reported in the quarter bringing the YTD total to 274 claims with an average claims cost of $14,287. Of the total claims report 61% of these are Property related claims.There were four fires in the quarter. Two are not considered substantial (approx. $85K and $135K). Two larger fires where one was for the Europa Supermarket in Simcoe (approx. $400K) and a total loss house fire on the Reserve (approx. $550K). Claims incurred YTD for the 2020 accident year total $4.2M with minimal reinsurance recoveries. Claims development in 2020 for all previous occurrence years totaled ($1.2M) with $1.4M reinsurance impact12.3201915.1202015.2Plan8.6Plan4.920194.82020
21Financial Results Q2 2020GENERAL EXPENSES Up 21% from 2019 Down 13% from planCOMMISSIONS & GENERAL EXPENSESCommissions as a percentage of GWP for the quarter of 14% is lower than anticipated partially due to a lower 2019 CPC payment compared to what was accrued for at year end coupled with a sales mix of business dierent from Plan and the Prior Year at 17.0% and 15.3% respectively. General expenses of $2.3M are $341K below Plan of $2.7M primarily the result of lower personnel costs due to timing of new hires and changes in personnel, lower conference costs resulting from the cancellation of the OMIA annual conference and not attending NAMIC conferences, lower IT costs due to lower IBS maintenance fees and lower association fees. Compared to the prior year, general expenses are higher driven by the investment in talent and higher marketing costs resulting from increased community donations as part of COVID 19.2.7Plan1.920192.32020
Financial Results Q2 2020DISTRIBUTION Q2The overall book from both Agent and Broker remain on the positive side, with the broker book continuing to substantially outperform the agent book. Although the Agent book grew 5% overall, it is derived mainly from renewal premium increases that accounted for 8% of written premium. New business Auto -21%, Commercial -29%, Residential -20% and Farm +11%. In comparison, Broker business grew +22% overall. Renewal premiums were +29% while new business Auto – 34%, Commercial +27%, Residential –9%, Garage Auto -55% and Farm +44%. community donations as part of COVID 19.WrittenPremium5%NewBusiness-19%Renewals8%WrittenPremium22%NewBusiness0%Renewals29%Line Written Premium New Business RenewalsAutomobile+5% -21% +9%Commercial+5% -29% +11%Agribusiness-0% +11% -0%Garage Auto0% 0% 0%Residential+9% -20% +11%+5% -19% +8%Line Written Premium New Business RenewalsAutomobile+14% -34% +29%Commercial+35% +27% +38%Agribusiness+29% +44% +27%Garage Auto+84% -55% -746%Residential+18% -9% +24%+22% -0% +29%AGENT Q2 BROKER Q2
23Financial Results Q2 2020DISTRIBUTION YTDThe overall book from both Agent and Broker remain on the positive side, with the broker book continuing to substantially outperform the agent book. Although the Agent book grew +7% overall, it is derived mainly from renewal premium increases that accounted for +9% of written premium. New business Auto -4%, Commercial -28%, Residential -30% and Farm +1%. In comparison, Broker business grew +26% overall. Renewal premiums were +28% while new business Auto – 12%, Commercial +33%, Residential –2%, Garage Auto +32% and Farm +110%.WrittenPremium26%NewBusiness16%Renewals28%WrittenPremium7%NewBusiness-13%Renewals9%Line Written Premium New Business RenewalsAutomobile+10% -4% +11%Commercial+16% -28% +25%Agribusiness-0% +1% -0%Garage Auto0% 0% 0%Residential+7% -30% +9%+7% -13% +9%Line Written Premium New Business RenewalsAutomobile+21% -12% +32%Commercial+33% +33% +33%Agribusiness+42% +110% +28%Garage Auto+445% +32% -729%Residential+17% -2% +21%+26% +16% +28%AGENT YTD BROKER YTD
InvestmentsThe quarter started out very strong but subdued in June. Albeit the quarter investment result end on a positive note at $1.2 net of fees. On a YTD results have swung from the negative territory to positive ending June at $442K. The markets and interest rates continue their volatile ways and Nova Mutual is not completely immune to this volatility. Equity markets saw investors either taking profit or running towards safe havens. Interest rates continue to slide, and we see this as GIC’s renew at less than 1% for a one-year term. The Bank of Canada’s overnight lending rate remains at 0.25% to try and stimulate the economy as the Province now begins to allow non-essential companies to reopen for business while practicing social distancing. In April 2020 the final amount of $1.3 from CCL was transferred to PH&N for investment as prescribed by the SIP. As at the end of June PH&N manages over $28.1 million on behalf of Nova Mutual. In June the Investment Committee recommended to the Board the addition of a Real Estate fund managed as part of the PH&N portfolio. This is considered an alternative asset class within the Statement of Investment Policy. Alternative assets have a dierent risk and liquidity level than traditional Funds and are expected to be deployed to this asset class in October 2020. On June 24th Mutual’s invested in Collectivfide we notified of a Bond call eective Oct 1, 2020. Nova Mutual’s commitment to Collectivfide in addition to our current $400K in equity is an additional $600 in Bonds. Collectivfide has also requested additional funds should the current shareholder companies be interested or new participants.INVESTMENT MIXOther – 0% Broker Losses – 3% Alternative Assets – 0% Global Equities – 4% CDN Equities – 15% GIC’s – 8% Bonds – 70%
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Risk Management Enterprise Risk ManagementThe following section presents our top 9 risks identified with the most severe potential impact. In assessing the potential impact for each of the top risks, the presence and eectiveness of risk mitigation activities are taken into consideration.1 Technology Failure 2 Catastrophes 3 IT and Cyber Security risk 4 Reserve & Pricing Inadequacy 5 Inability to Identify & Contain Fraud 6 Increased Competition & Disruption 7 Turbulence in Financial Markets 8 Losing Key Talent 9 Member Satisfaction Operational Risk Insurance Risk Insurance Risk Insurance Risk Insurance Risk Strategic Risk Financial Risk Operational Risk Strategic Risk No Changes No Changes No Changes No Changes No Changes No Changes No Changes No Changes No ChangesSTRATEGIC RISK• Reputation• Distribution• Government & Regulation• Competition & DisruptionINSURANCE RISK• Catastrophe• Reserving• Underwriting• ReinsuranceOPERATIONAL RISK• People• Processes• IT & Infrastructure• External EventsFINANCIAL RISK• Market• Liquidity• Credit• Basis
31Risk MitigationNova Mutual IT continues to mitigate the findings from our 2020 Penetration Test. In this quarter we have completed an additional 25 findings and have 10 more in progress. Many of the items remaining in To-Do were put on hold with the pandemic as they require in oce actions. With the onset of Ontario’s plan for Phase 3, Nova Mutual IT looks to re-plan these activities.In ProgressTo-DoN/ADone30102318In ProgressTo-DoN/ADone0510152025303540LowModerateHighCritical361621 each47881312FINDINGS RESOLUTION BY SEVERITY FINDINGS RESOLUTION STATUS
Risk MitigationVULNERABILITY MANAGEMENTAs well as mitigating what we know from our PEN Test, Nova Mutual IT has taken a far more aggressive approach to vulnerability management. Vulnerability management is a key responsibility of any IT security, and it involves assessing, mitigating (if necessary) and reporting on any security vulnerabilities that exist in an organization’s systems and software. But vulnerabilities can be managed only if they have been discovered and identified, and the way to achieve this is through a comprehensive vulnerability scanning program. A vulnerability scanner is an application we run weekly that identifies and creates an inventory of all the systems (including servers, desktops, laptops, virtual machines, containers, firewalls, switches, and printers) connected to a network. For each device that it identifies it also attempts to identify the operating system it runs and the software installed on it, along with other attributes such as open ports and user accounts. Our vulnerability scanner will also attempt to log in to systems using default or other credentials in order to build a more detailed picture of the system. After building up an inventory, the vulnerability scanner checks each item in the inventory against one or more databases of known vulnerabilities to see if any items are subject to any of these vulnerabilities. The result of a vulnerability scan is a list of all the systems found and identified on the network, highlighting any that have known vulnerabilities that may need attention.HTTPS INSPECTION Some 67% of all malware seen in the first quarter was delivered via HTTPS, according to security firm WatchGuard Technologies. HTTPS was designed to secure web trac by encrypting communications and thus prevent man-in-the-middle attacks and other types of eavesdropping. But HTTPS can hide malicious trac directed toward an organization since a secure gateway by itself won’t inspect encrypted content. Nova Mutual IT has implemented HTTPS inspection which is a process by which you can analyze the encrypted web trac by decrypting it using the providers certificate, inspecting it against known malware definitions and re-encrypting the trac prior to delivery.
33Risk MitigationEMAIL GATEWAYNova IT continues to monitor and refine our Email Gateway to help prevent bad actors from penetrating our parameter. The biggest impact this quarter was the refinement of our policies to eliminate the “Gary Anderson Phishing” email. These emails are a result of social engineering whereby bad actors craft and email which appears to be from Gary Anderson to our users asking for accounts, logins or gift cards. These attacks are one of the hardest to eliminate as they tend not to have dangerous links but rather rely on direct one-on-one contact with a person. These rejections are reflected in the Ani-Spoofing areas in the chart.The other slice of interest in this chart is the IP Found in RBL. These emails are sent to our email server from proven bad actors defined in various security databases globally. Our targeted Threat Protection has also proven ecient. Although the numbers are low, any of these blocked Malwares could have resulted in a costly data breach.
In ConclusionWe are now six months into 31 Lengths, which is our horse racing theme patterned after the 1973 Triple Crown accomplishments of Secretariat. In many respects, our Transformation Year will parallel the success Secretariat had in the first leg of the Triple Crown being the Kentucky Derby.In keeping with Secretariat’s modus operandi, we are starting out of the gate towards the end of the field, assessing our position. Taking on some new talent and parting ways with others is essential for positioning us for a strong showing.In some respects, our activities around Brand have us ahead of our initial expectations regarding online activity to our social media channels and web page trac. That is a good sign as our strong finish down the stretch of our three-year plan will need that solid foundation when we unleash our Digital Products. In other respects, some of our objectives are proceeding as planned which is encouraging, considering the obstacles brought about from a global pandemic.All in all, the future looks good to finish “in the money”.