Nova Q2 Report - 2022 : simplebooklet.com

5EXECUTIVE SUMMARYGATHERING CONTINUOUS FEEDBACK AND ENHANCING ENGAGEMENTSales continue to slow as expected with a YTD growth rate of 10% signiﬁ cantly lower than planned for. Sales are projected to end the year at a similar pace. We continue to see growth in our Farm and Commercial portfolios.Several functional areas have met with the consultant Steve Smith, who continues his work until the end of August 2022. The teams have been grateful to share their experiences with Steve, having open and honest conversations, highlighting pain points and areas for improvement to enhance the member experience.June was the end of the second quarter. From a ﬁ nancial perspective, April saw both an underwriting loss and investment loss while May results were marginally better with a small underwriting and investment gain. June saw mixed results with an underwriting income o set by a large investment loss. Although investment markets continue to be volatile, and we continue to see the impact of the latest round of interest rate hikes on the bond portfolio, the investment portfolio remains solid.The quarter ended with an underwriting proﬁ t of $357K and an investment loss of $1.5M. Partially o setting the losses is the gain from the sale of the Simcoe o ce of $448K. The YTD the net loss is $487K after taxes.The MCT is expected to be between 360% and 365%. The June YTD result are promising as we see positive signs on the underwriting front. Q3 2022 will see a rate increase on the property portfolio.Recruitment has been a priority during the quarter. There are several vacancies to be ﬁ lled by Q3 2022.

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IT UPDATEBRAND UPDATEINSURANCE PLATFORM DECISIONNova Mutual has made the decision to pause on the initiative with Nude Solutions. With the current state of our MCT and Capital position, Nova Mutual has made the decision to move forward with Cognition + as their interim solution for the next 3-5 years. C+ will allow Nova to move to a more modernized, security driven and workﬂow enhanced platform, while continuing to look for a long-term solution.The rollout of the Cognition + platform has begun and is expected to be completed by Q3 2023. A road map has been developed to assist in a smooth transition from IBS to Cognition+. Each line of business, one at a time, will be transitioned with the assistance of the Nova IT and Cognition+ resources.UPDATED RECRUITMENT STRATEGYRecruitment was a focus for the team in the second quarter. With the launch of a successful recruitment campaign we have experienced considerable results. The team introduced a fresh streamlined look featuring the ‘U’ headline with a graphic relating to the position, highlighting only a few of the key responsibilities, along with the salary band, and a call to action ‘Apply Today.’ The social media strategy was to post open positions, as needed to LinkedIn and Facebook as well as an Instagram story, linking to the careers page of the website which further details the beneﬁts we oer as a company. An increase in web trac was substantial coming from social media to our website. Facebook, LinkedIn and Instagram ‘referrals’ accounted for 299 click throughs to the website VS an average of 203 in Q1. After the main homepage, the careers page was the most visited landing page with 255 sessions.

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7OUR MEMBER FIRST APPROACHWith the launch of a new initiative highlighting our members, we have seen an uptake in our online engagement. The purpose of this initiative is to visit and Uplift our members by telling their story and providing them with high end content that they can re purpose. During these visits, we ﬁ lm Member Spotlight Video’s which included a short introductory video with the member, and additional footage around their space. To date, we have highlighted 6 members, produced quality video’s, and launched these stories through our social media channels, tying in the Broker to enhance the engagement. The feedback we have received from our members is outstanding, they are profoundly grateful to be recognized and given the opportunity to highlight their business. From this initiative we are experiencing Brokers reaching out to us with excitement regarding their members and future partnerships for us to engage.HERE IS AN OVERVIEW OF NOVA MUTUAL’S TOP ENGAGEMENTS FOR Q2Top Posts | 2 of 5Facebook Top PostsReview your top posts published during the selected time period, based on thepost’s lifetime performance.Post LifetimeNovaMutualsome sort of thingDescending by Lifetime EngagementsNovaMutualWed 5/18/2022 7:11 am…Total Engagements 240Reactions 86Comments 18Shares 10Post Link Clicks 11Other Post Clicks 115NovaMutualTue 4/26/2022 7:03 am …Total Engagements 201Reactions 63Comments 14Shares 24Post Link Clicks 4Other Post Clicks 96NovaMutualWed 4/13/2022 12:47 p…Total Engagements 178Reactions 59Comments 10Shares 5Post Link Clicks 13Other Post Clicks 91Today on our Member Uplift serHeidi from Generations MarketLearning Centre. Listen as she Xtra Life Toys and Games…where fun matters! Locatedon Robinson St., in downtow…This week on Uplift, we chat wiRoloson, Senior Underwriter onAgribusiness team. Listen as heTop Posts | 4 of 5Instagram Top PostsReview your top posts, stories, and reels published during the selected timeperiod, based on the post, story, or reel’s lifetime performance.Post LifetimenovamutualDescending by Lifetime EngagementsnovamutualThu 6/9/2022 8:05 am PDTTotal Engagements 77Likes 74Comments 2Saves 1novamutualTue 4/5/2022 8:51 am PDTTotal Engagements 35Likes 34Comments 1Saves 0novamutualMon 6/27/2022 7:24 am …Total Engagements 31Likes 31Comments 0Saves 0#TBT - Last week weparticipated in the Mutual SloPitch Tournament. We…NOne week ago, we hosted ourﬁrst Collab Lab sessions tobring the team together, ge…Last week we collaboratedwith our member @211mainin Port Dover to host a party…Top Posts | 5 of 5LinkedIn Top PostsReview your top posts published during the selected time period, based on thepost’s lifetime performance.Post LifetimeNova Mutual Insurance CompanyDescending by Lifetime EngagementsNova Mutual In…Mon 6/20/2022 5:35 pm …Total Engagements 3,223Reactions 80Comments 0Shares 1Post Link Clicks 3,142Nova Mutual In…Mon 6/27/2022 5:49 pm …Total Engagements 1,280Reactions 83Comments 2Shares 1Post Link Clicks 1,194Nova Mutual In…Wed 6/15/2022 4:48 pm…Total Engagements 357Reactions 159Comments 25Shares 0Post Link Clicks 173Last week we had theabsolute pleasure of attendingthe Insurance Brokers…Last week we collaboratedwith our member 211 Main inPort Dover to host a party f…We are excited to celebrateGlenn Pick in his new role asPresident and CEO here at…

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UNDERWRITING UPDATEFARM AND RESIDENTIAL PROPERTY RATE UPDATEEective September 1, 2022, residential and farm property rates will increase 8%. These increases are consistent with the rate indication tools provided by Farm Mutual Re. With the rate increase in place Nova will see an increase to premium on both the Residential and Farm book of business by approximately $867K. The last noted increase was done in 2020.Further, an inﬂation factor of 5% continues to be added on residential and farm property (previously 7%). A 7% inﬂation factor will remain on the Commercial book of business. This change is eective September 1st, 2022.

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9FINANCIAL RESULTS Q2 YTD 2022OVERVIEW• Gross Written Premiums (GWP) were up from the prior year and below plan for Q2 2022 by 9% and (9%) respectively. YTD GWP were solid at $19.1M. YTD GWP is lower than Plan by 9% and higher than the prior year by 10%.• While Q1 saw signiﬁcantly higher General expenses compared to Q1 2021, in Q2 there was a slowing of these expenses. YTD expenses are lower than plan by 7%.• YTD Underwriting proﬁt of $357K is signiﬁcantly better than plan and higher than the prior year.• The YTD Combined Ratio is 99.3% (101.0% 2021).• Poor market performance resulted in Net Investment losses of $1.5M YTD ($2.3M lower than plan and the prior year).PREMIUMSYTD premiums are up 10% versus the prior year and are 9% below Plan. Nova Mutual has written $2.2M in new business which is down 21% from the prior year. The decrease in new business premiums versus the prior year is driven by lower Auto and Commercial. YTD Agribusiness and Commercial total premiums are up over last year by 20% and 12% respectively. New business in Agribusiness is down 5% YTD. Specialty lines accounted for 46% of premiums YTD versus 43% in the prior year.Although we fell short of our Plan in terms of Premiums, our revised focus on slowing growth is reﬂected in the YTD GWP.GROSS WRITTEN PREMIUM NET WRITTEN PREMIUM17. 5202115.1202120.9PLAN18.3PLAN19.1202216.32022Up 10% from 2021Down 9% from planUp 8% from 2021Down 11% from plan

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11DISTRIBUTIONThe chart below represents the year-over-year change in premiums by product, by distribution channel. In 2022, there were several factors impacting the agency’s new business sales. The agency channel is still focused on working with members on ensuring correct insured to value and rebalancing of the portfolio between Nova agents. A new agent was hired in Q1 and will turn their focus to generating new business beginning in the third quarter. Eorts continue to recruit a new agent to expand and assist with growing the agency book of business. There is a strong emphasis on ensuring the correct focus, attention and service is available to meet our members’ needs. YTD premiums from the agency channel are slightly higher than the prior year, however, new business is down 29% for the same period. Renewal premiums are up 7% which includes the current inﬂation factor on residential properties.YTD premiums sourced through the Broker channel are up 10% from the prior year with new business down 21% over the same period. Broker consolidation continues industry wide. In 2022 Nova Mutual continues to see several contracted Brokers sell to larger Brokers (Campbell, Roy & Eldridge and Newman Insurance). At this point, we are not certain how these transactions may aect Nova Mutual however will continue to monitor these relationships and activity. We continue to watch the 2 larger brokerages that own over 50% of the book of business as these Brokers continue to search out new M&A activity. Overall renewal premiums are performing very well, up 15% from the same period last year.AGENT Q2 2022 BROKER Q2 2022Written Premium New Business Renewal Written Premium New Business RenewalAutomobile -0% -37% +5% +2% -36% +8%Commercial +13% +15% +13% +12% -31% +25%Agribusiness +5% -69% +7% +22% -4% +32%Garage Auto +0% +0% +0% +38% -8% -65%Residential +5% -16% +6% +8% -5% +10%Total +3% -29% +7% +10% -21% +17%+3%+10%-29%-21 %+7%+17%

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CLAIMSThere were 218 new claims reported in the quarter with an average gross claim cost of $20K (YTD 422 new claims, $20K average). QTD Claims count activity is up 24% year over year due in part to weather related claims during May 2022. Although the claim count is higher than Q2 2021, the average gross claims cost is approximately 50% lower. Gross incurred claims Q2 YTD were $2.2M lower over the previous year. The severity of claims is lower year over year.On a YTD basis Nova incurred $10.9M in direct incurred claims and paid almost $4.98M to settle claims during the quarter.In Q2 there was 1 claim over $500K, for a total loss house ﬁre, with policy inception year of 2019 (total incurred cost of $1.031M). Compared to Q2 last year, where there were 2 ﬁres signiﬁcantly over retention.When looking at total gross claims incurred in Q2 2022, $343K or 7% of all gross claims incurred came from new business (2022). The Q2 fully allocated Claims ratio of 61.2% (57.9% YTD), is lower than Plan of 68.7% (83.1% YTD) and the prior year of 71.4% (70.2%).FINANCIAL RESULTS Q2 YTD 2022

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13CLAIMS RATIOSThe chart below shows pure loss ratios1 YTD by line of business.YTD TOTAL YTD AGENT YTD BROKER2022 2021 2022 2021 2022 2021Automobile 75.6% 23.1% 57.4% 27.3% 79.9% 22.1%Commercial 28.4% 71.2% 4.7% -1.2% 29.4% 74.8%Agribusiness 55.4% 125.6% 18.4% 13.0% 61.2% 148.5%Garage Auto 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Residential 70.0% 63.9% 45.6% 15.2% 75.1% 74.2%Total 58.6% 62.9% 42.6% 18.6% 61.2% 70.9%1 Excludes Reinsurance, IBNR’s, Internal Adjusting Expenses, and Allocated Expenses.COMMISSIONS & GENERAL EXPENSESYTD commissions as a percentage of GWP of 15.4% are lower than anticipated (16.4%). The expected full year CPC is estimated to be approximately $118K at this time. The 2022 CPC estimate is lower than 2021 due in part to the previously announced qualiﬁcation changes reducing the Loss ratio to 45% and the CPC rate lowered to 10%. The Prior Year average commission rate YTD was 16.4%.YTD General expenses of $3.2M are $246K below Plan of $3.4M primarily the result of lower IT costs and personnel costs due to timing and vacancies. YTD Nova Mutual has reduced the FTE’s by 4: 5 new hires, 1 return from leave, 2 on leave and 8 terminations/departures. As at June 30, 2022, Nova Mutual’s active FTE complement is 42. The YTD expense ratio of 42.4% is slightly better than the Plan of 45.3% and the same as the prior year.

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INVESTEMENTSYTD net investment loss was $1.47M. The results are below Plan by 273% and prior year 286%. The YTD return on investments was -7.7% net of fees. These losses are due to the market volatility that the world has been experiencing since the beginning of 2022 and the impact of recent interest rate increases from the Bank of Canada. The Bank of Canada’s overnight lending as of July 13th is now at 2.5%. The GIC portfolio continues to reinvest maturities at increasingly higher long term interest rates.As at June 30, 2022, the market value of investments under management with PH&N is $33.0M representing 83% of the total investment portfolio. Eective March 31, 2022, the 33 Park Road oce building in Simcoe Ont. was sold and the gain on sale has been recognized ($448K) in Q1. This property also generated rental revenue of $18.8k YTD.Broker loans are in good standing. YTD income is $19.4K.MCT SCOREThe MCT (Minimum Capital Test) score is a regulatory measure of ﬁnancial strength. This test compares the company’s capital against the risk proﬁle of the organization. The regulatory minimum MCT score is set at 150% while the company’s internal target is set at 300%. As at June 30, 2022 it is estimated that the MCT score will be in the range of 360% – 365%. This is down from the Q1 2022 MCT score of 375.8% (Q4 2021 364.6%).INVESTMENT MIXOther 0.2%Broker Loans2.8%Global Equities3.9%GIC’s6.2%Canadian Equities15.0%Bonds 64.7%Real Estate 7.2%ROI7.7%Investments$39.8MOTHER INFORMATION

Nova Q2 Report - 2022

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