Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q1 2017 Earnings Presentation
30 slides from Ia Financial's earnings presentation, May 11, 2017
Slide 1: First Quarter 2017 Conference Call
First Quarter 2017 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary May 11, 2017 1
Slide 2: Q1/2017 Highlights
Q1/2017 Highlights Strong business growth overall and earnings within guidance ► Reported EPS of $1.03, $1.08 before exceptional items, and trailing 12 months ROE of 13.4% ► Exceptional items: tax on premiums (-$0.04 EPS) and HollisWealth acquisition (-$0.01 EPS) Profit ► Favourable market-related g
Slide 3: Strong Sales Growth Overall
Strong Sales Growth Overall Excellent top line with mutual funds leading the parade First quarter ($Million, unless otherwise indicated) 2017 2016 Variation ► Individual Insurance Canada 46.5 42.0 11% United States 23.3 23.4 — Total 69.8 65.4 7% ► Individual Wealth Management Segregated funds - net
Slide 4: Focused on Long-Term Value Creation
Focused on Long-Term Value Creation Q1/2017: $41.86 Book Value per Share CAGR (end of period) 1-year +15% 5-year +10% 10-year +8% Since 2000 +10% $9.36 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201 2.2 2.2 1.7 1.6 1.8 1.7 1.9 2.0 1.1 1.4 1.5 1.0 1.1 1.5 1.3
Slide 5: Q1/2017 Results
Q1/2017 Results In line with guidance despite adverse policyholder experience Guidance 2017 results Reported $1.03 EPS $1.00 to $1.10 Within guidance Core $1.07 ROE Reported 13.4% (trailing twelve months) 11.0% to 12.5% Within or above guidance Core 12.0% Quarterly range Strain 6% Better than our Q1
Slide 6: Q1 Experience and Exceptional Items
Q1 Experience and Exceptional Items Gains and losses offset each other EPS impact in cents Experience Exceptional items +12¢ +4¢ +1¢ -1¢ -4¢ -12¢ Market- Policyholder Strain Income HollisWealth Tax on related experience on capital integration premiums (details on next slide) 6
Slide 7: Policyholder Experience (ex-market gains)
Policyholder Experience (ex-market gains) Unfavourable for Individual Insurance 2017 2016 2015 EPS impact 2016 2015 in cents Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Annual Annual Individual Insurance (15) 16 7 4 2 9 9 14 (4) 29 28 Group Insurance (1) (9) 0 1 7 (2) 5 1 (3) (1) 1 Individual Wealth 3 0 4 3 0 (7) (4
Slide 8: Management's View of Core
Management's View of Core Core EPS of $1.07 Q1 Reported EPS Q1 Core EPS Q1 Reported EPS $1.03 Adjusted for: $1.10 $1.10 $1.07 Exceptional losses $1.03 ► Tax on premiums +$0.04 ► HollisWealth integration +$0.01 Market-related gains -$0.12 Analyst iA Analyst iA Experience loss consensus result consens
Slide 9: Capital Position
Capital Position Still strong and above target range Solvency Ratio (%, end of period) 225 222 217 217 213 209 ~ 208 Key changes 200% during the quarter Target 175% ► -3% Macroeconomics HollisWealth closing in Q3/17 will have an estimated impact of -14 percentage points 2012 2013 2014 2015 2016 Q1/1
Slide 10: A Flexible Balance Sheet
A Flexible Balance Sheet Well within our comfort range March 31 December 31 March 31 Agency Rating 2017 2016 2016 Solvency ratio 222% 225% 205% S&P A+ Leverage ratio 23.4% 23.8% 24.4% A.M. Best A+ (Superior) Coverage ratio 13.0x 12.8x 8.6x DBRS A (high) 10
Slide 11: iA Financial Group is turning
iA Financial Group is turning 11
Slide 12: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business +$0.04 EPS in Q1 on strong sales in Canada and favourable sales mix 2017 2016 2015 ($Million, unless otherwise indicated) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales 69.8 93.4 75.0 72.9 65.4 73.7 63.8 61.7 55.1 Strain 4.4 5.1 8.8 9.3 11.3 14.4 15.2 15.2 21.3 Strain (
Slide 13: Income on Capital
Income on Capital Higher investment income offset by higher claims at iAAH 2017 2017 2016 2015 ($Million, pre-tax) Quarterly Run Rate Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 33.0 39.1 29.4 32.1 33.5 33.5 33.7 27.7 28.4 32.6 Financing & Intangibles (14.0) (12.3) (15.4) (12.8) (12.0) (11.8) (10.6
Slide 14: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) In the middle of guidance (20% to 22%) 2017 2016 2015 ($Million,unless otherwise indicated) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 129.4 180.4 165.6 157.7 108.3 (20.7) 122.5 142.5 102.7 Income on capital 15.8 12.2 20.6 17.5 14.8 20.2 23.5 20.2 13.6 Pre-tax income 145.2
Slide 15: Equity Market Sensitivity
Equity Market Sensitivity (End of period) Q1/2017 Q4/2016 Q1/2016 S&P/TSX index 15,548 pts 15,288 pts 13,494 pts iA solvency ratio 222% 225% 205% Sensitivities Stocks matching Level of S&P/TSX before reserves 11,300 pts 11,400 pts 9,600 pts long-term require strengthening for future policy liabiliti
Slide 16: Interest Rate Sensitivity
Interest Rate Sensitivity (End of period) Q1/2017 Q4/2016 Q1/2016 ► IRR = Initial Reinvestment Rate ► Assumption is a direct function of current long-term rate IRR ► 75 bps protection as of Dec. 31, 2016 ► Potential after-tax impact on reserves of a 10 bps decrease in IRR ($23M) ($24M) ($27M) ► URR
Slide 17: S&P/TSX Thresholds for Q2/2017 Gain/Loss
S&P/TSX Thresholds for Q2/2017 Gain/Loss Potential impact TSX threshold Threshold is on Q2/2017 Earnings driver net income of for gain or loss compared to: a ±10% variation vs. threshold Actual TSX value Revenues on 1 at the end of 15,762 ±$9.0M UL policy funds Q2/2017 Actual average value3 MERs col
Slide 18: Record Quarter for Premiums and Deposits
Record Quarter for Premiums and Deposits Net premiums, premium equivalents and deposits ($Billion) Q1/2017 $Million YoY 8.2 Individual Insurance 433.7 5% 7.7 7.4 7.5 7.4 2.3 Individual Wealth Management 1,432.3 80% 1.8 1.8 2.0 Q4 Group Insurance 373.0 6% Q3 1.6 1.8 1.8 2.1 Group Savings and Retireme
Slide 19: Asset Growth
Asset Growth AUM/AUA Assets Under Management (assets under management and and Administration administration, end of period, $Billion) ($Billion, unless March 31 otherwise indicated) YoY 2017 130.2 126.2 115.8 Assets under management 109.5 41.4 42.9 98.8 General fund 36.3 6% 36.9 32.7 Segregated fund
Slide 20: Mutual Fund Net Sales
Mutual Fund Net Sales ($Million) 319 183 200 156 173 94 111 61 77 58 32 (11) (98) (68) (69) (121) (165) (267) (248) (316) (291) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 20 2012 2013 2014 2015 2016 2017
Slide 21: Individual Insurance
Individual Insurance First quarter ($Million, unless otherwise indicated) 2017 2016 Variation Sales1 Canada - Minimum premiums2 40.5 33.9 19% Canada - Excess premiums3 6.0 8.1 (26%) Canada - Total 46.5 42.0 11% US 23.3 23.4 — Total 69.8 65.4 7% Premiums 433.7 411.2 5% Number of policies (Canada) 27,
Slide 22: Individual Wealth Management
Individual Wealth Management First quarter ($Million, unless otherwise indicated) 2017 2016 Variation Gross sales1 General fund 94.0 58.5 61% Segregated funds 554.5 454.1 22% Mutual funds 783.8 285.3 175% Total 1,432.3 797.9 80% Net sales Segregated funds 164.7 142.6 22.1 Mutual funds 200.0 (291.2)
Slide 23: Group Insurance
Group Insurance First quarter ($Million, unless otherwise indicated) 2017 2016 Variation Sales1 Employee Plans 35.9 18.0 99% Dealer Services - Creditor Insurance2 75.7 66.2 14% Dealer Services - P&C Insurance 46.5 39.5 18% Dealer Services - Total 122.2 105.7 16% Special Markets Solutions 54.5 50.8 7
Slide 24: Group Savings and Retirement
Group Savings and Retirement First quarter Sales1 ($Million, unless otherwise indicated) 2017 2016 Variation Accumulation products 425.9 264.8 61% Insured annuities 31.9 59.2 (46%) Deposits2 17.4 9.9 76% Total 475.2 333.9 42% Q1 1-year Funds under management March 31, 2017 variation variation Accumu
Slide 25: Investment Portfolio
Investment Portfolio Continues to be of highest quality March 31 December 31 March 31 2017 2016 2016 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $31.6M $29.0M $17.5M Provisions for impaired investments $5.7M $5.6M $4.8M Net impaired investments $25.9M $23.4M $12.7M Net impaired in
Slide 26: 2017 Guidance
2017 Guidance EPS1 ROE1 11.0% to 12.5% 6% annual target Q1 $1.00 to $1.10 Strain (quarterly range from 0% to 15%) Q2 $1.15 to $1.25 Effective 20% to 22% tax rate Q3 $1.25 to $1.35 Q4 $1.25 to $1.35 Solvency 175% to 200% ratio 2017 $4.65 to $5.05 Payout 25% to 35% ratio (mid-range) 26 1 No reserve st
Slide 27: Investor Relations
Investor Relations Contact Grace Pollock Tel.: 418-780-5945 grace.pollock@ia.ca Next Reporting Dates Q2/2017 - August 3, 2017 Q3/2017 - November 8, 2017 Q4/2017 - February 15, 2018 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Relat
Slide 28: Non-IFRS Financial Information
Non-IFRS Financial Information iA Financial Group reports its financial results and statements in accordance with International Financial Reporting Standards (IFRS). It also publishes certain financial measures that are not based on IFRS (non‑IFRS). A financial measure is considered a non-IFRS measu
Slide 29: Forward-Looking Statements
Forward-Looking Statements This presentation may contain statements relating to strategies used by iA Financial Group or statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “may”, “could”, “should”, “would”, “suspect”, “ex
Slide 30: Financial Group YEARS
Financial Group YEARS