Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q2 2016 Earnings Presentation
33 slides from Ia Financial's earnings presentation, Aug 4, 2016
Slide 1: Second Quarter 2016 Conference Call
Second Quarter 2016 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary August 4, 2016 1
Slide 2: Q2 2016: An Outstanding Quarter
Q2 - 2016 An Outstanding Quarter ► Reported EPS of $1.35: 17% above top of guidance ($1.05-$1.15 EPS) ► Core EPS of $1.26: up 10.5% YoY with high quality of earnings Profit ► Favourable policyholder experience from all sectors (+$0.10 EPS) ► New-business strain of 13% better than guidance of 15% (+$
Slide 3: Sales Highlights
Sales Highlights Strong quarter for retail insurance... mutual funds looking up Second quarter Year-to-date at June 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation ► Individual Insurance Canada 48.4 43.5 11% 90.4 81.6 11% United States 24.5 18.2 35% 47.9 35.2 36% To
Slide 4: Q2 Earnings
Q2 Earnings Another strong Q2 Second quarter Year-to-date at June 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Net income attributed to shareholders 143.6 146.1 (2%) 246.0 260.5 (6%) Less: preferred shareholder dividends 4.1 3.9 +5% 8.2 9.4 (13%) Less: premium on
Slide 5: Q2 Earnings: Items of Note
Q2 Earnings High quality with favourable P/H experience in all lines of business Q2 items of note (gains and losses) MER +1¢ Hedging +10¢ +4¢ Group +3¢ Savings +3¢ Individual Group Insurance Individual Insurance Wealth +2¢ +1¢ +1¢ +1¢ Market Income Strain Experience Gains Taxes Related on Capital 5
Slide 6: Policyholder Experience
Policyholder Experience A strong H1/16, with gains in all lines of business Experience 2016 2015 H1 H1 by line of business 2015 2016 2015 (EPS impact in cents) Q2 Q1 Q4 Q3 Q2 Q1 Individual Insurance 4 2 9 9 14 (4) 28 6 10 Group Insurance 1 7 (2) 5 1 (3) 1 8 (2) Individual Wealth 3 0 (7) (2) 0 2 (7)
Slide 7: Management's View of Core
Management's View of Core $1.26 EPS for Q2, above guidance and consensus Q2 CORE EPS Q2 Reported EPS $1.35 $1.26 Exceptional items ► Taxes ($0.03) $1.07 Items greater than ±4¢ ► Hedging ($0.06) CONSENSUS1 iA Q2 Core EPS $1.26 10.5% growth in core EPS vs Q2/2015 ($1.14 ) 7 1 Core consensus as of July
Slide 8: Q2 Results vs. Guidance
Q2 Results vs. Guidance Clearly a strong beat Guidance Reported Reported and core ($1.26) EPS $1.05 to $1.15 $1.35 above guidance ROE Reported and core (13.7%) 11.0% to 12.5% 14.7% (quarter annualized) above guidance Lower than target on higher sales Strain 15% ± 5% 13% in Canada and US At low end o
Slide 9: YTD Results vs Guidance
YTD Results vs Guidance Well ahead on our 2016 guidance Guidance Reported Reported and core ($2.24) EPS $1.95 to $2.15 $2.31 above guidance ROE 12.1% on core basis, 11.0% to 12.5% 9.4% (trailing 12 months) at top of guidance Strain 15% ± 5% 15% In line with annual target Effective tax rate 18% to 20
Slide 10: A Flexible Balance Sheet
A Flexible Balance Sheet Decrease in solvency ratio is related to macroeconomic changes June 30 March 31 December 31 June 30 Agency Rating 2016 2016 2015 2015 Solvency 199% 205% 213% 223% S&P A+ (Strong) ratio Leverage 23.8% 24.4% 24.3% 24.7% A.M. Best A+ (Superior) ratio Coverage 9.5x 8.6x 8.2x 8.9
Slide 11: Macroeconomic Protection
Macroeconomic Protection Reflecting investment gains and LT interest rates at June 30, 2016 Interest rates Stock markets (at end of period) (at end of period) Intra-year variations don’t matter, Higher protection, management has time to act lifted by market growth 43 bps 30% 27% 29 bps Can. rates at
Slide 12: Steady Value Creation for Shareholders
Steady Value Creation for Shareholders Q2/2016 $37.60 Book Value Per Share (end of period) CAGR 1-year +4% 5-year +7% $9.36 10-year +8% Since 2000 +9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12
Slide 13: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business +$0.01 EPS in Q2 on higher sales volume in Canada and US 2016 2015 2014 ($Million, unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales 72.9 65.4 73.7 63.8 61.7 55.1 62.1 51.1 55.5 47.3 Strain 9.3 11.3 14.4 15.2 15.2 21.3 16.0 17.3 12.7 12.7 Str
Slide 14: Income On Capital
Income On Capital Higher investment income offset by adverse experience at iAAH 2016 2015 2014 ($Million, pre-tax) 2016 Run Rate Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment 30.0 33.5 33.5 33.7 27.7 28.4 32.6 29.8 29.3 27.2 26.7 income Financing & (12.0) (12.0) (11.8) (10.6) (10.0) (9.9) (8.8) (6.8) (6.
Slide 15: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) Low end of guidance because of true-ups 2016 2015 2014 ($Million,unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating 157.7 108.3 (20.7) 122.5 142.5 102.7 78.8 92.2 109.2 93.2 income Income on 17.5 14.8 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1 capital Pre-tax 1
Slide 16: Hedging Experience
Hedging Experience Positive impact for the year to date Average gain of $0.02 EPS/quarter Hedging impact on EPS (¢) over 23 quarters (since hedging program inception) 11 10 8 7 6 6 6 5 4 4 4 1 2 2 0 0 0 0 (3) (4) (5) (6) (12) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010
Slide 17: Capital Position
Capital Position Decrease is related to macroeconomic variations Solvency Ratio (%, end of period) 217 217 Key changes 209 213 during the quarter 205 200% 199 Target ► -5% Interest rates 175% ► -1% Equity markets 2012 2013 2014 2015 Q1/16 Q2/16 17
Slide 18: Market Sensitivity
Market Sensitivity (end of period) Q2/2016 Q1/2016 Q4/2015 Q2/2015 S&P/TSX composite index 14,065 13,494 13,010 14,553 IAG solvency ratio 199% 205% 213% 223% Sensitivities Stock Level of S&P/TSX before matching provisions require 9,800 pts 9,600 pts 9,500 pts 10,100 pts long-term strengthening for f
Slide 19: Interest Rate Sensitivity
Interest Rate Sensitivity Affected by decrease in long-term interest rates (end of period) Q2/2016 Q1/2016 Q4/2015 Q2/2015 1 Potential after-tax impact IRR on reserves of a 10 bps ($31 million) ($27 million) ($31 million) ($31 million) decrease in IRR Potential after-tax impact URR on reserves of a
Slide 20: S&P/TSX Thresholds for Q3/2016 Gain/Loss
S&P/TSX Thresholds for Q3/2016 Gain/Loss Potential impact Earnings TSX threshold Threshold is on Q3/2016 driver: for gain or loss: compared to: net income of a ±10% variation vs. threshold: Actual TSX value Revenues on 1 at the end of 14,258 ±$8.2 million UL policy funds Q3/2016 Actual average value
Slide 21: Asset Growth
Asset Growth Assets Under Management AUM/AUA and Administration (assets under management and June 30 ($Billion, unless administration, in $B) otherwise indicated) YoY 121.9 2016 115.8 109.5 Assets under management 98.8 38.9 36.9 32.7 General fund 36.0 11% 83.5 29.3 Segregated funds 20.6 5% AUA 23.9
Slide 22: Premiums and Deposits
Premiums and Deposits Net premiums, premium equivalents and deposits (in $B) Q2/2016 $Million YoY 7.5 7.7 Individual Insurance 413.2 6% 7.4 7.4 6.9 2.0 Individual Wealth 1.8 1.8 753.8 (4%) Management Q4 1.7 Group Insurance 374.8 5% 1.6 1.8 1.8 Q3 1.7 3.9 3.8 Group Savings and 318.3 (5%) Retirement 1
Slide 23: Individual Insurance
Individual Insurance Second quarter Year-to-date at June 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Sales1 Canada - Minimum premiums2 43.2 38.5 12% 77.1 74.2 4% Canada - Excess premiums3 5.2 5.0 4% 13.3 7.4 80% Canada - Total 48.4 43.5 11% 90.4 81.6 11% US 24.5
Slide 24: Individual Wealth Management
Individual Wealth Management Second quarter Year-to-date at June 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Gross sales1 General fund 85.0 32.0 166% 143.5 73.1 96% Segregated funds 352.1 366.5 (4%) 806.2 856.2 (6%) Mutual funds 316.7 383.0 (17%) 602.0 818.7 (26
Slide 25: Group Insurance
Group Insurance Second quarter Year-to-date at June 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Sales1 Employee Plans 17.1 25.3 (32%) 35.1 40.6 (14%) Dealer Services - Creditor Insurance 101.6 99.2 2% 167.8 164.6 2% Dealer Services - P&C Insurance 58.0 56.4 3% 9
Slide 26: Group Savings and Retirement
Group Savings and Retirement Second quarter Year-to-date at June 30 Sales1 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Accumulation products 300.8 306.3 (2%) 565.6 512.9 10% Insured annuities 20.1 18.2 10% 79.3 19.5 307% Deposits2 4.3 17.8 (76%) 14.2 60.8 (77%) Tot
Slide 27: Investment Portfolio
Investment Portfolio Continues to be of highest quality June 30 March 31 December 31 June 30 2016 2016 2015 2015 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $17.5M $17.5M $19.7M $25.0M Provisions for losses $4.8M $4.8M $5.5M $4.0M Net impaired investments $12.7M $12.7M $14.2M $21.
Slide 28: Value of New Business
Value of New Business Value of New Business ($Million) Year-over-year change by component 181.5 164.0 Q2/2015 37.5 153.1 45.2 Q4 39.3 135.5 44.9 Lower sales (0.3) 40.7 35.1 Q3 38.8 Variation in profit margins 1.0 38.4 31.9 44.3 61.7 Q2 42.6 Changes in economic (5.2) 33.4 assumptions 37.5 33.0 Q1 51.
Slide 29: 2016 Guidance
2016 Guidance EPS1 ROE1 11.0% to 12.5% Q1 $0.90 to $1.00 Strain 15% ± 5% Q2 $1.05 to $1.15 Effective 18% to 20% tax rate Q3 $1.15 to $1.25 Q4 $1.10 to $1.20 Solvency 175% to 200% ratio 2016 $4.20 to $4.60 Payout 25% to 35% ratio (mid-range) 29 1 No reserve strengthening considered in EPS and ROE gui
Slide 30: Investor Relations
Investor Relations Contact Grace Pollock Tel. 418-780-5945 grace.pollock@ia.ca Next Reporting Dates Q3 – November 2, 2016 Q4 – February 16, 2017 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Relations section of our website at www.i
Slide 31: Non-IFRS Financial Information
Non-IFRS Financial Information iA Financial Group reports its financial results in accordance with International Financial Reporting Standards (IFRS). It also publishes certain non-IFRS financial measures that do not have an IFRS equivalent, including sales, value of new business and solvency ratio,
Slide 32: Forward-Looking Statements
Forward-Looking Statements This document 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”, “expect
Slide 33: IAM
IAM Financial Group INVESTED IN YOU.