Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q1 2018 Earnings Presentation
36 slides from Ia Financial's earnings presentation, May 10, 2018
Slide 1: First Quarter 2018 Conference Call
First Quarter 2018 Conference Call Presenters: Yvon Charest, President and CEO Denis Ricard, Chief Operating Officer Jacques Potvin, EVP, CFO and Chief Actuary May 10, 2018 1
Slide 2: Table of Contents
Table of Contents 3 Highlights 14 Book value 25 Individual Insurance (Canada) 4 Q1 initiatives 15 Strain 26 Individual Wealth Management 5 Sales 16 Income on capital 27 Group Insurance 6 Results 17 Effective tax rate 28 Group Savings and Retirement 7 Items of note 18 Equity market sensitivity 29 US
Slide 3: Q1/2018 Highlights
Q1/2018 Highlights Strong start to the year: core EPS +26% YoY • Reported EPS of $1.29 and trailing-12-month ROE of 11.6% • Core EPS above guidance at $1.32 (+26% YoY); expected profit +11% YoY Profit • Favourable policyholder experience and contribution from HollisWealth • Gains from taxes and inve
Slide 4: Q1/2018 Initiatives
Q1/2018 Initiatives • DAC: iA enters the US market for extended warranties Acquisitions • PPI: iA becomes the leader in independent insurance brokerage distribution in Canada • ABEX: MGA supporting independent insurance advisors in Western Canada • Fifth line of business reflects growing importance
Slide 5: Q1/2018 Sales
Q1/2018 Sales Good fund inflows and sales growth at Group Savings, Special Solutions and iAAH First quarter ($Million, unless otherwise indicated) 2018 2017 Variation ► Individual Insurance 46.7 46.5 — ► Individual Wealth Management Segregated funds - net sales 219.7 164.7 55.0 Mutual funds - net sa
Slide 6: Q1/2018 Results
Q1/2018 Results Earnings above guidance and solvency ratio above new target Guidance Q1/2018 results Reported: $1.29 EPS $1.15 to $1.25 Core1: $1.32 ROE Reported: 11.6% 11.0% to 12.5% (trailing twelve months) Core: 11.7% Quarterly range Strain 14% from 0% to 15% Effective tax rate 21% to 23% 20% Sol
Slide 7: Q1 Items of Note
Q1 Items of Note Good operating results EPS impact +11¢ +3¢ +3¢ -1¢ -4¢ Market- Strain Policyholder Taxes Investment related experience income (details on following slide) on capital Note: The common share offering had a dilutive impact of $0.01 EPS in the first quarter, and will have an estimated d
Slide 8: Management’s View on EPS
Management’s View on EPS 26% YoY core1 EPS growth Q1 Reported EPS Q1 Core1 EPS Q1 Reported EPS $1.29 Adjusted for: $1.32 $1.29 Market-related loss +$0.04 $1.22 Experience gains/losses $1.15 in excess of $0.04 EPS ► Group Insurance -$0.01 Analyst iA Analyst iA consensus result consensus result Q1 Cor
Slide 9: Policyholder Experience (excluding market impact)
Policyholder Experience (excluding market impact) A solid Q1 2018 2017 2016 EPS impact 2017 2016 in cents1 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 annual annual Individual Insurance 4 (4) 1 (2) (13) 15 6 3 2 (18) 26 Group Insurance 5 3 (1) (4) (1) (9) 0 1 7 (3) (1) Individual Wealth 2 (1) 0 2 3 0 4 3 0 4 7 Manag
Slide 10: New Capital Regime
New Capital Regime 1 • Transition slightly favourable: $100M increase in excess capital Transition • No change to investment portfolio required • iA's target: 112% to 116% New • Reflects iA's risk profile target • New regime is more robust ◦ Stricter on the definition of available capital ◦ Risk-bas
Slide 11: Capital Position
Capital Position Solvency ratio remains above target Solvency ratio Solvency ratio under old regime1 under new regime2 (%, end of period) (%, 2018) Key changes 225 213 during the quarter 209 120 121 185%-200% 112%-116% target ► -5% Acquisitions (DAC & PPI) ► +4% Share issuances ► +1% Interest rate r
Slide 12: Solvency Ratio Macroeconomic Sensitivity
Solvency Ratio Macroeconomic Sensitivity Ratio more stable under new regime ► Equity market variation1 (30%) (20%) (10%) +10% +20% +30% ► Impact on solvency ratio (in percentage points) (4%) (1%) — +1% +4% +5% ► Interest rate variation2 (50 bps) (25 bps) +25 bps +50 bps ► Impact on solvency ratio (i
Slide 13: A Flexible Balance Sheet
A Flexible Balance Sheet March 31 December 31 March 31 2018 2017 2017 Agency Rating Old regime1 --- 209% 222% Solvency ratio 2 3 S&P A+ New regime 121% 120% --- A.M. Best A+ (Superior) Leverage ratio 23.5% 22.4% 23.4% Coverage ratio 14.1x 13.3x 13.0x DBRS A (high) Potential capital capacity from deb
Slide 14: Focused on Value Creation
Focused on Value Creation March 31, 2018 Book Value per Share CAGR BVPS = $45.05 (end of period) Price/BV = 1.18 1-year +8% 5-year +9% 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 2017 2018 2.17 2.22 1.72 1.61 1.80 1.74 1.94 2
Slide 15: Strain on New Business
Strain on New Business $0.01 EPS loss in Q1 on less favourable sales mix Reported strain includes Individual Insurance and US Operations lines of business. Historical data in the table below have been restated to reflect this change. 2018 2017 2016 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales ($M) 68.5 74.9 68.
Slide 16: Income on Capital
Income on Capital Investment income 3¢ above expectations and iAAH in line with expectations 2018 2018 2017 2016 ($Million, pre-tax) Quarterly Run Rate Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 35.5 40.4 32.2 39.1 35.3 39.1 29.4 32.1 33.5 33.5 Financing and (16.0) (16.3) (14.7) (13.8) (12.6) (12.
Slide 17: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) More favourable than expected (3¢ gain) mainly due to tax-exempt investment income 2018 2017 2016 ($Million, unless otherwise indicated) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 159.9 155.8 162.5 148.6 129.4 180.4 165.6 157.7 108.3 Income on capital 17.9 20.1 31.8 16.3 15
Slide 18: Equity Market Sensitivity
Equity Market Sensitivity (End of period) Q1/2018 Q4/2017 Q1/2017 S&P/TSX closing value 15,367 pts 16,209 pts 15,548 pts iA solvency ratio under the new capital regime 121% --- --- Sensitivities S&P/TSX1 level at which provisions for future Stocks matching policy benefits would have to be strengthen
Slide 19: Interest Rate Sensitivity
Interest Rate Sensitivity (End of period) Q1/2018 Q4/2017 Q1/2017 ► IRR = Initial Reinvestment Rate ► Key element is long-term Canadian rate at year-end IRR ► 43 bps protection as of Dec. 31, 2017 ► Impact on net income1 of a 10 bps decrease in IRR ($13M) ($18M) ($23M) ► URR = Ultimate Reinvestment
Slide 20: S&P/TSX Thresholds for Q2/2018 Gain or Loss
S&P/TSX Thresholds for Q2/2018 Gain or Loss Potential impact on TSX threshold Threshold Q2/2018 Earnings driver net income attributed to for gain or loss compared with: common shareholders of a ±10% variation vs. threshold 1 Actual TSX value Revenues on at the end of 15,578 ±$10.2M UL policy funds Q
Slide 21: Reported EPS and Core EPS Reconciliation
1 Reported EPS and Core EPS Reconciliation First quarter (On a diluted basis) 2018 2017 2 Variation EPS $1.29 $1.03 25% Adjusted for: Specific items: Tax on premiums — $0.04 HollisWealth integration — $0.01 Market-related gains and losses $0.04 ($0.12) Policyholder experience gains and losses in exc
Slide 22: Premiums and Deposits
Premiums and Deposits Net premiums, premium equivalents and deposits ($Billion) Q1/2018 $Million YoY 9.8 Individual Insurance 391.8 8% 8.2 2.4 7.7 Individual Wealth Management 1,397.4 (2%) 7.5 7.4 2.3 Q4 1.8 2.0 2.2 Group Insurance 422.5 14% Q3 1.8 1.8 2.1 Group Savings and Retirement 529.0 13% 2.4
Slide 23: Asset Growth
Asset Growth AUM/AUA (assets under management and Assets Under Management and Administration administration, end of period, $Billion) ($Billion, unless March 31 169.5 169.6 169.7 169.6 otherwise indicated) QoQ YoY 2018 Assets under management 126.2 80.8 79.9 General fund 39.2 4% 8% 115.8 109.5 Segre
Slide 24: Mutual Fund Net Sales
Mutual Fund Net Sales ($Million) 319 200 183 111 77 77 61 58 46 22 31 (11) (98) (68) (69) (121) (165) (267) (248) (316) (291) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 2016 2017 2018 24 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Infor
Slide 25: Individual Insurance (Canada)
Individual Insurance (Canada) First quarter ($Million, unless otherwise indicated) 2018 2017 Variation Sales1 Minimum premiums2 41.0 40.5 1% Excess premiums3 5.7 6.0 (5%) Total 46.7 46.5 — Premiums 391.8 362.2 8% Number of policies 26,941 27,478 (2%) 1 First-year annualized premiums. 2 Insurance com
Slide 26: Individual Wealth Management
Individual Wealth Management First quarter ($Million, unless otherwise indicated) 2018 2017 Variation Sales1 General fund 109.7 91.8 19% Segregated funds 617.6 554.5 11% Mutual funds 670.1 783.8 (15%) Total 1,397.4 1,430.1 (2%) Net sales Segregated funds 219.7 164.7 55.0 Mutual funds 45.8 200.0 (154
Slide 27: Group Insurance
Group Insurance First quarter ($Million, unless otherwise indicated) 2018 2017 Variation Sales1 Employee Plans 19.5 35.8 (46%) Dealer Services - Creditor Insurance2 72.3 75.7 (4%) P&C Insurance 49.9 46.5 7% Total 122.2 122.2 — Special Markets Solutions 65.0 54.5 19% Total Group Insurance 206.7 212.5
Slide 28: Group Savings and Retirement
Group Savings and Retirement First quarter Sales1 ($Million, unless otherwise indicated) 2018 2017 Variation Accumulation products 361.2 425.9 (15%) Insured annuities 164.9 31.9 417% Deposits2 9.2 17.4 (47%) Total 535.3 475.2 13% Q1 1-year Funds under management March 31, 2018 variation variation Ac
Slide 29: US Operations
US Operations First quarter ($Million, unless otherwise indicated) 2018 2017 Variation Sales ($US)1 Individual Insurance 17.3 17.7 (2%) Dealer Services - P&C 88.1 — — Premiums ($CAN) 101.5 74.9 36% 1 Sales are defined as first-year annualized premiums for Individual Insurance and as direct written p
Slide 30: Quality of Investment Portfolio
Quality of Investment Portfolio March 31 December 31 March 31 2018 2017 2017 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $27.3M $30.9M $31.6M Provisions for impaired investments $6.9M $7.5M $5.7M Net impaired investments $20.4M $23.4M $25.9M Net impaired investments as a % of inve
Slide 31: Dividend to Common Shareholders
Dividend to Common Shareholders $0.40 $0.35 $0.30 Dividend of 38¢ per share $0.25 payable in Q2/18 $0.20 Steady increases every 3rd quarter $0.15 First lifeco in Canada to resume dividend $0.10 increases after the financial crisis $0.05 $0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20
Slide 32: 2018 Guidance
2018 Guidance EPS1 ROE1 11.0% to 12.5% 6% annual target Q1 $1.15 to $1.25 Strain (quarterly range from 0% to 15%) Q2 $1.30 to $1.40 Solvency 112% to 116% ratio Q3 $1.40 to $1.50 Q4 $1.35 to $1.45 Effective 21% to 23% tax rate 2018 $5.20 to $5.60 Payout 25% to 35% ratio (mid-range) 1 Guidance for EPS
Slide 33: Investor Relations
Investor Relations Contact Grace Pollock Tel.: 418-780-5945 grace.pollock@ia.ca Next Reporting Dates Q2/2018 - August 2, 2018 Q3/2018 - November 7, 2018 Q4/2018 - February 14, 2019 Next Events NBF 8th Annual Quebec Conference - May 30, 2018 Investor Day - June 22, 2018 For information on our earning
Slide 34: 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 35: 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”, “will”, “could”, “should”, “would”, “suspe
Slide 36: TaN cal
TaN cal Financial Group