Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q4 2022 Earnings Presentation
52 slides from Ia Financial's earnings presentation, Feb 15, 2023
Slide 1: Fourth Quarter 2022 Conference Call
Fourth Quarter 2022 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary February 15, 2023 1
Slide 2: 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”, “will”, “could”, “should”, “would”, “suspect
Slide 3: Non-IFRS and Additional Financial Measures
Non-IFRS and Additional Financial Measures iA Financial Corporation and iA Insurance report their financial results and statements in accordance with International Financial Reporting Standards (“IFRS”). They also publish certain financial measures or ratios that are not based on IFRS (“non-IFRS”).
Slide 4: Table of contents
Table of contents 2 Forward-looking statements APPENDICES 3 Non-IFRS and add. measures 24 2023 guidance 38 Premiums and deposits 7 Q4/22 key results 25 Book value 39 Assets (AUM/AUA) 8 2022-2023 26 Dividend 40 Individual Insurance 10 Business mix 27 Core earnings reconciliation 41 Individual Wealth
Slide 5: Denis Ricard
Denis Ricard President and CEO 5
Slide 6: Executive team
Alain Bergeron Denis Ricard EVP, Chief Investment Officer President and CEO Renée Laflamme EVP, Individual Insurance, Savings and Retirement Jacques Potvin EVP, Chief Financial Officer and Chief Actuary Stephan Bourbonnais EVP, Wealth Management Mike Stickney EVP, Chief Growth Officer Sean O’Brien E
Slide 7: Q4/2022 Key Results
Q4/2022 KEY RESULTS Good profitability with core EPS and core ROE well within guidance Robust financial position with continued organic capital generation Sustained shareholder value at IFRS 9/17 transition Core EPS† +19% YoY Core ROE1† Top half of guidance in 2022 $2.40 Within guidance for Q4 and 2
Slide 8: 2022 – Solid results, amidst declining financial markets
2022 – Solid results, amidst declining financial markets ▪ Core ROE of 14.2% and Core EPS of $8.85, both well within guidance ▪ Robust solvency ratio and continued organic capital generation ▪ Strong sales results in most business units ▪ $0.5B returned to shareholders through dividends and share bu
Slide 9: Mike Stickney
IAS Financial Group Mike Stickney EVP and CGO
Slide 10: Diversified Business Mix – Q4 Highlights
DIVERSIFIED BUSINESS MIX – Q4 HIGHLIGHTS Foundation Expansion Long-established businesses High-growth distinctive in which iA excels and is businesses in which iA already a leader seeks to become a leader Individual Retail Insurance distribution ▪ Solid Q4 results supported by high- (Canada) ▪ Stron
Slide 11: Q4/22 Sales – Continued good business growth
Q4/22 SALES – Continued good business growth NET PREMIUMS, PREMIUM ASSETS UNDER MANAGEMENT INDIVIDUAL INSURANCE EQUIVALENTS AND DEPOSITS† AND ADMINISTRATION† (sales† in $M) (in $B) (end of period, $B) 95 87 221 Leading position in the 4.2 200 3.9 Canadian mass/mid market: • All business lines record
Slide 12: Q4/22 Sales – Continued good business growth (cont.)
Q4/22 SALES – Continued good business growth (cont.) SEGREGATED FUNDS MUTUAL FUNDS GROUP SAVINGS Individual Wealth Management Individual Wealth Management AND RETIREMENT (net sales† in $M) (net sales† in $M) (total sales† in $M) 1,025 823 Solidifying our strong 242 • Net sales impacted by • Very str
Slide 13: Q4/22 Sales – Continued good business growth (cont.)
Q4/22 SALES – Continued good business growth (cont.) EMPLOYEE PLANS DEALER SERVICES1 SPECIAL MARKETS iA AUTO AND HOME Group Insurance Group Insurance Group Insurance (direct written premiums† in $M) (premiums in $M) (sales† in $M) (sales† in $M) 100 91 326 296 102 295 266 76 +11% YoY +11% YoY +34% Y
Slide 14: Q4/22 Sales – Continued good business growth (cont.)
Q4/22 SALES – Continued good business growth (cont.) INDIVIDUAL INSURANCE DEALER SERVICES US Operations US Operations (sales† in US$M) (sales† in US$M) 37 255 241 33 • Sales decreased mainly due to ongoing vehicle inventory • Strong sales growth for the constraints and decreased quarter, in particul
Slide 15: Jacques Potvin
Jacques Potvin EVP, Chief Financial Officer and Chief Actuary 15
Slide 16: Q4/2022 Results vs. Guidance
Q4/2022 RESULTS VS. GUIDANCE All metrics are in-line or better than guidance, for Q4 and for the full year 2022 guidance Q4/2022 results 2022 results $2.35 to $2.50 in Q4 Core EPS1† $2.40 $8.85 $8.70 to $9.30 in 2022 Core ROE1† (trailing 12 months) 13.0% to 15.0% 14.2% Impact of new business† (strai
Slide 17: Core SOE and Items of Note
CORE SOE AND ITEMS OF NOTE Solid Core EPS driven by high experience gains, new business gains and lower taxes Source of earnings Items of note Q4/2022 on a core basis† ($M) (difference vs. expectations) Operating profit $M $M EPS Expected profit on in-force 258 PRE-TAX POST-TAX Experience gain (loss
Slide 18: Year-end assumption review and management actions
Year-end assumption review and management actions Near-neutral impact on earnings Impact on Q4 net income of annual year-end assumption review ($M) Mortality & morbidity (18) ▪ Annual update of experience studies ▪ Application of new mortality table from CIA ▪ Lower excess premiums projected in UL p
Slide 19: Solid Capital Position
SOLID CAPITAL POSITION Supported by ongoing organic capital generation Solvency ratio† Organic capital generation† iA Financial Corporation Inc. ($M) (end of period) Key changes1 ~550 during the quarter 134% ~490 2022 target range: 130% 130% 1.5% Organic capital generation† 126% net of digital initi
Slide 20: IFRS 17 and IFRS 9 Update
IFRS 17 AND IFRS 9 UPDATE CORE EPS Favourable positioning Guiding to solid growth Maintaining medium-term target IMPACTS AT TRANSITION1,2 10%+ growth Book value +$10M3 on average per year CSM level $5.5B3 Solvency ratio > 20 percentage point increase $8.85 In 2023 – Additional one-time mid-single-di
Slide 21: Virtual Information Session for Investors
Virtual Information Session Core EPS growth1 for Investors March 28, 2023, 9AM 10%+ annual growth on Medium-term average target maintaining current target ~15% Additional one-time mid- single digit growth in 2023 + 2023 from: • Favourable impacts of new over 2022 regime, including adjustments IFRS +
Slide 22: Question & Answer Session
Question & Answer Session PRESENT AND STRONG. More than ever. 22
Slide 23: Appendices
APPENDICES PRESENT AND STRONG. More than ever. 23
Slide 24: 2023 Guidance – Complementary information
2023 GUIDANCE – Complementary information • Under IFRS 17 and IFRS 9, core earnings will continue to be an important indicator of the Company’s ability to generate earnings, with the following estimated non-core items in 2023: ◦ Charges or proceeds related to acquisition or disposition of a business
Slide 25: Book Value per Share
BOOK VALUE PER SHARE P/BV ratio of 1.26 at December 31, 2022 $63.06 at December 31, 2022 CAGR 2022 growth tempered by unrealized losses on AFS 1-year +2% assets in the OCI; without this factor, growth would 5-year +8% have been over 9% 10-year +9% Since 2000 +9% March 31, 20001 $8.44 IPO 2000 2001 2
Slide 26: Dividend to Common Shareholders
DIVIDEND TO COMMON SHAREHOLDERS $0.70 Dividend per share of 67.5¢ payable $0.65 in Q1/2023 $0.60 The dividend per share paid in 2022 $0.55 was 25% higher than in 2021 $0.50 $0.45 $0.40 $0.35 Largest dividend increase (+29%) among Canadian lifecos following $0.30 the lifting of regulatory restriction
Slide 27: Reported and Core Earnings Reconciliation
REPORTED AND CORE EARNINGS RECONCILIATION $M $M EPS PRE-TAX POST-TAX Reported earnings 229 $2.17 Core earnings remove from reported earnings the impacts of the following items: UL (+7¢ EPS), assets backing LT liabilities (-5¢ EPS), Market-related impacts (8) (6) ($0.06) MERs (+3¢ EPS) and hedging (+
Slide 28: Additional protections in reserves
Additional protections in reserves Direct and indirect impacts of the COVID-19 pandemic will now be part of the normal reserving process Remaining provisions have been integrated with basic provisions as part of the year’s assumption changes (amounts in millions of Value Value dollars are expressed
Slide 29: Policyholder Experience
† POLICYHOLDER EXPERIENCE (excl. market-related impacts) Close to expectations with positive result in individual insurance and group sectors 2022 2021 2020 2022 2021 2020 EPS impact in cents† Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q41 annual annual annual Individual Insurance2 9 4 4 (6) 9 5 6 (6) 3 11 14 (1) Indi
Slide 30: Market-related impacts on earnings
† MARKET-RELATED IMPACTS ON EARNINGS : 6¢ EPS gain in Q4 UL policies (+7¢), MERs (+3¢), hedging (+1¢) and level of assets backing reserves (-5¢) Approximate after-tax impact of market-related 2022 2021 2020 variations as compared to the expected net earnings that the Company would have earned under
Slide 31: Impact of New Business (strain)
† IMPACT OF NEW BUSINESS (strain) 11¢ EPS gain in Q4 explained by the interest rate increase in the first part of the year being factored into the strain calculation and, to a lesser extent, the impact of sales Reported strain includes Individual Insurance in Canada and the US 2022 2021 2020 Q4 Q3 Q
Slide 32: Income on Capital
† INCOME ON CAPITAL : 12¢ EPS loss in Q4 Lower result at iAAH (-12¢) due to higher claims and digital transformation investments Lower Surex integration fees (+1¢) and higher financing costs (-1¢) Quarterly 2022 2021 2020 ($M, pre-tax) run rate in 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment
Slide 33: Effective Tax Rate
† EFFECTIVE TAX RATE (ETR) of 19.5% in Q4: 7¢ EPS gain Higher proportion of capital gains, non-taxable income and dividends than anticipated, partly offset by the 1.5% tax increase announced with 2022 federal budget 2022 2021 2020 ($M, unless otherwise indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Slide 34: Strong Balance Sheet
STRONG BALANCE SHEET Ratios Leverage ratio of 23.4% (Dec. 31, 2022) Coverage ratio† of 13.2x Capital Potential capital deployment† of ~$350M as at December 31, 2022 flexibility Very favourable impact expected at IFRS 9/17 transition1 During Q4/22, 0.7 million shares were redeemed and cancelled for a
Slide 35: Car Loans
CAR LOANS Q4 credit result close to post-pandemic expected experience, with a quarterly loss rate of 3.9% in Q4 Average credit loss rate1† Q1 Q2 Q3 Q4 2022 (trailing 12 months) Experience gain (loss) +1¢ +2¢ +1¢ (1¢) +3¢ 5.4% 5.3% 5.4% 5.5% 5.2% 5.2% 5.3% 5.0% 4.3% 3.6% 3.0% 3.0% 2.6% 2.6% 2.4% 2.3%
Slide 36: Investment Portfolio
INVESTMENT PORTFOLIO High-quality, diversified portfolio Bonds - Corporates - BB and lower: 1% Bond portfolio = 68% of total portfolio Real estate: 5% Mortgages - Insured: 1% Low direct exposure to equity market Mortgages - Uninsured: 3% • $4.0B of stocks in investment portfolio Bonds - Corporates -
Slide 37: Bond Portfolio by Category
BOND PORTFOLIO BY CATEGORY High-quality, conservative portfolio Utilities: 21% Corporate bonds = 66% of bond portfolio Financial: 15% Total bond portfolio by credit rating • 8% AAA Consumer - • 29% AA Non-cyclical: 7% $27.3B • 37% A • 24% B BB Consumer - Governments & Cyclical: 2% • 1% BB and lower
Slide 38: Premiums and Deposits
PREMIUMS AND DEPOSITS Net premiums, premium 16.6 equivalents and deposits† Q4/2022 $M YoY ($B) 15.2 14.0 4.2 Individual Insurance 472 2% 3.9 Q4 11.4 3.9 Individual Wealth Management 1,460 (33%) 10.4 9.8 4.1 3.1 3.3 Q3 Group Insurance 570 13% 2.6 Q4 2.4 3.9 Group Savings and Retirement 1,019 66% 2.7
Slide 39: Asset Growth
ASSET GROWTH AUM/AUA (assets under management and Assets under management and administration administration†, end of period, $B) 221.2 200.4 December 31 197.5 ($B, unless otherwise indicated) QoQ YoY 189.5 2022 169.5 168.8 109.7 Assets under management† 95.8 97.7 89.2 General fund1 50.1 — (9%) AUA 8
Slide 40: Individual Insurance (Canada)
INDIVIDUAL INSURANCE (Canada) Fourth quarter Year-to-date at December 31 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Minimum premiums2† 87 81 7% 352 263 34% Excess premiums3† 8 6 33% 35 23 52% Total 95 87 9% 387 286 35% Net premiums 472 461 2% 1,882 1,758 7% Numbe
Slide 41: Individual Wealth Management
INDIVIDUAL WEALTH MANAGEMENT Fourth quarter Year-to-date at December 31 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 General fund 408 228 79% 1,203 891 35% Segregated funds 702 1,250 (44%) 3,908 4,818 (19%) Mutual funds† 350 715 (51%) 1,722 3,066 (44%) Total 1,460
Slide 42: Group Insurance
GROUP INSURANCE Fourth quarter Year-to-date at December 31 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Employee Plans† 18 15 20% 46 135 (66%) Dealer Services - Creditor Insurance2† 53 58 (9%) 223 244 (9%) P&C Insurance† 95 78 22% 392 331 18% Car loan originations†
Slide 43: Group Savings and Retirement
GROUP SAVINGS AND RETIREMENT Fourth quarter Year-to-date at December 31 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Accumulation products† 563 549 3% 2,026 2,167 (7%) Insured annuities† 462 71 551% 801 604 33% Deposits2 — — NM — 27 (100%) Total 1,025 620 65% 2,827
Slide 44: US Operations
US OPERATIONS Fourth quarter Year-to-date at December 31 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales ($US)1 Individual Insurance† 37 33 12% 143 135 6% Dealer Services (P&C)† 241 255 (5%) 1,011 1,068 (5%) Net premiums and premium 319 294 9% 1,169 1,039 13% equivalen
Slide 45: Solvency Ratio
† SOLVENCY RATIO Transition to IFRS 9 and IFRS 17 to have a very iA Financial Corporation Inc. favourable impact on the solvency ratio (%, end of period) 137 134 133 134 132 130 130 131 130 130 126 127 128 126 124 124 125 119 110%-116% target Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/
Slide 46: Quality of Investment Portfolio
QUALITY OF INVESTMENT PORTFOLIO December 31 September 30 December 31 2022 2022 2021 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $27M $46M $23M Provisions for impaired investments $5M $8M $6M Net impaired investments $22M $38M $17M Net impaired investments as a % of investment port
Slide 47: ESG ambition
ESG ambition To contribute to sustainable growth and wellbeing for our clients, employees, partners, investors and communities Our main targets • Reduction of our GHG emissions by 20% per employee by 2025 • Now and in the future, achieve increased gender equity of between 40% and 60% in iA Financial
Slide 48: Concrete Actions for a Sustainable Future
CONCRETE ACTIONS FOR A SUSTAINABLE FUTURE ENVIRONMENT SOCIAL GOVERNANCE OUR CONTRIBUTION TO SUSTAINABLE FINANCE • Signatory of United Nations Principles for Responsible Investment (PRI) • Review of Responsible Investment Policy in 2022 • Climate Change Position Statement • Commitment to obtain the P
Slide 49: 2022 Guidance
2022 GUIDANCE As disclosed on February 16, 2022 Core EPS† Core ROE† 13.0% to 15.0% Q1 $1.85 to $2.00 Q2 $2.20 to $2.35 Impact of new 0% annual target Q3 $2.30 to $2.45 business (strain)† (quarterly range from -5% to 10%) Q4 $2.35 to $2.50 Solvency 110% to 116% 2022 $8.70 to $9.30 ratio† Non-core ite
Slide 50: Credit Ratings
CREDIT RATINGS iA Financial Industrial Alliance Insurance Corporation Inc. and Financial Services Inc. Credit rating agency Outlook Issuer rating Financial strength Standard & Poor’s A AA- Stable DBRS Morningstar A AA (low) Stable A.M. Best N/A A+ (Superior) Stable 50
Slide 51: Investor Relations
INVESTOR RELATIONS Contact Marie-Annick Bonneau Tel.: 418-931-0142 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q1/2023 - May 10, 2023 at 8AM Conference call on May 10, 2023 at 11AM Q2/2023 - August 3, 2023 after market close Conference call on August 4, 2023 at 8AM Q3/2023 - November 7, 2023 aft
Slide 52: iA Financial Group trademark notice
iA Financial Group is a business name and trademark of iA Financial Corporation Inc. and Industrial Alliance Insurance and Financial Services Inc.