Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Industrial Alliance Insurance and Financial Services — Q3 2013 Earnings Presentation
29 slides from Ia Financial's earnings presentation, Nov 6, 2013
Slide 1: Third Quarter 2013 Conference Call Presentation
Third Quarter 2013 Conference Call Presentation November 6, 2013 1
Slide 2: Presenters
Presenters YVON CHAREST NORMAND PÉPIN RENÉ CHABOT President and Executive Senior Chief Executive Vice-President Vice-President Officer and Chief Actuary 2
Slide 3: Q3/13 Overview
Q3/13 Overview One of our best quarters ever ► Strong earnings from continuing activities (YoY) Earnings of $105.8 million → +61% Diluted EPS of $1.07 → +$0.34 Annualized ROE of 14.9% → +370 bps ► A high-quality balance sheet (at Sept. 30) Solvency ratio → 227% Debt to equity (before/after Series “C
Slide 4: Sales Highlights
Sales Highlights Capital-light businesses deliver solid quarter ($Million, unless Growth Growth otherwise indicated) Q3/13 Q3/12 9M/13 9M/12 YoY YoY ► Individual Insurance 54.1 58.5 (8%) 177.1 174.1 2% ► Individual Wealth Mgmt ► Gross fund sales 668.7 669.8 0% 2,544.9 2,338.5 9% ► Group Insurance ►
Slide 5: Premiums and Deposits
Premiums and Deposits A strong contribution from Individual and General Insurance P&D (net premiums, premium equivalents and Q3/13 $Million YoY deposits in $B) Individual Insurance 362.8 10% 7.0 6.9 6.8 Individual Wealth 668.7 0% Management 5.7 1.7 1.7 5.6 5.4 1.8 Group Insurance 363.4 1% 1.3 Q4 1.6
Slide 6: Asset Growth
Asset Growth Mutual funds deliver for the fourth consecutive quarter AUM/AUA (assets under management and administration in $B) At Sept. 30/13 $Billion YoY General fund 26.9 4% AUA AUM Seg funds 16.0 9% 89.0 83.5 Mutual funds 10.0 15% 73.6 25.4 23.9 Other 10.7 28% 21.9 AUM sub-total 63.6 11% AUA sub
Slide 7: Profitability
Profitability EPS reaches all-time high for a single quarter ($Million, unless otherwise indicated) Q3/13 Q3/121 ∆ YoY 9M/13 9M/121 ∆ YoY ► Net income attributed to shareholders 114.4 112.3 2% 284.7 253.0 13% ► Less: Preferred share dividends 8.6 9.0 (4%) 25.9 21.5 20% ► Net income attributed to com
Slide 8: Profitability
Profitability Clean results from all lines of business $Million After tax EPS Individual Ins. + 13.6 + 14¢ ► Favourable mortality (+8¢). UL front ending (+3¢). Other gains (+3¢). Ind. Wealth Mgmt + 7.4 + 8¢ ► Hedging gains (+6¢). Market impact on MERs (+3¢). Higher business development expenses (-1¢
Slide 9: Profitability
Profitability Above Q3 guidance EPS GUIDANCE REPORTED Q1 $0.65 to $0.75 $0.83 ($0.85 adjusted for IATS) ($0.81 excluding one-time Q2 $0.75 to $0.85 $0.74 debt redemption fee of $0.07) Q3 $0.80 to $0.90 $1.07 Q4 $0.80 to $0.90 2013 $3.00 to $3.40 9
Slide 10: Capital Remains Comfortable
Capital Remains Comfortable Reflects initiatives over last year to strengthen balance sheet Solvency Ratio (%) 237 Key changes during Q3/13 224 227 217 211 200 Target • Interest rates (+3%) 186 • Equity markets (-1%) • Profit and other items (+1%) Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 10
Slide 11: Room to Absorb Market Downturns
Room to Absorb Market Downturns At At At Sept. 30, June 30, Sept. 30, 2013 2013 2012 ► Stocks Level of S&P/TSX before matching provisions require 10,800 points 10,600 points 10,900 points long-term strengthening for future policy (-16%) (-13%) (-12%) liabilities benefits ► Solvency Level of S&P/TSX
Slide 12: Income on Capital
Income on Capital Financing expenses (+), IAAH and AFS gains (-) vs Q2/13 2013 20121 2011 ($Million) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 AFS gains 0.2 9.5 8.4 5.7 6.5 10.1 9.7 8.5 9.7 13.3 6.9 Other invest. income 29.1 27.8 23.7 33.6 17.2 21.8 21.3 18.6 23.2 22.7 21.7 Subtotal 29.3 37.3 32.1 39.3 23.7
Slide 13: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business Maintaining guidance for 15% in Q4 2013 2012 2011 ($Million, unless otherwise indicated) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Sales 54.1 57.2 65.8 69.2 58.5 62.2 53.4 64.2 55.5 Strain 10.7 12.4 20.0 15.7 21.9 27.6 30.4 31.2 28.0 Strain 20% 22% 30% 23% 37% 44% 57% 49
Slide 14: Effective Tax Rate
Effective Tax Rate In line with 21% to 24% guidance 2013 20121 2011 ($Million, unless otherwise indicated) Q3 Q2 Q1 Q4 Q32 Q2 Q1 Q4 Q3 Operating income 125.1 82.8 90.3 56.8 72.8 53.8 55.5 (156.2) 41.1 Income on capital 24.2 32.3 18.6 31.5 18.1 26.1 23.2 27.2 25.8 Penalty on debt --- (9.3) --- --- --
Slide 15: Sensitivity to Long-term Interest Rates
Sensitivity to Long-term Interest Rates At At At Sept. 30, June 30, Sept. 30, 2013 2013 2012 Impact on net income of a ► IRR 10 bps decrease in IRR ($16 million) ($16 million) ($24 million) Impact on net income of a ► URR 10 bps decrease in URR ($57 million) ($59 million) ($60 million) ► Total inter
Slide 16: S&P/TSX Thresholds for Q4/13 Gain/Loss
S&P/TSX Thresholds for Q4/13 Gain/Loss Impact on TSX Threshold Net Income of Earning Experience Gain or Loss for Gain or Loss a 10% Variation Drivers in a Period Depends on: in Q4/13 vs. Threshold ► Revenues on Change in actual TSX 13,0111 ±$7M UL policy funds value between start and and income on c
Slide 17: 2013 Guidance
2013 Guidance Unchanged after equity issue and Jovian acquisition EPS $3.00 to $3.40 (Adjusted for IATS) ROE 10.5% to 12.0% Solvency ratio 175% to 200% Payout ratio 25% to 35% (mid-range) Effective tax rate 21% to 24% Strain (% of sales) 25% No reserve strengthening considered in guidance for EPS an
Slide 18: High-Quality Balance Sheet
High-Quality Balance Sheet With financial flexibility Debt Ratio (Debentures and preferred shares /Capital structure as of Sept. 30, 2013) Agency Rating Outlook S&P A+ (Strong) Stable 35.9%1 A.M. Best A (Excellent) Stable DBRS IC-2 Stable 28.5% With the upcoming redemption of the Series C $100M pref
Slide 19: Book Value Per Share
Book Value Per Share IA is steadily growing shareholder value Book Value per Share (end of period) $29.34 $30 $25 +7% $20 YTD $15 $10 $9.36 $5 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q3/13 19
Slide 20: Individual Insurance
Individual Insurance Sales reflect overall industry trend in 2013 ($Million, unless otherwise indicated) Q3/13 Q3/12 Var. 9M/13 9M/12 Var. Sales1 Minimum premiums2 45.7 51.0 (10%) 141.7 146.4 (3%) Excess premiums3 8.4 7.5 12% 35.4 27.7 28% Total 54.1 58.5 (8%) 177.1 174.1 2% Premiums 362.8 329.7 10%
Slide 21: Individual Wealth Management
Individual Wealth Management Mutual funds report strong gross sales and positive net sales ($Million, unless otherwise indicated) Q3/13 Q3/12 Variation 9M/13 9M/12 Variation Sales1 General fund 18.3 76.8 (76%) 88.3 278.5 (68%) Segregated funds 212.1 240.5 (12%) 745.2 876.0 (15%) Mutual funds 438.3 3
Slide 22: Group Insurance
Group Insurance Dealer Services lead top-line growth ($Million, unless otherwise indicated) Q3/13 Q3/12 Variation 9M/13 9M/12 Variation Sales1 Employee Plans 8.8 10.6 (17%) 51.3 38.2 34% Dealer Services • Creditor Insurance 117.7 104.5 13% 292.3 266.8 10% • P&C 46.1 36.6 26% 110.2 96.9 14% Special M
Slide 23: Group Savings and Retirement
Group Savings and Retirement Year to date results are strong ($Million, unless otherwise indicated) Q3/13 Q3/12 Variation 9M/13 9M/12 Variation Sales1 Accumulation products 162.3 255.8 (37%) 657.2 557.2 18% Insured annuities 1.2 7.2 (83%) 66.7 22.8 193% Deposits 16.2 14.1 15% 47.6 49.3 (3%) Total 17
Slide 24: Investment Portfolio
Investment Portfolio Continues to be of highest quality Sept. 30, June 30, Sept. 30, 2013 2013 2012 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $16.1M $11.0M $11.9M Provisions for losses $2.2M $2.3M $3.0M Net impaired investments $13.9M $8.7M $8.9M Net impaired investments as a %
Slide 25: Value of New Business Increases
Value of New Business Increases Driven by insurance rate increases and higher mutual fund sales Value of New Business (VNB) ($Million) VNB Growth $Million VNB in Q3/12 38.4 169.8 163.6 153.1 Increase in sales 0.4 53.8 36.0 136.3 122.8 121.4 44.9 Increase in profit 3.0 margins 40.7 Q4 27.3 38.6 36.2
Slide 26: Investor Relations
Investor Relations Contact Grace Pollock Tel. 418-780-5945 grace.pollock@inalco.com Fiscal 2013 Reporting Dates First quarter – May 9, 2013 Second quarter – August 1, 2013 Third quarter – November 6, 2013 Fourth quarter – February 13, 2014 For information on our earnings releases, conference calls a
Slide 27: Non-IFRS Financial Information
Non-IFRS Financial Information Industrial Alliance Insurance and Financial Services Inc. 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, va
Slide 28: Forward-Looking Statements
Forward-Looking Statements This document may contain statements relating to strategies used by Industrial Alliance 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”, “expec
Slide 29: Third Quarter 2013 Conference Call Presentation
Third Quarter 2013 Conference Call Presentation November 6, 2013 29
Industrial Alliance Insurance and Financial Services — Q3 2013 Earnings Presentation on 6ix