Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q3 2021 Earnings Presentation
51 slides from Ia Financial's earnings presentation, Nov 3, 2021
Slide 1: Third Quarter 2021 Conference Call
Third Quarter 2021 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary November 3, 2021 PRESENT AND STRONG. More than ever.
Slide 2: Table of contents
Table of contents 4 Key results APPENDICES 5 Highlights 20 Book value 36 Individual Insurance 7 Sales 21 Dividend 37 Individual Wealth Management 8 Sales (cont.) 22 Policyholder experience 38 Group Insurance 9 Acquisition of Surex.com 23 Impact of new business (strain) 39 Group Savings and Retiremen
Slide 3: Denis Ricard, President and CEO
Denis Ricard President and CEO
Slide 4: Q3/2021 Key Results
Q3/2021 Sustained growth momentum Earnings above expectations, continued very strong sales KEY RESULTS momentum and robust financial position Core EPS Core ROE P&D $2.23 Above 14.0% At top of $4.1B +4% YoY guidance guidance AUM/AUA Solvency ratio Book value $214.5B 131% $60.82 +15% YoY Above target
Slide 5: Diversified business mix – Q3 highlights
Diversified business mix – Q3 highlights Foundation Expansion Long-established businesses High-growth distinctive in which iA excels and is businesses in which iA already a leader seeks to become a leader Individual Retail Insurance distribution ▪ Individual Insurance sales up (Canada) ▪ Solid contr
Slide 6: Michael L. Stickney, EVP and CGO
Michael L. Stickney EVP and CGO
Slide 7: Q3/2021: Solid sales results
Q3/2021: Solid sales results Continuing the momentum recorded for several quarters Third quarter ($M, unless otherwise indicated) 2021 2020 Variation Continued momentum and leading position in the mass/mid market from: ► Individual Insurance 68 53 28% ▪ Strong and diversified distribution networks ▪
Slide 8: Q3/2021: Solid sales results (cont.)
Q3/2021: Solid sales results (cont.) Continuing the momentum recorded for several quarters Third quarter ($M, unless otherwise indicated) 2021 2020 Variation ► Individual Wealth Management General fund - sales 213 208 2% Good sales result #1 in the industry after 8 months – Net sales more than doubl
Slide 9: Acquisition of Surex.com
Acquisition of Surex.com Adding P&C expertise, growth synergies and digital capabilities for further growth HIGH STRATEGIC VALUE FOR iA ◦ Acquiring digital and distribution P&C expertise and capabilities ◦ Expanding distribution capabilities ◦ Investing in businesses with ROE higher than Company’s t
Slide 10: Jacques Potvin, EVP, CFO and Chief Actuary
Jacques Potvin EVP, CFO and Chief Actuary
Slide 11: Q3/2021 results vs. guidance
Q3/2021 results vs. guidance Results compare favourably with guidance with EPS above guidance for Q3 and YTD - 2021 guidance Q3/2021 results 9M/2021 results $2.00 to $2.15 in Q3 Core EPS1 $2.23 $6.31 $5.65 to $6.10 for 9M Core ROE1 (trailing 12 months) 12.5% to 14.0% 14.0% Impact of new business (st
Slide 12: Reported and core earnings reconciliation
Reported and core earnings reconciliation $M $M - EPS PRE-TAX POST-TAX Reported earnings 217 $2.01 Core earnings remove from reported earnings the impacts of the following items: UL (2¢ EPS gain), assets backing LT liabilities (2¢ EPS loss), Market-related impacts (1) — — MERs (1¢ EPS gain) and hedg
Slide 13: Core SOE and items of note
Core SOE and items of note Core expected profit on in-force up 11% YoY1 Source of earnings Q3/2021 items of note Q3/2021 on a core basis ($M) (difference vs. expectations) Operating profit $M $M EPS Expected profit on in-force 255 PRE-TAX POST-TAX Favourable total policyholder experience in Q3 and f
Slide 14: Additional protections in reserves for pandemic uncertainty
Additional protections in reserves for pandemic uncertainty Q3 mortality was slightly higher than expected Intitial value Current value (amounts in millions of dollars are expressed at Evolution during 9M/2021 at before taxes) Dec. 31, 2020 Sept. 30, 2021 Q1 Q2 Q3 YTD Excess mortality $58M Expected
Slide 15: Capital position
Capital position 131% solvency ratio – Comfortably above iA’s target level Solvency ratio Key changes during the quarter iA Financial Corporation Inc. (%, end of period) 137 134 133 130 128 130 131 126 124 127 124 125 ► +2.0% Organic capital generation 120 122 119 net of digital initiatives 110%-116
Slide 16: Strong balance sheet
Strong balance sheet Distinctive Embedded in reserving process, iA’s distinctive market protection decreases net income and solvency market ratio volatility and supports iA’s 110% to 116% solvency ratio target. protection Protection is worth more than 8 percentage points of solvency ratio (as at Sep
Slide 17: Year-end assumption review and management actions
Year-end assumption review and management actions Expecting 2021 result to have non-significant earnings impact, similar to last 5 years Impact on income of annual assumption Expected impact on Q4/2021 net income review and management actions ($M, after tax) non- Mortality & morbidity significant 23
Slide 18: Question & Answer Session
Question & Answer Session PRESENT AND STRONG. More than ever.
Slide 19: Appendices
APPENDICES PRESENT AND STRONG. More than ever.
Slide 20: Book value per share
Book value per share P/BV ratio of 1.18 at September 30, 2021 $60.82 at September 30, 2021 CAGR 1-year +12% 5-year +10% 10-year +8% Since 2000 +10% March 31, 20001 $8.44 IPO 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2.17 2.22 1.72 1.61 1
Slide 21: Dividend to common shareholders
Dividend to common shareholders Dividend increases temporarily on hold, in accordance with regulators’ instructions $0.50 $0.45 $0.40 Dividend of $0.35 48.5¢ per share payable in Q4/21 $0.30 $0.25 Steady increases every 3 quarters $0.20 $0.15 First lifeco in Canada to resume dividend increases after
Slide 22: Policyholder experience: 15¢ EPS gain in Q3
Policyholder experience (excl. market-related impacts): 15¢ EPS gain in Q3 Favourable total policyholder experience in Q3 and for the year to date 2021 2020 2019 EPS impact 2021 2020 20192 in cents Q3 Q2 Q1 Q41 Q3 Q2 Q1 Q42 Q3 YTD annual annual Individual Insurance3 5 6 (6) 3 4 0 (8) 3 2 5 (1) 5 Ind
Slide 23: Impact of new business (strain)
Impact of new business (strain) Strain of 3% of sales in Q3, in the middle of the -5% to 10% guidance range Reported strain includes Individual Insurance in Canada and the US - 2021 2020 2019 - Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Sales ($M) 110 118 98 112 98 98 85 90 81 Strain ($M) (3) 1 (5) (6) (2) (10) (10
Slide 24: Income on capital: 9¢ EPS gain in Q3
Income on capital: 9¢ EPS gain in Q3 Very favourable experience at iAAH (+9¢), investment income slightly higher than expected (+1¢) and amortization of intangible assets slightly higher than planned (-1¢) Quarterly 2021 2020 2019 ($M, pre-tax) run rate in 2021 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Investment
Slide 25: Effective tax rate of 22.0%
Effective tax rate (ETR) of 22.0%: 1¢ EPS loss in Q3 At the top end of the 20% to 22% guidance range 2021 2020 2019 ($M, unless otherwise indicated) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Operating income 249 276 206 190 249 210 9 184 201 Income on capital 37 29 34 21 19 31 34 27 40 Pre-tax income 286 305 240 2
Slide 26: Market-related impacts on earnings
Market-related impacts on earnings: Globally as expected in Q3 UL policies (+2¢), MERs (+1¢), hedging (-1¢) and level of assets backing reserves (-2¢) Approximate after-tax impact of market-related 2021 2020 2019 variations as compared to the expected net earnings that the Company would have earned
Slide 27: Car loans: 6¢ EPS gain in Q3
Car loans: 6¢ EPS gain in Q3 and well-positioned provisions Strong portfolio performance from continued better credit experience Average credit loss rate1 (trailing 12 months) 5.4% 5.4% 5.5% 5.2% 5.2% 5.3% 5.3% 5.0% 4.3% Temporary credit loss trend is attributed to continued 3.6% client payment patt
Slide 28: Investment portfolio
Investment portfolio High-quality, diversified portfolio Investment portfolio Bond portfolio = 73% of total portfolio Bonds - Corporates - BB and lower: 0.8% Low direct exposure to equity market Bonds - Corporates - Real estate: 4.2% BBB and higher: 36.8% • $3.7B of stocks in investment portfolio Mo
Slide 29: Bond portfolio by category
Bond portfolio by category High-quality, conservative portfolio Utilities: 16% Corporate bonds = 51% of bond portfolio Total bond portfolio by credit rating Financial: 12% • 6% AAA • 43% AA $32.3B Governments & • 32% A Municipalities: 49% • 18% BBB • 1% BB and lower Consumer - Non-cyclical: 8% No ex
Slide 30: Distinctive market protection
Distinctive market protection Robust protection Decrease in index requiring a strengthening of provisions for future policy benefits for stocks matching long-term liabilities (end of period) 32%32% 32% 31% 30% 30% 30% 29% 28% 28% 27% 27% 27% 27% 27% 27% 26% 26% 26% 2011-2020 25% 25%25% 25%25% 24% 24
Slide 31: Equity market sensitivity
Equity market sensitivity (End of period) Q3/2021 Q2/2021 Q4/2020 Q3/2020 S&P/TSX closing value 20,070 pts 20,166 pts 17,433 pts 16,121 pts iA Financial Corporation solvency ratio 131% 130% 130% 125% Sensitivities S&P/TSX1 level at which provisions for future policy benefits Market protection for wo
Slide 32: Interest rate sensitivity
Interest rate sensitivity (End of period) Q3/2021 Q2/2021 Q4/2020 Q3/2020 ► IRR = Initial Reinvestment Rate ► Key element is long-term Canadian rate at year-end IRR ► Impact on net income1 of a 10 bps decrease in IRR $1M $4M $4M $0M ► URR = Ultimate Reinvestment Rate ► Maximum assumption is promulga
Slide 33: S&P/TSX thresholds for Q4/2021 gain or loss
S&P/TSX thresholds for Q4/2021 gain or loss Potential impact on TSX threshold Threshold Q4/2021 Earnings driver net income attributed to for gain or loss compared with: common shareholders of a ±10% variation vs. threshold Actual TSX value Revenues on 1 at the end of UL policy funds 20,346 ±$11.5M Q
Slide 34: Premiums and deposits
Premiums and deposits Net premiums, premium equivalents and deposits Q3/2021 $M YoY ($B) 14.0 Q4 Individual Insurance 433 5% 12.4 11.4 3.9 10.4 Individual Wealth Management 2,019 37% 9.8 4.1 Q3 3.1 2.6 Group Insurance 478 6% 8.2 2.4 3.9 2.3 2.7 2.4 Group Savings and Retirement 804 (32%) 2.2 3.9 Q2 2
Slide 35: Asset growth
Asset growth AUM/AUA (assets under management and Assets under management and administration administration, end of period, $B) 214.5 September 30 197.5 ($B, unless otherwise indicated) QoQ YoY 189.5 2021 169.5 168.8 Assets under management 106.2 95.8 89.2 General fund1 54.2 2% 3% 126.2 80.8 79.7 Se
Slide 36: Individual Insurance (Canada)
Individual Insurance (Canada) Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 Minimum premiums2 63 51 24% 182 138 32% Excess premiums3 5 2 150% 17 13 31% Total 68 53 28% 199 151 32% Premiums 433 412 5% 1,297 1,203 8% Number o
Slide 37: Individual Wealth Management
Individual Wealth Management Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 General fund 213 208 2% 662 589 12% Segregated funds 1,146 725 58% 3,569 2,196 63% Mutual funds 660 545 21% 2,351 1,743 35% Total 2,019 1,478 37% 6,
Slide 38: Group Insurance
Group Insurance Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 Employee Plans 19 26 (27%) 120 106 13% Dealer Services - Creditor Insurance2 73 90 (19%) 186 196 (5%) P&C Insurance 95 88 8% 253 204 24% Car loan originations 13
Slide 39: Group Savings and Retirement
Group Savings and Retirement Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 Accumulation products 500 526 (5%) 1,618 1,469 10% Insured annuities 310 648 (52%) 533 706 (25%) Deposits2 — 6 (100%) 27 29 (7%) Total 810 1,180 (31
Slide 40: US Operations
US Operations Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales ($US)1 Individual Insurance 34 34 — 102 96 6% Dealer Services (P&C)2 295 222 33% 813 473 72% Premiums and equivalents 252 311 (19%) 745 677 10% ($CAN) Q3/2020 figur
Slide 41: Quality of investment portfolio
Quality of investment portfolio September 30 June 30 December 31 September 30 - 2021 2021 2020 2020 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $23M $23M $45M $45M Provisions for impaired investments $6M $6M $14M $8M Net impaired investments $17M $17M $31M $37M Net impaired invest
Slide 42: Solvency ratio market-related sensitivity
Solvency ratio market-related sensitivity at Dec. 31, 2020 Sensitivity continues to be low Equity market variation1 (30%) (20%) (10%) +10% +20% +30% ► Impact on solvency ratio Dec. 31, 2020 +1% +2% +1% 0% 0% +2% (in percentage points) Interest rate variation2 (50 bps) (25 bps) +25 bps +50 bps ► Impa
Slide 43: ESG ambition
ESG ambition To contribute to sustainable growth and wellbeing for ENVI Reduction of our GHG emissions RON our clients, employees, partners, investors and communities MENT by 20% per employee by 2025 Now and in the future, achieve gender equity of SO between 40% and60% CIAL in iA Financial Group sen
Slide 44: ESG — A cohesive, mobilizing vision
ESG — A cohesive, mobilizing vision • Carbon neutral since the beginning of 2020 ENVI • Focused on initiatives aimed at reducing our GHG emissions RON • $80.5 million of new investments in renewable energy in 2020 MENT • Majority of our 40+ properties in Canada are BOMA BEST or LEED certified • Part
Slide 45: Credit ratings
Credit ratings iA Financial Industrial Alliance Insurance Credit rating agency Corporation Inc. and Financial Services Inc. 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 45
Slide 46: 2021 guidance
2021 guidance Core EPS Core ROE 12.5% to 14.0% Q1 $1.70 to $1.85 Q2 $1.95 to $2.10 Impact of new 2% annual target Q3 $2.00 to $2.15 business (strain) (quarterly range from -5% to 10%) Q4 $1.95 to $2.10 Solvency 110% to 116% 2021 $7.60 to $8.20 ratio Capital $275M to $325M generation Non-core items E
Slide 47: Investor Relations
Investor Relations Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q4/2021 - February 16, 2022 Q1/2022 - May 12, 2022 Q2/2022 - July 28, 2022 Q3/2022 - November 9, 2022 For information on our earnings releases, conference calls and related
Slide 48: Non-IFRS financial information
Non-IFRS financial information iA Financial Corporation 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
Slide 49: Non-IFRS financial information (cont.)
Non-IFRS financial information (cont.) Core earnings (loss) and financial measures based on core earnings (loss), including core EPS and core ROE, are non-IFRS financial measures used to better understand the capacity of the Company to generate sustainable earnings. Core earnings (loss) remove from
Slide 50: Forward-looking statements
Forward-looking statements This presentation may contain statements relating to strategies used by iA Financial Corporation 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
Slide 51: 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.