Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Scotiabank Financials Summit 2020
31 slides from Ia Financial's conference presentation, Sep 10, 2020
Slide 1: Responsible Choices – Investor presentation
Responsible Choices STRENGTH GROWTH AMBITION Scotiabank Financials Summit Investor presentation September 10, 2020
Slide 2: Table of contents
Table of contents 3 Solid fundamentals APPENDICES 4 H1/2020 highlights 13 Pandemic impacts on earnings 22 Hedging 5 Canadian operations 14 Pandemic impacts on sales 23 Car loans 6 US strategy 15 H1/2020 sales 24 Dividend 7 IAS acquisition 16 Premiums and deposits & Assets 25 Credit ratings 8 Remote
Slide 3: Solid fundamentals
Solid fundamentals Staying on course with our long-term vision More positive for 2020 following resilient Q2 results EARNINGS VALUE FOR SHAREHOLDERS Solid H1/2020 sales results and increasing US contribution GROWTH 10% historical book value CAGR Attractive price/BV ratio Strong and flexible balance
Slide 4: H1/2020 highlights – Resilient results
H1/2020 highlights – Resilient results Solid EPS, strong business growth and robust capital position amid pandemic • Reported EPS of $2.07 (-33% YoY) and trailing-12-month ROE1 of 10.5% • Core EPS of $2.98 (+3% YoY) and trailing-12-month core ROE1 of 12.4% • Direct impact of the pandemic during H1 i
Slide 5: Canadian operations
Canadian operations Organic growth fuelled by the strength of our distribution and the client and advisor experience INDIVIDUAL INSURANCE • 47% of 2019 operating profit, aiming at 5% annual growth in sales • Key success factors: Extensive distribution network Competitive digital tools for adviso
Slide 6: US strategy – Moving toward a meaningful business
US strategy – Moving toward a meaningful business Steadily and successfully growing two capital-light businesses Two divisions in the US Operating Profit (CAD$M) Individual Insurance Dealer Services 56 Simplified life insurance Extended warranties (mostly final expense and and other ancillary produc
Slide 7: Acquisition of US company IAS Parent Holdings, Inc.
Acquisition of US company IAS Parent Holdings, Inc. Ongoing integration, with a view to supporting our long-term growth strategy Parent Holdings Consistent with iA’s capital optimization and growth strategies by increasing capital-light business • One of the largest providers of solutions in the US
Slide 8: Remote selling tools for advisors
Remote selling tools for advisors Strategically advantaged by digital tools and current position in the middle market Individual Insurance The pandemic has accelerated the adoption of digital tools by advisors • Approval at point of sale using predictive analysis since 2017 • Constantly improving ou
Slide 9: Technology: Making smart choices to support our strategy
Technology: Making smart choices to support our strategy iA’s agility is a competitive advantage Ongoing digital transformation since 2018 • Improving client experience • Optimizing operational efficiency • Strengthening digital tools for advisors and employees • Developing initiatives to generate n
Slide 10: iA shareholder value creation vs. peers
iA shareholder value creation vs. peers Book Value Per Share iAG and Dividends Paid +386% (end of period) Peers +221% June 30, June 30, 2020 20041 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10 1 Chosen as the earliest comparable start date.
Slide 11: Share price and book value per share
Share price and book value per share P/BV ratio of 0.90 at September 2, 2020 IAG Share Price Historical CAGR: 9%3 $53.234 $47.653 Book Value Per Share $8.441 Historical CAGR: 10%4 $7.8752 At end of period 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 12: APPENDICES
APPENDICES
Slide 13: Pandemic-related impacts on reported earnings in H2/2020
Pandemic-related impacts on reported earnings in H2/2020 2020 results could be better than initially assessed, depending on pandemic evolution For the remainder of 2020 Initial Current Comments assessment assessment1 See disclosed earnings sensitivities Macroeconomics – – – to + + – – to + Hedging m
Slide 14: Pandemic-related impacts on sales in H2/2020
Pandemic-related impacts on sales in H2/2020 Better outlook than initially expected: Sales strategy shows resiliency Sales for the remainder of 2020 Sales before Comments the pandemic Initial assessment Current assessment1 Individual Insurance Strong Lower Slightly lower Distribution networks fully
Slide 15: H1/2020 sales
H1/2020 sales Solid results for Individual Insurance (CAN and US), fund inflows, Employee Plans and iAAH Year-to-date at June 30 ($Million, unless otherwise indicated) 2020 2019 Variation ► Individual Insurance 98.1 89.2 10% ► Individual Wealth Management General fund - sales 380.6 207.1 84% Segrega
Slide 16: Premiums and deposits & Assets
Premiums and deposits & Assets Reduction in Q2/2020 mainly from sale of iA Investment Net premiums, premium AUM/AUA Counsel Inc. and transfer of mortgages under administration equivalents and deposits (assets under management and ($Billion) administration, end of period, $Billion) 189.5 10.3 169.5 Q
Slide 17: Robust capital position with a flexible balance sheet
Robust capital position with a flexible balance sheet Solvency • 124%, above target range of 110%-116% – Appropriate for iA’s risk profile ratio • Low sensitivity to macroeconomic variations Ratios • Leverage ratio of 25.6% (June 30, 2020) • Coverage ratio of 12.4x Capital • H1/2020: Organic capital
Slide 18: Solvency ratio variations since new capital regime inception
Solvency ratio variations since new capital regime inception Impact from macro variations is minimal despite macro volatility 137% 134% 133% 126% 127% 122% 124% 124% 120% 121% 119% Macro Macro Macro Macro Macro Macro Macro Macro Macro Macro impact impact impact impact impact impact impact impact imp
Slide 19: Low interest rate environment
Low interest rate environment IRR sensitivity eliminated leading to low impact on earnings IRR: Initial Reinvestment Rate Impact at year-end on reserves Impact on net income of IRR changes has been eliminated when decreasing IRR and URR assumptions Earnings URR: Ultimate Reinvestment Rate → Usually
Slide 20: Investment portfolio
Investment portfolio High-quality, diversified portfolio Bond portfolio: 69.2% of total portfolio • Only 0.8% of bond portfolio rated BB or lower • 48.2% of bond portfolio are corporate bonds Low direct exposure to equity market: • $2.9B of stocks in investment portfolio ⦁46% private equity ⦁32% bac
Slide 21: Bond portfolio by category
Bond portfolio by category High-quality, conservative portfolio Bond oil & gas exposure = 2.8% of total portfolio • Direct exposure is 0.8% of total portfolio • Almost all exposure is in corporate bonds Bond pandemic-affected sectors1 • 0.55% Consumer cyclical (retailers, autos and hotels) • 0.60% I
Slide 22: Hedging for seg funds: An effective and robust long-term program
Hedging for seg funds: An effective and robust long-term program Cumulative gains of 13¢ EPS since program inception Hedging impact on EPS (¢) H1/20 loss due to very high market (since hedging program inception) volatility in March and April 0 0 0 0 0 0 Program inception Only 9% of sales in 2019 and
Slide 23: Car loan credit experience
Car loan credit experience Provision well positioned to navigate through the economic slowdown Average credit loss rate (non-prime)1 Trailing 12 months Car loans represent 1.9% of investment portfolio at June 30, 2020 Temporary decrease in Q2/20 due to relief measures to clients and changes in clien
Slide 24: Dividend to common shareholders
Dividend to common shareholders Dividend of 48.5¢ per share payable in Q3/20 Steady increases every three quarters First lifeco in Canada to resume dividend increases after the financial crisis 24
Slide 25: Credit ratings
Credit ratings Industrial Alliance Insurance iA Financial Corporation Inc. and Financial Services Inc. Credit rating agency Issuer rating Credit rating agency Financial strength S&P A S&P AA- DBRS A (low) DBRS A (high) A.M. Best A+ (Superior) 25
Slide 26: Building for the long term
Building for the long term iA Financial Group is carbon neutral as of 2020 ENVIRONMENTAL ⦁ Continuing projects and initiatives aimed at reducing GHG emissions at the source ⦁ All GHG emissions that cannot be eliminated are calculated and offset ⦁ Majority of our 40+ properties in Canada are BOMA BES
Slide 27: iA priorities in the context of the pandemic
iA priorities in the context of the pandemic Providing support to clients, employees and the community CLIENTS EMPLOYEES COMMUNITY Priority to provide various forms of relief to Priority to protect the health and safety of Priority to fight against COVID-19 and its help near 250K clients in these di
Slide 28: Investor Relations
Investor Relations Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q3/2020 - November 4, 2020 Q4/2020 - February 11, 2021 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Rel
Slide 29: 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 30: 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 31: iA Financial Group is a business name and trademark
iA Financial Group is a business name and trademark of iA Financial Corporation Inc. and Industrial Alliance Insurance and Financial Services Inc.