Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q3 2022 Earnings Presentation
52 slides from Ia Financial's earnings presentation, Nov 9, 2022
Slide 1: Third Quarter 2022 Conference Call
Third Quarter 2022 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary November 9, 2022 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 Book value 38 Premiums and deposits 7 Q3/22 key results 25 Dividend 39 Assets (AUM/AUA) 9 Business mix 26 Policyholder experience 40 Individual Insurance 10 Sales 27 Impact of new business (strain) 41 Individua
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 Sean O’Brien EVP, Wealth Management Mike Stickney EVP, Chief Growth Officer Éric Jobin EVP, Group
Slide 7: Q3/2022 Key Results
Q3/2022 KEY RESULTS Growing EPS and Core ROE near the middle of guidance Robust financial position with continued organic capital generation Core EPS† +3% YoY Core ROE1† $2.29 vs. $2.30 to $2.45 13.8% vs. 13% to 15% guidance guidance Solvency ratio† Organic capital 130% ~$160M Robust and above targe
Slide 8: Michael L. Stickney
Michael L. Stickney EVP and CGO 8
Slide 9: 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 ▪ High-performing distribution (Canada) ▪ Good sales g
Slide 10: Q3/22 Sales – Continued good business growth
Q3/22 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) 93 214 Leading position in the 4.1 196 Canadian mass/mid 68 market support our • Unfavourable varia
Slide 11: Q3/22 Sales – Continued good business growth (cont.)
Q3/22 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) 839 261 810 Solidifying our strong • Net sales impacted by • Sales lowe
Slide 12: Q3/22 Sales – Continued good business growth (cont.)
Q3/22 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 $M) 124 77 118 315 300 301 285 48 +11% YoY +60% YoY +5% Yo
Slide 13: Q3/22 Sales – Continued good business growth (cont.)
Q3/22 SALES – Continued good business growth (cont.) INDIVIDUAL INSURANCE DEALER SERVICES US Operations US Operations (sales† in US$M) (sales† in US$M) 295 34 35 • Sales decreased mainly due 261 to low retail sales of new • Good sales growth for the and used cars, which both quarter, in particular f
Slide 14: Jacques Potvin
Jacques Potvin EVP, Chief Financial Officer and Chief Actuary 14
Slide 15: Q3/2022 Results vs. Guidance
Q3/2022 RESULTS VS. GUIDANCE Q3 core EPS 1¢ below guidance and all other metrics in-line or better than guidance 2022 guidance Q3/2022 results 9M/2022 results $2.30 to $2.45 in Q3 Core EPS1† $2.29 $6.45 $6.35 to $6.80 in 9M Core ROE1† (trailing 12 months) 13.0% to 15.0% 13.8% Impact of new business†
Slide 16: Reported and Core Earnings Reconciliation
REPORTED AND CORE EARNINGS RECONCILIATION $M $M EPS PRE-TAX POST-TAX Reported earnings 215 $2.03 Core earnings remove from reported earnings the impacts of the following items: UL (-2¢ EPS), assets backing LT liabilities (-5¢ EPS), Market-related impacts 13 10 $0.09 MERs (+2¢ EPS) and hedging (-4¢ E
Slide 17: Core SOE and Items of Note
CORE SOE AND ITEMS OF NOTE Core expected profit on in-force up 2% YoY, dampened by lower markets Source of earnings Items of note Q3/2022 on a core basis† ($M) (difference vs. expectations) Operating profit $M $M EPS Expected profit on in-force 260 PRE-TAX POST-TAX Experience gain (loss) (10) (10) (
Slide 18: Additional Protections in Reserves
ADDITIONAL PROTECTIONS IN RESERVES To cover the direct and collateral impacts of the pandemic Q3 additional mortality claims were lower than the provision available for Q3 in the US and higher than the provision available for Q3 in Canada Policyholder behaviour protection and US mortality provision
Slide 19: Solid Capital Position
SOLID CAPITAL POSITION Supported by ongoing organic capital generation Solvency ratio† Organic capital generation† iA Financial Corporation Inc. ($M) (end of period) Key changes1 555 during the quarter ~ 490 2022 target range: 134% $450M to $525M 130% 130% 130% 2.0% Organic capital generation† net o
Slide 20: Strong Balance Sheet
STRONG BALANCE SHEET Ratios Leverage ratio of 23.4% and coverage ratio† of 15.0x (Sept. 30, 2022) Distinctive Embedded in reserving process, iA’s distinctive macroeconomic protections decrease net income and solvency macroeconomic ratio† volatility and support iA’s 110% to 116% solvency ratio target
Slide 21: IFRS 17 and IFRS 9 Update
IFRS 17 AND IFRS 9 UPDATE iA’S SOUND APPROACH FAVOURABLE RELATIVE POSITIONING TOWARDS TRANSITION IMPACTS AT TRANSITION 1,2 Book value Near-neutral Managing business with a long- CSM level >$5B term vision to protect strength and quality of our balance sheet Solvency ratio >20 percentage point increa
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: Book Value per Share
BOOK VALUE PER SHARE P/BV ratio of 1.13 at September 30, 2022 $62.38 at September 30, 2022 CAGR 1-year +3% 5-year +8% 10-year +9% Since 2000 +9% 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 2021 2.17 2.22 1.72 1.61
Slide 25: Dividend to Common Shareholders
DIVIDEND TO COMMON SHAREHOLDERS $0.70 Dividend per share of 67.5¢ payable $0.65 in Q4/2022 $0.60 $0.55 $0.50 $0.45 $0.40 $0.35 Largest dividend increase (+29%) among Canadian lifecos following $0.30 the lifting of regulatory restrictions in November 2021 $0.25 Steady increases $0.20 every 3 quarters
Slide 26: Policyholder Experience
POLICYHOLDER EXPERIENCE† (excl. market-related impacts) 2022 2021 2020 2022 2021 2020 EPS impact in cents† Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q41 Q3 Q2 Q1 9M annual annual Individual Insurance2 4 4 (6) 9 5 6 (6) 3 4 0 (8) 2 14 (1) Individual Wealth Management3 (6) (3) 1 (6) 1 5 2 (10) (1) (1) 0 (8) 2 (12) Group I
Slide 27: Impact of New Business (strain)
IMPACT OF NEW BUSINESS (strain)† 11¢ EPS gain in Q3 explained by the interest rate increase in the first part of the year being factored into the strain calculation and by the higher than expected sales volume Reported strain includes Individual Insurance in Canada and the US 2022 2021 2020 Q3 Q2 Q1
Slide 28: Income on Capital
† INCOME ON CAPITAL : 43¢ EPS loss in Q3 Adjustment of software, premises and furnishings book values (-25¢), lower revenues at iAAH (-9¢), accounting interpretation relating to cloud computing (-9¢), higher investment income (+1¢) and higher financing costs (-1¢) Quarterly 2022 2021 2020 ($M, pre-t
Slide 29: Effective Tax Rate
† EFFECTIVE TAX RATE (ETR) of 18.0% in Q3: 4¢ EPS gain Lower tax charge mainly due to a higher proportion of capital gains than anticipated 2022 2021 2020 ($M, unless otherwise indicated) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income† 299 238 170 252 249 276 206 190 249 210 9 Income on capital†
Slide 30: Market-Related Impacts on Earnings
† MARKET-RELATED IMPACTS ON EARNINGS : 9¢ EPS loss in Q3 MERs (+2¢), UL policies (-2¢), hedging (-4¢) 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: Car Loans
† CAR LOANS: 1¢ EPS gain in Q3 Strong portfolio performance from continued good credit experience Average credit loss rate1† (trailing 12 months) 5.3% 5.4% 5.3% 5.4% 5.5% 5.2% 5.2% 5.0% 4.3% 3.6% 3.0% 2.6% 2.6% 2.4% 2.3% 2.3% 2.3% Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/
Slide 32: Investment Portfolio
INVESTMENT PORTFOLIO High-quality, diversified portfolio Bonds - Corporates - BB and lower: 1% Bond portfolio = 69% of total portfolio Real estate: 5% Low direct exposure to equity market Mortgages - Insured: 3% • $3.9B of stocks in investment portfolio Mortgages - Uninsured: 1% Bonds - Corporates -
Slide 33: Bond Portfolio by Category
BOND PORTFOLIO BY CATEGORY High-quality, conservative portfolio Utilities: 21% Corporate bonds = 61% of bond portfolio Financial: 14% Total bond portfolio by credit rating • 7% AAA • 35% AA $27.0B • 37% A Consumer - Non-cyclical: 7% • 20% BBB Governments & • 1% BB and lower Municipalities: 39% Consu
Slide 34: Equity Market Sensitivity
EQUITY MARKET SENSITIVITY (End of period) Q3/2022 Q2/2022 Q4/2021 Q3/2021 S&P/TSX closing value 18,444 pts 18,861 pts 21,223 pts 20,070 pts iA Financial Corporation solvency ratio 130% 130% 134% 131% Sensitivities S&P/TSX1 level at which provisions for future policy benefits Market protection for wo
Slide 35: Interest Rate Sensitivity
† INTEREST RATE SENSITIVITY As at Sept. 30, 2022 10 bps 10 bps increase decrease Combined metric better reflects economic view of change in interest rates URR + IRR ► Impact on net income1 of a 10 bps parallel variation +$19M ($19M) Ultimate Reinvestment Rate – Maximum assumption promulgated by CIA
Slide 36: Solvency Ratio Macroeconomic Sensitivity
† SOLVENCY RATIO MACROECONOMIC SENSITIVITY Sensitivity continues to be low Equity market variation1 (30%) (20%) (10%) +10% +20% +30% ► Impact on solvency ratio† Last update +2% +2% +1% (1%) (2%) (1%) (in percentage points) (March 31, 2022) Interest rate variation2, 3 (50 bps) (25 bps) +25 bps +50 bp
Slide 37: S&P/TSX Thresholds for Q4/2022 Gain or Loss
S&P/TSX THRESHOLDS FOR Q4/2022 GAIN OR LOSS Potential impact on TSX threshold Threshold Q4/2022 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 18,698 ±$9.8M UL policy funds Q
Slide 38: Premiums and Deposits
PREMIUMS AND DEPOSITS Net premiums, premium 16.6 equivalents and deposits† Q3/2022 $M YoY ($B) 14.0 4.2 Individual Insurance 465 7% 11.4 3.9 Individual Wealth Management 1,414 (30%) 11.3 10.4 9.8 4.1 3.1 3.3 Q3 Group Insurance 537 12% 2.6 Q4 2.4 3.9 Group Savings and Retirement 474 (41%) 2.7 Q3 2.2
Slide 39: Asset Growth
ASSET GROWTH AUM/AUA (assets under management and Assets under management and administration administration†, end of period, $B) 221.2 September 30 197.5 196.2 ($B, unless otherwise indicated) QoQ YoY 189.5 2022 169.5 168.8 109.7 Assets under management† 95.8 96.1 89.2 General fund1 49.9 2% (8%) AUA
Slide 40: Individual Insurance (Canada)
INDIVIDUAL INSURANCE (Canada) Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Minimum premiums2† 87 63 38% 265 182 46% Excess premiums3† 6 5 20% 27 17 59% Total 93 68 37% 292 199 47% Net premiums 465 433 7% 1,410 1,297 9% Num
Slide 41: Individual Wealth Management
INDIVIDUAL WEALTH MANAGEMENT Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 General fund 326 214 52% 795 663 20% Segregated funds 782 1,145 (32%) 3,206 3,568 (10%) Mutual funds† 306 660 (54%) 1,372 2,351 (42%) Total 1,414 2,
Slide 42: Group Insurance
GROUP INSURANCE Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Employee Plans† 5 19 (74%) 28 120 (77%) Dealer Services - Creditor Insurance2† 64 73 (12%) 170 186 (9%) P&C Insurance† 111 95 17% 297 253 17% Car loan originatio
Slide 43: Group Savings and Retirement
GROUP SAVINGS AND RETIREMENT Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Accumulation products† 369 500 (26%) 1,463 1,618 (10%) Insured annuities† 113 310 (64%) 339 533 (36%) Deposits2 — — NM — 27 (100%) Total 482 810 (40
Slide 44: US Operations
US OPERATIONS Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales ($US)1 Individual Insurance† 35 34 3% 106 102 4% Dealer Services (P&C)† 261 295 (12%) 770 813 (5%) Net premiums and premium 271 252 8% 850 745 14% equivalents† ($CA
Slide 45: Solvency Ratio
† SOLVENCY RATIO iA Financial Corporation Inc. (%, end of period) 137 134 133 134 132 130 130 131 130 130 126 127 128 124 124 125 119 110%-116% target Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 45 † This item is a non-IFRS measure; see the “
Slide 46: Quality of Investment Portfolio
QUALITY OF INVESTMENT PORTFOLIO September 30 June 30 September 30 2022 2022 2021 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $46M $44M $23M Provisions for impaired investments $8M $8M $6M Net impaired investments $38M $36M $17M Net impaired investments as a % of investment portfol
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) • Publication of Responsible Investment Policy in 2021 • Climate Change Position Statement • Commitment to obtain
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 Q4/2022 - February 14, 2023 Q1/2023 - May 10, 2023 Q2/2023 - August 1, 2023 Q3/2023 - November 7, 2023 For information on our earnings releases, conference calls and related disclosure
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.