Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q2 2021 Earnings Presentation
49 slides from Ia Financial's earnings presentation, Jul 29, 2021
Slide 1: Second Quarter 2021 Conference Call
Second Quarter 2021 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary July 29, 2021 PRESENT AND STRONG. More than ever.
Slide 2: Table of contents
Table of contents 4 Key results APPENDICES 5 Highlights 19 Book value 34 Individual Insurance 7 Sales 20 Dividend 35 Individual Wealth Management 8 Sales (cont.) 21 Policyholder experience 36 Group Insurance 9 US Dealer Services 22 Impact of new business (strain) 37 Group Savings and Retirement 11 R
Slide 3: Denis Ricard, President and CEO
Denis Ricard President and CEO
Slide 4: Q2/2021 Key Results
Q2/2021 Sustained growth momentum Strong results in virtually all business units, KEY RESULTS most notably both retail sectors, Dealer divisions and iAAH Core EPS Core ROE P&D $2.29 14.2% $3.9B +34% YoY Above guidance +47% YoY AUM/AUA Solvency ratio Book value $210.5B 130% $59.02 +16% YoY Above targ
Slide 5: Diversified business mix – Q2 highlights
Diversified business mix – Q2 highlights Foundation Expansion Long-established businesses High-growth distinctive in which iA excels and is businesses in which iA already a leader seeks to become a leader Individual Retail Insurance distribution ▪ Very strong sales for all 3 (Canada) ▪ Better than e
Slide 6: Michael L. Stickney, EVP and CGO
Michael L. Stickney EVP and CGO
Slide 7: Q2/2021: Solid sales results
Q2/2021: Solid sales results Strong sales across all lines of business Second quarter ($M, unless otherwise indicated) 2021 2020 Variation Continued momentum from: ► Individual Insurance 73 53 38% ▪ Strong and diversified distribution networks ▪ High-performance digital tools ▪ Comprehensive and com
Slide 8: Q2/2021: Solid sales results (cont.)
Q2/2021: Solid sales results (cont.) Strong sales across all lines of business Second quarter ($M, unless otherwise indicated) 2021 2020 Variation ► Individual Wealth Management General fund - sales 220 175 26% Sales continue to be excellent #1 in the industry (gross and net sales) Segregated funds
Slide 9: US Dealer Services guiding to solid growth
US Dealer Services guiding to solid growth Sales ($US) • Growth through new dealer enrolment and 285 increased sales from existing accounts: Well-balanced business mix: ~50/50 between 246 new and used cars 233 222 • IAS integration is progressing well Q oQ Starting to reap the benefits of the synerg
Slide 10: Jacques Potvin, EVP, CFO and Chief Actuary
Jacques Potvin EVP, CFO and Chief Actuary
Slide 11: Q2/2021 results vs. guidance
Q2/2021 results vs. guidance EPS, ROE, strain, solvency ratio and capital generation all in-line or better than targets 2021 guidance Q2/2021 results H1/2021 results $1.95 to $2.10 in Q2 Core EPS1 $2.29 $4.08 $3.65 to $3.95 in H1 Core ROE1 (trailing 12 months) 12.5% to 14.0% 14.2% Impact of new busi
Slide 12: Reported and core earnings reconciliation
Reported and core earnings reconciliation $M $M EPS PRE-TAX POST-TAX Reported earnings 231 $2.15 Core earnings remove from reported earnings the impacts of the following items: UL (8¢ EPS gain), assets backing LT liabilities (2¢ EPS loss), MERs (1¢ EPS gain) Market-related impacts (14) (10) ($0.09)
Slide 13: Core SOE and items of note
Core SOE and items of note Core expected profit on in-force up 29% YoY Source of earnings Q2/2021 items of note Q2/2021 on a core basis ($M) (difference vs. expectations) Operating profit $M $M EPS Expected profit on in-force 246 PRE-TAX POST-TAX Solid experience gains from almost all business units
Slide 14: Additional protections in reserves for pandemic uncertainty
Additional protections in reserves for pandemic uncertainty Canada: Q2 mortality slightly above expectations (1¢ EPS experience loss) US: Q2 mortality better than expected (2¢ EPS excess provision carried forward) (amounts in millions of dollars Intitial value Current value are expressed before taxe
Slide 15: Capital position
Capital position 130% solvency ratio – Comfortably above iA’s target level Solvency ratio Key changes during the quarter iA Financial Corporation Inc. (%, end of period) 137 134 133 130 128 130 126 127 125 122 124 124 120 119 ► +1.0% Organic capital generation 110%-116% target net of digital initiat
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 9 percentage points of solvency ratio (as at Jun
Slide 17: Question & Answer Session
Question & Answer Session PRESENT AND STRONG. More than ever.
Slide 18: APPENDICES
APPENDICES PRESENT AND STRONG. More than ever.
Slide 19: Book value per share
Book value per share P/BV ratio of 1.14 at June 30, 2021 $59.02 CAGR at June 30, 2021 1-year +11% 5-year +9% 10-year +9% 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 1.80 1.74 1.
Slide 20: 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 Q3/21 $0.30 $0.25 Steady increases every 3 quarters $0.20 $0.15 First lifeco in Canada to resume dividend increases after
Slide 21: Policyholder experience: 32¢ EPS gain in Q2
Policyholder experience (excl. market-related impacts): 32¢ EPS gain in Q2 Solid results for almost all business units, including iAAH and Dealer divisions 2021 2020 2019 EPS impact 2021 2020 20192 in cents Q2 Q1 Q41 Q3 Q2 Q1 Q42 Q3 Q2 Q1 YTD annual annual Individual Insurance3 6 (6) 3 4 0 (8) 3 2 6
Slide 22: Impact of new business (strain): 1¢ EPS gain in Q2
Impact of new business (strain): 1¢ EPS gain in Q2 Within target range of -5% to 10%, with favourable impact from higher sales than expected Reported strain includes Individual Insurance in Canada and the US 2021 2020 2019 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales ($M) 118 98 112 98 98 85 90 81 81 67 Stra
Slide 23: Income on capital: 6¢ EPS gain in Q2
Income on capital: 6¢ EPS gain in Q2 Very favourable experience at iAAH (+9¢) and IT software asset writedown (-3¢) Quarterly 2021 2020 2019 ($M, pre-tax) run rate in 2021 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 37.0 33 39 24 27 36 41 35 39 42 42 Financing1 (10.5) (11) (10) (11) (11) (11) (9
Slide 24: Effective tax rate (ETR) of 22.6%
Effective tax rate (ETR) of 22.6%: 2¢ EPS loss in Q2 Favourable: lower taxation from the Company’s status as a multinational insurer (CIF) and other small deviations Unfavourable: true-up for the 2020 tax period 2021 2020 2019 ($M, unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating
Slide 25: Market-related impacts on earnings
Market-related impacts on earnings: 9¢ EPS gain in Q2 UL policies (+8¢), hedging (+2¢), MERs (+1¢) and level of assets backing reserves (-2¢) Approximate after-tax impact of market-related variations, 2021 2020 2019 in millions of dollars, as compared to the expected net earnings that the Company wo
Slide 26: Car loans: 5¢ EPS gain in Q2
Car loans: 5¢ EPS gain in Q2 and well-positioned provisions X¢EPS 3¢ EPS gain gain frominstrong Q2 from favourable portfolio credit performance (betterexperience and and credit experience) partial COVID 2¢ EPS provision gain from the partialrelease release of pandemic-related provisions due to pande
Slide 27: Investment portfolio
Investment portfolio High-quality, diversified portfolio Investment portfolio Bond portfolio = 73% of total portfolio Bonds - Corporates - BB and lower: 0.6% Low direct exposure to equity market Bonds - Corporates - Real estate: 4.3% BBB and higher: 35.4% • $3.6B of stocks in investment portfolio Mo
Slide 28: Bond portfolio by category
Bond portfolio by category High-quality, conservative portfolio Corporate bonds = 49.5% of bond portfolio Utilities: 15% Bonds in pandemic-affected sectors1 • 0.54% Consumer cyclical (retailers, autos and hotels) • 0.64% Industrial (airports and airport services) • 0.03% Materials (metals and mining
Slide 29: Equity market sensitivity
Equity market sensitivity (End of period) Q2/2021 Q1/2021 Q4/2020 Q2/2020 S&P/TSX closing value 20,166 pts 18,701 pts 17,433 pts 15,515 pts iA Financial Corporation solvency ratio 130% 128% 130% 124% Sensitivities S&P/TSX1 level at which provisions for future policy benefits Market protection for wo
Slide 30: Interest rate sensitivity
Interest rate sensitivity (End of period) Q2/2021 Q1/2021 Q4/2020 Q2/2020 ► 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 $4M $1M $4M $3M ► URR = Ultimate Reinvestment Rate ► Maximum assumption is promulga
Slide 31: S&P/TSX thresholds for Q3/2021 gain or loss
S&P/TSX thresholds for Q3/2021 gain or loss Potential impact on TSX threshold Threshold Q3/2021 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 20,166 ±$11.3M UL policy funds Q
Slide 32: Premiums and deposits
Premiums and deposits Net premiums, premium Q2/2021 $M YoY equivalents and deposits ($B) 14.0 Individual Insurance 445 13% Q4 3.9 Individual Wealth Management 2,015 58% 11.4 10.4 9.8 Q3 Group Insurance 471 20% 3.1 2.6 8.4 8.2 2.4 8.3 3.9 Group Savings and Retirement 668 87% 2.3 2.7 Q2 2.4 3.9 2.2 US
Slide 33: Asset growth
Asset growth AUM/AUA (assets under management and 210.5 Assets under management and administration administration, end of period, $B) 197.5 189.5 June 30 ($B, unless otherwise indicated) QoQ YoY 169.5 168.8 2021 104.7 95.8 Assets under management 89.2 126.2 80.8 79.7 General fund1 53.2 2% 3% Segrega
Slide 34: Individual Insurance (Canada)
Individual Insurance (Canada) Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 Minimum premiums2 65 44 48% 119 87 37% Excess premiums3 8 9 (11%) 12 11 9% Total 73 53 38% 131 98 34% Premiums 445 394 13% 864 791 9% Number of policie
Slide 35: Individual Wealth Management
Individual Wealth Management Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 General fund 220 175 26% 449 381 18% Segregated funds 1,046 599 75% 2,423 1,471 65% Mutual funds 749 505 48% 1,691 1,198 41% Total 2,015 1,279 58% 4,563
Slide 36: Group Insurance
Group Insurance Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 Employee Plans 14 23 (39%) 101 80 26% Dealer Services - Creditor Insurance2 70 47 49% 113 106 7% P&C Insurance 94 54 74% 158 116 36% Car loan originations 148 89 66%
Slide 37: Group Savings and Retirement
Group Savings and Retirement Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales1 Accumulation products 479 309 55% 1,118 943 19% Insured annuities 196 52 277% 223 58 284% Deposits2 — 4 (100%) 27 23 17% Total 675 365 85% 1,368 1,024 3
Slide 38: US Operations
US Operations Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2021 2020 Variation 2021 2020 Variation Sales ($US)1 Individual Insurance 37 33 12% 68 62 10% Dealer Services (P&C)2 285 134 113% 518 251 106% Premiums and equivalents 246 187 32% 493 366 35% ($CAN) 1 Sales are def
Slide 39: Quality of investment portfolio
Quality of investment portfolio June 30 March 31 December 31 June 30 2021 2021 2020 2020 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $23M $23M $45M $44M Provisions for impaired investments $6M $6M $14M $8M Net impaired investments $17M $17M $31M $36M Net impaired investments as a
Slide 40: Solvency ratio market-related sensitivity at Dec. 31, 2020
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 41: 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 increased gender equity of SO between 40% and60% CIAL in iA Financial
Slide 42: 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 43: 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 43
Slide 44: 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 45: Investor Relations
Investor Relations Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q3/2021 - November 3, 2021 Q4/2021 - February 17, 2022 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Rel
Slide 46: 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 47: 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 48: 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 49: 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.