Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Investor Presentation (June 2020)
29 slides from Ia Financial's investor presentation, Jun 8, 2020
Slide 1: Responsible Choices – Investor presentation
Responsible Choices STRENGTH GROWTH AMBITION Investor presentation June 8, 2020
Slide 2: Table of contents
Table of contents 3 Solid fundamentals 12 Capital sensitivity 21 Book value vs. peers 4 Priorities during pandemic 13 Stress testing on capital and liquidity 22 Dividend 5 Pandemic impacts on sales 14 Hedging 23 Premiums and deposits 6 Distance selling tools 15 Investment portfolio 24 Credit ratings
Slide 3: Solid fundamentals
Solid fundamentals Staying on course with our long-term vision PRIORITIES AGILITY Focus on health and safety of employees and advisors Fully operational very quickly, a real success story Provide support to clients and communities High-performance distance selling tools for advisors EARNINGS SALES &
Slide 4: iA priorities since the beginning of the pandemic
iA priorities since the beginning of the pandemic Providing support to clients, employees and 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 clients in these difficult t
Slide 5: Pandemic-related impacts on sales in coming quarters
Pandemic-related impacts on sales in coming quarters Proven strategy unaffected – Sales results show resiliency Sales before Sales for the the pandemic remainder of 2020 Comments (Initial assessment) Individual Insurance Strong Lower Fast digital transition due to highly competitive Individual Wealt
Slide 6: Distance selling tools for advisors
Distance selling tools for advisors Strategically advantaged by digital tools and current position in the middle market Individual Insurance • Offering approval at point of sale using predictive analysis since 2017 and The pandemic has accelerated the adoption of digital tools by advisors constantly
Slide 7: Pandemic-related impacts on reported earnings in 2020
Pandemic-related impacts on reported earnings in 2020 Recent market recovery could lead to better results than expected Initial assessment See sensitivities provided during Q1/2020 conference call Macroeconomics – – – to + + Extreme financial market volatility may still impact earnings NON-CORE 2020
Slide 8: US strategy – Moving toward a meaningful business
US strategy – Moving toward a meaningful business Steadily and successfully growing on two fronts 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 products +18.5% 3-yea
Slide 9: Acquisition of US company IAS Parent Holdings, Inc.
Acquisition of US company IAS Parent Holdings, Inc. Now better positioned to grow in this capital-light business Consistent with iA’s growth strategy and capitalizing on Parent Holdings positive growth trends within the vehicle warranty market • One of the largest providers of solutions in the US ve
Slide 10: Capital
Capital Robust position and flexible balance sheet Solvency • 121%1 above target range of 110%-116% – Appropriate for iA’s risk profile ratio • Low sensitivity to macroeconomic variations Debt and • Leverage ratio of 25.9% – Provides flexibility coverage ratios • Coverage ratio of 13.3x Potential ca
Slide 11: 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% 120% 120% 119% Macro Macro Macro Macro Macro Macro Macro Macro Macro impact impact impact impact impact impact impact impact impact --- -0.
Slide 12: Solvency ratio sensitivity
Solvency ratio sensitivity Low sensitivity to macroeconomic variations ► Equity market variation1 (30%) (20%) (10%) +10% +20% +30% ► Impact on solvency ratio March 31, 2020 (2%) (1%) +1% (2%) (2%) 0% (in percentage points) ► Interest rate variation2 (50 bps) (25 bps) +25 bps +50 bps ► Impact on solv
Slide 13: Stress testing on capital and liquidity
Stress testing on capital and liquidity Good positioning even under severe scenarios Q1 solvency ratio pro forma post-acquisitions is 121% Under a comprehensive scenario shocking income, sales and assumptions, Solvency ratio assuming interest rates close to 0% for the entire curve and 5% of the popu
Slide 14: Hedging for seg funds: An effective and robust long-term program
Hedging for seg funds: An effective and robust long-term program April and May combined hedging loss < $3M as volatility was offset by a positive from other risks Impact on EPS Cumulative expected impact on earnings is nil, with quarterly fluctuations (Cumulative gains of 20¢ EPS since program incep
Slide 15: Investment portfolio
Investment portfolio High-quality, diversified portfolio As at March 31, 2020 Bond portfolio: 66.7% of total portfolio • Only 0.5% of total portfolio rated BB or lower • 48.5% of total bonds are corporate bonds Car loans: 2.0% of total portfolio Low direct exposure to equity market: • $2.8B of stock
Slide 16: Bond portfolio by category
Bond portfolio by category High-quality, conservative portfolio As at March 31, 2020 Utilities 14% Bond exposure Financial 11% by credit rating Consumer - 5% AAA $27.7B Non-cyclical 8% 47% AA Government & Consumer - Cyclical 1% Municipalities 52% 31% A Energy 5% 16% BBB 1% BB and lower Industrial 4%
Slide 17: Limited exposure to hardly hit sectors
Limited exposure to hardly hit sectors Direct exposure to oil and gas is only 0.8% of total portfolio Oil & Gas Pandemic-affected sectors1 Total (direct and indirect) exposure = Total exposure = 1.3% of total portfolio 3.1% of total portfolio Exposure by asset category 87% Corporate bonds Exposure b
Slide 18: Car loans
Car loans Provision was doubled in Q1 to cover expected losses from pandemic-affected accounts Average credit loss rate (non-prime)2 (Trailing 12 months since acquisition of CTL in Q3/15) Car loans represent 2% of investment portfolio1 8.3% 8.0% • Provision for car loans increased from $10.3M to 7.4
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: Share price and book value per share
Share price and book value per share P/BV ratio of 0.89 at June 4, 2020 IAG Share Price Historical CAGR: 8%3 $52.294 $46.663 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 2019
Slide 21: iA shareholder value creation vs. peers
iA shareholder value creation vs. peers Book Value Per Share iAG and Dividends Paid +376% (end of period) Peers +222% March 31, June 30, 2020 20041 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 21 1 Chosen as the earliest comparable start date.
Slide 22: Dividend to common shareholders
Dividend to common shareholders Dividend of 48.5¢ per share payable in Q2/20 Steady increases every 3rd quarter First lifeco in Canada to resume dividend increases after the financial crisis 22
Slide 23: Premiums and deposits
Premiums and deposits Net premiums, premium equivalents and deposits Q1/2020 $Million YoY ($Billion) 10.3 Individual Insurance 397.5 3% Individual Wealth Management 1,771.0 40% Group Insurance 461.3 6% Q4 Group Savings and Retirement 652.0 (3%) Q3 US Operations 178.9 18% Q2 General Insurance 84.5 13
Slide 24: 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) 24
Slide 25: Building for the long term
Building for the long term iA Financial Group becomes carbon neutral in 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 ⦁ Signatory of United Nations Principles for Responsi
Slide 26: Investor Relations
Investor Relations Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q2/2020 - July 30, 2020 Q3/2020 - November 4, 2020 Q4/2020 - February 11, 2021 For information on our earnings releases, conference calls and related disclosure documents,
Slide 27: 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 28: 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 29: 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.