Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Industrial Alliance Insurance and Financial Services — Q2 2014 Earnings Presentation
30 slides from Ia Financial's earnings presentation, Jul 31, 2014
Slide 1: Second Quarter 2014 Conference Call Presentation
Second Quarter 2014 Conference Call Presentation July 31, 2014 1
Slide 2: Presenters
Presenters YVON CHAREST NORMAND PÉPIN RENÉ CHABOT President and Executive Executive Chief Executive Officer Vice-President Vice-President and Chief Actuary 2
Slide 3: Q2/2014 Highlights
Q2/2014 Highlights Reported EPS above guidance Profitability ► $1.13 EPS above guidance of $0.85-$0.95 (consensus of $0.94) ► Exceptional tax gain of $0.15 EPS ► Adverse disability, dental & health offset by favourable mortality ► Contribution from favourable markets (growth and volatility) ► ROE
Slide 4: Strong Operator in All Environments
Strong Operator in All Environments Book Value Per Share (end of period) $32.47 CAGR $9.36 1-year +14% 5-year +9% Since IPO +10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q2/14 4
Slide 5: Sales Highlights
Sales Highlights Mixed results ($Million, unless Growth Growth otherwise indicated) Q2/14 Q2/13 H1/14 H1/13 YoY YoY ► Individual Insurance 55.5 57.2 (3%) 112.3 123.0 (9%) ► Individual Wealth Mgmt ► Mutual funds gross sales 429.2 536.1 (20%) 1,065.1 1,273.1 (16%) ► Seg. funds gross sales 293.5 220.9
Slide 6: Asset Growth
Asset Growth Largely attributed to well-performing equity markets AUM/AUA (assets under management and administration in $B) At June 30/14 $Billion YoY AUA 105.3 98.7 General fund 29.4 10% AUM 83.5 31.2 Seg funds 18.2 17% 73.6 29.3 Mutual funds1 12.0 24% 23.9 21.9 Other1 14.5 42% AUM sub-total 74.1
Slide 7: Premiums and Deposits
Premiums and Deposits P&D reflects lower wealth management inflows Net premiums, premium equivalents and deposits (in $B) Q2/14 $Million YoY Individual Insurance 362.2 6% 7.4 7.0 6.9 6.8 Individual Wealth 1.8 748.8 (4%) 1.7 Management Q4 1.8 1.7 Group Insurance 349.1 0% 1.6 1.6 1.7 Q3 1.5 3.8 Group
Slide 8: Q2 Profitability
Q2 Profitability Reported EPS above guidance ($0.85-$0.95) ($Million unless otherwise indicated) Q2/14 Q2/13 ∆ YoY H1/14 H1/13 ∆ YoY ► Net income attributed to 120.7 81.9 47% 210.7 170.3 24% shareholders ► Less: Preferred share dividends 7.1 8.6 (17%) 14.2 17.3 (18%) ► Net income available to common
Slide 9: Reported Earnings Above Guidance
Reported Earnings Above Guidance Maintaining tax rate guidance for next two quarters Q2 Guidance Q2 H1 EPS $0.85 to $0.95 $1.13 $1.96 Strain 25% 23% 23% 2014 Guidance Q2 H1 ROE1 11.0% to 12.5% 14.2% 13.0% Tax Rate 18% to 22% 7% 12% Payout 25% to 35% (mid-range) 23% 26% 9 1 Annualized for the quarter
Slide 10: Q2 Profitability Drivers
Q2 Profitability Drivers Strong headline earnings EPS Q2 items of note (gains and losses) $1.13 $0.94 15¢ Taxes 6¢ 2¢ 4¢ Hedging 3¢ Mortality Markets Strain CONSENSUS REPORTED -2¢ -6¢ Lapse and E-e Morbidity Plans 10
Slide 11: Q2 Adjusted Earnings
Q2 Adjusted Earnings Using our methodology presented at Investor Day EPS Q2 adjustments $1.13 Reported EPS $1.13 $0.98 $0.94 ► Exceptional items ► Tax gain -15¢ ► Typical items (over ±4¢) ► Employee plans +2¢ ► Hedging -2¢ CONSENSUS REPORTED ADJUSTED Adjusted EPS $0.98 11
Slide 12: Capital Position
Capital Position Solidly above 175%-200% guidance Solvency Ratio (%) Key changes during Q2/14 237 224 227 211 217 217 212 215 • Interest rates (-3%) 200 Target 186 • Equity markets (-1%) • IAS 19 (-1%) • Profit (+3%) • Debt issuance (+5%) Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 1
Slide 13: Significant Capacity to Absorb Market Downturns
Significant Capacity to Absorb Market Downturns Stock Market Sensitivities At At At June 30, March 31, June 30, 2014 2014 2013 ► Stocks Level of S&P/TSX before matching provisions require 10,600 points 10,500 points 10,600 points long-term strengthening for future policy (-30%) (-27%) (-13%) liabili
Slide 14: Long-term Interest Rate Sensitivity
Long-term Interest Rate Sensitivity Interest Rates Sensitivities At At At June 30, March 31, June 30, 2014 2014 2013 Impact on net income of a ► IRR 10 bps decrease in IRR ($21 million) ($20 million) ($16 million) Impact on net income of a ► URR 10 bps decrease in URR ($63 million) ($60 million) ($5
Slide 15: S&P/TSX Thresholds for Q3/14 Gain/Loss
S&P/TSX Thresholds for Q3/14 Gain/Loss Impact on Q3 Earning TSX threshold Threshold is net income of driver: for gain or loss: compared to: a ±10% variation vs. threshold: Revenues on Actual TSX value 15,354 1 ±$8M UL policy funds at the end of Q3 MERs collected on Actual average value3 15,250 2 ±$4
Slide 16: Income on Capital
Income on Capital Q2 in-line with ~$20M quarterly run rate 2014 2013 2012 ($Million, pre-tax) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 27.2 26.7 26.0 29.9 37.3 32.1 39.3 23.7 31.9 31.0 IA Auto and Home 0.1 (3.5) (1.5) 0.8 3.5 (3.1) 1.6 4.0 3.7 1.7 Financing & Intangibles (7.4) (7.1) (7.0) (5.
Slide 17: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business Mid-guidance in Q2 (15%-30%) 2014 2013 2012 ($Million, unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales 55.5 56.8 57.2 54.1 57.2 65.8 69.2 58.5 62.2 53.4 Strain 12.7 12.7 6.1 10.7 12.4 20.0 15.7 21.9 27.6 30.4 Strain 23% 22% 11% 20% 22% 30%
Slide 18: Effective Tax Rate
Effective Tax Rate Tax gain reduces effective tax rate to 7% in Q2 2014 2013 2012 ($Million, unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q32 Q2 Q1 Operating income 109.2 93.2 104.9 124.5 82.8 90.3 56.8 72.8 53.8 55.5 Income on capital 19.9 16.1 17.5 24.8 23.0 18.6 31.5 18.1 26.1 23.2 Taxable in
Slide 19: High-Quality Balance Sheet With Financial Flexibility
High-Quality Balance Sheet With Financial Flexibility Slightly higher debt ratio reflects net debt issuance in Q2 Debt Ratio (Debentures and preferred shares / Capital structure) 35.9% Agency Rating Outlook S&P A+ (Strong) Stable 25.8% 26.2% A.M. Best A+ (Superior) Stable DBRS IC-2 Stable 12/31/2012
Slide 20: Individual Insurance
Individual Insurance ($Million unless otherwise indicated) Q2/14 Q2/13 Var. H1/14 H1/13 Var. Sales 1 Minimum premiums2 50.4 48.4 4% 93.7 96.0 (2%) Excess premiums3 5.1 8.8 (42%) 18.6 27.0 (31%) Total 55.5 57.2 (3%) 112.3 123.0 (9%) Premiums 362.2 343.0 6% 741.3 700.1 6% Number of policies (Canada) 2
Slide 21: Individual Wealth Management
Individual Wealth Management ($Million, unless otherwise indicated) Q2/14 Q2/13 Variation H1/14 H1/13 Variation Sales 1 General fund 26.1 26.5 (2%) 62.6 70.0 (11%) Segregated funds 293.5 220.9 33% 693.4 533.1 30% Mutual funds 429.2 536.1 (20%) 1,065.1 1,273.1 (16%) Total 748.8 783.5 (4%) 1,821.1 1,8
Slide 22: Group Insurance
Group Insurance ($Million) Q2/14 Q2/13 Variation H1/14 H1/13 Variation Sales 1 Employee Plans 8.1 13.2 (39%) 17.1 42.5 (60%) Dealer Services • Creditor Insurance 105.6 106.2 (1%) 175.6 174.6 1% • P&C 46.5 37.7 23% 76.4 64.1 19% Special Markets Solutions 37.6 36.8 2% 85.7 85.1 1% Premiums and equival
Slide 23: Group Savings and Retirement
Group Savings and Retirement ($Million) Q2/14 Q2/13 Variation H1/14 H1/13 Variation Sales 1 Accumulation products 177.9 313.3 (43%) 400.3 494.9 (19%) Insured annuities 13.8 9.7 42% 80.3 65.5 23% Deposits 2 14.8 17.2 (14%) 19.8 31.4 (37%) Total 206.5 340.2 (39%) 500.4 591.8 (15%) Variation ($Million,
Slide 24: Investment Portfolio
Investment Portfolio Continues to be of highest quality June 30, March 31, June 30, 2014 2014 2013 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $21.1M $17.5M $11.0M Provisions for losses $3.6M $3.5M $2.3M Net impaired investments $17.5M $14.0M $8.7M Net impaired investments as a %
Slide 25: Value of New Business
Value of New Business Value of New Business (VNB) ($Million) VNB Growth ($M) 181.5 VNB in Q2/13 44.3 169.8 163.6 153.1 45.2 Q4 36.0 Decrease in sales (2.4) 53.8 44.9 40.7 Decrease in profit 38.6 (3.0) margins Q3 41.4 85.9 38.4 44.3 Change in economic 42.7 42.6 3.7 35.9 assumptions Q2 33.4 38.7 46.3
Slide 26: 2014 Guidance
2014 Guidance Effective EPS1 Strain ROE1 tax rate Q1 $0.75 to $0.85 30% Additional quarterly strain Q2 $0.85 to $0.95 25% variation of -10% to +5% Q3 $0.90 to $1.00 25% due to 11.0% 18% product mix to to Q4 $0.90 to $1.00 20% 12.5% 22% 2014 $3.40 to $3.80 25% Solvency ratio: 175% to 200% Payout rati
Slide 27: Investor Relations
Investor Relations Contact Grace Pollock Tel. 418-780-5945 grace.pollock@inalco.com Fiscal 2014 Reporting Dates First quarter – May 8, 2014 Second quarter – July 31, 2014 Third quarter – November 5, 2014 Fourth quarter – February 12, 2015 For information on our earnings releases, conference calls an
Slide 28: Non-IFRS Financial Information
Non-IFRS Financial Information Industrial Alliance Insurance and Financial Services Inc. reports its financial results in accordance with International Financial Reporting Standards (IFRS). It also publishes certain non -IFRS financial measures that do not have an IFRS equivalent, including sales, v
Slide 29: Forward-Looking Statements
Forward-Looking Statements This document may contain statements relating to strategies used by Industrial Alliance 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”, “expec
Slide 30: Second Quarter 2014 Conference Call Presentation
Second Quarter 2014 Conference Call Presentation July 31, 2014 30
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