Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q3 2023 Earnings Presentation
46 slides from Ia Financial's earnings presentation, Nov 8, 2023
Slide 1: Third Quarter 2023 Conference Call
Third Quarter 2023 Conference Call Presenters: Denis Ricard, President and CEO Éric Jobin, EVP, CFO and Chief Actuary November 8, 2023
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 (hereinafter referred to individually in this section as the “Company”) report their financial results and statements in accordance with International Financial Reporting Standards (“IFRS”). They also publish certai
Slide 4: Table of Contents
TABLE OF CONTENTS 2 Forward-looking statements APPENDICES 3 Non-IFRS and add. measures 21 Book value 34 Insurance, Canada (cont.) 8 Q3/2023 key results 22 Dividend 35 Wealth Management 9 Financial targets 23 Capital deployment priorities 36 Wealth Management (cont.) 10 Sales 24 Results by segment 37
Slide 5: Agenda
AGENDA ▪ Key results Denis Ricard ▪ Strategic update President and CEO ▪ Business growth ▪ Profitability Éric Jobin EVP, CFO and Chief Actuary ▪ Financial strength ▪ Questions & Answers 5
Slide 6: Denis Ricard
Denis Ricard President and CEO 6
Slide 7: Management team
Denis Ricard Stephan Bourbonnais President and CEO EVP, Wealth Management Éric Jobin Renée Laflamme EVP, Chief Financial EVP, Individual Insurance, Officer and Chief Actuary Savings and Retirement Mike Stickney EVP, Chief Growth Officer Pierre Miron US Operations, Co-Head EVP, Chief Growth Officer o
Slide 8: Q3/2023 Key Results
Q3/2023 KEY RESULTS Focused growth strategy driving strong sales results and 10% YoY increase in core EPS Robust capital position and continued organic capital generation $2.50 Core EPS† 14.8% 2 Core ROE† +10% YoY1,3 15%+ medium-term guidance Solvency ratio † Organic capital generation† 145% 120% op
Slide 9: Financial Targets Summary
FINANCIAL TARGETS SUMMARY 2021 2022 9M/23 Medium-term guidance IFRS 4 IFRS 4 IFRS 9/171 IFRS 9/17 Core EPS YoY growth +17% +6% N/A 7% 10%+ annual average growth 2 Core ROE 14.2% 14.2% 14.5% 14.8% 15%+ Solvency ratio3 134% 126%4 154%5 145% 120% operating target Organic capital generation ~$490M ~$550
Slide 10: Q3/23 Business Growth – Insurance, Canada
Q3/23 BUSINESS GROWTH – Insurance, Canada INDIVIDUAL INSURANCE GROUP INSURANCE HIGHLIGHTS † (sales in $M) Employee Plans and Special Markets (net premiums† in $M) Individual Insurance • Another solid performance which compares to a 407 strong quarter a year earlier 93 96 384 • #1 in number of indivi
Slide 11: Q3/23 Business Growth – Wealth Management
Q3/23 BUSINESS GROWTH – Wealth Management INDIVIDUAL SEGREGATED FUNDS INDIVIDUAL MUTUAL FUNDS HIGHLIGHTS † † (gross sales in $M) (gross sales in $M) 882 782 Individual Wealth 306 289 • Net sales of $216M during the quarter +13% -6% for seg funds amid challenging YoY YoY macroeconomic environment • #
Slide 12: Q3/23 Business Growth – US Operations
Q3/23 BUSINESS GROWTH – US Operations HIGHLIGHTS INDIVIDUAL INSURANCE DEALER SERVICES Individual Insurance † (sales in US$M) (sales† in US$M) • Record high sales confirming strong growth potential in the US life insurance market 44 261 • Strong performance of distribution channels 248 • Customized p
Slide 13: Acquisition of Vericity
ACQUISITION OF VERICITY Strengthening individual insurance presence and diversifying distribution in the US HIGH STRATEGIC VALUE FOR iA ◦ Adding scale to our core insurance competencies with Fidelity Life ◦ Diversifying and complementing our distribution capabilities with direct-to-consumer reach th
Slide 14: Éric Jobin
Éric Jobin EVP, Chief Financial Officer and Chief Actuary 14
Slide 15: Q3/2023 Profitability and Financial Strength
Q3/2023 PROFITABILITY AND FINANCIAL STRENGTH Q3/2023 Q3/20221 YoY HIGHLIGHTS Profitability Core EPS of $2.50, up 10% YoY Core EPS $2.50 $2.27 6 +10% • Expected insurance earnings: +12% YoY • Core insurance service result: +10% YoY Core earnings $256M $241M +6% 2 • Core non-insurance activities: +10%
Slide 16: Q3/2023 Performance – Operating business segments
Q3/2023 PERFORMANCE – Operating business segments INSURANCE, WEALTH US CANADA MANAGEMENT OPERATIONS Core earnings ($M) Core earnings ($M) Core earnings ($M) 91 37 84 82 32 +8% 65 +26% (14%) YoY YoY YoY 1 1 1 Q3/22 Q3/23 Q3/22 Q3/23 Q3/22 Q3/23 ▪ 9% YoY growth in expected insurance earnings, ▪ 16% Yo
Slide 17: Q3/2023 Performance – Investment and Corporate
Q3/2023 PERFORMANCE – Investment and Corporate INVESTMENT Favourable items CORE EARNINGS RECONCILIATION • Investment portfolio optimization to Core earnings ($M) support higher investment returns and Q3 YTD (9M) improve asset/liability management ($M, unless otherwise indicated) 2023 2023 97 • Good
Slide 18: Robust Capital Position
ROBUST CAPITAL POSITION Supported by ongoing organic capital generation Capital available Q3/2023 MOVEMENTS Solvency ratio1 for deployment2 Solvency ratio1 (end of period) Beginning of quarter3 154% $1.8B 154% Core earnings net of dividends 2.5% $178M 145% Organic CSM growth (excl. seg funds) 0.5% $
Slide 19: Question & Answer Session
Question & Answer Session iA@ 19 Financtal Group
Slide 20: Appendices
APPENDICES 20
Slide 21: Book Value per Share
BOOK VALUE PER SHARE $65.25 at September 30, 2023 P/BV ratio of 1.31 at September 30, 2023 IFRS IFRS 4 9/17 CAGR March 31, 20001 $8.44 1-year +4% 5-year +7% 10-year +8% Since 2000 +10% IPO 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2
Slide 22: Dividend to Common Shareholders
DIVIDEND TO COMMON SHAREHOLDERS $0.80 Dividend per share of $0.75 to 76.5¢ payable in $0.70 Q4/2023 $0.65 $0.60 $0.55 $0.50 $0.45 $0.40 Largest dividend increase (+29%) $0.35 among Canadian lifecos $0.30 following the lifting of regulatory restrictions in November 2021 $0.25 Steady increases $0.20 e
Slide 23: Growth-Driven Strategy Focused on Strong Shareholder Value
GROWTH-DRIVEN STRATEGY FOCUSED ON STRONG SHAREHOLDER VALUE Capital deployment Capital available $1.6B for deployment1 (September 30, 2023) priorities 1 Profitable organic growth Investing in digital evolution to propel growth 2 Disciplined acquisitions RECENT INITIATIVES To strengthen strategic posi
Slide 24: Core Reconciliation
Q3/2023 CORE DOE AND CORE RECONCILIATION BY SEGMENT Insurance, Wealth ($M, unless otherwise indicated) US Operations Investment Corporate TOTAL Canada Management YoY Expected insurance earnings 143 67 40 — — 250 12% Impact of new insurance business (9) — (2) — — (11) DRIVERS OF EARNINGS + Core insur
Slide 25: Q3/2023 Drivers of Earnings
Q3/2023 DRIVERS OF EARNINGS† Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2023 20221 YoY 2023 20221 YoY DRIVERS OF EARNINGS - CORE - CONSOLIDATED Core insurance service result Risk adjustment release 61 57 7% 179 171 5% CSM recognized for services provided 152 132 15%
Slide 26: Market-Related Impacts
MARKET-RELATED IMPACTS METHODOLOGY 1 Quarterly non-core market-related impacts are the difference between: Reported net investment result, which is the actual IFRS result, and Core net investment result, which is based on management expectations MANAGEMENT EXPECTATIONS FOR CORE NET INVESTMENT RESULT
Slide 27: CSM Movement Analysis
CSM MOVEMENT ANALYSIS† ($M, unless otherwise indicated) Q3/2023 Q3/2022 YoY CSM - Beginning of period 5,740 5,586 Q3/23 highlights Organic CSM movement1 Impact of new insurance business2 134 152 Organic CSM increase of $38M Organic financial growth 59 3 63 • $59M organic financial growth3 Insurance
Slide 28: Investment Portfolio
INVESTMENT PORTFOLIO Resilient portfolio composed of high-quality assets and diversified exposures Bonds - Corporates - BB and lower: 0.5% Investment properties: 4% ü Fixed income ALM1-oriented portfolio ▪ see further details on slide 29 Mortgages - Insured: 3% Mortgages - Uninsured: 1% ü Prudent ex
Slide 29: Bond Portfolio
$27.1B BOND PORTFOLIO High-quality and conservative portfolio Distribution by industry sector Distribution by category of issuer (Corporate bonds) Financial services 21% BOND PORTFOLIO IS 69% OF TOTAL PORTFOLIO Governments 31% Utilities 31% • 66% are corporate bonds and 34% are government & Municipa
Slide 30: High-Quality Investment Properties & Mortgages Portfolios
HIGH-QUALITY INVESTMENT PROPERTIES & MORTGAGES PORTFOLIOS $1.7B INVESTMENT PROPERTIES $1.5B MORTGAGES ▪ Capital-efficient investment properties ▪ Disciplined underwriting process 1 ▪ Average lease terms remaining of ~9 years Combined portfolios ▪ Large portion rented to governments ▪ 70% of mortgage
Slide 31: Immediate Sensitivities Under IFRS 17
IMMEDIATE SENSITIVITIES UNDER IFRS 17 For more information on sensitivities, please refer to the quarterly and annual Management’s IMMEDIATE IMPACT Discussion and Analysis (MD&A) Net income Equity Solvency ratio CSM (non-core) as at September 30, 2023 $M post-tax $M post-tax Percentage points $M pre
Slide 32: Core Earnings Sensitivities
CORE EARNINGS SENSITIVITIES REVENUES & EXPENSES DIRECTLY IMPACTED BY THE LEVEL OF EQUITY MARKETS AND INTEREST RATES IMPACT ON as at Sept. 30, 2023 Variation FUTURE QUARTER Description of shock ▪ Expected return on non-fixed income (NFI) CORE EARNINGS1 asset investments $M post-tax ▪ CSM recognition
Slide 33: Insurance, Canada
INSURANCE, CANADA Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Individual Insurance Sales1 Minimum premiums2 84 87 (3%) 245 265 (8%) Excess premiums3 12 6 100% 29 27 7% Total 96 93 3% 274 292 (6%) Gross premiums 621 584 6% 1,830
Slide 34: Insurance, Canada (cont.)
INSURANCE, CANADA (cont.) Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Group Insurance Employee Plans Sales - New business during the year 10 5 100% 44 28 57% Net premiums 330 315 5% 981 937 5% Premium equivalents and deposits 56
Slide 35: Wealth Management
WEALTH MANAGEMENT Third quarter ($M, unless otherwise indicated) 2023 2022 Variation Individual Wealth Management Sales - Gross sales Segregated funds 882 782 13% Mutual funds† 289 306 (6%) Insured annuities and other savings products 618 326 90% Total 1,789 1,414 27% Sales - Net sales Segregated fu
Slide 36: Wealth Management (cont.)
WEALTH MANAGEMENT (cont.) Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Group Savings and Retirement Sales - Gross sales Accumulation contracts† Other accumulation contracts 23 13 77% 60 56 7% Segregated funds 430 356 21% 1,365 1,
Slide 37: US Operations
US OPERATIONS Third quarter Year-to-date at September 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Individual Insurance† Sales ($US) 44 35 26% 128 106 21% Sales ($CAN) 58 46 26% 171 136 26% Net premiums ($CAN) 161 123 31% 473 399 19% Dealer Services† Sales ($US) 248 26
Slide 38: Premiums and Deposits
PREMIUMS AND DEPOSITS Net premiums, premium equivalents and deposits† ($M, unless otherwise indicated) Q3/2023 YoY ($B) 16.6 Insurance, Canada 15.4 Individual Insurance 497 7% 14.0 4.2 3.9 Group Insurance 463 8% 12.6 11.4 3.9 Dealer Services 1 168 20% 10.4 9.8 4.1 3.9 Q3 iA Auto and Home1 117 10% 3.
Slide 39: Asset Growth
ASSET GROWTH AUM/AUA (assets under management and Assets under management and administration administration†, end of period, $B) 221.2 September 30 205.6 ($B, unless otherwise indicated) QoQ YoY 197.5 198.1 2023 189.4 168.8 Assets under management 109.7 95.8 97.7 102.2 General fund1 48.7 (4%) 2% 89.
Slide 40: Solvency Ratio
SOLVENCY RATIO Robust capital position supported by ongoing organic capital generation and well above operating target iA Financial Corporation Inc. (%, end of period) 154 149 1452 137 134 133 134 132 130 130 131 130 130 126 127 128 126 124 124 125 119 120% operating target Q3/18 Q4/18 Q1/19 Q2/19 Q
Slide 41: ESG – What We Do at iA
ESG ESG -–What WHAT we WE do DO at AT iA iA Initial strategy: Reduce Continue offsetting GHG emissions 50% For all iA Financial Group Senior Integration of TCFD Integration of sustainable our GHG emissions by of new iA Financial Leadership Positions2, (scope 1 and 2) recommendations and development
Slide 42: 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 42
Slide 43: Glossary
GLOSSARY Acronym Term Additional information ACL Allowance for credit losses Amount defined by IFRS 9 that adjusts the carrying amount of an asset for estimated future credit losses. AMF Autorité des marchés financiers Body mandated by the Government of Quebec to regulate Quebec insurers, including
Slide 44: Glossary (cont.)
GLOSSARY (cont.) Acronym Term Additional information IFRS International Financial Reporting Standards Set of accounting standards mandatory for Canadian publicly-owned companies. MD&A Management’s Discussion and Analysis - NCIB Normal course issuer bid - NFI Non-fixed income Asset class notably incl
Slide 45: Investor Relations
INVESTOR RELATIONS Contact Marie-Annick Bonneau Tel.: 418-931-0142 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q4/2023 - February 20, 2024 after market close Conference call on February 21, 2024 Q1/2024 - May 9, 2024 Conference call on May 9, 2024 Q2/2024 - August 6, 2024 after market close Conf
Slide 46: 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.