Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q2 2023 Earnings Presentation
47 slides from Ia Financial's earnings presentation, Aug 4, 2023
Slide 1: Second Quarter 2023 Conference Call
Second Quarter 2023 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary August 4, 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 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 21 Book value 34 Insurance, Canada (cont.) 8 Q2/2023 key results 22 Dividend 35 Wealth Management 9 Financial targets 23 Capital deployment priorities 36 Wealth Management (cont.) 11 Sales 24 Results by segment 37
Slide 5: Key results and strategic update
Key results and strategic update Denis Ricard, President and CEO Business growth Michael L. Stickney, EVP and CGO Profitability & Financial strength Jacques Potvin, EVP, CFO and Chief Actuary Questions & Answers 5
Slide 6: Denis Ricard
Denis Ricard President and CEO 6
Slide 7: Denis Ricard, Mike Stickney, Jacques Potvin
Denis Ricard Stephan Bourbonnais President and CEO EVP, Wealth Management Renée Laflamme Mike Stickney EVP, Individual Insurance, EVP, Chief Growth Officer Savings and Retirement Pierre Miron Jacques Potvin EVP, Chief Transformation EVP, Chief Financial Officer, Dealer Services Officer and Chief Act
Slide 8: Q2/2023 Key Results
Q2/2023 KEY RESULTS Very robust capital position and continued organic capital generation Increasing business growth momentum in almost all business units $2.39 Core EPS† 14.5% 2 Core ROE† +3% YoY1 15%+ medium-term guidance Solvency ratio† Organic capital generation† 154% Up 5 percentage points in Q
Slide 9: Financial Targets Summary
FINANCIAL TARGETS SUMMARY 2021 2022 H1/23 Medium-term guidance IFRS 4 IFRS 4 IFRS 9/171 IFRS 9/17 +7% +17% +6% vs. Q2/22 IFRS 4 10%+ Core EPS YoY growth N/A annual average growth vs. 2020 vs. 2021 +5% vs. Q2/22 IFRS 17 2 Core ROE 14.2% 14.2% 14.5% 14.5% 15%+ Solvency ratio3 134% 126%4 154%5 154% 120
Slide 10: Michael L. Stickney
Michael L. Stickney EVP and CGO 10
Slide 11: Q2/23 Business Growth – Insurance, Canada
Q2/23 BUSINESS GROWTH – Insurance, Canada INDIVIDUAL INSURANCE GROUP INSURANCE HIGHLIGHTS † (sales in $M) Employee Plans and Special Markets (net premiums† in $M) Individual Insurance 98 • Compares to a strong quarter a year earlier, 89 404 Q2/2023 result is up 22% from Q2/2021 73 380 • #1 in number
Slide 12: Q2/23 Business Growth – Wealth Management
Q2/23 BUSINESS GROWTH – Wealth Management INDIVIDUAL SEGREGATED FUNDS INDIVIDUAL MUTUAL FUNDS HIGHLIGHTS † † (gross sales in $M) (gross sales in $M) 924 829 Individual Wealth 375 370 • Net fund entries of $49M during the -10% -1% quarter YoY YoY • #1 in Canada in gross and net sales1 of seg funds •
Slide 13: Q2/23 Business Growth – US Operations
Q2/23 BUSINESS GROWTH – US Operations HIGHLIGHTS INDIVIDUAL INSURANCE DEALER SERVICES Individual Insurance † (sales in US$M) (sales† in US$M) • Strong sales driven by good performance from the middle/family and final expense 266 markets 43 246 • Customized portfolio of products sold in 38 230 select
Slide 14: Jacques Potvin
Jacques Potvin EVP, Chief Financial Officer and Chief Actuary 14
Slide 15: Q2/2023 Profitability and Financial Strength
Q2/2023 PROFITABILITY AND FINANCIAL STRENGTH Q2/2023 Q2/20221 YoY HIGHLIGHTS Profitability Core EPS of $2.39, up 3% YoY Core EPS $2.39 $2.32 +3% • 11% YoY growth in expected insurance earnings • 9% YoY growth in core insurance service result Core earnings $247M $250M (1%) 2 • 14% YoY growth in core
Slide 16: Q2/2023 Performance – Operating business segments
Q2/2023 PERFORMANCE – Operating business segments INSURANCE, WEALTH US CANADA MANAGEMENT OPERATIONS Core earnings ($M) Core earnings ($M) Core earnings ($M) 97 91 76 (6%) 66 +15% 40 (35%) YoY YoY YoY 26 1 Q2/22 Q2/23 Q2/22 1 Q2/23 Q2/22 1 Q2/23 ▪ Q2/23 compares with a very strong Q2/22 ▪ 12% YoY gro
Slide 17: Q2/2023 Performance – Investment and Corporate
Q2/2023 PERFORMANCE – Investment and Corporate INVESTMENT Solid core earnings growth CORE EARNINGS RECONCILIATION • 14% core net investment result growth Q2 H1 Core earnings ($M) ($M, unless otherwise indicated) • Investment portfolio optimization to 2023 2023 support higher investment returns and i
Slide 18: Robust Capital Position
ROBUST CAPITAL POSITION Supported by ongoing organic capital generation Capital available Q2/2023 MOVEMENTS Solvency ratio1 for deployment2 Solvency ratio1 (end of period) Beginning of quarter3 149% $1.8B 154% 149% Core earnings net of dividends 2.5% $168M Organic CSM growth (excl. seg funds) 1.0% $
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 P/BV ratio of 1.38 at June 30, 2023 $65.39 at June 30, 2023 CAGR 1-year +4% 5-year +7% 10-year +9% IFRS IFRS 4 9/17 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 2022 2.17 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 Q3/2023 $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 $1.8B for deployment (June 30, 2023) priorities 1 Profitable organic growth Investing in digital evolution to propel growth 2 Disciplined acquisitions RECENT INITIATIVES To strengthen strategic positionin
Slide 24: Core Reconciliation
Q2/2023 CORE DOE AND CORE RECONCILIATION BY SEGMENT Insurance, Wealth ($M, unless otherwise indicated) US Operations Investment Corporate TOTAL Canada Management YoY Expected insurance earnings 141 66 39 — — 246 11% Impact of new insurance business (14) — (1) — — (15) DRIVERS OF EARNINGS + Core insu
Slide 25: Q2/2023 Drivers of Earnings
Q2/2023 DRIVERS OF EARNINGS† Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2023 20221 YoY 2023 20221 YoY DRIVERS OF EARNINGS - CORE - CONSOLIDATED Core insurance service result Risk adjustment release 59 57 4% 118 114 4% CSM recognized for services provided 153 130 18% 300
Slide 26: Q2/23 Market-related Impacts
Q2/23 market-related impacts Non-core impact 1 – = (M, post-tax) Reported net investment result Core net investment result (management expectations) Q2/23 H1/23 INTEREST RATES & Reported investment income on fixed-income investments Investment income, net of finance expenses on all contract (includi
Slide 27: CSM Movement Analysis
CSM MOVEMENT ANALYSIS† ($M, unless otherwise indicated) Q2/2023 Q2/2022 YoY Q2/23 highlights CSM - Beginning of period 5,756 5,591 Good $75M organic CSM increase Organic CSM movement1 • $21M insurance experience gains: 2 Impact of new insurance business 147 172 Favourable shift in segregated fund bu
Slide 28: Investment Portfolio
INVESTMENT PORTFOLIO Resilient portfolio composed of high-quality assets and diversified exposures Bonds - Corporates - BB and lower: 1% Fixed income ALM1-oriented portfolio Investment properties: 4% ▪ Portfolio comprised of 69% in bonds with average credit rating between A and A+ Bonds - Corporates
Slide 29: $28.5B Bond Portfolio
$28.5B BOND PORTFOLIO BOND PORTFOLIO EXPERIENCE IN Q2 High-quality and conservative portfolio • No defaults • Favourable credit rating changes, with more upgrades than downgrades BOND PORTFOLIO IS 69% OF TOTAL PORTFOLIO • 65% are corporate bonds and 35% are government & municipalities bonds Distribu
Slide 30: High Quality Investment Properties & Mortgages Portfolios
HIGH QUALITY INVESTMENT PROPERTIES & MORTGAGES PORTFOLIOS $1.8B INVESTMENT PROPERTIES $1.5B MORTGAGES ▪ Capital-efficient investment properties ▪ Disciplined underwriting process ▪ Average lease terms remaining of ~9 years1 Combined portfolios ▪ Large portion rented to governments ▪ 71% of mortgages
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 June 30, 2023 $M post-tax $M post-tax Percentage points $M pre-tax
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 June 30, 2023 Variation FUTURE QUARTER Description of shock ▪ Expected return on non-fixed income (NFI) CORE EARNINGS1 asset investments $M post-tax ▪ CSM recognition i
Slide 33: Insurance, Canada
INSURANCE, CANADA Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Individual Insurance Sales1 Minimum premiums2 79 86 (8%) 161 178 (10%) Excess premiums3 10 12 (17%) 17 21 (19%) Total 89 98 (9%) 178 199 (11%) Gross premiums 616 584 5% 1
Slide 34: Insurance, Canada (cont.)
INSURANCE, CANADA (cont.) Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Group Insurance Employee Plans Sales - New business during the year 13 12 8% 34 23 48% Net premiums 326 319 2% 651 622 5% Premium equivalents and deposits 60 45 3
Slide 35: Wealth Management
WEALTH MANAGEMENT Second quarter ($M, unless otherwise indicated) 2023 2022 Variation Individual Wealth Management Sales - Gross sales Segregated funds 829 924 (10%) Mutual funds† 370 375 (1%) Insured annuities and other savings products 646 230 181% Total 1,845 1,529 21% Sales - Net sales Segregate
Slide 36: Wealth Management (cont.)
WEALTH MANAGEMENT (cont.) Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Group Savings and Retirement Sales - Gross sales Accumulation contracts† Other accumulation contracts 19 22 (14%) 37 43 (14%) Segregated funds 407 472 (14%) 935 1
Slide 37: US Operations
US OPERATIONS Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2023 2022 Variation 2023 2022 Variation Individual Insurance† Sales ($US) 43 38 13% 84 71 18% Sales ($CAN) 57 48 19% 113 90 26% Net premiums ($CAN) 158 141 12% 312 276 13% Dealer Services† Sales ($US) 246 266 (8%)
Slide 38: Premiums and Deposits
PREMIUMS AND DEPOSITS Net premiums, premium equivalents and deposits† ($M, unless otherwise indicated) Q2/2023 YoY ($B) 16.6 Insurance, Canada 15.4 Individual Insurance 494 5% 14.0 4.2 3.9 Group Insurance 464 9% 11.4 3.9 Dealer Services 144 18% 10.4 Q4 9.8 4.1 iA Auto and Home1 111 10% 3.1 3.3 2.6 8
Slide 39: Asset Growth
ASSET GROWTH AUM/AUA (assets under management and Assets under management and administration administration†, end of period, $B) 221.2 210.9 June 30 ($B, unless otherwise indicated) QoQ YoY 197.5 198.1 2023 189.4 168.8 Assets under management 109.7 104.2 95.8 97.7 General fund1 50.5 2% 8% 89.2 Segre
Slide 40: Solvency Ratio
SOLVENCY RATIO iA Financial Corporation Inc. (%, end of period) 154 149 137 134 133 134 132 130 130 131 130 130 126 127 128 126 124 124 125 122 119 120% operating target Q2/18 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 Q4/22 Q1/23 Q2/23 IFRS
Slide 41: 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 (from a 2019 baseline) • Now and in the future, between 40% and 60% of iA Financial Group Senio
Slide 42: 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) • ESG committee roles and responsibilities have been formalized and Sustainable • Climate Change Position Statemen
Slide 43: 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 43
Slide 44: 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 45: 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 46: Investor Relations
INVESTOR RELATIONS Contact Marie-Annick Bonneau Tel.: 418-931-0142 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q3/2023 - November 7, 2023 after market close Conference call on November 8, 2023 at 10AM Q4/2023 - February 20, 2024 after market close Conference call on February 21, 2024 Q1/2024 - M
Slide 47: iA Financial Group is a business name and trademark
iA Financial Group is a business name and trademark of iA Financial Corporation Inc. and Industrial Alliance Insurance and Financial Services Inc.