Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q2 2015 Earnings Presentation
31 slides from Ia Financial's earnings presentation, Jul 30, 2015
Slide 1: Second Quarter 2015 Conference Call
Second Quarter 2015 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary July 30, 2015 1
Slide 2: Q2 Highlights
Q2 Highlights A clear beat and a dividend increase ► Q2 reported EPS of $1.40 Above guidance [$0.95-$1.05] ► Expected profit up 15% to $132.5 million Profit ► Core EPS of $1.14 driven by favourable policyholder experience ► Mortality gain (+8¢) and strain at 25% (better than 30% guidance) ► Except
Slide 3: New Executive Responsibilities
New Executive Responsibilities RENÉE LAFLAMME RENÉ CHABOT DENIS RICARD Executive Vice-President Executive Vice-President, Executive Vice-President CFO and Chief Actuary Employee Plans, Actuarial Services, Individual Insurance and Special Markets Information Technology Annuities, Dealer Solutions and
Slide 4: Sales Highlights
Sales Highlights A strong showing overall ($Million, unless YoY YoY Q2/15 Q2/14 H1/15 H1/14 otherwise indicated) Growth Growth ► Individual Insurance 61.7 55.5 11% 116.8 102.81 14% ► Individual Wealth Mgmt ► Net seg fund sales 88.8 35.7 +53.1 259.6 131.5 +128.1 ► Net mutual fund sales (165.1) (98.0)
Slide 5: Asset Growth
Asset Growth Good momentum despite market headwinds in Q2 AUM/AUA (assets under management and administration in $B) At June 30, 2015 $Billion YoY AUA 112.9 General fund 32.3 10% 109.5 AUM 98.8 Seg funds 19.6 8% 32.7 34.7 83.5 29.3 Mutual funds 11.4 (5%) 73.6 23.9 Other 14.8 2% 21.9 AUM sub-total 78
Slide 6: Premiums and Deposits
Premiums and Deposits Raising the bar Net premiums, premium equivalents and deposits (in $B) Q2/15 $Million YoY 7.4 7.5 Individual Insurance 388.6 7% 7.0 6.9 1.8 1.8 Individual Wealth 781.5 4% Q4 1.7 1.7 Management 1.6 Group Insurance 340.0 (3%) 1.6 1.8 Q3 1.7 3.9 Group Savings and 336.5 68% Retirem
Slide 7: Q2 Profit
Q2 Profit A healthy contribution to the year to date ($Million, unless otherwise indicated) Q2/15 Q2/14 ∆ YoY H1/15 H1/14 ∆ YoY ► Net income attributed to 146.1 120.7 +21% 260.5 210.7 +24% shareholders ► Less: Preferred share dividends 3.9 7.1 -45% 9.4 14.2 -34% ► Less: Premium on preferred share --
Slide 8: Q2 Results vs. Guidance
Q2 Results vs. Guidance An all-round outperformance Guidance Q2 Reported Comments EPS $0.95 to $1.05 $1.40 Core of $1.14 ROE 11.0% to 12.5% 15.8% 13.0% on a core basis Better than Strain 30% 25% expected sales mix Effective tax rate 18% to 20% 10% Exceptional tax gain Interest rate increase and Solv
Slide 9: Q2 Reported EPS is $1.40
Q2 Reported EPS is $1.40 A gap of 45¢ between reported EPS and headline consensus1 of 95¢ Q2 items of note (gains and losses) Net experience gain of +18¢ Exceptional tax gain +17¢ Hedging Mortality Lower car dealer Other Strain IAAH +8¢ +8¢ claims +6¢ +2¢ +1¢ +1¢ Market (UL policies) -5¢ Core gains
Slide 10: Q2 Adjusted EPS
Q2 Adjusted EPS Management’s view of core is $1.14 Q2 EPS Q2 Reported EPS $1.40 $1.14 ► Exceptional items $0.98 ► Tax gain ($0.17) ► Items greater than ±4¢ ► Market loss (UL front-ending) $0.01 CONSENSUS 1 (core) iA ADJUSTED ► Mortality gain ($0.04) ► Individual Insur. P/H experience ($0.02) ► Hedgi
Slide 11: Strong Capital Position
Strong Capital Position QoQ reflects rate movements and higher profit Solvency Ratio (%, end of period) Key changes during Q2/15 217 217 223 212 215 215 209 211 200% Target LT interest rates (+8%) 175% Profit (+3%) Markets (+1%) 2012 2013 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 11
Slide 12: Shareholder Value Creation: +7% in H1
Shareholder Value Creation: +7% in H1 Book Value Per Share Q2/15 (end of period) $36.11 CAGR 1-year +11% $9.36 5-year +8% Since 2000 +10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1/15 12
Slide 13: Balance Sheet Flexibility
Balance Sheet Flexibility Significant capital to support our growth initiatives (end of period) Q2/15 Q1/15 Q4/14 Q2/14 Solvency ratio 223% 211% 209% 215% Leverage ratio 24.7% 25.4% 23.7% 26.2% Coverage ratio 8.9x 7.8x 7.9x 8.3x 13
Slide 14: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business YTD is in line with 2015 guidance (30% ± 5%) 2015 2014 2013 2012 Q2 Q1 Q4 Q3 Q2 Q11 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales ($M) 61.7 55.1 62.1 51.1 55.5 47.3 57.2 54.1 57.2 65.8 69.2 58.5 62.2 53.4 Strain ($M) 15.2 21.3 16.0 17.3 12.7 12.7 6.1 10.7 12.4 20.0 15.7 2
Slide 15: Income on Capital
Income on Capital Higher contribution from iA Auto & Home in Q2 offset by financing costs 2015 2014 2013 2012 ($Million, pre-tax) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 28.4 32.61 29.8 29.3 27.2 26.7 26.0 29.9 37.3 32.1 39.3 23.7 31.9 31.0 Financing & (9.9) 2 (8.8) 1,2 (6.8) (6.
Slide 16: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) Reflects exceptional tax gain 2015 2014 2013 2012 ($Million, unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 142.5 102.7 78.8 92.2 109.2 93.2 104.9 124.5 82.8 90.3 56.8 72.8 53.8 55.5 Income on capital 20.2 13.6 28.1 27.3 19.9 16.1 17.5
Slide 17: Market Sensitivity
Market Sensitivity (end of period) Q2/15 Q1/15 Q2/14 Stocks Level of S&P/TSX before matching 10,100 pts 10,100 pts 10,600 pts provisions require strengthening long-term (-31%) (-32%) (-30%) for future policy benefits liabilities Solvency Level of S&P/TSX at which 7,800 pts 8,400 pts 8,600 pts ratio
Slide 18: Interest Rate Sensitivity
Interest Rate Sensitivity (end of period) Q2/15 Q1/15 Q2/14 After-tax impact on reserves of a URR 10 bps decrease in URR ($58 million) ($62million) ($63 million) After-tax impact on reserves of a IRR 10 bps decrease in IRR ($31 million) ($35 million) ($21 million) After-tax impact on reserves of a T
Slide 19: S&P/TSX Thresholds for Q3/15 Gain/Loss
S&P/TSX Thresholds for Q3/15 Gain/Loss Impact on Q3/15 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 14,753 1 ±$8.5M UL policy funds at the end of Q3/15 MERs collected on Actual average value3 14,6
Slide 20: Healthy Balance Sheet With Flexibility to Support Growth
Healthy Balance Sheet With Flexibility to Support Growth Debt Ratio (Debentures and preferred shares / Capital structure) (end of period) 35.9% Agency Rating Outlook S&P A+ (Strong) Stable 25.8% A.M. Best A+ (Superior) Stable 24.7% 23.7% DBRS IC-2 Stable 2012 2013 2014 Q2/15 20
Slide 21: Individual Insurance
Individual Insurance ($Million, unless otherwise indicated) Q2/15 Q2/14 Variation H1/15 H1/14 Variation Sales1 Canada – Minimum premium2 38.5 36.4 6% 74.2 67.7 10% Canada – Excess premium3, 4 5.0 5.1 (2%) 7.4 9.1 (19%) Canada – Sub-total 43.5 41.5 5% 81.6 76.8 6% United States 18.2 14.0 30% 35.2 26.
Slide 22: Individual Wealth Management
Individual Wealth Management ($Million, unless otherwise indicated) Q2/15 Q2/14 Variation H1/15 H1/14 Variation Gross sales1 General fund 32.0 26.1 23% 73.1 62.6 17% Segregated funds 366.5 293.5 25% 856.2 693.4 23% Mutual funds 383.0 429.2 (11%) 818.7 1,065.1 (23%) Total 781.5 748.8 4% 1,748.0 1,821
Slide 23: Group Insurance
Group Insurance ($Million, unless otherwise indicated) Q2/15 Q2/14 Variation H1/15 H1/14 Variation Sales1 Employee Plans 25.3 8.1 212% 40.6 17.1 137% Dealer Services • Creditor Insurance 99.2 105.6 (6%) 164.6 175.6 (6%) • P&C 56.4 46.5 21% 92.1 76.4 21% • Total 155.6 152.1 2% 256.7 252.0 2% Special
Slide 24: Group Savings and Retirement
Group Savings and Retirement ($Million, unless otherwise indicated) Q2/15 Q2/14 Variation H1/15 H1/14 Variation Sales1 Accumulation products 306.3 177.9 72% 512.9 400.3 28% Insured annuities 18.2 13.8 32% 19.5 80.3 (76%) Deposits2 17.8 14.8 20% 60.8 19.8 207% TOTAL 342.3 206.5 66% 593.2 500.4 19% Va
Slide 25: Investment Portfolio
Investment Portfolio Continues to be of highest quality June 30, March 31, June 30, 2015 2015 2014 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $25.0M $24.6M $21.1M Provisions for losses $4.0M $4.0M $3.6M Net impaired investments $21.0M $20.6M $17.5M Net impaired investments as a %
Slide 26: Value of New Business
Value of New Business Value of New Business (VNB) ($Million) VNB in Q2/14 $42.6M 181.5 163.6 164.0 153.1 45.2 Impact of sales $2.9M Q4 36.0 39.3 44.9 40.7 Profit margins ($0.8M) 38.6 38.8 Q3 38.4 68.5 Economic assumptions ($7.2M) 44.3 42.7 42.6 Q2 33.4 37.5 VNB in Q2/15 $37.5M 46.3 51.3 43.3 Q1 36.4
Slide 27: 2015 Guidance
2015 Guidance EPS1 ROE1 11.0% to 12.5% Q1 $0.85 to $0.95 Strain 30% ± 5% Q2 $0.95 to $1.05 Effective Q3 $1.00 to $1.10 18% to 20% tax rate Q4 $1.00 to $1.10 Solvency 175% to 200% ratio 2015 $3.80 to $4.20 Payout 25% to 35% ratio (mid-range) 27 1 No reserve strengthening considered in EPS and ROE gui
Slide 28: Investor Relations
Investor Relations Contact Grace Pollock Tel. 418-780-5945 grace.pollock@ia.ca 2015 Reporting Dates Q3 – November 4, 2015 Q4 – February 11, 2016 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Relations section of our website at www.i
Slide 29: 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, va
Slide 30: 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 31: iA Financial Group
IAB Financial Group INVESTED IN YOU.