Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q4 2017 Earnings Presentation
38 slides from Ia Financial's earnings presentation, Feb 15, 2018
Slide 1: Fourth Quarter 2017 Conference Call
Fourth Quarter 2017 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary February 15, 2018 1
Slide 2: Table of Contents
Table of Contents 3 Q4/2017 highlights 15 2018 guidance 27 AUM/AUA 4 2017 in a nutshell 16 Capital 28 Mutual fund net sales 5 Sales 17 Balance sheet 29 Individual Insurance 6 Corporate structure 18 Book value 30 Individual Wealth Management 7 Q4/2017 results 19 Strain 31 Group Insurance 8 Q4 items o
Slide 3: Q4/2017 Highlights
Q4/2017 Highlights Solid growth in top line and core earnings • Reported EPS of $1.24 and trailing-12-month ROE of 11.4% • Core EPS +11% YoY and expected profit +16% YoY Profit • Year-end reserve strengthening of $0.10 EPS, net • Gains/losses from favourable markets, adverse lapse and higher strain
Slide 4: 2017 In A Nutshell
2017 In A Nutshell Core earnings in line, continued business growth and strong financial position • Reported EPS of $4.81 and core EPS of $4.88, at the middle of guidance • Expected profit on in-force +14% YoY and strain target reached Profit • $0.20 experience loss due to lapse; lapse assumption re
Slide 5: Full-year Sales
Full-year Sales Strong overall; Individual Insurance impacted by tax changes Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2017 2016 Variation 2017 2016 Variation ► Individual Insurance Canada 52.8 71.4 (26%) 194.0 212.1 (9%) United States 22.1 22.0 — 94.1 94.6 (1
Slide 6: Change in Corporate Structure
Change in Corporate Structure Intention announced on February 5, 2018 to adopt a Holdco/Opco structure Holdco • Adapting legal structure to current reality of iA Financial Group • Better suited to growth strategy and diversification of operations • More operational and financial flexibility • Level
Slide 7: Q4/2017 Results
Q4/2017 Results Solid growth in core earnings Guidance Q4/2017 results Reported: $1.24 EPS $1.25 to $1.35 Core1: $1.27 ROE Reported: 11.4% 11.0% to 12.5% (trailing twelve months) Core: 11.5% Quarterly range Strain 6% from 0% to 15% Effective tax rate 20% to 22% 22% Solvency ratio 175% to 200% 209% (
Slide 8: Q4 Items of Note
Q4 Items of Note Mostly in line with expectations EPS impact +9¢ -1¢ -2¢ -2¢ -10¢ Year-end Market- Policyholder Strain HollisWealth assumption review related experience integration (details on following slides) 8 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" a
Slide 9: Management's View on EPS
Management’s View on EPS 11% core1 EPS growth vs. Q4/2016 Q4 Reported EPS Q4 Core1 EPS Q4 Reported EPS $1.24 Adjusted for: $1.33 $1.32 Specific items: HollisWealth integration +$0.02 $1.27 $1.24 Change in assumptions and +$0.10 management actions Market-related gains -$0.09 Analyst iA Analyst iA con
Slide 10: Policyholder Experience
Policyholder Experience (excluding market impact and HollisWealth integration) Only material deviation in Q4 is lapse in Individual Insurance 2017 2016 2015 EPS impact 2017 2016 2015 in cents Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 annual annual annual Individual Insurance (4) 1 (1) (15) 16 7 4 2 9 9 14
Slide 11: 2017 Year-End Assumption Review
2017 Year-End Assumption Review Lapse assumption repositioned at year-end Impact on net income Pre-tax After-tax ($Million, non-PAR business) Mortality improvement (new CIA table) Mortality & Morbidity 378 277 Annual mortality and morbidity assumption review Lapse assumption update from internal stu
Slide 12: Macroeconomic Protection
Macroeconomic Protection Markets can drop 30% and interest rates by 43 bps before reserves need strengthening Stock market protection Interest rate protection (at end of period) (at end of period) 75 bps 32% 30% 27% 25% 23% 43 bps 43 bps 43 bps 40 bps Year-end Canadian 3.27% 2.34% 2.17% 2.35% 2.27%
Slide 13: 2017 Results
2017 Results Targets reached Guidance 2017 results Reported: $4.81 EPS $4.65 to $5.05 Core1: $4.88 ROE Reported: 11.4% 11.0% to 12.5% (trailing twelve months) Core: 11.5% Strain 6% 5% Effective tax rate 20% to 22% 22% Solvency ratio 175% to 200% 209% (~201% post-DAC) Payout ratio 25% to 35% 30% (mid
Slide 14: EPS Guidance
EPS Guidance Committed to minimum 10% annual EPS growth EPS Guidance $5.60 (diluted) $5.05 $5.20 $4.60 $4.20 $4.65 $3.80 $4.20 $3.40 $3.80 $3.10 $3.40 Target +11% $3.00 range $2.50 2012 2013 2014 2015 2016 2017 2018 Reported EPS $3.22 $3.57 $3.97 $3.57 $5.19 $4.81 Core1 EPS N/A $3.30 $3.54 $4.04 $4.
Slide 15: 2018 Guidance
2018 Guidance EPS1 ROE1 11.0% to 12.5% Q1 $1.15 to $1.25 6% annual target Strain (quarterly range from 0% to 15%) Q2 $1.30 to $1.40 Q3 $1.40 to $1.50 Effective 21% to 23% tax rate Q4 $1.35 to $1.45 Payout 25% to 35% 2018 $5.20 to $5.60 ratio (mid-range) 1 Guidance for EPS and ROE excludes any potent
Slide 16: Capital Position
Capital Position Above target range Solvency Ratio (%, end of period) 225 222 Key changes 220 213 213 209 during the quarter 200% ► -5% Macroeconomics Target ► +1% Profit and others 175% ~201% post-DAC acquisition closed on Jan. 23, 2018 Q4/15 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 16 This slide presents non
Slide 17: A Flexible Balance Sheet
A Flexible Balance Sheet With capacity to fund our growth December 31 September 30 December 31 Agency Rating 2017 2017 2016 Solvency ratio 209% 213% 225% S&P A+ ~201% post-DAC Leverage ratio 22.4% 22.8% 23.8% A.M. Best A+ (Superior) Coverage ratio 13.3x 12.7x 12.8x DBRS A (high) 17 This slide presen
Slide 18: Focused on Value Creation
Focused on Value Creation December 31, 2017 Book Value per Share CAGR BVPS = $44.20 (end of period) 1-year +8% 5-year +10% 10-year +8% Since 2000 +10% $9.36 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2.17 2.22 1.72 1.61 1.80 1.74 1.94 2.03 1.15 1.41 1.4
Slide 19: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business $0.02 EPS loss in Q4 on lower sales 2017 2016 2015 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales ($M) 74.9 68.6 74.8 69.8 93.4 75.0 72.9 65.4 73.7 63.8 61.7 55.1 Strain ($M) 4.7 3.3 2.5 4.4 5.1 8.8 9.3 11.3 14.4 15.2 15.2 21.3 Strain (%) 6% 5% 3% 6% 5% 12% 13%
Slide 20: Income on Capital
Income on Capital Investment income is in line and a second good quarter at iAAH 2018 2017 2017 2016 2015 ($Million, pre-tax) Quarterly Quarterly Run Rate Run Rate Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 35.5 33.0 32.2 39.1 35.3 39.1 29.4 32.1 33.5 33.5 33.7 27.7 28.4 32.6 Financing an
Slide 21: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) At top of guidance for Q4/17 and 2017 2017 2016 2015 ($Million, unless otherwise indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 155.8 162.5 148.6 129.4 180.4 165.6 157.7 108.3 (20.7) 122.5 142.5 102.7 Income on capital 20.1 31.8 16.3 15.8 12.2 20.6 17.5 14.8
Slide 22: Equity Market Sensitivity
Equity Market Sensitivity (End of period) Q4/2017 Q3/2017 Q4/2016 S&P/TSX closing value 16,209 pts 15,635 pts 15,288 pts iA solvency ratio 209% 213% 225% Sensitivities S&P/TSX level at which provisions for future policy Stocks matching benefits would have to be strengthened 11,300 pts 11,700 pts 11,
Slide 23: Interest Rate Sensitivity
Interest Rate Sensitivity (End of period) Q4/2017 Q3/2017 Q4/2016 ► IRR = Initial Reinvestment Rate ► Key element is long-term Canadian rate at year-end IRR ► 43 bps protection as of Dec. 31, 2017 gives management time to act ► Impact on net income1 of a 10 bps decrease in IRR ($18M) ($15M) ($24M) ►
Slide 24: S&P/TSX Thresholds for Q1/2018 Gain or Loss
S&P/TSX Thresholds for Q1/2018 Gain or Loss Potential impact on TSX threshold Threshold Q1/2018 Earnings driver net income attributed to for gain or loss compared with: common shareholders of a ±10% variation vs. threshold 1 Actual TSX value Revenues on at the end of 16,432 ±$10.7M UL policy funds Q
Slide 25: Reported EPS and Core EPS Reconciliation
1 Reported EPS and Core EPS Reconciliation Fourth quarter Year-to-date at December 31 (On a diluted basis) 2017 2016 Variation 2017 2016 Variation EPS $1.24 $1.48 (16%) $4.81 $5.19 (7%) Adjusted for: Specific items: Tax on premiums — — $0.04 — HollisWealth integration $0.02 — $0.08 — Income tax gain
Slide 26: Premiums and Deposits
Premiums and Deposits Net premiums, premium equivalents and deposits ($Billion) Q4/2017 $Million YoY 9.8 Individual Insurance 470.3 4% 8.2 2.4 7.5 7.7 7.4 7.4 Individual Wealth Management 1,097.8 11% 2.3 Q4 1.8 1.8 2.0 2.2 Group Insurance 445.9 17% Q3 1.6 1.8 1.8 2.1 2.4 Group Savings and Retirement
Slide 27: Asset Growth
Asset Growth AUM/AUA (assets under management and Assets Under Management and Administration administration, end of period, $Billion) 169.5 169.6 ($Billion, unless December 31 otherwise indicated) QoQ YoY 2017 126.2 Assets under management 80.8 115.8 109.5 General fund 37.8 2% 7% 98.8 41.4 36.9 Segr
Slide 28: Mutual Fund Net Sales
Mutual Fund Net Sales ($Million) 319 200 173 183 156 111 94 77 77 61 58 32 22 31 (11) (98) (68) (69) (121) (165) (267) (248) (316) (291) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013 2014 2015 2016 2017 28 This slide presents non-IFRS financial measures. See "Non-
Slide 29: Individual Insurance
Individual Insurance Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2017 2016 Variation 2017 2016 Variation Sales1 Canada - Minimum premiums2 46.2 62.6 (26%) 170.2 186.4 (9%) Canada - Excess premiums3 6.6 8.8 (25%) 23.8 25.7 (7%) Canada - Total 52.8 71.4 (26%) 194.
Slide 30: Individual Wealth Management
Individual Wealth Management Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2017 2016 Variation 2017 2016 Variation Sales1 General fund 86.2 73.2 18% 326.7 300.6 9% Segregated funds 451.9 383.2 18% 1,883.4 1,559.6 21% Mutual funds 559.7 535.4 5% 2,365.4 1,474.3 60%
Slide 31: Group Insurance
Group Insurance Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2017 2016 Variation 2017 2016 Variation Sales1 Employee Plans 7.3 23.1 (68%) 107.6 71.4 51% Dealer Services - Creditor Insurance2 99.0 85.5 16% 401.4 363.0 11% P&C Insurance 49.0 43.8 12% 233.4 196.9 19
Slide 32: Group Savings and Retirement
Group Savings and Retirement Fourth quarter Year-to-date at December 31 Sales1 ($Million, unless otherwise indicated) 2017 2016 Variation 2017 2016 Variation Accumulation products 272.9 349.0 (22%) 1,367.9 1,334.9 2% Insured annuities 45.9 5.5 735% 122.2 85.1 44% Deposits2 15.9 12.7 25% 55.0 61.4 (1
Slide 33: Quality of Investment Portfolio
Quality of Investment Portfolio December 31 September 30 December 31 2017 2017 2016 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $30.9M $31.1M $29.0M Provisions for impaired investments $7.5M $5.6M $5.6M Net impaired investments $23.4M $25.5M $23.4M Net impaired investments as a %
Slide 34: 2017 Guidance
2017 Guidance EPS1 ROE1 11.0% to 12.5% 6% annual target Q1 $1.00 to $1.10 Strain (quarterly range from 0% to 15%) Q2 $1.15 to $1.25 Effective 20% to 22% tax rate Q3 $1.25 to $1.35 Q4 $1.25 to $1.35 Solvency 175% to 200% ratio 2017 $4.65 to $5.05 Payout 25% to 35% ratio (mid-range) 1 Guidance for EPS
Slide 35: Investor Relations
Investor Relations Contact Grace Pollock Tel.: 418-780-5945 grace.pollock@ia.ca Next Reporting Dates Q1/2018 - May 10, 2018 Q2/2018 - August 2, 2018 Q3/2018 - November 7, 2018 Q4/2018 - February 14, 2019 Next Investor Day: June 22, 2018 For information on our earnings releases, conference calls and
Slide 36: Non-IFRS Financial Information
Non-IFRS Financial Information iA Financial Group 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 measu
Slide 37: Forward-Looking Statements
Forward-Looking Statements This presentation 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”, “suspe
Slide 38: TaN cal
TaN cal Financial Group