Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Industrial Alliance Insurance and Financial Services — Q4 2015 Earnings Presentation
36 slides from Ia Financial's earnings presentation, Feb 11, 2016
Slide 1: Fourth quarter 2015 Conference Call
Fourth quarter 2015 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary February 11, 2016 1
Slide 2: Q4 Highlights
Q4 Highlights Another strong quarter on a core basis ► Expected profit up 11% YoY to $129.4 million ► Reported EPS of $0.04 after assumption strengthening Profit ► Core EPS of $1.05 driven primarily by individual life gains ► Strain at 20% of sales better than quarterly guidance of 25% ► Outstanding
Slide 3: Sales Highlights
Sales Highlights An outstanding year except for mutual funds Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2015 2014 Variation 2015 2014 Variation ► Individual Insurance Canada 52.2 48.2 8% 176.9 162.0 1 9% United States 21.5 13.9 55% 77.4 54.0 43% Total 73.7 62.1
Slide 4: Asset Growth
Asset Growth Solid despite mutual fund outflows AUM/AUA Assets Under Management and Administration (assets under management and administration, in $B) ($Billion, unless December 31, otherwise indicated) YoY 2015 115.8 109.5 Assets under 98.8 management 36.9 32.7 General fund 33.2 5% 83.5 29.3 Segreg
Slide 5: Premiums and Deposits
Premiums and Deposits A strong Q4 with the help of Group Savings and Retirement Net premiums, premium equivalents and deposits (in $B) Q4/2015 $Million YoY 7.7 Individual Insurance 410.8 7% 7.4 7.4 7.5 7.0 6.9 2.0 Individual Wealth 1.8 1.8 692.2 (12%) 1.7 Management Q4 1.7 Group Insurance 378.8 6% 1
Slide 6: Q4 Earnings
Q4 Earnings Reported EPS is at top of guidance before assumption changes Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2015 2014 Variation 2015 2014 Variation Net income attributed to shareholders 8.3 123.7 — 386.4 432.9 (11%) Less: preferred shareholder dividends
Slide 7: Q4 Earnings
Q4 Earnings Another strong quarter for Individual Insurance Q4 items of note (gains and losses) Exceptional Market related Experience Income on capital +9¢ +6¢ Investment Individual income MER +1¢ UL +4¢ Insurance Hedging +2¢ Individual -3¢ -3¢ Wealth Group iAAH -7¢ businesses Assumption review -$1.
Slide 8: Experience (other than market related)
Experience (other than market related) A clear improvement in the insurance sectors Experience gain (loss) (EPS impact in cents) 2015 2014 2015 2014 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Individual Insurance 28 (2) 9 9 14 (4) 5 (5) 2 (4) Group Insurance 1 (16) (2) 5 1 (3) (1) (4) (7) (4) Individual Wealth (7) (3)
Slide 9: 2015 Year-End Assumption Review
2015 Year-End Assumption Review Lapse now off our watch list Impact on net income (M$) Pre-tax After-tax + Management actions (~$130M) Economic 344 254 + Model refinements (default assumptions, assumptions infrastructure modeling, investment expenses) net of decrease in IRR (~$125M) Mortality 48 35
Slide 10: Macroeconomic Protection Remains in Place
Macroeconomic Protection Remains in Place iA can withstand significant market and interest rate events Interest rates Stock markets (at year-end) (at year-end) Remember: Reserves can sustain a 27% Intra-year variations don’t matter, drop in equity markets management has time to act 43 bps 43 bps 32%
Slide 11: Management's View of Core EPS
Management's View of Core EPS $1.05 for Q4 ... $4.21 for the full year Q4 Reported EPS $0.04 Q4 EPS Exceptional item ► Reserve strengthening +$1.05 $1.07 $1.05 Items greater than ±4¢ ► Market gain (UL) ($0.02) ► Individual insurance ($0.05) ► Individual Wealth +$0.03 CONSENSUS1 Q4 Core EPS $1.05 iA
Slide 12: 2015 Results vs. Guidance
2015 Results vs. Guidance All metrics compare favourably on a core basis Guidance Reported iA's core EPS $3.80 to $4.20 $3.57 $4.21 ROE 11.0% to 12.5% 10.2% 11.9% Strain 30% 26% 26% Effective tax rate 18% to 20% 9% 20% Solvency ratio 175% to 200% 213% 213% 25% to 35% Payout ratio 32% 27% (mid-range)
Slide 13: 2016 Guidance
2016 Guidance Strain of 15% will be a significant driver of higher earnings EPS 1 ROE1 11.0% to 12.5% Q1 $0.90 to $1.00 Strain 15% ± 5% Q2 $1.05 to $1.15 Effective 18% to 20% tax rate Q3 $1.15 to $1.25 Q4 $1.10 to $1.20 Solvency 175% to 200% ratio 2016 $4.20 to $4.60 Payout 25% to 35% ratio (mid-ran
Slide 14: Where's the Growth Coming From in 2016?
Where’s the Growth Coming From in 2016? Insurance sectors will be key contributors 2015 EPS MID-GUIDANCE $4.00 ► Individual Insurance Lower strain and growth of expected profit +$0.43 ► Group Insurance Growth in all three divisions plus CTL car loans +$0.17 Individual Wealth ► Lower asset base in mu
Slide 15: Strain Guidance Cut In Half
Strain Guidance Cut In Half Realizing the full benefit of improvements in 2016 Strain as a % of sales 53 Improvements Actual Guidance 39 ► New reinsurance treaty 30 27 ► Sales mix 26 21 ► US underwriting changes 15 2011 2012 2013 2014 2015 2015 2016 15
Slide 16: Income On Capital
Income On Capital 2016 runrate reflects more intangibles and new iAAH investment QUARTERLY RUNRATE ($Million, pre-tax) 2016 2015 2014 Investment income 30.0 28.5 25.0 1 Financing & Intangibles (12.0) (8.0) (6.0) Sub Total 18.0 20.5 19.0 IA Auto and Home (0.5) 1.5 1.0 Total 17.5 22.0 20.0 1 Q1/15 deb
Slide 17: A Flexible Balance Sheet
A Flexible Balance Sheet To support growth initiatives December 31 September 30 December 31 Agency Rating Outlook 2015 2015 2014 Solvency 213% 225% 209% S&P A+ Stable ratio (Strong) Leverage 24.3% 24.5% 23.7% A.M. Best A+ Stable ratio (Superior) Coverage 8.2x 9.5x 7.9x DBRS A Stable ratio (High) Som
Slide 18: Strong Capital Position
Strong Capital Position Q4 ratio reflects acquisitions and seg fund capital volatility Solvency Ratio (%, end of period) 223 225 217 217 213 Key changes 209 211 200% during the quarter Target ► -7% Acquisitions 175% ► -5% Seg Funds 2012 2013 2014 Q1/15 Q2/15 Q3/15 Q4/15 18
Slide 19: Sensitivity of Solvency Ratio
Sensitivity of Solvency Ratio Interest rates (Québec long) TSX level TSX variation +0.20%1 At Dec. 31/15 -0.20%1 13,000 At Dec. 31/15 216% 213% 211% 12,400 -5% 209% 207% 205% 11,700 -10% 207% 205% 203% 11,100 -15% 205% 202% 200% 10,400 -20% 202% 200% 198% 9,800 -25% 200% 198% 195% 9,100 -30% 193% 19
Slide 20: Steady Value Creation for Shareholders
Steady Value Creation for Shareholders Book Value Per Share $36.76 (end of period) CAGR 1-year +9% 5-year +8% $9.36 Since 2000 +10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20
Slide 21: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business Q4 result beats guidance of 25% 2015 2014 2013 ($Million, unless otherwise indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q11 Q4 Q3 Q2 Q1 Sales 73.7 63.8 61.7 55.1 62.1 51.1 55.5 47.3 57.2 54.1 57.2 65.8 Strain 14.4 15.2 15.2 21.3 16.0 17.3 12.7 12.7 6.1 10.7 12.4 20.0 S
Slide 22: Income On Capital
Income On Capital iAAH results reflect adverse experience and expenses for new sub 2015 2014 2013 ($Million, pre-tax) Q4 Q3 Q2 Q11 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 33.7 27.7 28.4 32.6 29.8 29.3 27.2 26.7 26.0 29.9 37.3 32.1 Financing & (10.6) (10.0) (9.9) (8.8) (6.8) (6.7) (7.4) (7.1) (7.0)
Slide 23: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) 2015 ETR is 9% ► 20% on a core basis 2015 2014 2013 ($Million,unless otherwise indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating (20.7) 122.5 142.5 102.7 78.8 92.2 109.2 93.2 104.9 124.5 82.8 90.3 income Income on 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1 17.5 24.8 23.0
Slide 24: Market Sensitivity
Market Sensitivity (end of period) Q4/2015 Q3/2015 Q4/2014 S&P/TSX composite index 13,010 13,307 14,632 IAG solvency ratio 213% 225% 209% Sensitivities Stock Level of S&P/TSX before matching provisions require 9,500 pts 10,100 pts 9,900 pts long-term strengthening for future ( -27% ) ( -24% ) ( -32%
Slide 25: Interest Rate Sensitivity
Interest Rate Sensitivity (end of period) Q4/2015 Q3/2015 Q4/2014 1 After-tax impact on IRR reserves of a 10 bps ($31 million) ($32 million) ($35 million) decrease in IRR After-tax impact on URR reserves of a 10 bps ($60 million) ($57 million) ($59 million) decrease in URR After-tax impact on Total
Slide 26: S&P/TSX Thresholds for Q1/16 Gain/Loss
S&P/TSX Thresholds for Q1/16 Gain/Loss Impact on Q1/16 Earning TSX threshold for Threshold is net income of driver: gain or loss: compared to: a ±10% variation vs. threshold: Actual TSX value Revenues on 1 at the end of 13,189 ±$8.3 million UL policy funds Q1/16 Actual average value3 MERs collected
Slide 27: Individual Insurance
Individual Insurance 1 Fourth quarter Year-to-date at December 31 Sales ($Million, unless otherwise indicated) 2015 2014 Variation 2015 2014 Variation Canada - Minimum premiums2 43.0 40.8 5% 155.0 141.1 10% Canada - Excess premiums3,4 9.2 7.4 24% 21.9 20.9 5% Canada - Total Canada 52.2 48.2 8% 176.9
Slide 28: Individual Wealth Management
Individual Wealth Management Sales Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2015 2014 Variation 2015 2014 Variation Gross sales1 General fund 29.3 24.2 21% 130.4 111.9 17% Segregated funds 366.8 338.9 8% 1,581.2 1,352.6 17% Mutual funds 296.1 421.1 (30%) 1,42
Slide 29: Group Insurance
Group Insurance Year-to-date at Fourth quarter ($Million, unless otherwise indicated) December 31 2015 2014 Variation 2015 2014 Variation Sales1 Employee Plans 14.5 7.5 93% 68.0 70.2 (3%) Dealer Services - Creditor Insurance 89.3 90.5 (1%) 363.0 378.6 (4%) Dealer Services - P&C Insurance 49.1 37.6 3
Slide 30: Group Savings and Retirement
Group Savings and Retirement Fourth quarter Year-to-date at December 31 Sales1 ($Million, unless otherwise indicated) 2015 2014 Variation 2015 2014 Variation Accumulation products 375.0 210.3 78% 1,114.8 811.7 37% Insured annuities 91.3 11.7 680% 112.6 131.9 (15%) Deposits2 10.7 7.1 51% 88.8 44.1 10
Slide 31: Investment Portfolio
Investment Portfolio Continues to be of highest quality December 31 September 30 December 31 2015 2015 2014 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $19.7M $32.3M $22.5M Provisions for losses $5.5M $5.3M $3.8M Net impaired investments $14.2M $27.0M $18.7M Net impaired invest. a
Slide 32: Value of New Business
Value of New Business Value of New Business ($Million) Year-over-year change by component 181.5 163.6 164.0 Q4/2014 39.3 153.1 45.2 Q4 36.0 39.3 135.5 Increase in sales 2.6 44.9 40.7 35.1 Q3 38.6 38.8 Variation in profit margins (0.6) 38.4 31.9 Changes in economic 44.3 (6.2) Q2 42.7 42.6 assumptions
Slide 33: Investor Relations
Investor Relations Contact Grace Pollock Tel. 418-780-5945 grace.pollock@ia.ca Next Reporting Date Q1 – May 5, 2016 Q2 – August 4, 2016 Q3 – November 2, 2016 Q4 – February 16, 2017 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Relat
Slide 34: 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 35: 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 36: iA Financial Group
IAM Financial Group INVESTED IN YOU.
Industrial Alliance Insurance and Financial Services — Q4 2015 Earnings Presentation on 6ix