Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q4 2016 Earnings Presentation
35 slides from Ia Financial's earnings presentation, Feb 16, 2017
Slide 1: Fourth Quarter 2016 Conference Call
Fourth Quarter 2016 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary February 16, 2017 1
Slide 2: Year ends on a solid note
Q4/2016 Year ends on a solid note ► Reported EPS of $1.48: 23% above top of guidance ($1.10-$1.20 EPS) ► Core EPS of $1.16, within guidance and +10% YoY Profit ► Favourable policyholder experience (+$0.05 EPS) and favourable strain ratio of 5% (+$0.01 EPS) ► $0.02 market-related gain: UL policies (+
Slide 3: Sales Highlights
Sales Highlights Very strong quarter for retail insurance and turnaround in mutual fund net sales Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation ► Individual Insurance Canada 71.4 52.2 37% 212.1 176.9 20% United States 22.0 2
Slide 4: Q4 Results vs. Guidance
Q4 Results vs. Guidance A strong end to a strong year Q4/2016 2016 Guidance Reported Guidance Reported $1.48 $5.19 EPS $1.10 to $1.20 $4.20 to $4.60 Core: $1.16 Core: $4.77 14.9% 13.2% ROE1 11.0% to 12.5% 11.0% to 12.5% Core: 12.2% Core: 11.6% Strain 15% ± 5% 5% 15% ± 5% 11% Effective tax rate 18% t
Slide 5: Q4 Earnings
Q4 Earnings Continuation of favourable policyholder experience Q4 items of note (gains and losses) +22¢ Assumption changes +6¢ +5¢ Taxes P/H experience Income on capital UL +3¢ +1¢ Hedging -1¢ iAAH -3¢ Strain Market Related Financing -3¢ 5
Slide 6: Policyholder Experience (ex-market gains)
Policyholder Experience (ex-market gains) A strong trend for Individual Insurance Experience 2016 2015 2016 2015 by line of business Annual Annual (EPS impact in cents) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Individual Insurance 16 7 4 2 9 9 14 (4) 29 28 Group Insurance (9) 0 1 7 (2) 5 1 (3) (1) 1 Individual Wealt
Slide 7: Management's View of Core
Management's View of Core $1.16 EPS for Q4, within guidance and close to consensus Q4 CORE EPS Q4 Reported EPS $1.48 Exceptional items $1.18 $1.16 ► Assumption changes ($0.22) ► Taxes ($0.06) ► Financing cost +$0.03 ANALYST CONSENSUS1 Items greater than ±4¢ ► Individual Insurance ($0.12) iA RESULT ►
Slide 8: 2016 Year-End Assumption Review
2016 Year-End Assumption Review URR dropped by 20 bps and IRR protection increased to 75 bps Impact on net income Pre-tax After-tax ($Million) Mortality & Morbidity 43 31 + Annual assumption review Policyholder behaviour (50) (37) - Minor change related to lapse - URR decreased from 3.30% to 3.10% (
Slide 9: Macroeconomic Protection at Year-End
Macroeconomic Protection at Year-End Markets can drop 25% and interest rates by 75 bps before reserves need strengthening Stock market protection Interest rate protection (at end of period) (at end of period) 75 bps 32% 27% 25% 23% 43 bps 43 bps 40 bps Year-end Canadian rates: 3.27% 2.34% 2.17% 2.35
Slide 10: Capital Position
Capital Position Ratio is above guidance Solvency Ratio (%, end of period) 225 Key changes 217 217 213 218 during the quarter 209 205 199 200% Target ► +9% Macroeconomics (mostly interest rate) 175% ► -4% Debt redemption (-) and share issue (+) ► +2% Profit and others HollisWealth closing in Q3/17 w
Slide 11: Sensitivity of Solvency Ratio to Rates and Markets
Sensitivity of Solvency Ratio to Rates and Markets Interest rates (Quebec long) TSX level TSX variation +0.20%1 At Dec. 31/16 -0.20%1 16,800 +10% 229% 227% 225% 16,100 +5% 226% 224% 222% 15,300 At Dec. 31/16 227% 225% 222% 14,500 -5% 229% 227% 224% 13,800 -10% 230% 228% 226% 13,000 -15% 232% 230% 22
Slide 12: Mid-Point of 2017 EPS Guidance up 10% YoY
Mid-Point of 2017 EPS Guidance up 10% YoY Let's not forget seasonality of earnings and strain 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%
Slide 13: Income on Capital
Income on Capital iA Auto and Home seasonality could be as high as ±$5M QUARTERLY RUN RATE 2017 2016 2015 2014 ($Million, pre-tax) Investment income 33.0 30.0 28.5 25.0 Financing & Intangibles (14.0) (12.0) (8.0) (6.0) Subtotal 19.0 18.0 20.5 19.0 iA Auto and Home 0.5 (0.5) 1.5 1.0 (with seasonality
Slide 14: Updated Core Earnings Definition Starting in 2017
Updated Core Earnings Definition Starting in 2017 Market gains and losses excluded in updated definition Excluded from 2016 Core EPS core earnings Expected profit on in-force NO Old Updated G/L in excess of $0.04 EPS, definition definition Policyholder experience gain (loss) by line of business Q1 $
Slide 15: Growth in Dividend to Common Shareholders
Growth in Dividend to Common Shareholders 9% dividend increase $0.35 $0.30 $0.25 Dividend payable in Q1/17 increased by $0.20 9% to 35¢ per share Steady increases every 3 quarters $0.15 First lifeco in Canada to resume dividend increases after the $0.10 financial crisis $0.05 $0.00 2005 2006 2007 20
Slide 16: Steady Value Creation for Shareholders
Steady Value Creation for Shareholders Q4/2016 Book Value Per Share $40.97 (end of period) CAGR 1-year +11% 5-year +9% 10-year +8% Since 2000 +10% $9.36 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 16
Slide 17: Q4 Earnings
Q4 Earnings A solid quarter Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 1 2016 2015 Variation 2016 2015 1 Variation Net income attributed to shareholders 159.2 2 8.3 553.7 386.4 Less: dividends attributed to preferred shares 4.2 3 4.1 16.5 18.0 Less: redemption
Slide 18: A Flexible Balance Sheet
A Flexible Balance Sheet Good capacity to fund our growth December 31 September 30 December 31 Agency Rating 2016 2016 2015 Solvency ratio 225% 218% 213% S&P A+ (Strong) Leverage ratio 23.8% 28.7% 24.3% A.M. Best A+ (Superior) Coverage ratio 12.8x 10.3x 8.2x DBRS A (high) 18
Slide 19: Equity Market Sensitivity
Equity Market Sensitivity (End of period) Q4/2016 Q3/2016 Q4/2015 S&P/TSX index 15,288 pts 14,726 pts 13,010 pts iA solvency ratio 225% 218% 213% Sensitivities Stocks matching Level of S&P/TSX before reserves 11,400 pts 10,000 pts 9,500 pts long-term require strengthening for future policy liabiliti
Slide 20: Interest Rate Sensitivity
Interest Rate Sensitivity (End of period) Q4/2016 Q3/2016 Q4/2015 ► IRR = Initial Reinvestment Rate ► Assumption is a direct function of current long-term rate IRR ► 75 bps protection as of Dec. 31, 2016 ► Potential after-tax impact on reserves of a 10 bps decrease in IRR ($24M) ($25M) ($31M) ► URR
Slide 21: S&P/TSX Thresholds for Q1/2017 Gain/Loss
S&P/TSX Thresholds for Q1/2017 Gain/Loss Potential impact TSX threshold Threshold is on Q1/2017 Earnings driver net income of for gain or loss compared to: a ±10% variation vs. threshold Actual TSX value Revenues on 1 at the end of 15,498 ±$9.3M UL policy funds Q1/2017 2 Actual average value3 MERs c
Slide 22: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business +$0.01 EPS in Q4 on strong sales in Canada 2016 2015 2014 ($Million, unless otherwise indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales 93.4 75.0 72.9 65.4 73.7 63.8 61.7 55.1 62.1 51.1 55.5 47.3 Strain 5.1 8.8 9.3 11.3 14.4 15.2 15.2 21.3 16.0 17.3 12.
Slide 23: Income on Capital
Income on Capital Higher financing costs, higher claims and expenses at iAAH 2016 2016 2015 2014 ($Million, pre-tax) Quarterly Run Rate Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 30.0 29.4 32.1 33.5 33.5 33.7 27.7 28.4 32.6 29.8 29.3 27.2 26.7 Financing & Intangibles (12.0) (15.4) (12.8)
Slide 24: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) Expecting an increase to 20%-22% in 2017 2016 2015 2014 ($Million,unless otherwise indicated) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 180.4 165.6 157.7 108.3 (20.7) 122.5 142.5 102.7 78.8 92.2 109.2 93.2 Income on capital 12.2 20.6 17.5 14.8 20.2 23.5 20.2 13.6
Slide 25: Premiums and Deposits
Premiums and Deposits Net premiums, premium Q4/2016 $Million YoY equivalents and deposits ($Billion) 8.2 Individual Insurance 453.8 10% 7.7 7.4 7.5 7.4 6.9 2.3 Individual Wealth Management 991.8 43% 1.8 1.8 2.0 Q4 1.7 Group Insurance 379.6 0% 1.6 1.8 1.8 2.1 Q3 1.7 Group Savings and Retirement 360.6
Slide 26: Asset Growth
Asset Growth AUM/AUA Assets Under Management (assets under management and Administration and administration, $Billion) 126.2 ($Billion, unless December 31 otherwise indicated) YoY 115.8 2016 109.5 98.8 41.4 Assets under management 36.9 32.7 83.5 General fund 35.2 6% 29.3 Segregated funds 21.8 10% AU
Slide 27: Individual Insurance
Individual Insurance Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Sales1 Canada - Minimum premiums2 62.6 43.0 46% 186.4 155.0 20% Canada - Excess premiums3 8.8 9.2 (4%) 25.7 21.9 17% Canada - Total 71.4 52.2 37% 212.1 176.9
Slide 28: Individual Wealth Management
Individual Wealth Management Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Gross sales1 General fund 73.2 29.3 150% 300.6 130.4 131% Segregated funds 383.2 366.8 4% 1,559.6 1,581.2 (1%) Mutual funds 535.4 296.1 81% 1,474.3 1
Slide 29: Group Insurance
Group Insurance Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Sales1 Employee Plans 23.1 14.5 59% 71.4 68.0 5% Dealer Services - Creditor Insurance2 85.5 89.3 (4%) 363.0 363.0 0% Dealer Services - P&C Insurance 43.8 49.1 (11
Slide 30: Group Savings and Retirement
Group Savings and Retirement Fourth quarter Year-to-date at December 31 Sales1 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Accumulation products 349.0 375.0 (7%) 1,334.9 1,114.8 20% Insured annuities 5.5 91.3 (94%) 85.1 112.6 (24%) Deposits2 12.7 10.7 19% 61.4 88.8
Slide 31: Investment Portfolio
Investment Portfolio Continues to be of highest quality December 31 September 30 December 31 2016 2016 2015 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $29.0M $17.8M $19.7M Provisions for impaired investments $5.6M $5.1M $5.5M Net impaired investments $23.4M $12.7M $14.2M Net impa
Slide 32: Investor Relations
Investor Relations Contact Grace Pollock Tel.: 418-780-5945 grace.pollock@ia.ca Next Reporting Dates Q1/2017 - May 11, 2017 Q2/2017 - August 3, 2017 Q3/2017 - November 8, 2017 Q4/2017 - February 15, 2018 For information on our earnings releases, conference calls and related disclosure documents, con
Slide 33: Non-IFRS Financial Information
Non-IFRS Financial Information iA Financial Group 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, loan originations, finance receivables, c
Slide 34: 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”, “could”, “should”, “would”, “suspect”, “expect
Slide 35: Financial Group YEARS INVESTED IN YOU.
Financial Group YEARS INVESTED IN YOU.