Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Investor Day (2016)
107 slides from Ia Financial's investor day presentation, 2016
Slide 1: Growing and Prospering in a Low Interest Rate Environment
Growing anc Prospering in a Low Interest Rate Environment 2016 Investor Day he, 2018 IAB Financial Group
Slide 2: Cautionary Notes
Cautionary Notes 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,” “could,” “should,” “would,” “suspect,” “expect,” “an
Slide 3: Let's Think Another Way
Let’s Think Another Way Yvon Charest President and Chief Executive Officer 1
Slide 4: Since Our Last Investor Day
Since Our Last Investor Day Results are mostly above or within expectations OUTPERFORM ► Final expense (US) Among top 3 for sales to IMOs ► Adjustable disability #1 in Canada ► Retail insurance Outstanding sales and profit improvement ► Segregated funds #1 for net sales and #3 for total assets ► Dea
Slide 5: iA Living with Low LT Interest Rates
iA Living with Low LT Interest Rates Proven earnings visibility and solvency ratio above target Diluted EPS 4.60 ($) 4.20 3.80 4.20 3.40 3.80 3.10 3.40 Guidance 3.00 Strong fundamentals 2.50 for rates to remain low-for-long 2012 2013 2014 2015 2016 LT Canada rate 2.37% 3.27% 2.34% 2.17% 2.02%1 1 Sol
Slide 6: Reality Check on Interest Rates
Reality Check on Interest Rates Yes, they’re low and could be low-for-long but... Our balance sheet ► Many changes to investment strategy since drop in rates is positioned ► Significant management actions completed to date accordingly ► Still ample opportunity to support further drop in rates Our ne
Slide 7: Reality Check on Capital
Reality Check on Capital Beyond the solvency ratio, also need to consider... ► Proven visibility of earnings ► Smart capital management ► Macroeconomic protection in actuarial reserves ► Upcoming recognition of hedging strategy ► Growth in dividend to shareholders 5
Slide 8: Let's Think Another Way
Let’s Think Another Way Is the market blinded by low LT interest rates? Growth in total value per share Peer 1 (Book value and dividends paid) +256% iA +222% Peer 2 +86% Peer 3 +82% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1/16 1.8 1.7 1.9 2.0 1.1 1.4 1.5 1.0 1.1 1.5 1.3 1.2 1.1
Slide 9: Between Now and 2019
Between Now and 2019 iA will continue to grow and prosper through… ORGANIC GROWTH PROFIT IMPROVEMENT OPERATIONAL EFFICIENCIES ACQUISITIONS ACTIVE CAPITAL AND INVESTMENT MANAGEMENT 7
Slide 10: IAB
IAB Financial Group INVESTED IN YOU.
Slide 11: Investment Strategy: A Shield Against Further Headwinds
Investment Strategy: A Shield Against Further Headwinds Michel Tremblay Executive Vice-President and Chief Investment Officer 1
Slide 12: iA: A Very Resilient Company
iA: A Very Resilient Company In a declining interest rate environment 50 4.05% 4.08% $44.13 45 40 30-yr Cdn rates 35 $32.20 Stock price 30 $29.07 25 2.15% 20 2005 2009 2015 The investment strategy has played a key role so far. What can be done next? 2
Slide 13: Investment Strategy
Investment Strategy Many weapons in our arsenal ► Asset duration extension creates value Mismatch opportunities to offset negative developments ► Credit yield enhancement creates value Credit opportunities and provides flexibility to management Non-fixed income (NFI) ► Diversification of strategies
Slide 14: Changing the Asset Mix
Changing the Asset Mix Lower proportion of mortgages Mismatch Mortgage portfolio opportunities (% of invested assets and $B) 21% $3.4B $2.1B1 1 7% 2009 2015 2009 2015 Still $2.1B of short duration mortgage assets. Opportunity for further reduction if necessary. 4 1 Excluding $0.8B of securitized mor
Slide 15: Lengthening Cash Flow Duration
Lengthening Cash Flow Duration By reducing the proportion of short-term cash flows Mismatch Assets1 with cash flows <10 years opportunities (% of invested assets1 and amount) 34% $5.6B $4.5B 21% 2009 2015 2009 2015 At $5.6B, our opportunity to reduce short-term cash flows is even higher than it was
Slide 16: Duration and Long-Term Risk Sensitivity
Duration and Long-Term Risk Sensitivity Through purchase of financial derivatives Mismatch Notional amount1 opportunities $1.2B1 • Bond forwards • Repurchase agreements Duration xxx ~ 20 yrs • Interest rate swaps • Total return swaps None 2009 2015 Limited use so far, lots of room going forward 6 1
Slide 17: Diversifying Risks Without Reducing Yield
Diversifying Risks Without Reducing Yield From Quebec to a mix of Quebec and Ontario Credit Provincial bond portfolio opportunities ($B) 9.6 30-year bond rates 4.3 2009 2015 5.3 Québec 4.89% 3.26% 4.0 4.3 4.75% 3.20% Ontario 0.9 0.4 1.0 Other 2009 2015 7
Slide 18: Increasing Yield Through Corporate Credit
Increasing Yield Through Corporate Credit From governments to corporates Credit Total bond portfolio opportunities By category of issuer Peer avg 2009 2015 ($B and % of portfolio) 2015 Government $6.1 65% $10.6 55% 35% Corporates (public and private) $3.3 35% $8.7 45% 65% Total $9.4 100% $19.3 100%
Slide 19: Decreasing Sensitivity to LT Interest Rates
Decreasing Sensitivity to LT Interest Rates With the purchase of long-term corporate bonds Credit Corporate bond portfolio opportunities By maturity 2009 2015 ($B and % of portfolio) Long-term $0.7 21% $4.0 46% Mid-term $0.9 27% $2.5 29% Short-term (<10 years) $1.7 52% $2.2 25% Total $3.3 100% $8.7
Slide 20: Taking Credit Risks with LT Corporate Bonds
Taking Credit Risks with LT Corporate Bonds Where it is profitable to do so Credit Long-term corporate bond portfolio opportunities By rating 2009 2015 ($B and % of portfolio) A & higher $0.6 86% $2.3 58% BBB $0.1 14% $1.7 42% Total $0.7 100% $4.0 100% BBBs offer the best risk-reward profile 10
Slide 21: But Still with a Safe Approach
But Still with a Safe Approach Investing in non-cyclical sectors Credit BBB long-term corporate bond portfolio opportunities By sector 2009 2015 ($B and % of portfolio) Canadian and US midstream $0.4 24% Renewable energy $0.3 18% US utilities Not material $0.3 18% Public-private partnerships $0.2 12
Slide 22: Going Out of Canada
Going Out of Canada Without currency risk Credit Long-term corporate bond portfolio opportunities By geography 2009 2015 ($B and % of portfolio) Canada $0.6 86% $2.3 58% US $0.1 14% $1.6 41% Other -- -- $0.1 1% Total $0.7 100% $4.0 100% Full value of US investment not totally recognized yet. Convert
Slide 23: Non-Fixed Income (NFI) Portfolio
Non-Fixed Income (NFI) Portfolio No major changes over the last several years NFI Non-fixed income portfolio opportunities By category 2009 2015 ($B and % of portfolio) Equity (including participations) $1.9 73% $3.1 72% Real estate $0.7 27% $1.2 28% Total $2.6 100% $4.3 100% NFI as a % of total inv
Slide 24: Equity Portfolio
Equity Portfolio Less exposed to stock market volatility than it seems NFI Equity portfolio opportunities By category 2009 2015 ($B and % of portfolio) UL accounts $0.7 37% $0.6 19% Preferred shares $0.2 10% $0.6 19% Equity Public $1.0 53% $1.2 39% Private -- -- $0.7 23% Total $1.9 100% $3.1 100% Ac
Slide 25: Public Equities Add Yield Potential
Public Equities Add Yield Potential While limiting volatility risk NFI Public equity portfolio opportunities (Excluding UL accounts and preferred shares) By strategy 2009 2015 ($B and % of portfolio) Indexed $0.8 80% $0.4 33% Non-indexed $0.2 20% $0.8 67% Total $1.0 100% $1.2 100% By geography 2009
Slide 26: Adding Private Equity
Adding Private Equity Increases protection against low LT interest rates NFI Private equity portfolio opportunities Correlation with By strategy 2009 2015 Public Interest ($M and % of portfolio) stocks rates Infrastructure Not material $405 55% none --- Buyout $33 79% $228 31% ++ none Secondary mark
Slide 27: Real Estate a Natural Hedge vs. Interest Rates
Real Estate a Natural Hedge vs. Interest Rates Market value increased as interest rates decreased NFI Investment properties opportunities ($B) 1.2 0.3 Net acquisitions 2009-2015 0.7 Market value 0.9 0.7 2009 2015 Nearly 30% increase in market value over 6 years 17
Slide 28: Real Estate: A Conservative Approach
Real Estate: A Conservative Approach One-third occupied by government tenants NFI Real estate portfolio opportunities By occupancy 2009 2015 ($B and % of portfolio) Government $0.2 29% $0.4 33% Non-government $0.5 71% $0.8 67% Total portfolio $0.7 100% $1.2 100% Occupancy rate 94% 90% 18
Slide 29: Summary
Summary Mismatch opportunities Credit opportunities Non-fixed income (NFI) opportunities 19
Slide 30: IAB
IAB Financial Group INVESTED IN YOU.
Slide 31: Continuing Our Growth in Retail Insurance and Savings
Continuing Our Growth in Retail Insurance and Savings Denis Ricard Executive Vice-President Individual Insurance and Annuities 1
Slide 32: Since Our Last Investor Day
Since Our Last Investor Day Delivering on our plan ► Improving strain Insurance ► Starting to get traction with our PAR-like product ► Continuing successful rollout of Excellence outside Quebec ► Strong seg fund sales: #1 for net sales and #3 for total assets Savings ► New distribution strategy and
Slide 33: Market Positions in Canada
Market Positions in Canada Life 4th ► Sales Strong presence insurance in family market 2nd ► # of policies Disability 3rd ► Sales #1 for adjustable insurance (Excellence) 2nd ► # of policies disability 1st ► Net sales Segregated Current leader funds 3rd ► Gross sales in net sales 3rd ► Assets 3 Sour
Slide 34: Continuing to Grow and Prosper
Continuing to Grow and Prosper Three reasons 3 Distribution 2 Distribution 1 Distribution 4
Slide 35: Distribution Is Our Bedrock
Distribution Is Our Bedrock iA’s success is rooted in its distribution networks ► Close to 2,000 advisors and managers Career ► Insurance: 28% of sales ► Savings: 39% of sales ► Amount of business placed with iA varies among: Traditional (e.g. single owners) MGAs Consolidators Specialized dist
Slide 36: How iA Is Leveraging Its Distribution
How iA Is Leveraging Its Distribution Two recent successes 1 Rollout of Excellence across Canada 2 New dedicated sales team for seg funds 6
Slide 37: Using Our Distribution Networks
Using Our Distribution Networks To support the cross-Canada expansion of Excellence 2015 $15.2M sales 2010 $7.2M sales 40% outside Quebec 60% 96% in Quebec in Quebec Acquired in 2008, Excellence has more than doubled its sales in the last five years 7
Slide 38: Expanding Our Distribution
Expanding Our Distribution By creating a dedicated sales team for seg funds Gross sales ($M) 1,581 1,353 988 Current leader in New net sales distribution strategy 2013 2014 2015 8
Slide 39: Strategic Focus on Multiple Distribution Networks
Strategic Focus on Multiple Distribution Networks Building and growing long-lasting relationships Distribution Business iA strategy network environment Low recruitment Focus on recruitment Career in the industry and retention Traditional MGAs Lack of succession Protect in-force Build deeper MGA cons
Slide 40: Multiple Distribution Networks
Multiple Distribution Networks Opportunity to gain a greater share of consolidator business INSURANCE SAVINGS Career 28% Traditional MGAs 39% 41% 41% MGA consolidators 20% Specialized MGAs 11% 13% 7% 2015 Canadian sales 2015 gross sales of $177M of $1.7B 10
Slide 41: Operational Efficiencies
Operational Efficiencies Active on two fronts ► Reduce long-term guarantee products Increase ► Promote low-risk seg funds profit ► Decrease strain Clients and distributors 11
Slide 42: Reduce Long-Term Guarantee Products
Reduce Long-Term Guarantee Products On the right track ► Sales team promoting low guarantee products ► PAR-like product showing encouraging results ► Product changes/re-pricing in Fall 2016 with two objectives: Insurance Reflect 2017 tax changes Improve profitability while staying competitive ►
Slide 43: Promote Low-Risk Seg Funds
Promote Low-Risk Seg Funds In solutions 2012 2015 Sales of 28% low-risk seg funds 67% (% of total gross sales) $1.1B Total gross seg fund sales $1.6B 13
Slide 44: Individual Insurance Strain
Individual Insurance Strain On the right track and still working to improve profit Strain as a % of sales Recent improvements 27% 26% ► Renegotiated reinsurance treaty ► Improved sales mix 17% 15% Now working on ► Higher product profitability 10% ► Better sales mix 2014 2015 Q1/16 2016 Next GUIDANCE
Slide 45: Operational Efficiencies
Operational Efficiencies Active on two fronts Increase profit Clients ► Make it easy for clients and distributors to do business with iA and ► Explore new ways to interact with clients as well as to service distributors and market our products 15
Slide 46: Operational Efficiencies and Cost Improvements
Operational Efficiencies and Cost Improvements Making it easy for clients and distributors PRODUCTS WEB ACCESS SIMPLIFIED ADVISOR TOOLS UNDERWRITING ADMINISTRATION 16
Slide 47: Confident We Can Continue
Confident We Can Continue To grow and prosper in retail insurance and savings We have the know-how to grow and 1 leverage our distribution networks We are focused on operational 2 and financial efficiencies 17
Slide 48: Growing Dealer Services Profit Through Its Full-Product Suite
Growing Dealer Services Profit Through Its Full-Product Suite Denis Ricard Executive Vice-President Individual Insurance and Annuities 18
Slide 49: One-Stop Shopping for Car Dealers
One-Stop Shopping for Car Dealers Today iA is the only provider of this suite of services Creditor insurance P&C products Car financing Car insurance Extended warranty Theft, chemical, Life, disability Car insurance via and tire and rim Retail loans via and critical illness iA Auto & Home replacemen
Slide 50: Growing Dealer Services Profit
Growing Dealer Services Profit On higher margin products ► P&C: The engine for recent sales and profit growth 2011-2015 ► Car loans: CTL acquired to further accelerate profit growth ► Increase profitability through expanded product suite Looking Car loans are a new high-growth area forward ► Strat
Slide 51: iA Car Loan Business
iA Car Loan Business Should represent >20% of Dealer Services profit by 2017 Trust Business organically developed Prime auto loans CAR LOAN BUSINESS Full-spectrum car loan offering Cross-Canada presence Strategic fit with Dealer Services Leverages car dealer network Acquired by iA in October
Slide 52: Top Line Growth
Top Line Growth #1 in Canada in aftermarket products for car dealers 5-year sales growth Car loans accelerating the growth (Creditor and P&C, $M) 561 ► Loan originations: $81M in Q1/16 ($186M in 2015) 367 ► Loan balance: $346M at March 31, 2016 (59% at prime rate) ► Car loan business leveraging car
Slide 53: Dealer Services Division
Dealer Services Division A typical iA success story... one step at a time Car loans P&C products Creditor insurance 1999 2000-01 2007 2010 2011 2012 2015 Acquired Acquired iA started P&C Acquired Acquired creditor 2 creditor manufacturing distribution CTL insurance insurance (VAG) via operations Sea
Slide 54: IAB
IAB Financial Group INVESTED IN YOU.
Slide 55: Positioning Our Mutual Funds for the Future
Positioning Our Mutual Funds for the Future Carl Mustos President iA Clarington 1
Slide 56: Scale in Manufacturing and Distribution
Scale in Manufacturing and Distribution More than $50B in AUA/AUM MANUFACTURING AFFILIATED DISTRIBUTION 80+ actively managed funds More than 2,800 advisors and investment solutions across Canada Mutual High net worth IIROC funds $8B $10B $4B $14B $38B AUM AUA MFDA $30B 2
Slide 57: Growing Faster Than the Market
Growing Faster Than the Market Reflects organic growth and acquisitions AUM AUA 20 ($B) 45 ($B) 40 16 35 Total growth 30 2007-2015 12 AUA 25 20 AUA 142% 8 AUM 45% 15 TSX TR 31% 4 10 5 AUM 0 0 2007 2009 2011 2013 2015 3
Slide 58: iA's Affiliated Distribution
iA’s Affiliated Distribution Access to a large and growing network 2nd largest non-bank distribution network in Canada Represented across all regions and channels Growing through acquisitions and organic recruitment Still more room to grow in a consolidating industry 4
Slide 59: Two Track Distribution
Two Track Distribution iA affiliates More predictable $38B AUA Leverage access and consistent Long-term partnerships Independents Predictable Large scale but ~$500B AUA Capture the theme Reliable less predictable Consistent Performance and product 5
Slide 60: Leverage Affiliated Distribution
Leverage Affiliated Distribution Build long-term strategic partnerships iA-manufactured mutual funds ► Managed solutions now almost 40% of all industry assets1 ► Managed solutions just 13% of assets at iA distribution affiliates 3rd party assets …an opportunity to partner iA affiliates $38B AUA 6 1
Slide 61: Leverage Affiliated Distribution
Leverage Affiliated Distribution Our managed solutions iA Clarington Managed Portfolios ► Built-in consultation with distribution affiliates to capture current demand iA Advisory Services Portfolios iA Advisory Services Portfolios ► Built to support distribution affiliates’ evolution to fee-based ac
Slide 62: Grow Market Share Among Independents
Grow Market Share Among Independents Fund performance is key iA-manufactured mutual funds Improvement in core performance (% of assets above median) YTD 1 yr 3 yrs 5 yrs Apr-16 78% 51% 36% 58% Independent assets Dec-15 38% 38% 42% 30% Independents ~$500B AUA 8 Source: Fundata (FundProfiler). Perform
Slide 63: Grow Market Share Among Independents
Grow Market Share Among Independents Through a broad product offering to capture the theme THEME ► NEW: iAC Managed Portfolios launched in The shift to May 2016 managed solutions ► NEW: iAC Core Plus Bond Fund ► NEW: iAC Floating Rate Income Fund THEME ► NEW: iAC Yield Opportunities Fund The income
Slide 64: Transparency and the Value of Advice
Transparency and the Value of Advice Greater awareness around fees and alternative pricing concepts (ETFs, Robo) Marketplace evolving to where costs and/or value are more narrowly defined and must be better articulated 200 bps 100 bps 100 bps ADVICE INVESTMENT MANAGEMENT FINANCIAL PLANNING ASSET ALL
Slide 65: iA Well Positioned
iA Well Positioned To serve an industry in transition ► Forstrong is an experienced global macro ETF strategist ETFs One of the longest tenures in ETF investing Institutional approach – disciplined and documented ► Robo with a heart Digital ► Advisor-supported digital solutions ► CRM2 compliant
Slide 66: iA Well Positioned
iA Well Positioned To benefit from Canada’s largest-ever wealth transfer Growing affiliated distribution to gain more market share for iA-manufactured products Attractive investment options for two different channels: ► iA affiliates – Mutual Fund of Funds and Advisory Services ► Independents – acti
Slide 67: IAB
IAB Financial Group INVESTED IN YOU.
Slide 68: Break
Back in 15 minutes IAB Financial Group INVESTED IN YOU.
Slide 69: Growing Our Group Business Contribution
Growing Our Group Business Contribution Renée Laflamme Executive Vice-President Group Benefits and Retirement Solutions 1
Slide 70: Group Benefits and Retirement Solutions
Group Benefits and Retirement Solutions Regrouped under new leadership in 2015 EMPLOYEE PLANS GROUP SAVINGS SPECIAL MARKETS AND RETIREMENT SOLUTIONS (SMS) (GSR) 2
Slide 71: Objectives Under the New Structure
Objectives Under the New Structure ► Offer a group solution to the marketplace ► Maximize marketing and distribution synergies ► Deliver a better experience for all stakeholders: DISTRIBUTORS: Integrated approach EMPLOYERS: One-stop service EMPLOYEES: Total well-being (health & financial) Our
Slide 72: Growing Our Contribution
Growing Our Contribution The plan is to deliver 10% of iA profit by 2019 + $480M in premiums +$31M via organic growth and new business and profit improvement 7% 17% 4-year 4-year CAGR CAGR TOP-LINE GROWTH OPERATING PROFIT 4
Slide 73: Key Actions to Achieve Plan
Key Actions to Achieve Plan ► Increase new business without sacrificing profit ► Review product mix (insured plans and other financial Employee Plans arrangements) ► Increase persistency by 2% ► Achieve sales objective of $700M/year for capital accumulation products (CAP) Group Savings ► Improve CAP
Slide 74: Growing Our Contribution
Growing Our Contribution Through organic growth and profit improvement Operating profit (Employee Plans, GSR and SMS; $M) 67 45 36 17 2016 off to a good start for Employee Plans 2014 2015 2016e 2019 6
Slide 75: Growth Objectives: Employee Plans
Growth Objectives Employee Plans Premiums ($B) ► Strengthen distribution relationships with key players 1.2 ► Provide solutions to support financial sustainability of plans Drug management 0.9 Long-term disability management ► Increase plan retention Foster voluntary products Wellness progra
Slide 76: Growth Objectives: Group Savings and Retirement
Growth Objectives Group Savings and Retirement Annual new business in CAP ($M) ► Strengthen distribution relationships with key players 700 ► Increase digital solution offering 560 ► Increase post-employment/retirement retention Disbursement solutions Advisory model Loyalty initiatives ► Integ
Slide 77: Growth Objectives: Special Markets Solutions
Growth Objectives Special Markets Solutions Premiums ($M) ► Mainly AD&D, student accident insurance, travel 230 insurance and critical illness (CI) ► Grow while maintaining niche approach (high ROE) 190 ► Target small markets with high growth potential (CI) ► Leverage distribution opportunities with
Slide 78: Reaching Our 2019 Objectives
Reaching Our 2019 Objectives ► Organic growth Employee Plans ► Back to full profit contribution by 2019 ► Improved value proposition for employers and employees ► Grow CAP assets Group Savings ► Improve retention by 25% and Retirement ► Maintain insured annuity block of business Special Markets ► Or
Slide 79: IAB
IAB Financial Group INVESTED IN YOU.
Slide 80: Growing Our US Contribution
Growing Our US Contribution Mike Stickney President iA American 1
Slide 81: Since Our Last Investor Day
Since Our Last Investor Day A lot of progress on many fronts ► Growth has been outstanding Top line ► Now among top 3 companies marketing final expense products to IMOs ► Net income is improving Bottom line ► Individual life strain reduced from 35% to 15% due to underwriting review and growth ► Stre
Slide 82: Our Plan Between Now and 2019
Our Plan Between Now and 2019 Sales ► $125M through organic growth Distribution ► Broader distribution and product offering and products Strain ► 10% Operating profit ► $30M Acquisitions ► Additional value creation 3
Slide 83: Sales of $125M Within Reach
Sales of $125M Within Reach Sales ($M) Based on recent 125 results, our plan is attainable 77 2015 2019 4
Slide 84: A Broader Distribution and Product Offering
A Broader Distribution and Product Offering Helping to fuel organic growth ► Continue to support existing IMOs with their own growth ► Diversify distribution Worksite marketing Military sales ► Active agent growth ► Enhance product offering Export Canadian success in individual disability (Exc
Slide 85: Active Agent Growth
Active Agent Growth Through expansion of distribution capacity Number of active agents 9,375 Headcount has more than doubled since 2013 4,323 2013 2016 (April 30) 6
Slide 86: Profit Improvement
Profit Improvement Good progress on key metrics since 2013 2013 2015 Improvement Strain 35% 20% -15% Operating profit $3M $13M 4x ROE 6% 8% +200 bps 7
Slide 87: Our Plan Between Now and 2019
Our Plan Between Now and 2019 Operating profit expected to grow 20% annually +10% +10% Strain from ORGANIC GROWTH OPERATIONAL EFFICIENCIES 15% 10% 8
Slide 88: Expecting to Double Profit by 2019
Expecting to Double Profit by 2019 12% 50 14% 45 ROE 12% Now focused on 12% 40 9% bringing ROE up 35 9% 10% 30 to iA guidance 30 Operating 8% 25 profit 20 ($M) 6% 16 15 4% 10 2% 5 0 0% 2016e 2019 9
Slide 89: Additional Value Through Acquisitions
Additional Value Through Acquisitions Appetite ► Deploy up to US$300M for acquisitions Target ► Existing niche or new segment Potential ► Double profit contribution from US operations Annual growth of 20% in operating profit + additional contribution from acquisitions could represent 10% of iA overa
Slide 90: IAB
IAB Financial Group INVESTED IN YOU.
Slide 91: Growing and Prospering in a Low-for-Long Environment
Growing and Prospering in a Low-for-Long Environment René Chabot Executive Vice-President, CFO and Chief Actuary 1
Slide 92: Growing and Prospering
Growing and Prospering In a low-for-long interest rate environment ► Continue to deliver double-digit EPS growth 10% annual ► Reserves comfortably positioned for today’s environment EPS growth ► Low-for-long rates fully manageable for the next 5 years 2
Slide 93: Continue to Deliver Double-Digit EPS Growth
Continue to Deliver Double-Digit EPS Growth Diluted EPS ($) Guidance 4.60 4.20 3.80 4.20 3.40 3.80 3.10 3.00 3.40 10% annual 2.50 EPS growth 2012 2013 2014 2015 2016 2017 2018 2019 3
Slide 94: Last-Four-Year Achievements
Last-Four-Year Achievements Core EPS ► From $2.80 to above $4.00: >10% annually growth Operational ► Strain improvement: from 50% to 25% efficiencies ► Income tax optimization: from 22.5% to 19.0% ► Lapse now a non-issue Reserves ► Macroeconomic protection doubled ROE ► Average of 12% with passive c
Slide 95: Between Now and 2019
Between Now and 2019 Plan is to deliver annual EPS growth of 10% ±1% MUTUAL +2% FUNDS ACTIVE CAPITAL MANAGEMENT 10% +2% ACQUISITIONS +1% OPERATIONAL EFFICIENCIES +2% Distribution, PROFIT US and Wealth IMPROVEMENT Management Strain and unit cost improvement in retail businesses Employee Plans, +5% Gr
Slide 96: Between Now and 2019
Between Now and 2019 Plan is to deliver additional EPS growth of $1.50 ±15¢ MUTUAL +30¢ FUNDS ACTIVE CAPITAL MANAGEMENT $1.50 +30¢ ACQUISITIONS +15¢ OPERATIONAL EFFICIENCIES +30¢ Distribution, PROFIT US and Wealth IMPROVEMENT Management Strain and unit cost improvement in retail businesses Employee
Slide 97: +5% EPS – Organic Growth
+5% EPS – Organic Growth From all insurance and wealth management businesses Retail ► Natural growth of expected profit insurance Wealth ► Asset growth related to markets and net sales management Group ► Profit on growing premium income businesses 7
Slide 98: +2% EPS – Profit Improvement
+2% EPS – Profit Improvement More contribution from capital-light businesses Group Benefits ► Back to normal run rate for Employee Plans and Retirement ► Higher contribution from capital accumulation products Dealer Services ► Growth in higher profit margin segments (P&C and car loans) iA Auto and ►
Slide 99: +1% EPS – Operational Efficiencies
+1% EPS – Operational Efficiencies In retail insurance and wealth management businesses ► 2016 guidance: 15% Strain ► Currently working on next target: 10% ► Lower strain related to profit improvement initiatives Unit costs ► Mostly related to improvements in retail operations 9
Slide 100: +2% EPS – Acquisitions
+2% EPS – Acquisitions Consistent with track record for past acquisitions Past contribution of +2% EPS/year 50% ► iA Clarington 15% ► iA Excellence Total contribution of $80M to 13% ► Distribution affiliates 2015 net income 12% ► US 10% ► Dealer Services 10
Slide 101: ROE Expansion
ROE Expansion Could be realized via more active capital management More clarity at end +1% of 2016 +1% Active Impact of new management capital regime Management of in-force of solvency ratio portfolios ~12% at top of guidance ROE Aligned with 10% annual 12% is a good return in a EPS growth low-for-l
Slide 102: Reserves Comfortably Positioned
Reserves Comfortably Positioned No clouds in the foreseeable future Lapse ► Issue is considered resolved Interest rates ► Fully manageable to 2020 Equity markets ► Significant protection against market downturn Mortality ► Positive contribution expected to continue 12
Slide 103: Interest Rates
Interest Rates Our plan is to be ahead of the curve 2015 2016-17 2018-20 4.0% 3.8% 3.6% ► CIA and iA current ► iA expected position at ► Assuming low-for-long positioning end of 2016 rates until 2020 ► Industry database ► Will be neutral on ► Represents -20 bps in ends at 2012; plan is profit and st
Slide 104: Our Response to Low-for-Long Rates
Our Response to Low-for-Long Rates Acting on two key fronts in retail insurance Active ► Investment strategy focused on adding value investment ► Many opportunities: mismatch, credit and NFI management ► Strong track record of significant yearly gains ► Product re-pricing and strain improvement Acti
Slide 105: New Capital Regime
New Capital Regime Still in wait-and-see mode Favourable ► AMF to recognize hedging strategy by year-end development ► More robust framework aligned with ERM process for seg funds ► Gains expected on capital levels and/or sensitivities Overall ► Could be positive, negative or neutral for iA framewor
Slide 106: One Last Thought
One Last Thought iA is building iA is growing EPS iA is protected and developing and providing against macroeconomic profitable businesses earnings visibility downturns iA is committed to iA is continuing to grow iA is growing active capital management in a low-for-long shareholder value environment
Slide 107: IAB
IAB Financial Group INVESTED IN YOU.