Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q3 2016 Earnings Presentation
32 slides from Ia Financial's earnings presentation, Nov 2, 2016
Slide 1: Third Quarter 2016 Conference Call
Third Quarter 2016 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary November 2, 2016 1
Slide 2: Q3 2016: Another outstanding quarter
Q3 - 2016 Another outstanding quarter ► Reported EPS of $1.40: 12% above top of guidance ($1.15-$1.25 EPS) ► Core EPS of $1.37: up 25% YoY Profit ► Favourable policyholder experience (+$0.12 EPS), mostly from Individual Insurance ► Market-related gain for hedging (+$0.04 EPS), UL policies (+$0.04 EP
Slide 3: Sales Highlights
Sales Highlights Strong quarter for retail insurance and a turnaround for net fund sales Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation ► Individual Insurance Canada 50.3 43.1 17% 140.7 124.7 13% United States 24.7 20.7 19% 7
Slide 4: Mutual and Seg Fund Net Sales
Mutual and Seg Fund Net Sales Mutual fund business improving Retail fund net sales ($M) 364 356 195 139 147 154 67 78 57 5 21 3 -62 -76 -68 -96 -165 -149 -235 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 2015 2016 4
Slide 5: Q3 Earnings
Q3 Earnings Strong YoY growth Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Net income attributed to shareholders 148.5 117.6 +26% 394.5 378.1 4% Less: dividends attributed to preferred shares 4.1 4.5 (9%) 12.3 13.9 (12%) Le
Slide 6: Q3 Earnings: Items of note
Q3 Earnings Favourable policyholder experience continues Q3 items of note (gains and losses) Experience Gains of 12¢ MER +1¢ UL Other +1¢ +4¢ Morbidity +3¢ +4¢ Hedging +3¢ +4¢ Mortality Longevity +3¢ & Expenses +1¢ +1¢ Market Related Individual Individual Employee Dealer Group Income on Strain +9¢ I
Slide 7: Policyholder Experience
Policyholder Experience Third consecutive solid quarter Experience 2016 2015 2015 2016 2015 by line of business Annual YTD YTD (EPS impact in cents) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Individual Insurance 7 4 2 9 9 14 (4) 28 13 19 Group Insurance 0 1 7 (2) 5 1 (3) 1 8 3 Individual Wealth 4 3 0 (7) (2) 0 2 (7) 7 0
Slide 8: Management's View of Core
Management's View of Core $1.37 EPS for Q3, above guidance and consensus Q3 CORE EPS Q3 Reported EPS $1.40 2016 YTD Core EPS $1.37 No exceptional items Q1 $0.98 $1.14 Items greater than ±4¢ Q2 $1.26 $3.61 ► Individual Insur. gain ($0.03) Q3 $1.37 CONSENSUS1 iA Q3 Core EPS $1.37 2016 YTD EPS Guidance
Slide 9: Q3 Results vs. Guidance
Q3 Results vs. Guidance Clearly another strong beat Guidance Reported EPS $1.15 to $1.25 $1.40 Reported and core ($1.37) above guidance ROE 11.0% to 12.5% 14.7% Reported and core (14.4%) above guidance (quarter annualized) Lower than target on higher sales Strain 15% ± 5% 12% and lower expenses in C
Slide 10: YTD Results vs. Guidance
YTD Results vs. Guidance Still well ahead on our 2016 plan Guidance Reported EPS $3.10 to $3.40 $3.71 YTD core is $3.61 ROE 11.0% to 12.5% 10.1% 12.6% on core basis (trailing twelve months) Strain 15% ± 5% 14% Below annual target Effective tax rate 18% to 20% 19% Within guidance Solvency ratio 175%
Slide 11: Capital Position
Capital Position Increase in solvency ratio reflects recent capital issuance Solvency Ratio (%, end of period) Key changes during the quarter 217 217 218 209 213 205 200% 199 ► +18% Debt issue ($400M) Target ► +2% Profit 175% ► +2% CTL review ► -3% Interest rate decline After redemption of the $250M
Slide 12: A Flexible Balance Sheet
A Flexible Balance Sheet Good capacity to fund our growth September 30 June 30 December 31 September 30 Agency Rating 2016 2016 2015 2015 Solvency ratio 218% 199% 213% 225% S&P A+ (Strong) (207% post-redemption) Leverage ratio 28.7% 23.8% 24.3% 24.5% A.M. Best A+ (Superior) (25.4% post-redemption) C
Slide 13: Steady Value Creation for Shareholders
Steady Value Creation for Shareholders Q3/2016 Book Value Per Share $38.63 (end of period) CAGR 1-year +6% 5-year +7% 10-year +8% Since 2000 +9% $9.36 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 13
Slide 14: Individual Insurance Strain on New Business
Individual Insurance Strain on New Business +$0.01 EPS in Q3 on higher sales volume and lower expenses 2016 2015 2014 ($Million, unless otherwise indicated) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales 75.0 72.9 65.4 73.7 63.8 61.7 55.1 62.1 51.1 55.5 47.3 Strain 8.8 9.3 11.3 14.4 15.2 15.2 21.3 16.0 17.3
Slide 15: Income On Capital
Income On Capital Lower profit at iAAH due to adverse experience 2016 2015 2014 ($Million, pre-tax) 2016 Run Rate Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 30.0 32.1 33.5 33.5 33.7 27.7 28.4 32.6 29.8 29.3 27.2 26.7 Financing & Intangibles (12.0) (12.8) (12.0) (11.8) (10.6) (10.0) (9.9) (8.
Slide 16: Effective Tax Rate (ETR)
Effective Tax Rate (ETR) Within guidance 2016 2015 2014 ($Million,unless otherwise indicated) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 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 20.6 17.5 14.8 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1 Pre-tax income 186.
Slide 17: Equity Market Sensitivity
Equity Market Sensitivity (End of period) Q3/2016 Q2/2016 Q4/2015 Q3/2015 S&P/TSX index 14,726 pts 14,065 pts 13,010 pts 13,307 pts IAG solvency ratio 218% 199% 213% 225% Sensitivities Stock matching Level of S&P/TSX before reserves 10,000 pts 9,800 pts 9,500 pts 10,100 pts long-term require strengt
Slide 18: Interest Rate Sensitivity
Interest Rate Sensitivity (End of period) Q3/2016 Q2/2016 Q4/2015 Q3/2015 Potential after-tax impact on reserves IRR1 of a 10 bps decrease in IRR ($25M) ($31M) ($31M) ($32M) Potential after-tax impact on reserves URR of a 10 bps decrease in URR ($66M) ($65M) ($60M) ($57M) Potential after-tax impact
Slide 19: S&P/TSX Thresholds for Q4/2016 Gain/Loss
S&P/TSX Thresholds for Q4/2016 Gain/Loss Potential impact TSX threshold Threshold is on Q4/2016 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 14,928 ±$8.7M UL policy funds Q4/2016 Actual average value3 MERs
Slide 20: Asset Growth
Asset Growth AUM/AUA Assets Under Management (assets under management and and Administration administration, in $B) 126.2 ($Billion, unless September 30 otherwise indicated) YoY 115.8 2016 109.5 98.8 40.7 Assets under management 36.9 32.7 83.5 General fund 37.1 14% 29.3 Segregated funds 21.5 13% AUA
Slide 21: Premiums and Deposits
Premiums and Deposits Net premiums, premium Q3/2016 $Million YoY equivalents and deposits (in $B) Individual Insurance 407.9 3% 7.5 7.7 7.4 7.4 6.9 Individual Wealth Management 791.0 13% 1.8 1.8 2.0 6.0 5.9 Q4 1.7 Group Insurance 370.0 0% 1.6 1.8 1.8 2.1 Q3 1.7 Group Savings and Retirement 448.3 87%
Slide 22: Individual Insurance
Individual Insurance Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Sales1 Canada - Minimum premiums2 46.7 37.8 24% 123.8 112.0 11% Canada - Excess premiums3 3.6 5.3 (32%) 16.9 12.7 33% Canada - Total 50.3 43.1 17% 140.7 124.
Slide 23: Individual Wealth Management
Individual Wealth Management Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Gross sales1 General fund 83.9 28.0 200% 227.4 101.1 125% Segregated funds 370.2 358.2 3% 1,176.4 1,214.4 (3%) Mutual funds 336.9 313.7 7% 938.9 1,13
Slide 24: Group Insurance
Group Insurance Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Sales1 Employee Plans 13.2 12.9 2% 48.3 53.5 (10%) Dealer Services - Creditor Insurance2 109.7 109.1 1% 277.5 273.7 1% Dealer Services - P&C Insurance 55.6 56.5 (
Slide 25: Group Savings and Retirement
Group Savings and Retirement Third quarter Year-to-date at September 30 Sales1 ($Million, unless otherwise indicated) 2016 2015 Variation 2016 2015 Variation Accumulation products 420.3 226.9 85% 985.9 739.8 33% Insured annuities 0.3 1.8 (83%) 79.6 21.3 274% Deposits2 34.5 17.3 99% 48.7 78.1 (38%) T
Slide 26: Investment Portfolio
Investment Portfolio Continues to be of highest quality September 30 June 30 December 31 September 30 2016 2016 2015 2015 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $17.8M $17.5M $19.7M $32.3M Provisions for impaired investments $5.1M $4.8M $5.5M $5.3M Net impaired investments $1
Slide 27: Value of New Business
Value of New Business Value of New Business ($Million) Year-over-year change 181.5 by component 164.0 153.1 45.2 39.3 Q3/2015 31.9 135.5 Q4 44.9 40.7 35.1 Higher sales 3.2 38.8 93.6 Q3 38.4 31.9 31.9 Variation in profit margins 2.2 44.3 42.6 Q2 33.4 37.5 33.0 Changes in economic assumptions (5.4) 51
Slide 28: 2016 Guidance
2016 Guidance EPS1 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-range) 28 1 No reserve strengthening considered in EPS and ROE gui
Slide 29: Investor Relations
Investor Relations Contact Grace Pollock Tel. 418-780-5945 grace.pollock@ia.ca Next Reporting Dates Q4/2016 - February 16, 2017 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 relate
Slide 30: 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, v
Slide 31: 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 32: TaN cal
TaN cal Financial Group INVESTED IN YOU.