Slide 1: Second Quarter 2022 Conference Call
Second Quarter 2022 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary July 28, 2022 1
Slide 2: 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”, “will”, “could”, “should”, “would”, “suspect
Slide 3: Non-IFRS and Additional Financial Measures
Non-IFRS and Additional Financial Measures iA Financial Corporation and iA Insurance report their financial results and statements in accordance with International Financial Reporting Standards (“IFRS”). They also publish certain financial measures or ratios that are not based on IFRS (“non-IFRS”).
Slide 4: Table of contents
Table of contents 2 Forward-looking statements APPENDICES 3 Non-IFRS and add. measures 24 Book value 38 Premiums and deposits 7 Q2/22 key results 25 Dividend 39 Assets (AUM/AUA) 9 Business mix 26 Policyholder experience 40 Individual Insurance 10 Sales 27 Impact of new business (strain) 41 Individua
Slide 5: Denis Ricard
Denis Ricard President and CEO 5
Slide 6: Presenters and executive team
Denis Ricard Renée Laflamme President and CEO EVP, Individual Insurance, Savings and Retirement Jacques Potvin Sean O’Brien EVP, Chief Financial Officer EVP, Wealth Management and Chief Actuary François Blais Mike Stickney EVP, Dealer Services EVP, Chief Growth Officer and Special Risks Éric Jobin A
Slide 7: Q2/2022 Key Results
Q2/2022 KEY RESULTS Core EPS above guidance and core ROE above the middle of guidance Dividend increased and robust financial position Core EPS† Core ROE1† $2.37 14.1% Above guidance Middle of guidance Solvency ratio† Organic capital 130% ~$160M Above target generation Dividend increase Book value2
Slide 8: Michael L. Stickney
Michael L. Stickney EVP and CGO 8
Slide 9: Diversified Business Mix – Q2 Highlights
DIVERSIFIED BUSINESS MIX – Q2 HIGHLIGHTS Foundation Expansion Long-established businesses High-growth distinctive in which iA excels and is businesses in which iA already a leader seeks to become a leader Individual Retail Insurance distribution ▪ Very strong sales growth in (Canada) ▪ Good sales gr
Slide 10: Q2/22 Sales – Good business growth continued
Q2/22 SALES – Good business growth continued NET PREMIUMS, PREMIUM ASSETS UNDER MANAGEMENT INDIVIDUAL INSURANCE EQUIVALENTS AND DEPOSITS† AND ADMINISTRATION† (sales† in $M) (in $B) (end of period, $B) 98 Continued momentum of 210.5 recent quarters and 3.9 193.6 leading position in the 3.6 Canadian m
Slide 11: Q2/22 Sales – Good business growth continued (cont.)
Q2/22 SALES – Good business growth continued (cont.) SEGREGATED FUNDS MUTUAL FUNDS GROUP SAVINGS Individual Wealth Management Individual Wealth Management AND RETIREMENT (net sales† in $M) (net sales† in $M) (total sales† in $M) 675 695 673 272 Solidifying our strong • Impacted by the • Good result
Slide 12: Q2/22 Sales – Good business growth continued (cont.)
Q2/22 SALES – Good business growth continued (cont.) EMPLOYEE PLANS DEALER SERVICES2 SPECIAL MARKETS iA AUTO AND HOME Group Insurance Group Insurance Group Insurance (direct written premiums† in $M) (premiums1 in $M) (sales† in $M) (sales† in $M) 364 355 69 139 145 327 312 44 +11% YoY +14% YoY +57%
Slide 13: Q2/22 Sales – Good business growth continued (cont.)
Q2/22 SALES – Good business growth continued (cont.) INDIVIDUAL INSURANCE DEALER SERVICES US Operations US Operations (sales† in US$M) (sales† in US$M) 285 266 37 38 • Sales down 7% YoY compared to a strong quarter a year ago, while new • Good sales growth for the and used US light vehicle sales qua
Slide 14: Jacques Potvin
Jacques Potvin EVP, Chief Financial Officer and Chief Actuary 14
Slide 15: Q2/2022 Results vs. Guidance
Q2/2022 RESULTS VS. GUIDANCE All metrics in-line or better than guidance 2022 guidance Q2/2022 results H1/2022 results $2.20 to $2.35 in Q2 Core EPS1† $2.37 $4.16 $4.05 to $4.35 in H1 Core ROE1† (trailing 12 months) 13.0% to 15.0% 14.1% Impact of new business† (strain) -5% to 10% (12%) 2 (2%) 2 Solv
Slide 16: Reported and Core Earnings Reconciliation
REPORTED AND CORE EARNINGS RECONCILIATION $M $M EPS PRE-TAX POST-TAX Reported earnings 222 $2.06 Core earnings remove from reported earnings the impacts of the following items: UL (-21¢ EPS), assets backing LT liabilities (-4¢ EPS), Market-related impacts 45 33 $0.31 MERs (-5¢ EPS) and hedging (-1¢
Slide 17: Core SOE and Items of Note
CORE SOE AND ITEMS OF NOTE Core expected profit on in-force up 9% YoY and experience gains of 5¢ EPS Source of earnings Items of note Q2/2022 on a core basis† ($M) (difference vs. expectations) Operating profit $M $M EPS PRE-TAX POST-TAX Favourable policyholder experience, particularly for Expected
Slide 18: Additional Protections in Reserves
ADDITIONAL PROTECTIONS IN RESERVES To cover the direct and collateral impacts of the pandemic Q2 mortality was better than expected in the US and higher than expected in Canada Policyholder behaviour protection and US mortality provision are carried forward (amounts in millions of Value Value dollar
Slide 19: Solid Capital Position
SOLID CAPITAL POSITION Supported by ongoing organic capital generation Solvency ratio† Organic capital generation† iA Financial Corporation Inc. ($M) (end of period) 134% 132% 490 525 2022 130% 130% Key changes 450 target during the quarter 110%-116% target ~$160M during Q2/22 (3.5%) Macroeconomic v
Slide 20: Strong Balance Sheet
STRONG BALANCE SHEET Ratios Leverage ratio of 23.7% and coverage ratio† of 14.8x (June 30, 2022) Distinctive Embedded in reserving process, iA’s distinctive macroeconomic protections decrease net income and solvency macroeconomic ratio† volatility and support iA’s 110% to 116% solvency ratio target.
Slide 21: IFRS and IFRS Update
IFRS 17 AND IFRS 9 UPDATE iA’S SOUND APPROACH FAVOURABLE RELATIVE POSITIONING TOWARDS TRANSITION IMPACTS1† Near-neutral at transition2 FINANCIAL STRENGTH Book value Managing business with a long- Favourable at June 30, 2022 term vision to protect strength CSM level >$5B at transition2 and quality of
Slide 22: Question & Answer Session
Question & Answer Session PRESENT AND STRONG. More than ever. 22
Slide 23: Appendices
APPENDICES PRESENT AND STRONG. More than ever. 23
Slide 24: Book Value per Share
BOOK VALUE PER SHARE P/BV ratio of 1.05 at June 30, 2022 $60.97 at June 30, 2022 CAGR 1-year +3% 5-year +8% 10-year +9% Since 2000 +9% March 31, 20001 $8.44 IPO 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2.17 2.22 1.72 1.61 1.80 1.74
Slide 25: Dividend to Common Shareholders
DIVIDEND TO COMMON SHAREHOLDERS $0.70 Dividend increased $0.65 by 8% to 67.5¢ per share $0.60 payable in Q3/2022 $0.55 $0.50 $0.45 $0.40 $0.35 Largest dividend increase (+29%) among Canadian lifecos following $0.30 the lifting of regulatory restrictions in November 2021 $0.25 Steady increases $0.20
Slide 26: Policyholder Experience
† POLICYHOLDER EXPERIENCE (excl. market-related impacts) Positive net experience during Q2 2022 2021 2020 2022 EPS impact 2021 2020 in cents† Q2 Q1 Q4 Q3 Q2 Q1 Q41 Q3 Q2 Q1 H1 annual annual Individual Insurance2 4 (6) 9 5 6 (6) 3 4 0 (8) (2) 14 (1) Individual Wealth Management3 (3) 1 (6) 1 5 2 (10)
Slide 27: Impact of New Business (strain)
† IMPACT OF NEW BUSINESS (strain) 8¢ EPS gain in Q2 explained by the interest rate increase in the first part of the year being factored into the strain calculation and by the higher than expected sales volume Reported strain includes Individual Insurance in Canada and the US 2022 2021 2020 Q2 Q1 Q4
Slide 28: Income on Capital
† INCOME ON CAPITAL : 1¢ EPS loss in Q2 Higher investment income (+3¢) and lower Surex integration costs than planned (+1¢), unfavourable experience at iAAH (-4¢) and higher financing costs (-1¢) Quarterly 2022 2021 2020 ($M, pre-tax) run rate in 2022 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income
Slide 29: Effective Tax Rate of 12.7% in Q2
† EFFECTIVE TAX RATE (ETR) of 12.7% in Q2: 21¢ EPS gain Favourable: Refinement of our tax position for 2022 (+3¢) and prior years (+25¢) Unfavourable: Higher taxation from the Company’s status as a multinational insurer (CIF) (-7¢) 2022 2021 2020 ($M, unless otherwise indicated) Q2 Q1 Q4 Q3 Q2 Q1 Q4
Slide 30: Market-Related Impacts on Earnings
† MARKET-RELATED IMPACTS ON EARNINGS : 31¢ EPS loss in Q2 UL policies (-21¢), MERs (-5¢), level of assets backing reserves (-4¢) and hedging (-1¢) Approximate after-tax impact of market-related 2022 2021 2020 variations as compared to the expected net earnings that the Company would have earned unde
Slide 31: Car Loans
† CAR LOANS: 2¢ EPS gain in Q2 Strong portfolio performance from continued good credit experience Average credit loss rate1† (trailing 12 months) 5.3% 5.4% 5.3% 5.4% 5.5% 5.2% 5.2% 5.0% 4.3% 3.6% 3.0% 2.6% 2.4% 2.3% 2.3% 2.3% Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3
Slide 32: Investment Portfolio
INVESTMENT PORTFOLIO High-quality, diversified portfolio Bonds - Corporates - BB and lower: 1% Bond portfolio = 68% of total portfolio Real estate: 4% Low direct exposure to equity market Mortgages - Insured: 3% • $3.8B of stocks in investment portfolio Mortgages - Uninsured: 1% Bonds - Corporates -
Slide 33: Bond Portfolio by Category
BOND PORTFOLIO BY CATEGORY High-quality, conservative portfolio Utilities: 20% Corporate bonds = 60% of bond portfolio Financial: 13% Total bond portfolio by credit rating • 6% AAA • 38% AA $26.6B • 36% A Consumer - Governments & Non-cyclical: 8% • 20% BBB Municipalities: 40% • 1% BB and lower Consu
Slide 34: Equity Market Sensitivity
EQUITY MARKET SENSITIVITY (End of period) Q2/2022 Q1/2022 Q4/2021 Q2/2021 S&P/TSX closing value 18,861 pts 21,890 pts 21,223 pts 20,166 pts iA Financial Corporation solvency ratio 130% 132% 134% 130% Sensitivities S&P/TSX1 level at which provisions for future policy benefits Market protection for wo
Slide 35: Interest Rate Sensitivity
† INTEREST RATE SENSITIVITY As at June 30, 2022 10 bps 10 bps increase decrease Combined metric better reflects economic view of change in interest rates URR + IRR ► Impact on net income1 of a 10 bps parallel variation +$23M ($23M) Ultimate Reinvestment Rate – Maximum assumption promulgated by CIA U
Slide 36: Solvency Ratio Macroeconomic Sensitivity
† SOLVENCY RATIO MACROECONOMIC SENSITIVITY Sensitivity continues to be low Equity market variation1 (30%) (20%) (10%) +10% +20% +30% ► Impact on solvency ratio† March 31, 2022 +2% +2% +1% (1%) (2%) (1%) (in percentage points) Interest rate variation2, 3 (50 bps) (25 bps) +25 bps +50 bps ► Impact on
Slide 37: S&P/TSX Thresholds for Q3/2022 Gain or Loss
S&P/TSX THRESHOLDS FOR Q3/2022 GAIN OR LOSS Potential impact on TSX threshold Threshold Q3/2022 Earnings driver net income attributed to for gain or loss compared with: common shareholders of a ±10% variation vs. threshold† Actual TSX value Revenues on 1 at the end of 19,121 ±$9.9M UL policy funds Q
Slide 38: Premiums and Deposits
PREMIUMS AND DEPOSITS Net premiums, premium 16.6 equivalents and deposits† Q2/2022 $M YoY ($B) 14.0 4.2 Individual Insurance 469 5% 11.4 3.9 Individual Wealth Management 1,529 (24%) 10.4 9.8 4.1 3.1 Group Insurance 530 13% 2.6 Q4 2.4 8.0 3.9 Group Savings and Retirement 689 3% 2.7 Q3 2.2 2.4 3.9 3.6
Slide 39: Asset Growth
ASSET GROWTH AUM/AUA (assets under management and Assets under management and administration administration†, end of period, $B) 221.2 June 30 197.5 193.6 ($B, unless otherwise indicated) QoQ YoY 189.5 2022 169.5 168.8 109.7 Assets under management† 95.8 89.2 94.2 General fund1 48.9 (6%) (8%) AUA 80
Slide 40: Individual Insurance (Canada)
INDIVIDUAL INSURANCE (Canada) Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Minimum premiums2† 86 65 32% 178 119 50% Excess premiums3† 12 8 50% 21 12 75% Total 98 73 34% 199 131 52% Net premiums 469 445 5% 945 864 9% Number of
Slide 41: Individual Wealth Management
INDIVIDUAL WEALTH MANAGEMENT Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 General fund 230 220 5% 469 449 4% Segregated funds 924 1,046 (12%) 2,424 2,423 — Mutual funds† 375 749 (50%) 1,066 1,691 (37%) Total 1,529 2,015 (24%)
Slide 42: Group Insurance
GROUP INSURANCE Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Employee Plans† 12 14 (14%) 23 101 (77%) Dealer Services - Creditor Insurance2† 63 70 (10%) 106 113 (6%) P&C Insurance† 109 94 16% 186 158 18% Car loan originations†
Slide 43: Group Savings and Retirement
GROUP SAVINGS AND RETIREMENT Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales1 Accumulation products† 494 479 3% 1,094 1,118 (2%) Insured annuities† 201 196 3% 226 223 1% Deposits2 — — NM — 27 (100%) Total 695 675 3% 1,320 1,368 (4
Slide 44: US Operations
US OPERATIONS Second quarter Year-to-date at June 30 ($M, unless otherwise indicated) 2022 2021 Variation 2022 2021 Variation Sales ($US)1 Individual Insurance† 38 37 3% 71 68 4% Dealer Services (P&C)† 266 285 (7%) 509 518 (2%) Net premiums and premium 290 246 18% 579 493 17% equivalents† ($CAN) 1 S
Slide 45: Solvency Ratio
† SOLVENCY RATIO iA Financial Corporation Inc. (%, end of period) 137 134 133 134 132 130 130 131 130 126 127 128 124 124 125 122 119 110%-116% target Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 45 † This item is a non-IFRS measure; see the “
Slide 46: Quality of Investment Portfolio
QUALITY OF INVESTMENT PORTFOLIO June 30 March 31 June 30 2022 2022 2021 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $44M $23M $23M Provisions for impaired investments $8M $6M $6M Net impaired investments $36M $17M $17M Net impaired investments as a % of investment portfolio 0.09%
Slide 47: ESG Ambition
ESG ambition To contribute to sustainable growth and wellbeing for our clients, employees, partners, investors and communities Our main targets • Reduction of our GHG emissions by 20% per employee by 2025 • Now and in the future, achieve increased gender equity of between 40% and 60% in iA Financial
Slide 48: Concrete Actions for a Sustainable Future
CONCRETE ACTIONS FOR A SUSTAINABLE FUTURE ENVIRONMENT SOCIAL GOVERNANCE OUR CONTRIBUTION TO SUSTAINABLE FINANCE • Signatory of United Nations Principles for Responsible Investment (PRI) • Publication of Responsible Investment Policy in 2021 • Climate Change Position Statement • Commitment to obtain
Slide 49: 2022 Guidance
2022 GUIDANCE As disclosed on February 16, 2022 Core EPS† Core ROE† 13.0% to 15.0% Q1 $1.85 to $2.00 Q2 $2.20 to $2.35 Impact of new 0% annual target Q3 $2.30 to $2.45 business (strain)† (quarterly range from -5% to 10%) Q4 $2.35 to $2.50 Solvency 110% to 116% 2022 $8.70 to $9.30 ratio† Non-core ite
Slide 50: Credit Ratings
CREDIT RATINGS iA Financial Industrial Alliance Insurance Corporation Inc. and Financial Services Inc. Credit rating agency Outlook Issuer rating Financial strength Standard & Poor’s A AA- Stable DBRS Morningstar A AA (low) Stable A.M. Best N/A A+ (Superior) Stable 50
Slide 51: Investor Relations
INVESTOR RELATIONS Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q3/2022 - November 9, 2022 Q4/2022 - February 14, 2023 Q1/2023 - May 10, 2023 Q2/2023 - August 1, 2023 Q3/2023 - November 7, 2023 For information on our earnings releases,
Slide 52: iA Financial Group trademark notice
iA Financial Group is a business name and trademark of iA Financial Corporation Inc. and Industrial Alliance Insurance and Financial Services Inc.