Slide 1: First Quarter 2022 Conference Call
First Quarter 2022 Conference Call Presenters: Denis Ricard, President and CEO Michael L. Stickney, EVP and CGO Jacques Potvin, EVP, CFO and Chief Actuary May 12, 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 25 Book value 40 Assets (AUM/AUA) 7 Q1/22 key results 26 Dividend 41 Individual Insurance 9 Business mix 27 Policyholder experience 42 Individual Wealth Management 10 Sales 28 Impact of new business (strain) 43 Gr
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: Q1/2022 Key Results
Q1/2022 KEY RESULTS Robust financial position and continued strong sales momentum ROE in the middle of 13% to 15% guidance Core EPS† Core ROE† $1.79 14.1% vs. $1.85-$2.00 guidance Middle of guidance P&D† AUM/AUA† $4.4B $213.9B Same as record Q1/21 +6% YoY Solvency ratio† Book value1 132% $61.04 Abov
Slide 8: Michael L. Stickney
Michael L. Stickney EVP and CGO 8
Slide 9: Diversified Business Mix – Q1 Highlights
DIVERSIFIED BUSINESS MIX – Q1 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: Q1/22 Sales – Continued momentum to start the year
Q1/22 SALES – Continued momentum to start the year NET PREMIUMS, PREMIUM ASSETS UNDER MANAGEMENT INDIVIDUAL INSURANCE EQUIVALENTS AND DEPOSITS† AND ADMINISTRATION† (sales† in $M) (in $B) (end of period, $B) 4.4 4.4 213.9 101 Continued momentum of 201.2 87 recent quarters and leading position in the
Slide 11: Q1/22 Sales (cont.)
Q1/22 SALES – Continued momentum to start the year (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) 693 625 1,009 378 972 Solidifying our strong • Good performance •
Slide 12: Q1/22 Sales (cont.)
Q1/22 SALES – Continued momentum to start the year (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 $M) 350 298 74 312 84 88 231 47 +12% YoY +29% YoY +
Slide 13: Q1/22 Sales (cont.)
Q1/22 SALES – Continued momentum to start the year (cont.) INDIVIDUAL INSURANCE DEALER SERVICES US Operations US Operations (sales† in US$M) (sales† in US$M) 33 31 243 233 • Good sales growth for the • Good performance in Q1 quarter, in particular from in the context of vehicle the family and govern
Slide 14: Jacques Potvin
Jacques Potvin EVP, Chief Financial Officer and Chief Actuary 14
Slide 15: Q1/2022 Results vs. Guidance
Q1/2022 RESULTS VS. GUIDANCE All metrics in-line or better than guidance, with the exception of core EPS 2022 guidance Q1/2022 result Core EPS1† $1.85 to $2.00 in Q1 $1.79 Core ROE1† (trailing 12 months) 13.0% to 15.0% 14.1% Impact of new business† (strain) -5% to 10% 7% Solvency ratio† 110% to 116%
Slide 16: Reported and Core Earnings Reconciliation
REPORTED AND CORE EARNINGS RECONCILIATION $M $M EPS PRE-TAX POST-TAX Reported earnings 151 $1.40 Core earnings remove from reported earnings the impacts of the following items: UL (8¢ EPS loss), assets backing LT liabilities (1¢ EPS Market-related impacts 24 18 $0.17 loss), MERs (3¢ EPS loss) and he
Slide 17: Core SOE and Items of Note
CORE SOE AND ITEMS OF NOTE Core expected profit on in-force up 9% YoY Source of earnings Q1/2022 items of note Q1/2022 on a core basis† ($M) (difference vs. expectations) -9¢: Unfavourable policyholder experience, mostly Operating profit statistical fluctuations $M $M EPS PRE-TAX POST-TAX -5¢: Highe
Slide 18: Additional Protections in Reserves
ADDITIONAL PROTECTIONS IN RESERVES To cover the direct and collateral impacts of the pandemic Q1 additional mortality claims were higher than expected in Canada and lower than expected in the US – The excess provision is carried forward (amounts in millions of Value Value dollars are expressed at De
Slide 19: Solid Capital Position
SOLID CAPITAL POSITION Supported by ongoing organic capital generation Solvency ratio† Organic capital generation† iA Financial Corporation Inc. ($M) (end of period) 134% 490 525 2022 130% 132% Key changes 450 target during the quarter 110%-116% target ~$100M during Q1/22 (3.5%) Market-related varia
Slide 20: Strong Balance Sheet
STRONG BALANCE SHEET Ratios Leverage ratio of 23.4% and coverage ratio† of 15.6x (March 31, 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 17 and IFRS 9 transition outlook
IFRS 17 and IFRS 9 Q1/22 EVOLUTION ADDED CONFIDENCE transition outlook IN OUR TRANSITION OUTLOOK Expected impact Non-finalized or uncertain items at Jan 1, 2023 Q1/22 evolution from near-neutral to favourable for: ECONOMIC ENVIRONMENT: Renewed outlook • Preliminary estimates suggest Q1/22 macroecono
Slide 22: IFRS 17 Training Video
IFRS 17 TRAINING VIDEO Now available on ia.ca 22
Slide 23: Question & Answer Session
Question & Answer Session PRESENT AND STRONG. More than ever. 23
Slide 24: Appendices
APPENDICES PRESENT AND STRONG. More than ever. 24
Slide 25: Book Value per Share
BOOK VALUE PER SHARE P/BV ratio of 1.25 at March 31, 2022 $61.04 at March 31, 2022 CAGR 1-year +7% 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.
Slide 26: Dividend to Common Shareholders
DIVIDEND TO COMMON SHAREHOLDERS Dividend of 62.5¢ per share $0.65 payable in Q2/2022 $0.60 $0.55 $0.50 $0.45 $0.40 Largest dividend increase (+29%) $0.35 among Canadian lifecos following $0.30 the lifting of regulatory restrictions in November 2021 $0.25 Steady increases $0.20 every 3 quarters $0.15
Slide 27: Policyholder Experience
† POLICYHOLDER EXPERIENCE (excl. market-related impacts) 10¢ loss in Q1: Unfavourable experience, mostly due to statistical fluctuations, and higher expenses, from higher professional services in the context of talent scarcity and high inflation 2022 2021 2020 EPS impact 2021 2020 in cents† Q1 Q4 Q3
Slide 28: Impact of New Business (strain)
† IMPACT OF NEW BUSINESS (strain) 2¢ EPS loss in Q1 from a different sales mix than planned Q1 strain result does not factor in the first quarter increase in interest rates Reported strain includes Individual Insurance in Canada and the US 2022 2021 2020 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales† ($M) 143 12
Slide 29: Income on Capital
† INCOME ON CAPITAL : 6¢ EPS gain in Q1 Favourable experience at iAAH (+4¢), higher investment income (+1¢) and lower Surex integration costs than planned (+1¢) Quarterly 2022 2021 2020 ($M, pre-tax) run rate in 2022 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 43 44 41 38 33 39 24 27 36 41 Financin
Slide 30: Effective Tax Rate (ETR)
EFFECTIVE TAX RATE (ETR) 18.7% in Q1: 3¢ EPS gain† 2022 2021 2020 ($M, unless otherwise indicated) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income† 170 252 249 276 206 190 249 210 9 Income on capital† 23 25 37 29 34 21 19 31 34 Pre-tax income 193 277 286 305 240 211 268 241 43 Income taxes 36 63 63 69 6
Slide 31: Market-Related Impacts on Earnings
† MARKET-RELATED IMPACTS ON EARNINGS : 17¢ EPS loss in Q1 UL policies (-8¢), hedging (-5¢), MERs (-3¢) and level of assets backing reserves (-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 under
Slide 32: Car Loans
† CAR LOANS: 1¢ EPS gain in Q1 Strong portfolio performance from continued good credit experience Average credit loss rate1† (trailing 12 months) 5.4% 5.4% 5.5% 5.2% 5.2% 5.3% 5.3% 5.0% 4.3% 3.6% 3.0% 2.6% 2.4% 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 Q3/21 Q
Slide 33: Investment Portfolio
INVESTMENT PORTFOLIO High-quality, diversified portfolio Investment portfolio Bonds - Corporates - BB Bond portfolio = 70% of total portfolio and lower: 1% Real estate: 4% Low direct exposure to equity market Mortgages - Insured: 3% • $4.1B of stocks in investment portfolio Bonds - Corporates - BBB
Slide 34: Bond Portfolio by Category
BOND PORTFOLIO BY CATEGORY High-quality, conservative portfolio Utilities: 18% Corporate bonds = 57% of bond portfolio Financial: 12% Total bond portfolio by credit rating • 5% AAA • 40% AA $29.4B • 34% A Governments & Consumer - • 19% BBB Municipalities: 43% Non-cyclical: 8% • 1% BB and lower Consu
Slide 35: Equity Market Sensitivity
EQUITY MARKET SENSITIVITY (End of period) Q1/2022 Q4/2021 Q1/2021 S&P/TSX closing value 21,890 pts 21,223 pts 18,701 pts iA Financial Corporation solvency ratio 132% 134% 128% Sensitivities S&P/TSX1 level at which provisions for future policy benefits Market protection for would have to be strengthe
Slide 36: Interest Rate Sensitivity
† INTEREST RATE SENSITIVITY As at March 31, 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 +$31M ($31M) Ultimate Reinvestment Rate – Maximum assumption promulgated by CIA
Slide 37: 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 38: S&P/TSX Thresholds for Q2/2022 Gain or Loss
S&P/TSX THRESHOLDS FOR Q2/2022 GAIN OR LOSS Potential impact on TSX threshold Threshold Q2/2022 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 22,191 ±$11.7M UL policy funds
Slide 39: Premiums and Deposits
PREMIUMS AND DEPOSITS Net premiums, premium 16.6 equivalents and deposits† Q1/2022 $M YoY ($B) 14.0 4.2 Individual Insurance 476 14% 11.4 3.9 Individual Wealth Management 2,430 (5%) 10.4 9.8 4.1 3.1 Group Insurance 500 17% 2.6 Q4 2.4 3.9 Group Savings and Retirement 618 (10%) 2.7 Q3 2.2 2.4 3.9 2.7
Slide 40: Asset Growth
ASSET GROWTH AUM/AUA (assets under management and Assets under management and administration administration†, end of period, $B) 221.2 213.9 March 31 197.5 ($B, unless otherwise indicated) QoQ YoY 189.5 2022 169.5 168.8 109.7 Assets under management† 106.9 95.8 89.2 General fund1 51.8 (6%) (1%) AUA
Slide 41: Individual Insurance (Canada)
INDIVIDUAL INSURANCE (Canada) First quarter ($M, unless otherwise indicated) 2022 2021 Variation Sales1 Minimum premiums2† 92 54 70% Excess premiums3† 9 4 125% Total 101 58 74% Net premiums 476 419 14% Number of policies 40,897 35,590 15% (life insurance only) 1 First-year annualized premiums. 2 Ins
Slide 42: Individual Wealth Management
INDIVIDUAL WEALTH MANAGEMENT First quarter ($M, unless otherwise indicated) 2022 2021 Variation Sales1 General fund 239 229 4% Segregated funds 1,500 1,377 9% Mutual funds† 691 942 (27%) Total 2,430 2,548 (5%) Net investment fund sales Segregated funds 1,009 972 37 Mutual funds† 83 378 (295) Total 1
Slide 43: Group Insurance
GROUP INSURANCE First quarter ($M, unless otherwise indicated) 2022 2021 Variation Sales1 Employee Plans† 11 87 (87%) Dealer Services - Creditor Insurance2† 43 43 — P&C Insurance† 77 64 20% Car loan originations† 178 124 44% Total 298 231 29% Special Markets† 74 47 57% Total Group Insurance 383 365
Slide 44: Group Savings and Retirement
GROUP SAVINGS AND RETIREMENT First quarter ($M, unless otherwise indicated) 2022 2021 Variation Sales1 Accumulation products† 600 639 (6%) Insured annuities† 25 27 (7%) Deposits2 — 27 (100%) Total 625 693 (10%) Net premiums and deposits 618 687 (10%) Q1 1-year Assets under management March 31, 2022
Slide 45: US Operations
US OPERATIONS First quarter ($M, unless otherwise indicated) 2022 2021 Variation Sales ($US)1 Individual Insurance† 33 31 6% Dealer Services (P&C)† 243 233 4% Net premiums and premium 289 247 17% equivalents† ($CAN) 1 Sales are defined as first-year annualized premiums for Individual Insurance and a
Slide 46: Solvency Ratio
† SOLVENCY RATIO iA Financial Corporation Inc. (%, end of period) 137 134 133 134 132 130 130 131 126 127 128 124 124 125 120 122 119 110%-116% target Q1/18 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 46 † This item is a non-IFRS measure; see the “
Slide 47: Quality of Investment Portfolio
QUALITY OF INVESTMENT PORTFOLIO March 31 December 31 March 31 2022 2021 2021 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $23M $23M $23M Provisions for impaired investments $6M $6M $6M Net impaired investments $17M $17M $17M Net impaired investments as a % of investment portfolio 0
Slide 48: ESG Ambition
ESG AMBITION To contribute to sustainable growth and wellbeing for ENVI Reduction of our GHG emissions RON our clients, employees, partners, investors and communities MENT by 20% per employee by 2025 Now and in the future, achieve gender equity of SO between 40% and60% CIAL in iA Financial Group sen
Slide 49: Concrete actions for a sustainable future
Concrete actions for a sustainable future • Carbon neutral since the beginning of 2020 • Offsetting our GHG emissions by investing in source reduction projects ENVI • Creation of a climate change task force to achieve and improve reduction targets RON MENT • 36% of private investment portfolio is in
Slide 50: 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 51: 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 51
Slide 52: Investor Relations
INVESTOR RELATIONS Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q2/2022 - July 28, 2022 Q3/2022 - November 8, 2022 Q4/2022 - February 14, 2023 Q1/2023 - May 10, 2023 Q2/2023 - August 1, 2023 Q3/2023 - November 7, 2023 For information on
Slide 53: 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 54: Non-IFRS and Additional Financial Measures (cont.)
Non-IFRS and Additional Financial Measures (cont.) • Core earnings: ◦ Category under Regulation 52-112: Non-IFRS financial measures that constitute historical information. ◦ Definition: Removes from reported earnings (loss) the impacts of the following items that create volatility in the Company’s r
Slide 55: Non-IFRS and Additional Financial Measures (cont.)
Non-IFRS and Additional Financial Measures (cont.) • Core return on common shareholders’ equity (core ROE): ◦ Category under Regulation 52-112: Non-IFRS ratio. ◦ Definition: A ratio, expressed as a percentage, obtained by dividing the consolidated core earnings by the average common shareholders’ eq
Slide 56: Non-IFRS and Additional Financial Measures (cont.)
Non-IFRS and Additional Financial Measures (cont.) • Car loan measure – Loan originations: ◦ Category under Regulation 52-112: Supplementary financial measures. ◦ Definition: New car loans disbursed during a period. ◦ Purpose: Used to assess the Company’s ability to generate new business in the car
Slide 57: Non-IFRS and Additional Financial Measures (cont.)
Non-IFRS and Additional Financial Measures (cont.) • Organic capital generation: ◦ Category under Regulation 52-112: Supplementary financial measure. ◦ Definition: Excess capital generated in the normal course of business, excluding the impact of the macroeconomic environment, where excess capital i
Slide 58: Non-IFRS and Additional Financial Measures (cont.)
Non-IFRS and Additional Financial Measures (cont.) • Individual Wealth Management mutual funds deposits, Group Savings and Retirement deposits, US Operations Dealer Services premium equivalents and Group Insurance Employee Plans ASO, Investment contracts and premium equivalents and deposits: ◦ Categ
Slide 59: Non-IFRS and Additional Financial Measures (cont.)
Non-IFRS and Additional Financial Measures (cont.) • Financial leverage measure – Debentures + Preferred Shares issued by a subsidiary/Capital: ◦ Category under Regulation 52-112: Supplementary financial measures. ◦ Definition: Calculated by dividing the total debentures plus preferred shares issued
Slide 60: 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.