Ia Financial Corporation Inc. · TSX:IAG
Ia Financial — Q3 2019 Earnings Presentation
35 slides from Ia Financial's earnings presentation, Nov 6, 2019
Slide 1: Third Quarter 2019 Conference Call
Third Quarter 2019 Conference Call Presenters: Denis Ricard, President and CEO Jacques Potvin, EVP, CFO and Chief Actuary November 6, 2019
Slide 2: Table of contents
Table of contents 3 Highlights 14 Book value 25 Group Savings and Retirement 4 Sales 15 Hedging 26 US Operations 5 Results 16 Equity market sensitivity 27 Investment portfolio 6 Items of note 17 Interest rate sensitivity 28 Car loans 7 Policyholder experience 18 S&P/TSX thresholds for Q4/2019 29 Div
Slide 3: Q3/2019 highlights
Q3/2019 highlights EPS above guidance – Growing P&D and assets – Capital above target • Reported EPS of $1.72 and trailing-12-month ROE of 12.7% • Core EPS of $1.77, above guidance of $1.55-$1.65 • Expected profit up 14% YoY from growth in each of the five lines of business • Many positive items: St
Slide 4: Q3/2019 sales
Q3/2019 sales Good results for US divisions, seg funds, Group Insurance, Group Savings and iAAH Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2019 2018 Variation 2019 2018 Variation ► Individual Insurance 47.0 49.4 (5%) 136.2 143.5 (5%) ► Individual Wealth Managem
Slide 5: Q3/2019 results
Q3/2019 results Favourable results for all metrics 2019 guidance Q3/2019 results 9M/2019 results Q3: $1.55 to $1.65 Reported: $1.72 Reported: $4.81 EPS 9M: $4.25 to $4.55 Core1: $1.77 Core1: $4.66 ROE Reported: 12.7% 11.0% to 12.5% --- (trailing twelve months) Core: 12.4% Quarterly range from 0% to
Slide 6: Q3 items of note
Q3 items of note Several positive items to offset PPI purchase price and goodwill adjustments EPS impact +5¢ +5¢ +2¢ +1¢ +1¢ -2¢ -8¢ PPI Policyholder Strain Taxes Income iAAH Market-related adjustments experience on capital (details on following slide) 6 This slide presents non-IFRS financial measur
Slide 7: Policyholder experience (excluding market impact)
Policyholder experience (excluding market impact) Some quarterly fluctuations in Q3 – Experience globally positive YTD 2019 2018 EPS impact 9M/2019 2018 in cents Q3 Q2 Q1 Q4 Q3 Q2 Q1 annual 1 Individual Insurance 4 6 (6) (8) 2 10 4 4 8 Individual Wealth 0 (3) (1) 02 3 (1) 2 (4) 4 Management Group In
Slide 8: Management’s view on EPS
Management’s view on EPS Core EPS1 of $1.77, above guidance of $1.55-$1.65 Q3 reported EPS Q3 core EPS1 Q3 reported EPS $1.72 $1.77 Adjusted for: $1.72 Specific items: $1.58 $1.57 ► Market-related gain -$0.05 ► PPI purchase price and goodwill +$0.08 adjustments Experience gains/losses in excess of $
Slide 9: Capital position
Capital position Solvency ratio is well above target Solvency ratio iA Financial Corporation Inc. (%, end of period) 134 Key changes during the quarter 126 127 122 124 120 119 110%-116% target ► +1% Organic capital generation ► +6% $400M subordinated debt issuance Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19
Slide 10: Flexible balance sheet
Flexible balance sheet Acquisitions are top priority for capital deployment Capital • ~$235M in organic generation, in line with annual plan generation (9M/2019) • ~$360M in capital relief from investment strategies to manage macroeconomic risks • Leverage ratio of 22.4% Ratios • Coverage ratio of 1
Slide 11: Effective tax rate (ETR) of 21.6%, within 20%-22% target (+1¢ EPS)
Effective tax rate (ETR) of 21.6%, within 20%-22% target (+1¢ EPS) Q3 back within guidance from tax optimization work 2019 2018 2017 ($Million, unless otherwise indicated) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating income 201.1 208.7 184.6 137.1 189.1 201.5 159.9 155.8 162.5 148.6 129.4 Income on ca
Slide 12: Income on capital
Income on capital Favourable experience at iAAH (+5¢ EPS) and lower financing costs (+2¢ EPS) Quarterly 2019 2018 2017 Run Rate ($Million, pre-tax) 2019 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 39.5 38.8 42.0 41.6 59.3 38.6 34.9 40.4 32.2 39.1 35.3 39.1 Financing1 and (17.0) (14.8) (14.8)
Slide 13: Strain on new business
Strain on new business Better than expected in Q3 because of favourable sales mix (+1¢ EPS) Reported strain includes Individual Insurance in Canada and the US 2019 2018 2017 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Sales ($M) 81.3 81.1 66.6 75.5 76.9 75.1 68.5 74.9 68.8 74.9 69.9 Strain ($M) (1.7) (1.4) (6.
Slide 14: Book value per share
Book value per share P/BV ratio of 1.19 at Sept. 30, 2019 September 30, 2019 $50.79 CAGR 1-year +9% 5-year +9% 10-year +9% Since 2000 +10% 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 2.17 2.22 1.72 1.61 1.80 1.74 1.94
Slide 15: Hedging experience
Hedging experience Generally a win: Average gain of $0.02 EPS/quarter since inception Hedging impact on EPS (¢) (since hedging program inception) 11 10 9 8 7 6 6 6 5 5 4 4 4 4 4 4 3 3 1 2 2 2 2 0 0 0 0 (1) 0 0 (3) (4) (5) (9) (6) (12) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 16: Equity market sensitivity
Equity market sensitivity (End of period) Q3/2019 Q2/2019 Q4/2018 Q3/2018 S&P/TSX closing value 16,659 pts 16,382 pts 14,323 pts 16,073 pts iA Financial Corporation solvency ratio 134% 127% 126% 119% Sensitivities S&P/TSX1 level at which provisions for future Stocks matching policy benefits would ha
Slide 17: Interest rate sensitivity
Interest rate sensitivity (End of period) Q3/2019 Q2/2019 Q4/2018 Q3/2018 ► IRR = Initial Reinvestment Rate ► Key element is long-term Canadian rate at year-end IRR ► 42 bps protection as of Dec. 31, 2018 ► Impact on net income1 of a 10 bps decrease in IRR ($12M) ($12M) ($10M) ($8M) ► URR = Ultimate
Slide 18: S&P/TSX thresholds for Q4/2019 gain or loss
S&P/TSX thresholds for Q4/2019 gain or loss Potential impact on TSX threshold Threshold Q4/2019 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 16,888 , ±$10.4M UL policy funds
Slide 19: Reported EPS and core EPS reconciliation
1 Reported EPS and core EPS reconciliation Third quarter Year-to-date at September 30 (On a diluted basis) 2019 2018 Variation 2019 2018 Variation EPS $1.72 $1.50 15% $4.81 $4.23 14% Adjusted for: Specific items: PPI purchase price and goodwill adjustments $0.08 — $0.08 — Unusual income tax gains an
Slide 20: Premiums and deposits
Premiums and deposits Net premiums, premium equivalents and deposits Q3/2019 $Million YoY ($Billion) 10.3 10.4 Individual Insurance 397.5 3% 9.8 2.6 Individual Wealth Management 1,203.6 21% 8.2 2.4 8.3 7.7 2.3 2.7 Group Insurance 454.6 (2%) Q4 2.0 2.4 2.2 Group Savings and Retirement 439.5 39% Q3 1.
Slide 21: Asset growth
Asset growth AUM/AUA (assets under management and Assets under management and administration administration, end of period, $Billion) 187.1 169.6 ($Billion, unless September 30 169.5 168.8 QoQ YoY otherwise indicated) 2019 87.6 Assets under management 126.2 80.8 79.7 115.8 General fund 45.5 5% 16% 4
Slide 22: Individual Insurance (Canada)
Individual Insurance (Canada) Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2019 2018 Variation 2019 2018 Variation Sales1 Minimum premiums2 45.8 43.7 5% 127.9 129.0 (1%) Excess premiums3 1.2 5.7 (79%) 8.3 14.5 (43%) Total 47.0 49.4 (5%) 136.2 143.5 (5%) Premiums
Slide 23: Individual Wealth Management
Individual Wealth Management Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2019 2018 Variation 2019 2018 Variation Sales1 General fund 162.0 88.1 84% 369.1 295.8 25% Segregated funds 576.4 464.4 24% 1,732.1 1,527.9 13% Mutual funds 465.2 442.1 5% 1,497.4 1,656.1 (
Slide 24: Group Insurance
Group Insurance Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2019 2018 Variation 2019 2018 Variation Sales1 Employee Plans 12.9 9.4 37% 42.9 85.3 (50%) Dealer Services - Creditor Insurance2 97.6 108.3 (10%) 253.7 287.2 (12%) P&C Insurance 70.6 66.1 7% 197.5 187.4
Slide 25: Group Savings and Retirement
Group Savings and Retirement Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2019 2018 Variation 2019 2018 Variation Sales1 Accumulation products 340.5 286.7 19% 1,017.3 989.6 3% Insured annuities 95.0 22.7 319% 430.3 208.6 106% Deposits2 11.0 13.9 (21%) 32.8 30.4 8
Slide 26: US Operations
US Operations Third quarter Year-to-date at September 30 ($Million, unless otherwise indicated) 2019 2018 Variation 2019 2018 Variation Sales ($US)1 Individual Insurance 25.9 21.0 23% 69.8 59.8 17% Dealer Services (P&C) 117.5 104.8 12% 341.6 295.8 15% Premiums and equivalents 160.6 140.7 14% 475.3 4
Slide 27: Quality of investment portfolio
Quality of investment portfolio September 30 June 30 December 31 September 30 2019 2019 2018 2018 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $24.0M $23.9M $24.5M $24.6M Provisions for impaired investments $11.1M $11.1M $8.6M $6.0M Net impaired investments $12.9M $12.8M $15.9M $18
Slide 28: Car loan credit experience
Car loan credit experience Long-term trend is in line with management expectations Average credit loss rate (non-prime)1 Trailing 12 months since acquisition of CTL during Q3/15 8.3% 8.0% 7.4% 6.7% 6.1% 5.9% 5.7% 5.4% 5.2% 5.2% 5.3% 5.4% 5.3% Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/
Slide 29: Dividend to common shareholders
Dividend to common shareholders $0.45 $0.40 $0.35 Dividend of $0.30 45¢ per share payable in Q4/19 $0.25 Steady increases $0.20 every 3rd quarter $0.15 First lifeco in Canada to resume dividend $0.10 increases after the financial crisis $0.05 $0.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2
Slide 30: 2019 guidance
2019 guidance iA Financial Corporation EPS1 ROE1 11.0% to 12.5% 6% annual target Q1 $1.25 to $1.35 Strain (quarterly range from 0% to 15%) Q2 $1.45 to $1.55 Solvency 110% to 116% ratio Q3 $1.55 to $1.65 Q4 $1.50 to $1.60 Effective 20% to 22% tax rate 2019 $5.75 to $6.15 Payout 25% to 35% ratio (mid-
Slide 31: Credit ratings
Credit ratings Industrial Alliance Insurance iA Financial Corporation Inc. and Financial Services Inc. Credit rating agency Issuer rating Credit rating agency Financial strength S&P A S&P AA- DBRS A (low) DBRS A (high) A.M. Best A+ (Superior) 31
Slide 32: Investor Relations
Investor Relations Contact Marie-Annick Bonneau Tel.: 418-684-5000, ext. 104287 Marie-Annick.Bonneau@ia.ca Next Reporting Dates Q4/2019 - February 13, 2020 Q1/2020 - May 7, 2020 Q2/2020 - July 30, 2020 Q3/2020 - November 4, 2020 For information on our earnings releases, conference calls and related
Slide 33: Non-IFRS financial information
Non-IFRS financial information iA Financial Corporation reports its financial results and statements in accordance with International Financial Reporting Standards (IFRS). It also publishes certain financial measures that are not based on IFRS (non-IFRS). A financial measure is considered a non-IFRS
Slide 34: Forward-looking statements
Forward-looking statements 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”, “will”, “could”, “should”, “would”, “suspe
Slide 35: TaN cal
TaN cal Financial Group