Fourth Quarter 2017 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary February 15, 2018 1
Table of Contents 3 15 Q4/2017 highlights 2018 guidance 27 AUM/AUA 4 16 2017 in a nutshell Capital 28 Mutual fund net sales 5 17 Sales Balance sheet 29 Individual Insurance 6 18 Corporate structure Book value 30 Individual Wealth Management 7 19 Q4/2017 results Strain 31 Group Insurance 8 20 Q4 items of note Income on capital 32 Group Savings and Retirement 9 21 Management’s view on EPS Effective tax rate 33 Investment portfolio 10 22 Policyholder experience Equity market sensitivity 34 2017 guidance 11 23 Year-end assumption review Interest rate sensitivity 35 Investor relations 12 24 Macroeconomic protection S&P/TSX thresholds for Q1/2018 36 Non-IFRS financial information 13 25 2017 results Core EPS reconciliation 37 Forward-looking statements 14 26 EPS guidance Premiums and deposits 2
Q4/2017 Highlights Solid growth in top line and core earnings • Reported EPS of $1.24 and trailing-12-month ROE of 11.4% • Core EPS +11% YoY and expected profit +16% YoY Profit • Year-end reserve strengthening of $0.10 EPS, net • Gains/losses from favourable markets, adverse lapse and higher strain • Premiums and deposits of $2.4B (+7% YoY) and AUM/AUA of $169.5B (+34% YoY) • Total net mutual and seg fund inflows of $132.6M Business • Individual Insurance sales dampened by tax change, as expected Growth • Solid sales growth at Dealer Services, Special Markets Solutions and iAAH • Completed acquisition of US-based DAC in January 2018 (extended vehicle warranties) • Solvency ratio of 209% (~201% post-DAC closing) Financial • Book value per share of $44.20: +8% YoY and +2% QoQ Strength • Dividend of $0.38/common share; Q4 payout ratio of 30% 3 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
2017 In A Nutshell Core earnings in line, continued business growth and strong financial position • Reported EPS of $4.81 and core EPS of $4.88, at the middle of guidance • Expected profit on in-force +14% YoY and strain target reached Profit • $0.20 experience loss due to lapse; lapse assumption repositioned at year-end • 2018 guidance of $5.20 to $5.60; mid-guidance is 11% above 2017 core EPS • Strong positive net fund flows; mutual fund turnaround confirmed Business • Individual Insurance sales back to normal growth, following new tax rule introduction Growth • Strong sales growth in all divisions of Group Insurance and at iAAH • Recent acquisitions in US (DAC) and Canada (HollisWealth) expand financial services network • Solvency ratio above target Financial • Strong and flexible balance sheet, with low debt ratio and high coverage ratio Strength • Book value per share +8% YoY • Quarterly dividend increased by 9%; dividend paid in 2017 is +13% YoY 4 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Full-year Sales Strong overall; Individual Insurance impacted by tax changes Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2017 2016 Variation 2017 2016 Variation ► Individual Insurance Canada 52.8 71.4 (26%) 194.0 212.1 (9%) United States 22.1 22.0 — 94.1 94.6 (1%) Total 74.9 93.4 (20%) 288.1 306.7 (6%) ► Individual Wealth Management Segregated funds - net sales 101.9 74.1 27.8 509.9 341.7 168.2 Mutual funds - net sales 30.7 77.2 (46.5) 329.2 (404.4) 733.6 Total - net sales 132.6 151.3 (18.7) 839.1 (62.7) 901.8 ► Group Insurance Employee Plans 7.3 23.1 (68%) 107.6 71.4 51% Dealer Services (Creditor Insurance and P&C) 148.0 129.3 14% 634.8 559.9 13% Special Markets Solutions 79.1 59.8 32% 231.2 194.1 19% Total 234.4 212.2 10% 973.6 825.4 18% ► Group Savings and Retirement 334.7 367.2 (9%) 1,545.1 1,481.4 4% ► iA Auto and Home 64.2 59.4 8% 308.8 278.6 11% 5 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Change in Corporate Structure Intention announced on February 5, 2018 to adopt a Holdco/Opco structure Holdco • Adapting legal structure to current reality of iA Financial Group • Better suited to growth strategy and diversification of operations • More operational and financial flexibility • Level playing field with peers Opco 6
Q4/2017 Results Solid growth in core earnings Guidance Q4/2017 results Reported: $1.24 EPS $1.25 to $1.35 Core 1 : $1.27 Reported: 11.4% ROE 11.0% to 12.5% (trailing twelve months) Core: 11.5% Quarterly range Strain 6% from 0% to 15% Effective tax rate 20% to 22% 22% (~ 201% post-DAC) Solvency ratio 175% to 200% 209% 25% to 35% Payout ratio 30% (mid-range) 7 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information. 1 See "Reported EPS and Core EPS Reconciliation" in this slide package.
Q4 Items of Note Mostly in line with expectations EPS impact +9¢ -1¢ -2¢ -2¢ -10¢ Year-end Market- Policyholder Strain HollisWealth assumption review related experience integration (details on following slides) 8 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Management’s View on EPS 11% core 1 EPS growth vs. Q4/2016 Q4 Core 1 EPS Q4 Reported EPS Q4 Reported EPS $1.24 Adjusted for: $1.33 Specific items: $1.32 HollisWealth integration +$0.02 $1.27 $1.24 Change in assumptions and +$0.10 management actions Market-related gains -$0.09 Analyst iA Analyst iA consensus consensus result result Q4 Core 1 EPS $1.27 Q4/2016 core 1 EPS $1.14 YoY growth 11% 9 1 See "Reported EPS and Core EPS Reconciliation" in this slide package. This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Policyholder Experience (excluding market impact and HollisWealth integration) Only material deviation in Q4 is lapse in Individual Insurance 2017 2016 2015 EPS impact 2017 2016 2015 in cents annual annual annual Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Individual Insurance (4) 1 (1) (15) 16 7 4 2 9 9 14 (4) (19) 29 28 Group Insurance 3 (1) (4) (1) (9) 0 1 7 (2) 5 1 (3) (3) (1) 1 Individual Wealth (1) (1) 2 3 0 4 3 0 (7) (4) 0 2 3 7 (9) Management Group Savings 1 (1) 1 1 (2) 1 2 0 (1) 2 0 1 2 1 2 and Retirement Total (1) (2) (2) (12) 5 12 10 9 (1) 12 15 (4) (17) 36 22 iAAH 0 1 (4) (3) (3) (3) (1) 0 (3) 0 1 (6) (6) (7) (8) (in income on capital) 10 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
2017 Year-End Assumption Review Lapse assumption repositioned at year-end Impact on net income Pre-tax After-tax ($Million, non-PAR business) Mortality improvement (new CIA table) Mortality & Morbidity 378 277 Annual mortality and morbidity assumption review Lapse assumption update from internal studies considering recent Policyholder behaviour (675) (494) experience Aligned with Q3 disclosure Economic assumptions 229 168 URR aligned with CIA promulgated rate Expenses & Other 54 39 Model refinement related to system changes Total (14) (10) $0.10 EPS net impact from reserve strengthening 11
Macroeconomic Protection Markets can drop 30% and interest rates by 43 bps before reserves need strengthening Stock market protection Interest rate protection 75 bps (at end of period) (at end of period) 32% 30% 27% 25% 23% 43 bps 43 bps 43 bps 40 bps Year-end 3.27% 2.34% 2.17% 2.35% 2.27% Canadian rates: 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 12
2017 Results Targets reached Guidance 2017 results Reported: $4.81 EPS $4.65 to $5.05 Core 1 : $4.88 Reported: 11.4% ROE 11.0% to 12.5% (trailing twelve months) Core: 11.5% Strain 5% 6% Effective tax rate 20% to 22% 22% (~ 201% post-DAC) Solvency ratio 175% to 200% 209% 25% to 35% Payout ratio 30% (mid-range) 13 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information. 1 See "Reported EPS and Core EPS Reconciliation" in this slide package.
EPS Guidance Committed to minimum 10% annual EPS growth $5.60 EPS Guidance (diluted) $5.05 $5.20 $4.60 $4.65 $4.20 $3.80 $4.20 $3.80 $3.40 $3.10 $3.40 +11% Target $3.00 range $2.50 2012 2013 2014 2015 2016 2017 2018 Reported EPS $3.22 $3.57 $3.97 $3.57 $5.19 $4.81 Core 1 EPS N/A $3.30 $3.54 $4.04 $4.67 $4.88 14 1 See "Reported EPS and Core EPS Reconciliation" in this slide package. This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
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