First quarter 2016 Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary May 5, 2016 1
Q1 Highlights Delivering on our 2016 plan ► Reported EPS of $0.96 above mid-guidance ($0.90-$1.00 EPS) ► Key drivers of 2016 plan above expectations: strain and insurance businesses Profit ► New-business strain of 17% beats Q1 guidance (+$0.01) ► 4th consecutive quarter of P/H gains in insurance businesses (+$0.09) ► Retail insurance maintains strong momentum in Canada and U.S. (+19%) ► iA moves into first position for net seg fund sales in Canada Business ► Group Insurance segments, Group Savings and iAAH report good growth Growth ► Mutual fund business reports performance improvements in key funds and good start for new products launched in Q1 as part of action plan to redress gross sales ► Quarterly dividend increased by $0.02 to $0.32 per share Financial ► Change in solvency ratio to 205% reflects Q1 macroeconomics and seg funds Strength ► BVPS of $36.48: -1% QoQ due to pension fund charge in OCI 2
Sales Highlights Retail insurance operations maintain strong momentum First quarter ($Million, unless otherwise indicated) 2016 2015 Variation ► Individual Insurance Canada 42.0 38.1 10% United States 23.4 17.0 38% Total 65.4 55.1 19% ► Individual Wealth Management Segregated funds - net sales 142.6 170.8 (28.2) Mutual funds - net sales (291.2) (267.0) (24.2) Total - net sales (148.6) (96.2) (52.4) ► Group Insurance Employee Plans 18.0 15.3 18% Dealer Services 105.7 101.1 5% Special Markets Solutions 50.8 47.5 7% Total 174.5 163.9 6% ► Group Savings and Retirement 333.9 250.9 33% ► IA Auto and Home 52.7 46.9 12% 3
Q1 Earnings EPS aligned with guidance First quarter ($Million, unless otherwise indicated) 2016 2015 Variation Net income attributed to shareholders 102.4 114.4 (10%) 2 Less: preferred shareholder dividends 4.1 5.5 (25%) Less: premium on redemption of pref. shares — 4.0 --- Net income attributed to common shareholders 98.3 104.9 (6%) Earnings per common share (EPS) (diluted) $ 0.96 $ 1.03 ($0.07) Return on common shareholders' equity (ROE) 1 10.5% 12.1% (160 bps) Book value per share $36.48 $34.94 4% Results adjusted for significant items 3 Net income attributed to common shareholders 98.3 89.8 +9% Earnings per common share (EPS) (diluted) $ 0.96 $ 0.88 $0.08 Return on common shareholders' equity (ROE) 1 10.5% 10.4% 10 bps 1 Annualized 2 $5M in Financial Statements due to rounding 4 3 Non-IFRS, adjusted for tax recovery ($0.19) and premium for redemption of preferred shares ($0.04) in Q1/2015
Q1 Earnings Continuing favourable P/H experience from insurance operations Q1 items of note (gains and losses) Income Market related Experience on capital +4¢ +3¢ +3¢ Employee +2¢ Plans Dealer Investment Individual Services income Insurance -1¢ MER UL Hedging -4¢ -6¢ 5
Experience (other than market related) Key drivers of 2016 plan are above expectations Experience gains (losses) (EPS impact in cents) 2016 2015 2014 2015 2014 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Individual 2 9 9 14 (4) 5 (5) 2 (4) 28 (2) Insurance Group Insurance 7 (2) 5 1 (3) (1) (4) (7) (4) 1 (16) Individual Wealth 0 (7) (2) 0 2 (5) 0 1 1 (7) (3) Management Group Savings 0 (1) 2 0 1 (1) 0 0 1 2 0 and Retirement iAAH 0 (3) 0 1 (6) 0 3 0 (1) (8) 2 Total 9 (4) 14 16 (10) (2) (6) (4) (7) 16 (19) 6
Management's View of Core $0.98 EPS for Q1, above mid-guidance Q1 CORE EPS Q4 Reported EPS $0.96 $1.00 $0.98 Items greater than ±4¢ ► Hedging +$0.02 CONSENSUS 1 iA Q4 Core EPS $0.98 7 1 Core consensus as of April 27, 2016
Q1 Results vs. Guidance Delivering on our 2016 plan Guidance Reported Reported above mid-guidance EPS $0.96 $0.90 to $1.00 Core EPS of $0.98 ROE 10.5% Seasonality impact 11.0% to 12.5% 20% for Q1 Better than expected, Strain 17% reflects favourable sales mix 15% for 2016 Effective tax rate 17% In line with seasonality 18% to 20% Macroeconomics Solvency ratio 205% 175% to 200% and seg fund portfolio 25% to 35% Payout ratio 31% Within guidance (mid-range) 8
A Flexible Balance Sheet Half of decrease in solvency ratio is seg fund related March 31 December 31 March 31 Agency Rating 2016 2015 2015 Solvency 205% 213% 211% S&P A+ (Strong) ratio Leverage 24.4% 24.3% 25.4% A.M. Best A+ (Superior) ratio Coverage 8.6x 8.2x 7.8x DBRS A (high) ratio 9
Steady Value Creation for Shareholders Q1/2016 $36.48 Book Value Per Share (end of period) CAGR 1-year +4% 5-year +7% 10-year +8% $9.36 Since 2000 +9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10
Hedging Experience Hedging program overall positive since inception 22 quarters: Hedging impact on EPS ( ¢ ) 13 positives, 4 neutrals and 5 negatives (since hedging program inception) Average quarterly gain of 2 cents EPS 11 8 7 6 6 6 5 4 4 4 2 2 1 0 0 0 0 (3) (5) (4) (6) (12) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2011 2012 2013 2014 2015 2016 11
Individual Insurance Strain on New Business 1¢ EPS gain: Better than expected (Q1 at 17% vs 20% guidance) 2016 2015 2014 ($Million, unless otherwise indicated) Q1 1 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Sales 65.4 73.7 63.8 61.7 55.1 62.1 51.1 55.5 47.3 Strain 11.3 14.4 15.2 15.2 21.3 16.0 17.3 12.7 12.7 Strain (%) 17% 20% 24% 25% 39% 26% 34% 23% 27% Annual total 17% 26% 27% YoY improvement because of : 1) existing reinsurance treaty renegotiated, 2) underwriting changes in the US and 3) more profitable sales mix 12 1 Excess premiums for January and February 2014 were revised downwards by $9.5M due to a correction related to large policies.
Income On Capital Q1/16 in line with iAAH seasonality and new investment 2016 2015 2014 ($Million, pre-tax) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment 33.5 33.7 27.7 28.4 32.6 29.8 29.3 27.2 26.7 income Financing & (11.8) (10.6) (10.0) (9.9) (8.8) (6.8) (6.7) (7.4) (7.1) Intangibles 1 Sub Total 21.7 23.1 17.7 18.5 23.8 23.0 22.6 19.8 19.6 IA Auto (6.9) (2.9) 5.8 1.7 (10.2) 5.1 4.7 0.1 (3.5) and Home Total 14.8 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1 13 1 As of Q1/2015, includes higher financing costs related to debt issuance, offset by preferred share redemption.
Effective Tax Rate (ETR) In line with earnings seasonality 2016 2015 2014 ($Million,unless otherwise indicated) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Operating 108.3 (20.7) 122.5 142.5 102.7 78.8 92.2 109.2 93.2 income Income on 14.8 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1 capital Pre-tax 123.1 (0.5) 146.0 162.7 116.3 106.9 119.5 129.1 109.3 income Income 20.7 (8.8) 28.4 16.6 1.9 (16.8) 21.0 8.4 19.3 taxes ETR 17% nm 19% 10% 2% nm 18% 7% 18% 14
Market Sensitivity Q1/2016 Q4/2015 Q1/2015 (end of period) S&P/TSX composite index 13,494 13,010 14,902 IAG solvency ratio 205% 213% 211% Sensitivities Stock Level of S&P/TSX before 9,600 pts 9,500 pts 10,100 pts matching provisions require long-term strengthening for future ( -29% ) ( -27% ) ( -32% ) policy benefits liabilities 8,200 pts 7,900 pts 8,400 pts Level of S&P/TSX at which solvency ratio is 175% ( -39% ) ( -39% ) ( -44% ) Solvency ratio 6,500 pts 6,100 pts 6,800 pts Level of S&P/TSX at which solvency ratio is 150% ( -52% ) ( -53% ) ( -54% ) Full year potential impact of Net income ($27 million) ($28 million) ($30 million) a sudden 10% decrease in stock markets 15
Interest Rate Sensitivity Q1/2016 Q4/2015 Q1/2015 (end of period) Potential after-tax impact IRR 1 on reserves of a 10 bps ($27 million) ($31 million) ($35 million) decrease in IRR Potential after-tax impact URR on reserves of a 10 bps ($59 million) ($60 million) ($62 million) decrease in URR Potential after-tax impact Total on reserves of a 10 bps ($86 million) ($91 million) ($97 million) decrease in URR and IRR 16 1 New standards of practice were introduced in 2014. Since then, IRR sensitivity is mostly dependent on the variation of Canadian long term rates.
S&P/TSX Thresholds for Q2/2016 Gain/Loss Potential impact on Q2/2016 Earning TSX threshold Threshold is net income of driver: for gain or loss: compared to: a ±10% variation vs. threshold: Actual TSX value Revenues on at the end of 1 13,680 ±$8.1 million UL policy funds Q2/2016 Actual average value 3 MERs collected on 2 of TSX during 13,587 ±$4.7 million investment funds Q2/2016 17 1 Expected closing value of TSX at the end of Q2/2016. 2 Expected average value of TSX during Q2/2016. 3 Average of all trading day closing values.
Asset Growth Assets Under Management and Administration AUM/AUA (assets under management and March 31 ($Billion, unless YoY administration, in $B) otherwise indicated) 2016 117.7 117.6 115.8 109.5 Assets under management 98.8 37.5 36.9 General fund 34.4 3% 32.7 83.5 29.3 Segregated funds 20.0 1% 23.9 AUA Mutual funds 10.1 (14%) Other 15.6 6% Subtotal 80.1 0% 80.1 78.9 76.8 69.5 AUM 59.6 Assets under 37.5 8% administration Total 117.7 3% 2012 2013 2014 2015 Q1/16 18 Note: The figures do not always add up exactly due to rounding differences.
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