Delivering Long-term Shareholder Value

Transcription

1 Delivering Long-term Shareholder Value Yvon Charest President and CEO 1 CIBC 12 th Annual Eastern Institutional Investor Conference Montreal, September 19, 2013 Robust Business Model Capital is strong Financial flexibility Upside to increase in interest rates Stable earnings More contribution from -light businesses Confident regarding 2015 earnings target Business strategy unchanged Premiums and deposits at record levels Wealth management continues to grow All business lines increasing market penetration 2 1

2 Capital is Strong Room to absorb adverse macro events and support growth initiatives Solvency ratio (%) Target Still room for improvement: Internal generation could be improved for retail insurance Ratio would be less sensitive if more seg funds were hedged Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 3 Financial Flexibility Refinancing strategy executed in first half of 2013 Debt ratio (Debentures and preferred shares /Total ) 36% Agency Rating Outlook S&P A+ (Strong) Stable 29% A.M. Best A (Excellent) Stable DBRS IC-2 Stable Q4/12 Q2/13 1 No change in credit ratings since IA became public in February After redemption of $100M 8.25% sub-debt on April 1 st and $150M 5.714% IATS on June 30 th 2

3 Change in Actuarial Practices Under Discussion In addition to upside on interest rates Fixed income Potentially positive Plus would reduce URR headwinds Non-fixed income (NFI) Probably negative Net impact Neutral But need to wait for final standards Interest rates (%) Actuarial reserve at Dec Min/Max since June 30, 2013 IRR / 4.48 Canada L-T rate / Stable Earnings Speak to Strong Business Model IA rebounds quickly after two economic crises EPS 1 Stock market downturn Drop in interest rates $3.11 $2.98 $2.95 $2.63 $2.43 $3.17 Reserves strengthened Diluted and adjusted for IATS in and debt asymmetry in Excludes extraordinary provision in Restated following amendment to IAS-19 and adoption of IFRS-10. Excludes gain on sale of US annuity business. 3

4 2013 Year to Date Results On track at mid-year 2013 Guidance Year to date EPS 1 $3.00 to $3.40 $1.59 (6 months) ROE 1 Payout ratio Effective tax rate Solvency ratio 10.5% to 12.0% 25% to 35% (mid-range) 21% to 24% 175% to 200% 11.6% (annualized) (11.8% before debt buybacks) 31% 21% 224% Strain 2 Book value 25% of sales 8% annual growth 26% of sales, trend 4% growth YTD 7 1 No reserve strengthening considered in guidance for EPS and ROE 2 Individual Insurance Confident Regarding 2015 Earnings Target 2015 EPS target of $4.00, $1.20 EPS increase vs EPS growth $1.20 Strain reduction Growth from -light businesses Growth from traditional businesses Operational optimization ~40% ~15% ~35% ~10% Done! Ahead of plan In progress Ongoing 8 4

5 Record P&D for the Year to Date Business growth maintains momentum P&D (net premiums, premium equivalents and deposits in $B) Q4 Q3 Q2 Q Q Q Six months ended June 30, 2013 $M YoY Individual Insurance % Individual Wealth Management 1, % Group Insurance (1%) Group Savings and Retirement % General Insurance % Total 3, % 9 Asset Growth AUM growth is early indicator of future profitability AUA/AUM (assets under management and administration in $B) AUA AUM At June 30/13 $B YoY General fund % Seg funds % Mutual funds % Other % AUM sub-total % AUA sub-total % Total % H1/

6 Continuing to Increase Market Penetration According to industry data Business strategy is unchanged Market share Individual Insurance Individual Wealth Mgmt (Segregated Funds) Group Insurance (Employee Plans 1 ) Group Savings and Retirement New Business %/13.5% (Min./Target) 11.2% 7.1% 4.3% In Force 3 8.9% 10.8% 4.6% 5.5% Mutual Funds - Net Asset Growth (YoY) 4 Industrial Alliance Industry +17.2% +13.9% 11 1 Target market: 50 to 1,000 employees. 2 New business in Individual Wealth Management refers to gross sales; in other sectors it refers to first-year annualized premiums. 3 In force in insurance sectors refers to direct premiums and premium equivalents; in other sectors it refers to assets. 4 At July 31, Source: Latest available industry data from CLHIA, Fraser Group, Investor Economics, IFIC and LIMRA. Capital-light Businesses Targeted for SOLID growth Business strategy is unchanged 2012 YoY Growth +10% ASSETS Mutual Funds Continuing to grow mutual fund business Jovian acquisition adds private wealth management +31% SALES +11% SALES Dealer Services Leader in a niche market Untapped growth potential for P&C products Auto & Home Insurance Double-digit growth per year over the last decade Direct sales and references from IA distribution networks +15% SALES Individual Non-guaranteed Disability Insurance Roll-out across Canada gaining traction 12 6

7 IAG is a Proven Outperformer Book Value per Share (end of period) $30 $25 CAGR since % $28.32 $20 $15 13 $10 $5 $ IA Remains Focused on Building Long-term Shareholder Value Increase in interest rates Actuarial practices under discussion Hedging of more seg funds $4.00 EPS target for 2015 (+$1.20 EPS vs. 2012) Business strategy unchanged Wealth management Capital-light products Adjustable insurance products 14 7

8 IFRS The Company publishes certain non-ifrs financial measures that do not have an IFRS equivalent, including sales, value of new business, embedded value and solvency ratio, or which have an IFRS equivalent such as data on operating profit and income taxes on earnings presented in the sources of earnings table. The Company also uses non-ifrs adjusted data in relation to net income, earnings per share and return on equity. The Company believes that these non-ifrs financial measures provide investors and analysts with additional information to better understand the Company s financial results as well as assess its growth and earnings potential. Since non-ifrs financial measures do not have a standardized definition, they may differ from the non-ifrs financial measures used by other institutions. The Company strongly encourages investors to review its financial statements and other publicly-filed reports in their entirety and not to rely on any single financial measure. All amounts are in Canadian dollars unless noted otherwise. 15 Forward-looking Statements This presentation may contain statements relating to strategies used by Industrial Alliance 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, expect, anticipate, intend, plan, believe, estimate, and continue (or the negative thereof), as well as words such as objective or goal or other similar words or expressions. Such statements constitute forward-looking statements within the meaning of securities laws. Forward-looking statements include, but are not limited to, information concerning the Company s possible or assumed future operating results. These statements are not historical facts; they represent only the Company s expectations, estimates and projections regarding future events. Although Industrial Alliance believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Factors that could cause actual results to differ materially from expectations include, but are not limited to: general business and economic conditions; level of competition and consolidation; changes in laws and regulations including tax laws; liquidity of Industrial Alliance including the availability of financing to meet existing financial commitments on their expected maturity dates when required; accuracy of information received from counterparties and the ability of counterparties to meet their obligations; accuracy of accounting policies and actuarial methods used by Industrial Alliance; insurance risks including mortality, morbidity, longevity and policyholder behaviour including the occurrence of natural or man-made disasters, pandemic diseases and acts of terrorism. Additional information about the material factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the Risk Management section of the Management s Discussion and Analysis and in the Management of Risks Associated with Financial Instruments note to Industrial Alliance s consolidated financial statements, and elsewhere in Industrial Alliance s filings with Canadian securities regulators, which are available for review at The forward-looking statements in this presentation reflect the Company s expectations as of the date of this presentation. Industrial Alliance does not undertake to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, except as required by law. 16 8

9 Investor Relations Contact Grace Pollock Tel.: Fiscal 2013 Reporting Dates First quarter May 9, 2013 Second quarter August 1, 2013 Third quarter November 6, 2013 Fourth quarter February 13, 2014 For information on earnings releases, conference calls and related disclosure documents, consult the Investor Relations section of our website at 17 Delivering Long-term Shareholder Value Yvon Charest President and CEO 18 CIBC 12 th Annual Eastern Institutional Investor Conference Montreal, September 19,