Fourth Quarter 2018 Conference Call Presenters: Denis Ricard, President and CEO Jacques Potvin, EVP, CFO and Chief Actuary February 14, 2019
Table of contents 3 16 Highlights 2019 EPS growth 29 AUM/AUA 4 17 30 Sales Car loans Individual Insurance 5 18 31 Results Hedging Individual Wealth Management 6 19 32 Items of note Book value Group Insurance 7 20 33 Policyholder experience Strain Group Savings and Retirement 8 21 34 Income on capital Taxes US Operations 9 22 35 Assumption review Balance sheet Investment portfolio 10 23 36 Management’s view on EPS Macroeconomic protection Dividend 11 24 37 Capital position Equity market sensitivity 2018 guidance 12 25 38 Solvency ratio sensitivity Interest rate sensitivity Investor Relations 13 26 39 Capital S&P/TSX thresholds for Q1/2019 Non-IFRS financial information 14 27 40 EPS guidance Core EPS reconciliation Forward-looking statements 15 28 2019 guidance Premiums and deposits 2
Q4/2018 highlights Finishes off a very good year • Reported EPS of $1.36 and trailing-12-month ROE of 12.5% • Core EPS of $1.39 (+9% YoY) • Market impact offset by gains from sale of real estate and HollisWealth purchase price adjustment Profit • Neutral impact of year-end actuarial assumption review • Premiums and deposits of $2.6 billion (+6% YoY) and AUM/AUA of $168.8 billion (stable YoY) • Canada: Good sales for group businesses, iAAH, seg funds and general fund • US: Strong sales in both Individual Insurance and P&C Growth • Mutual funds in net outflows • Recognition of hedging program: positive impact on solvency ratio and market sensitivity • Solvency ratio of 126%, well above 112%-116% target • Book value per share of $47.40: +9% YoY and +2% QoQ Capital • 64% of earnings returned to shareholders in the form of dividends and buybacks (1.1M shares) • Dividend payable in Q1/2019 of $0.415/common share 3 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Q4/2018 sales Good growth for group businesses, iAAH, general fund and US Operations Fourth quarter Year-to-date at December 31 ($Million, unless otherwise indicated) 2018 2017 Variation 2018 2017 Variation ► Individual Insurance 47.3 52.8 (10%) 190.8 194.0 (2%) ► Individual Wealth Management General fund - sales 104.8 83.7 25% 400.6 316.5 27% Segregated funds - net sales 76.1 101.9 (25.8) 422.3 509.9 (87.6) Mutual funds - net sales (117.9) 30.7 (148.6) (157.6) 329.2 ( 486.8 ) ► Group Insurance Employee Plans 7.2 7.2 0% 92.5 107.3 (14%) Dealer Services (Creditor, P&C and car loan orig.) 240.7 210.2 15% 962.9 913.4 5% Special Markets Solutions 76.2 79.1 (4%) 255.6 231.2 11% Total 324.1 296.5 9% 1,311.0 1,251.9 5% ► Group Savings and Retirement 438.3 334.7 31% 1,666.9 1,545.1 8% ► US Operations ($US) Individual Insurance 21.4 17.5 22% 81.2 72.9 11% Dealer Services - P&C (DAC acquisition) 79.3 — — 375.1 — — ► iA Auto and Home 68.5 64.2 7% 322.8 308.8 5% 4 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Q4/2018 results Favourable results vs. guidance 2018 guidance Q4/2018 results 2018 results Q4: $1.35 to $1.45 Reported: $1.36 Reported: $5.59 EPS 2018: $5.20 to $5.60 Core 1 : Core 1 : $1.39 $5.55 Reported: 12.5% ROE 11.0% to 12.5% (trailing twelve months) Core: 12.4% Quarterly range Strain 4% 9% from 0% to 15% Effective tax rate 19% 22% 21% to 23% Solvency ratio 126% (as at December 31) 112% to 116% 25% to 35% Payout ratio 30% 28% (mid-range) 5 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 Market impact offset by gains from real estate and HollisWealth adjustment EPS impact +19¢ +10¢ +5¢ -1¢ -7¢ -28¢ Market- Policyholder Strain Taxes HollisWealth Income related experience purchase price on capital adjustment (details on following slide) Note: The February 2018 common share offering and the NCIB program had a net dilutive impact of $0.02 EPS in the fourth quarter. 6 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Policyholder experience (excluding market impact) Group Insurance and iAAH turnarounds maintaining positive trend 2018 2017 2016 EPS impact 2018 2017 2016 in cents 1 annual annual annual Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Individual Insurance (8) 2 10 4 (4) 1 (2) (13) 15 6 3 2 8 (18) 26 Individual Wealth 2 0 3 (1) 2 (1) 0 2 3 0 4 3 0 4 4 7 Management Group Insurance 4 1 5 5 3 (1) (4) (1) (9) 0 1 7 15 (3) (1) Group Savings (2) 0 1 1 1 (1) 1 1 (2) 1 2 0 0 2 1 and Retirement US Operations (1) 1 5 (1) 0 (1) 1 (2) 1 1 1 0 4 (2) 3 Total (7) 7 20 11 (1) (2) (2) (12) 5 12 10 9 31 (17) 36 iAAH 1 0 2 0 0 1 (4) (3) (3) (3) (1) 0 3 (6) (7) (in income on capital) 1 Adjusted for the addition of fifth line of business (US Operations). 2 Excluding HollisWealth acquisition price final adjustment. 7 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
Income on capital Real estate sale net of AFS realized losses (+14¢), iAAH (+1¢) and others (+4¢) Quarterly Run Rate 2018 2017 2016 ($Million, pre-tax) 2019 2018 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Investment income 39.5 35.5 59.3 38.6 34.9 40.4 32.2 39.1 35.3 39.1 29.4 32.1 33.5 33.5 Financing and (17.0) (16.0) (13.0) (16.9) (17.6) (16.3) (14.7) (13.8) (12.6) (12.3) (15.4) (12.8) (12.0) (11.8) intangibles Subtotal 22.5 19.5 46.3 21.7 17.3 24.1 17.5 25.3 22.7 26.8 14.0 19.3 21.5 21.7 3.0 3.0 iA Auto 8.3 8.8 5.7 (6.2) 2.6 6.5 (6.4) (11.0) (1.8) 1.3 (4.0) (6.9) excluding excluding and Home seasonality seasonality Total 25.5 22.5 54.6 30.5 23.0 17.9 20.1 31.8 16.3 15.8 12.2 20.6 17.5 14.8 8 This slide presents non-IFRS financial measures. See "Non-IFRS Financial Information" at the end of this document for further information.
2018 year-end assumption review Net impact is neutral, URR positioned 15 bps ahead of promulgated rate Impact on net income Pre-tax After-tax ($Million, non-PAR business) Mortality & Morbidity 44 32 Annual mortality and morbidity assumption review Policyholder behaviour (4) (3) Annual P/H behaviour assumption review Economic assumptions 75 55 Investment gains net of URR decrease Expenses & Other (115) (84) Mostly model refinement for policy liabilities and expenses Total 0 0 Net impact on EPS 9
Management’s view on EPS 9% YoY core EPS 1 growth Q4 core EPS 1 Q4 reported EPS Q4 reported EPS $1.36 Adjusted for: Specific items: $1.39 -$0.05 Taxes $1.36 $1.36 Sale of real estate net of realized -$0.14 loss on AFS investments Market-related loss +$0.28 HollisWealth purchase price -$0.10 $1.23 adjustment Experience gains/losses Analyst iA Analyst iA in excess of $0.04 EPS consensus consensus Individual Insurance P/H exper. +$0.04 result result Q4 core EPS 1 $1.39 Q4/2017 core EPS 1 $1.27 YoY growth 9% 10 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.
Capital position Solvency ratio is well above target Solvency ratio 1 Key changes during the quarter (%, 2018) 126 122 120 120 119 ► +3.0% Recognition of hedging program for seg funds 112%-116% target ► +2.0% Review of assumptions, particularly URR strengthening ► +1.0% Organic capital generation ► +1.0% Macroeconomic, increase in credit spread s ► +1.0% Investment strategy to manage equity market risk ► -1.0% Buyback of ~1.1M shares Jan. 1 Mar. 31 June 30 Sept. 30 Dec. 31 1 2018 solvency ratios have been retroactively adjusted to reflect the correction of estimates used to establish income taxes payable in prior periods, decreasing the retained earnings at January 1, 2017 by $58M. 11 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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