Q2 - 2016 An Outstanding Quarter Reported EPS of $1.35: 17% above - - PowerPoint PPT Presentation

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Second Quarter 2016

Conference Call Presenters: Yvon Charest, President and CEO René Chabot, EVP, CFO and Chief Actuary

August 4, 2016

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An Outstanding Quarter

Q2 - 2016

Profit Business Growth Financial Strength

► Reported EPS of $1.35: 17% above top of guidance ($1.05-$1.15 EPS) ► Core EPS of $1.26: up 10.5% YoY with high quality of earnings ► Favourable policyholder experience from all sectors (+$0.10 EPS) ► New-business strain of 13% better than guidance of 15% (+$0.01 EPS) ► Market-related gain for hedging (+$0.10 EPS) and MERs (+$0.01 EPS) ► Retail insurance maintains strong momentum in both Canada and US (+18%) ► iA seg funds #1 in Canada for net sales while industry is in net redemptions ► Mutual funds: YoY improvement in net outflows and fund performance ► Assets under management and administration up 4% in Q2 and 8% YoY ► Solvency ratio of 199% reflects Q2 macroeconomics (-6%) ► Book value per share of $37.60: +4% YoY and +3% QoQ ► Quarterly dividend of $0.32 per common share

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Sales Highlights

Strong quarter for retail insurance... mutual funds looking up

($Million, unless otherwise indicated)

Second quarter Year-to-date at June 30 2016 2015 Variation 2016 2015 Variation

► Individual Insurance Canada 48.4 43.5 11% 90.4 81.6 11% United States 24.5 18.2 35% 47.9 35.2 36% Total 72.9 61.7 18% 138.3 116.8 18% ► Individual Wealth Management Segregated funds - net sales 53.4 88.8 (35.4) 196.0 259.6 (63.6) Mutual funds - net sales (121.3) (165.1) 43.8 (412.5) (432.1) 19.6 Total - net sales (67.9) (76.3) 8.4 (216.5) (172.5) ( 44.0 ) ► Group Insurance Employee Plans 17.1 25.3 (32%) 35.1 40.6 (14%) Dealer Services 159.6 155.6 3% 265.3 256.7 3% Special Markets Solutions 40.6 41.8 (3%) 91.4 89.3 2% Total 217.3 222.7 (2%) 391.8 386.6 1% ► Group Savings and Retirement 325.2 342.3 (5%) 659.1 593.2 11% ► iA Auto and Home 91.6 81.5 12% 144.3 128.4 12%

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Another strong Q2

($Million, unless

• therwise indicated)

Second quarter Year-to-date at June 30

2016 2015 Variation 2016 2015 Variation Net income attributed to shareholders 143.6 146.1 (2%) 246.0 260.5 (6%) Less: preferred shareholder dividends 4.1 3.9 +5% 8.2 9.4 (13%) Less: premium on redemption of pref. shares — — — — 4.0 — Net income attributed to common shareholders 139.5 142.2 (2%) 237.8 247.1 (4%) Earnings per common share (EPS) (diluted) $1.35 $1.40 ($0.05) $2.31 $2.43 ($0.12) Return on common shareholders' equity (ROE)1 14.7% 15.8% (110 bps) 9.4% 13.1% (370 bps) Book value per share $37.60 $36.11 4% $37.60 $36.11 4%

Q2 Earnings

1 Annualized for the quarter and trailing 12 months for the year to date.

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High quality with favourable P/H experience in all lines of business

Q2 items of note

(gains and losses)

+10¢ +1¢ +4¢ +3¢ +2¢ +1¢ +1¢ +3¢

Q2 Earnings

Income

• n Capital

Individual Insurance Taxes Group Insurance Strain Market Related Individual Wealth Group Savings

MER +1¢ Hedging

Experience Gains

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Policyholder Experience

A strong H1/16, with gains in all lines of business

Experience by line of business

(EPS impact in cents)

2016 2015 2015 H1 2016 H1 2015 Q2 Q1 Q4 Q3 Q2 Q1

Individual Insurance 4 2 9 9 14 (4) 28 6 10 Group Insurance 1 7 (2) 5 1 (3) 1 8 (2) Individual Wealth Management 3 (7) (2) 2 (7) 3 2 Group Savings and Retirement 2 (1) 2 1 2 2 1 Total 10 9 (1) 14 15 (4) 24 19 11 iAAH (Income on capital) (1) (3) 1 (6) (8) (1) (5)

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$1.07 $1.26

$1.26 EPS for Q2, above guidance and consensus

1 Core consensus as of July 29, 2016.

Management's View of Core

Q2 CORE EPS

iA CONSENSUS1 Q2 Reported EPS $1.35

Exceptional items ► Taxes ($0.03) Items greater than ±4¢ ► Hedging ($0.06)

Q2 Core EPS $1.26

10.5% growth in core EPS vs Q2/2015 ($1.14 )

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Q2 Results vs. Guidance

Clearly a strong beat

Guidance Reported EPS

$1.05 to $1.15

$1.35 Reported and core ($1.26) above guidance

ROE

(quarter annualized)

11.0% to 12.5%

14.7% Reported and core (13.7%) above guidance

Strain

15% ± 5%

13% Lower than target on higher sales in Canada and US

Effective tax rate

18% to 20%

18% At low end of guidance because of 2015 true-ups

Solvency ratio

175% to 200%

199% Down because of macro- economics but at top of guidance

Payout ratio

25% to 35%

24% At low end of guidance due to strong profitability in the quarter

(mid-range)

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YTD Results vs Guidance

Well ahead on our 2016 guidance

Guidance Reported EPS

$1.95 to $2.15

$2.31 Reported and core ($2.24) above guidance

ROE

(trailing 12 months)

11.0% to 12.5%

9.4% 12.1% on core basis, at top of guidance

Strain

15% ± 5%

15% In line with annual target

Effective tax rate

18% to 20%

18% At low end of guidance

Solvency ratio

175% to 200%

199% At top of guidance

Payout ratio

25% to 35%

27% Within guidance

(mid-range)

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A Flexible Balance Sheet

June 30 March 31 December 31 June 30 2016 2016 2015 2015

Solvency ratio

199% 205% 213% 223%

Leverage ratio

23.8% 24.4% 24.3% 24.7%

Coverage ratio

9.5x 8.6x 8.2x 8.9x

Agency Rating

S&P A+ (Strong) A.M. Best A+ (Superior) DBRS A (high)

Decrease in solvency ratio is related to macroeconomic changes

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2015 June 2016 30% 27%

Interest rates

(at end of period)

2015 June 2016

29 bps 43 bps

Macroeconomic Protection

Stock markets

(at end of period)

Reflecting investment gains and LT interest rates at June 30, 2016

Higher protection, lifted by market growth

• Can. rates

at 1.73% at quarter-end

Intra-year variations don’t matter, management has time to act

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Steady Value Creation for Shareholders

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Book Value Per Share

(end of period)

$9.36 Q2/2016 $37.60 CAGR 1-year +4% 5-year +7% 10-year +8% Since 2000 +9%

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Individual Insurance Strain on New Business

+$0.01 EPS in Q2 on higher sales volume in Canada and US

($Million, unless

• therwise indicated)

2016 2015 2014 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Sales

72.9 65.4 73.7 63.8 61.7 55.1 62.1 51.1 55.5 47.3

Strain

9.3 11.3 14.4 15.2 15.2 21.3 16.0 17.3 12.7 12.7

Strain (%)

13% 17% 20% 24% 25% 39% 26% 34% 23% 27%

Annual total

15% 26% 27%

H1/2016 is 3 percentage points ahead of guidance

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Income On Capital

Higher investment income offset by adverse experience at iAAH

($Million, pre-tax)

2016 Run Rate 2016 2015 2014 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Investment income

30.0 33.5 33.5 33.7 27.7 28.4 32.6 29.8 29.3 27.2 26.7

Financing & Intangibles

(12.0) (12.0) (11.8) (10.6) (10.0) (9.9) (8.8) (6.8) (6.7) (7.4) (7.1)

Subtotal

18.0 21.5 21.7 23.1 17.7 18.5 23.8 23.0 22.6 19.8 19.6

iA Auto and Home

(0.5)

with seasonality

(4.0) (6.9) (2.9) 5.8 1.7 (10.2) 5.1 4.7 0.1 (3.5)

Total

17.5 17.5 14.8 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1

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Effective Tax Rate (ETR)

Low end of guidance because of true-ups

($Million,unless

• therwise indicated)

2016 2015 2014 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Operating income

157.7 108.3 (20.7) 122.5 142.5 102.7 78.8 92.2 109.2 93.2

Income on capital

17.5 14.8 20.2 23.5 20.2 13.6 28.1 27.3 19.9 16.1

Pre-tax income

175.2 123.1 (0.5) 146.0 162.7 116.3 106.9 119.5 129.1 109.3

Income taxes

31.6 20.7 (8.8) 28.4 16.6 1.9 (16.8) 21.0 8.4 19.3

ETR

18% 17% NM 19% 10% 2% NM 18% 7% 18%

NM: not meaningful

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Positive impact for the year to date

Hedging impact on EPS (¢)

(since hedging program inception)

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

1 (5) (4) 5 4 4 11 7 6 6 2 6 2 (12) 8 (3) 4 (6)

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Hedging Experience

2010 2011 2012 2013 2014 2015 2016 Average gain of $0.02 EPS/quarter

• ver 23 quarters

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Target

Capital Position

Decrease is related to macroeconomic variations

Solvency Ratio

(%, end of period)

Key changes during the quarter

►

• 5%

Interest rates ►

• 1%

Equity markets

2012 2013 2014 2015 Q1/16 Q2/16 217 217 209 213 205 199

200% 175%

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Market Sensitivity

(end of period)

Q2/2016 Q1/2016 Q4/2015 Q2/2015

S&P/TSX composite index 14,065 13,494 13,010 14,553 IAG solvency ratio 199% 205% 213% 223%

Sensitivities

Stock matching long-term liabilities

Level of S&P/TSX before provisions require strengthening for future policy benefits

9,800 pts 9,600 pts 9,500 pts 10,100 pts ( -30% ) ( -29% ) ( -27% ) ( -31% ) Solvency ratio

Level of S&P/TSX at which solvency ratio is 175%

8,600 pts 8,200 pts 7,900 pts 7,800 pts ( -39% ) ( -39% ) ( -39% ) ( -46% )

Level of S&P/TSX at which solvency ratio is 150%

6,800 pts 6,500 pts 6,100 pts 6,100 pts ( -52% ) ( -52% ) ( -53% ) ( -58% ) Net income

Full-year potential impact of a sudden 10% decrease in stock markets

($28 million) ($27 million) ($28 million) ($29 million)

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Interest Rate Sensitivity

(end of period)

Q2/2016 Q1/2016 Q4/2015 Q2/2015 IRR1

Potential after-tax impact

• n reserves of a 10 bps

decrease in IRR ($31 million) ($27 million) ($31 million) ($31 million)

URR

Potential after-tax impact

• n reserves of a 10 bps

decrease in URR ($65 million) ($59 million) ($60 million) ($58 million)

Total

Potential after-tax impact

• n reserves of a 10 bps

decrease in URR and IRR ($96 million) ($86 million) ($91 million) ($89 million)

1 IRR sensitivity is mostly dependent on the variation of Canadian long-term rates.

Affected by decrease in long-term interest rates

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S&P/TSX Thresholds for Q3/2016 Gain/Loss

Earnings driver: TSX threshold for gain or loss: Threshold is compared to: Potential impact

• n Q3/2016

net income of a ±10% variation

• vs. threshold:

Revenues on UL policy funds 14,258 Actual TSX value at the end of ±$8.2 million Q3/2016 MERs collected on investment funds 14,161 Actual average value3

• f TSX during

±$4.9 million Q3/2016

1 Expected closing value of TSX at the end of Q3/2016. 2 Expected average value of TSX during Q3/2016. 3 Average of all trading day closing values.

2 1

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Asset Growth

Assets Under Management and Administration

($Billion, unless

• therwise indicated)

June 30 YoY 2016 Assets under management General fund 36.0 11% Segregated funds 20.6 5% Mutual funds 10.2 (11%) Other 16.2 9% Subtotal 83.0 6% Assets under administration 38.9 12% Total 121.9 8%

AUM/AUA

(assets under management and administration, in $B) 2012 2013 2014 2015 Q2/16 59.6 69.5 76.8 78.9 83.0 23.9 83.5 29.3 98.8 32.7 109.5 36.9 115.8 38.9 121.9 AUA AUM

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Premiums and Deposits

Net premiums, premium equivalents and deposits (in $B)

Q2/2016 $Million YoY

Individual Insurance 413.2 6% Individual Wealth Management 753.8 (4%) Group Insurance 374.8 5% Group Savings and Retirement 318.3 (5%) General Insurance 61.0 11% TOTAL 1,921.1 0%

Note: The figures do not always add up exactly due to rounding differences.

2012 2013 2014 2015 2016

1.9 2.1 2.1 2.0 1.9 1.6 1.9 1.7 1.9 1.9

3.8

1.7 1.6 1.8 1.8 1.7

6.9

1.8

7.4

1.8

7.4

2.0

7.7 Q4 Q3 Q2 Q1

7.5 3.9

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Individual Insurance

($Million, unless otherwise indicated)

Second quarter Year-to-date at June 30

2016 2015 Variation 2016 2015 Variation

Sales1 Canada - Minimum premiums2

43.2 38.5 12% 77.1 74.2 4%

Canada - Excess premiums3

5.2 5.0 4% 13.3 7.4 80%

Canada - Total

48.4 43.5 11% 90.4 81.6 11%

US

24.5 18.2 35% 47.9 35.2 36%

Total

72.9 61.7 18% 138.3 116.8 18%

Premiums

413.2 388.6 6% 824.4 771.9 7%

Number of policies (Canada)

28,901 28,403 2% 53,287 52,801 1%

1 First-year annualized premiums. 2 Insurance component. 3 Savings component.

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Individual Wealth Management

($Million, unless otherwise indicated)

Second quarter Year-to-date at June 30 2016 2015 Variation 2016 2015 Variation

Gross sales1 General fund 85.0 32.0 166% 143.5 73.1 96% Segregated funds 352.1 366.5 (4%) 806.2 856.2 (6%) Mutual funds 316.7 383.0 (17%) 602.0 818.7 (26%) Total 753.8 781.5 (4%) 1,551.7 1,748.0 (11%) Net sales Segregated funds 53.4 88.8 (35.4) 196.0 259.6 (63.6) Mutual funds (121.3) (165.1) 43.8 (412.5) (432.1) 19.6 Total (67.9) (76.3) 8.4 (216.5) (172.5) (44.0)

($Million, unless otherwise indicated)

June 30 Q2 YTD 1-year 2016 variation variation variation

Assets under management General fund 1,124.2 4% 3% 1% Segregated funds 12,706.3 2% 3% 3% Mutual funds 10,214.1 1% (2%) (11%) Other 3,969.4 7% 7% 9% Total 28,014.0 2% 2% (2%) Assets under administration 38,844.4 4% 5% 12% Total AUM/AUA 66,858.4 3% 4% 6%

1 Defined as net premiums for general and segregated funds, and deposits for mutual funds.

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Group Insurance

($Million, unless otherwise indicated)

Second quarter Year-to-date at June 30

2016 2015 Variation 2016 2015 Variation Sales1 Employee Plans 17.1 25.3 (32%) 35.1 40.6 (14%) Dealer Services - Creditor Insurance 101.6 99.2 2% 167.8 164.6 2% Dealer Services - P&C Insurance 58.0 56.4 3% 97.5 92.1 6% Dealer Services - Total 159.6 155.6 3% 265.3 256.7 3% Special Markets Solutions 40.6 41.8 (3%) 91.4 89.3 2% Total Group Insurance 217.3 222.7 (2%) 391.8 386.6 1% Premiums and equivalents Premiums2 344.6 330.9 4% 666.1 636.9 5% Service contracts (ASO) 11.2 10.5 7% 23.9 22.3 7% Investment contracts 19.0 16.9 12% 36.8 35.4 4% Total 374.8 358.3 5% 726.8 694.6 5%

1 Employee Plans: first-year annualized premiums (including premium equivalents), Dealer Services (Creditor): gross premiums (before

reinsurance and cancellations), Dealer Services (P&C): direct written premiums, Special Markets Solutions: premiums before reinsurance.

2 Adjusted retroactively in Q4-2015 to include P&C premiums which were previously included in general insurance.

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Group Savings and Retirement

Funds under management

June 30, 2016 Q2 YTD 1-year variation variation variation Accumulation products 8,981.1 4% 5% 8% Insured annuities 3,326.9 2% 4% 4% Total 12,308.0 3% 5% 7%

Sales1

($Million, unless otherwise indicated)

Second quarter Year-to-date at June 30 2016 2015 Variation 2016 2015 Variation Accumulation products 300.8 306.3 (2%) 565.6 512.9 10% Insured annuities 20.1 18.2 10% 79.3 19.5 307% Deposits2 4.3 17.8 (76%) 14.2 60.8 (77%) Total 325.2 342.3 (5%) 659.1 593.2 11%

1 Sales are defined as gross premiums (before reinsurance) and deposits. 2 Deposits include GICs held in trust and institutional management contracts.

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Investment Portfolio

Continues to be of highest quality

June 30 March 31 December 31 June 30 2016 2016 2015 2015 IMPAIRED INVESTMENTS AND PROVISIONS Gross impaired investments $17.5M $17.5M $19.7M $25.0M Provisions for losses $4.8M $4.8M $5.5M $4.0M Net impaired investments $12.7M $12.7M $14.2M $21.0M Net impaired investments as a % of total investments 0.04% 0.04% 0.05% 0.07% Provisions as a % of gross impaired investments 27.4% 27.4% 27.9% 16.1% BONDS Proportion rated BB or lower 0.69% 0.65% 0.66% 0.62% Delinquency rate 0.00% 0.00% 0.00% 0.00% MORTGAGES – Delinquency rate 0.26% 0.27% 0.29% 0.46% REAL ESTATE – Occupancy rate on investment properties 89.4% 89.6% 90.1% 90.0%

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Value of New Business

Year-over-year change by component

Q2/2015 37.5

Lower sales (0.3) Variation in profit margins 1.0 Changes in economic assumptions (5.2)

Q2/2016 33.0

Value of New Business

($Million)

2012 2013 2014 2015 2016

36.4 51.3 43.3 31.0 28.7 33.4 44.3 42.6 37.5 33.0 61.7 38.4 40.7 38.8 31.9 44.9 153.1 45.2 181.5 39.3 164.0 35.1 135.5

Q4 Q3 Q2 Q1

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2016 Guidance

EPS1 Q1 $0.90 to $1.00 Q2 $1.05 to $1.15 Q3 $1.15 to $1.25 Q4 $1.10 to $1.20 2016 $4.20 to $4.60 ROE1 11.0% to 12.5% Strain 15% ± 5% Effective tax rate 18% to 20% Solvency ratio 175% to 200% Payout ratio 25% to 35%

(mid-range)

1 No reserve strengthening considered in EPS and ROE guidance.

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Investor Relations

Contact Grace Pollock

• Tel. 418-780-5945

grace.pollock@ia.ca Next Reporting Dates Q3 – November 2, 2016 Q4 – February 16, 2017 For information on our earnings releases, conference calls and related disclosure documents, consult the Investor Relations section of our website at www.ia.ca.

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Non-IFRS Financial Information

iA Financial Group reports its financial results in accordance with International Financial Reporting Standards (IFRS). It also publishes certain non-IFRS financial measures that do not have an IFRS equivalent, including sales, value of new business 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

• n equity. These non-IFRS financial measures are often accompanied by and reconciled with IFRS financial measures.

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.

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Forward-Looking Statements

This document 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”, “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 iA Financial Group 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

• r assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed
• r 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 iA Financial Group 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 iA Financial Group; 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 iA Financial Group’s consolidated financial statements, and elsewhere in iA Financial Group’s filings with Canadian securities regulators, which are available for review at www.sedar.com. The forward-looking statements in this document reflect the Company’s expectations as of the date of this document. iA Financial Group does not undertake to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, except as required by law.

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