1
Delivering Long-term
Shareholder Value
CIBC 12th Annual Eastern Institutional Investor Conference Montreal, September 19, 2013
Yvon Charest
President and CEO
2
Robust Business Model
►
Capital is strong
►
Financial flexibility
►
Upside to increase in interest rates
►
Stable earnings
►
More contribution from capital-light businesses
►
Confident regarding 2015 earnings target
►
Premiums and deposits at record levels
►
Wealth management continues to grow
►
All business lines increasing market penetration
3
Capital is Strong
Room to absorb adverse macro events
and support growth initiatives
186
200
211
217
237
224
Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13
Target
Still room for improvement:
►Internal capital generation could
be improved for retail insurance
►Ratio would be less sensitive ifmore seg funds were hedged
Solvency ratio
(%)
Healthy
balance
sheet
4
Financial Flexibility
Refinancing strategy executed in first half of 2013
Agency
Rating
Outlook
S&P
A+ (Strong)
Stable
A.M. Best
A (Excellent)
Stable
DBRS
IC-2
Stable
36%
29%
Q4/12
Q2/13
Debt ratio
(Debentures and preferred shares /Total capital)
1
1 After redemption of $100M 8.25% sub-debt on April 1st and $150M 5.714% IATS on June 30th
No change in credit ratings since
IA became public in February 2000
5
Change in Actuarial Practices Under Discussion
In addition to upside on interest rates
Net impact
Fixed
income
Non-fixed
income (NFI)
Potentially positive
Plus would reduce URR headwinds
Probably negative
Neutral
But need to wait for final standards
Healthy
balance
sheet
Interest rates
(%)
Actuarial reserve
at Dec. 2012
Min/Max since
June 30, 2013
IRR
3.57
3.99 / 4.48
Canada L-T rate
2.37
2.88 / 3.31
6
2007
2008
2009
2010
2011
2012
1 Diluted and adjusted for IATS in 2010-12 and debt asymmetry in 2007-09. Excludes extraordinary provision in 2005.
2 Restated following amendment to IAS-19 and adoption of IFRS-10. Excludes gain on sale of US annuity business. $3.11 $2.63 $2.43 $2.98 $2.95
EPS
1Stable Earnings Speak to Strong Business Model
IA rebounds quickly after two economic crises
7
26% of sales, trend
2013 Year to Date Results
On track at mid-year
11.6
%
(annualized) (11.8% before debt buybacks)31%
224%
4
% growth
YTD
EPS
EPS
11ROE
ROE
11Payout ratio
Payout ratio
Effective tax rate
Effective tax rate
Book value
Book value
Solvency ratio
Solvency ratio
Strain
Strain
2221%
Year to date
$1.59 (6 months)
10.5% to 12.0%
25% to 35% (mid-range)
175% to 200%
8% annual growth
25% of sales
21% to 24%
2013 Guidance
$3.00 to $3.40
1 No reserve strengthening considered in guidance for EPS and ROE
2 Individual Insurance
Profit is
capital
8
Confident Regarding 2015 Earnings Target
2015 EPS target of $4.00, $1.20 EPS increase vs. 2012
2012-2015
EPS growth
$1.20
~10%
~40%
Strain
reduction
Operational
optimization
Ongoing
Done!
Profit is
capital
~15%
~35%
Growth from
traditional
businesses
Growth from
capital-light
businesses
9
Record P&D for the Year to Date
Business growth maintains momentum
P&D
(net premiums, premium equivalents and
deposits in $B)
Six months ended
June 30, 2013
$M
YoY
Individual Insurance
700.1
7%
Individual Wealth
Management
1,876.2
12%
Group Insurance
682.3
(1%)
Group Savings and
Retirement
580.2
70%
General Insurance
123.0
15%
Total
3,961.8
14%
Q1
1.9
Q2
1.6
1.4
1.3
1.8
2.0
1.9
2.1
1.5
1.3
1.6
1.7
1.6
1.9
1.4
1.3
1.5
1.6
1.7
1.2
1.6
1.8
1.7
1.8
2008 2009 2010 2011 2012 2013
5.7
6.8
7.0
6.9
5.4
4.0
Q1
Q2
Q3
Q4
10
Asset Growth
AUM growth is early indicator of future profitability
51.7
59.6
62.2
21.9
23.9
24.6
2011
2012
H1/13
AUA
AUM
AUA/AUM
(assets under management and administration in $B)
11
Market share
Individual
Insurance
Individual
Wealth Mgmt
(Segregated Funds)Group
Insurance
(Employee Plans1)Group Savings
and Retirement
New
Business
210.9%/13.5%
(Min./Target)11.2%
7.1%
4.3%
In Force
38.9%
10.8%
4.6%
5.5%
Continuing to Increase Market Penetration
According to industry data
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, 2013.
Source: Latest available industry data from CLHIA, Fraser Group, Investor Economics, IFIC and LIMRA.
Business
strategy is
unchanged
Mutual Funds - Net Asset Growth (YoY)
4Industrial Alliance
Industry
+17.2%
+13.9%
12
Individual Non-guaranteed Disability Insurance
Roll-out across Canada gaining traction
Capital-light Businesses
Targeted for SOLID growth
Mutual Funds
Continuing to grow mutual fund business
Jovian acquisition adds private wealth management
Dealer Services
Leader in a niche market
Untapped growth potential for P&C products
Business
strategy is
unchanged
2012 YoY
Growth
+15%
SALES+
10
%
ASSETS+31%
SALESAuto & Home Insurance
Double-digit growth
per year over the last decade
Direct sales and references from IA distribution networks
+11%
13
$9.36
$28.32
$5
$10
$15
$20
$25
$30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012IAG is a Proven Outperformer
Profit is
capital
Book Value per Share
(end of period)
+10
%
CAGR
since 2000
14
►
Increase in interest rates
►
Actuarial practices under discussion
►
Hedging of more seg funds
Business
strategy
unchanged
Healthy
balance
sheet
Profit is
capital
IA Remains Focused on Building
Long-term Shareholder Value
►
$4.00 EPS target for 2015
(+$1.20 EPS vs. 2012)
►
Wealth management
►
Capital-light products
15
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.
16
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 www.sedar.com.
17
Investor Relations
Contact
Grace Pollock
Tel.: 418 780-5945
[email protected]
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 www.inalco.com.
18
Delivering Long-term
Shareholder Value
CIBC 12th Annual Eastern Institutional Investor Conference Montreal, September 19, 2013
