Canada NewsWire
QUEBEC CITY, May 12, 2022
Robust financial position and continued strong sales momentum
The results presented below are for iA Financial Corporation Inc. ("iA Financial Corporation" or the "Company"), the holding company that owns 100% of the common shares of Industrial Alliance Insurance and Financial Services Inc. ("iA Insurance"). The results for iA Insurance are presented in a separate section on page 6 of this document. This news release presents non-IFRS measures used by the Company when evaluating its results and measuring its performance. These non-IFRS measures are not standardized financial measures and are not included in the financial statements. These measures are: return on common shareholders' equity (ROE), core earnings per common share (core EPS), core ROE, different payout ratios, organic capital generation, potential capital deployment, different measures of business growth, components or measures of capital, solvency, sources of earnings, sensitivities and car loan portfolio. See the "Non-IFRS and Additional Financial Measures" section at the end of this document for relevant information about such measures. |
QUEBEC CITY, May 12, 2022 /CNW Telbec/ - For the first quarter ended March 31, 2022, iA Financial Corporation (TSX: IAG) reports net income attributed to common shareholders of $151 million, diluted earnings per common share (EPS) of $1.40 and return on common shareholders' equity (ROE) for the trailing twelve months of 12.8%. Core EPS† was $1.79 and core ROE† for the trailing twelve months was 14.1%. Premiums and deposits† amounted to $4.4 billion during the quarter, similar to the record achieved for the same period in 2021. Assets under management and administration† ended the quarter at $213.9 billion, a year-over-year increase of 6%.
"Our sales, most notably in individual insurance and segregated funds, have been strong since the beginning of the year, building on the momentum of 2021. Partly due to the success of our participating products, we continue to increase the proportion of capital‑light products, which accounted for more than 85% of new individual insurance sales in the first quarter," commented Denis Ricard, President and CEO of iA Financial Group. "Our financial solidity and the strength of our distribution networks are driving forces for the success of our growth strategy. Regarding the macroeconomic environment, rising long-term rates should be a clear positive for long-term shareholder value. Lastly, we cannot remain silent in the face of the current geopolitical situation, which prompted us to join an initiative in support of Ukrainian immigrants affected by the conflict."
"While Q1 profitability did not meet our expectations, several fundamentals, such as our robust balance sheet, strong capital position and good organic capital generation, provide a stable foundation to pursue our growth strategy in an environment of macroeconomic variations and high inflation," added Jacques Potvin, Executive Vice‑President, CFO and Chief Actuary. "In addition, in light of first quarter developments, we are pleased to reiterate our neutral to favourable impact outlook for the transition to IFRS 9 and IFRS 17 for the key financial indicators."
Earnings Highlights | First quarter | ||
2022 | 2021 | Variation | |
Net income attributed to shareholders (in millions) | $157 | $179 | (12%) |
Less: dividends on preferred shares issued by a subsidiary (in millions) | $6 | $6 | — |
Net income attributed to common shareholders (in millions) | $151 | $173 | (13%) |
Weighted average number of common shares (in millions, diluted) | 108.1 | 107.5 | 1% |
Earnings per common share (diluted) | $1.40 | $1.61 | (13%) |
Core earnings per common share (diluted)1,† | $1.79 | $1.79 | — |
Other Financial Highlights | March 31, 2022 | December 31, 2021 | March 31, 2021 |
Return on common shareholders' equity† | 12.8% | 13.2% | 12.7% |
Core return on common shareholders' equity1,† | 14.1% | 14.2% | 13.6% |
Solvency ratio† | 132% | 134% | 128% |
Book value per share2 | $61.04 | $62.01 | $56.95 |
Assets under management and administration† (in billions) | $213.9 | $221.2 | $201.2 |
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1 | On a trailing twelve month basis. |
2 | Book value per common share is a financial measure calculated by dividing the common shareholders' equity by the number of common shares outstanding at the end of the period; all components of this measure are IFRS measures. |
† | This item is a non-IFRS measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures. |
The results of iA Financial Corporation for the first quarter of 2022 are presented on a consolidated basis with those of its subsidiaries, including iA Insurance. Unless otherwise indicated, the results presented in this document are compared with those from the corresponding period last year.
Profitability – For the first quarter ended March 31, 2022, iA Financial Corporation reports diluted earnings per common share (EPS) of $1.40 compared to $1.61 for the same quarter of 2021. Diluted core EPS† of $1.79 for the first quarter of 2022 is similar to last year's result.
The table below reconciles the Company's reported and core earnings.† Core earnings is a non-IFRS measure that represents management's view of the Company's capacity to generate sustainable earnings.
Reported Earnings and Core Earnings Reconciliation | ||||
(in millions of dollars after tax unless otherwise indicated) | First quarter | |||
Earnings | EPS (diluted basis) | |||
2022 | 2022 | 2021 | Variation | |
Reported earnings | 151 | $1.40 | $1.61 | (13%) |
Core earnings remove from reported earnings the impacts of | ||||
Market-related impacts that differ from management's best | 18 | $0.17 | ($0.04) | |
Assumption changes and management actions | — | — | — | |
Charges or proceeds related to acquisition or disposition of | 4 | $0.04 | $0.03 | |
Amortization of acquisition-related finite life intangible assets | 15 | $0.14 | $0.13 | |
Non-core pension expense | 5 | $0.04 | $0.06 | |
Other specified unusual gains and losses | — | — | — | |
Core earnings† | 193 | $1.79 | $1.79 | — |
The following items presented in the "Sources of Earnings"† section of the Company's Financial Information Package explain the differences between management's expectations and reported earnings for the three-month period ended March 31, 2022. This information contains non-IFRS measures. All figures are after tax unless otherwise indicated.
The Company reported net income attributed to common shareholders of $151 million for the first quarter of 2022. This result, as analyzed according to sources of earnings, can be explained as follows:
Expected profit on in-force† – At $225 million pre-tax, expected profit on in-force (EPIF) for the first quarter of 2022 was up 10% or $21 million year over year. This strong increase in EPIF is mainly the result of organic growth, including high net fund entries during the last twelve months and the favourable impact of financial markets in the wealth sectors.
Experience gains (losses)† versus expected profit – For the first quarter of 2022, the Company reports a total net experience loss of $0.30 EPS ($33 million) versus management expectations. The following experience results are worthy of note:
Impact of new business (strain)† in Individual Insurance in Canada and the U.S. – New business for the two business lines generated a charge at issue of $10 million pre‑tax, or 7% of sales for the quarter. This result is within the -5% to 10% target range but higher than expected ($0.02 EPS loss), mainly explained by a different sales mix than planned. Strain does not factor in the first quarter increase in interest rates.
Income on capital† – Net income earned on the Company's surplus funds, which includes income from the iA Auto and Home affiliate (iAAH), was $23 million before tax for the first quarter, representing a gain of $0.06 EPS versus management expectations. This is explained by favourable experience for home protections at iAAH (+$0.04 EPS), higher investment income on surplus (+ $0.01 EPS) and lower Surex integration costs than planned (+0.01 EPS).
Income taxes† – The effective tax rate for the quarter was 18.7%, below the 21% to 23% guidance range. As a result, the tax charge was lower than expected ($0.03 EPS gain).
Business growth – The Company continued its growth momentum to start 2022 with good sales results for the first quarter. In Canada, the Company continues to strengthen its market-leading position in all three "Foundation"3 businesses of Individual Insurance, Individual Wealth Management and Dealer Services. In addition to their "Support"3 of branding and synergies with other businesses, Special Markets and Group Savings and Retirement had strong sales growth and iA Auto and Home recorded good sales.† Lastly, in the U.S., good performances were recorded in the "Expansion"3 businesses of Individual Insurance and Dealer Services.
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3 | At the Investor Event held on March 10, 2021, the Company presented its business mix under three main categories: Foundation, Support and Expansion. |
† | This item is a non-IFRS measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures. |
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4 | Net premiums and premium equivalents |
Financial position – At March 31, 2022, the solvency ratio† was 132%, compared with 134% at the end of the previous quarter and 128% a year earlier. This result is above the Company's target range of 110% to 116%. The two percentage point decrease in the first quarter is due to unfavourable market-related variations, partly offset by the good contribution of organic capital generation† and the net positive impact of the February debenture redemption and issuance. The Company's leverage ratio† at March 31, 2022 was 23.4%, compared to 22.7% at December 31, 2021.
Capital generation† – The Company organically generated approximately $100 million in additional capital during the first quarter.
Debenture redemption – On February 23, 2022, iA Insurance completed the redemption of its 2.64% subordinated debentures due February 23, 2027, with a nominal value of $250 million.
Debenture issuance – On February 25, 2022, iA Financial Group completed its inaugural sustainability bond offering of $300 million aggregate principal amount 3.187% fixed/floating unsecured subordinated debentures due February 25, 2032. The debentures were rated "A (low)" by DBRS Morningstar and "A-" by S&P Global Ratings.
Book value5 – The book value per common share was $61.04 at March 31, 2022, up 7% over twelve months and down 2% from the previous quarter. The variation for the quarter is mainly explained by the decrease in accumulated other comprehensive income, which was negatively impacted by rising interest rates and credit spreads.
Dividend – The Company paid a quarterly dividend of $0.6250 to common shareholders in the first quarter of 2022. The Board of Directors approved a quarterly dividend of $0.6250 per share for the second quarter of 2022, the same as in the first quarter, on the outstanding common shares of iA Financial Corporation. This dividend is payable on June 15, 2022 to the shareholders of record at May 27, 2022.
Normal Course Issuer Bid – In the first quarter of 2022, the Company redeemed and cancelled 108,200 outstanding common shares. Under the NCIB regime, the Company can redeem up to 5,382,503 common shares, representing approximately 5% of the outstanding common shares, between December 6, 2021 and December 5, 2022.
Dividend Reinvestment and Share Purchase Plan – Registered shareholders wishing to enrol in iA Financial Corporation's Dividend Reinvestment and Share Purchase Plan (DRIP) so as to be eligible to reinvest the next dividend payable on June 15, 2022 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on May 19, 2022. Enrolment information is provided on iA Financial Group's website at http://ia.ca/investorrelations, under the Dividends section. Common shares issued under iA Financial Corporation's DRIP will be purchased on the secondary market and no discount will be applicable.
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5 | Book value per common share is a financial measure calculated by dividing the common shareholders' equity by the number of common shares outstanding at the end of the period; all components of this measure are IFRS measures. |
† | This item is a non-IFRS measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures. |
2021 Sustainability Report – On April 1, 2022, iA Financial Group released its 2021 Sustainability Report, which outlines the Company's environmental, social and governance initiatives and achievements for 2021. Highlights of the report include:
2022 federal budget – The 2022 federal budget was published on April 7, 2022. Among other things, the budget introduced new taxes aimed specifically at banks and life insurance companies, as well as an update on the taxation of the upcoming IFRS 17 accounting regime. Note than these new measures are not enacted yet. The Company's financial objectives and guidance provided to the market were not changed following the 2022 federal budget release.
Credit ratings – Credit rating agencies S&P Global, DBRS Morningstar and A.M. Best confirmed, with a stable outlook, all ratings of iA Financial Corporation and its related entities, including Industrial Alliance Insurance and Financial Services Inc.
Board of Directors – The Company's annual meeting will be held virtually on Thursday, May 12, 2022. At the meeting, two new director nominees, Ms. Ouma Sananikone and Ms. Rebecca Schechter, will be proposed for election by shareholders.
Executive appointment – On April, 20, 2022, the Company announced that Stéphanie Butt Thibodeau will be joining iA Financial Group on May 16, 2022 as Executive Vice‑President and Chief Talent and Culture Officer. Ms. Butt Thibodeau has over 27 years of experience in financial services and human resource management, as well as in corporate transformation and organizational agility.
2022 Market guidance for iA Financial Corporation, as disclosed on February 16, 2022
Transition to IFRS 17 and IFRS 9 and outlook for 2023 – The Company's management is already making decisions and taking actions based on the new IFRS 17 and IFRS 9 accounting standards that will come into effect on January 1, 2023. Due to its strong and flexible balance sheet under IFRS 4 and its well-positioned actuarial assumptions, management considers that the Company is in a favourable position for the transition to the new accounting standards. Based on currently available information, impacts ranging from near-neutral to favourable are expected for the following key measures: 1) Core EPS, 2) Core EPS growth, 3) Core ROE, 4) Book value, 5) Solvency ratio and 6) Capital available for deployment. Core earnings will continue to be the best indicator of the Company's ability to generate sustainable revenues, eliminating the short-term volatility that may result from the de-linking between assets and liabilities under the new accounting regime. Finally, it is important to note that this outlook is preliminary as the following elements are not finalized or remain uncertain: the tax treatment of the contractual service margin (CSM) at transition, the changes that will be made to the formula for calculating the solvency ratio and the evolution of the macroeconomic environment until transition.
The Company's outlook, including the market guidance provided, constitutes forward-looking information within the meaning of securities laws. Although the Company believes that its outlook is reasonable, such statements involve risks and uncertainties and undue reliance should not be placed on such statements. Factors that could cause actual results to differ materially from expectations include, but are not limited to: insurance, market, credit, liquidity, strategic and operational risks. In addition, certain material factors or assumptions are applied in preparing the Company's outlook, including but not limited to: accuracy of accounting policies and best estimate actuarial and economic assumptions used by the Company; a business growth rate similar to previous years; no unexpected material changes in the economic, competitive, insurance, legal or regulatory environment; risks and conditions; and the Company's recent performance and results, as discussed elsewhere in this document. The Company's outlook serves to provide shareholders, market analysts, investors, and other stakeholders with a basis for adjusting their expectations with regards to the Company's performance throughout the year and may not be appropriate for other purposes. Additional information about risk factors and assumptions applied may be found in the "Forward-looking Statements" section of this document.
† | This item is a non-IFRS measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures. |
Profitability – In the first quarter of 2022, iA Insurance recorded net income attributed to its sole common shareholder, iA Financial Corporation, of $154 million, compared to $171 million a year earlier.
Financial position – The solvency ratio† of iA Insurance was 123% at March 31, 2022, compared with 127% at the end of the previous quarter and 116% a year earlier. The decrease of four percentage points in the first quarter is due to the redemption of $250 million of subordinated debentures in February and unfavourable market-related variations, which were partly offset by the contribution of organic capital generation.†
Debenture redemption – On February 23, 2022, iA Insurance completed the redemption of its 2.64% subordinated debentures due February 23, 2027, with a nominal value of $250 million.
Dividend – iA Insurance paid no dividend in the first quarter of 2022. For the second quarter of 2022, the Board of Directors of iA Insurance approved that there will be no dividend to its sole common shareholder, iA Financial Corporation, and therefore no dividend should be paid by iA Insurance.
Credit ratings – Credit rating agencies S&P Global, DBRS Morningstar and A.M. Best confirmed, with a stable outlook, all ratings of iA Financial Corporation and its related entities, including Industrial Alliance Insurance and Financial Services Inc.
Board of Directors – The Company's annual meeting will be held virtually on Thursday, May 12, 2022. At the meeting, two new director nominees, Ms. Ouma Sananikone and Ms. Rebecca Schechter, will be proposed for election by shareholders to replace those not seeking another term.
iA Insurance | |||
Earnings Highlights | First quarter | ||
(In millions of dollars, unless otherwise indicated) | 2022 | 2021 | Variation |
Net income attributed to shareholders | 160 | 177 | (10%) |
Less: dividends on preferred shares | 6 | 6 | — |
Net income attributed to common shareholder | 154 | 171 | (10%) |
Other Financial Highlights | |||
(In millions of dollars, unless otherwise indicated) | March 31, 2022 | December 31, 2021 | March 31, 2021 |
Total capital† | 6,358 | 6,584 | 5,861 |
Solvency ratio† | 123% | 127% | 116% |
Non-IFRS and Additional Financial Measures
iA Financial Corporation and iA Insurance (hereinafter referred to individually in this section as the "Company") report their financial results and statements in accordance with International Financial Reporting Standards ("IFRS"). They also publish certain financial measures or ratios that are not based on IFRS ("non-IFRS"). A financial measure is considered a non-IFRS measure for Canadian securities law purposes if it is presented other than in accordance with the generally accepted accounting principles ("GAAP") used for the company's audited financial statements. The Company uses non-IFRS measures when evaluating its results and measuring its performance. The Company believes that non-IFRS measures provide additional information to better understand its financial results and assess its growth and earnings potential, and that they facilitate comparison of the quarterly and full year results of the Company's ongoing operations. Since non-IFRS measures do not have standardized definitions and meaning, they may differ from the non-IFRS financial measures used by other institutions and should not be viewed as an alternative to measures of financial performance determined in accordance with IFRS. 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. These non-IFRS measures are often accompanied by and reconciled with IFRS financial measures. For certain non‑IFRS measures, there are no directly comparable amounts under IFRS.
Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure from the Canadian Securities Administrators ("Regulation 52‑112") establishes disclosure requirements that apply, respectively, to each of the following categories of non-IFRS measures used by iA Financial Group:
Below is a description of the non-IFRS financial measures, non-IFRS ratios and supplementary financial measures used by the Company. Additional information is provided, along with a description of the reconciliation to the closest IFRS measure, where applicable.
Non-IFRS measures published by iA Financial Group are:
a. | market-related impacts that differ from management's best estimate assumptions, which include impacts of returns on equity markets and changes in interest rates related to (i) management fees collected on assets under management or administration (MERs), (ii) universal life policies, (iii) the level of assets backing long-term liabilities, and (iv) the dynamic hedging program for segregated fund guarantees; |
b. | assumption changes and management actions; |
c. | charges or proceeds related to acquisition or disposition of a business, including acquisition, integration and restructuring costs; |
d. | amortization of acquisition-related finite life intangible assets; |
e. | non-core pension expense, that represents the difference between the asset return (interest income on plan assets) calculated using the expected return on plan assets and the IFRS prescribed pension plan discount rate; and |
f. | specified items which management believes are not representative of the performance of the Company, including (i) material legal settlements and provisions, (ii) unusual income tax gains and losses, (iii) material impairment charges related to goodwill and intangible assets, and (iv) other specified unusual gains and losses. |
Note: This core earnings definition is applicable as of January 1, 2021. However, the core results for prior periods that are presented for comparison purposes have also been calculated according to this definition. The changes to the definition of core earnings at the beginning of 2021 are consistent with the ongoing evolution of the business and help to better reflect and assess the underlying operating business performance, while maintaining consistency with the general concept of the metric and continuity with the previous definition.
a. |
Operating profit, which is the sum of the following components of the sources of earnings analysis: expected profit on in-force, experience gains and losses, impact of new business and changes in assumptions and management actions. |
b. | Expected profit on in-force, which represents the portion of the consolidated net income on business in force at the start of the reporting period that was expected to be realized based on the achievement of best‑estimate assumptions. |
c. | Experience gains or losses, which represent the difference between reported income and the income that would have been reported if all assumptions made at the start of the period had materialized. |
d. | Impact of new business, or strain, which represents the point-of-sale impact on net income of writing new business during the period. The expected profit realized in the years after a policy is issued should cover the strain incurred at the time of issue. |
e. | Changes in assumptions and management actions, which is the impact on pre-tax net income resulting from changes in actuarial methods and assumptions or other management actions. Changes in assumptions result from the Company ensuring the adequacy of its provisions given the existing economic and financial environment as well as the Company's own experience in terms of mortality, morbidity, lapse rates, unit costs and other factors. Management actions represent the impact of actions apart from the normal operation of the business, including but not limited to changes in methodology, model refinement and impacts of acquisitions, mergers and divestitures. |
f. | Income on capital, which represents the income derived from investments in which the Company's capital is invested, minus any expenses incurred to generate that income. The Company also includes financing expenses from debentures, amortization of intangible assets related to acquisitions and the results of the iA Auto and Home (iAAH) subsidiary in this item. |
g. | Income taxes, which represent the value of amounts payable under the tax laws and include tax payable and deferred income taxes. A life insurer's investment income taxes and premium taxes are not included in these amounts. Income taxes are considered to be an expense for the purpose of calculating the operating profit. |
a. | Deposits refer to amounts received from clients under an investment contract. Deposits are not reflected in the Company's income statements. |
b. | Premium equivalents refer to amounts related to service contracts or services where the Company is primarily an administrator but could become an insurer if a specific event were to happen. These amounts are not accounted for in "Net premiums". |
a. | Individual Insurance minimum and excess premium sales are defined as first-year annualized premiums. The net premiums presented in the Consolidated Financial Statements include fund entries on both in-force contracts and new business written during the period and are reduced by premiums ceded to reinsurers. |
b. | Individual Wealth Management gross mutual fund sales are defined as deposits and include primary market sales of ETFs. |
c. | Individual Wealth Management net mutual fund sales correspond to net fund entries and are defined as Individual Wealth Management gross mutual fund sales less withdrawals and transfers. |
d. | Group Insurance Employee Plans sales are defined as first-year annualized premiums, including premium equivalents (Administrative Services Only). |
e. | US Operations Individual Insurance sales are defined as first-year annualized premiums. |
f. | Group Insurance Special Markets sales are defined as fund entries on both in-force contracts and new business written during the period. |
g. | Group Insurance Dealer Services P&C sales are defined as direct written premiums (before reinsurance). |
h. | Group Savings and Retirement sales of accumulation contracts and insured annuities include gross premiums (before reinsurance) and premium equivalents, or deposits. |
i. | US Operations Dealer Services sales are defined as direct written premiums (before reinsurance) and premium equivalents. |
j. | General Insurance sales are defined as direct written premiums. |
For a detailed discussion of iA Financial Corporation's and iA Insurance's first quarter results, investors are invited to consult the Management's Discussion and Analysis for the quarter ended March 31, 2022, the related financial statements and accompanying notes and the Financial Information Package for each company, all of which are available on the iA Financial Group website at ia.ca under About iA, in the Investor Relations/Financial Reports section and on SEDAR at sedar.com.
Management will hold a conference call to present iA Financial Group's first quarter results on Thursday, May 12, 2022 at 11:30 a.m. (ET). The dial-in number is 416-620-9188 or 1-800-954-0652 (toll-free within North America). A replay of the conference call will be available for a one-week period, starting at 2:00 p.m. on Thursday, May 12, 2022. To access the conference call replay, dial 1‑800‑558‑5253 (toll‑free) and enter access code 22016279. A webcast of the conference call (listen-only mode) will also be available on the iA Financial Group website at ia.ca.
iA Financial Corporation is holding its Annual Meeting virtually at 2:00 p.m. (ET) on Thursday, May 12, 2022, at the following web address: https://www.icastpro.ca/eia220512b. A webcast of the meeting as well as a copy of management's presentation will be available on the Company's website at ia.ca under About iA, in the Investor Relations/Events and Presentations section.
iA Financial Group is one of the largest insurance and wealth management groups in Canada, with operations in the United States. Founded in 1892, it is an important Canadian public company and is listed on the Toronto Stock Exchange under the ticker symbols IAG (common shares) and IAF (preferred shares).
iA Financial Group is a business name and trademark of iA Financial Corporation Inc. and Industrial Alliance Insurance and Financial Services Inc. |
SOURCE iA Financial Group
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