iA Financial Group Results Exceed Targets in the Third Quarter

Strong EPS growth for a second consecutive quarter

THIRD QUARTER HIGHLIGHTS – iA Financial Corporation

• Reported EPS of $1.72 (+15% YoY) and ROE of 12.7% (trailing twelve months)
• Core EPS¹ of $1.77, above guidance of $1.55 to $1.65
• 14% increase in expected profit on in-force
• Premiums and deposits of $2.7B (+15% YoY)
• Solvency ratio of 134% at September 30, 2019 (119% at September 30, 2018) and $400M debenture issuance
• Announcement of Normal Course Issuer Bid renewal

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") as a result of a plan of arrangement. The results for iA Insurance are presented in a separate section on page 4 of this document.

This news release presents non-IFRS measures. See "Non-IFRS Financial Information" at the end of this document for further information.

QUEBEC CITY, Nov. 6, 2019 /CNW Telbec/ - For the third quarter ended September 30, 2019, iA Financial Corporation (TSX: IAG) reports net income attributed to common shareholders of $183.7 million, diluted earnings per common share (EPS) of $1.72 and return on shareholders' equity (ROE)¹ for the last twelve months of 12.7%. Core EPS of $1.77 is above guidance of $1.55 to $1.65 per share for the quarter.

"Our positive third quarter and year-to-date results demonstrate our sustainable ability to create value," commented Denis Ricard, President and CEO of iA Financial Group. "For the second straight quarter, earnings per share grew 15% or more over twelve months and return on equity was above our target range. That means our strategy has been effective at helping us achieve and even exceed our growth targets."

"Business growth was also good," Mr. Ricard continued, "particularly in the U.S. market, which continues to show strong growth potential and where we're looking to expand our operations. In Canada, we're still ranked number one in net segregated fund sales. We also posted good sales results in a number of business lines, which contributed to our 15% increase in premiums and deposits compared to third quarter last year."

"Growth in expected profit on in-force remains strong at 14%," added Jacques Potvin, Executive Vice‑President, CFO and Chief Actuary. "We also beat earnings guidance thanks to a number of favourable items, including experience for Individual Insurance, Group Savings and Retirement and iA Auto and Home, as well as positive market impact. Our capital deployment capacity has improved, which gives us more flexibility to execute our growth strategy."

Earnings Highlights	Third quarter				Year-to-date at September 30
	2019	2018	Variation		2019	2018	Variation
Net income attributed to shareholders (in millions)	$189.1	$170.5	11%		$533.0	$478.7	11%
Less: dividends on preferred shares issued by a subsidiary (in millions)	$5.4	$5.6	(4%)		$16.8	$15.5	8%
Net income attributed to common shareholders (in millions)	$183.7	$164.9	11%		$516.2	$463.2	11%
Weighted average number of common shares (in millions)	106.9	110.2	(3%)		107.3	109.2	(2%)
Earnings per common share (diluted)	$1.72	$1.50	15%		$4.81	$4.23	14%
Core earnings per common share (diluted)^1	$1.77	$1.46	21%		$4.66	$4.16	12%
Other Financial Highlights	September 30, 2019		June 30, 2019		December 31, 2018		September 30, 2018
Return on common shareholders' equity^1	12.7%		12.6%		12.5%		12.3%
Core return on common shareholders' equity^1	12.4%		12.1%		12.4%		12.2%
Solvency ratio	134%		127%		126%		119%
Book value per share	$50.79		$49.70		$47.40		$46.65
Assets under management and administration	$187.1B		$184.2B^2		$168.8B		$177.0B

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^1	ROE, core ROE and core EPS are non-IFRS measures. See "Reported EPS and Core EPS Reconciliation" in this document.
^2	In Q3-2019, an adjustment was made to the June 30, 2019 figure for assets under administration.

The results of iA Financial Corporation for the third quarter of 2019 are presented on a consolidated basis with those of its subsidiaries, including iA Insurance. As a result of a plan of arrangement, iA Financial Corporation became the successor issuer and the financial results of iA Insurance for the year ended December 31, 2018 constitute the financial results of iA Financial Corporation. The comparative data for 2018 presented herein is therefore the same as the data for iA Insurance.

Profitability - For the third quarter ended September 30, 2019, iA Financial Corporation reports diluted earnings per share (EPS) of $1.72, an increase of 15% from $1.50 in the same quarter of 2018. Core EPS was $1.77 and was above guidance of $1.55 to $1.65.

The following table reconciles reported and core EPS for the third quarter. Adjustments applied in the Company's core EPS calculation are explained in the section titled "Non-IFRS Financial Information."

Reported EPS and Core EPS Reconciliation
(On a diluted basis)	Third quarter			Year-to-date at September 30
	2019	2018	Variation	2019	2018	Variation
Reported EPS	$1.72	$1.50	15%	$4.81	$4.23	14%
Adjusted for:
Specific items:
Unusual income tax gains and losses	—	—		($0.04)	$0.07
PPI purchase price and goodwill adjustments	$0.08	—		$0.08	—
Market-related gains and losses	($0.05)	($0.04)		($0.23)	($0.05)
Policyholder experience gains and losses in excess of $0.04 EPS	$0.03	—		$0.03	($0.09)
iA Auto and Home experience gains and losses in excess of $0.04 EPS	($0.01)	—		($0.01)	—
Usual income tax gains and losses in excess of $0.04 EPS	—	—		$0.02	—
Core EPS	$1.77	$1.46	21%	$4.66	$4.16	12%

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 September 30, 2019. All figures are after tax unless otherwise indicated. This information contains non-IFRS measures.

Expected profit on in-force increased 14% year over year to $206.9 million, reflecting growth in all lines of business. In particular, US Operations and Group Insurance were up 35% and 24% respectively.

For the third quarter of 2019, the Company reports a total net market-related and policyholder experience gain of $0.03 EPS ($3.6 million) versus management expectations. Details follow by line of business.

Individual Insurance reported an experience gain of $0.05 EPS ($5.8 million), resulting from favourable policyholder (lapse) experience (+$0.03 EPS), favourable morbidity (+$0.02 EPS), positive market impact on universal life insurance policies (+ $0.01 EPS) and various other positive items (+$0.01 EPS). Commission income from the PPI subsidiary was lower than expected (‑$0.02 EPS), with a similar impact anticipated for the fourth quarter.

Individual Wealth Management reported favourable experience for the quarter (gain of $4.5 million or +$0.04 EPS), due to the positive market impact on the segregated fund hedging program.

Group Insurance recorded a loss of $0.07 EPS for the quarter (‑$7.2 million). Experience in Employee Plans was unfavourable for long‑term disability insurance (‑$0.03 EPS) as well as other coverages (‑$0.01 EPS). In Dealer Services (including car loans), experience was below expectations, mainly for creditor insurance (‑$0.02 EPS). Lastly, in Special Markets Solutions, experience was slightly unfavourable, primarily for travel insurance (‑$0.01 EPS).

Group Savings and Retirement reported a gain of $0.03 EPS ($3.2 million), mainly due to favourable longevity experience.

US Operations reported an experience loss of $0.02 EPS (‑$2.7 million), due to unfavourable experience in the Individual Insurance division (‑$0.01 EPS) and higher expenses in the Dealer Services division (‑$0.01 EPS).

Strain in the Individual Insurance and US Operations sectors - Strain on new business amounted to $1.7 million pre-tax, or 2% of sales for the quarter, representing a gain of $0.01 EPS mainly due to a favourable sales mix.

PPI Management Inc. (PPI) purchase price and goodwill adjustments - The Company concluded the final settlement of the PPI acquisition price. The contingent consideration was settled for less than initially planned. At the same time, the financial projections of the subsidiary were reviewed, which led to a goodwill impairment. This resulted in a negative net impact on third quarter results of $8.5 million on a non-taxable basis (‑$0.08 EPS).

Income on Capital - Income on capital reached $40.1 million pre-tax, representing a gain of $0.07 EPS. Financing expenses were lower than expected due to the debenture redemption in May (+ $0.02 EPS), and experience at iAAH was very favourable (+ $0.05 EPS).

Income Taxes - The effective tax rate for the quarter of 21.6% is within guidance of 20% to 22%. As announced in the second quarter, the implementation of a new investment strategy led to a recurring reduction in the tax advantage generated by the decrease in dividend income from Canadian companies (‑$0.01 EPS). At the same time, tax optimization efforts led to a favourable adjustment in the income tax calculation related to the Company's status as a multinational insurer (+$0.02 EPS).

Business Growth - Premiums and deposits of over $2.7 billion were up from the same quarter last year (+15%), reflecting strong growth in the Individual Wealth Management and Group Savings and Retirement business lines, among others. Assets under management and administration of $187.1 billion were up 2% quarter over quarter and 6% year over year owing to market growth and the influx of new assets.

The retail insurance sector in Canada reported total sales of $47.0 million. Total premium sales were down year over year (-5%), while minimum premium sales were up (+5%).

In retail wealth management, guaranteed product sales of $162.0 million were up significantly from the previous year. Gross sales of segregated funds amounted to $576.4 million (+24%), and net sales were $167.8 million compared to $63.1 million a year earlier. Gross sales of mutual funds totalled $465.2 million (+5%) with net outflows of $127.9 million.

The group insurance sector is made up of three divisions. In the Employee Plans division, sales totalled $12.9 million, up 37% from the same quarter last year. In the Dealer Services division, sales totalled $299.7 million (+13%). By product, P&C sales were $70.6 million (+7%), creditor insurance sales were $97.6 million (-10%) and non-prime car loan originations totalled $131.5 million (+45%). Lastly, sales in the Special Markets Solutions division amounted to $62.9 million (+9%).

The group savings and retirement sector reported total sales of $446.5 million versus $323.3 million a year earlier, an increase of 38%.

In the U.S., the momentum continued with individual insurance sales growing 23% to US $25.9 million and dealer services sales growing 12% to US $117.5 million.

At iA Auto and Home, written premiums in the third quarter were up 10% year over year at $96.2 million.

Debenture issuance - On September 19, 2019, the Company announced an offering of 3.072% fixed/floating subordinated debentures due September 24, 2031, with a nominal value of $400 million.

Financial position - At September 30, 2019, the solvency ratio was 134%, compared with 127% at June 30, 2019 and 119% a year earlier. This is above the Company's target range of 110% to 116%. The change during the third quarter is the net result of the debenture issuance (+6 percentage points) and organic capital generation (+1 percentage point). The debt ratio at September 30, 2019 was 22.4%.

Book value - The book value per common share was $50.79 at September 30, 2019, up 2% from the last quarter and 9% over twelve months.

Normal Course Issuer Bid - Under the program in effect from November 12, 2018 to November 11, 2019, the Company redeemed 0.3 million shares in the third quarter for a total value of $15.2 million. Between November 12, 2018 and September 30, 2019, iA Financial Group redeemed 3.9 million shares, representing 3.6% of its shares at November 1, 2018. In addition, with the approval of the Toronto Stock Exchange and the Autorité des marchés financiers, the Company plans to redeem, under a Normal Course Issuer Bid between November 12, 2019 and November 11, 2020, up to 5,335,397 common shares, representing approximately 5% of its 106,707,949 common shares issued and outstanding at November 1, 2019. The redemption purchases will be made at market price at the time of purchase through the facilities of the Toronto Stock Exchange or an alternative Canadian trading system, in accordance with market rules and policies. The common shares redeemed will be cancelled.

Annual actuarial assumption review - The annual review of actuarial assumptions has begun and will be finalized in the coming weeks. The final results will be reported on February 13, 2020, with the fourth quarter 2019 results disclosure. The Company believes that the total impact of this review on the fourth quarter 2019 results will be immaterial.

Dividend - The Board of Directors approved a quarterly dividend of 45 cents per share on the outstanding common shares of iA Financial Corporation. This dividend is payable on December 16, 2019 to shareholders of record at November 22, 2019.

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 December 16, 2019 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on November 15, 2019. Enrolment information is provided on iA Financial Group's website at ia.ca under About iA, in the Investor Relations/Dividends section. Common shares issued under iA Financial Corporation's DRIP will be purchased on the secondary market and no discount will be applicable.

Market Guidance for 2019 for iA Financial Corporation

• Earnings per common share: target range of $5.75 to $6.15
• Return on common shareholders' equity (ROE): target range of 11.0% to 12.5%
• Solvency ratio: target range of 110% to 116%
• Dividend payout ratio: range of 25% to 35% with the target being the midpoint
• Effective tax rate: target range of 20% to 22%
• Strain on new business: annual target of 6% of sales with quarterly range of 0% to 15%

Guidance for EPS and ROE excludes any potential impact of the year-end assumption review.

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THIRD QUARTER HIGHLIGHTS – iA Insurance

Profitability – In the third quarter of 2019, iA Insurance recorded net income attributed to its sole common shareholder, iA Financial Corporation, of $183.4 million, an increase of $18.5 million over $164.9 million a year earlier. This growth is mainly explained by increased revenues, essentially in net premiums and investment income.

Financial position – The solvency ratio was 126% at September 30, 2019, compared with 125% at the end of the previous quarter and 119% a year earlier. This is above the minimum required by regulatory authorities as well as iA Insurance's target range of 112% to 116%.

Dividend – iA Insurance paid a dividend of $0.7460 per common share in the third quarter to its sole common shareholder, iA Financial Corporation, for a total of $81 million. The Board of Directors of iA Insurance also approved a dividend of $300 million to its sole common shareholder, iA Financial Corporation.

iA Insurance
Earnings Highlights	Third quarter			Year-to-date at September 30
(In millions of dollars)	2019	2018	Variation	2019	2018	Variation
Net income attributed to shareholders	188.8	170.5	18.3	532.7	478.7	54.0
Less: dividends on preferred shares	5.4	5.6	(0.2)	16.8	15.5	1.3
Net income attributed to common shareholders	183.4	164.9	18.5	515.9	463.2	52.7

Other Financial Highlights	September 30, 2019	June 30, 2019	December 31, 2018	September 30, 2018
Total capital (in millions of dollars)	6,510.6	6,418.5	6,619.5	6,586.4
Solvency ratio	126%	125%	126%	119%

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GENERAL INFORMATION

Non-IFRS Financial Information
iA Financial Corporation and iA Insurance (collectively "iA Financial Group") report their financial results and statements in accordance with International Financial Reporting Standards (IFRS). iA Financial Group also publishes certain financial measures 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 used for the companies' audited financial statements. These non‑IFRS financial measures are often accompanied by and reconciled with IFRS financial measures. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. iA Financial Group believes that these non-IFRS financial measures provide additional information to better understand iA Financial Group's financial results and assess its growth and earnings potential, and that they facilitate comparison of the quarterly and full-year results of iA Financial Group's ongoing operations. Since non‑IFRS financial 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. iA Financial Group 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.

Non-IFRS financial measures published by iA Financial Corporation include, but are not limited to: return on common shareholders' equity (ROE), core earnings per common share (core EPS), core return on common shareholders' equity (core ROE), sales, net sales, assets under management (AUM), assets under administration (AUA), premium equivalents, deposits, sources of earnings measures (expected profit on in-force, experience gains and losses, strain on sales, changes in assumptions, management actions and income on capital), capital, solvency ratio, interest rate and equity market sensitivities, loan originations, finance receivables and average credit loss rate on car loans.

The analysis of profitability according to the sources of earnings presents sources of income in compliance with the guideline issued by the Office of the Superintendent of Financial Institutions and developed in co-operation with the Canadian Institute of Actuaries. This analysis is intended to be a supplement to the disclosure required by IFRS and to facilitate the understanding of iA Financial Corporation's financial position by both existing and prospective stakeholders to better form a view as to the quality, potential volatility and sustainability of earnings. It provides an analysis of the difference between actual income and the income that would have been reported had all assumptions at the start of the reporting period materialized during the reporting period. It sets out the following measures: expected profit on in-force business (representing 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); experience gains and losses (representing gains and losses that are due to differences between the actual experience during the reporting period and the best‑estimate assumptions at the start of the reporting period); new business strain (representing the point-of-sale impact on net income of writing new business during the period); changes in assumptions, management actions and income on capital (representing the net income earned on iA Financial Corporation's surplus funds).

Core earnings per common share is a non-IFRS measure used to better understand the capacity of iA Financial Corporation to generate sustainable earnings.

Management's estimate of iA Financial Corporation's core earnings per common share excludes: 1) specific items, including but not limited to year‑end assumption changes and unusual income tax gains and losses; 2) market gains and losses related to universal life policies, investment funds (MERs) and the dynamic hedging program for segregated fund guarantees; 3) gains and losses in excess of $0.04 per share, on a quarterly basis, for strain on Individual Insurance sales, for policyholder experience by business segment (Individual Insurance, Individual Wealth Management, Group Insurance, Group Savings and Retirement, US Operations and iA Auto and Home Insurance), for usual income tax gains and losses and for investment income on capital.

Non-IFRS financial measures published by iA Insurance include, but are not limited to: return on common shareholders' equity (ROE), sales, assets under management (AUM), assets under administration (AUA), capital and solvency ratio.

Sales is a non-IFRS measure used to assess iA Financial Group's ability to generate new business. They are defined as fund entries on new business written during the period. Net premiums, which are part of the revenues presented in the financial statements, include both fund entries from new business written and in-force contracts. Assets under management and administration is a non-IFRS measure used to assess iA Financial Group's ability to generate fees, particularly for investment funds and funds under administration. An analysis of revenues by sector is presented in the Analysis According to the Financial Statements section of the Management's Discussion and Analysis.

Forward-looking Statements
This news release 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", "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. In this news release, forward-looking statements include, but are not limited to, information concerning possible or assumed future operating results. These statements are not historical facts; they represent only 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 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 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 for the year 2018, the "Management of Risks Associated with Financial Instruments" note to the audited consolidated financial statements for the year ended December 31, 2018, and elsewhere in iA Financial Group's filings with the Canadian Securities Administrators, which are available for review at sedar.com.

The forward-looking statements in this news release reflect iA Financial Group'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.

Documents Related to the Financial Results
For a detailed discussion of iA Financial Corporation's and iA Insurance's third quarter results, investors are invited to consult the Management's Discussion and Analysis for the quarter ended September 30, 2019, 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.

Conference Call
Management will hold a conference call to present iA Financial Group's third quarter results on Wednesday, November 6, 2019 at 2:00 p.m. (ET). The toll-free dial-in number is 1-800-908-8951. A replay of the conference call will be available for a one-week period, starting at 4:30 p.m. on Wednesday, November 6, 2019. To access the conference call replay, dial 1‑800‑558‑5253 (toll‑free) and enter access code 21930061. A webcast of the conference call (listen-only mode) will also be available on the iA Financial Group website at ia.ca.

About iA Financial Group
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 one of Canada's largest public companies 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 Industrial Alliance Insurance and Financial Services Inc.

Investor Relations: Marie-Annick Bonneau, Office: 418-684-5000, ext. 104287, Email: [email protected]; Media Relations: Pierre Picard, Office: 418-684-5000, ext. 101660, Email: [email protected]

Related Links

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