Industrial Alliance Insurance and Financial Services Inc. Reports Good First Quarter Results - Quarterly dividend to common shareholders increased by 7%

Q1-2016 Highlights

• Reported EPS of $0.96 at mid-point of guidance for Q1 ($0.90-$1.00)
• Fourth consecutive quarter of favourable policyholder experience in insurance businesses (+$0.09 EPS)
• New-business strain ratio of 17% better than Q1 guidance of 20% (+$0.01 EPS)
• Retail insurance operations maintain strong momentum in Canada and the U.S. (+19% sales growth)
• Number one position for net sales of segregated funds in Canada during Q1
• Solvency ratio of 205% reflects higher required capital for Q1 macroeconomics and segregated fund portfolio
• Quarterly dividend increased by $0.02 to $0.32 per common share

QUEBEC CITY, May 5, 2016 /CNW Telbec/ - (TSX: IAG) - Yvon Charest, President and Chief Executive Officer, commented: "Our strong first quarter reflects the continued success of initiatives to grow our business organically as well as through value-building acquisitions, while maintaining a clear focus on delivering profit growth. Building on the excellent momentum of our individual insurance and segregated fund businesses, we continue our action plan to manage strain on new business in retail insurance, solidify the recent progress in our employee plans segment and make meaningful progress toward improving gross and net sales in our mutual funds business, as well as pursuing new opportunities to sustain long-term value creation for our shareholders."

"On top of the normal growth of our business this quarter, we are particularly pleased with the results from our retail insurance operations, employee plans and car dealer services, all of which reported strong policyholder experience," continued René Chabot, Executive Vice-President, CFO and Chief Actuary. "Our strain ratio came in below our guidance for the quarter which also contributed to our solid earnings. iA Auto and Home results reflect normal seasonality as well as our  previously announced investment in a new subsidiary to grow the business. In terms of our balance sheet, our exposure to the oil and gas sector is relatively benign, we can absorb a significant drop in equity markets if need be and we have the flexibility to fund our growth initiatives."

Highlights
		First quarter
(In millions of dollars, unless otherwise indicated)		2016	2015	Variation
Net income attributed to shareholders		102.4	114.4	(10%)
Less: preferred share dividends		4.1	5.5	(25%)
Less: premium on preferred share redemption		—	4.0	—
Net income attributed to common shareholders		98.3	104.9	(6%)
Earnings per common share (diluted)		$0.96	$1.03	($0.07)
Return on common shareholders' equity^1		10.5%	12.1%	(160 bps)
Results adjusted for significant items^2
Net income attributed to common shareholders		98.3	89.8	9%
Earnings per common share (diluted)		$0.96	$0.88	$0.08
Return on common shareholders' equity ^1		10.5%	10.4%	10 bps
^1 Annualized for the quarter.
^2 Non-IFRS, adjusted for tax recovery ($0.19) and premium for redemption of preferred shares ($0.04) in Q1/2015
		March 31, 2016	December 31, 2015	March 31, 2015
Solvency ratio		205%	213%	211%
Book value per share		$36.48	$36.76	$34.94
Assets under management and administration		$117.7B	$115.8B	$114.7B
Net impaired investments as a % of total investments		0.04%	0.05%	0.07%

FIRST QUARTER HIGHLIGHTS

Profitability - For the first quarter ended March 31, 2016, Industrial Alliance Insurance and Financial Services Inc. reports net income attributed to common shareholders of $98.3 million and diluted earnings per common share (EPS) of $0.96 (guidance was $0.90-$1.00 EPS). This compares with net income to common shareholders of $104.9 million and EPS of $1.03 for the same quarter last year. The annualized return on shareholders' equity (ROE) was 10.5% compared with 12.1% a year earlier. It should be noted that first‑quarter profitability in the prior year included significant items that provided a net gain of $0.15 per share. Excluding these items, net income attributed to common shareholders was $89.8 million, diluted EPS was $0.88 and ROE was 10.4% in the first quarter a year ago.

The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.

Expected profit on in-force increased by 5% to $126.1 million pre-tax over the same quarter last year and is attributed mainly to the retail and group insurance sectors. The same sectors also realized favourable policyholder experience of $0.09 per share ($9.2 million), which was more than offset by market-related losses of $0.11 per share ($12.3 million). A detailed analysis of gains and losses follows.

Individual Insurance reported favourable mortality and morbidity experience of $0.02 per share offset by a market loss of $0.04 per share on Universal Life policies, for a net experience loss of $0.02 per share ($2.0 million).

Individual Wealth Management reported a net experience loss of $0.07 per share ($6.6 million) related principally to the dynamic hedging program for the segregated fund guarantee ($0.06 EPS) and lower fees on assets under management ($0.01 EPS).

Group Insurance reported an experience gain of $0.07 per share ($6.7 million) attributed mainly  to favourable long term disability for Employee Plans ($0.04 EPS), as well as lower claims in the Dealer Services division ($0.03 EPS).

Group Savings and Retirement results were in line with expectations for the first quarter.

Strain - In the Individual Insurance sector, strain on new business amounted to $11.3 million pre-tax, or 17% of sales, compared with guidance of 20% for the first quarter (full-year guidance is 15%). Management estimates that the lower strain ratio, which is attributed to a  better than expected sales mix, represented a gain of $0.01 per share.

Income on capital - Total income on capital of $14.8 million pre-tax compares with $13.6 million in the same quarter a year ago. The result for this quarter is in line with normal earnings seasonality for iA Auto and Home, as well as reflecting the latter's investment in a new subsidiary to grow the business.

Income taxes - The effective tax rate was 17% versus guidance of 18-20%.

Business Growth - Assets under management and administration of $117.7 billion grew by 2% in the first quarter (3% year over year), principally due to good inflows from our distribution affiliates. Premiums and deposits of $1.9 billion compared with $2.0 billion a year earlier, reflecting lower gross sales in the individual wealth management sector.

In retail insurance, total sales of $65.4 million (+19%) were driven by growth in Canada (+10%) and the US (+38%). Sales in our adjustable disability business, which continues to expand across Canada, were up by 12%. This is the sixth consecutive quarter of  business growth in the retail insurance sector.

In retail wealth management, momentum in the segregated fund business carried over into the first quarter and the Company recorded its eighth consecutive quarter of net inflows, which moved it into first position for net sales in Canada. Gross sales of segregated funds amounted to $454.1 million (-7%) and net inflows were $142.6 million (-17%). In the mutual fund business, the Company's gross sales amounted to $285.3 million (-35%) while net outflows were $291.2 million for the quarter.

The group insurance sector reported total sales of $174.5 million (+6%). Special Markets Solutions had sales of $50.8 million (+7%). In Dealer Services, sales of P&C products and creditor insurance amounted to $39.5 million (+11%) and $66.2 million (+1%), respectively, for an overall increase of 5%. In the Employee Plans segment, sales reached $18.0 million (+18%).

In Group Savings and Retirement, sales were $333.9 million, 33% higher than the previous year, reflecting growth in capital accumulation products as well as insured annuities.

Capital - At March 31, 2016, the solvency ratio was 205% compared with 213% at the end of the previous quarter. Half of the decrease is related to changes in the macroeconomic environment and the other half to the segregated fund portfolio.

Dividend - The Board of Directors approved a 7% increase in the dividend on the Company's outstanding common shares, bringing it to 32 cents per share. This dividend is payable on June 15, 2016 to shareholders of record at May 20, 2016.

Dividend Reinvestment and Share Purchase - Registered shareholders wishing to enroll in the Company's Dividend Reinvestment and Share Purchase Plan (DRIP) so as to be eligible to reinvest the next dividend payable on June 15, 2016 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on May 13, 2016. Enrollment information is provided on the Company's website at www.ia.ca under About iA, in the Investor Relations/Dividends section. Common shares issued under the Company's DRIP will be purchased on the secondary market and no discount will be applicable.

Market Guidance for 2016

• Earnings per common share: target range of $4.20 to $4.60
• Return on common shareholders' equity (ROE): target range of 11.0% to 12.5%
• Solvency ratio: target range of 175% to 200%
• Dividend payout ratio: payout range of 25% to 35% with the target being the mid-point
• Effective tax rate: target range of 18% to 20%
• Strain on new business: target of 15% (±5%) of sales in Individual Insurance

GENERAL INFORMATION

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 on 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.

Forward-looking Statements
This press 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. 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 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 2015 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 news release reflect the Company's expectations as of the date of this press release. 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 the Company's first quarter results, investors are invited to consult the MD&A for the quarter ended March 31, 2016, related consolidated financial statements and accompanying notes as well as our supplemental information package, all of which are available on the iA Financial Group website at www.ia.ca under About iA, in the Investor Relations/Financial Reports section and on SEDAR at www.sedar.com.

Conference Call
Management will hold a conference call to present the Company's results on Thursday, May 5, 2016, at 11:30 a.m. (ET). The toll‑free dial-in number is 1-800-681-1621. A replay of the conference call will be available for a one‑week period, starting at 2:00 p.m. on May 5, 2016. To access the the conference call replay, dial 1‑800‑558‑5253 (toll-free) and enter access code 21807897. A webcast of the conference call ( listen-only mode) will also be available on the company's website at www.ia.ca.

Annual Meeting
iA Financial Group Alliance is holding its Annual Meeting at 2:00 p.m. (ET) on Thursday, May 5, 2016 at the Quebec City Convention Centre located at 1000 René-Lévesque Boulevard East in Quebec City. Media will have the opportunity to meet with President and Chief Executive Office Yvon Charest immediately after the Annual Meetintg at approximately 3:30 p.m. A webcast and a videoconference of the meeting as well as a copy of the management presentation will be available on the company's website at www.ia.ca under About iA, in the Investor Relations/Events and Presentations section.

Investor Day
iA Financial Group will hold an investor day in Toronto, Ontario on Tuesday, June 14, 2016, from 8:30 a.m. to 1:30 p.m. (ET).  Further information will be provided in the following weeks.

About iA Financial Group
Founded in 1892, iA Financial Group offers life and health insurance products, mutual and segregated funds, savings and retirement plans, RRSPs, securities, auto and home insurance, mortgages and car loans and other financial products and services for both individuals and groups. It is one of the four largest life and health insurance companies in Canada and among the largest publicly-traded companies in the country. iA Financial Group stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.

iA Financial Group is a business name and trademark of Industrial Alliance Insurance and Financial Services Inc.

SOURCE Industrial Alliance Insurance and Financial Services Inc.

Investor Relations, Grace Pollock, Office: 418 780-5945, Email: [email protected]; Media Relations, Pierre Picard, Office: 418 684-5000, ext. 1660, Email: [email protected]