iA Financial Group Reports Third Quarter Results and Announces a 10% Increase in Its Common Dividend
Sustained profitable growth driven by continued strong sales momentum
This news release presents certain non-IFRS and additional financial measures used by the Company when evaluating its results and measuring its performance. For relevant information about non-IFRS measures used in this document, see the "Non-IFRS and Additional Financial Measures" section in this document and in the Management's Discussion and Analysis for the period ended September 30, 2024, which is hereby incorporated by reference, and is available for review at sedarplus.ca or on iA Financial Group's website at ia.ca. The results presented below are for iA Financial Corporation Inc. ("iA Financial Corporation" or the "Company").
THIRD QUARTER HIGHLIGHTS, iA Financial Corporation
Solid profitability: EPS of $2.99, trailing 12-month ROE1 of 14.5% and annualized ROE of 16.9%
Achievement of mid-term targets: core EPS†† of $2.93 (+17% YoY), trailing 12-month core ROE†† of 15.3% and annualized core ROE†† of 16.6%
Strong sales2 momentum leading to over $4.9 billion in premiums and deposits2,3 and nearly $250 billion in assets (total AUM2 and AUA2)
Robust solvency ratio4 of 140% and capital available for deployment2 of $1 billion, expected to increase by $700 million on January 1, 20255
Book value per common share6 reaching $71.63 at September 30, 2024, up 10% over 12 months
Dividend to common shareholders increased by 10% and renewal of NCIB program to buy back up to 5% of outstanding shares
QUEBEC CITY, Nov. 5, 2024 /CNW/ - For the third quarter ended September 30, 2024, iA Financial Corporation (TSX:IAG) recorded core diluted earnings per common share (EPS)†† of $2.93, which is 17% higher than the same period in 2023. Core return on common shareholders' equity (ROE)†† for the trailing twelve months was 15.3%, meeting the Company's medium-term target of 15%+. Third quarter net income attributed to common shareholders was $283 million, diluted EPS was $2.99 and ROE for the trailing twelve months was 14.5%. The solvency ratio of 140% at September 30, 2024 is well above the Company's operating target of 120%.
"We achieved solid third quarter results, with very strong EPS growth and ROE expansion. Disciplined execution of our growth-driven strategy resulted in a 25% year-over-year increase in premiums and deposits3 in the third quarter, driven by robust sales and the acquisitions of Vericity and the Prosperity blocks of business. Sales were particularly strong for segregated funds and individual insurance in Canada and the U.S., " commented Denis Ricard, President and CEO of iA Financial Group. "With our high level of capital available for deployment, which is expected to increase further, we will continue to invest in our growth, both organically and through acquisitions. Through our sustained growth, we will continue our track record of creating and returning value to our shareholders."
"Third quarter results testify to our ability to generate growth through quality earnings. The strong year-over-year EPS growth is mainly due to higher expected insurance earnings, resulting from solid growth in premiums and deposits3, as well as in assets, including those from recent acquisitions," added Éric Jobin, Executive Vice‑President, CFO and Chief Actuary. "This good profitability led to strong organic capital generation2 of $180 million for the quarter, which positions us well to achieve our 600 million+ target for 2024. With our solid capital position, we are pleased to announce today a 10% increase in our dividend to common shareholders and the renewal of our share buyback program for the coming year."
Earnings Highlights
Third quarter
Year-to-date at September 30
2024
2023
Variation
2024
2023
Variation
Net income attributed to shareholders (in millions)
$288
$56
414 %
$736
$533
38 %
Less: dividends on preferred shares issued by a subsidiary (in millions)
($5)
($1)
($14)
($12)
Net income attributed to common shareholders (in millions)
$283
$55
415 %
$722
$521
39 %
Weighted average number of common shares (in millions, diluted)
94.6
102.6
(8 %)
97.1
103.6
(6 %)
Earnings per common share (diluted)
$2.99
$0.54
454 %
$7.44
$5.04
48 %
Core earnings†
277
256
8 %
787
720
9 %
Core earnings per common share (diluted)††
$2.93
$2.50
17 %
$8.12
$6.97
16 %
Other Financial Highlights
September 30, 2024
June 30, 2024
December 31, 2023
September 30, 2023
Return on common shareholders' equity (trailing twelve months)
14.5 %
11.1 %
11.6 %
10.6 %
Core return on common shareholders' equity†† (trailing twelve months)
15.3 %
15.0 %
14.4 %
14.8 %
Solvency ratio
140 %
141 %
145 %
145 %
Book value per share
$71.63
$69.92
$66.90
$65.25
Assets under management and assets under administration (in billions)
$249.7
$235.4
$218.9
$205.0
________________________________________
1
Consolidated net income attributed to common shareholders divided by the average common shareholders' equity for the period.
2
Sales, net premiums, premium equivalents and deposits, AUM, AUA, capital available for deployment and organic capital generation represent supplementary financial measures. Refer to the "Non-IFRS and Additional Financial Measures" section in this document and in the Q3/2024 Management's Discussion and Analysis for more information.
3
Net premiums, premium equivalents and deposits
4
The solvency ratio is calculated in accordance with the Capital Adequacy Requirements Guideline, Life and Health Insurance (CARLI) mandated by the Autorité des marchés financiers du Québec (AMF). This financial measure is exempt from certain requirements of Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure according to AMF Blanket Order No. 2021-PDG-0065.
5
According to the proposed revised Capital Adequacy Requirements Guideline, Life and Health Insurance published by the Autorité des marches financiers du Québec, the Company's capital available for deployment is expected to increase by $700 million on January 1, 2025.
6
Book value per common share is calculated by dividing the common shareholders' equity by the number of common shares outstanding at the end of the period.
†
This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document and in the Q3/2024 Management's Discussion and Analysis.
††
This item is a non-IFRS ratio; see the "Non-IFRS and Additional Financial Measures" section in this document and in the Q3/2024 Management's Discussion and Analysis.
Unless otherwise indicated, the results presented in this document are in Canadian dollars and are compared with those from the corresponding period last year.
ANALYSIS OF EARNINGS BY BUSINESS SEGMENT
Core earnings†
Year-to-date at September 30
Q3/2024
Quarter-over-quarter
Year-over-year
Year-over-year
(In millions of dollars, unless otherwise indicated)
Q2/2024
Variation
Q3/2023
Variation
2024
2023
Variation
Insurance, Canada
106
106
—
91
16 %
304
256
19 %
Wealth Management
106
98
8 %
82
29 %
299
223
34 %
US Operations
31
22
41 %
32
(3 %)
72
75
(4 %)
Investment
80
91
(12 %)
93
(14 %)
257
307
(16 %)
Corporate
(46)
(50)
(8 %)
(42)
10 %
(145)
(141)
3 %
Total
277
267
4 %
256
8 %
787
720
9 %
Net income attributed to common shareholders
Insurance, Canada
95
97
(2 %)
79
20 %
275
231
19 %
Wealth Management
99
91
9 %
73
36 %
278
203
37 %
US Operations
21
8
163 %
24
(13 %)
41
54
(24 %)
Investment
114
63
81 %
(76)
not meaningful
277
177
56 %
Corporate
(46)
(53)
(13 %)
(45)
2 %
(149)
(144)
3 %
Total
283
206
37 %
55
415 %
722
521
39 %
Insurance, Canada
Net income attributed to common shareholders for the Insurance, Canada segment was $95 million compared to $79 million for the same period in 2023. Net income attributed to common shareholders is comprised of core earnings† as well as core earnings adjustments.
Core earnings adjustments to net income totalled $11 million, mostly from acquisition-related items.
Core earnings† for this business segment were $106 million, higher than $91 million for the same period in 2023.The 16% increase in core earnings† over the same period in 2023 is the net result of various items. In particular, expected insurance earnings7 were higher than a year ago, an increase driven by the favourable impact of price increases in various business units in the last 12 months. Other positive items included the lower impact of new insurance business7 from Employee Plans compared to a year ago, the favourable impact of higher distribution results on core non-insurance activities7 and lower core other expenses.7 As for core insurance experience,7 losses of $6 million were recorded during the quarter. At iA Auto and Home, claims associated with the heavy rainfall event that occurred in August in Quebec were partly offset by lower auto thefts and otherwise favourable summer weather. In other business units, favourable morbidity and mortality experience was offset by miscellaneous unfavourable items, including higher claims in Dealer Services.
Wealth Management
Net income attributed to common shareholders for the Wealth Management segment was $99 million compared to $73 million for the same period in 2023. Net income attributed to common shareholders is comprised of core earnings† as well as core earnings adjustments.
Core earnings adjustments to net income totalled $7 million, mostly from acquisition-related items.
Core earnings† for this business segment were $106 million for the third quarter compared with $82 million a year ago.The 29% increase in core earnings† over the same period in 2023 is mainly the result of good financial market performance, as well as an increase in the expected insurance earnings for segregated funds from strong net sales over the last 12 months and the increase in CSM recognized for services provided.8 Mortality experience was also favourable, leading to an insurance experience gain. Finally, core non-insurance activities were up, reflecting a solid performance once again from the distribution affiliates, arising mainly from higher net commissions and better margins.
________________________________________
7
This item is a component of the drivers of earnings (DOE). For more information, refer to the "Non-IFRS and Additional Financial Measures" section of this document and of the Q3/2024 Management's Discussion and Analysis. For a reconciliation of core earnings† to net income attributed to common shareholders through the drivers of earnings (DOE), refer to the "Reconciliation of Select Non-IFRS Financial Measures" section of this document.
8
This item is a component of the CSM movement analysis. Refer to the "Non-IFRS and Additional Financial Measures" section of this document and to the "CSM Movement Analysis" section of the Q3/2024 Management's Discussion and Analysis for more information on the CSM movement analysis.
†
This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document and in the Q3/2024 Management's Discussion and Analysis.
US Operations
Net income attributed to common shareholders for the US Operations segment was $21 million compared to $24 million for the same period in 2023. Net income attributed to common shareholders is comprised of core earnings† as well as core earnings adjustments.
Core earnings adjustments to net income totalled $10 million, mostly from acquisition-related items.
Core earnings† for this business segment were $31 million, which compares to $32 million for the same period in 2023.The $1 million year-over-year decrease is the net result of various items. In particular, the recent acquisitions of Vericity and the Prosperity blocks of business led to an increase in expected insurance earnings. Core insurance experience was also positive, mainly from favourable mortality experience. However, in core non-insurance activities, the unfavourable impact of lower sales in 2023 and the less favourable business mix arising from the current competitive environment was only partly offset by good sales growth in 2024. Finally, core other expenses increased following the addition of Vericity expenses, while non-recurring expenses were partially mitigated by cost-saving initiatives in Dealer Services.
Investments
Net income attributed to common shareholders for the Investments segment was $114 million compared to a net loss of $76 million for the same period in 2023. Net income attributed to common shareholders is comprised of core earnings† as well as core earnings adjustments.
Core earnings adjustments to net income of $34 million for this business segment are market-related, as the impact of favourable equity, interest rate and credit spread variations were partly offset by investment property value adjustments and the unfavourable impact of the tax-exempt investment income from the Company's multinational insurer status (CIF).9
Core earnings† for this business segment were $80 million compared to $93 million a year ago and to $91 million the previous quarter. The third quarter core earnings† were supported by the good performance of our high-quality investment portfolio, bolstered by the favourable impact of interest rate variations. However, taxes were higher and the result from iA Auto Finance was lower due to credit losses and an increased allowance for credit losses.10
Corporate
The net loss attributed to common shareholders for the Corporate segment was $46 million compared to $45 million for the same period in 2023. The net loss attributed to common shareholders is comprised of core losses† as well as core earnings adjustments.
Core losses adjustments to net loss for this business segment from acquisition-related items totalled $1 million pre-tax, which is less than $500,000 after tax.
This segment recorded core losses† from after-tax expenses of $46 million, which compares with $42 million in the third quarter of 2023. This quarter's result is derived from core other expenses of $60 million before taxes, which is in line with the 2024 quarterly expectation of $65 million plus or minus $5 million. The favourable outcome for corporate expenses is the result of ongoing strong emphasis on operational efficiency, cost-conscious execution and a disciplined approach to project and workforce management.
RECONCILIATION OF NET INCOME ATTRIBUTED TO COMMON SHAREHOLDERS AND CORE EARNINGS†
The following table presents net income attributed to common shareholders and the adjustments that account for the difference between net income attributed to common shareholders and core earnings.†
Core earnings† of $277 million in the third quarter are derived from net income attributed to common shareholders of $283 million and a total adjustment of $6 million from:
the favourable market-related impacts that differ from management's expectations, totalling $34 million, as the impact of favourable equity, interest rate and credit spread variations was partly offset by investment property value adjustments and the unfavourable impact from the CIF;
a total of $6 million related to the Prosperity and Vericity acquisitions ($3 million), the charge for the Surex minority shareholders' sell option ($2 million) and small restructuring charges ($1 million);
the expenses associated with acquisition-related intangible assets of $19 million; and
the impact of non-core pension expenses11 of $3 million.
________________________________________
9
Impact of the tax-exempt investment income (above or below expected long-term tax impacts) from the Company's multinational insurer status.
10
Total allowance for credit losses (ACL) as a percentage of gross loans is defined as the ratio of ACL expressed as a percentage of gross loans. Provides a measure of the expected credit experience of the loan portfolio.
11
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.
†
This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document and in the Q3/2024 Management's Discussion and Analysis.
Net Income Attributed to Common Shareholders and Core Earnings† Reconciliation, Consolidated
(In millions of dollars, unless otherwise indicated)
Third quarter
Year-to-date at September 30
2024
2023
Variation
2024
2023
Variation
Net income attributed to common shareholders
283
55
415 %
722
521
39 %
Core earnings adjustments (post tax)
Market-related impacts
(34)
169
(16)
171
Interest rates and credit spreads
(26)
14
(14)
