Mr. Denis Ricard reports

IA FINANCIAL GROUP REPORTS SECOND QUARTER RESULTS

For the second quarter ended June 30, 2023, iA Financial Corp. had quarterly net income attributed to common shareholders of $196-million, diluted earnings per common share (EPS) of $1.89 and return on common shareholders equity (ROE) for the trailing 12 months of 9.7 per cent. Core EPS was $2.39, 3 per cent higher than the 2022 second quarter result, and core ROE for the trailing 12 months was 14.5 per cent. On a year-to-date basis, core EPS of $4.47 is 7 per cent higher than the 2022 IFRS 4 (international financial reporting standards) result, and following recent changes in the environment, the company is now of the view that 2023 core EPS growth is less likely to exceed 2022 IFRS 4 core EPS by more than 13 per cent. The solvency ratio of 154 per cent at June 30, 2023, is five percentage points higher than at the end of the previous quarter.

Second quarter highlights -- iA Financial

• Core EPS of $2.39, up 3 per cent compared with Q2 2022 result and trailing 12 months core ROE of 14.5 per cent;
• Reported EPS of $1.89, up 34 per cent compared with Q2 2022 result;
• Business growth momentum with strong sales in almost all business units, including individual insurance in Canada and the United States;
• Solid 12-per-cent YoY (year-over-year) increase in premiums and deposits and 10-per-cent YoY increase in AUM/AUA (assets under management/assets under administration);
• Very robust solvency ratio of 154 per cent, with organic capital generation of $150-million and $1.8-billion of deployable capital at June 30, 2023;
• Book value per common share reaching $65.39 at June 30, 2023, up 4 per cent in the first six months of 2023.

"During the second quarter, our sales, already strong overall since the start of the year, gained further momentum, particularly in all business units of insurance, Canada, in U.S. individual insurance and for individual annuity inflows," commented Denis Ricard, president and chief executive officer of iA Financial Group. "With our robust business model, our proven ability to generate growth and our particularly strong capital position, we continue to invest in our digital transformation and we are looking forward to the future success of our growth strategy. In the short term, while 2023 core EPS growth is likely to be softer than initially targeted, we remain fully committed to creating value for our shareholders and delivering average core EPS growth of 10 per cent plus per annum."

"We conclude the first half of the year with a very high solvency ratio of 154 per cent, reflecting good continuing organic capital generation and sound capital and risk management practices," added Jacques Potvin, executive vice-president, chief financial officer and chief actuary. "Good second quarter profitability is attributable partly to an 11-per-cent increase in expected insurance earnings, together with core insurance experience gains resulting mainly from favourable disability experience. The core net investment result, up 14 per cent year over year, also contributed favourably to the quarterly result. Our solid fundamentals, which underpin the resilience of our diversified business model and our ability to navigate successfully in different environments, will continue to support strong and sustained long-term core earnings growth."

Analysis of earnings

This section contains measures that have no IFRS equivalents. see "non-IFRS financial information" in the management's discussion and analysis as at June 30, 2023, for more information and an explanation of the adjustments applied in the company's core earnings calculation.

Reported and core earnings

Second quarter reported earnings, or net income to common shareholders, increased by 29 per cent year over year to total $196-million, while core earnings amounted to $247-million. Core earnings is a non-IFRS measure that represents management's view of the company's continuing capacity to generate earnings. Core earnings per common share was $2.39 for the second quarter, compared with $2.32 during the same period in 2022 (a restated result under IFRS 9 and IFRS 17). An analysis of these results is presented in the next sections.

Core earnings by business segment

The second quarter core earnings result was $247-million.

Outlook

Medium-term guidance and update on 2023 core EPS growth outlook

The transition to the new IFRS 17 and IFRS 9 accounting standards, which came into effect on Jan. 1, 2023, was favourable for the company on most metrics, including core EPS. In particular, profit recognition for long-term business and acquisition expenses for segregated funds under the new accounting standards, as well as the higher return expected from the total portfolio management approach adopted by the company, support a higher level of core EPS. Added to this was the impact on core profitability of the favourable interest rate environment at the end of 2022. As a result, the company expected its 2023 core EPS to grow by 10 per cent, plus an additional one-time mid-single-digit growth (in example, for a total of 13 per cent to 18 per cent) over 2022 IFRS 4 core EPS, subject to certain factors, notably the macroeconomic environment.

Since the beginning of 2023, the company has observed a number of changes in some of these factors, including slower recovery in U.S. dealer services profitability, unfavourable mortality experience in Canada, higher P&C (property and casualty) claims due to inflation and weather events, and unfavourable macroeconomic variations such as the recent worsening of the yield curve inversion. Given these developments, unless positive changes occur during the second half of the year, the company now considers it less likely to grow 2023 core EPS by more than 13 per cent over 2022 IFRS 4 core EPS.

As the company's fundamentals, business model and strategy remain intact and robust, all medium-term market guidance is maintained, including the expected average core EPS annual growth of 10 per cent plus and the organic capital generation target of over $600-million for 2023.

Medium-term guidance for iA Financial, as disclosed on March 28, 2023

• Core earnings per common share: target of 10-per-cent-plus annual average growth;
• Core return on common shareholders equity (ROE): target of 15 per cent plus;
• Solvency ratio operating target: target of 120 per cent;
• Organic capital generation: target of $600-million in 2023;
• Dividend payout ratio based on core earnings: target range of 25 per cent to 35 per cent.

Conference call

Management will hold a conference call to present iA Financial Group's second quarter results on Friday, Aug. 4, 2023, at 8 a.m. ET. The dial-in number is 416-981-9030 or 1-800-908-8370 (toll-free within North America). A replay of the conference call will be available for a one-week period, starting at 10:30 a.m. on Friday, Aug. 4, 2023. To access the conference call replay, dial 1-800-558-5253 (toll-free) and enter access code 22027246. A webcast of the conference call (listen-only mode) will also be available on the iA Financial Group website.

About iA Financial Corp. Ltd.

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).

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