MD&A (q3 2024 ia financial corporation mda)

iA Financial Corporation Inc.

Management's Discussion and Analysis for the Third Quarter of 2024

November 5, 2024

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis for iA Financial Corporation Inc. ("iA Financial Corporation" or the "Company") is dated November 5, 2024. This Management's Discussion and Analysis should be read in conjunction with the unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023. It should also be read with the Management's Discussion and Analysis and the audited consolidated financial statements for the year ended December 31, 2023. The Supplemental Information Package for the last nine quarters may contain additional data that complements the information in this Management's Discussion and Analysis.

The Company's business units are grouped into reportable operating segments based on their similar economic characteristics.

The Company's operating segments, which reflect its organizational structure for decision making, are described below according to their main products and services or their specific characteristics:

Insurance, Canada - Life and health insurance products, auto and home insurance products, creditor insurance, replacement insurance and warranties, extended warranties and other ancillary products for dealer services, and specialized products for special markets.

Wealth Management - Products and services for savings plans, retirement funds and segregated funds, in addition to securities brokerage (including cross-border services), trust operations and mutual funds.

US Operations - Life insurance products and extended warranties relating to dealer services sold in the United States.

Investment - Investment and financing activities of the Company, except the investment activities of wealth distribution affiliates.

Corporate - All expenses that are not allocated to other operating segments, such as expenses for certain corporate functions.

Information concerning these segments is included in our annual and interim consolidated financial statements and accompanying notes and this 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.

The Company recorded core earnings† of $277 million in the third quarter of 2024 and core diluted earnings per common share (core EPS)†† of $2.93, which is 17% higher than the same period in 2023. Core retuon common shareholders' equity (ROE)†† for the trailing twelve months was 15.3% at September 30, 2024, exceeding the Company's 15%+ medium-term target threshold. Annualized core ROE†† was 16.6% for the quarter.

Net income attributed to common shareholders was $283 million and diluted earnings per common share (EPS) was $2.99, which is much higher than the third quarter of 2023. Retuon common shareholders' equity (ROE) for the trailing twelve months was 14.5% at September 30, 2024. Annualized ROE was 16.9% for the quarter.

An analysis of earnings by business segment for the quarter and the year to date is provided in the "Analysis of Earnings by Business Segment" section of this document. Also, refer to the "Reconciliation of Select Non-IFRS Financial Measures" section of this document for reconciliations between core earnings† and net income (loss) attributed to common shareholders.

Business growth - Sales2 momentum continued to be strong in both Canada and the U.S. during the third quarter, with almost every business unit recording good sales growth compared to the same period last year. In Insurance, Canada, strong sales of $103 million were recorded in Individual Insurance, and the Company maintained a leading position for the number of policies sold.3 Also, within this segment, Employee Plans, Special Markets and iA Auto and Home all posted strong sales growth. In the Wealth Management segment, the Company recorded solid net segregated fund inflows of $781 million and continued to rank first for both gross and net sales of segregated funds.4 Sales of insured annuities and other savings products were good, albeit lower than last year's very strong quarter, as clients are more optimistic towards riskier asset classes with higher retupotential. Mutual fund gross sales for the quarter posted strong growth year over year and Group Savings and Retirement also recorded a solid sales performance. In the US Operations segment, record sales were once again achieved in Individual Insurance and good sales growth was recorded in Dealer Services. The strong business growth propelled net premiums,5 premium equivalents and deposits5 to over $4.9 billion, representing a solid increase of 25% compared to the same period in 2023, and total assets under management6 and total assets under administration6 to nearly $250 billion, representing an increase of 22% over the last twelve months.

• Consolidated net income attributed to common shareholders divided by the average common shareholders' equity for the period.

• Sales is a supplementary financial measure. Refer to the "Non-IFRS and Additional Financial Measures" section of this document for more information on sales.

• According to the latest Canadian data published by LIMRA.
  4 Source: Investor Economics, August 2024.
  5 Net premiums, premium equivalents and deposits are supplementary financial measures. Refer to the "Non-IFRS and Additional Financial Measures" section of this document for more information.
  6 Assets under management and assets under administration are supplementary financial measures. Refer to the "Non-IFRS and Additional Financial Measures" section of this document for more information.
• This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

• This item is a non-IFRS ratio; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

Financial position - The Company's solvency ratio7 was 140% at September 30, 2024, compared with 141% at the end of the previous quarter and 145% a year earlier. This result is well above the Company's solvency ratio operating target of 120%. The one percentage point decrease during the third quarter is the result of specific items. These include capital deployment through share buybacks (NCIB), the acquisition of two blocks of business from Prosperity Life Group and IT investments. They also include capital management initiatives, namely the $125 million redemption of iA Insurance outstanding preferred shares. These items were partly offset by the favourable impact of organic capital generation,8 which continues to be strong at $180 million, and the positive impact of macroeconomic variations. The Company's financial leverage ratio†† of 15.3% at September 30, 2024 compares favourably to 16.4% at the end of the previous quarter.

Organic capital generation and capital available for deployment9 - The Company organically generated $180 million in additional capital during the third quarter. After nine months, $485 million has been generated, which is in line with projections to exceed the minimum annual target of $600 million in 2024. At September 30, 2024, the capital available for deployment was assessed at $1.0 billion. In addition, as detailed below in this section, if adopted as published, the AMF's proposed revisions to the Capital Adequacy Requirements Guideline - Life and Health Insurance (CARLI) are expected to increase the Company's capital available for deployment by around $700 million on January 1, 2025.

Proposed changes to AMF Capital Adequacy Requirements Guideline - On September 19, 2024, the Autorité des marchés financiers du Québec (AMF) published a consultation concerning a revised Capital Adequacy Requirements Guideline - Life and Health Insurance (CARLI), expected to take effect on January 1, 2025. This consultation ended on October 22, 2024. If adopted as published, iA Financial Corporation would no longer be subject to the intervention target ratios, while still being subject to minimum ratios. This is anticipated to positively impact iA's financial flexibility, and the revised guideline is expected to increase the Company's capital available for deployment by around $700 million, with no material impact on the solvency ratio level. Note that the proposed change related to intervention target ratios would not impact Industrial Alliance Insurance and Financial Services Inc.

Among other changes, the proposed CARLI guideline includes revisions related to the regulatory capital requirements for segregated fund guarantees. In this regard, a transition period is authorized for the first two quarters of 2025 when insurers can apply the previous version of the guideline. Analyses will be performed in anticipation of this transition period to assess the impacts of these other changes, which are expected to be more limited than those resulting from the removal of intervention target ratios mentioned above.

Book value - The book value per common share10 was $71.63 at September 30, 2024, up 2% during the quarter and 10% during the last twelve months.

Normal Course Issuer Bid (NCIB) - During the third quarter of 2024, the Company repurchased and cancelled 1,379,860 outstanding common shares for a total value of $123 million under the NCIB program. A total of 7,004,964 shares, or approximately 6.94% of the issued and outstanding common shares as at October 31, 2023, were repurchased under the current program between November 14, 2023 and September 30, 2024.

Dividend - The Company paid a quarterly dividend of $0.8200 per share to common shareholders in the third quarter of 2024. The Board of Directors approved a quarterly dividend of $0.9000 per share payable during the fourth quarter of 2024, representing an increase of $0.08 per share or 10% compared to the dividend paid in the previous quarter. This dividend is payable on December 16, 2024 to the shareholders of record at November 22, 2024.

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, 2024 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on November 15, 2024. Enrolment information is provided on iA Financial Group's website at ia.ca, 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.

• 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. Refer to the "Non-IFRS and Additional Financial Measures" section of this document for more information.

• Organic capital generation is a supplementary financial measure. Refer to the "Non-IFRS and Additional Financial Measures" section of this document for more information.

• Capital available for deployment is a supplementary financial measure. Refer to the "Non-IFRS and Additional Financial Measures" section of this document for more

information.

10 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 for relevant information about such measures.

• This item is a non-IFRS ratio; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

B. Business Growth

Business growth is measured by growth in sales, premiums, premium equivalents and deposits and assets under management and administration.

Sales - Sales measure the Company's ability to generate new business and are defined as fund entries on new business written during the period. For more information on the calculation and presentation of sales within each business unit, refer to the "Non- IFRS and Additional Financial Measures" section in this document.

Sales Growth by Business Segment

• Vericity's sales have been added to Q3 2024 figures.
• This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

• This item is a non-IFRS ratio; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

INSURANCE, CANADA

Individual Insurance - Third quarter sales totalled $103 million, recording another solid performance with a 7% increase over a strong quarter a year earlier. This very good result reflects the strength of all our distribution networks, the excellent performance of our digital tools, as well as our comprehensive and distinctive range of products. Sales were notably strong for participating insurance and living benefit products. The Company maintained the leading position in the Canadian market for the number of policies issued.2

Group Insurance - Third quarter sales of $18 million in Employee Plans were significantly higher than the $10 million recorded during the same quarter last year, largely attributed to the higher volume of mid-to-large group sales. Net premiums, premium equivalents and deposits increased by 9% year over year, benefiting from good sales and premium increases on renewals. Special Markets sales were 14% higher than a year earlier, reaching $97 million, driven by strong sales growth in travel medical insurance products.

Dealer Services - Total sales ended the third quarter at $197 million, 2% higher than the same period in 2023. This growth was essentially supported by sales of extended warranties and ancillary products. Note that the impact of the temporary outage at CDK Global at the end of the second quarter was immaterial on third quarter sales.

General Insurance (iA Auto and Home) - Direct written premiums reached $164 million in the third quarter, a strong increase of 15% compared to the same period last year. This reflects the success in generating new sales and the impact of recent premium increases.

WEALTH MANAGEMENT

Individual Wealth Management - The Company continued to rank first in Canada in gross and net segregated fund sales.3 Gross sales of segregated funds amounted to more than $1.3 billion for the third quarter, a significant increase of 51% year over year, and net sales were once again particularly strong at $781 million. This robust performance was driven notably by the strength of our distribution networks. Additionally, the favourable performance of financial markets continued to increase client optimism towards riskier asset classes with higher retupotential compared to guaranteed investments. Reciprocally, sales of insured annuities and other savings products totalled $483 million in the third quarter, compared to a very strong quarter of $618 million a year earlier. Mutual fund gross sales for the quarter amounted to $385 million, 33% higher than the same period in 2023, with net outflows of $163 million.

Group Savings and Retirement - Sales for the third quarter totalled $900 million and were 62% higher than a year earlier. This solid performance was driven by strong sales of both insured annuities and accumulation products.

US OPERATIONS

Individual Insurance - Record sales of US$68 million in the third quarter were 55% higher than a year earlier. This solid result, driven by good results in the final expense and middle/family markets and the addition of sales from the Vericity acquisition, confirms our potential for strong growth in the U.S. life insurance market, both organically and through acquisitions.

Dealer Services - Third quarter sales were up 15% over the same period last year, reaching US$286 million. This good result reflects the quality of our products and services. Also, dealers are emphasizing supplementary products sold with vehicles (F&I products) amid improved consumer affordability resulting from lower interest rates and reduced vehicle prices. Note that sales that were delayed to the third quarter due to the temporary outage at CDK Global at the end of the second quarter totalled around US$10 million.

• According to the latest Canadian data published by LIMRA.
  3 Source: Investor Economics, August 2024.
• This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

• This item is a non-IFRS ratio; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

ASSETS UNDER MANAGEMENT AND ASSETS UNDER ADMINISTRATION

Assets under management and assets under administration - Assets under management and assets under administration measure the Company's ability to generate fees, particularly for investment funds, funds under management and funds under administration.

Assets Under Management and Assets Under Administration

Assets under management and administration ended the third quarter at around $250 billion, up 22% over the last 12 months and up 6% during the quarter, mainly driven by favourable market conditions and high net fund inflows.

NET PREMIUMS, PREMIUM EQUIVALENTS AND DEPOSITS

Net premiums, premium equivalents and deposits - Net premiums, premium equivalents and deposits include entries from both new business written and in-force contracts. For more information on the calculation and presentation of net premiums, premium equivalents and deposits within each business unit, refer to the "Non-IFRS and Additional Financial Measures" section in this document.

Net Premiums, Premium Equivalents and Deposits5

Net premiums, premium equivalents and deposits exceeded $4.9 billion in the third quarter, recording a solid increase of 25% over the same period last year. All business units contributed to this strong performance, particularly Individual Wealth Management and Group Savings and Retirement.

• All general fund assets, including insured annuities, other savings products and other accumulation contracts.

• Premium equivalents and deposits include all premiums collected by the Company for its insurance and annuity activities (and posted to the general fund), all amounts collected for segregated funds (which are also considered to be premiums), deposits from the Group Insurance, Group Savings and Retirement and US Operations sectors, and

mutual fund deposits.

• Includes iA Auto and Home and some minor consolidation adjustments.
• This item is a non-IFRS financial measure; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.

• This item is a non-IFRS ratio; see the "Non-IFRS and Additional Financial Measures" section in this document for relevant information about such measures.