Morningstar DBRS Confirms iA Financial Corporation Inc.'s Issuer Rating at "A" and Industrial Alliance Insurance and Financial Services Inc.'s Financial Strength Rating at AA (low), Stable Trends

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on iA Financial Corporation Inc. (iA or the Company) and its related entities, including iA's Issuer Rating at "A" and Industrial Alliance Insurance and Financial Services Inc.'s Financial Strength Rating at AA (low). The trends on all credit ratings are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings and trends reflect iA's extensive franchise in the Canadian life insurance market, its diversified risk profile, and its strong and stable financial performance. In Canada, iA has built a comprehensive distribution network through investment in technology, relationships, and acquisitions. The Company has been successful at managing the risks and the profitability of its core individual insurance and wealth management businesses while at the same time growing its auto services and distribution capabilities. The Company maintains a conservative, high-quality investment portfolio and a comfortable excess capital buffer. The credit ratings also consider iA's growing investments in private assets and operational performance with respect to integrating multiple acquisitions, notably in the U.S. where it aspires to grow.

CREDIT RATING DRIVERS
Morningstar DBRS would upgrade iA's credit ratings if the Company improves its market position and profitability, especially in the U.S. market, while maintaining a similar risk profile and capital buffer. Conversely, Morningstar DBRS would downgrade iA's credit ratings following a sustained deterioration in profitability combined with a substantial decline in capital levels.

CREDIT RATING RATIONALE
Franchise Building Block Assessment: Strong/Good
iA has demonstrated the strength of its franchise in recent years, maintaining leading volumes of life insurance policies sold in Canada and generating strong premiums and deposit growth of 39% in 2024 YoY. iA's strong relationships with distributors and its investment in acquisitions and technology position the Company well to continue to be a leader in individual insurance and segregated funds in Canada. iA's ambitions to grow in the U.S. market offers opportunities for capital deployment, but the Company does not benefit from the same franchise presence there.

Earnings Building Block Assessment: Strong
iA delivered strong earnings of $942 million in 2024 compared with $769 million in 2023, mainly attributable to record new business growth and favourable equity market conditions. The Company's return on equity (ROE) also increased to 13.9% in 2024, which is below some of its large peers but still satisfactory. The ROE could further strengthen going forward as iA has the potential to generate incremental earnings as evidenced by its 15.9% ROE on a core basis. The Company's profitability has been notably stable in recent years and iA has reported an ROE above 10% in each of the last 10 years.

Risk Building Block Assessment: Strong/Good
iA's risk profile benefits from its diversified business focused on lower capital intensity products. The Company also has a diversified, conservative investment portfolio, with negligible credit losses and manageable exposure to commercial real estate and other private assets. Correspondingly, operational and strategic risks, including those related to large investments in technology, are increasingly important to the Company's performance. iA has an extensive risk management infrastructure with adequate independent risk monitoring and reporting processes.

Funding and Liquidity Building Block Assessment: Strong
With its conservative investment portfolio, iA maintains a large quantity of liquid assets available to fund any liquidity shortfall. While its long-term insurance portfolio is exposed to policyholder behaviour, the Company's diversified product portfolio limits the liquidity risk exposure from claims or surrenders. iA maintains a robust liquidity monitoring program as well as good access to external financing, including $572 million in undrawn lines of credit as of YE2024.

Capitalization Building Block Assessment: Strong
iA is well capitalized with a strong holding company solvency capital ratio of 139% at YE2024 (126% at operating company level) and lower financial leverage than its peers, providing capacity for additional capital deployment. The Company continues to have good organic capital generation tied to its growing earnings and proven access to capital. In Q1 2025 the Company expects to redeem $400 million in subordinated debentures and will be subject to regulatory capital changes which will, when combined, reduce its solvency ratio to 133% on a pro forma basis but will nevertheless increase its capital available for deployment, considering the additional room for issuance and the impact of the new capital regime at the operating company level.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (September 10, 2024) https://dbrs.morningstar.com/research/439195. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at https://dbrs.morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS's trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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