On April 3, iA Financial Group’s President and CEO Denis Ricard gave a talk at the Canadian Club of Montreal 2023 about insurance leadership... a role he compared to musicians playing a complex score in harmony.
The musical metaphor Ricard used to explain iA’s success demonstrates that he is equally adept at making numbers and the saxophone sing. He explained that iA’s accomplishments would not have been possible without its management team’s leadership. The iA CEO surprised his audience by alternating between financial results overheads and a YouTube video of a quartet of jazz virtuosos to illustrate his points.
Musical debut
Ricard’s lecture, entitled “Le leadership en cinq temps,” pays tribute to Take Five, a piece that saxophonist Paul Desmond composed in 1959 and performed in the 1960s as part of a quartet with pianist Dave Brubeck. Why leadership in five beats? “This piece has five beats per bar,” explains Ricard. An innovation at a time when most popular music had three- or four-beat bars.
Take Five is also quite difficult to perform. “It took the quartet two days to get it right,” says Denis Ricard, adding that he often makes mistakes when performing the piece “on a Friday night” with a group of colleagues. “The musicians in Dave Brubeck’s quartet transform the complexity of jazz into a rhythm and a melody. iA Financial Group is also a complex organization,” he points out.
Why did the iA CEO choose this metaphor? In fact, he studied music before actuarial science. While attending Cégep de Shawinigan, the young saxophonist took courses at the Trois-Rivières music conservatory. “I was hesitating between music and actuarial science. My pragmatic father, known for his great wisdom, told me: ‘If you go into actuarial science, you’ll be able to pay your bills.’ I think he was right: I’m here today and can talk to you about music at the same time,” he told the captivated audience.
Giving the organization meaning
Denis Ricard believes that leadership must be steeped in the organization’s mission and values. The company must build a solid management team where each member is a specialist who plays their part while coordinating perfectly with the others. The role of this team is to promote and spread these values throughout the company.
Before getting to that level, he said, all managers must reflect on the importance of playing their role well in an increasingly complex world. The company’s mission emerges from this reflection: “iA exists so that its clients can feel confident and secure about their future,” Denis Ricard explains.
Ricard embraced this mission early on, after a formative experience. “Early in my career, I accompanied a financial advisor who was about to present a cheque to a family that had lost a member. That moment gave me great pride, because I understood that what our organization is all about is protection.”
Denis Ricard began his career at iA Financial Group in 1985 as an actuarial analyst, after earning a bachelor’s degree in actuarial sciences from Université Laval. In 2018, he took the reins from Yvon Charest, who had led the insurer since 2000.
Dominant position
“We have a dominant position in Canada,” says Denis Ricard. He points out that iA Financial Group ranks fourth in the life and health insurance market. “And that’s because we play in the big leagues,” referring to the three titans: Canada Life, Sun Life and Manulife.
The insurer shines in several niches, iA’s CEO continues. “We are the family champions. We have the largest share of the individual insurance market in Canada in terms of policies sold, at 27 per cent.” He claims that iA is also the Canadian leader in terms of sales of segregated fund policies, dealer warranties and auto loan disability insurance. “We are number two in wealth management,” he notes.
Distribution networks
iA Financial Group has established a distribution strategy that is strongly focused on vast and diversified networks, “ranging from the most dedicated to the most independent,” Denis Ricard continues.
“We strongly believe in the value of consulting. People are important in our business,” says iA’s CEO. Even more important is the fact that “only 50 per cent of children have a registered education savings plan (RESP),” even though governments subsidize contributions, he points out.
“Only 50 per cent of Canadians have a retirement plan,” says Ricard. Regrettably, “half of Canadians are living paycheque to paycheque,” which he admits makes budgeting a challenge.
Some people think that technology will replace the advice given by a human being, but Denis Ricard expects that technology will complement advisors’ work, nothing more. “We believe that the future lies in the combination of human quality and digital. We are investing heavily in this,” he says.
Generating growth
Since iA Financial Group (then Industrial Alliance) went public in 2000 following the demutualization of the major insurers, its share value has grown by an average of 13 per cent per year, says Ricard. This performance, which he describes as “the best in Canada among insurers,” has been fuelled by organic growth and more than 65 “prudent” acquisitions.
An entrepreneurial spirit combined with sound risk management and exemplary governance has enabled iA Financial Group to create value and build an enviable reputation in the past two decades, the CEO says. “Two things drive me: growing the organization and building a high-performance management team.”
Denis Ricard spoke at the Canadian Club of Montréal a few days after iA’s virtual Investor Session on March 28. During that event, Ricard stated that the transition to the new accounting regime for IFRS 17 insurance contracts and IFRS 9 financial instruments is very favourable for iA.
“iA’s financial strength is now fully recognized, with a solvency ratio of 154 per cent, which translates into just under $2 billion in capital available for deployment,” he said. The exact figure is $1.8 billion.
Big acquisition in sight
At the Canadian Club, the CEO elaborated on this performance, adding that iA’s operations generate about $600 million in additional capital each year (estimated for 2023, up from $550 million in 2022). “We can envision bigger projects. We may be targeting bigger fish than we were a few years ago.” Ricard says.
In May 2020, iA Financial Group completed the largest acquisition in its history when it bought out U.S. auto warranty specialist IAS Parent Holdings for US$720 million, or nearly C$950 million at the time.
In a press briefing on the sidelines of the event, Denis Ricard said he was paying particular attention to the United States for potential acquisitions in the life and health insurance or mechanical warranty sectors. The Group is prepared to spend between $500 million and nearly $1 billion on a buyout, he adds.
Less interest-rate sensitive
At the same 2020 press briefing, Ricard explained that IFRS 17 has inflated iA’s capital by freeing up the prudential margin that was retained under the previous IFRS 4. The transition to the insurance contracts standard has also allowed iA Financial Group to reduce its sensitivity to interest rate risk. The CEO mentioned that iA has reduced its interest-rate sensitivity through better matching of its assets and liabilities. On the other hand, it has increased its credit risk by purchasing more corporate bonds.
In the past, Denis Ricard had described the implementation of IFRS 17 as a setback for the industry. Now, he is making the best of it. “It’s not as bad as we thought at first, but IFRS 17 still brings volatility to earnings published in financial statements. It puts a short-term lens on very long-term commitments,” he says.
Turning complexity into value
The transition to IFRS accounting standards was a herculean task. Denis Ricard said it took the equivalent of 90,000 person days. “That means it would take one person 400 years to complete this project,” he explains. “The jazz connection makes me think about complexity in terms of agility, fluidity, creativity. That’s what our organizations need to succeed in a complex environment. In the business world, we can transform complexity into value creation.”
Shared foundations and improvisation
The common foundation that propelled iA to achieve “beautiful results” is made up of not only shared values but also complicity, trust, respect and benevolence toward one another, Denis Ricard explains. “As a leader, I am responsible for creating an environment that will make our management teams agile, fluid, capable of innovating and creating value,” he adds.
iA’s CEO also believes that improvisation is to jazz what innovation is to a successful management team. It gives them the right to make mistakes and become more resilient to challenges. “It’s a culture that develops in an inspired way. It doesn’t happen by itself: it requires work and discussion. A strong, unified leadership team has a ripple effect throughout the organization. It’s a competitive advantage,” says Denis Ricard.
