Denis Ricard, president and CEO of iA Financial Group discussed interest rates, share buybacks, capital and acquisitions and iA’s business in Canada, for the benefit of investors and analysts gathered for the TD Financial Services & Fintech Summit

In the chat with TD Securities analyst, Mario Mendonca, Ricard said short term interest rates have little impact on the company. He also discussed the company’s decision to buy back eight per cent of its stock. Another focus of the discussion was on capital and capital allocation – an area the CEO says is a key priority, as the company’s capital to deploy went from approximately $300-million to $1.5-billion following the implementation of the IFRS 17 accounting standard.

“In our reserves, there were some margins that were not recognized under the previous regime,” he said. “We had extra margin in our reserves never recognized in capital. All of a sudden, under IFRS-17 we couldn’t keep that extra margin, it had to be released.” In addition to tuck-in acquisitions, the company has also increased its dividend in the past year by more than 20 per cent, he added.

Interest rates 

Mario Mendonca asked Denis Ricard what the Bank of Canada's June 5th announcement of a 0.25 per cent decrease in the key interest rate would mean for iA. The rate was lowered from 5 per cent to 4.75 per cent, marking the first reduction in four years. Economists anticipate four more cuts by the end of the year, including one in July. "I sleep very well when I look at interest rate movements. It’s really the long-term rates that are key. The change doesn’t mean much. It’s a small change in short-term interest rates."

The iA President & CEO acknowledges that the rate cut may put some pressure on the profitability of investment products but adds that a 0.25 per cent reduction will not make a significant difference. On the other hand, Ricard believes that the short-term rate decrease could boost their dealer services operations, including credit insurance. 

On acquisitions 

"We have a nice problem; we have too much capital. Allocation of capital is my priority," stated Ricard. He also mentioned that he would be guided by the organic growth of all business lines. This allocation priority includes the capital regularly dedicated to technology investments, Ricard adds, because eventually, they generate synergies and additional revenue. 

Second in line are acquisitions. To date, iA Financial Group's acquisitions have not nearly absorbed the $600 million it generates annually. Ricard cites the acquisition of Vericity by its subsidiary, iA American Holdings. Announced on October 3, 2023, the transaction cost $170 million USD (equivalent to $234 million CAD today). Vericity serves the middle market for life insurance and also operates a digital agency.

Denis Ricard mentioned that discussions are ongoing about potential acquisition targets. "We are looking for more sizeable acquisitions," says the CEO of iA Financial Group. 

Canadian division

As for Canada, he says the company’s focus on individual insurance remains important for iA. “It’s always driven profitability for this business over the long term,” he says about the Canadian division’s sales in individual insurance. “The individual insurance is really the core business of iA. We are number one in number of policies.” He added that the company’s current market share sits at 27 per cent.

He attributes this to the fact that the company is focused on the mass market (smaller policies), the development of digital tools and its focused attention on distribution. “We are a distribution shop. We’ve got the relationships with the whole spectrum of distributors,” he says, including captive agents and independent agents alike. “Including the (independent) one we own, PPI,” he adds. “You don’t need to be number one in pricing when you sell smaller policies, because it’s really the relationship with distributors that is key.” 

Article written in collaboration with Alain Thériault.