iA Financial Corporation's net income fell 3.9 per cent in the second quarter of 2022. However, this decline was much smaller than the 12.7 per cent downturn posted in Q1.
The insurer reported net income attributed to common shareholders of $222 million in the second quarter of 2022, versus $231 million in Q2 2021. This represents a decrease of 4 per cent or $9 million.
The company recorded a net experience loss of $37 million in 2022, or $28 million after tax, and -$0.26 per share. It attributes this result to the negative impact of market changes.
A positive note
The insurer highlights positive aspects of its performance despite the decline in net income. Denis Ricard, President and CEO of iA Financial Group, says that strong second quarter results and solid capital position led his firm to increase the dividend paid to common shareholders by 8 per cent. He also described the recent increase in long-term interest rates as “very positive.”
Jacques Potvin, iA's Executive Vice-President, Chief Financial Officer and Chief Actuary, noted that core earnings per share (EPS) for the second quarter were above market guidance. He linked this performance to strong growth in expected profit on in-force combined with positive core experience. “This solid result contributed to strong organic capital generation of about $160 million, adding to the Company’s financial strength and leading to future value creation,” he commented.
Expected profit on in-force represents the portion of income from policies and contracts in force at the beginning of the period that is expected to be realized based on the best assumptions made at the time the 2022 outlook was developed.
Potvin also reinforces his positive outlook on the effects of the transition to IFRS 9 (financial instruments) and IFRS 17 (insurance contracts).
“We now expect a significant increase in our solvency ratio, among other favourable estimated impacts at transition,” Potvin added. In its statements, iA describes its solvency ratio as robust, at 130 per cent at June 30, 2022.
Results by sector
Only iA's group insurance segment saw earnings growth in the second quarter of 2022. This segment posted net income attributed to common shareholders of $34 million in Q2 2022, compared with $26 million in Q2 2021. The increase amounts to 30.8 per cent or $8 million.
Four lines of business saw results decline:
Group Savings and Retirement: Net income attributed to common shareholders was $1 million in Q2 2022 compared with $7 million in Q2 2021. The corresponding decrease is 85.7 per cent or $6 million.
U.S. Business: Net income attributed to common shareholders was $24 million in Q2 2022 versus $27 million in Q2 2021, for a decrease of 11.1 per cent or $3 million
Individual Wealth Management: Net income attributed to common shareholders was $57 million in Q2 2022, down from $60 million in Q2 2021. This represents a decrease of 5 per cent or $3 million.
Individual Insurance: Net income attributed to common shareholders was $106 million in Q2 2022 versus $111 million in Q2 2021. The decrease equals 4.5 per cent or $5 million.
iA Insurance reported Q2 2022 net income of $225 million attributed to its sole common shareholder, iA Financial Corporation, down from $232 million in the second quarter of 2021. This represents a decrease of 3 per cent or $7 million.
Strong individual insurance sales
Four segments saw sales growth in the second quarter of 2022: individual life insurance, group insurance, group savings and retirement, and property and casualty insurance.
Individual Life: Denis Ricard reports that sales momentum continued in the second quarter of 2022, particularly in individual insurance sales, which totalled $98 million in Q2 2022, compared with $73 million in Q2 2021. This represents an increase of 34.2 per cent or $25 million.
In its second quarter MD&A, the insurer notably attributes this growth to the good performance of all its distribution networks and the increase in the average premium per policy sold. It highlights particularly strong sales from one large distributor, which it declines to name. IA adds that its participating life insurance products have been very successful.
Group Insurance: Sales were $436 million in Q2 2022, compared with $370 million in Q2 2021. The corresponding increase is 17.8 per cent or $66 million.
Growth in this segment was driven primarily by Dealer Services. Sales in this division were $355 million in Q2 2022, an increase of 14 per cent over Q2 2021. In the Employee Plans division, group insurance sales totalled $12 million in Q2 2022, versus $14 million in Q2 2021. IA explains that the volume of quoting activities in this line of business decreased during the quarter.
Property & Casualty: Sales were $145 million in Q2 2022, versus $139 million in Q2 2021. This represents an increase of 4.3 per cent or $6 million.
Group Savings and Retirement: Sales were $695 million in Q2 2022 compared with $675 million in Q2 2021. The increase equals 3 per cent or $20 million.
Sales in two lines decline
Wealth Management: Sales were $1.529 billion in the second quarter of 2022, compared with $2.015 billion in Q2 2021, for a decrease of 24.1 per cent or $486 million.
All the same, the CEO of iA Financial Group believes that the wealth management business performed well. “The wealth management sector recorded net fund inflows amidst declining financial markets,” he points out.
U.S. Business: Sales were $304 million in Q2 2022, compared with $322 million in Q2 2021. The corresponding decrease is 5.6 per cent or $18 million.
Looking at the results in closer detail, U.S. individual insurance sales were $38 million in Q2 2022 compared with $37 million in Q2 2021, an increase of 2.7 per cent. Dealer Services Property & Casualty sales were $266 million in Q2 2022 versus $285 million in Q2 2021, representing a decrease of 6.7 per cent.