Earnings call transcript: IA Financial Group’s Q2 2025 performance shines with strong EPS growth

IA Financial Group, with a market capitalization of $4.45 billion, reported robust financial results for the second quarter of 2025, showcasing significant year-over-year growth in core earnings per share (EPS) and other key performance metrics. According to InvestingPro analysis, the company’s stock appears undervalued despite delivering an impressive 99% return over the past year. The company continues to benefit from its diverse business model and strategic acquisitions, contributing to its strong market position.

Key Takeaways

• Core EPS increased by 27% year-over-year to $3.49.
• Core return on equity (ROE) reached 17%, achieving the 2027 target.
• Net income and core earnings rose by 56% and 22%, respectively.
• The acquisition of RF Capital, valued at $597 million, adds $40 billion in assets under administration.
• U.S. individual insurance sales exceeded Canadian sales for the first time.

Company Performance

IA Financial Group demonstrated a strong financial performance in Q2 2025, with core EPS reaching $3.49, marking a 27% increase from the previous year. The company’s core ROE achieved its 2027 target of 17%, highlighting its efficient capital management and profitability. The integration of RF Capital is expected to enhance IA’s asset management capabilities, further solidifying its competitive edge in the market.

Financial Highlights

• Revenue: Not specified in the earnings call.
• Core EPS: $3.49, up 27% year-over-year.
• Core ROE: 17%, meeting the 2027 target.
• Net income: Increased by 56%.
• Core earnings: Increased by 22%.
• Premiums and deposits: Up 4% year-over-year.
• Assets under management and administration: Up 16%.
• Solvency ratio: 133%.

Outlook & Guidance

IA Financial Group remains optimistic about its future prospects, targeting continued ROE around 17%. The company plans to focus on organic growth, strategic acquisitions, and capital return. With macroeconomic conditions remaining stable, IA anticipates further growth in U.S. individual insurance sales, which have already surpassed Canadian sales for the first time. Analyst consensus from InvestingPro supports this optimistic outlook, with price targets ranging from $8.00 to $10.40, though 4 analysts have recently revised their earnings expectations downward for the upcoming period.

Executive Commentary

Denis Ricard, CEO of IA Financial Group, emphasized the company’s strong quarterly performance, stating, "We delivered a very strong quarter with core EPS reaching $3.49, up 27% year over year." Ricard also highlighted the company’s robust capital position, noting, "Our capital position is robust with a solvency ratio of 133% at the end of Q2."

Risks and Challenges

• Macroeconomic Pressures: Economic downturns could impact consumer spending and investment returns.
• Regulatory Changes: New regulations could affect operational costs and compliance requirements.
• Integration Risks: The successful integration of RF Capital is crucial for realizing its full value.
• Market Competition: Increasing competition in the insurance and asset management sectors could pressure margins.
• Exchange Rate Fluctuations: Currency volatility could affect international operations and profitability.

IA Financial Group’s Q2 2025 performance underscores its strong market position and strategic focus on growth, reflected in its "GREAT" financial health score of 3.53 from InvestingPro. The company remains committed to leveraging its diversified business model to navigate potential challenges and capitalize on emerging opportunities. For deeper insights into IA Financial Group’s performance and potential, including exclusive Fair Value estimates and comprehensive financial analysis, explore the full Pro Research Report available on InvestingPro.

Full transcript - Iamgold Corp (IAG) Q2 2025:

Conference Operator: Thank you for standing by. This is the conference operator. Welcome to the IA Financial Group Second Quarter twenty twenty five Earnings Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

I would now like to turn the conference over to Caroline Drouin, Head of Investor Relations. Please go ahead.

Caroline Drouin, Head of Investor Relations, IA Financial Group: Good morning, everyone. Welcome to our second quarter twenty twenty five conference call. All of our Q2 documents, including press release, slides for this conference call, supplementary information package and quarterly MD and A are posted in the Investor Relations section of our website at ia.ca. This conference call is open to the financial community, the media and the public. And I remind you that a question period is reserved for financial analysts.

A recording of this call will be available for one week starting this evening, and the archived webcast will be available for ninety days and a transcript will be available on our website in the next week. Now I draw your attention to the forward looking statements information on Slide two as well as the non IFRS and additional financial measures information on Slide three. Also, please note that a detailed discussion of the company’s risk is provided in our 2024 MD and A available on SEDAR and on our website with an update in our Q2 twenty twenty five MD and A, which was released yesterday. I will now turn the call over to Denis Ricard, President and CEO.

Denis Ricard, President and CEO, IA Financial Group: Good morning, everyone, and thank you for being with us on the call today. As usual, I will start by introducing everyone attending on behalf of IA. Joining me are Eric Jobain, Chief Financial Officer and Chief Actuary Alain Bergeron, Chief Investment Officer Stephane Gourbonnet, responsible for our Wealth Management Operations Rene Laflame, in charge of Individual Insurance Savings and Retirement Pierre Meron, Chief Growth Officer of our Canadian Operations and responsible for Dealer Services Canada and IU Home Sean O’Brien, Chief Growth Officer of our U. S. Operations and Louis Philippe Pouliat, in charge of our Group Benefits and Retirement Solutions.

There’s a lot to be excited about, both in terms of our financial performance this quarter and the execution of our growth strategy. As you saw, we just announced our intention to acquire RF Capital, an exciting and valuable addition to our Wealth Management platform. It’s only been a week since the announcement, so while we are not providing new details today, we are more than happy to give you an early read on how it’s been received. Stephane has been meeting with advisers across the country, and during the question period, he can share a bit of the tone and energy he is observing on the ground, if you have questions, obviously. Let’s begin with Slide eight for a summary of our second quarter results.

We will not use the word exceptional, but this quarter makes a strong case for it. This is one of those quarters where the profitability numbers really do all the talking. We delivered a very strong quarter with core EPS reaching $3.49 up 27% year over year. Our core ROE reached 17% on a trailing twelve month basis, already at our 2027 target. These results reflect the quality of our earnings, significant insurance experience gains and the consistency of our performance across all business segments.

Sales momentum remained strong across all business segments with premiums and deposits up 4% year over year and assets under management and administration up 16%. This growth highlights the strength of our distribution networks, the relevance of our product offerings and the trust we continue to build with our clients. Our capital position is robust with a solvency ratio of 133% at the end of Q2, supported by strong organic capital generation and prudent risk management. Our book value per share has risen to $76.02 up 9% year over year. And excluding the impact of the NCIB, the increase over the last twelve months is 11%.

Let’s now turn to Slide nine for Insurance Canada. We saw good growth across all business units. Individual Insurance sales increased by 5% year over year, reaching $103,000,000 This growth highlights the strength of our distribution networks, the effectiveness of our digital tools and diversity of our product offering. We maintained our leading position in the number of policies issued in Canada. In Group Insurance, premiums and deposits rose by 7%, fueled by premium adjustments over the past year.

In Dealer Services, sales reached $225,000,000 this quarter, marking a 16% increase over the same period last year. The strong performance was driven by sustained momentum in P and C sales and the contribution of Global Warranty. Lastly, iOtone and Home delivered strong results with sales up 10% year over year to reach $2.00 $6,000,000 This growth was supported by an increased number of policies and agile repricing. Moving to Slide 10, where we highlight our Wealth Management results. IE continues to lead the Canadian market in segment sales, both in gross and net sales.

Gross sales were up 8% year over year, approaching $1,400,000,000 while net sales reached $670,000,000 These results reflect the strength of our distribution networks and the competitiveness of our product lineup. Mutual fund gross sales declined slightly, but net outflows and other individual savings products were down 21%, reflecting investor preference for higher return asset classes. Finally, in Group Savings and Retirement, total assets under management rose by 18% year over year, while total sales were down 4%, driven by the growth in accumulation product sales. Let’s look at Slide 11, where we continue to see strong momentum in our U. S.

Operations. Individual insurance sales increased by 59% year over year, reaching US78 million dollars equivalent to million dollars So in Canadian dollars, this marks the first time our individual insurance sales in The U. S. Have surpassed those in Canada. This impressive performance is driven by organic growth in our core markets and the successful integration of Vericity, which continues to meet our expectations.

The added scale and digital capabilities from the acquisition are already making a significant contribution to our results and reinforcing our long term growth ambitions. In Dealer Services, sales increased by 6%, supported by our strong product offering and the effectiveness of our distribution channels. The strong performance across both U. S. Business units highlights the value of our diversified business model and demonstrates our ability to scale effectively in The U.

S. Market. Finally, turning to Slide 12, which clearly illustrates how our core financial metrics are tracking well toward our targets. Core EPS growth for the first six months of 2025 is 23% year over year. This impressive result exceeds our midterm annual growth target of 10% plus.

Core ROE stands at 17%, which is already in line with the 2027 target. Eric will discuss this achievement in a moment. So far in 2025, we’ve generated $325,000,000 in organic capital, keeping us well on track to meet our 2025 target of over $650,000,000 Lastly, our dividend payout ratio is well within our target range of 25% to 35%, and the 10% dividend increase announced yesterday is expected to support this ratio in the coming quarters. Having reviewed our financial targets, I would like to conclude by highlighting a key strategic initiative currently underway to support these goals. Please turn to Slide 13 as we discuss the recent announcement of our acquisition of RF Capital.

We remain focused on strategic capital deployment, and our capital allocation priorities remain unchanged: investing in organic growth pursuing disciplined acquisition and returning capital through share buybacks and dividends. Our active share buyback program, the dividend increase we announced yesterday and the acquisition of RF Capital announced last week, all align with our commitment to delivering long term value to our shareholders. Our intent to acquire RF Capital marks an exciting milestone for IE. This strategic move significantly accelerates our growth in the high net worth segment and strengthens our national presence in wealth management. With over $40,000,000,000 in assets under administration, RF Capital is one of the largest independent wealth management firms in the country.

Its entrepreneurial culture and adviser centric model align perfectly with IE. The transaction, valued at $597,000,000 and fully funded with cash on hand is expected to be neutral to core earnings in year one and accretive to core EPS by at least $0.15 in year two. We are also excited about the potential for meaningful synergies while maintaining RF Capital’s operational independence and strong brand. This acquisition clearly demonstrates our disciplined growth strategy in action and represents a major step forward in creating long term value for our shareholders. Heading into the second half of the year, we do so with solid momentum and a focused strategy to deliver on our commitments.

I have consistently emphasized that the IA Way is the cornerstone of our performance, and once again, the results speak for themselves. It’s a winning formula, and I will continue to highlight its importance in the future. With that, I will now hand it over to Eric, who will comment on the second quarter profitability and capital strength. Following Eric’s comment, we will take questions. Eric?

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Thank you, Denis, and good morning, everyone. I’m pleased to walk you through a quarter that reflects disciplined execution, strong segment performance and continued momentum toward our strategic goals. Let’s begin with Slide 15, which provides an overview of our profitability and financial strength for the second quarter. We concluded the 2025 on a very high note with core EPS of $3.49 representing an increase of 27% year over year and a reported EPS of $3.43 for the second quarter. This performance notably highlights the solid contribution from all three operating segments driven by significant experience gains, higher expected insurance earnings and sustained growth in non insurance activities.

As Denis pointed out, while we would not level this quarter as exceptional, it was a period where everything aligned perfectly. This resulted in strong profitability growth and a core ROE of 17% for the last twelve months. We are pleased to highlight that our ROE is running ahead of schedule against our ROE target of 17% plus in 2027, thanks to our strong year to date performance driven by important experience gain and favorable macroeconomic tailwinds. Building on this momentum, we anticipate that our core ROE will remain at its current level approximately 17% in the coming quarters assuming macroeconomic factors stay where they are now. While we remain prudent given macro and ongoing trade uncertainties, our trajectory toward our 2027 ROE target of 17% plus remains firmly on track and we remain committed to reaching this goal.

Our robust capital position is supported by our ongoing ability to generate organic capital and provide us with the flexibility to pursue both organic growth and strategic acquisitions. Over the last twelve months, our book value per share has increased by 9% and excluding the impact of our active share buyback, this increase would have been 11%. Additionally, we announced a 10% increase in the dividend for common shareholders, underscoring our confidence in our sustainable earning power. Together, this speaks to the disciplined execution of our capital strategy and our commitment to creating shareholder value. Building on this strong profitability, let’s now look at how each segment contributed.

Turning to Slide 16 for an overview of the Q2 total earnings performance by segment. Net income and core earnings rose sharply year over year by 5622%, respectively. This growth was broad based with all three operating segments and the investment result contributing to both reported and core performances. Now moving to Slide 17 to take a closer look at how each segment performed in the second quarter. In Insurance Canada, core earnings for the quarter reached $133,000,000 marking a solid 25% year over year increase.

This growth was primarily driven by important core insurance experience gains, including favorable morbidity in employee plans, favorable mortality in individual insurance and lower claims at Aiea Home and Auto. The segment also benefited from higher expected earnings from Aiye Aomenoto along with the increase in the combined risk adjustment release and CSM recognized for service provided. Moreover, core non insurance activities contributed positively to this growth supported by the good performance of dealer services. Lower core other expenses were also recorded. Finally, the impact from new insurance business in employee plan was more pronounced this quarter reflecting a higher volume of confirmed sales.

Let’s now move from Insurance Canada to Wealth Management. On Slide 18, you can see that in the Wealth Management segment, second quarter core earnings rose to $113,000,000 up 15% year over year. This growth was primarily driven by an increase in the CSM recognized for services provided, largely due to strong net segregated fund sales and positive financial market performance over the past twelve months. Core and insurance activities also saw a slight uptick, thanks to the good performance from Group Savings and Retirement and IA Clarington, where net revenue on assets was recorded. Turning to our U.

S. Operations on Slide 19. Core earnings totaled $36,000,000 in Q2, representing a significant 64% increase year over year. This performance was mainly driven by a pretax $28,000,000 increase in core insurance service results fueled by contribution from Vericity and Prosperity blocks of business, as well as core insurance experience gains from favorable mortality experience in individual insurance. Core non insurance activities increased by $1,000,000 year over year, driven by higher earnings from dealer services resulting from the disciplined management action we’ve been putting in place.

As we continue to integrate Vericity and focus on realizing synergies, it is important to note that during Q2, the combined impact of Vericity and Prosperity acquisition was slightly positive on core earnings, aligning with our expectation at time of acquisition. Additionally, as part of the adjustments to net income for the quarter, an adjustment was made to Vericities deferred tax assets related to tax losses incurred prior to the acquisition by IA resulting in a favorable impact of $30,000,000 on net income. Now turning to Slide 20 for the results of the Investment segment. Core earnings for the quarter were $102,000,000 up 12% year over year. Before accounting for taxes, financing charges on debentures and dividends, the core net investment results was $127,000,000 up from $108,000,000 a year ago.

This strong performance was supported by several factors, including the favorable impact of interest rate variation in recent quarters. In addition, credit experience was positive in Q2 with higher impacts from upgrades than downgrades in the fixed income portfolio and positive credit experience in the IA Auto Finance car loan portfolio. Moving to Slide 21. The corporate segment core other expenses totaled $79,000,000 pretax. Maintaining our focus on operational efficiency, this amount includes $68,000,000 pretax in core other expenses in line with our quarterly expectation of $68,000,000 plus or minus $5,000,000 It also includes a higher provision of $11,000,000 pretax for the variable compensation related to the company strong performance since the beginning of 2025.

I would like to say a few words regarding the management action related to our pension plan, which has accumulated a significant surplus over the years. We have decided to use a portion of this surplus to recognize current retirees and employees. For retirees, a special one time increase in retirement benefits resulted in a $14,000,000 charge to Q2 net income. For employees, a temporary reduction in pension contributions will be in effect from Q3 twenty twenty five through Q2 twenty twenty six with an expected impact of approximately $4,000,000 on net income over each of the next four quarters. This initiative stems from the surplus position of our pension plan and underscores our appreciation of our employees and retirees to the company’s growth and success.

Please go to Slide 22 now to review our solvency ratio and capital available for deployment as of June 30. As of 06/30/2025, our solvency ratio stands at 138%, well above the regulatory minimum ratio of 90%. The six percentage point increase during the second quarter was mainly driven by the impact of strong organic capital generation and the issuance of preferred shares. This increase was partially offset by strategic capital deployment activities, including share buybacks and IT investments. As a reminder, on pro form a basis, taking into account the proposed acquisition of RF Capital announced on July 28, the solvency ratio was estimated at 132%.

Our consistent ability to generate strong and ongoing organic capital is evident with quarterly record of 200,000,000 in additional capital in the second quarter keeping us on track to reach our target of $650,000,000 plus in 2025. As of June 30, the capital available for deployment was assessed at $1,500,000,000 positively impacted by organic capital generation. As a reminder, on a pro form a basis and taking into account the proposed acquisition of RF Capital, the capital available for deployment is estimated at $900,000,000 Our second quarter results clearly highlight the momentum of our operations. We delivered strong profitability while continuing to generate and deploy capital effectively. This financial discipline gives us the flexibility to support and drive our growth ambitions.

As we progress through the remainder of 2025, we remain confident in our strategy, execution capabilities and ability to deliver sustainable long term value. This concludes my remarks. Operator, we are now ready to take questions.

Conference Operator: Thank you. We will now begin the question and answer session. The first question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Doug Young, Analyst, Desjardins Capital Markets: Hi, good morning. I guess the question is for Eric or maybe Sean. Is there any way you can quantify the year over year improvement in core earnings of The U. S. Dealer services business versus The U.

S. Life insurance business? I mean it seems like there’s the gradual improvement in U. S. Dealership profitability is flowing through as you’d signaled you had expected.

But I just find it sometimes hard to quantify between what goes through the non the core non insurance activities and what goes through on the insurance activities for that business. So I don’t know if you can kind of give a little bit more color there?

Denis Ricard, President and CEO, IA Financial Group: Yes. It’s Denis here first. I mean, we are very pleased to the increase in The U. S. Business profitability this quarter.

We don’t disclose specific of each of these businesses separately. But I’m going to ask maybe Sean to give some color about all the initiatives that we did that are paying off right now, because there are things you control and other things you don’t control. And for the things that we do control, we’ve made several initiatives that improve the profitability. So keep in mind that both The U. S.

Life and The U. S. Dealer has improved. Sean?

Sean O’Brien, Chief Growth Officer of U.S. Operations, IA Financial Group: Yes. Thanks, Denis. And yes, I sort of I’m thinking about it as gradual improvements really being driven by four key additions we’ve taken. The first one is repricing. I’ve spoken to that before.

And I could say that now we have actually repriced all onerous products in the warranty business without any exception. So that’s going to help to restore some of the margins and I think discipline that we’re looking for in

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: that business. The other side of

Sean O’Brien, Chief Growth Officer of U.S. Operations, IA Financial Group: the expense management, again, we’ve spoken to that as well. But I’d say at this point, we’ve reduced our total expenses by about 5% in that business. And that’s meaningful. That’s not taking the fact that despite inflation that’s happening in all businesses. So quite happy with that.

And that’s just getting the business to the point it needs to be. The business mix is proving out well as well. It’s just a good reminder, especially with some of the pressure on the new car business right now with some tariff worries. 50% of our business is in the used car market, 50% in the used. So it does create a nice balance as there is some volatility in one segment or the other.

And the other side is the differentiation in that business is proving out well. We talked about DAC, DealerWizard. These are sort of alternate channels. It has nice profit delivery and sales action in those areas. On the risk side, it’s like Eric said, we’re delivering our anticipated synergies.

It’s the business is going well, and it’s on track with where we expect to be and really happy with sort of the innovation and sort of the some of the energy that team is bringing to our overall U. S. Life initiatives.

Tom MacKinnon, Analyst, BMO Capital Markets: Okay. So am I going

Doug Young, Analyst, Desjardins Capital Markets: to get the split? I get that. But I figured I’d ask. Second is that in Canada, the individual Canada individual insurance, can you break down, Eric, the £31,000,000 insurance experience between group morbidity, individual mortality and lower home and auto? Is it a third each?

Or is there one that accounted for more? Just hoping to get a little bit more color on that €31,000,000

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Yes. Doug, it’s Eric. We’re not going to split it, but the reality is that all operations have performed very well in the quarter. I mentioned in my speaking notes some particular alignment going out in the same direction. So we had mortality, positive experience gain.

We had morbidity on the group side. We had high human auto favorable weather conditions. So it goes on like this. And the EUR 31,000,000 is composed of, I would say, small to medium size experience gains arising from all those operating segments.

Doug Young, Analyst, Desjardins Capital Markets: Two for two, okay. And then just maybe if we can go back to the RF acquisition, and I don’t think you’re going to give this to me, but maybe you can give some color. Maybe more around like the integration plans and plans to retain advisers. And I’ll give you a kind of where I’m going at this. And I know you don’t want to give the cost of adviser retention, but can you give some context in relative to the announced purchase price?

Is it 10%, 20%, 30%? Is that what’s the cost going to be to retain the advisers? And I ask that just because

Tom MacKinnon, Analyst, BMO Capital Markets: I find it hard to get

Doug Young, Analyst, Desjardins Capital Markets: a sense of the price paid without kind of getting the sense of what the cost is going to be to retain the adviser network. And given what we’ve seen historically, in some cases that those costs can be quite significant. So I figured I’d throw

Tom MacKinnon, Analyst, BMO Capital Markets: it out there and just see what I can get.

Denis Ricard, President and CEO, IA Financial Group: Yes. Thank you, Doug. It’s Tinny here. Obviously, has to be some steps before we get into that point where we know exactly what the cost would be. And but at this point, I think it will be quite important, at least that you hear from Stefan the tone coming from the discussion he’s having with the various advisers.

And maybe Stefan, you can give some colors at this point?

Stephane Gourbonnet, Responsible for Wealth Management Operations, IA Financial Group: Yes, certainly. I mean, since the announcement, we’ve been I mean, as you mentioned, right, the adviser retention is a key success factor. So we’ve been, since the announcement, trying to

Luis Philippe Pouliat, Responsible for Group Benefits and Retirement Solutions, IA Financial Group: be as visible as possible,

Stephane Gourbonnet, Responsible for Wealth Management Operations, IA Financial Group: meeting with the executive team, meeting with all the employees and the advisers across the country. I’m actually right in the middle of a road trip right now. And what we want to do is we want to bring it to more of a tailored approach in the way we want to do things. So we’ve been listening to advisers, making sure we understand what matters to them and making sure we have a chance to share with them the vision that we have and how we see this partnership strengthening together and how we could do very well. I think what advisers are seeing is it’s two proud Canadian histories coming together with one shared future, and

Tom MacKinnon, Analyst, BMO Capital Markets: it brings

Stephane Gourbonnet, Responsible for Wealth Management Operations, IA Financial Group: nearly three hundred years of combined experience. So they’re excited about it. They feel the fit in terms of culture and we are known as being great integrators and operators. They know we’re going to respect their business model like we’re bringing this as a distinct offering to what we currently do. And everything that’s been done right now is to assure a seamless transition for both them and their clients, right?

So no repapering, no change in the brand, no change in the location. It’s all about continuity. And I think that’s been well received so far. So what we’re seeing is great feedback from the team. The advisers are engaged.

I like to say that the knowledge is in the room and they’re asking good questions. And I think they’re now starting to see the real potential of what we could do together and they’re definitely leaning in. So looking forward to meeting our new advisers across the country in the next few weeks.

Doug Young, Analyst, Desjardins Capital Markets: Appreciate the color. Thank you.

Conference Operator: The next question is from Tom MacKinnon from BMO Capital. Please go ahead.

Gabriel Dechaine, Analyst, National Bank Financial: Yes, thanks. Good morning. Just a question on the strain in Canada, maybe a little bit higher than anticipated. You talked about higher confirmed sales. If I look at employee benefit plan sales, they actually were almost down they were down significantly year over year.

So I think you used the term confirmed sales. How are we to measure these confirmed sales? Does that mean sales haven’t been booked yet? Just some color there, please.

Luis Philippe Pouliat, Responsible for Group Benefits and Retirement Solutions, IA Financial Group: Yes, this is Luis Alive speaking. Thanks for the question. Yes, think we’ve talked a few times about confirmed versus implemented. So the sales you are seeing in the disclosure are implemented sales and the strain reflects sales that we have confirmed. So we are not disclosing the confirmed sales, but what I can say is we have a tremendous momentum and many of the sales we were able to confirm will be implemented in the remainder of the year or leading in 2026.

Gabriel Dechaine, Analyst, National Bank Financial: Okay. Thanks for that. And just to follow-up with respect to the dealer services income you get in the core non insurance activities. Can you remind us of any seasonality associated with that business? Especially given, I mean, just helpful given you’ve got Global Warranty in Canada and your U.

S. Dealer services is now kind of back in more of a steady state form? Thanks.

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Yes, I will Tom, I will say that yes, there is a little bit of seasonality and it’s connected with the fact that auto sales have and guarantees have some seasonality. Q4 is usually low quarter Q1 and then you have Q2 with spring coming, people tend to go and buy more cars. So you know that the product that we sell with auto are following that trend of that pattern of auto sales during the year.

Gabriel Dechaine, Analyst, National Bank Financial: Okay. Thanks for that.

Conference Operator: The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Caroline Drouin, Head of Investor Relations, IA Financial Group0: Hey, quick one here. Just a confirm sale thing in group. So the strain came through this quarter, so you don’t see a bump coming up in the next couple? There’s no lag kind of thing?

Luis Philippe Pouliat, Responsible for Group Benefits and Retirement Solutions, IA Financial Group: I would say that it’s actually difficult to predict actually the timing. Just a reminder that it’s a bit of a lumpy type of business, right? There’s seasonality to how that business is growing. Typically first quarter and third quarter a bit higher. But then in any given year you could see fluctuation and that’s normal.

I like to look at it from maybe a bit of a longer term perspective. If you look at kind of year to date sales, right already you’d have two quarters in and you’d have more of a better picture and it’s actually a 40% increase versus last year. So hard to say whether it’s just a lag, but just a bit lumpy is my view on it. Got it.

Caroline Drouin, Head of Investor Relations, IA Financial Group0: Just a I got a CSM question and an ROE question. Is there anything so your CSM, the amount recognized in the quarter was up 18% year over year. And if I look at the I’m pretty sure people look at it this way for modeling anyway, how much that number represents some of the beginning balance of the balance sheet balance to kind of get a sort of a ratio for how that trends over time. But what I’ve noticed is that the ratio of what you’re recognizing each quarter relative to the actual balance has been increasing steadily for the past couple of years. Is that I don’t know, is it factor multifactors behind that?

You’re selling more short dated products with CSM? Your interest rates are having an impact. What’s the story there?

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Yes, I guess, are you looking at wealth Gabriel when you look at this or

Caroline Drouin, Head of Investor Relations, IA Financial Group0: are you looking at the whatever the goes Okay. Into that,

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Because you have to have two things in mind. First, the growth of the CSM amortization is following our great growth story on this insurance product. So that’s one item that contributes to this increase. And the second one is mostly due to seg funds and market experience. With the new CSM approach following IFRS implementation, when there is market positive market experience, we have to stick to the initial amortization schedule.

So we take the gain from market, we increase the CSM and then we amortize more over the remaining period. So that’s what is playing out here and that increases the ratio that you look at.

Caroline Drouin, Head of Investor Relations, IA Financial Group0: Got it. And I guess my last question here on ROE. Denim might not like the word exceptional. I don’t think it’s bad word. But you had an 18 nearly 19% ROE this quarter annualized.

And if I strip out some of the experience gains, you’re still at around 17%. So at or on par with your target in 2027, you said that you’re probably going to be at around that level over the next few quarters as long as the macro backdrop cooperates. What’s I guess, A, what’s providing that confidence? The target was only provided a few months ago and we’re already there. So what’s the big picture story here that so much positive can develop in so short of a time?

I know equity markets have been good at all, but got to be more than just that.

Denis Ricard, President and CEO, IA Financial Group: Yes, Gabriel, When we said the 17% plus, it was the investor event. There were some obviously, there are still some geopolitical disruption, guess, is the word I’m going to use here. So, we tend to be prudent in the way we set our guidance. And the reality is that our business model is quite resilient. So, we are ahead of our game right now.

And so, I look more at the plus than the 17, to be honest with you at this point. It’s too early to change our guidance, but we are very pleased that looking forward we will be we think it’s going to be at the plus as opposed to the minimum of the 17. Got it. All right. I mean, is there anything

Caroline Drouin, Head of Investor Relations, IA Financial Group0: well, know what, I’ll leave it at that. Yes.

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: I’ll just add one comment regarding your question to what Denis said. With respect to the fact that you were looking for what has been driving us ramping up, the macroeconomic were not the macroeconomic has been the tailwind since the investor event. The EUA, AUM, everything has been has increased. So right now, it’s still a tailwind. So that’s the main driver since the investor event.

Caroline Drouin, Head of Investor Relations, IA Financial Group0: All right. Have a good enjoy the rest of your summer.

Denis Ricard, President and CEO, IA Financial Group: Thank you.

Conference Operator: The next question is from Mario Mendonca from TD Securities. Please go ahead.

Caroline Drouin, Head of Investor Relations, IA Financial Group1: Good morning. Couple of quick questions. First, on the experience gains. Is it still appropriate to assume that experience gains will trend around zero going forward? Or maybe over the long term, is that an appropriate assumption?

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Yes, I’ll take a hello Mario, it’s Eric. I’d say a couple of things on this because our IA’s has always been to be prudent at managing liabilities. And if you look historically at experience gain, you will find, I looked at it very recently, over the last ten years, two third of the times we had positive experience gain, we had one third of the times we had loss. So our prudent way of managing liabilities is putting kind of positive bias on average over time. So that’s one clue.

And for the remaining of the year, when we look at because every year we rethink liability assumption when we do the reserve assumption change. It tends to reset the clock on this. But for the remaining of 2025, we’re quite confident that our quarterly annualized ROE will stay around 17% for the remaining of the year. As I said, assuming macroeconomic holds, when we look at everything altogether, that’s where I would guide you to look at for in terms of profitability. The

Caroline Drouin, Head of Investor Relations, IA Financial Group1: way I’m interpreting that answer is that until you have your assumption review, experience gains could remain positive in the next, say, two quarters and then in 2026, you reset and maybe we get closer to zero. Is that am I interpreting Yes, your answer

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: absolutely Mario. If you look just in Q1 this year after year end assumption review, we just had a million of experience gain. So we reset the clock annually.

Denis Ricard, President and CEO, IA Financial Group: Okay. I think I understand. And then

Caroline Drouin, Head of Investor Relations, IA Financial Group1: the second question is on buyback activity.

Caroline Drouin, Head of Investor Relations, IA Financial Group2: I am looking at the last

Caroline Drouin, Head of Investor Relations, IA Financial Group1: three quarters, the average buybacks kind of modest, works out to an average of $05,000,000 shares a quarter. The previous three quarters, maybe four quarters, if you look at the average, was closer to $2,000,000 So quite a fair quite a meaningful drop in the pace of buyback activities in the last three quarters relative to the last couple of years. Could you talk about why that’s played out? Why the buyback activity has slowed so much and what your intentions are?

Denis Ricard, President and CEO, IA Financial Group: It’s Denis here. Yes. When we started the buyback, at that time, I mean, the price of the stock was ridiculously low. It was a factor for us to buy back more shares at the time. Not that I’m saying that they are well, I would say, valued right now.

They are still undervalued. That’s what a CEO would always tell you anyway. But the point is that there has been, I would say, a discussion internally about what should be the right level and looking opportunities that we had in terms of acquisition. So our first objective is to grow by organic growth, acquisition and then at the end, the buyback. So in our 2030 plan that we presented to the Board, there is a certain level of buyback that we implemented and that we believe that we’re going to continue.

And we will adjust the level of buyback whether or not we do acquire organization over the years. I think the one thing that you have to keep in mind is that we will not we don’t intend to pile up capital, okay? So, we want to deploy it. So, if we’re not in a position to acquire organization and deploy capital by acquisition, we will increase the buyback.

Doug Young, Analyst, Desjardins Capital Markets: Okay. Thank you.

Conference Operator: The next question is from Lamar Prasad from Cormark. Please go ahead.

Caroline Drouin, Head of Investor Relations, IA Financial Group2: Yes, thanks. Maybe for Denis or Eric to start off here. Just a question on the ROE continuing on Gabe’s line of questioning. And I appreciate your answer to focus on the plus. But under what would be helpful is to understand, under what circumstances would you actually present to the Board or say that we need to bump up this target a bit higher?

Because it sounds like 17% is on lock and you have that target at the 2027. It’s plausible that you’re going to exceed it by a fair margin, at least that’s from where I’m sitting. So maybe talk about like the process in bumping up this target higher. And I appreciate that you just introduced it a couple of months back. So any thoughts would be helpful.

Denis Ricard, President and CEO, IA Financial Group: No, that’s a great question. It’s very early in the process. We’ve bumped it up significantly at the beginning of this year. And our business model has really proven very positive in terms of results. So we are at the point where you might we might all say that we are quite comfortable with the 17%.

I guess, I can say that we are comfortable with the plus as we have mentioned. But it’s there are so many parameters that can change. I mean, we talk about the geopolitical environment, the economic environment. We don’t talk much about competitive environment and because I believe there is much more discipline in the market right now, But you never know, I mean, there might be changes in going forward in the future. We never know about that.

Again, I feel quite comfortable right now because the I would say that compared to fifteen years ago, there’s in more the market. And so to me, it’s prudent at this point not to go the next step. It might come in a year, we’ll see. But at this point, we have to stay prudent. I would rather under promise and over deliver.

Caroline Drouin, Head of Investor Relations, IA Financial Group2: I appreciate it. And then just maybe moving on to U. S. Individual insurance sales. I think it’s been constant or flat over the prior three quarters.

And then kind of like a step function up, I think it was 70,000,000 68,000,000 to $78,000,000 constant dollars. Is there anything special in that 78,000,000 this quarter? Or is that are we hitting a new growth trajectory for individual insurance?

Denis Ricard, President and CEO, IA Financial Group: You’re talking in The U. S, right?

Stephane Gourbonnet, Responsible for Wealth Management Operations, IA Financial Group: Yes.

Denis Ricard, President and CEO, IA Financial Group: In The U. S, okay. Yes. Maybe, Sean, you want to comment on the sales,

Sean O’Brien, Chief Growth Officer of U.S. Operations, IA Financial Group: which have been quite fantastic as far as I’m concerned? Yes. I mean, American Amicables have been having had a fantastic quarter and is really delivering a strong relationship with the IMO as well established model. And yes, they’ve just really improving out their model quite well. And then on the overseas side as well, they’re on plan and doing well.

So it’s I’d say the star is AMM in the last quarter, air con amicable that is.

Denis Ricard, President and CEO, IA Financial Group: I would say I mean, keep in mind that over the last fifteen years since we acquired American Amicable, the average I mean, CAGR in terms of sales growth had been around 15%, 16% a year. This is amazing. And now we have severity that is increasing even more our U. S. Sales.

So I don’t see any decrease or I don’t see any stabilization of our sales growth in The U. S. At this point.

Caroline Drouin, Head of Investor Relations, IA Financial Group2: So it’s plausible we could build off that $78,000,000 this quarter in Individual Insurance. Is that what I’m kind of hearing?

Denis Ricard, President and CEO, IA Financial Group: Sorry, missed your question.

Caroline Drouin, Head of Investor Relations, IA Financial Group2: It then we’re going to expect some growth off that $78,000,000 in Q2 in individual insurance sales in The U. S. That’s a good starting point for additional growth.

Denis Ricard, President and CEO, IA Financial Group: Absolutely. Okay.

Caroline Drouin, Head of Investor Relations, IA Financial Group2: And then one question on Vercity. I’m assuming this write up in the Vercity deferred tax asset was driven by the move towards profitability for that business. Wondering if I have this right and if there’s more to go in terms of these deferred tax asset as the profitability of Vercity continues to improve? And if you could quantify the potential write up in that deferred tax asset, it would be helpful.

Eric Jobain, Chief Financial Officer and Chief Actuary, IA Financial Group: Yes, sure, Lamar. It’s Eric. On this one, just a bit of context. When we acquired Vericity, you have to remember that this entity was running at loss. So they could not put any value on those past net operating losses in their balance sheet and we did not pay anything for it, okay.

That being said, of course, when we made the acquisition, we had a business case, we had management actions, so we had things to improve profitability. So in the integration phase of the last year, we had to get comfortable with the fact that eventually what we would do in terms of management action would put these potential net operating loss recoverable. So that’s what we did from a U. S. Tax perspective.

And we recognize most of it at this point. The remaining part, they have an expiry date and they are less probable to recover, but we did put the value of those deferred tax assets that we thought we can recover with our plan ongoing plan. Yes. I would like

Denis Ricard, President and CEO, IA Financial Group: to add on this. It’s quite interesting because when we acquire organization, obviously, we do initiatives to improve. And this is a very, very interesting one because that change made us it made it possible for this acquisition to generate an ROE over the current ROE guidance even though we acquired it in the past. So I’m very pleased to this positive development.

Conference Operator: The next question is from Darko Mihelic from RBC Capital Markets. Please go ahead.

Tom MacKinnon, Analyst, BMO Capital Markets: Hi. Thank you. Good morning. I think my main question is so deep in the weeds that maybe I’ll take it offline. Eric, if that’s possible, I’d love to follow-up call on just a mechanic.

But my other question is maybe for you, Denny. In your answer on the question of capital deployment, I just as I sit back and I see the results of this quarter and you can sort of see the trend and the help that your company gets from strong markets, you’re going be adding RF capital, you want to deploy more capital. I guess the question is the business mix and the dependency on equity markets really performing well. I’m not worried about immediate sensitivities, which we can see. It’s just that a sustained prolonged strong market really helps what happens in the reverse case.

And so does that change perhaps how you might deploy capital after RF closes?

Denis Ricard, President and CEO, IA Financial Group: Absolutely not. Darko, when I look at all of our businesses, I have a long term view. And in all the businesses that we are in, right now, we believe that we can generate an ROE that is above our 17% target. So, we’re not at the point where we would say there is, let’s say, overconcentration in one sector versus the other. We look at the opportunities that exist in the business that we’re in.

I mean, we said in the past, for example, that The U. S, there were more opportunities, but guess what? We just announced one in Canada. So we have to look at the opportunities that present ourselves and we don’t feel that there is an over concentration in one sector versus the other.

Tom MacKinnon, Analyst, BMO Capital Markets: Okay. That’s fair. And with respect to the RF acquisition and its closing, Presumably the idea would be that you’d really want to sort of grow and add to that business as you move forward. So is there maybe you can talk to opportunities to further grow that business inorganically? Do you think that they exist?

Denis Ricard, President and CEO, IA Financial Group: There are less and less of those opportunities, but there are still some. So we are on the lookout to increase our distribution. If there is one that is available, we will be there.

Tom MacKinnon, Analyst, BMO Capital Markets: Great. Thank you.

Conference Operator: This concludes the question and answer session. I would like to turn the conference back over to Denis Ricard for any closing remarks.

Denis Ricard, President and CEO, IA Financial Group: Well, thank you all. As you’ve seen, we are quite excited about the IA model. The organization is generating a very significant amount of excess capital from their operations. We already had a 17%. We are now focusing on the plus as you’ve heard today.

So and the top line is great. So we feel very confident going forward. And thank you for being present to this call today and see you have a great end of the summer. Thank you.

Conference Operator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.