iA Financial Sees 10%+ EPS Growth as $1.1B Capital Bolsters Wealth Push

Key Points

• iA Financial expects EPS growth above 10% and ROE above 17%, supported by strong operating performance, CAD 1.1 billion in excess capital and roughly CAD 700 million in annual capital generation.
• Wealth management remains a key growth driver: the company reported CAD 2.5 billion in net segregated-fund sales in the first half of the year, while RF Capital assets increased to about CAD 47 billion and are targeted to reach CAD 50 billion next year.
• iA continues to target 5%–8% long-term growth in Canadian individual insurance, but recent U.S. results were weaker because of mortality claims and elevated lapses; management expects gradual improvement in its U.S. dealer business.

Denis Ricard, president and chief executive officer of iA Financial TSE: IAG, said the insurer’s capital position, operating performance and growth strategy support confidence in maintaining return on equity above 17% and earnings-per-share growth above 10%.

Ricard spoke after the event host highlighted the company’s performance during his eight-year tenure as CEO, including a reported 13% compound annual growth rate in core EPS through 2025, 8% growth in book value per share and an increase in return on equity to 17.5% from 12%. Ricard said iA Financial’s share price had risen from CAD 49.75 when he became CEO to more than CAD 210.

Capital flexibility and earnings quality

Ricard said iA Financial has CAD 1.1 billion of excess capital available for deployment and generates roughly CAD 700 million annually. He said the company has flexibility to use capital for share repurchases or acquisitions, while its operations continue to perform well.

“When you combine our current operations profitability, which are doing very well, plus the fact that we have excess capital to deploy, I feel even more confident today than ever before,” Ricard said regarding the outlook for EPS growth.

On earnings quality, Ricard said book-value growth is the most important long-term measure for a life insurer because of the duration of insurance contracts. He said iA Financial has generated book-value growth, including dividends paid to shareholders, of more than 10%, compared with an historical level of 11%.

He also said that, cumulatively since the adoption of IFRS 17, core earnings have represented 85% of reported earnings. Mark-to-market assets have totaled 99% cumulatively over that period, according to Ricard, who said the result supports the credibility of the assumptions underlying core earnings despite volatility introduced by the accounting standard.

Wealth management growth and RF Capital

Ricard said wealth management, which the host said contributes close to half of iA Financial’s total earnings, remains a major growth opportunity. The company is a leader in segregated funds and in non-bank full-service brokerage distribution, he said.

In segregated funds, Ricard said iA Financial has ranked first since 2015 across measures including gross sales, net sales and assets under management. The company reported CAD 2.5 billion in net segregated-fund sales in the first six months of the year.

Ricard said the market can expand because many Canadians remain underprotected or underprepared for retirement. He attributed iA Financial’s sales performance to its focus on the mass market, simplified technology and processes, product design and distribution relationships.

He described the acquisition of RF Capital as one of the company’s best acquisitions, citing stronger-than-expected retention and favorable market conditions. Assets associated with the business have risen from about CAD 40 billion at acquisition to about CAD 47 billion, and iA Financial is targeting CAD 50 billion next year. The company expects recruiting advisors to be a principal growth lever.

Ricard said iA Financial would consider additional wealth-management acquisitions at reasonable prices, though organic growth remains the first priority. He also acknowledged that cross-selling iA products through its wealth channels has not yet met his expectations, saying the company is implementing processes to improve results.

Insurance operations and U.S. outlook

In Canadian individual insurance, Ricard reiterated a medium- to long-term growth expectation of 5% to 8%. He attributed a recent sales slowdown partly to the company’s decision to reduce its presence in certain concepts it viewed as carrying greater advisor-behavior risk. He said the slowdown was not a secular trend.

Ricard said iA Financial holds roughly 25% market share by number of individual insurance policies sold in Canada. The company is seeking to expand from its mass-market strength into the mid-market through product offerings, distribution and a greater presence in national accounts.

Regarding insurance experience, Ricard said results have been roughly even over the last two quarters, with about CAD 1 million in experience gains. He said the company expects experience gains over time because it reserves prudently, though results can vary by quarter.

Ricard said he was dissatisfied with U.S. results over the last two quarters but remained confident in the U.S. life business. He cited significant mortality claims in one quarter and elevated lapse rates tied to a distributor’s recruitment of newer advisors in another. He said the U.S. life operation has delivered a 16% compound annual growth rate since 2010 and has produced returns on equity above the company’s target range.

The U.S. dealer business faces headwinds from car sales and inflation, he said, while repricing of extended-warranty products and changes to the sales team are expected to produce gradual improvement. Ricard said Vericity is performing in line with plan, with its eFinancial distribution operation and Fidelity Life manufacturing business creating additional sales synergies.

Looking ahead, Ricard said investors should focus on business growth, capital deployment and the resulting direction of return on equity and EPS.

About iA Financial (TSE:IAG)

iA Financial Group is one of the largest insurance and wealth management groups in Canada, with operations in the United States. Founded in 1892, it is an important Canadian public company and is listed on the Toronto Stock Exchange under the ticker symbol IAG (common shares). To learn more about iA Financial Group, you can sign up for our newsletter on our website at ia.ca. iA Financial Group is a business name and trademark of iA Financial Corporation Inc

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.