Thank you for standing by. This is the conference operator. Welcome to the iA Financial Group 's second quarter 2025 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. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Caroline Drouin, Head of Investor Relations. Please go ahead.
Good morning, everyone. Bonjour à tous. Welcome to our second quarter 2025 conference call. All of our Q2 documents, including press release, slides for this conference call, supplementary information package, and quarterly MD&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 the 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 90 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&A available on SEDAR and on our website, with an update in our Q2 2025 MD&A, which was released yesterday. I will now turn the call over to Denis Ricard, President and CEO.
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 Éric Jobin, Chief Financial Officer and Chief Actuary; Alain Bergeron, Chief Investment Officer; Stephan Bourbonnais, Responsible for Wealth Management Operations; Renée Laflamme, in charge of Individual Insurance, Savings, and Retirement; Pierre Miron, Chief Growth Officer of our Canadian operations and responsible for Dealer Services Canada and iA Auto & Home; Sean O'Brien, Chief Growth Officer of our U.S. operations; and Louis-Philippe Pouliot, 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're not providing new details today, we're more than happy to give you an early read on how it's been received. Stephan has been meeting with advisors across the country, and during the question period, he can share a bit of the tone and energy he's 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 CAD 3.49, up 27% year-over-year. Our Core ROE reached 17% on a trailing 12-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 remains 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 130% at the end of Q2, supported by strong organic capital generation and prudent risk management. Our book value per share has risen to CAD 76.02, up 9% year-over-year, and excluding the impact of the NCID, the increase over the last 12 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 CAD 103 million. This growth highlights the strength of our distribution networks, the effectiveness of our digital tools, and the 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 CAD 225 million this quarter, marking a 16% increase over the same period last year. The strong performance was driven by sustained momentum in P&C sales and the contribution of Global Warranty. Lastly, iA Auto & Home delivered strong results with sales up 10% year-over-year to reach CAD 206 million. This growth was supported by an increased number of policies and agile repricing. Moving to slide 10, where we highlight our wealth management results.
iA continues to lead the Canadian market in segment sales, both in gross and net sales. Gross sales were up 8% year-over-year, approaching CAD 1.4 billion, while net sales reached CAD 670 million. 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 in 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 $78 million , equivalent to CAD 108 million .
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 a 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. Éric will discuss this achievement in a moment. So far, in 2025, we've generated CAD 325 million in organic capital, keeping us well on track to meet our 2025 target of over CAD 650 million. Lastly, our dividend payout ratio is well within our target range of 25%- 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 iA. This strategic move significantly accelerates our growth in the high-net-worth segment and strengthens our national presence in Wealth Management. With over CAD 40 billion in assets under administration, RF Capital is one of the largest independent wealth management firms in the country. Its entrepreneurial culture and advisor-centric model align perfectly with iA.
The transaction, valued at CAD 597 million 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 CAD 0.15 in year two. We're 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 Éric, who will comment on the second quarter profitability and capital strength. Following Éric's comment, we will take questions. Éric.
Thank you, Denis, and good morning, everyone. I'm pleased to walk you through a quarter that reflects discipline, 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 first half of 2025 on a very high note, with Core EPS of CAD 3.49, representing an increase of 27% year-over-year and a reported EPS of CAD 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 label 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 12 months.
We are pleased to highlight that our ROE is running ahead of schedule against our ROE target of 17%+ in 2027, thanks to our strong year-to-date performance driven by important experience gains and favorable macroeconomic tailwinds. Building on this momentum, we anticipate that our Core ROE will remain at its current level of 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%+ 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 12 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 66% and 22% 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 CAD 133 million, 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 iA Auto & Home. The segment also benefited from higher expected iA Auto & Home, 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 plans 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, the second quarter core earnings rose to CAD 113 million, 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 12 months. Core non-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. Higher net revenue on assets was recorded. Turning to our U.S. operations on slide 19, core earnings totaled CAD 36 million in Q2, representing a significant 64% increase year-over-year.
This performance was mainly driven by a pretax CAD 28 million 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 CAD 1 million year-over-year, driven by higher earnings from dealer services, resulting from the discipline 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 the Vericity and Prosperity acquisition was slightly positive on core earnings, aligning with our expectation at the time of acquisition.
Additionally, as part of the adjustments to net income for the quarter, an adjustment was made to Vericity's deferred tax assets related to tax losses incurred prior to the acquisition by iA, resulting in a favorable impact of CAD 30 million on net income. Now turning to slide 20 for the results of the investment segment. Core earnings for the quarter were CAD 102 million, up 12% year-over-year. Before accounting for taxes, financing charges on debentures, and dividends, the core net investment result was CAD 127 million, up from CAD 108 million a year ago. The 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 CAD 79 million pretax. Maintaining our focus on operational efficiency, this amount includes CAD 68 million pretax in core other expenses, in line with our quarterly expectation of CAD 68 million plus or minus CAD 5 million. It also includes a higher provision of CAD 11 million pretax for the variable compensation related to the company's 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 CAD 14 million charge to Q2 net income.
For employees, a temporary reduction in pension contributions will be in effect from Q3 2025 through Q2 2026, with an expected impact of approximately CAD 4 million 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 June 30, 2025, our Solvency Ratio stands at 138%, well above the regulatory minimum ratio of 90%. The 6% 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 a pro forma basis, taking into account the proposed acquisition of RF Capital . announced on July 28, the Solvency Ratio is estimated at 132%. Our consistent ability to generate strong and ongoing organic capital is evident with a quarterly record of CAD 200 million in additional capital in the second quarter, keeping us on track to reach our target of CAD 650 million plus in 2025. As of June 30, the capital available for deployment was assessed at CAD 1.5 billion, positively impacted by organic capital generation. As a reminder, on a pro forma basis and taking into account the proposed acquisition of RF Capital ., the capital available for deployment is estimated at CAD 900 million. 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. These conclude my remarks. Operator, we are now ready to take questions.
Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. One moment, please, while callers join the queue. The first question is from Doug Young from Desjardins Capital Markets. Please go ahead.
Hi, good morning. I guess the question is for Éric or maybe Sean. Is there any way you can quantify the year-over-year improvements in core earnings at the U.S. dealer services business versus the U.S. life insurance business? I mean, it seems like there's, you know, the gradual improvement in U.S. dealership profitability is flowing through, as you'd signaled you had expected. I just find it sometimes hard to quantify between, you know, what goes through the non-core non-insurance activities and what goes through on the insurance activities for that business. I don't know if you can kind of give a little bit more color there.
Yeah, it's Denis here first. I mean, we are very pleased with the increase in the U.S. business profitability this quarter. We don't disclose the specifics of each of these businesses separately. I'm going to ask maybe Sean to give some color about, you know, 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. For the things that we do control, we've made several initiatives that improve the profitability. Keep in mind that both the U.S. life and the U.S. dealer has improved. Sean?
Yeah, thanks, Denis. I sort of, I'm thinking about it as, you know, those gradual improvements really being driven by four key initiatives we've taken. The first one is the repricing. I've spoken to that before. I could say that now we have actually repriced all onerous products in the warranty business without any exception. That's going to help to restore some of the margins and I think discipline that we're looking for in that business. The other side is the expense management. Again, we've spoken to that as well. I'd say at this point, we've reduced our total expenses by about 5% in that business. That's meaningful. That's not taking into effect despite inflation that's happening in all businesses. Quite happy with that. That's just getting the business to the point where 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. You know, 50% of our business is in the used car market, 50% in the new. It does create a nice balance as there is some volatility in one segment to the other. The other side is the differentiation in that business is proving out well. We talked about DAC and DealerWizard. These are sort of alternate channels. It has some nice profit delivery and sales action in those areas. On the Vericity side, it's, like Éric said, we're delivering our anticipated synergies. The business is going well and it's on track with where we expect to be. Really happy with sort of the innovation and some of the energy that team is bringing to our overall U.S. life initiatives.
Okay. I'm not going to get the split. I get that. I figured I'd ask. The second is that in Canada, you know, the individual Canada individual insurance, can you break down, Éric, the CAD 31 million 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? I'm just hoping to get a little bit more color on that CAD 31 million.
Yeah, Doug, it's Éric. You know, we're not going to split it. The reality is that all operations have performed very well in the quarter. I mentioned in my speaking notes some particular alignment going all in the same direction. We had mortality positive experience gain. We had morbidity on the group side. iA Auto & Home favorable weather conditions. It goes on like this. The CAD 31 million is composed of, I would say, small to medium-sized experience gains arising from all those operating segments.
Two for two. Okay. 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 the integration plans and plans to retain advisors. I'll give you kind of where I'm going at this. I know you don't want to give the cost of advisor retention, but can you give some context relative to the announced purchase price? Is it 10%, 20%, 30%? What's the cost going to be to retain the advisors? I ask that just because I find it hard to get a sense of the price paid without getting a sense of what the cost is going to be to retain the advisor network. Given what we've seen historically, in some cases, those costs can be quite significant.
I figured I'd throw it out there and see what I can get.
Yeah, thank you, Doug. It's Denis here, obviously. There has to be some steps before we get into that point where we know exactly what the cost would be. At this point, I think it would be quite important at least that you hear from Stephan the tone coming from the discussion he's having with the various advisors. Maybe, Stephan, you can give some colors at this point?
Yeah, certainly. I mean, since the announcement, we've been, as you mentioned, right, the advisor retention is a key success factor. We've been, since the announcement, trying to be as visible as possible, meeting with the executive team, meeting with all the employees and the advisors across the country. I'm actually right in the middle of a road trip right now. 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. We've been listening to advisors, 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 advisors are seeing is it's two proud Canadian histories coming together with one shared future, and it brings nearly 300 years of combined experience. 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. We're bringing this as a distinct offering to what we currently do. Everything that's been done right now is to assure a seamless transition for both them and their clients, right? No repapering, no change in the brand, no change in the location. It's all about continuity. I think it's been well received so far. What we're seeing is great feedback from the team. The advisors are engaged. I like to say that the knowledge is in the room, and they're asking good questions.
I think they're now starting to see the real potential of what we could do together, and they're definitely leaning in. Looking forward to meeting our new advisors across the country in the next few weeks.
Appreciate the call. Thank you.
The next question is from Tom MacKinnon from BMO Capital. Please go ahead.
Yeah, 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. I think you used the term confirmed sales. How are we to measure these confirmed sales? Does that mean the sales haven't been booked yet? Just some color there, please.
Yeah, this is Éric speaking. Thanks for the question. I think we've talked a few times about confirmed versus implemented. The sales you are seeing in the disclosure are implemented sales, and the strain reflects sales that we have confirmed. We are not disclosing the confirmed sales, but what I can say is we have 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.
Okay, thanks for that. 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.
Yeah, 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 and guarantees have some seasonality. Q4 is usually a low quarter, Q1, and then you have Q2. With spring coming, people tend to go and buy more cars. You know that the product that we sell with autos is following that trend of that pattern of auto sales during the year.
Okay, thanks for that.
The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.
Hey, quick one here. Just that confirmed sale thing in Group. 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?
I would say that it's actually difficult to predict the timing. Just a reminder that it's a bit of a lumpy type of business, right? There's seasonality to how the business is growing. Typically, first quarter and third quarter are a bit higher, but 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. It's hard to say whether it's just a lag, but just a bit lumpy is my view on it.
Just the, I got a CSM question and an ROE question. Is there anything, so your CSM, the amount recognized in the quarter, it was up 18% year-over-year. If I look at the, I'm pretty sure people look at it this way for modeling anyway, how much that number represents of the beginning balance of the balance sheet balance to kind of, you know, get a sort of a ratio for, you know, how that, you know, trends over time. 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 a factor, multi-factors behind that? You're selling more short-dated products with CSM. Your interest rates are having an impact. What's the story there?
Yeah, I guess, are you looking at Wealth, Gabriel, when you look at this, or are you?
I'm looking at the total, you know, whatever that goes into.
Okay, because you have to have two things in mind. First, the growth of the CSM amortization is following our great, you know, growth story on this insurance product. That's one item that contributes to this increase. The second one is mostly due to seg funds and market experience. You know, with the new CSM approach following IFRS implementation, when there is positive market experience, we have to stick to the initial amortization schedule. We take the gain from market, we increase the CSM, and then we amortize more over the remaining period. That's what is playing out here, and that increases the ratio that you look at.
Got it. I guess my last question here on ROE, Denis might not like the word exceptional. I don't think it's a bad word, but you had an 18 point, nearly 19% ROE this quarter annualized. If I strip out some of the experience gains, you're still at around 17%. At or on par with your target in 2027. You said that you're probably going to beat 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. 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 and all, but it's got to be more than just that.
Yeah, Gabriel, when we said the 17%+ , it was the investor event. There were some, obviously, there are still some geopolitical disruption, I guess, is the word I'm going to use here. We tend to be prudent in the way we set our guidance. The reality is that our business model is quite resilient. We are ahead of our game right now. 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. Is there anything, you know what, I'll leave it at that.
Yeah, 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 has been a tailwind since the investor event. The AUA, AUM, everything has increased. Right now, it's still a tailwind. That's the main driver since the investor event.
All right. Have a good one, enjoy the rest of your summer.
Thank you.
The next question is from Mario Mendonca from TD Securities. Please go ahead.
Good morning. A 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?
Yeah, I'll take a hello, Mario, it's Éric. I'd say a couple of things on this because, you know, iA's DNA has always been to be prudent at managing liabilities. If you look historically at experience gain, you will find I looked at it very recently. Over the last 10 years, 2/3 of the times we had positive experience gain, where we had one-third of the times we had loss. Our prudent way at managing liabilities is putting kind of positive bias on average over time. That's one clue. 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. For the remaining of 2025, you know, 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. 17%+ .
The 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. In 2026, you reset and maybe we get closer to zero. Is that, am I interpreting your answer correctly?
Yeah, absolutely, Mario. If you look just in Q1 this year, after year-end assumption review, we just had CAD 1 million of experience gains. We reset the clock annually.
Okay, I think I understand. The second question is on buyback activity. I'm looking at the last three quarters, the average buybacks, kind of modest, works out to an average of half a million shares a quarter. The previous three quarters, maybe four quarters, if you look at the average, it was closer to CAD 2 million. 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?
It's Denis here. When we started the buyback, at the time, 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, I would say, valued right now. They are still undervalued. That's what a CEO would always tell you anyway. The point is that there's been, I would say, a discussion internally about what should be the right level and looking at the opportunity that we had in terms of acquisition. Our first objective is to grow by organic growth, acquisition, and then at the end, the buyback. 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.
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. We want to deploy it. If we're not in a position to acquire organization and deploy capital by acquisition, we will increase the buyback.
Okay, thank you.
The next question is from Lemar Persaud from Cormark. Please go ahead.
Yeah, thanks. Maybe for Denis or Éric Jobin to start off here. Just a question on the ROE, continuing on Gabe's line of questioning. I appreciate your answer to focus on the plus. What would be helpful is to understand under what circumstances would you actually present to the board, you know, or say that, you know, we need to bump up this target a bit higher? It sounds like 17% is on lock, and you have that target out to 2027. It's plausible that you're going to exceed it by a fair margin, at least that's from where I'm sitting. Maybe talk about the process in bumping up this target higher. I appreciate that you just introduced it a couple of months back. Any thoughts would be helpful?
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. We are at the point where we might all say that, you know, we're quite comfortable with the 17%. I guess I can say that we are comfortable with the plus, as we have mentioned. 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 the competitive environment because I believe there is much more discipline in the market right now, but you never know. There might be changes going forward in the future. We never know about that.
Again, I feel quite comfortable right now because I would say that compared to 15 years ago, there's much more discipline, much more discipline in the market. To me, it's prudent at this point not to go the next step. It might come, it might come in a year. We'll see. At this point, we have to stay prudent. I would rather under-promise and over-deliver.
I appreciate it. Just maybe moving on to U.S. individual insurance sales. I think it's been constant or flat over the prior three quarters, then kind of like a step function up. I think it was CAD 68 million to CAD 78 million constant dollars. Is there anything special in that CAD 78 million this quarter, or are we hitting a new growth trajectory for individual insurance?
You're talking in the U.S., right?
Yeah.
In the U.S., okay. Yeah, maybe Sean, you want to comment on the sales, which have been quite fantastic as far as I'm concerned.
Yeah, I mean, American-Amicable have been having a fantastic quarter and is really delivering a strong relationship with the IMO, as well-established model. They've just really improving up their model quite well. On the Vericity side as well, they're on plan and doing well. I'd say the star is AMM in the last quarter. American-Amicable , that is, right?
Yeah, I would say, keep in mind that over the last 15 years, since we acquired American-Amicable , the average, I mean, the CAGR in terms of sales growth had been around 15%, 16% a year. This is amazing. Now we have Vericity that is, you know, increasing even more our U.S. sales. I don't see any decrease or I don't see any stabilization of our sales growth in the U.S. at this point.
It's plausible we could build off that $78 million this quarter in Individual Insurance. Is that what I'm kind of hearing?
Sorry, I missed your question.
We're going to expect some growth off that $78 million in Q2 in Individual Insurance sales in the U.S. That's a good starting point for additional growth.
Absolutely.
One question on Vericity. I'm assuming this write-up in the Vericity deferred tax asset was, you know, driven by the move towards profitability for that business. I'm wondering if I have this right and if there's more to go in terms of these deferred tax assets as the profitability of Vericity continues to improve. If you could quantify the potential write-up in that deferred tax asset, it would be helpful.
Yeah, sure, Lemar, it's Éric. On this one, just a bit of context. When we acquired Vericity, you have to remember that this entity was running at a loss. They could not put any value on those past net operating losses in their balance sheet. We did not pay anything for it. That being said, of course, when we made the acquisition, we had a business case. We had management actions. We had things to improve profitability. 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. That's what we did from a U.S. tax perspective. We recognize most of it at this point. The remaining part, they have an expiry date and they are less probable to recover.
We did put the value of those deferred tax assets that we thought we can recover with our ongoing plan.
I would like to add on this. This is quite interesting because when we acquire an organization, obviously we do initiatives to improve. This is a very, very interesting one because that change made it possible for this acquisition to generate an ROE over the current ROE guidance, even though we acquired it in the past. I'm very pleased to this positive development.
Once again, if you have a question, please press star then one. The next question is from Darko Milevic from RBC Capital Markets. Please go ahead.
Hi, thank you. Good morning. I think my main question is so deep in the weeds that maybe I'll take it offline. Éric, if that's possible, I'd love to have a follow-up call on just a mechanic. My other question is maybe for you, Denis, in your answer on the question of capital deployment. As I sit back and I see the results of this quarter, and you could sort of see the trend and the help that your company gets from strong markets. You're going to 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?
Does that change perhaps how you might deploy capital after RF closes?
Absolutely not. Darko, when I look at all of our businesses, I have a long-term view. In all the businesses that we are in right now, we believe that we can generate an ROE that is above our 17% target. We're not at the point where we would say there is, let's say, an 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 in the U.S., there were more opportunities, but guess what? We just announced one in Canada. We have to look at the opportunities that present ourselves, and we don't feel that there is an overconcentration in one sector versus the other.
Okay, that's fair. With respect to the RF . acquisition and its closing, presumably, you know, the idea would be that you'd really want to sort of grow and add to that business as you move forward. Is there maybe you can talk to opportunities to further grow that business inorganically? Do you think that they exist?
There are fewer and fewer of those opportunities, but there are still some. We are on the lookout to increase our distribution. If there is one that is available, we will be there.
Great, thank you.
This concludes the question and answer session. I would like to turn the conference back over to Denis Ricard for any closing remarks.
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. The top line is great. We feel very confident going forward. Thank you for being present to this call today. See you, have a great end of the summer. Thank you.
This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.