I'd like to welcome to the stage Monsieur Denis Ricard, President and CEO of iA Financial Group. A regular guest on this stage. Thanks for coming again this year, Denis.
Yep, nice to be here with you.
Great. Especially after I had to win yesterday.
Yeah, great game.
Oh, yeah.
Isn't it? Wow.
It's a bit of a change from when I'm in Toronto.
No comment.
That's an easy one. Let's go to your ROE target. You know, you blew past it pretty fast. You know, you get that raises obvious questions, and you said two things on the last call that I found interesting. You emphasized the plus.
Mm-hmm.
Saying, "Yeah, well, we said it, there's potential beyond and we're doing that." But you also suggested that it provides you flexibility in the event of an acquisition that to me signals that maybe you take a step back on ROE, still a good ROE, but to accommodate an acquisition, you would have to maybe sacrifice a bit of ROE. Is that just a general statement because historically iA has been an acquisitive company? Or are you getting people, you know, ready that, you know, something might be happening sooner rather than later?
I would say that it's not a signal that there's something imminent or not here. I think over the years we've grown at iA significantly. 70 acquisitions since 2000, 10 of them over $100 million. We are growth story basically. We've delivered a significant increase in EPS over the years. ROE is, I mean, the landscape in Canada has changed significantly. I've seen that over all my career. Where it was difficult to generate excess capital.
Mm-hmm
Fifteen years ago, for example. Today, we are in a position that I've never seen in Canada, and it's for the whole industry. In particular for iA, we're generating CAD 700 million of excess capital on a yearly basis. It's a nice problem to have, but we will stay disciplined in the way we're going to allocate it. In terms of ROE, I mean, obviously, at the extreme, if we were only to buy back shares, it would be easy to beat the 7. I mean, we would be on the plus plus.
Mm-hmm.
Okay? This is not what we want to do in the long term. In the long term, we want to be a growth organization. That means that at some point, you know, we're going to invest in acquisition with the hurdle rate that we target over the long term. Sometimes when you do an acquisition, it might put pressure down to the ROE in the first years. Because some of these acquisition obviously assumes that there's gonna be growth over time. This is what we've done over the years, and it's been quite successful. It's a mix of. I would want in the long term to have a mix of both acquiring organization to strengthen our current businesses.
Mm-hmm
And also obviously with the current situation, some buyback is probably inevitable.
You did mention, you know, the ROE and excess capital generation of, you know, your company and others, I guess, and how, you know, it's something unprecedented. You know, I get that question a lot. Are the ROE sustainable, and what's changed? My answer to that is, well, there have been a few changes over time, like how it turned out to be more favorable than expected.
also just, you know, in a very simplistic way, if we go way back to the financial crisis, and there were some fundamental changes to business models that were required, and we know that it takes a long time for changes insurance companies make to their strategies to have an impact on the bottom line. Well, it just so happens it's been a long time. Is it really just, you know, the passage of time and all the changes you've made since then that
Yeah, there's been.
that's put you in a position where you are now?
I mean, I've seen. I've gone through the 2008 crisis.
Yeah
Obviously, and also the 2010+, where the interest rates, the long-term interest rates, has been a big driver of, let's say, the difficulty of the industry to generate excess capital. My take today is that the industry is much more disciplined.
Mm-hmm.
There's been also some consolidation within the industry. We are able to generate excess capital that has nothing to do with what was before. Capital-light products more, capital-light businesses, more than it used to be. You don't see lapse-supported products that like they used to be in Canada. There's been a shift of products, shift of businesses. Also the regulator has done a better job of recognizing the good risk management practices of organizations. By doing that, organizations adapt their practice to obviously optimize their capital position. It's really a combination of a lot of things. I think in Canada, we are in a great spot right now.
Yeah. Bringing it back to that acquisition question, and you know, your answer was thorough, but I just wanna follow up with you know, potential targets. You've done the RF acquisition in Canada, so broaden your you know, your wealth strategy. Then it makes me think, okay, well, the next deal, if and when it happens, gonna be in the U.S. For a while, it looked like a default option was the warranty business 'cause you'd made a couple acquisitions. You know, you had the American-Amicable deal that was, I don't know, 10-
Twenty-ten.
2010. Vericity was a few years ago.
Yeah.
Looks like there's another avenue for more niche-y insurance, individual insurance type businesses. Equal probability of that?
Well,
Between warranty and individual, I mean
I mean, I would be interested to acquire, I mean, obviously with the right price, acquire an organization in any business we're in because we're able to generate or we're above our target in those businesses, so. The reality is that, for example, in individual insurance in Canada, I mean, there are not that many opportunities. We know that. To your point, I've been saying for the last three years that there would be more opportunities in the U.S. Guess what?
Mm-hmm.
The last one was in Canada. To some extent.
True
you have to also accept the fact that we're gonna be opportunistic also. If we can strengthen our business like it did with RF Capital, like it did with Global Warranty, and it was a great acquisition. Vericity in the U.S., as you mentioned. We are open to strengthen the current strategy of all our businesses, and so we are looking across the spectrum of all the businesses we're in right now.
Okay. Now, you know, focusing on the organic targets, the ROE seems to be, you know, in cruise control. For this year, your other target, your 10%+ EPS growth seems a little bit more challenging given that, you know, your Q2 and Q3 of 2025 were very, very strong. The bar is quite high. How do you think about it?
I'm very confident about the future. Last year we had 16% EPS growth, previous year, 20%. Very significant results for our organization. When I look forward, I see some tailwinds. Capital, we're generating a lot of capital. We're not going to pile up capital. We're going to deploy it in some way. That's going to fuel. That, that's one thing. The second thing is about the acquisition that we made recently, whether it's RF Capital or Vericity, they are becoming accretive. They are, you know, obviously contributing to the EPS growth going forward. There are three things. The last thing I would mention is all our businesses are having significant growth that is fueling. Just think about the wealth management business in Canada.
The seg fund business has had great results recently.
Mm-hmm.
Life insurance, we are improving our relationship with our distributor. The growth is there. I'm quite confident about the future. It's not because you've just had a great year that you cannot have a great year the next year.
Okay. Then you did mention well, a couple elements of that growth picture, the RF Capital and Vericity accretion from those transactions. Can you just maybe flesh that out a little bit more? Because RF Capital, on the heels of very strong market performance, is gonna be more accretive sooner, Vericity for other reasons as well. Maybe put some numbers on that and
Yeah
Explain it a bit better than I did.
Yeah. I'd say at a high level, RF Capital, we are ahead of where we thought we would be. For Vericity, we are on par with where we wanted to be. For RF Capital, we said that we would be accretive in the second year, and we've already started first quarter to be accretive. Better market, a better retention versus the price that we paid have obviously fueled significantly. We were very proactive in the synergies.
Mm-hmm
That we wanted to implement. Those three things have, I mean, have basically made us accretive immediately on that acquisition. For Vericity, second year, we are not turning the corner in a sense that we said that we would be accretive in the second year. This is where we are. Last quarter, we were neutral on accretiveness. From that, from this point on, we are going to be accretive in that acquisition. That fuels the EPS growth.
The Vericity, I recall that when it was a standalone company, they didn't have enough capital to retain risk, so they used reinsurance. Is a big driver for this just recapturing some maturing reinsurance contracts?
Yeah. Well
How big is that?
The story of Vericity is a bit similar to the American-Amicable of 2010. I remind you that American-Amicable, we started with $25 million premium fifteen years ago. We had $230 million last year.
Mm-hmm.
And the ROE that was single digit when we bought the company, and last year was above our target, guidance. It's been a huge success. One of the reasons, I mean, some of the reasons, I guess, is that they were constrained on capital. The previous owner didn't want to put capital. Also they had very expensive reinsurance treaties in terms of expenses as well. Vericity was a public company, so obviously, those costs are gone now. I mean, we very quickly worked on what could be changed, and so it became accretive faster because of that. The story about Vericity now is really to speed up the growth going forward, like we did with American-Amicable.
American-Amicable CAGR in terms of sales and profitable sales over the last 15 years is 16%.
Mm-hmm.
Huge.
I do wanna ask a couple of questions about RF Capital from two angles here. I'll start with the mandatory AI question and disruption risk.
Yeah
'Cause, you know, it came up in, you know, very intensely a few months ago, not with RF, but U.S. firms. What's the response to, you know, very simplistic view that these are businesses that are gonna be disrupted?
How do you see that? I've been there, done that.
Okay.
Okay. Technology disruption.
Okay.
Okay, I've heard that forever, in our businesses, particularly over the last 10 years, I must say. You know, the Fintech was supposed to disrupt all our businesses, and now AI, we can hear that it was going to disrupt our businesses. Let's take a big, deep breath here. Okay, first of all, I think what is important in terms of technology is to do the smart choices. At our organization, we are spending a reasonable amount of time thinking about how it can help our business. We still believe in the value of advice. This is very, very important. Our ambition is to be the best organization that combines the human aspect of the business and the digital aspect of the business.
The technology is basically making our advisors. We want the advisors to be more productive at the end of the day. We want the organization to be more productive. This is the efficiency part of the AI, and it's obviously the first part that you look at. Then there's the interaction with the clients also, spending time and efforts to simplify.
Mm-hmm
Simplify the process with the advisors and with the clients. This is where we are putting a lot of energy right now. To me, it's continuity, continuous improvement in terms of technology. One might say it's gonna go faster. Fine. I mean, it's okay. The one thing also to realize is that 83% of our employees are using AI internally. I must tell you anecdotally, I speak with my employees very often in any events, meetings, lunch, ask them, "Oh, are you using AI?" 100% of them tell me that they use AI and to some-
Do they-
to some degree.
Do they use AI to give you that answer?
To give me what?
My boss asked me if I'm using AI.
Oh, no. It's to develop the reflex of using AI.
Yeah
That is important also.
Actually, I'll get back to RF, but before I forget, there was something that jumped out from your Q4 results, and I don't wanna make a mountain out of a molehill here, but it just, you know, found it interesting. One of the non-core items was a write-down of
Yeah
An IT project that was obsolete. I looked, well, how big is the IT intangibles balance on your balance sheet? It's pretty, you know, decent percentage of your book value. Would it be possible that as, you know, you make investments in AI and other, you know, initiatives, that a lot of your legacy technology becomes obsolete, and you have to write it off at a faster pace?
Now, that's an interesting question. In fact,
Try not to get too accounting-focused.
No, I know, I know. It's really a testimony of what I've been saying for the last seven years that iA has invested heavily in technology. It's been a huge change in 2018 and in terms of investing. We are investing close to CAD 400 million a year in technology, and some of it is capitalized. I mean, it's. You have to follow the accounting rules, okay? I don't want to get technical here, but obviously, there is a process every year to evaluate to what extent some of these software are still valid. Now, what we are seeing is that more and more of the development in technology, you cannot capitalize anymore because you use—you're in the cloud, and you have
Yeah
Service, you know, like SaaS. These things, you cannot capitalize them. We are in a situation where in our income statement right now, you have the amortization of the past that you're talking about, and also the fact that a bigger proportion of your investment technology goes directly through income statement. We have been able to produce results that are very, very good, notwithstanding the fact that it's kind of a double counting to some extent.
Yeah.
You know, you have to amortize the past, and at the same time, you have to.
Expense the future.
Yeah. To me, I mean, it's a current process. Will there be more in the future? I mean, we have to do the accounting as they go, but right now, you just need to realize that we kind of have some, you know, a portion of our expenses are kind of a double counting of expenses.
Got it.
still, we're able to have, you know, EPS growth that is over 10%.
Back to RF, as I promised. I mean, a very stupid question, but what's the growth strategy in terms of their distributors? They sell stocks, primarily their IAs? Or are they gonna start selling seg funds at some point? Or what's the
Well-
I mean, cross-sell, I suppose.
Okay, it's still early in the game. We've been very, very happy about the retention. The key is to retain the advisors.
Yeah.
We have a great technology platform that they really enjoy. The key in that business, and we've done it through the other businesses in the wealth management, like Investia, iA Private Wealth, is to obviously recruit. Recruit new advisors within the platform and grow the business of each of those advisors. It's really AUA. I mean, the biggest, obviously, the most important KPI is the AUA.
Mm-hmm.
How do you grow the AUA? Yeah, you've got the market. In the long term, that's gonna help, but at the end of the day, you also want to recruit. The service that we provide, the platform that we provide, they really enjoy it.
Yeah. Other, you know, future products that you don't have now that they might need?
Okay, we have positioned ourselves as, let's say, in the independent
Yeah
Wealth advisory space, okay? You, there's so much you can do. Obviously, we talk to those advisors. We have our own MGA, you know. At the end of the day, we respect the independence.
Right.
This is our branding, you know, so you cannot push too much like other organization in Canada could do because they're more like proprietary-
Mm-hmm
To some extent. Yeah, there's gonna be some synergies. We have not priced for any of those synergies. We'll see going forward.
You know, yes, you are an independent distribution-focused organization. Like the old HollisWealth and now RF Capital, and I have the MGA stuff. That's insurance-focused. The back office synergies, are those a reality though?
Well, yes. Within the wealth management space.
Mm-hmm
There are some synergies. It was already, I would say, expected when we did all the bid and everything, due diligence. We knew that we would have some synergies. That's part of that.
Yeah. Okay. Just wealth more high level. You touched upon this earlier that the seg fund business has been very successful, and it has. Is the market becoming more competitive? I hate asking that question. It kinda sounds silly.
Well, the way I
Great-West Lifeco was here earlier.
No, this is a great question because to some extent, are we in a takeaway game in Canada? You know, surveys demonstrate that 50% of the population is underprotected, both on the insurance side and also in terms of preparing for retirement.
Mm-hmm.
When I look at the Canadian market, I mean, I welcome, you know, more players because it's not a demand problem, it's an offer problem. We need more advisors in Canada to offer those advice to clients. When you look at iA in particular, we are in the mass market, the family market. Our average account for seg fund is very small, to be honest with you. But we offer simple solutions to our clients. Our advisors offer both the insurance and seg funds, so we keep it simple. We keep it simple for them. That's what, that's how we've been quite successful. We, like, diversified fund has been quite popular over the years.
We try to have our solutions that are very simple for the mass market. We've been quite successful.
Moving into the general fund, an activity that comes up from time to time, the auto lending business. It's you know come onto you know people's radar screen quite prominently in the last few weeks. What's the update? I know iA has been provisioning quite steadily for the last
Yeah
Couple of years I believe. Is there anything notable there?
Absolutely not. I tell you, I follow that very closely. You know.
Mm-hmm
that I was involved in buying that company.
Yep
Ten years ago, the underwriting of the risks has been tightened significantly. We see the business obviously, but it's really part of the portfolio of all the assets.
Right
That back our liabilities going forward. We have no intention to increase it. We are happy where we are right now. The market has tightened as well. I mean, other players in the industry have tightened their underwriting criteria. The quality has improved.
The P&C business. What's the weather been like in Quebec? I should know, but I don't.
No, no, it's okay. It's okay. Yeah, the weather is okay.
Yeah.
Yeah. It's been a cold winter.
Small talk, right?
I don't know if you find it, but I find the winter, you know, interminable.
We talked about acquisitions earlier. Buybacks have been, you know, a big part of the. You can walk and chew gum at the same time, clearly. Q4 was pretty active for buybacks. I'm just wondering if you can just give us some of the parameters around what's driving them. That, in the past, if we go back a few years, you said when the stock's undervalued and it's like closer to book value, but that's
Yeah
way back in the rearview mirror, those valuation levels. What's the, you know, the view today?
Yeah. A CEO will always tell you that the price of the stock should be higher.
Yeah.
It's a great opportunity to buy our stock, I guess, and that's what we're doing. We are running at. I mean, this is public information obviously because on a monthly basis you can see it, but we're running about 5% of the buyback at this point. The idea is that we don't want to pile up capital. We're generating CAD 700 of excess capital on a yearly basis. The idea is that unless, you know, we see an acquisition coming, we were going to continue actively to buy back shares probably at the pace that you see right now. It could depend also on the price of the stock.
I mean, there is a complicated formula that we apply, but at the end of the day, it's really dependent on both our willingness. I mean, the first criteria is our willingness to buy back.
Mm-hmm.
That's the case right now. It's accretive to the ROE. It's accretive to the EPS as well. Yeah, you should expect buyback going forward about the same level or maybe more. We will see. I mean, something to discuss.
Okay. I think that just about wraps it up. We've