Disciplined Capital Deployment After ROE Surge, Buybacks Continue, Deals Optional
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CAD 700 million of annual excess capital is being generated, and iA will deploy it “disciplinedly” — continuing share buybacks at roughly a 5% pace (or more) unless a compelling acquisition arises.
Acquisitions remain opportunistic within existing businesses; recent deals like RF Capital became accretive sooner than expected and Vericity is now expected to be accretive going forward, supporting EPS accretion.
iA says its ROE has “blown past” targets due to a shift to capital‑light products, industry consolidation and improved regulatory capital treatment, and management expects further EPS growth from capital deployment, acquisitions and ongoing business momentum.
Denis Ricard, President and CEO of iA Financial (TSE:IAG), said the insurer is focused on disciplined capital deployment after “blowing past” its return-on-equity (ROE) target, while maintaining flexibility for acquisitions and continuing an active share buyback program.
Speaking in an onstage discussion, Ricard stressed that surpassing the ROE target should not be read as a signal that a near-term deal is imminent. Instead, he framed the company’s position as the result of a long-running shift in the Canadian insurance landscape and iA’s strategy, including a tilt toward more capital-light products and businesses.
Ricard said iA has been a “growth story,” noting the company has completed 70 acquisitions since 2000, including 10 transactions over $100 million. He also highlighted what he described as an unprecedented level of excess capital generation in Canada today, both for iA and across the industry.
“In particular for iA, we’re generating CAD 700 million of excess capital on a yearly basis,” he said, adding that the company intends to remain disciplined in allocating it.
He said that if the company focused solely on share repurchases, it would be “easy” to push ROE even higher, but that iA’s longer-term aim is to remain a growth organization. Ricard added that acquisitions can pressure ROE in the early years, even when they meet the company’s long-term hurdle rate, because they are typically underwritten for growth over time.
Asked what has changed since the financial crisis era and the prolonged period of low long-term interest rates, Ricard pointed to multiple factors. He said the industry has become more disciplined, has experienced consolidation, and has shifted away from products that were more capital-intensive in prior cycles.
He also said regulators have improved how they recognize insurers’ risk management practices, which in turn has influenced how organizations manage and optimize capital. Overall, he described today’s Canadian environment as a “great spot” for the industry.
On potential targets, Ricard said iA would be interested in acquiring businesses it already operates in—subject to the “right price”—because the company is performing above its targets across those segments. He acknowledged that opportunities in Canadian individual insurance are limited, and while he has said for several years that more opportunities could emerge in the U.S., iA’s most recent notable transaction was in Canada (referencing RF Capital).
Ricard said iA is open to strengthening its existing strategies across its portfolio, citing RF Capital, Global Warranty, and Vericity as examples. He said the company is “looking across the spectrum” of businesses it is already in.
Ricard said he remains confident in iA’s ability to deliver growth despite strong prior-year comparisons. He referenced 16% EPS growth last year and 20% EPS growth the previous year, and cited three tailwinds:
Capital deployment: iA is generating significant excess capital and does not intend to “pile up” capital.
Acquisition accretion: RF Capital and Vericity are becoming accretive and contributing to EPS.
Business momentum: Ricard said iA is seeing “significant growth” across operations, pointing to wealth management results, strong performance in the segregated fund business, and improvements in relationships with life insurance distributors.
On RF Capital, Ricard said performance is ahead of expectations. While iA had said the deal would be accretive in the second year, Ricard said it became accretive in the first quarter, helped by better markets, better retention relative to the price paid, and proactive synergy implementation.
For Vericity, Ricard said results are “on par” with expectations. He said iA had guided for second-year accretion; last quarter the deal was neutral on accretiveness and, from this point forward, he expects it to be accretive.
Discussing Vericity’s business, Ricard compared it to iA’s American-Amicable acquisition in 2010, describing that company’s growth from $25 million in premium to $230 million last year and an ROE that moved from single digits at acquisition to above iA’s target. For Vericity, he cited constraints under prior ownership, expensive reinsurance treaties, and the elimination of costs associated with being a public company as factors that supported faster improvement. He said the focus now is to “speed up the growth going forward.”
Ricard pushed back on broad disruption narratives, arguing that iA’s approach is to make “smart choices” that support productivity and client-advisor interaction while maintaining the value of advice. He said iA’s ambition is to combine the “human aspect” and “digital aspect” of the business, and noted that 83% of employees are using AI internally.
He also addressed a prior write-down related to an obsolete IT project, tying it to heavy technology investment since 2018. Ricard said iA is investing close to CAD 400 million annually in technology, with some costs capitalized under accounting rules, but that more development is shifting to cloud and SaaS models that cannot be capitalized, creating a dynamic where amortization of past investments coincides with expensing newer spending.
On share repurchases, Ricard said iA is currently buying back shares at roughly a 5% pace (which he noted is publicly observable monthly). With excess capital generation of about CAD 700 million annually and no desire to accumulate capital, he said buybacks should be expected to continue at roughly the same level “or maybe more,” unless the company sees an acquisition coming. Ricard added that buybacks are accretive to ROE and EPS, and said the pace can also depend on the stock price under the company’s internal framework.
Elsewhere, Ricard said iA has no intention to increase exposure in its auto lending business, describing it as part of the asset portfolio backing liabilities. He said underwriting has been tightened significantly over time and that market conditions have also tightened, improving overall quality. He added there was “absolutely not” anything notable to report on provisioning trends, saying he follows the business closely.
iA Financial Corp Inc is a life and health insurance company. It offers life and health insurance products, savings and retirement plans, mutual funds, securities, auto and home insurance, mortgages, and others. The company operates and manages its activities according to five main reportable operating segments Individual Insurance, Individual Wealth Management, Group Insurance, Group Savings and Retirement, and US Operations.
