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iA Financial group

Quebec City

Revenue (2021) $15.5 billion

Profit (2021) $830 million

Three-year share price gain 13.4%

P/E ratio (trailing) 10.9

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The life insurance and wealth management businesses aren’t rocket science, but iA Financial, Canada’s fourth-largest life insurer, also has a unique—and profitable—auto dealer segment, which provides creditor insurance, warranties and other products for vehicle dealers.

As 61-year-old iA CEO Denis Ricard recalls (he joined the company as a young actuary in 1985), when iA bought Vancouver-based Seaboard Life in 1999, “we inherited these car dealer businesses, and we just grew them.” Across Canada and the United States, the segment represents a significant portion of capital allocated and is growing.

It’s just one trait that sets iA apart from the Big Three life insurers in Canada (Manulife, the Great-West Lifeco group of companies and Sun Life). Another is more focus. Created by the merger of Quebec City-based Industrial Life and Montreal-based Alliance Mutual Life in 1987, iA sticks to North America, while Manulife, Great-West and Sun all have substantial interests overseas.

Although iA has completed more than 40 acquisitions since 2000, much of the company’s growth over time has been organic. Ricard says maintaining solid relationships with distributors—its own agents and independent ones—is a priority. “It’s hard work on a day-to-day basis, but it creates a moat” around the company.

Life insurance has been a tough business since the 2008-09 financial crisis. Central banks pushed interest rates to historic lows, which hit life insurers with a double whammy—they had to set aside more reserves to cover claims that may not come for decades, and lower rates hurt their returns on bonds and other fixed-income investments.

But central bankers started increasing rates in early 2022, and Ricard says because iA is more interest-rate sensitive than the Big Three, “it’s been a huge plus for us.” Canada’s adoption of the controversial International Financial Reporting Standards accounting regime in 2011 has also helped. Without going into detail, Ricard, who’s been CEO since 2018, says it’s because his company has a more conservative balance sheet than its rivals.

As a result, iA’s share price has beaten the Big Three since the company demutualized in 2000. Yet, Ricard has no standard CEO modesty about his stock. “We are still strongly undervalued,” he says. One metric to watch: the price-to-book-value ratio. It has been at about 1.3 recently, but he thinks it should be closer to the 1.7 of National Bank of Canada, in many ways the scrappiest of the big banks.

Ricard also says he has “no plans to retire.” It doesn’t sound like he’s easing up on the accelerator at all. /John Daly

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