Q1 2025 iA Financial Corp Inc Earnings Call

Operator: Thank you for standing by. This is the conference operator.

Thank you for standing by this is the conference operator welcome to the Industrial Alliance Financial Group first quarter 2025 earnings results Conference call.

Operator: Welcome to the Industrial Alliance Financial Group First Quarter 2025 Earnings Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded.

As a reminder, all participants are in listen only mode and the conference is being recorded.

Operator: 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 conference call, you may signal an operator by pressing star, then zero.

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 conference call you May signal, an operator by pressing Star then zero.

Caroline Drouin: I would now like to turn the conference over to Caroline Drouin, Head of Investor Relations. Please go ahead. Thank you.

Speaker Change: I would now like to turn the conference over to Caroline Drouin, Head of Investor Relations. Please go ahead.

Caroline Drouin: Good afternoon and welcome to IA's earnings conference call for the first quarter of 2025. All of our Q1 documents, including press release, slides for this conference call, supplementary information package, and quarterly MD&A are posted on the investor relations section of our website at ia.ca. This conference call is open to the financial community, the media, and the public. I remind you that the question period is reserved for financial analysts.

Caroline Drouin: 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. I draw your attention to the forward-looking statements information on slide 2, as well as the non-IFRS and additional financial measures information on slide 3.

Caroline Drouin: Also, please note that a detailed discussion of the company's risk is provided in our 2024 MD&A, available on CDAR and on our website with an update in our Q1 2025 MD&A released yesterday.

Speaker Change: Ball on SEDAR and on our website with an update in our Q1 'twenty 'twenty five M. DNA released yesterday and with that I will now turn the call over to Dan usually call President and CEO.

Denis Ricard: And with that, I will now turn the call over to Denis Ricard, President and CEO. Good afternoon, everyone. Thank you for being with us on the call today.

Speaker Change: Yeah.

Dan Usually: Good afternoon, everyone and thank you for being with us on the call today.

Denis Ricard: As usual, I will start by introducing everyone attending on behalf of iA.

Dan Usually: As usual I will start by introducing everyone attending on behalf of <unk>.

Denis Ricard: Joining me are Eric Jobin, Chief Financial Officer and Chief Actuary. Alain Bergeron, Chief Investment Officer. Stephan Bourbonnais, Responsible for our Wealth Management Operations Renee 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 IOTO and HOMES. Sean O'Brien, Chief Growth Officer of our U.S. operation. and Louis-Philippe Pouliot in charge of Group Benefits and Retirement Solutions.

Dan Usually: Joining me are <unk>.

Speaker Change: Goodbye, Chief Financial Officer, and Chief Actuary.

Speaker Change: I think those are all chief investment Officer Stu.

Speaker Change: It's defendable button it responsible for our wealth management operations.

Speaker Change: But I need a flaw in charge of individual insurance savings and retirement.

Speaker Change: Telling me Oh, Chief growth officer of our Canadian operations and responsible for dealer services, Canada and are you doing at home.

Speaker Change: Shawn O'brien, Chief growth officer of our U S operations.

Speaker Change: And do we slip a yacht in charge of group benefits and retirement solutions.

Denis Ricard: Starting with slide 8 for an overview of our first quarter results. We had a strong quarter marked by continued momentum in our sales and earnings along with disciplined execution. I'm pleased. to walk you through the highlights of this remarkable quarter. Core EPS increased by a robust 19% year-over-year, reaching $2.91. Core ROE stands at 16.1% on a trailing 12-month basis. progressing well towards our new target of 17% plus in 2027. Sales in both Canada and the U.S. continue to be strong this quarter, contributing to the 19% year-over-year growth in premiums and deposits, as well as a 15% increase in assets under management and administration.

Speaker Change: Starting with slide eight for an overview of our first quarter results.

Speaker Change: We had a strong quarter marked by continued momentum in our sales and earnings along with disciplined execution.

Speaker Change: I am pleased.

Speaker Change: To walk you through the highlights of this remarkable quarter.

Speaker Change: Core EPS increased by a robust 19% year over year, reaching $2.91.

Speaker Change: Core ROE stands at 16, 1% on a trailing 12 month basis.

Speaker Change: Forget progressing well towards our new target of 17% plus in 2020 seven.

Speaker Change: Sales in both Canada, and the U S continued to be strong this quarter contributing to the 19% year over year growth in premiums and deposits as well as a 15% increase in assets under management and administration.

Denis Ricard: This marks the fourth consecutive quarter of double-digit growth in premium and deposits, as well as assets under management and administration. We maintain a robust capital position with a solvency ratio at 132%, which is supported by the ongoing organic capital generation and disciplined capital management. Our book value per share reached $74.62. representing an 8% year-over-year increase. Excluding the impact of the NCIP, the increase over the last 12 months is close to 11%.

Speaker Change: This marks the fourth consecutive quarter of double digit growth in premiums and deposits as well as assets under management and administration.

Speaker Change: We maintained a robust capital position with a solvency ratio at 132%, which is supported by the ongoing organic capital generation and disciplined capital management.

Speaker Change: Our book value per share reached $74 $6.62.

Speaker Change: Representing an 8% year over year increase.

Excluding the impact of the NCI would be the increase over the last 12 months is close to 11%.

Denis Ricard: Turning to slide 9 to look at Q1 Business Growth for Insurance Canada. In this segment, we are seeing strong sales momentum in all businesses units while strengthening our leadership position in our foundation businesses, including individual insurance, dealer services, and sector. In individual insurance, sales increase by 11% year-over-year to reach $99 million. This result reflects the strength of all our distribution networks, the outstanding performance of our digital tools, and our comprehensive range of products. We maintain our leading position in the Canadian market for the number of policies issued. In group insurance, sales were driven both by increased product uptake among existing clients and by the addition of plan members, resulting in a 31% year-over-year increase.

Speaker Change: Turning to slide nine to look at Q1 business growth for insurance, Canada.

Speaker Change: In this segment, we're seeing strong sales momentum in all businesses units, while strengthening our leadership position in our foundation businesses, including individual insurance dealer services and six months.

Speaker Change: In individual insurance sales increased by 11% year over year to reach $99 million.

Speaker Change: This result reflects the strength of all of our distribution networks. The outstanding performance of our digital tools and our comprehensive range of products.

Speaker Change: We maintained our leading position in the Canadian market for the number of policies issued.

Speaker Change: And group insurance sales were driven both by increased product uptake among existing clients and by the addition of plan members, resulting in a 31% year over year increase.

Denis Ricard: This growth contributed to premiums and deposits totaling $531 million, representing a 5% increase from the previous year. In dealer services, total sales of $163 million grew by 10%, supported by guaranteed asset protection and ancillary products. This audit result highlights our position as a top dealer services provider offering a comprehensive range of products and leveraging our extensive distribution network.

Speaker Change: This growth contributed to premiums and deposits totaling $531 million, representing 5% increase from the previous year.

Speaker Change: Indeed, our services total sales of $163 million grew by 10% supported by guaranteed asset protection and ancillary products.

Speaker Change: This solid result highlights our position as a top dealer services provider offering a comprehensive range of products and leveraging our extensive distribution network.

Denis Ricard: Finally, IOTO and Home delivered good sales results with direct written premiums reaching $129 million in the first quarter. marking a strong increase of 13% over the same period last year. The growth in this subsidiary was driven by a high number of policies issued and targeted repricing.

Speaker Change: Finally are you doing home delivered good sales results with direct written premiums, reaching $129 million in the first quarter.

Speaker Change: Marking a strong increase of 13% over the same period last year.

Speaker Change: The growth in this subsidiary was driven by a high number of policies issued and targeted repricing.

Denis Ricard: Now, looking at slide 10 to comment on sales results for Wealth Management, which were again, very solid, particularly for six IE continues to rank first in Canada for both gross and net SEC fund sales. Achieving record-breaking levels this quarter. Growth sales soared to over $1.9 billion, marking an impressive 52% increase compared to last year. Net sales amounted to nearly $1.2 billion. These outstanding results highlight the strength of our distribution networks and the quality and breadth of our product line. Growth sales of mutual funds increased by a strong 32% compared to the same period last year.

Speaker Change: Now looking at slide 10 to come in on sales results for wealth management, which were again very solid particularly for sick funds.

Speaker Change: <unk> continues to rank first in Canada for both gross and net fund sales.

Speaker Change: Cheating record breaking levels this quarter.

Speaker Change: Girl sales soared to over $1 9 billion, marking an impressive 52% increase compared to last year.

Speaker Change: Net sales amounted to nearly 1.2 billion. These outstanding results highlight the strength of our distribution networks and the quality and breadth of our product lineup.

Speaker Change: Gross sales of mutual funds increased by a strong 33% compared to December of last year, reaching.

Denis Ricard: reaching a total of $647 million in Q1. Net outflows amounted to $62 million. Sales of other individual savings products reached $467 million during the quarter, maintaining high levels despite a market environment that favored asset classes with higher return potential.

Speaker Change: Reaching a total of $647 million in Q1.

Speaker Change: Net outflows amounted to $62 million.

Speaker Change: Sales of other individuals savings product reached $467 million during the quarter maintaining high levels. Despite the market environment that favored asset classes with higher return potential.

Denis Ricard: Finally, sales in Group Savings and Retirement totaled $841 million, reflecting an 8% decrease compared to the previous year. This is the net result of accumulation product sales remaining consistent with 2024 levels, while insured and released sales were lower than last year.

Speaker Change: Finally sales in group savings and retirement totaled $841 million, reflecting an 8% decrease compared to the previous year. This is the net result of acumen has shown product sales remaining consistent with 2024 levels wild ensure the annuity sales were lower than last year.

Speaker Change: Yeah.

Denis Ricard: Let's move on to slide 11, which covers our sales results in the U.S. and Individual Insurance. Sales of 68 million U.S.

Speaker Change: Let's move on to slide 11, which covers our sales results in the U S.

Speaker Change: In individual insurance sales of 68 million U S dollars or 62% higher than a year earlier driven by good organic growth in our target markets and the addition of sales from the various at acquisition, which added scale and new digital capabilities.

Denis Ricard: dollars were 62% higher than a year earlier, driven by good organic growth in our target markets and the addition of sales from the Verisit acquisition, which added scale and new digital capabilities. In dealer services, first quarter sales increased by 23 percent compared to the same period last year, reaching an impressive 306 million U.S. dollars. This performance underscores the effectiveness of our growth strategy and focus on execution. By expanding our distribution channels and prioritizing superior customer experiences, we are solidifying our position in the industry.

Speaker Change: Indeed, our services first quarter sales increased by 23% compared to December of last year, reaching an impressive 306 million U S. Dollar.

Speaker Change: This performance underscores the effectiveness of our growth strategy and focus on execution.

Speaker Change: By expanding our distribution channels and prior right prioritizing superior customer experiences, we all started fighting our position in the industry.

Denis Ricard: The impressive sales results in both US business units demonstrate the potential for expansion of our business model as we continue to allocate capital to grow and scale in the US.

Speaker Change: The impressive sales results in both the U S business units demonstrated the potential for expansion of our business model as we continue to allocate capital to grow in scale in the U S.

Speaker Change: Yeah.

Denis Ricard: Moving to slide 12. where you see that our key financial results are well aligned with their respective targets. Core EPS growth of 19% year-over-year compares favorably with our mid-term annual average target of 10% plus. Core ROE of 16.1% is progressing well toward our target of 17% plus in 2027.

Speaker Change: Moving to slide 12.

Speaker Change: Where you see that all of our key financial results are well aligned with their respective targets.

Speaker Change: Core EPS growth of 19% year over year compares favorably with our midterm undeveloped rich target of 10% plus.

Speaker Change: Core ROE of 16.1% is progressing well towards our target of 17% plus in 2027.

Denis Ricard: This good profitability contributed to the generation of $125 million in organic capital in Q1, on track to meet our 2025 target of $650 plus million. Lastly, our dividend payout ratio is near the middle of the target.

Speaker Change: This good profitability contributor to the generation of $125 million in organic capital in Q1 on track to meet our 2025 target of 650 plus million dollar.

Speaker Change: Lastly, our dividend payout ratio is near the middle of the target range.

Denis Ricard: Turning to slide 13 to discuss our capital deployment priorities and recent initiatives. As you may recall, the revised CARLI guideline, effective January 1, 2025, has positively impacted our financial flexibility and increased our ability to deploy capital, a top priority for executing our growth strategy. As of March 31st, 2025, we had $1.4 billion in capital available for deployment following another active quarter of strategic capital deployment initiatives. These initiatives included dividends, share buybacks, IT investments, and the recent acquisition of global warranty. which strengthens our presence in the Canadian used car warranty market.

Speaker Change: Turning to slide 13 to discuss our capital deployment priorities and recent initiatives as you may recall, the revised Carly guideline effective January 1st 2025.

Speaker Change: This, particularly impacted our financial flexibility and increased our ability to deploy capital a top priority for executing our growth strategy.

Speaker Change: As of March 31, 2025, we had $1 4 billion dollar in capital available for deployment following another active quarter of strategic capital deployment initiatives.

Speaker Change: These initiatives included dividends share buybacks it investments and the recent acquisition of global warranty.

Speaker Change: Which strengthens our presence in the Canadian used car warranty market.

Denis Ricard: Now, before I turn the call to Eric to detail our first quarter financials, I'd like to offer my perspective on the uncertainty created by the fast-moving political and macroeconomic environment. I want to highlight the financial strength and stability of our organization. Throughout our history. We have successfully navigated various economic cycles, slowdowns, and recessions. Our business model is highly diversified, spanning products, markets, and geographies, which makes us less sensitive to economic fluctuations today than in the past. This resilience is due to our multiple revenue streams and best-in-class risk management. We remain committed to focusing on improving what we can control.

Speaker Change: Now before I turn the call to Eric to detail, our first quarter financials I'd like to offer my perspective on the uncertainty created by the fast moving political and macroeconomic environment.

Speaker Change: I want to highlight the financial strength and stability of our organization.

Speaker Change: Throughout our history.

Speaker Change: We have successfully navigate through the various economic cycles slowdowns and recessions.

Speaker Change: Our business model is highly diversified spanning products markets and geographies.

Speaker Change: Which makes us less sensitive to economic fluctuations today than in the past.

Speaker Change: This resiliency is due to our multiple revenue streams and best in class risk management expertise.

Speaker Change: We remain committed to focusing on improving what we can control.

Denis Ricard: Harnessing the entrepreneurial energy of our distribution network. Adjusting pricing as needed. Driving Efficiency Internally. and Priorities IE. The support and service of our clients.

Speaker Change: Harnessing the entrepreneurial energy of our distribution networks.

Speaker Change: Adjusting pricing as needed.

Speaker Change: Driving efficiency internally.

Speaker Change: And priorities I priorities I.

Speaker Change: T E Z.

Speaker Change: The support and service of our clients needs.

Denis Ricard: In February, we hosted an investor event where we unveiled new financial targets and outlined a clear strategy for achieving them. We emphasize that our goal to increase ROE and create long-term value for our shareholders is grounded in our unique approach, the IAWI. A prime example of this approach is our distribution network, which serves as a key differentiator that sets us apart from competitors.

Speaker Change: In February we hosted an investor event, where we unveiled new financial targets and outlined a clear strategy for achieving them.

Speaker Change: We emphasize that our goal to increase our ROIC and create long term value for our shareholders is grounded in our unique approach.

Speaker Change: I E.

Speaker Change: A prime example of this approach is all of our distribution network, which serves as a key differentiator that sets us apart from competitors.

Denis Ricard: in Uncertain Environments. Customers tend to choose the provider they trust most. Our extensive distribution network, combined with the high quality advice from our human advisors. is a true point of distinction that reinforces this trust. Our Q1 2025 results demonstrate that we haven't seen any attenuation of demand yet. While there may be some short-term noise along the way, We approach this new financial cycle confidently.

Speaker Change: In uncertain environments customers tend to choose the provider the trolls the trust most.

Speaker Change: Our extensive distribution network comeback.

Speaker Change: Combined with the high quality advice from our human advisers.

Speaker Change: Is a true point of distinction that reinforces this trust.

Speaker Change: Our Q1 'twenty twenty-five results demonstrate that we haven't seen any attenuation of demand yet.

Speaker Change: While there may be some short term noise along the way we.

Speaker Change: We approach this new financial cycle confidently.

Denis Ricard: And remember that in every challenge lies great opportunity. With that in mind, we will remain focused on growth by actively exploring acquisition opportunities and staying disciplined and vigilant to capitalize on potential new opportunities.

Speaker Change: And remember that in every challenge lies great opportunity with that in mind, we will remain focused on growth by actively exploring acquisition opportunities and staying disciplined and vigilant to capitalize on potential new opportunities.

Denis Ricard: With that, I will now hand it over to Eric who will comment on the first quarter profitability and capital strength.

Speaker Change: With that I will now hand, it over to Eric who will comment on the first quarter profitability and capital strength.

Eric Jobin: Following Eric's comments, we will take questions. Thank you, Denis, and good afternoon, everyone. Let's begin with slide 15 where we highlight a strong start to 2025 with good profitability results and financial Core EPS for Q1 2025 reached $2.91, representing 9% year-over-year increase, and reported EPS was $1.98. The rising core EPS reflects notably a strong increase in the insurance service results driven by all operating business segments, as well as a strong increase in the core net investment results. Our strong earnings coupled with our strategic capital deployment initiative have elevated our core ROE to 16.1% for the last 12 marking steady progress toward our new target of 17% plus set for 2027.

Speaker Change: Followed following Eric's comments, we will take questions.

Eric: Thank you Denny and good afternoon, everyone.

Speaker Change: Let's begin with slide 15, where we highlight our strong start to 2025 with good crush stability results and financial strength.

Eric: Yeah.

Eric: Core EPS for Q1, 2025 reached $2.91, representing 9% year over year increase and reported EPS was 198.

Eric: <unk> core EPS reflects notably a strong increase in the insurance service result, driven by all operating business segment as well as a strong increase in the core net investment result.

Eric: Our strong earnings coupled with our strategic capital deployment initiative has elevated our Colorado a week to 16, 1% for the last 12 months, marking steady progress.

Eric: Toward our new target of 17% plus set for 'twenty 'twenty seven.

Eric Jobin: Our capital position is robust and supported by ongoing organic capital generation providing plenty of capacity for organic growth and acquisition. Finally, over the last 12 months, our book value per share has increased by 8% reflecting our ability to create value for shareholders. During the same period, we have strategically executed a series of share buybacks reflecting our commitment to enhancing shareholder value and optimizing our capital structure. Without the impact of share buybacks, our book value per share would have increased by approximately 11%. These figures underscore the significant role that our share repurchase program has played in driving value for our shareholders.

Eric: Our capital position is robust and supported by ongoing organic capital generation, providing plenty of capacity for organic growth and acquisitions.

Eric: Finally over the last 12 months, our book value per share has increased by 8%, reflecting our ability to create value for shareholders.

Eric: During the same period, we have strategically execute well to the series of share buyback, reflecting our commitment to win and seeing shovel deferred U and optimizing our capital structure.

Eric: Without the impact of share buybacks, our book value per share would have increased by approximately 11%.

Eric: These figures underscores the significant role that our share repurchase program has played in driving value for our shareholders.

Eric Jobin: Turning to slide 16 to look at the Q1 total earnings performance. Net income decreased by 20% year over year due to the investment segment being affected by macroeconomic fluctuation.

Eric: Turning to slide 16 to look at the Q1 total earnings performance.

Eric: Net income decreased by 20% year over year due to the investments segment being affected by macroeconomic fluctuations.

Eric Jobin: I will come back to this point in a minute. Meanwhile, net income for all other segments together grew by a solid 14%. Our earnings grew by 12% year over year with all operating business segments posting good growth.

Eric: I will come back to this point in a minute. Meanwhile, net income for all other segments together grew by a solid 14%.

Eric: <unk> earnings grew by 12% year over year with all operating business segments posting.

Eric: It dropped.

Eric Jobin: Now moving to slide 17 to take a closer look at Q1 results by segment. In Insurance Canada, core earnings for the quarter rose to $100 million, representing a 9% year-over-year This growth was primarily driven by higher expected insurance earnings, which included an increase in the Combined Risk Adjustment Release and CSM recognized for services provided. Additionally, there was an increase in expected earnings from IA, Otto & Ohm, PAA, Bissau. Also contributing positively to this growth are the reduced impact from new insurance business and employee plans. Favorable insurance experience resulting from lower claims at IE, Otto & Ohm, and positive morbidity experience.

Eric: Now moving to slide 17 to take a closer look at Q1 results by segment.

Eric: In insurance, Canada core earnings for the quarter Rose to 100 million, representing a 9% year over year increase.

Eric: This growth was primarily driven by higher expected insurance earnings, which included an increase in the combined risk adjustment release and CSM recognized for services provided.

Eric: Additionally, there was an increase in expected earnings from our unique or toy known P. A a business.

Eric: Also contributing positively to this growth at a reduced impact from new entrance business and employee plans favorable insurance experience, resulting from lower claims that little window and positive morbidity experience.

Eric Jobin: Lastly, core non-insurance activities were higher driven by good performance in dealer services and distribution activities.

Eric: Lastly, core non insurance activities were higher driven by good performance in dealer services and distribution activities.

Eric Jobin: Turning to slide 18 in the Wealth Management segment, first quarter earnings rose to $106 million representing a 12% year-over-year increase. This growth was mainly driven by an increase in the combined RA and CSM for service providers. These favorable impacts were largely due to a strong net fund, segregated fund sales and positive financial market performance over the past 12 Core non-insurance activities were higher as a result of good performance from group saving and retirement due to higher net revenue on assets.

Eric: Turning to slide 18 in the wealth management segment first quarter earnings Rose to 106 million representing a 12%.

Eric: Year over year increase this growth was mainly driven by an increase in the combined <unk> and CSM for services provided.

Eric: These favorable impacts were largely due to our strong net phone segregated fund sales and positive financial market performance over the past 12 months.

Eric: Corporate non insurance activities were higher as a result of good performance from group saving and retirement due to higher net revenue on assets.

Eric Jobin: On slide 19, core earnings from U.S. operations totaled $30 million in Q1, marking a significant 58% year-over-year growth. This increase was primarily driven by a strong pre-tax $19 million rise in the core insurance service result, which includes contributions from the prosperity blocks of business and an additional $8 million from the VeriCiti acquisitions. Card on insurance activities saw an increase of 1 million year-over-year. This result is the net of 4 million lost from various city distribution activities and 5 million increase in earnings in dealer services.

Eric: On slide 19.

Eric: Core earnings from U S operations totaled 30 million in Q1, marking a significant 58% year over year growth.

Eric: This increase was primarily driven by a strong pre tax 19 million rise in the core insurance service results, which includes contribution from the prosperity blocks of business and an additional 8 million from the very strategic acquisition.

Eric: Our non insurance activities saw an increase of 1 million year over year. This result is that net of 4 million less from diversity distribution activities and 5 million increase in earnings on in dealer services. We are particularly pleased with the performance of dealer services.

Eric Jobin: We are particularly pleased with the performance of dealer services, which underscores the effectiveness of the discipline management action that we have been implementing. Looking ahead, we remain focused on executing our integration plan and realizing synergies on diversity acquisition. It's important to highlight that during Q1, the combined impact of diversity and prosperity acquisition was neutral on Q1. This result aligns with our expectations at the time of the acquisition.

Eric: Which underscores the effectiveness of the disciplined management action that we SPN implementing.

Eric: Looking ahead, we remain focused on executing our integration plan and realizing synergies on diversity acquisition.

Eric: It's important to highlight that during Q1, the combined impact of diversity and prosperity acquisition was neutral on core earnings.

Eric: This result, aligns with our expectations at the time of the acquisitions.

Eric Jobin: Now turning to slide 20 for the result of the investment. Core earnings for the quarter were $85 million, consistent with the same period last Before accounting for taxes, financing charge and expenses, core net investment result was $124 million up from $109 a year ago, and exceeding the $120 million recorded in the previous quarter. This 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 Q1 due to the higher impacts from upgrades than downgrades in the fixed income portfolio, while credit experience in the IA auto finance car loan portfolio met expectations.

Eric: Now turning to slide 24, the result of the investments segment.

Eric: Core earnings for the quarter were 85 million consistent with the same period last year.

Eric: Before accounting for taxes financing charge and expenses coordinate that Fred Smith result was 124 million up from 109, a year ago and exceeding the 120 million recorded in the previous quarter.

Eric: This strong performance was supported by several factors, including the favorable impact of interest rate variation in recent quarters.

Eric: In addition credit experience was positive in Q1 due to the other and tax from them from upgrades downgrades in the fixed income portfolio, while it credit experience in the auto finance car loan portfolio met expectations.

Eric Jobin: Non-core adjustments total $50 million, permanently reflecting unfavorable market-related variation, including losses in public and private equity and value adjustment in the investment property.

Eric: Non core adjustments totaled 50 million yen permanently, reflecting unfavorable market related valuation, including losses in public and private equity and value adjustment in the investment properties.

Eric Jobin: Moving to slide 21. Corporate segment core other expenses total $65 million pre-tax, aligning with the quarterly expectation of $68 million plus or minus $5 million.

Eric: Moving to slide 21.

Eric: The corporate segment, Colorado expenses totaled 65 million pre tax aligning with the quarterly expectation of 68 million plus or minus $5 million.

Eric Jobin: This consistency reflects... our ongoing focus on operational efficiency.

Eric: This consistency reflects.

Eric: Our ongoing focus on operational efficiency.

Eric Jobin: Please go to slide 22 for an overview of the company's robust capital position. Our solvency ratio stands at 132%, well above the regulatory minimum ratio of 90%. The 7% point decrease during the first quarter primarily resulted from the strategic capital management and deployment activities, including the redemptions of subordinated debentures, the global warranty acquisition, share buybacks and IT investments. Our strong profitability enabled the organic generation of $125 million in additional capital during the first quarter. This aligns with our projections to exceed the annual target threshold of $650 million in 2025. As a reminder, due to the seasonality, organic capital generation is typically lower in the first quarter and tends to strengthen from the second quarter onward.

Eric: Please go to slide 22 for an overview of the company's robust capital position.

Eric: Our solvency ratio stands at 132% well above the regulatory minimum ratio of 90%.

Eric: The seven percentage point decrease during the first quarter, primarily resulted from the strategic capital management and deployment activities, including the redemptions of subordinated debentures, the global warranty acquisition share buybacks and investments.

Eric: Our strong Pos should they believe T enable the organic generation of 125 million in additional capital during the first quarter.

Eric: This aligns with our projections to exceed the target threshold of 650 million in 2025.

Eric: As a reminder, due to the seasonality organic capital generation is typically lower in the first quarter and tends to strengthen from the second quarter onwards.

Eric Jobin: As of March 31, 2025, the capital available for deployment was assessed at $1.4 billion, positively impacted by the updated quarterly guideline as of January 1, 2025. Our first quarter results demonstrate the strength of our operations. Profitability was strong, and we have the capacity to continue to generate and deploy capital. This financial strength provides the resources necessary to fuel our continued growth.

Eric: As of March 31, 2025 that kept us all available for deployment was assessed at $1 4 billion pulse is positively impacted by the update third quarter League guideline as of January one 'twenty 'twenty five.

Eric: Our first quarter results demonstrate the strength of our operations profitability was strong and we have the capacity to continue to generate and deploy capital there.

Eric: Financial strength provide the resources necessary to fuel our continued growth as.

Eric Jobin: As we progress through 2025, we look to the future with great confidence in our strategy, capabilities, and long-term sustainable growth.

Eric: As we progress through 'twenty to 'twenty, five we look to the future with great confidence in our strategy capabilities and long term sustainable growth.

Eric Jobin: These conclude my remarks.

Eric: These conclude my remarks, operator, we'll now take questions.

Operator: Operator, we will now take questions. Thank you.

Eric: 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 tele acknowledging your request if you're using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

Operator: 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're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two.

Operator: We will pause for a moment as callers join the queue.

Speaker Change: Little costs for a moment as colleagues trying to queue.

Meny Grauman: The first question is for Meny Grauman from Scotiabank. Please go ahead. Hi, good afternoon. Eric, you ended your comments by talking about the seasonality in organic capital generation, noting Q1 seasonally lower. And I just wanted to understand what drives that seasonality? Why is Q1 lower?

Speaker Change: The first question is from many Grumman from Scotiabank. Please go ahead.

Speaker Change: Hi, Good afternoon, Eric you ended your comments by talking about the seasonality and organic capital generation.

Speaker Change: Noting Q1 seasonally lower and just I just wanted to understand what drives that seasonality wise Q1 lower.

Eric Jobin: Absolutely, Meny. What's happening there is the seasonality effect of the group businesses, the capital deployment to support that line of business. If you remember, we talked about seasonality. is higher in Q1 and Q2. So that's what is happening. It's only capital deployment to support the business growth in there. And it typically employers typically renew a lot of their business on the first quarter of Got it.

Speaker Change: Absolutely many of the what is happening there is the seasonality effect of the group businesses.

Speaker Change: The capital deployment to support that line of business. If you remember we talked that seasonality is higher in Q1 and Q2. So that's what is happening it's only capital deployment to support the business.

Speaker Change: Wrote in there and it typically.

Speaker Change: Lawyers typically renew a lot of their business on the first quarter of the year.

Got it and then second question just on the services side, obviously good results in Q1, but lots of uncertainty and question marks about the underlying auto business and just wondering.

Meny Grauman: And then a second question just on the dealer services side. Obviously good results in Q1, but lots of uncertainty and question marks about the underlying auto business. And just wondering if you are hearing from the dealers on either side of the border any change in customer behavior due to tariffs or the uncertainty of tariffs, and do you expect that to change?

Speaker Change: If you are hearing from the dealers are on either side of the border are any change in customer behavior due to tariffs and the uncertainty of tariffs and and do you expect that to change.

Denis Ricard: Hey, Meny, it's Denis here. What we've seen so far is that, especially in the US, people tend to, I would say, we have more purchase so far. Paul Holden, Denis Ricard, Pierre Miron, Alain Bergeron, Denis Ricard, Pierre Miron, So you're talking about a pull forward of demand.

Dan Usually: Hey, Manny it's Dan here.

Dan Usually: What we've seen so far is that.

Speaker Change: Especially in the U S people tend to.

Dan Usually: I would see it.

Speaker Change: Have more purchase of cars.

Speaker Change: Those kind of advanced there the purchase of car, that's what's going on right now.

Speaker Change: So there might be some movement from let's see.

Speaker Change: The next quarter or two of the disk water or the last quarter.

Speaker Change: A sense that people kind of expected that there might be some impact on price or do you pretty much you know what with an advanced changing their cars. So that's that's I would say the behavior that we see at this point.

Speaker Change: So you're talking about the pull forward of demand. So does that mean, it's reasonable to assume that we could see some weakness.

Denis Ricard: So does that mean that's reasonable to assume that we could see some weakness? In the way I look at it myself, okay, there might be some noise per quarter. But at the end of the way, the question we have to ask ourselves is that will people drive less cars in the future? It might be that the sales per quarter will vary. It would be different from the historical pattern. But the reality is that people need their cars to go to work, to travel. And to me, it's like the midterm, long-term perspective hasn't changed at all.

Speaker Change: In the coming season will look at it.

Speaker Change: Myself, okay, there might be some noise Berg Walter.

Speaker Change: But at the end of the the way. The question you asked Josh out of ourselves is that will people drive less cars in the future.

Speaker Change: It might be that are the sales per quarter will vary it would be different for me to see how historical pattern, but the reality is that people need their cars to go to work to travel.

Speaker Change: And to me, it's the like the midterm long term's perspective hasn't changed.

Meny Grauman: It's just that there might be some noise in the near future. Got it.

Speaker Change: At all it's just that there might be some noise in the near future.

Meny Grauman: Thank you, Denis.

Denise: Got it thank you Denise.

Speaker Change: Yeah.

Gabriel Dechaine: The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead. Hi there. Just a couple of questions around capital. I think your buyback had been very active for the past year and a half or so, and it really pulled back this quarter. I know there's a priority list that ranks lower than some of the other ones, but I'm wondering if there's any other element to that decision not to repurchase as many shares this quarter. Does it have to do with timing it with your internal capital generation? Possibly.

Speaker Change: The next question is from gasoline to Shane from National Bank Financial. Please go ahead.

Speaker Change: Sure.

Speaker Change: Hi, there just a couple of questions are around capital.

I think you know your buyback had been very active for the past year, and a half or so and it really.

Speaker Change: Pull back this quarter I know you know the priority list is lower than some of the other ones are.

Speaker Change: But I'm wondering if there's any.

Other element to.

Speaker Change: Decision about the repurchases many shares this quarter, we will have to do with you know I guess, you're timing it with your internal capital generation.

Gabriel Dechaine: I have a follow-up.

Speaker Change: Possibly.

Speaker Change: Yeah, and then I have a follow up.

Speaker Change: Yeah.

Eric Jobin: Just, it's Eric, I'll take it. In terms of NCIB in the quarter, remember at the investor event, we talked about a capital deployment for the year. And remember that early in the quarter, in January, we announced an acquisition of global warranty, which resulted in about one percentage point reduction in the ratio. So for us, it's a form of capital deployment. So that's why we had a slow start in the year with respect to NCIB. And if you look in the recent months, we've been accelerating the NCIB to deploy more capital through it. And if you look at the monthly adjustment that we've made in February, March, and now April, you will see that it's steadily increasing.

Speaker Change: Just it said hey, Kyle I'll take it a it's a in the in terms of and CIB yeah in the quarter a remember at the Investor event, we talked about our capital deployment for.

Speaker Change: For the year and remember that early in the quarter in January we announced an acquisition of global water and tea, which resulted in about a one percentage point reduction in the ratio. So for us it's a form of capital deployment. So that's why we are we had a slow start in the year with respect to <unk>.

Speaker Change: In CIB and if you look in the recent months we've been accelerating.

Speaker Change: The N C I b.

Speaker Change: To deploy more capital true width and the if you look at the monthly.

Speaker Change: Just meant that we've made in February March and now April you will see that steadily increasing.

Eric Jobin: Okay. Gabriel, I would add that if you look at the investor event document, we kind of provided some kind of guidance where we would like to be for this year in terms of capital deployment. And the pace of buyback is consistent with that. Got it. So pretty straightforward there.

Speaker Change: Okay.

Speaker Change: Yeah, Yeah, I would add that if you look at the Investor event.

Speaker Change: The document are we kind of provided some kind of guidance, where we would like to be a for this year in terms of capital deployment.

Speaker Change: The pace of our buyback is consistent with that.

Speaker Change: Got it Hum pretty straightforward, there and as far as the the capital rule changes for Sig funds, you're still using <unk>.

Gabriel Dechaine: And as far as the capital rule changes for SEG funds, you're still using the old capital formula in the first half, but then switching to the new one in the second half, if I understand correctly. Any impact there that you can quantify? Will it be meaningful?

Speaker Change: Capital Formula for the first half with the switching to the new one in the second half if I understand correctly.

Speaker Change: Any impact.

Speaker Change: Impact there that you can quantify what would be meaningful.

Eric Jobin: Yes, Gabriel, it's Eric again. You're right, this will be effective July 1. So it's third quarter. And we don't, we don't expect this to be meaningful to, to our results. You know that we've, we've talked at the investor event, our, about our discipline risk management practices. So this is reflective of our good risk management practices. You have it.

Yes, Gibbs yeah, let's say it again youre right. This will be a fix is a July FERC. So we'd start quarter, Andrew we don't take we don't expect this to be a meaningful to our to our results are you know that we've we've talked at the investor event that we're in.

Speaker Change: That word disciplined risk management practices. So this is reflective of our good risk management practices.

Gabriel Dechaine: Okay, that's it. Thanks.

Speaker Change: Got it okay. That's it thanks.

Speaker Change: Yeah.

Doug Young: The next question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Speaker Change: The next question is from Danielle <unk> capital markets. Please go ahead.

Doug Young: Good afternoon. Just going to slide 22 and I look at the capital, organic capital generation and capital available for deployment this quarter versus last quarter. And the capital available for deployment didn't change quarter over quarter. And, you know, one of the things that seems to be dragging down organic capital generation is the macro variations. And it's happened for two quarters in a row. So I'm just trying to figure out how to think about this and what is driving the impact from the macro variations. I think you talked about what happened last quarter. Is it similar to this quarter?

Danielle: Hi, Good afternoon, I'm, just going to slide 22, when I look at the capital organic capital generation and <unk>.

Speaker Change: Capital available for deployment this quarter versus last quarter.

Speaker Change: And the capital available for deployment didn't change quarter over quarter, and you know one of the things that seems to be dragging down organic capital generation is the macro variation.

Speaker Change: And it's happened for two quarters in a row. So I'm just trying to figure out how to think about this in and what is driving the impact from the macro variations I think you've talked about what happened last quarter is it similar to this quarter.

Doug Young: But just if you can kind of talk through how I should be thinking about all that.

Speaker Change: But just if you can kind of talk through how I should be thinking about all that.

Speaker Change: Yeah.

Eric Jobin: Yeah, Doug, it's Eric again. On the macroeconomic side, you have to think that you have to remember that what we do on the investment side in terms of getting closer to our optimal portfolio deploys somehow capital down the road. So adjustments to our portfolio is a way to capital to get additional returns. So that's a big element.

Erik: Yeah, Doug it's Erik again are on the macroeconomic side.

Erik: You have to think that a you have to remember that what we do on the investment side in terms of getting closer to our optimal portfolio deploys somehow capital are down.

Erik: On the roadshow adjustments to our portfolio is a is a way to deploy capital to get to additional returns. So that's a that's a big element.

Alain Bergeron: And so maybe two follow ups on that. Can you talk about what you're doing or what you're investing in? And why wouldn't that be just a normal organic consumption of capital? Or am I missing something?

Speaker Change: And so maybe two follow ups on that can you talk about what youre doing or what you're investing in in and why wouldn't that be just a normal organic consumption of capital or am I missing something.

Erik: Yeah.

Alain Bergeron: Hi, it's Alain Bergeron speaking here. I think you're right that generally speaking, the trend will be that as the firm grows, as the liability grows, our investments in portfolio, including assets consuming capital like privates or public equity, will go up. Now quarter to quarter, there may be noise depending on opportunities, depending on return. And so I think that's the high level.

Erik: I am telling I think that's what I'm speaking here.

Erik: I think youre right that generally speaking the trend will be that as the firm grows as their liability grows our investments and portfolio, including assets consuming capital like privates or public equity will go up now quarter to quarter, there may be noise, depending on opportunities depending on the return.

Erik: So I think that's a that's the high level.

Doug Young: Okay, so you wouldn't expect this to be kind of ongoing, this can be a little bit just happened two quarters in a row. But like, it could be a little bit lumpy sees like quarter to quarter, that's how I should be thinking about it. And this is and this is going into private and public equity. That's really what's consuming the capital. on the investment portfolio, that's correct. So I think you're right to say that's that's a trend, but quarter over quarter, really, that could go either way. Okay, there's a bit of noise around. Fair enough.

Erik: Okay. So you wouldn't expect this to be kind of ongoing this can be a little bit just happened two quarters at road, but it could be a little bit lumpy quarter to quarter, that's how I should be thinking about it and this is and this is going into private and public equity that's really whats consuming the cancel them.

Erik: On the investment portfolio, that's correct. So I think youre right to say, that's a that's a trend but quarter over quarter really that could go either way.

Erik: Okay.

Erik: Was around it.

Erik: That's fair enough and then.

Doug Young: And then, I don't know, Sean or Denis, like the U.S. dealer service profits, I think you talked a bit about it, you know, it looked like the profits, when I kind of back into it, have improved by a good amount, you know, year over year. It sounds like you're feeling better about this business. Am I reading that correctly? Can you talk a bit about how much core earnings at the U.S. dealer services, like how much was core earnings up? And has this business kind of turned the corner? And is it to the point where, you know, things get tough, you would be more willing to allocate capital to do M&A in this business?

Erik: Sean are there any like the U S dealer service profit, Thank you talked a bit about it.

Erik: It looked like the profits when I kind of back into it to improve by a good amount year over year. It sounds like you're feeling better about this business.

Erik: Am I reading that correctly can you talk a bit about how much core earnings at the U S dealer services like how much was core earnings up.

Erik: And as this business kind of turned the corner and is it to the point where.

Erik: Things get tough you would be more willing to allocate capital to do M&A in this business.

Erik: Okay. Several several questions. Thank you for that I was expecting it I guess.

Erik: Well first of all about turning the corner last quarter I said that are you know, they're all signs that we are turning a corner.

Erik: Now we are let's say we own the the high road right now to get there to turn the corner we might be on the high we soon but we're not there yet, but that's the way I would I would put it at this point.

Denis Ricard: And regarding the coordinates, I don't know, just before about acquisition, because you asked a question about acquisition. It's interesting because there might be opportunities that will arise in the foreseeable future because of, you know, all the, let's call it the disruption, with the tariffs and whatever is going on in the US and the interest rates and the cost of private equity, whatever. There might be opportunities that will arise in terms of opportunities in that space. So for us, it's to be on the lookout and it could be positive on that regard.

Erik: And regarding to coordinate I don't know it just before about acquisition because you asked a question about acquisition.

Erik: It's interesting because there might be opportunities that will arise.

Erik: In the foreseeable future because of you know all the the skull to disruption.

Erik: With the tariffs and whatever is going on in the U S. A.

Erik: And the interest rate's indicative cost of death for private equity or whatever.

Erik: There might be opportunities here with a rise in terms of our opportunities in that in that space. So for us it's to be on the lookout and it could be positive on that regard.

Eric Jobin: And with that said, Eric, do you want to comment on the coordinates? Yeah, just quickly to add on the coroning. The situation improved. We've mentioned explicitly that there was a $5 million improvement in earnings for a U.S. dealer. We're very happy with this. This is the combined impact, I would say, of profitable growth and the impact of collecting the benefits on the investment we've been making and adjusting the processes and the business in the last year or so. So we're collecting the benefit on that and we expect that these will remain going forward.

Erik: And with that said I do want to comment on the core earnings.

Erik: Yeah, just quickly tool to add on the core earnings does.

Does it would destroy shouldn't improve we've mention explicitly that that.

Erik: That was a 5 million our improvement in earnings for our U S dealer, we're very happy with this.

Erik: This is a combined in fact, I would say of our profitable growth.

Erik: And the impact of collecting the benefits on the the investment we've been making and adjusting.

Erik: The the processes in the business in the last year or so so we're collecting the benefit on that end and we expect that these will remain going forward.

Sean O'Brien: And maybe I would like to, I would like to ask Sean just to give a some color about what we are doing in the US on that on that front to improve the business. Yeah, thanks, Denis. quite an exercise in really extracting the benefit out of the work that we've done in modernizing that business and bringing together the administration systems. We're also putting a lot of focus on, we have a nice distribution, a variety of distribution channels in the US, so we're investing in those particular channels to bring in the new business. And then the other part is the repricing initiatives where we were looking at our products and just doing some catch up in a number of the products across our bandwidth.

Speaker Change: And maybe I was too I would like to ask shown just to give me some color about what we are doing in the U S on that that's front to improve the business.

Speaker Change: Yeah. Thanks, Sidney Yeah, it's it's a.

Speaker Change: Quite an exercise and really extracting the benefit out of the work that we've done in modernizing that business and bringing together. The administration systems. We're also putting a lot of focus on we have a nice distribution.

Speaker Change: Do you have distribution channels in the U S. So we're investing in those particular channels to bring in to bring in the new business and then the other part is the repricing initiatives, where we were looking at all of our products and just doing some catch up and in a number of the products across our bandwidth. So we're seeing some some nice benefit from that that catch up on pricing. So it is kind of a three pronged.

Sean O'Brien: So we're seeing some nice benefit from that catch up on pricing. So it's kind of a three-pronged approach that's starting to pay off.

Speaker Change: Approach, that's starting to starting to pay off.

Denis Ricard: And Denny, just one follow up on the acquisition side in the US dealership, you're on the lookout, obviously, if there's disruption, are you willing to do a big deal? I mean, you've done bigger deals with IAS. Is this more tuck in? Or would you be willing to step into something bigger? I would say that we are concentrating on focusing on the organic growth at this point, turning the corner solidly, I would say. We are on the right track, feel very confident about the team and the actions that they are taking and I think we have to be a bit patient about the next step where we would go for a bigger acquisition.

Speaker Change: And then just one follow up on the acquisition side in the dealership Youre on the Lookout. Obviously disruption are you willing to do a big deal I mean, you've done bigger deals without yet.

Speaker Change: Is this more tuck in or would you be willing to step in and do something bigger.

Speaker Change: I would say that our we are concentrating on focusing on the organic growth at this point turning the corner of solidly I would say we on the right track feel very confident about the team and the actions that they're taking and I think we have to be a bit patient about the next step where we would go for a bigger acquisition it might be a smaller one.

Denis Ricard: It might be a smaller one, but I don't think you should expect a big one in the short term. Appreciate the cover.

Speaker Change: But I don't think you should expect get big wanted the short.

Speaker Change: A short term.

Speaker Change: Appreciate the color. Thank you.

Denis Ricard: Thank you.

Speaker Change: <unk>.

Speaker Change: Yeah.

Paul Holden: The next question is from Paul Holden from CIBC, please go ahead. Thank you. Good morning. So, ongoing question I continue to hear related to tariffs is the impact it might have on U.S. dealer services profitability, not so much from a sales perspective, which we have already covered, but more from a claims cost perspective.

Speaker Change: The next question is from Paul Holden from CIBC. Please go ahead.

Paul Holden: Thank you good morning Oncor.

Paul Holden: Ongoing question I continue to hear related to tariffs is the impact that might have on U S dealer services profitability not so much from sales perspective, which you've already covered but more from a claims cost perspective. So.

Sean O'Brien: So two parts to that question, one, are there any actions you are taking today to help mitigate potential cost inflation or higher cost of parts? And then two, how would you think about the longer-term impact and ability to reprice, so sort of going to Denise's point that maybe create some short-term noise, but longer-term would actually maybe be positive.

Paul Holden: Two parts to that question, one or are there any actions you're taking today to.

Paul Holden: To help mitigate potential cost inflation or higher cost of parts and then two how would you think about the longer term impact and ability to.

Paul Holden: Reprice folks sort of on a point that maybe create some short term noise, but longer term it actually maybe be positive.

Sean O'Brien: Yeah, this is Sean O'Brien. Yeah, we're watching that one closely. We haven't seen parts increases or labor increase, but as that gets passed down, we expect that potentially could come. So we're watching it really closely and are prepared to adjust pricing as we need to. And we're also watching the industry as well to see as competitors are making any moves of that such. So we're ready to do it and prepared for it. The other part that we're sort of seeing as we talk to dealers is as there's uncertainty and pricing gets pushed onto the consumers that there's, you know, having protection in their vehicle is important.

Paul Holden: Yeah. This is Shawn O'brien, yeah, we're watching that one closely we haven't seen a parts increases our labor increase but as that gets passed out we expect that potentially could come. So we're watching it really closely and are prepared to to just pricing is as we need to and we're also watching the industry as well to see us as competitors are making any moves of that such a where we are.

Paul Holden: Ready to do it and and prepared for the other part that we're sort of seeing as we've talked to dealers as as there is uncertainty in pricing gets pushed onto the consumers that there is a having protection on their in their vehicle is important you know you're a vehicle repairs are quite heavy so it's a habit that protection and peace of mind is something that will hopefully we will see a bit of a.

Sean O'Brien: I mean, your vehicle repairs are quite heavy, so it's having that protection and that peace of mind is something that hopefully we'll see a bit of an uptick on F&I sales, even as prices are going up.

Paul Holden: Uptick on F&I sales as even as prices are going up and in U S.

Sean O'Brien: If I can add one thing that is specific to the U.S. as well is that the business is highly reinsured. So, it's 75% reinsured. We do mostly admin in the U.S. So we're less affected because of. Yeah, okay. No, that's a fair point. Thanks for that.

Paul Holden: If I can add the one thing that is specific to U S. As well is that the business is IV reinsure that book, so with 75% reinsured. Its we do mostly at men in the U S. So were less affected because of that.

Speaker Change: Yeah, Okay fair.

Paul Holden: Fairpoint extra life.

Paul Holden: And then, I guess, second question, I think it was Denis, I can't remember if it was Denis or Eric, you mentioned that the Verisity and Prosperity deals were earnings neutral in Q1. I think based on original guidance, the expectation is for them to start becoming earnings accretive in the second half of this year.

Speaker Change: And then I guess second question.

Speaker Change:

Speaker Change: To me I can't remember Sidney or Eric you mentioned that P. A diversity and prosperity deals were earnings neutral in Q1, I think based on original guidance. The expectation is for them to start becoming earnings accretive in the second half of this year I just want to.

Eric Jobin: I just want to verify that I have that correct and if that is correct, that you are on path to delivering that expected accretion by second half of 2025.

Speaker Change: Verify that I have that correct and if that is correct, but you are on path to delivering that expected accretion by second half of 'twenty five.

Eric Jobin: Yes, Paul, it's Eric again. I will say absolutely. You're right on this. We're on the path to get there. We're still in the first year. So we're slightly negative on vericity. And remember last year that we said that the combined equity, vericity and prosperity was kind of neutral in the first year. And, and we're expecting vericity to be to start being accretive starting in the second half. Okay, great.

Speaker Change: Yes Polytechnic again, we'll see yeah absolutely.

Speaker Change: Youre right on this we're on the path to a to get there we're still in the first year. So where are were slightly negative on the risky and remember last year that we said that the combined with Citi.

Speaker Change: Every city and prosperity was kind of neutral in the first team and and we're expecting <unk> to be to start being accretive starting in the second half of the year.

Paul Holden: Last one for me, and hopefully it's a quick one too.

Speaker Change: Okay, Great and last one for me and hopefully a quick one to.

Speaker Change: I don't recall, you mentioning technology investments has an impact on the light cat ratio in the past.

Paul Holden: I don't recall you mentioning technology investments as an impact on the LICAT ratio in the past. Maybe that's just because now we're talking about a larger capitalized cost versus something that's expensed, but just kind of curious on the accounting and nature of that investment. It was just a question of materiality, I guess, Paul. It's always been there. We have a very robust program to deploy capital through IT, to support our businesses. And it's, as you know, we're following very thoroughly our operating leverage and capital deployment.

Speaker Change: Maybe that's just because now we're talking about a larger capitalized cost versus something about expense, but just kind of curious on the accounting and nature of that of that investment.

Speaker Change: Okay.

Speaker Change: So it was just a question of materiality I guess, Paul it's always been there we have a very robust program to deploy capital true by two to <unk> to support our businesses and it's as you know we're following very Toro fleet, our our openreach.

Eric Jobin: So it's just business as usual for the Okay, and maybe some quick color on what that what that investment exactly is for like the nature of it. Oh, it varies a lot. It's for back office system, front office, everything that supports lines of business.

Speaker Change: <unk> leverage and capital deployment. So we're just business as usual for this okay.

Speaker Change: Okay, and maybe some quick color on what that what that investment exactly as for like the nature of it.

Speaker Change: Oh it P. J it varies a lot it's for a back office system front office everything that supports our.

Speaker Change: Lines of business, Okay, Okay, I'll leave it there thanks for the time.

Paul Holden: Okay, okay, I'll leave it there.

Speaker Change: Yeah.

Tom Mackinnon: The next question is from Tom MacKinnon from BMO Capital Markets. Please go ahead. Yeah, thanks. Good afternoon.

Speaker Change: The next question is from Tom Mackinnon from BMO capital markets. Please go ahead.

Tom Mackinnon: Yeah. Thanks, good afternoon.

Tom Mackinnon: I'm just going to take the acquisition diversity a little bit further. I think when you disclose your third quarter 23 result, That's just shortly after you announced the acquisition. You talked about $0.04 core EPS dilution in the first year, $0.02 accretion. second year, and then 10 cents accretion in the third.

Tom Mackinnon: Take the acquisition diversity, a little bit further I think when you disclosed your third quarter 'twenty three results.

Tom Mackinnon: That's just certainly after you announced the acquisition you talked about four cents.

Tom Mackinnon: Core EPS dilution in the first year two cents accretion.

Tom Mackinnon: In the second year, and then 10 cents accretion in the third year.

Tom Mackinnon: Are you still seeing that? I'm not sure.

Speaker Change: Are you still seeing that.

Speaker Change: I'm not sure can you repeat what you mentioned come because.

Eric Jobin: Can you repeat what you mentioned, Tom? Because...

Tom Mackinnon: Can you repeat your question, please?

Speaker Change: Can you repeat your question please.

Tom Mackinnon: Yeah, you talked about core, the core EPS impact of the acquisition of Vericity. And it was $0.04 dilution in the first year. This is to core EPS, $0.02 accretion in year two and $0.10 accretion in year three.

Speaker Change: Yeah, you talked about core core EPS impact of the acquisition of risk Okay and.

Speaker Change: More sense it was four cents dilution in the first year.

This is to core EPS to the sensus accretion in year, two and 10 cents accretion in year three.

Eric Jobin: And it looks like you would still stand by. I mean, we're three this is three quarters through year one and you're already neutral. So are you on the trajectory to be two cents? for Year 3. Yes, the short answer is yes to this. Okay, that's great.

Speaker Change: And it looks like you are.

Speaker Change: Would still standby.

Speaker Change: I mean were three this is three quarters through year, one and you're already neutral.

Speaker Change: So are you on the trajectory to be two cents accretion in year, two and 10 cents accretion by year, three or four year three.

Speaker Change: Yes, the short answer is yes to this Uh huh.

Speaker Change: Okay. That's great and then the second is just with respect to the new business strain in group business.

Tom Mackinnon: And then the second is, just with respect to the new business strain and group business, this thing came down nicely year over year.

Speaker Change: Thing came down nicely year over year, but if I look at our employee benefits sales, they basically doubled or more than doubled year over year. So it is is it really a function of that.

Eric Jobin: But if I look at the employee benefits sales, they basically doubled or more than doubled year over year. So is it really a function of that? The strains down because the sales are up? Or have you done anything different?

Speaker Change: The strange down because the sales are up or have you done anything different to mitigate.

Speaker Change: Mitigate straying outside of just volume.

Eric Jobin: I'll just start with the strain and I'll pass it over to Louis-Philippe for Business Outlook. On the strain, we're just out of the year-end review of assumptions. And what you've seen in the strain reduction is just an update. We've got pretty good profitable renewals, so the strain is lower in Q1 because of those items. So on the business outlook with respect to premiums, I will pass it over to Louis.

Speaker Change: Yeah, I'll, just talked with the strain and I'll pass it over to Luis Felipe pulp business outlook under strain are we're just out of the <unk>.

Speaker Change: The year end review of assumptions, so and what you've seen in this train. The reduction is just an update with our we've got a we've got a pretty good profitable renewals will the strain is is lower in Q1 because of those items. So Tim so on the <unk>.

Speaker Change: This outlook with.

Speaker Change: Respect to premiums I will pass it over to Phil.

Louis-Philippe Pouliot: Yeah, thanks Eric. I'm happy you mentioned the renewal, because when you look at the weight of renewals versus new sales on the effect of strain, renewal is actually a bigger effect. And what we see is that we are executing really well on our renewal strategy. So it maintains profitability over time. So we like what we're seeing on that front. And maybe with respect to I guess, what we see for the future and how things are going. I mean, we're looking at internal indicators right now, the quoting activity. And so what we're seeing in the marketplace is an indication that we can continue on the same trend that we've seen the last maybe year or two.

Phil: Yeah. Thanks, I think I'm happy you mentioned their renewals because when you looked at the weight of renewals versus new sales on the effects of strain renewables is actually a bigger effect than what we see is that we are executing really well on a renewal of their strategy. So it maintains profitability overtime. So we like what we're seeing on that front.

Speaker Change: And maybe with respect to them I.

Speaker Change: I guess, a what we see for for the future and how things are going I mean, we're looking at internal indicators are right now are the quoting activity and so what we're seeing in the market places is an indication that we can continue on the same trend that we've seen in the last and maybe you are too.

Louis-Philippe Pouliot: And yeah, it's great news. I'm happy to see 70 million in the first quarter compared to a full year 2024 of 80 something. So we're in a great spot. And I see that momentum continuing for sure. It's the result of a few things and oh I'm sorry yeah and if you continue that kind of momentum do we expect that that strain number is going to kind of stay in the range that we saw in the first quarter? I think we're in the right spot the way we're looking at it at this level and probably a good indicator.

Speaker Change: Yeah, It's great news are happy to see a 78 million in the first quarter compared to a full year 'twenty 'twenty four the D 80, something so we're in a great spot and I see that momentum continuing here for sure.

Speaker Change: It's the result of a few things.

Speaker Change: Oh, I'm sorry, yeah.

Speaker Change: And if you continue that kind of momentum do do we expect that that strain number is going to kind of.

Speaker Change: Stay in the range that we saw in the first quarter.

Speaker Change: I mean, I think we're on the right. We were looking at are at at this level and probably a good indicator that there it's gonna be bumpy, it's gonna be because because there's it's just the nature of things but.

Louis-Philippe Pouliot: It's going to be bumpy, it's going to be because it's just the nature of things, but I think the level we're at is a good indication.

Speaker Change: I think the level. We're at is a good indication for the future.

Louis-Philippe Pouliot: Sounds good, thanks. Tom, I just want to remind you one item though, because you compare business growth with respect to strain. Keep in mind that the business growth of that line of business is reflective implemented sales. So what Woophilip is talking about is implemented sales, and the strain is connected with confirmed sales. that may take a while to be implemented. So there's a slight disconnect between the growth that you see and the strain. Strain comes first. Okay, so you mean you report confirmed sales, but by the time you get them on your books, they're implemented?

Speaker Change: Sounds good thanks.

Speaker Change: Tom I, just want to remind you one item because you compare business growth with respect to strain <unk>.

Speaker Change: Keep in mind that the business growth of that line of business is reflective implemented sales. So what what Philip is talking about is implemented sales and the strain is connected with confirm sales that may take a while to be implemented. So there's a slight disconnect between the growth that you see and the <unk>.

Speaker Change: Strain come first.

Speaker Change: Okay. So a confirmed media report confirmed sales but.

Speaker Change: And you get them on your books, they're implemented is that.

Louis-Philippe Pouliot: Is that... Is that the way we would distinguish the difference there? No, not exactly. We report the strain on the confirmed business. That will take a little while to implement. And the business growth that you see in the SIP is reflective of the implemented sales that were confirmed, let's say, in the last 12 months or so. Okay, thanks for that.

Speaker Change: That's the way we would distinguish the difference there.

Speaker Change: No nothing exactly we report the strain on the confirmed business that will take a little while to implement and the business growth that you see in the Sip is reflective of the implemented sales that were confirmed let's see.

Speaker Change: In the last 12 months or so.

Speaker Change: Okay. Thanks for that.

Speaker Change: Okay.

Mario Mendonca: The next question is from Mario Mendonca from TD Securities. Please go ahead. Good afternoon, Denis, I appreciate your comments about the long term trends in US dealer service. But in the short term, it does appear that there could be some volatility. And maybe going to Eric, then, there's $306 million of US dealer services sales in the quarter. If we assume 75% of that is reinsured, so we're looking at maybe $240 million, what I'd like to understand is how that $240 million or so of sales in a given quarter... would impact the drivers of earnings in the U.S.

Speaker Change: The next question is from Mario Mendonca from TD Securities. Please go ahead.

Mario Mendonca: Good afternoon, Denny I appreciate your comments about the long term trends in U S dealer services, but in the short term. It does appear that there could be some volatility.

Mario Mendonca: And maybe going to Eric then theres $306 million of U S dealer services sales in the quarter.

Mario Mendonca: If we assume 75% of that is reinsured. So we're looking at maybe $240 million, what I'd like to understand is how that $240 million or so of sales in a given quarter would impact the drivers of earnings in the U S. Firstly does it go through the core non insurance activities does it go through PPA.

Eric Jobin: Firstly, does it go through the core non-insurance activities? Does it go through PPA? And then secondly... Sales in a given quarter. How do they affect the quarter? Do they?

Mario Mendonca: And then secondly sale.

Mario Mendonca: Sales in a given quarter, how do they affect the quarter is it do they.

Eric Jobin: benefit earnings over, say, a 12-month period or immediately in the quarter.

Mario Mendonca: Benefit earnings over say, a 12 month period or immediately in the quarter of the sale.

Eric Jobin: Mario, it's Eric. I will start with respect to your question with where does it shows up. The reinsured business is admin business, so you're right, it shows up in the core non-insurance line of the driver of earnings. Does it get reflected immediately or over time? It's mostly reflected at time of sale. Okay, so if in fact... there is some meaningful volatility and sales have been pushed forward. And that's what every Read. You could read that in pretty much any economy. uh...

Mario Mendonca: But he always take I will start with respect to your question with where does it shows up.

Mario Mendonca: The reinsured business is admin business, so youre right. It shows up in the core non insurance line of the driver of earnings.

Speaker Change: Does it get reflected in immediately.

Mario Mendonca: Overtime.

Mario Mendonca: It's it's mostly it's mostly reflected at time of sale.

Speaker Change: Okay. So if in fact.

Speaker Change: There is some meaningful volatility and sales have been pushed forward and thats what every.

Speaker Change: If you would.

Speaker Change: Reed you can read that in pretty much any economists.

Eric Jobin: papers of of late that there was a significant pull forward of sales then does it necessarily mean that if sales were to come off meaningfully Thank you all. Yes, it can be impacted. because of what I just explained about the timing and where it shows up.

Speaker Change: Papers of late that there wasn't a significant pull forward of sales.

Speaker Change: Does it necessarily mean that if sales were to come off meaningfully.

Speaker Change: In Q2 that that line could be impacted.

Speaker Change: The core non insurance activities.

Speaker Change: Yes, it can be infected.

Speaker Change: Because of the what we what I just explained about the timing and where it shows up.

Speaker Change: And then maybe didn't eat the there was a discussion around material capital flexibility for the company. This is a discussion that was had late last year.

Denis Ricard: Maybe, Denis, there was a discussion around Material Capital Flexibility For the company, this is a discussion that was had late last year. uh... because of the change in I'm trying to understand how that might play out at a practical level. I may have asked you this in the past, is this something where we'd see the company's leverage ratio increase more significantly? Is that still something we should expect? or will there be no meaningful impact on the balance? Our intent, Mario, is to have the most optimized. I would say that the leverage ratio right now is too low in terms of where we want to be.

Speaker Change: Because of the change in capital standards.

Speaker Change: I'm trying to understand how that might play out and at a practical level and I may have asked you. This in the past is this is this something where we'd see the company's leverage ratio increase more significantly is that still something we should expect or.

Speaker Change: Or.

Speaker Change: Will there be no meaningful impact on the balance sheet as a result of that change.

Speaker Change: Our intent and my view is I'm.

Speaker Change: You still have the most optimized.

Speaker Change: <unk> balance sheet. Eventually so the idea is to move I would say gradually over that the state. So you shouldn't I mean, I would say that the leverage ratio right. Now is just too low in terms of where we want to be.

Speaker Change: Okay. Thank you.

Operator: This concludes the question and answer session.

Speaker Change: This concludes the question answer session I would now like to turn.

Denis Ricard: I would now like to turn the conference over to Denis Ricard for closing comments. Well, thank you for all your questions and being there. I just want to emphasize three things that I think are important. We didn't have that many questions on growth, but growth has been fantastic in the quarter. And it's really a testimony of, you know, our capacity to grow the company for the next quarter because you can ask questions in the next quarters. And I mean, the more sales we have now, the better the results should be in the future.

Speaker Change: The conference over to you didn't even account for closing comments.

Speaker Change: Well. Thank you for all your questions and being there I just want to emphasize three things that I think are important we didn't have that many questions on growth, but growth has been fantastic in the quarter and it's really a testimony of our capacity to grow the company for the next quarter because you can ask questions in the next quarters and I mean.

Speaker Change: The more cells, we have now the better the results should be in the future. That's number one second is that when you look at our core or a week, we're moving towards our 17% plus I mean, we're not there yet, but we are certainly moving towards that.

Denis Ricard: That's number one. Second is that when you look at our ROI, we're moving towards our 17% plus. I mean, we're not there yet, but we are certainly moving towards that.

Denis Ricard: And lastly, the U.S. earnings operation is improving significantly. So I'm very pleased about that.

Speaker Change: And lastly, the your U S earnings our operation is improving significantly so I'm very pleased about that so thank you for attending this call and see you next time.

Denis Ricard: So thank you for attending this call and see you next time.

Speaker Change: Yeah.

Speaker Change: Yeah.

Operator: This brings a close to today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Speaker Change: This brings our close today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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