Q3 2025 iA Financial Corp Inc Earnings Call
Speaker #4: Thank you for standing by . This is the conference operator . Welcome to the iA Financial Group . Third quarter 2025 Earnings Results .
Speaker #4: Conference call . As a reminder , all participants are in listen only mode and the conference is being recorded . After the presentation , there will be an opportunity to ask questions .
Speaker #4: 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 .
Speaker #4: Then zero . I would now like to turn the conference over to Caroline Drouin with iA Financial group . Please go ahead .
Speaker #5: Thank you and good morning , everyone . Bonjour . Welcome to Iaes third Quarter 2025 conference call . This conference call is open to the financial community .
Speaker #5: The media and the public . And I remind you that the question period is reserved for financial analysts . Before we start , I draw your attention to the forward looking statements , information on slide two , as well as the non IFRS and additional financial measures information on slide three .
Speaker #5: Also , please note that a detailed discussion of the company's risks is provided in our 2024 MDA available on Cd-R and on our website with an update in our Q3 2025 MDA , which was released yesterday .
Speaker #5: I will start by introducing everyone attending on behalf of Aya . First Denis Ricard president and CEO Eric Jobin Chief Financial Officer and Chief Actuary Alain Bergeron .
Speaker #5: Chief Investment Officer Stéphane Bourbonnais is responsible for our wealth management operations. René Laflamme is responsible for individual insurance, savings, and retirement.
Speaker #5: Pierre Miron , Chief Growth officer for our Canadian Operations and responsible for dealer Services Canada . And Aya Auto and Home . Sean O'Brien , Chief Growth Officer for our US operations .
Speaker #5: And finally , Louis-Philippe Pouliot , in charge of group benefits and retirement solutions . So with that , I will now turn the call over to Good morning everyone .
Speaker #5: Denis Ricard .
Speaker #6: And thank you for being with us on the call today . Before we dive into our strong third quarter financial results , I'd like to begin with the significant milestone for Aya on October 31st , we officially completed the acquisition of RF capital Group , one of Canada's leading independent wealth management firms .
Speaker #6: This transaction represents a major step forward in our strategy to strengthen our national footprint and expand our presence in the high net worth segment .
Speaker #6: This transaction represents a major
Speaker #6: very pleased to welcome RF capital's talented teams to Aya , and we look forward to the opportunities this partnership will unlock later in the call .
Speaker #6: Stéphane Bourbonnais will provide more details on this successful transaction. Now let's turn to slide eight for an overview of our third quarter results.
Speaker #6: We entered the second half of the year with strong momentum . Core EPs reached $3.47 , up 18% year over year , and our core ROE stood at 17.2% on a trailing 12 month basis .
Speaker #6: Already meeting our 2020 target of 17% plus . These results underscore the resilience and strength of our diversified business model , which continues to deliver consistent long term value for our clients and shareholders .
Speaker #6: Sales continued to be strong , with premiums and deposits up 6% year over year . And total assets under management and administration of 15% .
Speaker #6: This performance reflects our ability to meet evolving client needs through a broad and competitive product suite , supported by high performing distribution network .
Speaker #6: Our position proves to be robust with a solvency ratio of 138% at the end of Q3 , well above the regulatory minimum . This was supported by a strong organic capital generation of $170 million during the quarter .
Speaker #6: As of September 30th , our capital available for deployment stood at approximately $1.7 billion . Together , the acquisition of RF capital and the AMF revised Kali guideline , which we will be discussed in more detail by Erik later in the call , our to reduce the solvency ratio by three percentage points and to reduce the capital available for deployment by $375 million .
Speaker #6: Therefore , on a pro forma basis , as of September 30th , the solvency ratio is 135% and our capital available for deployment is estimated at $1.3 billion .
Speaker #6: Finally , our book value per share increased to $79.22 , up 11% year over year . We continue to return value to shareholders through our active NCIB , excluding the impact of the increase in book value over the last 12 months is close to 13% .
Speaker #6: Let's now turn to slide nine to review the business growth in our Insurance Canada segment. Sales level and growth were good across almost all business units.
Speaker #6: Starting with individual insurance sales reached $102 million , marking a second consecutive quarter above the $100 million mark . While this represents a 1% year over year decline , it's important to look beyond this figure .
Speaker #6: We continue to rank number one in Canada for the number of policies issued , with volume up 5% compared to the same quarter last year .
Speaker #6: This growth reflects strong business activity , particularly in our core market . The mass market . More importantly , net premiums increased by 11% year over year on a year to date basis .
Speaker #6: Sales are up 5% and this is fully aligned with the expectations we shared at our last investor event . This performance underscores the strength of our distribution networks .
Speaker #6: The effectiveness of our digital tools , and the breadth of our product offering . Turning to group insurance premiums and deposits rose by 4% year over year , supported by good sales implemented in the last 12 months .
Speaker #6: In dealer services , sales grew by 9% to $214 million , driven by continued momentum in PNC insurance and the contribution from global warranty .
Speaker #6: Finally , I Auto and Home delivered another strong quarter , with sales up 10% year over year to $180 million , reflecting both an increase in the number of policies issued and price adjustments .
Speaker #6: Moving to slide number ten to highlight wealth management sales , where a combined net fund sales from SEG and mutual funds across all our units surpassed $1.1 billion .
Speaker #6: This quarter , we continued to build on our leadership position in the Canadian SEG fund market , posting strong results in both gross and net sales .
Speaker #6: Gross sales of segment rose 23% year over year , exceeding 1.6 billion , while net sales reached $997 million . These results speak to the strength of our distribution networks and continued appeal of our product offering in mutual funds , gross sales increased by 58% to $608 million , and net sales reached $25 million , supported by favorable market conditions and a rebound in the industry wide sales .
Speaker #6: Sales of other individual savings products declined 17% year over year as investors continue to favor higher return asset classes in the current market environment .
Speaker #6: Finally , in group savings and retirement , total sales reached $607 million . Compared to $900 million a year earlier . Sales of accumulation products and insured annuities were lower this quarter .
Speaker #6: Note that volumes in this unit can fluctuate significantly depending on the size of contracts . That said , total assets under management in group savings were up 15% compared to a year ago .
Speaker #6: Looking at slide 11 , our US operations continue to perform well in individual insurance sales increased by 15% year over year , reaching $78 million in the US dollar .
Speaker #6: Our approximately 107 million CAD . Once again this quarter , our US individual insurance sales surpassed those in Canada , driven by organic growth in our core markets .
Speaker #6: Veracity continues to benefit from its scalable platform and data driven capabilities . Its integration remains on track and is supported and is supporting our long term ambitions in the US market .
Speaker #6: In dealer services , sales remained stable at $286 million , reflecting consistent year over year performance . It's worth noting that sales in the third quarter of 2024 were temporarily elevated due to a system outage , and that the growth momentum observed in the first half of 2025 was moderated by dealer group attrition .
Speaker #6: This attrition was partly driven by repricing efforts as part of the management actions . We've been executing with discipline in recent quarters . While repricing efforts led to the loss of certain accounts , it was a strategic decision aimed at strengthening the foundation of the business and ensuring long term profitability .
Speaker #6: We continue to invest in distribution relationships and remain focused on driving sustainable growth through our high quality offerings . Now turning to slide 12 , where our financial metrics demonstrate consistent progress toward our mid-term targets .
Speaker #6: Core growth for the first nine months of 2025 stands at 22% year over year , well ahead of our mid-term target of 10% plus and a strong indicator of our earnings momentum .
Speaker #6: Core ROE remains solid at 17.2% , already meeting our 2027 objective . Year to date , we've generated $495 million in organic capital , keeping us firmly on track to meet our 2025 target of over $650 million .
Speaker #6: Lastly , our dividend payout ratio of 28.3% is well within our target range . To conclude , we renewed our NCIB program , allowing us to repurchase up to 5% of our outstanding shares .
Speaker #6: This decision reflects our balanced approach to capital allocation and underscores our commitment to returning value to shareholders , while continuing to invest in organic growth and strategic acquisitions .
Speaker #6: With that , I will now hand it over to Eric , who will comment on our third quarter profitability and capital strength following Eric's remarks .
Speaker #6: Stefan will share a few comments on the RF capital acquisition , and then we will open the line for questions . Eric .
Speaker #5: Thank you .
Speaker #6: Denis , and .
Speaker #7: Good morning , everyone , and pleased to walk you through our third quarter results , which reflect the consistency of our performance . The discipline , execution of our strategy and the strength of our diversified business model .
Speaker #7: These results , combined with a robust capital position , reinforce our ability to deliver on our financial targets . Let's begin with slide 14 , which provides an overview of our profitability and financial strength for the third quarter .
Speaker #7: Core for the third quarter reached $3.47 , representing an increase of 18% year over year . And reported EPs came in at $3.91 , up 31% from the same period last year .
Speaker #7: This performance reflects strong growth in our core insurance service results . Higher können Non-insurance activities and a solid increase in the core net investment result .
Speaker #7: These results reaffirmed the strength of our fundamentals and the effectiveness of our strategy in delivering sustainable profitability . The quarterly core ROE annualized for the quarter was 18% , and our trailing 12 month core ROE reached 17.2% .
Speaker #7: Continuing to trend above the target of 17% plus for 2027 , we are pleased with this level of performance and remain focused on building on this momentum while staying prudent , given macroeconomic and trade related uncertainties .
Speaker #7: Our financial position is both solid and flexible , supported by our continued ability to generate organic capital . This trend enables us to pursue high quality growth opportunities , both organically and through targeted acquisitions .
Speaker #7: While maintaining a strong financial position . I'll return to the financial position later in my remarks to discuss the impact of the RF capital acquisition and the upcoming 2026 AMF revised Carly guideline .
Speaker #7: Over the past 12 months , our book Value Per Share has increased by 11% , excluding the impact of our active share buybacks .
Speaker #7: This increase would have been 13% . Yesterday , we announced the renewal of our NCIB program authorizing the repurchase of up to 5% of our outstanding shares .
Speaker #7: This renewal reflects our continued commitment to disciplined capital deployment and delivering value to shareholders . Turning to slide 15 for an overview of our third quarter total earnings performance .
Speaker #7: Net income grew by 29% year over year , while core earnings rose 17% , reflecting solid contributions from all three operating segments and strong investment results .
Speaker #7: Notably , net income exceeded core earnings this quarter , driven by favorable macroeconomic variations . Now , turning to slide 16 for a closer look at segment performance in the third quarter .
Speaker #7: In Insurance Canada , core earnings were 113 million , up 7% year over year . This growth was driven by higher core insurance service result , reflecting an increase in combined risk adjustment release and CSM recognized for services provided .
Speaker #7: Unfavorable morbidity in group insurance , which continued to which contributed to insurance experience . Loss of 2 million , was partially offset by favorable mortality and lower claims at high auto and home .
Speaker #7: The impact of new business was $10 million as a result of new insurance business and employee plans stemming from a high volume of confirmed sales, including one large group core. Non-insurance activities also contributed positively.
Speaker #7: LED by the good performance of dealer services . Finally , core other expenses were slightly higher than last year , reflecting normal business growth .
Speaker #7: Let's now move from Insurance Canada to Wealth Management. On slide 17, you'll see that in the Wealth Management segment, core earnings reached $125 million in the third quarter.
Speaker #7: Up 18% year over year . This growth was primarily primarily driven by increase in the combined risk adjustment release and CSM recognized for services provided supported by strong net segregated fund sales and positive financial market performance over the past 12 months .
Speaker #7: Core Non-insurance activities also posted a solid increase . Thanks to good performance from group savings and retirement . Our well distribution affiliates and AIA Clarington , where higher net revenues on assets was recorded .
Speaker #7: Turning to slide 18 , covering our US operations where third quarter core earnings totaled 32 million , up 3% year over year . This result reflects several factors , including a higher combined risk adjustment release and CSM recognized for service provided supported by good business growth over the past 12 months , the segment also benefited from a lower impact of new insurance business and reduced core other expense .
Speaker #7: During the quarter . We recorded entrance experience gains of 2 million , driven by favorable mortality in individual insurance core Non-insurance activities . Total 19 million , in line with the prior year .
Speaker #7: Higher earnings from dealer services were offset by expected losses in various city distribution activities . That said , core earnings growth was tempered by higher core income taxes , primarily due to one time adjustments .
Speaker #7: Now , turning to slide 19 for the results of the investment segment . Core earnings for the quarter were 105 million , up from 80 million in Q3 2020 .
Speaker #7: For before accounting for taxes , financing charges on debentures and dividends , the core net investment result was 132 million , compared to 111 million a year ago .
Speaker #7: The strong performance was supported by several factors , including the favorable impact of interest rate variations in recent quarters stemming from the steepening of the yield curve , as well as to a lower extent , higher results from high auto finance and the contribution of additional assets from the issuance of institutional pref shares .
Speaker #7: In addition , credit experience was positive , with higher impacts from upgrades than downgrades in the fixed income portfolio . At higher auto finance , our underwriting discipline and portfolio quality .
Speaker #7: Contributed to a positive credit experience in the car loan segment . Moving to slide 20 for the corporate segment core other expenses total 70 million pre-tax in the third quarter , consistent with our quarterly expectation of 68 million plus or minus 5 million , as we continue to focus on operational efficiency .
Speaker #7: If you turn to slide 21 to review our solvency ratio and capital available for deployment as of September 30th , 2025 , our solvency ratio stands at 138% , well above the regulatory minimum ratio of 90% .
Speaker #7: The ratio remained stable during the quarter as the positive impacts of organic capital generation and macroeconomic variations were offset by capital deployment activities , including share buyback .
Speaker #7: It investments and other non-organic factors such as adjustments in the investment portfolio on a pro forma basis , the solvency ratio is estimated at 135% , taking into account the impact of the RF capital acquisition completed on October 31st , 2025 and the expected impact of the 2026 AMF revised Curly guideline .
Speaker #7: On that note , in September 2025 , the AMF published a consultation for a revised Curly guideline set to take effect on January 1st , 2026 .
Speaker #7: If at if adopted as published , the guideline would , among other changes , modify the treatment of excess capital recognition for property and casualty subsidiaries .
Speaker #7: This effect is expected to be positive for our US dealer service business unit and results in favorable impact on the solvency ratio and capital available for deployment .
Speaker #7: During the third quarter , we generated strong hundred and 70 million in organic capital , keeping us on track to reach our 2025 target of 650 million plus .
Speaker #7: As of September 30th , capital available for deployment was assessed at 1.7 billion , supported by organic capital generation and the positive impact of the 2025 AMF revised guideline on Segregated funds on a pro forma basis , taking into account the RF Capital acquisition and the expected impact of the AMF 2026 revised Curly guideline capital for available for deployment is estimated at 1.3 billion .
Speaker #7: Despite investing in the second largest acquisition in our history , we remain . We maintain a substantial amount of capital available for deployment , giving us the flexibility to pursue attractive growth opportunities as we build on successive quarters of strong profitability and a robust capital position .
Speaker #7: We enter the final quarter of the year with confidence in our strategy and in our ability to execute . We remain focused on maintaining this momentum and delivering consistent , high quality results that support our long term objectives .
Speaker #7: These conclude my remarks . I will now turn it over to Stephane , who will speak about the RF capital acquisition . Stephane , over to you .
Speaker #8: Thank you . Eric . Good morning everyone . I'm pleased to take a few moments to speak about the successful closing of the acquisition of RF capital .
Speaker #8: As you know , that took place on October 31st and as David mentioned , this transaction marks a major milestone in our ambition to establish ourselves as Canada's leading non-bank wealth management platform .
Speaker #8: When you look at slide 23 , you'll see that the total price of the transaction is 693 million , which includes the advisory retention strategy .
Speaker #8: We implemented prior to closing transaction and integration costs , are estimated at 60 million before tax and are expected to be incurred over the first three years .
Speaker #8: So this investment reflects our long term commitment to the value of advice and advisory engagement . And we expect the acquisition to be neutral to core earning in year one and accretive to core EPs by at least $0.15 in year two .
Speaker #8: This acquisition strengthens our position in the high net worth segment and expands our national footprint by adding advisors and offices coast to coast and by integrating RF Capital Advisor Network in Ireland .
Speaker #8: Now operates with three complementary business models with industrial and private wealth , which will allow us to drive efficiency and technology operations and innovation , and will position us for accelerated growth .
Speaker #8: All with the main objective to equip our advisors with tools and expertise that they will have access to that will help them deliver a strong experience and outcome to their clients .
Speaker #8: If we now move to slide 24 , we present the timeline of this acquisition . So since the announcement announcement in July , we've been on the road objective was to meet with RF capital Advisors .
Speaker #8: Obviously , the focus was on advisor retention . We wanted to take the time and the opportunity to visit every offices in Canada to sit down with advisors one on one , to get to know them better , to share our vision and to ensure a smooth transition for everybody involved .
Speaker #8: The conversations were rich . The conversations were candid and very much forward looking . We're pleased with the overwhelming positivity and openness demonstrated by the advisors .
Speaker #8: They see a real opportunity and this new chapter in our genuinely excited about joining forces with us . Three things really captured . I think their attention in terms of how we wanted to go forward with them , the fact that we wanted to keep it as a distinct business .
Speaker #8: I think they were excited about the opportunity to continue growing and building their own culture . The thoughtful approach that we had to avoid any disruption for them with advisors not needed to repaper or lose any client data was a key .
Speaker #8: And last but not least , they really see through value in our partnership . Understanding the capabilities from an IT and perspective that we could bring immediately to their roadmap in the light of their feedback and the enthusiasm they have shown .
Speaker #8: We are ready to move forward with the integration , the synergy plan is officially in motion . We're approaching it with the same discipline and focus that that guides us through our all of our strategic initiative .
Speaker #8: This is an exciting moment when you look at the numbers that we show on slide 24 , when we started the process at the end of June , the assets under administration was at 40.4 billion and now is up to 43.6 billion .
Speaker #8: At the end of September , the number of advisors remains stable . We did lose some advisors , but we started the process with 143 teams .
Speaker #8: And at the conclusion of the transaction , we were at 142 teams , reflecting teams that have joined us during this process . So with the addition of RF capital , I now serves over 500,000 clients through more than 1450 advisors with assets under the administration exceeding 192 billion at the group level .
Speaker #8: We have assets under administration and management in excess of 330 billion . A clear reflection of our continued growth and the successful execution of our strategic priorities with the retention strategy completed , our focus now shifts to unlocking synergies , accelerating the integration and delivering the full value all in line with the Iowa .
Speaker #8: These benefits include expanded product access , shared technology , enhanced recruiting potential , and operational efficiency . And this transaction principles are strategic vision and sets IIA wealth on on a path towards sustained long term growth .
Speaker #8: So thank you and I will now turn it back to Denis for concluding remarks . Denis .
Speaker #6: Thank you . Thank you Stefan , and yes , we are very , very pleased with the RF capital acquisition and very proud to close the retention strategy chapter .
Speaker #6: On a strong note , with successful outcomes leading up to the closing of the transaction . So before we move to the Q&A , let me just take a moment to close with a few reflections .
Speaker #6: Please turn to slide 26 . Our third quarter results . Once again demonstrate the strength and consistency of our diversified business model and our ability to execute with discipline .
Speaker #6: We're not just delivering , we're compounding quarter after quarter , year after year . We continue to build momentum . Our earnings growth is consistent , underpinned by high quality results and a clear focus on long term value creation .
Speaker #6: Our organic capital generation and robust financial position give us the flexibility to invest in strategic growth and return value to shareholders . Sales momentum is strong , particularly in wealth management , which generated over $1.1 billion in net net fund sales this quarter .
Speaker #6: These results reflect the continued appeal of our offerings and the strength of our distribution network . This performance is no coincidence . Our strategy is clear .
Speaker #6: We are executing the way it's the result of a resilient and differentiated business model built on five reinforcing pillars targeted niche markets , a broad and entrepreneurial distribution network , diversified product offerings , agile technology , and scalable platforms .
Speaker #6: This unique combination is what sets us apart . It makes us resilient and enables us to consistently deliver across economic cycles while positioning us for long term growth .
Speaker #6: Our recent acquisition of RF capital is a clear example of how we deploy capital to strengthen our foundation and accelerate future growth . We are focussed , disciplined and confident in our ability to to continue delivering not just results , but sustainable compounding growth .
Speaker #6: Thank you . Operator . We're now ready for to take questions .
Speaker #4: Thank you . We'll now begin the question and answer session to join the question queue . You may press star then one on your telephone keypad .
Speaker #4: You'll 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 .
Speaker #4: Our first question is from Gabriel Chen with National Bank financial . Please go ahead .
Speaker #9: Hi . Good . Good morning . So another good news on the capital front there with the AMF modification . There just wondering is this for for for starters this bringing the the AMF more in line with Osfi treatment .
Speaker #9: And then second I mean I'll ask the obvious question . What's your you know your appetite for more acquisitions at this stage it seems like , you know , it would default to to buybacks in my assumption .
Speaker #9: But you know , you're an acquisitive company historically . So maybe there's something else on the horizon .
Speaker #7: Yes , Gabriel , it's Eric . I'll take the first part and I'll leave it the second part for Denny , for the the Carly guideline .
Speaker #7: It brings AMF , you know , this dealer business model is kind of unique for an insurer in Canada . So there's not really a comparable at the level .
Speaker #7: So it's it's not necessarily that , but it brings AMF in line with the US regulators in terms of capital requirements . So there's this this is where the alignment is is coming .
Speaker #9: Oh is it recognizing that it's a PNC business basically . Or .
Speaker #7: Yes exactly . And so it takes into account the risk of the business instead of just applying a guideline .
Speaker #9: So got it .
Speaker #6: Yeah . It's in here . We're very pleased with the the end result . Having a level playing field with our competitors in the US was was a goal .
Speaker #6: And we're very pleased of the discussion we had with the regulators . Regulators has been quite open on that . Obviously the regulator is not here to give us a Christmas gift , but really the level playing field was the goal all the way for for both of us in terms of the appetite for the dealer business , obviously it was a milestone for us here .
Speaker #6: In the sense that , you know , before we this was settled , there was I mean , we were not sure exactly what would be the end result .
Speaker #6: And to some extent , we were patient to wait to see what would be the end result . Now that it's been solved .
Speaker #6: There's one , I guess , stepped forward before we we want to go , let's say bigger on the dealer business in the US , which is really to bring profitability to a I would say an adequate level , a reasonable level , a level that we would be comfortable with .
Speaker #6: And the team is working very , very hard . And at some point I'm sure we're going to get questions . But Sean can answer that .
Speaker #6: But we've done , you know , various steps toward improving the profitability and the growth of that business . We are on the right path .
Speaker #6: I'm very I'm very confident that within a couple of quarters , we might we might take a decision to go bigger on that .
Speaker #9: Thank you . And then my second question , just from a modeling standpoint , I guess the capital deployed , you close that RF capital post quarter .
Speaker #9: Is there step down in the expected investment income line that we should expect . And I you know , just for , you know , clarification , then there would be an offset in somewhere else I guess .
Speaker #9: Expected profit such that it's still an EPs neutral in the first year .
Speaker #7: Yes . Gabriel , you are right . In fact , one of the reasons why the expected investment earnings in the third quarter was higher than last quarter was that we we issued capital in June and we will get the opposite impact in the fourth quarter where we have now deployed the capital , reduced the amount of asset .
Speaker #7: So that will reduce our investment income . But increase , increase our operating results in the wealth segment going forward . Going forward .
Speaker #7: So so that being said , Gabriel , in terms of attractiveness , we of course we just have two months in to the in to 25 .
Speaker #7: We expect to to get some neutrality . But as we we we look and if macroeconomic holds and you know , Stephane has done a great job with with retaining advisors .
Speaker #7: So we we now expect to to be accretive in the first year if everything goes like this . So we and as a simple rule , you know , we mentioned some aggressiveness number in when we we we made an announced the acquisition .
Speaker #7: You should assume that this this number can move a year earlier as , as a good proxy for what the performance of this acquisition .
Speaker #9: Like that $0.15 could be year one as opposed to year two . Got it . Okay .
Speaker #7: Yeah . Exactly . But but the only thing Gabriel is expect some neutrality in in the next couple of months . But you know , overall for the first year we see that it will be accretive .
Speaker #9: Got it . Thank you .
Speaker #4: The next question is from Doug Young with Desjardins Capital Markets . Please go ahead .
Speaker #10: Good morning . Maybe for Eric or Stefan just to continuing with the the RF acquisition discussion , I was going to ask how you get from neutral year 1 to $0.15 accretion in year two .
Speaker #10: But you talked a little bit about it . But can you maybe I'll just elaborate . Like why ? Why initially you thought it was going to be zero year one and $0.15 year two .
Speaker #10: And why . It could be pulled forward . And then there's been no discussion on at least I don't think there's been a lot of discussion on revenue synergies .
Speaker #10: But maybe I've missed it . But like do you think there's opportunity for revenue synergies and could you kind of elaborate a little bit about where that could come from .
Speaker #6: Yeah . Well thank you , Doug for the question . It's Denny here . You know , when we bid for an acquisition , there's always a lot of assumptions behind that .
Speaker #6: In this case , there were two that were critical . One was the retention obviously . And the second was about the what's the performance of the of the market .
Speaker #6: And on both sides , we've had fantastic results , much better than we expected on both retention and the macroeconomic environment has been very favorable .
Speaker #6: A huge tailwind . So that's why that's why we're seeing today that , you know , the $0.15 , we might just realize it in the first year as opposed to the second year .
Speaker #10: Thoughts on the revenue synergies .
Speaker #8: Yeah , I could take that part when we yeah . Thank you . Visiting with them , visiting with them . What we've heard there's a lot of opportunities when you think of from a product solution perspective , whether it is Yuma , SMA .
Speaker #8: They need assistance . They were looking for a team that could support them on product development oversight . They were looking for support .
Speaker #8: On economic insight , asset allocation strategy . So those are the things that we have within our organization that we're going to be able to put forward .
Speaker #8: Capital market activities . They did have a team , but I think there's complementary skill set that we're bringing to the table . Considering the high net worth profile that they have with advisors and the alternative space , there's there's an appetite for us to support them .
Speaker #8: There's distinct product that we could build with them as well from structure notes ECM syndication . They're excited about our trading desk on the equity and FX side .
Speaker #8: So I really do think there is a lot of opportunity. And I think that what we like is we are ready to bring this forward.
Speaker #8: So we are actually at the office today speaking to the advisors and the employees . And we're are able to show them a roadmap from the synergies perspective in terms of what they expect right now and for for the next coming quarters .
Speaker #8: We also see a lot of opportunity on the recruiting side . I think I shared with this group with the investor model in private Wealth .
Speaker #8: We were good at attracting non-bank advisors . There's a huge opportunity in Canada to attract bank advisors . People are looking for an alternative and I think the Richardson Channel offers us that opportunity to bring bank advisors to us .
Speaker #8: So this will accelerate the recruiting and probably improve as well as the retention . We were doing well , but now having multiple channels , advisors will be able to pick and choose where they want to operate based on their needs and preferences .
Speaker #8: And we could also say there's a huge opportunity on the CAS management side for us . So we feel we feel comfortable about what we could create in terms of synergy on the revenue side .
Speaker #10: That's helpful . And then just second , I don't know if this is for for Eric or but strong quarter for the investment division .
Speaker #10: I always find this is really tough to model . Can you talk about any puts and takes that we should be thinking about when we're modeling Q4 2026 , anything unusual ?
Speaker #10: I know you did a raise that obviously bolstered cash , and then you had cash that has now been deployed with RF . I'm just trying to put in context of how to think about that division and model that division .
Speaker #10: So I don't get any huge surprises . Thanks .
Speaker #7: Yes , it's Eric dog . I'll , I'll , I'll keep I'll take this one as you're right . First our you know , the capital issuance in June was one of the drivers of the beat or the increase quarter over quarter .
Speaker #7: The other item that is difficult for you to predict is when the the yield curve is moving and steepening or flattering . So this this part is , is difficult to model .
Speaker #7: But and it it was positive in the quarter . And I would say that the third part that has been positive and that is contributing contributing to investment income as well , is the improvement in i.e. auto finance performance , the expected investment earnings coming from that segment .
Speaker #7: You know , as improved , over the last 12 months , we've done many things to improve the credit underwriting criteria , and we're seeing the results .
Speaker #7: And now the expected investment earnings is is improving . And and credit experience . Start to be positive as well . So so I think we've been successful in turning around that that investment portfolio .
Speaker #7: And we're just collecting the benefit of that hard work.
Speaker #10: So is this Eric . Is this like a normal quarter or or should we kind of be thinking about something a little less robust ?
Speaker #7: You mean in Iota Finance? Doug, or...
Speaker #10: No , the investment division in general .
Speaker #7: Okay . Yeah . In in general , you know , I , I talked about three things that explain . So obviously the capital issuance going the other way around this time as we've just deployed 700 million , you should expect investment income to go down by roughly I would say 5 million next quarter .
Speaker #7: But you will see improvement in the operating result of the wealth segment . And keep in mind the guidance I gave about the aggressiveness earlier on .
Speaker #7: So so those are the moving parts . And then it's difficult to to to guess where the yield curve will move in the coming quarters .
Speaker #7: But for I o to finance we're really confident that we're there . And , and we've made the improvement that we needed to do .
Speaker #7: So that should prevail in Q4 as well. That's kind of how I see it.
Speaker #10: Appreciate the color . Thank you .
Speaker #4: The next question is from Tom MacKinnon with BMO . Please go ahead .
Speaker #11: Yeah . Thanks . I got two questions . The first is , with respect to the core Non-insurance activities in the US . You know , down quarter over quarter , 4 million .
Speaker #11: You mentioned losses for distribution activities of veracity . Can you elaborate on that is , you know , how much of those losses are in that 19 .
Speaker #11: What's the dollar amount there, and what would drive that core? Non-insurance activities? Is the number expected to increase as it is predominantly related to dealer services sales?
Speaker #11: How should we think about these other distribution activities that and their impact ? Thanks . And I have a follow up .
Speaker #7: Yes, thanks. I'll start with an explanation for the financial impact, and then my colleague Sean will step in for the strategy.
Speaker #7: In fact , what you've seen in the quarter is a decrease related to the sales activity that will . Sean comment just after me and the only thing I would remind you , Tom , is that we say all the time that the profit recognition for dealer service is happening mostly at time of issuance .
Speaker #7: So when sales go down , it impacts directly the the core non-insurance activities . And as a rule of thumb , I said previously , I think someone asked me and I said 70% , 75% of the the revenue are recognized as time of sales .
Speaker #7: So it's really that effect . And and I will leave now the , the the mic to Sean to explain what is what he is doing on on the , on his strategy .
Speaker #7: Sean .
Speaker #12: Yeah, thanks, Eric. Did he mention in the open for the dealer services business that we're really happy with the recovery we're seeing this year?
Speaker #12: The real focus was, you know, working on the operations, reducing some of the expenses on it, and then looking at pricing across the board.
Speaker #12: And I mentioned last quarter that we've repriced all of our owners products in that business . And and it was expected as part of that process with a real focus on profitable , high performing dealers , that we would see some attrition , which we did all within sort of the range of what we'd expected .
Speaker #12: The other impact we're seeing this year is there's some variance in the normal sales flow in the US , with the Q1 was so strong , it was about 23% higher than the year previous , as I recall , and so we sort of saw some pull ahead .
Speaker #12: I think at the beginning of the year . And in Q3 was was softer , but overall really happy with the results . We're going to come in very close to our target of 10% .
Speaker #12: I suspect for the year . Yeah . So things are things are looking good . Very happy with it .
Speaker #11: And the veracity . What was the impact there and how should we be ? Is veracity really material to that line ?
Speaker #12: No . Go ahead Eric . Yeah . Yeah .
Speaker #7: Yeah . If you want to add Sean , the materiality of the receipt , keep in mind that in that core non-insurance activities , you have the distribution impact of the veracity acquisition .
Speaker #7: So it's it's still minimal , Tom , on this . It's slightly negative , but it's as expected , we knew when we made that acquisition that we would have a couple of years of loss .
Speaker #7: And on that line . And when we refer to accretive overall starting in year two , it's when we look at the overall picture , including the insurance activities that you have in the driver of earning in , at , at in other lines .
Speaker #7: So overall , things are moving in the right direction . But but for the distribution arm , it's still operating at loss . And we still expect losses to happen for a little while before it becomes profitable .
Speaker #7: But things are moving in the direction that we expected .
Speaker #11: Okay . And follow up question is just with respect to capital generation , organic capital generation , year to date , your earnings are up .
Speaker #11: Your core earnings are up 22% . I think if you kind of look just , you know , you might be almost up 18% year over year in the quarter .
Speaker #11: Yet the so certainly tracking well ahead of the ten guide . But the 10% growth plus guide . But the organic capital generation you know the 650 versus the 600 isn't is substantially less than the core earnings growth .
Speaker #11: Is there any reason why or is it is it the policyholder gains that aren't necessarily transferable then the into organic capital generation ? Just any color ?
Speaker #11: There would be helpful . Thanks .
Speaker #7: Things are moving in line with plan Tom . We we always have some seasonality that takes place for organic capital generation during the year .
Speaker #7: Specifically in the first half where it's it's kind of lower . And then it's stronger in the second half . If you look at the past year , you'll see the same trend as we speak .
Speaker #7: We're at 4.95 million of organic generation . Well , on our way to to get to the 650 million plus . So , so things are , are 595 .
Speaker #7: Excuse me , I said the . 495 but we're well in a good direction to get there .
Speaker #11: Now my question isn't are you going to get there ? My question is why is the growth in the organic capital ? Why is that growth less than the growth in the core earnings ?
Speaker #7: We'll take it a Tom , if you don't mind , it , can it can get technical .
Speaker #11: Understood .
Speaker #4: The next question is from Paul Holden with CIBC . Please go ahead .
Speaker #13: Thank you . Good morning . Two questions for you as well . First one on the mutual fund sales . Big improvement in growth .
Speaker #13: Sales up 58% year over year . And then that drove up net sales to the positive , which is great . So what .
Speaker #13: Understand that a little bit more obviously with the idea of sustainability of that of that improvement . So if you can explain where the where that huge growth in growth sales is coming from , if its affiliated distribution versus third party , if there's being an improvement of fund performance or if its more new product launches , whatever color you can give us .
Speaker #13: Thank you .
Speaker #6: Yeah , we're very pleased with the the mutual fund sales this quarter . And maybe Stephane , you want to give more color on that .
Speaker #8: Yes . Thank you . Yeah . Great . Great improvement I would say quarter over quarter . And year to date . The industry has rebounded as well .
Speaker #8: Right . So I think we also benefited from that . But I think what you're seeing here is we've done a lot of work on retooling the team , realigning the team , upgrading our talent .
Speaker #8: We've been successful at increasing our sales through the affiliate channel with new products that have landed well with our team, mostly with our UMA approach and elite pools.
Speaker #8: That has been a huge success . And we've seen a significant adoption . We've supported advisors with alternative products as well that they've been looking at , and we've seen increased sales in the Non-affiliate as well .
Speaker #8: We onboarded a a new manager , a new portfolio manager a year ago with a firm named agile , and they've been quite successful at opening up doors with with the banks .
Speaker #8: So it's been it's been great to see and that has driven obviously net sales to be in a positive territory . So it's looking good .
Speaker #8: What I like is we see the consistency week over week . We've seen an increase in sales on our average . We've also seen week after week the net number being there .
Speaker #8: So it's not like one big week or one big month . That is is giving and showing the the numbers , the consistency in the approach we're having .
Speaker #8: So I feel pretty good about the momentum where we're at right now .
Speaker #13: Okay . Great . And then a bigger picture question on on Roe . I mean , as you highlighted , you're ahead of plan in terms of Roe expansion , which is which is great .
Speaker #13: And if I recall from Investor Day, you kind of highlighted two potential catalysts for the ability to exceed that 17% target, which were share buybacks and acquisitions.
Speaker #13: Two things that look to be in the card are those are those kind of the things we should continue to look at in terms of your ability to exceed that 17% level ?
Speaker #13: Or can you also get there based on where you are today , just based on organic , organic growth as well ?
Speaker #6: Yeah . Thank you for the question . Absolutely . That's the answer . The short answer . We have a pace of buyback right now , which is lower than our capacity to generate organic capital .
Speaker #6: I we are actively looking for , you know , profitable acquisition going forward . But at the end of the day , there's always a plan B that if we're not able to deploy profitably , our capital , that we might increase the the NCIB , the buyback .
Speaker #6: So those are the very important tools that return value to the shareholders . Our first choice is really to grow the company , grow the organization .
Speaker #6: That's what we've done recently with the RF capital Acquisition . But and we are actively looking at some of our first choice . But at the end of the day , if we cannot for whatever reason , we will will return the the value to the shareholders .
Speaker #6: Where our goal is not to pile up capital .
Speaker #13: All right . Okay . Thank you for that . That's it for me .
Speaker #4: Once again , if you have a question , please press star . Then one . The next question is from Mike Russinovich with Scotiabank .
Speaker #4: Please go ahead .
Speaker #14: Hey good morning . Just a quick follow up from on from Eric . Maybe on the the steepening of the yield curve and just making sure I heard you correctly .
Speaker #14: So, $5 million down potentially. That's for the investment segment overall next quarter.
Speaker #7: Yes . Excepting excluding any macroeconomic impact . That's that's what you should expect . Everything being the same .
Speaker #14: Got it . Okay . And then as far as the movement in the yield curve , the steepening , I'm just trying to get a better sense of was there anything peculiar about the steepening .
Speaker #14: Is it any part of the curve that that drove an outsized result ? Just trying to get a sense of , of , you know , just just what happened in the quarter ?
Speaker #14: It seems like it's a sustainable level with maybe a bit of downside for next quarter. But generally, you're going to keep those gains because the yield curve has already steepened. Is that the way to think about it?
Speaker #7: Yes , exactly . We always say that we're winning when the curve is steepening . Overall for the organization . Of course , some sectors may be affected by short term decrease in in interest rate , but overall , when we look at our overall organization , we win .
Speaker #7: And the of course , at some point steepening on its own is is is not enough . We need we need a good long term and rate as well .
Speaker #7: But in the current environment, it's favorable for us on both sides: steepening and the level of interest rates.
Speaker #14: Okay , okay . That's helpful . And then a quick one for Stefan just on the retention of the IAS with RF capital .
Speaker #14: Do you think you're past the point where you know , the risk of attrition has has basically gone ? What I'm getting at is I'm not really sure if it's if it's at the announcement date within a few months of the announcement date .
Speaker #14: And that's when you'd normally see attrition . Or is it like , you know , 12 months later , like , do you feel like you're past the point where , you know , the downside risk on attrition has basically diminished at this point ?
Speaker #8: I'd love to say yes to this , but unfortunately , right . Our focus is always the same . And and it's true for RF , but it's true for investor and private .
Speaker #8: Well , right . It's always to make sure that we're keeping our advisors to stay with us . Right . So obviously the ad opportunities to choose a different path , I think what they're saying is they're willing to stay with us and see what we can do .
Speaker #8: And by coming together . So I think we're going to have a really good shot at showing to them the value of our new partnership .
Speaker #8: I think they're excited about it. So I was obviously concerned from the first few weeks to see how they would react. And I know the industry was close to them and offering them an alternative.
Speaker #8: And I think the message that we're getting is they're willing to give us a fair shot and we're going to take it and we're going to work with them to make sure that it's a successful partnership for for both parties .
Speaker #14: Got it . Thanks . Appreciate the color .
Speaker #6: Yeah . Maybe just one thing to add is that obviously the first weeks were very , very critical . So the the pretty much understand what our value proposition right now .
Speaker #6: And as you've seen from the numbers , I mean most of the teams are with us as we speak . But obviously for any other for any organization , including us , you always have to demonstrate your value .
Speaker #4: The next question is from Darko Mihelic with RBC Capital Markets . Please go ahead .
Speaker #15: Hi . Thank you . Good morning . I'll be very quick . Eric , I just wanted to go back to that 5 million drop in investment .
Speaker #15: Are you talking the which line item are you talking about ? Because we calculate that the lcns alone will be an $11 million impact next quarter .
Speaker #15: So are you talking ex that or am I or are you talking the investment line like , are you talking bottom line number for just five .
Speaker #7: No , no I'm talking about the expected investment income . Darko . The top line of of that when you when we reduce our investment invested asset by 700 million , if you make a reasonable assumption , you'll figure out quickly how we get to the 5 million per quarter .
Speaker #15: Yeah . Okay . Great . And then just , just overall , Denny , are you getting a little I mean , the markets have been very kind .
Speaker #15: How do you feel about the overall exposure to very strong equity markets ? A solid yield curve essentially where I'm going with this is , you know , we're at a stage now where your wealth business is much bigger .
Speaker #15: Your investments are in very strong place . How do you feel about a downturn , a drawdown supposedly like something like that ? How do you how do you how do you can you speak to your sensitivity to these items and what makes you comfortable that you know your earnings power is is really secure in a , in a bear market , so to speak .
Speaker #6: I mean , we have sensitivity . Thank you for the question . We have sensitivity testing on the , you know , the market movement .
Speaker #6: So you can relate to that if you want . But the one thing that I would say is that , I mean , as far as I'm concerned , I'm not I'm not that concerned of a downturn .
Speaker #6: We know it's going to happen at some point for sure . When we commit for the 10% EPs growth going forward , 10% plus , it's really for the long term .
Speaker #6: So there are years where , you know , the 10% might not be hit because of market . You know , if there is a strong market downturn , it might affect the profitability overall .
Speaker #6: But at the end of the day , when you when we look long term , we're pretty confident pretty much confident that we will reach or even exceed the 10% plus we've already had a great ride so far , much more than the 10% plus .
Speaker #6: So you have to look at it on a very long term basis . I mean , obviously from one year to the other , you'll see some sensitivity .
Speaker #15: Okay . Does it change your capital deployment plans ?
Speaker #6: No , it's not changing . Absolutely not . We would be prepared to allocate and deploy our capital in any business , even the ones that are sensitive to the market , like RF capital that we've just bought .
Speaker #6: Obviously , we're very pleased where we are right now because the market has also collaborated a lot since we announced the acquisition . So if there are other opportunities in space , we will get there and or any other space like an individual insurance in the US is one that is less .
Speaker #6: I would say affected by stock market . This is one that we would be very much prepared to to invest as well . Dealer services will see as as I said before , still need a couple of quarters because before we we go bigger on that .
Speaker #6: But again , any business we're in , we're pretty happy because the ROE is higher than the target .
Speaker #15: Thank you very much for that , Eric . If you have a chance , I'd like to also speak offline regarding your capital .
Speaker #15: We did an analysis using comprehensive income core and reported , and we found very little relationship between those and capital generation . So I'd love to be part of that conversation please .
Speaker #15: Thank you .
Speaker #7: No problem .
Speaker #4: This concludes the question and answer session . I'd like to turn the conference back over to Caroline Drouin for any closing remarks .
Speaker #5: Thank you , everyone for joining us today . All of our Q3 earnings release and slides for today's conference call are posted on the Investor Relations section of our website at .
Speaker #5: A recording of this call will be available for one week starting this evening , and the archived webcast will be available . Available for 90 days and a transcript will be available on our website in the next week .