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IFRS 17: “back to Canada “, said Denis Ricard

by

Alain Castonguay

28 November 2018 13:30

Denis Ricard | Photo : Alain Castonguay

According to Denis Ricard, president and chief operating officer ofiA group financial, the entry into force of the new IFRS accounting standards 17 in 2022 does not represent a progress for canadian insurers.

Mr. Ricard was the guest of a dinner-conference held in Quebec city on Tuesday 27 November. A good part of the presentation of Denis Ricard was heard at the canadian club, the 17 September in Montreal.

It is with the five lines of development, the same as those presented during the investor day June 22, 2018, Denis Ricard, has expressed his dissatisfaction with IFRS 17. The second axis focuses on reserves, investments and capital, which aims to protect at any time the financial position strong.

A stake since 2004

Denis Ricard intends to speak of the new IFRS standards since 2004, when he was chief actuary. It had to be done in 2012, it will be implemented eventually in 2022. “What is important, it is the capital. The accounting, the recognition of profits in the time, there are things arbitrary in there, ” he says.

According to him, the current method to recognize the ability to generate profits is good, because there are very few differences between the earnings per share (EPS), as reported for iA, and the adjusted earnings. “With the method of IFRS 17, which comes next, it separates the active and the passive. There will be a greater volatility of financial results. Result : we’ll all need to adjust our results, ” he says.

“A big mistake”

According to him, in the years 2000, thecanadian Institute of accountants ” has unfortunately abandoned its sovereignty in terms of its ability to set accounting standards in canada “. This has been a ” great mistake which was committed at the time “, he laments.

Denis Ricard, is appealing to canadian authorities for regulations. “We need to keep the control here. Yes, there are international standards, but we need to have a look canadian on what it is doing. There are different products here, it must be recognized. I have confidence that the regulators will recognize it and will not let fall the industry, ” he said, arguing the lobbying efforts conducted by thecanadian Association of insurance companies of persons (CLHIA).

A war chest of$ 1 billion

iA financial Group has never been in such an enviable position in terms of capital, ” notes Mr. Ricard. The company has “at least a billion available to make acquisitions,” he insists.

The new canadian standards on capital recognize better the sound management of the risks undertaken by the insurer, according to Denis Ricard. “It will protect if the markets experience a significant decline. The sensitivity of our capital ratio has never been so low compared to macroeconomic factors, ” he continued.

Other redemptions

On Monday, Denis Ricard, and Jacques Potvin, vice-president and chief financial officer, met with institutional investors. For Mr. Potvin, reports Mr. Ricard, the best way to understand the value of an insurer is to look at the evolution of its book value per share, outstanding. Since demutualization in 2000, the average growth rate in IA is 10 % per year, from $ 8,44 $ at march 31, 2000 to 47,18 $ September 30, 2018.

The evolution of the title on the market has seen a similar growth of 10 % during the same period, but the title has already been significantly better valued by investors. “It is not for nothing that we have initiated share repurchase programs “, he says.

Last Monday, the value of the action ai was 48,62 $, barely higher than its carrying value. “Investors ask us if we are buyers. At this price, we will be active, certainly, ” he said. Mr. Ricard points out have already passed the same message when trading with financial analysts, during the publication of the most recent quarterly results, on November 7.

Axes of development

iA is a first in Québec in several market segments : number of contracts sold in individual insurance, net sales of segregated funds, sales of disability insurance. The group is also tied to the 1st rank in the distribution of mutual funds among non-bank institutions and to contracts sold in car dealerships. “Compared to our competitors in Canada, we produce 95 % of our activities in the country. There is still room to grow in Canada, ” he says.

Also, on the plan of the net profits in the canadian operations, the average annual growth between 2012 and 2017 has been 15 % in iA, compared with -1 % for the three main competitors in the insurance of persons.

Translated otherwise, these same benefits realized in ai accounted for 25 % of those carried out by the three biggest insurers in 2012. Five years later, ai realized 53 % of the profits of its competitors, still in their canadian operations.

30 acquisitions in 30 years

In 30 years, iA has conducted a thirty acquisitions. “30 years ago, we were not at all in the management of heritage. The sector now accounts for one-third of our profits “, he says.

To improve the client experience and their relationships with advisors, Denis Ricard, points out the presence on the board of directors of Louis Tetu (Coveo), Nicolas Darveau-Garneau (Google) and Marc Poulin (ex-president of Sobeys). The appointment of Pierre Miron last August, as vice-president in charge of information technology, will continue the transition to digital started in iA. Mr. Miron has held similar positions since 2010 at the Caisse de dépôt et placement du Québec.

Learn to say no : a challenge

Denis Ricard has not even spent 100 days in the chair of the big boss, but it is already a fact. “What has surprised me the most, it is the management of my time. It is important to learn to say no. We can’t do everything, ” he says.

The new CEO of iA financial Group has taken over some of the charitable activities previously conducted by Yvon Charest, who was very involved in the community. “I wanted to send a message of continuity,” he says.

Denis Ricard points out that, during its passage to the canadian club in September, he was in post for a few days. “It’s Yvon Charest, who announced to me, at the time of transition, that I was going to have to do this presentation. He had accepted the invitation in the spring, knowing that he was not going to be there, ” says Mr. Ricard, smiling.

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