iA Financial Group reported on Feb. 14 net income of $612.7 million for 2018, a 19% increase over net income of $515.5 million for 2017.
For the fourth quarter of 2018, net income was $149.5 million, an increase of 13% compared to net income of $132.8 million posted in Q4 2017.
Return on shareholders' equity for the last twelve months stood at 12.5%, compared to 11.4% for 2017.
The company’s solvency ratio was 126% at the end of Q4 2018, up from 119% at the end of the third quarter of the year.
"Our 2018 results demonstrate strong progress on the objectives we presented at our Investor Day in June", stated Denis Ricard, President and CEO of iA Financial Group. "First, earnings per share are up by a strong 16% over the previous year. Second, I am very pleased with the improved profitability at iA Auto and Home and Employee Plans, both of which made a good contribution to our 2018 results. Third, both our insurance and P&C businesses in the U.S. are delivering above expectations, which bodes well for the future."
Difficult business environment for mutual fund business
Ricard added that sales “were generally satisfactory for the year, except in our mutual fund business that is operating in a difficult business environment. With the HollisWealth integration behind us, we are now focused on executing our strategy to leverage our affiliated distribution networks and to increase our share of their business. We are making real progress on this front and will be working closely with our affiliates in 2019 to build upon those valuable relationships."
Commenting on the fourth quarter results, Jacques Potvin, EVP, CFO and Chief Actuary said, "Our solvency ratio at year-end finished well above our guidance. Among other items, we are extremely pleased to announce that we received the credit for our segregated fund hedging program that not only increased our capital, but further reduces the sensitivity of our solvency ratio to the macroeconomic environment."
Individual insurance business
In the fourth quarter, the company’s individual insurance business reported an experience loss of $0.24 EPS ($25.9 million). This is mainly explained by the unfavourable impact of equity markets on universal life policies (-$0.16 EPS).
Premiums and deposits increased six per cent to $2.6 billion, reflecting growth in all sectors, with the exception of retail wealth management. The retail insurance sector in Canada reported total sales of $47.3 million, down 10% from $52.8 million in Q4 2017.
Consumer preference for guaranteed products
In retail wealth management, guaranteed product sales of $104.8 million were up 25% over the previous year. This reflects “the current preference of consumers for guaranteed products,” says the company.
Gross sales of segregated funds amounted to $460.0 million during Q4 2018, an increase of 2% over the same quarter a year earlier. However, net sales totaled $76.1 million, a decline of 25%.
Gross sales of mutual funds were $481.8 million, a 14% decline compared to the same quarter a year before. Net outflows amounted to $117.9 million, compared with net inflows of $30.7 million a year earlier.
Group sales increased
The group insurance sector reported total sales of $324.1 million, an increase of 9%. In the group savings and retirement sector, total sales were $438.3 million, up 31%.