La Capitale Financial Group has set an ambitious goal in its new strategic plan, namely to have a billion dollars of life insurance premiums and another billion in property and casualty insurance by 2020.
Jean St-Gelais has been La Capitale’s CEO for six months. He knows that his objective will be reached at the expense of his competitors, and he is well aware that they are all trying to grow. “We must make sure that we are one of the ones who succeed in executing their strategic plans,” he said in an interview with The Insurance and Investment Journal. In early October, the magazine met with St-Gelais at the insurer’s head office in Quebec City.
St-Gelais is focused primarily on organic growth to fuel La Capitale’s expansion. He is aiming for a 5% to 7% annual increase in each division. He says he is open to the idea of forming alliances, whether it be for technological investments or product development.
Digital technology is number one on the list of challenges La Capitale needs to address. “Finding how best to deal with the issue is already a challenge. You have to be on top of things. We are looking at ways to expand our development laboratory. We have also been approached by a multitude of groups who want to present their innovations. The challenge is therefore not only choosing the right solutions, but also asking the right questions. Do we introduce trendy watches to measure people’s health? Is this too much of an intrusion on their private lives? There are also self-driving cars. We need to think about these things. There are a lot of questions that need to be answered,” he says.
New role as business leader
Heading a business is all new to St-Gelais, who spent his career in the public service and served as as the CEO of Quebec regulator, Autorité des marchés financiers (AMF), for seven years. “One of the reasons I agreed to lead La Capitale is because it is a mutual company. It holds the same values that are dear to me: putting people first, transparency, and sound financial position.”
He adds that working for a mutual company strikes a balance between pure capitalism and the social economy. “We are here to serve the mutual policyholders. If one must choose between making a profit and serving the client, at a mutual it is easier to choose to look after the customer properly.”
As for his new role as a businessman, St-Gelais said he prefers to think of it as putting together the best possible teams. He points out that he has worked with many organizations and companies over the years to support economic development projects.
“In the private sector, what is simpler is that the goals are clear. There are results to be achieved. In the public sector, the situation changes more quickly. Something that was important three weeks ago may no longer be so the next day. But that does not mean that things are necessarily easier to manage in the private sector,” he explains.
St-Gelais considers himself to be someone who can open doors for his staff, thanks to the many contacts he has made over the years. In addition, he believes he can help La Capitale avoid regulatory pitfalls. “Instead of saying that the AMF is not making sense, I can help demystify things,” he says.
He also wants to change La Capitale’s corporate culture, which he thinks is tightly knit; he would like to improve communication between people who work in general insurance and those in the life insurance division.
“If one is working on a technology project, it may well be that the other could benefit from it. With what is coming on the technology side, we must think about the customer space. It is not a question of marrying the two divisions together, but of doing so when there is value added,” he says.
For St-Gelais, one example of this complementary approach is the boutique office it has opened at the McGill University Health Centre, where it offers its products to the 12,000 health professionals who work there.
St-Gelais believes that one of the mutual company’s greatest strengths is its presence in multiple distribution channels. He points to property and casualty (P&C) insurance, where La Capitale employs direct agents, affiliated autonomous agents, as well as independent brokers through its subsidiary L’Unique General Insurance.
“We see that when one area is doing well, another may be experiencing a few more difficulties. We notice the same thing in life insurance, in that when savings are doing well, the insurance component suffers a little more. We can set ourselves apart thanks to this (multiple channel distribution), even though we do not have the scale of players like Intact Financial Corporation or Great-West Life.”
St-Gelais agrees that there are areas in which the company must reinvest. This is why its information technology teams need to be at the forefront. The insurer had its P&C management system evaluated, but the consultants advised him to keep it since it was better than what some companies were offering at high prices.
However, it is in customer service that St-Gelais says La Capitale should stand out from the crowd. “If a self-employed construction worker is injured in Ontario, it should be a point of honour to deliver a cheque the next day, especially since he is probably lying in his hospital bed,” he says as an example.
As for the challenges ahead, St-Gelais notes that low interest rates will force La Capitale to review its strategy. The Bank of Canada has made it clear that interest rates are expected to remain low for a long time. “We must therefore determine what that means for our products, both for life insurance and investments,” he says.
La Capitale’s group insurance business is also of interest to St-Gelais. “2015 was difficult for us. 2016 looks like it will be too. As demographics change, drug prices remain a concern. Today, everyone is taking medication,” he observes. “We realized in recent months that we were slow to make investments in our disability insurance. We are engaged in a process that will allow us to be there for the long term.”
Growth outside Quebec
The company has set ambitious targets for growth outside of Quebec. “We are on the lookout for opportunities that may present themselves. It is certainly more difficult for a mutual to raise capital, but we have a partnership with the European insurer COVEA which is involved in some of our activities,” notes St-Gelais. “They have a lot of money, with 17 billion Euros in revenues. If we want to fund an expansion, we can turn to them. However there is no urgency on that front, and we must see if it is a good fit with the game plan.”
Outside Quebec, the mutual company is present through its subsidiary La Capitale Financial Services, which used to do business as Penncorp. In general insurance, La Capitale is active in brokerage through its subsidiary Unica, which has experienced a major turnaround; in his interview with The Insurance and Investment Journal, St-Gelais revealed that this subsidiary is shifting towards commercial insurance. In Quebec, L’Unique will also continue its expansion into commercial insurance.
No to demutualization
Several life insurers demutualized at the beginning of the 2000s. P&C insurers will soon be able to do the same, once Economical Insurance has completed the process. Would La Capitale also be interested in taking this path? Not at all, responds St-Gelais.
“We are very happy in this model. In Quebec, we are fortunate that the cooperative model is very strong, whether with Desjardins Group, Agropur, or La Coop fédérée. If groups need to be formed, we will look at what can be done with other mutuals. There are more opportunities on this side than there is with demutualization,” he says. “Besides, the conversation with La Capitale’s board of directors would be very short if I were to present them with a demutualization scenario. I do not see any opening in that area.”