iA Financial's Q2 Earnings Rise; U.S. Dealer Services Drag Persists

MONTREAL — iA Financial Group (TSE:IAG) delivered stronger second-quarter earnings and sustained growth in wealth management, but management used the latest earnings call to stress that improving profitability in its U.S. Dealer Services business will take time.

The company reported core earnings of CAD 330 million for the second quarter of 2026, with net income reaching CAD 384 million. Core earnings per share came in at CAD 3.68, up 5% from a year earlier, while reported EPS rose 25% to CAD 4.28. Trailing 12-month core return on equity stood at 17.5%, above the company's 2026 target of at least 17%.

President and CEO Denis Ricard said results reflected contributions across the company's various operations, not a single source of growth. Net premiums, premium equivalents and deposits increased 25% year over year to CAD 6.3 billion. Assets under management and administration rose 37% over the past 12 months, supported by fund inflows, favorable financial markets and the addition of RF Capital.

The solvency ratio ended the quarter at 137%, with CAD 1.1 billion of capital available for deployment. The company generated CAD 188 million of organic capital in the quarter and CAD 335 million in the first half, keeping it on track to generate more than CAD 700 million in organic capital during 2026, Ricard said.

During the quarter, iA Financial returned capital through dividends and CAD 347 million of share repurchases. Book value per common share was CAD 80.55, up 6% from a year earlier.

CFO and Chief Actuary Éric Jobin said the solvency ratio improved by three percentage points in the quarter, helped by a May capital issuance, organic capital generation and favorable macroeconomic impacts. That was partly offset by share buybacks, investments in organic growth and common-share dividends.

Jobin told analysts that deployable capital declined by about CAD 100 million from the prior quarter, mainly due to share repurchases. He noted that the company is currently constrained by its core ratio, with negative reserves tied to growth in Canadian insurance and segregated funds limiting the immediate recognition of some sales-related gains in deployable capital.

Wealth management core earnings rose 37% year over year to CAD 155 million. Jobin attributed the gain to strong segregated fund inflows, favorable markets, higher net revenue on assets, advisor recruitment and a CAD 13 million contribution from RF Capital Group, which he said was performing better than expected at the time of its acquisition.

Wealth management gross sales reached CAD 4.3 billion, while combined net inflows in segregated and mutual funds totaled CAD 934 million. Individual segregated fund gross sales climbed 52% year over year to more than CAD 2 billion, with net sales surpassing CAD 1 billion. Mutual fund gross sales rose 46% to CAD 644 million, but the business recorded net outflows of CAD 73 million.

Group savings and retirement sales exceeded CAD 1.1 billion, up 35% from a year earlier, while total assets under management increased 15% year over year.

Management said the wealth management gains came from both structural and market-related factors. Jobin said the contribution was roughly split between organic or structural drivers and favorable macroeconomic conditions, cautioning that market conditions may not remain as strong in future quarters.

In the Canadian insurance segment, core earnings were CAD 128 million. Favorable mortality and morbidity experience contributed CAD 19 million before taxes, compared with a CAD 31 million gain in the same quarter last year. Higher risk-adjustment releases and contractual service margin recognition in individual insurance and employee plans also supported results.

Individual insurance sales totaled CAD 102 million, roughly in line with a year earlier. Ricard and Renée Laflamme, executive vice president for individual insurance, savings and retirement, said the company remains disciplined in underwriting and pricing, particularly for participating insurance products with early value accumulation features.

Laflamme said iA Financial held a 25% market share in policies issued in Canada, though quarterly policy volumes can vary. Management said it remains vigilant around certain high-mid and large-case sales concepts to avoid taking on too much long-term lapse risk.

Employee plans implemented sales reached CAD 30 million, up from CAD 8 million in the second quarter of 2025. Special markets sales were affected by lower international student medical insurance volumes after federal measures limited entry for international students. Management expects that impact to remain visible in the second half.

Dealer Services sales in Canada were CAD 218 million, close to the prior-year result, while iA Auto and Home direct written premiums increased 5% to CAD 216 million.

U.S. operations generated core earnings of CAD 24 million, down from CAD 36 million a year earlier. U.S. individual insurance sales reached a quarterly record of US$86 million, up 10%, driven by final-expense and middle-market products. The segment, however, recorded a CAD 8 million experience loss, primarily due to a small number of large mortality claims at Fidelity Life.

Jobin characterized the mortality losses as statistical fluctuations and said they were expected to be non-recurring. Management continues to expect the Fidelity Life acquisition to become accretive to core earnings in the second half of 2026.

U.S. Dealer Services sales were US$292 million, broadly unchanged from a year earlier amid a less favorable auto market. Ricard acknowledged the business has performed below the company's long-term expectations but said management actions are meant to support a gradual recovery.

Sean O'Brien, executive vice president and chief growth officer for U.S. operations, said the company has repriced products, focused on operations and restructured its sales organization. He said iA Financial initially emphasized its dealer acquisition channel but has since added sales leaders focused on agent and dealer channels, with a pipeline building for later this year and into 2027.

Ricard said the company expects U.S. operations to become a growth tailwind in 2027 and 2028, though improvement in U.S. Dealer Services is not expected within just a few quarters.

Overall, the quarter highlights the strength of iA's Canadian wealth and insurance franchises, while the U.S. operations remain the key variable for future growth. The company's core ROE is comfortably above target and capital generation is on pace, but investors are likely to watch for more concrete evidence that the U.S. Dealer Services turnaround is gaining traction.

All figures are in Canadian dollars unless otherwise stated. Founded in 1892, iA Financial Group is one of Canada's largest insurance and wealth management groups, with operations in the United States. Its common shares trade on the Toronto Stock Exchange under the symbol IAG.