iA Financial Corporation Inc. (IAG) Earnings Call Transcript & Summary

Good afternoon. I'm Tom MacKinnon with BMO Capital Markets, and thank you for joining us today for a virtual fireside chat with Denis Ricard, President and CEO of iA Financial Group. We're going to talk about the company's response to COVID-19 and the company's strategy, particularly with respect to its growth in the U.S. market with the acquisition of the dealer services company, IAS. it's a U.S. company, and this acquisition closed in mid-May.

So first of all, Denis, thank you so much for coming and joining us this afternoon in this virtual fireside chat. I want to talk about how you and your business are doing since the beginning of the pandemic, more particularly on an operational point of view, how is the business doing? And how will the pandemic impact sales for the rest of 2020?

Well, thank you, Tom. I'm very glad to be with you this afternoon. There's a lot in that question, so let me just start with and saying, first, at a very high level that there are 3 things that are realized, went pretty well during this crisis. The first one is the resilience of our business model. I'm going to talk more about that in that question. The agility also that we -- that all the staff has shown during the crisis has been fantastic. And the last thing would be about the fact that -- my biggest takeaway of what we just lived through is the fact that the resistance to change is now very low. So there's a lot of changes that can be done without resistance as it used to be, let's say, before the precrisis. I'm talking, in general, for the society and even at iA. So let me just say that in terms of our business impact, we prepared for that pandemic to some extent. We knew there was something going on in Asia beginning of the year. In fact, we had a crisis committee that monitored what was going on there. And when [Audio Gap] for example, we said to our employees to move out and go to telework before the government even forced people to do that. And basically, very, very quickly, more than 95% of our employees started working from home. We basically set 2 priorities once this started. The first one was obviously the health and safety of our employees, but also making sure that we can also do continued businesses, continue our operations. And I'm very proud of what our staff has done. I'm very proud of the business model robustness that we have demonstrated. The one thing that is very interesting also is about -- is the distribution. I mean, I've said that many times in the past, distribution is really our strength. We've developed relationship with distributors over the years. We are in the relationship business, basically. And I'm very proud because now in our distribution network, we can sell at distance even better than that I would have expected. So reaching clients still there, it's only the manner to reach out that has changed. And thanks to our high-performing digital tools and electronic platform. The -- I would say, the transition to digital sales went pretty smoothly, more than we had expected, as I mentioned. I'll give you an example. I was in a meeting recently with some of our best sales reps. And basically, the guys were talking about all the opportunities that they were seeing, being more productive, talking about their clients. I mean their clients' resistance of change is also very low, so they were able to talk to their clients using, obviously, video conference tools, which was un -- inimaginable a few months ago. So -- I mean, they made a lot of -- I mean, our distributors, they made a lot of changes themselves. So we are reaping the benefit of choices that we made a few years ago by starting our digital strategy. I mean, in individual insurance in Canada, for example, we've offered approval at point-of-sale using predictive analysis since 2017. And we've been constantly improving our predictive models since. So I can say that 100% of iA product can be sold at a distance and more than 95% of applications are now done electronically. That's amazing. That's -- it's amazing when you think about it. Our target market is the middle and mass affluent market. And the fact that we sell lower face amount. We sell tons of policies in Canada. We've been #1 in sales of insurance policies for a long time. Then it also creates opportunities for us because the underwriting is obviously lower than at the higher face amount. So for individual insurance, we really reap the benefit. Same for seg fund. We introduced last year a new electronic platform. This tool was an immediate success. And you can see from our excellent sales result that we have had over the last few quarters, like a transaction can be done in only 10 minutes with that tool. So that's for distribution. It's been very well. Distributors have been very resilient, agile. And I would say the response from them has been better than we expected. In terms of our clients, I'd say that clients are even more aware of the needs of insurance product or security in general. So they've been very receptive to our distributor, reaching out to them. Advice is very important. People realize it, especially during these times. So our industry, I think, has been -- to some extent, I think long-term or even midterm would be favored by what we've just lived through just by the technology that we've improved and also the fact that clients are much more receptive to our offering. And let me finish just by saying what is the impact on our sales. In fact, I can say right now that it's better than we had initially anticipated, let's say, a month ago. For example, in Canada, for individual insurance, the number of policies sold in individual insurance is only slightly inferior to normal. And when I look at, let's say, individual wealth net sales, for example, they are very good. They've been very good, both, I would say, when I combine the seg fund and mutual fund, we have quite strong, positive net sales. Even -- I mean, still, we're still having a very, very satisfying sales. Our group business is doing very well as well, better than anticipated. But there is one sector that in Canada has been more difficult, which is the dealer services sector because we have to be honest here. Dealership were closed in April and most of -- and for some part of May. And so it's no surprise that it's been more difficult. But when I look at, let's say, the last week, you see that things are picking up for that business. In the U.S., dealerships were still open. So dealer services sales, I mean, the current operation that we had, let's say, before IAS, only slightly lower than what we expected, I mean, for the full year. I'm talking about the budget here. So sales are still holding on. And also for the individual insurance sales in the U.S., you may remember that they were quite strong during the first quarter. And so far, in Q2, the momentum seems to be ongoing. So again, I mean, if I summarize, resilience, agility and also combined with low resistance to change, it's proven that our business model is quite strong.

Okay. That's great. I want to talk a little bit about guidance here. You withdrew your 2020 guidance, and that's understandable. But how should we think about core earnings for the rest of 2020?

Okay. I think that if I look back where we were a month ago when we disclosed our Q1 results, we made the decision, obviously, to remove the guidance. We've always provided guidance in the past. And in fact, our philosophy is that we try to be as accurate as possible in our guidance. And in fact, we also delivered on results that were in line or even better than the guidance in general, when I look at the past. So it was important for us to provide a guidance that would be reliable. That's always been our philosophy. So a month ago, we decided to withdraw the guidance and -- because, obviously, there's too much unknown. If I look forward for the rest of the year, if -- compared to where we were a month ago, it's going better than envisioned at that time. You -- I mean, I've already mentioned about the sales. The market seems to be in a recovery mode. And most importantly, we've also evaluated to what extent this COVID would produce, let's say, what I would call, permanent damage to our businesses. And we don't see where is it that it's going to produce, let's say, significant permanent damages to our businesses. So once the situation stabilizes, and it seems to go on the right way right now, we will reinstate guidance whenever things are more stable. And also just to finish on that, the -- we presented in the fall of last year a plan to our Board, which covered 4 years. And basically, obviously, 2020 is going to be very different from what we had envisioned at first, but we believe that 2021, 2022, if things continue to go as smooth as they are doing right now, we believe that we will be able to come back to our initial plan.

Okay. That's good. Maybe you can talk a little bit about policyholder experience or credit experience for the remainder of 2020 and will be coming up also to year-end actuarial assumption reviews for mortality, morbidity and lapse. So how should we be thinking about those things?

Sure. Again, it's a bit related to the previous question to some extent. Overall experience for the remainder of 2020 is still uncertain due to the pandemic. And we don't know if there may be a second wave at some point, and it may have some impact. But I would say that we believe that experience is going to be better than what -- again, what we anticipated when we tabled our Q1 results. There's going to be some positives, like we've seen for car insurance, for example. We're going to see some negative, for example, mortality. Because of some COVID claims, it's going to be negative. Morbidity, the jury is still out. I mean, first quarter was not that good, but we'll see over the next few months. In terms of credit, our portfolio has been -- I mean, investment portfolio has been quite conservative when I look at versus, let's say, our peers. And so I believe that we're going to be less affected on that part, I mean, and we can talk more about that later on, if you want. In fact, again, to my point, no permanent damage, we believe. So, yes, there may be some experience loss that we -- like we've seen in the first quarter, but we believe that will be nonrecurring, and there's no permanent damage to our business. And going forward, we believe that we will still continue to have positive earnings coming from the experience as it was the case prior to the COVID-19. If I move to the year-end actuarial assumption, well, obviously, this is -- Chief Actuary is the one making the call on that one. The general principle for him is that he would strengthen his assumption if he believes and he observes that there is a permanent deviation of experience. The word permanent is quite important here. So that's why if we believe that there's going to be some nonrecurring impact of the COVID and then -- and nonpermanent, then, obviously, it would not lead to a strengthening of reserve for what is unfavorable. So we'll see. In terms of the interest rates, for example, is -- I mean, because, obviously, there was some ripple effect of the crisis. Interest rates went down this year. And thanks to some of the hedging strategies we've implemented in the past, we are not sensitive to the IRR anymore. And also in terms of the URR, right now, we don't believe that the URR prescribed rate will change this year. And for all of the other assumption, I mean, it's definitely too early to tell the result of assumption changes at year-end. So we are monitoring it -- this very, very closely.

Yes. I'd echo your comments about credit -- the bond portfolio. I think, Industrial Alliance's bond portfolio, about 55% of it is government bonds, and that compares to maybe about 35 for the other 3. So you certainly have higher proportion of government bonds here, so we shouldn't expect issues with respect to that. Moving on to the IAS acquisition, which closed on May 22. Can you tell us more about -- maybe just remind us what the rationale was for that acquisition and what this company does? Just -- I don't think we've discussed it really that deeply since the acquisition was announced in December.

No. You're right, and it's probably my first real opportunity to talk in length -- in great length about that acquisition. Well, at a very high level, let's say, on the strategic rationale, what we're trying to achieve basically is to become a leader in some businesses. And when I say it's early, it could be defined that as being top 3 or something like that. Like if you look at our businesses, for example, right now, in Canada, we are a leader -- we believe we are a leader in the individual insurance business. The number of stock, like we are #1 in number of policies and #3 or #4 in terms of sales. And when I look at, let's say, wealth management and distribution, top 2, top 1 in seg funds. And also, we are a leader in Canadian dealer services -- I mean, dealer services in Canada. So we already are leaders in businesses in Canada. And the idea of buying IAS was that -- for strategic reasons is to become a leader in a -- I don't like to call it a niche, but in a business in the U.S. And why that business? Well, we know that business very well. We've been there for 50 years in Canada. We bought Seaboard in 1999, but these guys have been in the business for a long time before. So we know that business very, very well. And when you look at, let's say, IAS, largest provider of solution -- one of the largest, sorry, provider of solution in the U.S. warranty market and ancillary products. So it has a broad end-to-end product offering -- service offering, multiple distribution channel. We also like the management team of that company, which we think is going to fit with ours. It also diversifies our current product in the U.S. and the geographic mix. And there's going to be significant synergies between IAS and DAC. I mean DAC/Southwest Re, which is our existing bridgehead in the U.S. in that business that we bought in 2018. So we started small. It was smaller with DAC/Southwest Re. And we had great success since 2018 with that company. And now we moved, let's say, at a larger level. We also like the fact that it's a low-risk, capital-light business. And so we are, let's say, decreasing our exposure to macroeconomic, like, parameters. And the last thing I would say is that IAS has a large geographic footprint in the U.S. It's a business that is highly fragmented also in the U.S. Even with the fact that we're bought this, let's say, a large provider in the U.S., we will still only have 2.5% of the market share in the U.S. In fact, the current leader has less than 10%. So there is an opportunity for us to grow also in the future. So all in all, it's -- we become a leader in the U.S. in a high-growth business.

Yes. That's great. I think when you announced it, you talked about expected synergies and some earnings generation. What's the impact of the pandemic and, I guess, other macroeconomic changes we've seen since this acquisition was announced? What -- how are those going to be impacting expected synergies or earnings generation that you look to get from IAS?

Yes. Well, we still expect that acquisition to be accretive in the short term. When we announced it, we said it would be neutral this year and accretive next year. We are still in that pattern right now. You have to know that in that business, the earnings are a function of previous year's sale, like there's an amortization of revenues over time. We are confident in our projections. And whether or not there is a sales slowdown right now, I mean, at some point, there's going to be a pickup of the car sales, and the whole thing is kind of smooth out over time. So we are still on our trajectory of being accretive in that business for next year. Now in the U.S., sales of -- I mean, car sales have slowed down recently. But it's encouraging because I follow the J.D. Power statistics on a weekly basis, and there's a pickup that is -- I mean, the sales pickup that is occurring right now in the U.S. So -- I mean, when I look at that and I look at the -- our sales result for that business, where April and May, which were -- obviously, we were in the middle of the crisis, our results were close to normal, which gives us every reason to be optimistic for the future. And so there are uncertainty as to where the market will go in terms of the car sales. We don't know how people will react to the fact that transportation may change -- public transportation. Who wants to take public transportation right now because we are still in the middle of the COVID crisis. In Asia, there has been some positive experience from the return to new normal, meaning that the car sales have been quite positive. It may be different from one market to the other. It's still big unknown there. But at the end of the day, we believe that there are opportunities for us because in that business -- it's a business that needs to be consolidated. At some point, tuck-in acquisitions could be interesting in that business. The synergies with our current operation also. So if you look at it, we are quite confident that, as I said, for 2021 that we will be on our trajectory of earnings.

So does that mean that -- I think you had talked about what the earnings impact would be both before or the -- accretion would be both including and excluding integration costs for 2021. Are you saying that you expect to sort of be on track to hit that now?

Yes. What we said for 2021, it was $0.27, including the integration cost. And we said that for that year, it would be $0.10 of integration cost. And we disclosed that number. I can't recall exactly when, but that was disclosed. And we said neutral -- I mean net of expense neutral this year, $0.27 next year, if I recall correctly here. So to your question, at this point, we still believe that we could be on track for that record next year.

Okay. That's good. Maybe a little bit about -- we hear a lot about dealerships closed, sometimes dealerships may not necessarily open. Can they actually go bankrupt? What does happen to this business if the dealers go bankrupt? What's the ramifications for iA? Are they on the hook for anything? Maybe you can talk about that.

Yes. And I'll just say, a very important question. I mentioned before that it was a low-risk, low-capital business, and there is a reason for that is that the financial risk for iA if a dealer go bankrupt is very, very low -- very limited. In fact, the only -- I mean, the only, I would say, situation where this would happen that there's a risk that we pay something is if the dealer goes bankrupt and, that is important, and there is not enough money in the trust account to pay the claims. Because -- I mean, we're basically in the fee business. So what happened is that all the money -- all the premiums, let's say, are going to be -- are being paid into a trust account. And the risk is also very low because dealers, they have no access, no control over the trust funds. Typically, we do administer all the trust cash flows, and we control the setting of premium rates to make sure that there is enough money to pay future claims. So with some practices to monitor the product prices and adequate adjustment in rates, we ensure that there is sufficient funds in the trust. And let's say that in addition, I would remind that with the pandemic, people -- they drive less. The claim experience is currently better than normal, meaning that the likelihood of insufficient funds is even lower. So all in all, iA has a very limited risk if, for any reason, a dealer would go bankrupt.

Okay. So maybe just elaborating that in a bigger point of view then, what would you say the biggest risks are associated with the IAS acquisition? And maybe on the other hand, what are the biggest opportunities?

Okay. Well, in terms of risk, I think one of the risks is if we don't do a good job of integration. But the reality is that the management team that we have with that company and the -- also the company that we already own, like DAC and Southwest Re, they have -- I mean, the IAS management team, they have experience in acquiring and integrating other companies. So that will be very helpful in the integration process. The other -- I would say the other main risk would be, let's say, pandemic-related. So if there is a second wave, if the economy is not recovering, if car sales don't pick up because of pandemic, for example, that could be another risk. But -- I mean, to me, that would be like a limited short-term risk that at some point, we will come back to normal. Long term is there a risk that the future transportation changes, consumer behavior changing? Well, the jury is still out for that, is just a risk? Or is that an opportunity? I mean, there are people that talk on one side or the other. For example, the reluctance of people to use public transportation is one thing. But at the same time, the economic situation is not easy. So people losing their jobs, so it's more difficult to buy a car, for example. So right now, in the short term, it can go both sides. Long term, we will see. But at the end of the day, like I mentioned, on the opportunity side, well, we are -- we see synergies with that. I mentioned that, that's an opportunity. I also see the fact that we -- in terms of products, for example, it's very much complementary to what we have. Distribution channel is quite different. I mean IAS was more in, what we call, the direct distribution and they were there because they acquired the agency over time. They're also in the post-sale distribution channels, which is kind of an interesting channel, still small. But when people already have bought the car, we could sell post sales. That's an interesting new market that we're looking at. So opportunity, synergies for sure. And in terms of growth, there's opportunities, as I mentioned, because it's a fragmented business. And so at the same time, there's going to be acquisition opportunities. There may also be some carriers that may not survive the crisis, some small -- very small players because, as I mentioned, it's a very fragmented market. And -- so there are opportunities that will be there. So tuck-in acquisition, as I mentioned, could be something interesting in terms of opportunities. So for us, it's really a growth play really when you think about that.

Yes. Now that you've completed this acquisition, maybe talk about just general growth strategy going forward in terms of being capital-light. Does this change at all any kind of capital deployment, maybe diversification here in terms of both geography and business lines? How should we be thinking about that?

Well, I think in the current environment, as I mentioned, we are leaders in some sectors in Canada. We are becoming a leader in the dealer services in the U.S. We have a small operation in insurance in a very niche type of business in the U.S. also that we like a lot. So we like those businesses. And I think the focus will now be for -- I mean, certainly for this year and next year will be on organic growth, meaning that growing all these businesses, integrating IAS with DAC, obviously, and maybe doing some tuck-in acquisitions to grow, but nothing major at this point. Also, the third thing would be technology. Investing in technology to either get more revenue or be more efficient. And I'll give you the example of the revenue side because of COVID, distributors quickly switched to digital tools, and we've been very, very successful in our digital tools. We -- and it's not a coincidence. I mean, it's not by chance, it's something that we had already planned for some time. So we had invested in technology, and we are accelerating investment in technology, as I said, both for revenue and also for efficiency. And the other thing that we may also do is, obviously, additional returns for our investment portfolio. So we have the room to increase our corporate bond exposure, and we did see some opportunity and add high-quality corporate bonds in our portfolio as well. So that's something that is very important. So yes, that's it.

Maybe talk about capital position. You got a pro forma solvency ratio of 121%. You talked about 110% to 116% target. I mean, the sensitivity of Industrial Alliance now with swings in interest rates and equity markets, it's just a mere fraction, if anything, of what it was in the global financial crisis. So tell us -- talk about capital and how comfortable you are operating at this range in this current environment?

Yes. In fact, that's a very interesting point here. LICAT that came in 2018 has been a game changer. As you mentioned, our sensitivity to macroeconomic has decreased significantly. We're not as sensitive as we used to be on the interest rate side and on the stock market side. And basically, we had set our target range based on that sensitivity. So we are very, very comfortable with where we are today. In fact, we -- I'll give you an example here. We made a test -- a stress test on, let's say, a really scary scenario, like a COVID scenario, which is very bad, like high proportion of the population being affected, like 5% of population being affected, 0 interest rate for the entire curve, TSX at 9,000 points. And even although that's extreme scenario, the capital ratio would still be above 116%. It would be above the high end of our range. So that's really a test that demonstrates the robustness of our capital position. And sometimes -- so that's -- I think that talks a lot. Now it's funny because when people talk to me about capital, I also used another, let's say, demonstration to explain why 121% today is very comfortable. Now for those of you who were there before 2018, with the MCCSR regime, the equivalent of 121% was 215% of the MCCSR, 2-1-5, 215%. And it wasn't -- I mean, imagine if we were at 215% MCCSR, but with a lot of sensitivity to interest rates and stock market, the discussion could be different. But today, we are at the same level, let's say, at the 215% MCCSR without the sensitivity that we used to have. So again, that's why I'm saying I'm very comfortable. I mean, it's -- I don't see why at this point, we really need to have more capital.

Yes. That's a good point. I mean, I think the -- I think your former CEO, Yvon Charest, used to talk about 175% to 200% range in that kind of...

Yes, absolutely.

And in kind of the old MCCSR framework. And if this is equivalent to 215%, that's a lot of fat there. So that's good. What would you say if anybody said that you need to strengthen your capital position? Obviously, what you're talking about here doesn't seem to suggest that. And maybe just a little bit about what you can organically generate every year as well. I think you had talked about that being, I recall, somewhere around the 200-ish range or so or -- maybe just correct me if I'm wrong.

Yes. Well, under normal circumstances, we talked about over $250 million a year of -- generation of capital. The other thing that we -- I can mention on that specific question is that on top of doing this extreme scenario, we've also looked at the liquidity, obviously. And under all the scenarios -- many scenarios, we meet all the requirements and cash flow needs. So that -- liquidity is not an issue at all. And one other thing that I should mention here is that last year Standard & Poor's reaffirmed our credit ratings, which was quite a positive. In fact, there are a couple of things that you mentioned. They liked our capacity to generate capital, the fact that we have a good enterprise risk management process that has improved over the years. So I think it's quite -- it has been quite positive. So we don't need to be, let's say, at the level of, I don't know, 130% plus level. We prefer to put our capital to work. And we can see that because of our risk profile, because of the fact that we are not sensitive to macroeconomic as we used to be.

Yes. In retrospect, it was a good idea taking out that interest rate sensitivity a couple of years ago. I think -- I don't know if you were getting full credit for it then, but you certainly should be given full credit for it now. Talk maybe about the investment portfolio, maybe just with respect to -- we'll start with the hedging program. You got -- we had a big loss in the first quarter on the extreme volatility we saw in the markets, and that's related to your seg fund hedging program. How should we think about this program for the rest of the year as markets -- they might remain pretty volatile for a while. I think you had mentioned that in April, it was -- things were significantly better, but -- in terms of that portfolio, but maybe share some of your thoughts with us in that regard, please.

Yes. Yes. Yes. I mean, Q1 has been an outlier. I mean, historically, when we look at -- since we introduced that program in 2010, definitely, it's an outlier, extreme volatility. I mean, not a high volatility, extreme volatility like never seen before. So April and May showed relatively high volatility, but not as extreme as in March. And so the program has reacted exactly as is -- as it was intended to. And I just want to remind you that, that program is to hedge the risk on the seg fund guarantees, by the way. So if you look at April and May together, so far, the program has experienced a loss of less than $3 million after tax. So we are confident that even if market remains volatile for 2020, not on the extreme side, we are very confident that the program will play -- will do its job, basically.

Yes. I believe and I think that program actually made money before it didn't as well. So...

Yes. That's a good point. Yes. You're right.

Okay. And maybe just going on a little bit more about your investment portfolio. That seems to be getting a lot of talk right now as to what some of your exposures might be there. I did mention you've got a high proportion of government bonds, but maybe you can talk about some of the other exposures just in terms of maybe energy bonds or any consumer cyclicals or anything with respect to your investment portfolio that would have heightened risk under these kind of current circumstances?

Yes. Well, this is another area where I would say our business model shows resiliency and has served us very well during this pandemic. So the pandemic impact has been fairly limited to our portfolio. I give you 2 reasons here. The first is that we have limited exposure to hardly hit sectors. Only 0.8% of our total portfolio has direct exposure to oil and gas. Only 1.3% of our total portfolio has exposure to sectors that are most affected by COVID-19, like retailers, to hotels, airport, things like that. So only 1.3%. So that's the first reason. The second, 2/3 of our total portfolio is invested in bonds. And with more than half being government, like you said. So as for our corporate bond portfolio, it showed quite defensive and less prone to downgrades compared to the industry. And it's also worth mentioning that since the beginning of the pandemic, there's been not only downgrades, but some upgrades, which have minimized the negative impact of any current economic downturn. So this is part of our conservative philosophy. Our asset mix is well diversified and to some extent, conservative. So with a result that we are well positioned when markets are volatile and macroeconomic variations are important. So our -- overall, our investment portfolio is considered at low risk compared to the industry, basically. That would be my takeaway.

And what about your car loan portfolio? Maybe you can talk about the credit risks associated with that. I think you did increase some provisions associated with that. So maybe some more color on that, if you could, please.

Yes. Yes. Just to remind people that we are in the near prime market with car loan, and it represents only 2% of our total portfolio, just as a reminder. So -- I mean, we consider an average credit loss, let's say, below 5.8% to be reasonable based on our, let's say, pricing and our portfolio. The economic impact of the pandemic, we believe, is going to increase the credit loss in the coming months. We've already increased our provision. We expect a gradual increase throughout 2020 not of the provision, but the loss. Provision is already taken. We believe the losses will be -- will occur more in Q4 this year, Q1 next year, so that the -- let's say that we expect the credit loss rate that we disclose, which is the average of the last 12 months, to stay below 7% during the crisis. I mean, if you look at the history of our rates, recently, it's been around 5% and 5.5%. We believe it's going to go as high as 7% through the crisis. And we've already, as you said, increased the provision for that from $10 million to $20 million based on the projection that we've done. And we are quite confident that this will be enough to go through the crisis unless, obviously, things go bad and deteriorates more than they are right now. So we'll see as we go along.

Yes. And being a smaller percentage of your portfolio, even another $10 million, and that thing is not going to be a significant hit to book value or earnings or capital, so...

That's it.

And then with respect to the low interest rate environment, how is that affecting things like maybe strain or sales profit? Anything else that you might add with respect to the low interest rate environment here?

Sure. We are in a very different position than we were, let's say, back in the 2008 crisis. Many, many actions were taken to reduce the impact of low interest rates on earnings, products and also, I would say, solvency ratio. Let's say, on earnings, as we mentioned before, we reduced our sensitivity to the IRR to 0. And the timing was perfect. In fact, it was not well received at the time by the market, but now that we are reaping the benefit of that. As for the URR, as I mentioned, I mean, we -- I mean, because we are moving more and more away from the long-term guarantee product, I mean, that sensitivity over time should reduce. On products, well, the impact of low rates is negative on products with long-term guarantees. We all know that. But as I mentioned, we've diversified the way in time. We put more emphasis on products and lines of businesses that we have short-term guarantees like we did for the warranty business, the dealer services business. And also, we will introduce a new power product in Q2. In fact, it's going to be launched later this week. And so, whatever is it, the pricing of some of our products based on the new interest rates, they should come this year. So it is also important to note that we have already reflected the impact on strain this year, and we intend to continue that. So that's another reason why we're going to reposition our pricing for some of the products. So -- and the third is our solvency ratio. And as you know, the sensitivity to the interest rates -- while a decrease of 50 bps would increase the ratio by 2%, that's improving our capital position. So finally, on the financing perspective, the impact of low rates, we will be positive on the financing cost. So that's all in all, all the impacts of the low interest rate environment.

Have you found that you might have to look to reprice products as a result of rates being lower? I mean, is there anything -- has it changed some of the strain initially?

Yes. In fact, the whole industry is repricing their long-term guarantee products. Some players have already moved, but we are introducing the power product. It was the first step that we're doing this year, and then we will reevaluate the pricing of our long-term guarantee products.

Okay. That's great. Denis, is there anything else you'd like to add here?

Yes. Maybe I'd like to conclude -- just 3 things very quickly, just to summarize what I mentioned. First thing is, I think this crisis has shown the great resilience that we had since the beginning of the crisis. I'm very proud of that. Our strategic positioning, our sound risk management and our work over the past few years has really paid off here. Our clients, distributors have been the primary beneficiaries of that because we maintain a high-quality experience at all times. And once this is all behind us, our growth momentum will at least be as strong as it was before. We don't see permanent damages to our business. And our shareholders will also benefit from that resiliency. So that's the first point. The second point, capital. I would like to emphasize again how robust, strong, comfortable is our capital position based on our risk profile. We've decreased our risk profile -- I mean, the level of risk over time, and it's paid off right now. So if you ask me, does capital keeps me awake at night? The answer is no. And third and finally, we are very, very happy with the recent U.S. acquisition and how it position us for the continued growth. We're becoming a leader in the U.S. market in a capital-light business that we know very, very well with a very low risk profile and also that has a great growth potential. That business is very fragmented and IAS, along with our existing business, will create a platform of scale to participate in future industry consolidation. So Tom, thank you very much for speaking with me today, and I wish everyone to stay safe.

Thank you, Denis, for participating. And thanks to all for joining the call. Good afternoon.