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

Good day, and welcome to the iA Financial Group Investor Event under the theme of guiding to solid growth. My name is Marie-Annick Bonneau, and I am the Head of Investor Relations. We would have preferred to welcome you in-person, of course, but we have adapted to the context, and we are pleased that we are able to hold this event virtually. Please note that our speaker slides are available on our website at ia.ca in the Investor Relations section under Events & Presentation. This event will include 7 presentations and will end at noon. There will also be 2 Q&A periods. [Operator Instructions] I'll draw your attention to the forward-looking statements notice on the screen and in the slide package. A more detailed discussion of the company's risks and uncertainties is provided in our 2020 annual report available on our website. And now to officially start off the day, let me introduce Denis Ricard, our President and Chief Executive Officer. Denis joined iA in 1985 as an actuary. Over the years, he has assumed positions of increasing responsibilities in different areas of the company. Among other things, he was Chief Actuary, Executive Vice President of our Individual Insurance and Annuities business and Chief Operating Officer prior to being appointed as President and CEO in 2018.

Welcome to the iA 2021 investor event. I hope that you're all well, you and your family, because, frankly, we've gone through quite an unusual year in the last 12 months. We all have to adapt to the virtual world, and this is what we've done for this event. So we've changed a bit the format compared to the previous Investor Day. And today, we will focus on some areas of the company. We'll talk about the strategy and focus on some businesses that we think are going to be quite useful for you to understand. And don't worry, if we don't talk about a certain business, you will have a chance during the Q&A period to ask any question for any business. With me today, we will have the executive member -- Executive Committee members, and we will be introducing them as we go along. So let's start. Let me start by reminding you the last time that we had such an event was in 2018, like 3 years ago. And you may remember at the time, there was a change of guard between the previous CEO and myself. And basically, what we did from that point on is that for the next 12 months, the Executive Committee members have worked very hard on defining a new strategic plan, a 4-year plan from 2020 to 2023. That's what we call the 2023 Plan. And today, you are going to hear a lot about that plan. Now here we are today, a year and a few months after the start of the execution of that plan, and I must tell you that, I mean, the pandemic has proven that our business model has been quite resilient, and there's not much that need to be changed versus the original plan. I guess the only thing that I would say is that it emphasize a lot the importance of the choices that we are making regarding IT investments and, in particular, digital. So we have a very ambitious plan. The first thing that we discussed with the staff and management when we started the process is to define our purpose. So why does iA exist? It's kind of a mission. And basically, at the end of the day, at the end of the exercise, we came up with that statement: To assure that our clients feel confident and secure about their future. And that reminds me, a conversation I had with one of my daughter several years ago, and she was starting her career and basically had some issues with her budget, i.e., her expenses were higher than her revenues. And hopefully, she's not listening to me today. But long story short, I organized a meeting between her and one of our top advisers. And basically, after the meeting, she said to me, "You know, dad, I was listened. I have a plan. I feel quite secure and confident about my financial future." And this is what it's all about. All the businesses that we're in, the common thread of all our businesses is really about protection, protecting for death; for disability; for prescription drug; for, let's say, protecting assets like home and auto; retirement. It's the common thread of all our businesses. And when you think about it, when we think about ESG, for example, the S of ESG, our purpose, our mission is right in line with the social role that we need to play in the society. So I'm very proud, and we are very proud. It's really engaged the employee. It really resonates with the employee. Now let's just go back a bit and talk about our recent results. And here, I'm using the last 5 years because over the last 5 years, we had like 2 Investor Days, and basically, one of the message -- a strong message that we conveyed during those Investor Event was that we were committed to grow EPS by more than 10% a year in average. And also, we had some guidance for ROE along the way of between 11% and 12.5%. And when you look at those results that we've generated over the last 5 years, it is very clear that we have delivered. And when I look at the longer period, and I think it's important to note here why is it that we're looking at a long period. And I started in 2004 because this is after the consolidation of the [indiscernible] ended with the purchase by Great-West of Canada Life. So from that point until today, over the cycles, we have delivered the best performance in terms of book value growth. Yes, we are the fourth-largest in Canada, but we were -- we are the first in delivering value in terms of book value. And why do I use book value? It's because it's, all included. It includes all the noise that sometimes you can hear from one quarter to the other for adjusted measures like the impact of macroeconomic factor and so on. It's all-inclusive. So we've been the best performer over that time. And it's important looking long term also because we are in a business that is long term. Same thing can be said about total return. If an investor had invested $1 at the time of the IPO, iA has generated the best total return for the investor, best. So again, fourth in terms of size but first in terms of performance over that long period. Now that's the past. You may ask me, "Okay, what about the future?" So we are quite confident that what has made success for us in the past is going to continue in the future. And here, we say that for -- we've got strong sales. We've had, let's say, distribution, very close to distribution, full suite of product. Well, guess what, we are continuing investing significantly on our ongoing digital evolution both for growth and also for efficiency. We've made a lot of acquisitions in the past 20 years and more so in the past, let's say, 5 years in terms of investments. And we are in a great position right now. We have leading positions, and we are going to consolidate those businesses, continue to grow organically and take advantage of the competitive advantages that we have built over time. The third thing is about the risk profile. And this is a theme that is going to be very important today. Over the last decade, we've improved significantly our risk profile, moving from high capital-intensive businesses to less capital-intensive business, improving our risk profile in all lines of businesses. And so that today, that with the changes in the regulatory environment, like the LICAT formula in 2018, those 2 combined has made us very productive in terms of generating excess capital, and which leads to the potential of a great ROE expansion going forward. That's going to be a very big theme today. Our 4-year strategic plan was based on 4 axes: growth, client experience, employee experience and operating efficiency. And you see here that for each of them, we have defined an ambition. And I'm going to talk about each of those axes in the next slides, but let me first say that there's a fifth one that is being added, which is ESG, very important for us. We are part of the community. We are not outside of the community. And I'll have more details on ESG at the end of my presentation. So let's start with the first axis, which is growth. And I've got several slides on that one. I'd like to explain a couple of those boxes here. First one is the commitment that we have for distribution. We are in a relationship business. We've developed a relationship with distributors for a long time, I mean the [indiscernible] distributors to the most independent distributors. We even own distribution right now. That allowed us to be closer to them, obviously, closer to our clients and also to better anticipate and know about the trends in the industry. It's been quite a competitive advantage for us to be so close to distribution along all the years. Second box I'd like to comment is about the pricing discipline. Well, I'm sure you know that we are pricing our products continuously. And every year, in November, we do a kind of a snapshot exercise where all the heads of sectors get together with the corporate executives. And basically, we look at how is it that a new cohort of sales is generating profitability, both in terms of different measures, like profit per thousand and also per ROE. And last November, I was amazed as to how the market is disciplined and allows us to generate profitability that is above our target range, and I would say significantly above our target range. And I'm going to say that at the end of the day, I said to the heads of line of businesses, you know what, there's no limit. You can invest in organic growth, no problem, because if we can generate that kind of profitability, I'm sure investors will be quite happy. The other point I'd like to discuss is our smart choices of digital, both for clients, advisers and for employees. The pandemic has shown that we have made good choices. And not only when the pandemic hit, we had started that years ago. So again, that's why I'm quite confident that we can grow going forward. Targeted acquisition. Basically, we are focusing on organic growth, as I mentioned. So going forward for the next 18 to 24 months, you should not expect a significant acquisition, something maybe along the way of a bolt-on acquisition. Now there are 2 boxes that I haven't spoken about, and I'm going to talk about it in the next slides It's our business mix, our ambition. What do we want to be? Who are we? I talked to you about the why, let's talk about the what. Now 20 years ago, if you had asked me at the time, who are we, I would have said, we are a Canadian life insurance company. And now we're moving more and more towards the North American financial institutions. And where is it that we want to play? We want to play in markets or segment of the markets where we can win, especially the mass mid-market, where it's the middle class and where profitability is quite significant, more significant. Now I would divide our businesses in 3 categories. Sometimes people are asking me, "Why are you in so many businesses?" And they find it hard to understand. I'll explain it to you. Hopefully, it's going to be simple here. We've got our foundation businesses, like the Individual Insurance in Canada, the Dealer Services in Canada and our wealth management manufacturing, both in seg and mutual funds, where we have strong expertise, where we have a leadership position in Canada. Those businesses are at the base of who we are. And they benefit from what I call the support businesses, like the P&C business, like the Group Insurance business that brings cross-line synergy opportunities and also adds to the branding of those foundation businesses. An example would be the referral program between P&C and Life Insurance or Dealer Services, for example. And we've got several of those cross-line opportunities. But if it was only for those 2 categories of businesses, we would not have generated the kind of growth that we had in the past years. So over the last years, we've expanded in other sectors like the expansion business, let's call it that way, distribution business in Canada, the U.S. business, businesses where we were able to take advantage of our strong leadership position in Canada and expertise to export that expertise in other fields. So at the end of the day, when you look at all that ecosystem of businesses, I mean it's all about using -- having synergies in between so that at the end of the day, 1 plus 1 equals more than 2. I spoke a bit about the acquisition, just to remind you what we've done over the last 20 years. And 70% of -- in terms of dollar amount, 70% of those acquisitions have been done over the last 5 years. So we're going to take 18 to 24 months to consolidate it, get all the synergies we can from all those acquisitions, both in Canada and the U.S., and resume our target acquisition journey thereafter. In the meantime, you may expect some bolt-on acquisition, not more than that. But in the U.S., we've gone a long way. We were nowhere, let's say, 10 years ago, and in 2020, now it represented 13% of our operating profit, and a bit more if we count iAS for the full year, it would be around 15%, 16%. And the goal would be to increase to 20% in 2025 in both the sectors that we've invested significantly, which is the Individual Insurance and the Dealer Services. And we're very pleased because in the Individual Insurance, we've grown organically significantly over the last 10 years. And on the Dealer Services, it's a fragmented business, and it's ripe for consolidation, so there are some opportunities for us there to grow. We're also very confident on our growth strategy because we have a very strong balance sheet, a solvency ratio at 130%. And on top of that, there is a distinctive market protection in the reserve that adds -- that would add 10% to that solvency ratio. And we are generating a lot of excess capital, as I mentioned before, because more and more we are in a low-intensive capital type of business and the business are quite profitable. And lastly, we have, I would say, a long tradition of being conservative in our reserve. I used to be myself a Chief Actuary of the company. And our Chief Actuary last year -- last quarter, took some special provision for the COVID, so it goes along this tradition of being conservative in our reserves. Now capital allocation, as I mentioned, the focus will be on organic growth, then resuming dividends whenever the regulators allows it and NCIB as well, if favorable conditions apply. And acquisition will be bolt-on for the time being. Now let me talk about the other axis of our 2023 Plan. Client experience. On the left side of that slide, you see like a 3-way relationship between the client, the adviser and iA. In the past, it was more like a linear approach, like iA, distributor and clients, where everything needed to go through the adviser. But with digital and with all the client-centricity initiatives that we're taking, more and more, it's a 3-way relationship. But what makes iA different is the fact that we are so close to distribution that we know better the needs of the clients, the needs of the distributor obviously and, at the same time, being able to anticipate the trends in the industry. Now around that 3-way relationship, you see the future that we're building. We are building the future of the omnichannel experience, the 360-view of the clients, it's all about data. So we are currently building that infrastructure, and you're going to hear a bit more about it later on today. Let me move to the employee experience, a very, very important axis for us in our strategy. I think here, what -- what is distinctive of iA versus our peers is our tradition and, I would say, our obsession for internal mobility. We want people to grow internally by giving them challenges and getting them out of their comfort zone. That's the best way to develop talent. And that, combined with the strong culture of feedback and recognition, is really the basis of our pipeline for succession planning, a very strong succession planning process. And we are shaping the future of work as well. And interestingly, we had a project that we started in 2018 called the work from anywhere, anytime. And it was to give flexibility to our employees to work anywhere, anytime. And in March 2020, we moved from that to basically 100% work from home for 95-plus percent of our employees. We were prepared, and it's not something that we did over a weekend. It's something that was built over some time, and we were prepared. It gives you a good idea how we made some smart choices in the past. The other thing very important for the future is upskilling the -- for tomorrow because more and more of the jobs will be less on the [indiscernible], more on the technical side. And also the employee wellness, we are taking care of our employees. And one thing I'd you like to remember, when we talk about ESG, we walk the talk. Last quarter, we made a choice basically to invest in our employees, and it cost $0.10 per share. You remember? So we did it because we think it was the right decision not only for the employees but for the company. So we walk the talk. And we measure success or we measure satisfaction of our employees on a regular basis, like every 3 to 4 weeks. And more than 97% of our employees are saying that they are satisfied or well satisfied with the way we handled the pandemic. So kudo to all of us. The last axis is about operating efficiency. Two things to say here. The first one is the focused investment we're doing to become more efficient, at the same time, helping the clients experience and the adviser experience. And you'll hear more about that today. But the other point I'd like to mention is about the philosophy of lean and agile that we are using in the company. We've used that for at least 15 years in the company. And it's working so well during the pandemic because basically, we organize -- just to give you an example of what it means, we organize on a delay basis some digital scrum, let's call it that way, at all level of the organization, where we are aligning the priorities as we go. It's very important. So the strategy is something, but the execution is even more important. And that lean philosophy is helping us focus on the client and focus on continuous improvement. Now let's talk about ESG for a moment. Post pandemic, the biggest challenge of this century as far as I'm concerned is climate change, and we have to do our part. You know that we said a couple of years ago that we are carbon free, but we have to go a step further. We will be introducing in the next sustainability report to be released at the end of March targets for emission reduction. As you know also, we are signatory of the PRI, and there are several initiatives within the organization that are to be part of the report that's going to be tabled at the end of the month. On the S part, the social part, promotion of diversity and inclusion is becoming more important especially with the events that happened in the U.S. last year. So we are doing more there. We are setting targets, and we are putting in our agenda issues regarding the underrepresented groups as well. I already spoke about clients' experience and the -- let's say, the employee experience, but also to mention that during the pandemic, we've obviously helped some of our clients through the process as well. In terms of governance, well, we are a regulated organization. So the governance was already at a high level, but we are improving as we go especially on the risk management side. It's been recognized by some of the rating agencies. And also on the cybersecurity because we are selling trust when you think about it. So clients need to trust us especially the way we handle their data, so it's becoming a high priority for iA. So let me just summarize, at the end of the day, once I've said that, we're quite confident going forward that we can continue delivering on our commitment to an EPS growth of at least 10% a year. More than that, now with the fact that the -- we are able to generate excess capital, we have good profitability in our businesses, we're moving to low capital-intensive businesses, we're confident that the target range of our ROE, which now is at 12.5% to 14% core ROE, could increase in the very near future to 13% to 15%. So that concludes my presentation. Basically, the next speakers will be Mike Stickney. Mike will talk to us about our business mix and also our business strategies. Following Mike will be Renée Laflamme, and Renée will talk about our Individual Insurance and how is it that we've been successful growing our individual retail business in Canada. And then we'll have a session on Dealer Services. You know that we've invested significantly on Dealer Services. So Mike Stickney, François Blais and Kristen will be part of that presentation. And so I'm sure that you're going to find it very instructive. And it's going to be followed by a Q&A session and then a break. And following that, we will have Pierre Miron and Renée Laflamme that will talk to us about how is it that our IT investments support growth. And we'll have Alain Bergeron. Alain will give you some of his main findings since he joined the company in 2019 and probably talk about more about his view of the future of investments. And finally, Jacques Potvin will talk about our financial strength and our profitability. So with that said, I'll leave it to Mike.

Thank you, Denis, for this overview of iA's strategy. As mentioned by Denis, growth is an important strategic axis of our company's success. Members of senior management will now discuss this topic more in depth. I will first invite Mr. Mike Stickney, Executive Vice President and Chief Growth Officer, who will present on growth strategies and synergies among our various businesses. Mike is a seasoned executive with more than 40 years in the insurance industry. He is located in the U.S., where he oversees growth initiatives for all lines of business. In prior role, Mike was responsible for our Dealer Services and Special Market division as well as for our U.S. operations.

Good morning. I'm going to spend a few minutes talking about growth with our businesses overall. So moving to the first slide, the key takeaways for this presentation are, over the last decade, we've had solid growth both from organic growth and acquisitions; we have an interesting mix of diversified businesses that provide good growth and strong financial results; and we have a well-defined plan to grow these businesses well into the future. Moving to the next slide, I want to touch on some of our successes over the last 10 years. Starting with organic growth, we have a broad and competitive product portfolio, and we've done well to shift the product mix to capital-light, high-ROE products. We've developed a number of great digital tools, and we've had a lot of success with them recently. And we have a large distribution network that has been very loyal to us. In terms of acquisitions, we've done 40 acquisitions in the last 10 years. We've expanded into the United States. We've expanded into the wealth sector, we've expanded into the Canadian dealer market. And we've also expanded into direct ownership of distribution. In terms of some of our market positions. We are #1 in terms of life policies sold in Canada. We are #1 in net seg fund sales. And we are in the top 2 in the Canadian dealer market. The next slide shows our growth over the last 10 years. Total premiums and deposits have basically doubled from $6.8 billion to $14.1 billion. And on the right, we've got assets under management plus AUA, and they've grown from $69 billion to $198 billion, which is an 11% average growth rate. Moving to the next slide, we have what I call the triangle. Some of you have seen this before in previous presentations, and it groups our businesses into 3 categories. First, on the left is the foundation businesses. These are the Canadian Individual Life business, the wealth and the Canadian dealer business. These are some of our bigger businesses, and they make a strong contribution to the bottom line. Next on the bottom, are the support businesses. These tend to be some of our smaller businesses. They make a good profit contribution, and they provide good sources of synergy. And finally, on the right, we've got what we call the expansion businesses. They provide good growth and good profit contribution. These are mainly businesses that have been acquired in the last 10 years. And it's important to point out that these businesses are capital-light, high-ROE businesses. So moving to the next slide, I'm still working with these 3 categories of our businesses. And this chart shows our operating profit from 2010 to 2020, both in dollar terms and in percentage of the total. So there's 2 key issues here, I think. First, the operating profit has grown from $283 million to $755 million in this 10-year period, which I think is a great result. Secondly, the expansion businesses have grown from 4% of the total operating profit in 2010 to 21% of total operating profit in 2020. And we expect that this percentage will continue to grow into the future. One other key message I'd like to make is that back on Slide 4, you saw that we developed a strong top line growth. And now for the same period, you could see in this slide that we have developed very solid bottom line growth as well. Moving to the next slide, I just talked about the importance of our moving into capital-light, high-ROE businesses. But it's also important to recognize the work we've been doing in some of our traditional, high-capital businesses to improve our capital position. The chart on the right shows -- at the top, shows the percentage of seg fund sales in low-guarantee products. This percentage has increased from 76% in 2016 to 94% in 2020. Similarly for the line just below, we've increased the percentage of individual life sales and low-guarantee products from 56% in 2016 to 72% in 2020. The bottom line here is that we have improved our ROE in both of these businesses and the company overall by shifting the product mix in these businesses to a higher percentage of capital-light products. Moving to the next slide, and I'll spend a minute talking about how we've created synergy between some of the businesses in the company. This slide shows 2 types of synergies. First, we've developed a referral system for career agents in Québec to refer their life customers to Home and Auto business to potentially sell them a Home or an Auto policy. Secondly, we have done the same thing with car dealers in Québec. The car dealers can refer their customers to us for the sale of an Auto policy or even a Home policy. Today, both of these referral systems have turned into solid distribution channels for us. Another area of synergy we believe we can take advantage of is our deep knowledge of the dealer business in Canada. If you add it up with the Seaboard years, we've been in this business for over 55 years. And we believe we can use this deep knowledge to develop a similar business in the United States, and this is well underway with DAC and IAS. Moving to the next slide, the slide shows a few other synergies that we are working on. We believe one of our strengths is distribution management. And by owning distribution, we can create synergies in a few ways. We can leverage these relationships by staying even closer to distributors. And secondly, we can participate in distribution consolidation. Another type of synergy comes from our strong brand in the retail life market in Canada. It helps us with our marketing of group insurance in the group insurance and group savings business and also can help us marketing individual products to group customers. Moving to the next slide, I want to talk about the future growth of our business, and I'll start with the foundation businesses. We certainly had quite a bit of success with these businesses in the last year or so. The Canadian Individual Life business, our sales increased by 19% in 2020, and this was a very big improvement over previous years. Gross seg fund sales increased by 30% in 2020. And as I mentioned earlier, we are #1 in net sales. And then gross mutual fund sales also increased, and they increased by 21% in 2020, which is an outstanding improvement. So these are outstanding results, and they certainly make me optimistic about our future with these businesses. Moving into support businesses, I think the most interesting story here is our Home and Auto business. If you go back 5 years, this was a breakeven business and did not have a lot of growth. We've made significant improvement, utilizing the synergies I just talked about as well as improved digital marketing. Also, we reviewed the pricing for this business, which has helped to significantly improve margins. Today, we have a profitable business with solid growth potential. Finally, moving to the expansion businesses, there's a number of growth stories going on here. First, with distribution, we've had strong growth in 2020 in our MFDA channel. And now we are focused on generating similar results for our IIROC channel. Moving to the U.S. life insurance operation. This has been an outstanding story for us. When we acquired American Amicable in 2010, the sales were about $25 million. We just finished 2020 and came in just over $125 million. So we've grown that business by a multiple of 5 in the 10-year period. This has been an outstanding growth story for us. Finally, in the U.S. dealer business, this is being built from the DAC and IAS acquisition. We saw good growth with the DAC business in the first few years. Obviously, it slowed down a bit in 2020 due to the pandemic. However, I am optimistic that we're going to see a vaccine-led recovery later in 2021, fueling an improving growth story. So back to the key takeaways. I want to reinforce that we have had strong top line growth for the last 10 years. We have a good mix of diversified businesses, delivering solid growth and a strong bottom line. And we have a well-defined road map to continue to perform into the future. This concludes my presentation, and I will turn it over to Renée. Thank you.

Thank you, Mike. And now to continue with our growth segment, I'm pleased to invite Renée Laflamme, Executive Vice President, Individual Insurance, Savings and Retirement, to say a few words on the key aspects of iA's strategy to successfully grow in the Canadian insurance market. Renée is a fellow CPA and also a Chartered Financial Analyst. She has been with iA for more than 20 years. Among other things in previous roles, she was the Head of Group Benefits and Retirement Solutions. Over to you, Renée.

Good day, everyone. Well, at iA, Individual Insurance, Savings and Retirement has a strong momentum. We've had outstanding growth in 2020, and this is the result of a strong strategy. What I would like you to remember from this presentation are 4 things. First, our product. We have a wide range of product. We have all the products to answer the client needs as well as the advisers' need. Second, distribution. Distribution is a strength at iA. It is a backbone of our organization. Number three is technology. We believe that we have a significant competitive advantage, and this has proven to be true during the pandemic. And number four, we have a plan to pursue profitable growth. As you know, we are a leader in individual insurance. We have grown by 19% year-over-year in 2020. Not only that, we're #1 in number of policies sold, and we have gained market share on that same metric. In 2016, we were at 17%. In 2020, we're now at 21%. In fact, one policy out of 5 is sold by iA in Canada. 1 policy out of 3 for critical illness is sold by iA in Canada. This really speaks to our strong leadership position in the mass and mid-market. The mass and mid-market is a broad market. It is a resilient market. We have a leadership position in the mass market, and we're gaining and growing market share into the mid-market. And this is very well in line with our overall strategy. We are also leaders in the seg fund business. We've grown 30% in 2020, and we are #1 in net sales since 2016. Well, that doesn't happen by luck. I'd say it happens by design. In fact, if you look at the industry, so the seg fund industry in Canada, over the last 3 years, the industry has grown its assets under management by 2%. And at iA, we've grown by 10%. There are many reasons for such a tremendous growth and outstanding performance. Technology is one of them, and I'll speak to that later in the presentation. But I need to give you the information and to provide you the information that we do have a strong lineup of fund. We have a very competitive lineup of fund. And we also have a strong governance to monitor the performance of those funds. I mentioned when I started the presentation that I'd like you to remember 4 things, and the first one being the fact that we have a wide range of products. We have all the products from the simplified issue products all the way to the most sophisticated products. You will remember that in 2020, we've launched 2 new products: UL YRT, a universal life yearly renewable term; and a participating whole life insurance policy. Both of these products were very well received in the marketplace and by all distribution networks. When we do launch new products, develop new products and review our fine lineup, we have a rigorous pricing discipline. With the existing persistent low interest rate environment and this pricing discipline, it's not surprising to see that the proportion of our capital-light product is very large in the new business. In fact, the capital-light product provide a more affordable solution to the clients while it is providing the protection that they are looking for. We know what the advisers are looking for, and we know what the clients are looking for. And we believe that owning distribution is a competitive advantage because we're actually sitting in the front row to see what the market trends are. Distribution is critical. It's a competitive advantage to us, and we are dealing with all distribution networks. We have our carrier network, a dedicated network in the province of Québec with 2,000 advisers. We're dealing with all the MGAs, the more dedicated MGAs as well as the very large MGAs called the consolidators, one of which is PPI that we own. We've been able, in the last 2 years, to grow by 17% the number of advisers that are doing business with iA. We do have a customer -- a customizable approach to the MGAs that we're dealing with, so for networks like the [ care ] networks that are recruiting young advisers and provide training or we're dealing with also the more -- the other MGAs that are recruiting more seasoned advisers or more sophisticated advisers. In one case, we will provide more training. In the other cases, we'll provide more expertise. But in all cases, we provide the best digital tools so that we can support the MGA into his operational efficiency and we can also provide the adviser the tools to do the business easy with us. We're convinced that the role of the adviser is critical. And even though the clients are connected, even though the clients are going on the web to do their research and they do some transactions on the web, the adviser is still playing a critical role. In fact, it is very interesting to see that there's a -- in a survey done by LIMRA in the U.S. in January 2020, they say that the great -- the proportion of the clients that are looking for a financial adviser is at its highest point, and it's growing. McKinsey is echoing the same thing in the report that they published in September 2020. Well, you know it's not that simple to buy life insurance or to buy critical insurance. The clients need advice before they actually confirm the purchase of the insurance. Most of them are looking for that final advice that comfort that they're doing the right thing. So the advisers are playing a critical role. And as an insurer, we also recognize, however, that we must embrace the integration of physical and digital channels. And this is why we're investing so much into technology. We're investing into our EVO platform. The EVO platform is the platform that the advisers are using to buy insurance, the platform that they are using to obtain instant acceptance at point of sale for insured amount up to $2 million. 94% of all the applications we receive at iA are electronic applications coming through EVO. And not only that, out of those 94%, 75% are signed electronically by the client and the advisers. On the seg fund side, we also have digital processes from end to end. You can actually enroll in less than 9 minutes, and you can do subsequent deposits almost instantaneously. So we're very proud and very confident in the tools that we're offering to the client. And it's nice to see that others are seeing that, too. In a survey done by [indiscernible] in 2020 over 18 insurers in Canada, they state that iA is 15% faster than the industry in issuing policies and that 44% more business is settled within 10 days at iA. Now some of you may say well, Renée, maybe, your average policy is smaller than other players. Well, this is only partially true because if you look at the survey over the last couple of years, you see that iA is improving faster than the industry. So what's next? Well, going forward, we will certainly continue to improve our EVO platform. We want to go from the current technology to the full web-based technology, go from a standard sales cycle for the adviser to a much more sales process where the client can be involved with the adviser, going from a platform offering product to a platform using data to provide the next best offer to the client and the adviser. We want also to use more AI into our accelerated underwriting and provide more self-serve capabilities to our clients to be easy to do business with. We will continue to grow the business. Going forward, we want to grow the business in Individual Insurance by 5% to 8% and then the seg fund business from 10% to 12%. Some of you may say, well, you've delivered 19%, how come you're aiming only at 5% to 8%. Well, going forward, 5% to 8% is an ambitious task. You need to know that the industry, the Canadian insurance industry in Canada have grown in the past 5 years and even in the past 10 years by less than 3.5%. So aiming to grow 5% to 8% is really outpacing the market, and it's also gaining market share. How is it that we're going to do this? Well, of course, we will continue to invest into our digital solution to remain at the leading edge. We will leverage our new product and be proactive in providing new products and improving our lineup of funds, and we will keep that strong momentum we have with all our distribution network. We will provide profitable growth going forward. We have multiple earnings growth initiatives. Of course, there is a 101 rule that you need to grow your sales and revenues faster than the expenses. But as well, we will continue to improve our operational efficiency with digital. We will optimize our product offering and profit margins. We will continue to deliver an ROE on new business that is higher than the corporate target. And we want to optimize our asset-liability matching and risk management. We will provide profitable growth, and we will provide profitable growth with the right product shelf, with our unparalleled breadth of distribution and with best-in-class technology. We have the capabilities to outpace the competition in this mature market. Thank you.

Thank you, Renée. To conclude this growth segment, we have lined up for you 3 executives who will present on Dealer Services. First up, Mike Stickney, EVP and Chief Growth Officer, will present iA's 20-year history in Dealer Services. It will be followed by François Blais and Kristen Gruber, who will give you more insight on the strategic direction of these businesses in Canada and in the U.S. François is an actuary, who have been with iA for 16 years. He is currently Executive Vice President for Dealer Services and Special Risk. Previously, he occupied various positions at iA including as President of iA Auto and Home. Kristen, who is the President of U.S. Dealer Services Operations, has a degree in finance and has been in the industry for about 30 years. Previously, she has occupied other senior roles in our Dealer Services business in the U.S. Prior to their presentation, I would like to remind you that you can send us your question for the Q&A period that will follow shortly. And now to Mike, François and Kristen.

Good morning. Next, I'm going to talk about our dealer businesses in both Canada and the United States. I think it's fair to say that we get a lot of questions about our dealer businesses. The questions are along the lines of why are you in this business or how did you get in this business. And I think these questions make a lot of sense. A lot of people think of us as a traditional life insurance company. So I'd like to address these types of questions by answering the question on this slide, which is, why do you like this business? Starting with the Canadian market, the reasons we like this market in Canada are that we have a strong market position in Canada. We are one of the top 2 players in Canada. Second reason is that it is a capital-light, high-ROE business. And the third is that it has been a good growth engine for us for many years. Shifting to the U.S., the answer is a little bit different because it is a different market. The reasons we like the market in the U.S. is that we feel we can leverage our knowledge that we've gained from operating in Canada. Like Canada, it is a capital-light, high-ROE business. And finally, the U.S. market is quite fragmented, and we believe it could be a good growth engine for us for many years into the future. The next slide shows our top line growth for these businesses. On the left is the Canadian sales for the last 10 years, and we've shown good growth, going from $261 million of sales in 2010 to about $970 million of sales in 2020. That's a 14% average growth rate. On the right, we've got the U.S. sales since we acquired DAC in 2018. We've had good growth for DAC for the last few years, and we will see further growth in 2020 and 2021 because of the IAS acquisition. However, we have hit a bump on the road in 2020 due to the pandemic. Moving to the next slide, this provides a time line on our development in this business in Canada. The story starts in 1999, when iA acquired Seaboard Life. Seaboard was a leader in this market at the time, and they had been in the business for 35 years up to that point in time. A footnote in the Seaboard story is that I came from Seaboard Life, and I have been connected with this business for most of my career. Next, we acquired a broker in Montreal in 2000, named Mecagroupe, and that was really our first entry into the Québec market. Seaboard had not operated in Québec up to that point. In 2007, we entered the warranty market on an organic basis. And then in 2010, we acquired a company called National Warranties, which gave us more market share and scale in the warranty business. And then National Warranties also provided us entry into the used car market in Canada. Then in 2015, we acquired CTL, which put us into the auto finance business. So the growth in our Canadian business has really been driven by a combination of organic growth, acquisition of distribution and acquisition of new product manufacturing capabilities. The next slide shows a high level comparison of our Canadian and our U.S. businesses. I think the easiest way to look at this slide is to focus on the differences. There are 2 main differences. The first is creditor insurance. It is an important market in Canada but doesn't really exist in the United States because of regulatory issues. The second difference is that we are in the auto finance business in Canada, however, we have no intention of entering this market in the United States. I think there'll be a lot of scale and competitive issues in the U.S., and it's just not an area of interest for us. So as you can see, there are more similarities than differences between the 2 businesses and the 2 countries. Moving to the next slide, this sums up our story in the dealer markets quite well. Our ambition is to become a North American leader in these markets. We are already a leader in Canada. Obviously, we have work to do in the U.S. We believe that the combination of DAC and IAS puts us in the top 10 in the U.S. market. And our objective in the U.S. is to gain market share and move up this market share ladder. Finally, in closing, I want to say that we are focused on organic growth in these businesses. I believe we have a tailwind coming in during the next few years due to a vaccine-led recovery in these markets. And we also believe we have opportunities for growth and marketing products through OEMs. Overall, I am quite optimistic about our future in these businesses. So this concludes my presentation, and I'll turn it over to François. Thank you.

Thanks, Mike, and thank you, everyone, for being here. I will focus my attention today on Dealer Services Canada. There are 4 key takeaways I would like for you to leave with today: first, we are top of mind when it comes to virtually all types of insurance and warranties products sold through the dealership network; second, it is a business that has a strong contribution to iA ROE; third, in every business that we're in, we have a deliberate growth strategy and a rigorous risk management strategy tied to it; last, [indiscernible], we have a clear path towards growth. So first, let's just start by brushing up a portrait of who we are in this industry. We are clearly a top of mind provider when it comes to virtually all types of products distributed through the finance and insurance manager office. So whether it's life insurance, disability insurance, extended warranties, appearance protection packages, entitled devices, we are the manufacturer of all these products. And these are available for all types of vehicles, a car, power sports, farming equipment. So in every types of vehicles, we do manufacture these products. Historically, we've been quite strong in the new car space. But now with the recent acquisitions, we are also as strong in the used car space. And in that, I would say that we are diversified in every possible dimensions. Now just to outline a bit of the significance of who we are in this market, here's a few KPIs. So over the last 5 years, we outgrew the market by 14 percentage points. So that has helped to solidify our top 1 position in the insurance and warranty space in Canada but also secured top 3 in terms of non-prime auto loans. And remember that this growth has a purpose. It is in businesses that are capital light and contributing greatly to iA ROE. You probably have noticed that over the past few years, we have been shifting from traditional creditor insurance to more of a warranties or referred here as a P&C insurance products. This has been a leverage shift as most of our acquisition has been in this field. We will still continue to focus on these as we expect most of, if not all of our growth to come from this line of business. We do also see opportunities to grow moderately in near-prime car financing. Talking about auto loans. It is a business that we found to be quite complementary to our expertise in insurance and warranties in 3 ways, actually. First, well, it provides strong internal synergies in completing our 360 view of the dealership distribution. Well, second, it brings also great internal synergies with other lines of businesses of iA and especially within the individual sector and providing competitive cost of fund access. And third, well, we were able to export our sound risk management practice and actuarial expertise to deliver stability and sustainability of results. Now I'd like for you to draw your attention to the right-hand side of Slide 6, where we see the graph. Since the acquisition of CTL, we've worked actively to increase the quality of the portfolio. The share of near-prime loans grew 18 percentage points over that period. And now it represents the vast majority of our -- all of our loans -- outstanding loans. So great impact in terms of decreasing the volatility of results. Looking now more at the future of our growth and where it will come from. Historically, well, we've been built through acquisitions. That has created an impressive breadth of financial and insurance products. Now it's time for us to shift from a more traditional product-centric approach to more of a client-centric approach. We have all the tools in our ends to partner with dealers in providing superior client experience and then helping to provide financial peace of mind to car buyers. We've been historically quite strong in the dealership business, and we have a lot of potential to work closer with car manufacturers. We hold relationships already, but we will be looking to expand these. We have a manufacturing capability that is unmet, and we need to capitalize on this. Well, over the past years, we have also grown in a success and also as a growth generator for iA distribution network as well as a door opener at the same time for discussions on life insurance products. We need to continue to expand this value proposition, to export it and make it available to other lines of businesses to help further to protect the financial well-being of Canadians and iA clients. To sum it all up, I've demonstrated to you how well positioned we are in this market. We are clearly top of mind provider when it comes to virtually all types of insurance and warranties sold to dealership network. This is a business that has a strong contribution to iA overall ROE. In every businesses that we're in, we have a strong commitment towards risk management. And looking forward, we have a promising growth potential. And with the position we have in the market, we are very well positioned to seize it. And with that, over to Kristen.

Thanks, François. Hello, everyone. I'd like to start and finish today with 4 key messages. First, U.S. dealer services has delivered strong, profitable growth. Second, the IAS acquisition was strategic, and we created a leadership position in this market. Third, industry conditions support us, and they're favorable. And finally, we have a robust plan for a profitable growth strategy. Let's go back to 2018 when iA first acquired DAC. At that time, DAC had about a 1% market share, with $348 million of sales. In the last 3 years, DAC has grown its business by 16% CAGR, strongly outperforming retail new vehicle sales and generating ROEs above target. We did this with 2 primary sources of revenue at the dealership point of sale. We generated administration fees from the sale of F&I products, and we generated insurance fees. And while we were successful with this model, our growth opportunities without an acquisition were limited based on the breadth of services that we provided. Our positions following the IAS acquisition is much stronger for 4 primary reasons. The first is we got immediate scale with our 2 existing sources of revenue in the dealer channel. We basically brought 2 administration companies together, and we grew our market share from 1% to 4.5%, and we became a top 10 provider. To put this into perspective, the largest provider in this space is estimated to have about a 10% market share. We also got scale with our insurance company, DAC. We now insure the vast majority of IAS' business, and we're starting to see these synergies. Secondly, IAS introduced new revenue streams that diversify and enhance our dealer relationships. We now have the ability to participate in 3x the revenue opportunity every time a product is sold at point of sale. Third, we now have a post-sale distribution channel, which is our direct-to-consumer platform. Now while dealer sales still represent the vast majority of F&I products sold today, the post-sale segment is large, and it represents about 100 million vehicles that are on the road today in the U.S. whose manufacturer warranty has expired, but they're still in that sweet spot for our coverage eligibility. And finally, we now have a lead generation company that mines a dealer's data to reengage customers at the optimal point in the vehicle ownership cycle. This lead gen platform has a history of innovation around technology, and solves 2 critical problems for dealers. First, it helps them identify new customers. Second, it sources inventory for their used car department. This tool moves us from being just another F&I product provider to being the dealer's partner, generating vehicle sales in addition to F&I revenue, and allowing us to engage in the full customer life cycle. We now have all the tools to deliver a superior client experience. We have a much larger and more diversified distribution network. We have agnostic technology that plugs into any digital retailing solution that a dealer chooses, and there are a lot of choices out there. We have a speed to market advantage with our own A-rated insurance company, which means that we are the ones who control the pace, the priorities and the pricing of all of our products. Our integrated platform means that we do it all. Nothing is outsourced. And that gives us a tremendous amount of control and flexibility when it comes to customizing solutions for our clients. And that's an important differentiator in this industry. Speaking of the industry, we have some favorable tailwinds that support our initiatives. There are more than 100 F&I product providers in this fragmented industry, and that makes it ripe for further consolidation and market share gains. The demand for F&I products is increasing due to escalating repair costs and longer loan terms that are making our products even more affordable. F&I now accounts for about 30% of a dealer's gross revenue, and our products are an important component. And finally, the outlook for car sales have improved, thanks in part to some demographic trends, such as suburbanization into areas without established mass transit systems where personal car ownership is required. A recent survey from Cox Automotive indicated that the number of people who plan to use ridesharing services this year is down significantly and 24% of customers surveyed plan to actually add another vehicle. This all leads to a very robust story for both top line sales as well as bottom line earnings. Our primary initiative in 2021 is to leverage our full suite of products, services, technology and training. What I found is that we deliver the best client experience when we have all of our products installed, when we service the account with training and income development, and when our dealers benefit from our lead gen technology. And we have a lot of room to cross-sell these services. We will continue to build a pipeline for new agents and dealers as part of our rebranding strategy that will be publicly announced later this month, as we rebrand to iA American Warranty Group. And we will expand our post-sale vehicle channel to capture more of those 100 million vehicles that are on the road today. On the earnings side, DAC has historically been a stable source of profitable earnings, and that will just be augmented by the addition of IAS' business. We will also add synergy gains once our integration with IAS is complete, especially when we consolidate IAS' legacy admin systems. In conclusion, our story is about adding 2 businesses together to generate more than the sum of the parts. And we are in the first chapter. So to remind you, U.S. dealer services has delivered strong, profitable growth. The IAS acquisition was strategic, and we created a leadership position in this market. Industry conditions are favorable, and they support our initiatives. And finally, we have a robust plan to execute a profitable growth strategy. Thank you very much.

Thank you, Mike, François and Kristen for this presentation. It is now time for our first Q&A session. And we already have received some questions, but it is still time to send questions if you have any. Just so that you are not surprised, as Jacques Potvin, our CFO, will be presenting during the second portion of the event, questions that are more oriented to the financial aspect will be kept for the second Q&A session. So I will now start with the first question from Gabriel Dechaine. What do you mean by favorable conditions to justify a buyback? The only time you had an active buyback was in response to conditions that were not favorable. For example, the Ituna litigation response.

So thank you, Gabriel. And it's Denis here. I will answer your question. Actually, when we did use the NCIB, I guess, the favorable conditions at the time were, first of all, that we had significant excess capital; and second, that the price of our share was very much quite low basically when you look, for example, compared to the book value. So the price, the book was quite small. So I would say that, right now, it's -- I mean the NCIB would be our last use of capital. The focus is on organic growth, as I mentioned in my presentation. Obviously, some tuck-in acquisition if we can be opportunistic. Nothing major, however, and increase in dividends. But on their favorable condition, don't read too much into it. It's more like, if for any reason, there is, let's say, huge excess capital position and that the price of our share is attractive, I mean for us to buy, then we would use that option.

Moving now to the second question from Meny Grauman. Meny sent 2 question, one more related to IFRS 17, which I will keep for the second Q&A. So I will go with your other questions, Meny. There are lots of articles about the decline of auto dealerships as manufacturers increasingly look to go direct. Volvo's recent announcement, for example. How dramatic is this trend? How adaptable is your business to these changes?

I think I will direct that question to Mike Stickney. Mike?

Sure. Thanks for the question, Meny. This is a trend we're watching. I think it's important to bear in mind, Volvo has got a very small market share in the U.S. So I don't think it's -- in itself, it's a big deal. They sell less cars than Tesla does. So as I said, it's something that we are monitoring. And obviously, there's a risk there if there's a big shift in dealer distribution of automobiles. But my own view is we're a long ways away from there.

Yes. Maybe one thing that I would add to Mike's comment is that, some years ago, I would say probably 4 to 5 years ago, we had started talking to the OEMs, the auto manufacturer. And we struck some deals, for example, in Canada with Honda and Nissan, where we developed the relationship with the OEMs. So for us, traditionally, and we are still much more concentrated on the dealerships. But at the same time, we are open, and we are trying to get some deals also with the OEMs in collaboration with the dealers. Yes.

Okay. Thank you, Mike and Denis. Moving now to a question from Darko Mihelic. What about the risk of being committed to distribution? Do you lobby against consumer-friendly policies? Do you fight against standardized titles, say fund trailers commission, insurance sales through bank branches? Will a backlash ensue?

Yes. Darko, thank you for your question. Well, this is, let's say, a huge topic in a sense that the value to customers, there's definitely a trend towards providing more value to the customers and also being more transparent with the customers. So to me, it's a trend that is not going to stop, and we have to adapt as an organization to that. I would say that -- I mean we work very, very closely with the CLHIE and also with the regulators to improve the, what I would call, the fair treatment of customers, which is a big thing these days. And we're used to that. And we are used on the IIROC side and MFDA side. We're used to work with the regulators and being, I would say, customer-friendly. On the insurance side, we are through the CLHIE guidelines, but there are more to come. And we have to adapt as an organization, and we are pleased with the direction this is taking. My last comment would be about future of distribution. We are very committed to the -- with distributors. But at the same time, we knew that digital is going to take more and more places. And so we develop our tools, our digital tools, for example, in a way such that, in the future, if there are more and more, let's say, digital interaction in terms of sales, that we would be prepared to do that. So our investments in technology is such that it would be quick for us to adapt to a different kind of distribution as well.

Okay. So now another question from Gabriel Dechaine. Gabriel is asking. You state that ROE on new business is higher than your corporate target. To be clear, does that mean that it is superior to 14%? And does the statement apply to both SEG funds and life insurance products?

Yes. Well, yes, in my presentation, I mentioned that the ROE was significantly higher for all lines of businesses. In fact, it -- that includes the insurance business, the SEG fund businesses, all the businesses. I mean there are -- to some degree, some are way more -- I mean profitable than others. But yes, you should include also in that the individual life insurance. And Renée has explained to you that we're doing -- we've improved the product mix significantly. And it helps a lot in terms of ROE expansion for that specific line of business as well. You may remember that, several years ago, we give messages like, well, we would like to emphasize other businesses. We want to go away from the long-term guarantee products in the individual insurance line of business. But today, when I look at the product mix of that line of business, I would be pleased if we could increase the sales even more.

Okay. Now from Tom MacKinnon. How were you able to grow the number of advisers doing business with iA in Canada by 17% over the last 2 years? How much was organic?

So Renée will lead you on that one.

Yes. Thank you very much. How did we do this? I would say 3 things. The first is a very disciplined approach to sales. So being close to the MGAs and being close to the adviser. So that's a very disciplined approach. As I mentioned in the presentation, we've launched 2 new product. One of which is a participating whole life, so of course, that interested new advisers. And finally, during the COVID, some advisers turn to iA for the solutions for non face-to-face or remote sales. To your question, how much of it is organic? I assume you mean how much of it comes from the networks that we own, whether it's PPI or the carrier network. Well, the great majority would come from all distribution networks, from all MGAs. So the majority would come not necessarily from the networks that we own.

Yes. This is an interesting question. Anecdotically, I spoke with some sales manager last year. It was quite fascinating that some of them told me, because they recruit green agents most of the time, but basically, some of them told me that they were able to recruit advisers from other organizations because of our digital tools. It may be just anecdotical, but I think it's reinforced your point here. Next question?

Yes. Before if I move to the next question, I'd just like to outline that today, questions are open to everyone. So not only to analysts, but also to investors. I do not think that we receive a few questions from investors, too. But I just want to everyone listening to know that you can ask question. So the next question will be from Doug Young. Doug is asking, for U.S. dealer services, organic growth avenues are from agent recruitment and finding new dealerships. Can you provide an update on both? Mike, expand on growth opportunity for U.S. dealer services through OEM. So I assume Doug would want Mike to comment further on this.

Yes. We can start with Mike here.

Well, actually, I'll deal with the last part. But I think Kristen would -- it's a good question for her. Where you asked about the OEMs, Doug. We've had some pretty good success in Canada, signing deals with OEMs. François talked about it in his remarks. We are confidentially working on a situation in the U.S., but it may or may not come together. The U.S. is a different market, and there's a few large players that do a fair amount of the OEM business. And I'll let Kristen talk about the meat and potatoes part of the business, which is the agents and direct dealer distribution.

Sure. I'm happy to. Despite COVID and despite less travel in 2020, we've actually made very good inroads on signing new agents and new dealers. I want to say we signed about 300 dealers in the second half of 2020. Now obviously, not all these dealers we signed for all of our products. But the important thing is you get your foot in the door, you start to make some inroads for say, 1 or 2 products. And hopefully, we expand our share there. So I'd say we're making good progress despite the travel restrictions.

Okay. So next question, from an investor this time. Could you give us some examples of synergies that will result from IAS? And can we expect to see the results of these synergies in 2021?

Yes. Last question on that one.

It basically fall into 3 buckets. We've got our insurance premium synergies, that was basically moving all of IAS' contracts from a competitor insurance company over to DAC. That project has been completed in 2020, and we're starting to see those synergies. Now we have to be patient for those earnings to materialize, but the business has moved to DAC on a written basis. The second example of synergies is revenue synergies. It's basically cross-selling the products and services that we now have between our, let's say, our combined platform. And then the third synergy is really operational synergies. And the biggest operational synergy will come from sunsetting or consolidating, let's say, IAS legacy admin systems. So we've started that project. And we will start to see those synergies when we sunset the first one, which is due basically Q1 of 2022. So those are really the 3 categories of synergies that we are pursuing.

Okay. So thanks, Kristen. Now we have a question for Sean O'Brien. So the question is, since Sean joined the Wealth Management very recently, I am interested to know what are his main findings so far about that business?

Yes. I'd say there's kind of 3 areas I sort of honed in, I think, since I joined Wealth. And the first one was kind of the strength of our distribution. I don't -- coming from outside in, when I came into it, I didn't -- I don't think we get recognized for sort of the power of our advice channel. The advisers that I've been meeting, these are entrepreneurial business-oriented advisers that are really focused on growing their practice. And to me, it's exciting because really it's both just building the platform, helping sort of showing the best practice how to do it. But because of the way they're engaged in building their business, I can see some nice organic growth coming out of that platform. The other one is just from looking at the MFD and the IIROC investing in private wealth, I see them as very distinct strategies. So really, so we're just kind of working down the path of really understanding what we need to grow, but both of them are -- should be growth stories and both of them we'll be looking to invest in to help build up the platform. And the last one is Clarington. Clarington, it's a pretty neat opportunity. I mean we've been focused over the last couple of years on really focusing on fund performance, sort of rationalizing the shelf. And starting to now leverage some of the capabilities that Alain Bergeron is building on the -- from an asset management perspective to get some investment scale in that business. And I'm excited about it. And our affiliates are excited as well about the sort of where we're beginning to show some nice shifts on that. So those 3 areas were -- are quite exciting for me.

Okay. We now have another question on the U.S. dealer services business. So the question is, looking at dealer services business model in the U.S., what is the main source of profit in the business model or life cycle?

Yes. I will leave Mike and also maybe Kristen on that one. Probably interesting to note that, versus Canada, there are some differences, mainly the fact that, in the U.S., there are more, let's say, profit sharing type of agreement, something probably that, Mike, you want to comment?

Sure. Yes. The U.S., when you boil it all down, is a pretty simple business model. We charge fees for administration and basically insurance fees. And our costs are our costs. So the margins come from these variable fees. The more policies you sell, the more fees you get, minus your costs. And so it's -- there's not a lot of a typical insurance risk for that business. It really is a fee-for-service business.

Okay. So go ahead, Kristen. Sorry.

And I was just going to add that we have a lot more opportunities now with our combined platform to generate fee income in a lot of different ways. So the breadth of fee income has expanded with the IAS acquisition.

Okay. So we will take one last question for this -- oh, I see there's another one. Well, we'll take one and maybe a second last question for this segment. So first one, you are doing very well with your P&C business in Québec. Do you plan to expand your P&C activities outside Québec?

Yes. I think it's important to understand why -- first, why are we in that business in Québec. And basically, that business has been really a support business for all others, really helping the other, I would say, foundation businesses thrive. So if we ever want to go outside Québec at some point, it will have to be some strategic reason like that. I mean we're not going to go outside Québec and try to compete against the big players without any -- some kind of competitive advantage. So this is something we're looking at in terms of more distribution as opposed to manufacturing. It could be that in the near future that we look at distribute some P&C products in collaboration with some of the other sectors that we're in. But I mean we're just analyzing it as we speak. So we don't know, but that's -- it's something that is -- could be on the table.

Okay. So now moving to another question from Doug Young. For U.S. dealer services, so is there any new regulatory rules pending or any new regulations being discussed that could impact margins on any of the products?

Kristen, do you want to comment on that one?

Sure. Yes. There are -- to my knowledge, there aren't any regulatory -- there isn't any pending regulations that would have a material impact on our sales. We're actively watching the CFPB as they -- under a new administration, we anticipate that they will become more active. Auto dealers have traditionally been exempt from the breadth of the CFPB regulations. But they certainly can affect the dealer business by looking at lender practices. But we feel very confident that our business model is not going to be negatively affected by any regulatory -- any regulations on the horizon, let's say.

Okay. Thanks, Kristen. Another question from Paul Holden this time. And this will be the last question prior to the break. So the question from Paul is the following. Can you provide some color around the global ship -- chip shortage and its impact on automotive production and IAS in the next 12 to 18 months?

I see that there are a lot of interesting questions on the U.S. dealer services business. So Kristen, I guess you can take that one.

Sure. Yes. We're definitely watching the global chip shortage. We're hearing from manufacturers that there is definitely going to be some pressure on new car inventory because of these shortages. But new car inventory pressure is one thing we've been dealing with since Q2. I mean the COVID pandemic, when most manufacturers shut down their production lines, we saw inventory shortages on new cars that really bled into Q2, Q3 and Q4. So we've done a very good job managing through those inventory shortages, and we'll continue to do that until -- these things have a way of balancing eventually. And until then, we'll just continue to do what we've done, which is grow our business one dealer, one agent at a time.

Yes. I can testify that it is applying also in Canada because I'm still waiting for the car I ordered in last December. So supposed to get it in April. Hopefully, I get it. Okay?

Okay. So thanks for your questions, and thanks to our speakers for answering them. In terms of logistic, you can see that there are still 3 questions outstanding, but they will be prioritized during our second Q&A session when Jacques is with us. And just to explain. We're doing this event in the context of the pandemic. So the Q&A sessions, we are -- they were staged in advance. We all have our place, so that's why Jacques was not with us for this first session. It was for sanitary conditions, but he will be here for the second session and will answer these questions. The other thing, all of our speakers will be available during the second Q&A session. So if you have other questions that you'd like to ask to Renée, Kristen, Mike or François, they will be available to answer them during the second session. And last item, we will now take a break, and the event will resume at 10:45 sharp. Thanks. [Break]

Welcome to the second portion of our event. Technology is continually evolving, and it is a key aspect of our strategy. I'll now invite Pierre Miron, Executive Vice President, Information Technology and Investment Operations. Pierre joined iA in 2018, with more than 30 years of experience in IT and finance sectors. Among previous roles, he has worked at Caisse de dépôt et placement du Québec, where as EVP and Chief Operations and IT Officer, he modernized CDPQ's technology and operational infrastructure. Today, he will be accompanied by Renée Laflamme, EVP, Individual Insurance, Savings and Retirement, to comment on our digital strategy.

Good morning. I'm happy to discuss with my colleague, Renée Laflamme, the iA Digital Transformation Investment plan. As you will see during the course of this presentation, this plan helps to strengthen our strategic position on the distribution of iA products in order to support the company growth strategy. This $500 million investment plan, which runs until 2025, is strictly dedicated to the iA digital transformation strategy. It is in addition to the regular IT investment we make. It is particularly devoted to the implementation of state-of-the-art business platform to modernize and simplify our legacy system and also to add specific component of improving the customer and adviser experience. In addition, part of this sum is also devoted to the automation of business processes and increase the use of data, including the use of artificial intelligence and predictive analytics. In summary, this -- in terms of value creation or return on investment, if you wish, the work we've done so far shows that the investment we'll make will contribute to the improvement of the earnings per share by at least 1% over the next few years. I'll turn it over to Renée to you -- to briefly present the progress made in 2020. Renée?

Thank you very much, Pierre. Well, yes, in 2020, the technology was ready to support growth. We've already discussed the outstanding growth of individual insurance and savings, and how the digital technology supported that growth. We've had growth in all lines of business. It's interesting to note that in the Wealth business, and more specifically, in the MFDA business, we can recruit and onboard new advisers 100% online. In fact, we've recruited $1.2 billion of asset under administration 100% digitally. So we can say that at iA, the digital technology is truly supporting growth. Less visible, but just as important, technology is also supporting operational efficiency. For example, in the group division, we can do 100% of health claims electronically. It's also interesting to see that more than 95% of our employees are currently working from home. They're working remotely. In fact, when COVID hit a year ago, over the weekend, 95% of our staff were working from home. We would like to show you an example of how technology is truly supporting growth. And we will show you the EVO platform. EVO is the platform that our advisers are using to sell insurance. 94% of all the applications we receive are electronic, and they're coming through EVO. Watch this. [Presentation]

To give you a more detailed view of this plan, we have decided to focus our investment in 3 axes that will contribute to fuel the growth of the company. The first one, and maybe the most important one, is the client and adviser experience. Our digital tools help outpace the market growth by obtain a more detailed view of the customer to the use of the data and improve the customer and adviser experience by providing sophisticated sales tools and self-serve capabilities. Because of this investment, it will be easier to do business with iA whether it's a direct connection with a client or to an adviser. The second one is business efficiency that will help reduce our direct operational costs by 20%. The renewable of our business platform as well as the process automation component will make it possible to achieve this gain in efficiency. In addition, part of the strategy too is to reduce IT costs by adapting cloud-based solution and removing all expensive legacy systems. And finally, the third one is related to the people pillar, by having the right talents and skills at the right moment. You can imagine an evolution of the talent pool with the achievement of this pillar -- or the 2 other pillars: fewer clerical staff with process automation and more high-caliber professional for the use of artificial intelligence and predictive analytics. And finally, we are continuing to search for strategic partners to enable us to speed up certain initiative. To fully support these axes, we are investing in 4 enablers. And the first one, already covered, is system and technology by deploying our business platform with straight reprocessing, automation and robotization capabilities. In addition to our process-driven efficiency, we leverage our data and analytics flexibility by adding artificial intelligence and predictive analytics. So you can imagine both at the same time, very high-efficiency on process-driven and being driven by data to be triggered by life event coming from our customer -- from the data coming from the customers. Talent and culture. In everything we do, we take a digital stance. This contribute to the rapidly evolving talent pool, less operational, more ethical, like I said earlier. Obviously, we are continuing to invest in the concept of work from anywhere. For sure, we were ready when the COVID has been declared last year. But more than that, we are heavily investing on this concept of this new way of working. Therefore, we are already promoting this new way of working. And finally, the operational model and partnership. The key message here, we are really looking for technology that are scalables and flexible enough to support our organic growth as well as future acquisition. In a sense, we are creating a kind of [ recipient ] for the future for scaling our growth strategy.

Yes. As mentioned by Pierre, technology is truly supporting operational efficiencies. And in the individual insurance sector, we are in motion. We are modernizing our back office. We are actually implementing a new solution in a new modern ecosystem. And we will do this to favor straight-through processing as well as a better connectivity with our partners and with the internal ecosystem at iA. We will retire the legacy system, and we will save almost $25 million per year. This project is a 5-year project, and we are one year in. It's going to be multiple deliveries, and we are very proud with the deliveries that have been done so far, and that will continue to be done in the next steps. With this new technology and the increased operational efficiency, we are clearly building ourselves another strong competitive advantage.

So in addition to what Renée just present -- I just presented, our plan is to replicate the same strategy with -- for the other business units, such as the Wealth, the dealers and maybe the group insurance as well. So the whole idea is not only to revisit the back office modernization, but it's also to go over our complete integration from the front to the back office operation in that sense. So now to give you a more closer look about what we mean by improving the client and adviser experience, I'll turn it over to Renée again to talk to you about this notion of 360 view of the customer. Renée?

Well, going forward, having a 360 view of the client is critical. We already know our clients very well. We know our adviser. We're using the data, and we have multiple initiatives. And just to name one. For example, with the consent of the client, we cross-reference between individual insurance and iA auto and home. We have multiple of those initiatives that we do across our organization. However, we want to go further. We want to do more. So we want to be able to use the data to be able to identify the next best offer to our clients or to the advisers. We want to be able to give more self-serve capabilities to our clients to be easy to deal with. We want to be able to automate some of the tasks that our people in the contact center have so that they're more efficient and they also have a better employee experience. In fact, it's a seamless experience for both the client and the advisers, easy to do business with. In order to do this, we, of course, need to have the right strategy, and I'll let Pierre speak to this.

Talking a little bit more about what we mean by technology behind this is, yes, considering the implementation of the deployment of a global CRM, if you wish, but also leveraging as much as possible all the data that we're going to get, that we're going to collect from all the different sources, and improving the customer experience by leveraging as much as possible the data coming from all over the place and trigger some action coming out from the CRM and the other tools that's going to be implemented. Finally, in a nutshell, we are really shaping the iA ecosystem to fully support our business plan. As you may know, IT is business and business is IT in the financial services. Some of the targets we've discussed today, including our drive to maintain superior growth through digital technologies, greater uptake of product offering and efficiency gain, are realistically achievable. Therefore, and as I mentioned at the beginning of my presentation, I'm deeply convinced and we are deeply convinced that this IT investment contribute to an improvement of 1% -- of at least 1% in the earning per share for the next years. I hope that we succeeded to give you a very short overview of what we are intending to do. Key messages here. We're already in action. And the objective is to maintain our strategic position related to the efficiency of our distribution product. We've already captured some of the benefits related to this investment. It's a journey. Everything will not be completed tomorrow. But we know exactly what we're going to be doing with the $500 million investment. And it's a real positive return on investment of at least 1%. Thank you very much for listening.

Thank you, Pierre and Renée. It is now my pleasure to invite Alain Bergeron, Executive Vice President and Chief Investment Officer. In addition to his Master in Financial Engineering, Alain is a CFA and a chartered market technician. Previously, Alain was Senior Vice President at Mackenzie. He also spent more than 10 years at the Canada Pension Plan Investment board. Over to you, Alain.

Good morning, everyone. It's a pleasure to speak with you today. In my session, I'll focus on 3 things. I've been joined, iA 18 months ago, I'll give you some of my initial impressions. I'll give you insights about iA's investment portfolio, and I'll finish by focusing on the future. Many of you know me from my days on the buy side but it's the first time you see me on the issuer side at an Investor Day. Let me start by saying why I came to iA. I came to iA because I saw something. I felt there was great potential, and I felt that I could help the investment team realize that potential. It reminds me of my last 2 roles, which I really enjoy. Take the CPP investment board role, for example. When I joined in 2003, it was hard to recruit talent. CPP didn't have anything close to their reputation it enjoyed when I left 11 years later or today. It was definitely a team effort, and I really enjoyed the role that I played in that. Here at iA, I'm starting with a much stronger base, however. If you look at the chart on the left, it shows that iA now has scale, $100 billion of AUM. There's been a massive evolution at iA in the last 10 to 15 years. Managing $25 billion is not at all the same as managing $100 billion. And you all know the importance of scale and asset management. iA has a strong balance sheet, it has capital, it has a strong distribution. There are many teams with solid investment performance. The portfolios are well managed. More -- there's more investment talent. There's more scale, there's more breadth here than I expected coming in. And that gap between external brand, external perception and reality, that's clearly an opportunity. If you combine all this with a collaborative culture and a real desire to get to another level from Denis, from the Board, from the investment team, that's a very attractive combination of factors. Let me give you a sense of the current capabilities of the investment team. This team has over 100 investment professionals. That allows us to get exposure to quality assets. Yes, in the traditional asset classes, such as equity and bonds. But also in private assets, such as private debt, private equity, real estate, commercial mortgages, infrastructure. In fact, we manage over $13 billion of private assets. And you can see the breakdown of that on the chart on the left. The chart on the right shows you the AUM. Our AUM broken down by type of clients. The key point here is that the investment team serves both retail and institutional type of clients, which are roughly speaking of similar size. Now that concludes my first point that iA as an investment platform with critical mass. Now let's do a quick overview of iA's investment portfolio. That's the $45 billion portfolio that you see on the table on the right. This slide shows you the portfolio allocation. The key takeaway here is that the investment portfolio of iA is positioned conservatively. This is mainly a fixed income portfolio, 71% in bonds. So that keeps the risk low. It provides a reliable income stream that serves to back our liability. The majority of those bonds are government bonds, and 2020 was a good year to show the resiliency of the bond portfolio. Credit impairments were less than 0.1% of the corporate portfolio. In terms of sectors that are making the headline in the market these days or where risks are elevated, I thought I'd take a moment to focus on those. And in the process, demonstrate that our exposure is either small, right, if you look at our holdings in the worst sectors are worse affected by COVID, 1.1% of portfolio, or that our positioning is fairly defensive relative to typical institutional portfolio, which help mitigate the risk. Commercial mortgages. Over 70% are insured. In terms of our investment properties, retail allocations, less than 10%. Our leases are long term, right? Our wall weighted average lease term is 9.6 years. The biggest type of tenants we have are government. So those characteristics should help our portfolio navigate the uncertainty of the next few years. If you look at the evolution of our assets over the last 5 years, there are 3 main points. Number one, the credit quality of the portfolio has increased. As the chart shows, AA and AAAs are now 53% of the bond portfolio. I would also point out that our allocation to BB and lower is 1%. The allocation mix between government and corporate has remained fairly stable. But it's also worth noting that our allocation to corporate is lower than other life cos. And that provides some dry powder for the future. And as the chart shows here, we have decreased our public equity allocation, and we've replaced them with infrastructure and private equity and with also an option strategy. The option strategy decreases the risk of the equity exposure and as such, it also makes the portfolio more capital efficient. Let me say a few words on our risk management. We have 4 main risk management programs. They allow us to manage and decrease the risk that is coming from segment guarantees, our interest rate exposure, our current sale exposure and the public equity -- in public equity, the option strategy that I just talked about in the previous page. All of them have been effective at reducing bulk in general and in 2020. And as such, and because the capital formula recognizes good risk management, all of them have also been effective at reducing the regulatory capital. I want to bring your attention to our interest rate sensitivity because there was a big shift in our exposure in the last few years. Look at the chart on the left. The blue line shows a measure of interest rate sensitivity called IRR, or initial reinvestment risk. The orange line shows the 30-year Canadian rates. So the chart shows that we have executed our plan to eliminate our exposure that my predecessor had talked about at the last Investor Day. In fact, we actually accelerated its implementation a few weeks after I joined. It also shows that the timing was favorable. The exposure was eliminated a few months before the rate collapse. We've clearly enjoyed very quickly the benefit of that protection during 2020. The table to the right shows how we're using derivatives. It shows you the breakdown of how we're using them. The key takeaway is that 99.98% of the derivative on our balance sheet are used to implement the hedging programs of the previous page. Now let's shift to our future evolution and ways we think we can add more value to this organization. Now despite the strong base that I've mentioned at the beginning, I don't think we're capturing the full potential of our scale. Historically, our investment capabilities were somewhat fragmented. For example, think of iA Clarington. Had its own investment department, its own trading desk, its own investment oversight function. It's hard to make the economics work as a stand-alone 10 billion investment shop but the complete different story within the $100 billion ecosystem. To get the benefit of scale, we've consolidated all portfolio management capabilities in 1 investment department, and we've merged the trading desks and the oversight function. There's a second dimension to this. There are some areas that would benefit from more resources from augmented capabilities to realize the full value that can be derived from the asset that we manage. It's not clear that smaller pools of $10 billion or $20 billion could afford certain capabilities in isolation, but that's a very different story when you take the $100 billion here. An example of these capabilities is asset allocation and portfolio construction. And it's big enough that I have made it a separate point on the next slide. I'll finish this slide by saying that the investment team is relatively unknown in relation to its size and depth. So we have the opportunity to decrease the gap between the perception and the reality. And by doing so, supporting further the lines of business in their sales effort. And by adding talent, it would positively reinforce that brand effort as well. I've mentioned asset allocation and portfolio construction a minute ago. I believe that iA, as a whole, would benefit from having deep world-class capabilities in this area, something of the caliber of the large and sophisticated pension funds. I'm very happy to say that deepening these capabilities has good momentum. We've had some talent joining us recently with experience at leading global investment firms, and we'll have more to say in the next few months. We've also made some internal changes and are dedicating more talent and focus on this. Wider focus. If we can improve the total portfolio return with a similar risk profile, that could be meaningful. iA's investment portfolio is $45 billion. So the math is simple. Every basis point of extra return is worth $4.5 million a year. There's also the coming of IFRS 17, which could provide an opportunity to enhance our core for construction and our SAA strategic asset allocation. Research is underway. It's too early to share the conclusion of this stage, other than saying that the initial results are encouraging. The other reason for the focus is that for iA's clients, these augmented capabilities should improve the expected risk-adjusted return but also create a differentiated narrative for our multi-asset funds such as the managed solutions. And these funds represent a huge category. And so that should help move the dial with our mutual fund and our SEG funds. Optimizing capital. That will be a big area of focus for the next few years, including 2021. We're exploring strategies that aim at reducing further the left tail without sacrificing returns too much. And because the capital formula recognizes good risk management, these strategies reduce regulatory capital and ultimately increase the ROE. It's important to note that when and if my team is able to seize these opportunities, is able to realize that additional value, that value would end up flowing through the profitability of the various business lines. The main takeaway of my presentation are this. There is now a critical mass for investment management at iA. We have scale. Two, the portfolios are fairly conservative, complemented with solid risk management program; and three, there are several opportunities that have been identified for my department to generate more value, and my team is focused on realizing them. Thank you.

Thank you, Alain. To continue, I will invite Jacques Potvin, Executive Vice President, CFO and Chief Actuary, to comment on our financial strength and profitability. Jacques is an actuary with more than 30 years of experience with iA. Prior to his current position, Jacques occupy different senior roles within iA, including as Chief Risk Officer as well as with corporate actuarial services, individual insurance sales and marketing. Before Jacques' presentation, I just want to remind you that you can ask questions and forward them to us prior to the second Q&A period, which will follow Jacques' presentation. And now to Jacques.

Thank you, Marie-Annick. Good morning, everyone. It's a pleasure for me to be with you this morning even if it's through our screen. So let's dive in right away into my presentation. There are 4 key takeaway I would like you to remember from my presentation. The first one is our risk profile has significantly improved compared to a decade ago. Second is that IFRS 17 is coming, but we will be ready. Third one is the reserve are well positioned. We have a strong capital position. We generate organic capital so that today, we're committing to continue to grow the EPS at a 10%-plus on average per annum, and we're committing as well to improve the ROE on our businesses. The risk profile. I like to look at the risk profile from the balance sheet point of view, to look at the asset, liabilities and the interaction between both. If you look on the asset side, and you've heard Alain discussed about it earlier, we have improved our bond portfolio. We have a strong credit rating, but not only that, behind that there's a good diversification of [ ishwar ] in regard of industry, provinces and even more exposure in the United States. So quite different study from -- compared to 10 years ago. On the equity side, we used to -- for long-term liabilities, we used to be 100% invested into public equity. Now we have private equity. We have infrastructure. We have options, and we still have a part of public equity, much more better diversification. And we have other asset classes. So overall, the asset portfolio is very well diversified. On the liability side, you heard Mike this morning mention about the growth of our different business lines. So you know that our lines have different risk profile. So we've grown a lot the distribution as a business. We grow through acquisition, we bought also IAS and DAC into the dealer space in the U.S. So geographical diversification. And those 2 businesses are capital-light businesses. We've also grown organically our life insurance business in the U.S. at a faster pace. And even for our more traditional lines of business, we have improved the diversification of the product line. Another slide shown by Mike this morning shown actually for life individual insurance that we moved away from long-term guarantee. Same for SEG funds, actually, we move away from high-end guarantee to low-end guarantee. So a much better diversification of risk from the liability side. When you look at the interaction between both, and Alain touched base on that as well, we've improved the different ALM technique asset liability actual techniques during the years so that we have eliminate the exposure to IRR. We've also reduced our sensitivity to a market downturn. So good ALM technique there. At the same time, if you recall, we implemented a long time ago, a hedging program for the SEG fund, and we have kept improved that program year in, year out. So overall, when you look at the risk profile of the company, it's a different study, completely different story compared to 10 years ago. Any show of resiliency of our model show last year during the results, during the crisis. One good news is DBRS just published a press release, I don't know if you've seen it, that they are improving our credit rating by 1 notch. You will recall that Standard & Poor did the same 2 years ago. So this is not stranger to the great work that has been done at iA. Let's discuss now about IFRS 17. IFRS 17 is the new accounting standard that will apply to the insurance industry starting in 2023. This standard is principal-based greater than being prescribed methodology. So it means that insurance company will have to make choices for those different principles. And the choices will be directly related to the business model. And you know that the business model of the different company in the industry are somewhat different. So it means that choices may be different from 1 company to the other. Where we are on that file right now is we're still waiting for the regulator to finally finalize, I would say, the changes they would bring to the solvency ratio formula because the formula is using some accounting number as well as the Canadian Institute of Actuary to finalize the different guidelines -- to narrow the range of practice. So for us, when we will have those information, we will finalize our choice. But one thing that we know for sure thing right now is the fact that it will be a tremendous change for the industry and education will need to be provided. So we will do our fair share with the different industry setting, and we will help teaching session to educate you guys. And we will do that in 2022, and let's hope that we will be able to do it face-to-face. If we dig a little bit more deeply into IFRS 17, what the team is doing right now is making sure that operationally, we will be able to continue to produce our financial statement every quarter. So we're quite confident we'll be able to get there. But there's a lot of work though to get there. For the business model, like I said in the first slide with the risk profile, we are very pleased with where we are in regards of that and that standard, there will be a complete -- when we switch to the new regime, there will be a complete reset of the balance sheet. But we're ready for that because we are -- our reserve are well positioned, and we have a strong capital position. One thing though that I personally think is a flop from that standard is that it use short-term lenses to look at the performance of the insurance company whatever if the business is short term, midterm or long term. Take, for example, our life insurance business, which is a very long-term business. Actually the commitment to our policyholder will match you on average in more than 45 years. So IFRS 17 is looking at that through short-term lenses. It will bring volatility into the report earning. That's why core earning definition will be much more important than it is today. One thing that you will all be pleased with, there will be much more disclosure than under the current regime. So it's coming in 2023 for the standard NT chain in 2022. Let's concentrate now on 2021, 2022. Reserve, our reserve are very well positioned. And actually, it's because that during the last decade, all appointed actuaries that had been in function have been diligently recognizing every experience study that were coming our way. Whether they were the industries today or our own internal study, we've been disciplined to make the assumption change that were required. You will certainly recall that policy behavior, declining interest rate were headwinds, while on the other end, we have motive improvements, and we have management action that have been tailwind. So overall, during that decade, we've been able to provide good return despite those noises. But what is more important is really where our reserves are sitting today. I can guarantee you that our reserves are very well positioned. We are meeting all CIE standard. In addition to those standards, there's 3 specific items I would like to draw your attention to because we are different the other company. First one is that [ URL ]. I still expect the Canadian Institute of Actuary, the CIA, to change the promulgated rate in 2021. So we took a hit of 15 bps at the end of 2020. So it's already behind us. Second is the financial market protection. I will discuss it on the next slide. And the third item are the COVID protection we took -- we put at the end of 2020. It's important to remember that COVID impact on our earnings last year on the actuarial assumption have been positive overall. Okay, it wasn't negative. It's been positive. However, when we look at -- during the Q4, when we were looking at the future, we decided to be prudent, and we decided to recognize the fact that we think that mortality there will be more claims coming from that because of the situation. And both in the U.S., mainly in the U.S. actually, some in Canada as well. And we believe we had a product, high-end product that more subject to outflow. So we decided to put that issue behind us. So we took $130 million of reserve, took over those future loss we expect to get. Okay. We will provide a full visibility on that every quarter about the usage of those provisions. Let's look now at the financial market protection. From the graph that you see on the left side of the slide, you see the building block of the reserve and capital. The bottom, you start with the best estimate liabilities. And the best estimate liabilities already your best shot, you use your best assumption what you expect to pay overall. So you have present value of claims and expenses minus present value of premiums. That's simply that. After that, you have the Canadian Institute of Actuary standard ask you to put protection, which is called the PFAD, Provision for Adverse Deviation. So it provide a level of protection. After that, you have the regulators that ask you to help capital to support the business. So this is what you see at the top of the chart, which is the available capital and is calculated with the solvency ratio. What differentiate us is that in between the capital and the regular PFAD, we have what we call a stock market protection. We put that reserve in place in 2005 or around that date. We took a hit at the time to put that reserve there. And the reasoning behind that is the fact that we are owning equity exposure to support very long-term liabilities. So for us, it's a buy and hold strategy. It's not available for trade. So we wanted to eliminate the short-term volatility and concentrate our energy to manage that business with that long-term view. So that provision, which is not recognized in the capital, that's why we are showing, you see the first bullet that at the end of the year, it worked -- it was worth $700 million or net [ channel ] 10% on the capital ratio, if we were to release it, but that's not our goal. We want to keep it for one reason: it absorb all the short-term volatility of the market. And at the end of the year, you can see on the second bullet, we will have been able to sustain a drop of the public and private equity market of 27% before hitting the P&L. So quite a protection there. So the end result is that P&L is less volatile and the solvency ratio is less volatile. So overall, our reserves are very well positioned. Let's look now at the capital. The capital, you can see here our organic generation of capital. You can see there were 3 phases. First one, 2010 until 2013, we were not able to generate any organic capital. A couple of reasons for that. Actually, the formula -- the former formula was quite procyclical. We were not that much discipline in terms of pricing. And we haven't started yet to derisk, to put some risk mitigation technique. When you look at 2014 until 2017, we were still under the MCCSR formula ratio. So still that formula was not capturing all the benefit of risk mitigation technique. But anyhow, we have asked the industry allowed us to be more disciplined into pricing. You will certainly remember the improvement in our strain during those years. And profit is the best source of capital as well as we put in place the risk mitigation factor. But what's really interesting is now today. Since 2018, we've been under the LICAT ratio or CALI ratio in Québec. And those ratios really recognize the good risk mitigation techniques. And that's why we're able to generate organic capital now because we have such techniques in place. When you look at the future, we've raised the bar this year when we provided the guidance at the end of Q4 by $25 million. Two reasons, very simple. IAS capital-light business will provide profit and the second is the successful introduction of the power product in the insurance. There is one thing, though, that is not written on the slide but I want you to really understand, is that care presented that we will ramp up our investment into technology. So it means that part of that capital will be deployed to do such to deliver such a strategy. So you can expect that over the next 5 year, we will use $500 million of capital to support our strategy. So strong reserve, strong capital. This allow us the executive team to concentrate on growing EPS. And that's what I'm discussing here. You've heard this morning, my colleague discuss about some [ initiative ] in their lines of business. One thing that is important is after the investor event, I will encourage you to go into the appendix of my presentation because you will find there all the earning drivers for each business unit that you see on the slide. So you will have more precision about each of the NCSs. But for me, I summarize it in 3 main points. The first one is that maintain pricing discipline. It's not worth buying the market. We have to be -- to make sure that the business you're selling, you will get profit, profit is the best source of capital, best source of growing EPS. Second one, you want to grow the business, fine and really great. That's what we like to do, but make sure that you grow your expenses at a lower pace than the revenue. And the third one is efficiency. Denis spoke about continuous improvement that is part of mantra, it's been part of our mantra for years. And also, there are digital incentive that would help to even go further their synergies and efficiency. How does it translate into number? So I brought back the same bubble as we had in previous investor days. If you start on the left side, you have the 6%, which is organic growth. What is the definition of organic growth is that cruise control, keeps the lights on, is do business as usual without any certainty. That's really the definition we have with that. And we're able to generate a 6% only by doing that. Which is a very solid base. After that, if you look at the 2 other model, that's where all the management is concentrating their energy to be able to deliver growth. Could be through revenue to efficiency and all that. Here, we use to bubble because we wanted to isolate the fact and provide visibility on the distribution like we did in 2018. And you can see for those 2 model that the digital initiative with fewer into those incentive and will support the growth. The fourth model is the capital deployment. So after paying for the digital initiative, we still have capital to deploy, either through bolt-on acquisition or to NCIB. So we are very confident to be able to grow the EPS by that 1% plus with that. So if you add all those number, you get the 10% plus-plus, actually, if you do the right arithmetic equation. So we are very confident to be able to deliver that. That's why today, we are committing to continue to grow the EPS at a pace of 10% on average per annum. The right side of the slide is quite interesting. Alain mentioned and I spoke about the risk profile, and we'll continue to have initiative to improve the efficiency of our usage of capital and we're quite pleased to commit today to grow the ROE target. So that's why you see it growing from 2021 to 2023. So in summary, the main key takeaway. Our profile is a completely different story to what it was 10 years ago, very improved. Second, IFRS 17 is coming; we will be ready. Third one, reserve our well positioned, strong capital position, and we continue to generate organic capital. This allow us to concentrate and to commit today to deliver that 10% -- to continue to deliver that 10% plus of EPS growth as well as committing to improve the ROE. Thank you very much.

Thank you, Jacques, and thank you to all of our speakers. Before we start with the second Q&A session, our President and CEO, Denis Ricard, would like to say you a few words. Denis?

Thank you, Marie-Annick. What a week. Yesterday, we had the announcement about the rating agency having an improvement in our rating. Today, we have the investor event. And timing is everything. So in the middle of the presentation of Alain a few minutes ago, we received the decision from the court of appeal of Saskatchewan regarding the Ituna case. And you may remember that we had won in the first instance, and there was an appeal being done by the plaintiffs and the appeal has been dismissed by the court of appeal of Saskatchewan, which is a good news for iA. So I thought that it was worth saying that during this event because it's unbelievable it happened in the middle of the event. Thank you.

Okay. So thank you, Denis. So we will now take questions, and I will start with a question for our CFO, Jacques Potvin. So the question is from Meny Grauman. Meny, at the last Investor Day, there was a reluctance to provide guidance beyond the introduction of IFRS 17. With the ROE guidance for 2023, it sounds like you have clarity on that. What will then be -- what will the impact be on your EPS growth and ROE outlook?

That's a pretty good question, Meny. Thank you very much for that. Actually, we're 2 years later than 2 years ago; actually, we have a better understanding of the standard. But remember what I said in my presentation, there are still some unknown. And those unknown are in regards of the final capital formula we will add. However, the fact that we're very confident in our portioning of the reserve, our capital and the regulator mentioned that they are satisfied with the total capital of the industry, we're quite optimistic that we will be okay under IFRS 17 without any problem, but we will see, we will see. So that's why we're more confident today in regards of that. About the growth of EPS, I would think that when I look at the current accounting regime, the cost that we have, it's sustainable. And that's what we've demonstrated over the last decade. That's what we believe in for the future if we were to stay on that. So we think it's a really good metric in regard of what we can deliver year and year out. So that's why we're more confident today to say that with the caveat of we're still waiting for some of the answer from regulator.

Okay. Another question for you, Jacques, and this time, it is from Tom MacKinnon. Can you split your 10% core EPS target into expected profit growth by segment and the impact of strain by segment?

Thank you, Tom, for that question. It's a great question. There's a slide that Mike presented that show the growth of the 3 big buckets and from that is that the expansion, you can expect a higher growth from expansion than the support business and the foundation part. One other thing that we need to consider because of how the investment we're making, the digital transformation, so there will be -- it won't be a linear growth from -- for each of those sector. So that's one thing. So we look at the overall -- and the best thing is look at that slide that I spoke about, my slide. And you can look at the trajectory that should give you a good in about where we see it going. No way that it won't be a straight line.

Somehow still had a second question about the core EPS growth. Denis talked about at least 10% core EPS growth on average per year as a target. Can you please elaborate on how you see this by segment? Is there something you'd like to add, Jacques, on this?

Actually, that's a statement that I just provided to Tom's question.

Thanks, Jacques. So now a question from Meny Grauman. Is the back office modernization spend of $220 million included in the $500 investment target?

Yes, the answer is the main bulk of it, I would say, close to $200 million is to come. So we spent a little bit last year, like Denis mentioned in our presentation that we are already in motion, but there's $200 million that is included in the $500 million.

Okay. So Jacques, I would say, yes, people were waiting for you. I still have a few questions for you. This one from Meny Grauman. Is there still an opportunity to shift more exposure from government bonds to corporate -- sorry, that will be maybe more for Alain Bergeron, my apologies. You are still below peers in terms of that mix. How big is that opportunity? So Alain, to you.

I mean you're right. So there's -- in fact, we have a fair bit less of corporate bonds than our peers. And I agree with you that that's an opportunity for future increase in allocation. At the last Investor Day, my predecessor had talked about the $3 billion opportunity. Things have grown. It's probably slightly bigger than that today. Now the current intent, we don't have current intention at this stage to make important changes in the short-term with that allocation. We are comfortable being conservative right now. We don't see screening opportunities at the current level to max out our exposure. That say, that's our intent to selectively accumulate attractive assets in the corporate debt. We're doing that, and we will do so in the disciplined manner that you'd expect us to do so, taking into account the capital. Now there is also this element of strategic asset allocation research that I talked about earlier. So the conclusion of that research that we're doing could influence our long-term appetite for the increase potentially. But for now, it's a bit early to tell. Now it's not a bad idea to do what you suggested, to look at peers, to try to get an estimate of how much we could potentially buy. But at the same time, it's fairly gross estimate, and it is fairly rough in the sense that our -- the way we think about it is really the allocation is governed by, yes, the opportunity we see, but also the overall risk tolerance of iA, which includes investment risk, but also includes other non-investment risk. So Marie-Annick?

Yes. Thanks, Alain. So now a question from Gabriel Dechaine. You hinted that IFRS 17 theme could provide some strategic asset allocation opportunities. You can't give details at this point, but could you provide some general thoughts?

That's for Alain to answer.

The question? I smile a bit because the way Gabriel asked the question was a fairly accurate understanding of the nuances that I was trying to communicate in the words that I chose. Look, there's still some uncertainty. There's still lots of decisions to be finalized when it comes to IFRS 17. But you asked for general thoughts. So IFRS 17 at a high level, it aligns better the accounting with the economics. So for example, currently, there are gaps. There are cases where the accounting and the economic risks measurement would diverge. And so when it comes to building a portfolio, that leads to complex trade-off. The closer these measures are, then the easier it becomes to manage and optimize the portfolio for these 2 dimensions. And in the process, reduce regulatory capital. So from an interest investment portfolio, what we have essentially is a multidimensional, efficient frontier. And so what we optimize for economic risk, economic return accounting, risk, accounting return, regulatory capital, liquidity. But the closer the economic and the accountings are, the higher we can move the actual frontier. And I said, it's still a lot not to be finalized. We're preparing for this. We're building capabilities to take full advantage of the opportunity that could be provided. But a lot of it will be revealed in the next several quarters.

Okay. Thank you, Alain, for these comments. Another question from Gabriel, this time for Jacques. Will IFRS 17 eliminate the present value effect of large reserve releases charges? Will new business train expense be eliminated?

Thank you, Gabriel. That's a really good question. However, I feel it's very dangerous to answer those kind of questions at such an event. Like I said in my presentation, there will be teaching because the new standard is very different from the current accounting regime. What I can say though is that strain is not there to disappear because you can not under that new standard, the principal, you cannot front end any profit. So for a company like us that doesn't have -- that doesn't have a positive strain or front-ending profit within business in regard of managing that. For the other question about -- and I don't recall what's the first part of the question, Marie-Annick? Okay, the big result, the big result. Actually, the CSM is a present value of future profit, and it will absorb a portion of the business change. So that will be it. But just wait for the teaching. I'll continue to read. You can reach out. But we need to have a complete understanding of the standout to understand the meaning of what I just said.

Now moving to a question from Doug Young. Doug would like to confirm regarding the $325 million organic capital generation, if this is before after funding organic growth and the $500 million IT investment.

Thank you very much, Doug. Again, I understand you're very optimistic. You use the high end of the range so that -- thank you very much. You believe in us. I appreciate that. The reality of it actually is that organic growth is included in it. But like I said, the $500 million of investment in technological investment we'll do over the next 5 years will be taken out from that. So let's say that it's $100 million in 2021. So it means that net-net, as for organic growth, as for investment, it will be $225 million if we use the high end of the range.

Okay. Now a question from Mario. How much of the $500 million will be capitalized versus expense?

That's a pretty good question. Even if Denis mentioned that we know exactly where we're going, there's still some, I would say, string to attach. And actually, when you use cloud computing, okay, you cannot capitalize as much. 10 years ago, you were doing investment in IT and all investment were capitalized. But today, in the area we're in, we can use some cloud technology. We can develop some software. So overall, my guesstimate would be probably 70%, 75%, but we have not finalized every decision about that $500 million, so it can vary a little bit.

Okay. Thanks, Jacques. We now have a question from Tom MacKinnon about group insurance retirements. I will read the question. You mentioned group insurance retirement are only support businesses. How do you balance the increasing needs for technology investments in these businesses in order to compete if bounding these businesses core. Is this money well spent?

Yes. I'll start, and we'll ask Eric to complete. Well, I just want to make sure that I don't get a misunderstand here in the sense that -- I'm not saying it's a second class division. The group insurance is not a second class dividend. In fact, all the ecosystem of businesses that I explained in my presentation, they are all very important division in our businesses. I just wanted to provide some kind of categories or reference for you to understand our point of view and the fact that we have synergies in between our businesses. Now with that said, I will leave Eric to answer more precisely your question.

Thank you, Denis, and thank you, Tom, for your question. I would say that group business profitability is very well positioned right now. And when I look at our mandate within the iA family, it's clearly a mandate of ROE support for the organization. Group businesses is capital-light kind of business that is helping, iA as leverage for the ROE globally. And as Denis and Jacques mentioned, we want to extend the ROE. So it's one of those tools to help there. I would say second, we are a smaller player in the Canadian industry, no doubt about that. But we hear more and more that we are an alternative to the big players in the market. So by making smart choices in investment, in technology, we can develop this as an alternative and turn this expense into an efficiency tool to help maintain our ROE mission within iA financial group. And I would say finally, on this, group businesses is there to help plan members when they are at work. And when the -- when plan members leave their employment or go to retirement, if they know the iA site, they would want to go elsewhere in the family in individual channels and elsewhere. And this is where the cross line of business strategy becomes important.

Thank you, Eric. We have another question for Alain. So Alain, how do you intend to reduce the brand gap you mentioned in your presentation?

Right. Yes, I mentioned in my session that I do see a gap there between that external perception of the investment capabilities and the actual breadth and depth of the investment team. Now of course, right, we have some investors that have a big profile, but I'm talking on aggregate. From a brand standpoint, it's my sense that the investment team is punching below its weight. So I think there's some low-hanging fruits that are contributing to this gap. So we have some teams that have never been really marketed. They are 100% focused on managing money, which is great from an investment performance standpoint, and we don't want to lose that. But they don't have enough bandwidth for telling their stories, supporting the sales force, meet the clients. And I also have mentioned, our efforts have been historically, in general, too fragmented. So really, my plan is not to do some expensive marketing campaign but to start by tackling these issues that I've mentioned, to make fairly small, low-risk investments to better commercialize what we have. So for example, we'll hire some resources such as client portfolio managers to tell the portfolio manager story to represent them to support the sales effort, to create compelling decks, and we'll focus on the ability to reuse across the various lines of business. So that doesn't cost much, but that could have a very meaningful impact versus what we have today. And another element of the plan is to add exceptional investment talent. So that will help dovetail, that will help reinforce the momentum, essentially creating a perception that there is something very interesting that's happening at iA on the investment side.

Thank you, Alain. The next question will be for Renée. Renée, in the EVO video, you mentioned -- well, actually it was not you, but it is mentioned that 1/3 of business is straight through processing. What does that mean?

Well, I thank you for the question. What it means is that 1/3 of our business is done without any human intervention. So the policy is issued without anybody touching it. So it goes in electronically with the electronic app, it's approved at point of sales because it's under 2 million, and it answers the criteria, and there's an electronic signature by the client and the adviser. So nobody is touching the policy and its issue. So that's really what it means.

Thank you, Renée. Back to you, Alain. About real estate in your investment portfolio, what are your intentions considering the changing environment accelerated by the pandemic?

Well, at this point, we're not planning for major changes in our overall real estate positioning. This is driven by 3 factors: one is that our current portfolio, real estate portfolio investment properties, that portfolio is fairly defensive. And it was defensive coming in the pandemic. So we're quite fortunate to have the real estate portfolio that we have. I say this because I have mentioned -- I'm going to repeat a bit things I said in the presentation, but we only have 10% of it in retail. Our main tenants are governments. We have long-term leases. The WALT is 9.6 years. Occupancy is 95%. So even if there's a lot of uncertainty in the -- in that asset class in the short term, we have these mitigants that should help navigate that period. Two, it is very hard to tell the impact of that COVID, the working from anywhere or working from home trends that we'll have in the long term, and I'm talking about office here. For sure, I expect the demand in the office space to decrease in the short-term in the market. There's no information edge here. Most investors expect that. But what's not clear to me is how this will stack up against the growth of the economy in the long term, right. If the economy grows at 2% a year, it's 13 years, 20% growth. And the decrease of set on projects and its impact on supply. So how these demands and supply factors will end up balancing in the long term, that's hard to tell. And three, I've mentioned that we're doing research to enhance our strategic asset allocation. Too early to tell, but this conclusion could end up increasing or decreasing our appetite for that asset class. Look, we're always looking at ways to -- we're looking at opportunities to diversify, optimize further. There are -- for example, we have a few buildings we're in the process of selling. But overall, it's not a great environment for the asset class in the short term, but we're happy with the quality of our portfolio, and I would not expect big changes from us in the short term.

Thanks, Alain, for that answer. We now have a question from Ivan Sevago. Mr. Sevago wrote, your focus is on distributor. What are your plans for the direct client access? Denis? Yes.

I'm going to take that one. But this is a question, a very great question. Thank you, Ivan. Has been debated internally for some time, and we had a lot of discussion with our Board of Directors. And it's pretty clear that we have to adapt our business model over the years to the fact that more and more the customers want to do directly what they do. However, I mean in Canada, I mean sales are still going through the distributors. So for us, yes, the focus right now is on distribution. But we are preparing for the days where the -- most of the sales could come. We don't know. The jury is still out, as far as I'm concerned. But we are preparing by building tools that could -- it's like turning the switch on and off. The distributors, direct or a hybrid model as well. So we are preparing for that because it may come 1 day. Now with that said, probably in the P&C business, there is more, I would say, opportunity in the short-term because it's a product that people need to buy as opposed to the other products where it's still -- people are saying that it's still something that is being sold as opposed to something that's being bought. So there are some inroads that we're doing on the P&C side to improve our tools to be able to do everything direct. And it would be consistent with the business model we have in that line of business. But if any of my colleagues want to add on that because they would all be available to answer that question for their own sector, we are -- we'll discuss that in great length.

Maybe I will add. Yes. Maybe I may add just 1 thing. I think that what is critical, as Denis mentioned, is to be omnichannel. So as we move along and care has shown it as well and in the triangle between iA and the client and the adviser is important. So the multichannel is preparing us for whichever way the market is going to go.

Now a question from Tom MacKinnon that will be for Jacques. The $500 million investment spend, both the capitalized fees and the noncapital fees, will this be included in core EPS? And does the core EPS growth rate objective include this additional cost?

The answer is yes, it is included. If you remember, the 1% plus growth that Pierre spoke about, it would come from efficiency, will come from growth. And if you look at the slide with the bubble, that 1% loss is fueling the growth on the EPS, and it's including all the investment we're making.

One last question from Ivan Sevago. That will be for you, Alain. Can you expand on why IFRS 17 is an opportunity for an investment point of view? So Alain, it's up to you.

Yes. I've given all that I could give on the previous answer. I think it's a similar version of the question asked earlier, and I don't think I could add further.

Thanks, Alain. That will be all for our second Q&A session. I want to thank all of our speakers again. Also want to thank you for attending this event. Please note that a replay of this conference will be available on our website for 90 days. The webcast will be available on our website for 6 months starting this afternoon. As transcript will also be available on our website next week. Should you have any other questions on any of the topics discussed here today, you can contact me by phone or by e-mail. All of my contact information is on our website at www.iA.ca, in the Investor Relations section. And now to conclude our investor event, I will turn to our President and CEO, Denis Ricard.

Thank you, Marie-Annick. Hi, everyone. So I will recap right now, and let's assume that we are climbing the CN tower, and I'll do my -- what I call the elevator pitch. So let me see that we've discussed today, iA being the fourth largest life co in Canada. But as we mentioned, the best-performing over the last 20 years in a lot of metrics. We are performing in a diversified type of businesses. We've described different categories of businesses. We're very strong in businesses that are foundation for our companies. But we've got other businesses that altogether are adding a lot of cross line synergies opportunities. We could not today have gone through all the details, but let me assure you that if the business are there, it's because they have -- strategically, they have a reason to be there. We are present now more in the U.S. than ever. And there is an area of growth for our organization. And one thing that was also very important is the fact that we are much more in business that are capital light. We are generating excess capital. And we believe that we can grow EPS by over the 10% a year and also increase the ROE. The 2023 plan is underway. There is 4 axes, and I described all of them in my presentation, growth, mainly on the organic side as opposed to acquisition for the time being. And the great success we had on the distribution side. The second being the customer experience and the fact that it's -- we're very much connected to distribution to better understand the client. The employee experience, we do care about our employees, the efficiency and our lean philosophy. And at the end of the day, there is a fifth one, which is adding, which is ESG and I mentioned to you the reasons why it is so important for us to incorporate that into our strategy. So all in all, this is about the message. Now we are at the top of the CN tower. So I will leave you for the day. And I would like to thank you a lot for having attending this meeting. Thank you.