iA Financial Corporation Inc. (IAG) Q2 2026 Earnings Call Transcript

Thank you for standing by. This is the conference operator. Welcome to the IA Financial Group Second Quarter 2026 Earnings Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then I would now like to turn the conference over to Caroline Drouin, Head of Investor Relations with IA Financial Group. Please go ahead.

Caroline Drouin Thank you and good morning, everyone. Bonjour à tous. Welcome to IA's second quarter 2026 conference call. This conference call is open to the financial community, the media, and the public. I remind you that the question period is reserved for financial analysts. And before we start, I draw your attention to the forward-looking statements information information on Slide 2. Forward-looking statements made today are subject to risks and uncertainties that could cause actual results to differ materially. These statements are based on certain material factors and assumptions. I also draw your attention to the non-IFRS and additional financial measures on Slide 3. Today's commentary will also include adjusted financial measures, which should be considered as a supplement to IFRS measures. For further details, including those factors and assumptions, please refer to our press release and MD&A. I will start by introducing everyone attending on behalf of IA. Denis Ricard, President and CEO. Eric Jobin, Chief Financial Officer and Chief Actuary. Alain Bergeron, Chief Investment Officer. Denis Bertiome, Chief Growth Officer for our Canadian operations and responsible for IA Auto and Home. Stéphane Bourbonnet, responsible for her wealth management operations. Renée Laflamme, responsible for individual insurance, savings, and retirement. Sean O'Brien, chief growth officer for our U.S. operations and responsible for dealer services. Louis-Philippe Pouliot, in charge of group benefits and retirement solutions. And with that, I will now turn the call over to Denis Ricard.

Good morning and thank you for joining us today. We delivered another strong quarter, demonstrating once again the value of our diversified business Our ability to generate consistent profitability is supported by multiple source of earnings and solid growth for the whole organization. At the same time, wealth management continues to strengthen its contribution to our results and is becoming an increasingly important driver of growth. Across the organization, our focus remains on discipline, execution, and profitable growth. We continue to make deliberate decisions that prioritize long-term value creation, business quality, and sustainable returns. These priorities are clearly reflected in our second quarter results. Turning to slide eight, the quarter was strong across several dimensions, earnings, ROE, business growth, capital, and shareholder value. Importantly, the growth was not concentrated in one area. It reflected the strong activity in our distribution platforms, continued wealth management momentum, and discipline execution across the organization. Let me highlight a few key metrics. Core EPS was $3.68, up 5% year-over-year, and EPS was $4.28, up 25% year-over-year. Our trailing 12-month score over we reached 17.5% in line with our 2026 target of 17% or more. Business growth was also strong. Net premiums, premium equivalents and deposits were $6.3 billion, up 25% year-over-year. Assets under management and administration grew 37% over the last 12 months. This growth reflects solid organic growth from funding flows, favorable markets, and the addition of RF capital. Our financial position remained a clear strength. The solvency ratio stood at 137% at quarter end, and we had $1.1 billion of capital available for deployment. We also generated $188 million of organic capital during the quarter. At the same time, we continued to return capital to shareholders during the quarter. In addition to our regular dividend, we deployed $347 million to our share buyback program. Finally, book value per common share reached $80.55, up 6% over the last 12 months. Overall, these results reinforce our confidence in the trajectory of our business. We are growing, delivering strong profitability, and maintaining the balance sheet strength needed to create long-term value. Turning now to slide 9. Our Insurance Canada segment delivered a good quarter, supported by the strength of our distribution platforms, the diversity of our businesses, and our continued focus on profitable In individual insurance, sales totaled $102 million, a result comparable to last year's strong performance. We remain very pleased with the momentum across the business and the strength of our market position. We continue to benefit from our growing distribution network, the effectiveness of our digital tools, and our comprehensive product offering. We also maintain our leading position in Canada for the number of policies issued. The stability of our results reflects our disciplined approach to underwriting and business selection, which supports sustainable, profitable growth over time. In group insurance, premium and deposits remained close to the strong level recorded a year ago. Employee plans implemented sales reached $30 million, significantly above the $8 million recorded in the second quarter of 2025. In special markets, sales were affected by lower volumes of international student medical insurance following federal government measures limiting the number of international students entering Canada. We have also taken deliberate actions to optimize the business mix and focus on opportunities that meet our return objectives. This disciplined approach strengthens the quality of future earnings, and we expect the impact of lower international student volumes on sales to remain visible in the second half of the year. Dealer services sales remain good at $218 million, close to the results for the same period last year, benefiting from our extensive distribution network and comprehensive suite of dealer services products. Finally, at IOTO and Home, direct written premium increased 5% over a year to $216 million. This growth was driven by higher policy volumes and the favorable impact of price adjustments implemented over the last 12 months. Overall, our Insurance Canada businesses continue to demonstrate the benefits of scale, the distribution strength, and discipline execution, while maintaining a strong focus on profitable growth. Turning to slide 10, wealth management delivered another solid quarter and continues to be an increasingly important contributor to our growth and earnings profile. Momentum remains strong across the platform, with growth sales reaching $4.3 billion in combined net inflows of SEC funds and mutual funds of $934 million. We further strengthened our leadership position in the Canadian SEC fund market, maintaining the number one position for both growth and net sales. Individual SEC funds growth sales increased 52 percent year-over-year to more than $2 billion, while net sales exceeded $1 billion. This performance reflects the strength of our growing distribution networks, strong advisor engagement and the attractiveness of our product offering. In mutual funds, growth sales increased 46% year-over-year to $644 million, while net outflows of $73 million were recorded. Sales of other individual savings products reached $449 million, up 5% from last year. And finally, in group savings and retirement, total sales exceeded $1.1 billion, up 35% year-over-year, supported by strong momentum in accumulation products. Total assets under management increased 15% year-over-year. As we continue to build one of Canada's leading independent wealth franchise, we remain well-positioned to benefit from long-term wealth accumulation trends and generate sustainable growth in assets, earnings, and shareholder value. Turning now to slide 11, our U.S. operations remain an important growth platform and a valuable contributor to the diversification of our business and earnings profile. The quarter once again demonstrated the benefits of our diversified U.S. presence across both individual insurance and dealer services. In individual insurance, sales reached a quarterly record of $86 million, up 10% from a year ago. This strong performance was driven by continued growth in the final expense and middle market segments, supported by disciplined sales practices, key digital capabilities, and strong engagement across our distribution network. In dealer services, sales totaled $292 million, broadly in line with the same quarter last year, despite less favorable U.S. auto market conditions. The business continues to benefit from the effectiveness and diversity of its distribution channels, as well as the quality of our products and services. Our focus remains on strengthening distribution relationships and continuing to enhance business quality and long-term profitability. Turning to slide 12, our results continue to demonstrate solid progress toward our financial targets and reinforce our confidence in the outlook for the remainder of the year. Core EPS increased 8% year-over-year in the first six months of 2026, reflecting continued profitable growth across the organization. Our trailing 12-month core ROE stood at 17.5% on June 30, already meeting our 2026 target. This performance reflects disciplined execution, strong fundamentals, and our continued focus on sustainable growth and capital efficiency. Organic capital generation remains a key strength of the organization. Year-to-date, we have generated $335 million of organic capital, keeping us well on track toward our objective of generating more than $700 million in 2026. Consistent with historical trends, capital generation is typically stronger in the second half of the year, reinforcing our confidence in achieving this objective. Finally, our core dividend payout ratio remained within our target range at approximately 30%. With that, I will now hand it over to Eric, who will review our second quarter profitability and capital position in more detail.

Thank you, Denis, and good morning, everyone. I'm pleased to walk you through our second quarter results, which, once again, demonstrate the strength of our diversified business model, sustainable, sustained business momentum, and robust capital position. Let me begin with slide 14, where I'd like to highlight three key takeaways before reviewing the segment's results. First, we delivered strong profitability. Core earnings reached $330 million, and Core ROE was 18.5% on a quarterly annualized basis and 17.5% last 12 months. Net income was $384 million, which is higher than core earnings, supported by favorable market-related impacts during the quarter. Second, our earnings mix continues to evolve positively. Wealth management delivered another strong quarter driven by strong organic momentum. the increasing scale of our wealth platform, favorable markets, and the contribution of RF capital. Third, with a solvency ratio of 137% and $1.1 billion of capital available for deployment, our capital position is robust and we have substantial capacity to invest for growth. Let's now take a look at the second quarter core earnings results by segments. by turning to slide 15 with Insurance Canada. This sector delivered another strong quarter with core earnings of $128 million, demonstrating the stability and profitability of the business. Experience remained favorable, contributing $19 million pre-taxed earnings to favorable mortality and morbidity experience. While this was below the exceptionally strong experience gain of $31 million recorded a year ago, it reflects continued solid risk management across the portfolio. Core earnings also benefited from higher combined risk adjustment reliefs and CSM recognized for service provided, particularly in individual insurance and employee plans, as well as lower core income taxes during the quarter. These positive factors were partially offset by lower earnings from core non-insurance activities, primarily year-over-year and dealer services. Let's now turn to wealth management on slide 16. Wealth management delivered another strong quarter with core earnings increasing 37% year-over-year to $155 million. This performance was driven by higher combined risk adjustment release and CSM-recognized for services provided, benefiting from strong segregated fund inflows and favorable financial markets. In addition, insurance experience gains of $2 million were recorded during the quarter. Core non-insurance activities also contributed meaningfully to earnings growth supported by higher net revenue on assets, advisor recruitment, and the strong contribution from RF Capital Group of $13 million, which continues to perform well and better than expected at time of acquisition. These positive drivers were partially offset by higher expenses incurred to support business growth and expansion. Overall, wealth management continues to enhance the quality and diversity of our earnings base while delivering attractive profitability and strong earnings growth. Turning to slide 17 for U.S. operations, second quarter core earnings in our U.S. operations were $24 million compared to $36 million a year ago. In individual insurance, the strong earnings growth achieved over recent years continues to be reflected by high levels of risk adjustment release and CSM recognized for services provided. This quarter, however, growth was moderated by experience loss of $8 million, mainly due to unfavorable mortality at Fidelity Life, arising from a small number of large claims, which we view as statistical fluctuations. Before these experience losses, which are expected to be non-recurring, the combined contribution from Fidelity Life and E-Financial was neutral to core earnings. As a result, we continue to expect the acquisition to be accretive to core earnings in the second half of 2026. In dealer services, core earnings continued to reflect a sales mix weighted toward insurance products. While the pace of earnings improvement has been slower than originally anticipated, we continue to implement a series of management actions designed to improve long-term profitability and overall business quality. As these initiatives are implemented, some earnings variability may occur. We remain confident that the actions we are taking position the business to deliver stronger, more profitable, and sustainable growth over time. Now turning to slide 18 for the result of the investment segment, core earnings for the quarter were $79 million compared to $102 million a year ago and to $93 million in the first quarter. The year-over-year decrease was mainly driven by higher financing charges on debentures, semiannual dividends on PREV shares, and higher core income taxes. Core earnings were driven by a core net investment result of $129 million, which is $2 million higher than for the same period last year. This result consists of expected investment earnings of $119 million and favorable credit experience of $10 million, which is attributable to both the fixed income and car loan portfolios. Quarter-over-quarter expected investment earnings benefited from the positive contributions of IA Auto Finance and the capital issued in May. These benefits were offset by a reduction in invested assets, mainly due to the share-by-back program. Core earnings adjustment generated a positive impact of $104 million during the quarter, driven by favorable macroeconomic variation in the non-fixed income asset, particularly the strong performance of public equities. Moving to slide 19 for the results of the corporate segment, We continue to demonstrate disciplined expense management during the quarter with core corporate expenses totaling $74 million before taxes compared to $75 million a year ago. This result included core other expenses of $65 million before taxes, which is at the low end of the quarterly target range of $70 million, plus or minus $5 million, as well as $9 million of higher-than-expected provision for variable compensation, reflecting both the company's strong operating performance and share price appreciation during the quarter. While maintaining a strong focus on expense management and operational efficiency, we continue to invest in strategic priorities, including AI, capabilities, and future growth initiatives. As a result, we expect core other expenses in the third and fourth quarter to trend toward the midpoint of our target range. Lastly, the consolidated core effective tax rate was 21.2% in the second quarter, benefitting from favorable non-recurring items. We continue to expect the core effective tax rate for the third quarter and fourth quarter to be positioned toward the upper end of our target range of 21 to 23%. Please turn to slide 20 to review our robust capital position and financial strength. As of June 30, 2026, our solvency ratio stood at 137%, and our capital available for deployment was $1.1 billion. The solvency ratio increased by three percentage points during the quarter, driven by the favorable impact of the capital issuance completed in May, solid organic capital generation, and positive macroeconomic impacts. These favorable items were partly offset by the $347 million deployed through the share buyback program, investment in organic growth initiatives, and dividend payments to common shareholders. Overall, our capital position is robust, and our deployment capacity provides flexibility to invest in growth opportunities, pursue capital allocation priorities, and continue creating value for shareholders. To conclude, in Insurance Canada, favorable insurance experience once again demonstrates the strength of our risk management culture and underwriting discipline. In wealth management, we are proud of the success we have achieved and of the sustainable strength of our segregated fund products. In the U.S., we continue to take deliberate management actions to enhance the profitability of dealer services. While these actions may affect short-term results, they support long-term profitable growth. Our Q2 results highlight the strength of our diversified business model, and we are entering the second half of 2026 from a position of strength. Finally, core ROE is well-anchored over 17%. With that, I will turn the call back to Denis.

Please turn to slide 22. As we look back on the second quarter, we are pleased with the strong execution across the organization. While wealth management continues to increase its contribution to earnings and growth, the strength of our company remains rooted in our unique, diversified business model and the multiple drivers of growth across the organization. The breadth of our platform enables us to generate consistent profitability and create value through a variety of business and market environments. The 25% increase in premiums and deposits, together with the 37% growth in assets over the past year, reflects the strength of our distribution capabilities, our ability to attract and support high-quality advisors, and the disciplined execution of our growth strategy. We continue to see strong momentum in wealth management, supported by elevated activity across our distribution platforms, strong net inflows, and growing assets. At the same time, we remain focused across all of our businesses on generating profitable growth and making deliberate decisions that strengthen the quality and sustainability of future earnings. Returning value to shareholders remains a key priority. During the quarter, we continue to do so through both dividends and share repurchases under our NCIB programs. And with a solvency ratio of 137% and $1.1 billion of capital available for deployment, we remain well positioned to support future growth opportunities while maintaining our disciplined approach to capital allocation. As we move into the second half of the year, we remain focused on executing our strategy, supporting our distribution networks, delivering profitable growth, and creating long-term value for shareholders.

Thank you, Operator. we're now ready to take questions thank you we will now begin the question and answer session to join the question queue you may press star then one on your telephone keypad you will hear a tone acknowledging your request if you're using a speakerphone please pick up your handset before pressing any keys to withdraw your question please press star then two we will pause for a moment as callers join the queue the first question is from doug young from desjardins capital markets. Please go ahead.

Good morning. Just wanted to maybe dig a little bit deeper onto the U.S. extended vehicle warranty business. It looks like the U.S. and the U.S. to P.A. line was down. The non-insurance quarter news was down quarter for quarter. And I think, correct me if I'm wrong, there was reference to the loss of dealers on the admin side. I don't know if that was dealers moving to the insurance side, but just trying to get a little bit more into the depth of what you're seeing there and what your expectations are from that business over the coming year.

Yeah, it's Denny here. I'll start and then Eric will follow up on this. Maybe a high-level comment on that business and as you've seen in terms of the sales, sales are soft in the quarter. There are things that we do control and things that we do not. And there's been some headwind on the car sales. You'll hear from us for sure. But to me as a CEO, What is important is that from what we control, and there are initiatives that we have been doing for some time already that are obviously taking a bit of time to have some impact, but we are doing the right thing. That is, I think, what is the important message that you have to keep in mind so that we believe that we're going to get the improvement in our profitability over time and the sales growth as well, but it's not linear. I mean, it's not something that is linear and it's just going one way. So, sometimes you've got some pause. But, Eric, you want to comment more on this?

Yeah, I just want to add, Doug, to your question with respect to the PEA earnings being slightly down quarter over quarter. Keep in mind that this is a business on the insurance side that has a bit of seasonality. Remember that I talk about this very often, that some of our businesses have seasonality patterns. And for dealer services in the U.S., the insurance business has a higher frequency of claims in the second and third quarter. So it's a little bit like IE or Minoto in Insurance Canada that tend to have lower expected earnings in the first quarter. For dealer services, in the U.S., it's second and third quarter.

Yeah, okay. And then can you maybe just flesh out why are the dealers choosing to go with the insurance versus the admin side? Like, is there a structural reason that that's, like, when you look into it, like, what do you get back from the dealers while they're choosing to go in that direction?

So I will ask, sorry, I will ask Sean just to talk a bit more about our strategy there and the push that we made on the DAX side, you know, last year and the success we've got so far and then the initiatives that we're doing on the other side.

Yeah, thanks, Denis. Yeah, just to jump back, our three main actions we've taken with that business, we started focusing on profitable growth is we've actively repriced all of our products. Good news is now all the sales have an ROE above our expectation. The industry's been fairly price disciplined in the U.S., which is helpful, and in Canada. Then we focused on operations. The last part has been the sales structure. And last year, we started with DAC. We saw it as a quick opportunity, and DAC is really where we're driving these insurance sales. and you can see those numbers coming forward. So really, it's a separate channel where we're selling that business. And then on the first half of this year, we've restructured the sales team and now we have the sales leaders in place focused on the agent and dealer channel and there's a nice pipeline building. And I'm confident we'll definitely see some nice growth ahead later this year and into next. But as we said, the business is not perfectly linear. The gradual recovery is underway. There is some natural attrition as dealers come and go Well, and usually it's related to acquisitions. The dealer gets bought by another group, and they have another provider, and sometimes you lose stores, and that's the most common reason you see it, but that's not the primary driver. Really, it's just what you're seeing is the focus on DAC that started last year, and you'll start to see the dealer and agent channel building in the quarters ahead.

Okay, and then – so I appreciate that. And then just, Eric, maybe we'll go to slide 20, and just – maybe I'm just slow this morning, But can you help me think through your solvency ratio is up sequentially, but the capital available for deployment is down? And I can see the different kind of points in there. And it looks like financing activities is included. Can you just help me think through why that would be? And then, you know, what is the binding constraint that helps you define what is available for deployment?

That's a very good question, Doug, because you know that the regulatory regime has many, many constraints in it. One is the solvency ratio, and there are other ones, and one has to do with the core ratio as well. And this is where, right now, that IEA is constrained. When we calculate the amount of capital available for deployment, we're constrained by the core ratio. And the biggest driver of the core ratio constraint is negative reserves. So right now, with the growth that we're experiencing in Insurance Canada and the segregated funds, this is what is creating a bit of a challenge in the short term because the gains coming from those sales cannot be fully reflected in capital available for deployment. But, you know, it will flow out in the future, but in the short term, this is the constraint that we're binded by.

And for the first part of the question, the capital for deployment already incorporates the potential financing. So when we do go out in the market and we raise capital, it does not change the capital for deployment.

Yeah, absolutely. The way to look at capital available for deployment, the way we talk about it, is to talk about the current excess capital that we have in the books and potential remaining financial flexibility. So what Denis is mentioning, for example, in the first quarter, We said that capital available for deployment was $1.2 billion, so it was a combination of both elements. As you know, we issued a sub-debt in the second quarter, and it did not change the number. So really, you know, what drove the decrease of about $100 million quarter over quarter is the share-buy-back program. So the financial flexibility was already in there. This is perfect. I appreciate the call. Thank you.

The next question is from Tom McKinnon from BMO. Please go ahead.

Yeah, thanks very much. Question just with respect to Canadian individual insurance sales. 2025 was up nicely 6% over 2024, but you're starting off 2026 here down in the first quarter year-over-year, down in the second quarter year-over-year in terms of new sales. And I think in the first quarter, you might have been up a bit in policies, number of policies issued. But it looks like now you're down year over year in terms of number of policies issued. So what's happening here? What can you do to improve this trend going forward?

Thank you, Tom. It's Tony here. Thank you for the question. René will answer that question. But first, I just want to make a high-level comment. When you look at the overall growth in the organization for the quarter, we're very pleased. Like I said before, 25% grew in terms of net premiums, and the AUA-UM grew by 37%. So we're very, very pleased. Obviously, the wealth management business has done a fantastic growth trajectory. But then when you look at some other sectors like individual insurance and special markets, you see some kind of pause in terms of growth. but it's really a reflection of some of the initiative that we made because we want to stay disciplined in underwriting pricing, risk management, and everything. So René will go into more details, but you have to keep in mind that sometimes there are pockets of industries that we don't want to play in, and it may have some impact.

Thank you, Denis. Thank you, Tom, for your question. First of all, when you look at the number of policies sold, keep in mind that we're the leader in number of policies sold. Canada with 25 percent of the market share. Thus, it may happen that we have a softer quarter, but again, we see the activity and we're confident in our ability to continue to grow the number of policies sold. Looking at it from a dollar perspective sales, We did this quarter $102 million, similar or very slightly lower than the same quarter last year. We're looking at the market with increased vigilance, especially relative to certain sales concepts in the high, mid, large case range. And we're staying disciplined and making sure that we are not taking on due risk. So that would cover, and I think, Éric, if you want to reinforce on some of our risk management.

Yeah, I just want to take this opportunity to reinforce René's message and make a connection with what we mentioned at the investor event to our, you know, risk management practices and control. You know, what René is mentioning is that we don't want to take undue risk in the books and face lapse issues with aggressive sales concept from 8 to 10 years from now. So we're careful with that and making sure that the business we bring in the books is creating value for the company as well for the client and the advisor, not only for the latest two.

Is there any product set that you're taking the increased vigilance in? Is it par, non-par, term? I don't know if you can elaborate on that.

Well, as you know, 50% or more of the product sold in the industry is the par product. So obviously, the increased vigilance is mostly on the par product, those products that accumulates value early on. So those are the ones. Thanks.

The next question is from Gabriel Deschaines from National Bank of Canada. Please go ahead.

Good morning. Quick one on the experience gains in the non-prime auto. What were allowances or were impairments just below expectation?

Can you delve into that a little bit? remember gabriel that a couple of years ago we strengthened the underwriting on on our credit portfolio for auto loans and it's just collecting the benefits of of that strengthening that happened a little while ago the experience has just been better than expected in this case nothing special to mention about any allowance release or anything It's just experience-based.

No, I understand the repositioning you did a couple of years ago. Just from an accounting standpoint, it could come from a variety of non-insurance accounting, rather. I just want to get a sense. You have an assumption for a certain amount of impairments, and it was a lower number than that. Is that essentially it?

Yeah, that's exactly what I refer to when I say it's an experience, a positive experience game.

Got it. And then, yeah, sorry. Somebody else?

No, I just wanted to add it's actual minus expected, Gabriel.

Now, bigger picture question for Denis. And I'm starting to get, well, not starting, I'm getting this more frequently, I should say, from investors about all the companies I cover as their, you know, stocks are at all-time highs nearly every day. valuations are getting are very unusually high compared to any historical record if I tie that into your M&A appetite which you've been very transparent the company you're an acquisitive company you go to near slides 30 plus since 2015 like how does the stocks valuation influence your willingness to do maybe a more

transformational transaction than the ones you've done in the past like what sort of conditions would you need for industrial alliance to issue equity to finance a transaction let's say well first of all the higher the price as we all know the the cheaper would be you know to buy an organization if we need to raise capital that would be an obvious one now with that said we have plenty of capital right now 1.1 billion we're generating 700 a year um so and our buyback strategy obviously depends on various um criteria one of it is the you know any potential acquisition that we would do in the near future so that that would be one of the elements that we would take into consideration so and and and i would say i would add to this i mean being a 18 billion plus market cap company we might target something that is bigger than what we have done in the past i mean we've done the biggest one would be like a billion dollar some years ago so we might go a bit higher than that but i mean it has to be really strategic for us to go with a huge acquisition that would be transformational for the organization we don't bet the farm and it's not part of our It's not part of our DNA. So it is possible that at some point we might go bigger, but it would have to be a really, really good fit for the organization.

I guess this is a question I can ask any of the companies I cover, but I'll start with you. Thank you. Enjoy the rest of the week.

Thank you.

The next question is from Mario Mendonca from TD Securities. Please go ahead.

Good morning. I want to focus on two businesses, one that's functioning at a very high level. I think you'd agree is currently functioning.

That's a closed question. The closed answer is yes.

The way I'm going with the question, what would be interesting to know is the timing. So when you think about an ongoing iteration, does the U.S. business grow in 2027 and 2028 in that process?

Okay, so from where we are right now, I see the U.S. business as a tailwind. So the answer is yes. Yeah, okay. Let me go further in this. I try to be as short as possible. First of all, the U.S. life business, really, really happy about it. The American Amicable, I mean, obviously, forget about the laps for the last quarter, which was a blip in the graph. Very, very pleased, already above our target, and it's growing. It's grown for 16% KGAR for the last 16 years. Really, really pleased. Varicity, according to the plan right now, I mean, it's going to be aggressive at the end of the year and growing further along the way. So those two businesses, the answer is yes. I mean, there is in our budget process some incremental growth in that business. Now, the U.S. dealer business, the last one, it's been a disappointing business since we were about the organization. I don't want to go through all the history of that. But the theme that we have right now, I'm quite confident, and I look at the pipeline that is there, I'm quite confident that this is going to gradually improve. It would take time. It's not going to happen in a few quarters. But when I look at the growth over, let's say, 20, 27, 20, 28, it's going to be a tailwind as far as I'm concerned.

Okay, let's flip over to a vincere argument. But what I'm struggling with right now, is there any reason why it was there anything in the quarter and sort of return to more a more normal level as early as next quarter? Or would you argue that it's struck?

It's a new high as far as I'm concerned. And I see no reason. I mean, obviously, the market recently has been quite it has collaborated significantly. But if you look at the net flows from the organization, the consistency of the net flows over the years, I see no reason why it would stop at this point.

And Eric wants to add that we're debating here who should answer that question. So, Eric, you want to add something? Go ahead. Yeah, I just want to add because I know that at the end of this call, Mario, you all need to update your numbers. And there's one flavor I wanted to provide on this question that I expected today, to be honest, is when you look at the excellent result we had in the wealth management segment, it's important to note that the macroeconomic was a tailwind. That's for sure. And the organic or structural, as you mentioned, also contributed. And it's about 50-50. Just wanted to provide this additional information to you so that, you know, looking forward, you can adjust for that because, of course, the market has been great and we love it, and I'd like it to be the same in the third and fourth quarter, but we know it's not going to be always like in the second quarter. So just wanted to provide you some color on how to manage this looking ahead.

All right. I think we could all use a little bit of clarity on that as we go forward because it's hard to interpret. I think my impression is that this is the new structurally higher level, but perhaps you're cautioning me otherwise. Is that right, Eric?

I would say it's a higher – well, when I said it's a new high in terms of AUM and AUA, that's what I'm saying. I think Eric referred to the increase. The 37 percent, half of it is what you call structural.

It's structural or organic-related, and half of it is macroeconomic. So if I connect with Denis, Denis said that it's a new eye. Everything else being equal and stock market not going down and keep increasing at a normal pace, you would expect a lower increase looking into Q4 and Q3.

Thank you.

The next question is from Paul Holden from CIBC. Please go ahead.

Thank you. Good morning. I want to start with a bigger picture question that's related to interest rates. Now, IA obviously has brought down its interest rate sensitivity over time and intentionally. But putting aside the sensitivities that you give us, I still want to think that higher rates, particularly at the long end of the curve, are beneficial for your business. whether that's through sales, the pricing of new sales and the margins associated with that, or just the earnings on surplus. Maybe you can walk us through sort of, you know, what the implications are for your business. Do I have it right that you're still positively impacted by higher rates, and how so?

Yeah, it's a quite important question, Paul, because the level of interest rate is important. You're absolutely right. We kept saying that long-term interest rate being higher is positive for us if everything else stays the same. Keep in mind that the inverted yield curve a couple of years ago created some Edwins. So the level of long-term interest rate is important, but the shape of the yield curve is important as well. So to maintain this, we need a positive yield curve, meaning short-term rates being lower than long-term rates.

Assuming the current is a positive, so again, maybe you can walk us through how should we expect that to show in IA's results over time? Because I don't think it's an overnight impact, but again, maybe whether it's through sales, the margins on those new sales, earnings on surplus, how will we know it is positive?

Yeah, in fact, you're right. New sales, you know, assuming that prices are not adjusted, then there's no reason to believe the contrary at this point. The market is being very disciplined, so there's no pressure on pricing. So, of course, if long-term rates are higher than our pricing, it's beneficial to us. So, that's the most important element. As for the other things, keep in mind that we do our best to wedge our assets and liabilities. We talked a couple of times about our total portfolio management, you know, approach to manage the interest rate risk. We do our best to minimize it, but we still have a small positive variance. If you look at our core earnings sensitivities to long-term interest rate, it's still positive. So, it means that, you know, by reinvesting and lengthening the duration of our portfolio over time, we still win with the overall portfolio management as well.

Let me move on. In terms of the U.S. business, you've seen negative insurance experience in each of the last three quarters, and I think from unrelated factors. So, you could say it's all different. I guess my question is twofold. Like, given a recent experience, is there anything you see in the results where maybe, in terms of setting actuarial assumptions, a little bit more challenging in the U.S. versus Canada? You have a very long history of being very good at getting the assumptions right in Canada. Is there anything in the U.S. that you think is different? And in any way, does that impact the way you think about further capital allocation into the U.S.?

The short answer is absolutely not, Paul. I don't see any issue. The loss that we experience in Q2 is completely unrelated with what happened in Q1. Remember, in Q1, it was a lapse issue connected with more green agents than normal. This quarter, it's mortality-related, and its first quarter was in American Amicable. Second quarter, it's mortality-related at Fidelity Life, and it's just a couple of higher claims that took place, and those are accidents and things like that. So it's really not something that worries me with the assumptions at this point with respect to that. So there's nothing. And, you know, on the lapse issue in Q1, we took actions to fix it. So when I look at my crystal ball for the remaining of the year, I don't see anything that preoccupies me at this point.

And just to add, Eric, on the mortality side, we look at it holistically. So overall, we have a gain. So if there was to be something on the reserve chain, let's say that we didn't feel good about mortality. I mean, for the U.S., overall, it would be positive.

Denis, you're absolutely right. Across the organization in the second quarter, mortality overall was positive. So I keep saying that we like mortality risk. That's something we're really good at managing. We like the underwriting. We like the risk management. So we retain some risk with respect to mortality, and we like it. and it's been positive. It's been a positive profitability driver for as long as I can remember at Aie. So overall, even across the organization, there's no worry about this risk.

Okay. And then, Denis, obviously, given that answer, then it doesn't impact Appetite to deploy more capital into the U.S.? No, it has absolutely no impact. That's it from me.

As a reminder, to ask a question, please press star one. The next question is from Mike Rizvenovich from Scotiabank. Please go ahead.

Hey, good morning. Just wanted to follow up on the wealth commentary and just thinking about it from the terms of if the market does go into a declining environment, if assets under management are declining. I'm just wondering, I know that you've got a structurally higher profitability level, but what's the torque to the downside, or how sensitive is it to the downside if AUM is to come down when you think about the composition of your fee-based revenue?

Mike, you have all the sensitivities in our supplemental information package to help you figure out the scenario you want to consider or look at. It's all in there.

Okay, fair enough. And then maybe for Denny, just on the buyback strategy, how does your book value impact sort of play into your buybacks? And you obviously got a very aggressive buyback right now based on your NCIB. I know you care about book value growth. You've been very clear that the long-term outperformance on book value growth has been a big positive for IEG over time. How do you look at it now with respect to current valuation levels?

Yeah, well, thank you for the question, Mike. In terms of the buyback, there are many criteria that makes us decide whether we go bigger or not. The price is obviously one. So, I mean, everything else being the same, the higher the price, the lower the amount of buyback we're going to do. But, like I said, there are many other factors, our capital position, the alternative uses of capital, market conditions. And we don't have an objective or a goal of buying back a certain amount. At the end of the day, we also said that we don't want to pile up capital. But, again, there are many, many factors that justify whether or not we go big or not on the buyback side.

Okay, that's helpful. Thanks for the caller.

This concludes the question-and-answer session. I'd like to turn the conference back over to Caroline Doulin for any closing remarks.

Caroline Doulin Thank you, everyone, for joining us today. Our Q2 earnings release and slides for today's conference call are posted in the investor relations sections of our website, and a recording of this call will be available for one week, starting this evening. And the archived webcast will be available for 90 days, and a transcript will be available on our website in the next week. Note that our 2026 third-quarter results are scheduled to be released after market close on Monday, November 9, 2026. Thank you again, and that concludes our call.

This brings a close to today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.