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ai Group financial update on independent distributors to gain market share

by

Alain Thériault

,

Serge Therrien

11 July 2018 07:00

Yvon Charest: Denis Ricard (Photo : Denis Méthot)

While the acquisition of general agents by insurers multiply, iA financial Group wants to intensify the expansion of its independent distribution network to compete for its share of the cake to the big three.

The Journal of insurance met with the two most senior officers of the insurer, on the sidelines of its annual meeting, held on 10 may. Yvon Charest , and Denis Ricard, respectively, president and chief executive officer and chief operating officer, stressed that the acquisitions of networks carried out in recent years have allowed the insurer to build a cost-effective machine.

They argue that ai wants to resolutely take its place among the greats. Mr. Charest gives as an example a statistic related to the average earnings of his company, compared to those insurers who are ahead in terms of market shares, representing Sun Life Financial, Great-West Lifeco , and Manulife.

Mr. Charest emphasized that the average net profits of the iA Group financial accounts for 53 % of the average net profits of its three main competitors. This proportion was 25 % in 2012.

Mr. Charest pointed out that their competitors can leverage their operations in Asia to inflate their profits. This is not the case of iA financial Group, which expects to take more place in Canada, where the insurer is derives 95 % of its profits.

iA financial Group is also the target of increasing the earnings per share (EPS) of the company of at least 10% annually by 2019. This growth should come from its business in effect, anticipate the two leaders, which also include its recent acquisitions, such as those of Heritage Hollis in 2017 and PPI Management in February 2018.

Distribution : more than ever the sinews of war

Denis Ricard has always thought that the distribution represented the sinews of war in insurance. The consolidation that has occurred among the general agents has strengthened this conviction, he entrusted the Journal of insurance.

When Great-West Lifeco acquired Group financial Horizons, it was clear that iA financial Group was to be part of the game, said Mr. Ricard. Acquire PPI has been an important milestone in this direction, » he said.

By acquiring PPI and its network of expert advisors in the market to high-net-worth, Mr. Ricard is estimated to have at the same time acquired a solid management team and competent. He argues that this team will be able to provide the support to the advisors with assets from a small general agents purchased in the past.

Acquire a consolidator which weighs heavily in the balance of power distribution also allows ai to protect its market. «Which of our competitors with an integrated network will dare to close the faucet of the Industrial Alliance so that we can distribute their products «, said Mr. Ricard.

He also revealed that PPI will become the platform of its business to consolidate the market. However, after just over a month of operation in the bosom of iA, PPI acquired on April 10, ABEX Brokerage Services and its subsidiary ABEX National Brokerage.

«PPI and Insurance Hollis will not be separated»

Mr. Charest explained that the transaction was necessary of course to PPI, due to its close proximity with ABEX-in the Calgary region. «Smaller than PPI, ABEX has two corporate headquarters in Calgary. PPI only took five weeks to decide to buy’, » he says. His name will disappear in favour of that of PPI, which has completed the integration of its operations, » he adds.

MESSRS. Charest and Williams have stated that, for the moment, PPI operates independently of The Insurance Hollis, entity distribution, resulting from the acquisition of Heritage Hollis in the past year. Centre national de courtage d’assurance (CNCA) has been merged into Insurance Hollis. «PPI and Insurance Hollis will not be separated,» revealed Mr. Ricard.

It suggests that the two distribution networks may eventually merge, but that no decision has been taken on such a merger. «Currently, we have two general agents : PPI and Insurance Hollis,» said Mr. Ricard. Insurance Hollis is chaired by John Hopkins.

Cost-effective to respect the independence

iA has also gained a lot of small general agents in the last few years. As for these smaller players than for PPI, the insurer is committed to respecting the independence of the consultants who work for its general agents.

«In absolute terms, manufacturing is a little more cost-effective, suitable Mr. Ricard. But the acquisition of a distributor can generate the same profitability in the long term. We get a return on equity compared to the price that one pays. In addition to the fact that we could sell our own products, the distribution itself is an interesting business. Seen from the side of the management of the heritage, a network that we are building for 15 years. The same logic applies to the insurance side. «

This respect for the independence paid : the insurer harvesting the fruit of the relationships he had already built with its distributors before acquiring them. «When we ask our distributors a place to go to make our products with their representatives, they always say yes. We have a privileged access, » said Mr Ricard, but as ever the company will not impose its products.

3 000 consultants in PPI

The acquisition of MPI has added an important network. «More than 3,000 advisors are dealing with PPI,» said Yvon Charest.

He said, however, not to be able to reveal the exact proportion that these advisors are placing in PPI. «This is the most difficult thing to determine, replied Mr. Charest. Y a-t-he 1 800 that pass through a smaller general agent for other business ? Technically, nobody knows. The compliance model has its limits in Canada. Who will be responsible for the supervision of the advisor, PPI or another agent, where it places its business ? No general agent has the portrait of consolidated business advisor. «

On the side of Insurance Hollis, Mr. Ricard said that several advisors emphasized already the products of iA. «We bought in the past from small general agents who were dealing with us and that the owner had no succession, for maintaining the relationship with the counselor. Several of these advisors were holding sometimes up to 75 % to 80 % of their business with us. We have purchased several of these general agents over time, which has given us a critical mass for cost effective. «

What is the market share of iA wants to be in the independent network ? It is the insurer who has the more units of insurance policies in force in Canada, with a market share of almost 19 %.

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