Desjardins financial Security, the dominant life and health insurance firm in Quebec, hopes to extend its reach across Canada as it searches for growth opportunities and looks to steal market share from the country’s three largest insurers.

“What we want to do is double the market share outside Quebec by the end of 2008,” says Richard Fortier, president and COO of DFS, a subsidiary of Lévis, Que.-based Desjardins Group — by far the country’s largest co-operative financial institution. “This means we have to make aggressive moves to develop the business and/or make an acquisition.”

DFS holds a 19% market share Quebec, in terms of insurance sales, he says, but just 2% in the rest of Canada. It sells individual and group insurance, annuities, segregated funds and third-party mutual funds through a team of about 1,000 associated advisors. Many of the these advisors are dually licensed and sell products through both the firm’s insurance distribution network and its mutual fund dealership. The company also distributes products through 4,000 independent financial advisors across the country.

DFS has enjoyed steady sales growth in Quebec, but the firm, and Desjardins Group overall, is such a well-established player in its home province that few new local growth prospects exist. It is realizing large growth outside Quebec, however — and it wants more.

For example, group and business insurance sales through the first three quarters of 2006 were $174.5 million, more than double the sales for the same period last year. The increase is largely attributable to sales outside Quebec, which contributed $138.6 million to the national figure.

“Last year, we became the insurer of the employees of Newfoundland and Labrador. That’s about $80 million in premiums from a single sale,” says Fortier, an insurance industry veteran who took on the top job at DFS in September after being with the firm since 1994. He says that DFS considers the Newfoundland contract a feather in its cap, and a good indication that the firm can land large accounts outside Quebec.

The company’s assets under management and administration stood at $23 billion as of Sept. 30, 2006, an increase of 20.4% from a year earlier, making DFS the fourth-largest life and health firm in Canada, behind Sun Life Financial Inc., Manulife Financial Corp. and Great-West Life Assurance Co.

Group and business insurance represented 72% of earnings, which amounted to $108.6 million through the first nine months of 2006, while individual insurance contributed 24.9% and savings products pitched in 3.1%.

DFS is in the second year of a three-year, three-pronged growth strategy, says Fortier.

The first element of the strategy is to expand the business, either organically or by acquisition. DFS has a list of four or five potential targets and plenty of cash to make the acquisitions — but deals so far have been elusive.

“Nothing’s for sale,” Fortier says. “So, we have to work harder on this.”

Early last year, DFS bought Montreal-based mutual fund dealership Performa Financial Group Ltd., which did most of its business outside Quebec. Performa advisors were merged into the firm’s existing mutual fund dealership.

“The integration went well. We kept a great majority of the advisors and a great majority of the assets,” Fortier says. “If some other shop similar to Performa comes up for sale, we will be there to put in an offer.”

The second element in the strategy is to focus on being regarded as an alternative to the big three insurers. The company hopes to ramp up its brand recognition and keep down costs, thereby improving pricing and driving new business.

“We don’t feel we’ll get all the group business,” Fortier says, “but, at least, we’ll be on the list when customers are asking for proposals.”

In December, DFS announced that it would change the name of LFS Laurentian Financial Services, its insurance and savings product distribution subsidiary, to Desjardins Financial Security Independent Network. The unit has 471 reps at 20 financial centres outside Quebec.

The independent distribution network in Quebec, which has 572 reps in 13 financial centres, will retain the name Services Financier SFL to distinguish it from the captive Desjardins-branded sales force that operates only in Quebec. The 283-advisor captive sales force is paid by salary, not commissions, and although it sells DFS products through the Desjardins caisses, it operates separately from the DFS subsidiary.

@page_break@DFS has also announced it will change the name of Optifund Investments Inc., its Mutual Fund Dealers Association of Canada-registered dealer, to Desjardins Financial Security Investments Inc. The unit, through which 1,150 financial advisors sell products, represents DFS’s original mutual fund distribution network plus the Performa advisors.

“Every time we open a new shop, we make sure that the Desjardins name is there,” says Fortier, who adds that it’s the firm’s advisors who are happiest about the higher visibility of the Desjardins brand.

The final element of the strategy is to make DFS an “employer of choice,” especially for young workers. DFS has had a particular problem finding potential employees who both know the insurance industry and are sufficiently bilingual. “It’s pretty tough to get people to work in insurance. There are sexier careers,” Fortier says.

DFS is addressing the talent shortage by involving itself with youth initiatives and looking to offer employees a positive, flexible working environment.

“What we’re doing is explaining to the public that insurance is a big industry, and we’re a big player,” he says. “You can make a career here.”

Expanding sales in all DFS’s lines of business is also important. “We do business in insurance, but we like to have diversity,” Fortier says. “You lower your risk by having several lines of business.”

He adds that the company usually introduces about five to 10 new products every year, with a recent focus on critical illness and long-term care insurance products. In January, DFS announced an expansion of its Millennia III seg funds portfolio program by adding Franklin Templeton Quotential portfolios to its lineup.

“We believe as the baby boomers approach retirement, a lot of money will move into the market,” Fortier says. “We want to be ready.”

The company is also looking to build its advisor base, one of the reasons that DFS is trying to boost its visibility. “We have the back-office capability and the machinery to take on more business,” Fortier says. “We have people going around the market looking to get new advisors.”

Fortier doesn’t believe that cultural differences will be a big problem in trying to expand a Quebec-based business across Canada, although he acknowledges there are some differences between customer needs in Quebec and elsewhere.

“Customers are a bit different in the savings area. In the rest of Canada, customers will ask more for mutual funds or [at least] more aggressive mutual funds,” he explains. “In Quebec, they’re a bit more conservative — and that’s not new. For as long as I can remember, that’s been the story.”

The important part for Fortier, especially outside Quebec, is to let customers know that DFS is a big company that is driven by its customers.

“Because people are looking for security, they like well-capitalized companies like DFS,” Fortier says. “And we are preoccupied by the interests of our customers.

“In the co-operative movement, the users of the services are generally the owners of the company, so we’re really focused on what the customer has to tell us.” IE