Dominion Bond Rating Service Ltd. has confirmed the credit ratings of Industrial Alliance Insurance and Financial Services Inc. and Industrial Alliance Capital Trust, all with continuing stable trends.

“As a mid-sized player in an industry dominated by three much larger competitors, IA is still able to compete effectively given its focus on multi-channel distribution and the development of competitive products,” DBRS said. It says first half earnings were favourable, with net income of $76 million; and, the company’s capital remained strong.

“Broker relationships are a key success factor, and with the past consolidation of industry players, the company has the opportunity to make inroads with brokers that prefer to have alternatives in insurance product manufacturers,” the rating agency said. “IA is a strong player in the individual insurance market, with popular products and good distribution, and is also one of the leaders in segregated funds with a 7% market share by assets, ranking fourth.”

DBRS says that the firm’s operations are well diversified, with almost an even split between protection and wealth management products. “The low interest rate environment limits earnings due to lower spreads, but DBRS expects this will be a positive development for future profit growth as interest rates begin to increase in Canada,” DBRS said.
It also reports that the company is well capitalized, helped by a recent issue of subordinated debt, and has plans to continue to grow the business both organically and through acquisitions.

“Expanding the group business across Canada is being considered, as the company sees potential in the small to mid-sized group business segment. Another option is to seek niche acquisitions in the U.S. Acquisition criteria are strict, and IA will only consider transactions that expand distribution, decrease costs, or expand specific niches,” it says. “