IAG Surpasses Expectations with Strong Q1 2025 Performance, Core Earnings Up 12%

Byline: Amid a challenging economic backdrop, IAG has delivered robust first-quarter results, driven by cross-divisional growth and strategic acquisitions. While the headline "triples operating profit" may overstate the figures, the data reveals a company leveraging its diversified portfolio to outperform expectations.

A Quarter of Strategic Momentum

IAG’s Q1 2025 performance underscores its transition into a high-growth insurer and wealth manager. Core diluted EPS rose 19% to $2.91, while core earnings increased 12% year-over-year to $273 million, surpassing analyst estimates. The 19% jump in total sales—driven by record segregated fund sales in wealth management and strong performances in its US operations—highlight the company’s execution of its growth roadmap.

Segment Breakdown: Where the Growth Came From

1. Insurance, Canada:
2. Core earnings grew 9% to $100 million, fueled by strong contributions from Group Insurance (sales up to $178 million) and iA Auto/ Home direct premiums (+13% YoY).

3. The segment’s performance reflects IAG’s focus on expanding its distribution channels and leveraging risk-adjustment gains.

4. Wealth Management:

5. A standout performer, with segregated fund sales soaring 52% to $1.9 billion gross, solidifying its position as Canada’s top provider.

6. Mutual fund sales also rose 33%, demonstrating demand for diversified investment products.

7. US Operations:

8. Core earnings nearly doubled (up 58% YoY) to $30 million, with organic growth and the Vericity acquisition contributing $8 million pre-tax.

9. Individual Insurance sales jumped 62% to $68 million, while Dealer Services grew 23% to $306 million, signaling successful cross-border expansion.

10. Investment Segment:

11. The only drag, with core earnings flat (-1% YoY) due to equity market headwinds. However, fixed income and car loans provided offsetting credit gains.

Financial Health and Capital Management: A Mixed Picture

IAG’s solvency ratio dipped to 132% (from 142% YoY), but this reflects proactive capital deployment:
- $125 million in organic capital generation in Q1, ahead of the $650 million annual target.
- $1.4 billion in capital available for strategic moves, including the Global Warranty acquisition and share buybacks.

Risks and the Path Forward

While the results are encouraging, challenges remain. The investment segment’s exposure to equity markets poses a risk, as does the solvency ratio decline. Management has, however, reaffirmed its 2027 ROE target of 17%+, citing robust capital generation and operational discipline.

Conclusion: A Buy Signal for Long-Term Investors?

IAG’s Q1 results demonstrate resilience and strategic execution across its core businesses. With AUM/AUA hitting $264 billion (+15% YoY), strong organic sales growth, and a capital base supporting acquisitions, the company is well-positioned to capitalize on its expansion plans.

The key metrics:
- Core ROE: 16.1% (up from 14.6% YoY) — within striking distance of its 17%+ target.
- Sales Growth: 19% YoY total sales, with all segments contributing.
- Capital Generation: $125M in Q1, exceeding the annual run rate.

Investors should note the risks tied to market volatility and integration of acquisitions. However, the company’s diversified revenue streams, disciplined capital allocation, and clear growth trajectory suggest that IAG remains a compelling long-term investment. With shares up 14% YTD (as of Q1), the stock could continue to outperform peers if these trends persist.

In a sector where stability is prized, IAG’s mix of growth and capital efficiency makes it a standout performer. The path to 17% ROE is visible — execution will be the key.