December 10, 2018

Industrial Alliance Insurance & Financial Services (IAG)


 

The Industrial Alliance Insurance & Financial Services (IAG) is the fourth largest insurance company in Canada trailing Sun Life Financial (SLF), Manulife Financial (MLF), and Great-West Lifeco (GWO).  While the company has long laboured in the shadow of these “Big 3,” it has recently emerged as a solid investment in its own right.  The cautious approach IAG has taken over the last decade has given it better returns than the companies mentioned above.  It is also expected to be the first of the Canadian insurance companies to raise its quarterly dividend (this is in especially stark contrast to Manulife which cut its dividend in half) after the financial meltdown of 2008.  IAG offers the same breadth of life and health insurance as the rest of the industry and has expanded into mutual funds, RRSPs, segrated funds, home and auto insurance in the past few years.  It has roughly $71 billion under management.  They serve over 3 million Canadians, and have a small, but quickly growing American clientele.  IAG employs almost four thousand people.

 

industrial_allianceIAG was founded in Quebec in the year 1892.  For decades the company was content to stay within the friendly confines of its Francophone bastion, but in 1980 the company started looking at expansion within Canada.  IAG is now proud to boast that a majority of its revenues actually come from outside of Quebec.  While the company’s growth has been impressive, a recent Globe and Mail article may have summed up the company best when it recently stated, “Being the 4th biggest Canadian insurance company is sort of like being the 7th biggest bank, or the 3rd largest airline, it’s very difficult to get attention.”  One of the bright points of comparison for IAG is that its relatively small international exposure and solid Canadian foothold have allowed it to weather the recent financial storms much better than its larger competitors.

 

In 2005 IAG began exploring expansion possibilities outside of Canada.  They settled on the USA as their focus.  Yvon Charest, the CEO of IAG, justified the decision by saying of the USA that, “It is so big that you can have a niche strategy – you can be active in the U.S. without competing with the giants there.”  After analyzing many USA companies, as of early 2010 IAG had still not found the right opportunity for U.S. expansion amidst the current financial turmoil.  Then, in November 2010, the company decided upon a Texas company by the name of American-Amicable Holding Inc. which they promptly purchased for $145 million.  The acquisition has a good track record and a strong balance sheet.  It is considered low-risk with an established distribution network.  IAG’s cautious approach will likely pay dividends for the company in the long term (both figuratively and literally speaking).

 

Despite IAG’s successes it is still a Canadian insurance company, which means that its stock price has been beaten up by the recent market volatility.  It is currently trading at around $36.50 per share.  This gives it a Price-to-Earnings ration of 11.81, and a yield of about 2.7%.  Even though it looks to be raising its dividend soon, IAG’s dividend ratio still trails its main competitors in the field by substantial margin.

 

 

The Industrial Alliance Insurance & Financial Services (IAG) Dividend Stock Graph:

TSE IAG

The Industrial Alliance Insurance & Financial Services (IAG) Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
IAGIndustrial Alliance Insurance & Financial Services Inc40.422.4232.140.170388113.081110

 

 

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