I
G
M
F
I
N
A
N
C
I
A
L
I
N
C
.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
9
IGM FINANCIAL
ANNUAL
REPORT
TSX: IGM
2019
INVESTED
IN HELPING
CANADIANS
LOUIS GOSSNER &
SHELLY SEAMAN
OWNERS, J&L RESTAURANT
PARTNERSHIP
IG WEALTH MANAGEMENT AND
MACKENZIE INVESTMENTS CLIENTS
SINCE 2005
Contents
Who we are | Reasons to invest
2019 highlights
Guiding principles
Corporate structure
Report to shareholders
Board of Directors and
Executive Leadership
IGM highlights
Wealth Management
Asset Management
Strategic Investments
Talent and culture
3
4
6
7
8
13
14
16
18
20
“Our advisor is very
thorough and genuinely
cares about us."
ZAHIRALI &
ROSHAN HEMANI
RETIREES
IG WEALTH MANAGEMENT
CLIENTS SINCE 2006
Readers are referred to the caution regarding Forward-Looking
Statements and Non-IFRS Financial Measures and Additional IFRS
Measures on page 24 of this Annual Report.
2
3
We are committed to improving the
financial well-being of Canadians and
helping them achieve their goals at every
stage of their lives.
Who we are
IGM FINANCIAL INC. (TSX: IGM) is a leading wealth and asset
management company supporting financial advisors and the clients
they serve in Canada, and institutional investors throughout North
America, Europe and Asia.
Through its operating companies, IGM provides a broad range of
financial and investment planning services to help Canadians meet
their financial goals.
The company creates value for shareholders through three key areas:
• Wealth Management
• Asset Management
• Strategic Investments
Reasons to invest
• Bold steps taken to transform operating companies resulting in market
share gains and operational efficiencies
• Experienced leadership team focused on driving innovation, an agile
culture and exceptional client outcomes
• Exciting growth opportunities through investments in fintech and
Chinese markets
• Financial strength and scale, strong governance and benefits as a
member of the Power Corporation group of companies
• Long-term view to shareholder value creation and demonstrated
commitment to corporate responsibility
T
S
E
V
N
I
O
T
S
N
O
S
A
E
R
|
E
R
A
E
W
O
H
W
|
S
T
N
E
T
N
O
C
33
2
2019 Highlights
Our Clients
Our People
Our Community
OVER 1 MILLION
IG Wealth Management clients
OVER 3,300
employees across the IGM group
of companies
MORE THAN
30,000
external advisors doing business with
Mackenzie Investments
47%
of Mackenzie Investments mutual
fund assets reside in funds rated
4 or 5 star by Morningstar
100%
of IG Wealth Management
Consultant practices hold the CFP
or F.Pl. designation or are enrolled
in the program
#1 RANKED
Investment Planning Counsel led
19 other firms in the 2019 Credo
Consulting investor survey
96%
Gallup participation rate for employees
across the IGM group of companies
34%
of IGM senior leadership roles
(Vice-President level and higher) held
by women
1,759
IG Wealth Management Consultants
with more than four years experience
and a total network of 3,381 Consultants
and Associates
6 PARTNER IN
ACTION TEAMS
employee-led PIA teams enhance
awareness, understanding and
progress in diversity and inclusion
ranked IGM Financial one of the Global
100 Most Sustainable Corporations in
the World
$6.25 million raised by more than
37,000 walkers during 400+ walks
$12.1 million donated to charities
across Canada since 1999
IGM Financial recognized for our
work tackling climate change through
disclosure
IGM Financial signed statement of
support for the Task Force on Climate-
related Financial Disclosures (TCFD)
We are proud of our commitments and achievements in working towards a sustainable future
4
5
IGM FINANCIAL INC. ANNUAL REPORT 2019
Shareholder Highlights
Strong Asset Growth
NET EARNINGS
$746.7 MILLION
$3.12 PER SHARE
available to common shareholders
ADJUSTED NET EARNINGS
$763.9 MILLION
$3.19 PER SHARE
available to common shareholders
DIVIDENDS DECLARED
$537.6 MILLION
$2.25 PER SHARE
per common share
TOTAL SHAREHOLDER RETURN
27.4%
share price appreciation and dividends
$190
$170
$167
$149
2018
2019
2018
2019
Total Assets Under Management
($ Billions)
Total Assets Under Administration
($ Billions)
TOTAL ASSETS UNDER MANAGEMENT
IG Wealth Management
Mackenzie Investments
Investment Planning Counsel
TOTAL ASSETS UNDER ADMINISTRATION
IG Wealth Management
Mackenzie Investments
2018
$83,137
$62,728
$5,125
2019
$93,161
$70,205
$5,391
2018
2019
$86,287
$97,277
$62,728
$70,205
Investment Planning Counsel
$25,706
$27,728
S
T
H
G
I
L
H
G
I
H
R
E
D
L
O
H
E
R
A
H
S
|
S
T
H
G
I
L
H
G
I
H
9
1
0
2
5
4
Our Guiding Principles
CLIENTS COME FIRST IN ALL WE DO
SCALABLE GROWTH
We will leverage the IGM ecosystem to deliver the
best outcomes for our clients
We will pursue growth while maximizing the use
of scalable processes across all of our businesses
STRONG BUSINESSES & A STRONG IGM
INNOVATION ACCELERATION
We will drive speed, creativity and adaptability
by maintaining an open, flexible and
collaborative organization
We will maintain the unique externally-oriented
strategies of our individual businesses while at
the same time maximizing the value of shared
knowledge and resources
TALENT STRENGTH FOR ALL OF IGM
We will use our scale to attract, retain and
develop diverse top talent by offering vibrant
career opportunities
“My advisor has helped
me make investment
decisions that have
greatly benefited
myself and my family.”
NATALIE BALEN-CINELLI
OWNER, LOLABEAN PHOTOS
DAVID CINELLI
REAL ESTATE AGENT, ROYAL LEPAGE SIGNATURE
INVESTMENT PLANNING COUNSEL
CLIENTS SINCE 2015
6
7
IGM FINANCIAL INC. ANNUAL REPORT 2019 Corporate Structure
Wealth Management
Asset Management
Strategic Investments
China:
Fintech:
Partner:
Power Corporation is an international management and
holding company that focuses on financial services in North
America, Europe and Asia. Its core holdings are leading
insurance, retirement, wealth management and investment
businesses, including a portfolio of alternative asset
investment platforms.
STRENGTH AND SCALE AS PART OF
POWER CORPORATION GROUP OF COMPANIES
• Scale advantages through shared technology, back office
and procurement
• Access to distribution, product capabilities and expertise
• Strong governance and oversight
• Benefits through cooperation
• Financial strength
E
R
U
T
C
U
R
T
S
E
T
A
R
O
P
R
O
C
|
S
E
L
P
I
C
N
I
R
P
G
N
I
D
I
U
G
R
U
O
7
6
Report to shareholders
Well-positioned to build on
the positive momentum
IGM Financial strives to be Canada’s best diversified
wealth and asset management firm and we are proud of
the accomplishments and results we generated for our
shareholders in 2019. The year featured ongoing growth
and significant milestones for our business as we continued
to execute our strategy. We furthered our commitment to
our employees, clients, communities and the environment
with new programs, partnerships and mandates.
This foundation-building positions us well for the future.
Jeffrey R. Carney
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
IGM FINANCIAL INC.
R. Jeffrey Orr
CHAIR OF THE BOARD
IGM FINANCIAL INC.
8
9
IGM FINANCIAL INC. ANNUAL REPORT 2019 Strong Shareholder & Client Results
Ongoing Strategic & Operational Transformation
The financial markets tested investor confidence in
late 2018 and this continued into early 2019. However,
investors who remained committed to their financial
plans were rewarded as 2019 reflected the highest
market returns in more than a decade, with most
global equity markets delivering double-digit returns.
IGM finished 2019 with record high assets under
administration of $190.2 billion and assets under
management of $166.8 billion, both up 12% from
2018. Average investment fund assets under
management were up 3.3% over 2018. Net earnings
were $746.7 million or $3.12 per share and our
adjusted net earnings were $763.9 million or $3.19 per
share, down 3% from our record high level in 2018.
With our strong balance sheet and cash flow, we
continued to focus on capital management activities,
returning immediate value to shareholders through
dividends. Dividends declared in 2019 were $538
million or $2.25 per share, unchanged from the
previous year. IGM also returned $100 million in
capital to shareholders through share repurchases.
Our share price increased significantly, driving a total
return to shareholders of 27.4% during the year.
We are also excited to report that our clients across
the IGM group of companies achieved an average
investment return of 13% during 2019, helping them
plan for the future and achieve their dreams. This,
combined with successful refreshes of brands across
IG and Mackenzie, drove higher advisor perception
scores and improved brand consideration.
We continued our transformation to modernize our
digital platforms and technology infrastructure. This
enabled our company to enhance operations, achieve
efficiencies and further improve the service
experience for our clients. It included a number of
important partnerships with global leaders in their
respective fields.
For example, CIBC Mellon Global Services Company
was engaged to assume most of our fund services
functions. Leveraging their scale, industry-leading
technology and capabilities allows us to focus on our
core business of working with clients to help them
achieve their financial goals and aspirations.
We also announced that Google Cloud would manage
our data platform. As a result, we became one of the
first major Canadian financial services companies to
move SAP applications and data to the Google Cloud
Platform. This helps us enhance the client experience,
leverage operational efficiencies through greater
productivity and provides IGM with access to a wide
range of capabilities, including advanced analytics,
data mining and artificial intelligence.
In addition, we introduced Salesforce, a new Customer
Relationship Management platform based on
industry-leading technology, to IG Consultants. The
new platform enables them to seamlessly manage
client relationships, improve their efficiency through
digitized workflows, and access data-driven reporting
to help them better run their practices.
Our strategic transformation goes beyond client
experience and includes progress in the area of
expense management, while still allowing us to invest
in the future. We managed expenses during 2019 at
levels below our guidance. We remain focused on
delivering strong earnings growth through operating
leverage as we continue to drive our initiatives to
automate and improve operational efficiency.
S
R
E
D
L
O
H
E
R
A
H
S
O
T
T
R
O
P
E
R
9
8
Commitment to Our People &
the World Around Us
IGM Financial is committed to making a positive
impact on the lives of our people, the clients we serve,
and the communities in which we work and live.
Employee diversity and inclusion continued to be a
key priority as we want to reflect the mosaic of
Canada. To promote gender equality, in 2018 we
committed publicly to adhering to the United Nations
Women’s Empowerment Principles. Our goal is to have
at least 35% of our executive roles — vice-president
and above — held by women and the progress we
made in 2019 has kept us on track. We also partnered
with Pride at Work Canada to promote a more inclusive
workplace for all employees regardless of gender
expression, gender identity or sexual orientation.
We were particularly proud of the employee
engagement scores we received in 2019. To foster a
high-performing and diverse culture, we continue to
partner with Gallup, a global leader in workforce
engagement research. We increased our scores across
the board in 2019. This is a validation of our ongoing
efforts to build a positive and inclusive culture where
employees feel empowered, valued and secure.
Leveraging Gallup best practices also helps foster and
drive our ongoing commitment to an engaged
workforce, with industry-leading training,
development and career advancement.
We have a long-standing practice of being responsible
investors of our clients’ money —incorporating
environmental, social and governance (ESG) factors
into investment decisions to better manage risk and
generate long-term sustainable returns. For example,
building on our UN Principles for Responsible
Investment (PRI) commitment, IG Wealth Management
now requires all investment advisors to the IG product
shelf be signatories to the UN PRI. This ensures
responsible investment practices are embedded
across all investment mandates. Further, Mackenzie
and IG continue to make socially responsible investing
a priority by offering clients a variety of solutions
including the Mackenzie Global Environmental Equity
Fund and the pioneering IG Mackenzie Summa
SRI Fund.
In 2019 we increased our focus on integrating climate
change risk and opportunities into our business by
signing the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations. We were also
the only Canadian firm recognized on CDP’s Climate
Change A List for the second year in a row for our
efforts in tackling climate change.
STRUCTURED FOR SUCCESS
Wealth Management
IG Wealth Management continued to strengthen our
industry-leading financial planning capabilities to
unlock clients’ full wealth potential. The talent we’ve
attracted to our IG Consultant team and enhanced
new recruit productivity have allowed us to increase
our focus on holistic wealth management, providing
quality financial advice and delivering great service.
During 2019, our client assets under administration
grew to $97.3 billion, an increase of more than $10
billion from 2018, while our mutual fund gross sales
remained at near record high levels of $8.7 billion. We
also made significant progress with our ongoing focus
on the high net-worth (HNW) segment across our IG
Private Wealth Management business. In 2019, 52% of
sales came from HNW solutions, up from 28% in 2016.
We are proud of this success.
Our National Service Centre, launched in 2018, also hit
a new milestone with more than 200,000 clients and
$1.7 billion in assets under management. The National
Service Centre allows us to offer a targeted, consistent
and improved real-time experience for clients with
smaller accounts, while our credentialed planners
focus on those clients who have more complicated
and sophisticated needs.
10
11
IGM FINANCIAL INC. ANNUAL REPORT 2019 IG clients also benefitted from new product
offerings and managed solutions, supported by
partnerships with high-quality sub-advisors,
including Blackrock, T. Rowe Price, Pimco and
Mackenzie Investments. Importantly, 9 out of 14 of
IG’s wealth management portfolios rated 4 or 5 stars
according to Morningstar Canada (a leader in global
investment research).
Also driving our 2019 success in the wealth
management space was the performance of
Investment Planning Counsel (IPC). The firm
introduced an integrated marketing campaign to
recruit entrepreneurial advisors. It also relaunched
its Total Client Experience (TCE) business system.
TCE simplifies, modernizes and digitizes processes
to make it even easier for advisors to deliver
professional, consistent service every time they
interact with clients.
Asset Management
Mackenzie Investments’ ongoing commitment to
providing retail and institutional investors with
choice, innovation and performance was recognized
in 2019, with four Mackenzie mutual funds and ETFs
winning 2019 Lipper Awards, which honours funds
that lead in delivering strong, risk-adjusted
performance, and 12 funds recognized for industry-
leading performance at the 2019 Fundata
FundGrade A+ Awards.
During the year, we achieved our highest gross retail
sales in 20 years, fuelled by positive flows in both
our mutual fund and ETF businesses. Our multi-
channel, solutions-oriented strategy continues to
drive choice and innovation for the organization and
contributed to helping us reach more than $140
billion in assets under management in 2019. We also
continue to be encouraged by the progress we are
making in our institutional business and look
forward to carrying this momentum into 2020.
Barry McInerney
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
MACKENZIE INVESTMENTS
S
R
E
D
L
O
H
E
R
A
H
S
O
T
T
R
O
P
E
R
11
10
with opportunities to leverage synergies, benefiting
both Canadian and Chinese investors. China AMC had
$192 billion in assets under management in 2019, an
increase of 17.3% from 2018.
LOOKING FORWARD
IGM is uniquely positioned to continue to grow our
business, drive shareholder returns and help our
clients build their dreams and achieve their financial
goals. The progress and advances we have made in
innovating and streamlining our business have put us
on a path to accelerated growth in the decade ahead.
We’re building on strong foundations through our
brands and our holistic approach to financial planning
and investing. Our diverse range of products,
solutions, distribution channels and geographies put
us in a position for strong growth in the wealth and
asset management industry — for our clients
and shareholders.
We take great pride in our team and what they achieve
every day. Their commitment and teamwork propel us
forward. IGM has the people, culture and strategies
that will enable us to keep innovating and growing
on behalf of our clients, our shareholders and
our communities.
On behalf of the Board of Directors.
Jeffrey R. Carney
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
IGM FINANCIAL INC.
R. Jeffrey Orr
CHAIR OF THE BOARD
IGM FINANCIAL INC.
Forty-seven per cent of our assets reside in mutual
funds rated 4 or 5 stars according to Morningstar
Canada. Our ETF business, which launched just three
and a half years ago, has become the sixth largest in
Canada, with almost $5 billion in assets under
management across 30 products.
We also continued to be a leading voice within the
Canadian asset management industry. Cormex
Research, a third-party media content and analysis
firm, consistently ranked us among the leading
independent and bank-owned firms in earned media
share of voice throughout 2019. As such, we are
defining and shaping the discussions around key
trends and issues in our sector.
Strategic Investments
The strategic investments we have made position us
well for future growth. They also benefit us by allowing
our core businesses to participate in opportunities in
Canada, the US and in the significant growth taking
place in China and within the dynamic and rapidly
emerging fintech sector.
One of last year’s highlights was the additional USD
$50 million investment we made in Personal Capital, a
US online financial advisory and personal wealth
management company. Personal Capital continues to
see significant potential with USD $12 billion in assets
under management, a 57.2% increase year-over-year
and tracked account value of USD $841 billion, a 32%
increase from 2018.
We also made an additional $51.9 million investment
in Wealthsimple Inc., Canada’s largest online
investment management service, as well as a $14.8
million investment in Portage3 Ventures, a fintech
venture capital fund.
Our ongoing investment and growing relationship with
China Asset Management Co., Ltd. (China AMC), a
premier asset management firm in China, allowed us
to continue to benefit from the dynamic market
growth taking place there and provided Mackenzie
12
13
IGM FINANCIAL INC. ANNUAL REPORT 2019 Board of Directors
and Executive Leadership
BOARD OF DIRECTORS
EXECUTIVE LEADERSHIP
Marc A. Bibeau (1,3,4)
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
BEAUWARD REAL ESTATE INC.
Jeffrey R. Carney (4)
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL INC.
IG WEALTH MANAGEMENT
Marcel R. Coutu (3,4)
CORPORATE DIRECTOR
André Desmarais,
O.C., O.Q. (2,3,4)
DEPUTY CHAIRMAN
POWER CORPORATION OF CANADA
Paul Desmarais, Jr.,
O.C., O.Q. (2,3,4)
CHAIRMAN
POWER CORPORATION OF CANADA
Gary Doer (2,4)
SENIOR BUSINESS ADVISOR
DENTONS CANADA LLP
Susan Doniz (1,4)
GROUP CHIEF INFORMATION
OFFICER
QANTAS AIRWAYS LIMITED
Claude Généreux (3,4)
EXECUTIVE VICE-PRESIDENT
POWER CORPORATION OF CANADA
Sharon L. Hodgson (1,4,5)
DEAN
IVEY BUSINESS SCHOOL
Sharon MacLeod (1,3,4,5)
CORPORATE DIRECTOR
Susan J. McArthur (2,3,4)
CORPORATE DIRECTOR
John S. McCallum (1,2,4,5)
PROFESSOR OF FINANCE
UNIVERSITY OF MANITOBA
R. Jeffrey Orr (2,3,4)
CHAIR OF THE BOARD
IGM FINANCIAL INC.
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER CORPORATION OF CANADA
Gregory D. Tretiak,
FCPA, FCA (4)
EXECUTIVE VICE-PRESIDENT
AND CHIEF FINANCIAL OFFICER
POWER CORPORATION OF CANADA
Beth Wilson (4,5)
CHIEF EXECUTIVE OFFICER
DENTONS CANADA LLP
Jeffrey R. Carney
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL
IG WEALTH MANAGEMENT
Barry McInerney
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
MACKENZIE INVESTMENTS
Chris Reynolds
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
INVESTMENT PLANNING COUNSEL
Todd Asman
EXECUTIVE VICE-PRESIDENT,
PRODUCTS & FINANCIAL
PLANNING
IG WEALTH MANAGEMENT
Cynthia Currie
EXECUTIVE VICE-PRESIDENT,
CHIEF HUMAN RESOURCES
OFFICER
IGM FINANCIAL
Michael Dibden
CHIEF OPERATING OFFICER
IGM FINANCIAL
Tony Elavia
EXECUTIVE VICE-PRESIDENT,
CHIEF INVESTMENT OFFICER
MACKENZIE INVESTMENTS
Rhonda Goldberg
EXECUTIVE VICE-PRESIDENT,
GENERAL COUNSEL
IGM FINANCIAL
Luke Gould
EXECUTIVE VICE-PRESIDENT,
CHIEF FINANCIAL OFFICER
IGM FINANCIAL
Mark Kinzel
EXECUTIVE VICE-PRESIDENT,
FINANCIAL SERVICES
IG WEALTH MANAGEMENT
Douglas Milne
EXECUTIVE VICE-PRESIDENT,
CHIEF MARKETING AND
STRATEGY OFFICER
IGM FINANCIAL
Damon Murchison
EXECUTIVE VICE-PRESIDENT,
HEAD OF RETAIL
MACKENZIE INVESTMENTS
Blaine Shewchuk
EXECUTIVE VICE-PRESIDENT,
CHIEF STRATEGY & CORPORATE
DEVELOPMENT OFFICER
IGM FINANCIAL
(1) AUDIT COMMITTEE | Chair: John S. McCallum
(2) GOVERNANCE AND NOMINATING COMMITTEE | Chair: R. Jeffrey Orr
(3) HUMAN RESOURCES COMMITTEE | Chair: Claude Généreux
(4)
INVESTMENT COMMITTEE | Chair: Gregory D. Tretiak
(5) RELATED PARTY AND CONDUCT REVIEW COMMITTEE | Chair: John S. McCallum
P
I
H
S
R
E
D
A
E
L
E
V
I
T
U
C
E
X
E
D
N
A
S
R
O
T
C
E
R
I
D
F
O
D
R
A
O
B
13
12
IGM Highlights
Wealth Management
IGM Financial is well-positioned to meet the needs of Canadians through its two
operating companies focused on wealth management. IG Wealth Management and
Investment Planning Counsel put the client at the centre of everything we do.
Transparent & Simplified Client Experience
IG Wealth Management continued to deliver on its
client-focused commitment by making fees easier to
understand while introducing product and pricing
changes to accelerate asset growth for clients. The IG
Advisory Account (IGAA) is a new fee-based account
offering clients the ability to simplify and consolidate
selected investments into a single account, while
providing them with competitively-priced, unbundled
pricing options. IGAA was available to all clients in
January 2020.
ANIL AND MANJULA
SHARMA
GENERAL MANAGER,
NEW WORLD FRICTION
INVESTMENT PLANNING COUNSEL
CLIENTS SINCE 2000
IG WEALTH MANAGEMENT
Enhancing Canadians’ Financial Well-Being
In 2019, IG Wealth Management introduced several
tools to help bring the IG Living Plan to life, including
the IG Living Plan Snapshot and Assessment.
These proprietary online resources bring together the
company’s expertise and experience in financial
planning, digital technology and data science. The
tools provide an assessment of clients and consumers
financial well-being along with actionable next steps.
Clients also have access to the Retirement Paycheque
which displays the monthly income a client could
expect to receive in retirement based on their
current plan.
Inspiring Financial Confidence
Building on our legacy of giving back, the IG Empower
Your Tomorrow program provides Canadians with the
resources and confidence they need to own their
financial future. The company has identified and is
working with four at-risk groups that stand to benefit
the most from financial guidance; Indigenous peoples,
newcomers, seniors and youth. In the fall of 2019, we
updated and re-launched our Money & Youth
financial literacy textbook and website, which reached
more than 43,000 high school students across
Canada. In addition, the second annual national IG
Wealth Management Walk for Alzheimer’s program
raised more than $6.25 million dollars, a 22% increase
year-over-year. By working with community partners
and organizations – along with IG Consultants,
employees and clients – IG Wealth Management is
building confidence where it matters.
9
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
.
C
N
I
L
A
I
C
N
A
N
I
F
M
G
I
14
HIG H LIG HTS
$97.3 BILLION
TOTAL ASSETS UNDER ADMINISTRATION
$8.7 BILLION
MUTUAL FUND GROSS SALES
$4.6 BILLION
GROSS SALES IN HNW SOLUTIONS
H IG HL IGH TS
$27.7 BILLION
ASSETS UNDER ADMINISTRATION
IG WEALTH MANAGEMENT WINNIPEG CLIENT ADVISORY COUNCIL
CLIENT ADVISORY COUNCILS SHARE THEIR INSIGHTS AND IDEAS WITH SENIOR LEADERSHIP TO ENHANCE THE OVERALL
CLIENT EXPERIENCE AT IG WEALTH MANAGEMENT
INVESTMENT PLANNING COUNSEL
Redefining the Client Experience
Investment Planning Counsel (IPC) enjoyed a strong 2019 with
several initiatives contributing to the firm’s success.
The introduction of an integrated marketing and recruitment
campaign to target and recruit prospective advisors better
positioned IPC as the dealership of choice.
With the success of its 2018 Corporate Branch Pilot Program, the
company expanded the program in 2019 to nine corporate offices
across Canada. The initiative offers advisors the ability to plan their
succession by either transitioning their business to a team that
would care for their clients in the IPC way or by joining the corporate
branch as a corporate advisor.
Also in 2019, IPC’s award-winning Total Client Experience (TCE)
program was simplified, modernized and digitized, making it easier
for IPC advisors to deliver a consistent yet remarkable experience to
every client.
T
N
E
M
E
G
A
N
A
M
H
T
L
A
E
W
|
S
T
H
G
I
L
H
G
I
H
M
G
I
15
IGM Highlights
Asset Management
H IGHL IGHTS
$140.1*
BILLION
TOTAL ASSETS UNDER MANAGEMENT
$1.6 BILLION
ETF NET CREATIONS IN 2018:
5TH HIGHEST IN INDUSTRY
$9.9 BILLION
MUTUAL FUND GROSS SALES
* includes $69.9 billion in advisory fee mandates to IG Wealth
Management mutual funds which are excluded from Mackenzie
Investments' operating segment
PAUL MOWBRAY
CERTIFIED FINANCIAL PLANNER,
INVESTMENT PLANNING COUNSEL
DOING BUSINESS WITH
MACKENZIE INVESTMENTS
SINCE 1988
IGM Financial is committed to
providing innovative and high-quality
investment solutions. Mackenzie
Investments continues to deliver strong
investment performance by drawing
on more than 50 years of experience,
insights and expertise in the asset
management business.
Providing Investors with Innovation and Options
Ongoing product innovation at Mackenzie
Investments contributed to the company’s growth
in 2019 and further complemented its diversified
product offering. With the launch of three new
alternative strategy products in February, Mackenzie
currently offers retail investors five liquid alternative
funds. Further, the firm introduced the Mackenzie
International Dividend Fund and the Mackenzie
Global Growth Balanced Fund, a new multi-asset
solution.
Mackenzie's ETF business continued its impressive
growth with the introduction of several new
offerings, including the Mackenzie Emerging
Markets Local Currency Bond Index ETF, launched in
October and the first of its kind in Canada. In
addition, Mackenzie continues to work with our
partner China Asset Management Corporation
(CAMC) to develop and launch products and
services in both China and Canada.
16
17
IGM FINANCIAL INC. ANNUAL REPORT 2019 Better Together
In 2019, Mackenzie Investments evolved its brand
proposition – Better Together – to more accurately
reflect the company’s commitment to the industry
and to supporting advisors and their clients.
Competitive fees and strong performance are key,
but client trust is essential. When investors,
advisors and Mackenzie Investments work
together, the combined effort makes everyone better
and creates stronger results for clients.
Celebrating 20 Years of Giving Back
Mackenzie Investments has a long history of caring
about the communities where we live and work. The
firm continues to encourage its employees to be
generous through financial contributions and
volunteering. Celebrating our 20th anniversary in 2019,
the Mackenzie Investments Charitable Foundation
is run entirely by employee volunteers and supports
charities across Canada, with a focus on organizations
that support women, children and youth. The
Foundation has donated more than $12 million in
grants to charitable organizations that positively
impact the lives of those in need.
‘’Mackenzie is a trusted
brand for Canadians and
has been for my clients
over the last 25 years."
WENDY CHUI
SENIOR VICE-PRESIDENT AND
INVESTMENT ADVISOR
TD WEALTH, PRIVATE INVESTMENT ADVICE
DOING BUSINESS WITH MACKENZIE
INVESTMENTS SINCE 1994
T
N
E
M
E
G
A
N
A
M
T
E
S
S
A
|
S
T
H
G
I
L
H
G
I
H
M
G
I
17
16
IGM Highlights
Strategic Investments
IGM Financial’s Strategic
Investments diversify our earnings'
sources, expand our capabilities,
and fuel growth opportunities
in key markets and segments.
IGM Financial is one of the largest foreign
investors that participates in the Chinese
domestic asset management industry. Our
investment in China Asset Management
Corporation (CAMC) gives us access to the
second largest economy in the world and
one of the fastest growing wealth markets.
A portfolio of leading fintech firms provides
innovative capabilities to our core businesses
while also providing IGM Financial access to
markets with significant potential for growth.
Our long-term, strategic partnership with
our sister company Great-West Lifeco
provides IGM Financial with meaningful
earnings and cash flow contributions.
CHINA
Founded in 1998 as one of the first fund
management companies in China, China
Asset Management Corporation (CAMC)
has developed and maintained a position
among the market leaders in China’s
asset management industry.
$192.4 CAD
BI LLI ON
ASSETS UNDER
MANAGEMENT
AS AT DECEMBER 31, 2019
17%
AUM GROWTH
YEAR OVER YEAR
13.9%
OWNERSHIP INTEREST
PARTNER
Great-West Lifeco, which is controlled by
Power Financial Corporation, is a financial
services holding company with interests
in the life insurance, health insurance,
retirement savings, investment
management and reinsurance businesses.
$1.2
BI LLI ON
4%
MARKET VALUE
EQUITY INTEREST
18
19
IGM FINANCIAL INC. ANNUAL REPORT 2019 FINTECH
Wealthsimple is Canada’s largest online
investment management service. This
strategic investment offers best-in-class
digital access, innovation, client service
and delivery.
Personal Capital is a leading US digital
wealth manager that has experienced
significant growth since its inception.
$6.3
BILLION
ASSETS UNDER
ADMINISTRATION
AS AT DECEMBER 31, 2019
$841USD
BIL L ION
TRACKED
ACCOUNT VALUE
AS AT DECEMBER 31, 2019
OVER
250,000
CUSTOMERS
57%
AUM GROWTH
YEAR OVER YEAR
24.8%
EQUITY INTEREST
Portag3, a venture capital fund focused
on the financial technology sector, has
holdings in more than two dozen early-
stage financial technology companies,
including Wealthsimple. It is one of only a
few platforms dedicated solely to
investing in financial technology, and its
success points the way for the digital
future of asset and wealth management.
28
UNIQUE INVESTMENTS
S
T
N
E
M
T
S
E
V
N
I
C
I
G
E
T
A
R
T
S
|
S
T
H
G
I
L
H
G
I
H
M
G
I
19
18
Talent and Culture
IGM Financial is a caring company, with a
culture that is rooted in doing what’s best
for its employees and clients every day.
In 2019 we continued on our journey of becoming
one of the best places to work and an employer of
choice for new talent. We know that our ability to
provide industry-leading client experiences is linked
directly to having a workforce that feels engaged,
inspired, valued and respected.
Our people want to play an active role in the
communities where we work and live. This includes
participating in our annual employee-run United
Way Campaign and the Mackenzie Investments
Charitable Foundation, which raise millions for
Canadian charities annually. Our employees also
participate in a number of national sponsorship
programs, such as the IG Wealth Management Walk
for Alzheimer's. In 2019, thousands of IG employees
and family members participated in more than 400
walks across Canada.
It’s for these reasons that we have chosen to focus on
six key strategic areas to drive a best-in-class experience
for employees across the IGM group of companies:
1. STRATEGIC WORKFORCE PLANNING
To strengthen the alignment between our talent and future
business opportunities
2. OPTIMAL ORGANIZATION DESIGN
To better reflect how work is done and ensure we have the skills
and experience in place to service clients' evolving needs
3. EMBED OUR LEARNING AND CULTURE
To ensure our colleagues are growing and achieving
their aspirations
4. CREATING A DIFFERENTIATED TALENT VALUE PROPOSITION
To create better client and talent outcomes
5. ADOPTING A HOLISTIC APPROACH TOWARDS
TOTAL REWARDS
To provide talent with a compelling overall
compensation package
6. HUMAN CAPITAL MANAGEMENT INVESTMENTS
To equip our leaders to make more informed decisions and
enhance the employee experience
ABENA OSEI-KWABENA
SENIOR CLIENT RELATIONS REPRESENTATIVE
MACKENZIE INVESTMENTS
20
21
IGM FINANCIAL INC. ANNUAL REPORT 2019 Significant progress was made across these
pillars in 2019. For example, our team created
an integrated career framework process
across IGM’s group of companies that
harmonized roles and established consistent
talent programs and policies.
We made employee wellness a priority by
ensuring all talent had access to Wellness
Days and also signalled our ongoing
commitment to community engagement by
increasing the number of Volunteer Days
available to IGM’s workforce.
We are looking forward to continuing this
momentum into 2020. Our people are our
strength and a key competitive differentiator.
Our commitment to them is to create an
environment in which they have the
opportunity to thrive.
IG employees join together to
participate in local IG Wealth
Management Walk for Alzheimer’s
Mackenzie Investments employees celebrate 52 years
of history and the launch of a new brand identity
E
R
U
T
L
U
C
D
N
A
T
N
E
L
A
T
M
G
I
21
20
22
PB
IGM FINANCIAL INC. ANNUAL REPORT 2019 FINANCIAL SECTION
MANAGEMENT’S DISCUSSION AND ANALYSIS
IGM Financial Inc.
Summary of Consolidated Operating Results
IG Wealth Management
Review of the Business
Review of Segment Operating Results
Mackenzie Investments
Review of the Business
Review of Segment Operating Results
Corporate and Other
Review of Segment Operating Results
IGM Financial Inc.
Consolidated Financial Position
Consolidated Liquidity and Capital Resources
Risk Management
Outlook
Critical Accounting Estimates and Policies
Disclosure Controls and Procedures
Internal Control Over Financial Reporting
Other Information
FINANCIAL REVIEW
Consolidated Financial Statements
Management’s Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Supplementary Information
Quarterly Review
Ten Year Review
25
36
43
47
54
57
59
62
67
79
81
84
84
85
87
88
90
95
130
132
23
IGM FINANCIAL INC. ANNUAL REPORT 2019 MANAGEMENT’S DISCUSSION AND ANALYSIS
The Management’s Discussion and Analysis (MD&A) presents management’s view of the results of operations and the financial condition
of IGM Financial Inc. (IGM Financial or the Company) as at and for the years ended December 31, 2019 and 2018 and should be read in
conjunction with the audited Consolidated Financial Statements. Commentary in the MD&A as at and for the year ended December 31,
2019 is as of February 14, 2020.
BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
The Consolidated Financial Statements of IGM Financial, which are the basis of the information presented in the Company's MD&A, have
been prepared in accordance with International Financial Reporting Standards (IFRS) and are presented in Canadian dollars (Note 2 of
the Consolidated Financial Statements).
PRINCIPAL HOLDERS OF VOTING SHARES
As at December 31, 2019, Power Financial Corporation (PFC) and Great-West Lifeco Inc. (Lifeco), a subsidiary of PFC, held directly or
indirectly 62.1% and 3.9%, respectively, of the outstanding common shares of IGM Financial.
FORWARD-LOOKING STATEMENTS
Certain statements in this report, other than statements of historical fact, are forward-
looking statements based on certain assumptions and reflect IGM Financial’s current
expectations. Forward-looking statements are provided to assist the reader in understanding
the Company’s financial position and results of operations as at and for the periods ended
on certain dates and to present information about management’s current expectations
and plans relating to the future. Readers are cautioned that such statements may not
be appropriate for other purposes. These statements may include, without limitation,
statements regarding the operations, business, financial condition, expected financial results,
performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies
and outlook of the Company, as well as the outlook for North American and international
economies, for the current fiscal year and subsequent periods. Forward-looking statements
include statements that are predictive in nature, depend upon or refer to future events or
conditions, or include words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”,
“seeks”, “intends”, “targets”, “projects”, “forecasts” or negative versions thereof and other similar
expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”.
This information is based upon certain material factors or assumptions that were applied in
drawing a conclusion or making a forecast or projection as reflected in the forward-looking
statements, including the perception of historical trends, current conditions and expected
future developments, as well as other factors that are believed to be appropriate in the
circumstances. While the Company considers these assumptions to be reasonable based on
information currently available to management, they may prove to be incorrect.
By its nature, this information is subject to inherent risks and uncertainties that may
be general or specific and which give rise to the possibility that expectations, forecasts,
predictions, projections or conclusions will not prove to be accurate, that assumptions may
not be correct and that objectives, strategic goals and priorities will not be achieved.
A variety of material factors, many of which are beyond the Company’s and its subsidiaries’
control, affect the operations, performance and results of the Company, and its subsidiaries,
and their businesses, and could cause actual results to differ materially from current
expectations of estimated or anticipated events or results. These factors include, but are not
limited to: the impact or unanticipated impact of general economic, political and market
factors in North America and internationally, interest and foreign exchange rates, global
equity and capital markets, management of market liquidity and funding risks, changes in
accounting policies and methods used to report financial condition (including uncertainties
associated with critical accounting assumptions and estimates), the effect of applying future
accounting changes, operational and reputational risks, business competition, technological
change, changes in government regulations and legislation, changes in tax laws, unexpected
judicial or regulatory proceedings, catastrophic events, the Company's ability to complete
strategic transactions, integrate acquisitions and implement other growth strategies, and the
Company’s and its subsidiaries’ success in anticipating and managing the foregoing factors.
The reader is cautioned that the foregoing list is not exhaustive of the factors that may affect
any of the Company’s forward-looking statements. The reader is also cautioned to consider
these and other factors, uncertainties and potential events carefully and not place undue
reliance on forward-looking statements.
Other than as specifically required by applicable Canadian law, the Company undertakes no
obligation to update any forward-looking statements to reflect events or circumstances after
the date on which such statements are made, or to reflect the occurrence of unanticipated
events, whether as a result of new information, future events or results, or otherwise.
Additional information about the risks and uncertainties of the Company’s business and
material factors or assumptions on which information contained in forward-looking
statements is based is provided in its disclosure materials, including this Management’s
Discussion and Analysis and its most recent Annual Information Form, filed with the securities
regulatory authorities in Canada, available at www.sedar.com.
NON-IFRS FINANCIAL MEASURES AND ADDITIONAL IFRS MEASURES
Net earnings available to common shareholders, which is an additional measure in
accordance with IFRS, may be subdivided into two components consisting of:
• Adjusted net earnings available to common shareholders; and
• Other items, which include the after-tax impact of any item that management considers
to be of a non-recurring nature or that could make the period-over-period comparison of
results from operations less meaningful.
“Adjusted net earnings available to common shareholders”, “adjusted diluted earnings per
share” (EPS) and “adjusted return on average common equity” (ROE) are non-IFRS financial
measures which are used to provide management and investors with additional measures
to assess earnings performance. These non-IFRS financial measures do not have standard
meanings prescribed by IFRS and may not be directly comparable to similar measures used
by other companies.
“Earnings before interest and taxes” (EBIT), “earnings before interest, taxes, depreciation and
amortization before sales commissions” (EBITDA before sales commissions), and “earnings
before interest, taxes, depreciation and amortization after sales commissions” (EBITDA after sales
commissions) are also non-IFRS financial measures. EBIT, EBITDA before sales commissions
and EBITDA after sales commissions are alternative measures of performance utilized by
management, investors and investment analysts to evaluate and analyze the Company’s results.
The two EBITDA measures have been introduced following the adoption of IFRS 15. EBITDA
before sales commissions excludes all mutual fund sales commissions and is comparable to prior
periods. EBITDA after sales commissions includes all sales commissions and highlights aggregate
cash flows. Other items of a non-recurring nature, or that could make the period-over-period
comparison of results from operations less meaningful, are further excluded to arrive at EBITDA
before sales commissions and EBITDA after sales commissions. These non-IFRS financial
measures do not have standard meanings prescribed by IFRS and may not be directly comparable
to similar measures used by other companies.
“Earnings before income taxes” and “net earnings available to common shareholders” are
additional IFRS measures which are used to provide management and investors with
additional measures to assess earnings performance. These measures are considered
additional IFRS measures as they are in addition to the minimum line items required by IFRS
and are relevant to an understanding of the entity’s financial performance.
Refer to the appropriate reconciliations of non-IFRS financial measures to reported results in
accordance with IFRS in Tables 1 to 4.
24
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS IGM FINANCIAL INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS
IGM Financial Inc. (TSX:IGM) is a leading wealth and asset
management company. The Company’s principal businesses are
Investors Group Inc. and Mackenzie Financial Corporation, each
operating distinctly, primarily within the advice segment of the
financial services market.
IGM Financial’s assets under administration were $190.2 billion
as at December 31, 2019, up 11.8% from $170.1 billion at
December 31, 2018.
Total assets under management were $166.8 billion at
December 31, 2019, the highest level in the history of the
Company, compared with $149.1 billion at December 31,
2018, as detailed in Tables 6 and 7. Average total assets under
management for the year ended December 31, 2019 were
$161.0 billion compared to $156.9 billion in 2018. Average total
assets under management for the fourth quarter of 2019 were
$164.5 billion compared to $153.0 billion in 2018.
Adjusted Net Earnings and Adjusted Net Earnings per Share
For the financial year ($ millions, except per share amounts)
796
3.21
736
728
792
764
3.05
3.02
3.19
3.29
2015
2016
2017
2018
2019
Adjusted Net Earnings
Adjusted Diluted EPS
Adjusted net earnings and adjusted net earnings per share excluded the
following after-tax amounts:
Investment fund assets under management, also at a record
2015 - a charge related to restructuring and other charges.
high, were $161.8 billion at December 31, 2019 compared with
$143.3 billion at December 31, 2018. Average investment fund
assets under management for the year ended December 31,
2019 were $155.5 billion compared to $150.5 billion in 2018.
Average investment fund assets under management for the
fourth quarter of 2019 were $159.5 billion compared to $147.0
billion in 2018.
Net earnings available to common shareholders for the year
ended December 31, 2019 were $746.7 million or $3.12 per share
compared to net earnings available to common shareholders of
2016 - a reduction in income tax estimates related to certain tax filings.
2017 - charges related to restructuring and other, a favourable revaluation of
the Company's pension plan obligation, charges representing the Company's
proportionate share in Great-West Lifeco Inc.'s one-time charges and
restructuring provision.
2018 - charges related to restructuring and other and the premium paid on the
early redemption of debentures.
2019 - the Company’s proportionate share in Great-West Lifeco Inc.’s one-time
charges.
$767.3 million or $3.18 per share in 2018, a decrease of 1.9% in
Other items for the year ended December 31, 2019 consisted of:
earnings per share. Adjusted net earnings available to common
shareholders, excluding other items outlined below, for the year
ended December 31, 2019 were $763.9 million or $3.19 per
share compared to adjusted net earnings available to common
shareholders of $791.8 million or $3.29 per share in 2018, a
decrease of 3.0% in adjusted earnings per share.
Net earnings available to common shareholders for the three
months ended December 31, 2019 were $191.6 million or 80
cents per share compared to net earnings available to common
shareholders of $179.9 million or 75 cents per share for the
• A one-time charge of $9.2 million, recorded in the fourth
quarter, which represented the Company’s proportionate
share in Great-West Lifeco Inc.’s after-tax adjustments related
to the revaluation of a deferred tax asset, restructuring costs
and the net gain on the Scottish Friendly transaction.
• A one-time charge of $8.0 million, recorded in the second
quarter, which represented the Company’s proportionate
share in Great-West Lifeco Inc.’s after-tax loss on the sale of
its United States individual life insurance and annuity business.
comparative period in 2018. Adjusted net earnings available to
Other items for the year ended December 31, 2018 consisted of:
common shareholders, excluding other items outlined below,
for the three months ended December 31, 2019 were $200.8
million or 84 cents per share compared to adjusted net earnings
available to common shareholders of $179.9 million or 75 cents
per share in 2018.
• Restructuring and other charges of $16.7 million after-tax
($22.7 million pre-tax) resulting from the re-engineering of
North American equity offerings and associated personnel
changes, as well as other initiatives to improve the Company’s
offerings and operational effectiveness.
• A premium of $7.8 million after-tax ($10.7 million pre-tax)
paid on the early redemption of the $375 million 7.35%
debentures on August 10, 2018.
25
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS TABLE 1: RECONCILIATION OF NON-IFRS FINANCIAL MEASURES
($ millions)
Adjusted net earnings available to common
shareholders – Non-IFRS measure
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures,
net of tax
Restructuring and other, net of tax
THREE MONTHS ENDED
TWELVE MONTHS ENDED
2019
DEC. 31
2019
SEP. 30
2018
DEC. 31
2019
DEC. 31
2018
DEC. 31
$
200.8
(9.2)
$
202.5
–
$
179.9
–
$
763.9
(17.2)
$
791.8
–
–
–
–
–
–
–
–
–
(7.8)
(16.7)
Net earnings available to common shareholders – IFRS
$
191.6
$
202.5
$
179.9
$
746.7
$
767.3
Adjusted net earnings per share(1) available to
common shareholders – Non-IFRS measure
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures,
net of tax
Restructuring and other, net of tax
Net earnings per share(1) available to
common shareholders – IFRS
EBITDA before sales commissions – Non-IFRS measure
Sales-based commissions paid
EBITDA after sales commissions – Non-IFRS measure
Sales-based commissions paid subject to amortization
Amortization of capitalized sales commissions
Amortization of capital, intangible
and other assets(2)
Interest expense(3)
Adjusted Earnings before income taxes –
Non-IFRS measure
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures
Restructuring and other
Earnings before income taxes
Income taxes
Perpetual preferred share dividends
$
0.84
(0.04)
$
0.85
–
$
0.75
–
$
3.19
(0.07)
$
3.29
–
$
$
–
–
0.80
336.5
(45.2)
291.3
23.5
(6.5)
(19.9)
(27.8)
260.6
(9.2)
–
–
251.4
(59.8)
–
$
$
–
–
0.85
337.1
(38.2)
298.9
16.3
(5.9)
(19.9)
(27.7)
261.7
–
–
–
261.7
(59.2)
–
$
$
–
–
–
–
(0.04)
(0.07)
0.75
$
3.12
$
3.18
296.8
(41.2)
255.6
13.2
(4.3)
(14.4)
(24.1)
226.0
–
–
–
226.0
(43.9)
(2.2)
$ 1,294.0
(165.1)
1,128.9
67.2
(22.4)
(79.5)
(108.4)
985.8
(17.2)
–
–
968.6
(219.7)
(2.2)
$ 1,333.0
(188.5)
1,144.5
55.7
(14.4)
(56.1)
(110.2)
1,019.5
–
(10.7)
(22.7)
986.1
(210.0)
(8.8)
Net earnings available to common shareholders – IFRS
$
191.6
$
202.5
$
179.9
$
746.7
$
767.3
(1) Diluted earnings per share.
(2) Amortization expense includes amortization on capital assets and intangible assets and in 2019 also includes amortization on right-of-use assets as a result of the Company's
adoption of IFRS 16, Leases (fourth quarter - $6.0 million; third quarter - $6.0 million; 2019 - $23.5 million).
(3) Interest expense includes interest on long-term debt and in 2019 also includes interest on leases as a result of the Company's adoption of IFRS 16, Leases (fourth quarter -
$1.0 million; third quarter - $1.0 million; 2019 - $4.1 million).
Shareholders’ equity was $4.5 billion at December 31, 2019,
2019 DEVELOPMENTS
compared to $4.6 billion at December 31, 2018. Return on
average common equity based on adjusted net earnings for
the year ended December 31, 2019 was 17.2%, compared
with 18.2% for the comparative period in 2018. The quarterly
dividend per common share was 56.25 cents in 2019,
unchanged from the end of 2018.
TRANSFORMATION ACTIVITIES
IGM Financial has previously announced a five-year
transformation to modernize its digital platforms and
technology infrastructure to enable the company to enhance
operations, achieve efficiencies and further improve the service
experience for its clients. As part of this transformation effort,
we announced two initiatives during the year:
26
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
• IGM Financial has selected CIBC Mellon to assume most of
Non-commission expense in 2019 was $3.8 million lower
its fund services functions. This will add fund administration
and interest expense was $4.1 million higher as a result of the
servicing solutions to the custody and related services that
adoption of IFRS 16. If IFRS 16 had been applied retrospectively,
CIBC Mellon already performed for the Company.
non-commission expense in 2018 would have been $0.5 million
• We have chosen Google Cloud to manage our data platform. We
lower and interest expense $4.1 million higher.
are among the first major Canadian financial services companies
to move SAP applications and data to the Google Cloud Platform.
The migration of the firm’s data to a cloud-based environment
will enhance operational efficiencies through greater
productivity and business agility, and enhanced service levels.
CAPITAL MANAGEMENT ACTIVITIES
IFRS 16 impacted EBITDA as the expenses are now categorized
as amortization and interest expenses, which are excluded from
EBITDA. Previously, the cash payments were expensed and
included within EBITDA.
In 2019, EBITDA before sales commissions increased by $27.3
million to $1,294.0 million as a result of IFRS 16. If IFRS 16 had
IGM Financial initiated a number of capital and liquidity
been applied retroactively, EBITDA before sales commission in
transactions in 2019, including:
2018, would have increased by $22.9 million to $1,355.9 million.
• The issuance of $250.0 million 4.206% debentures maturing on
March 21, 2050.
REPORTABLE SEGMENTS
• Part of the proceeds from the issuance of the $250.0 million
IGM Financial's reportable segments are:
debentures was used to fund the redemption of the $150.0
million issued and outstanding 5.90% Non-Cumulative First
Preferred Shares, Series B on April 30, 2019.
• The Company purchased 2,762,788 shares at a cost of
$100 million.
In April 2019, the Company participated on a proportionate
basis in the Great-West Lifeco (Lifeco) substantial issuer bid
by selling 2,400,255 of its shares for proceeds of $80.4 million.
The Company’s 4% interest in Lifeco remains substantially
unchanged.
PERSONAL CAPITAL
In January 2019, the Company made an additional investment
in Personal Capital Corporation (Personal Capital) of $66.8
million resulting in the reclassification of $217.0 million on the
Consolidated Balance Sheet from Corporate investments to
Investments in associates. As a result, the Company now uses
• IG Wealth Management (IG Wealth Management or IG)
• Mackenzie Investments (Mackenzie Investments or
Mackenzie)
• Corporate and Other
These segments, as shown in Tables 2, 3 and 4 reflect the
Company’s internal financial reporting and performance
measurement.
Certain items reflected in Tables 2, 3, and 4 are not allocated
to segments:
• Interest expense – represents interest expense on long-term
debt and, in 2019 also includes interest expense on leases
as a result of the adoption of IFRS 16, Leases. The change in
interest expense in the period also resulted from the impact
of the following transactions:
– The redemption of $150 million 6.58% debentures on
the equity method of accounting for its 24.8% equity interest in
March 7, 2018;
Personal Capital.
– The issuance of $200 million 4.174% debentures on
July 11, 2018;
ADOPTION OF IFRS 16 LEASES
– The early redemption of $375 million 7.35% debentures on
On January 1, 2019, the Company adopted IFRS 16, Leases,
August 10, 2018, and;
which resulted in recognition of a right-of-use asset related
to the Company’s property leases and a corresponding lease
obligation. Previously, the Company expensed total lease
payments in non-commission expense. Under IFRS 16, lease
related expenses are recognized as amortization in non-
commission expense and interest in interest expense (Note 2 to
the Consolidated Financial Statements).
The adoption of IFRS 16 resulted in a change to timing of
– The issuance of $250 million 4.206% debentures on March
20, 2019.
• 2019 Proportionate share of associate's one-time charges –
consisted of:
– $9.2 million representing the Company’s proportionate
share in Great-West Lifeco Inc.’s after-tax adjustments,
recorded in the fourth quarter, related to the revaluation of
a deferred tax asset, restructuring costs and the net gain on
non-commission expenses but had no effect on cash flows of
the Scottish Friendly transaction.
the Company.
27
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS TABLE 2: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q4 2019 VS. Q4 2018
THREE MONTHS ENDED
($ millions)
2019
2018
2019
2018
2019
2018
2019
2018
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
IG WEALTH MANAGEMENT MACKENZIE INVESTMENTS
CORPORATE & OTHER
TOTAL
Revenues
Fee income
Net investment income and other
Expenses
Commission
Non-Commission(1)
$ 501.0
16.8
$
477.0 $
11.0
517.8
488.0
159.6
151.9
311.5
156.3
159.6
315.9
207.3
0.6
207.9
73.9
92.6
69.7
86.9
44.8
21.5
66.3
46.4
22.5
68.9
166.5
156.6
$
$
195.1
(3.1)
$
70.5
36.5
71.6 $
39.9
192.0
107.0
111.5
$
778.8
53.9
832.7
743.7
47.8
791.5
Earnings before interest and taxes
$ 206.3
$
172.1 $
41.4
$
35.4
$
40.7
$
42.6
Interest expense(2)
Proportionate share of associate's one time charges
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
Net earnings available to common shareholders
Adjusted net earnings available to common shareholders(3)
278.3
266.0
544.3
288.4
(27.8)
(9.2)
251.4
59.8
191.6
–
272.4
269.0
541.4
250.1
(24.1)
–
226.0
43.9
182.1
2.2
179.9
179.9
$
191.6
$
200.8
$
$
(1) The Company’s investment management functions reside at Mackenzie Investments and the cost of investment management activities is allocated proportionately between
the segments.
(2) Interest expense includes interest on long-term debt and in 2019 also includes interest on leases of $1.0 million as a result of the Company's adoption of IFRS 16, Leases.
(3) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company's use of non-IFRS financial measures.
2019 adjusted net earnings excluded the proportionate share of associate's one-time charges of $9.2 million, which was recorded in Proportionate share of associates' earnings in
the Consolidated Statements of Earnings.
– $8.0 million representing the Company’s proportionate
• Income taxes – changes in the effective tax rates are shown in
share in Great-West Lifeco Inc.’s after-tax loss, recorded
Table 5.
in the second quarter, on the sale of its United States
individual life insurance and annuity business.
Tax planning may result in the Company recording lower
levels of income taxes. Management monitors the status of its
• 2018 Premium paid on early redemption of debentures –
income tax filings and regularly assesses the overall adequacy
represents the premium paid on the early redemption of the
of its provision for income taxes and, as a result, income
$375 million 7.35% debentures on August 10, 2018.
taxes recorded in prior years may be adjusted in the current
• 2018 Restructuring and other – $22.7 million ($16.7 million
after-tax) recorded in the third quarter resulted from the
re-engineering of North American equity offerings and
associated personnel changes, as well as other initiatives
to improve the Company’s offerings and operational
effectiveness.
year. The effect of changes in management's best estimates
reported in adjusted net earnings is reflected in Other items,
which also includes, but is not limited to, the effect of lower
effective income tax rates on foreign operations.
• Perpetual preferred share dividends – represents the dividends
declared on the Company’s 5.90% non-cumulative first
preferred shares. The decrease in the preferred share
dividends reflects the redemption of the $150.0 million in
preferred shares on April 30, 2019.
28
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 3: CONSOLIDATED OPERATING RESULTS BY SEGMENT – YTD 2019 VS. YTD 2018
TWELVE MONTHS ENDED
2019
2018
2019
2018
2019
2018
2019
2018
($ millions)
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
IG WEALTH MANAGEMENT MACKENZIE INVESTMENTS
CORPORATE & OTHER
TOTAL
Revenues
Fee income
Net investment income and other
Expenses
Commission
Non-Commission(1)
$ 1,958.8
56.2
$ 1,940.0 $
46.7
2,015.0
1,986.7
628.8
615.9
623.4
597.3
1,244.7
1,220.7
807.6
4.2
811.8
292.9
350.4
643.3
$
806.5
(1.9)
$ 284.0
139.0
$
290.7 $ 3,050.4
199.4
167.1
$ 3,037.2
211.9
804.6
423.0
457.8
3,249.8
3,249.1
291.1
335.1
626.2
179.5
88.1
267.6
184.2
88.3
1,101.2
1,054.4
1,098.7
1,020.7
272.5
2,155.6
2,119.4
Earnings before interest and taxes
$ 770.3
$
766.0 $
168.5
$
178.4
$ 155.4
$
185.3
1,094.2
1,129.7
Interest expense(2)
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures
Restructuring and other
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
Net earnings available to common shareholders
Adjusted net earnings available to common shareholders(3)
(108.4)
(17.2)
–
–
968.6
219.7
748.9
2.2
$
746.7
$
763.9
$
$
(110.2)
–
(10.7)
(22.7)
986.1
210.0
776.1
8.8
767.3
791.8
(1) The Company’s investment management functions reside at Mackenzie Investments and the cost of investment management activities is allocated proportionately between
the segments.
(2) Interest expense includes interest on long-term debt and in 2019 also includes interest on leases of $4.1 million as a result of the Company's adoption of IFRS 16, Leases.
(3) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company's use of non-IFRS financial measures.
Adjusted net earnings exclude other items as follows:
– 2019 – Proportionate share of associate's one-time charges of $17.2 million, which was recorded in Proportionate share of associates' earnings in the Consolidated Statements
of Earnings.
– 2018 – Premium paid on early redemption of debentures of $10.7 million ($7.8 million after-tax), which was recorded in Interest expense in the Consolidated Statements
of Earnings.
– Restructuring and other charges of $22.7 million ($16.7 million after tax), which was recorded in Commission and Non-commission expenses in the Consolidated
Statements of Earnings.
29
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 4: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q4 2019 VS. Q3 2019
THREE MONTHS ENDED
($ millions)
2019
DEC. 31
2019
SEP. 30
2019
DEC. 31
2019
SEP. 30
2019
DEC. 31
2019
SEP. 30
2019
DEC. 31
IG WEALTH MANAGEMENT MACKENZIE INVESTMENTS
CORPORATE & OTHER
TOTAL
2019
SEP. 30
Revenues
Fee income
Net investment income and other
Expenses
Commission
Non-Commission(1)
$ 501.0
16.8
$
492.9 $
15.8
517.8
508.7
159.6
151.9
311.5
154.7
148.2
302.9
207.3
0.6
207.9
73.9
92.6
73.0
84.2
44.8
21.5
66.3
44.7
21.9
66.6
166.5
157.2
$
$
205.0
(1.4)
$
70.5
36.5
71.7 $
32.1
203.6
107.0
103.8
$
778.8
53.9
832.7
769.6
46.5
816.1
Earnings before interest and taxes
$ 206.3
$
205.8 $
41.4
$
46.4
$
40.7
$
37.2
Interest expense(2)
Proportionate share of associate's one-time charges
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
Net earnings available to common shareholders
Adjusted net earnings available to common shareholders(3)
278.3
266.0
544.3
288.4
(27.8)
(9.2)
251.4
59.8
191.6
–
272.4
254.3
526.7
289.4
(27.7)
–
261.7
59.2
202.5
–
202.5
202.5
$
191.6
$
200.8
$
$
(1) The Company’s investment management functions reside at Mackenzie Investments and the cost of investment management activities is allocated proportionately between
the segments.
(2) Interest expense includes interest on long-term debt and interest on leases as a result of the Company's adoption of IFRS 16, Leases (fourth quarter - $1.0 million;
third quarter - $1.0 million)
(3) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company's use of non-IFRS financial measures.
Fourth quarter adjusted net earnings excluded the proportionate share of associate's one-time charges of $9.2 million, which was recorded in Proportionate share of associates'
earnings in the Consolidated Statements of Earnings.
TABLE 5: EFFECTIVE INCOME TAX RATE
Income taxes at Canadian federal and
provincial statutory rates
Effect of:
Proportionate share of associates’ earnings
Tax loss consolidation(1)
Other items
Effective income tax rate – adjusted net earnings
Proportionate share of associate’s one-time charges
THREE MONTHS ENDED
TWELVE MONTHS ENDED
2019
DEC. 31
2019
SEP. 30
2018
DEC. 31
2019
DEC. 31
2018
DEC. 31
26.76 %
26.75 %
26.83 %
26.77 %
26.81 %
(3.43)
(1.36)
0.83
22.80
0.99
(2.89)
(1.32)
0.09
22.63
–
(3.79)
(1.56)
(2.07)
19.41
–
(3.31)
(1.41)
0.15
22.20
0.48
(3.79)
(1.40)
(0.33)
21.29
–
Effective income tax rate – net earnings
23.79 %
22.63 %
19.41 %
22.68 %
21.29 %
(1) See Note 26 - Related Party Transactions of the Consolidated Financial Statements included in the 2019 IGM Financial Inc. Annual Report (Annual Financial Statements).
30
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARY OF CHANGES IN TOTAL ASSETS
UNDER MANAGEMENT AND ADMINISTRATION
December 31, 2018, an increase of 11.9%. Changes in assets under
management and administration are detailed in Tables 6 and 7.
Assets under administration were $190.2 billion at December
31, 2019 compared to $170.1 billion at December 31, 2018, an
increase of 11.8%. Total assets under management were $166.8
billion at December 31, 2019 compared to $149.1 billion at
Changes in assets under management for IG Wealth
Management and Mackenzie Investments are discussed further
in each of their respective Review of the Business sections in
the MD&A.
TABLE 6: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – Q4 2019 VS. Q4 2018(1)
IG WEALTH
MANAGEMENT
MACKENZIE
INVESTMENT
INVESTMENTS
PLANNING COUNSEL
INTERCOMPANY
ELIMINATIONS(2)
CONSOLIDATED
THREE MONTHS ENDED
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
($ millions)
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
Investment funds
Mutual funds(3)(4)
Gross sales
Net sales
ETFs
Net creations
$ 2,251
(247)
$ 2,118 $ 2,587
18
(125)
$ 2,328 $
(146)
$
147
(114)
229 $
(65)
$
–
–
– $ 4,985
(343)
–
$ 4,675
(336)
Inter-product eliminations(2)
Total investment
fund net sales
Sub-advisory, institutional
and other accounts
Net sales
–
–
–
–
646
(399)
137
(82)
–
–
–
–
–
(45)
–
56
646
(444)
137
(26)
(247)
(125)
265
(91)
(114)
(65)
(45)
56
(141)
(225)
–
–
(86)
(224)
–
–
14
75
(72)
(149)
Combined net sales
$
(247) $
(125) $
179
$
(315) $
(114) $
(65) $
(31) $
131 $
(213) $
(374)
Change in total assets
under management
Net sales
Investment returns
$
(247) $
2,629
(125) $
(5,730)
179
1,755
$
(315) $
(4,304)
(114) $
140
Net change in assets
Beginning assets
2,382
90,779
(5,855)
88,992
1,934
68,271
(4,619)
67,347
26
5,365
(65) $
(342)
(407)
5,532
(31) $
(39)
131 $
102
(213) $
4,485
(374)
(10,274)
(70)
(1,879)
233
(2,157)
4,272
162,536
(10,648)
159,714
Ending assets
$ 93,161
$ 83,137 $ 70,205
$ 62,728 $ 5,391
$ 5,125 $ (1,949) $
(1,924) $ 166,808
$ 149,066
Total assets under
management consists of:
Investment funds
Mutual funds(3)
ETFs
Inter-product eliminations(2)
$ 93,161
–
–
$ 83,137 $ 60,838
4,749
(1,596)
–
–
$ 53,407 $ 5,391
–
–
2,949
(848)
$ 5,125 $
–
–
Total investment funds
Sub-advisory, institutional
93,161
83,137
63,991
55,508
5,391
5,125
$
–
–
(780)
(780)
– $ 159,390
4,749
–
(2,376)
(488)
$ 141,669
2,949
(1,336)
(488)
161,763
143,282
and other accounts
–
–
6,214
7,220
–
–
(1,169)
(1,436)
5,045
5,784
Ending assets
$ 93,161
$ 83,137 $ 70,205
$ 62,728 $ 5,391
$ 5,125 $ (1,949) $
(1,924) $ 166,808
$ 149,066
Assets under
administration(1)
$ 97,277
$ 86,287 $ 70,205
$ 62,728 $ 27,728
$ 25,706 $ (4,972) $
(4,633) $ 190,238
$ 170,088
(1) Assets under management consists of assets in the Company's funds and pools. Assets under administration consists of assets in Client accounts administered by the Company.
(2) Consolidated results eliminate double counting where business is reflected within multiple segments:
– Included with Mackenzie's results were advisory mandates to other segments with assets of $1.9 billion at December 31, 2019 (2018 - $1.9 billion) and net redemptions of
$31 million for the fourth quarter of 2019 (2018 - net sales of $131 million).
– Included in ETFs are mutual fund investments in ETFs totalling $1.6 billion at December 31, 2019 (2018 - $848 million) and net sales of $399 million in the three months
ending December 31, 2019 (2018 - $82 million).
(3) IG Wealth Management and Investment Planning Counsel AUM and net sales include separately managed accounts.
(4) During the fourth quarter of 2019, institutional clients which include Mackenzie mutual funds within their investment offerings made fund allocation changes which resulted in
sales of $129 million, redemptions of $165 million and net redemptions of $36 million.
31
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 7: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – 2019 VS. 2018(1)
IG WEALTH
MANAGEMENT
MACKENZIE
INVESTMENT
INVESTMENTS
PLANNING COUNSEL
INTERCOMPANY
ELIMINATIONS(2)
CONSOLIDATED
TWELVE MONTHS ENDED
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
($ millions)
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
DEC. 31
Investment funds
Mutual funds(3)(4)
Gross sales
Net sales
ETFs
Net creations
Inter-product eliminations(2)
Total investment
$ 8,723
$ 9,075 $ 9,886
$ 9,951 $
694
$
960 $
(1,089)
485
512
113
(272)
(18)
–
–
–
–
1,559
1,799
(655)
(530)
–
–
–
–
–
–
–
$
– $ 19,303
$ 19,986
–
–
(849)
580
1,559
1,799
(197)
(407)
(852)
(937)
fund net sales
(1,089)
485
1,416
1,382
(272)
(18)
(197)
(407)
(142)
1,442
Sub-advisory, institutional
and other accounts(5)
Net sales
–
–
(1,894)
(487)
–
–
403
(117)
(1,491)
(604)
Combined net sales
$ (1,089) $
485 $
(478) $
895 $
(272) $
(18) $
206
$
(524) $ (1,633) $
838
Change in total assets
under management
Net sales
$ (1,089) $
485 $
(478) $
895 $
(272) $
(18) $
206
$
(524) $ (1,633) $
838
Investment returns
11,113
(5,356)
7,955
(2,676)
538
(234)
(231)
(19)
19,375
(8,285)
Net change in assets
10,024
(4,871)
7,477
(1,781)
Beginning assets
83,137
88,008
62,728
64,509
266
5,125
(252)
5,377
(25)
(543)
17,742
(7,447)
(1,924)
(1,381)
149,066
156,513
Ending assets
$ 93,161
$ 83,137 $ 70,205
$ 62,728 $ 5,391
$ 5,125 $ (1,949) $
(1,924) $ 166,808
$ 149,066
Assets under
administration(1)
$ 97,277
$ 86,287 $ 70,205
$ 62,728 $ 27,728
$ 25,706 $ (4,972) $
(4,633) $ 190,238
$ 170,088
(1) Assets under management consists of assets in the Company's funds and pools. Assets under administration consists of assets in Client accounts administered by the Company.
(2) Consolidated results eliminate double counting where business is reflected within multiple segments:
– Included with Mackenzie's results were advisory mandates to other segments with assets of $1.9 billion at December 31, 2019 (2018 - $1.9 billion) and net redemptions of
$206 million for the twelve months ending December 31, 2019 (2018 - net sales of $524 million).
– Included in ETFs are mutual fund investments in ETFs totalling $1.6 billion at December 31, 2019 (2018 - $848 million) and net sales of $655 million for the twelve months
ending December 31, 2019 (2018 - $530 million).
(3) IG Wealth Management and Investment Planning Counsel total AUM and net sales include separately managed accounts.
(4) During 2019, institutional clients which include Mackenzie mutual funds within their investment offerings made fund allocation changes which resulted in sales of $129 million,
redemptions of $165 million and net redemptions of $36 million.
During 2018, institutional clients which include Mackenzie mutual funds within their investment offerings made fund allocation changes which resulted in sales of $409 million,
redemptions of $807 million and net redemptions of $398 million.
(5) During the third quarter of 2019, MD Financial Management reassigned sub-advisory responsibilities totalling $1.2 billion on mandates advised upon by Mackenzie.
32
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
SELECTED ANNUAL INFORMATION
Financial information for the three most recently completed
years is included in Table 8.
Net Earnings and Earnings per Share – Except as noted in the
reconciliation in Table 8, variations in net earnings and total
revenues result primarily from changes in average daily mutual
fund assets under management. Investment fund assets under
management were $149.8 billion in 2017, decreased to $143.3
billion in 2018 and increased to $161.8 billion in 2019, driven
largely by changes in financial markets during the period.
Average investment fund assets under management for the
year ended December 31, 2019 were $155.5 billion compared
to $150.5 billion in 2018. The impact on earnings and revenues
of changes in average daily investment fund assets under
Total assets under management at December 31, 2019 were
$166.8 billion and included investment fund assets under
management totalling $161.8 billion. Net earnings in future
periods will largely be determined by the level of investment
fund assets which will continue to be influenced by global
market conditions.
Dividends per Common Share – Annual dividends per common
share were $2.25 in 2019, unchanged from 2018 and 2017.
SUMMARY OF QUARTERLY RESULTS
The Summary of Quarterly Results in Table 9 includes the
eight most recent quarters and the reconciliation of non-IFRS
financial measures to net earnings in accordance with IFRS.
management and other pertinent items are discussed in the
Changes in average daily investment fund assets under
Review of Segment Operating Results sections of the MD&A for
management over the eight most recent quarters, as shown in
both IG Wealth Management and Mackenzie.
Table 9, largely reflect the impact of changes in domestic and
foreign markets and net sales of the Company.
33
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 8: SELECTED ANNUAL INFORMATION
Consolidated statements of earnings ($ millions)
Revenues
Fee income
Net investment income and other
Expenses
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures
Restructuring and other
Pension plan
Proportionate share of associate’s provision
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
2019
2018
2017
$ 3,050.4
199.4
$ 3,037.2
211.9
$ 3,005.7
167.3
3,249.8
2,264.0
985.8
(17.2)
–
–
–
–
968.6
219.7
748.9
2.2
3,249.1
2,229.6
1,019.5
–
(10.7)
(22.7)
–
–
986.1
210.0
776.1
8.8
3,173.0
2,224.4
948.6
(14.0)
–
(195.3)
50.4
(5.1)
784.6
173.9
610.7
8.8
Net earnings available to common shareholders
$
746.7
$
767.3
$
601.9
Reconciliation of Non-IFRS financial measures(1) ($ millions)
Adjusted net earnings available to common shareholders – non-IFRS measure
Other items:
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures, net of tax
Restructuring and other, net of tax
Pension plan, net of tax
Proportionate share of associate’s provision
$
763.9
$
791.8
$
727.8
(17.2)
–
–
–
–
–
(7.8)
(16.7)
–
–
(14.0)
–
(143.6)
36.8
(5.1)
Net earnings available to common shareholders – IFRS
$
746.7
$
767.3
$
601.9
Earnings per share ($)
Adjusted net earnings available to common shareholders(1)
– Basic
– Diluted
Net earnings available to common shareholders
– Basic
– Diluted
Dividends per share ($)
Common
Preferred, Series B
$
3.19
3.19
3.12
3.12
$
2.25
0.37
$
$
3.29
3.29
3.19
3.18
2.25
1.48
$
$
3.03
3.02
2.50
2.50
2.25
1.48
Average daily investment fund assets ($ millions)
$ 155,532
$ 150,502
$ 143,735
Total investment fund assets under management ($ millions)
$ 161,763
$ 143,282
$ 149,819
Total assets under management ($ millions)
Total assets under administration ($ millions)
Total corporate assets ($ millions)
Total long-term debt ($ millions)
Outstanding common shares (thousands)
$ 166,808
$ 149,066
$ 156,513
$ 190,238
$ 170,088
$ 179,081
$ 15,391
$
2,100
$
$
15,609
1,850
$
$
16,499
2,175
238,294
240,885
240,666
(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in addition to the Summary of Consolidated Operating Results section included in this MD&A for an explanation
of Other items used to calculate the Company's Non-IFRS financial measures.
34
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 9: SUMMARY OF QUARTERLY RESULTS
Consolidated statements of earnings ($ millions)
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Expenses
Commission
Non-commission
Interest(1)
Earnings before undernoted
Proportionate share of associate’s one-time charges
Premium paid on early redemption of debentures
Restructuring and other
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
2019
Q4
2019
Q3
2019
Q2
2019
Q1
2018
Q4
2018
Q3
2018
Q2
2018
Q1
$ 581.2 $ 574.0 $ 567.5 $ 545.2 $ 546.0 $ 573.8 $ 562.8 $ 556.6
107.6
93.3
52.1
101.7
89.3
52.9
104.5
91.1
46.5
104.2
93.4
53.9
104.1
94.2
46.1
103.3
94.4
47.8
109.1
93.3
55.8
107.1
89.9
56.2
832.7
816.1
811.9
789.1
791.5
832.0
816.0
809.6
278.3
266.0
27.8
572.1
260.6
(9.2)
–
–
251.4
59.8
191.6
–
272.4
254.3
27.7
554.4
261.7
–
–
–
261.7
59.2
202.5
–
275.8
259.7
27.7
274.7
274.4
25.2
563.2
574.3
248.7
(8.0)
–
–
240.7
55.6
185.1
–
214.8
–
–
–
214.8
45.1
169.7
2.2
272.4
269.0
24.1
565.5
226.0
–
–
–
226.0
43.9
182.1
2.2
270.1
245.9
27.0
543.0
289.0
–
(10.7)
(22.7)
255.6
55.2
200.4
2.2
270.1
252.7
28.8
551.6
264.4
–
–
–
264.4
58.5
205.9
2.2
286.1
253.1
30.3
569.5
240.1
–
–
–
240.1
52.4
187.7
2.2
Net earnings available to common shareholders
$ 191.6 $ 202.5 $ 185.1
$ 167.5 $ 179.9 $ 198.2 $ 203.7 $ 185.5
Reconciliation of Non-IFRS financial measures(2) ($ millions)
Adjusted net earnings available to common
shareholders – non-IFRS measure
Other items:
Proportionate share of associate’s
$ 200.8 $ 202.5 $ 193.1 $ 167.5 $ 179.9 $ 222.7 $ 203.7 $ 185.5
one-time charges
Premium paid on early redemption of
debentures, net of tax
Restructuring and other, net of tax
Net earnings available to common
shareholders – IFRS
Earnings per Share (¢)
Adjusted net earnings available to
common shareholders(1)
– Basic
– Diluted
Net earnings available to common shareholders
– Basic
– Diluted
(9.2)
–
–
–
–
–
(8.0)
–
–
–
–
–
–
–
–
–
(7.8)
(16.7)
–
–
–
–
–
–
$ 191.6 $ 202.5 $ 185.1 $ 167.5 $ 179.9 $ 198.2 $ 203.7 $ 185.5
84
84
80
80
85
85
85
85
81
81
77
77
70
70
70
70
75
75
75
75
92
92
82
82
85
85
85
85
77
77
77
77
Average daily investment fund assets ($ billions)
$ 159.5 $ 156.8 $ 155.7 $ 149.9 $ 147.0 $ 154.0 $ 150.9 $ 150.1
Total investment fund assets under
management ($ billions)
$ 161.8 $ 157.6 $ 156.3 $ 154.3 $ 143.3 $ 153.4 $ 152.5 $ 149.2
Total assets under management ($ billions)
$ 166.8 $ 162.5 $ 162.3 $ 160.5 $ 149.1 $ 159.7 $ 159.1 $ 155.8
Assets under administration ($ billions)
$ 190.2 $ 185.1 $ 184.7 $ 182.8 $ 170.1 $ 182.6 $ 181.6 $ 177.9
(1) Interest expense includes interest on long-term debt and in 2019 also includes interest on leases as a result of the Company's adoption of IFRS 16, Leases.
(2) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A in addition to the Summary of Consolidated Operating Results section included in the MD&A of
the 2019 IGM Financial Inc. Annual Report for an explanation of Other items used to calculate the Company's Non-IFRS financial measures.
35
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
IG WEALTH MANAGEMENT
REVIEW OF THE BUSINESS
IG Wealth Management provides a broad range of financial and
investment planning services to Canadians through its exclusive
Fee Income – IG Wealth Management
For the financial year ($ millions)
network of Consultants across the country.
Fee income is primarily generated from the management,
administration and distribution of IG Wealth Management mutual
funds and the provision of advisory services to our clients.
Fee income is also earned from the distribution of insurance,
securities and other financial services.
Additional revenue is derived from net investment income and
other income, primarily related to our mortgage business.
Revenues depend largely on the level and composition of mutual
fund assets under management. The comprehensive planning
approach, provided by our Consultants through the broad
range of financial products and services offered by IG Wealth
Management, has resulted in a mutual fund redemption rate
lower than the industry average.
1,776
1,833
1,927
1,940
1,959
2015
2016
2017
2018
2019
2019 DEVELOPMENTS
FEE TRANSPARENCY FOR ALL CLIENTS AND PRICING
encourage consolidation of our clients’ assets with IG Wealth
CHANGES
Management and to increase the competitiveness of our products
IG Wealth Management is delivering on its client-focused
to attract new clients. On March 1, 2019, IG Wealth Management
commitment by expanding fee transparency while introducing
enhanced the competitiveness of pricing to households with over
product and pricing changes to accelerate growth.
$1 million in assets with IG Wealth Management through advisory
The company has also introduced more competitive pricing to
IG Wealth Management is increasing fee transparency by making
unbundled solutions available to all client segments in the fourth
fee reductions across multiple client segments.
quarter of 2019. Previously, these solutions have been available
IG WEALTH MANAGEMENT STRATEGY
only to high net worth clients. Under unbundled solutions, clients
IG Wealth Management’s promise is to inspire financial confidence.
pay an advisory fee to the dealer for its services as opposed
to dealer compensation being bundled within mutual fund
management fees. Prior to this change, IG’s unbundled fee option
(Series U and Series I) had been limited to high net worth clients
and had represented over 80% of high net worth client gross
sales year to date. Over the next year, our Consultants will be
migrating clients to unbundled solutions. To facilitate the move to
unbundled fee options, IG Wealth Management also introduced
the IG Advisory Account (IGAA) in the fourth quarter of 2019.
IGAA is a fee-based account that improves fee transparency by
offering the ability to simplify and consolidate investments into a
single account while providing all of our clients with unbundled
pricing solutions. IGAA accounts can hold both IG Wealth
Our strategic mandate is to be Canada’s financial partner of
choice.
Our value proposition is to deliver better Gamma, better Beta and
better Alpha:
• Gamma – the value of all efforts that sit outside of investment
portfolio construction. This includes the value that a financial
advisor adds to a client relationship, and comes from the
creation and follow through of a well-constructed financial plan.
• Beta – the value created by well-constructed investment
portfolios – achieving expected investment returns for the
lowest possible risk.
Management and eligible external assets. IG Wealth Management
• Alpha – the value of active management – achieving returns
earns fees from these external assets while also compensating its
superior to passive benchmarks with a similar composition
Consultants on these assets.
and risk profile.
36
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS We seek to deliver our value proposition through:
Superior Advice
• Superior Advice – Acquiring a deep knowledge of Canadian
investors and using those insights to shape everything we do.
• Segmented Client Experiences – Creating segmented
experiences personalized throughout our clients’ lifetimes.
• Entrepreneurial Advisors – Inspiring our entrepreneurial
advisors to constantly deliver an engaging experience and a
holistic plan that seeks to deliver superior outcomes.
• Powerful Financial Solutions – Providing our clients with a
comprehensive suite of well-constructed, high-performing
and competitively priced solutions.
• Business processes that are simple, easy and digitized –
Re-designing client and advisor interactions to simplify
processes, reduce errors, and digitize the experience with an
appropriate cost structure.
• Enabled by a high-performing and diverse culture.
GAMMA
THE VALUE OF ALL EFFORTS THAT SIT OUTSIDE OF INVESTMENT PORTFOLIO
CONSTRUCTION. THIS INCLUDES THE VALUE THAT A FINANCIAL ADVISOR ADDS
TO A CLIENT RELATIONSHIP, AND COMES FROM THE CREATION AND FOLLOW
THROUGH OF A WELL-CONSTRUCTED FINANCIAL PLAN.
Entrepreneurial Advisors
IG Wealth Management has a national distribution network of
Consultants based in region offices across Canada.
The following provides a breakdown of the IG Wealth
Management Consultant network into its significant components
at December 31, 2019:
• 1,759 Consultant practices (1,973 at December 31, 2018),
which reflect Consultants with more than four years of IG
Wealth Management experience. These practices may include
Associates as described below. The level and productivity of
Consultant practices is a key measurement of our business as
they serve clientele representing approximately 95% of AUM.
IG Wealth Management requires all Consultants with more than
four years of experience to have or be enrolled to achieve the
Certified Financial Planner (CFP) or its Quebec equivalent, Financial
Planner (F.Pl.) designations. The CFP and F.Pl. designations are
nationally recognized financial planning qualifications that require
an individual to demonstrate financial planning competence
through education, standardized examinations, continuing
education requirements, and accountability to ethical standards.
IG Wealth Management combines a number of interview and
testing techniques to identify individuals who demonstrate a
blend of experience, education and aptitude that makes them well
suited to becoming successful financial planners. This process is
continually reviewed in our efforts to select the most appropriate
candidates as new Consultants to improve their likelihood of
success in the future.
Each year our training curriculum is reviewed and refreshed to
offer new Consultants important building blocks to develop client
relationships. As Consultants progress, they develop their skills as
financial planners and business managers through a selection of
focused educational programs including: financial planning skills,
product knowledge, client service, business development skills,
compliance, technology, practice management and other related
topics.
IG Wealth Management also supports Consultants and clients
through its network of product and planning specialists who
assist in the areas of advanced financial planning, mortgages
and banking, insurance, and securities. These specialists provide
support in ensuring that we are offering the very best in financial
planning and providing plans that are comprehensive across all
elements of a client’s financial life. Our specialist complement
also includes wealth planning specialists who are IIROC-licensed
and ensure that the same level of comprehensive advice on direct
securities is available to clients who are served by both our Mutual
Fund Dealers Association of Canada (MFDA) and Investment
• 591 New Consultants (700 at December 31, 2018), which
Industry Regulatory Organization of Canada (IIROC) licensed
are those Consultants with less than four years of IG Wealth
Consultants. Clients of our MFDA and IIROC licensed Consultants
Management experience.
have access to similar product and service offerings.
• 1,031 Associates and Regional Directors (1,038 at December
31, 2018). Associates are licensed team members of
Segmented Client Experiences
Consultant practices who provide financial planning services
IG Wealth Management distinguishes itself from its competition by
and advice to the clientele served by the team.
offering comprehensive planning to its clients within the context
• IG Wealth Management had a total Consultant network of
3,381 (3,711 at December 31, 2018).
IG Wealth Management’s recruiting standards increase the
likelihood of success while also enhancing our culture and brand.
of long-term relationships. The value of this approach is illustrated
through independent studies demonstrating that households
receiving advice from a financial advisor have greater wealth than
non-advised households, and that this advantage increases based
on the length of the relationship with the financial advisor.
37
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS IG Living Plan™ is a holistic, client-centric approach to financial
IG Wealth Management continually reviews and enhances our
planning that reflects the evolving needs, goals and aspirations of
Consultant technology platform, bringing greater efficiencies to
Canadian families and individuals. The IG Living Plan provides a
our Consultants’ contact management and portfolio information
single, integrated view of all aspects of a client’s finances including
and financial planning systems to help them serve our clients
retirement and estate planning, investments and tax strategies,
more effectively.
creating a truly synchronized and comprehensive plan.
IG Wealth Management’s dealer platform provides increased
The IG Living Plan leverages the experience and expertise of IG
automation and supports both MFDA and IIROC licensed advisors
Wealth Management’s Consultants who serve approximately one
as well as new products on our investment dealer platform
million clients located in communities throughout Canada.
designed to support the high net worth segment of our client
IG Wealth Management has a full range of products that allow us
to provide a tailored IG Living Plan that evolves over time. These
products include:
• Powerful financial solutions that include investment vehicles
that match risk and investment performance to each client’s
needs and requirements.
• Insurance products that include a variety of different policy
types from the leading insurers in Canada.
base. The platform is expected to result in efficiencies over the
long term. IG Wealth Management continues the transitioning of
clients to this platform.
IG Wealth Management’s Personal Financial Planner (PFP)
software handles a wide range of potential financial planning
needs – from projections and illustrations for basic financial
planning concepts to the preparation of written financial plans
which integrate all disciplines of financial planning, including
investment, tax, retirement, education, risk management and
• Mortgage and banking to develop mortgage and other lending
estate planning.
strategies that meet the individual needs and goals of each
client as part of their comprehensive financial plan.
Enabled by a high-performing and diverse culture
• Charitable Giving Program, a donor-advised giving program
IG Wealth Management has established a high-performing and
which enables Canadians to make donations and build an
diverse culture to allow employees and Consultants to achieve
enduring charitable giving legacy with considerably less expense
maximum results. Gallup and other surveys are utilized to ensure
and complexity than setting up and administering their own
that employees and Consultants are fully engaged and have the
private foundation.
The National Service Centre, launched in 2018, allows us to offer a
targeted, consistent and improved real-time experience for clients
with smaller accounts, while our credentialed planners focus on
those clients who have more complicated and sophisticated needs.
The National Service Centre supports more than 200,000 clients
and $1.7 billion assets under management.
Business processes
Administrative support for Consultants and clients includes
timely and accurate client account record-keeping and
reporting, effective problem resolution support, and continuous
improvements to servicing systems.
This administrative support is provided for Consultants and clients
from both IG Wealth Management’s head office in Winnipeg,
Manitoba and IG Wealth Management’s Quebec General Office
resources required to excel.
BETA AND ALPHA
BETA - THE VALUE CREATED BY WELL-CONSTRUCTED INVESTMENT PORTFOLIOS –
ACHIEVING EXPECTED INVESTMENT RETURNS FOR THE LOWEST POSSIBLE RISK.
ALPHA - THE VALUE OF ACTIVE MANAGEMENT – ACHIEVING RETURNS SUPERIOR
TO PASSIVE BENCHMARKS WITH A SIMILAR COMPOSITION AND RISK PROFILE.
IG Wealth Management strives to provide Beta and Alpha
through the selection of its global sub-advisors. The use of sub-
advisors allows us to provide clients with products that provide
diversification and global reach.
A strong selection process exists to ensure the best available
sub-advisors are selected to manage IG Wealth Management’s
investment products. IG Wealth Management oversees all sub-
advisors to ensure that their activities are consistent with its
investment philosophy and with the investment objectives and
located in Montreal for Consultants and clients residing in Quebec.
strategies of the products that they advise.
The Quebec General Office has approximately 180 employees
and operating units for most functions supporting approximately
730 Consultants throughout Quebec. Mutual fund assets under
management in Quebec were approximately $17 billion as at
December 31, 2019.
IG Wealth Management’s primary focus is on providing managed
solutions that deliver superior risk-adjusted returns to our clients
so that they can confidently pursue their goals and a more secure
financial future. Engaging numerous high quality investment
management organizations from all over the world is a key design
aspect of these managed solutions that enables the delivery of
multi-disciplinary teams, global connections, depth of research and
38
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS use of information technology. Investment Managers are selected
to a portfolio manager. There are seven different investment
through a rigorous process followed by continuous performance
mandates available that provide core equity exposure in
monitoring and oversight. IG Wealth Management’s advisory
Canadian, U.S., North American and International equity
relationships include Mackenzie Investments, as well as other world
markets. IG Wealth Management’s Fee-Based Account
class investment firms.
New Products
program is a non-discretionary, fee-based brokerage
account offering clients the benefits of a holistic approach to
managing their portfolio.
IG Wealth Management continues to enhance the performance,
• IG Advisory Account (IGAA) and unbundled fee structures – The
scope and diversity of our investment offering with the introduction
IGAA was introduced in the fourth quarter of 2019 and is a
of new funds and other product changes that are well-suited to
fee-based account that improves client experience by offering
the long-term diverse needs of Canadian investors.
Powerful Financial Solutions
the ability to simplify and consolidate selected investments
into a single account while providing all of our clients with
unbundled pricing solutions. IGAA accounts increase fee
IG Wealth Management provides a wide range of investment and
transparency and can hold both IG Wealth Management and
other financial solutions that enable clients to achieve their goals.
eligible external assets.
• Mutual Funds – IG Wealth Management offers a wide breadth
A growing portion of IG Wealth Management’s client assets
and depth of mutual funds that assist clients and their
are in unbundled fee structures where a separate advisory fee
Consultants to develop customized portfolios to meet their
(IGAA, iProfile or Series U) is charged to the client account by
objectives by diversifying their holdings across investment
the dealer. At December 31, 2019, $36.0 billion, or 38.7% of IG
managers, asset categories, investment styles, geography,
Wealth Management’s mutual fund assets under management,
capitalization and sectors.
• IG Wealth Portfolios – IG Wealth Management offers managed
portfolios that seek to provide diversification and long-term
consistent performance. Portfolios rebalance investments to
ensure that the chosen mix of risk and return is maintained.
IG Wealth Management has a variety of portfolio solutions
including IG Core Portfolios, IG Managed Payout Portfolios,
Investors Portfolios, and IG Managed Risk Portfolios.
• iProfile™ - iProfile is a unique portfolio management program
that is available for households with investments held at
IG Wealth Management in excess of $250,000. iProfile
investment portfolios have been designed to maximize
returns and manage risk by diversifying across asset classes,
management styles and geographic regions.
were in products with unbundled fee structures, up 42.2% from
$25.3 billion at December 31, 2018 which represented 30.5% of
assets under management. Sales of these products to high net
worth clients totalled $1.1 billion for the fourth quarter of 2019,
an increase of $364 million from the fourth quarter of 2018,
representing 88% of total high net worth sales and 51% of total
mutual fund sales. For the twelve months ended December 31,
2019, sales totalled $3.8 billion, an increase of $0.8 billion from
2018, representing 83% of total high net worth sales and 44% of
total mutual fund sales.
Over the next year, the Company will migrate the majority
of existing clients to unbundled fee products. Unbundled fee
products separate the advisory fee that is charged directly
to a client’s account from the fees charged to the underlying
• Segregated Funds - IG Wealth Management offers segregated
investment funds. Following this transition, IG Wealth
funds which include the IG Series of Guaranteed Investment
Management will discontinue offering bundled purchase options
Funds (GIFs). GIFs are segregated fund policies issued by The
for substantially all investment products.
Great-West Life Assurance Company and include 14 fund-of-
fund segregated portfolios and six individual segregated funds.
These segregated funds provide for long-term investment
growth potential combined with risk management, full
and partial maturity and death benefit guarantee features,
potential creditor protection and estate planning efficiencies.
• Separately Managed Accounts and Fee-Based Brokerage Account
- IG Wealth Management’s separately managed account
program, Azure Managed InvestmentsTM is offered through
IG Wealth Management’s brokerage services firm, Investors
Group Securities Inc. Azure Managed Investments are
discretionary dealer-managed accounts that allow clients to
delegate responsibility for day-to-day investment decisions
IG Wealth Management monitors its investment performance
by comparing to certain benchmarks. Morningstar† fund ranking
service is one of the rankings monitored when determining
fund performance.
At December 31, 2019, 57.4% of IG Wealth Management mutual
funds had a rating of three stars or better from the Morningstar†
fund ranking service and 16.5% had a rating of four or five stars.
This compared to the Morningstar† universe of 69.5% for three
stars or better and 34.4% for four and five star funds at December
31, 2019. Morningstar Ratings† are an objective, quantitative
measure of a fund’s three, five and ten year risk-adjusted
performance relative to comparable funds.
39
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS ASSETS UNDER MANAGEMENT
At December 31, 2019, IG Wealth Management’s mutual
fund assets under management were $93.2 billion, an all-time
quarter end high. The level of assets under management is
influenced by three factors: sales, redemptions and investment
returns of our funds. Changes in mutual fund assets under
management for the periods under review are reflected in
Table 10.
HIGH NET WORTH OFFERINGS
IG Wealth Management has several offerings to address the
needs of high net worth clients, who represent a growing
segment of our client base, and continues to look at ways
to provide further offerings to this segment. Assets under
management for clients in this category totalled $50.0 billion at
December 31, 2019, an increase of 20.5% from one year ago,
and represented 54% of total assets under management. Sales
of high net worth solutions totalled $1.3 billion for the fourth
quarter of 2019, an increase of 27.5% from a year ago, and
represented 58% of total sales up from 48% in 2018. For the
twelve month period, sales of high net worth solutions totalled
$4.6 billion and represented 52% of total sales up from 45%
in 2018.
• Series U is available to all clients and provides a pricing
structure which separates the advisory fee, which is charged
directly to a client’s account, from the fees charged to the
underlying investment funds. At December 31, 2019, Series
U assets under management related to households with
investments in IG Wealth Management funds in excess of
$500,000 had increased to $20.9 billion, compared to $16.3
billion at December 31, 2018, an increase of 28.3%.
CHANGES IN ASSETS UNDER MANAGEMENT
AND ADMINISTRATION– 2019 VS. 2018
IG Wealth Management’s assets under administration were
$97.3 billion at December 31, 2019, representing an increase
of 12.7% from $86.3 billion at December 31, 2018. IG Wealth
Management’s mutual fund assets under management were
$93.2 billion at December 31, 2019, representing an increase of
12.1% from $83.1 billion at December 31, 2018. Average daily
mutual fund assets were $91.9 billion in the fourth quarter of
2019, up 8.0% from $85.1 billion in the fourth quarter of 2018.
Average daily mutual fund assets were $89.9 billion for the
twelve months ended December 31, 2019, up 2.6% from $87.6
billion in 2018.
For the quarter ended December 31, 2019, sales of IG Wealth
Management mutual funds through its Consultant network
were $2.3 billion, an increase of 6.3% from the comparable
period in 2018. Mutual fund redemptions totalled $2.5 billion, an
increase of 11.4% from 2018. IG Wealth Management mutual
fund net redemptions for the fourth quarter of 2019 were
$247 million compared with net redemptions of $125 million in
2018. During the fourth quarter, investment returns resulted in
an increase of $2.6 billion in mutual fund assets compared to a
decrease of $5.7 billion in the fourth quarter of 2018.
IG Wealth Management’s annualized quarterly redemption
rate for long-term funds was 10.2% in the fourth quarter of
2019, compared to 9.7% in the fourth quarter of 2018. IG
Wealth Management’s twelve month trailing redemption
rate for long-term funds was 10.3% at December 31, 2019,
compared to 9.2% at December 31, 2018, and remains well
below the corresponding average redemption rate for all other
members of the Investment Funds Institute of Canada (IFIC)
• iProfile™ - is a unique portfolio management program that is
of approximately 16.2% at December 31, 2019. The increase
available for households with investments held at IG Wealth
in the redemption rate primarily relates to weakened investor
Management in excess of $250,000. The iProfile program has
confidence over the last year.
a pricing structure which separates the advisory fee, which is
charged directly to a client’s account, from the fees charged to
the underlying investment funds. At December 31, 2019, the
iProfile program assets under management were $15.1 billion,
an increase of 67.2% from $9.0 billion at December 31, 2018.
• Series J is available for households with investments in IG
Wealth Management funds in excess of $500,000 and had
assets of $14.0 billion at December 31, 2019, a decrease of
13.5% from $16.1 billion at December 31, 2018, largely as
a result of transfer activity from Series J to Series U. Series J
pricing structure bundles the cost of asset management and
advice into one fee.
For the twelve months ended December 31, 2019, sales of
IG Wealth Management mutual funds through its Consultant
network were $8.7 billion, a decrease of 3.9% from 2018.
Mutual fund redemptions totalled $9.8 billion, an increase of
14.2% from 2018. Net redemptions of IG Wealth Management
mutual funds were $1.1 billion compared with net sales of $485
million in 2018. During 2019, investment returns resulted in an
increase of $11.1 billion in mutual fund assets compared to a
decrease of $5.4 million in 2018.
40
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS TABLE 10: CHANGE IN ASSETS UNDER MANAGEMENT AND ADMINISTRATION – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Mutual fund assets under management
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
2019
SEP. 30
2018
DEC. 31
2019
SEP. 30
$
2019
DEC. 31
2,251
2,498
(247)
2,629
2,382
90,779
$
2,077
2,368
$
2,118
2,243
(291)
894
603
90,176
(125)
(5,730)
(5,855)
88,992
% CHANGE
2018
DEC. 31
6.3 %
11.4
(97.6)
N/M
N/M
2.0
12.1 %
12.7 %
8.0 %
8.4 %
5.5
15.1
194.1
N/M
0.7
2.6 %
3.0 %
1.7 %
Assets under administration
$ 97,277
$ 94,456
$ 86,287
Daily average mutual fund assets
$ 91,931
$ 90,363
$ 85,128
$ 93,161
$ 90,779
$ 83,137
TWELVE MONTHS ENDED
($ millions)
Mutual fund assets under management
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Assets under administration
Daily average mutual fund assets
2019
DEC. 31
2018
DEC. 31
% CHANGE
$
8,723
9,812
$
9,075
8,590
(1,089)
11,113
10,024
83,137
485
(5,356)
(4,871)
88,008
$ 93,161
$ 83,137
$ 97,277
$ 86,287
$ 89,875
$ 87,595
(3.9) %
14.2
N/M
N/M
N/M
(5.5)
12.1 %
12.7 %
2.6 %
CHANGES IN ASSETS UNDER MANAGEMENT
AND ADMINISTRATION – Q4 2019 VS. Q3 2019
IG Wealth Management's assets under administration were
$97.3 billion at December 31, 2019, an increase of 3.0% from
$94.5 billion at September 30, 2019. IG Wealth Management's
mutual fund assets under management were $93.2 billion at
December 31, 2019, an increase of 2.6% from $90.8 billion at
September 30, 2019. Average daily mutual fund assets were
$91.9 billion in the fourth quarter of 2019 compared to $90.4
billion in the third quarter of 2019, an increase of 1.7%.
For the quarter ended December 31, 2019, sales of IG Wealth
Management mutual funds through its Consultant network
were $2.3 billion, an increase of 8.4% from the third quarter of
2019. Mutual fund redemptions, which totalled $2.5 billion for
the fourth quarter, increased 5.5% from the previous quarter
and the annualized quarterly redemption rate was 10.2% in the
fourth quarter compared to 9.9% in the third quarter of 2019. IG
Wealth Management mutual fund net redemptions were $247
million for the current quarter compared to net redemptions of
$291 million in the previous quarter.
OTHER PRODUCTS AND SERVICES
SEGREGATED FUNDS
IG Wealth Management offers segregated funds which include
the IG Series of Guaranteed Investment Funds (GIFs). Select
GIF policies allow for a Lifetime Income Benefit (LIB) option to
provide guaranteed retirement income for life. The investment
components of these segregated funds are managed by IG
Wealth Management. At December 31, 2019, total segregated
fund assets were $1.6 billion, unchanged from December 31, 2018.
INSURANCE
IG Wealth Management continues to be a leader in
the distribution of life insurance in Canada. Through its
arrangements with leading insurance companies, IG Wealth
Management offers a broad range of term, universal life, whole
life, disability, critical illness, long-term care, personal health
care coverage and group insurance. The Canada Life Assurance
Company is a leading provider of the Company’s insurance
products. Effective as of January 1, 2020, Great-West, London
41
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
Life and Canada Life, amalgamated into a single company, The
Canada Life Assurance Company.
The average number of policies sold by each insurance-licensed
Consultant was 2.5 for the quarter ended December 31, 2019,
compared to 2.6 in 2018. For the year ended December 31,
2019, the average number of policies sold by each insurance-
licensed Consultant was 10.0, compared to 9.7 in 2018.
Distribution of insurance products is enhanced through IG
Wealth Management’s Insurance Planning Specialists, located
Mortgage fundings offered through IG Wealth Management and
through Solutions Banking† for the three and twelve months
ended December 31, 2019 were $293 million and $1.2 billion
compared to $305 million and $1.3 billion in 2018, a decrease of
3.9% and 9.8%, respectively. At December 31, 2019, mortgages
offered through both sources totalled $10.3 billion, compared to
$10.7 billion at December 31, 2018, a decrease of 3.7%.
Available credit associated with Solutions Banking† All-in-One
accounts originated for the three and twelve month periods
throughout Canada, who assist Consultants with advanced
ended December 31, 2019 were $240 million and $770 million,
estate planning solutions for high net worth clients.
respectively, compared to $187 million and $931 million in 2018.
At December 31, 2019, the balance outstanding of Solutions
Banking† All-in-One products was $2.9 billion, compared to $2.6
billion one year ago, and represented approximately 50% of total
available credit associated with these accounts.
Other products and services offered through IG Wealth
Management’s Solutions Banking† include investment loans, lines
of credit, personal loans, creditor insurance, deposit accounts,
and credit cards. Through Solutions Banking†, clients have access
to a network of banking machines, as well as a private labeled
client website and client service centre. The Solutions Banking†
offering supports IG Wealth Management’s approach to
delivering total financial solutions for our clients through a broad
financial planning platform. Total lending products of IG Wealth
Management clients in the Solutions Banking† offering, including
Solutions Banking† mortgages totalled $4.5 billion at December
31, 2019, compared to $4.1 billion at December 31, 2018.
SECURITIES OPERATIONS
Investors Group Securities Inc. is an investment dealer registered
in all Canadian provinces and territories providing clients with
securities services to complement their financial and investment
planning. IG Wealth Management Consultants can refer clients
to one of our Wealth Planning Specialists available through
Investors Group Securities Inc.
MORTGAGE AND BANKING OPERATIONS
IG Wealth Management Mortgage Planning Specialists are
located throughout each province in Canada, and work with our
clients and their Consultants to develop mortgage and other
lending strategies that meet the individual needs and goals of
each client as part of their comprehensive financial plan.
Mortgages are offered to clients by IG Wealth Management,
a national mortgage lender, and through IG Wealth
Management’s Solutions Banking†, provided by National Bank
of Canada under a long-term distribution agreement. An All-
in-One product, a comprehensive cash management solution
that integrates the features of a mortgage, term loan, revolving
line of credit and deposit account, is also offered through
Solutions Banking†.
42
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS REVIEW OF SEGMENT OPERATING RESULTS
IG Wealth Management’s earnings before interest and taxes are
presented in Table 11.
2019 VS. 2018
FEE INCOME
Fee income is generated from the management, administration
and distribution of IG Wealth Management mutual funds. The
TABLE 11: OPERATING RESULTS – IG WEALTH MANAGEMENT
distribution of insurance and Solutions Banking† products and
the provision of securities services provide additional fee income.
IG Wealth Management earns management fees for investment
management services provided to its mutual funds, which
depend largely on the level and composition of mutual fund
assets under management. Management fees were $381.7
million in the fourth quarter of 2019, an increase of $25.0 million
THREE MONTHS ENDED
($ millions)
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Expenses
Commission
Commission amortization
Mutual fund sales commissions expensed as incurred
Other commissions
Asset-based compensation
Non-commission
$
2019
DEC. 31
381.7
75.3
44.0
501.0
16.8
517.8
6.5
16.1
30.7
53.3
106.3
151.9
311.5
$
2019
SEP. 30
376.2
75.2
41.5
492.9
15.8
508.7
5.9
16.4
29.0
51.3
103.4
148.2
302.9
2018
DEC. 31
2019
SEP. 30
% CHANGE
2018
DEC. 31
$
356.7
75.2
45.1
477.0
11.0
488.0
4.4
22.2
30.4
57.0
99.3
159.6
315.9
1.5 %
0.1
6.0
1.6
6.3
1.8
10.2
(1.8)
5.9
3.9
2.8
2.5
2.8
7.0 %
0.1
(2.4)
5.0
52.7
6.1
47.7
(27.5)
1.0
(6.5)
7.0
(4.8)
(1.4)
Earnings before interest and taxes
$
206.3
$
205.8
$
172.1
0.2 %
19.9 %
TWELVE MONTHS ENDED
($ millions)
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Expenses
Commission
Commission amortization
Mutual fund sales commissions expensed as incurred
Other commissions
Asset-based compensation
Non-commission
2019
DEC. 31
2018
DEC. 31
% CHANGE
$ 1,488.0
299.6
171.2
1,958.8
56.2
$ 1,458.1
310.4
171.5
1,940.0
46.7
2,015.0
1,986.7
22.4
72.8
121.9
217.1
411.7
615.9
14.5
103.4
118.3
236.2
387.2
597.3
1,244.7
1,220.7
2.1 %
(3.5)
(0.2)
1.0
20.3
1.4
54.5
(29.6)
3.0
(8.1)
6.3
3.1
2.0
Earnings before interest and taxes
$
770.3
$
766.0
0.6 %
43
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
or 7.0% from $356.7 million in 2018. For the twelve months
insurance and banking products. IG Wealth Management no
ended December 31, 2019, management fees were $1,488.0
longer offers the deferred sales purchase option for its mutual
million, an increase of $29.9 million or 2.1% from $1,458.1
funds. Redemption fee income varies depending on the level of
million in 2018.
deferred sales charge attributable to fee-based redemptions.
The net increase in management fees in the fourth quarter
of 2019 was primarily due to the increase in average assets
under management of 8.0%, as shown in Table 10. The average
management fee rate for the fourth quarter was 165.2 basis
points of average assets under management compared to
NET INVESTMENT INCOME AND OTHER
Net investment income and other includes income related to
mortgage banking operations and net interest income related to
intermediary operations.
166.1 basis points in 2018, reflecting pricing reductions effective
Net investment income and other was $16.8 million in the
March 1, 2019.
The net increase in management fees in the year ended
December 31, 2019 was primarily due to the increase in average
assets under management of 2.6%, as shown in Table 10. The
fourth quarter of 2019, an increase of $5.8 million from $11.0
million in 2018. For the year ended December 31, 2019, net
investment income and other totalled $56.2 million, an increase
of $9.5 million from $46.7 million in 2018.
average management fee rate for the twelve months ended
Net investment income related to IG Wealth Management’s
December 31, 2019, was 165.9 basis points of average assets
mortgage banking operations totalled $12.8 million for the
under management compared to 166.4 basis points in 2018,
fourth quarter of 2019 compared to $6.0 million in 2018, an
reflecting pricing reductions effective March 1, 2019.
increase of $6.8 million. For the year ended December 31, 2019,
IG Wealth Management receives administration fees for
providing administrative services to its mutual funds and
trusteeship services to its unit trust mutual funds, which also
depend largely on the level and composition of mutual fund
assets under management. Administration fees totalled $75.3
million in the current quarter, up slightly from $75.2 million
a year ago. Administration fees were $299.6 million for the
twelve month period ended December 31, 2019 compared to
$310.4 million in 2018, a decrease of 3.5%. The decrease in the
twelve month period resulted primarily from the movement of
assets into unbundled products which are not charged certain
administration fees and changes in the composition of average
assets under management.
Distribution fees are earned from:
• Distribution of insurance products through I.G. Insurance
Services Inc.
• Redemption fees on mutual funds that were sold with a
deferred sales charge.
• Portfolio fund distribution fees.
net investment income related to IG Wealth Management’s
mortgage banking operations totalled $45.4 million compared
to $36.9 million in 2018, an increase of $8.5 million. The changes
in mortgage banking income were largely due to fair value
adjustments which increased by $6.3 million and $9.3 million
for the three and twelve month periods ended December 31,
2019 to $0.2 million and ($4.3) million, respectively, compared
to 2018. The increases in both periods were primarily due to
negative fair value adjustments in 2018 on certain securitization
related financial instruments. A summary of mortgage banking
operations for the three and twelve month periods under review
is presented in Table 12.
EXPENSES
IG Wealth Management incurs commission expense in
connection with the distribution of its financial services and
products. Commissions are paid on the sale of these products
and fluctuate with the level of sales. Commissions paid on
the sale of investment products are capitalized and amortized
over their estimated useful lives where the Company receives
a fee directly from the client. All other commissions paid on
• Securities trading services provided through Investors Group
investment product sales are expensed as incurred.
Securities Inc.
• Banking services provided through Solutions Banking†.
Commission expense was $53.3 million for the fourth quarter
of 2019, a decrease of $3.7 million from $57.0 million in
Distribution fee income of $44.0 million for the fourth quarter
2018 primarily due to lower mutual fund sales and lower
of 2019 decreased by $1.1 million from $45.1 million in 2018,
compensation related to the distribution of insurance products.
primarily due to lower distribution fee income from insurance
products and lower redemption fees, offset in part by higher
For the twelve month period, commission expense was $217.1
million, a decrease of $19.1 million from $236.2 million in 2018.
banking income. For the twelve month period, distribution
The decrease in mutual fund commissions was primarily due to
fee income of $171.2 million decreased by $0.3 million from
lower mutual fund sales partially offset by higher compensation
$171.5 million in 2018, primarily due to lower redemption fees,
related to the distribution of insurance products.
offset in part by the increase in distribution fee income from
44
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS TABLE 12: MORTGAGE BANKING OPERATIONS – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
2019
DEC. 31
2019
SEP. 30
2018
DEC. 31
2019
SEP. 30
% CHANGE
2018
DEC. 31
Total mortgage banking income
Net interest income on securitized loans
Interest income
Interest expense
Net interest income
Gains on sales(1)
Fair value adjustments
Other
Average mortgages serviced
Securitizations
Other
Mortgage sales to:(2)
Securitizations
Other(1)
TWELVE MONTHS ENDED
($ millions)
Total mortgage banking income
Net interest income on securitized loans
Interest income
Interest expense
Net interest income
Gains on sales(1)
Fair value adjustments
Other
Average mortgages serviced
Securitizations
Other
Mortgage sales to:(2)
Securitizations
Other(1)
$
$
$
50.5
41.3
9.2
0.6
0.2
2.8
12.8
6,996
2,744
$
$
$
52.4
42.9
9.5
0.9
0.7
2.8
13.9
7,185
2,750
$
$
$
51.7
42.5
9.2
–
(6.1)
2.9
6.0
7,264
3,104
$
9,740
$
9,935
$ 10,368
$
$
284
256
540
$
$
469
166
635
$
$
550
81
631
(3.6) %
(3.7)
(3.2)
(33.3)
(71.4)
–
(2.3) %
(2.8)
–
N/M
N/M
(3.4)
(7.9) %
113.3 %
(2.6) %
(0.2)
(2.0) %
(39.4) %
54.2
(15.0) %
(3.7) %
(11.6)
(6.1) %
(48.4) %
216.0
(14.4) %
2019
DEC. 31
2018
DEC. 31
% CHANGE
$
208.0
171.9
$
204.0
165.1
36.1
3.2
(4.3)
10.4
$
45.4
$
7,232
2,782
$
$
38.9
1.5
(13.6)
10.1
36.9
7,388
3,174
$ 10,014
$ 10,562
$
1,517
558
$
1,841
357
$
2,075
$
2,198
2.0 %
4.1
(7.2)
113.3
68.4
3.0
23.0 %
(2.1) %
(12.4)
(5.2) %
(17.6) %
56.3
(5.6) %
(1) Represents sales to institutional investors through private placements, to Investors Mortgage and Short Term Income Fund, and to Investors Canadian Corporate Bond Fund as well
as gains realized on those sales.
(2) Represents principal amounts sold.
45
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
Asset-based compensation, which is based on the value of
Administration fees were $75.3 million in the fourth quarter of
assets under management, increased by $7.0 million and $24.5
2019, up slightly from the third quarter.
million for the three and twelve month periods ended December
31, 2019 to $106.3 million and $411.7 million, compared to
2018. The increase was primarily due to the increase in assets
under management.
Non-commission expenses incurred by IG Wealth Management
Distribution fee income of $44.0 million in the fourth quarter of
2019 increased by $2.5 million from $41.5 million in the third
quarter primarily due to an increase in distribution fee income
from insurance product sales offset by lower redemption fees.
primarily relate to the support of the Consultant network,
NET INVESTMENT INCOME AND OTHER
the administration, marketing and management of its mutual
Net investment income and other was $16.8 million in the
funds and other products, as well as sub-advisory fees related
fourth quarter of 2019 compared to $15.8 million in the
to mutual fund assets under management. Non-commission
previous quarter, an increase of $1.0 million.
expenses were $151.9 million for the fourth quarter of 2019
compared to $159.6 million in 2018, a decrease of $7.7 million
or 4.8%. The decrease for the quarter was primarily due to
advertising and marketing expenses resulting from the brand
re-launch recorded in the fourth quarter of 2018. For the twelve
Net investment income related to IG Wealth Management’s
mortgage banking operations totalled $12.8 million in the fourth
quarter, a decrease of $1.1 million from $13.9 million in the
previous quarter as shown in Table 12.
month period, non-commission expenses were $615.9 million
in 2019 compared to $597.3 million in 2018, an increase of
EXPENSES
$18.6 million or 3.1%. The increase in 2019 was primarily due to
increased technology expenses in the first quarter relating to the
migration of clients to our new dealer platform and unbundled
fee arrangements, as well as continued expenses associated
with the brand re-launch.
Q4 2019 VS. Q3 2019
FEE INCOME
Commission expense in the current quarter was $53.3
million compared with $51.3 million in the previous quarter.
The increase related to higher cash commissions paid being
expensed in the quarter primarily due to higher mutual fund
sales and compensation related to the distribution of insurance
product sales.
Non-commission expenses increased to $151.9 million in the
current quarter compared to $148.2 million in the prior quarter
primarily due to the seasonality of expenses offset in part by
Management fee income increased by $5.5 million or 1.5% to
ongoing efforts to manage non-commission expense.
$381.7 million in the fourth quarter of 2019 compared with
the third quarter. The increase in management fees in the
fourth quarter was primarily due to the increase in average
assets under management of 1.7% for the quarter, as shown in
Table 10.
46
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS MACKENZIE INVESTMENTS
REVIEW OF THE BUSINESS
Mackenzie’s core business is the provision of investment
management and related services offered through diversified
investment solutions, distributed through multiple distribution
channels. We are committed to delivering strong investment
performance for our clients by drawing on the experience and
perspective gained through over 50 years in the investment
management business.
Mackenzie earns revenue primarily from:
• Management fees earned from its investment funds, sub-
advised accounts and institutional clients.
• Fees earned from its mutual funds for administrative services.
Fee Income – Mackenzie
For the financial year ($ millions)
809
769
809
807
808
2015
2016
2017
2018
2019
Founded in 1967, Mackenzie continues to build an investment
• Redemption fees on deferred sales charge and low load units.
advisory business through proprietary investment research and
The largest component of Mackenzie’s revenues is management
fees. The amount of management fees depends on the level
and composition of assets under management. Management
fee rates vary depending on the investment objective and the
portfolio management while utilizing strategic partners in a
selected sub-advisory capacity. Our business focuses on multiple
distribution channels: Retail, Strategic Alliances and Institutional.
Mackenzie primarily distributes its retail investment products
account type of the underlying assets under management. Equity
through third party financial advisors. Mackenzie’s sales teams
based mandates have higher management fee rates than fixed
income mandates and retail mutual fund accounts have higher
work with many of the more than 30,000 independent financial
advisors and their firms across Canada. In addition to its retail
management fee rates than sub-advised and institutional accounts.
distribution team, Mackenzie also has specialty teams focused
MACKENZIE STRATEGY
Mackenzie seeks to be Canada’s preferred global asset
management solutions provider and business partner.
Mackenzie’s vision: We are committed to the financial success of
investors, through their eyes. This impacts the strategic priorities
we select to fulfil that commitment and drive future business
growth. Our strategic mandate is two-fold: win in the Canadian
retail space and build meaningful strategic relationships. We aim
to achieve this mandate by attracting and fostering the best
minds in the investment industry, responding to changing needs
of financial advisors and investors with distinctive and innovative
solutions, and continuing to deliver institutional quality in
everything we do.
Supporting this vision and strategic mandate are six key
foundational capabilities that our employees strive to achieve:
• Delivering competitive and consistent risk-adjusted
performance
on strategic alliances and the institutional marketplace. Within
the strategic alliance channel, Mackenzie offers certain series
of its mutual funds and provides sub-advisory services to third
party and related party investment programs offered by banks,
insurance companies and other investment companies. Strategic
alliances with related parties include providing advisory services
to IG Wealth Management, Investment Planning Counsel and
Great-West Lifeco Inc. (Lifeco) subsidiaries, and also include a
private label mutual fund arrangement with Lifeco subsidiary
Quadrus. Within the strategic alliance channel, Mackenzie’s
primary distribution relationship is with the head office of the
respective bank, insurance company or investment company.
In the institutional channel, Mackenzie provides investment
management services to pension plans, foundations and other
institutions. Mackenzie attracts new institutional business through
its relationships with pension and management consultants.
Gross sales and redemption activity in strategic alliance and
institutional accounts can be more pronounced than in the retail
channel given the relative size and the nature of the distribution
relationships of these accounts. These accounts are also subject
• Offering innovative and high quality investment solutions
to ongoing reviews and rebalance activities which may result in
• Accelerating distribution
• Advancing brand leadership
• Driving operational excellence and discipline
• Enabling a high-performing and diverse culture
Mackenzie seeks to maximize returns on business investment
by focusing resources in areas that directly impact the success
of our strategic mandate: investment management, distribution
and client experience.
a significant change in the level of assets under management.
Mackenzie is positioned to continue to build and enhance
its distribution relationships given its team of experienced
investment professionals, strength of its distribution network,
broad product shelf, competitively priced products and its focus
on client experience and investment excellence.
47
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS ASSETS UNDER MANAGEMENT
The changes in investment fund assets under management are
summarized in Table 13 and the changes in total assets under
management are summarized in Table 14.
At December 31, 2019, Mackenzie’s investment fund assets
under management were $64.0 billion, an all-time high, and
total assets under management were $70.2 billion. The change
in Mackenzie’s assets under management is determined
by investment returns generated for our clients and net
contributions from our clients.
TABLE 13: CHANGE IN INVESTMENT FUND ASSETS UNDER MANAGEMENT – MACKENZIE(1)
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Mutual fund net sales (redemptions)(2)
ETF net creations
Inter-product eliminations(3)
Investment fund net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Consists of:
Mutual funds
ETFs
Inter-product eliminations(3)
Investment funds
2019
DEC. 31
$
2,587
2,569
2019
SEP. 30
2,253
2,114
$
2018
DEC. 31
$
2,328
2,474
18
646
(399)
265
1,576
1,841
62,150
139
597
(245)
491
264
755
61,395
(146)
137
(82)
(91)
(3,894)
(3,985)
59,493
2019
SEP. 30
14.8 %
21.5
(87.1)
8.2
(62.9)
(46.0)
N/M
143.8
1.2
% CHANGE
2018
DEC. 31
11.1 %
3.8
N/M
N/M
N/M
N/M
N/M
N/M
4.5
$ 63,991
$ 62,150
$ 55,508
3.0 %
15.3 %
$ 60,838
4,749
(1,596)
$ 59,275
4,051
(1,176)
$ 53,407
2,949
(848)
$ 63,991
$ 62,150
$ 55,508
2.6 %
17.2
(35.7)
3.0 %
1.9 %
13.9 %
61.0
(88.2)
15.3 %
10.2 %
Daily average investment fund assets
$ 62,969
$ 61,802
$ 57,138
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Mutual fund net sales (redemptions)(2)
ETF net creations
Inter-product eliminations(3)
Investment fund net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Daily average investment fund assets
$
2019
DEC. 31
9,886
9,374
512
1,559
(655)
1,416
7,067
8,483
55,508
$
2018
DEC. 31
9,951
9,838
113
1,799
(530)
1,382
(2,417)
(1,035)
56,543
$ 63,991
$ 55,508
$ 60,949
$ 57,918
% CHANGE
(0.7) %
(4.7)
N/M
(13.3)
(23.6)
2.5
N/M
N/M
(1.8)
15.3 %
5.2 %
(1) Mackenzie segment excludes investments into Mackenzie mutual funds by IG Wealth Management mutual funds from its assets under management and net sales.
(2) During 2019 and 2018, institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes:
– Fourth quarter of 2019 – resulted in sales of $129 million, redemptions of $165 million and net redemptions of $36 million.
– During 2018 – resulted in sales of $409 million, redemptions of $807 million and net redemptions of $398 million.
(3) Total investment fund net sales and assets under management exclude Mackenzie mutual fund investments in ETFs.
48
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 14: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – MACKENZIE(1)
THREE MONTHS ENDED
($ millions)
Net sales (redemptions)
Mutual funds(2)
ETF net creations
Inter-product eliminations(3)
Investment funds
Sub-advisory, institutional and other accounts(4)
Total net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Consists of:
Mutual funds
ETFs
Inter-product eliminations(3)
Investment funds
Sub-advisory, institutional and other accounts(4)
2019
DEC. 31
2019
SEP. 30
2018
DEC. 31
2019
SEP. 30
$
18
646
(399)
265
(86)
179
1,755
1,934
68,271
$
139
597
(245)
491
(1,171)
(680)
343
(337)
68,608
$
(146)
137
(82)
(91)
(224)
(315)
(4,304)
(4,619)
67,347
(87.1) %
8.2
(62.9)
(46.0)
92.7
N/M
N/M
N/M
(0.5)
% CHANGE
2018
DEC. 31
N/M %
N/M
N/M
N/M
61.6
N/M
N/M
N/M
1.4
$ 70,205
$ 68,271
$ 62,728
2.8 %
11.9 %
$ 60,838
4,749
(1,596)
63,991
6,214
$ 59,275
4,051
(1,176)
62,150
6,121
$ 53,407
2,949
(848)
55,508
7,220
2.6 %
17.2
(35.7)
3.0
1.5
2.8 %
1.4 %
13.9 %
61.0
(88.2)
15.3
(13.9)
11.9 %
7.0 %
Total assets under management
$ 70,205
$ 68,271
$ 62,728
Average total assets(5)
$ 69,137
$ 68,209
$ 64,628
TWELVE MONTHS ENDED
($ millions)
Net sales (redemptions)
Mutual funds(2)
ETF net creations
Inter-product eliminations(3)
Investment funds
Sub-advisory, institutional and other accounts(4)
Total net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Average total assets(5)
2019
DEC. 31
2018
DEC. 31
% CHANGE
$
512
1,559
(655)
1,416
(1,894)
(478)
7,955
7,477
62,728
$
113
1,799
(530)
1,382
(487)
895
(2,676)
(1,781)
64,509
$ 70,205
$ 62,728
$ 67,772
$ 65,860
N/M %
(13.3)
(23.6)
2.5
N/M
N/M
N/M
N/M
(2.8)
11.9 %
2.9 %
(1) Mackenzie segment excludes investments into Mackenzie mutual funds by IG Wealth Management mutual funds from its assets under management and net sales.
(2) During 2019 and 2018, institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes:
– Fourth quarter of 2019 – resulted in sales of $129 million, redemptions of $165 million and net redemptions of $36 million.
– During 2018 – resulted in sales of $409 million, redemptions of $807 million and net redemptions of $398 million.
(3) Total investment fund net sales and assets under management exclude Mackenzie mutual fund investments in ETFs.
(4) During the third quarter of 2019, MD Financial Management reassigned sub-advisory responsibilities totalling $1.2 billion on mandates advised upon by Mackenzie.
(5) Based on daily average investment fund assets and month-end average sub-advisory, institutional and other assets.
49
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
CHANGE IN ASSETS UNDER
MANAGEMENT – 2019 VS. 2018
In the twelve months ended December 31, 2019, Mackenzie’s
mutual fund gross sales were $9.9 billion, a decrease of 0.7%
Mackenzie’s total assets under management at December 31,
from $10.0 billion in the comparative period last year. Mutual
2019 were $70.2 billion, an increase of 11.9% from $62.7 billion
fund redemptions in the current period were $9.4 billion, a
at December 31, 2018. Mackenzie’s sub-advisory, institutional
decrease of 4.7% from last year. Mutual fund net sales for the
and other accounts at December 31, 2019 were $6.2 billion, a
twelve months ended December 31, 2019 were $512 million,
decrease of 13.9% from $7.2 billion last year.
Mackenzie’s investment fund assets under management were
$64.0 billion at December 31, 2019, an increase of 15.3% from
December 31, 2018. Mackenzie’s mutual fund assets under
management were $60.8 billion at December 31, 2019, an
increase of 13.9% from $53.4 billion at December 31, 2018.
Mackenzie’s ETF assets were $4.7 billion at December 31, 2019,
inclusive of $1.6 billion in investments from Mackenzie mutual
funds, compared to $2.9 billion at December 31, 2018, inclusive
of $848 million in investments from Mackenzie mutual funds.
In the three months ended December 31, 2019, Mackenzie’s
mutual fund gross sales were $2.6 billion, the highest fourth
quarter gross sales in the Company's history, compared to $2.3
billion in 2018. Mutual fund redemptions in the current quarter
were $2.6 billion, an increase of 3.8% from last year. Mutual fund
net sales for the three months ended December 31, 2019 were
$18 million, as compared to net redemptions of $146 million
last year. In the three months ended December 31, 2019, ETF
net creations were $646 million compared to $137 million last
year, inclusive of $399 million and $82 million, respectively, in
investments from Mackenzie mutual funds. Investment fund net
sales in the current quarter were $265 million compared to net
redemptions of $91 million last year. During the current quarter,
investment returns resulted in investment fund assets increasing
as compared to net sales of $113 million last year. In the twelve
months ended December 31, 2019, ETF net creations were $1.6
billion, inclusive of $655 million in investments from Mackenzie
mutual funds, compared to ETF net creations of $1.8 billion,
inclusive of $530 million in investments from Mackenzie mutual
funds last year. Investment fund net sales in the current period
were $1.4 billion, an increase of 2.5% from last year. During the
current period, investment returns resulted in investment fund
assets increasing by $7.1 billion as compared to a decrease of
$2.4 billion last year.
During the twelve months ended December 31, 2019, certain
third party programs, which include Mackenzie mutual funds,
made fund allocation changes resulting in gross sales of $129
million, redemptions of $165 million and net redemptions of
$36 million. During the twelve months ended December 31,
2018, certain third party programs, which include Mackenzie
mutual funds, made fund allocation changes resulting in gross
sales of $409 million, redemptions of $807 million and net
redemptions of $398 million. Excluding these transactions in
2019 and 2018, mutual fund gross sales increased 2.3% and
mutual fund redemptions increased 2.0% in the twelve months
ended December 31, 2019 compared to last year and mutual
fund net sales were $548 million in the current year compared
to $511 million last year.
by $1.6 billion compared to a decrease of $3.9 billion last year.
Redemptions of long-term mutual funds in the three and
During the fourth quarter of 2019, certain third party programs,
which include Mackenzie mutual funds, made fund allocation
changes resulting in gross sales of $129 million, redemptions
of $165 million and net redemptions of $36 million. Excluding
these transactions in 2019, mutual fund gross sales increased
5.6% and mutual fund redemptions decreased 2.8% in the
three months ended December 31, 2019 compared to last year
and mutual fund net sales of $54 million in 2019 compared to
mutual fund net redemptions of $146 million last year.
twelve months ended December 31, 2019, were $2.5 billion
and $9.0 billion, respectively, as compared to $2.4 billion
and $9.5 billion last year. Redemptions of long-term mutual
funds excluding mutual fund allocation changes made by
third party programs were $8.8 billion in the twelve months
ended December 31, 2019, compared to $8.7 billion last year.
Mackenzie’s annualized quarterly redemption rate for long-
term mutual funds was 16.4% in the fourth quarter of 2019,
compared to 17.1% in the fourth quarter of 2018. Mackenzie’s
annualized quarterly redemption rate for long-term mutual
Total net sales for the three months ended December 31, 2019
funds excluding rebalance transactions was 15.3% in the fourth
were $179 million, compared to net redemptions of $315 million
quarter of 2019. Mackenzie’s twelve-month trailing redemption
last year. During the current quarter, investment returns resulted
rate for long-term mutual funds was 15.6% at December 31,
in assets increasing by $1.8 billion compared to a decrease
2019, as compared to 17.1% last year. Mackenzie’s twelve
of $4.3 billion last year. Excluding the mutual fund allocation
month trailing redemption rate for long-term funds, excluding
changes made by third party programs during the fourth quarter
rebalance transactions, was 15.3% at December 31, 2019,
of 2019, total net sales were $215 million in the current quarter
compared to 15.6% at December 31, 2018. The corresponding
compared to net redemptions of $315 million last year.
average twelve-month trailing redemption rate for long-term
mutual funds for all other members of IFIC was approximately
50
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS 15.8% at December 31, 2019. Mackenzie’s twelve-month
of $54 million in the fourth quarter compared to net sales of
trailing redemption rate is comprised of the weighted average
$139 million in the third quarter.
redemption rate for front-end load assets, deferred sales
charge and low load assets with redemption fees, and deferred
sales charge assets without redemption fees (matured assets).
Generally, redemption rates for front-end load assets and
matured assets are higher than the redemption rates for
deferred sales charge and low load assets with redemption fees.
Redemptions of long-term mutual fund assets in the current
quarter were $2.5 billion, compared to $2.0 billion in the third
quarter of 2019. Mackenzie’s annualized quarterly redemption
rate for long-term mutual funds for the current quarter was
16.4% compared to 13.7% for the third quarter. Mackenzie’s
annualized quarterly redemption rate for long-term mutual
Total net redemptions for the twelve months ended December
funds excluding the mutual fund allocation changes made
31, 2019 were $478 million, as compared to net sales of $895
by third party programs was 15.3% during the fourth quarter.
million last year. During the twelve months ended December 31,
Net redemptions of long-term funds for the current quarter were
2019, investment returns resulted in assets increasing by $8.0
$19 million compared to net sales of $88 million in the previous quarter.
billion, compared to a decrease of $2.7 billion last year. During
the third quarter of 2019, MD Financial Management reassigned
$1.2 billion of sub-advisory mandates managed by Mackenzie.
The pro-forma impact on Mackenzie’s pre-tax earnings from
these mandate changes is not meaningful. Excluding the
reassigned MD Financial Management sub-advisory mandates
For the quarter ended December 31, 2019, Mackenzie ETF net
creations were $646 million, compared to $597 million in the
third quarter. In the current quarter, ETF net creations were
inclusive of $399 million in investments from Mackenzie mutual
funds compared to $245 million in the third quarter.
during the third quarter of 2019 and the mutual fund allocation
Investment fund net sales in the current quarter were $265
changes in 2019 and 2018 previously discussed, total net sales
million compared to net sales of $491 million in the third
were $720 million for the current period compared to net sales
quarter. Excluding the mutual fund allocation changes made
of $1.3 billion last year.
CHANGE IN ASSETS UNDER
MANAGEMENT – Q4 2019 VS. Q3 2019
Mackenzie’s total assets under management at December 31,
2019, were $70.2 billion, an increase of 2.8% from $68.3 billion
at September 30, 2019. Mackenzie’s sub-advisory, institutional
and other accounts at December 31, 2019 were $6.2 billion, an
increase of 1.5% from $6.1 billion at September 30, 2019.
by third party programs during the fourth quarter of 2019,
investment fund net sales of $301 million in the fourth quarter
compared to net sales of $491 million in the third quarter.
INVESTMENT MANAGEMENT
Mackenzie has $140.1 billion in assets under management at
December 31, 2019, including $69.9 billion of advisory mandates
to the IG Wealth Management family of funds. It has teams
located in Toronto, Montreal, Winnipeg, Boston, Dublin and
Mackenzie’s investment fund assets under management were
Hong Kong.
$64.0 billion at December 31, 2019, an increase of 3.0% from
$62.2 billion at September 30, 2019. Mackenzie’s mutual fund
assets under management were $60.8 billion at December 31,
2019, an increase of 2.6% from $59.3 billion at September 30,
2019. Mackenzie’s ETF assets were $4.7 billion at December 31,
2019, inclusive of $1.6 billion in investments from Mackenzie
mutual funds compared to $4.1 billion at September 30, 2019,
inclusive of $1.2 billion in investments from Mackenzie mutual funds.
This investment management organization continues to
deliver its investment offerings through a boutique structure,
with separate in-house investment teams which each have a
distinct focus and investment approach. This boutique approach
promotes diversification of styles and ideas and provides
Mackenzie with a breadth of capabilities. Oversight is conducted
through a common process intended to promote superior
risk-adjusted returns over time. This process is focused upon
For the quarter ended December 31, 2019, Mackenzie mutual
i) identifying and encouraging each team’s performance edge,
fund gross sales were $2.6 billion, an increase of 14.8% from the
ii) promoting best practices in portfolio construction, and iii)
third quarter of 2019. Mutual fund redemptions, which totalled
emphasizing risk management.
$2.6 billion for the fourth quarter, increased by 21.5% from the
previous quarter. Net sales of Mackenzie mutual funds for the
current quarter were $18 million compared with net sales of
$139 million in the previous quarter. Excluding the mutual fund
Mackenzie currently has fourteen boutiques. Initiatives during
2019 impacting the in-house investment offerings include
the following:
allocation changes made by third party programs during the
• Mackenzie changed the portfolio management of two of
fourth quarter of 2019, mutual fund gross sales increased 9.1%
its mutual funds by bringing their investment management
and mutual fund redemptions increased 13.7% in the fourth
in-house. The Mackenzie Fixed Income Team assumed
quarter compared to the third quarter and mutual fund net sales
51
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS management of the Mackenzie Corporate Bond Fund and
the Mackenzie North American Corporate Bond Fund. These
funds were previously sub-advised by a third party.
• Mackenzie’s Fixed Income Team assumed portfolio
management responsibilities for all externally sub-advised
mandates within the Symmetry Canadian Bond Fund. This
fund is utilized in the Symmetry Managed Solutions program.
In addition to its own investment teams, Mackenzie
supplements its investment capabilities through the use of third
party sub-advisors in selected areas. These sub-advisors include
Putnam Investments Inc., TOBAM, China AMC, Pax Ellevate
Management LLC, Rockefeller & Co and Greenchip Financial.
Mackenzie's assets under management are diversified by
investment objective as set out in Table 15. The development
of a broad range of investment capabilities and products
fund ranking service. At December 31, 2019, 75.1% of
Mackenzie mutual fund assets measured by Morningstar† had a
rating of three stars or better and 47.3% had a rating of four or
five stars. This compared to the Morningstar† universe of 83.9%
for three stars or better and 46.0% for four and five star funds at
December 31, 2019. These ratings exclude the Quadrus Group
of Funds†.
Mackenzie was once again recognized for industry leading
performance, winning four 2019 Lipper Awards. The award
honours funds that lead in delivering strong, risk-adjusted
performance relative to their peers:
• Mackenzie Canadian Growth Balanced Fund Series A – Best
three-year and five-year performance in the Canadian Equity
Balanced category. This fund is co-managed by Mackenzie’s
Bluewater, Fixed Income and Asset Allocation Teams.
has proven to be, and continues to be, a key strength of
• Mackenzie Floating Rate Income Fund Series A – Best three-
the organization in satisfying the evolving financial needs of
year performance in the Floating Rate Loan category. This
our clients.
Long-term investment performance is a key measure of
Mackenzie’s ongoing success. At December 31, 2019, 48.3%
of Mackenzie mutual fund assets were rated in the top two
performance quartiles for the one year time frame, 54.4% for the
three year time frame and 58.3% for the five year time frame.
Mackenzie also monitors its fund performance relative to the
ratings it receives on its mutual funds from the Morningstar†
fund is managed by Mackenzie’s Fixed Income Team
• Mackenzie Core Plus Canadian Fixed Income ETF – Best
three-year performance in the Canadian Fixed Income
category. This fund is managed by Mackenzie’s Fixed
Income team.
In addition, twelve funds were recognized for industry leading
performance at the 2019 Fundata FundGrade A+ Awards.
TABLE 15: ASSETS UNDER MANAGEMENT BY INVESTMENT OBJECTIVE – MACKENZIE
($ millions)
Equity
Domestic
Foreign
Balanced
Domestic
Foreign
Fixed Income
Domestic
Foreign
Money Market
Domestic
Total
Consists of:
Investment funds
Sub-advisory, institutional and other accounts
52
2019
2018
$ 10,341
23,197
14.8 %
33.0
$ 10,442
19,932
16.6 %
31.8
33,538
47.8
30,374
48.4
12,460
14,273
26,733
4,898
4,556
9,454
17.7
20.3
38.0
7.0
6.5
13.5
11,135
12,202
23,337
4,512
4,021
8,533
17.7
19.5
37.2
7.2
6.4
13.6
480
0.7
484
0.8
$ 70,205
100.0 %
$ 62,728
100.0 %
$ 63,991
6,214
91.1 %
8.9
$ 55,508
7,220
88.5 %
11.5
$ 70,205
100.0 %
$ 62,728
100.0 %
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
PRODUCTS
Mackenzie continues to evolve its product shelf by providing
enhanced investment solutions for financial advisors to offer
their clients. In 2019, Mackenzie launched a number of new
products, implemented pricing enhancements, and merged
mutual funds to streamline and strengthen its product shelf.
EXCHANGE TRADED FUNDS
The addition of Exchange Traded Funds (ETF) has
complemented Mackenzie’s broad and innovative fund line-
up and reflects its investor-focused vision to provide advisors
and investors with new solutions to drive investor outcomes
and achieve their personal goals. These ETFs offer investors
another investment option to utilize in building long-term
diversified portfolios.
During 2019, Mackenzie launched two new ETFs:
• Mackenzie Emerging Markets Bond Index ETF was launched
to provide investors with broad exposure to emerging
markets while investing in U.S. denominated, emerging
market government bonds and government related bonds.
This ETF hedges foreign currency back to the Canadian dollar.
• Mackenzie Emerging Markets Local Currency Bond Index
MUTUAL FUNDS
During 2019 Mackenzie launched five mutual funds:
• Mackenzie Global Growth Balanced Fund was launched
to give investors stronger geographic diversification and
enhanced return potential. The Fund is managed by the
Mackenzie Bluewater and Mackenzie Fixed Income Teams.
Assets under management in this fund were $150 million by
the end of the year.
• Three new liquid alternative funds (Mackenzie Credit Absolute
Return Fund, Mackenzie Global Macro Fund and Mackenzie
Global Long/Short Equity Alpha Fund) were launched to
enhance diversified sources of return and improve portfolio
stability. These three new funds bring our liquid alternative
offering to five funds, supplementing our earlier launches of
the Mackenzie Diversified Alternatives Fund and Mackenzie
Multi-Strategy Absolute Return Funds which have attracted
$1.3 billion to date.
• Mackenzie International Dividend Fund was launched to
provide investors with access to high-quality, dividend-paying
companies outside of Canada and the U.S. in order to help
diversify geographic concentration. This fund is managed by
Mackenzie’s Global Equity & Income Team.
ETF was launched to provide investors with the opportunity
During 2019, Mackenzie also merged five mutual funds to
to access the strong growth and diversification benefits of
streamline and strengthen its product shelf and make it easier
investing in emerging markets.
to navigate.
Assets under management of these two launches surpassed
$350 million by the end of the year, inclusive of $277 million in
investments from Mackenzie mutual funds.
PRICING ENHANCEMENTS
Mackenzie is focused on delivering clear, consistent and
competitive pricing. Initiatives implemented during 2019 include
Mackenzie’s current line-up consists of thirty ETFs: fifteen
the following:
active and strategic beta ETFs and fifteen traditional index ETFs.
During 2019, two milestones were achieved: i) ETF assets under
management surpassed $4 billion and ii) traditional index ETF
assets under management reached $2.0 billion. ETF assets under
management ended the year at $4.7 billion, an all-time high,
inclusive of $1.6 billion in investments from Mackenzie mutual
funds. This ranks Mackenzie in sixth place in the Canadian ETF
industry for assets under management. Mackenzie’s ETF assets
under management passed $5 billion in January 2020.
• Mackenzie reduced management fees by 5 to 15 basis points
on the six High Diversification funds sub-advised by TOBAM,
two fixed income mutual funds and five ETF Portfolios.
• Mackenzie reduced management fees on all thirteen
traditional index ETFs by 1 to 16 basis points.
53
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS REVIEW OF SEGMENT OPERATING RESULTS
Mackenzie’s segment excludes revenue earned on advisory
and composition of assets under management. Management
mandates to IG Wealth Management funds and investments
fee rates vary depending on the investment objective and the
into Mackenzie mutual funds by IG Wealth Management mutual
account type of the underlying assets under management. For
funds. The costs of the investment management team have
example, equity-based mandates have higher management
been allocated across segments.
Mackenzie’s earnings before interest and taxes are presented in
Table 16.
2019 VS. 2018
REVENUES
The largest component of Mackenzie’s revenues is management
fees. The amount of management fees depends on the level
TABLE 16: OPERATING RESULTS – MACKENZIE
fee rates than fixed income mandates and retail mutual fund
accounts have higher management fee rates than sub-advised
and institutional accounts. The majority of Mackenzie’s mutual
fund assets are purchased on a retail basis.
Within Mackenzie’s retail mutual fund offering, certain series are
offered for fee-based programs of participating dealers whereby
dealer compensation on such series is charged directly by the
dealer to a client (primarily Series F). As Mackenzie does not pay
THREE MONTHS ENDED
($ millions)
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Expenses
Commission
Trailing commission
Non-commission
2019
DEC. 31
2019
SEP. 30
2018
DEC. 31
2019
SEP. 30
$
180.4
25.5
1.4
207.3
0.6
207.9
5.6
68.3
92.6
166.5
$
178.6
25.0
1.4
205.0
(1.4)
203.6
5.4
67.6
84.2
157.2
$
169.9
23.8
1.4
195.1
(3.1)
192.0
5.7
64.0
86.9
156.6
1.0 %
2.0
–
1.1
N/M
2.1
3.7
1.0
10.0
5.9
% CHANGE
2018
DEC. 31
6.2 %
7.1
–
6.3
N/M
8.3
(1.8)
6.7
6.6
6.3
Earnings before interest and taxes
$
41.4
$
46.4
$
35.4
(10.8) %
16.9 %
TWELVE MONTHS ENDED
($ millions)
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Expenses
Commission
Trailing commission
Non-commission
2019
DEC. 31
2018
DEC. 31
% CHANGE
$
703.5
98.3
5.8
807.6
4.2
811.8
24.8
268.1
350.4
643.3
$
701.4
98.4
6.7
806.5
(1.9)
804.6
28.7
262.4
335.1
626.2
0.3 %
(0.1)
(13.4)
0.1
N/M
0.9
(13.6)
2.2
4.6
2.7
Earnings before interest and taxes
$
168.5
$
178.4
(5.5) %
54
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
the dealer compensation, these series have lower management
investment income and other was $0.6 million for the three
fees. At December 31, 2019, these series had $11.0 billion in
months ended December 31, 2019 compared to ($3.1) million
assets, an increase of 32.8% from the prior year.
last year. Net investment income and other was $4.2 million for
Management fees were $180.4 million for the three months
ended December 31, 2019, an increase of $10.5 million or
6.2% from $169.9 million last year. Management fees were
$703.5 million for the twelve months ended December 31,
2019, an increase of $2.1 million or 0.3% from $701.4 million
last year. The increase in both the three and twelve month
periods was due to an increase in total average assets under
management offset by a decline in the effective management
fee rate. Mackenzie’s average management fee rate was 103.8
the twelve months ended December 31, 2019, an increase of
$6.1 million from ($1.9) million last year.
EXPENSES
Mackenzie’s expenses were $166.5 million for the three months
ended December 31, 2019, an increase of $9.9 million or 6.3%
from $156.6 million in 2018. Expenses for the twelve months
ended December 31, 2019 were $643.3 million, an increase of
$17.1 million or 2.7% from $626.2 million last year.
and 104.0 basis points in the three and twelve months ended
Mackenzie pays selling commissions to the dealers that sell its
December 31, 2019 compared to 104.3 and 106.5 basis points,
respectively, in the comparative periods in 2018.
mutual funds on a deferred sales charge and low load purchase
option. Commissions paid are expensed as incurred.
The net change in management fees was due to a decline in
Commission expense was $5.6 million in the three months
the average management fee rate, offset by the increase in total
ended December 31, 2019, as compared to $5.7 million
average assets under management of 2.9%. Mackenzie’s average
last year. Commission expense in the twelve months ended
management fee rate in the twelve months ended December
December 31, 2019 was $24.8 million compared to $28.7
31, 2019 was 104.0 basis points compared to 106.5 basis points
million in 2018.
in 2018.
Trailing commissions paid to dealers are paid on certain classes
The decrease in the average management fee rate in both the
of retail mutual funds and are calculated as a percentage
three and twelve month periods was due to a change in the
of mutual fund assets under management. These fees vary
composition of assets under management, including the impact
depending on the fund type and the purchase option upon
of having a greater share in non-retail priced products and
which the fund was sold: front-end, deferred sales charge or
Series F.
Mackenzie earns administration fees primarily from providing
services to its investment funds. Administration fees were $25.5
million for the three months ended December 31, 2019, an
increase of $1.7 million or 7.1% from last year. Administration
fees were $98.3 million for the twelve months ended December
31, 2019, a decrease of $0.1 million or 0.1% from $98.4 million
last year.
low load. Trailing commissions were $68.3 million in the three
months ended December 31, 2019, an increase of $4.3 million
or 6.7% from $64.0 million last year. Trailing commissions in the
twelve months ended December 31, 2019 were $268.1 million,
an increase of $5.7 million or 2.2% from $262.4 million last year.
The increase in both the three and twelve month periods was
primarily due to the increase in average mutual fund assets
offset by a decline in the effective trailing commission rate.
Trailing commissions as a percentage of average mutual fund
Mackenzie earns distribution fee income on redemptions of
assets under management was 45.6 and 46.0 basis points in the
mutual fund assets sold on a deferred sales charge purchase
three and twelve months ended December 31, 2019 compared
option and on a low load purchase option. Redemption fees
to 46.6 and 46.7 basis points in the three and twelve months
charged for deferred sales charge assets range from 5.5% in the
ended December 31, 2018. The decline was due to a change in
first year and decrease to zero after seven years. Redemption
composition of mutual fund assets towards those series within
fees for low load assets range from 2.0% to 3.0% in the first year
mutual funds that do not pay trailing commissions.
and decrease to zero after two or three years, depending on the
purchase option. Distribution fee income in the three months
ended December 31, 2019 was $1.4 million, unchanged from
the prior year. Distribution fee income in the twelve months
ended December 31, 2019 was $5.8 million, a decrease of $0.9
million from $6.7 million last year.
Non-commission expenses are incurred by Mackenzie in the
administration, marketing and management of its assets under
management. Non-commission expenses were $92.6 million in
the three months ended December 31, 2019, an increase of $5.7
million or 6.6% from $86.9 million in 2018. Non-commission
expenses in the twelve months ended December 31, 2019 were
Net investment income and other includes investment returns
$350.4 million, an increase of $15.3 million or 4.6% from $335.1
related to Mackenzie’s investments in proprietary funds. These
million in 2018.
investments are generally made in the process of launching
a fund and are sold as third party investors subscribe. Net
55
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS Q4 2019 VS. Q3 2019
EXPENSES
REVENUES
Mackenzie’s expenses were $166.5 million for the current
quarter, an increase of $9.3 million or 5.9% from $157.2 million
Mackenzie’s revenues were $207.9 million for the current
quarter, an increase of $4.3 million or 2.1% from $203.6 million
in the third quarter.
in the third quarter.
Management fees were $180.4 million for the current quarter,
an increase of $1.8 million or 1.0% from $178.6 million in the
third quarter. Factors contributing to the net increase are as
follows:
• Average assets under management were $69.1 billion in the
current quarter, an increase of 1.4% from the prior quarter.
Commission expense related to selling commissions paid
was $5.6 million in the quarter ended December 31, 2019, as
compared to $5.4 million in the third quarter.
Trailing commissions were $68.3 million in the current quarter,
an increase of $0.7 million or 1.0% from $67.6 million in the
third quarter. The change in trailing commissions reflects the
1.5% period over period increase in average mutual fund assets
under management, offset in part by a decline in the effective
• Mackenzie’s average management fee rate was 103.8 basis
trailing commission rate. The effective trailing commission rate
points in the current quarter compared to 104.2 basis points
was 45.6 basis points in the current quarter compared to 45.8
in the prior quarter.
basis points in the third quarter.
Administration fees were $25.5 million in the current quarter, an
Non-commission expenses were $92.6 million in the current
increase of 2.0% from $25.0 million in the third quarter.
quarter, an increase of $8.4 million from $84.2 million in the
Net investment income and other includes investment returns
related to Mackenzie’s investments in proprietary funds. Net
investment income and other was $0.6 million for the current
quarter compared to ($1.4) million in the third quarter.
third quarter, primarily attributed to the seasonality of expenses.
56
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS CORPORATE AND OTHER
REVIEW OF SEGMENT OPERATING RESULTS
The Corporate and Other segment includes net investment
2019 VS. 2018
income not allocated to the IG Wealth Management or
Mackenzie segments, the Company’s proportionate share of
earnings of its associates, Great-West Lifeco Inc. (Lifeco), China
Asset Management Co., Ltd. (China AMC) and Personal Capital
Corporation (Personal Capital), operating results for Investment
Planning Counsel Inc., other income, as well as consolidation
elimination entries.
The proportionate share of associates’ earnings decreased by
$2.0 million in the fourth quarter of 2019 and decreased by
$27.6 million in the year ended December 31, 2019, compared
to 2018. These earnings reflect equity earnings from Lifeco
and China AMC for all periods under review and from Personal
Capital beginning in the first quarter 2019, as discussed in
the Consolidated Financial Position section of this MD&A. The
On January 24, 2019, the Company invested an additional
decrease in the fourth quarter resulted primarily from the
amount of $66.8 million (USD $50.0 million) in Personal Capital
inclusion of the Company’s proportionate share of Personal
and, as a result, the Company began using the equity method
Capital’s losses of $4.5 million, offset in part by an increase in
to account for its investment in Personal Capital as it exercises
Lifeco’s earnings of $2.5 million. The decrease in the twelve
significant influence. Significant influence arises from its voting
month period ended December 31, 2019, resulted primarily
interest and board representation.
The Company also has investments in Wealthsimple Financial
Corporation and Portag3 Ventures LPs.
Corporate and other earnings before interest and taxes are
presented in Table 17.
from the inclusion of the Company’s proportionate share of
Personal Capital’s losses of $16.8 million and the decrease in
Lifeco’s earnings of $11.9 million over 2018. Net investment
income and other decreased to $3.9 million in the fourth quarter
of 2019 compared to $5.3 million in 2018. For the twelve
month period, net investment income and other decreased to
$16.6 million compared to $17.1 million in 2018.
TABLE 17: OPERATING RESULTS – CORPORATE AND OTHER
THREE MONTHS ENDED
($ millions)
Revenues
Fee income
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Commission
Non-commission
$
2019
DEC. 31
70.5
3.9
32.6
107.0
44.8
21.5
66.3
$
2019
SEP. 30
71.7
3.2
28.9
103.8
44.7
21.9
66.6
2018
DEC. 31
2019
SEP. 30
% CHANGE
2018
DEC. 31
$
71.6
5.3
34.6
111.5
46.4
22.5
68.9
(1.7) %
21.9
12.8
3.1
0.2
(1.8)
(0.5)
(1.5) %
(26.4)
(5.8)
(4.0)
(3.4)
(4.4)
(3.8)
Earnings before interest and taxes
$
40.7
$
37.2
$
42.6
9.4 %
(4.5) %
TWELVE MONTHS ENDED
($ millions)
Revenues
Fee income
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Commission
Non-commission
2019
DEC. 31
2018
DEC. 31
% CHANGE
$
284.0
16.6
122.4
423.0
179.5
88.1
267.6
$
290.7
17.1
150.0
457.8
184.2
88.3
272.5
(2.3) %
(2.9)
(18.4)
(7.6)
(2.6)
(0.2)
(1.8)
Earnings before interest and taxes
$
155.4
$
185.3
(16.1) %
57
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
Earnings before interest and taxes related to Investment
Planning Counsel were $1.4 million higher in the fourth quarter
of 2019 compared to the same period in 2018 and were $0.7
million higher in the twelve month period.
Q4 2019 VS. Q3 2019
The proportionate share of associates’ earnings was $32.6
million in the fourth quarter of 2019, an increase of $3.7 million
from the third quarter of 2019 primarily resulting from an
increase in Lifeco’s earnings. Net investment income and other
was $3.9 million in the fourth quarter of 2019, compared to $3.2
million in the third quarter.
Earnings before interest and taxes related to Investment
Planning Counsel were $0.7 million lower in the fourth quarter
of 2019 compared to the prior quarter.
58
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS IGM FINANCIAL INC.
CONSOLIDATED FINANCIAL POSITION
IGM Financial's total assets were $15.4 billion at December 31,
Wealthsimple Financial Corporation (Wealthsimple) is an
2019, compared to $15.6 billion at December 31, 2018.
online investment manager that provides financial investment
OTHER INVESTMENTS
The composition of the Company’s securities holdings is detailed
in Table 18.
FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME (FVTOCI)
Gains and losses on FVTOCI investments are recorded in Other
comprehensive income.
CORPORATE INVESTMENTS
Corporate investments is primarily comprised of the Company’s
investments in Wealthsimple Financial Corporation, and Portag3
Ventures LP and Portag3 Ventures II LP. In January 2019, the
Company made an additional investment of $66.8 million (USD
$50.0 million) in Personal Capital Corporation which increased
its voting interest to 22.7% resulting in the reclassification
of $217.0 million on the Consolidated Balance Sheet from
Corporate investments to Investment in associates.
Portag3 Ventures LP and Portag3 Ventures II LP (Portag3)
are early-stage investment funds dedicated to backing
innovating financial services companies and are controlled
guidance. As at December 31, 2019, the Company had invested
a total of $186.9 million in Wealthsimple through a limited
partnership controlled by the Company’s parent, Power Financial
Corporation. The Company invested a total of $51.9 million
during the current year.
FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
Securities classified as FVTPL include equity securities and
proprietary investment funds. Gains and losses are recorded
in Net investment income and other in the Consolidated
Statements of Earnings.
Certain proprietary investment funds are consolidated where
the Company has made the assessment that it controls the
investment fund. The underlying securities of these funds are
classified as FVTPL.
LOANS
The composition of the Company’s loans is detailed in Table 19.
Loans consisted of residential mortgages and represented 46.8%
of total assets at December 31, 2019, compared to 49.6% at
December 31, 2018.
by the Company’s parent, Power Financial Corporation. As at
Loans measured at amortized cost are primarily comprised of
December 31, 2019, the Company had invested a total of $48.9
residential mortgages sold to securitization programs sponsored
million in Portag3, including $14.8 million which was invested
by third parties that in turn issue securities to investors. An
during 2019.
TABLE 18: OTHER INVESTMENTS
offsetting liability, Obligations to securitization entities, has
been recorded and totalled $6.9 billion at December 31, 2019,
compared to $7.4 billion at December 31, 2018.
($ millions)
COST
FAIR VALUE
COST
FAIR VALUE
DECEMBER 31, 2019
DECEMBER 31, 2018
Fair value through other comprehensive income
Corporate investments
Fair value through profit or loss
Equity securities
Proprietary investment funds
$ 245.0
$ 301.2
$ 303.6
$ 372.4
1.6
51.3
52.9
1.8
54.4
56.2
17.0
78.5
95.5
12.9
74.6
87.5
$ 297.9
$ 357.4
$ 399.1
$ 459.9
59
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company holds loans pending sale or securitization. Loans
cost, with interest income and interest expense, utilizing the
measured at fair value through profit or loss are residential
effective interest rate method, recorded over the term of the
mortgages held temporarily by the Company pending sale.
mortgages, ii) the component of swaps entered into under
Loans held for securitization are carried at amortized cost.
the CMB Program whereby the Company pays coupons on
Total loans being held pending sale or securitization are $344.5
Canada Mortgage Bonds and receives investment returns on the
million at December 31, 2019 compared to $363.9 million at
reinvestment of repaid mortgage principal, are recorded at fair
December 31, 2018.
value, and iii) cash reserves held under the ABCP program are
Residential mortgages originated by IG Wealth Management are
carried at amortized cost.
funded primarily through sales to third parties on a fully serviced
In the fourth quarter of 2019, the Company securitized loans
basis, including Canada Mortgage and Housing Corporation
through its mortgage banking operations with cash proceeds of
(CMHC) or Canadian bank sponsored securitization programs.
$277.8 million compared to $531.3 million in 2018. Additional
IG Wealth Management services $12.0 billion of residential
information related to the Company’s securitization activities,
mortgages, including $2.4 billion originated by subsidiaries
including the Company’s hedges of related reinvestment
of Lifeco.
SECURITIZATION ARRANGEMENTS
Through the Company’s mortgage banking operations,
residential mortgages originated by IG Wealth Management
mortgage planning specialists are sold to securitization trusts
sponsored by third parties that in turn issue securities to
investors. The Company securitizes residential mortgages
through the CMHC sponsored National Housing Act Mortgage-
Backed Securities (NHA MBS) and the Canada Mortgage
and interest rate risk, can be found in the Financial Risk
section of this MD&A and in Note 6 to the Consolidated
Financial Statements.
INVESTMENT IN ASSOCIATES
GREAT-WEST LIFECO INC. (LIFECO)
At December 31, 2019, the Company held a 4% equity interest
in Lifeco. IGM Financial and Lifeco are controlled by Power
Financial Corporation.
Bond Program (CMB Program) and through Canadian bank-
The equity method is used to account for IGM Financial’s
sponsored asset-backed commercial paper (ABCP) programs.
investment in Lifeco, as it exercises significant influence.
The Company retains servicing responsibilities and certain
Changes in the carrying value for the year ended December 31,
elements of credit risk and prepayment risk associated with the
2019 compared with 2018 are shown in Table 20.
transferred assets. The Company’s credit risk on its securitized
mortgages is partially mitigated through the use of insurance.
Derecognition of financial assets in accordance with IFRS is
based on the transfer of risks and rewards of ownership. As the
Company has retained prepayment risk and certain elements
In April 2019, the Company participated on a proportionate
basis in the Lifeco substantial issuer bid by selling 2,400,255 of
its shares in Lifeco for proceeds of $80.4 million. The Company’s
4% interest in Lifeco remains substantially unchanged.
of credit risk associated with the Company’s securitization
In June 2019, Lifeco recorded a one-time loss in relation to
transactions through the CMB and ABCP programs, they are
the sale of substantially all of its United States individual life
accounted for as secured borrowings. The Company records
insurance and annuity business. In December 2019, Lifeco
the transactions under these programs as follows: i) the
recorded one-time charges in relation to the revaluation of
mortgages and related obligations are carried at amortized
a deferred tax asset, restructuring costs and the net gain on
the Scottish Friendly transaction. The Company’s after-tax
proportionate share of these charges was $17.2 million.
TABLE 19: LOANS
($ millions)
Amortized cost
Less: Allowance for expected credit losses
Fair value through profit or loss
60
DECEMBER 31, 2019
DECEMBER 31, 2018
$ 7,198.7
0.7
7,198.0
–
$ 7,198.0
$ 7,734.5
0.8
7,733.7
4.3
$ 7,738.0
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
CHINA ASSET MANAGEMENT CO., LTD. (CHINA AMC)
As at December 31, 2019, Personal Capital had 2.41 million
Founded in 1998 as one of the first fund management companies
registered users, individuals who have signed up to use Personal
in China, China AMC has developed and maintained a position
Capital’s free dashboard platform, representing an increase of
among the market leaders in China’s asset management industry.
19.8% from 2.01 million at December 31, 2018 and an increase
China AMC’s total assets under management, excluding subsidiary
of 4.2% from 2.32 million at September 30, 2019.
assets under management, were RMB¥ 1,032.1 billion ($192.4
Personal Capital’s total assets under management were USD
billion) at December 31, 2019, representing an increase of 17.3%
$12.3 billion as at December 31, 2019, representing an increase of
(CAD$ increase of 10.3%) from RMB¥ 879.7 billion ($174.5 billion)
57.2% from USD $7.8 billion at December 31, 2018 and an increase
at December 31, 2018.
of 13.6% from USD $10.8 billion as at September 30, 2019.
The equity method is used to account for the Company’s 13.9%
Tracked Account Value (TAV), the gross value of assets and
equity interest in China AMC, as it exercises significant influence.
liabilities aggregated by registered users, was USD $841 billion
Changes in the carrying value for the three and twelve months
as at December 31, 2019, representing an increase of 32.0%
ended December 31, 2019 are shown in Table 20. The change in
from USD $637 billion at December 31, 2018 and an increase of
other comprehensive income in the twelve month period of 2019
7.2% from USD $784 billion as at September 30, 2019.
was due to a 6.0% depreciation of the Chinese Yuan relative to
the Canadian dollar.
PERSONAL CAPITAL CORPORATION (PERSONAL CAPITAL)
Founded in 2009 in the United States, Personal Capital is a
leading digital wealth manager that has experienced significant
growth since its inception.
The equity method is used to account for the Company’s 24.8%
equity interest in Personal Capital, as it exercises significant
influence. IGM Financial’s equity earnings from Personal Capital
includes its proportionate share of Personal Capital’s net loss
adjusted by IGM Financial’s amortization of intangible assets
that it recognized as part of its investment in the company.
Changes in the carrying value for the three and twelve months
ended December 31, 2019 are shown in Table 20.
TABLE 20: INVESTMENT IN ASSOCIATES
($ millions)
2019
DECEMBER 31
2018
DECEMBER 31
LIFECO
CHINA
AMC
PERSONAL
CAPITAL
TOTAL
LIFECO
CHINA
AMC
TOTAL
THREE MONTH PERIOD
Carrying value, October 1
Dividends received
Proportionate share of:
Earnings (losses)(1)
Associate's one-time charges(1)
Other comprehensive income (loss)
and other adjustments
$ 898.7
(15.4)
$ 651.2
–
$ 202.8
–
$ 1,752.7
(15.4)
$ 967.4
(15.4)
$ 641.3
–
$ 1,608.7
(15.4)
29.9
(9.2)
(7.3)
7.2
–
4.3
(4.5)
–
(3.8)
32.6
(9.2)
(6.8)
27.4
–
7.2
–
34.6
–
(11.6)
35.0
23.4
Carrying value, December 31
$ 896.7
$ 662.7
$ 194.5
$ 1,753.9
$ 967.8
$ 683.5
$ 1,651.3
TWELVE MONTH PERIOD
Carrying value, January 1
Transfer from corporate
investments (FVTOCI)
Proceeds from substantial issuer bid
Dividends received
Proportionate share of:
Earnings (losses)(1)
Associate's one-time charges(1)
Other comprehensive income (loss)
and other adjustments
Carrying value, December 31
$ 967.8
$ 683.5
$
–
$ 1,651.3
$ 901.4
$ 647.9
$ 1,549.3
–
(80.4)
(62.6)
109.1
(17.2)
(20.0)
$ 896.7
–
–
(10.3)
30.1
–
217.0
–
–
(16.8)
–
217.0
(80.4)
(72.9)
122.4
(17.2)
–
–
(61.8)
–
–
(12.2)
–
–
(74.0)
121.0
–
29.0
–
150.0
–
(40.6)
(5.7)
(66.3)
7.2
18.8
26.0
$ 662.7
$ 194.5
$ 1,753.9
$ 967.8
$ 683.5
$ 1,651.3
(1) The proportionate share of earnings from the Company’s investment in associates is recorded in Net investment income and other in the Corporate and other reportable segment
(Tables 2, 3 and 4).
61
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
Cash and cash equivalents totalled $720.0 million at December 31,
2019 compared with $650.2 million at December 31, 2018. Cash
and cash equivalents related to the Company’s deposit operations
were $2.2 million at December 31, 2019, compared to $2.4 million
at December 31, 2018, as shown in Table 21.
Working capital, which consists of current assets less current
liabilities, totalled $464.3 million at December 31, 2019
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA)
For the financial year ($ millions)
1,393
1,321
1,355
1,333
1,294
EBITDA before
sales commissions
compared with $366.1 million at December 31, 2018 (Table 22).
1,143
1,086
1,083
1,145
1,129
EBITDA after
sales commissions
Working capital is utilized to:
• Finance ongoing operations, including the funding of sales
commissions.
• Temporarily finance mortgages in its mortgage banking
operations.
2015
2016
2017
2018
2019
Adjusted EBITDA before and after sales commissions excluded the following:
• Pay interest and dividends related to long-term debt and
2015 - a charge related to restructuring and other charges.
preferred shares.
• Maintain liquidity requirements for regulated entities.
• Pay quarterly dividends on its outstanding common shares.
• Finance common share repurchases and retirement of long-
term debt.
IGM Financial continues to generate significant cash flows from
its operations. Earnings before interest, taxes, depreciation
and amortization before sales commissions (EBITDA before
sales commissions) totalled $1,294.0 million in the year ended
2017 - charges related to restructuring and other, a favourable revaluation
of the Company's pension plan obligation, charges representing the
proportionate share in Great-West Lifeco Inc.'s one-time charges and
restructuring provision.
2018 - charges related to restructuring and other and the premium paid on
the early redemption of debentures.
2019 - the Company’s proportionate share in Great-West Lifeco Inc.’s one-
time charges.
December 31, 2019 compared to $1,333.0 million in 2018.
compared to $1,144.5 million in 2018. EBITDA after sales
EBITDA before sales commissions excludes the impact of both
commissions excludes the impact of commission amortization
commissions paid and commission amortization (refer to
(refer to Table 1).
Table 1).
Refer to the Financial Instruments Risk section of this MD&A
Earnings before interest, taxes, depreciation and amortization
for information related to other sources of liquidity and to
after sales commissions (EBITDA after sales commissions)
the Company’s exposure to and management of liquidity and
totalled $1,128.9 million in the year ended December 31, 2019
funding risk.
TABLE 21: DEPOSIT OPERATIONS – FINANCIAL POSITION
AS AT DECEMBER 31 ($ millions)
Assets
Cash and cash equivalents
Client funds on deposit
Accounts and other receivables
Loans
Total assets
Liabilities and shareholders’ equity
Deposit liabilities
Other liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
62
2019
2018
$
2.2
561.3
12.3
20.4
$
2.4
546.8
8.8
21.3
$ 596.2
$ 579.3
$ 584.3
0.5
11.4
$ 568.8
0.5
10.0
$ 596.2
$ 579.3
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
TABLE 22: WORKING CAPITAL
AS AT DECEMBER 31 ($ millions)
Current Assets
Cash and cash equivalents
Client funds on deposit
Accounts receivable and other assets
Current portion of mortgages and other
Current Liabilities
Accounts and other payables
Deposits and certificates
Current portion of long-term liabilities
Working Capital
2019
2018
$ 720.0
561.3
345.3
1,531.7
$ 650.2
546.8
311.9
1,280.1
3,158.3
2,789.0
611.9
579.0
1,503.1
644.7
562.4
1,215.8
2,694.0
2,422.9
$ 464.3
$ 366.1
CASH FLOWS
• Changes in operating assets and liabilities and other.
Table 23 - Cash Flows is a summary of the Consolidated
• The add-back of one-time adjustments in 2018, which
Statements of Cash Flows which forms part of the Consolidated
included a restructuring provision and other.
Financial Statements for the year ended December 31, 2019.
Cash and cash equivalents increased by $69.8 million in 2019
compared to a decrease of $316.6 million in 2018.
Adjustments to determine net cash from operating activities
during the year ended 2019 compared to 2018 consist of non-
cash operating activities offset by cash operating activities:
• The add-back of amortization of capitalized sale commissions
offset by the deduction of capitalized sales commissions paid.
• The deduction of restructuring provision cash payments.
Financing activities during the year ended December 31, 2019
compared to 2018 related to:
• An increase in obligations to securitization entities of $1,456.3
million and repayments of obligations to securitization
entities of $1,960.8 million in 2019 compared to an increase
in obligations to securitization entities of $1,771.7 million
and repayments of obligations to securitization entities of
• The add-back of amortization of capital, intangible and other assets.
$2,034.4 million in 2018.
• The deduction of investment in associates’ equity earnings
• Issuance of debentures of $250.0 million in 2019, compared
offset by dividends received.
to the issuance of debentures of $200.0 million in 2018.
• The add-back of pension and other post-employment
benefits offset by cash contributions.
TABLE 23: CASH FLOWS
TWELVE MONTHS ENDED
($ millions)
Operating activities
Earnings before income taxes
Income taxes paid
Adjustments to determine net cash from operating activities
Financing activities
Investing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
2019
DEC. 31
2018
DEC. 31
% CHANGE
$
968.7
(236.7)
(19.9)
712.1
(1,068.9)
426.6
69.8
650.2
$
986.1
(132.6)
(68.3)
785.2
(1,131.8)
30.0
(316.6)
966.8
$
720.0
$
650.2
(1.8) %
(78.5)
70.9
(9.3)
5.6
N/M
N/M
(32.7)
10.7 %
63
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
• Repayment of debentures of $525.0 million in 2018.
• Redemption of preferred shares of $150.0 million in the
Capital
As at December 31 ($ millions)
second quarter of 2019.
• The purchase of 2,762,788 common shares in 2019 under
IGM Financial’s normal course issuer bid at a cost of $100.0
million. There were no purchases in 2018.
• The payment of perpetual preferred share dividends which
totalled $4.4 million in 2019 compared to $8.8 million
in 2018.
• The payment of regular common share dividends which
totalled $539.0 million in 2019 compared to $541.8 million
in 2018.
Investing activities during the year ended December 31, 2019
compared to 2018 primarily related to:
• The purchases of other investments totalling $118.9 million
and sales of other investments with proceeds of $85.5 million
in 2019 compared to $154.5 million and $93.5 million,
respectively, in 2018.
• An increase in loans of $1,682.1 million with repayments of
loans and other of $2,211.5 million in 2019 compared to
$1,748.4 million and $1,895.6 million, respectively, in 2018,
primarily related to residential mortgages in the Company’s
mortgage banking operations.
• Net cash used in additions to intangible assets and
acquisitions was $64.1 million in 2019 compared to $49.1
million in 2018.
• An additional investment in Personal Capital of $66.8 million
in the first quarter of 2019.
• Proceeds of $80.4 million from the sale of 2,400,255 Lifeco
shares in 2019 as a result of the Company’s participation in
the Lifeco substantial issuer bid.
CAPITAL RESOURCES
The Company’s capital management objective is to maximize
shareholder returns while ensuring that the Company is
capitalized in a manner which appropriately supports regulatory
capital requirements, working capital needs and business
expansion. The Company’s capital management practices are
focused on preserving the quality of its financial position by
maintaining a solid capital base and a strong balance sheet.
Capital of the Company consists of long-term debt, perpetual
preferred shares and common shareholders’ equity which
totalled $6.6 billion at December 31, 2019, compared to $6.4
billion at December 31, 2018. At December 31, 2018, capital
included perpetual preferred shares of $150 million which
were redeemed in April 2019. The Company regularly assesses
its capital management practices in response to changing
economic conditions.
64
6,052
6,072
1,325
1,325
7,000
2,175
6,599
2,100
6,452
1,850
150
150
150
150
4,577
4,597
4,675
4,452
4,499
2015
2016
2017
2018
2019
Long-term Debt
Perpetual Preferred Shares
Common Shareholders’ Equity
The Company’s capital is primarily utilized in its ongoing
business operations to support working capital requirements,
long-term investments made by the Company, business
expansion and other strategic objectives. Subsidiaries subject
to regulatory capital requirements include investment dealers,
mutual fund dealers, exempt market dealers, portfolio managers,
investment fund managers and a trust company. These
subsidiaries are required to maintain minimum levels of capital
based on either working capital, liquidity or shareholders’ equity.
The Company’s subsidiaries have complied with all regulatory
capital requirements.
The total outstanding long-term debt was $2.1 billion at
December 31, 2019, compared to $1.9 billion at December 31,
2018. Long-term debt is comprised of debentures which are
senior unsecured debt obligations of the Company subject to
standard covenants, including negative pledges, but which do
not include any specified financial or operational covenants. The
net increase in long-term debt resulted from the issuance on
March 20, 2019 of $250.0 million 4.206% debentures maturing
March 21, 2050.
The net proceeds from the issuance of the debenture was used
by the Company in part to fund the redemption of $150 million
5.90% Non-Cumulative First Preferred Shares, Series B and for
general corporate purposes. The Company redeemed the Series
B Preferred Shares on April 30, 2019.
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS The Company purchased 2,762,788 common shares during
a company and are indicators of the likelihood of payment and
the year ended December 31, 2019 at a cost of $100.0
the capacity of a company to meet its obligations in accordance
million under its normal course issuer bid (refer to Note 17
with the terms of each obligation. Descriptions of the rating
to the Consolidated Financial Statements). The Company
categories for each of the agencies set forth below have been
commenced a normal course issuer bid on March 26, 2019 to
obtained from the respective rating agencies’ websites.
purchase up to 4 million of its common shares to provide the
flexibility to manage its capital position while generating value
for shareholders.
These ratings are not a recommendation to buy, sell or hold
the securities of the Company and do not address market price
or other factors that might determine suitability of a specific
In connection with its normal course issuer bid, the Company
security for a particular investor. The ratings also may not
has established an automatic securities purchase plan for
reflect the potential impact of all risks on the value of securities
its common shares. The automatic securities purchase plan
and are subject to revision or withdrawal at any time by the
provides standard instructions regarding how IGM Financial’s
rating organization.
common shares are to be purchased under its normal course
issuer bid during certain pre-determined trading blackout
periods. Outside of these pre-determined trading blackout
periods, purchases under the Company’s normal course issuer
bid will be completed based upon management’s discretion.
The A rating assigned to IGM Financial’s senior unsecured
debentures by S&P is the sixth highest of the 22 ratings used
for long-term debt. This rating indicates S&P’s view that the
Company’s capacity to meet its financial commitment on the
obligation is strong, but the obligation is somewhat more
Other activities in 2019 included the declaration of perpetual
susceptible to the adverse effects of changes in circumstances
preferred share dividends of $2.2 million or $0.36875 per share
and economic conditions than obligations in higher
and common share dividends of $537.6 million or $2.25 per
rated categories.
share. Changes in common share capital are reflected in the
Consolidated Statements of Changes in Shareholders’ Equity.
The A (High) rating assigned to IGM Financial’s senior unsecured
debentures by DBRS is the fifth highest of the 26 ratings used
Standard & Poor’s (S&P) current rating on the Company’s senior
for long-term debt. Under the DBRS long-term rating scale,
unsecured debentures is “A” with a stable outlook. Dominion
debt securities rated A (High) are of good credit quality and the
Bond Rating Service’s (DBRS) current rating on the Company’s
capacity for the payment of financial obligations is substantial.
senior unsecured debentures is “A (High)” with a stable
While this is a favourable rating, entities in the A (High) category
rating trend.
Credit ratings are intended to provide investors with an
independent measure of the credit quality of the securities of
TABLE 24: FINANCIAL INSTRUMENTS
may be vulnerable to future events, but qualifying negative
factors are considered manageable.
($ millions)
CARRYING VALUE FAIR VALUE
CARRYING VALUE
FAIR VALUE
DECEMBER 31, 2019
DECEMBER 31, 2018
Financial assets recorded at fair value
Other investments
– Fair value through other comprehensive income
– Fair value through profit or loss
$
301.2
56.2
$
301.2
56.2
$
372.4
87.5
$
372.4
87.5
Loans
– Fair value through profit or loss
Derivative financial instruments
Financial assets recorded at amortized cost
Loans
– Amortized cost
Financial liabilities recorded at fair value
Derivative financial instruments
Other financial liabilities
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long-term debt
–
15.2
–
15.2
4.3
16.4
4.3
16.4
7,198.0
7,273.8
7,733.7
7,785.5
17.2
–
17.2
–
29.0
8.2
29.0
8.2
584.3
6,913.6
2,100.0
584.7
6,997.0
2,453.6
568.8
7,370.2
1,850.0
569.0
7,436.9
2,050.3
65
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL INSTRUMENTS
Table 24 presents the carrying amounts and fair values of
financial assets and financial liabilities. The table excludes fair
value information for financial assets and financial liabilities not
• Obligations to securitization entities are valued by discounting
the expected future cash flows at prevailing market yields for
securities issued by these securitization entities having similar
terms and characteristics.
measured at fair value if the carrying amount is a reasonable
• Deposits and certificates are valued by discounting the
approximation of fair value. These items include cash and
contractual cash flows using market interest rates currently
cash equivalents, accounts and other receivables, certain other
offered for deposits with similar terms and credit risks.
financial assets, accounts payable and accrued liabilities and
• Long-term debt is valued using quoted prices for each
certain other financial liabilities.
debenture available in the market.
Fair value is determined using the following methods and
assumptions:
• Other investments and other financial assets and liabilities
are valued using quoted prices from active markets, when
available. When a quoted market price is not readily available,
valuation techniques are used that require assumptions
related to discount rates and the timing and amount of future
cash flows. Wherever possible, observable market inputs are
used in the valuation techniques.
• Derivative financial instruments are valued based on quoted
market prices, where available, prevailing market rates for
instruments with similar characteristics and maturities, or
discounted cash flow analysis.
See Note 23 of the Consolidated Financial Statements which
provides additional discussion on the determination of fair value
of financial instruments.
Although there were changes to both the carrying values and
fair values of financial instruments, these changes did not have
• Loans classified as held for trading are valued using market
a material impact on the financial condition of the Company for
interest rates for loans with similar credit risk and maturity,
the twelve months ended December 31, 2019.
specifically lending rates offered to retail borrowers by
financial institutions.
• Loans classified as amortized cost are valued by discounting
the expected future cash flows at prevailing market yields.
66
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS RISK MANAGEMENT
The Company is exposed to a variety of risks that are inherent
Committee which oversees conflicts of interest as well as the
in its business activities. Its ability to manage these risks is key
administration of the Code of Business Conduct and Ethics for
to its ongoing success. The Company emphasizes a strong risk
Directors, Officers and Employees (Code of Conduct).
management culture and the implementation of an effective
risk management approach. The risk management approach
coordinates risk management across the organization and its
business units and seeks to ensure prudent and measured risk-
taking in order to achieve an appropriate balance between risk
and return. Fundamental to our enterprise risk management
program is protecting and enhancing our reputation.
RISK MANAGEMENT FRAMEWORK
The Company’s risk management approach is undertaken
through its Enterprise Risk Management (ERM) Framework
which includes five core elements: risk governance, risk appetite,
risk principles, a defined risk management process, and risk
Management oversight for risk management resides with the
executive Risk Management Committee which is comprised of
the President and Chief Executive Officer, IGM Financial and
IG Wealth Management, the President and Chief Executive
Officer, Mackenzie Investments, the Chief Financial Officer, the
General Counsel, the Chief Operating Officer and the Executive
Vice President Chief Strategy and Corporate Development
Officer. The committee is responsible for providing oversight
of the Company’s risk management process by: i) establishing
and maintaining the risk framework and policy, ii) defining the
Company’s risk appetite, iii) ensuring the Company’s risk profile
and processes are aligned with corporate strategy and risk
appetite, and iv) establishing “tone at the top” and reinforcing a
management culture. The ERM Framework is established under
strong culture of risk management.
the Company’s ERM Policy, which is approved by the Risk
Management Committee.
RISK GOVERNANCE
The Company’s risk governance structure emphasizes a
comprehensive and consistent framework throughout the
Company and its subsidiaries, with identified ownership of
risk management in each business unit and oversight by an
executive Risk Management Committee accountable to the
Board of Directors. Additional oversight is provided by the
Enterprise Risk Management (ERM) Department, compliance
groups, and the Company’s Internal Audit Department.
The Board of Directors provides primary oversight and carries
out its risk management mandate. The Board is responsible
for the oversight of enterprise risk management by: i) ensuring
that appropriate procedures are in place to identify and manage
risks and establish risk tolerances, ii) ensuring that appropriate
policies, procedures and controls are implemented to manage
risks, and iii) reviewing the risk management process on a
regular basis to ensure that it is functioning effectively.
Other specific risks are managed with the support of the
following Board committees:
• The Audit Committee has specific risk oversight
responsibilities in relation to financial disclosure, internal
controls and the control environment as well as the
Company’s compliance activities.
The Chief Executive Officers of the operating companies have
overall responsibility for overseeing risk management of their
respective companies.
The Company has assigned responsibility for risk management
using the Three Lines of Defence model, with the First Line
reflecting the business units having primary responsibility for
risk management, supported by Second Line risk management
functions and a Third Line Internal Audit function providing
assurance and validation of the design and effectiveness of the
ERM Framework.
First Line of Defence
The leaders of the various business units and support functions
have primary ownership and accountability for the ongoing
risk management associated with their respective activities.
Responsibilities of business unit and support function leaders
include: i) establishing and maintaining procedures for the
identification, assessment, documentation and escalation of
risks, ii) implementing control activities to mitigate risks, iii)
identifying opportunities for risk reduction or transfer, and iv)
aligning business and operational strategies with the risk culture
and risk appetite of the organization as established by the Risk
Management Committee.
Second Line of Defence
The Enterprise Risk Management (ERM) Department provides
oversight, analysis and reporting to the Risk Management
• Other committees having specific risk oversight responsibilities
include: i) the Human Resource Committee which oversees
Committee on the level of risks relative to the established risk
appetite for all activities of the Company. Other responsibilities
compensation policies and practices, ii) the Governance and
include: i) developing and maintaining the enterprise risk
Nominating Committee which oversees corporate governance
management program and framework, ii) managing the
practices, and iii) the Related Party and Conduct Review
enterprise risk management process, and iii) providing guidance
and training to business unit and support function leaders.
67
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS The Company has a number of committees of senior business
We use a consistent methodology across our organizations
leaders which provide oversight of specific business risks,
and business units for identification and assessment of risks.
including the Financial Risk Management and Operational
Risks are assessed by evaluating the impact and likelihood of
Risk Management committees. These committees perform
the potential risk event after consideration of controls and any
critical reviews of risk assessments, risk management practices
risk transfer activities. The results of these assessments are
and risk response plans developed by business units and
considered relative to risk appetite and tolerances and may
support functions.
result in action plans to adjust the risk profile.
Other oversight accountabilities reside with the Company’s
Risk assessments are monitored and reviewed on an ongoing
corporate and compliance groups which are responsible for
basis by business units and by oversight areas including the ERM
ensuring compliance with policies, laws and regulations.
Department. The ERM Department promotes and coordinates
Third Line of Defence
communication and consultation to support effective risk
management and escalation. The ERM Department regularly
The Internal Audit Department is the third line of defence and
reports on the results of risk assessments and on the assessment
provides independent assurance to senior management and
the Board of Directors on the effectiveness of risk management
process to the Risk Management Committee and to the Board
of Directors.
policies, processes and practices.
RISK MANAGEMENT CULTURE
RISK APPETITE AND RISK PRINCIPLES
Risk management is intended to be everyone’s responsibility
The Risk Management Committee establishes the Company’s
within the organization. The ERM Department engages
appetite for different types of risk through the Risk Appetite
all business units in workshops to foster awareness and
Framework. Under the Risk Appetite Framework, one of four
incorporation of our risk framework into our business activities.
appetite levels is established for each risk type and business
activity of the Company. These appetite levels range from
those where the Company has no appetite for risk and seeks to
minimize any losses, to those where the Company readily accepts
exposure while seeking to ensure that risks are well understood
and managed. These appetite levels guide our business units as
We have an established business planning process which
reinforces our risk management culture. Our compensation
programs are typically objectives-based, and do not encourage
or reward excessive or inappropriate risk taking, and often are
aligned specifically with risk management objectives.
they engage in business activities, and inform them in establishing
Our risk management program emphasizes integrity, ethical
policies, limits, controls and risk transfer activities.
A Risk Appetite Statement and Risk Principles provide further
guidance to business leaders and employees as they conduct risk
management activities. The Risk Appetite Statement’s emphasis is
to maintain the Company’s reputation and brand, ensure financial
practices, responsible management and measured risk-taking
with a long-term view. Our standards of integrity and ethics are
reflected within our Code of Conduct which applies to directors,
officers and employees.
flexibility, and focus on mitigating operational risk.
KEY RISKS OF THE BUSINESS
RISK MANAGEMENT PROCESS
The Company identifies risks to which its businesses and
operations could be exposed considering factors both internal
The Company’s risk management process is designed to foster:
and external to the organization. These risks are broadly
• Ongoing assessment of risks and tolerance in a changing
operating environment.
• Appropriate identification and understanding of existing and
emerging risks and risk response.
• Timely monitoring and escalation of risks based upon
changing circumstances.
grouped into six categories.
1) FINANCIAL RISK
LIQUIDITY AND FUNDING RISK
Liquidity and funding risk is the risk of the inability to generate
or obtain sufficient cash in a timely and cost-effective manner
to meet contractual or anticipated commitments as they come
Significant risks that may adversely affect the Company’s ability
due or arise.
to achieve its strategic and business objectives are identified
through the Company’s ongoing risk management process.
The Company’s liquidity management practices include:
• Maintaining liquid assets and lines of credit to satisfy near
term liquidity needs.
• Ensuring effective controls over liquidity management processes.
68
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS • Performing regular cash forecasts and stress testing.
insured by an insurer that is approved by CMHC. The availability
• Regular assessment of capital market conditions and the
of mortgage insurance is dependent upon market conditions
Company’s ability to access bank and capital market funding.
and is subject to change.
• Ongoing efforts to diversify and expand long-term mortgage
As part of ongoing liquidity management during 2019 and 2018,
funding sources.
the Company:
• Oversight of liquidity management by the Financial Risk
Management Committee, a committee of finance and other
business leaders.
A key funding requirement for the Company is the funding of
Consultant network compensation paid for the distribution of
financial products and services. This compensation continues to
be paid from operating cash flows.
The Company also maintains sufficient liquidity to fund and
temporarily hold mortgages pending sale or securitization
• Continued to assess additional funding sources for the
Company’s mortgage banking operations.
• Repaid the $150 million 6.58% debentures in March 2018.
• Issued $200 million of 30 year 4.174% debentures in July
2018. The net proceeds were used by IGM Financial, together
with a portion of IGM Financial’s existing internal cash
resources, to fund the early redemption in August of all of its
$375 million aggregate principal amount of 7.35% debentures
due April 8, 2019.
to long-term funding sources and to manage any derivative
• Issued $250 million 4.206% debentures in March 2019
collateral requirements related to the mortgage banking
maturing March 21, 2050. The net proceeds were used by the
operation. Through its mortgage banking operations, residential
Company to fund the redemption of $150 million 5.90% Non-
mortgages are sold to third parties including certain mutual
Cumulative First Preferred Shares, Series B and for general
funds, institutional investors through private placements,
corporate purposes. The Company redeemed the Series B
Canadian bank-sponsored securitization trusts, and by issuance
Preferred Shares on April 30, 2019.
and sale of National Housing Act Mortgage-Backed Securities
(NHA MBS) securities including sales to Canada Housing Trust
under the CMB Program. The Company maintains committed
capacity within certain Canadian bank-sponsored securitization
trusts. Capacity for sales under the CMB Program consists of
participation in new CMB issues and reinvestment of principal
• Participated in the Lifeco substantial issuer bid by selling
2,400,255 of its shares in Lifeco for proceeds of $80.4 million.
The Company’s contractual obligations are reflected in Table 25.
The maturity schedule for long-term debt of $2.1 billion
is reflected in the accompanying chart (Long-Term Debt
repayments held in the Principal Reinvestment Accounts. The
Maturity Schedule).
Company’s continued ability to fund residential mortgages
through Canadian bank-sponsored securitization trusts and
NHA MBS is dependent on securitization market conditions and
government regulations that are subject to change. A condition
of the NHA MBS and CMB Program is that securitized loans be
In addition to IGM Financial’s current balance of cash and
cash equivalents, liquidity is available through the Company’s
lines of credit. The Company’s lines of credit with various
Schedule I Canadian chartered banks totalled $825 million at
December 31, 2019, unchanged from December 31, 2018. The
TABLE 25: CONTRACTUAL OBLIGATIONS
AS AT DECEMBER 31, 2019
($ millions)
Derivative financial instruments
Deposits and certificates
Obligations to securitization entities
Leases(1)
Long-term debt
Pension funding(2)
DEMAND
LESS THAN
1 YEAR
$
–
573.0
–
–
–
–
$
6.9
6.0
1,473.6
26.2
–
26.1
$
1-5
YEARS
10.1
4.2
5,431.5
54.7
–
–
$
AFTER
5 YEARS
0.2
1.1
8.5
23.5
2,100.0
–
$
TOTAL
17.2
584.3
6,913.6
104.4
2,100.0
26.1
Total contractual obligations
$
573.0
$ 1,538.8
$ 5,500.5
$ 2,133.3
$ 9,745.6
(1) Includes remaining lease payments related to office space and equipment used in the normal course of business.
(2) The next required actuarial valuation will be completed based on a measurement date of December 31, 2020. Pension funding requirements beyond 2020 are subject to significant
variability and will be determined based on future actuarial valuations. Pension contribution decisions are subject to change, as contributions are affected by many factors including
market performance, regulatory requirements, changes in assumptions and management's ability to change funding policy.
69
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
Long-Term Debt Maturity Schedule
($ millions)
525
175
150
150
200
450
250
200
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046
2047
2048 2049 2050
Year
lines of credit at December 31, 2019 consisted of committed
2018 to reduce its solvency deficit and increase its going
lines of $650 million and uncommitted lines of $175 million,
concern surplus. The Company expects to make contributions
unchanged from December 31, 2018. The Company has
of approximately $26.1 million in 2020. Pension contribution
accessed its uncommitted lines of credit in the past; however,
decisions are subject to change, as contributions are affected
any advances made by a bank under the uncommitted lines of
by many factors including market performance, regulatory
credit are at the bank’s sole discretion. As at December 31, 2019
requirements, changes in assumptions and management’s ability
and December 31, 2018, the Company was not utilizing its
to change funding policy.
committed lines of credit or its uncommitted lines of credit.
Management believes cash flows from operations, available
The actuarial valuation for funding purposes related to the
cash balances and other sources of liquidity described above are
Company’s registered defined benefit pension plan, based on a
sufficient to meet the Company’s liquidity needs. The Company
measurement date of December 31, 2017, was completed in
continues to have the ability to meet its operational cash
May 2018. The valuation determines the plan surplus or deficit
flow requirements, its contractual obligations, and its declared
on both a solvency and going concern basis. The solvency basis
dividends. The current practice of the Company is to declare
determines the relationship between the plan assets and its
and pay dividends to common shareholders on a quarterly basis
liabilities assuming that the plan is wound up and settled on
at the discretion of the Board of Directors. The declaration of
the valuation date. A going concern valuation compares the
dividends by the Board of Directors is dependent on a variety
relationship between the plan assets and the present value of
of factors, including earnings which are significantly influenced
the expected future benefit cash flows, assuming the plan will
by the impact that debt and equity market performance has on
be maintained indefinitely. Based on the actuarial valuation, the
the Company’s fee income and commission and certain other
registered pension plan had a solvency deficit of $47.2 million
expenses. The Company’s liquidity position and its management
compared to $82.7 million in the previous actuarial valuation,
of liquidity and funding risk have not changed materially since
which was based on a measurement date of December 31,
December 31, 2018.
2016. The decrease in the solvency deficit resulted primarily
from higher assets due to contribution and investment returns
CREDIT RISK
and is required to be funded over five years. The registered
Credit risk is the potential for financial loss to the Company if a
pension plan had a going concern surplus of $46.1 million
counterparty to a transaction fails to meet its obligations.
compared to $24.4 million in the previous valuation. The next
required actuarial valuation will be based on a measurement
date of December 31, 2020. During 2019, the Company made
contributions of $26.4 million (2018 - $40.4 million). The
Company utilized $10.5 million of the payments made during
The Company’s cash and cash equivalents, other investment
holdings, mortgage portfolios, and derivatives are subject to
credit risk. The Company monitors its credit risk management
practices on an ongoing basis to evaluate their effectiveness.
70
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS Cash and Cash Equivalents
• Credit risk for mortgages securitized by transfer to bank-
At December 31, 2019, cash and cash equivalents of $720.0 million
sponsored securitization trusts totalling $2.9 billion (2018
(2018 - $650.2 million) consisted of cash balances of $68.0 million
– $3.1 billion) is limited to amounts held in cash reserve
(2018 - $81.8 million) on deposit with Canadian chartered banks
accounts and future net interest income, the fair values of
and cash equivalents of $652.0 million (2018 - $568.4 million).
which were $71.9 million (2018 - $74.1 million) and $37.9
Cash equivalents are comprised of Government of Canada treasury
million (2018 - $35.6 million), respectively, at December 31,
bills totalling $34.5 million (2018 - $103.5 million), provincial
2019. Cash reserve accounts are reflected on the balance
government treasury bills and promissory notes of $206.5 million
sheet, whereas rights to future net interest income are not
(2018 - $76.2 million), bankers’ acceptances and other short-
reflected on the balance sheet and will be recorded over
term notes issued by Canadian chartered banks of $411.0 million
the life of the mortgages. This risk is further mitigated by
(2018 - $364.3 million). Also included in 2018 were highly rated
insurance with 4.6% of mortgages held in ABCP Trusts insured
corporate commercial paper of $24.4 million.
at December 31, 2019 (2018 – 8.3%).
The Company manages credit risk related to cash and cash
At December 31, 2019, residential mortgages recorded on
equivalents by adhering to its Investment Policy that outlines credit
risk parameters and concentration limits. The Company regularly
balance sheet were 59.1% insured (2018 – 61.5%). As at
December 31, 2019, impaired mortgages on these portfolios
reviews the credit ratings of its counterparties. The maximum
were $2.4 million, compared to $3.3 million at December 31,
exposure to credit risk on these financial instruments is their
2018. Uninsured non-performing mortgages over 90 days
carrying value.
The Company’s exposure to and management of credit risk related
on these portfolios were $1.6 million at December 31, 2019,
compared to $1.8 million at December 31, 2018.
to cash and cash equivalents and fixed income securities have not
The Company also retains certain elements of credit risk on
changed materially since December 31, 2018.
Mortgage Portfolio
As at December 31, 2019, residential mortgages, recorded on
the Company’s balance sheet, of $7.2 billion (2018 - $7.7 billion)
consisted of $6.8 billion sold to securitization programs (2018
- $7.3 billion), $344.5 million held pending sale or securitization
(2018 - $363.9 million) and $24.2 million related to the
Company’s intermediary operations (2018 - $25.6 million).
mortgage loans sold to the Investors Mortgage and Short
Term Income Fund and to the Investors Canadian Corporate
Bond Fund through an agreement to repurchase mortgages
in certain circumstances benefiting the funds. These loans are
not recorded on the Company’s balance sheet as the Company
has transferred substantially all of the risks and rewards of
ownership associated with these loans.
The Company regularly reviews the credit quality of the
mortgages and the adequacy of the allowance for expected
The Company manages credit risk related to residential
credit losses.
mortgages through:
• Adhering to its lending policy and underwriting standards;
• Its loan servicing capabilities;
• Use of client-insured mortgage default insurance and
mortgage portfolio default insurance held by the Company;
and
• Its practice of originating its mortgages exclusively through its
own network of Mortgage Planning Specialists and IG Wealth
Management Consultants as part of a client’s IG Living Plan.
The Company’s allowance for expected credit losses was
$0.7 million at December 31, 2019, compared to $0.8 million
at December 31, 2018, and is considered adequate by
management to absorb all credit-related losses in the mortgage
portfolios based on: i) historical credit performance experience
and recent trends, ii) current portfolio credit metrics and other
relevant characteristics, and iii) regular stress testing of losses
under adverse real estate market conditions.
The Company’s exposure to and management of credit risk
related to mortgage portfolios have not changed materially
In certain instances, credit risk is also limited by the terms and
nature of securitization transactions as described below:
since December 31, 2018.
• Under the NHA MBS program totalling $3.9 billion (2018
Derivatives
- $4.2 billion), the Company is obligated to make timely
payment of principal and coupons irrespective of whether
The Company is exposed to credit risk through derivative
contracts it utilizes to hedge interest rate risk, to facilitate
such payments were received from the mortgage borrower.
securitization transactions and to hedge market risk related
However, as required by the NHA MBS program, 100% of the
to certain stock-based compensation arrangements. These
loans are insured by an approved insurer.
derivatives are discussed more fully under the Market Risk
section of this MD&A.
71
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS To the extent that the fair value of the derivatives is in a
totalled negative $4.9 million (December 31, 2018 - negative
gain position, the Company is exposed to credit risk that
$11.0 million), on an outstanding notional amount of $1.6
its counterparties fail to fulfil their obligations under these
billion at December 31, 2019 (December 31, 2018 - $1.7
arrangements.
The Company’s derivative activities are managed in accordance
with its Investment Policy which includes counterparty limits
and other parameters to manage counterparty risk. The
aggregate credit risk exposure related to derivatives that
are in a gain position of $15.7 million (2018 - $19.4 million)
does not give effect to any netting agreements or collateral
arrangements. The exposure to credit risk, considering netting
agreements and collateral arrangements and including rights
to future net interest income, was $0.7 million at December 31,
2019 (2018 - nil). Counterparties are all Canadian Schedule I
chartered banks and, as a result, management has determined
that the Company’s overall credit risk related to derivatives was
not significant at December 31, 2019. Management of credit
risk related to derivatives has not changed materially since
December 31, 2018.
Additional information related to the Company’s securitization
activities and utilization of derivative contracts can be found in
Notes 2, 6 and 22 to the Annual Financial Statements.
MARKET RISK
Market risk is the potential for loss to the Company from
changes in the values of its financial instruments due to changes
in foreign exchange rates, interest rates or equity prices.
Interest Rate Risk
The Company is exposed to interest rate risk on its mortgage
portfolio and on certain of the derivative financial instruments
used in the Company’s mortgage banking operations.
billion). The net fair value of these swaps of negative $5.8
million at December 31, 2019 (December 31, 2018 - negative
$6.1 million) is recorded on the balance sheet and has an
outstanding notional amount of $2.4 billion (December 31,
2018 - $2.6 billion).
• The Company is exposed to the impact that changes in
interest rates may have on the value of mortgages committed
to or held pending sale or securitization to long-term
funding sources. The Company enters into interest rate
swaps to hedge the interest rate risk related to funding
costs for mortgages held by the Company pending sale
or securitization. Beginning in 2018, hedge accounting
is applied to the cost of funds on certain securitization
activities. The effective portion of fair value changes of the
associated interest rate swaps are initially recognized in Other
comprehensive income and subsequently recognized in Net
investment income and other over the term of the related
Obligations to securitization entities. The fair value of these
swaps was $0.6 million (December 31, 2018 - negative $1.8
million) on an outstanding notional amount of $180.4 million
at December 31, 2019 (December 31, 2018 - $249.9 million).
As at December 31, 2019, the impact to annual net earnings
of a 100 basis point increase in interest rates would have been
a decrease of approximately $2.0 million (December 31, 2018
- decrease of $0.5 million). The Company’s exposure to and
management of interest rate risk have not changed materially
since December 31, 2018.
Equity Price Risk
The Company is exposed to equity price risk on its equity
The Company manages interest rate risk associated with its
investments which are classified as either fair value through
mortgage banking operations by entering into interest rate
other comprehensive income or fair value through profit or loss.
swaps with Canadian Schedule I chartered banks as follows:
The fair value of the equity investments was $357.4 million at
• The Company has in certain instances funded floating rate
mortgages with fixed rate Canada Mortgage Bonds as part
December 31, 2019 (December 31, 2018 - $459.9 million), as
shown in Table 18.
of the securitization transactions under the CMB Program.
The Company sponsors a number of deferred compensation
As previously discussed, as part of the CMB Program, the
arrangements for employees where payments to participants
Company is party to a swap whereby it is entitled to receive
are deferred and linked to the performance of the common
investment returns on reinvested mortgage principal and is
shares of IGM Financial Inc. The Company hedges its exposure
obligated to pay Canada Mortgage Bond coupons. This swap
to this risk through the use of forward agreements and total
had a negative fair value of $0.9 million (December 31, 2018
return swaps.
– positive $4.9 million) and an outstanding notional amount
of $0.8 billion at December 31, 2019 (December 31, 2018
Foreign Exchange Risk
- $0.9 billion). The Company enters into interest rate swaps
with Canadian Schedule I chartered banks to hedge the risk
that the interest rates earned on floating rate mortgages and
reinvestment returns decline. The fair value of these swaps
The Company is exposed to foreign exchange risk on its
investments in Personal Capital and China AMC. Changes to
the carrying value due to changes in foreign exchange rates
on these investments are recognized in Other comprehensive
72
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS income. A 5% appreciation (depreciation) in Canadian currency
The Company’s exposure to the value of assets under
relative to foreign currencies would decrease (increase)
management aligns it with the experience of its clients. Assets
the aggregate carrying value of foreign investments by
under management are broadly diversified by asset class,
approximately $40.5 million ($44.8 million).
geographic region, industry sector, investment team and style.
The Company’s proportionate share of China AMC’s and
Personal Capital’s earnings (losses), recorded in Proportionate
share of associates’ earnings in the Consolidated Statements
of Earnings, is also affected by changes in foreign exchange
rates. A 5% appreciation (depreciation) in Canadian currency
relative to foreign currencies would decrease (increase) the
Company’s proportionate share of associates’ earnings (losses)
by approximately $0.7 million ($0.6 million).
RISKS RELATED TO ASSETS UNDER MANAGEMENT
At December 31, 2019, IGM Financial’s total assets under
management were $166.8 billion compared to $149.1 billion at
December 31, 2018.
The Company regularly reviews the sensitivity of its assets
under management, revenues, earnings and cash flow to
changes in financial markets. The Company believes that over
the long term, exposure to investment returns on its client
portfolios is beneficial to the Company’s results and consistent
with stakeholder expectations, and generally it does not
engage in risk transfer activities such as hedging in relation to
these exposures.
2) OPERATIONAL RISK
Operational risks relating to people and processes are mitigated
through policies and process controls. Oversight of risks and
ongoing evaluation of the effectiveness of controls is provided by
the Company’s Compliance Department, ERM Department and
The Company’s primary sources of revenues are management,
Internal Audit Department.
administration and other fees which are applied as an annual
percentage of the level of assets under management. As a result,
the level of the Company’s revenues and earnings are indirectly
exposed to a number of financial risks that affect the value of
assets under management on an ongoing basis. These include
market risks, such as changes in equity prices, interest rates and
foreign exchange rates, as well as credit risk on debt securities,
loans and credit exposures from other counterparties within our
client portfolios.
The Company has an insurance review process where it assesses
and determines the nature and extent of insurance that is
appropriate to provide adequate protection against unexpected
losses, and where it is required by law, regulators or contractual
agreements.
OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate
or failed internal processes or systems, human interaction or
Changing financial market conditions may also lead to a change
external events, but excludes business risk.
in the composition of the Company’s assets under management
between equity and fixed income instruments, which could
result in lower revenues depending upon the management fee
rates associated with different asset classes and mandates.
Operational risk affects all business activities, including the
processes in place to manage other risks. As a result, operational
risk can be difficult to measure, given that it forms part of
other risks of the Company and may not always be separately
identified. Our Company is exposed to a broad range of
operational risks, including information technology security
TABLE 26: IGM FINANCIAL ASSETS UNDER MANAGEMENT – ASSET AND CURRENCY MIX
AS AT DECEMBER 31, 2019
Cash
Short-term fixed income and mortgages
Other fixed income
Domestic equity
Foreign equity
Real Property
CAD
USD
Other
INVESTMENT FUNDS
TOTAL
1.8 %
4.8
27.2
22.2
41.2
2.8
2.0 %
4.7
26.8
22.3
41.5
2.7
100.0 %
100.0 %
56.2 %
28.4
15.4
56.1 %
28.2
15.7
100.0 %
100.0 %
73
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
and system failures, errors relating to transaction processing,
MODEL RISK
financial models and valuations, fraud and misappropriation of
The Company uses a variety of models to assist in: the valuation of
assets, and inadequate application of internal control processes.
financial instruments, operational scenario testing, management
The impact can result in significant financial loss, reputational
of cash flows, capital management, and assessment of potential
harm or regulatory actions.
The Company’s risk management framework emphasizes
operational risk management and internal control. The
Company has a very low appetite for risk in this area.
acquisitions. These models incorporate internal assumptions,
observable market inputs and available market prices. Effective
controls exist over the development, implementation and
application of these models. However, changes in the internal
assumptions or other factors affecting the models could have an
The business unit leaders are responsible for management of the
adverse effect on the Company’s consolidated financial position.
day to day operational risks of their respective business units.
Specific programs, policies, training, standards and governance
LEGAL AND REGULATORY COMPLIANCE
processes have been developed to support the management of
operational risk.
The Company has a business continuity management program
to support the sustainment, management and recovery of critical
operations and processes in the event of a business disruption.
TECHNOLOGY AND CYBER RISK
Legal and regulatory compliance risk is the risk of not
complying with laws, contractual agreements or regulatory
requirements. These risks relate to regulation governing product
distribution, investment management, accounting, reporting and
communications.
IGM Financial is subject to complex and changing legal, taxation
and regulatory requirements, including the requirements of
Technology and cyber risk driven by systems are managed
agencies of the federal, provincial and territorial governments
through controls over technology development and change
in Canada which regulate the Company and its activities.
management. Information security is a significant risk to our
The Company and its subsidiaries are also subject to the
industry and our Company’s operations. The Company uses
requirements of self-regulatory organizations to which they
systems and technology to support its business operations and
belong. These and other regulatory bodies regularly adopt
the client and financial advisor experience. As a result, we are
new laws, rules, regulations and policies that apply to the
exposed to risks relating to technology and cyber security such
Company and its subsidiaries. These requirements include
as data breaches, identity theft and hacking, including the risk
those that apply to IGM Financial as a publicly traded company
of denial of service or malicious software attacks. Such attacks
and those that apply to the Company's subsidiaries based on
could compromise confidential information of the Company and
the nature of their activities. They include regulations related
that of clients or other stakeholders, and could result in negative
to the management and provision of financial products and
consequences including lost revenue, litigation, regulatory scrutiny
services, including securities, insurance and mortgages, and
or reputational damage. To remain resilient to such threats,
other activities carried on by the Company in the markets in
the Company has established enterprise-wide cyber security
which it operates. Regulatory standards affecting the Company
programs, benchmarked capabilities to sound industry practices,
and the financial services industry are significant and continually
and has implemented threat and vulnerability assessment and
evolve. The Company and its subsidiaries are subject to reviews
response capabilities.
as part of the normal ongoing process of oversight by the
THIRD PARTY SERVICE PROVIDERS
The Company regularly engages third parties to provide
expertise and efficiencies that support our operational activities.
Our exposure to third party service provider risk could include
reputational, regulatory and other operational risks. Policies,
standard operating procedures and dedicated resources,
including a supplier code of conduct, have been developed and
implemented to specifically address third party service provider
risk. Due diligence and monitoring activities are performed by the
Company prior to entering into contractual relationships with third
party service providers and on an ongoing basis. As our reliance
on external service providers continues to grow, we continue
to enhance resources and processes to support third party
risk management.
various regulators.
Failure to comply with laws, rules or regulations could lead to
regulatory sanctions and civil liability, and may have an adverse
reputational or financial effect on the Company. The Company
manages legal and regulatory compliance risk through its efforts
to promote a strong culture of compliance. The monitoring of
regulatory developments and their impact on the Company is
overseen by the Regulatory Initiatives Committee chaired by
the Executive Vice-President, General Counsel. The Company
also continues to develop and maintain compliance policies,
processes and oversight, including specific communications
on compliance and legal matters, training, testing, monitoring
and reporting. The Audit Committee of the Company receives
regular reporting on compliance initiatives and issues.
74
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS IGM Financial promotes a strong culture of ethics and integrity
The Company has a business planning process that supports
through its Code of Conduct approved by the Board of Directors,
development of an annual business plan, approved by the Board
which outlines standards of conduct that apply to all IGM
of Directors, which incorporates objectives and targets for the
Financial directors, officers and employees. The Code of Conduct
Company. Components of management compensation are
references many policies relating to the conduct of directors,
associated with the achievement of earnings targets and other
officers and employees. Other corporate policies cover anti-
objectives associated with the plan. Strategic plans and direction
money laundering and privacy. Training is provided on these
are part of this planning process and are integrated into the
policies on an annual basis. Individuals subject to the Code of
Company’s risk management program.
Conduct attest annually that they understand the requirements
and have complied with its provisions.
ACQUISITION RISK
Business units are responsible for management of legal and
regulatory compliance risk, and implementing appropriate
policies, procedures and controls. The Company’s Compliance
Departments are responsible for providing oversight of all
regulated compliance activities. The Internal Audit Department
also provides oversight and investigations concerning regulatory
compliance matters.
CONTINGENCIES
The Company is subject to legal actions arising in the normal
course of its business. In December 2018, a proposed class
action was filed in the Ontario Superior Court against Mackenzie
which alleges that the company should not have paid mutual
fund trailing commissions to order execution only dealers.
Although it is difficult to predict the outcome of any such legal
The Company is also exposed to risks related to its acquisitions.
The Company undertakes thorough due diligence prior to
completing an acquisition, but there is no assurance that the
Company will achieve the expected strategic objectives or cost
and revenue synergies subsequent to an acquisition. Subsequent
changes in the economic environment and other unanticipated
factors may affect the Company’s ability to achieve expected
earnings growth or expense reductions. The success of an
acquisition is dependent on retaining assets under management,
clients, and key employees of an acquired company.
4) REGULATORY DEVELOPMENTS
Regulatory development risk is the potential for changes to
regulatory, legal, or tax requirements that may have an adverse
impact upon the Company’s business activities or financial results.
actions, based on current knowledge and consultation with legal
The Company is exposed to the risk of changes in laws, taxation
counsel, management does not expect the outcome of any of
and regulation that could have an adverse impact on the
these matters, individually or in aggregate, to have a material
Company. Particular regulatory initiatives may have the effect
adverse effect on the Company’s consolidated financial position.
of making the products of the Company’s subsidiaries appear to
be less competitive than the products of other financial service
3) GOVERNANCE, OVERSIGHT AND STRATEGIC RISK
providers, to third party distribution channels and to clients.
Governance, oversight and strategic risk is the risk of potential
Regulatory differences that may impact the competitiveness
adverse impacts resulting from inadequate or inappropriate
of the Company’s products include regulatory costs, tax
governance, oversight, management of incentives and conflicts,
treatment, disclosure requirements, transaction processes or
and strategic planning.
IGM Financial believes in the importance of good corporate
governance and the central role played by directors in
the governance process. We believe that sound corporate
governance is essential to the well-being of the Company and
its shareholders.
other differences that may be as a result of differing regulation
or application of regulation. Regulatory developments may
also impact product structures, pricing, and dealer and advisor
compensation. While the Company and its subsidiaries actively
monitor such initiatives, and where feasible comment upon or
discuss them with regulators, the ability of the Company and its
subsidiaries to mitigate the imposition of differential regulatory
Oversight of IGM Financial is performed by the Board of
treatment of financial products or services is limited.
Directors directly and through its five committees. The
Company’s President and Chief Executive Officer has overall
CLIENT FOCUSED REFORMS
responsibility for management of the Company. The Company’s
On October 3, 2019, the Canadian Securities Administrators
activities are carried out principally by three operating
companies - Investors Group Inc., Mackenzie Financial
(the CSA) published final rule amendments to implement
enhancements to the obligations owed by registrants to their
Corporation and Investment Planning Counsel Inc. - each of
clients (the Client Focused Reforms).
which are managed by a President and Chief Executive Officer.
75
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS The Client Focused Reforms include rule amendments that, when
redeeming their investments. These factors may also affect
implemented, will require registrants to:
the level and volatility of financial markets and the value of the
• Address all material conflicts of interest in the best interest of
the client;
• Put the client’s interest first when making a suitability
determination; and
• Do more to clarify for clients what they should expect from
their registrants.
The rule amendments are expected to come into force on
December 31, 2019, with a phased transition period spanning
over a two year period. The Company believes it is well
positioned to implement the Client Focused Reforms.
MUTUAL FUND EMBEDDED COMMISSIONS
On December 19, 2019, the CSA published a notice announcing
that all provinces and territories in Canada will eliminate trailing
commissions paid to dealers who only execute orders and do not
provide advice, such as discount brokers; and all provinces and
territories, excluding Ontario, will eliminate the Deferred Sales
Charge (DSC) purchase option.
The rule amendments are expected to be published in 2020
and be subject to a two-year transition period. The Ontario
Securities Commission will explore alternative approaches to the
elimination of the DSC purchase option in Ontario.
The Company believes it is well positioned to respond to these
proposals, as IG Wealth Management and Investment Planning
Counsel no longer offer the deferred sales charge option.
5) BUSINESS RISK
GENERAL BUSINESS CONDITIONS
General business conditions risk refers to the potential for an
unfavourable impact on IGM Financial resulting from competitive
or other external factors relating to the marketplace.
Company’s assets under management, as described more fully
under the Risks Related to Assets Under Management section of
this MD&A.
The Company, across its operating subsidiaries, is focused on
communicating with clients and emphasizing the importance of
financial planning across economic cycles. The Company and the
industry continue to take steps to educate Canadian investors
on the merits of financial planning, diversification and long-term
investing. In periods of volatility, Consultants and independent
financial advisors play a key role in assisting investors in
maintaining perspective and focus on their long-term objectives.
Redemption rates for long-term funds are summarized in
Table 27 and are discussed in the IG Wealth Management and
Mackenzie Segment Operating Results sections of this MD&A.
PRODUCT/SERVICE OFFERING
There is potential for unfavourable impacts on IGM Financial
resulting from inadequate product or service performance,
quality or breadth.
IGM Financial and its subsidiaries operate in a highly competitive
environment, competing with other financial service providers,
investment managers and product and service types. Client
development and retention can be influenced by a number of
factors, including products and services offered by competitors,
relative service levels, relative pricing, product attributes,
reputation and actions taken by competitors. This competition
could have an adverse impact upon the Company’s financial
position and operating results. Please refer to The Competitive
Landscape section of this MD&A for further discussion.
The Company provides Consultants, independent financial
advisors, as well as retail and institutional clients with a high
level of service and support and a broad range of investment
Global economic conditions, changes in equity markets,
products, with a focus on building enduring relationships.
demographics and other factors including geopolitical risk and
The Company’s subsidiaries also continually review their
government instability, can affect investor confidence, income
respective product and service offering and pricing to ensure
levels and savings decisions. This could result in reduced sales of
competitiveness in the marketplace.
IGM Financial’s products and services and/or result in investors
TABLE 27: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG-TERM FUNDS
IGM Financial Inc.
IG Wealth Management
Mackenzie
Counsel
76
2019
DEC. 31
2018
DEC. 31
10.3 %
15.6 %
19.3 %
9.2 %
17.1 %
19.2 %
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company strives to deliver strong investment performance
investment performance record, marketing, educational and service
on its products relative to benchmarks and peers. Poor
support has made Mackenzie one of Canada’s leading investment
investment performance relative to benchmarks or peers
management companies. These factors are discussed further in
could reduce the level of assets under management and sales
the Mackenzie Review of the Business section of this MD&A.
and asset retention, as well as adversely impact our brands.
Meaningful and/or sustained underperformance could affect
PEOPLE RISK
the Company's results. The Company's objective is to cultivate
People risk refers to the potential inability to attract or retain
investment processes and disciplines that provide it with a
key employees or Consultants, develop to an appropriate level of
competitive advantage, and does so by diversifying its assets
proficiency, or manage personnel succession or transition.
under management and product shelf by investment team,
brand, asset class, mandate, style and geographic region.
BUSINESS/CLIENT RELATIONSHIPS
Business/Client relationships risk refers to the risk potential for
unfavourable impacts on IGM Financial resulting from changes to
other key relationships. These relationships primarily include IG
Wealth Management clients and Consultants, Mackenzie retail
distribution, strategic and significant business partners, clients of
Mackenzie funds, and sub-advisors and other product suppliers.
Management, investment and distribution personnel play an
important role in developing, implementing, managing and
distributing products and services offered by IGM Financial. The
loss of these individuals or an inability to attract, retain and
motivate sufficient numbers of qualified personnel could affect
IGM Financial’s business and financial performance.
6) ENVIRONMENTAL AND SOCIAL RISK
Environmental and social risk is the potential risk of financial loss
or harm resulting from environmental or social issues arising from
IG Wealth Management Consultant network – IG Wealth
our business operations or investment activities. Environmental
Management derives all of its mutual fund sales through its
and social risks are identified as one of the six categories of risks
Consultant network. IG Wealth Management Consultants have
within the Company’s ERM Framework.
regular direct contact with clients which can lead to a strong
and personal client relationship based on the client’s confidence
in that individual Consultant. The market for financial advisors
is extremely competitive. The loss of a significant number of key
Consultants could lead to the loss of client accounts which could
have an adverse effect on IG Wealth Management’s results of
Environmental risks include issues such as climate change,
biodiversity, pollution, waste, and the unsustainable use of energy,
water and other resources. Social risks include issues such as
human rights, labour standards, diversity and inclusion, and
community impacts.
operations and business prospects. IG Wealth Management is
IGM Financial has a long-standing commitment to responsible
focused on strengthening its distribution network of Consultants
management, as articulated in the Company’s Corporate
and on responding to the complex financial needs of its clients by
Responsibility Statement approved by the Board of Directors.
delivering a diverse range of products and services in the context
The Board’s risk management oversight includes ensuring
of personalized financial advice, as discussed in the IG Wealth
that material environmental and social risks are appropriately
Management Review of the Business section of this MD&A.
identified, managed and monitored.
Mackenzie – Mackenzie derives the majority of its mutual fund
The Company’s executive Risk Management Committee is
sales through third party financial advisors. Financial advisors
responsible for providing oversight of the risk management
generally offer their clients investment products in addition to,
process. Other management committees provide oversight of
and in competition with Mackenzie. Mackenzie also derives
specific risks including the Corporate Responsibility Committee.
sales of its investment products and services from its strategic
The Corporate Responsibility Committee is comprised of senior
alliance and institutional clients. Due to the nature of the
executives of the Company who are responsible for ensuring
distribution relationship in these relationships and the relative
implementation of policy and strategy, establishing goals and
size of these accounts, gross sale and redemption activity can be
initiatives, measuring progress, and approving annual reporting for
more pronounced in these accounts than in a retail relationship.
environmental, social and governance matters.
Mackenzie’s ability to market its investment products is highly
dependent on continued access to these distribution networks.
The inability to have such access could have a material adverse
effect on Mackenzie’s operating results and business prospects.
Mackenzie is well positioned to manage this risk and to continue
to build and enhance its distribution relationships. Mackenzie’s
diverse portfolio of financial products and its long-term
Our commitment to responsible management is demonstrated
through various mechanisms – including our Code of Conduct
for our employees, contractors, and directors; our Supplier Code
of Conduct for the firms that do business with us; our Respectful
Workplace Policy; our Diversity Policy; our Environmental Policy;
and other related policies.
77
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS IG Wealth Management and Mackenzie Investments are
signatories to the Principles for Responsible Investment (PRI).
IG Wealth Management sub-advisors were also required to
be signatories to the PRI by the end of 2019. Under the PRI,
investors formally commit to incorporate environmental, social
and governance issues into their investment decision making and
active ownership processes. In addition, IG Wealth Management,
Mackenzie Investments and Investment Planning Counsel have
implemented Responsible Investment Policies outlining the
practices at each company.
IGM Financial also reports annually on its environmental, social
and governance management and performance in its Corporate
Responsibility Report available on our website. The information in
these reports does not form a part of this document.
CLIMATE CHANGE
We believe that financial services companies have an important
role to play in addressing climate change. Global practices are
continually evolving relating to the identification, analysis, and
management of climate risks and opportunities
IGM Financial is a long-standing participant in the CDP
(formerly Carbon Disclosure Project), which promotes corporate
disclosures on greenhouse gas emissions and climate change
management including setting and monitoring emission
reduction targets. For the 2018 and 2019 surveys, IGM Financial
was the only Canadian firm recognized by CDP as a corporate
leader in climate change disclosure with a position on their
Climate Change A List.
The Financial Stability Board’s Task Force on Climate-related
Financial Disclosures (TCFD) was established in response
to investor demand for enhanced information on climate-
related risks and opportunities. IGM Financial and its operating
companies support the TCFD recommendations which include
a framework for consistent, voluntary climate-related financial
disclosures that provide decision-useful information to investors
and other stakeholders.
78
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS OUTLOOK
THE FINANCIAL SERVICES ENVIRONMENT
Canadians held $4.4 trillion in discretionary financial assets
with financial institutions at December 31, 2018 based on
the most recent report from Investor Economics. The nature
of holdings was diverse, ranging from demand deposits held
for short-term cash management purposes to longer-term
investments held for retirement purposes. Approximately 65%
($2.9 trillion) of these financial assets are held within the context
of a relationship with a financial advisor, and this is the primary
channel serving the longer-term savings needs of Canadians. Of
the $1.5 trillion held outside of a financial advisory relationship,
approximately 63% consisted of bank deposits.
Financial advisors represent the primary distribution channel for
the Company’s products and services, and the core emphasis
of the Company’s business model is to support these financial
advisors as they work with clients to plan for and achieve their
financial goals. Multiple sources of emerging research show
significantly better financial outcomes for Canadians who
use financial advisors compared to those who do not. The
Company actively promotes the value of financial advice and
the importance of a relationship with an advisor to develop and
remain focused on long-term financial plans and goals.
diversified, vertically-integrated participants, similar to IGM
Financial, who offer both financial planning and investment
management services.
Canadian banks distribute financial products and services
through their traditional bank branches, as well as through their
full service and discount brokerage subsidiaries. Bank branches
continue to place increased emphasis on both financial planning
and mutual funds. In addition, each of the “big six” banks has
one or more mutual fund management subsidiaries. Collectively,
mutual fund assets of the “big six” bank-owned mutual fund
managers and affiliated firms represented 46% of total industry
long-term mutual fund assets at December 31, 2019.
The Canadian mutual fund industry continues to be very
concentrated, with the ten largest firms and their subsidiaries
representing 73% of industry long-term mutual fund assets
and 73% of total mutual fund assets under management at
December 31, 2019. Management anticipates continuing
consolidation in this segment of the industry as smaller
participants are acquired by larger organizations.
Management believes that the financial services industry will
continue to be influenced by the following trends:
Approximately 40% of Canadian discretionary financial assets or
$1.8 trillion resided in investment funds at December 31, 2018,
making it the largest financial asset class held by Canadians.
• Shifting demographics as the number of Canadians in their
prime savings and retirement years continue to increase.
• Changes in investor attitudes based on economic conditions.
Other asset types include deposit products and direct securities
• Continued importance of the role of the financial advisor.
such as stocks and bonds. Approximately 77% of investment
funds are comprised of mutual fund products, with other
product categories including segregated funds, hedge funds,
pooled funds, closed end funds and exchange traded funds.
With $162 billion in investment fund assets under management
at December 31, 2019, the Company is among the country’s
largest investment fund managers. Management believes that
investment funds are likely to remain the preferred savings
vehicle of Canadians. Investment funds provide investors
with the benefits of diversification, professional management,
flexibility and convenience, and are available in a broad range of
mandates and structures to meet most investor requirements
and preferences.
Competition and technology have fostered a trend towards
financial service providers offering a comprehensive range
of proprietary products and services. Traditional distinctions
between bank branches, full service brokerages, financial
planning firms and insurance agent sales forces have become
obscured as many of these financial service providers strive
to offer comprehensive financial advice implemented through
access to a broad product shelf. Accordingly, the Canadian
financial services industry is characterized by a number of large,
• Public policy related to retirement savings.
• Changes in the regulatory environment.
• An evolving competitive landscape.
• Advancing and changing technology.
THE COMPETITIVE LANDSCAPE
IGM Financial and its subsidiaries operate in a highly competitive
environment. IG Wealth Management and Investment Planning
Counsel compete directly with other retail financial service
providers, including other financial planning firms, as well as full
service brokerages, banks and insurance companies. IG Wealth
Management, Mackenzie and Investment Planning Counsel
compete directly with other investment managers for assets
under management, and their products compete with stocks,
bonds and other asset classes for a share of the investment
assets of Canadians.
Competition from other financial service providers, alternative
product types or delivery channels, and changes in regulations
or public preferences could impact the characteristics of product
and service offerings of the Company, including pricing, product
79
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS structures, dealer and advisor compensation and disclosure. The
BROAD PRODUCT CAPABILITIES
Company monitors developments on an ongoing basis, and
IGM Financial's subsidiaries continue to develop and launch
engages in policy discussions and develops product and service
innovative products and strategic investment planning tools to
responses as appropriate.
assist advisors in building optimized portfolios for clients.
IGM Financial continues to focus on its commitment to provide
quality investment advice and financial products, service
innovations, effective management of the Company and long-
term value for its clients and shareholders. Management believes
that the Company is well-positioned to meet competitive
challenges and capitalize on future opportunities.
ENDURING RELATIONSHIPS
IGM Financial enjoys significant advantages as a result of
the enduring relationships that advisors enjoy with clients. In
addition, the Company's subsidiaries have strong heritages and
cultures which are challenging for competitors to replicate.
The Company enjoys several competitive strengths, including:
BENEFITS OF BEING PART OF THE POWER FINANCIAL
GROUP OF COMPANIES
As part of the Power Financial group of companies, IGM
Financial benefits through expense savings from shared service
arrangements, as well as through access to distribution,
products and capital.
• Broad and diversified distribution with an emphasis on those
channels emphasizing comprehensive financial planning
through a relationship with a financial advisor.
• Broad product capabilities, leading brands and quality sub-
advisory relationships.
• Enduring client relationships and the long-standing heritages
and cultures of its subsidiaries.
• Benefits of being part of the Power Financial group of
companies.
BROAD AND DIVERSIFIED DISTRIBUTION
IGM Financial's distribution strength is a competitive advantage.
In addition to owning two of Canada’s largest financial planning
organizations, IG Wealth Management and Investment Planning
Counsel, IGM Financial has, through Mackenzie, access to
distribution through over 30,000 independent financial advisors.
Mackenzie also, in its growing strategic alliance business,
partners with Canadian and U.S. manufacturing and distribution
complexes to provide investment management to a number of
retail investment fund mandates.
80
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS CRITICAL ACCOUNTING ESTIMATES AND POLICIES
SUMMARY OF CRITICAL
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with IFRS
requires management to exercise judgment in the process of
applying accounting policies and requires management to make
estimates and assumptions that affect amounts reported in the
Consolidated Financial Statements and accompanying notes.
In applying these policies, management makes subjective and
complex judgments that frequently require estimates about
matters that are inherently uncertain. Many of these policies are
common in the financial services industry; others are specific
to IGM Financial's businesses and operations. IGM Financial's
These tests involve the use of estimates and assumptions
appropriate in the circumstances. In assessing the recoverable
amounts, valuation approaches are used that include
discounted cash flow analysis and application of capitalization
multiples to financial and operating metrics based upon
precedent acquisition transactions and trading comparables.
Assumptions and estimates employed include future changes
in assets under management resulting from net sales and
investment returns, pricing and profit margin changes,
discount rates, and capitalization multiples.
The Company completed its annual impairment tests of
goodwill and indefinite life intangible assets as at April 1,
significant accounting policies are described in detail in Note 2
2019, and determined there was no impairment in the value
of the Consolidated Financial Statements.
of those assets.
Critical accounting estimates relate to the fair value of financial
instruments, goodwill and intangibles, income taxes, capitalized
sales commissions, provisions and employee benefits.
• Income taxes – The provision for income taxes is determined
on the basis of the anticipated tax treatment of transactions
recorded in the Consolidated Statements of Earnings. The
determination of the provision for income taxes requires
The major critical accounting estimates are summarized below:
interpretation of tax legislation in a number of jurisdictions.
• Fair value of financial instruments – The Company’s financial
instruments are carried at fair value, except for loans, deposits
and certificates, obligations to securitization entities, and
long-term debt which are all carried at amortized cost.
The fair value of publicly traded financial instruments is
determined using published market prices. The fair value
of financial instruments where published market prices are
not available, including derivatives related to the Company’s
securitized loans, are determined using various valuation
models which maximize the use of observable market inputs
where available. Valuation methodologies and assumptions
used in valuation models are reviewed on an ongoing basis.
Changes in these assumptions or valuation methodologies
could result in significant changes in net earnings.
• Goodwill and intangible assets – Goodwill, indefinite life
intangible assets, and definite life intangible assets are
reflected in Note 11 of the Consolidated Financial Statements.
The Company tests the fair value of goodwill and indefinite
life intangible assets for impairment at least once a year and
more frequently if an event or circumstance indicates the
asset may be impaired. An impairment loss is recognized
if the amount of the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs of disposal and its value in use.
For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash inflows (cash generating units). Finite life intangible
assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amounts may not
be recoverable.
Tax planning may allow the Company to record lower
income taxes in the current year and income taxes recorded
in prior years may be adjusted in the current year to reflect
management’s best estimates of the overall adequacy
of its provisions. Any related tax benefits or changes in
management’s best estimates are reflected in the provision
for income taxes. The recognition of deferred tax assets
depends on management’s assumption that future earnings
will be sufficient to realize the future benefit. The amount
of the deferred tax asset or liability recorded is based on
management’s best estimate of the timing of the realization
of the assets or liabilities. If our interpretation of tax legislation
differs from that of the tax authorities or if timing of reversals
is not as anticipated, the provision for income taxes could
increase or decrease in future periods. Additional information
related to income taxes is included in the Summary of
Consolidated Operating Results in this MD&A and in Note 15
to the Consolidated Financial Statements.
• Capitalized sales commissions – Commissions paid directly by
the client on the sale of certain mutual fund products are
deferred and amortized over a maximum period of seven
years. The Company regularly reviews the carrying value of
capitalized sales commissions with respect to any events or
circumstances that indicate impairment. Among the tests
performed by the Company to assess recoverability is the
comparison of the future economic benefits derived from the
capitalized sales commission asset in relation to its carrying
value. At December 31, 2019, there were no indications of
impairment to capitalized sales commissions.
81
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS • Provisions – A provision is recognized when there is a present
$46.3 million, which were recorded in Other comprehensive
obligation as a result of a past transaction or event, it is
income. The assets in the Company’s registered defined
“probable” that an outflow of resources will be required to
benefit pension plan also increased due to the Company
settle the obligation and a reliable estimate can be made
contributing $26.4 million (2018 - $40.4 million) to the
of the obligation. In determining the best estimate for a
pension plan. The decrease in the discount rate utilized to
provision, a single estimate, a weighted average of all possible
value the defined benefit pension plan obligation resulted
outcomes, or the midpoint where there is a range of equally
in actuarial losses of $62.0 million which were recorded in
possible outcomes are all considered. A significant change in
Other comprehensive income. Demographic assumptions
assessment of the likelihood or the best estimate may result in
and experience adjustments were revised which resulted in
additional adjustments to net earnings.
• Employee benefits – The Company maintains a number of
employee benefit plans. These plans include a funded registered
defined benefit pension plan for all eligible employees,
unfunded supplementary executive retirement plans for certain
executive officers (SERPs) and an unfunded post-employment
health care and life insurance plan for eligible retirees. The
funded registered defined benefit pension plan provides
pensions based on length of service and final average earnings.
The measurement date for the Company’s defined benefit
net actuarial gains of $0.9 million. The total defined benefit
pension plan obligation was $565.6 million at December 31,
2019 compared to $496.7 million at December 31, 2018. As
a result of these changes, the defined benefit pension plan
had an accrued benefit liability of $99.1 million at December
31, 2019 compared to $89.3 million at the end of 2018. The
unfunded SERPs and other post-retirement benefits plans had
an accrued benefit liability of $69.2 million and $39.1 million,
respectively, at December 31, 2019 compared to $62.1 million
and $37.7 million in 2018.
pension plan assets and for the accrued benefit obligations on
A decrease of 0.25% in the discount rate utilized in 2019
all defined benefit plans is December 31.
Due to the long-term nature of these plans, the calculation of
the accrued benefit liability depends on various assumptions
including discount rates, rates of return on assets, the level
and types of benefits provided, healthcare cost trend rates,
projected salary increases, retirement age, and mortality and
would result in a change of $27.3 million in the accrued
pension obligation, $25.5 million in other comprehensive
income, and $1.8 million in pension expense. Additional
information regarding the Company’s accounting and
sensitivities related to pensions and other post-retirement
benefits is included in Notes 2 and 14 of the Consolidated
termination rates. The discount rate assumption is determined
Financial Statements.
using a yield curve of AA corporate debt securities. All
other assumptions are determined by management and
reviewed by independent actuaries who calculate the pension
CHANGES IN ACCOUNTING POLICIES
and other future benefits expenses and accrued benefit
IFRS 16 LEASES (IFRS 16)
obligations. Actual experience that differs from the actuarial
As of January 1, 2019, the Company adopted IFRS 16 using
assumptions will result in actuarial gains or losses as well as
the modified retrospective method with no restatement of
changes in benefits expense. The Company records actuarial
comparative financial information. Under this approach, the
gains and losses on all of its defined benefit plans in Other
Company recognized a lease liability of $105.5 million equal to
comprehensive income.
the present value of the remaining lease payments discounted
During 2019, the performance of the defined benefit pension
using the Company's incremental borrowing rate at January 1,
plan assets was positively impacted by market conditions.
2019. The weighted average discount rate applied was 4.4%. A
Corporate bond yields decreased in 2019 thereby impacting
right-of-use asset of $96.1 million representing the Company's
the discount rate used to measure the Company’s accrued
property leases was also recognized at its carrying amount as
benefit liability. The discount rate utilized to value the defined
if IFRS 16 had been applied since each lease commencement
benefit pension plan accrued benefit liability at December 31,
date, net of the accumulated amortization that would have
2019 was 3.20% compared to 3.90% at December 31, 2018.
been recognized up to January 1, 2019. The difference between
Pension plan assets increased to $466.5 million at December
the right-of-use asset and the lease liability of $9.4 million
31, 2019 from $407.4 million at December 31, 2018. The
was recognized as an adjustment to retained earnings as at
increase in plan assets was due to market performance of
January 1, 2019. The following practical expedients were applied
$62.4 million comprised of interest income of $16.1 million
on transition:
calculated based on the discount rate, which was recorded
as a reduction to the pension expense, and actuarial gains of
• Applied a single discount rate to a portfolio of leases with
reasonably similar characteristics.
82
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS • Accounted for leases for which the remaining lease term ends
FUTURE ACCOUNTING CHANGES
within 12 months of the date of initial application as a short-
term lease.
The Company continuously monitors the potential changes
proposed by the International Accounting Standards Board
• Relied on its assessment of whether leases are onerous
(IASB) and analyzes the effect that changes in the standards
may have on the Company’s operations.
The IASB is currently undertaking a number of projects which
will result in changes to existing IFRS standards that may affect
the Company. Updates will be provided as the projects develop.
applying IAS 37, Provisions, Contingent Liabilities and
Contingent Assets, immediately before the date of
initial application as an alternative to performing an
impairment review.
Amortization expense increased due to the amortization of the
right-of-use asset and interest expense increased due to the
imputed interest on the lease liability; however total expenses
are not noticeably different due to the offsetting decrease to
operating lease expense.
Table 28 details the impact of IFRS 16 on the Consolidated
Balance Sheet as at January 1, 2019.
TABLE 28: IMPACT OF IFRS 16 ON BALANCE SHEET
($ millions)
Assets
Other assets(1)
Capital assets
Liabilities
Accounts payable and accrued liabilities (1)
Lease obligations
Deferred income taxes
Retained earnings
(1) Write-off of free rent inducement on capitalized leases.
DECEMBER 31, 2018
ADJUSTMENT DUE TO
ADOPTION OF IFRS 16
JANUARY 1, 2019
$
$
46.5
138.6
397.4
–
295.7
2,840.6
$
$
$
(0.1)
96.1
96.0
(1.9)
105.5
(2.0)
(5.6)
$
96.0
$
$
46.4
234.7
395.5
105.5
293.7
2,835.0
83
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS
DISCLOSURE CONTROLS AND PROCEDURES
The Company’s disclosure controls and procedures are designed
The Company's management, under the supervision of the
to provide reasonable assurance that (a) material information
President and Chief Executive Officer and the Chief Financial
relating to the Company is made known to the President and
Officer, has evaluated the effectiveness of the Company’s
Chief Executive Officer and the Chief Financial Officer by others,
disclosure controls and procedures. Based on their evaluations
particularly during the period in which the annual filings are
as of December 31, 2019, the President and Chief Executive
being prepared, and (b) information required to be disclosed by
Officer and the Chief Financial Officer have concluded that the
the Company in its annual filings, interim filings or other reports
Company’s disclosure controls and procedures are effective.
filed or submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods
specified in securities legislation.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company’s internal control over financial reporting is
has concluded that this outsourcing has not materially affected
designed to provide reasonable assurance regarding the
the Company’s internal controls in 2019. As the transition
reliability of financial reporting and the preparation of financial
proceeds over the coming months and years, management will
statements for external purposes in accordance with IFRS. The
continually reassess its impact on the Company’s internal control
Company’s management is responsible for establishing and
over financial reporting.
maintaining adequate internal control over financial reporting.
The Company's management, under the supervision of the
All internal control systems have inherent limitations and may
President and Chief Executive Officer and the Chief Financial
become inadequate because of changes in conditions. Therefore,
Officer, has evaluated the effectiveness of the Company’s
even those systems determined to be effective can provide
internal control over financial reporting based on the Internal
only reasonable assurance with respect to financial statement
Control - Integrated Framework (COSO 2013 Framework)
preparation and presentation.
Effective November 18, 2019, IGM Financial entered into an
outsourcing agreement with CIBC Mellon to assume most
of IGM Financial’s fund services functions. This will add fund
administration servicing solutions to the custody and related
services that CIBC Mellon already performs for IGM Financial.
As a result of the outsourcing, substantially all of IGM Financial’s
employees in the outsourced functions were hired by CIBC
Mellon and continued performing the same functions during
published by The Committee of Sponsoring Organizations of the
Treadway Commission. The Company transitioned to the COSO
2013 Framework during 2014. Based on their evaluations
as of December 31, 2019, the President and Chief Executive
Officer and the Chief Financial Officer have concluded that the
Company’s internal control over financial reporting is effective
in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS.
the remainder of the fourth quarter. Contractually, CIBC Mellon
Notwithstanding the above, during the fourth quarter of 2019,
is required to develop and implement internal controls and has
there have been no changes in the Company’s internal control
agreed to work with IGM Financial to implement compliance
over financial reporting that have materially affected, or are
measures to satisfy CSA National Instrument 52-109. CIBC
reasonably likely to materially affect, the Company’s internal
Mellon has agreed to make minimal changes to processes and
control over financial reporting.
systems through year end 2019. Accordingly, management
84
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS OTHER INFORMATION
TRANSACTIONS WITH RELATED PARTIES
After obtaining advanced tax rulings in October 2017, the
IGM Financial enters into transactions with Great-West Life
Assurance Company (Great-West), London Life Insurance
Company (London Life) and The Canada Life Assurance
Company (Canada Life), which are all subsidiaries of its affiliate,
Lifeco, which is a subsidiary of Power Financial Corporation.
Effective as of January 1, 2020, Great-West, London Life and
Canada Life, amalgamated into a single company, The Canada
Life Assurance Company. These transactions are in the normal
course of operations and have been recorded at fair value:
• During 2019 and 2018, the Company provided to and
received from Great-West certain administrative services
enabling each organization to take advantage of economies
of scale and areas of expertise.
Company agreed to tax loss consolidation transactions with
the Power Corporation of Canada group whereby shares of a
subsidiary that has generated tax losses may be acquired in each
year up to and including 2020. The acquisitions are expected
to close in the fourth quarter of each year. The Company will
recognize the benefit of the tax losses realized throughout the
year. On each of December 31, 2019 and December 31, 2018,
the Company acquired shares of such loss companies and
recorded the benefit of the tax losses acquired.
For further information on transactions involving related
parties, see Notes 8 and 26 to the Company’s Consolidated
Financial Statements.
• The Company distributes insurance products under a
OUTSTANDING SHARE DATA
distribution agreement with Great-West and Canada Life
and received $54.8 million in distribution fees (2018 - $62.6
million). The Company received $17.1 million (2018 - $17.5
million) and paid $26.2 million (2018 - $25.4 million) to
Great-West and related subsidiary companies for the
provision of sub-advisory services for certain investment
funds. The Company paid $78.8 million (2018 – $78.3 million)
to London Life related to the distribution of certain mutual
funds of the Company.
• In order to manage its overall liquidity position, the Company’s
mortgage banking operation is active in the securitization
market and also sells residential mortgage loans to third
parties, on a fully serviced basis. During 2019, the Company
sold residential mortgage loans to Great-West and London
Life for $10.8 million compared to $61.4 million in 2018.
Outstanding common shares of IGM Financial as at December
31, 2019 totalled 238,294,090. Outstanding stock options as
at December 31, 2019 totalled 10,529,360, of which 5,470,178
were exercisable. As at February 11, 2020, outstanding common
shares totalled 238,300,145 and outstanding stock options
totalled 10,514,061 of which 5,464,123 were exercisable.
SEDAR
Additional information relating to IGM Financial, including
the Company’s most recent financial statements and Annual
Information Form, is available at www.sedar.com.
85
IGM FINANCIAL INC. ANNUAL REPORT 2019 | MANAGEMENT’S DISCUSSION AND ANALYSIS CONSOLIDATED FINANCIAL STATEMENTS
Management’s Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1 Corporate information
Note 2 Summary of significant accounting policies
Note 3 Non-commission expense
Note 4 Other investments
Note 5 Loans
Note 6 Securitizations
Note 7 Other assets
Note 8 Investment in associates
Note 9 Capital assets
Note 10 Capitalized sales commissions
Note 11 Goodwill and intangible assets
Note 12 Deposits and certificates
Note 13 Other liabilities
Note 14 Employee benefits
Note 15 Income taxes
Note 16 Long-term debt
Note 17 Share capital
Note 18 Capital management
Note 19 Share-based payments
Note 20 Accumulated other comprehensive income (loss)
Note 21 Risk management
Note 22 Derivative financial instruments
Note 23 Fair value of financial instruments
Note 24 Earnings per common share
Note 25 Contingent liabilities and guarantees
Note 26 Related party transactions
Note 27 Segmented information
87
88
90
91
92
93
94
95
95
95
101
101
102
102
103
104
106
106
107
108
108
109
112
113
114
115
115
117
118
122
122
125
126
126
127
86
IGM FINANCIAL INC. ANNUAL REPORT 2019 MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The Consolidated Financial Statements of IGM Financial Inc. have been prepared by Management, which is responsible for the integrity,
objectivity and reliability of the information presented, including selecting appropriate accounting principles and making judgments
and estimates. These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting
Standards. Financial information presented elsewhere in this Annual Report is consistent with that in the Consolidated Financial
Statements for comparable periods.
Systems of internal control and supporting procedures are maintained to provide reasonable assurance of the reliability of financial
information and the safeguarding of all assets controlled by the Company. These controls and supporting procedures include quality
standards in hiring and training employees, the establishment of organizational structures providing a well-defined division of
responsibilities and accountability for performance, and the communication of policies and guidelines through the organization. Internal
controls are reviewed and evaluated extensively by the internal auditor and are subject to scrutiny by the external auditors.
Ultimate responsibility for the Consolidated Financial Statements rests with the Board of Directors. The Board is assisted in discharging
this responsibility by an Audit Committee, consisting entirely of independent directors. This Committee reviews the Consolidated Financial
Statements and recommends them for approval by the Board. In addition, the Audit Committee reviews the recommendations of the
internal auditor and the external auditors for improvements in internal control and the action of Management to implement such
recommendations. In carrying out its duties and responsibilities, the Committee meets regularly with Management and with both the
internal auditor and the external auditors to review the scope and timing of their respective audits, to review their findings and to satisfy
itself that their responsibilities have been properly discharged.
Deloitte LLP, independent auditors appointed by the shareholders, have examined the Consolidated Financial Statements of the
Company in accordance with Canadian generally accepted auditing standards, and have expressed their opinion upon the completion
of their examination in their Report to the Shareholders. The external auditors have full and free access to the Audit Committee to
discuss their audit and related findings.
Jeffrey R. Carney
President and Chief Executive Officer
Luke Gould
Executive Vice-President and
Chief Financial Officer
87
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of IGM Financial Inc.
OPINION
We have audited the consolidated financial statements of IGM Financial Inc. (the “Company”), which comprise the consolidated
balance sheets as at December 31, 2019 and 2018, and the consolidated statements of earnings, comprehensive income, changes in
shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary
of significant accounting policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with
International Financial Reporting Standards (“IFRS”).
BASIS FOR OPINION
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
OTHER INFORMATION
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed
on this other information, we conclude that there is a material misstatement of this other information, we are required to report that
fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will perform
on this other information, we conclude that there is a material misstatement of this other information, we are required to report that
fact to those charged with governance.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such
internal control as management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
88
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT (continued)
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is David Dalziel.
Chartered Professional Accountants
Winnipeg, Manitoba
February 14, 2020
89
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars, except per share amounts)
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Proportionate share of associates' earnings (Note 8)
Expenses
Commission
Non–commission (Note 3)
Interest (Note 16 and 27)
Earnings before income taxes
Income taxes (Note 15)
Net earnings
Perpetual preferred share dividends
2019
2018
$ 2,267,960
414,457
368,036
76,928
105,225
$ 2,239,182
427,093
370,906
61,928
149,962
3,232,606
3,249,071
1,101,165
1,054,389
108,386
1,098,643
1,043,482
120,859
2,263,940
2,262,984
968,666
219,719
748,947
2,213
986,087
209,919
776,168
8,850
Net earnings available to common shareholders
$
746,734
$
767,318
Earnings per share (in dollars) (Note 24)
– Basic
– Diluted
(See accompanying notes to consolidated financial statements.)
$
$
3.12
3.12
$
$
3.19
3.18
90
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars)
Net earnings
Other comprehensive income (loss), net of tax
Items that will not be reclassified to Net earnings
Fair value through other comprehensive income investments
2019
2018
$
748,947
$
776,168
Other comprehensive income (loss), net of tax of $(1,651) and $(2,835)
10,597
18,166
Employee benefits
Net actuarial gains (losses), net of tax of $6,243 and $6,117
Investment in associates - employee benefits and other
Other comprehensive income (loss), net of tax of nil
Items that may be reclassified subsequently to Net earnings
Investment in associates and other
Other comprehensive income (loss), net of tax of $3,448 and $(412)
Total comprehensive income
(See accompanying notes to consolidated financial statements.)
(16,895)
(16,523)
(19,129)
5,035
(35,009)
18,637
(60,436)
25,315
$
688,511
$
801,483
91
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Other investments (Note 4)
Client funds on deposit
Accounts and other receivables
Income taxes recoverable
Loans (Note 5)
Derivative financial instruments (Note 22)
Other assets (Note 7)
Investment in associates (Note 8)
Capital assets (Note 9)
Capitalized sales commissions (Note 10)
Deferred income taxes (Note 15)
Intangible assets (Note 11)
Goodwill (Note 11)
Liabilities
Accounts payable and accrued liabilities
Income taxes payable
Derivative financial instruments (Note 22)
Deposits and certificates (Note 12)
Other liabilities (Note 13)
Obligations to securitization entities (Note 6)
Lease obligations
Deferred income taxes (Note 15)
Long–term debt (Note 16)
Shareholders' Equity
Share capital
Perpetual preferred shares
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
2019
2018
$
720,005
357,362
561,269
394,210
11,925
7,198,043
15,204
45,843
1,753,882
216,956
149,866
76,517
1,230,127
2,660,267
$
650,228
459,911
546,787
319,609
9,316
7,738,031
16,364
46,531
1,651,304
138,647
105,044
75,607
1,191,068
2,660,267
$ 15,391,476
$ 15,608,714
$
434,957
4,867
17,193
584,331
441,902
6,913,636
90,446
305,049
2,100,000
$
397,379
51,894
28,990
568,799
444,173
7,370,193
–
295,719
1,850,000
10,892,381
11,007,147
–
1,597,860
48,677
2,980,260
(127,702)
150,000
1,611,263
45,536
2,840,566
(45,798)
4,499,095
4,601,567
$ 15,391,476
$ 15,608,714
These financial statements were approved and authorized for issuance by the Board of Directors on February 14, 2020.
Jeffrey R. Carney
Director
John McCallum
Director
(See accompanying notes to consolidated financial statements.)
92
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands of Canadian dollars)
2019
Balance, beginning of year
As previously reported
Change in accounting policy (Note 2)
IFRS 16
As restated
Net earnings
Other comprehensive income (loss),
net of tax
Total comprehensive income
Redemption of preferred shares
Common shares
Issued under stock option plan
Purchased for cancellation
Stock options
Current period expense
Exercised
Perpetual preferred share dividends
Common share dividends
Transfer out of fair value through other
comprehensive income
Common share cancellation excess and other
SHARE CAPITAL
PERPETUAL
PREFERRED
SHARES
(Note 17)
COMMON
SHARES
(Note 17)
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
RETAINED
TOTAL
SHAREHOLDERS’
CONTRIBUTED
SURPLUS
EARNINGS
(Note 20)
EQUITY
$ 150,000
$ 1,611,263
$
45,536
$ 2,840,566
$
(45,798)
$ 4,601,567
–
–
–
(5,568)
–
(5,568)
150,000
1,611,263
45,536
2,834,998
(45,798)
4,595,999
–
–
–
(150,000)
–
–
–
–
–
–
–
–
–
–
–
–
5,111
(18,514)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,406
(265)
–
–
–
–
(2,213)
(537,588)
748,947
–
748,947
–
(60,436)
(60,436)
748,947
(60,436)
688,511
–
–
–
–
–
–
–
(150,000)
5,111
(18,514)
3,406
(265)
(2,213)
(537,588)
–
–
21,468
(85,352)
(21,468)
–
–
(85,352)
Balance, end of year
$
–
$ 1,597,860
$
48,677
$ 2,980,260
$
(127,702)
$ 4,499,095
2018
Balance, beginning of year
Net earnings
Other comprehensive income (loss),
net of tax
Total comprehensive income
Common shares
Issued under stock option plan
Stock options
Current period expense
Exercised
Perpetual preferred share dividends
Common share dividends
Other
$
150,000
$ 1,602,726
$
42,633
$ 2,620,797
$
(71,113)
$ 4,345,043
–
–
–
–
–
–
–
–
–
–
–
–
8,537
–
–
–
–
–
–
–
–
–
3,687
(784)
–
–
–
776,168
–
776,168
–
776,168
25,315
25,315
25,315
801,483
–
–
–
(8,850)
(541,883)
(5,666)
–
–
–
–
–
–
8,537
3,687
(784)
(8,850)
(541,883)
(5,666)
Balance, end of year
$
150,000
$ 1,611,263
$
45,536
$ 2,840,566
$
(45,798)
$ 4,601,567
(See accompanying notes to consolidated financial statements.)
93
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars)
Operating activities
Earnings before income taxes
Income taxes paid
Adjustments to determine net cash from operating activities
Capitalized sales commission amortization
Capitalized sales commissions paid
Amortization of capital, intangible and other assets
Proportionate share of associates' earnings, net of dividends received
Pension and other post–employment benefits
Restructuring provisions and other
Changes in operating assets and liabilities and other
Cash from operating activites before restructuring provision payments
Restructuring provision cash payments
Financing activities
Net decrease in deposits and certificates
Increase in obligations to securitization entities
Repayments of obligations to securitization entities and other
Repayment of lease obligations
Issue of debentures
Repayment of debentures
Redemption of preferred shares
Issue of common shares
Common shares purchased for cancellation
Perpetual preferred share dividends paid
Common share dividends paid
Investing activities
Purchase of other investments
Proceeds from the sale of other investments
Increase in loans
Repayment of loans and other
Net additions to capital assets
Net cash used in additions to intangible assets and acquisitions
Investment in Personal Capital Corporation
Proceeds from substantial issuer bid (Note 8)
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash
Cash equivalents
Supplemental disclosure of cash flow information related to operating activities
Interest and dividends received
Interest paid
(See accompanying notes to consolidated financial statements.)
94
2019
2018
$
968,666 $
(236,676)
986,087
(132,611)
22,387
(67,209)
79,496
(32,251)
(4,810)
–
9,316
738,919
(26,853)
14,462
(55,685)
56,065
(77,190)
(18,428)
22,758
51,626
847,084
(61,931)
712,066
785,153
(2,472)
1,456,265
(1,960,757)
(23,370)
250,000
–
(150,000)
4,846
(99,963)
(4,425)
(539,046)
(1,248)
1,771,735
(2,034,429)
–
200,000
(525,000)
–
7,753
–
(8,850)
(541,759)
(1,068,922)
(1,131,798)
(118,917)
85,462
(1,682,079)
2,211,504
(18,813)
(64,121)
(66,811)
80,408
(154,463)
93,498
(1,748,387)
1,895,648
(7,117)
(49,149)
–
–
426,633
30,030
69,777
650,228
(316,615)
966,843
$
$
720,005 $
650,228
67,986 $
652,019
81,799
568,429
$
720,005 $
650,228
$
$
301,738 $
271,914 $
296,793
290,510
IGM FINANCIAL INC. ANNUAL REPORT 2019 | CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019 and 2018 (In thousands of Canadian dollars, except shares and per share amounts)
NOTE 1 CORPORATE INFORMATION
IGM Financial Inc. (the Company) is a publicly listed company (TSX: IGM), incorporated and domiciled in Canada. The registered address
of the Company is 447 Portage Avenue, Winnipeg, Manitoba, Canada. The Company is controlled by Power Financial Corporation.
IGM Financial Inc. is a wealth and asset management company which serves the financial needs of Canadians through its principal
subsidiaries, each operating distinctly within the advice segment of the financial services market. The Company’s wholly-owned
principal subsidiaries are Investors Group Inc. and Mackenzie Financial Corporation.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements of the Company have been prepared in accordance with International Financial Reporting
Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The policies set out below were consistently
applied to all the periods presented unless otherwise noted.
USE OF JUDGMENT, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS requires management to exercise judgment in the process of
applying accounting policies and requires management to make estimates and assumptions that affect the amounts reported in the
Consolidated Financial Statements. The key areas where judgment has been applied include: the determination of which financial
assets should be derecognized; the assessment of the appropriate classification of financial instruments, including those classified as
fair value through profit or loss; and the assessment that significant influence exists for its investment in associates. Key components of
the financial statements requiring management to make estimates include: the fair value of financial instruments, goodwill, intangible
assets, income taxes, capitalized sales commissions, provisions and employee benefits. Actual results may differ from such estimates.
Further detail of judgments and estimates are found in the remainder of Note 2 and in Notes 6, 8, 10, 11, 13, 14, 15 and 23.
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company and all subsidiaries on a consolidated basis after
elimination of intercompany transactions and balances. Subsidiaries are entities the Company controls when it is exposed, or has rights,
to variable returns from its involvement and has the ability to affect those returns through its power to direct the relevant activities of
the entity.
The Company’s investments in Great-West Lifeco Inc. (Lifeco), China Asset Management Co., Ltd. (China AMC) and Personal Capital
Corporation (Personal Capital) are accounted for using the equity method. The investments were initially recorded at cost and the
carrying amounts are increased or decreased to recognize the Company’s share of the investments’ comprehensive income (loss) and
the dividends received since the date of acquisition.
CHANGES IN ACCOUNTING POLICIES
IFRS 16 Leases (IFRS 16)
As of January 1, 2019, the Company adopted IFRS 16 using the modified retrospective method with no restatement of comparative
financial information. Under this approach, the Company recognized a lease liability of $105.5 million equal to the present value of
the remaining lease payments discounted using the Company's incremental borrowing rate at January 1, 2019. The weighted average
discount rate applied was 4.4%. A right-of-use asset of $96.1 million representing the Company's property leases was also recognized
at its carrying amount as if IFRS 16 had been applied since each lease commencement date, net of the accumulated amortization that
would have been recognized up to January 1, 2019. The difference between the right-of-use asset and the lease liability of
95
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CHANGES IN ACCOUNTING POLICIES (continued)
IFRS 16 Leases (IFRS 16) (continued)
$9.4 million ($5.6 million after-tax and other adjustments) was recognized as an adjustment to retained earnings as at January 1, 2019.
The following practical expedients were applied on transition:
• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
• Accounted for leases for which the remaining lease term ends within 12 months of the date of initial application as a short-term lease.
• Relied on its assessment of whether leases are onerous applying IAS 37, Provisions, Contingent Liabilities and Contingent Assets,
immediately before the date of initial application as an alternative to performing an impairment review.
Amortization expense increased due to the amortization of the right-of-use asset and interest expense increased due to the
imputed interest on the lease liability; however total expenses are not materially different due to the offsetting decrease to operating
lease expense.
Impact of the changes in accounting policies on the Consolidated Balance Sheet:
DECEMBER 31, 2018
ADJUSTMENT DUE TO
ADOPTION OF IFRS 16
JANUARY 1, 2019
Assets
Other assets(1)
Capital assets
Liabilities & Shareholders' Equity
Accounts payable and
accrued liabilities(1)
Lease obligations
Deferred income taxes
Retained earnings
(1) Write-off of free rent inducement on capitalized leases
REVENUE RECOGNITION
$
$
46,531
138,647
397,379
-
295,719
2,840,566
$
$
$
$
(61)
96,065
96,004
(1,958)
105,539
(2,009)
(5,568)
96,004
$
$
46,470
234,712
395,421
105,539
293,710
2,834,998
Management fees are based on the net asset value of investment fund or other assets under management and are accrued as the
service is performed. Administration fees are also accrued as the service is performed. Distribution fees derived from investment fund
and securities transactions are recognized on a trade date basis. Distribution fees derived from insurance and other financial services
transactions are recognized on an accrual basis. Consideration is collected within a short period from the date of revenue recognition
of the associated services. Aggregate receivables related to these services as at December 31, 2019 were $92.1 million (2018 -
$66.0 million).
FINANCIAL INSTRUMENTS
All financial assets are initially recognized at fair value in the Consolidated Balance Sheets and are subsequently classified as measured
at fair value through profit or loss (FVTPL), fair value through other comprehensive income (FVTOCI) or amortized cost based on the
Company’s assessment of the business model within which the financial asset is managed and the financial asset’s contractual cash
flow characteristics.
A financial asset is measured at amortized cost if it is held within a business model of holding financial assets and collecting contractual
cash flows and those cash flows are comprised solely of payments of principal and interest. A financial asset is measured at FVTOCI if
the financial asset is held within a business model of both collecting contractual cash flows and selling the financial assets or through
an irrevocable election for equity instruments that are not held for trading. All other financial assets are measured at FVTPL. A financial
asset that would otherwise be measured at amortized cost or FVTOCI can be designated as FVTPL through an irrevocable election if
doing so eliminates or significantly reduces an accounting mismatch.
96
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FINANCIAL INSTRUMENTS (continued)
Financial assets can only be reclassified when there is a change to the business model within which they are managed. Such
reclassifications are applied on a prospective basis.
Financial liabilities are classified either as measured at amortized cost using the effective interest method or as FVTPL, which are
recorded at fair value.
Unrealized gains and losses on financial assets classified as FVTOCI as well as other comprehensive income amounts, including
unrealized foreign currency translation gains and losses related to the Company’s investment in its associates, are recorded in the
Consolidated Statements of Comprehensive Income on a net of tax basis. Accumulated other comprehensive income forms part of
Shareholders’ equity.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash and temporary investments consisting of highly liquid investments with short-term maturities.
Interest income is recorded on an accrual basis in Net investment income and other in the Consolidated Statements of Earnings.
OTHER INVESTMENTS
Other investments, which are recorded on a trade date basis, are classified as either FVTOCI or FVTPL.
The Company has elected to classify certain equity investments that are not held for trading as FVTOCI. Unrealized gains and losses on
these FVTOCI investments are recorded in Other comprehensive income and transferred directly to retained earnings when realized
without being recorded through profit or loss. Dividends declared are recorded in Net investment income and other in the Consolidated
Statements of Earnings.
FVTPL investments are held for trading and are comprised of fixed income and equity investments and investments in proprietary
investment funds. Unrealized and realized gains and losses, dividends declared, and interest income on these investments are recorded
in Net investment income and other in the Consolidated Statements of Earnings.
LOANS
Loans are classified as either FVTPL or amortized cost, based on the Company’s assessment of the business model within which the
loan is managed.
Changes in fair value of loans measured at FVTPL are recorded in Net investment income and other in the Consolidated Statements of
Earnings. Loans measured at amortized cost are recorded net of an allowance for expected credit losses. Interest income is accounted
for on the accrual basis using the effective interest method for all loans and is recorded in Net investment income and other in the
Consolidated Statements of Earnings.
The Company applies a three-stage impairment approach to measure expected credit losses on loans: 1) On origination, an allowance
for 12-month expected credit losses is established, 2) Lifetime expected credit losses are recognized where there is a significant
deterioration of credit quality, and 3) A loan is considered credit impaired when there is no longer reasonable assurance of collection.
DERECOGNITION
The Company enters into transactions where it transfers financial assets recognized on its balance sheet. The determination of whether
the financial assets are derecognized is based on the extent to which the risks and rewards of ownership are transferred. The gains
or losses and the servicing fee revenue for financial assets that are derecognized are reported in Net investment income and other in
the Consolidated Statements of Earnings. The transactions for financial assets that are not derecognized are accounted for as secured
financing transactions.
SALES COMMISSIONS
Commissions are paid on investment product sales where the Company either receives a fee directly from the client or where it
receives a fee directly from the investment fund.
97
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SALES COMMISSIONS (continued)
Commissions paid on investment product sales where the Company receives a fee directly from the client are capitalized and
amortized over their estimated useful lives, not exceeding a period of seven years. The Company regularly reviews the carrying value of
capitalized selling commissions with respect to any events or circumstances that indicate impairment. Among the tests performed by
the Company to assess recoverability is the comparison of the future economic benefits derived from the capitalized selling commission
asset in relation to its carrying value.
All other commissions paid on investment product sales are expensed as incurred.
CAPITAL ASSETS
Capital assets are comprised of Property and equipment and Right-of-use assets.
Property and equipment
Buildings, furnishings and equipment are amortized on a straight-line basis over their estimated useful lives, which range from 3 to 17
years for equipment and furnishings and 10 to 50 years for the building and its components. Capital assets are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Right-of-use assets
A right-of-use asset representing the Company's property leases is depreciated using the straight-line method from the
commencement date to the end of the lease term and is recorded in Non-commission expense.
LEASES
For contracts that contain a lease, the Company recognizes a right-of-use asset and a lease liability. Imputed interest on the lease
liability is recorded in Interest expense.
Lease payments included in the measurement of the lease liability comprises fixed payments less any lease incentives receivable,
variable payments that depend on an index or a rate, and payments or penalties for terminating the lease, if any. The lease payments
are discounted using the Company's incremental borrowing rate, which is applied to portfolios of leases with reasonably similar
characteristics.
The Company does not recognize a right-of-use asset or lease liability for leases that, at commencement date, have a lease term of 12
months or less, and leases for which the underlying asset is of low value. The Company recognizes the payments associated with these
leases as an expense on a straight-line basis over the term of the lease.
GOODWILL AND INTANGIBLE ASSETS
The Company tests the carrying value of goodwill and indefinite life intangible assets for impairment at least once a year and more
frequently if an event or circumstance indicates the asset may be impaired. An impairment loss is recognized if the amount of the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal or its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows (cash generating units).
Investment fund management contracts have been assessed to have an indefinite useful life as the contractual right to manage the
assets has no fixed term.
Trade names have been assessed to have an indefinite useful life as they contribute to the revenues of the Company’s integrated asset
management business as a whole and the Company intends to utilize them for the foreseeable future.
Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Software assets are amortized
over a period not exceeding 7 years and distribution and other management contracts are amortized over a period not exceeding 20
years. Finite life intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable.
98
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EMPLOYEE BENEFITS
The Company maintains a number of employee benefit plans including defined benefit plans and defined contribution pension plans
for eligible employees. These plans are related parties in accordance with IFRS. The Company’s defined benefit plans include a funded
defined benefit pension plan for eligible employees, unfunded supplementary executive retirement plans (SERP) for certain executive
officers, and an unfunded post-employment health care, dental and life insurance plan for eligible retirees.
The defined benefit pension plan provides pensions based on length of service and final average earnings.
The cost of the defined benefit plans is actuarially determined using the projected unit credit method prorated on service based upon
management’s assumptions about discount rates, compensation increases, retirement ages of employees, mortality and expected
health care costs. Any changes in these assumptions will impact the carrying amount of pension obligations. The Company’s accrued
benefit liability in respect of defined benefit plans is calculated separately for each plan by discounting the amount of the benefit that
employees have earned in return for their service in current and prior periods and deducting the fair value of any plan assets. The
Company determines the net interest component of the pension expense for the period by applying the discount rate used to measure
the accrued benefit liability at the beginning of the annual period to the net accrued benefit liability. The discount rate used to value
liabilities is determined using a yield curve of AA corporate debt securities.
If the plan benefits are changed, or a plan is curtailed, any past service costs or curtailment gains or losses are recognized immediately
in net earnings.
Current service costs, past service costs and curtailment gains or losses are included in Non-commission expenses.
Remeasurements arising from defined benefit plans represent actuarial gains and losses and the actual return on plan assets, less
interest calculated at the discount rate. Remeasurements are recognized immediately through Other comprehensive income (OCI) and
are not reclassified to net earnings.
The accrued benefit liability represents the deficit related to defined benefit plans and is included in Other liabilities.
Payments to the defined contribution pension plans are expensed as incurred.
SHARE-BASED PAYMENTS
The Company uses the fair value based method to account for stock options granted to employees. The fair value of stock options is
determined on each grant date. Compensation expense is recognized over the period that the stock options vest, with a corresponding
increase in Contributed surplus. When stock options are exercised, the proceeds together with the amount recorded in Contributed
surplus are added to Share capital.
The Company recognizes a liability for cash settled awards including those granted under the Performance Share Unit, Restricted Share
Unit and Deferred Share Unit plans. Compensation expense is recognized over the vesting period, net of related hedges. The liability is
remeasured at fair value at each reporting period.
PROVISIONS
A provision is recognized if, as a result of a past event, the Company has a present obligation where a reliable estimate can be made,
and it is probable that an outflow of resources will be required to settle the obligation.
INCOME TAXES
The Company uses the liability method in accounting for income taxes whereby deferred income tax assets and liabilities reflect the
expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases
and tax loss carryforwards. Deferred income tax assets and liabilities are measured based on the enacted or substantively enacted tax
rates which are anticipated to be in effect when the temporary differences are expected to reverse.
99
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EARNINGS PER SHARE
Basic earnings per share is determined by dividing Net earnings available to common shareholders by the weighted average number
of common shares outstanding for the year. Diluted earnings per share is determined using the same method as basic earnings per
share except that the average number of common shares outstanding includes the potential dilutive effect of outstanding stock options
granted by the Company as determined by the treasury stock method.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company in the management of equity price and interest rate risks. The Company
does not utilize derivative financial instruments for speculative purposes.
The Company formally documents all hedging relationships, as well as its risk management objective and strategy for undertaking
various hedging transactions. This process includes linking all derivatives to specific assets and liabilities on the Consolidated Balance
Sheets or to anticipated future transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows
of hedged items. Derivative financial instruments are recorded at fair value in the Consolidated Balance Sheets.
Derivative financial instruments specifically designated as a hedge and meeting the criteria for hedge effectiveness offset the changes
in fair values or cash flows of hedged items. A hedge is designated either as a cash flow hedge or a fair value hedge. A cash flow
hedge requires the change in fair value of the derivative, to the extent effective, to be recorded in Other comprehensive income, which
is reclassified to the Consolidated Statements of Earnings when the hedged item affects earnings. The change in fair value of the
ineffective portion of the derivative in a cash flow hedge is recorded in the Consolidated Statements of Earnings. A fair value hedge
requires the change in fair value of the hedging derivative and the change in fair value of the hedged item relating to the hedged risk to
both be recorded in the Consolidated Statements of Earnings.
The Company enters into interest rate swaps as part of its mortgage banking and intermediary operations. These swap agreements
require the periodic exchange of net interest payments without the exchange of the notional principal amount on which the payments
are based. Swaps entered into to hedge the costs of funds on certain securitization activities are designated as hedging instruments
(Note 21). The effective portion of changes in fair value are initially recorded in Other comprehensive income and subsequently
recorded in Net investment income and other in the Consolidated Statements of Earnings over the term of the associated Obligations
to securitization entities. Remaining mortgage related swaps are not designated as hedging instruments and changes in fair value are
recorded directly in Net investment income and other in the Consolidated Statements of Earnings.
The Company also enters into total return swaps and forward agreements to manage its exposure to fluctuations in the total return of
its common shares related to deferred compensation arrangements. Total return swap and forward agreements require the exchange
of net contractual payments periodically or at maturity without the exchange of the notional principal amounts on which the payments
are based. Certain of these derivatives are not designated as hedging instruments and changes in fair value are recorded in Non-
commission expense in the Consolidated Statements of Earnings.
Derivatives continue to be utilized on a basis consistent with the risk management policies of the Company and are monitored by the
Company for effectiveness as economic hedges even if specific hedge accounting requirements are not met.
OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities are offset and the net amount is presented on the Consolidated Balance Sheets when the Company has
a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the assets and settle the
liabilities simultaneously.
FUTURE ACCOUNTING CHANGES
The Company continuously monitors the potential changes proposed by the IASB and analyzes the effect that changes in the standards
may have on the Company’s operations.
100
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 NON-COMMISSION EXPENSE
Salaries and employee benefits
Restructuring and other
Occupancy
Amortization of capital, intangible and other assets
Other
2019
2018
$
$
517,796
–
27,840
79,496
429,257
481,116
22,758
56,816
56,065
426,727
$ 1,054,389
$ 1,043,482
In 2018, the Company incurred restructuring and other charges of $22.7 million related to the re-engineering of North American equity
offerings and associated personnel changes, as well as other initiatives to improve the Company’s offerings and operational effectiveness.
NOTE 4 OTHER INVESTMENTS
Fair value through other
comprehensive income (FVTOCI)
Corporate investments
Fair value through profit or loss (FVTPL)
Equity securities
Proprietary investment funds
2019
FAIR
VALUE
COST
2018
FAIR
VALUE
COST
$ 244,989
$ 301,196
$ 303,619
$ 372,396
1,575
51,304
1,759
54,407
16,976
78,504
12,915
74,600
52,879
56,166
95,480
87,515
$ 297,868
$ 357,362
$ 399,099
$ 459,911
FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Corporate investments
Corporate investments is primarily comprised of the Company’s investments in Wealthsimple Financial Corporation (Wealthsimple),
and Portag3 Ventures LP and Portag3 Ventures II LP (Portag3). At December 31, 2018, investments also included Personal Capital
Corporation (Personal Capital). In January 2019, the Company invested an additional amount of $66.8 million (USD $50.0 million) in
Personal Capital which increased its voting interest to 22.7% and resulted in reclassification of the investment in Personal Capital from
FVTOCI to the equity method (Note 8).
Wealthsimple is an online investment manager that provides financial investment guidance. Portag3 is an early-stage investment fund
dedicated to backing innovating financial services companies. Wealthsimple and Portag3 are both controlled by the Company’s parent,
Power Financial Corporation.
In 2019, the Company invested $51.9 million related to Wealthsimple (2018 - $72.3 million) and $14.8 million related to Portag3 (2018
- $16.3 million).
FAIR VALUE THROUGH PROFIT OR LOSS
Proprietary investment funds
The Company manages and provides services and earns management and administration fees, in respect of investment funds that
are not recognized in the Consolidated Balance Sheets. As at December 31, 2019, there were $161.8 billion in investment fund
assets under management (2018 - $143.3 billion). The Company’s investments in proprietary investment funds are classified on the
Company’s Consolidated Balance Sheets as fair value through profit or loss. These investments are generally made in the process of
launching a new fund and are sold as third party investors subscribe. This balance represents the Company’s maximum exposure to loss
associated with these investments.
101
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 OTHER INVESTMENTS (continued)
FAIR VALUE THROUGH PROFIT OR LOSS (continued)
Proprietary investment funds (continued)
Certain investment funds are consolidated where the Company has made the assessment that it controls the investment fund. As
at December 31, 2019, the underlying investments related to these consolidated investment funds primarily consisted of cash and
short-term investments of $7.1 million (2018 - $11.2 million), equity securities of $21.8 million (2018 - $33.8 million) and fixed income
securities of $6.0 million (2018 – $3.0 million). The underlying securities of these funds are classified as FVTPL and recognized at fair value.
NOTE 5 LOANS
Amortized cost
Residential mortgages
Less: Allowance for expected credit losses
Fair value through profit or loss
The change in the allowance for expected credit losses is as follows:
Balance, beginning of year
Write-offs, net of recoveries
Expected credit losses
Balance, end of year
Total credit impaired loans as at December 31, 2019 were $2,381 (2018 - $3,271).
CONTRACTUAL MATURITY
1 YEAR
OR LESS
1 – 5
YEARS
OVER
5 YEARS
2019
TOTAL
2018
TOTAL
$ 1,524,491
$ 5,666,635
$
7,592
$ 7,198,718
$ 7,734,529
675
801
7,198,043
–
7,733,728
4,303
$ 7,198,043
$ 7,738,031
$
$
801
(863)
737
806
(326)
321
$
675
$
801
Total interest income on loans was $218.3 million (2018 - $213.9 million). Total interest expense on obligations to securitization
entities, related to securitized loans, was $171.9 million (2018 - $165.2 million). Gains realized on the sale of residential mortgages
totalled $3.2 million (2018 - $1.5 million). Fair value adjustments related to mortgage banking operations totalled negative $4.3 million
(2018 - negative $13.6 million). These amounts were included in Net investment income and other. Net investment income and other
also includes other mortgage banking related items including portfolio insurance, issue costs, and other items.
NOTE 6 SECURITIZATIONS
The Company securitizes residential mortgages through the Canada Mortgage and Housing Corporation (CMHC) sponsored National
Housing Act Mortgage-Backed Securities (NHA MBS) Program and Canada Mortgage Bond (CMB) Program and through Canadian
bank-sponsored asset-backed commercial paper (ABCP) programs. These transactions do not meet the requirements for derecognition
as the Company retains prepayment risk and certain elements of credit risk. Accordingly, the Company has retained these mortgages
on its balance sheets and has recorded offsetting liabilities for the net proceeds received as Obligations to securitization entities which
are recorded at amortized cost.
The Company earns interest on the mortgages and pays interest on the obligations to securitization entities. As part of the CMB
transactions, the Company enters into a swap transaction whereby the Company pays coupons on CMBs and receives investment
returns on the NHA MBS and the reinvestment of repaid mortgage principal. A component of this swap, related to the obligation to
pay CMB coupons and receive investment returns on repaid mortgage principal, is recorded as a derivative and had a negative fair value
of $0.9 million at December 31, 2019 (2018 - positive $4.9 million).
102
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 SECURITIZATIONS (continued)
Under the NHA MBS and CMB Program, the Company has an obligation to make timely payments to security holders regardless of
whether amounts are received from mortgagors. All mortgages securitized under the NHA MBS and CMB Program are insured by
CMHC or another approved insurer under the program. As part of the ABCP transactions, the Company has provided cash reserves for
credit enhancement which are recorded at cost. Credit risk is limited to these cash reserves and future net interest income as the ABCP
Trusts have no recourse to the Company's other assets for failure to make payments when due. Credit risk is further limited to the
extent these mortgages are insured.
2019
Carrying value
NHA MBS and CMB Program
Bank sponsored ABCP
Total
Fair value
2018
Carrying value
NHA MBS and CMB Program
Bank sponsored ABCP
Total
Fair value
SECURITIZED
SECURITIZATION
OBLIGATIONS TO
MORTGAGES
ENTITIES
NET
$ 3,890,955
2,938,910
$ 3,938,732
2,974,904
$ 6,829,865
$ 6,913,636
$ 6,907,742
$ 6,996,953
$
$
$
(47,777)
(35,994)
(83,771)
(89,211)
$ 4,246,668
3,102,498
$ 4,250,641
3,119,552
$ 7,349,166
$ 7,370,193
$ 7,405,170
$ 7,436,873
$
$
$
(3,973)
(17,054)
(21,027)
(31,703)
The carrying value of Obligations to securitization entities, which is recorded net of issue costs, includes principal payments received
on securitized mortgages that are not due to be settled until after the reporting period. Issue costs are amortized over the life of the
obligation on an effective interest rate basis.
NOTE 7 OTHER ASSETS
Deferred and prepaid expenses
Other
2019
2018
$
44,673
1,170
$
45,461
1,070
$
45,843
$
46,531
Total other assets of $19.1 million as at December 31, 2019 (2018 - $18.9 million) are expected to be realized within one year.
103
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 INVESTMENT IN ASSOCIATES
2019
Balance, beginning of year
Transfer from Corporate
investments (FVTOCI)
Proceeds from substantial issuer bid
Dividends received
Proportionate share of:
Earnings (losses)
Associate's one-time charges
Other comprehensive income (loss)
and other adjustments
LIFECO
CHINA AMC
PERSONAL CAPITAL
TOTAL
$
967,829
$
683,475
$
–
$
1,651,304
–
(80,408)
(62,673)
109,088
(17,200)
–
–
(10,301)
30,119
–
216,952
–
–
(16,782)
–
216,952
(80,408)
(72,974)
122,425
(17,200)
(19,985)
(40,599)
(5,633)
(66,217)
Balance, end of year
$
896,651
$
662,694
$
194,537
$
1,753,882
2018
Balance, beginning of year
Dividends received
Proportionate share of:
Earnings
Other comprehensive income (loss)
and other adjustments
$
901,405
(61,831)
$
647,880
(12,156)
$
120,966
28,996
7,289
18,755
Balance, end of year
$
967,829
$
683,475
$
–
–
–
–
–
$
1,549,285
(73,987)
149,962
26,044
$
1,651,304
The Company uses the equity method to account for its investments in Great-West Lifeco Inc., China Asset Management Co., Ltd. and
Personal Capital Corporation as it exercises significant influence.
GREAT-WEST LIFECO INC. (LIFECO)
Lifeco is a publicly listed company that is incorporated and domiciled in Canada and is controlled by Power Financial Corporation.
Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment
management and reinsurance businesses, primarily in Canada, the United States, Europe and Asia.
At December 31, 2019, the Company held 37,337,133 (2018 - 39,737,388) shares of Lifeco, which represented an equity interest of
4.0% (2018 - 4.0%). Significant influence arises from several factors, including but not limited to the following: common control of
Lifeco by Power Financial Corporation, directors common to the boards of the Company and Lifeco, certain shared strategic alliances,
significant intercompany transactions and service agreements that influence the financial and operating policies of both companies.
The Company’s proportionate share of Lifeco’s earnings is recorded in the Consolidated Statements of Earnings.
In April 2019, the Company participated on a proportionate basis in the Lifeco substantial issuer bid by selling 2,400,255 of its shares in
Lifeco for proceeds of $80.4 million.
In June 2019, Lifeco recorded a one-time loss in relation to the sale of substantially all of its United States individual life insurance
and annuity business. In December 2019, Lifeco recorded one-time charges in relation to the revaluation of a deferred tax asset,
restructuring costs and the net gain on the Scottish Friendly transaction. The Company’s after-tax proportionate share of these charges
was $17.2 million.
The fair value of the Company’s investment in Lifeco totalled $1,241.8 million at December 31, 2019 (2018 - $1,118.6 million). The
Company has elected to apply the exemption in IFRS 4 Insurance Contracts to retain Lifeco’s relevant accounting policies related to
Lifeco’s deferral of the adoption of IFRS 9 Financial Instruments.
Lifeco directly owned 9,200,000 shares of the Company at December 31, 2019 (2018 – 9,200,000).
Lifeco’s financial information as at December 31, 2019 can be obtained in its publicly available information.
104
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 INVESTMENT IN ASSOCIATES (continued)
CHINA ASSET MANAGEMENT CO., LTD. (CHINA AMC)
China AMC is an asset management company established in Beijing, China and is controlled by CITIC Securities Company Limited.
As at December 31, 2019, the Company held a 13.9% ownership interest in China AMC (2018 - 13.9%). Significant influence arises
from board representation, participating in the policy making process, shared strategic initiatives including joint product launches and
collaboration between management and investment teams.
The following table sets forth certain summary financial information from China AMC:
AS AT DECEMBER 31 (millions)
Total assets
Total liabilities
FOR THE YEAR ENDED DECEMBER 31
Revenue
Net earnings available to common shareholders
Total comprehensive income
CANADIAN
DOLLARS
2,171
504
2019
CHINESE
YUAN
11,645
2,701
CANADIAN
DOLLARS
2,051
445
2018
CHINESE
YUAN
10,342
2,242
763
230
234
3,977
1,201
1,219
733
224
235
3,733
1,140
1,171
PERSONAL CAPITAL CORPORATION (PERSONAL CAPITAL)
In January 2019, the Company invested an additional amount of $66.8 million (USD $50.0 million) in Personal Capital which increased
its voting interest to 22.7% and, combined with its board representation, resulted in the Company exercising significant influence.
As at December 31, 2019, the Company held a 24.8% equity interest in Personal Capital. IGM Financial’s equity earnings from Personal
Capital includes its proportionate share of Personal Capital’s net loss adjusted by IGM Financial’s amortization of intangible assets that
it recognized as part of its investment in the company.
The following table sets forth certain summary financial information for Personal Capital:
AS AT DECEMBER 31 (millions)
Total assets
Total liabilities
FOR THE YEAR ENDED DECEMBER 31
Revenue
Net loss available to common shareholders
Total comprehensive loss
CANADIAN
DOLLARS
85.9
23.0
2019
US
DOLLARS
66.1
17.7
99.8
(56.4)
(56.4)
75.3
(42.5)
(42.5)
CANADIAN
DOLLARS
2018
US
DOLLARS
–
–
–
–
–
–
–
–
–
–
105
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 CAPITAL ASSETS
2019
FURNITURE AND
EQUIPMENT
BUILDING AND
COMPONENTS
RIGHT-OF-USE
ASSETS
TOTAL
Cost
Less: accumulated amortization
$
321,108
(236,809)
$
66,817
(15,016)
$ 104,343
(23,487)
$
492,268
(275,312)
$
84,299
$
51,801
$
80,856
$
216,956
Changes in capital assets:
Balance, beginning of year
Adoption of IFRS 16
Additions
Disposals
Amortization
$
88,185
$
50,462
$
–
$
–
16,679
(893)
(19,672)
–
2,841
–
(1,502)
96,065
8,278
–
(23,487)
138,647
96,065
27,798
(893)
(44,661)
Balance, end of year
$
84,299
$
51,801
$
80,856
$
216,956
2018
Cost
Less: accumulated amortization
Changes in capital assets:
Balance, beginning of year
Additions
Disposals
Amortization
$
306,416
(218,231)
$
63,976
(13,514)
$
88,185
$
50,462
$
99,335
16,177
(5,833)
(21,494)
$
52,186
213
(536)
(1,401)
$
$
$
Balance, end of year
$
88,185
$
50,462
$
NOTE 10 CAPITALIZED SALES COMMISSIONS
Cost
Less: accumulated amortization
Changes in capitalized sales commissions
Balance, beginning of year
Changes due to:
Sales of investment funds
Amortization
Balance, end of year
106
–
–
–
–
–
–
–
–
$
370,392
(231,745)
$
138,647
$
151,521
16,390
(6,369)
(22,895)
$
138,647
2019
2018
$
192,504
(42,638)
$
125,264
(20,220)
$
149,866
$
105,044
$
105,044
$
63,821
67,209
(22,387)
55,685
(14,462)
44,822
41,223
$
149,866
$
105,044
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 GOODWILL AND INTANGIBLE ASSETS
FINITE LIFE
INDEFINITE LIFE
DISTRIBUTION
AND OTHER MUTUAL FUND
MANAGEMENT
MANAGEMENT
SOFTWARE
CONTRACTS
CONTRACTS
TRADE
NAMES
TOTAL
INTANGIBLE
ASSETS
GOODWILL
2019
Cost
Less: accumulated amortization
$ 256,365
(117,866)
$ 147,248
(81,356)
$ 740,559
–
$ 285,177
–
$ 1,429,349
(199,222)
$ 2,660,267
–
$ 138,499
$
65,892
$ 740,559
$ 285,177
$ 1,230,127
$ 2,660,267
Changes in goodwill and intangible assets:
Balance, beginning of year
Additions
Disposals
Amortization
$
$ 116,697
44,421
–
(22,619)
48,635
25,457
(1,726)
(6,474)
$ 740,559
–
–
–
$ 285,177
–
–
–
$ 1,191,068
69,878
(1,726)
(29,093)
$ 2,660,267
–
–
–
Balance, end of year
$ 138,499
$
65,892
$ 740,559
$ 285,177
$ 1,230,127
$ 2,660,267
2018
Cost
Less: accumulated amortization
$
212,006
(95,309)
$ 125,630
(76,995)
$ 740,559
–
$ 285,177
–
$ 1,363,372
(172,304)
$ 2,660,267
–
$ 116,697
$
48,635
$ 740,559
$ 285,177
$ 1,191,068
$ 2,660,267
Changes in goodwill and intangible assets:
Balance, beginning of year
Additions
Disposals
Amortization
$
$ 119,019
18,940
(216)
(21,046)
39,696
16,366
(1,877)
(5,550)
$ 740,559
–
–
–
$ 285,177
–
–
–
$ 1,184,451
35,306
(2,093)
(26,596)
$ 2,660,267
–
–
–
Balance, end of year
$ 116,697
$
48,635
$ 740,559
$ 285,177
$ 1,191,068
$ 2,660,267
The goodwill and indefinite life intangible assets consisting of investment fund management contracts and trade names are allocated
to each cash generating unit (CGU) as summarized in the following table:
IG Wealth Management
Mackenzie
Other
Total
2019
INDEFINITE
LIFE
INTANGIBLE
2018
INDEFINITE
LIFE
INTANGIBLE
GOODWILL
ASSETS
GOODWILL
ASSETS
$ 1,347,781
1,168,580
143,906
$
–
1,002,681
23,055
$ 1,347,781
1,168,580
143,906
$
–
1,002,681
23,055
$ 2,660,267
$ 1,025,736
$ 2,660,267
$ 1,025,736
107
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 GOODWILL AND INTANGIBLE ASSETS (continued)
The Company tests whether goodwill and indefinite life intangible assets are impaired by assessing the carrying amounts with the
recoverable amounts. The recoverable amount of the Company’s CGUs is based on the best available evidence of fair value less costs
of disposal. Fair value is initially assessed with reference to valuation multiples of comparable publicly-traded financial institutions and
precedent business acquisition transactions. These valuation multiples may include price-to-earnings or other conventionally used
measures for investment managers or other financial service providers (multiples of value to assets under management, revenues, or
other measures of profitability). This assessment may give regard to a variety of relevant considerations, including expected growth,
risk and capital market conditions, among other factors. The valuation multiples used in assessing fair value represent Level 2 fair
value inputs.
The fair value less costs of disposal of the Company’s CGUs was compared with the carrying amount and it was determined there was
no impairment. Changes in assumptions and estimates used in determining the recoverable amounts of CGUs can result in significant
adjustments to the valuation of the CGUs.
NOTE 12 DEPOSITS AND CERTIFICATES
Deposits and certificates are classified as other financial liabilities measured at amortized cost.
Included in the assets of the Consolidated Balance Sheets are cash and cash equivalents, client funds on deposit and loans amounting
to $584.3 million (2018 - $568.8 million) related to deposits and certificates.
Deposits
Certificates
NOTE 13 OTHER LIABILITIES
Dividends payable
Interest payable
Accrued benefit liabilities (Note 14)
Provisions
Other
TERM TO MATURITY
DEMAND
1 YEAR
OR LESS
$ 572,974
-
$
5,546
454
$
1–5
YEARS
3,607
630
OVER
5 YEARS
2019
TOTAL
2018
TOTAL
$
255
865
$ 582,382
1,949
$ 566,605
2,194
$ 572,974
$
6,000
$
4,237
$
1,120
$ 584,331
$ 568,799
2019
2018
$
$
134,040
30,127
207,441
20,513
49,781
137,710
27,527
189,113
50,768
39,055
$
441,902
$
444,173
The Company establishes restructuring provisions related to business acquisitions, divestitures and other items, as well as other
provisions in the normal course of its operations. Changes in provisions during 2019 consisted of additional estimates of $2.2 million,
provision reversals of $3.3 million and payments of $29.2 million.
Total other liabilities of $221.5 million as at December 31, 2019 (2018 - $238.5 million) are expected to be settled within one year.
108
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 EMPLOYEE BENEFITS
DEFINED BENEFIT PLANS
The Company maintains a number of employee pension and post-employment benefit plans. These plans include a funded registered
defined benefit pension plan for all eligible employees, unfunded supplementary executive retirement plans (SERPs) for certain executive
officers, and an unfunded post-employment health care, dental and life insurance plan for eligible retirees.
Effective July 1, 2012, the defined benefit pension plan was closed to new members. For all eligible employees hired after July 1, 2012,
the Company has a registered defined contribution pension plan.
The defined benefit pension plan is a separate trust that is legally separated from the Company. The defined benefit pension plan is
registered under the Pension Benefits Act of Manitoba (Act) and the Income Tax Act (ITA). As required by the Act, the defined benefit
pension plan is governed by a pension committee which includes current and retired employees. The Pension Committee has certain
responsibilities as described in the Act but may delegate certain activities to the Company. The ITA governs the employer’s ability to
make contributions and also has parameters that the plan must meet with respect to investments in foreign property.
The defined benefit pension plan provides lifetime pension benefits to all eligible employees based on length of service and final average
earnings subject to limits established by the ITA. Death benefits are available on the death of an active member or a retired member.
Employees who are not senior officers are required to make annual contributions based on a percentage of salaries which are subject
to a maximum amount.
The actuarial valuation for funding purposes related to the Company’s registered defined benefit pension plan, based on a
measurement date of December 31, 2017, was completed in May 2018. The valuation determines the plan surplus or deficit on both
a solvency and going concern basis. The solvency basis determines the relationship between the plan assets and its liabilities assuming
that the plan is wound up and settled on the valuation date. A going concern valuation compares the relationship between the plan
assets and the present value of the expected future benefit cash flows, assuming the plan will be maintained indefinitely. Based on
the actuarial valuation, the registered pension plan had a solvency deficit of $47.2 million compared to $82.7 million in the previous
actuarial valuation, which was based on a measurement date of December 31, 2016. The decrease in the solvency deficit resulted
primarily from higher assets due to contribution and investment returns, and is required to be funded over five years. The registered
pension plan had a going concern surplus of $46.1 million compared to $24.4 million in the previous valuation. The next required
actuarial valuation will be based on a measurement date of December 31, 2020. During 2019, the Company made contributions of
$26.4 million (2018 - $40.4 million). The Company utilized $10.5 million of the payments made during 2018 to reduce its solvency
deficit and increase its going concern surplus. The Company expects to make contributions of approximately $26.1 million in 2020.
Pension contribution decisions are subject to change, as contributions are affected by many factors including market performance,
regulatory requirements, changes in assumptions and management’s ability to change funding policy.
The SERPs are non-registered, non-contributory defined benefit plans which provide supplementary benefits to certain retired executives.
The other post-employment benefit plan is a non-contributory plan and provides eligible employees a reimbursement of medical costs
or a fixed amount per year to cover medical costs during retirement.
The SERPs and other post-employment benefit plans are managed by the Company with oversight from the Board of Directors.
The defined benefit plans expose the Company to actuarial risks such as mortality risk which represents life expectancy and impacts the
calculation of the obligations; interest rate risk which impacts the discount rate used to calculate the obligations and the actual return
on plan assets; salary risk as estimated salary increases are used in the calculation of the obligations; and investment risk as the nature
of the investments impact the actual return on the plan assets. The risks are managed by regular monitoring of the plans, applicable
regulations and other factors that could impact the Company’s expenses and cash flows.
109
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
Plan assets, benefit obligations and funded status:
Fair value of plan assets
Balance, beginning of year
Employee contributions
Employer contributions
Benefits paid
Interest income
Remeasurements:
- Return on plan assets
Balance, end of year
Accrued benefit obligation
Balance, beginning of year
Benefits paid
Current service cost
Curtailment (gain) loss
Employee contributions
Interest expense
Remeasurements:
Actuarial losses (gains)
- Demographic assumption
- Experience adjustments
- Financial assumptions
DEFINED
BENEFIT
OTHER POST–
EMPLOYMENT
DEFINED
BENEFIT
2019
2018
OTHER POST–
EMPLOYMENT
PENSION PLAN
SERPS
BENEFITS
PENSION PLAN
SERPS
BENEFITS
$
$ 407,428
2,316
26,368
(32,014)
16,065
46,384
466,547
496,715
(32,014)
18,540
–
2,316
19,048
–
(970)
61,971
$
–
–
–
–
–
–
–
62,084
(3,308)
1,462
–
–
2,265
–
1,934
4,798
–
–
–
–
–
–
–
37,742
(2,266)
539
–
–
1,337
$
$ 417,687
2,464
40,438
(35,411)
15,246
(32,996)
407,428
493,610
(35,411)
20,293
(776)
2,464
17,403
–
(648)
2,443
17,397
(3,098)
(15,167)
$
–
–
–
–
–
–
–
63,134
(2,873)
1,400
–
–
2,153
–
(12)
(1,718)
–
–
–
–
–
–
–
45,405
(2,373)
918
36
–
1,521
(5,708)
(787)
(1,270)
Balance, end of year
565,606
69,235
39,147
496,715
62,084
37,742
Accrued benefit liability
$
99,059
$
69,235
$
39,147
$
89,287
$
62,084
$
37,742
Significant actuarial assumptions used to calculate the defined benefit obligation:
Discount rate
Rate of compensation increase
Health care cost trend rate (1)
Mortality rates at age 65
for current pensioners
DEFINED
BENEFIT
OTHER POST–
EMPLOYMENT
DEFINED
BENEFIT
2019
2018
OTHER POST–
EMPLOYMENT
PENSION PLAN
SERPS
BENEFITS
PENSION PLAN
SERPS
BENEFITS
3.20%
3.90%
N/A
2.95%-3.10%
3.75%
N/A
3.05%
N/A
4.00%
3.90%
4.30%
N/A
3.55%-3.80%
3.75%
N/A
3.70%
N/A
5.78%
23.6 years
23.6 years
23.6 years
23.6 years
23.6 years
23.6 years
(1) Trending to 4.00% in 2044 and remaining at that rate thereafter.
110
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
The weighted average duration of the pension plan’s defined benefit obligation at the end of the reporting period is 19.1 years (2018 -
18.3 years).
Benefit expense:
DEFINED
BENEFIT
OTHER POST-
EMPLOYMENT
DEFINED
BENEFIT
2019
2018
OTHER POST-
EMPLOYMENT
PENSION PLAN
SERPS
BENEFITS
PENSION PLAN
SERPS
BENEFITS
Current service cost
Curtailment (gain) loss
Net interest cost
$
$
18,540
–
2,983
$
1,462
–
2,265
$
539
–
1,337
$
20,293
(776)
2,157
$
1,400
–
2,153
918
36
1,521
$
21,523
$
3,727
$
1,876
$
21,674
$
3,553
$
2,475
Sensitivity analysis:
The calculation of the accrued benefit liability and the related benefit expense are sensitive to the significant actuarial assumptions. The
following table presents the sensitivity analysis:
Defined benefit pension plan
Discount rate (+ / - 0.25%)
Increase
Decrease
Rate of compensation (+ / - 0.25%)
Increase
Decrease
Mortality
Increase 1 year
SERPs
Discount rate (+ / - 0.25%)
Increase
Decrease
Rate of compensation (+ / - 0.25%)
Increase
Decrease
Mortality
Increase 1 year
Other post-employment benefits
Discount rate (+ / - 0.25%)
Increase
Decrease
Health care cost trend rates (+ / - 1.00%)
Increase
Decrease
Mortality
Increase 1 year
2019
2018
INCREASE
INCREASE
INCREASE
INCREASE
(DECREASE)
(DECREASE)
(DECREASE)
(DECREASE)
IN LIABILITY
IN EXPENSE
IN LIABILITY
IN EXPENSE
$
(25,523)
27,313
$
(1,782)
1,815
$
(21,322)
22,784
$
(1,719)
1,743
9,676
(9,555)
812
(806)
7,245
(7,198)
720
(707)
12,476
686
9,725
705
(1,825)
1,908
79
(78)
52
(56)
23
(22)
(1,640)
1,713
75
(74)
1,681
58
1,418
(982)
1,028
1,372
(1,183)
1,180
43
(46)
39
(35)
44
(902)
940
1,180
(1,027)
987
52
(57)
22
(24)
57
36
(39)
44
(38)
45
111
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
The sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is
unlikely to occur as changes in certain assumptions may be correlated.
Asset allocation of defined benefit pension plan by asset category:
Equity securities
Fixed income securities
Alternative strategies
Cash and cash equivalents
2019
2018
59.2 %
30.3
9.4
1.1
56.4 %
32.5
9.9
1.2
100.0 %
100.0 %
The defined benefit pension plan adheres to its Statement of Investment Policies and Procedures which includes investment objectives,
asset allocation guidelines and investment limits by asset class. The defined benefit pension plan assets are invested in proprietary
investment funds with the exception of cash on deposit with Schedule I Canadian chartered banks.
DEFINED CONTRIBUTION PENSION PLANS
The Company maintains a number of defined contribution pension plans for eligible employees. The total expense recorded in Non-
commission expense was $5.5 million (2018 - $4.8 million).
GROUP RETIREMENT SAVINGS PLAN (RSP)
The Company maintains a group RSP for eligible employees. The Company’s contributions are recorded in Non-commission expense as
paid and totalled $6.9 million (2018 - $6.7 million).
NOTE 15 INCOME TAXES
Income tax expense:
Income taxes recognized in net earnings
Current taxes
Tax on current year's earnings
Adjustments in respect of prior years
Deferred taxes
Effective income tax rate:
Income taxes at Canadian federal and provincial statutory rates
Effect of:
Proportionate share of associates' earnings (Note 8)
Proportionate share of associate's one-time charges (Note 8)
Tax loss consolidation (Note 26)
Other items
Effective income tax rate
112
2019
2018
$
200,736
513
$
223,924
(9,317)
201,249
18,470
214,607
(4,688)
$
219,719
$
209,919
2019
2018
26.77 %
26.81 %
(3.31)
0.48
(1.41)
0.15
(3.79)
–
(1.40)
(0.33)
22.68 %
21.29 %
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 INCOME TAXES (continued)
DEFERRED INCOME TAXES
Sources of deferred income taxes:
Deferred income tax assets
Accrued benefit liabilities
Loss carryforwards
Other
Deferred income tax liabilities
Capitalized sales commissions (Note 2)
Intangible assets
Other
Deferred income tax assets and liabilities are presented on the Consolidated Balance Sheets as follows:
Deferred income tax assets
Deferred income tax liabilities
2019
2018
$
$
55,994
33,700
38,483
51,025
33,165
38,726
128,177
122,916
40,006
268,734
47,969
28,254
265,343
49,431
356,709
343,028
$
228,532
$
220,112
2019
2018
$
76,517
305,049
$
75,607
295,719
$
228,532
$
220,112
As at December 31, 2019, the Company had non-capital losses of $10.0 million (2018 - $4.6 million) available to reduce future taxable
income, the benefit of which had not been recognized. $9.2 million of the losses can be carried forward indefinitely and the remainder
expire on December 31, 2037.
NOTE 16 LONG-TERM DEBT
MATURITY
January 26, 2027
December 13, 2027
May 9, 2031
December 31, 2032
March 7, 2033
December 10, 2040
January 25, 2047
December 9, 2047
July 13, 2048
March 21, 2050
RATE
2019
2018
3.44%
6.65%
7.45%
7.00%
7.11%
6.00%
4.56%
4.115%
4.174%
4.206%
400,000
125,000
150,000
175,000
150,000
200,000
200,000
250,000
200,000
250,000
400,000
125,000
150,000
175,000
150,000
200,000
200,000
250,000
200,000
-
$ 2,100,000
$ 1,850,000
113
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 LONG-TERM DEBT (continued)
Long-term debt consists of unsecured debentures which are redeemable by the Company, in whole or in part, at any time, at the
greater of par and a formula price based upon yields at the time of redemption.
Long-term debt is classified as other financial liabilities and is recorded at amortized cost.
Interest expense relating to long-term debt was $104.3 million (2018 - $120.9 million).
On March 20, 2019, the Company issued $250.0 million 4.206% debentures maturing March 21, 2050. The net proceeds were used
by the Company to fund the redemption of $150.0 million of its issued and outstanding 5.90% Non-Cumulative First Preferred Shares,
Series B and for general corporate purposes. The Company redeemed the Series B Preferred Shares on April 30, 2019.
On March 7, 2018, the $150.0 million 6.58% debentures were due and were repaid.
On July 11, 2018, the Company issued $200.0 million of 4.174% debentures maturing July 13, 2048. On August 10, 2018, the net
proceeds were used by the Company, together with a portion of IGM Financial’s existing internal cash resources, to fund the early
redemption of all of its $375 million aggregate principal amount of 7.35% debentures due April 8, 2019. A premium of $10.7 million
was paid on the early redemption of the 7.35% debentures and is included in interest expense in the Consolidated Statements
of Earnings.
NOTE 17 SHARE CAPITAL
AUTHORIZED
Unlimited number of:
First preferred shares, issuable in series
Second preferred shares, issuable in series
Class 1 non-voting shares
Common shares, no par value
ISSUED AND OUTSTANDING
Perpetual preferred shares - classified as equity:
First preferred shares, Series B
Common shares:
Balance, beginning of year
Issued under Stock Option Plan (Note 19)
Purchased for cancellation
2019
STATED
VALUE
SHARES
2018
STATED
VALUE
SHARES
–
$
–
6,000,000
$ 150,000
240,885,317
171,561
(2,762,788)
$ 1,611,263
5,111
(18,514)
240,666,131
219,186
–
$ 1,602,726
8,537
–
Balance, end of year
238,294,090
$ 1,597,860
240,885,317
$ 1,611,263
PERPETUAL PREFERRED SHARES
The Company redeemed the First preferred shares, Series B for $150.0 million on April 30, 2019.
NORMAL COURSE ISSUER BID
The Company commenced a normal course issuer bid on March 26, 2019 which is effective until the earlier of March 25, 2020 and the
date on which the Company has purchased the maximum number of common shares permitted under the normal course issuer bid.
Pursuant to this bid, the Company may purchase up to 4.0 million or 1.7% of its common shares outstanding as at March 14, 2019.
The Company’s previous normal course issuer bid expired on March 19, 2018.
114
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 SHARE CAPITAL (continued)
NORMAL COURSE ISSUER BID (continued)
In 2019, there were 2,762,788 shares (2018 – nil) purchased at a cost of $100.0 million. The premium paid to purchase the shares in
excess of the stated value was charged to Retained earnings.
In connection with its normal course issuer bid, the Company established an automatic securities purchase plan for its common shares.
The automatic securities purchase plan provides standard instructions regarding how the Company’s common shares are to be purchased
under its normal course issuer bid during certain pre-determined trading blackout periods. Outside of these pre-determined trading blackout
periods, purchases under the Company’s normal course issuer bid will be completed based upon management’s discretion.
NOTE 18 CAPITAL MANAGEMENT
The Company’s capital management objective is to maximize shareholder returns while ensuring that the Company is capitalized in a
manner which appropriately supports regulatory capital requirements, working capital needs and business expansion. The Company’s
capital management practices are focused on preserving the quality of its financial position by maintaining a solid capital base and a
strong balance sheet. Capital of the Company consists of long-term debt and common shareholders’ equity. At December 31, 2018,
Capital also included perpetual preferred shares which were redeemed in April 2019. The Company regularly assesses its capital
management practices in response to changing economic conditions.
The Company’s capital is primarily utilized in its ongoing business operations to support working capital requirements, long-term
investments made by the Company, business expansion and other strategic objectives. Subsidiaries subject to regulatory capital
requirements include investment dealers, mutual fund dealers, exempt market dealers, portfolio managers, investment fund managers
and a trust company. These subsidiaries are required to maintain minimum levels of capital based on either working capital, liquidity or
shareholders’ equity. The Company’s subsidiaries have complied with all regulatory capital requirements.
The total outstanding long-term debt was $2,100.0 million at December 31, 2019, compared to $1,850.0 million at December 31,
2018. Long-term debt is comprised of debentures which are senior unsecured debt obligations of the Company subject to standard
covenants, including negative pledges, but which do not include any specified financial or operational covenants. The net increase in
long-term debt resulted from the issuance on March 20, 2019 of $250.0 million 4.206% debentures maturing March 21, 2050.
The net proceeds from the issuance of the debenture was used by the Company in part to fund the redemption of $150 million 5.90%
Non-Cumulative First Preferred Shares, Series B and for general corporate purposes. The Company redeemed the Series B Preferred
Shares on April 30, 2019.
The Company purchased 2,762,788 common shares during the year ended December 31, 2019 at a cost of $100.0 million under its
normal course issuer bid (Note 17). Other activities in 2019 included the declaration of perpetual preferred share dividends of $2.2
million or $0.36875 per share and common share dividends of $537.6 million or $2.25 per share. Changes in common share capital are
reflected in the Consolidated Statements of Changes in Shareholders’ Equity.
NOTE 19 SHARE-BASED PAYMENTS
STOCK OPTION PLAN
Under the terms of the Company’s Stock Option Plan (Plan), options to purchase common shares are periodically granted to employees
at prices not less than the weighted average trading price per common share on the Toronto Stock Exchange for the five trading
days preceding the date of the grant. The options are subject to time vesting conditions set out at the grant date. Options vest over a
period of up to 7.5 years from the grant date and are exercisable no later than 10 years after the grant date. At December 31, 2019,
20,415,351 (2018 - 20,586,912) common shares were reserved for issuance under the Plan.
115
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19 SHARE-BASED PAYMENTS (continued)
STOCK OPTION PLAN (continued)
During 2019, the Company granted 1,511,540 options to employees (2018 - 1,336,990). The weighted-average fair value of options
granted during the year ended December 31, 2019 has been estimated at $1.82 per option (2018 - $2.56) using the Black-Scholes
option pricing model. The weighted-average closing share price at the grant dates was $34.35 (2018 - $39.10). The assumptions used
in these valuation models include:
Exercise price
Risk-free interest rate
Expected option life
Expected volatility
Expected dividend yield
2019
2018
$
34.34
$
2.07%
7 years
18.00%
6.55%
39.28
2.35%
6 years
17.00%
5.73%
Expected volatility has been estimated based on the historic volatility of the Company’s share price over seven years which is reflective
of the expected option life. Stock options were exercised regularly throughout 2019 and the average share price in 2019 was $36.22.
The Company recorded compensation expense related to its stock option program of $3.4 million (2018 - $3.7 million).
Balance, beginning of year
Granted
Exercised
Forfeited
Balance, end of year
Exercisable, end of year
OPTIONS OUTSTANDING AT DECEMBER 31, 2019
2019
WEIGHTED-
NUMBER OF
AVERAGE
NUMBER OF
2018
WEIGHTED-
AVERAGE
OPTIONS
EXERCISE PRICE
OPTIONS
EXERCISE PRICE
9,701,894
1,511,540
(171,561)
(512,513)
10,529,360
5,470,178
$
$
$
42.27
34.34
28.25
45.20
8,912,748
1,336,990
(219,186)
(328,658)
41.22
9,701,894
43.99
4,742,050
$
$
$
42.59
39.28
35.37
43.53
42.27
44.28
EXPIRY
DATE
EXERCISE
OPTIONS
OPTIONS
PRICE $
OUTSTANDING
EXERCISABLE
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
40.45 - 42.82
42.49 - 46.72
45.56 - 47.23
44.73 - 47.26
53.81
43.28 - 43.97
34.88 - 38.17
39.71 - 41.74
37.58 - 40.10
34.29 - 36.91
559,351
426,531
659,948
999,590
763,700
1,090,690
1,939,899
1,292,707
1,319,699
1,477,245
559,351
426,531
659,948
887,348
683,950
725,413
833,563
428,035
266,039
–
10,529,360
5,470,178
SHARE UNIT PLANS
The Company has share unit plans for eligible employees to assist in retaining and further aligning the interests of senior management
with those of the shareholders. These plans include Performance Share Unit (PSU), Deferred Share Unit (DSU) and Restricted Share
Unit (RSU) plans. Under the terms of the plans, share units are awarded annually and are subject to time vesting conditions. In addition,
the PSU and DSU plans are subject to performance vesting conditions. The value of each share unit is based on the share price of the
Company’s common shares. The PSUs and RSUs are cash settled and vest over a three year period. Certain employees can elect at the
time of grant to receive a portion of their PSUs in the form of deferred share units which vest over a three year period. Deferred share
units are redeemable when a participant is no longer an employee of the Company or any of its affiliates by a lump sum payment
116
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 SHARE-BASED PAYMENTS (continued)
SHARE UNIT PLANS (continued)
based on the value of the deferred share unit at that time. Additional share units are issued in respect of dividends payable on common
shares based on a value of the share unit at the dividend payment date. The Company recorded compensation expense, excluding
the impact of hedging, of $17.0 million in 2019 (2018 - $6.8 million) and a liability of $26.5 million at December 31, 2019 (2018 -
$20.4 million).
SHARE PURCHASE PLANS
Under the Company’s share purchase plans, eligible employees and IG Wealth Management consultants can elect each year to have
a percentage of their annual earnings withheld, subject to a maximum, to purchase the Company’s common shares. The Company
matches 50% of the contribution amounts. All contributions are used by the plan trustee to purchase common shares in the open
market. Shares purchased with Company contributions vest after a maximum period of 3 years following the date of purchase. The
Company’s contributions are recorded in Non-commission expense as paid and totalled $10.0 million (2018 - $12.4 million).
DIRECTORS’ DEFERRED SHARE UNIT PLAN
The Company has a Deferred Share Unit (DSU) plan for the directors of the Company to promote a greater alignment of interests
between directors and shareholders of the Company. Under the terms of the plan, directors are required to receive 50% of their annual
board retainer in the form of DSUs and may elect to receive the balance of their annual board retainer in cash or DSUs. Directors may
elect to receive certain fees in a combination of DSUs and cash. The number of DSUs granted is determined by dividing the amount
of remuneration payable by the average closing price on the Toronto Stock Exchange of the common shares of the Company on the
last five days of the fiscal quarter (value of DSU). A director who has elected to receive DSUs will receive additional DSUs in respect
of dividends payable on common shares, based on the value of a DSU at the dividend payment date. DSUs are redeemable when a
participant is no longer a director, officer or employee of the Company or any of its affiliates by cash payments, based on the value of
the DSUs at that time. At December 31, 2019, the fair value of the DSUs outstanding was $18.6 million (2018 - $13.4 million). Any
difference between the change in fair value of the DSUs and the change in fair value of the total return swap, which is an economic
hedge for the DSU plan, is recognized in Non-commission expense in the period in which the change occurs.
NOTE 20 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
2019
Balance, beginning of year
Other comprehensive income (loss)
Transfer out of FVTOCI
Balance, end of year
2018
Balance, beginning of year
Other comprehensive income (loss)
Balance, end of year
Amounts are recorded net of tax.
EMPLOYEE
OTHER
IN ASSOCIATES
BENEFITS
INVESTMENTS
AND OTHER
TOTAL
INVESTMENT
$ (149,052)
(16,895)
–
$
57,234
10,597
(21,468)
$
46,020
(54,138)
–
$
(45,798)
(60,436)
(21,468)
$ (165,947)
$
46,363
$
(8,118)
$ (127,702)
$ (132,529)
(16,523)
$
39,068
18,166
$
22,348
23,672
$
(71,113)
25,315
$ (149,052)
$
57,234
$
46,020
$
(45,798)
117
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 RISK MANAGEMENT
The Company actively manages its liquidity, credit and market risks.
LIQUIDITY AND FUNDING RISK RELATED TO FINANCIAL INSTRUMENTS
Liquidity and funding risk is the risk of the inability to generate or obtain sufficient cash in a timely and cost-effective manner to meet
contractual or anticipated commitments as they come due or arise.
The Company’s liquidity management practices include:
• Maintaining liquid assets and lines of credit to satisfy near term liquidity needs.
• Ensuring effective controls over liquidity management processes.
• Performing regular cash forecasts and stress testing.
• Regular assessment of capital market conditions and the Company’s ability to access bank and capital market funding.
• Ongoing efforts to diversify and expand long-term mortgage funding sources.
• Oversight of liquidity by management and by the Financial Risk Management Committee, a committee of finance and other business leaders.
A key funding requirement for the Company is the funding of Consultant network compensation paid for the distribution of financial
products and services. This compensation continues to be paid from operating cash flows.
The Company also maintains sufficient liquidity to fund and temporarily hold mortgages pending sale or securitization to long-
term funding sources and to manage any derivative collateral requirements related to the mortgage banking operation. Through its
mortgage banking operations, residential mortgages are sold to third parties including certain mutual funds, institutional investors
through private placements, Canadian bank-sponsored securitization trusts, and by issuance and sale of National Housing Act
Mortgage Backed Securities (NHA MBS) securities including sales to Canada Housing Trust under the Canada Mortgage Bond Program
(CMB Program).
Certain subsidiaries of the Company are approved issuers of NHA MBS and are approved sellers into the CMB Program. Capacity
for sales under the CMB Program consists of participation in new CMB issues and reinvestment of principal repayments held in the
Principal Reinvestment Accounts.
The Company maintains committed capacity within certain Canadian bank-sponsored securitization trusts.
The Company’s contractual maturities of certain financial liabilities were as follows:
AS AT DECEMBER 31, 2019 ($ millions)
DEMAND
1 YEAR
1 – 5 YEARS
AFTER 5 YEARS
TOTAL
LESS THAN
Derivative financial instruments
Deposits and certificates
Obligations to securitization entities
Leases (1)
Long–term debt
Pension funding (2)
$
$
–
573.0
–
–
–
$
6.9
6.0
1,473.6
26.2
–
26.1
$
$
10.1
4.2
5,431.5
54.7
–
–
0.2
1.1
8.5
23.5
2,100.0
–
17.2
584.3
6,913.6
104.4
2,100.0
26.1
Total contractual maturities
$
573.0
$
1,538.8
$
5,500.5
$
2,133.3
$
9,745.6
(1) Includes remaining lease payments related to office space and equipment used in the normal course of business.
(2) The next required actuarial valuation will be completed based on a measurement date of December 31, 2020. Pension funding requirements beyond 2020 are subject to
significant variability and will be determined based on future actuarial valuations. Pension contribution decisions are subject to change, as contributions are affected by many
factors including market performance, regulatory requirements, changes in assumptions and management's ability to change funding policy.
118
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
In addition to the Company’s current balance of cash and cash equivalents, liquidity is available through the Company’s lines of
credit. The Company’s lines of credit with various Schedule I Canadian chartered banks totalled $825 million at December 31, 2019,
unchanged from December 31, 2018. The lines of credit at December 31, 2019 consisted of committed lines of $650 million and
uncommitted lines of $175 million, unchanged from December 31, 2018. The Company has accessed its uncommitted lines of credit
in the past; however, any advances made by a bank under the uncommitted lines of credit are at the bank’s sole discretion. As at
December 31, 2019 and December 31, 2018, the Company was not utilizing its committed lines of credit or its uncommitted lines
of credit.
The Company’s liquidity position and its management of liquidity and funding risk have not changed materially since December 31, 2018.
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS
Credit risk is the potential for financial loss to the Company if a counterparty to a transaction fails to meet its obligations. The
Company’s cash and cash equivalents, other investment holdings, mortgage portfolios, and derivatives are subject to credit risk. The
Company monitors its credit risk management practices on an ongoing basis to evaluate their effectiveness.
At December 31, 2019, cash and cash equivalents of $720.0 million (2018 - $650.2 million) consisted of cash balances of $68.0 million
(2018 - $81.8 million) on deposit with Canadian chartered banks and cash equivalents of $652.0 million (2018 - $568.4 million). Cash
equivalents are comprised of Government of Canada treasury bills totalling $34.5 million (2018 - $103.5 million), provincial government
treasury bills and promissory notes of $206.5 million (2018 - $76.2 million), bankers’ acceptances and other short-term notes issued
by Canadian chartered banks of $411.0 million (2018 - $364.3 million). Also included in 2018 were highly rated corporate commercial
paper of $24.4 million. The Company manages credit risk related to cash and cash equivalents by adhering to its Investment Policy that
outlines credit risk parameters and concentration limits. The Company regularly reviews the credit ratings of its counterparties. The
maximum exposure to credit risk on these financial instruments is their carrying value.
As at December 31, 2019, residential mortgages, recorded on the Company’s balance sheet, of $7.2 billion (2018 - $7.7 billion)
consisted of $6.8 billion sold to securitization programs (2018 - $7.3 billion), $344.5 million held pending sale or securitization (2018 -
$363.9 million) and $24.2 million related to the Company’s intermediary operations (2018 - $25.6 million).
The Company manages credit risk related to residential mortgages through:
• Adhering to its lending policy and underwriting standards;
• Its loan servicing capabilities;
• Use of client-insured mortgage default insurance and mortgage portfolio default insurance held by the Company; and
• Its practice of originating its mortgages exclusively through its own network of Mortgage Planning Specialists and IG Wealth
Management Consultants as part of a client’s IG Living Plan™.
In certain instances, credit risk is also limited by the terms and nature of securitization transactions as described below:
• Under the NHA MBS program totalling $3.9 billion (2018 - $4.2 billion), the Company is obligated to make timely payment of
principal and coupons irrespective of whether such payments were received from the mortgage borrower. However, as required by
the NHA MBS program, 100% of the loans are insured by an approved insurer.
• Credit risk for mortgages securitized by transfer to bank-sponsored securitization trusts totalling $2.9 billion (2018 - $3.1 billion) is
limited to amounts held in cash reserve accounts and future net interest income, the fair values of which were $71.9 million (2018
- $74.1 million) and $37.9 million (2018 - $35.6 million), respectively, at December 31, 2019. Cash reserve accounts are reflected on
the balance sheet, whereas rights to future net interest income are not reflected on the balance sheet and will be recorded over the
life of the mortgages. This risk is further mitigated by insurance with 4.6% of mortgages held in ABCP Trusts insured at December 31,
2019 (2018 - 8.3%).
119
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 21 RISK MANAGEMENT (continued)
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
At December 31, 2019, residential mortgages recorded on balance sheet were 59.1% insured (2018 - 61.5%). As at December
31, 2019, impaired mortgages on these portfolios were $2.4 million, compared to $3.3 million at December 31, 2018. Uninsured
non-performing mortgages over 90 days on these portfolios were $1.6 million at December 31, 2019, compared to $1.8 million at
December 31, 2018.
The Company also retains certain elements of credit risk on mortgage loans sold to the Investors Mortgage and Short Term Income
Fund and to the Investors Canadian Corporate Bond Fund through an agreement to repurchase mortgages in certain circumstances
benefiting the funds. These loans are not recorded on the Company’s balance sheet as the Company has transferred substantially all of
the risks and rewards of ownership associated with these loans.
The Company regularly reviews the credit quality of the mortgages and the adequacy of the allowance for expected credit losses.
The Company’s allowance for expected credit losses was $0.7 million at December 31, 2019, compared to $0.8 million at December 31,
2018, and is considered adequate by management to absorb all credit-related losses in the mortgage portfolios based on: i) historical
credit performance experience and recent trends, ii) current portfolio credit metrics and other relevant characteristics, and iii) regular
stress testing of losses under adverse real estate market conditions.
The Company’s exposure to and management of credit risk related to cash and cash equivalents, fixed income securities and mortgage
portfolios have not changed materially since December 31, 2018.
The Company is exposed to credit risk through derivative contracts it utilizes to hedge interest rate risk, to facilitate securitization
transactions and to hedge market risk related to certain stock-based compensation arrangements. These derivatives are discussed
more fully under the Market Risk section.
To the extent that the fair value of the derivatives is in a gain position, the Company is exposed to credit risk that its counterparties fail
to fulfil their obligations under these arrangements.
The Company’s derivative activities are managed in accordance with its Investment Policy which includes counterparty limits and
other parameters to manage counterparty risk. The aggregate credit risk exposure related to derivatives that are in a gain position of
$15.7 million (2018 - $19.4 million) does not give effect to any netting agreements or collateral arrangements. The exposure to credit
risk, considering netting agreements and collateral arrangements and including rights to future net interest income, was $0.7 million
at December 31, 2019 (2018 - nil). Counterparties are all Canadian Schedule I chartered banks and, as a result, management has
determined that the Company’s overall credit risk related to derivatives was not significant at December 31, 2019. Management of
credit risk related to derivatives has not changed materially since December 31, 2018.
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS
Market risk is the potential for loss to the Company from changes in the values of its financial instruments due to changes in foreign
exchange rates, interest rates or equity prices.
Interest Rate Risk
The Company is exposed to interest rate risk on its loan portfolio and on certain of the derivative financial instruments used in the
Company’s mortgage banking operations.
The Company manages interest rate risk associated with its mortgage banking operations by entering into interest rate swaps with
Canadian Schedule I chartered banks as follows:
• The Company has in certain instances funded floating rate mortgages with fixed rate Canada Mortgage Bonds as part of the
securitization transactions under the CMB Program. As previously discussed, as part of the CMB Program, the Company is party to a
swap whereby it is entitled to receive investment returns on reinvested mortgage principal and is obligated to pay Canada Mortgage
Bond coupons. This swap had a negative fair value of $0.9 million (2018 - positive $4.9 million) and an outstanding notional amount
of $0.8 billion at December 31, 2019 (2018 - $0.9 billion). The Company enters into interest rate swaps with Canadian Schedule I
chartered banks to hedge the risk that the interest rates earned on floating rate mortgages and reinvestment returns decline. The
120
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 21 RISK MANAGEMENT (continued)
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
Interest Rate Risk (continued)
fair value of these swaps totalled negative $4.9 million (2018 – negative $11.0 million), on an outstanding notional amount of $1.6 billion
at December 31, 2019 (2018 – $1.7 billion). The net fair value of these swaps of negative $5.8 million at December 31, 2019 (2018 –
negative $6.1 million) is recorded on the balance sheet and has an outstanding notional amount of $2.4 billion (2018 - $2.6 billion).
• The Company is exposed to the impact that changes in interest rates may have on the value of mortgages committed to or held
pending sale or securitization to long-term funding sources. The Company enters into interest rate swaps to hedge the interest rate
risk related to funding costs for mortgages held by the Company pending sale or securitization. Beginning in 2018, hedge accounting
is applied to the cost of funds on certain securitization activities. The effective portion of fair value changes of the associated interest
rate swaps are initially recognized in Other comprehensive income and subsequently recognized in Net investment income and other
over the term of the related Obligations to securitization entities. The fair value of these swaps was $0.6 million (2018 – negative
$1.8 million) on an outstanding notional amount of $180.4 million at December 31, 2019 (2018 - $249.9 million).
As at December 31, 2019, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease
of approximately $2.0 million (2018 - decrease of $0.5 million). The Company’s exposure to and management of interest rate risk have
not changed materially since December 31, 2018.
Equity Price Risk
The Company is exposed to equity price risk on its equity investments (Note 4) which are classified as either fair value through other
comprehensive income or fair value through profit or loss. The fair value of the equity investments was $357.4 million at December 31,
2019 (2018 - $459.9 million).
The Company sponsors a number of deferred compensation arrangements for employees where payments to participants are deferred
and linked to the performance of the common shares of IGM Financial Inc. The Company hedges its exposure to this risk through the
use of forward agreements and total return swaps.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk on its investments in Personal Capital and China AMC. Changes to the carrying value
due to changes in foreign exchange rates on these investments are recognized in Other comprehensive income. A 5% appreciation
(depreciation) in Canadian currency relative to foreign currencies would decrease (increase) the aggregate carrying value of foreign
investments by approximately $40.5 million ($44.8 million).
The Company’s proportionate share of China AMC’s and Personal Capital’s earnings (losses), recorded in Proportionate share
of associates’ earnings in the Consolidated Statements of Earnings, is also affected by changes in foreign exchange rates. A 5%
appreciation (depreciation) in Canadian currency relative to foreign currencies would decrease (increase) the proportionate share of
associates’ earnings (losses) by approximately $0.7 million ($0.6 million).
RISKS RELATED TO ASSETS UNDER MANAGEMENT
Risks related to the performance of the equity markets, changes in interest rates and changes in foreign currencies relative to the
Canadian dollar can have a significant impact on the level and mix of assets under management. These changes in assets under
management directly impact earnings.
121
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into derivative contracts which are either exchange-traded or negotiated in the over-the-counter market on
a diversified basis with Schedule I chartered banks or Canadian bank-sponsored securitization trusts that are counterparties to the
Company’s securitization transactions. In all cases, the derivative contracts are used for non-trading purposes. Interest rate swaps
are contractual agreements between two parties to exchange the related interest payments based on a specified notional amount
and reference rate for a specified period. Total return swaps are contractual agreements to exchange payments based on a specified
notional amount and the underlying security for a specific period. Options are contractual agreements which convey the right, but
not the obligation, to buy or sell specific financial instruments at a fixed price at a future date. Forward contracts are contractual
agreements to buy or sell a financial instrument on a future date at a specified price.
Certain of the Company’s derivative financial instruments are subject to master netting arrangements and are presented on a gross
basis. The amount subject to credit risk is limited to the current fair value of the instruments which are in a gain position and recorded
as assets on the Consolidated Balance Sheets. The total estimated fair value represents the total amount that the Company would
receive or pay to terminate all agreements at each year end. However, this would not result in a gain or loss to the Company as the
derivative instruments which correlate to certain assets and liabilities provide offsetting gains or losses.
The following table summarizes the Company’s derivative financial instruments:
2019
Swaps
Hedge accounting
No hedge accounting
Forward contracts
Hedge accounting
2018
Swaps
Hedge accounting
No hedge accounting
Forward contracts
Hedge accounting
1 YEAR
OR LESS
1–5
YEARS
OVER
5 YEARS
TOTAL
CREDIT
RISK
ASSET
LIABILITY
NOTIONAL AMOUNT
FAIR VALUE
$
–
914,441
$
59,559
1,466,479
$
46,504
76,973
$
106,063
2,457,893
$
373
12,049
$
373
12,049
$
10
17,183
10,175
33,440
–
43,615
2,782
2,782
–
$
924,616
$ 1,559,478
$
123,477
$ 2,607,571
$
15,204
$
15,204
$
17,193
$
–
907,525
$
122,186
1,736,413
$
42,650
36,737
$
164,836
2,680,675
$
1
16,034
$
1
16,034
$
1,158
23,252
10,310
26,985
–
37,295
329
329
4,580
$
917,835
$ 1,885,584
$
79,387
$ 2,882,806
$
16,364
$
16,364
$
28,990
The credit risk related to the Company’s derivative financial instruments after giving effect to any netting agreements was $0.7 million
(2018 - nil).
The credit risk related to the Company’s derivative financial instruments after giving effect to netting agreements and including
rights to future net interest income, was $0.7 million (2018 - nil). Rights to future net interest income are related to the Company’s
securitization activities and are not reflected on the Consolidated Balance Sheets.
NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values are management’s estimates and are calculated using market conditions at a specific point in time and may not reflect
future fair values. The calculations are subjective in nature, involve uncertainties and are matters of significant judgment.
All financial instruments measured at fair value and those for which fair value is disclosed are classified into one of three levels that
distinguish fair value measurements by the significance of the inputs used for valuation.
122
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in the most advantageous
market, utilizing a hierarchy of three different valuation techniques, based on the lowest level input that is significant to the fair value
measurement in its entirety.
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs other than Level 1 quoted prices for similar assets or liabilities in active markets; quoted prices
for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are
observable or corroborated by observable market data; and
Level 3 - Unobservable inputs that are supported by little or no market activity. Valuation techniques are primarily model-based.
Markets are considered inactive when transactions are not occurring with sufficient regularity. Inactive markets may be characterized
by a significant decline in the volume and level of observed trading activity or through large or erratic bid/offer spreads. In those
instances where traded markets are not considered sufficiently active, fair value is measured using valuation models which may utilize
predominantly observable market inputs (Level 2) or may utilize predominantly non-observable market inputs (Level 3). Management
considers all reasonably available information including indicative broker quotations, any available pricing for similar instruments, recent
arm’s length market transactions, any relevant observable market inputs, and internal model-based estimates. Management exercises
judgment in determining the most appropriate inputs and the weighting ascribed to each input as well as in the selection of valuation
methodologies.
Fair value is determined using the following methods and assumptions:
Other investments and other financial assets and financial liabilities are valued using quoted prices from active markets, when
available. When a quoted market price is not readily available, valuation techniques are used that require assumptions related
to discount rates and the timing and amount of future cash flows. Wherever possible, observable market inputs are used in the
valuation techniques.
Loans classified as Level 2 are valued using market interest rates for loans with similar credit risk and maturity.
Loans classified as Level 3 are valued by discounting the expected future cash flows at prevailing market yields.
Obligations to securitization entities are valued by discounting the expected future cash flows at prevailing market yields for
securities issued by these securitization entities having similar terms and characteristics.
Deposits and certificates are valued by discounting the contractual cash flows using market interest rates currently offered for
deposits with similar terms and credit risks.
Long-term debt is valued using quoted prices for each debenture available in the market.
Derivative financial instruments are valued based on quoted market prices, where available, prevailing market rates for instruments
with similar characteristics and maturities, or discounted cash flow analysis.
Level 1 financial instruments include exchange-traded equity investments and open-end investment fund units and other financial
liabilities in instances where there are quoted prices available from active markets.
Level 2 assets and liabilities include fixed income securities, loans, derivative financial instruments, deposits and certificates and long-
term debt. The fair value of fixed income securities is determined using quoted market prices or independent dealer price quotes. The
fair value of derivative financial instruments and deposits and certificates are determined using valuation models, discounted cash flow
methodologies, or similar techniques using primarily observable market inputs. The fair value of long-term debt is determined using
indicative broker quotes.
Level 3 assets and liabilities include investments with little or no trading activity valued using broker-dealer quotes, loans, other
financial assets, obligations to securitization entities and derivative financial instruments. Derivative financial instruments consist of
principal reinvestment account swaps which represent the component of a swap entered into under the CMB Program whereby
the Company pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage
123
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
principal. Fair value is determined by discounting the projected cashflows of the swaps. The notional amount, which is an input used to
determine the fair value of the swap, is determined using an average unobservable prepayment rate of 15% which is based on historical
prepayment patterns. An increase (decrease) in the assumed mortgage prepayment rate increases (decreases) the notional amount of
the swap.
The following table presents the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the
fair value hierarchy. The table distinguishes between those financial instruments recorded at fair value and those recorded at amortized
cost. The table also excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables,
certain other financial assets, accounts payable and accrued liabilities, and certain other financial liabilities.
2019
CARRYING VALUE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
FAIR VALUE
Financial assets recorded at fair value
Other investments
- FVTOCI
- FVTPL
Loans
- FVTPL
Derivative financial instruments
Financial assets recorded at amortized cost
Loans
- Amortized cost
Financial liabilities recorded at fair value
Derivative financial instruments
Other financial liabilities
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long-term debt
2018
Financial assets recorded at fair value
Other investments
- FVTOCI
- FVTPL
Loans
- FVTPL
Derivative financial instruments
Financial assets recorded at amortized cost
Loans
$
301,196
56,166
$
–
55,603
$
–
–
$
301,196
563
$
301,196
56,166
–
15,204
7,198,043
17,193
–
584,331
6,913,636
2,100,000
–
–
–
–
–
–
–
–
–
10,762
–
4,442
–
15,204
366,020
6,907,743
7,273,763
11,845
–
5,348
–
17,193
–
584,662
–
2,453,564
–
6,996,953
–
584,662
6,996,953
2,453,564
$
372,396
87,515
$
–
86,963
$
–
–
$
372,396
552
$
372,396
87,515
4,303
16,364
–
–
–
4,303
7,179
–
9,185
4,303
16,364
380,372
7,405,170
7,785,542
- Amortized cost
7,733,728
Financial liabilities recorded at fair value
Derivative financial instruments
Other financial liabilities
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long-term debt
28,990
8,237
–
8,235
24,704
2
4,286
–
28,990
8,237
568,799
7,370,193
1,850,000
–
–
–
569,048
–
2,050,299
–
7,436,873
–
569,048
7,436,873
2,050,299
124
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
There were no significant transfers between Level 1 and Level 2 in 2019 and 2018.
The following table provides a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
2019
Other investments
- FVTOCI
- FVTPL
Derivative financial
instruments, net
2018
Other investments
- FVTOCI
- FVTPL
Derivative financial
instruments, net
GAINS/
(LOSSES)
GAINS/(LOSSES)
INCLUDED IN
OTHER
PURCHASES
BALANCE
JANUARY 1
INCLUDED IN
NET EARNINGS(1)
COMPREHENSIVE
AND
TRANSFERS
BALANCE
INCOME
ISSUANCES
SETTLEMENTS
IN/OUT
DECEMBER 31
$ 372,396
552
$
–
11
$ 12,248
–
$ 66,693
–
$
–
–
$ (150,141)
–
$ 301,196
563
4,899
(5,207)
–
(1,551)
(953)
–
(906)
$ 262,825
661
$
–
(8)
$ 21,002
–
$ 88,569
–
$
–
–
$
–
(101)
$ 372,396
552
4,095
(12,689)
–
224
(13,269)
–
4,899
(1) Included in Net investment income in the Consolidated Statements of Earnings.
NOTE 24 EARNINGS PER COMMON SHARE
Earnings
Net earnings
Perpetual preferred share dividends
Net earnings available to common shareholders
Number of common shares (in thousands)
Weighted average number of common shares outstanding
Add: Potential exercise of outstanding stock options (1)
Average number of common shares outstanding
- Diluted basis
Earnings per common share (in dollars)
Basic
Diluted
(1) Excludes 1,591 thousand shares in 2019 related to outstanding stock options that were anti-dilutive (2018 - 1,453 thousand).
2019
2018
$
748,947
2,213
$
776,168
8,850
$
746,734
$
767,318
239,105
76
240,815
125
239,181
240,940
$
$
3.12
3.12
$
$
3.19
3.18
125
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25 CONTINGENT LIABILITIES AND GUARANTEES
CONTINGENT LIABILITIES
The Company is subject to legal actions arising in the normal course of its business. In December 2018, a proposed class action was
filed in the Ontario Superior Court against Mackenzie Financial Corporation which alleges that the company should not have paid
mutual fund trailing commissions to order execution only dealers. Although it is difficult to predict the outcome of any such legal actions,
based on current knowledge and consultation with legal counsel, management does not expect the outcome of any of these matters,
individually or in aggregate, to have a material adverse effect on the Company’s consolidated financial position.
GUARANTEES
In the normal course of operations, the Company executes agreements that provide for indemnifications to third parties in transactions
such as business dispositions, business acquisitions, loans and securitization transactions. The Company has also agreed to indemnify
its directors and officers. The nature of these agreements precludes the possibility of making a reasonable estimate of the maximum
potential amount the Company could be required to pay third parties as the agreements often do not specify a maximum amount and
the amounts are dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined.
Historically, the Company has not made any payments under such indemnification agreements. No provisions have been recognized
related to these agreements.
NOTE 26 RELATED PARTY TRANSACTIONS
TRANSACTIONS AND BALANCES WITH RELATED ENTITIES
The Company enters into transactions with The Great-West Life Assurance Company (Great-West), London Life Insurance Company
(London Life) and The Canada Life Assurance Company (Canada Life), which are all subsidiaries of its affiliate, Lifeco, which is a
subsidiary of Power Financial Corporation. Effective as of January 1, 2020, Great-West, London Life and Canada Life amalgamated
into a single company, The Canada Life Assurance Company. These transactions are in the normal course of operations and have been
recorded at fair value:
• During 2019 and 2018, the Company provided to and received from Great-West certain administrative services. The Company
distributes insurance products under a distribution agreement with Great-West and Canada Life and received $54.8 million in
distribution fees (2018 - $62.6 million). The Company received $17.1 million (2018 - $17.5 million) and paid $26.2 million (2018
- $25.4 million) to Great-West and related subsidiary companies for the provision of sub-advisory services for certain investment
funds. The Company paid $78.8 million (2018 - $78.3 million) to London Life related to the distribution of certain investment funds
of the Company.
• During 2019, the Company sold residential mortgage loans to Great-West and London Life for $10.8 million (2018 - $61.4 million).
After obtaining advanced tax rulings in October 2017, the Company agreed to tax loss consolidation transactions with the Power
Corporation of Canada group whereby shares of a subsidiary that has generated tax losses may be acquired in each year up to and
including 2020. The acquisitions are expected to close in the fourth quarter of each year. The Company will recognize the benefit of the
tax losses realized throughout the year. On each of December 31, 2019 and December 31, 2018, the Company acquired shares of such
loss companies and recorded the benefit of the tax losses acquired.
126
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 26 RELATED PARTY TRANSACTIONS (continued)
KEY MANAGEMENT COMPENSATION
The total compensation and other benefits to directors and employees classified as key management, being individuals having authority
and responsibility for planning, directing and controlling the activities of the Company, are as follows:
Compensation and employee benefits
Post-employment benefits
Share-based payments
$
2019
4,260
3,988
2,023
$
2018
4,200
3,007
1,638
$
10,271
$
8,845
Share-based payments exclude the fair value remeasurement of the deferred share units associated with changes in the Company’s
share price (Note 19).
NOTE 27 SEGMENTED INFORMATION
The Company's reportable segments are:
• IG Wealth Management
• Mackenzie
• Corporate and Other
These segments reflect the Company’s internal financial reporting and performance measurement. In the third quarter of 2018, the
Company announced that it had rebranded Investors Group as IG Wealth Management.
IG Wealth Management earns fee-based revenues in the conduct of its core business activities which are primarily related to the
distribution, management and administration of its investment funds. It also earns fee revenues from the provision of brokerage
services and the distribution of insurance and banking products. In addition, IG Wealth Management earns intermediary revenues
primarily from mortgage banking and servicing activities and from the assets funded by deposit and certificate products.
Mackenzie earns fee-based revenues from services it provides as fund manager to its investment funds and as investment advisor to
sub-advisory and institutional accounts.
Corporate and Other includes Investment Planning Counsel, equity income from its investments in Lifeco, China AMC and Personal
Capital (Note 8), net investment income on unallocated investments, other income, and also includes consolidation elimination entries.
127
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 27 SEGMENTED INFORMATION (continued)
2019
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Proportionate share of associates'
earnings
Expenses
Commission
Non–commission
IG WEALTH
MACKENZIE
CORPORATE
TOTAL
MANAGEMENT
INVESTMENTS
AND OTHER
SEGMENT
ADJUSTMENTS(1)
TOTAL
$ 1,487,935
299,631
171,164
56,248
$ 703,538
98,251
5,746
4,236
$
76,487
16,575
191,126
16,444
$ 2,267,960
414,457
368,036
76,928
$
–
–
–
–
$ 2,267,960
414,457
368,036
76,928
–
–
122,425
122,425
(17,200)
105,225
2,014,978
811,771
423,057
3,249,806
(17,200)
3,232,606
628,766
615,934
292,896
350,438
179,503
88,017
1,101,165
1,054,389
1,244,700
643,334
267,520
2,155,554
–
–
–
1,101,165
1,054,389
2,155,554
Earnings before undernoted
$ 770,278
$ 168,437
$ 155,537
1,094,252
(17,200)
1,077,052
Interest expense(2)
Proportionate share of associate's one–time charges
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
(108,386)
(17,200)
968,666
219,719
748,947
2,213
–
17,200
(108,386)
–
–
–
–
–
968,666
219,719
748,947
2,213
Net earnings available to common shareholders
$ 746,734
$
–
$ 746,734
Identifiable assets
Goodwill
Total assets
$ 8,508,059
1,347,781
$ 1,140,237
1,168,580
$ 3,082,913
143,906
$ 12,731,209
2,660,267
$ 9,855,840
$ 2,308,817
$ 3,226,819
$ 15,391,476
(1) Proportionate share of Associate’s one time charges is not related to a specific segment and therefore excluded from segment results. These items have been added back to their
respective revenue or expense line item to reconcile Total Segment results to the Company’s Consolidated Statements of Earnings.
(2) Interest expense includes interest on long-term debt and, beginning January 1, 2019, includes interest on leases of $4.1 million as a result of the Company's adoption of IFRS 16,
Leases.
128
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 27 SEGMENTED INFORMATION (continued)
2018
Revenues
Management fees
Administration fees
Distribution fees
Net investment income and other
Proportionate share of associates’
earnings
Expenses
Commission
Non-commission
IG WEALTH
MACKENZIE
CORPORATE
TOTAL
MANAGEMENT
INVESTMENTS
AND OTHER
SEGMENT
ADJUSTMENTS(1)
TOTAL
$ 1,458,127
310,382
171,531
46,665
$
$
701,424
98,353
6,713
(1,942)
79,631
18,358
192,662
17,205
$ 2,239,182
427,093
370,906
61,928
$
–
–
149,962
149,962
1,986,705
804,548
457,818
3,249,071
–
–
–
–
–
–
$ 2,239,182
427,093
370,906
61,928
149,962
3,249,071
623,421
597,242
291,089
335,105
184,133
88,377
1,098,643
1,020,724
–
22,758
1,098,643
1,043,482
1,220,663
626,194
272,510
2,119,367
22,758
2,142,125
Earnings before undernoted
$
766,042
$
178,354
$
185,308
1,129,704
(22,758)
1,106,946
Interest expense
Premium paid on early redemption of debentures (Note 16)
Restructuring and other charges (Note 3)
Earnings before income taxes
Income taxes
Net earnings
Perpetual preferred share dividends
(110,179)
(10,680)
(22,758)
986,087
209,919
776,168
8,850
Net earnings available to common shareholders
$
767,318
$
Identifiable assets
Goodwill
Total assets
$ 8,822,277
1,347,781
$ 1,153,639
1,168,580
$ 2,972,531
143,906
$ 12,948,447
2,660,267
$ 10,170,058
$ 2,322,219
$ 3,116,437
$ 15,608,714
(10,680)
10,680
22,758
–
–
–
–
–
(120,859)
–
–
986,087
209,919
776,168
8,850
$
767,318
(1) Premium paid on early redemption of debentures and Restructuring and other charges are not related to a specific segment and therefore excluded from segment results. These
items have been added back to their respective revenue or expense line item to reconcile Total Segment results to the Company’s Consolidated Statements of Earnings.
129
IGM FINANCIAL INC. ANNUAL REPORT 2019 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERLY REVIEW
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
($ thousands, except per share amounts)
Q4
Q3
Q2
2019
Q1
Q4
Q3
Q2
2018
Q1
Revenues
Management
Administration
Distribution
Net investment income and other
Proportionate share of associates' earnings
Expenses
Commission
Non–commission
Interest
$ 581,231
104,197
93,452
21,256
23,409
$ 574,083
104,433
91,075
17,580
28,902
$ 567,422
104,128
94,235
17,859
20,264
$ 545,224
101,699
89,274
20,233
32,650
$ 545,975
103,382
94,345
13,168
34,602
$ 573,825
109,054
93,344
15,974
39,793
$ 562,781
107,123
89,897
18,577
37,583
$ 556,601
107,534
93,320
14,209
37,984
823,545
816,073
803,908
789,080
791,472
831,990
815,961
809,648
278,279
266,043
27,758
272,367
254,257
27,764
275,853
259,651
27,648
274,666
274,438
25,216
272,308
269,034
24,122
270,073
268,676
37,703
270,164
252,627
28,770
286,098
253,145
30,264
572,080
554,388
563,152
574,320
565,464
576,452
551,561
569,507
Earnings before income taxes
Income taxes
251,465
59,835
261,685
59,208
240,756
55,632
214,760
45,044
226,008
43,874
255,538
55,172
264,400
58,483
Net earnings
Perpetual preferred share dividends
191,630
–
202,477
–
185,124
–
169,716
2,213
182,134
2,212
200,366
2,213
205,917
2,212
240,141
52,390
187,751
2,213
Net earnings available to
common shareholders
Reconciliation of Non–IFRS
Financial Measures(1)
Adjusted net earnings available to common
shareholders – non – IFRS measure
Proportionate share of associate's
one–time charges
Restructuring and other, net of tax
Premium paid on early redemption
of debentures, net of tax
Net earnings available to common
$ 191,630
$ 202,477
$ 185,124
$ 167,503
$ 179,922
$ 198,153
$ 203,705
$ 185,538
$ 200,830
$ 202,477
$ 193,124
$ 167,503
$ 179,922
$ 222,672
$ 203,705
$ 185,538
(9,200)
–
–
–
–
–
(8,000)
–
–
–
–
–
–
–
–
–
(16,723)
(7,796)
–
–
–
–
–
–
shareholders – IFRS
$ 191,630
$ 202,477
$ 185,124
$ 167,503
$ 179,922
$ 198,153
$ 203,705
$ 185,538
Diluted earnings per share (¢)
Net earnings
Adjusted net earnings (1)
Dividends per share (¢)
80
84
56.25
85
85
56.25
77
81
56.25
70
70
56.25
75
75
56.25
82
92
56.25
85
85
56.25
77
77
56.25
(1) Refer to page 24 of the MD&A for an explanation of the Company's use of non–IFRS financial measures.
130
IGM FINANCIAL INC. ANNUAL REPORT 2019 | QUARTERLY REVIEW
QUARTERLY REVIEW
STATISTICAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31
($ millions)
Investment funds
IG Wealth Management (1)
Mutual fund sales
Mutual fund
redemption rate (%) - total
Net sales (redemptions)
Assets under management
- long-term funds
Mackenzie
Mutual fund sales
Mutual fund
redemption rate (%) - total
- long-term funds
Net sales (redemptions)
Assets under management
Mutual fund
ETF
Investment fund (2)
Investment Planning Counsel (1)
Mutual fund sales
Mutual fund
redemption rate (%) - total
- long-term funds
Net sales (redemptions)
Assets under management
Total investment fund assets
under management (3)
Q4
Q3
Q2
2019
Q1
Q4
Q3
Q2
2018
Q1
$
2,251
$
2,077
$
2,045
$
2,350
$
2,118
$
2,014
$
2,084
$
2,859
10.9
10.3
(247)
93,161
10.8
10.2
(291)
90,779
10.5
9.9
(537)
90,176
10.1
9.5
(14)
89,411
9.8
9.2
(125)
83,137
9.5
8.8
(64)
88,992
9.3
8.6
(110)
88,762
9.1
8.4
784
87,103
2,587
2,253
2,541
2,505
2,328
2,252
2,741
2,630
16.1
15.6
265
60,838
4,749
63,991
16.2
15.7
491
59,275
4,051
62,150
16.7
16.2
284
58,864
3,454
61,395
17.5
17.0
376
57,694
3,330
60,126
17.6
17.1
(91)
53,407
2,949
55,508
16.9
16.4
258
57,343
2,963
59,493
15.8
15.3
447
56,842
2,600
58,692
14.2
13.7
768
55,586
2,004
56,994
147
154
174
219
229
219
252
260
19.5
19.3
(114)
5,391
21.1
20.9
(60)
5,365
20.9
20.7
(82)
5,396
20.3
20.1
(16)
5,426
19.4
19.2
(65)
5,125
17.1
16.8
(6)
5,532
17.1
16.9
5
5,562
16.9
16.7
48
5,452
161,763
157,578
156,301
154,335
143,282
153,430
152,477
149,203
Total assets under management (3)
166,808
162,536
162,328
160,467
149,066
159,714
159,129
155,758
Corporate assets
15,391
15,574
15,706
15,970
15,609
15,399
15,672
Consultants - IG Wealth Management
3,381
3,486
3,557
3,642
3,711
3,827
3,945
15,695
4,081
(1) IG Wealth Management and Investment Planning Counsel total assets under management and net sales include separtely managed accounts.
(2) Excludes Mackenzie mutual fund investments in ETFs
(3) Adjusted for inter-segment assets.
131
IGM FINANCIAL INC. ANNUAL REPORT 2019 | QUARTERLY REVIEW
TEN YEAR REVIEW
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
($ thousands, except
per share amounts)
2019
2018
2017
2016
2015
%
2014
2013
2012
2011
2010
%
CAGR(1)
5 YEAR
CAGR(1)
10 YEAR
Fee income
3,050,453 3,037,181 3,005,733 2,856,934 2,833,355
2.0 2,762,578 2,513,186 2,424,574 2,571,076 2,467,813
3.2
Net investment income
and other
182,153
211,890
148,277
187,849
194,590
2.0
164,706
176,836
152,582
161,376
140,874
11.2
RESTATED
Expenses
2,263,940 2,262,984 2,369,358 2,097,846 2,037,153
2.9 1,962,321 1,708,642 1,618,989 1,635,154 1,600,831
3,232,606 3,249,071 3,154,010 3,044,783 3,027,945
2.0 2,927,284 2,690,022 2,577,156 2,732,452 2,608,687
Income before undernoted
968,666
986,087
784,652
946,937
990,792
Income taxes
219,719
209,919
173,887
167,633
210,250
0.1
1.6
964,963
981,380
958,167 1,097,298 1,007,856
202,862
210,626
190,504
250,497
268,805
Discontinued operations
–
–
–
–
–
–
–
–
–
62,644
1,753
748,947
776,168
610,765
779,304
780,542
(0.3)
762,101
770,754
767,663
846,801
739,051
748,947
776,168
610,765
779,304
780,542
(0.3)
762,101
770,754
767,663
909,445
740,804
3.5
4.1
2.3
0.1
3.0
–
3.0
2,213
8,850
8,850
8,850
8,850
(24.5)
8,850
8,850
8,850
8,850
10,105
N/M
746,734
767,318
601,915
770,454
771,692
(0.2)
753,251
761,904
758,813
900,595
730,699
2.9
Net earnings
Perpetual preferred
share dividends
Net earnings available to
common shareholders
Adjusted net earnings available
to common shareholders (2) 763,934
791,837
727,864
736,454
796,001
(1.6)
826,100
763,510
746,404
832,991
758,943
2.1
Diluted earnings per share ($)
Net earnings
Adjusted net earnings (2)
Dividends per share ($)
Return on average common
equity (ROE) (%)
Net earnings
Adjusted net earnings (2)
Average shares
outstanding (thousands)
- Basic
- Diluted
3.12
3.19
2.25
16.9
17.2
3.18
3.29
2.25
17.7
18.2
2.50
3.02
2.25
12.9
15.6
3.19
3.05
2.25
17.1
16.3
3.11
3.21
2.25
16.9
17.4
0.9
(0.5)
0.7
2.98
3.27
2.18
16.2
17.8
3.02
3.02
2.15
17.3
17.3
2.97
2.92
2.15
17.6
17.3
3.48
3.22
2.10
21.3
19.7
2.78
2.89
2.05
17.6
18.2
3.9
3.1
0.9
239,105
240,815
240,585
241,300
248,173
252,108
252,013
254,853
258,151
261,855
239,181
240,940
240,921
241,402
248,299
252,778
252,474
255,277
259,075
262,867
Share price (closing $)
37.28
31.03
44.15
38.20
35.34
(4.2)
46.31
56.09
41.60
44.23
43.46
(1.3)
(1) Compound annual growth rate.
(2) Non-IFRS Financial Measures - Excludes other items as follows:
2019 - After-tax charge of $17.2 million representing the Company's proportionate share in Great-West Lifeco Inc.'s (Lifeco) one-time charges.
2018 - After-tax charge of $16.7 million related to restructuring and other and an after-tax charge of $7.8 million representing a premium paid on the early redemption of the
$375 million debentures.
2017 - After-tax charges of $126.8 million and $16.8 million related to restructuring and other charges, an after-tax reduction of $36.8 million in expenses related to the
Company's pension plan, after-tax charges of $14.0 million and $5.1 million related to the proportionate share in Lifeco's one-time charges and restructuring provision,
respectively.
2016 - A favourable change in income tax provision estimates of $34.0 million related to certain tax filings
2015 - An after-tax charge of $24.3 million related to restructuring and other charges.
2014 - An after-tax charge of $59.2 million related to distributions to clients, as well as other costs and an after-tax charge of $13.6 million related to restructuring and other
charges.
2013 - An after-tax charge of $10.6 million related to restructuring and other charges and an after-tax benefit of $9.0 million representing the Company's proportionate share of
net changes in Lifeco's litigation provision.
2012 - A favourable change in income tax provision estimates of $24.4 million related to certain tax filings, an after-tax charge of $5.6 million representing the Company's
proportionate share of net changes in Lifeco's litigation provisions, and a non-cash income tax charge of $6.4 million resulting from increases in Ontario corporate income
tax rates and their effect on the deferred income tax liability related to indefinite life intangible assets arising from prior business acquisitions.
2011 - Net earnings from discontinued operations of $62.6 million and an after-tax benefit of $5.0 million representing the Company's proportionate share of net changes in
Lifeco's litigation provisions.
2010 - Net earnings from discontinued operations of $1.8 million, a non-recurring after-tax charge of $21.8 million related to the transition to IFRS, and an after-tax charge of
$8.2 million representing the Company's proportionate share of Lifeco's incremental litigation provision.
132
IGM FINANCIAL INC. ANNUAL REPORT 2019 | TEN YEAR REVIEW
TEN YEAR REVIEW
STATISTICAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31
($ millions)
2019
2018
2017
2016
2015
CAGR(1)
5 YEAR
%
2014
2013
2012
2011
CAGR(1)
10 YEAR
%
2010
Investment funds
IG Wealth Management (2)
Mutual fund sales
Mutual fund redemption rate (%)
8,723
-total
-long-term funds
10.9
10.3
Net sales (redemptions)
(1,089)
Assets under management 93,161
Mackenzie
Mutual fund sales
Mutual fund redemption rate (%)
9,886
9,075
9,693
7,760
7,890
3.2
7,461
6,668
5,778
6,021
5,748
5.6
9.8
9.2
485
83,137
9.2
8.4
1,944
88,008
9.6
8.8
366
81,242
9.4
8.7
754
74,897
N/M
4.9
9.5
8.7
651
73,459
10.2
9.4
159
68,255
11.0
10.0
(724)
60,595
9.8
8.8
39
57,735
9.4
8.3
253
61,785
N/M
4.9
9,951
9,124
6,939
6,965
6.9
7,070
6,700
5,490
5,645
5,848
7.3
- total
- long-term funds
Net sales (redemptions)
Assets under management
16.1
15.6
1,416
17.6
17.1
1,382
15.2
14.8
1,780
15.6
15.0
(555)
16.6
16.2
(1,258) N/M
15.1
14.6
(209)
16.7
16.0
(487)
18.7
17.9
(1,974)
16.9
15.8
(1,548)
18.1
16.5
(1,519) N/M
Mutual fund
ETF
Investment fund (3)
60,838
4,749
63,991
53,407
2,949
55,508
55,615
1,296
56,543
51,314
113
51,427
48,445
4.5
48,782
46,024
40,394
39,141
43,452
4.1
48,445
5.6
48,782
46,024
40,394
39,141
43,452
4.6
Investment Planning Counsel (2)
Mutual fund sales
Mutual fund redemption rate (%)
694
960
889
955
741
0.3
682
485
401
543
499
7.3
- total
- long-term funds
Net sales (redemptions)
Assets under management
19.5
19.3
(272)
5,391
19.4
19.2
(18)
5,125
17.0
16.7
79
5,377
15.9
15.7
293
4,908
13.8
13.6
177
4,452
N/M
7.0
12.9
12.6
207
3,850
13.8
13.2
52
3,406
14.7
14.3
(24)
2,950
11.1
10.9
225
2,811
12.7
12.0
204
2,688
N/M
9.7
161,763 143,282 149,818 137,575 127,791
5.1 126,039 117,649 103,915
99,685 107,925
4.9
Total investment fund assets
under management (4)
Total assets under
management (4)
3.3
5.9
166,808
149,066
156,513
142,688
134,398
3.3
141,919
131,777
120,694
118,713
129,484
Corporate assets
15,391
15,609
16,499
15,625
14,831
1.3
14,417
12,880
11,962
11,144
12,237
Consultants -
IG Wealth Management
3,381
3,711
4,146
4,947
5,320
(8.1)
5,145
4,673
4,518
4,608
4,686
(3.1)
(1) Compound annual growth rate.
(2) IG Wealth Management and Investment Planning Counsel total assets under management and net sales include separately managed accounts.
(3) Excludes Mackenzie mutual fund investments in ETFs.
(4) Adjusted for inter-segment assets.
133
IGM FINANCIAL INC. ANNUAL REPORT 2019 | TEN YEAR REVIEW
SHAREHOLDER INFORMATION
HEAD OFFICE
447 Portage Avenue
Winnipeg, Manitoba R3B 3H5
Telephone: 204 943 0361
Fax: 204 947 1659
AUDITOR
Deloitte llp
TRANSFER AGENT AND REGISTRAR
Computershare Investor Services Inc.
Telephone: 800 564 6253
service@computershare.com
600, 530-8th Avenue S.W.
Calgary, Alberta T2P 3S8
1500 Robert-Bourassa Boulevard, 7th Floor
Montreal, Quebec H3A 3S8
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
510 Burrard Street, 2nd Floor
Vancouver, British Columbia V6C 3B9
STOCK EXCHANGE LISTING
Toronto Stock Exchange
Shares of IGM Financial Inc. are listed
on the Toronto Stock Exchange under
the following listings:
Common Shares: IGM
SHAREHOLDER INFORMATION
For additional financial information
about the Company, please contact:
Investor Relations
investor.relations@igmfinancial.com
For copies of the annual or quarterly
reports, please contact the Corporate
Secretary’s office at 204 956 8328 or visit
our website at www.igmfinancial.com
ANNUAL MEETING
The Annual Meeting of IGM Financial Inc.
will be held at
The Metropolitan Entertainment Centre,
281 Donald Street,
Winnipeg, Manitoba, Canada
on Friday, May 8, 2020
at 11:00 a.m. Central Time.
WEBSITES
Visit our websites at
www.igmfinancial.com
www.investorsgroup.com
www.mackenzieinvestments.com
www.ipcc.ca
™ Trademarks, including IG Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations, except as noted below.
Investment Planning Counsel’s trademark is owned by Investment Planning Counsel Inc. and used with permission.
Mackenzie Investments’ trademark is owned by Mackenzie Financial Corporation and used with permission.
†
Banking products and services are distributed through Solutions Banking™. Solutions Banking products and services are provided by National Bank of Canada. Solutions Banking
is a trademark of Power Financial Corporation. National Bank of Canada is a licensed user of these trademarks. Morningstar and the Morningstar Ratings are trademarks of
Morningstar Inc. Quadrus Group of Funds is a trademark of Quadrus Investment Services Ltd.
CFP® and Certified Financial Planner® are certification trademarks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council
is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB.
“IGM Financial Inc. 2019 Annual Report” © Copyright IGM Financial Inc. 2020
A MEMBER OF THE POWER CORPORATION GROUP OF COMPANIES
134
IGM FINANCIAL INC. ANNUAL REPORT 2019 | SHAREHOLDER INFORMATION