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Bettering
the lives of
Canadians
TSX: IGM
Contents
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91
Our purpose
2021 highlights
Letter to
shareholders
Corporate
structure
Wealth
management
highlights
Asset
management
highlights
Strategic
investments
highlights
Our people
Our commitment
to sustainability
Management’s
discussion and
analysis
Consolidated
financial
statements
Readers are referred to the
caution regarding Forward-Looking
Statements and Non-IFRS Financial
Measures and Additional IFRS
Measures on page 18 of this report.
Unless otherwise noted, all figures
mentioned in this report are in
Canadian dollars and are as of, or for
the year ending, December 31, 2021.
2
From our IGM family to yours
IGM maintains the
unique strategies of our
individual businesses
while maximizing
the value of shared
knowledge and resources.
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 globally.
IGM’s family of companies provide a broad range of financial
planning and investment management 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,
private alternative markets and China
• Benefit from financial strength and scale and strong
governance as a member of the Power Corporation
group of companies
• Long-term view to shareholder value creation and
demonstrated commitment to corporate sustainability
Our purpose
IGM Financial’s family of companies are
committed to bettering the lives of Canadians,
by better planning and managing their money.
We are helping people better manage their money so they can live the life they deserve.
We strive to do this through the pursuit of:
Better experiences
Better solutions
We bring together the best of both worlds for our
people – the accountability and agility of a small
player with the scale and impact of a big firm –
while offering more room to grow, in a diverse
and inclusive work environment.
We believe in improving the financial well-being of
Canadians by making comprehensive investment
and wealth planning solutions more accessible;
built on lasting relationships, not transactions.
Better communities
Better ownership
We leverage our local connectivity coast-to-coast
and our global voice to better our communities,
the environment, and the world around us, creating
a collective impact that goes well beyond our
company walls.
As part of the Power Corporation group of
companies, we balance short-term needs with
a long-term perspective that is focused on
creating enduring value and a sustainable future
for generations to come.
Building a culture of better, starts with values that make us better
We are
progressive
We think beyond
today and challenge
conventional thinking to
seek new and improved
ways of working.
We are
entrepreneurial
We celebrate initiative
and encourage everyone
to own their actions.
We are
responsible
We hold ourselves to
the highest standards
and do what’s right for
today and sustainable
for our future.
We are
inclusive
We embrace and
nurture our unique
perspectives as an
asset to be cultivated.
3
2021 IGM Financial Annual Report 2021 highlights
Our clients
Our people
Our community
1 million+
IG Wealth Management clients
30,000+
external advisors serving more
than 1 million Mackenzie clients
198,000
Investment Planning Counsel clients
51%
>3,800
employees across the
IGM family of companies
1,761
IG consultants with more than four
years experience and a total network
of 3,278 consultants and associates
28%
of IG consultants and associates are women
of Mackenzie mutual fund assets reside
in funds rated 4 or 5 stars by Morningstar
32%
$4.32 billion
assets under management in
Mackenzie-managed Sustainable
Solutions,1 up from $1.65B in 2020
IGM has ranked at the leadership
level for the past five years for it
climate change disclosure
of IGM senior leadership roles
(VP level and higher) held by women
IGM’s hybrid workplace
of the future
Creating best-in-class workspaces and a
hybrid work model to provide employees
with flexibility and choice, critical to a
inclusive employee experience
IGM ranked top capital markets and asset
management firm in Corporate Knights’ 2022
Global 100 Most Sustainable Corporations
New partnership with National Centre
for Truth and Reconciliation’s Imagine
a Canada K-12 education program
$1.92 million
raised through IGM Caring Company
Campaign, a 23% increase from 2020
IG streaming series takes Indigenous,
newcomer, senior and youth entrepreneurs
on a financial education journey to unloc
their dreams
IG and Mackenzie are committed to
the PRI and require all sub-advisors
to be signatories
IG recognized as one of the
Top 100 Employers in Canada
Mackenzie and IPC among
Greater Toronto’s Top Employers
$670,000
in grants given to charities
across Canada in 2021
We are proud of our
commitments and
achievements in working
towards a sustainable future
1 All investment boutiques at Mackenzie utilize ESG factors in their investment process. $4.32B includes only “sustainable investment” products where
sustainability goals are explicitly outlined in the objectives and strategies of each product by prospectus.
44
From our IGM family to yours
Shareholder highlights
Record high net earnings2
$978.9 million
$4.08 per share
up 28 per cent from 2020
Record high assets under
management & advisement
$277 billion
up 15 per cent from 2020
One year total
shareholder return
38.8%
Dividends declared
$537.8 million
$2.25 per share
per common share
2 available to common shareholders
Strong asset growth
2021 IGM Financial assets under management and advisement ($B)
240
8.7
28.4
277
Opening
Net flows
Investment
returns & other
Ending
Total assets under management and advisement ($B)
Opening
Net flows
Investment
returns & other
IG Wealth Management
Investment Planning Counsel
Mackenzie Investments
IGM Financial consolidated4
103.3
29.3
110.9
240.0
3.7
0.5
5.1
8.7
12.6
3.3
13.13
28.4
3 Investment returns and other includes the change in sub-advised Canada Life assets under management
4 Consolidated results eliminate double counting where business is reflected within multiple segment
Ending
119.6
33.1
129.1
277.1
5
2021 IGM Financial Annual Report Letter to
shareholders
A second year of living with the pandemic continued to
teach us all lessons in building resilience. While it has been
a trying time, many of us are adapting to the new normal and
there’s a growing sense of optimism.
At IGM, our business is about improving the lives of
Canadians through better planning and managing their
money. Our clients are more motivated than ever to
build their resilience against potential uncertainties and
are making the connection between how their money
is managed and how it can improve all aspects of their
lives, today and down the road. They’re also looking for
their investments to have a farther-reaching impact –
to help tackle climate change, to promote equity and
inclusion, and more.
We’re proud to have been there for our clients as they
dealt with the challenges of the pandemic and looked
to the future. Thanks to the outstanding efforts of our
employees and advisors, our clients did very well in
2021 – as did our shareholders – and we have clear
business momentum.
We ended the year with record high assets under
management and advisement (AUM&A) of $277 billion,
up 15 per cent from last year. Net inflows for the year
of $8.7 billion were also a record high, up from
$7.1 billion in 2020. Annual net earnings of $978.9
million or $4.08 per share are an all-time record high
and up 28 per cent from 2020.
Growing momentum
For Canadians, IGM’s ability to demystify the growing
complexity of financial markets – to provide clear
holistic guidance across all aspects of our clients’
financial lives, while also bringing institutional-style
solutions to retail investors – has set us apart in our
sector. As a result, the two big engines that drive our
business, wealth management and asset management,
delivered strong performance and are on clear paths
to continued growth. What’s more, our strategic
investments continued to help us enhance growth
profiles and expand capabilities.
Wealth management
With the pandemic persisting and inflation concerns
rising, it was essential for IG Wealth Management and
Investment Planning Counsel to stay close to clients
and help them navigate evolving market conditions
that directly affected their investment portfolios.
Under Damon Murchison’s leadership, IG Wealth
Management continued to experience strong and
sustainable growth. Client assets under advisement
grew to a record high $119.6 billion, an increase of
16 per cent from 2020, while full year net inflows were a
record high $3.7 billion, up from $795 million last year.
We’re proud to have been there for our clients as they dealt with
the challenges of the pandemic and looked to the future.
6
From our IGM family to yours
its leadership team with Chris Reynolds moving into the
newly created position of Executive Chair, and Blaine
Shewchuk, who was previously IGM’s Chief Strategy and
Corporate Development Officer, assuming the role of
President and Chief Executive Officer.
IPC continued to grow its corporate branch office
model and is well positioned as a generation of
independent advisors look to retire and transition
their business to a strategic partner. Results were
enhanced by IPC’s reputation with its financial advisors;
the firm received stellar ratings – 9.1 out of 10 – in the
Dealers’ Report Card.
To build on the momentum, IG solidified its leadership
team, adding recognized investment and client
experience expertise. IG’s Private Wealth Management
offering continued to support the affluent mass-market
and high-net-worth (HNW) segments. In 2021,
investment product sales to households with more
than $500k invested at IG was up 46 per cent from
2020, with this segment representing 59 per cent of
our sales, up from 54 per cent in 2020.
Client relationships were enhanced with the rollout of
the Conquest financial planning software, which uses
artificial intelligence, advanced analytics and allows
both real-time and remote collaboration to provide
an increasingly sophisticated level of planning. The
technology enables advisors to create and stress test
different scenarios, complex situations and adapt plans
quickly to reflect changes in clients’ lives. Investments
like this no doubt contributed to IG improving its scores
in 26 of the 27 business categories in the Investment
Executive 2021 Dealers’ Report Card, more than any
company in the study. These scores are based on
feedback from advisors about their firms.
The launch of IG’s Climate Action Portfolio was another
significant step forward in our commitment to being a
leader in sustainable initiatives, providing clients with a
new way to support the world’s transition to net zero
carbon emissions and take advantage of the growth
opportunities therein. Launched in late October 2021,
the suite of four diversified managed solutions has
been very well received.
Investment Planning Counsel (IPC) delivered strong
financial results in 2021. With net earnings up 34
per cent and at an all-time record high level, they are
poised for even greater success in the future. To take
advantage of emerging opportunities, IPC strengthened
James O’Sullivan
President and
Chief Executive Officer
IGM Financial
Asset management
Strategic investments
Mackenzie Investments, led by Barry McInerney,
rolled out innovative, forward-thinking products and
solutions, while delivering a second consecutive year
of record results.
Total AUM hit new highs of $210.3 billion, up 14 per
cent from $185.1 billion at the end of 2020. Mackenzie
saw record-high investment fund net sales of $5.4
billion and total net sales (including institutional)
of $5.1 billion in 2021.
Sustainable investing is one of Mackenzie’s main growth
drivers as institutional and retail investors alike look to
achieve better risk-adjusted returns, while contributing
to positive social and environmental change.
The firm continues to build its capabilities and
solutions – and make a name for itself – in this growing
space. Having acquired Greenchip Financial, which
specializes in environmental thematic investing, in late
2020, Mackenzie added the Mackenzie Betterworld
sustainability-focused boutique and launched its two
inaugural funds in 2021.
Alternative investments are expected to account for
about 50 per cent of the global asset management
revenue pool by 2024.1 In an effort to make this asset
class more accessible to retail investors, Mackenzie
launched the Mackenzie Northleaf Private Credit Fund
and the Mackenzie Northleaf Private Infrastructure
Fund in 2021. In January 2022 we launched an industry-
first interval fund, which gives retail investors a new way
to access illiquid private credit investment strategies.
Exchange-traded funds (ETFs) continue to be a core
part of Mackenzie’s business and grew by nearly 50 per
cent in one year. What’s more, the firm continued to
roll out industry-leading innovations including two first-
of-their-kind-in-Canada funds that expand Canadians’
access to growth opportunities in China, and a
balanced fund with cryptocurrency exposure.
1 BCG Global Asset Management 2020
88
From our IGM family to yours
Our strategic investments give us access to new sectors,
enhance the capabilities of our core business operations
and, as we’re finding, open doors to opportunities across
the various companies. These investments include,
for example, Wealthsimple, where we are the largest
shareholder, and Portag3 Ventures, a global fintech-
focused venture capital investor. Following an equity
fundraising in 2021, IGM’s investment in Wealthsimple
is valued at $1.15 billion which, including distributions
of $294 million, represents an approximate eight-fold
increase in the value of IGM’s cumulative investment of
$187 million.
Solidifying our position in the Chinese asset
management industry – one of the largest and fastest
growing markets in the world – we announced an
agreement in January 2022 to increase our investment
in China Asset Management Co. Ltd (ChinaAMC).
By acquiring Power Corporation of Canada’s 13.9
per cent equity interest in the company, we’ll have
a 27.8 per cent stake in one of the top three asset
managers in China. We see our continued partnership
as the best opportunity to accelerate growth and
diversify our business.
Accelerating change
for the better
While technological, social and
environmental changes were already
reshaping the way the world lives and
works, the pandemic has accelerated
many of these trends.
IGM was particularly well positioned to succeed over
the past two years thanks to an ongoing strategic
business initiative to modernize our employee,
consultant, advisor and client experience. When
COVID-19 emerged, our digital transformation enabled
us to move quickly to an online business model. Since
then, we have continued to adopt sophisticated digital
We continued to
promote diversity,
equity and inclusion in
our workplace and our
communities.
tools and new processes working with industry leaders
such as IBM and Google, and a new partner, CapIntel,
whose digital application will improve IG advisors’
ability to deliver advice and tailored know-your-product
proposals to clients quickly, simply and transparently.
In our workplace, we increased our focus on health
and wellness, leadership communications and regularly
surveying our people to ensure we were meeting
their needs in a timely manner. Many of the programs
and practices introduced in 2020 have since become
the new normal at IGM. We were most pleased that
our attention to our people was recognized, both
by them and externally – all three IGM companies
were ranked as Top 100 Employers, nationally for
IG Wealth Management and in the Greater Toronto
Area for Mackenzie and IPC.
Social issues have taken centre stage in the last
couple of years – in part because of the pandemic,
but also because of the troubling instances of racial
injustice that have come to light. We recognize our
responsibility to meet the moment. In 2021, IG Wealth
Management and Power Corporation announced a
partnership with the National Centre for Truth and
Reconciliation in an effort to be part of the Indigenous
reconciliation process. This was also the second
year of our IG Empower Your Tomorrow Indigenous
Commitment, which will deliver $5 million over five
years to Indigenous communities across Canada in
the form of financial empowerment tools, resources
and partnerships.
More broadly, we continued to promote diversity,
equity and inclusion in our workplace and our
communities, through performance targets, hiring
initiatives, training and community investments.
Mackenzie Together is a prime example of our
efforts to build a more equitable economy and a
fairer world; this community platform is dedicated
to creating a more inclusive investment world by
advancing women through education, financial
security and career opportunities.
While social issues demanded attention in 2021, the
growing threat posed by climate change could not
be ignored. Canadians witnessed the real impact of
climate change in the extreme weather events in British
Columbia and around the world. In November we
released our first Climate Position Statement, declaring
our support for a stronger global response to climate
change. Through our wealth and asset management
businesses, we aspire to play a significant role in the
transition to a low-carbon economy. Our position
statement outlines our three climate commitments,
which are to invest in a greener, climate-resilient
economy, to collaborate and engage to help shape
the global transition, and to demonstrate alignment
through corporate actions such as achieving carbon
neutrality in our own operations by 2022.
9
2021 IGM Financial Annual Report 2022 and beyond
Everything we do today is designed to create better
tomorrows, whether it be securing the financial future
of our clients, advancing careers for our employees and
advisors, contributing to the communities where we
live and work, or using our position as a large financial
services company to fight climate change.
That’s why we were so proud to be recognized as one
of Corporate Knights’ Global 100 Most Sustainable
Corporations for the third consecutive year. IGM
was ranked the top-rated capital markets and asset
management company globally and the top financial
services firm in North America. The study evaluates the
sustainability performance of more than 6,900 publicly
traded companies worldwide.
Looking ahead, our primary growth strategy will be
to continue attracting great employees, advisors and
clients. But with surplus capital and significant senior
debt capacity available, the leadership team is also
actively looking for M&A options that are strategically
aligned, solid businesses – focusing on companies
that would help us advance our HNW and ultra HNW
strategies in Canada or grow our presence in the global
asset management space.
Everything we do today is designed
to create better tomorrows.
We’re excited by the prospect of 2022 being the year
that the world moves past the pandemic. We believe
we have the right strategy, the right team and the
right culture to better the lives of Canadians and to
help us achieve higher and more sustainable returns
for our shareholders. Thank you for your continued
confidence in us.
On behalf of the Board of Directors,
James O’Sullivan
R. Jeffrey Orr
President and
Chief Executive Officer
IGM Financial
Chair of the Board
IGM Financial
R. Jeffrey Orr
Chair of the Board
IGM Financial
We believe we have the
right strategy, team and
culture to better the lives
of Canadians and to help
us achieve higher and more
sustainable returns for our
shareholders.
10
From our IGM family to yours
Corporate structure
Strength and scale as part of Power Corporation group of companies.
Power Corporation is an international management and holding
company that focuses on financial services in North America,
Europe and Asia.
Wealth management
Asset management
Strategic investments
Our business is about
improving the lives of
Canadians through
better planning and
managing their money.
2021 IGM Financial Annual Report 11
Wealth management
IGM Financial is committed to improving
the financial well-being of Canadians.
IG Wealth Management and Investment Planning Counsel continued to focus on delivering holistic financial planning
and promoting a culture that places the financial well-being of Canadians at the centre of everything we do.
Damon Murchison
President and
Chief Executive Officer
IG Wealth Management
$119.6 billion
$13.4 billion
Record high total assets
under advisement
Record high gross
client inflow
$3.7 billion
Record high net
client inflow
Won 5 FundGrade®
A+ Awards for Performance
New IG Climate Action Portfolios
aligned with net zero by 2050
76%
mutual fund
assets rated
3 stars or better
by Morningstar
Continued support for
The Alzheimer Society
of Canada with
$5.2 million
raised nationally by more than
9,500 virtual walkers and 38,000
donors through the IG Wealth
Management Walk for Alzheimer’s
Blaine Shewchuk
President and
Chief Executive Officer
Investment Planning Counsel
$33.1 billion
Record high total assets
under advisement
$5.6 billion
Record high total assets
under management
Record high net
client inflows of
$0.9 billion
Discretionary Portfolio Management
platform launched for PM Advisors,
reaching $1.1 billion
$38,500
raised to support both local
and international initiatives
1212
From our IGM family to yours
Asset management
IGM Financial is committed to providing innovative,
high-quality investments.
Mackenzie Investments continued to help advisors and investors build strong portfolios that meet today’s needs
while anticipating future economic and capital market conditions.
Barry McInerney
President and
Chief Executive Officer
Mackenzie Investments
$210.3 billion
Record high total assets
under management*
$5.4 billion
$12.0 billion
Record high investment
fund net sales
Record high mutual
fund gross sales
Investment management team
earned 8 Refinitiv Lipper Awards
Crowned Mont Ste-Marie ski
community the first winner of
annual Mackenzie Top Peak
Won 13 FundGrade®
A+ Awards for outstanding
investment performance
Mackenzie Greenchip Global Environmental
All Cap Fund
Rated five star and approaching
$2 billion
in assets
Ranked 6th
largest ETF
provider in Canada
Strategic investments
IGM Financial’s portfolio of strategic investments had another exceptional year, deriving value from previous
investments and integrating them in ways that generate new benefits to investors and clients.
ChinaAMC is one of the
leading asset managers
in China
Global private
markets solutions
provider
& OTHER
Fintech investments provide
innovative capabilities and
access to markets with
significant growth potential
Publicly traded,
international financial
services holding
company
13.9% ownership
interest
56% economic
interest
$1.3 billion fair
value
4% ownership
interest
* Includes $81.2 billion in advisory fee mandates to wealth management.
13
2021 IGM Financial Annual Report Our people
We aim to build a strong, inclusive and progressive culture, where
people want to grow their careers and do their best for clients,
communities and one another.
For the second year in a row, the vast majority of our employees worked from home, and we thank our leaders
and their teams for being open and innovative in how they approached work, stayed connected and remained
productive. Throughout the pandemic, employee feedback has led to the development of helpful resources and
wellness initiatives, and the decision to adopt a hybrid work model in the future.
Emotional
Financial
Social
Physical
Wellness at work
Caring for our peoples’ emotional, financial, physical
and social wellness was a strong focus for us again
in 2021. We’ve adapted our wellness programs to
fit our work-from-home world with fitness sessions,
counselling services, financial seminars and social
activities delivered online. Our focus on wellness
was a big reason why our operating companies
were recognized as top employers in Canada and
the Greater Toronto Area.
Survey results
In our 2021 engagement survey, employees told
us they’re proud to work for IGM:
84%
see their people
leader as effective
83%
feel they get the training
needed to do their job
85%
are proud to
work for IGM
82%
would gladly recommend
IGM as a place to work
79%
overall engagement score, higher
than Canadian and global benchmarks
IGM employees lend a hand to prepare Trails
Youth Initiatives’ camp for its youth participants.
1414
From our IGM family to yours
Diversity, equity and inclusion
We are committed to being a leading voice for advancing
DE&I across the financial services industry. More than
150 people are involved in our executive and business
councils, DE&I Centre of Excellence and business resource
groups representing women, Black, 2SLGBTQIA+ and
Indigenous communities – helping us execute our
three-pillar strategy. Together, we held events and
observances to increase awareness and foster learning and
engagement. In addition, our people leaders are required
to develop plans that advance DE&I within their teams.
70%
of our people completed inclusive
behaviours training
Broadened our recruiting strategy to source,
attract and hire a more diverse workforce
Addressed unconscious bias in the recruitment process
Implemented a targeted approach for recruiting
more female financial advisors
Increased our connections with community groups,
including new partnerships with Onyx Initiative and
Accelerate Her Future™
Inclusive workplace
Nurture a culture of allyship
and inclusive leadership
Diverse talent
Attract, develop, retain
and accelerate
Clients and brand
Leverage DE&I in
the marketplace
IGM’s Institutional Sales and Service team
support Breaking Down Barriers in Collingwood.
IGM employees prepare holiday packages
for Hospice Toronto’s Young Carers Program.
15
2021 IGM Financial Annual Report Our commitment
to sustainability
We are motivated by the role we can play
in building a better tomorrow for Canadians.
Our sustainability strategy keeps us focused
on what matters most to our business and our
stakeholders, and seeks to accelerate positive
change in areas where we – as wealth and asset
managers – can make the greatest impact.
Strategic priorities
Advancing
sustainable
investing
Building
financial
confidence
Accelerating diversity,
equity and inclusion
(DE&I) in finance
Everything we do
today is designed
to create better
tomorrows.
In 2021 we declared our support for a stronger global response to climate
change, and our commitment to climate action in three areas:
We will invest toward
a greener, climate-
resilient economy
We will collaborate and
engage to help shape the
global transition
We will demonstrate
alignment through our
corporate actions
Using our investment processes
and products to manage climate
risks and create solutions to
climate issues.
Bringing investment advice and
solutions to clients, helping
companies adapt to a net-zero
economy, and participating in
industry and policy advancements.
Holding ourselves to the high
standards we expect from the
companies we invest in and
achieving carbon neutrality in our
corporate offices and travel by 2022.
1616
From our IGM family to yours
Financial section
MANAGEMENT’S DISCUSSION AND ANALYSIS
IGM Financial Inc.
Summary of Consolidated Operating Results
Wealth Management
Review of the Business
Review of Segment Operating Results
Asset Management
Review of the Business
Review of Segment Operating Results
Strategic Investments and Other
Review of Segment Operating Results
IGM Financial Inc.
Consolidated Financial Position
Consolidated Liquidity and Capital Resources
Risk Management
The Financial Services Environment
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
19
33
42
47
56
60
62
66
70
85
87
89
89
90
92
93
96
101
136
138
| 17
2021 IGM Financial Inc. Annual Report 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, 2021 and 2020 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, 2021 is as of February 10, 2022.
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, 2021, Power Corporation of Canada (Power) and Great-West Lifeco Inc. (Lifeco), a subsidiary of Power, held
directly or indirectly 61.7% and 3.8%, 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
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), “adjusted earnings before interest and taxes”
(Adjusted 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, Adjusted EBIT, EBITDA before
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, outbreaks of disease or pandemics (such as COVID-19),
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.
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. EBITDA before sales commissions excludes all
sales commissions. 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.
18 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis IGM Financial Inc.
Summary of Consolidated Operating Results
IGM Financial Inc. (TSX:IGM) is a leading wealth and asset
per share for the comparative period in 2020, an increase of
management company supporting financial advisors and
15.6% in earnings per share.
the clients they serve in Canada, and institutional investors
throughout North America, Europe and Asia. The Company
operates through a number of operating subsidiaries and also
holds a number of strategic investments that provide benefits
to these subsidiaries while furthering the Company’s growth
prospects. The Company’s principle operating subsidiaries
are wealth manager IG Wealth Management (IG) and asset
manager Mackenzie Investments (Mackenzie). The Company
also operates through wealth manager Investment Planning
Counsel (IPC) and has strategic investments in Great-West
Lifeco Inc. (Lifeco), China Asset Management Co., Ltd.
(ChinaAMC), Northleaf Capital Group Ltd. (Northleaf), and
Wealthsimple Financial Corp. (Wealthsimple) as described
more fully later in this MD&A.
In the third quarter of 2020, the Company realigned its financial
reporting and related disclosures to reflect its current reportable
segments of Wealth Management, Asset Management and
Strategic Investments and Other. In the first quarter of 2021, the
Company further expanded its reportable segment disclosures
to report to Net Earnings. These segments are described later
in this MD&A.
IGM Financial’s assets under management and advisement
were $277.1 billion as at December 31, 2021, the highest level
in the history of the Company, compared with $240.0 billion
at December 31, 2020, as detailed in Table 6. Average total
assets under management and advisement for the year
ended December 31, 2021 were $259.7 billion compared to
$191.2 billion in 2020. Average total assets under management
and advisement for the fourth quarter of 2021 were $272.0 billion
compared to $202.2 billion in the fourth quarter of 2020.
Total assets under management were $245.3 billion at
December 31, 2021, the highest level in the history of the
Company, compared with $214.0 billion at December 31,
2020. Average total assets under management for the year
ended December 31, 2021 were $231.4 billion compared to
$168.5 billion in 2020. Average total assets under management
for the fourth quarter of 2021 were $241.9 billion compared to
$177.6 billion in the fourth quarter of 2020.
Net earnings available to common shareholders for the
year ended December 31, 2021 were at a record high of
$978.9 million or $4.08 per share compared to net earnings
available to common shareholders of $764.4 million or $3.21
per share in 2020, representing an increase of 27.1% in earnings
per share. Net earnings available to common shareholders
for the three months ended December 31, 2021 were
$268.5 million or $1.11 per share compared to net earnings
available to common shareholders of $229.1 million or $0.96
Adjusted net earnings available to common shareholders, excluding
other items outlined below, for the year ended December 31,
2021 were at a record high of $971.2 million or $4.05 per
share compared to adjusted net earnings available to common
shareholders of $762.9 million or $3.20 per share in 2020,
representing an increase of 26.6% in earnings per share. Adjusted
net earnings available to common shareholders, excluding other
items outlined below, for the three months ended December 31,
2021 were $260.8 million or $1.08 per share compared to adjusted
net earnings available to common shareholders of $204.3 million or
$0.86 per share for the comparative period in 2020, an increase of
25.6% in earnings per share.
Other items for the quarter ended December 31, 2021 consisted
of additional consideration receivable of $10.6 million ($7.7 million
after-tax) related to the sale of the Company’s equity interest in
Personal Capital Corporation (Personal Capital) in 2020.
Adjusted Net Earnings and Adjusted Net Earnings per Share
For the financial year ($ millions, except per share amounts)
Adjusted net earnings and adjusted net earnings per share excluded the
following after-tax amounts:
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.
2020 – the gain on sale of Personal Capital, gain on sale of Quadrus Group
of Funds net of acqusition costs, the Company’s proportionate
share of associate’s adjustments and restructuring and other.
2021 – additional consideration receivable related to the sale of Personal
Capital in 2020.
| 19
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Other items for the year ended December 31, 2020 consisted of:
CHINA ASSET MANAGEMENT CO. LTD. (ChinaAMC)
• A gain on the sale of the Quadrus Group of Funds net of
acquisition costs, of $21.4 million after-tax ($25.2 million
pre-tax), recorded in the fourth quarter.
• The Company’s proportionate share in Great-West Lifeco
Inc.’s after-tax adjustments related to the revaluation of a
deferred tax asset less certain restructuring and transaction
costs, of $3.4 million, recorded in the fourth quarter.
• A gain on the sale of the investment in Personal Capital of
$31.4 million after-tax ($37.2 million pre-tax), recorded in the
third quarter.
On January 5, 2022, the Company entered into an agreement
to acquire an additional 13.9% interest in ChinaAMC for cash
consideration of $1.15 billion from Power Corporation of
Canada (Power), which will increase the Company’s equity
interest in ChinaAMC from 13.9% to 27.8%. To partially fund the
transaction, IGM Financial will sell 15,200,662 common shares
of Lifeco to Power for cash consideration of $575 million, which
will reduce the Company’s equity interest in Lifeco from 4% to
2.4%. These transactions are expected to close in the first half of
2022, subject to customary closing conditions, including Chinese
regulatory approvals. The sale of Lifeco is conditional on IGM
• Restructuring and other charges of $54.7 million after-tax
Financial’s purchase of the ChinaAMC shares.
($74.5 million pre-tax), recorded in the third quarter, resulting
from our ongoing multi-year transformation initiatives and
Benefits of the ChinaAMC acquisition include:
efforts to enhance our operational effectiveness and also
from the acquisition of GLC Asset Management Group Ltd.
• Enhancing participation in the rapidly growing Chinese asset
management industry, through a meaningful ownership
(GLC) and other changes to our investment management
position in one of the leading asset managers in China.
teams. This included activities to improve efficiency and
capabilities by leveraging the scale and expertise of scaled
providers through outsourcing partnerships, as well as process
automation initiatives relating to key internal processes. The
Company also incurred severance and other charges relating
to the acquisition of GLC as well as other personnel changes.
• Reinforcing relationships and business opportunities between
Mackenzie and ChinaAMC as Mackenzie builds global, fully
diversified and differentiated solutions for its clients and
strengthens distribution opportunities in China.
• Simplifying the IGM Financial and Power organization
structure by consolidating the ChinaAMC ownership position
Shareholders’ equity was $6.5 billion at December 31, 2021,
at Mackenzie.
compared to $5.0 billion at December 31, 2020. Return on
• Providing a financially attractive outcome that is expected
average common equity based on adjusted net earnings for
to be accretive to IGM Financial’s earnings in the first year
the year ended December 31, 2021 was 16.4%, compared with
of increased ownership.
16.1% for the comparative period in 2020. Excluding the impact
of fair value through other comprehensive income investments
COVID-19
net of tax, return on average common equity for the year
ended December 31, 2021 is 19.0%. The quarterly dividend per
common share was 56.25 cents in 2021, unchanged from the
end of 2020.
2021 DEVELOPMENTS
WEALTHSIMPLE FINANCIAL CORP. (WEALTHSIMPLE)
Governments worldwide have enacted emergency measures to
combat the spread of a novel strain of coronavirus (COVID-19).
These measures, which include the implementation of travel
bans, closing of non-essential businesses, self-imposed
quarantine periods and social distancing, have caused significant
volatility in global equity markets and material disruption to
global businesses. Governments and central banks have reacted
with significant monetary and fiscal interventions designed to
Wealthsimple is an online investment manager that provides
stabilize economic conditions.
financial investment guidance.
The distribution of vaccines has resulted in the easing of
On May 3, 2021, Wealthsimple announced a $750 million equity
restrictions in many economies and has contributed to strong
fundraising, valuing IGM Financial’s investment in Wealthsimple
gains in certain economic sectors during 2021. However,
at $1,448 million. As part of the transaction, IGM Financial
there is uncertainty regarding the effectiveness of vaccines
disposed of a portion of its investment for proceeds of
against new variants of the virus, and this contributes towards
$294 million ($258 million after-tax).
The Company continues to be the largest shareholder in
Wealthsimple with an interest of 23% and fair value of
$1,153 million.
uncertainty of the timing of a full economic recovery. As a result,
it is not possible to reliably estimate the length and severity
of these developments and the impact on the financial results
and condition of the Company and its operating subsidiaries in
future periods.
20 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis COVID-19 has the current and ongoing potential to expose
MARKET OVERVIEW
the Company to a number of risks inherent in our business
activities. These include: liquidity risk; credit risk; business risk
and risks related to assets under management and advisement;
operational risk; governance, oversight and strategic risk;
regulatory developments; and people risk. These risks are
Returns in financial markets have remained strong in 2021 with
a continued upward trend since the first quarter of 2020:
• The S&P TSX Composite total return index increased by 6.5%
in the fourth quarter of 2021 and 25.1% for the year.
discussed in further detail in the Risk Management section
• U.S. equity markets, as measured by the S&P 500 total return
of this MD&A.
index, increased by 11.0% in the fourth quarter of 2021 and
28.7% for the year.
TABLE 1: RECONCILIATION OF NON-IFRS FINANCIAL MEASURES
($ millions)
Adjusted net earnings available to common
shareholders – Non-IFRS measure
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of
acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
THREE MONTHS ENDED
TWELVE MONTHS ENDED
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
$
260.8
$
270.8
$
204.3
$
971.2
$
762.9
7.7
–
–
–
–
–
–
–
–
21.4
3.4
–
7.7
–
–
–
31.4
21.4
3.4
(54.7)
Net earnings available to common shareholders – IFRS
$
268.5
$
270.8
$
229.1
$
978.9
$
764.4
Adjusted net earnings per share(1) available to
common shareholders – Non-IFRS measure
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of
acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
Net earnings per share(1) available to
common shareholders – IFRS
$
1.08
0.03
–
–
–
$
1.13
$
0.86
$
–
–
–
–
–
0.09
0.01
–
4.05
0.03
$
3.20
0.13
–
–
–
0.09
0.02
(0.23)
$
1.11
$
1.13
$
0.96
$
4.08
$
3.21
Average outstanding shares – Diluted (thousands)
241,443
240,575
238,308
240,019
238,307
EBITDA before sales commissions – Non-IFRS measure
$
411.8
$
422.3
$
326.4
$ 1,547.0
$ 1,226.4
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
Adjusted earnings before interest and
income taxes – Non-IFRS measure
Interest expense(2)
Adjusted earnings before income taxes –
Non-IFRS measure
Income taxes
Adjusted net earnings – Non-IFRS measure
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of
acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
(42.9)
368.9
39.3
(16.2)
(25.4)
366.6
28.6
338.0
76.5
261.5
7.7
–
–
–
(37.8)
384.5
33.8
(14.8)
(24.9)
378.6
28.7
349.9
78.4
271.5
–
–
–
–
(41.3)
285.1
36.1
(10.6)
(21.5)
289.1
27.9
261.2
56.7
204.5
–
21.4
3.4
–
(170.5)
(139.5)
1,376.5
1,086.9
151.0
(56.7)
(99.8)
117.6
(36.4)
(83.5)
1,371.0
1,084.6
113.9
1,257.1
283.9
973.2
7.7
–
–
–
110.6
974.0
210.9
763.1
31.4
21.4
3.4
(54.7)
Net earnings – IFRS
$
269.2
$
271.5
$
229.3
$
980.9
$
764.6
(1) Diluted earnings per share.
(2) Interest expense includes interest on long-term debt and leases.
| 21
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
• European equity markets, as measured by the MSCI Europe,
planning and related services to Canadian households. This
net total return index increased by 7.7% in the fourth quarter
segment includes the activities of IG Wealth Management
of 2021 and 25.1% for the year.
• Asian equity markets, as measured by the MSCI AC Asia
Pacific net total return index, decreased by 1.8% in the fourth
quarter of 2021 and decreased by 1.5% for the year.
• The FTSE TMX Canada Universe Bond total return Index
increased by 1.5% in the fourth quarter of 2021 and
decreased by 2.5% for the year.
• Our clients experienced an average investment return of
4.3% in the fourth quarter of 2021 and 11.9% for the year.
and Investment Planning Counsel. These firms are retail
distribution organizations who serve Canadian households
through their securities dealers, mutual fund dealers and
other subsidiaries licensed to distribute financial products
and services. A majority of the revenues of this segment
are derived from providing financial advice and distributing
financial products and services to Canadian households. This
segment also includes the investment management activities
of these organizations, including mutual fund management
and discretionary portfolio management services.
IGM Financial’s assets under management and advisement
• Asset Management – reflects the activities of operating
increased by 15.5% from $240.0 billion at December 31, 2020
to $277.1 billion at December 31, 2021. See Table 29 for the
composition of IGM Financial’s assets under management by
asset class.
REPORTING CHANGES
Effective January 1, 2021, the Company expanded its reportable
segment disclosures to report to Net earnings, whereas
previously it reported to Earnings before interest and taxes.
These changes further build on the disclosure enhancements
announced by the Company in the third quarter of 2020, which
were introduced to improve transparency into key drivers of
each business line and help stakeholders understand and assess
components of value. The Company’s reportable segments
are Wealth Management, Asset Management and Strategic
Investments & Other.
Prior period comparative information has been restated to
reflect these changes.
These changes have no impact on the reported earnings of
the Company.
These changes are intended to:
companies primarily focused on providing investment
management services, and represents the operations of
Mackenzie Investments. Investment management services are
provided to a suite of investment funds that are distributed
through third party dealers and financial advisors, and through
institutional advisory mandates to financial institutions,
pensions and other institutional investors.
• Strategic Investments and Other – primarily represents the
key strategic investments made by the Company, including
China Asset Management Co., Ltd., Great-West Lifeco Inc.,
Northleaf Capital Group Ltd., Wealthsimple Financial Corp.,
and Portag3 Ventures LPs, as well as unallocated capital.
Investments are classified in this segment (as opposed to the
Wealth Management or Asset Management segment) when
warranted due to different market segments, growth profiles
or other unique characteristics.
Assets under Management and Advisement (AUM&A)
represents the consolidated AUM and AUA of IGM Financial. In
the Wealth Management segment, AUM is a component part
of AUA. All instances where the asset management segment
is providing investment management services or distributing
its products through the Wealth Management segment are
eliminated in our reporting such that there is no double-
• Better reflect the business performance of underlying segments
counting of the same client savings held at IGM Financial’s
• Reflect the capacity for financial leverage within the segments
operating companies.
• Encourage sum-of-parts approach to value assessment
To calculate segment Net earnings, debt and interest is allocated
to each segment based on management’s assessment of: i)
capacity to service the debt, and ii) where the debt is being
serviced. Income tax expense is calculated based on revenue
and expenses included in each segment.
REPORTABLE SEGMENTS
The segments as described below reflect the Company’s internal
financial reporting and performance measurement (Tables 2 to 4):
• Wealth Management – reflects the activities of operating
companies that are principally focused on providing financial
Assets under Advisement (AUA) are the key driver of the
Wealth Management segment. AUA are savings and investment
products held within client accounts of our Wealth Management
segment operating companies.
Assets under Management (AUM) are the key driver of the
Asset Management segment. AUM are a secondary driver
of revenues and expenses within the Wealth Management
segment in relation to its investment management activities.
AUM are client assets where we provide investment
management services, and include investment funds where
we are the fund manager, investment advisory mandates
to institutions, and other client accounts where we have
discretionary portfolio management responsibilities.
22 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis FINANCIAL PRESENTATION
The financial presentation includes revenues and expenses to
Income taxes are reported in each segment. IGM Financial
consolidated changes in the effective tax rates are detailed
align with the key drivers of business activity and to reflect our
in Table 5.
emphasis on business growth and operational efficiency. The
categories are as follows:
• Wealth management revenue – revenues earned by
the Wealth Management segment for providing financial
planning, investment advisory and related financial services.
Revenues include financial advisory fees, investment
management and related administration fees, distribution
revenue associated with insurance and banking products and
Tax planning may result in the Company recording lower
levels of income taxes. Management monitors the status of its
income tax filings and regularly assesses the overall adequacy
of its provision for income taxes and, as a result, income taxes
recorded in prior years may be adjusted in the current year. The
effect of changes in management’s best estimates reported in
adjusted net earnings is reflected in Other, which also includes,
but is not limited to, the effect of lower effective income tax
services, and revenue relating to mortgage lending activities.
rates on foreign operations.
• Asset management revenue – revenues earned by the Asset
Management segment related to investment management
advisory and administrative services.
• Dealer compensation – asset-based and sales-based
Other items, as reflected in Tables 2, 3 and 4, 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
compensation paid to dealers by the Asset Management
meaningful and are not allocated to segments. Other items
segment.
• Advisory and business development expenses – expenses
incurred on activities directly associated with providing
financial planning services to clients of the Wealth
Management segment. Expenses include compensation,
recognition and other support provided to our financial
advisors, field management, product & planning specialists;
expenses associated with facilities, technology and training
relating to our financial advisors and specialists; other
business development activities including direct marketing
and advertising; and wholesale distribution activities
performed by the Asset Management segment. A significant
component of these expenses varies directly with levels
in 2021 and 2020 included:
• Gain on sale of Personal Capital
– 2021 – $10.6 million ($7.7 million after-tax), recorded in
the fourth quarter, resulting from additional consideration
receivable related to the sale of the Company’s equity
interest in Personal Capital in 2020.
– 2020 – $37.2 million ($31.4 million after-tax), recorded in
the third quarter, resulting from the sale of the Company’s
investment in Personal Capital.
• 2020 Gain on sale of the Quadrus Group of Funds net of acquisition
costs – $25.2 million ($21.4 million after-tax), recorded in the
fourth quarter.
of assets under management or advisement, business
• 2020 Proportionate share of associate’s adjustments – $3.4 million
development measures including sales and client acquisition,
which represented the Company’s proportionate share in
and the number of advisor and client relationships.
GreatWest Lifeco Inc.’s after-tax adjustments, recorded in
• Operations and support expenses – expenses associated
with business operations, including technology and business
the fourth quarter, related to the revaluation of a deferred
tax asset less certain restructuring and transaction costs.
processes; in-house investment management and product
• 2020 Restructuring and other – $74.5 million ($54.7 million
shelf management; corporate management and support
after-tax), recorded in the third quarter, resulting from
functions. These expenses primarily reflect compensation,
our ongoing multi-year transformation initiatives and
technology and other service provider expenses.
efforts to enhance our operational effectiveness and also
• Sub-advisory expenses – reflects fees relating to investment
management services provided by third party or related party
investment management organizations. These fees typically
are variable with the level of assets under management.
These fees include investment advisory services performed
for the Wealth Management segment by the Asset
Management segment.
Interest expense represents interest expense on long-term debt
and leases. Interest expense is allocated to each segment based
on management’s assessment of: i) capacity to service the debt,
and ii) where the debt is being serviced.
from the acquisition of GLC and other changes to our
investment management teams. This included activities to
improve efficiency and capabilities by leveraging the scale
and expertise of scaled providers through outsourcing
partnerships, as well as process automation initiatives
relating to key internal processes. The Company also
incurred severance and other charges relating to the
acquisition of GLC as well as other personnel changes.
| 23
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Asset management
Dealer compensation
expense
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
Expenses
Advisory and business
development
Operations and support
Sub-advisory
Adjusted earnings before
interest and taxes(1)
Interest expense(2)
Adjusted earnings before
income taxes
Income taxes
TABLE 2: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q4 2021 VS. Q4 2020
WEALTH MANAGEMENT
ASSET MANAGEMENT
STRATEGIC
INVESTMENTS
& OTHER
INTERSEGMENT
ELIMINATIONS
THREE MONTHS ENDED
($ millions)
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
TOTAL
2020
DEC. 31
Revenues
Wealth management
$ 672.5
$ 598.5 $
–
$
– $
–
–
–
–
296.8
242.1
–
–
(91.7)
(78.6)
205.1
163.5
–
–
–
–
$
– $
(5.0)
$
(4.3) $ 667.5
$ 594.2
–
–
–
(30.0)
(25.8)
266.8
216.3
5.0
4.3
(86.7)
(74.3)
(25.0)
(21.5)
180.1
142.0
1.4
1.0
1.3
1.0
1.1
1.1
–
–
–
–
673.9
599.5
206.4
164.5
50.7
51.8
40.1
41.2
–
–
–
50.7
(30.0)
(25.7)
902.1
0.1
3.8
3.2
284.8
115.9
49.5
450.2
254.8
113.3
42.7
410.8
24.1
88.3
1.6
28.3
74.6
1.5
114.0
104.4
223.7
22.7
188.7
22.7
201.0
53.8
166.0
44.2
92.4
5.9
86.5
21.2
65.3
–
60.1
5.2
54.9
14.2
40.7
–
–
1.3
–
1.3
50.5
–
50.5
1.5
49.0
0.7
–
0.9
–
0.9
40.3
–
40.3
(1.7)
42.0
0.2
–
–
(30.0)
(30.0)
–
0.2
(25.9)
(25.7)
–
–
–
–
–
–
–
–
–
–
–
–
308.9
205.5
21.1
535.5
366.6
28.6
338.0
76.5
261.5
0.7
Adjusted net earnings(1)
147.2
121.8
Non-controlling interest
–
–
Adjusted net earnings
available to common
shareholders(1)
Other items, net of tax
Gain on sale of
Personal Capital
Gain on sale of Quadrus
Group of Funds net of
acquisition costs
Proportionate share of
associate’s adjustments
Net earnings available to
common shareholders
$ 147.2
$ 121.8 $
65.3
$
40.7 $
48.3
$
41.8 $
–
$
–
260.8
204.3
7.7
–
–
–
21.4
3.4
$ 268.5
$ 229.1
(1) 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.
(2) Interest expense includes interest on long-term debt and leases.
24 |
40.1
779.5
283.1
189.0
18.3
490.4
289.1
27.9
261.2
56.7
204.5
0.2
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 3: CONSOLIDATED OPERATING RESULTS BY SEGMENT – TWELVE MONTHS ENDED
WEALTH MANAGEMENT
ASSET MANAGEMENT
STRATEGIC
INVESTMENTS
& OTHER
INTERSEGMENT
ELIMINATIONS
TWELVE MONTHS ENDED
($ millions)
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
TOTAL
2020
DEC. 31
Revenues
Wealth management
$ 2,572.9 $ 2,276.0 $
$
– $
–
– 1,126.1
913.5
–
–
–
(355.3)
(299.5)
–
770.8
614.0
– $
–
–
–
– $
(19.3) $
(16.4) $ 2,553.6 $ 2,259.6
–
(114.6)
(100.6) 1,011.5
812.9
–
19.3
16.4
(336.0)
(283.1)
–
(95.3)
(84.2)
675.5
529.8
3.6
2.3
5.8
2.9
2.7
6.0
(0.2)
(0.2)
11.9
11.0
–
–
–
–
196.4
147.0
–
–
196.4
147.0
2,576.5 2,278.3
776.6
616.9
199.1
153.0
(114.8)
(100.8) 3,437.4 2,947.4
Asset management
Dealer compensation
expense
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
Expenses
Advisory and business
development
1,089.3
960.0
88.7
80.2
Operations and support
466.1
453.7
335.6
293.7
Sub-advisory
189.7
163.2
6.9
8.7
1,745.1 1,576.9
431.2
382.6
–
4.9
–
4.9
–
–
– 1,178.0 1,040.2
4.1
–
4.1
(0.2)
(114.6)
(114.8)
(0.1)
806.4
751.4
(100.7)
82.0
71.2
(100.8) 2,066.4 1,862.8
Adjusted earnings before
interest and taxes(1)
831.4
701.4
345.4
234.3
194.2
148.9
Interest expense(2)
90.3
89.9
23.6
20.7
–
–
Adjusted earnings before
income taxes
741.1
611.5
321.8
213.6
194.2
148.9
Income taxes
198.0
162.6
81.0
55.7
4.9
(7.4)
Adjusted net earnings(1)
543.1
448.9
240.8
157.9
189.3
156.3
Non-controlling interest
–
–
–
–
2.0
0.2
–
–
–
–
–
–
– 1,371.0 1,084.6
–
113.9
110.6
– 1,257.1
283.9
974.0
210.9
973.2
763.1
2.0
0.2
–
–
–
Adjusted net earnings
available to common
shareholders(1)
Other items, net of tax
Gain on sale of
Personal Capital
Gain on sale of Quadrus
Group of Funds net of
acquisition costs
Proportionate share of
associate’s adjustments
Restructuring and other
Net earnings available to
common shareholders
$
543.1 $
448.9 $
240.8 $
157.9 $
187.3 $
156.1 $
– $
–
971.2
762.9
7.7
31.4
–
21.4
–
–
3.4
(54.7)
$
978.9 $
764.4
(1) 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.
(2) Interest expense includes interest on long-term debt and leases.
| 25
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 4: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q4 2021 VS. Q3 2021
WEALTH MANAGEMENT
ASSET MANAGEMENT
STRATEGIC
INVESTMENTS
& OTHER
INTERSEGMENT
ELIMINATIONS
THREE MONTHS ENDED
($ millions)
2021
DEC. 31
2021
SEP. 30
2021
DEC. 31
2021
SEP. 30
2021
DEC. 31
2021
SEP. 30
2021
DEC. 31
2021
SEP. 30
2021
DEC. 31
TOTAL
2021
SEP. 30
Revenues
Wealth management
$
672.5 $
660.0 $
– $
– $
Asset management
Dealer compensation
expense
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
–
–
296.8
293.1
–
–
–
(91.7)
(90.9)
–
205.1
202.2
– $
–
–
–
– $
(5.0) $
(5.0) $
667.5 $
655.0
–
(30.0)
(29.7)
266.8
263.4
–
–
5.0
5.0
(86.7)
(85.9)
(25.0)
(24.7)
180.1
177.5
1.4
(0.2)
1.3
2.2
1.1
0.6
–
(0.1)
3.8
2.5
–
–
–
–
673.9
659.8
206.4
204.4
50.7
51.8
55.9
56.5
–
–
50.7
55.9
(30.0)
(29.8)
902.1
890.9
Expenses
Advisory and business
development
284.8
274.8
Operations and support
115.9
113.2
24.1
88.3
19.2
83.3
Sub-advisory
49.5
48.7
1.6
1.7
450.2
436.7
114.0
104.2
–
1.3
–
1.3
–
1.2
–
1.2
–
–
–
308.9
(0.1)
205.5
294.0
197.6
(30.0)
(30.0)
(29.7)
21.1
20.7
(29.8)
535.5
512.3
Adjusted earnings before
interest and taxes(1)
223.7
223.1
92.4
100.2
50.5
55.3
Interest expense(2)
22.7
22.8
5.9
5.9
–
–
Adjusted earnings before
income taxes
Income taxes
201.0
200.3
53.8
53.5
Adjusted net earnings(1)
147.2
146.8
–
–
86.5
21.2
65.3
–
94.3
23.3
71.0
50.5
55.3
1.5
1.6
49.0
53.7
–
0.7
0.7
–
–
–
–
–
–
–
–
–
–
–
–
366.6
378.6
28.6
28.7
338.0
349.9
76.5
78.4
261.5
271.5
0.7
0.7
Non-controlling interest
Adjusted net earnings
available to common
shareholders(1)
Other items, net of tax
Gain on sale of
Personal Capital
Net earnings available to
common shareholders
$
147.2 $
146.8 $
65.3 $
71.0 $
48.3 $
53.0 $
– $
–
260.8
270.8
7.7
–
$
268.5 $
270.8
(1) 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.
(2) Interest expense includes interest on long-term debt and leases.
26 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
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
Effective income tax rate – adjusted net earnings
Disposition of assets net of acquisition costs
Proportionate share of associate’s adjustments
THREE MONTHS ENDED
TWELVE MONTHS ENDED
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
26.64 %
26.65 %
26.60 %
26.63 %
26.68 %
(3.39)
–
(0.48)
22.77
–
–
(3.78)
–
(0.47)
22.40
–
–
(3.29)
(0.96)
(0.19)
22.16
(0.98)
(0.31)
(3.65)
–
(0.36)
22.62
–
–
(3.71)
(1.15)
(0.11)
21.71
(0.82)
(0.09)
Effective income tax rate – net earnings
22.77 %
22.40 %
20.87 %
22.62 %
20.80 %
(1) See Note 27 – Related Party Transactions of the Consolidated Financial Statements included in the 2021 IGM Financial Inc. Annual Report (Consolidated Financial Statements).
The benefits from the tax loss consolidation arrangements ended at December 31, 2020.
TOTAL ASSETS UNDER
MANAGEMENT AND ADVISEMENT
Assets under management and advisement were $277.1 billion at
December 31, 2021 compared to $240.0 billion at December 31,
2020, an increase of 15.5%, as detailed in Table 6. Total assets
under management were $245.3 billion at December 31, 2021
compared to $214.0 billion at December 31, 2020, an increase
of 14.6%.
Full year net inflows of $8.7 billion are a record high and up
from $7.1 billion in 2020. Full year investment fund net sales of
$7.0 billion are a record high and up from net sales of $3.4 billion
in 2020. Total net inflows were $1.2 billion in the fourth quarter
of 2021 down from $2.2 billion in the fourth quarter of 2020.
Investment fund net sales of $1.1 billion in the fourth quarter of
2021 were down from $1.7 billion in the fourth quarter of 2020.
Net flows and net sales are based on assets under management
and advisement excluding sub-advisory assets to Canada Life
and to the Wealth Management segment.
Changes in assets under management for the Wealth
Management and Asset Management segments are
discussed further in each of their respective Review of
the Business sections in the MD&A.
| 27
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 6: ASSETS UNDER MANAGEMENT AND ADVISEMENT
WEALTH MANAGEMENT
ASSET MANAGEMENT(1)
IG WEALTH
MANAGEMENT
INVESTMENT
PLANNING COUNSEL
MACKENZIE
INVESTMENTS
INTERCOMPANY
ELIMINATIONS(2)
CONSOLIDATED
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
($ millions)
THREE MONTHS ENDED
Gross flows
Mutual fund gross sales(3)(4) $ 2,959
$ 2,572 $
174
$
177 $ 2,592
$ 4,501 $
Dealer gross inflows
3,437
2,938
1,509
1,487
–
–
Net flows
Mutual fund net sales(3)(4)
ETF net creations(5)
Investment fund net sales
Institutional SMA net sales(6)
Mackenzie net sales through
Wealth Management
IGM product net sales
Other dealer net flows
Total net flows
TWELVE MONTHS ENDED
Gross flows
457
–
457
–
36
493
492
985
(9)
–
(9)
–
130
121
364
485
(129)
–
(129)
–
20
(109)
232
123
(89)
–
(89)
–
59
(30)
279
249
512
245
757
(576)
1,376
372
1,748
(75)
–
–
181
1,673
–
–
181
1,673
Mutual fund gross sales(3)(4) $ 11,845
$ 8,987 $
774
$
577 $ 12,022
$ 13,565 $
Dealer gross inflows
13,434
9,977
5,366
4,760
–
–
Net flows
Mutual fund net sales(3)(4)
1,813
(451)
(288)
ETF Net creations(5)
–
–
–
Investment fund net sales
1,813
(451)
(288)
Institutional SMA net sales(6)
–
–
–
Mackenzie net sales through
Wealth Management
IGM product net sales
Other dealer net flows
Total net flows
431
2,244
1,440
3,684
211
(240)
1,035
795
180
(108)
596
488
(307)
–
(307)
–
113
(194)
567
373
3,908
1,532
5,440
(306)
2,956
1,232
4,188
2,062
–
–
5,134
6,250
–
–
5,134
6,250
(611)
(611)
6
(605)
–
–
–
–
–
–
(56)
(56)
1
(55)
–
–
–
–
–
–
$
– $ 5,725
$ 7,250
–
4,946
4,425
–
–
–
–
(189)
(189)
3
840
245
1,085
(576)
–
509
725
(186)
1,234
1,278
372
1,650
(75)
–
1,575
646
2,221
$
– $ 24,641
$ 23,129
–
18,800
14,737
–
–
–
–
(324)
(324)
5
(319)
5,433
1,532
6,965
(306)
–
6,659
2,042
8,701
2,198
1,232
3,430
2,062
–
5,492
1,607
7,099
(1) Asset Management flows activity excludes sub-advisory to Canada Life and the Wealth Management segment.
In the fourth quarter of 2020, Mackenzie Investments sold fund management contracts relating to private label Quadrus Group of Funds (QGOF) to Lifeco and, as a result, gross
and net mutual fund flows in 2021 are not directly comparable with 2020.
(2) Consolidated results eliminate double counting where business is reflected within multiple segments.
(3) IG Wealth Management and Investment Planning Counsel AUM and net sales include separately managed accounts.
(4) During the fourth quarter and the twelve month period, institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes
which resulted in:
2021 YTD – net redemptions of $361 million.
2020 YTD – sales of $1.4 billion and net sales of $612 million.
2020 Q4 – sales of $625 million and net sales of $32 million.
(5) ETFs – During the second and third quarters of 2020, Wealthsimple made allocation changes which resulted in $370 million in purchases in Mackenzie ETFs and $325 million
of redemptions from Mackenzie’s ETFs, respectively.
(6) Sub-advisory, institutional and other accounts:
2021 Q2 – Mackenzie was awarded $680 million of sub-advisory wins.
Q4 – an institutional client re-assigned sub-advisory responsibilities on mandates advised by Mackenzie totalling $667 million.
2020 Q2 – Mackenzie was awarded $2.6 billion of sub-advisory wins.
28 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 6: ASSETS UNDER MANAGEMENT AND ADVISEMENT (CONTINUED)
WEALTH MANAGEMENT
ASSET MANAGEMENT
IG WEALTH
MANAGEMENT
INVESTMENT
PLANNING COUNSEL
MACKENZIE
INVESTMENTS
INTERCOMPANY
ELIMINATIONS(1)
CONSOLIDATED
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
2021
DEC. 31
2020
DEC. 31
($ millions)
Assets under Management
and Advisement
Wealth Management
AUM
$ 110,541 $ 97,713 $
5,629 $
5,320
$
– $
– $ 116,170 $ 103,033
Mackenzie assets
sold through
Wealth Management
Other AUA
AUA
Asset Management
Mutual funds
ETFs
Investment funds
957
438
3,640
3,133
8,059
5,122
23,808
20,865
119,557 103,273
33,077
29,318
Institutional SMA
Sub-Advisory to
Canada Life
Total Institutional SMA
Total ex sub-advisory to
Wealth Management
Sub-advisory to
Wealth Management
Total AUM
ETFs
Distributed to
third parties
Held within IGM
managed products
Total ETFs
–
–
4,597
3,571
(11)
(11)
(8)
31,856
25,979
(8) 152,623 132,583
$ 62,969 $ 52,682
5,393
3,788
68,362
56,470
62,969
52,682
5,393
3,788
68,362
56,470
7,948
7,293
7,948
7,293
52,805
47,175
60,753
54,468
52,805
47,175
60,753
54,468
129,115 110,938
129,115 110,938
81,228
74,210
210,343 185,148
81,228
74,210
210,343 185,148
5,393
3,788
5,393
3,788
7,281
12,674
4,663
8,451
(7,281)
(7,281)
(4,663)
–
–
(4,663)
5,393
3,788
Consolidated
AUM
110,541
97,713
5,629
5,320 210,343 185,148
(81,228)
(74,210) 245,285 213,971
Mackenzie assets
sold through
Wealth Management
Other AUA
AUM&A
957
438
3,640
3,133
8,059
5,122
23,808
20,865
–
–
–
–
(4,597)
(3,571)
–
–
(11)
(8)
31,856
25,979
119,557 103,273
33,077
29,318 210,343 185,148
(85,836)
(77,789) 277,141 239,950
(1) Consolidated results eliminate double counting where business is reflected within multiple segments.
| 29
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
SELECTED ANNUAL INFORMATION
SUMMARY OF QUARTERLY RESULTS
Financial information for the three most recently completed
The Summary of Quarterly Results in Table 8 includes the
years is included in Table 7.
Net Earnings and Earnings per Share – Except as noted in the
eight most recent quarters and the reconciliation of non-IFRS
financial measures to net earnings in accordance with IFRS.
reconciliation in Table 7, variations in net earnings and total
Changes in average daily investment fund assets under
revenues result primarily from changes in average assets under
management over the eight most recent quarters, as shown in
management and advisement. Assets under management
Table 8, largely reflect the impact of changes in domestic and
and advisement were $190.0 billion in 2019, increased to
foreign markets and net sales of the Company.
$240.0 billion in 2020 and to $277.1 billion in 2021. Increases
were driven largely by changes in financial markets during
the periods, and in 2020 were primarily due to net business
acquisitions of $30.3 billion. Average total assets under
management and advisement for the year ended December 31,
2021 were $259.7 billion compared to $191.2 billion in 2020.
The impact on earnings and revenues of changes in average
total assets under management and advisement and other
pertinent items are discussed in the Review of Segment
Operating Results sections of the MD&A for both IG Wealth
Management and Mackenzie.
Net earnings in future periods will largely be determined by the
level of assets under management and advisement which will
continue to be influenced by global market conditions.
Dividends per Common Share – Annual dividends per common
share were $2.25 in 2021, unchanged from 2020 and 2019.
30 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis TABLE 7: SELECTED ANNUAL INFORMATION
Consolidated statements of earnings ($ millions)
Revenues
Wealth management
Net asset management
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Gain on sale of Personal Capital
Gain on sale of Quadrus Group of Funds net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other
Proportionate share of associate’s one-time charges
Earnings before income taxes
Income taxes
Net earnings
Non-controlling interest
Perpetual preferred share dividends
Net earnings available to common shareholders
Reconciliation of Non-IFRS financial measures(1) ($ millions)
2021
2020
2019
$ 2,553.6
$ 2,259.6
$ 2,299.0
675.5
11.9
196.4
3,437.4
2,180.3
1,257.1
10.6
–
–
–
–
1,267.7
286.8
980.9
(2.0)
–
529.8
11.0
147.0
2,947.4
1,973.4
974.0
37.2
25.2
3.4
(74.5)
–
965.3
200.7
764.6
(0.2)
–
515.3
24.8
122.4
2,961.5
1,975.7
985.8
–
–
–
–
(17.2)
968.6
219.7
748.9
–
(2.2)
$
978.9
$
764.4
$
746.7
Adjusted net earnings available to common shareholders – non-IFRS measure
$
971.2
$
762.9
$
763.9
Other items:
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
Proportionate share of associate’s one-time charges
Net earnings available to common shareholders – IFRS
Earnings per share ($)
Adjusted net earnings available to common shareholders(1)
– Basic
– Diluted
Net earnings available to common shareholders
– Basic
– Diluted
Dividends per share ($)
Common
Preferred, Series B
Average assets under management and advisement ($ billions)
Investment fund assets under management
Total assets under management
Total assets under management and advisement
Ending assets under management and advisement ($ billions)
Investment fund assets under management
Total assets under management
Total assets under management and advisement
Total corporate assets ($ millions)
Total long-term debt ($ millions)
Outstanding common shares (thousands)
Average outstanding shares – Diluted (thousands)
7.7
–
–
–
–
31.4
21.4
3.4
(54.7)
–
–
–
–
–
(17.2)
$
978.9
$
764.4
$
746.7
$
4.07
4.05
4.10
4.08
$
3.20
3.20
3.21
3.21
$
2.25
$
2.25
–
–
$
173.4
$
161.7
231.4
259.7
168.5
191.2
$
$
$
$
184.5
$
159.5
$
245.3
277.1
214.0
240.0
3.19
3.19
3.12
3.12
2.25
0.37
155.5
161.1
183.5
161.8
166.8
190.0
$ 17,661
$ 16,062
$ 15,391
$
2,100
$
2,100
$
2,100
239,679
238,308
238,294
240,019
238,307
239,181
(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.
| 31
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 8: SUMMARY OF QUARTERLY RESULTS
Consolidated statements of earnings ($ millions)
Revenues
Wealth management
Asset management
Dealer compensation expense
Net asset management
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Advisory and business development
Operations and support
Sub-advisory
Interest(1)
Earnings before undernoted
Gain on sale of Personal Capital
Gain on sale of Quadrus Group of Funds
net of acquisition costs
Proportionate share of associate’s adjustments
Restructuring and other
Earnings before income taxes
Income taxes
Net earnings
Non-controlling interest
2021
Q4
2021
Q3
2021
Q2
2021
Q1
2020
Q4
2020
Q3
2020
Q2
2020
Q1
$ 667.5 $ 655.0 $ 627.6 $ 603.5 $ 594.2 $ 571.6 $ 531.1 $ 562.7
266.8
(86.7)
180.1
3.8
50.7
263.4
(85.9)
177.5
2.5
55.9
248.3
(82.7)
165.6
2.5
48.2
233.0
(80.7)
152.3
3.1
41.6
216.3
(74.3)
142.0
3.2
40.1
207.4
(71.3)
136.1
2.2
43.5
902.1
890.9
843.9
800.5
779.5
753.4
308.9
205.5
21.1
28.6
564.1
338.0
10.6
–
–
–
348.6
79.4
269.2
0.7
294.0
197.6
20.7
28.7
541.0
349.9
–
–
–
–
349.9
78.4
271.5
0.7
291.1
196.8
20.4
28.5
536.8
307.1
–
–
–
–
307.1
69.3
237.8
0.4
284.0
206.5
19.8
28.1
538.4
262.1
–
–
–
–
262.1
59.7
202.4
0.2
283.1
189.0
18.3
27.9
518.3
261.2
–
25.2
3.4
–
289.8
60.5
229.3
0.2
252.6
181.9
18.5
27.9
480.9
272.5
37.2
–
–
(74.5)
235.2
44.3
190.9
–
190.7
(66.1)
124.6
7.6
43.3
706.6
245.4
185.4
16.9
27.5
475.2
231.4
–
–
–
–
231.4
47.9
183.5
–
198.5
(71.4)
127.1
(2.0)
20.1
707.9
259.1
195.1
17.5
27.3
499.0
208.9
–
–
–
–
208.9
48.0
160.9
–
Net earnings available to common shareholders
$ 268.5 $ 270.8 $ 237.4 $ 202.2 $ 229.1 $ 190.9 $ 183.5 $ 160.9
Reconciliation of Non-IFRS financial measures(2) ($ millions)
Adjusted net earnings available to common
shareholders – non-IFRS measure
$ 260.8 $ 270.8 $ 237.4 $ 202.2 $ 204.3 $ 214.2 $ 183.5 $ 160.9
Other items:
Gain on sale of Personal Capital, net of tax
Gain on sale of Quadrus Group of Funds net of
acquisition costs, net of tax
Proportionate share of associate’s adjustments
Restructuring and other, net of tax
7.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31.4
21.4
3.4
–
–
–
(54.7)
–
–
–
– –
–
–
–
Net earnings available to common shareholders – IFRS
$ 268.5 $ 270.8 $ 237.4 $ 202.2 $ 229.1 $ 190.9 $ 183.5 $ 160.9
Earnings per Share ($)
Adjusted net earnings available to common shareholders(2)
– Basic
– Diluted
$
1.09 $
1.13 $
0.99 $
0.85 $
0.86 $
0.90 $
0.77 $
1.08
1.13
0.99
0.85
0.86
0.90
0.77
Net earnings available to common shareholders
– Basic
– Diluted
1.12
1.11
1.13
1.13
0.99
0.99
0.85
0.85
0.96
0.96
0.80
0.80
0.77
0.77
0.68
0.68
0.68
0.68
Average outstanding shares – Diluted (thousands)
241,443
240,575
239,821
238,474
238,308
238,308
238,308
238,316
Average assets under management and advisement ($ billions)
Investment fund assets under management
$ 181.9 $ 178.6 $ 170.2 $ 162.7 $ 169.8 $ 163.7 $ 152.6 $ 158.5
Total assets under management
Assets under management and advisement
241.9
272.0
238.3
267.4
227.8
255.4
217.6
243.9
177.6
202.2
171.4
194.9
159.2
181.5
163.3
186.0
Ending assets under management and advisement ($ billions)
Investment fund assets under management
$ 184.5 $ 176.8 $ 174.4 $ 165.5 $ 159.5 $ 164.9 $ 157.8 $ 143.2
Total assets under management
Assets under management and advisement
245.3
277.1
236.2
265.2
233.6
262.0
221.6
248.5
214.0
240.0
172.6
196.4
165.4
188.3
147.5
168.4
(1) Interest expense includes interest on long-term debt and leases.
(2) 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.
32 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
Wealth Management
The Wealth Management segment consists of both IG Wealth
Sub-advisory fees are paid between segments and to third
Management (IG) and Investment Planning Counsel, Inc. (IPC).
parties for investment management services provided to our
Wealth Management revenue consists of:
investment products. Wealth Management is considered a client
of the Asset Management segment and transfer pricing is based
• Advisory fees are related to providing financial advice to
on values for similar sized asset management mandates.
clients including fees related to the distribution of products.
• Product and program fees are related to the management of
investment products and include management, administration
and other related fees.
Effective January 1, 2021, each segment now reflects their
results to adjusted net earnings. Debt and interest expense is
allocated to segment based on management’s assessment of:
i) capacity to service the debt, and ii) where the debt is being
• Other financial planning revenues are fees related to
serviced. Income taxes are also reported in each segment.
providing clients other financial products including mortgages,
insurance and banking products.
Review of the Business
IG Wealth Management, founded in 1926, provides
opportunities associated with climate change and the transition
comprehensive personal financial planning and wealth
to a net zero emission global economy.
management services to Canadians through our exclusive
network of 3,278 Consultants. IG Wealth Management
clients are more than one million individuals, families and
business owners.
IG Wealth Management entered into a partnership with CapIntel
that provides IG advisors access to a powerful investment
analysis and proposal tool. Portfolio comparisons and product
information is integrated with our Advisor Portal (Salesforce)
Investment Planning Counsel, founded in 1996, is an
to quickly and transparently deliver on demand analysis and
independent distributor of financial products, services and
generate compliant & compelling investment proposals to
advice in Canada, with 675 financial advisors.
our clients. CapIntel also monitors daily investment funds and
The Wealth Management segment provides a comprehensive
planning approach, through IG Wealth Management
Consultants and IPC Advisors, by offering a broad range of
financial products and services.
The review of the business in the Wealth Management section
primarily relates to IG Wealth Management as it represents 96%
of adjusted net earnings of the total segment.
2021 DEVELOPMENTS
equities and notifies our advisors (through advisor portal) of any
significant changes to investments that should be reviewed (for
example, but not inclusive – material change reports, change in
risk category, fund merger, corporate action, etc.)
IG WEALTH MANAGEMENT STRATEGY
IG Wealth Management’s promise is to inspire financial confidence.
Our strategic mandate is to be Canada’s financial partner
of choice.
In the fourth quarter, IG Wealth Management launched
Canadians hold $5.6 trillion in discretionary financial assets with
IG Climate Action Portfolios, a suite of four diversified
financial institutions at December 31, 2020, based on the most
managed solutions:
• IG Climate Action Portfolio – Global Fixed Income Balanced
• IG Climate Action Portfolio – Global Neutral Balanced
• IG Climate Action Portfolio – Global Equity Balanced
recent report from Investor Economics, and we view these
savings as IG Wealth Management’s addressable market. 76%
of these savings are held by households with over $1 million,
which are referred to as high net worth, and another 20% reside
with households with between $100,000 and $1 million, which
• IG Climate Action Portfolio – Global Equity
are referred to as mass affluent. These segments tend to have
These portfolios were developed with leading global asset
managers and provide clients with a new way to support
the world’s transition to net zero emissions. The portfolios
more complicated financial needs, and IG Wealth Management’s
focus on providing comprehensive financial planning solutions
positions it well to compete and grow in these segments.
invest in both equity and fixed income securities that are
Our value proposition is to deliver better Gamma, better Beta
believed to reduce the risks or are expected to benefit from the
and better Alpha.
| 33
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report We seek to deliver our value proposition through:
practices is a key measurement of our business as they serve
• 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
clientele representing approximately 96% of AUM.
• 380 New Consultants (445 at December 31, 2020), which are
those Consultants with less than four years of experience.
• 1,137 Associates and Regional Directors (1,044 at
December 31, 2020). Associates are licensed team members
of Consultant practices who provide financial planning
services and advice to the clientele served by the team.
• IG Wealth Management had a total Consultant network of
3,278 (3,304 at December 31, 2020).
and competitively priced solutions.
IG Wealth Management’s recruiting standards increase the
• 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.
• A high-performing and diverse culture.
DELIVERING 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, Superior Advice
Our financial advisors provide value to clients by developing
insight into their specific needs, creating and implementing
well-constructed financial plans and offering superior advice.
IG Wealth Management has a national distribution network
of more than 3,000 highly qualified financial advisors (called
Consultants) in communities throughout Canada. Our advisory
services are most suited to individuals with complicated
financial needs.
IG Wealth Management Consultant practices are industry
leaders in holding a credentialed financial planning designation.
These designations are nationally recognized financial planning
likelihood of success while also enhancing our culture and brand.
Our training curriculum is reviewed and refreshed each year
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.
We also support Consultants and clients through our network
of product and planning specialists, who assist in the areas of
advanced financial planning, mortgages and banking, insurance,
and securities. These specialists help to ensure that we are
providing comprehensive financial planning across all elements
of a client’s financial life. Clients are served by our Mutual Fund
Dealers Association of Canada (MFDA) and Investment Industry
Regulatory Organization of Canada (IIROC) licensed Consultants
or specialists.
Segmented Client Experiences
IG Wealth Management distinguishes itself from our competition
by offering comprehensive planning to our clients within the
context of long-term relationships. A primary focus is on
advising and attracting high net worth and mass affluent clients.
For the distinct needs of the high net worth market, we offer
IG Private Wealth Management which includes investment
management, retirement, tax and estate planning services.
qualifications that require an individual to demonstrate
IG Living Plan™ is our holistic, client-centric approach to
financial planning competence through education, standardized
financial planning that reflects the evolving needs, goals and
examinations, continuing education requirements, and
aspirations of Canadian families and individuals. The IG Living
accountability to ethical standards.
The following provides a breakdown of the IG Wealth
Management Consultant network into its significant
components at December 31, 2021:
• 1,761 Consultant practices (1,815 at December 31, 2020),
which reflect Consultants with more than four years of
experience. These practices may include Associates as
Plan Portal, which is based on Conquest Planning, provides
a single, integrated view of a client’s entire financial picture
and uses predictive tools to determine planning strategies
customized to the individual.
The IG Living Plan leverages the expertise of IG Wealth
Management’s Consultants who serve approximately one million
clients located in communities throughout Canada.
described below. The level and productivity of Consultant
IG Wealth Management has a full range of products that allow
us to provide a tailored IG Living Plan that evolves over time.
34 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis 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 policy types from
the leading insurers in Canada.
• Mortgage and banking solutions that are offered as part of a
comprehensive financial plan.
IG Wealth Management’s dealer platform provides increased
automation and supports both MFDA and IIROC licensed
advisors as well as new products on our investment dealer
platform designed to support the high net worth segment of
our client base.
A high-performing and diverse culture
It is essential that we offer competitive compensation and
benefits to attract and retain outstanding people. Our training
• Charitable Giving Program, a donor-advised giving program
and development approach, along with our use of feedback
which enables Canadians to make donations and build an
from periodic employee and advisor surveys, positions our
enduring charitable giving legacy with considerably less
employees and advisors to better serve our clients.
expense and complexity than setting up and administering
their own private foundation.
DELIVERING BETA AND ALPHA
IG Wealth Management’s National Service Centre is focused
on supporting more than 200,000 clients with less complex
requirements while allowing our Consultant practices to focus
on those clients with more complex needs.
IG Wealth Management Consultants are focused on the high
net worth and mass affluent segments of the market, which
we define as households with over $1 million and between
$100 thousand and $1 million, respectively.
Assets under advisement for clients with household assets
greater than $1 million (defined as “high net worth”) totalled
$43.5 billion at December 31, 2021, an increase of 40.8%
from one year ago, and represented 36% of total assets
under advisement.
Assets under advisement for clients with household assets
between $100 thousand and $1 million (defined as “mass
affluent”) totalled $66.5 billion at December 31, 2021, an
increase of 7.2% from one year ago, and represented 56%
of total assets under advisement.
Assets under advisement for clients with household assets
less than $100 thousand (defined as “mass market”) totalled
$9.6 billion at December 31, 2021, a decrease of 7.8% from
one year ago, and represented 8.0% of total assets under
advisement.
Business processes
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 achieve expected investment
returns for the lowest possible risk through well-constructed
investment portfolios (Beta), and to create value for clients
through active management (Alpha). To do this, we select and
engage high-quality sub-advisors so our clients have access to a
diverse range of investment products and solutions. Each asset
manager is selected through a proven and rigorous process.
We oversee all sub-advisors to ensure that their activities are
consistent with their investment philosophies and with the
investment objectives and strategies of the products they advise.
IG Wealth Management’s relationships include Mackenzie
Investments and other world class investment firms such as
BlackRock, T. Rowe Price, PIMCO, ChinaAMC, Putnam and JP
Morgan Asset Management.
Powerful Financial Solutions
We provide clients with an extensive suite of well-constructed
and competitively priced financial solutions. We regularly
enhance the scope and diversity of our investment offering with
new funds and product changes that enable clients to achieve
IG Wealth Management continually seeks to enhance our
their goals.
systems and business processes so our Consultants can serve
clients more effectively. We look to enhance client and advisor
interactions on an ongoing basis to simplify processes, reduce
errors, and digitize the experience with an appropriate cost
structure.
The IG Wealth Management Advisor Portal is a customer
relationship management platform based on Salesforce.
It enables our Consultants to manage client relationships,
improve their efficiency through digitized workflows, and
access data-driven reporting to help better run their practices.
Our solutions include:
• A deep and broad selection of mutual funds, diversified by
manager, asset category, investment style, geography, market
capitalization and sector.
• Managed portfolios that rebalance investments to ensure that
a chosen mix of risk and return is maintained. These solutions
include IG Core Portfolios, IG Managed Payout Portfolios,
Investors Portfolios, and IG Managed Risk Portfolios.
| 35
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report • IG Advisory Account (IGAA) and unbundled fee structures – The
In support of the global goal to reach net zero by 2050, IG
IGAA is a fee-based account that improves client experience
Wealth Management is a founding Signatory to Responsible
by offering the ability to simplify and consolidate selected
Investment Association’s Canadian Investor Statement on
investments into a single account while providing all of
Climate Change. To support this initiative, in the fourth quarter
our clients with a transparent advisory fee. IGAA accounts
IG Wealth Management launched the IG Climate Action
increase fee transparency and can hold most securities
Portfolios, a suite of four diversified managed solutions.
and investment products available in the marketplace to
individual investors.
• iProfile™ Portfolios – iProfile Portfolios are a suite of four
managed solutions that provide comprehensive diversification
and are designed to suit personal preferences for risk
tolerance and investment goals. These portfolios provide
exposure similar to the investments of the iProfile Private
Pools. These portfolios are offered in both the IGAA and
iProfile account structures.
• iProfile™ Private Portfolios – iProfile Private Portfolios are model
portfolios comprised of iProfile Private Pools, available for
households with investments held at IG Wealth Management
in excess of $250,000. iProfile Private Portfolios have been
designed to deliver strong risk-adjusted returns by diversifying
across asset classes, management styles and geographic
regions. Recent enhancements include the launch of new
discretionary model portfolios and six new iProfile Private
Pools to support the new models: three iProfile Active
Allocation Private Pools, iProfile Alternatives Private Pool
with mandates including long-short, global macro and global
equity hedge strategies, iProfile ETF Private Pool providing
exposure through exchange traded funds (ETF) and iProfile
Low Volatility Private Pool with Canadian, U.S., International
and Emerging Market geographic coverage.
In addition, we have incorporated investments in private
assets with the introduction of a Private Credit Mandate
in the iProfile Fixed Income Private Pool. The pool has
committed to three Northleaf Capital Partners’ private credit
investments that focus on loans to middle market companies
in North America and Europe, as well as to BlackRock, PIMCO
and Sagard. We have also introduced Private Investment
Mandates into both the iProfile Canadian Equity Private
Pool and the iProfile U.S. Equity Private Pool. Both of these
mandates intend to provide investors with enhanced
diversification and long-term capital appreciation through
exposure to investments in privately held companies. The
iProfile Canadian Equity Private Pool has currently made a
commitment to the Northleaf Growth Fund and the iProfile
U.S. Equity Private Pool has made a commitment to the
Northleaf Capital Opportunities Fund.
• Segregated funds that provide for long-term investment
growth potential combined with risk management, benefit
guarantee features and estate planning efficiencies.
• Separately managed accounts (discretionary dealer-managed
accounts).
A growing portion of IG Wealth Management’s client assets
are in unbundled fee structures. Unbundled fee products
separate the advisory fee that is charged directly to a client’s
account from the fees charged to the underlying investment
funds. This separation provides clients with greater transparency
into the fees they pay, and allows IG Wealth Management
to differentiate pricing by client segment to ensure that it
is competitive.
We have discontinued offering the bundled purchase option of
mutual funds and substantially all of our investment account types.
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, 2021, 75.8% of IG Wealth Management
mutual fund assets had a rating of three stars or better from
Morningstar† fund ranking service and 39.0% had a rating of
four or five stars. This compared to the Morningstar† universe
of 86.4% for three stars or better and 54.9% for four and five
star funds at December 31, 2021. Morningstar Ratings† are an
objective, quantitative measure of a fund’s three, five and ten
year risk-adjusted performance relative to comparable funds.
WEALTH MANAGEMENT ASSETS
UNDER MANAGEMENT AND ADVISEMENT
Assets under management and advisement are key performance
indicators for the Wealth Management segment.
Wealth Management’s assets under advisement were at a
record high level of $152.6 billion at December 31, 2021, an
increase of 15.1% from December 31, 2020. The level of assets
under advisement are influenced by three factors: client inflows,
client outflows and investment returns.
Wealth Management’s assets under management were also at
a record high level of $116.2 billion, an increase of 12.8% from
December 31, 2020. The level of assets under management are
influenced by sales, redemptions and investment returns.
Changes in Wealth Management assets under advisement and
assets under management for the periods under review are
reflected in Tables 9 and 10.
36 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis TABLE 9: CHANGE IN ASSETS UNDER ADVISEMENT – WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
4,946
$
4,278
$
4,425
15.6 %
11.8 %
3,837
1,109
6,052
7,161
3,003
1,275
842
2,117
3,688
737
6,831
7,568
145,462
143,345
125,015
27.8
(13.0)
N/M
238.3
1.5
4.0
50.5
(11.4)
(5.4)
16.4
Ending assets under advisement
$ 152,623
$ 145,462
$ 132,583
4.9 %
15.1 %
IG Wealth Management
Investment Planning Counsel
119,557
113,958
103,273
33,077
31,515
29,318
4.9
5.0
15.8
12.8
Average assets under advisement
$ 149,702
$ 146,531
$ 128,342
2.2 %
16.6 %
IG Wealth Management
Investment Planning Counsel
117,379
114,820
100,295
32,334
31,721
28,054
2.2
1.9
17.0
15.3
TWELVE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets under advisement
IG Wealth Management
Investment Planning Counsel
Average assets under advisement
IG Wealth Management
Investment Planning Counsel
2021
DEC. 31
2020
DEC. 31
% CHANGE
$
18,800
$
14,737
27.6 %
14,622
4,178
15,862
20,040
13,564
1,173
6,590
7,763
132,583
124,820
$ 152,623
$ 132,583
119,557
33,077
103,273
29,318
$ 142,867
$ 122,919
111,880
30,997
95,870
27,056
7.8
256.2
140.7
158.1
6.2
15.1 %
15.8
12.8
16.2 %
16.7
14.6
| 37
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 10: CHANGE IN ASSETS UNDER MANAGEMENT – WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
3,133
$
2,929
$
2,749
7.0 %
14.0 %
2,805
328
3,788
4,116
2,343
586
765
1,351
2,847
(98)
5,118
5,020
112,054
110,703
98,013
19.7
(44.0)
N/M
204.7
1.2
(1.5)
N/M
(26.0)
(18.0)
14.3
Ending assets under management
$ 116,170
$ 112,054
$ 103,033
3.7 %
12.8 %
IG Wealth Management
Investment Planning Counsel
110,541
106,551
5,629
5,503
97,713
5,320
3.7
2.3
13.1
5.8
Daily average mutual fund assets
$ 115,115
$ 113,145
$ 100,419
1.7 %
14.6 %
IG Wealth Management
Investment Planning Counsel
109,521
107,557
5,594
5,588
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets under management
IG Wealth Management
Investment Planning Counsel
Daily average mutual fund assets
IG Wealth Management
Investment Planning Counsel
95,194
5,225
2021
DEC. 31
1.8
0.1
15.1
7.1
2020
DEC. 31
% CHANGE
$
12,619
$
9,564
31.9 %
11,094
1,525
11,612
13,137
103,033
10,322
(758)
5,239
4,481
98,552
$ 116,170
$
103,033
110,541
5,629
97,713
5,320
$ 110,445
$
97,062
104,962
5,483
91,929
5,133
7.5
N/M
121.6
193.2
4.5
12.8 %
13.1
5.8
13.8 %
14.2
6.8
IG WEALTH MANAGEMENT ASSETS
UNDER MANAGEMENT AND ADVISEMENT
Changes in IG Wealth Management assets under advisement
and management for the periods under review are reflected in
Assets under advisement (AUA) are a key performance indicator
Tables 11 and 12.
for IG Wealth Management. AUA represents savings and
investment products, including Assets Under Management
where we provide investment management services, that are
held within our clients’ accounts. Advisory fees are charged
based on an annual percentage of substantially all AUA, through
the IG Advisory Account fee, and represent the majority of the
fees earned from our clients. Our Consultants’ compensation is
also based on AUA and net assets contributed by our clients.
IG Wealth Management’s assets under advisement and
mutual fund assets under management were at record high
levels at December 31, 2021. Assets under advisement were
$119.6 billion at December 31, 2021, an increase of 15.8% from
December 31, 2020, and mutual fund assets under management
were $110.5 billion, an increase of 13.1%.
For the quarter ended December 31, 2021, gross client
inflows of IG Wealth Management assets under advisement
were $3.4 billion, an increase of 17.0% from $2.9 billion in the
comparable period in 2020. Net client inflows were $1.0 billion,
an improvement of $500 million from net client inflows of
$485 million in the comparable period in 2020. During the
fourth quarter, investment returns resulted in an increase of
$4.6 billion in assets under advisement compared to an increase
of $5.3 billion in the fourth quarter of 2020.
For the twelve months ended December 31, 2021, gross client
inflows of IG Wealth Management assets under advisement
were $13.4 billion, the highest annual result in the history
of the company, and represented an increase of 34.6% from
$10.0 billion in the comparable period in 2020. Net client inflows
38 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 11: CHANGE IN ASSETS UNDER ADVISEMENT – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
3,437
$
3,141
$
2,938
9.4 %
17.0 %
2,452
985
4,614
5,599
2,127
1,014
759
1,773
2,453
485
5,250
5,735
113,958
112,185
97,538
$ 119,557
$ 113,958
$ 103,273
15.3
(2.9)
N/M
215.8
1.6
–
103.1
(12.1)
(2.4)
16.8
4.9 %
2.2 %
15.8 %
17.0 %
Average assets under advisement
$ 117,379
$ 114,820
$ 100,295
TWELVE MONTHS ENDED
($ millions)
Gross client inflows
Gross client outflows
Net flows
Investment returns
Net change in assets
Beginning assets
Ending assets
Average assets under advisement
2021
DEC. 31
2020
DEC. 31
% CHANGE
$ 13,434
$
9,977
34.6 %
9,750
3,684
12,600
16,284
9,182
795
5,378
6,173
103,273
97,100
$ 119,557
$ 103,273
$ 111,880
$
95,870
6.2
N/M
134.3
163.8
6.4
15.8 %
16.7 %
were at an all-time high level of $3.7 billion in the twelve month
CHANGE IN ASSETS UNDER MANAGEMENT
period, an improvement of $2.9 billion from net client inflows
AND ADVISEMENT – 2021 VS. 2020
of $795 million in the comparable period in 2020. During 2021,
IG Wealth Management’s assets under advisement were
investment returns resulted in an increase of $12.6 billion in
$119.6 billion at December 31, 2021, an increase of 15.8% from
assets under advisement compared to an increase of $5.4 billion
$103.3 billion at December 31, 2020. IG Wealth Management’s
in 2020.
Changes in mutual fund assets under management for the
periods under review are reflected in Table 12.
mutual fund assets under management were $110.5 billion at
December 31, 2021, representing an increase of 13.1% from
$97.7 billion at December 31, 2020. Average daily mutual fund
assets were $109.5 billion in the fourth quarter of 2021, up
In addition to net sales of $457 million in the fourth quarter
15.1% from $95.2 billion in the fourth quarter of 2020. Average
of 2021 to IG Wealth Management fund products, there were
daily mutual fund assets were $105.0 billion for the twelve
net sales to Mackenzie fund products of $36 million for a total
months ended December 31, 2021, up 14.2% from $91.9 billion
of $493 million in net sales to IGM Financial’s products. For
in 2020.
the twelve month period, net sales to IG Wealth Management
fund products were $1.8 billion and net sales to Mackenzie fund
products were $0.4 billion for a total of $2.2 billion in net sales
to IGM Financial’s products.
For the quarter ended December 31, 2021, sales of IG Wealth
Management mutual funds through its Consultant network
were $3.0 billion, an increase of 15.0% from the comparable
period in 2020. Mutual fund redemptions totalled $2.5 billion,
At December 31, 2021, $77.8 billion, or 70% of IG Wealth
a decrease of 3.1% from 2020. IG Wealth Management mutual
Management’s mutual fund assets under management, were
fund net sales for the fourth quarter of 2021 were $457 million
in products with unbundled fee structures, up 50.6% from
compared with net redemptions of $9 million in 2020. During
$51.7 billion at December 31, 2020 which represented 53%
the fourth quarter, investment returns resulted in an increase
of assets under management.
of $3.5 billion in mutual fund assets compared to an increase of
$4.8 billion in the fourth quarter of 2020.
| 39
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 12: CHANGE IN ASSETS UNDER MANAGEMENT – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
2,959
$
2,741
$
2,572
8.0 %
15.0 %
2,502
457
3,533
3,990
2,165
576
757
1,333
106,551
105,218
$ 110,541
$ 106,551
Daily average assets under management
$ 109,521
$ 107,557
Managed asset net sales
Investment fund net sales
Mackenzie net sales through Wealth Management
$
$
457
36
493
$
$
576
65
641
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Net sales (redemptions)
Investment returns
Net change in assets
Beginning assets
Ending assets
Daily average assets under management
Managed asset net sales
Investment fund net sales
Mackenzie net sales through Wealth Management
2,581
(9)
4,848
4,839
92,874
97,713
95,194
(9)
130
121
$
$
$
$
15.6
(20.7)
N/M
199.3
1.3
(3.1)
N/M
(27.1)
(17.5)
14.7
3.7 %
1.8 %
13.1 %
15.1 %
(20.7) %
N/M %
(44.6)
(72.3)
(23.1) %
N/M %
2021
DEC. 31
2020
DEC. 31
% CHANGE
$ 11,845
$
8,987
31.8 %
10,032
1,813
11,015
12,828
97,713
$ 110,541
$ 104,962
$
1,813
431
$
2,244
9,438
(451)
5,003
4,552
93,161
97,713
91,929
(451)
211
(240)
$
$
$
$
6.3
N/M
120.2
181.8
4.9
13.1 %
14.2 %
N/M %
104.3
N/M %
IG Wealth Management’s annualized quarterly redemption
in an increase of $11.0 billion in mutual fund assets compared
rate for long-term funds was 8.8% in the fourth quarter of
to an increase of $5.0 million in 2020.
2021, compared to 10.3% in the fourth quarter of 2020. IG
Wealth Management’s twelve month trailing redemption
CHANGE IN ASSETS UNDER MANAGEMENT
rate for long-term funds was 9.2% at December 31, 2021,
AND ADVISEMENT – Q4 2021 VS. Q3 2021
compared to 9.8% at December 31, 2020, and remains well
IG Wealth Management’s assets under advisement were
below the corresponding average redemption rate for all other
$119.6 billion at December 31, 2021, an increase of 4.9% from
members of the Investment Funds Institute of Canada (IFIC)
$114.0 billion at September 30, 2021. IG Wealth Management’s
of approximately 13.5% at December 31, 2021. IG Wealth
mutual fund assets under management were $110.5 billion at
Management’s redemption rate has been very stable compared
December 31, 2021, an increase of 3.7% from $106.6 billion
to the overall mutual fund industry, reflecting our focus on
at September 30, 2021. Average daily mutual fund assets
financial planning.
For the twelve months ended December 31, 2021, sales of
were $109.5 billion in the fourth quarter of 2021 compared to
$107.6 billion in the third quarter of 2021, an increase of 1.8%.
IG Wealth Management mutual funds through its Consultant
For the quarter ended December 31, 2021, sales of IG Wealth
network were $11.8 billion, an increase of 31.8% from 2020.
Mutual fund redemptions totalled $10.0 billion, an increase of
Management mutual funds through its Consultant network
were $3.0 billion, an increase of 8.0% from the third quarter of
6.3% from 2020. Net sales of IG Wealth Management mutual
2021. Mutual fund redemptions, which totalled $2.5 billion for
funds were $1.8 billion compared with net redemptions of
the fourth quarter, increased 15.6% from the previous quarter,
$451 million in 2020. During 2021, investment returns resulted
and the annualized quarterly redemption rate was 8.8% in
40 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
the fourth quarter compared to 7.7% in the third quarter of
MORTGAGE AND BANKING OPERATIONS
2021. IG Wealth Management mutual fund net sales were
IG Wealth Management Mortgage Planning Specialists are
$457 million for the current quarter compared to net sales of
located throughout each province in Canada, and work with our
$576 million in the previous quarter.
IG WEALTH MANAGEMENT
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, 2021,
total segregated fund assets were $1.5 billion, compared to
$1.6 billion at December 31, 2020.
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 average number of policies sold by each insurance-licensed
Consultant was 2.3 for the quarter ended December 31,
2021, compared to 2.6 in 2020. For the twelve months ended
December 31, 2021, the average number of policies sold by
each insurance-licensed Consultant was 9.5 compared to 9.0 in
2020. Distribution of insurance products is enhanced through
IG Wealth Management’s Insurance Planning Specialists, located
throughout Canada, who assist Consultants with advanced
estate planning solutions for high net worth clients.
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.
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†.
Mortgage fundings offered through IG Wealth Management and
through Solutions Banking† for the three and twelve months
ended December 31, 2021 were $221 million and $1.08 billion
compared to $297 million and $1.12 billion in 2020, a decrease of
25.6% and 3.3%, respectively. At December 31, 2021, mortgages
offered through both sources totalled $8.4 billion, compared to
$9.5 billion at December 31, 2020, a decrease of 11.3%.
Available credit associated with Solutions Banking† All-in-One
accounts originated for the three and twelve month periods
ended December 31, 2021 were $276 million and $1.3 billion,
respectively, compared to $411 million and $1.2 billion in 2020.
At December 31, 2021, the balance outstanding of Solutions
Banking† All-in-One products was $3.9 billion, compared to
$3.4 billion one year ago, and represented approximately 52%
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 labelled 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 outstanding lending products of IG Wealth Management
clients in the Solutions Banking† offering, including Solutions
Banking† mortgages totalled $5.7 billion at December 31, 2021,
compared to $5.1 billion at December 31, 2020.
| 41
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Review of Segment Operating Results
The increase in product and program fees in both the three
and twelve month periods of 2021 was primarily due to the
The Wealth Management segment’s adjusted net earnings are
increase in average assets under management of 15.1% and
presented in Table 13 and include the operations of IG Wealth
14.2%, respectively, as shown in Table 12. The average product
Management and Investment Planning Counsel.
IG WEALTH MANAGEMENT
IG Wealth Management adjusted net earnings are presented
in Table 14. Adjusted net earnings for the fourth quarter of
2021 were $141.1 million, an increase of 20.2% from the fourth
and program fee rate for the fourth quarter was 86.3 basis
points of average assets under management compared to 85.8
basis points in 2020, and the rate for the twelve month period
was 86.0 basis points of average assets under management
compared to 85.8 basis points in 2020, reflecting changes in
product mix and price in both periods.
quarter in 2020 and an increase of 0.1% from the prior quarter.
Other financial planning revenues are primarily earned from:
Adjusted net earnings for the year ended December 31, 2021
were $522.9 million, an increase of 20.5% from 2020.
• Mortgage banking operations
• Distribution of insurance products through I.G. Insurance
Adjusted earnings before interest and taxes for the fourth
Services Inc.
quarter of 2021 were $215.0 million, an increase of 17.9% from
the fourth quarter in 2020 and an increase of 0.1% from the
prior quarter. Adjusted earnings before interest and taxes for the
year ended December 31, 2021 were $802.8 million, an increase
of 18.1% from 2020.
2021 VS. 2020
FEE INCOME
Advisory fees include fees for providing financial advice to clients
including fees related to the distribution of products, and depend
largely on the level and composition of assets under advisement.
Advisory fees were $301.1 million in the fourth quarter of
2021, an increase of $35.6 million or 13.4% from $265.5 million
in 2020. For the twelve months ended December 31, 2021,
advisory fees were $1,154.3 million, an increase of $135.2 million
• Securities trading services provided through Investors Group
Securities Inc.
• Banking services provided through Solutions Banking†
Other financial planning revenues of $41.7 million for the fourth
quarter of 2021 decreased by $3.6 million from $45.3 million
in 2020, primarily due to lower earnings from the mortgage
banking operations partly offset by higher distribution fee
income from insurance products. For the twelve month period,
other financial planning revenues of $163.4 million increased
by $13.9 million from $149.5 million in 2020, due to higher
distribution fee income from insurance products partly offset
by lower earnings from the mortgage banking operations.
A summary of mortgage banking operations for the three and
twelve month periods under review is presented in Table 15.
or 13.3% from $1,019.1 million in 2020.
NET INVESTMENT INCOME AND OTHER
The increase in advisory fees in the three and twelve month
periods ending December 31, 2021 was primarily due to the
increase in average assets under advisement of 17.0% and
16.7%, respectively, as shown in Table 11. In both periods, the
increase in average assets was offset in part by a decrease in
the advisory fee rate. The average advisory fee rate for the
fourth quarter was 101.8 basis points of average assets under
advisement compared to 105.3 basis points in 2020, and for the
twelve month period, the rate was 103.2 basis points compared
to 106.3 basis points in 2020. The decrease in rates reflects
changes in product and client mix as we have more high net
worth clients who are eligible for lower rates.
Product and program fees depend largely on the level and
composition of mutual fund assets under management. Product
and program fees totalled $238.1 million in the current quarter,
up 15.7% from $205.8 million a year ago. Product and program
fees were $903.5 million for the twelve month period ended
December 31, 2021 compared to $790.6 million in 2020, an
increase of 14.3%.
Net investment income and other is primarily related to
investment income earned on our cash and cash equivalents
and securities and other income not related to our core business.
It also includes a charge from the Strategic Investments and
Other segment for the use of unallocated capital.
EXPENSES
IG Wealth Management incurs advisory and business
development expenses that include compensation paid to our
Consultants. The majority of these costs vary directly with asset
or sales levels. Also included are other distribution and business
development activities which do not vary directly with asset or
sales levels, such as direct marketing and advertising, financial
planning specialist support and other costs incurred to support
our adviser networks. These expenses tend to be discretionary
or vary based upon the number of consultants or clients.
Asset-based compensation fluctuates with the value of assets
under advisement. Asset-based compensation increased by
$25.2 million and $90.5 million for the three and twelve month
42 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis TABLE 13: OPERATING RESULTS – WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset-based compensation
Sales-based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub-advisory
Adjusted earnings before interest and taxes
Interest expense
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
TWELVE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset-based compensation
Sales-based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub-advisory
Adjusted earnings before interest and taxes
Interest expense
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
370.6
$
364.5
$
325.5
1.7 %
13.9 %
252.8
623.4
1.7
47.4
672.5
1.4
673.9
195.2
15.9
21.3
52.4
73.7
284.8
115.9
49.5
450.2
223.7
22.7
201.0
53.8
248.4
612.9
1.8
45.3
660.0
(0.2)
659.8
191.6
14.7
16.5
52.0
68.5
274.8
113.2
48.7
436.7
223.1
22.8
200.3
53.5
219.8
545.3
3.2
50.0
598.5
1.0
599.5
164.3
10.6
20.1
59.8
79.9
254.8
113.3
42.7
410.8
188.7
22.7
166.0
44.2
1.8
1.7
(5.6)
4.6
1.9
N/M
2.1
1.9
8.2
29.1
0.8
7.6
3.6
2.4
1.6
3.1
0.3
(0.4)
0.3
0.6
15.0
14.3
(46.9)
(5.2)
12.4
40.0
12.4
18.8
50.0
6.0
(12.4)
(7.8)
11.8
2.3
15.9
9.6
18.5
–
21.1
21.7
$
147.2
$
146.8
$
121.8
0.3 %
20.9 %
2021
DEC. 31
2020
DEC. 31
% CHANGE
$ 1,417.2
$ 1,245.7
13.8 %
961.1
2,378.3
10.0
184.6
2,572.9
3.6
2,576.5
740.1
56.1
75.5
217.6
293.1
1,089.3
466.1
189.7
1,745.1
831.4
90.3
741.1
198.0
846.3
2,092.0
16.0
168.0
2,276.0
2.3
2,278.3
625.9
36.4
69.8
227.9
297.7
960.0
453.7
163.2
1,576.9
701.4
89.9
611.5
162.6
13.6
13.7
(37.5)
9.9
13.0
56.5
13.1
18.2
54.1
8.2
(4.5)
(1.5)
13.5
2.7
16.2
10.7
18.5
0.4
21.2
21.8
$
543.1
$
448.9
21.0 %
| 43
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 14: OPERATING RESULTS – IG WEALTH MANAGEMENT
THREE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset-based compensation
Sales-based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub-advisory
Adjusted earnings before interest and taxes
Interest expense
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
TWELVE MONTHS ENDED
($ millions)
Revenues
Wealth Management
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Total Wealth Management
Net investment income and other
Expenses
Advisory and business development
Asset-based compensation
Sales-based compensation
Other
Other product commissions
Business development
Total advisory and business development
Operations and support
Sub-advisory
Adjusted earnings before interest and taxes
Interest expense
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
44 |
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
301.1
$
296.9
$
265.5
1.4 %
13.4 %
238.1
539.2
1.7
41.7
582.6
1.3
583.9
142.0
15.9
18.0
43.8
61.8
219.7
103.6
45.6
368.9
215.0
22.5
192.5
51.4
233.5
530.4
1.8
39.8
572.0
(0.5)
571.5
138.4
14.7
13.3
43.8
57.1
210.2
101.8
44.7
356.7
214.8
22.6
192.2
51.3
205.8
471.3
3.0
45.3
519.6
0.8
520.4
116.8
10.6
17.3
52.3
69.6
197.0
101.8
39.2
338.0
182.4
22.5
159.9
42.5
2.0
1.7
(5.6)
4.8
1.9
N/M
2.2
2.6
8.2
35.3
–
8.2
4.5
1.8
2.0
3.4
0.1
(0.4)
0.2
0.2
15.7
14.4
(43.3)
(7.9)
12.1
62.5
12.2
21.6
50.0
4.0
(16.3)
(11.2)
11.5
1.8
16.3
9.1
17.9
–
20.4
20.9
$
141.1
$
140.9
$
117.4
0.1 %
20.2 %
2021
DEC. 31
2020
DEC. 31
% CHANGE
$ 1,154.3
$ 1,019.1
13.3 %
903.5
2,057.8
9.9
163.4
2,231.1
2.6
2,233.7
536.0
56.1
62.8
184.6
247.4
839.5
416.9
174.5
790.6
1,809.7
15.7
149.5
1,974.9
1.3
1,976.2
445.5
36.4
58.6
199.1
257.7
739.6
407.1
149.7
1,430.9
1,296.4
802.8
89.6
713.2
190.3
679.8
89.3
590.5
156.7
14.3
13.7
(36.9)
9.3
13.0
100.0
13.0
20.3
54.1
7.2
(7.3)
(4.0)
13.5
2.4
16.6
10.4
18.1
0.3
20.8
21.4
$
522.9
$
433.8
20.5 %
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 15: MORTGAGE BANKING OPERATIONS – IG WEALTH MANAGEMENT
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
THREE 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)
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)
$
$
33.1
25.5
7.6
0.5
–
0.7
8.8
$
35.6
27.3
8.3
1.8
1.3
0.2
$
11.6
$
5,111
$
5,338
2,411
2,454
$
$
$
44.1
33.5
10.6
3.7
(1.0)
1.8
15.1
6,126
2,670
$
7,522
$
7,792
$
8,796
$
$
297
176
473
$
$
333
222
555
$
$
434
246
680
% CHANGE
2020
DEC. 31
(24.9) %
(23.9)
(28.3)
(86.5)
100.0
(61.1)
(7.0) %
(6.6)
(8.4)
(72.2)
(100.0)
250.0
(24.1) %
(41.7) %
(4.3) %
(1.8)
(3.5) %
(10.8) %
(20.7)
(14.8) %
(16.6) %
(9.7)
(14.5) %
(31.6) %
(28.5)
(30.4) %
2021
DEC. 31
2020
DEC. 31
% CHANGE
$
147.0
$
111.4
35.6
3.9
1.4
3.5
$
44.4
$
5,431
2,503
$
7,934
$
$
$
181.1
148.5
32.6
9.8
(5.1)
8.5
45.8
6,465
2,748
9,213
$
1,506
$
1,605
872
760
$
2,378
$
2,365
(18.8) %
(25.0)
9.2
(60.2)
N/M
(58.8)
(3.1) %
(16.0) %
(8.9)
(13.9) %
(6.2) %
14.7
0.5 %
(1) Represents sales to institutional investors through private placements, to IG Mackenzie Mortgage and Short Term Income Fund, and to IG Mackenzie Canadian Corporate Bond
Fund as well as gains realized on those sales.
(2) Represents principal amounts sold.
| 45
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
periods ended December 31, 2021 to $142.0 million and
Q4 2021 VS. Q3 2021
$536.0 million, respectively, compared to 2020. The increase
was primarily due to increased average assets under advisement
FEE INCOME
and Consultant performance.
IG Wealth Management sales-based compensation is based
upon the level of new assets contributed to client accounts at
IG Wealth Management (subject to eligibility requirements).
All sales-based compensation payments are capitalized
and amortized as they reflect incremental costs to obtain a
client contract.
Advisory fee income increased by $4.2 million or 1.4% to
$301.1 million in the fourth quarter of 2021 compared with the
third quarter of 2021. The increase in advisory fees in the fourth
quarter was primarily due to the increase in average assets
under advisement of 2.2% for the quarter, as shown in Table 11.
The average advisory fee rate for the fourth quarter was 101.8
basis points of average assets under management, a decrease
from 102.6 basis points in the third quarter primarily due to
Sales-based compensation was $15.9 million for the fourth
changes in client mix.
quarter of 2021, an increase of $5.3 million from $10.6 million in
2020. For the twelve month period, sales-based compensation
expense was $56.1 million, an increase of $19.7 million
from $36.4 million in 2020. The increase in expense is due
to additional sales-based commission being capitalized and
amortized throughout 2020 and 2021.
Other advisory and business development expenses were
$61.8 million in the fourth quarter of 2021, compared to
$69.6 million in 2020. Other advisory and business development
expenses were $247.4 million in the twelve months ended
December 31, 2021, compared to $257.7 million in 2020.
Product and program fees were $238.1 million in the fourth
quarter of 2021, an increase of $4.6 million from $233.5 million in
the third quarter of 2021. The increase in product and program
fees was due to higher assets under management. The average
product and program fee rate was 86.3 basis points in the current
quarter, compared to 86.1 basis points in the third quarter.
Other financial planning revenues of $41.7 million in the fourth
quarter of 2021 increased by $1.9 million from $39.8 million in
the third quarter, due to higher insurance sales partly offset by
lower mortgage income.
Operations and support includes costs that support our wealth
NET INVESTMENT INCOME AND OTHER
management and other general and administrative functions
Net investment income and other was $1.3 million in the fourth
such as product management, technology and operations, as
quarter of 2021, an increase of $1.8 million from the third quarter.
well as other functional business units and corporate expenses.
Operations and support expenses were $103.6 million for the
EXPENSES
fourth quarter of 2021 compared to $101.8 million in 2020, an
Advisory and business development expenses in the current
increase of $1.8 million or 1.8%. For the twelve month period,
quarter were $219.7 million, an increase of $9.5 million from
operations and support expenses were $416.9 million in 2021
$210.2 million in the previous quarter primarily due to higher
compared to $407.1 million in 2020, an increase of $9.8 million
assets under advisement, higher sales based compensation and
or 2.4%.
higher insurance sales.
Sub-advisory expenses were $45.6 million for the fourth
Operations and support expenses were $103.6 million for
quarter of 2021 compared to $39.2 million in 2020, an
the fourth quarter of 2021 compared to $101.8 million in the
increase of $6.4 million or 16.3%. For the twelve month period,
previous quarter, an increase of $1.8 million or 1.8%.
sub-advisory expenses were $174.5 million in 2021 compared
to $149.7 million in 2020, an increase of $24.8 million or 16.6%.
The increase in both periods is primarily due to higher assets
under management.
INTEREST EXPENSE
Interest expense, which includes allocated interest expense
on long-term debt and interest expense on leases, totalled
$22.5 million in the fourth quarter of 2021, unchanged from
2020. For the twelve month period, interest expense totalled
$89.6 million compared to $89.3 million in 2020. Long-term
debt interest expense is calculated based on a long-term debt
allocation of $1.7 billion to IG Wealth Management.
INVESTMENT PLANNING COUNSEL
2021 VS. 2020
Adjusted net earnings related to Investment Planning Counsel
were $1.7 million and $5.1 million higher in the three and twelve
month periods ended December 31, 2021 than the comparable
periods in 2020.
Q4 2021 VS. Q3 2021
Adjusted net earnings related to Investment Planning Counsel
were $0.2 million higher in the fourth quarter of 2021 compared
to the prior quarter.
46 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Asset Management
The Asset Management segment includes Mackenzie
Management is considered a client of the Asset Management
Investments (Mackenzie).
segment and transfer pricing is based on values for similar
Asset Management revenue reflects:
• Net asset management fees – third party includes fees
received from our mutual funds and fees from third parties
sized asset management mandates.
Assets managed for IG Wealth Management are included in the
Asset Management segment’s assets under management.
for investment management services. Compensation paid to
Effective January 1, 2021, each segment now reflects their
dealers offsets the fees earned.
• Asset management fees – Wealth Management includes
fees received from the Wealth Management segment. Wealth
results to adjusted net earnings. Debt and interest expense is
allocated to a segment based on management’s assessment of:
i) capacity to service the debt, and ii) where the debt is being
serviced. Income taxes are also reported in each segment.
Review of the Business
Mackenzie Investments is a diversified asset management
• Business processes that are simple, easy and digitized
solutions provider founded in 1967. We provide investment
management and related services with a wide range of
investment mandates through a boutique structure and using
multiple distribution channels. We are committed to delivering
strong investment performance for our clients by drawing on
more than 50 years of investment management experience.
• Continue to foster a high performance and diverse culture
These strategies impact our strategic priorities and drive future
business growth. We aim to achieve this 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
Mackenzie earns asset management fees primarily from:
institutional quality in everything we do.
• Management fees earned from its investment funds,
sub-advised accounts and institutional clients.
Mackenzie seeks to maximize returns on business investment by
focusing our resources in areas that directly impact the success
• Fees earned from its mutual funds for administrative services.
of our strategic focus: investment management, distribution and
• Redemption fees on deferred sales charge and low load units.
client experience.
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
account type of the underlying assets under management.
Equity based mandates have higher management fee rates
than fixed income mandates and retail mutual fund accounts
have higher management fee rates than sub-advised and
institutional accounts.
Our investment management capabilities are delivered through
a boutique structure, with separate in-house teams having
distinct focuses and diverse styles. Our research and portfolio
management teams are located in Toronto, Montreal, Winnipeg,
Vancouver, Boston, Dublin and Hong Kong. In addition to
our own investment teams, we supplement our investment
capabilities with strategic partners (third party sub-advisors) in
selected areas. The development of a broad range of investment
capabilities and products is a key strength in supporting the
evolving financial needs of investors.
ASSET MANAGEMENT STRATEGY
Mackenzie’s mission is to create a more invested world, together.
Our business focuses on three key distribution channels: retail,
strategic alliances and institutional.
Mackenzie’s objective is to become Canada’s preferred global
asset management solutions provider and business partner.
Mackenzie’s focus is based on five key strategies:
• Win in retail in a segmented way
• Build a global institutional business with a targeted approach
• Deliver innovative investment solutions and performance
Mackenzie primarily distributes its retail investment products
through third-party financial advisors. Our sales teams work
with many of the more than 30,000 independent financial
advisors and their firms across Canada. Our innovative,
comprehensive lineup of investment solutions covers all asset
classes and parts of the globe. We offer a range of relevant
products and investment solutions designed to help advisors
meet the evolving needs of their clients. We regularly introduce
| 47
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report new funds and we may merge or streamline our fund offerings
institutions. We attract new institutional business through our
to provide enhanced investment solutions.
relationships with pension and management consultants.
In addition to our retail distribution team, Mackenzie also
Gross sales and redemption activity in strategic alliance and
has specialty teams focused on strategic alliances and the
institutional accounts can be more pronounced than in the retail
institutional marketplace.
Within the strategic alliance channel, Mackenzie offers certain
series of our mutual funds and provides sub-advisory services to
third-party and related party investment programs offered by
channel, given the relative size and the nature of the distribution
relationships of these accounts. These accounts are also subject
to ongoing reviews and rebalance activities which may result in
a significant change in the level of assets under management.
banks, insurance companies and other investment companies.
Mackenzie continues to be positioned to continue to build
Strategic alliances with related parties include providing advisory
and enhance our distribution relationships given our team
services to IG Wealth Management, Investment Planning
of experienced investment professionals, strength of our
Counsel and Great-West Lifeco Inc. (Lifeco) subsidiaries.
distribution network, broad product shelf, competitively
Mackenzie partners with Wealthsimple to distribute ETFs
priced products and our focus on client experience and
through their product shelf. Within the strategic alliance
investment excellence.
channel, Mackenzie’s primary distribution relationship is with
the head office of the respective bank, insurance company or
ACQUISITIONS
investment company.
In the institutional channel, Mackenzie provides investment
management services to pension plans, foundations and other
GLC Asset Management Group Ltd. (GLC)
On December 31, 2020, Mackenzie acquired GLC, a Canadian
investment management firm with $37 billion in assets under
management, from Great-West Lifeco Inc. (Lifeco).
TABLE 16: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – ASSET MANAGEMENT(1)
THREE MONTHS ENDED
($ millions)
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
Assets under management excluding sub-advisory to
Canada Life and the Wealth Management Segment
Net sales (redemptions)
Mutual funds(1)
ETF net creations(2)
Investment funds(3)
Sub-advisory, institutional and other accounts(4)
Total net sales (redemptions)
Change due to GLC(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Consolidated assets under management(5)
Mutual funds
ETFs
Investment funds(3)
Sub-advisory, institutional and other accounts
Sub-advisory to Canada Life
$
512
245
757
(576)
181
–
3,162
3,343
72,967
$
799
320
1,119
(27)
1,092
–
54
1,146
71,821
$
1,376
(35.9) %
(62.8) %
372
1,748
(75)
1,673
(16,875)
4,365
(10,837)
74,600
(23.4)
(32.4)
N/M
(83.4)
–
N/M
191.7
1.6
(34.1)
(56.7)
N/M
(89.2)
100.0
(27.6)
N/M
(2.2)
$ 76,310
$
72,967
$
63,763
4.6 %
19.7 %
$ 62,969
$
59,721
$
52,682
5.4 %
19.5 %
5,393
68,362
7,948
76,310
52,805
5,068
64,789
8,178
72,967
51,131
3,788
56,470
7,293
63,763
47,175
110,938
74,210
6.4
5.5
(2.8)
4.6
3.3
4.0
2.5
42.4
21.1
9.0
19.7
11.9
16.4
9.5
Total excluding sub-advisory to Wealth Management
129,115
124,098
Sub-advisory to Wealth Management
81,228
79,242
Consolidated assets under management
$ 210,343
$ 203,340
$ 185,148
3.4 %
13.6 %
Average total assets(6)
Excluding sub-advisory to Wealth Management
$ 126,759
$ 125,181
$
77,186
1.3 %
64.2 %
Consolidated
207,143
204,850
149,491
1.1
38.6
48 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 16: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – ASSET MANAGEMENT(1)
TWELVE MONTHS ENDED
($ millions)
Assets under management excluding sub-advisory to
Canada Life and the Wealth Management Segment
Net sales (redemptions)
Mutual funds(1)
ETF net creations(2)
Investment funds(3)
Sub-advisory, institutional and other accounts(4)
Total net sales (redemptions)
Change due to GLC(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Average total assets(6)
Excluding sub-advisory to Wealth Management
Consolidated
2021
DEC. 31
2020
DEC. 31
% CHANGE
$
3,908
$
2,956
32.2 %
1,532
5,440
(306)
5,134
–
7,413
12,547
63,763
1,232
4,188
2,062
6,250
(16,875)
6,131
(4,494)
68,257
24.4
29.9
N/M
(17.9)
100.0
20.9
N/M
(6.6)
$ 76,310
$
63,763
19.7 %
$ 120,988
$
71,402
198,946
141,985
69.4 %
40.1
(1) Mutual funds – Institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes:
2021 YTD – resulted in redemptions and net redemptions of $361 million.
2020 YTD – resulted in sales of $1.4 billion, redemptions of $785 million and net sales of $612 million.
2020 Q4 – resulted in sales of $625 million, redemptions of $593 million and net sales of $32 million.
Q3 – resulted in sales and net sales of $290 million.
(2) ETFs – During the second and third quarters of 2020, Wealthsimple made allocation changes which resulted in $370 million in purchases in Mackenzie ETFs and $325 million of
redemptions from Mackenzie’s ETFs, respectively.
(3) Investment fund assets under management and net sales exclude investments into Mackenzie mutual funds and ETFs by IGM Financial’s investment funds.
(4) Sub-advisory, institutional and other accounts:
2021 Q2 – Mackenzie was awarded $680 million of sub-advisory wins.
Q4 – an institutional client re-assigned sub-advisory responsibilities on mandates advised by Mackenzie totalling $667 million.
2020 Q2 – Mackenzie was awarded $2.6 billion of sub-advisory wins.
(5) In the fourth quarter of 2020 Mackenzie Investments:
– Sold $16.2 billion of fund management contracts relating to private label Quadrus Group of Funds (QGOF) to Lifeco.
– Acquired $183 million in mutual fund assets under management related to the acquisition of Greenchip Financial Corp.
– Acquired $46.3 billion in institutional accounts as part of the transaction with Lifeco.
(6) Based on daily average investment fund assets and month-end average sub-advisory, institutional and other assets.
Separately, Lifeco’s subsidiary, The Canada Life Assurance
The acquisition also includes a distribution agreement with
Company (Canada Life) acquired the fund management
Canada Life, positioning Mackenzie as the core investment
contracts relating to private label Quadrus Group of Funds
advisor to its individual and group product offerings and
(QGOF). Mackenzie was previously the manager and trustee
enhancing Canada Life’s capabilities and competitiveness.
of the QGOF. Subsequent to the sale, Mackenzie continues to
provide investment and administration services to the QGOF.
Greenchip Financial Corp. (Greenchip)
Benefits of the deal to Mackenzie include the following:
• The net addition of $30.1 billion in assets under
management solidifying Mackenzie as one of Canada’s
largest asset managers.
On December 22, 2020, Mackenzie acquired Greenchip, a
leading Canadian firm focused exclusively on the environmental
economy since 2007. The acquisition added $618 million
in assets under management, of which $435 million was
sub-advisory mandates to the Mackenzie Global Environmental
• Expands Mackenzie’s distribution reach to the fast-growing
Equity Fund. Mackenzie has been a leader in bringing
group retirement business channel and establishes Mackenzie
sustainable investing to Canadians, with an evolving suite of
as one of the top three providers in Canada of investment
solutions to defined contribution plans and other group
retirement offerings.
• Enhances Mackenzie’s investment capabilities with the
addition of a new Canadian Equity boutique.
funds focused on environmental leadership, gender diversity and
sustainability. The acquisition of Greenchip is a natural evolution
reflecting the success of Greenchip’s sub-advisory relationship
to the Mackenzie Global Environmental Equity Fund.
| 49
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
ASSETS UNDER MANAGEMENT
The changes in total assets under management are summarized
in Table 16 and the changes in investment fund assets under
management are summarized in Table 17.
Assets managed for the Wealth Management segment are
included in total assets under management. Prior to the third
quarter of 2020, assets managed by Mackenzie for IG Wealth
Management were excluded from the Mackenzie reportable
segment. Comparative periods have been retroactively restated.
At December 31, 2021, Mackenzie’s total assets under
management were $210.3 billion, an all-time high, and an
increase of 13.6% from $185.1 billion last year. Mackenzie’s
total assets under management (excluding sub-advisory to
Wealth Management) were $129.1 billion, an all-time high,
and an increase of 16.4% from $110.9 billion last year. The
change in Mackenzie’s assets under management is determined
by investment returns generated for our clients and net
contributions from our clients.
CHANGE IN ASSETS UNDER
MANAGEMENT – 2021 VS. 2020
Mackenzie’s total assets under management at December 31,
2021 were $210.3 billion, an all-time high and an increase
of 13.6% from $185.1 billion at December 31, 2020. Assets
under management excluding sub-advisory to the Wealth
Management segment were $129.1 billion, an all-time high and
an increase of 16.4% from $110.9 billion at December 31, 2020.
Investment fund assets under management were $68.4 billion
at December 31, 2021, compared to $56.5 billion at
December 31, 2020, an increase of 21.1%. Mackenzie’s mutual
fund assets under management of $63.0 billion increased by
19.5% from $52.7 billion at December 31, 2020. Mackenzie’s
ETF assets excluding ETFs held within IGM Financial’s
managed products were $5.4 billion at December 31, 2021,
an increase of 42.4% from $3.8 billion at December 31, 2020.
ETF assets inclusive of IGM Financial’s managed products were
$12.7 billion at December 31, 2021 compared to $8.5 billion at
December 31, 2020.
In the three months ended December 31, 2021, Mackenzie’s
mutual fund gross sales were $2.6 billion a decrease of 42.4%
from $4.5 billion in 2020. Mutual fund redemptions in the
current quarter were $2.1 billion, a decrease of 33.4% from
last year. Mutual fund net sales for the three months ended
December 31, 2021 were $512 million, as compared to net
sales of $1.4 billion last year. In the three months ended
December 31, 2021, ETF net creations were $245 million
compared to $372 million last year. Investment fund net sales
in the current quarter were $757 million compared to net sales
of $1.7 billion last year. During the current quarter, investment
returns resulted in investment fund assets increasing by
$2.8 billion compared to an increase of $3.8 billion last year.
During the fourth quarter of 2020, certain third party programs,
which include Mackenzie mutual funds, made fund allocation
changes resulting in gross sales of $625 million, redemptions
of $593 million and net sales of $32 million. Excluding these
transactions in 2020, mutual fund gross sales decreased by
33.1% in the three months ended December 31, 2021 compared
to last year, mutual fund redemptions decreased by 17.9% and
mutual fund net sales of $512 million in 2021 compared to
mutual fund net sales of $1.3 billion last year.
Total net sales excluding sub-advisory to Canada Life and to
the Wealth Management segment for the three months ended
December 31, 2021 were $181 million compared to net sales
of $1.7 billion last year. During the fourth quarter of 2021, an
institutional client re-assigned sub-advisory responsibilities on
mandates advised by Mackenzie totalling $667 million. Excluding
this transaction and the mutual fund transactions discussed
above, net sales were $848 million for the three months ended
December 31, 2021 compared to net sales of $1.6 billion last
year. During the current quarter, investment returns resulted
in assets increasing by $3.2 billion compared to an increase of
$4.4 billion last year.
In the twelve months ended December 31, 2021, Mackenzie’s
mutual fund gross sales were $12.0 billion, a decrease of 11.4%
from $13.6 billion in 2020. Mutual fund redemptions in the
current period were $8.1 billion, a decrease of 23.5% from last
year. Mutual fund net sales for the year ended December 31,
2021 were $3.9 billion, as compared to net sales of $3.0 billion
last year. In the year ended December 31, 2021, ETF net
creations were $1.5 billion compared to $1.2 billion last year.
Investment fund net sales in the current period were $5.4 billion
compared to net sales of $4.2 billion last year. During the
current period, investment returns resulted in investment fund
assets increasing by $6.5 billion compared to an increase of
$5.1 billion last year.
During the twelve months ended December 31, 2021, certain
third party programs, which include Mackenzie mutual funds
made fund allocation changes resulting in redemptions and net
redemptions of $361 million. During the twelve months ended
December 31, 2020, certain third party programs, which include
Mackenzie mutual funds made fund allocation changes resulting
in gross sales of $1.4 billion, redemptions of $785 million and
net sales of $612 million. Excluding these transactions in 2021
and 2020, mutual fund gross sales decreased 1.2% and mutual
fund redemptions decreased 21.1% in the twelve months ended
December 31, 2021 compared to last year, and mutual fund
net sales were $4.3 billion in the current year compared to
$2.3 billion last year.
50 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis TABLE 17: CHANGE IN INVESTMENT FUND ASSETS UNDER MANAGEMENT – ASSET MANAGEMENT(1)
THREE MONTHS ENDED
($ millions)
Sales
Redemptions
Mutual fund net sales (redemptions)(2)
ETF net creations(3)
Investment fund net sales (redemptions)(4)
Change due to divestiture of Quadrus Group
of Funds and Greenchip acquisition(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Consists of:
Mutual funds
ETFs
Investment funds
Daily average investment fund assets
TWELVE MONTHS ENDED
($ millions)
Sales
Redemptions
Mutual fund net sales (redemptions)(2)
ETF net creations(3)
Investment fund net sales (redemptions)(4)
Change due to divestiture of Quadrus Group
of Funds and Greenchip acquisition(5)
Investment returns
Net change in assets
Beginning assets
Ending assets
Daily average investment fund assets
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
$
2,592
$
2,476
$
4,501
4.7 %
(42.4) %
2,080
512
245
757
–
2,816
3,573
64,789
1,677
799
320
1,119
–
16
1,135
63,654
3,125
1,376
372
1,748
(15,996)
3,789
(10,459)
66,929
24.0
(35.9)
(23.4)
(32.4)
–
N/M
214.8
1.8
(33.4)
(62.8)
(34.1)
(56.7)
100.0
(25.7)
N/M
(3.2)
$ 68,362
$
64,789
$
56,470
5.5 %
21.1 %
$ 62,969
$
59,721
$
52,682
5.4 %
19.5 %
5,393
5,068
3,788
6.4
42.4
$ 68,362
$ 66,833
$
$
64,789
65,460
$
$
56,470
69,343
5.5 %
21.1 %
2.1 %
(3.6) %
2021
DEC. 31
2020
DEC. 31
$ 12,022
$
13,565
8,114
3,908
1,532
5,440
–
6,452
11,892
56,470
$ 68,362
$ 63,003
$
$
10,609
2,956
1,232
4,188
(15,996)
5,067
(6,741)
63,211
56,470
64,617
% CHANGE
(11.4) %
(23.5)
32.2
24.4
29.9
100
27.3
N/M
(10.7)
21.1 %
(2.5) %
(1) Investment fund assets under management and net sales excludes investments into Mackenzie mutual funds and ETFs by IGM Financial’s investment funds.
(2) Mutual funds – Institutional clients, which include Mackenzie mutual funds within their investment offerings, made fund allocation changes:
2021 YTD – resulted in redemptions and net redemptions of $361 million.
2020 YTD – resulted in sales of $1.4 billion, redemptions of $785 million and net sales of $612 million.
2020 Q4 – resulted in sales of $625 million, redemptions of $593 million and net sales of $32 million.
Q3 – resulted in sales and net sales of $290 million.
In the fourth quarter of 2020, Mackenzie Investments sold fund management contracts relating to private label Quadrus Group of Funds (QGOF) to Lifeco and, as a result, gross
and net mutual fund flows in 2021 are not directly comparable with 2020.
(3) ETFs – During the second and third quarters of 2020, Wealthsimple made allocation changes which resulted in $370 million in purchases in Mackenzie ETFs and $325 million of
redemptions from Mackenzie’s ETFs, respectively.
(4) Total investment fund net sales and assets under management exclude Mackenzie mutual fund investments in ETFs.
(5) In the fourth quarter of 2020 Mackenzie Investments:
– Sold $16.2 billion of fund management contracts relating to private label Quadrus Group of Funds (QGOF) to Lifeco.
– Acquired $183 million in mutual fund assets under management related to the acquisition of Greenchip Financial Corp.
| 51
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
Redemptions of long-term mutual funds in the three and
As at December 31, 2021, Mackenzie’s sub-advisory to the
twelve months ended December 31, 2021, were $2.0 billion and
Wealth Management segment were $81.2 billion or 69.9% of
$8.0 billion, respectively, compared to $3.0 billion and $10.1 billion
total Wealth Management assets under management compared
last year. Redemptions of long-term mutual funds excluding
to $74.2 billion or 72.0% of total Wealth Management assets
mutual fund allocation changes made by third party programs
under management at December 31, 2020.
were $7.6 billion in the twelve months ended December 31, 2021
compared to $9.3 billion in the comparative period last year.
CHANGE IN ASSETS UNDER
Mackenzie’s annualized quarterly redemption rate for long-term
MANAGEMENT – Q4 2021 VS. Q3 2021
mutual funds was 13.3% in the fourth quarter of 2021, compared
Mackenzie’s total assets under management at December 31,
to 18.2% in the fourth quarter of 2020. Mackenzie’s annualized
2021 were $210.3 billion, an increase of 3.4% from $203.3 billion
quarterly redemption rate for long-term mutual funds excluding
at September 30, 2021. Assets under management excluding
rebalance transactions was 14.5% in the fourth quarter of 2020.
sub-advisory to the Wealth Management segment were
Mackenzie’s twelve-month trailing redemption rate for long-term
$129.1 billion, an increase of 4.0% from $124.1 billion at
mutual funds was 13.6% at December 31, 2021, compared to
September 30, 2021.
16.6% last year. Mackenzie’s twelve month trailing redemption
rate for long-term funds, excluding rebalance transactions,
was 12.9% at December 31, 2021, compared to 15.3% at
December 31, 2020. The corresponding average twelve-month
trailing redemption rate for long-term mutual funds for all other
members of IFIC was approximately 13.1% at December 31,
2021. Mackenzie’s twelve-month trailing redemption rate is
comprised of the weighted average 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
Investment fund assets under management were $68.4 billion
at December 31, 2021, an increase of 5.5% from $64.8 billion
at September 30, 2021. Mackenzie’s mutual fund assets under
management were $63.0 billion at December 31, 2021, an
increase of 5.4% from $59.7 billion at September 30, 2021.
Mackenzie’s ETF assets were $5.4 billion at December 31,
2021 compared to $5.1 billion at September 30, 2021. ETF
assets inclusive of IGM Financial’s managed products were
$12.7 billion at December 31, 2021 compared to $11.9 billion
at September 30, 2021.
for front-end load assets and matured assets are higher than the
For the quarter ended December 31, 2021, Mackenzie mutual
redemption rates for deferred sales charge and low load assets
fund gross sales were $2.6 billion, an increase of 4.7% from
with redemption fees.
ETF net creations were $1.5 billion in the twelve months ended
December 31, 2021, compared to $1.2 billion last year. During
the twelve months ended December 31, 2020, Wealthsimple
purchased $370 million and redeemed $325 million of
the third quarter of 2021. Mutual fund redemptions were
$2.1 billion, an increase of 24.0% from the third quarter of 2021.
Net sales of Mackenzie mutual funds for the current quarter
were $512 million compared with net sales of $799 million in
the previous quarter.
Mackenzie ETFs. Excluding these transactions in 2020, ETF
Redemptions of long-term mutual fund assets in the current
net creations were $1.5 billion in the current year compared
quarter were $2.0 billion, compared to $1.7 billion in the third
to $1.2 billion last year.
Total net sales excluding sub-advisory to Canada Life and to the
Wealth Management segment for the year ended December 31,
quarter. Mackenzie’s annualized quarterly redemption rate for
long-term mutual funds for the current quarter was 13.3%
compared to 11.0% in the third quarter.
2021 were $5.1 billion, compared to net sales of $6.3 billion
For the quarter ended December 31, 2021, Mackenzie ETF net
last year. During the second quarter of 2021, Mackenzie was
creations were $245 million compared to $320 million in the
awarded $680 million of sub-advisory mandates through our
third quarter.
strategic partnership with ChinaAMC. During the second quarter
of 2020, Mackenzie was awarded $2.6 billion of sub-advisory
mandates from various clients. Excluding these transactions and
the 2021 and 2020 transactions previously discussed, net sales
Investment fund net sales in the current quarter were
$757 million compared to net sales of $1.1 billion in the
third quarter.
were $5.5 billion for the twelve months ended December 31,
As at December 31, 2021, Mackenzie’s sub-advisory to Canada
2021 compared to net sales of $3.0 billion last year. During the
Life were $52.8 billion compared to $51.1 at September 30, 2021.
twelve months ended December 31, 2021, investment returns
resulted in assets increasing by $7.4 billion compared to an
increase of $6.1 billion last year.
As at December 31, 2021, Mackenzie’s sub-advisory to the
Wealth Management segment were $81.2 billion or 69.9% of
total Wealth Management assets under management compared
As at December 31, 2021, Mackenzie’s sub-advisory to Canada
to $79.2 billion or 70.7% of total Wealth Management assets
Life were $52.8 billion compared to $47.2 at December 31, 2020.
under management at September 30, 2021.
52 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis INVESTMENT MANAGEMENT
Mackenzie has $210.3 billion in assets under management at
December 31, 2021, an all-time high, including $81.2 billion of
sub-advisory mandates to the Wealth Management segment. It
has teams located in Toronto, Montreal, Winnipeg, Vancouver,
Boston, Dublin and Hong Kong.
We continue to deliver our 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 oversight
process focuses on i) identifying and encouraging each team’s
performance edge, ii) promoting best practices in portfolio
construction, and iii) emphasizing risk management.
Our investment team currently consists of seventeen boutiques,
including the following additions during 2021:
• Addition of a new Canadian Equity boutique with the
acquisition of GLC.
• Addition of a new boutique, Greenchip, that focuses on
thematic investing to combat climate change, through the
acquisition of Greenchip Financial Corp.
• Launch of a new sustainability-focused boutique
“Betterworld” during the second quarter of 2021. This
boutique invests exclusively in companies exemplifying
leadership in environmental, social and governance (ESG)
behaviours and practices.
the three year time frame and 59.5% 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 ranking service. At December 31, 2021, 85.8% of
Mackenzie mutual fund assets measured by Morningstar† had a
rating of three stars or better and 50.6% had a rating of four or
five stars. This compared to the Morningstar† universe of 86.4%
for three stars or better and 54.9% for four and five star funds at
December 31, 2021.
Mackenzie was once again recognized for industry leading
performance, winning eight 2021 Refinitiv Lipper Awards
across its mutual funds and ETFs. The awards honour funds
that lead in delivering strong, risk-adjusted performance relative
to their peers:
• Mackenzie Canadian Growth Balanced Series F – Best ten-
year performance in the Canadian Equity Balanced category.
This fund is co-managed by Mackenzie’s Bluewater, Fixed
Income and Multi-Asset Strategies Teams.
• Mackenzie Canadian Growth Series F – Best ten-year
performance in the Canadian Focused Equity category. This
fund is managed by Mackenzie’s Bluewater Team.
• Mackenzie Floating Rate Income Series F5 – Best five-year
performance in the Floating Rate Loan category. This fund is
managed by Mackenzie’s Fixed Income Team.
• Mackenzie Global Resource Fund F U$ – Best ten-year
performance in the Nature Resources Equity category. This
fund is managed by Mackenzie’s Resource Team.
• Mackenzie Precious Metals Fund F U$ – Best ten-year
performance in the Precious Metals Equity category. This fund
Mackenzie’s 56% ownership interest in Northleaf enhances its
is managed by Mackenzie’s Resource Team.
investment capabilities by offering global private equity, private
credit and infrastructure investment solutions to our clients.
In addition to our own investment teams, Mackenzie
supplements investment capabilities through the use of third
• Mackenzie Core Plus Canadian Fixed Income ETF – Best
three-year and five-year performance in the ETF Canadian
Fixed Income category. This ETF is managed by Mackenzie’s
Fixed Income Team.
party sub-advisors and strategic beta index providers in selected
• Mackenzie US TIPS Index ETF (CAD-Hedged) – Best three-
areas. These include Putnam Investments, TOBAM, ChinaAMC,
year performance in the ETF Global Fixed Income category.
Impax Asset Management and Rockefeller Capital Management.
In addition, thirteen of Mackenzie’s mutual funds and ETFs were
During 2021, Mackenzie undertook a number of initiatives on
recognized for industry leading performance at the Fundata
climate change in support of the global goal to reach net zero
FundGrade A+ awards.
by 2050. This builds upon Mackenzie’s sustainability strategy,
and these items included the following:
PRODUCTS
• Signatory to the global Net Zero Asset Managers Initiative
Mackenzie continues to evolve its product shelf by providing
• Founding participant to Climate Engagement Canada
enhanced investment solutions for financial advisors to offer
• Founding Signatory to Responsible Investment Association’s
Canadian Investor Statement on Climate Change.
Long-term investment performance is a key measure of
Mackenzie’s ongoing success. At December 31, 2021, 34.3%
of Mackenzie mutual fund assets were rated in the top two
performance quartiles for the one year time frame, 58.8% for
their clients. In 2021, Mackenzie launched a number of
new products and merged mutual funds to streamline and
strengthen its product shelf. During 2021, Mackenzie launched
ten mutual funds, two ETFs, and two alternative funds, including
five mutual funds and one alternative fund during the fourth
quarter. In January 2022, Mackenzie launched an additional
two mutual funds, two ETFs and one alternative fund.
| 53
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report MUTUAL FUNDS
Mackenzie manages its product shelf through new fund
solutions offered in partnership with sub-advisor TOBAM. The
unique feature of the Fund is its exposure to cryptocurrency
launches and fund mergers to streamline fund offerings for
through an allocation to Bitcoin and Ethereum ETFs up to
advisors and investors.
10%. The Fund also has exposures to global equity and fixed
During the first three quarters of 2021, Mackenzie launched five
income securities.
mutual funds:
In January 2022, Mackenzie launched two mutual funds:
• Mackenzie Greenchip Global Balanced Fund
• Mackenzie Global Sustainable Bond Fund
• Mackenzie Tax-Managed Global Equity Fund
• Mackenzie Betterworld Canadian Equity Fund
• Mackenzie Betterworld Global Equity Fund
• Mackenzie North American Equity Fund invests primarily in
US and Canadian companies, diversified across sectors and
industries. The portfolio managers seek to identify leading
businesses with above average growth rates and apply
a strong valuation discipline when investing. The Fund is
managed by the Mackenzie Bluewater Team.
During the fourth quarter of 2021, Mackenzie launched five
• Mackenzie North American Balanced Fund invests with a
mutual funds:
• Furthering its commitment to offer Canadian investors
expanded access to the strong growth taking place in China,
Mackenzie launched the Mackenzie ChinaAMC All China Bond
Fund and Mackenzie ChinaAMC Multi-Asset Fund. These
Funds are sub-advised by ChinaAMC.
‒ Mackenzie ChinaAMC All China Bond Fund seeks to
generate above average income for investors with the
potential for long-term capital growth by investing in
China’s fixed income markets, primarily in a diversified
portfolio of Chinese fixed-income securities of any size,
issued by companies and governments.
‒ Mackenzie ChinaAMC Multi Asset Fund is an all-in-one
solution for those seeking exposure to China. By investing
in both fixed income and equity markets, the Fund offers
the potential for favourable long term asset growth with
high yield potential and the diversification benefits of low
correlation to other markets.
• To address the needs of investors approaching retirement,
Mackenzie added to the suite of Monthly Income Portfolios
with the launch of the Mackenzie Monthly Income Growth
Portfolio. This Fund is Mackenzie’s first monthly income fund
in the global equity balanced category. It seeks to provide
balanced approach with value added from asset allocation
and equity and fixed income selections. The Fund is in the
global neutral balanced category, and as such will generally
maintain between 40-60% equities and 40-60% fixed income,
with a neutral target asset mix of 50% equity and 50%
fixed income. The Fund is co-managed by the Mackenzie
Bluewater Team, Mackenzie Fixed Team and Mackenzie
Multi-Asset Strategies Team.
On July 30, 2021, Mackenzie wound-up the Mackenzie Financial
Capital Corporation on a tax-deferred basis by merging each
of the 34 corporate class funds into their corresponding trust
fund equivalent. Changes to tax legislation and evolving market
trends have eliminated many of the benefits that were available
to corporate class funds. The continuing trust funds have a
substantially similar investment objective.
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 when building long-term diversified portfolios.
investors with a diversified portfolio designed to provide a
During 2021, Mackenzie launched two new ETFs. These ETFs
steady stream of income with long-term capital appreciation
further broadened our diverse offerings of ETFs:
and reduced volatility. The Fund offers a fixed 4% distribution
and is managed by Mackenzie’s Multi-Asset Strategies Team.
• Mackenzie Global Green Bond Fund seeks to generate income
• Wealthsimple Shariah World Equity Index ETF
• Mackenzie Global Sustainable Bond ETF
with the potential for long-term capital appreciation by
Mackenzie’s current line-up consists of 43 ETFs: 24 active and
investing primarily in fixed income securities of global issuers
strategic beta ETFs and 19 traditional index ETFs. ETF assets
of sustainable and responsible debt. The Fund focusses on
under management ended the quarter at $12.7 billion, inclusive
labelled green bonds and other debt instruments that are
of $7.3 billion in investments from IGM Financial’s mutual funds.
used to finance a greener future. The Fund is managed by the
Mackenzie Fixed Income Team.
This ranks Mackenzie in sixth place in the Canadian ETF industry
for assets under management.
• Mackenzie Maximum Diversification Global Multi-Asset Fund
further expands the suite of Maximum Diversification portfolio
54 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis In early 2022, Mackenzie launched two ETFs:
appreciation and income generation primarily through
investments in private infrastructure assets.
• Mackenzie Northleaf Private Credit Interval Fund was
launched during January 2022 and is managed by
Mackenzie’s Fixed Income Team in partnership with Northleaf.
The Fund, a first-of-its-kind retail offering in Canada, uses an
interval fund structure which allows for limited redemptions
at quarterly intervals. This provides retail investors with a
new way to access illiquid private credit investment strategies
that have traditionally been reserved for accredited and
institutional investors.
• Wealthsimple Green Bond Index ETF seeks to replicate the
performance of the Solactive Green Bond Index by investing
primarily in investment-grade green, social and sustainable
bonds, with its foreign currency exposure hedged back to the
Canadian dollar. The Index will generally invest in issuers of
green bonds that promote climate or other environmentally
sustainable initiatives.
• Mackenzie Emerging Markets Equity Index ETF captures large
and mid-cap representation across 20 emerging markets
countries. It tracks the Solactive GBS Emerging Markets
Large & Mid Cap CAD Index which is designed to track the
performance of equity securities in emerging markets.
ALTERNATIVE FUNDS
During 2021 and early 2022, Mackenzie launched three
products in collaboration with Northleaf Capital Partners
(Northleaf) as part of its ongoing commitment to expand retail
investor access to private market investment solutions.
• Mackenzie Northleaf Private Credit Fund was launched
during the first quarter and is managed by Mackenzie’s Fixed
Income Team in partnership with Northleaf. It targets to
invest a majority of its capital in Northleaf’s senior secured
private lending program for institutional investors. This
enables the Fund to provide accredited retail investors with
the opportunity to achieve higher income with enhanced
lender protections as compared to investments in the public
debt markets.
• Mackenzie Northleaf Private Infrastructure Fund was
launched during the second quarter and is managed by
Mackenzie’s Multi-Asset Strategies Team in partnership
with Northleaf. The Fund seeks to achieve long-term capital
| 55
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Review of Segment Operating Results
The Asset Management segment includes revenue earned on
• Net asset management fees – third party is comprised of
advisory mandates to the Wealth Management segment and
the following:
investments into Mackenzie mutual funds and ETFs by the
‒ Asset management fees – third party consists of
Wealth Management segment.
The Asset Management segment adjusted net earnings are
presented in Table 18. Adjusted net earnings for the fourth
quarter of 2021 were $65.3 million, an increase of 60.4% from
the fourth quarter in 2020 and a decrease of 8.0% from the
prior quarter.
Adjusted earnings before interest and taxes for the fourth
quarter of 2021 were $92.4 million, an increase of 53.7% from
the fourth quarter in 2020 and a decrease of 7.8% from the
prior quarter.
2021 VS. 2020
REVENUES
management and administration fees earned from our
investment funds and management fees from our third
party sub-advisory, institutional and other accounts.
The largest component is management fees from our
investment funds. The amount of management fees
depends on the level and composition of assets under
management. Management fee rates vary depending on
the investment objective and the account type of the
underlying assets under management. For example, equity-
based mandates have higher management fee rates than
fixed income mandates and retail mutual fund accounts
have higher management fee rates than sub-advised
and institutional accounts. The majority of Mackenzie’s
mutual fund assets are retail and sold through third party
financial advisors.
Asset management fees are classified as either Asset
management fees – third party or Asset management fees –
Wealth Management.
‒ Redemption fees – consists of fees earned from the
redemptions of mutual fund assets sold on a deferred sales
charge purchase option and on a low load purchase option.
TABLE 18: OPERATING RESULTS – ASSET MANAGEMENT
THREE MONTHS ENDED
($ millions)
Revenues
Asset management
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
Asset management fees – third party
$
265.4
$
262.5
$
215.1
1.1 %
23.4 %
Redemption fees
Dealer compensation expenses
Asset-based compensation
Sales-based compensation
Net asset management fees – third party
Asset management fees – Wealth Management
Net asset management
Net investment income and other
Expenses
Advisory and business development
Operations and support
Sub-advisory
Adjusted earnings before interest and taxes
Interest expense
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
1.4
266.8
(88.1)
(3.6)
(91.7)
175.1
30.0
205.1
1.3
206.4
24.1
88.3
1.6
114.0
92.4
5.9
86.5
21.2
65.3
$
0.9
263.4
(86.9)
(4.0)
(90.9)
172.5
29.7
202.2
2.2
204.4
19.2
83.3
1.7
104.2
100.2
5.9
94.3
23.3
71.0
$
1.2
216.3
(73.5)
(5.1)
(78.6)
137.7
25.8
163.5
1.0
164.5
28.3
74.6
1.5
104.4
60.1
5.2
54.9
14.2
40.7
$
55.6
1.3
1.4
(10.0)
0.9
1.5
1.0
1.4
(40.9)
1.0
25.5
6.0
(5.9)
9.4
(7.8)
–
(8.3)
(9.0)
16.7
23.3
19.9
(29.4)
16.7
27.2
16.3
25.4
30.0
25.5
(14.8)
18.4
6.7
9.2
53.7
13.5
57.6
49.3
(8.0) %
60.4 %
56 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 18: OPERATING RESULTS – ASSET MANAGEMENT
TWELVE MONTHS ENDED
($ millions)
Revenues
Asset management
Asset management fees – third party
Redemption fees
Dealer compensation expenses
Asset-based compensation
Sales-based compensation
Net asset management fees – third party
Asset management fees – Wealth Management
Net asset management
Net investment income and other
Expenses
Advisory and business development
Operations and support
Sub-advisory
Adjusted earnings before interest and taxes
Interest expense
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
2021
DEC. 31
2020
DEC. 31
% CHANGE
$ 1,007.0
$
808.4
4.5
1,011.5
(335.8)
(19.5)
(355.3)
656.2
114.6
770.8
5.8
776.6
88.7
335.6
6.9
431.2
345.4
23.6
321.8
81.0
4.5
812.9
(277.7)
(21.8)
(299.5)
513.4
100.6
614.0
2.9
616.9
80.2
293.7
8.7
382.6
234.3
20.7
213.6
55.7
24.6 %
–
24.4
20.9
(10.6)
18.6
27.8
13.9
25.5
100.0
25.9
10.6
14.3
(20.7)
12.7
47.4
14.0
50.7
45.4
$
240.8
$
157.9
52.5 %
Redemption fees charged for deferred sales charge assets
increase in net asset management fees – third party was
range from 5.5% in the first year and decrease to zero after
primarily due to a 64.2% increase in average assets under
seven years. Redemption fees for low load assets range
management, as shown in Table 16, partially offset by a decline
from 2.0% to 3.0% in the first year and decrease to zero
in the effective net asset management fee rate. Mackenzie’s net
after two or three years, depending on the purchase option.
asset management fee rate was 54.8 basis points for the three
‒ Dealer compensation expenses – consists of asset-
based and sales-based compensation. Asset-based
compensation represents trailing commissions paid to
dealers on certain classes of retail mutual funds and are
calculated as a percentage of mutual fund assets under
management. These fees vary depending on the fund type
and the purchase option upon which the fund was sold:
front-end, deferred sales charge or low load. Sales based
compensation are paid to dealers on the sale of mutual
funds under the deferred sales charge purchase option
and on a low load purchase option.
• Asset management fees – Wealth Management
consists of sub-advisory fees earned from the Wealth
Management segment.
Net asset management fees – third party were $175.1 million
for the three months ended December 31, 2021, an increase
of $37.4 million or 27.2% from $137.7 million last year. The
months ended December 31, 2021 compared to 70.8 basis
points in the comparative period in 2020. The decline in the
net management fee rate was primarily due to the increase in
sub-advisory assets from the GLC acquisition, which have lower
effective rates.
Net asset management fees – third party were $656.2 million
for the twelve months ended December 31, 2021, an increase
of $142.8 million or 27.8% from $513.4 million last year. The
increase in net asset management fees – third party was
primarily due to a 69.4% increase in average assets under
management, as shown in Table 16, partially offset by a decline
in the effective net asset management fee rate. Mackenzie’s
net asset management fee rate was 54.2 basis points for the
twelve months ended December 31, 2021 compared to 72.0
basis points in the comparative period in 2020. The decline
in the net management fee rate was primarily due to the
increase in sub-advisory assets from the GLC acquisition, which
| 57
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
have lower effective rates. Other factors include a change in
Operations and support includes costs associated with
the composition of assets under management, including the
business operations, including technology and business
impact of having a greater share in non-retail priced products.
processes, in-house investment management and product
Contributing to the increase in non-retail assets was the
shelf management, corporate management and support
onboarding of $2.6 billion of sub-advisory and institutional wins
functions. These expenses primarily reflect compensation,
during the second quarter of 2020.
Management fees – Wealth Management were $30.0 million
for the three months ended December 31, 2021, an increase of
$4.2 million or 16.3% from $25.8 million last year. The increase
in management fees was due to an increase in the effective
management fee rate and a 11.2% increase in average assets
under management. Mackenzie’s management fee rate was
14.8 basis points for the three months ended December 31,
2021 compared to 14.2 basis points in the comparative period
in 2020. The increase in the management fee rate was due to a
technology and other service provider expenses. Operations
and support expenses were $88.3 million for the three months
ended December 31, 2021, an increase of $13.7 million or
18.4% from $74.6 million in 2020. Expenses for the twelve
months ended December 31, 2021 were $335.6 million, an
increase of $41.9 million or 14.3% from $293.7 million last year.
The increase in the three and twelve month periods ended
December 31, 2021 compared to the prior year is due to
strategic initiatives including the acquisitions during the fourth
quarter of 2020.
change in the composition of assets under management.
Sub-advisory expenses were $1.6 million for the three months
Management fees – Wealth Management were $114.6 million
for the twelve months ended December 31, 2021, an increase
of $14.0 million or 13.9% from $100.6 million last year. The
increase in management fees was due to an increase in
the effective management fee rate and a 10.5% increase in
average assets under management. Mackenzie’s management
fee rate was 14.7 basis points for the twelve months ended
December 31, 2021 compared to 14.3 basis points in the
comparative period in 2020. The increase in the management
fee rate was due to a change in the composition of assets
under management.
ended December 31, 2021, compared to $1.5 million in 2020.
Expenses for the twelve months ended December 31, 2021
were $6.9 million, compared to $8.7 million last year.
INTEREST EXPENSE
Interest expense, which includes allocated interest expense
on long-term debt and interest expense on leases, totalled
$5.9 million in the fourth quarter of 2021 compared to
$5.2 million in the fourth quarter of 2020. Interest expense
for the twelve month period was $23.6 million compared to
$20.7 million in 2020. Long-term debt interest expense is
calculated based on a long-term debt allocation of $0.4 billion
Net investment income and other primarily includes investment
to Mackenzie.
returns related to Mackenzie’s investments in proprietary
funds. These investments are generally made in the process of
launching a fund and are sold as third party investors subscribe.
Q4 2021 VS. Q3 2021
Net investment income and other was $1.3 million for the three
REVENUES
months ended December 31, 2021 compared to $1.0 million
last year, and was $5.8 million for the twelve months ended
December 31, 2021 compared to $2.9 million last year.
EXPENSES
Mackenzie incurs advisory and business development expenses
that primarily include wholesale distribution activities and
these costs vary directly with assets or sales levels. Advisory
and business development expenses were $24.1 million for
the three months ended December 31, 2021, a decrease of
$4.2 million or 14.8% from $28.3 million in 2020. The decline
in expenses in the current quarter is due to lower wholesaler
commissions attributed to lower sales in the fourth quarter of
2021 compared to the fourth quarter of 2020. Expenses for the
twelve months ended December 31, 2021 were $88.7 million,
an increase of $8.5 million or 10.6% from $80.2 million last
year. The increase in the twelve months ended December 31,
2021 compared to the prior year is due to higher wholesaler
commissions attributed to record high level of sales during 2021.
Net asset management fees – third party were $175.1 million
for the current quarter, an increase of $2.6 million or 1.5% from
$172.5 million in the third quarter. The increase in Net asset
management fees – third party was primarily due to a 1.3%
increase in average assets under management, as shown in
Table 16, and an increase in the effective net asset management
fee rate. Mackenzie’s net asset management fee rate was 54.8
basis points for the current quarter compared to 54.7 basis
points in the third quarter.
Management fees – Wealth Management were $30.0 million in
the current quarter, up from $29.7 million in the third quarter of
2021, primarily due to the increase in assets under management
of 0.9% from the third quarter. The management fee rate was
14.8 basis points in the current quarter, consistent with the third
quarter.
Net investment income and other was $1.3 million for the
current quarter, a decrease of $0.9 million from the third quarter.
58 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis EXPENSES
Advisory and business development expenses were $24.1 million
for the current quarter, an increase of $4.9 million or 25.5% from
$19.2 million in the third quarter.
Operations and support expenses were $88.3 million for
the current quarter, an increase of $5.0 million or 6.0% from
$83.3 million compared to the third quarter.
Sub-advisory expenses were $1.6 million for the current quarter,
compared to $1.7 million in the third quarter.
| 59
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Strategic Investments and Other
Review of Segment Operating Results
The Strategic Investments and Other segment includes
2021 VS. 2020
investments in Great-West Lifeco Inc. (Lifeco), China Asset
Management Co., Ltd. (ChinaAMC), Northleaf Capital Group Ltd.
(Northleaf), Wealthsimple Financial Corp., Portag3 Ventures LPs.,
and unallocated capital.
Earnings from the Strategic Investments and Other segment
include the Company’s proportionate share of earnings of its
associates, Lifeco, ChinaAMC and Northleaf as well as net
investment income on unallocated capital.
In January 2022, the Company entered into an agreement
to acquire an additional 13.9% in ChinaAMC as discussed in
the Consolidated Financial Position section of this MD&A. To
partially fund the transaction, IGM Financial will sell 1.6% of its
4% interest in Lifeco.
In the third quarter of 2020, the Company sold its 24.8%
equity interest in Personal Capital Corporation (Personal Capital)
as discussed in the Consolidated Financial Position section of
this MD&A.
Assets held by the Strategic Investments and Other segment are
included in Table 19.
Unallocated capital represents capital not allocated to any of
the operating companies and which would be available for
investment, debt repayment, distribution to shareholders or
other corporate purposes. This capital is invested in highly
liquid, high quality financial instruments in accordance with the
Company’s Investment Policy.
Strategic Investments and Other segment adjusted net earnings
are presented in Table 20.
The proportionate share of associates’ earnings increased by
$10.6 million in the fourth quarter of 2021 compared to the
fourth quarter of 2020, and increased by $49.4 million in the
twelve months ended December 31, 2021 compared to 2020.
These earnings reflect equity earnings from Lifeco, ChinaAMC,
Northleaf and, until the third quarter of 2020, Personal Capital,
as discussed in the Consolidated Financial Position section
of this MD&A. The increase in the fourth quarter of 2021
resulted primarily from increases in the proportionate share of
ChinaAMC’s earnings of $5.2 million and Lifeco’s earnings of
$3.1 million. The increase in the twelve month period of 2021
resulted primarily from increases in the proportionate share of
ChinaAMC’s earnings of $20.1 million and Lifeco’s earnings of
$16.0 million and an increase due to Personal Capital, reflecting
the sale of the Company’s investment in the second quarter of
2020. The increase in both the three and twelve month periods
was also due to the increase in the proportionate share of
Northleaf’s earnings of $1.8 million and $6.9 million, respectively,
net of non-controlling interest.
Net investment income and other was $1.1 million in the fourth
quarter of 2021, unchanged from 2020, and was $2.7 million in
the twelve months ended December 31, 2021, a decrease from
$6.0 million in 2020.
Q4 2021 VS. Q3 2021
The proportionate share of associates’ earnings was
$50.7 million in the fourth quarter of 2021, a decrease of
$5.2 million from the third quarter of 2021, primarily due to a
decrease in the proportionate share of Lifeco’s earnings. Net
investment income and other was $1.1 million in the fourth
quarter of 2021, compared to $0.6 million in the third quarter.
TABLE 19: TOTAL ASSETS – STRATEGIC INVESTMENTS AND OTHER
($ millions)
Investments in associates
Lifeco
ChinaAMC
Northleaf
FVTOCI investments
Wealthsimple (direct investment only)
Portag3 and other investments
Unallocated capital and other
Total assets
Lifeco fair value
60 |
2021
2020
DECEMBER 31
DECEMBER 31
$ 1,020.8
$
768.7
258.8
2,048.3
1,133.5
157.9
1,291.4
767.5
962.4
720.3
248.5
1,931.2
511.6
81.7
593.3
240.6
$ 4,107.2
$ 1,415.5
$
$
2,765.1
1,133.2
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 20: OPERATING RESULTS – STRATEGIC INVESTMENTS AND OTHER
THREE MONTHS ENDED
($ millions)
Revenues
2021
DEC. 31
2021
SEP. 30
2020
DEC. 31
2021
SEP. 30
% CHANGE
2020
DEC. 31
Net investment income and other
$
1.1
$
0.6
$
1.1
83.3 %
– %
Proportionate share of associates’ earnings
Investment in Lifeco
Investment in ChinaAMC
Investment in Northleaf
Expenses
Operations and support
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
Non-controlling interest
Adjusted net earnings available
to common shareholders
TWELVE MONTHS ENDED
($ millions)
Revenues
Net investment income and other
Proportionate share of associates’ earnings
Investment in Lifeco
Investment in ChinaAMC
Investment in Northleaf
Investment in Personal Capital
Expenses
Operations and support
Adjusted earnings before taxes
Income taxes
Adjusted net earnings
Non-controlling interest
Adjusted net earnings available
to common shareholders
30.4
17.0
3.3
50.7
51.8
1.3
50.5
1.5
49.0
0.7
35.3
17.0
3.6
55.9
56.5
1.2
55.3
1.6
53.7
0.7
27.3
11.8
1.0
40.1
41.2
0.9
40.3
(1.7)
42.0
0.2
(13.9)
–
(8.3)
(9.3)
(8.3)
8.3
(8.7)
(6.3)
(8.8)
–
11.4
44.1
230.0
26.4
25.7
44.4
25.3
N/M
16.7
250.0
$
48.3
$
53.0
$
41.8
(8.9) %
15.6 %
2021
DEC. 31
2020
DEC. 31
% CHANGE
$
2.7
$
6.0
(55.0) %
125.1
61.6
9.7
–
196.4
199.1
4.9
194.2
4.9
189.3
2.0
109.1
41.5
1.0
(4.6)
147.0
153.0
4.1
148.9
(7.4)
156.3
0.2
14.7
48.4
N/M
100.0
33.6
30.1
19.5
30.4
N/M
21.1
N/M
$
187.3
$
156.1
20.0 %
| 61
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
IGM Financial Inc.
Consolidated Financial Position
IGM Financial’s total assets were $17.7 billion at December 31,
The total fair value of Corporate investments of $1.4 billion at
2021, compared to $16.1 billion at December 31, 2020.
December 31, 2021 is presented net of certain costs incurred
OTHER INVESTMENTS
The composition of the Company’s securities holdings is detailed
in Table 21.
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 Corp. (Wealthsimple),
and Portag3 Ventures LP, Portag3 Ventures II LP and Portage
Ventures III LP (Portag3).
Wealthsimple is an online investment manager that provides
financial investment guidance. The investment is classified at
Fair value through other comprehensive income.
On May 3, 2021, Wealthsimple announced a $750 million equity
fundraising, valuing IGM Financial’s investment in Wealthsimple
at $1,448 million. As part of the transaction, IGM Financial
disposed of a portion of its investment for proceeds of
$294 million ($258 million after-tax).
In 2021, a realized gain of $241 million ($209 million after-tax)
was transferred from Accumulated other comprehensive income
to Other retained earnings.
The Company continues to be the largest shareholder in
Wealthsimple with an interest of 23% and fair value of
$1,153 million.
Portag3 consists of early-stage investment funds dedicated
to backing innovating financial services companies and are
controlled by Power Corporation of Canada.
within the limited partnership structures holding the underlying
investments.
In 2021, the Company recorded after-tax gains in Other
comprehensive income of $834.5 million due to fair value
changes in the Company’s investments, primarily related to a
$776.3 million fair value adjustment in the first quarter related
to Wealthsimple.
In the fourth quarter of 2021, the Company recorded after-tax
gains in Other comprehensive income of $31.5 million related
to fair value changes in the Company’s investment in Portag3 as
well as the disposition of its investment in Aequitas Innovations,
Inc. which is expected to close in 2022.
FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
Securities classified as FVTPL include equity securities and
proprietary investment funds. Gains and losses are recorded
in Net investment income and other in the Consolidated
Statements of Earnings.
Certain proprietary investment funds are consolidated where
the Company has made the assessment that it controls the
investment fund. The underlying securities of these funds are
classified as FVTPL.
LOANS
The composition of the Company’s loans is detailed in Table 22.
Loans consisted of residential mortgages and represented 30.3%
of total assets at December 31, 2021, compared to 39.4% at
December 31, 2020.
Loans measured at amortized cost are primarily comprised of
residential mortgages sold to securitization programs sponsored
by third parties that in turn issue securities to investors. An
TABLE 21: OTHER INVESTMENTS
($ millions)
Fair value through other comprehensive income
Corporate investments
Fair value through profit or loss
Equity securities
Proprietary investment funds
62 |
DECEMBER 31, 2021
DECEMBER 31, 2020
COST
FAIR VALUE
COST
FAIR VALUE
$
226.2
$ 1,291.4
$
251.4
$
593.3
1.2
101.3
102.5
1.6
105.0
106.6
1.5
35.3
36.8
1.5
37.5
39.0
$
328.7
$ 1,398.0
$
288.2
$
632.3
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 22: LOANS
($ millions)
Amortized cost
Less: Allowance for expected credit losses
Fair value through profit or loss
DECEMBER 31, 2021
DECEMBER 31, 2020
$
5,297.0
$
6,329.4
0.6
5,296.4
57.4
0.8
6,328.6
3.3
$
5,353.8
$
6,331.9
offsetting liability, Obligations to securitization entities, has
effective interest rate method, recorded over the term of the
been recorded and totalled $5.1 billion at December 31, 2021,
mortgages, ii) the component of swaps entered into under
compared to $6.2 billion at December 31, 2020.
the CMB Program whereby the Company pays coupons on
The Company holds loans pending sale or securitization. Loans
measured at fair value through profit or loss are residential
mortgages held temporarily by the Company pending sale.
Loans held for securitization are carried at amortized cost. Total
Canada Mortgage Bonds and receives investment returns on
the reinvestment of repaid mortgage principal, are recorded at
fair value, and iii) cash reserves held under the ABCP program
are carried at amortized cost.
loans being held pending sale or securitization are $315.8 million
In the fourth quarter of 2021, the Company securitized loans
at December 31, 2021, compared to $334.5 million at
through its mortgage banking operations with cash proceeds
December 31, 2020.
Residential mortgages originated by IG Wealth Management are
funded primarily through sales to third parties on a fully serviced
basis, including Canada Mortgage and Housing Corporation
(CMHC) or Canadian bank sponsored securitization programs.
At December 31, 2021, IG Wealth Management serviced
$9.7 billion of residential mortgages, including $2.3 billion
of $283.7 million compared to $422.8 million in 2020. Additional
information related to the Company’s securitization activities,
including the Company’s hedges of related reinvestment and
interest rate risk, can be found in the Financial Risk section
of this MD&A and in Note 7 to the Consolidated Financial
Statements.
originated by subsidiaries of Lifeco.
INVESTMENT IN ASSOCIATES
SECURITIZATION ARRANGEMENTS
Through the Company’s mortgage banking operations,
Great-West Lifeco Inc. (Lifeco)
At December 31, 2021, the Company held a 4.0% equity
interest in Lifeco. IGM Financial and Lifeco are controlled
residential mortgages originated by IG Wealth Management
by Power Corporation of Canada.
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
Bond Program (CMB Program) and through Canadian bank-
The equity method is used to account for IGM Financial’s
investment in Lifeco, as it exercises significant influence.
Changes in the carrying value for the three and twelve months
ended December 31, 2021 compared with 2020 are shown in
Table 23.
sponsored asset-backed commercial paper (ABCP) programs.
On January 5, 2022, to partially fund the acquisition of
The Company retains servicing responsibilities and certain
an additional 13.9% interest in ChinaAMC, the Company
elements of credit risk and prepayment risk associated with the
announced it will sell 15,200,662 common shares of Lifeco to
transferred assets. The Company’s credit risk on its securitized
Power for cash consideration of $575 million, which will reduce
mortgages is partially mitigated through the use of insurance.
the Company’s equity interest in Lifeco from 4.0% to 2.4%. The
Derecognition of financial assets in accordance with IFRS is
sale of Lifeco is conditional on IGM Financial’s purchase of the
based on the transfer of risks and rewards of ownership. As the
ChinaAMC shares and is expected to close in the first half
Company has retained prepayment risk and certain elements
of 2022.
of credit risk associated with the Company’s securitization
transactions through the CMB and ABCP programs, they are
accounted for as secured borrowings. The Company records
the transactions under these programs as follows: i) the
mortgages and related obligations are carried at amortized
cost, with interest income and interest expense, utilizing the
In December 2020, Lifeco recorded a gain in relation to the
revaluation of a deferred tax asset less certain restructuring and
transaction costs. The Company’s after-tax proportionate share
of these adjustments was $3.4 million.
| 63
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
TABLE 23: INVESTMENT IN ASSOCIATES
DECEMBER 31, 2021
($ millions)
LIFECO
ChinaAMC NORTHLEAF
TOTAL
LIFECO
ChinaAMC NORTHLEAF
DECEMBER 31, 2020
PERSONAL
CAPITAL(3)
TOTAL
THREE MONTHS ENDED
Carrying value, October 1
$ 1,001.5
$ 742.6
$ 255.3
$ 1,999.4
$ 942.8
$ 713.0
$
–
$
Investment
Dividends
Proportionate share of:
Earnings(1)
Associate’s
adjustments(1)
Other comprehensive
income (loss) and
other adjustments
–
(18.3)
–
–
0.2
–
0.2
(18.3)
–
(16.3)
–
–
247.5
–
30.4
17.0
3.3(2)
50.7
27.3
11.8
1.0(2)
–
–
–
–
3.4
–
7.2
9.1
–
16.3
5.2
(4.5)
–
–
Carrying value, December 31
$ 1,020.8
$ 768.7
$ 258.8
$ 2,048.3
$ 962.4
$ 720.3
$ 248.5
$
–
–
–
–
–
–
–
$ 1,655.8
247.5
(16.3)
40.1
3.4
0.7
$ 1,931.2
TWELVE MONTHS ENDED
Carrying value, January 1
$ 962.4
$ 720.3
$ 248.5
$ 1,931.2
$ 896.7
$ 662.7
$
–
$ 194.5
$ 1,753.9
Investment
Dividends
Proportionate share of:
Earnings (losses)(1)
Associate’s adjustments(1)
Other comprehensive
income (loss) and
other adjustments
Disposition
–
(67.4)
125.1
–
–
(26.8)
61.6
–
0.6
–
9.7(2)
–
0.6
(94.2)
196.4
–
–
(65.4)
109.1
3.4
0.7
–
13.6
–
–
–
14.3
–
18.6
–
41.5
–
29.8
–
–
247.5
(13.7)
–
1.0(2)
–
–
–
(4.6)
–
247.5
(79.1)
147.0
3.4
–
–
8.8
57.2
(198.7)
(198.7)
Carrying value, December 31
$ 1,020.8
$ 768.7
$ 258.8
$ 2,048.3
$ 962.4
$ 720.3
$ 248.5
$
–
$ 1,931.2
(1) The proportionate share of earnings from the Company’s investment in associates is recorded in the Strategic Investments and Other segment.
(2) The Company’s proportionate share of Northleaf’s earnings, net of Non-controlling interest, was $2.6 million and $7.7 million, respectively, for the three and twelve month periods
in 2021 (2020 – $0.8 million in both periods).
(3) In 2020, the Company sold its equity interest in Personal Capital to a subsidiary of Lifeco, Empower Retirement.
China Asset Management Co., Ltd. (ChinaAMC)
On January 5, 2022, the Company entered into an agreement
Founded in 1998 as one of the first fund management
to acquire an additional 13.9% interest in ChinaAMC for cash
companies in China, ChinaAMC has developed and maintained
consideration of $1.15 billion from Power Corporation of Canada
a position among the market leaders in China’s asset
management industry.
ChinaAMC’s total assets under management, excluding
subsidiary assets under management, were RMB¥ 1,661.6 billion
($330.5 billion) at December 31, 2021, representing an
increase of 13.7% (CAD$ 15.9%) from RMB¥ 1,461.1 billion
($285.1 billion) at December 31, 2020.
(Power) which will increase the Company’s equity interest in
ChinaAMC from 13.9% to 27.8%. The transaction is expected
to close in the first half of 2022, subject to customary closing
conditions, including Chinese regulatory approvals.
Northleaf Capital Group Ltd. (Northleaf)
On October 28, 2020, the Company’s subsidiary, Mackenzie,
together with Lifeco, acquired a non-controlling interest
The equity method is used to account for the Company’s 13.9%
in Northleaf, a global private equity, private credit and
equity interest in ChinaAMC, as it exercises significant influence.
infrastructure fund manager headquartered in Toronto.
Changes in the carrying value for the three and twelve months
ended December 31, 2021 are shown in Table 23. The change
in other comprehensive income of $9.1 million in the three
month period ended December 31, 2021, was due to a 1.3%
appreciation of the Chinese yuan relative to the Canadian dollar.
The transaction was executed through an acquisition vehicle
80% owned by Mackenzie and 20% owned by Lifeco for
cash consideration of $241 million and up to an additional
$245 million in consideration at the end of five years from the
acquisition date subject to the business achieving exceptional
64 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
growth in certain performance measures over the period. Any
Northleaf’s assets under management, including invested
additional consideration will be recognized as expense over the
capital and uninvested commitments, were $19.5 billion as at
five year period based on the fair value of the expected payment,
December 31, 2021 (December 31, 2020 – $14.6 billion). The
which is revalued at each reporting period date.
increase of $4.9 billion in assets under management during
The acquisition vehicle acquired a 49.9% voting interest and
a 70% economic interest in Northleaf. Mackenzie and Lifeco
have an obligation and right to purchase the remaining equity
and voting interest in Northleaf commencing in approximately
five years from the acquisition date and extending into
future periods. The equity method is used to account for the
acquisition vehicle’s 70% economic interest as it exercises
significant influence. Significant influence arises from board
representation, participating in the policy making process
and shared strategic initiatives.
The Company controls the acquisition vehicle therefore it
recognizes the full 70% economic interest in Northleaf and
the twelve month period was driven by $5.5 billion in new
commitments and an increase of $0.1 billion related to foreign
exchange on USD denominated assets, offset by a decrease of
$0.7 billion in return of capital and other.
Personal Capital Corporation (Personal Capital)
In 2020, the Company sold its equity interest in Personal Capital
to a subsidiary of Lifeco, Empower Retirement, for proceeds
of $232.8 million (USD $176.2 million) and up to an additional
USD $24.6 million in consideration subject to Personal Capital
achieving certain target growth objectives. As a result of the
sale, the Company has derecognized its investment in Personal
Capital and recorded an accounting gain of $37.2 million
recognizes Non-controlling interest (NCI) related to Lifeco’s
($31.4 million net of tax) in Net investment income and other.
net interest in Northleaf of 14%. Net of NCI, IGM Financial’s
During the fourth quarter of 2021, the Company recorded
investment at December 31, 2020 was $199.6 million,
additional consideration receivable of $10.6 million ($7.7 million
comprised of $192.6 million in cash consideration, $6.2 million
after tax) in Net investment income and other.
in capitalized transaction costs, and proportionate share of
2020 earnings of $0.8 million.
| 65
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Consolidated Liquidity and Capital Resources
Earnings before interest, taxes, depreciation and amortization
LIQUIDITY
Cash and cash equivalents totalled $1,292.4 million at
December 31, 2021 compared with $771.6 million at
December 31, 2020. Cash and cash equivalents related
to the Company’s deposit operations were $1.3 million at
December 31, 2021, compared to $5.2 million at December 31,
2020, as shown in Table 24.
Client funds on deposit represents cash balances held by clients
within their investment accounts and with the offset included in
deposit liabilities.
Working capital, which consists of current assets less current
liabilities, totalled $908.0 million at December 31, 2021
compared with $330.8 million at December 31, 2020 (Table 25).
Working capital, which includes unallocated capital, is utilized to:
• Finance ongoing operations, including the funding of sales
commissions.
• Temporarily finance mortgages in its mortgage banking
operations.
• Pay interest related to long-term debt.
• Maintain liquidity requirements for regulated entities.
• Pay quarterly dividends on its outstanding common shares.
• Finance common share repurchases and retirement of
long-term debt.
• Capital investment in the business and business acquisitions.
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), a non-IFRS measure, totalled $1,547.0 million for
the year ended December 31, 2021, compared to $1,226.4 million
for 2020. EBITDA before sales commissions excludes the impact
of both commissions paid and commission amortization (refer to
Table 1).
TABLE 24: DEPOSIT OPERATIONS – FINANCIAL POSITION
AS AT DECEMBER 31 ($ 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
66 |
after sales commissions (EBITDA after sales commissions),
a non-IFRS measure, totalled $1376.5 million for the year
ended December 31, 2021, compared to $1,086.9 million for
2020. EBITDA after sales commissions excludes the impact of
commission amortization (refer to Table 1).
Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA)
For the financial year ($ millions)
Adjusted EBITDA before and after sales commissions excluded
the following:
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 of associate’s one-time charges.
2020 – the gain on sale of Personal Capital, gain on sale of Quadrus
Group of Funds net of acqusition costs, the Company’s
proportionate share of associate’s adjustments and restructuring
and other.
2021 – additional consideration receivable related to the sale of Personal
Capital in 2020.
2021
2020
$
1.3
2,238.6
$
5.2
1,063.4
0.6
10.8
48.4
10.5
$ 2,251.3
$ 1,127.5
$ 2,220.3
$ 1,104.9
20.4
10.6
12.2
10.4
$ 2,251.3
$ 1,127.5
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
TABLE 25: 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 securitized mortgages and other
Current Liabilities
Accounts and other payables
Deposits and certificates
Current portion of obligations to securitization entities and other
2021
2020
$ 1,292.4
$
771.6
2,238.6
405.0
1,234.5
5,170.5
879.1
2,219.0
1,164.4
4,262.5
1,063.4
391.3
1,518.6
3,744.9
756.5
1,101.4
1,556.2
3,414.1
Working Capital
$
908.0
$
330.8
Refer to the Financial Instruments Risk section of this MD&A
• The deduction of investment in associates’ equity earnings
for information related to other sources of liquidity and to
offset by dividends received.
the Company’s exposure to and management of liquidity and
• The add-back of pension and other post-employment
funding risk.
CASH FLOWS
Table 26 – Cash Flows is a summary of the Consolidated
Statements of Cash Flows which forms part of the Consolidated
Financial Statements for the year ended December 31, 2021.
Cash and cash equivalents increased by $520.8 million in 2021
compared to an increase of $51.6 million in 2020.
Adjustments to determine net cash from operating activities
during the year ended 2021 compared to 2020 consist of
non-cash operating activities offset by cash operating activities:
• The add-back of amortization of capitalized sales
commissions offset by the deduction of capitalized sales
commissions paid.
• The add-back of amortization of capital, intangible and
other assets.
benefits offset by cash contributions.
• Changes in operating assets and liabilities and other.
• The adjustment for other items in 2020, which included
the add-back of restructuring provision and other and
the deduction of the gain on the sale of the Company’s
investment in Personal Capital and the gain on the sale of
the Quadrus Group of Funds.
• The deduction of restructuring provision cash payments.
Financing activities during the year ended December 31, 2021
compared to 2020 related to:
• An increase in obligations to securitization entities
of $1,428.9 million and repayments of obligations to
securitization entities of $2,442.7 million in 2021 compared
to an increase in obligations to securitization entities
of $1,568.5 million and repayments of obligations to
securitization entities of $2,359.8 million in 2020.
TABLE 26: CASH FLOWS
TWELVE MONTHS ENDED
($ 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
2021
DEC. 31
2020
DEC. 31
% CHANGE
$ 1,267.7
$
965.4
(153.5)
(172.3)
31.3 %
10.9
(170.6)
943.6
(1,521.9)
1,099.1
520.8
771.6
(56.5)
736.6
(1,358.4)
673.4
51.6
720.0
(201.9)
28.1
(12.0)
63.2
N/M
7.2
$ 1,292.4
$
771.6
67.5 %
| 67
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
• The payment of regular common share dividends which
The total outstanding long-term debt was $2.1 billion at
totalled $537.0 million in 2021 compared to $536.2 million
December 31, 2021, unchanged from December 31, 2020.
in 2020.
Investing activities during the year ended December 31, 2021
compared to 2020 primarily related to:
• The purchases of other investments totalling $131.8 million
and sales of other investments with proceeds of
$348.2 million in 2021 compared to $32.7 million and
$38.8 million, respectively, in 2020.
• An increase in loans of $1,776.1 million with repayments of
loans and other of $2,744.7 million in 2021 compared to
$1,793.0 million and $2,679.7 million, respectively, in 2020,
primarily related to residential mortgages in the Company’s
mortgage banking operations.
• Net cash used in additions to intangible assets and
acquisitions was $75.3 million in 2021 compared to
$68.8 million in 2020.
2020 also included the following investing activities:
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.
Other activities in 2021 included the declaration of common
share dividends of $537.8 million or $2.25 per share. Changes in
common share capital are reflected in the Annual Consolidated
Statements of Changes in Shareholders’ Equity.
Standard & Poor’s (S&P) current rating on the Company’s senior
unsecured debentures is “A” with a stable outlook. Dominion Bond
Rating Service’s (DBRS) current rating on the Company’s senior
unsecured debentures is “A (High)” with a stable rating trend.
Credit ratings are intended to provide investors with an
independent measure of the credit quality of the securities of
a company and are indicators of the likelihood of payment and
the capacity of a company to meet its obligations in accordance
with the terms of each obligation. Descriptions of the rating
• The acquisition of GLC Asset Management Group Ltd.
categories for each of the agencies set forth below have been
for $175.8 million.
obtained from the respective rating agencies’ websites.
These ratings are not a recommendation to buy, sell or hold
the securities of the Company and do not address market price
or other factors that might determine suitability of a specific
security for a particular investor. The ratings also may not
reflect the potential impact of all risks on the value of securities
and are subject to revision or withdrawal at any time by the
rating organization.
Capital
As at December 31 ($ millions)
• The investment in Northleaf Capital Group Ltd. of $198.8 million.
• The sales of the Company’s investment in Personal
Capital and the Quadrus Group of Funds with proceeds
of $262.8 million.
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 and
common shareholders’ equity which totalled $8.6 billion at
December 31, 2021, compared to $7.1 billion at December 31,
2020. 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.
68 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis The A rating assigned to IGM Financial’s senior unsecured
amount of future cash flows. Wherever possible, observable
debentures by S&P is the sixth highest of the 22 ratings used
market inputs are used in the valuation techniques.
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
• Loans classified as held for trading are valued using market
interest rates for loans with similar credit risk and maturity,
specifically lending rates offered to retail borrowers by
susceptible to the adverse effects of changes in circumstances and
financial institutions.
economic conditions than obligations in higher rated categories.
The A (High) rating assigned to IGM Financial’s senior unsecured
• Loans classified as amortized cost are valued by discounting
the expected future cash flows at prevailing market yields.
debentures by DBRS is the fifth highest of the 26 ratings used
• Valuation methods used for Other investments classified as
for long-term debt. Under the DBRS long-term rating scale,
FVOCI include comparison to market transactions with arm’s
debt securities rated A (High) are of good credit quality and the
length third parties, use of market multiples, and discounted
capacity for the payment of financial obligations is substantial.
cash flow analysis.
While this is a favourable rating, entities in the A (High) category
may be vulnerable to future events, but qualifying negative
factors are considered manageable.
• 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.
FINANCIAL INSTRUMENTS
Table 27 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
measured at fair value if the carrying amount is a reasonable
• 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.
approximation of fair value. These items include cash and
• Derivative financial instruments are valued based on quoted
cash equivalents, accounts and other receivables, certain other
market prices, where available, prevailing market rates for
financial assets, accounts payable and accrued liabilities and
instruments with similar characteristics and maturities, or
certain other financial liabilities.
discounted cash flow analysis.
Fair value is determined using the following methods
See Note 24 of the Consolidated Financial Statements which
and assumptions:
provides additional discussion on the determination of fair value
• Other investments and other financial assets and financial
of financial instruments.
liabilities are valued using quoted prices from active markets,
Although there were changes to both the carrying values and
when available. When a quoted market price is not readily
fair values of financial instruments, these changes did not have
available, valuation techniques are used that require
a material impact on the financial condition of the Company for
assumptions related to discount rates and the timing and
the twelve months ended December 31, 2021.
TABLE 27: FINANCIAL INSTRUMENTS
($ millions)
Financial assets recorded at fair value
Other investments
DECEMBER 31, 2021
DECEMBER 31, 2020
CARRYING VALUE
FAIR VALUE
CARRYING VALUE
FAIR VALUE
– Fair value through other comprehensive income
$ 1,291.4
$ 1,291.4
$
593.3
$
593.3
– Fair value through profit or loss
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
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long-term debt
106.6
106.6
57.4
41.2
57.4
41.2
39.0
3.3
37.3
39.0
3.3
37.3
5,296.4
5,354.2
6,328.6
6,532.8
17.8
17.8
34.5
34.5
2,220.3
5,057.9
2,100.0
2,220.5
5,146.4
2,544.4
1,104.9
6,173.9
2,100.0
1,105.4
6,345.2
2,653.8
| 69
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report
Risk Management
IGM Financial is exposed to a variety of risks that are inherent in
• The Related Party and Conduct Review Committee oversees
our business activities. Our ability to manage these risks is key
conflicts of interest.
to our ongoing success. The Company emphasizes a strong risk
management culture and the implementation of an effective
risk management approach. Our 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 our comprehensive Enterprise Risk Management
(ERM) Framework which is composed of five core elements:
risk governance, risk appetite, risk principles, a defined risk
management process, and risk management culture. The
ERM Framework is established under our ERM Policy, which
is approved by the Executive Risk Management Committee.
RISK GOVERNANCE
Our risk governance structure emphasizes ownership of
risk management in each business unit and oversight by an
executive Risk Management Committee accountable to the
Risk Committee of the Board (Risk Committee) and ultimately
to the Board of Directors. Additional oversight is provided by
the ERM, Compliance and Internal Audit Departments.
The Risk Committee provides primary oversight and carries
out its risk management mandate. The Risk Committee is
responsible for assisting the Board in reviewing and overseeing
the risk governance structure and risk management program of
Management oversight for risk management resides with the
executive Risk Management Committee which is comprised
of the Chief Executive Officers of IGM Financial, IG Wealth
Management, Mackenzie Investments and Investment Planning
Counsel, the Chief Financial Officer, the General Counsel, the
Chief Operating Officer, and the Chief Human Resources Officer.
The committee is responsible for oversight of IGM Financial’s risk
management process by: i) establishing and maintaining the risk
framework and policy; ii) defining the risk appetite; iii) ensuring
our risk profile and processes are aligned with corporate
strategy and risk appetite; and iv) establishing “tone at the top”
and reinforcing a strong culture of risk management.
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 (the Internal Audit function) providing
assurance and validation of the design and effectiveness of the
ERM Framework.
In response to the impact of COVID-19, the Company is
focusing our teams on addressing and managing COVID-19
issues and has established new committees and processes
where required.
First Line of Defence
the Company by: i) ensuring that appropriate procedures are in
The leaders of the various business units and support functions
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:
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
• The Audit Committee has specific risk oversight responsibilities
and risk appetite of the organization as established by the Risk
in relation to financial disclosure, internal controls and the
Management Committee.
control environment as well as our compliance activities,
including administration of the Code of Conduct.
Second Line of Defence
• The Human Resource Committee oversees compensation
policies and practices.
• The Governance and Nominating Committee oversees
corporate governance practices.
The Enterprise Risk Management (ERM) Department provides
oversight, analysis and reporting to the Risk Management
Committee on the level of risks relative to the established risk
appetite for all activities of the Company. Other responsibilities
include: i) developing and maintaining the enterprise risk
70 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis management program and framework, ii) managing the
We use a consistent methodology across our organizations
enterprise risk management process, and iii) providing guidance
and business units for identification and assessment of risks.
and training to business unit and support function leaders.
Risks are assessed by evaluating the impact and likelihood of
The Company has a number of committees of senior business
leaders which provide oversight of specific business risks,
including the Financial Risk Management and Operational Risk
Management committees. These committees perform critical
the potential risk event after consideration of controls and any
risk transfer activities. The results of these assessments are
considered relative to risk appetite and tolerances and may
result in action plans to adjust the risk profile.
reviews of risk assessments, risk management practices and risk
Risk assessments are monitored and reviewed on an ongoing
response plans developed by business units and support functions.
basis by business units and by oversight areas including the ERM
Other oversight accountabilities reside with the Company’s
Legal and Compliance Departments which are responsible for
ensuring compliance with policies, laws and regulations.
Third Line of Defence
The Internal Audit Department is the third line of defence and
provides independent assurance to senior management and
the Board of Directors on the effectiveness of the Company’s
risk management policies, processes and practices.
RISK APPETITE AND RISK PRINCIPLES
The Risk Management Committee establishes the Company’s
appetite for different types of risk through the Risk Appetite
Department. The ERM Department promotes and coordinates
communication and consultation to support effective risk
management and escalation. The ERM Department regularly
reports on the results of risk assessments and on the assessment
process to the Risk Management Committee and to the Board
Risk Committee.
RISK MANAGEMENT CULTURE
Risk management is intended to be everyone’s responsibility
within the organization. The ERM Department engages all
business units in risk workshops and surveys to foster awareness
and facilitate incorporation of our risk framework into our
business activities.
Framework. Under the Risk Appetite Framework, one of four
We have an established business planning process which
appetite levels is established for each risk type and business
reinforces our risk management culture. Our compensation
activity of the Company. These appetite levels range from
programs are typically objectives-based, and do not encourage
those where the Company has no appetite for risk and seeks
or reward excessive or inappropriate risk taking, and often are
to minimize any losses, to those where the Company readily
aligned specifically with risk management objectives.
accepts exposure while seeking to ensure that risks are
well understood and managed. These appetite levels guide
our business units as they engage in business activities, and
inform them in establishing 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 flexibility, and focus on mitigating operational risk.
Our risk management program emphasizes integrity, ethical
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.
KEY RISKS OF THE BUSINESS
Significant risks that may adversely affect our ability to achieve
strategic and business objectives are identified through our
ongoing risk management process.
RISK MANAGEMENT PROCESS
We use a consistent methodology across our organizations and
The Company’s risk management process is designed to foster:
business units to identify and assess risks, considering factors
• 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.
Significant risks that may adversely affect the Company’s ability
to achieve its strategic and business objectives are identified
through the Company’s ongoing risk management process.
both internal and external to the organization. These risks are
broadly grouped into five categories: financial, operational,
strategic, business, and environmental and social.
1) FINANCIAL RISK
LIQUIDITY AND FUNDING RISK
This is the risk of an 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.
| 71
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Our liquidity management practices include:
that securitized loans be insured by an insurer that is approved
• Maintaining liquid assets and lines of credit to satisfy near
term liquidity needs.
by CMHC. The availability of mortgage insurance is dependent
upon market conditions and is subject to change.
• Ensuring effective controls over liquidity management processes.
As part of ongoing liquidity management during 2021 and 2020,
• Performing regular cash forecasts and stress testing.
the Company:
• Regular assessment of capital market conditions and the
• Continued to assess additional funding sources for the
Company’s ability to access bank and capital market funding.
Company’s mortgage banking operations.
• Ongoing efforts to diversify and expand long-term mortgage
• Received proceeds of $310.8 million from the sales of a
funding sources.
portion of the Company’s investment in Wealthsimple and
• Oversight of liquidity management by the Financial Risk
other investments in 2021.
Management Committee, a committee of finance and other
• Received proceeds from the sales of the Company’s
business leaders.
investment in Personal Capital and the Quadrus Group of
A key funding requirement 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. 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 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 repayments held in the Principal
Reinvestment Accounts. The 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
Funds of $262.8 million in 2020.
• Acquired GLC for $185 million and Northleaf for $241 million
in 2020.
The Company’s contractual obligations are reflected in Table 28.
The maturity schedule for long-term debt of $2.1 billion
is reflected in the accompanying chart (Long-Term Debt
Maturity Schedule).
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,
2021, unchanged from December 31, 2020. The lines of
credit at December 31, 2021 consisted of committed lines of
$650 million and uncommitted lines of $175 million, unchanged
from December 31, 2020. Any advances made by a bank
under the uncommitted lines of credit are at the bank’s sole
discretion. As at December 31, 2021 and December 31, 2020,
the Company was not utilizing its committed lines of credit or
its uncommitted lines of credit.
The actuarial valuation for funding purposes related to the
Company’s registered defined benefit pension plan, based on a
measurement date of December 31, 2020, was completed in
TABLE 28: CONTRACTUAL OBLIGATIONS
AS AT DECEMBER 31, 2021
($ millions)
Derivative financial instruments
Deposits and certificates
Obligations to securitization entities
Leases(1)
Long-term debt
Pension funding(2)
Total contractual obligations
DEMAND
LESS THAN
1 YEAR
$
–
$
2,218.6
–
–
–
–
6.7
0.4
1,157.8
31.8
–
14.1
$
1-5
YEARS
11.1
0.5
3,893.3
98.3
–
–
$
AFTER
5 YEARS
–
0.8
6.8
125.2
2,100.0
–
TOTAL
$
17.8
2,220.3
5,057.9
255.3
2,100.0
14.1
$ 2,218.6
$ 1,210.8
$ 4,003.2
$ 2,232.8
$ 9,665.4
(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, 2021. Pension funding requirements beyond 2022 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.
72 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
Long-Term Debt Maturity Schedule
($ millions)
June 2021. The valuation determines the plan surplus or deficit
The changes in the funding requirements will be considered
on both a solvency and going concern basis. The solvency basis
as part of the valuation of the pension plan that will be based
determines the relationship between the plan assets and its
on a measurement date of December 31, 2021. The changes
liabilities assuming that the plan is wound up and settled on
also allow an employer to establish a solvency reserve account
the valuation date. A going concern valuation compares the
which is a separate account within the pension fund to which
relationship between the plan assets and the present value of
the employer can remit solvency deficiency payments. The
the expected future benefit cash flows, assuming the plan will
administrator can refund all or a portion of the assets in this
be maintained indefinitely. Based on the actuarial valuation, the
separate account to the employer provided the plan remains
registered pension plan had a solvency deficit of $61.3 million
fully funded on a going concern basis and maintains a solvency
compared to $47.2 million in the previous actuarial valuation,
ratio of at least 105%. Benefit improvements under the plan are
which was based on a measurement date of December 31,
not allowed if the solvency ratio is less than 85%.
2017. The increase in the solvency deficit resulted primarily
as a result of lower interest rates and is required to be funded
over five years. The registered pension plan had a going
concern surplus of $79.2 million compared to $46.1 million
in the previous valuation. The next required actuarial valuation
will be based on a measurement date of December 31, 2021.
During the year, the Company has made cash contributions
of $14.3 million (2020 – $25.6 million). IGM Financial expects
annual contributions of approximately $14.1 million in 2022.
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. Effective
December 20, 2021, the Government of Manitoba implemented
funding changes for defined benefit pension plans. The changes
include funding the solvency deficit only if it falls below 85%
(previously was required to fund the entire solvency deficit). In
determining the funding for going concern deficits, a margin
known as the provision for adverse deviation will be added to
the going concern deficit. The minimum provision is 5% of the
Management believes cash flows from operations, available
cash balances and other sources of liquidity described above are
sufficient to meet the Company’s liquidity needs. The Company
continues to have the ability to meet its operational cash
flow requirements, its contractual obligations, and its declared
dividends. The current practice of the Company is to declare
and pay dividends to common shareholders on a quarterly basis
at the discretion of the Board of Directors. The declaration of
dividends by the Board of Directors is dependent on a variety
of factors, including earnings which are significantly influenced
by the impact that debt and equity market performance has on
the Company’s fee income and commission and certain other
expenses. The Company’s liquidity position and its management
of liquidity and funding risk have not changed materially since
December 31, 2020.
CREDIT RISK
This is the risk of financial loss to the Company if a counterparty
to a transaction fails to meet its obligations.
going concern liabilities and can increase up to 22% based on
The Company’s cash and cash equivalents, other investment
the pension’s target asset allocation. The funding period for
holdings, mortgage portfolios, and derivatives are subject to
going concern deficits will decrease from 15 years to 10 years.
| 73
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report credit risk. The Company monitors its credit risk management
such payments were received from the mortgage borrower.
practices on an ongoing basis to evaluate their effectiveness.
However, as required by the NHA MBS program, 100% of
Cash and Cash Equivalents and Client Funds on Deposit
At December 31, 2021, cash and cash equivalents of
$1,292.4 million (2020 – $771.6 million) consisted of cash
balances of $326.2 million (2020 – $76.6 million) on deposit
with Canadian chartered banks and cash equivalents of
the loans are insured by an approved insurer.
• Credit risk for mortgages securitized by transfer to bank-
sponsored securitization trusts totalling $2.4 billion (2020
– $2.8 billion) is limited to amounts held in cash reserve
accounts and future net interest income, the fair values
of which were $67.6 million (2020 – $73.0 million) and
$966.2 million (2020 – $695.0 million). Cash equivalents are
$34.1 million (2020 – $45.6 million), respectively, at
comprised of Government of Canada treasury bills totalling
December 31, 2021. Cash reserve accounts are reflected
$358.7 million (2020 – $96.0 million), provincial government
on the balance sheet, whereas rights to future net interest
treasury bills and promissory notes of $350.6 million (2020 –
income are not reflected on the balance sheet and will be
$148.8 million), bankers’ acceptances of $198.3 million (2020
recorded over the life of the mortgages.
– $450.2 million) and other corporate commercial paper of
$58.6 million (2020 – nil).
At December 31, 2021, residential mortgages recorded on
balance sheet were 53.1% insured (2020 – 55.3%). As at
Client funds on deposit of $2,238.6 million (2020 – $1,063.4 million)
December 31, 2021, impaired mortgages on these portfolios
represent cash balances held in client accounts deposited at
were $2.8 million, compared to $4.8 million at December 31,
Canadian financial institutions.
The Company manages credit risk related to cash and cash
equivalents by adhering to its Investment Policy that outlines
2020. Uninsured non-performing mortgages over 90 days
on these portfolios were $1.5 million at December 31, 2021,
compared to $2.3 million at December 31, 2020.
credit risk parameters and concentration limits. The Company
The Company also retains certain elements of credit risk
regularly reviews the credit ratings of its counterparties. The
on mortgage loans sold to the IG Mackenzie Mortgage and
maximum exposure to credit risk on these financial instruments
Short Term Income Fund and to the IG Mackenzie Canadian
is their carrying value.
The Company’s exposure to and management of credit risk
related to cash and cash equivalents and fixed income securities
have not changed materially since December 31, 2020.
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.
Mortgage Portfolio
The Company regularly reviews the credit quality of the
As at December 31, 2021, residential mortgages, recorded on
mortgages and the adequacy of the allowance for expected
the Company’s balance sheet, of $5.4 billion (2020 – $6.3 billion)
credit losses.
consisted of $5.0 billion sold to securitization programs (2020
– $6.0 billion), $315.8 million held pending sale or securitization
(2020 – $334.5 million) and $13.7 million related to the
Company’s intermediary operations (2020 – $14.1 million).
The Company’s allowance for expected credit losses was
$0.6 million at December 31, 2021, compared to $0.8 million
at December 31, 2020, and is considered adequate by
management to absorb all credit-related losses in the mortgage
The Company manages credit risk related to residential
portfolios based on: i) historical credit performance experience,
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.
ii) recent trends including the economic impact of COVID-19
and Canada’s COVID-19 Economic Response Plan to support
Canadians and businesses, iii) current portfolio credit metrics
and other relevant characteristics, iv) our strong financial
planning relationship with our clients, and v) 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
since December 31, 2020.
In certain instances, credit risk is also limited by the terms and
nature of securitization transactions as described below:
Derivatives
• Under the NHA MBS program totalling $2.6 billion (2020
– $3.2 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
securitization transactions and to hedge market risk related
74 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis to certain stock-based compensation arrangements. These
with Canadian Schedule I chartered banks to hedge the risk
derivatives are discussed more fully under the Market Risk
that the interest rates earned on floating rate mortgages and
section of this MD&A.
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.
reinvestment returns decline. The fair value of these swaps
totalled $3.5 million (December 31, 2020 – $19.9 million),
on an outstanding notional amount of $1.3 billion at
December 31, 2021 (December 31, 2020 – $1.3 billion). The
net fair value of these swaps of $4.5 million at December 31,
2021 (December 31, 2020 – negative $1.2 million) is recorded
The Company’s derivative activities are managed in accordance
on the balance sheet and has an outstanding notional
with its Investment Policy which includes counterparty limits
amount of $1.6 billion (December 31, 2020 – $2.0 billion).
and other parameters to manage counterparty risk. The
aggregate credit risk exposure related to derivatives that
are in a gain position of $39.5 million (2020 – $35.8 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,
2021 (2020 – $3.8 million). 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, 2021.
Management of credit risk related to derivatives has not
changed materially since December 31, 2020.
Additional information related to the Company’s securitization
activities and utilization of derivative contracts can be found in
Notes 2, 7 and 23 to the Consolidated Financial Statements.
MARKET RISK
• 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. 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 Wealth Management revenue over
the term of the related Obligations to securitization entities.
The fair value of these swaps was $0.6 million (December 31,
2020 – negative $0.3 million) on an outstanding notional
amount of $128.6 million at December 31, 2021
(December 31, 2020 – $191.3 million).
As at December 31, 2021, the impact to annual net earnings
of a 100 basis point increase in interest rates would have been
This is the risk of loss arising from changes in the values of
a decrease of approximately $3.0 million (December 31, 2020
the Company’s financial instruments due to changes in interest
– decrease of $1.3 million). The Company’s exposure to and
rates, equity prices or foreign exchange rates.
management of interest rate risk have not changed materially
since December 31, 2020.
Interest Rate Risk
IGM Financial is exposed to interest rate risk on its mortgage
Equity Price Risk
portfolio and on certain of the derivative financial instruments
IGM Financial is exposed to equity price risk on our equity
used in our 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 fair value of $1.0 million (December 31, 2020 –
negative $21.1 million) and an outstanding notional amount
of $0.3 billion at December 31, 2021 (December 31, 2020
– $0.7 billion). The Company enters into interest rate swaps
investments which are classified as either fair value through
other comprehensive income or fair value through profit
or loss or investments in associates. The fair value of the
equity investments was $1.4 billion at December 31, 2021
(December 31, 2020 – $632.3 million), as shown in Table 21.
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
IGM Financial is exposed to foreign exchange risk on its
investment in ChinaAMC. Changes to the carrying value due
to changes in foreign exchange rates is recognized in Other
| 75
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report comprehensive income. As at December 31, 2021, a 5%
result in lower revenues depending upon the management
appreciation (depreciation) in Canadian currency relative to
fee rates associated with different asset classes and mandates.
foreign currencies would decrease (increase) the aggregate
carrying value of foreign investments by approximately
$36.3 million ($40.2 million).
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,
The Company’s proportionate share of ChinaAMC’s earnings,
and generally it does not engage in risk transfer activities such
recorded in Proportionate share of associates’ earnings in the
as hedging in relation to these exposures.
Consolidated Statements of Earnings, is also affected by changes
in foreign exchange rates. For the year ended December 31,
2021, the impact to net earnings of 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 $2.9 million
($3.2 million).
RISKS RELATED TO ASSETS UNDER
MANAGEMENT AND ADVISEMENT
At December 31, 2021, IGM Financial’s total assets under
management and advisement were $277.1 billion compared
to $240.0 billion at December 31, 2020.
The Company’s primary sources of revenues are advisory fees
and asset management fees which are applied as an annual
percentage of the level of assets under management and
advisement. 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 and
advisement 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.
Changing financial market conditions may also lead to a change
in the composition of the Company’s assets under management
between equity and fixed income instruments, which could
The Company’s exposure to the value of assets under
management and advisement aligns it with the experience of
its clients. Assets under management are broadly diversified by
asset class, geographic region, industry sector, investment team
and style. The Company regularly reviews the sensitivity of its
assets under management, revenues, earnings and cash flow
to changes in financial markets.
2) OPERATIONAL RISK
This is the risk of financial loss, reputational damage or
regulatory actions resulting from inadequate or failed internal
processes or systems, human interaction or external events.
This excludes business risk, which is a separate category in our
ERM framework.
We are exposed to a broad range of operational risks, including
information technology security and system failures, errors
relating to transaction processing, financial models and
valuations, fraud and misappropriation of assets, and inadequate
application of internal control processes.
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 Internal Audit Department.
The Company has an insurance review process where it
assesses and determines the nature and extent of insurance
TABLE 29: IGM FINANCIAL ASSETS UNDER MANAGEMENT – ASSET AND CURRENCY MIX
AS AT DECEMBER 31, 2021
Cash
Short-term fixed income and mortgages
Other fixed income
Domestic equity
Foreign equity
Real Property
CAD
USD
Other
76 |
INVESTMENT FUNDS
TOTAL
1.2 %
3.7
23.3
20.6
48.7
2.5
2.2 %
3.5
23.0
25.8
43.6
1.9
100.0 %
100.0 %
51.0 %
56.4 %
32.4
16.6
29.5
14.1
100.0 %
100.0 %
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
that is appropriate to provide adequate protection against
confidential information of the Company and that of clients or
unexpected losses, and where it is required by law, regulators
other stakeholders, and could result in negative consequences
or contractual agreements.
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.
including lost revenue, litigation, regulatory scrutiny or
reputational damage. To remain resilient to such threats, we
have established enterprise-wide cyber security programs,
benchmarked capabilities to sound industry practices, and
implemented threat and vulnerability assessment and response
capabilities. Extended duration of work from home programs
introduces increased need to mitigate risk of potential data loss.
The Company’s risk management framework emphasizes
operational risk management and internal control. The
THIRD PARTY RISK
Company has a very low appetite for risk in this area.
We regularly engage third parties to provide expertise and
The business unit leaders are responsible for management of the
day to day operational risks of their respective business units.
Specific programs, policies, training, standards and governance
processes have been developed to help manage operational risk.
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 and outsourcing policy, have been
The Company has a crisis response plan which outlines crisis
developed and implemented to specifically address third party
response coordination policies and procedures in the event
service provider risk. We perform due diligence and monitoring
of a crisis that could significantly impact the organization’s
activities before entering into contractual relationships with
reputation, brands or business operations. The Company
third-party service providers and on an ongoing basis. As our
executes simulation exercises on a regular basis. The Company
reliance on external service providers continues to grow, we
has a crisis assessment team comprised of senior leadership
continue to enhance resources and processes to support third
who are responsible for crisis confirmation and management. In
party risk management.
addition, this team is responsible for setting strategy, overseeing
response and ensuring appropriate subject matter experts are
MODEL RISK
engaged in the scenario-dependent crisis response team.
The Company also has a business continuity management
program to enable critical operations and processes to function
in the event of a business disruption.
For the health and safety of the Company’s employees and
clients and to help efforts to limit the speed and spread of
the COVID-19 infection, the Company moved substantially
all of its employees and Consultants to work from home and
temporarily closed its offices in March 2020. The Company
is continuously assessing its plan and protocols, and taking
direction from external governing bodies such as the Medical
Officers of Health, to determine when employees and advisors
will return to the office.
The Company’s business continuity plan has been effective
at ensuring the Company is able to continue operations and
provide client service with minimal disruptions.
TECHNOLOGY AND CYBER RISK
We use systems and technology to support business operations
and the client and financial advisor experience. As a result, we
are exposed to risks relating to technology and cyber security
such as data breaches, identity theft and hacking, including
the risk of denial of service or malicious software attacks.
The volume of these activities in our society has increased
since the onset of COVID-19. Such attacks could compromise
We use a variety of models to assist in: the valuation of financial
instruments, operational scenario testing, management of
cash flows, capital management, and assessment of potential
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
adverse effect on the Company’s consolidated financial position
and reputation.
LEGAL AND REGULATORY COMPLIANCE RISK
This 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
agencies of the federal, provincial and territorial governments
in Canada which regulate the Company and its activities.
The Company and its subsidiaries are also subject to the
requirements of self-regulatory organizations to which they
belong. These and other regulatory bodies regularly adopt
new laws, rules, regulations and policies that apply to the
Company and its subsidiaries. These requirements include those
that apply to IGM Financial as a publicly traded company and
| 77
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report those that apply to the Company’s subsidiaries based on the
protect it through contracts that commit the service providers to
nature of their activities. They include regulations related to the
maintain levels of protection comparable to ours.
management and provision of financial products and services,
including securities, insurance and mortgages, and other activities
carried on by the Company in the markets in which it operates.
Regulatory standards affecting the Company and the financial
services industry are significant and continually evolve. The
Company and its subsidiaries are subject to reviews as part of the
normal ongoing process of oversight by the various regulators.
IGM Financial has established an enterprise Privacy Policy,
and our operating companies have supporting privacy policies
and procedures relevant to their businesses. Our operating
companies also have comprehensive procedures and controls to
safeguard personal information and prevent privacy breaches.
In the event of a privacy breach, our operating companies
have policies and procedures to mitigate risks and prevent
Failure to comply with laws, rules or regulations could lead to
re-occurrence. If a breach is determined to pose a real risk of
regulatory sanctions and civil liability, and may have an adverse
significant harm to a client, we will notify the individual, and
reputational or financial effect on the Company. The Company
the federal and/or provincial Privacy Commissioner where
manages legal and regulatory compliance risk through its efforts
applicable, in a timely manner.
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 Board receives regular
reporting on compliance initiatives and issues.
Employees and advisors are required to complete mandatory
privacy training at onboarding, and annually thereafter. The
training includes our privacy obligations, privacy tips and best
practices, and how to prevent, handle and report privacy
breaches, complaints and access to information requests. Each
operating company also has its own Privacy Officer, who is
responsible for the operating company’s privacy program,
provides guidance to employees and advisors, and manages
our response to privacy concerns.
IGM Financial promotes a strong culture of ethics and integrity
through its Code of Conduct approved by the Board of Directors,
CONTINGENCIES
which outlines standards of conduct that apply to all IGM
The Company is subject to legal actions arising in the normal
Financial directors, officers and employees. The Code of Conduct
course of its business. In December 2018, a proposed class
references many policies relating to the conduct of directors,
action was filed in the Ontario Superior Court against Mackenzie
officers and employees. Other corporate policies cover anti-
which alleges that the company should not have paid mutual
money laundering and privacy. Training is provided on these
fund trailing commissions to order execution only dealers.
policies on an annual basis. Individuals subject to the Code of
Although it is difficult to predict the outcome of any such legal
Conduct attest annually that they understand the requirements
actions, based on current knowledge and consultation with legal
and have complied with its provisions.
Business units are responsible for management of legal and
regulatory compliance risk, and implementing appropriate
policies, procedures and controls. The Compliance Department
is responsible for providing oversight of all regulated compliance
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.
3) STRATEGIC RISK
activities. The Internal Audit Department also provides oversight
This is the risk of potential adverse impacts resulting
concerning regulatory compliance matters.
PRIVACY RISK
Our clients entrust us with their personal information, and
we have a legal and ethical responsibility to protect it. In
accordance with Canadian privacy laws, we collect only personal
information that is necessary to provide our products and
services to clients, or where we have consent to do so. We do
not disclose personal information about clients unless required
by law, when necessary to provide products or services to them,
or as otherwise authorized by them.
If we need to share clients’ personal information with third-party
service providers, we remain responsible for that information and
from inadequate or inappropriate governance, oversight,
management of incentives and conflicts, regulatory
developments and strategy.
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 our shareholders.
Oversight of IGM Financial is performed by the Board of
Directors directly and through its five committees. The
Company’s President and Chief Executive Officer has overall
responsibility for management of the Company. The Company’s
activities are carried out principally by three operating
78 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis companies – Investors Group Inc., Mackenzie Financial
ACQUISITION RISK
Corporation and Investment Planning Counsel Inc. – each of
The Company is exposed to risks related to its acquisitions and
which are managed by a President and Chief Executive Officer.
strategic investments. The Company undertakes thorough due
The Company also has a strategy execution oversight function
diligence prior to completing an acquisition, but there is no
and committee that reviews and approves strategic initiative
assurance that the Company will achieve the expected strategic
business cases and oversees progress against our strategic
objectives or cost and revenue synergies subsequent to an
priorities and objectives.
The President and Chief Executive Officer of the Company,
in collaboration with the Board of Directors, is responsible
each year to develop, review and update the Company’s
strategic plan. The strategic plan sets out both the annual and
longer-term objectives for the Company in light of emerging
opportunities and risks and with a view to the Company’s
sustained profitable growth and long-term value creation.
The Board is responsible for approving the Company’s overall
business strategy. In carrying out this responsibility, the Board
reviews the short-, medium- and long-term risks associated
with the strategic plan, considers the strengths and potential
weaknesses of trends and opportunities, and approves the
Company’s annual business, financial and capital management
plans. A portion of each Board meeting is dedicated to
discussion of strategic matters including receiving updates on
the progress and implementation of the strategic plan.
REGULATORY DEVELOPMENT RISK
This is the potential for changes to regulatory, legal, or tax
requirements that may have an adverse impact on the
Company’s business activities or financial results.
We are exposed to the risk of changes in laws, taxation and
regulation that could have an adverse impact on the Company.
Particular regulatory initiatives may have the effect of making
the products of the Company’s subsidiaries appear to be
less competitive than the products of other financial service
providers, to third party distribution channels and to clients.
Regulatory differences that may impact the competitiveness
of the Company’s products include regulatory costs, tax
treatment, disclosure requirements, transaction processes or
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
treatment of financial products or services is limited.
The Company continuously monitors regulatory developments,
guidance and communications. .
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) BUSINESS RISK
GENERAL BUSINESS CONDITIONS
This risk refers to the potential for unfavourable impacts on
IGM Financial resulting from competitive or other external
factors relating to the marketplace.
Global economic conditions, changes in equity markets, inflation,
demographics and other factors including geopolitical risk and
government instability, can affect investor confidence, income
levels and savings decisions. This could result in reduced sales of
IGM Financial’s products and services and/or result in investors
redeeming their investments. These factors may also affect
the level and volatility of financial markets and the value of the
Company’s assets under management, as described more fully
under the Risks Related to Assets Under Management section
of this MD&A.
To manage this risk, the Company, across its operating
subsidiaries, communicates with clients and underscores 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
30 and are discussed in the Wealth Management and the Asset
Management Segment Operating Results sections of this MD&A.
CATASTROPHIC EVENTS OR LOSS
Catastrophic events or loss refers to the risk that events such
as earthquakes, floods, fire, tornadoes, pandemics, or terrorism
could adversely affect the Company’s financial performance.
Catastrophic events can cause economic uncertainty, affect
investor confidence, income levels and financial planning
decisions. This could affect the level and volatility of financial
markets and the level of the Company’s assets under
management and advisement.
| 79
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report TABLE 30: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG-TERM FUNDS
IGM Financial Inc.
IG Wealth Management
Mackenzie
Counsel
2021
DEC. 31
2020
DEC. 31
9.2 %
13.6 %
22.3 %
9.8 %
16.6 %
20.1 %
The global COVID-19 pandemic has caused economic disruption,
Meaningful and/or sustained underperformance could affect
adversely impacted economic conditions, has caused significant
the Company’s results. Our objective is to cultivate investment
volatility in the level of financial markets, and has increased
processes and disciplines that give us a competitive advantage,
unemployment in Canada and globally.
and we do this by diversifying our assets under management
In response, the Company implemented its business continuity
plans and transitioned substantially all of its employees and
Consultants to working from home.
and product shelf by investment team, brand, asset class,
mandate, style and geographic region.
BUSINESS / CLIENT RELATIONSHIPS
It is difficult to predict the ongoing significance of the COVID-
This risk refers to the potential for unfavourable impacts
19 pandemic and government measures taken in response will
on IGM Financial resulting from changes to key business or
affect world economies, our clients and our business. This event
client relationships. These relationships primarily include IG
could have a material impact on the financial positions and
Wealth Management clients and Consultants, Mackenzie retail
results of the Company, subject to duration and severity.
distribution, strategic and significant business partners, clients of
PRODUCT / SERVICE OFFERING
This risk refers to the potential for unfavourable impacts on
IGM Financial resulting from inadequate product or service
performance, quality or breadth.
Mackenzie funds, and sub-advisors and other product suppliers.
IG Wealth Management Consultant network – IG Wealth
Management derives all of its mutual fund sales through its
Consultant network. IG Wealth Management Consultants have
regular direct contact with clients which can lead to a strong
IGM Financial and its subsidiaries operate in a highly competitive
and personal client relationship based on the client’s confidence
environment, competing with other financial service providers,
in that individual Consultant. The market for financial advisors
investment managers and product and service types. Client
is extremely competitive. The loss of a significant number of key
development and retention can be influenced by a number
Consultants could lead to the loss of client accounts which could
of factors, including investment performance, products and
have an adverse effect on IG Wealth Management’s results of
services offered by competitors, relative service levels, relative
operations and business prospects. IG Wealth Management is
pricing, product attributes, reputation and actions taken by
focused on strengthening its distribution network of Consultants
competitors. This competition could have an adverse impact
and on responding to the complex financial needs of its clients by
upon the Company’s financial position and operating results.
delivering a diverse range of products and services in the context
Please refer to The Competitive Landscape section of this MD&A
of personalized financial advice, as discussed in the Wealth
for further discussion.
Management Review of the Business section of this MD&A.
We provide Consultants, independent financial advisors, as
Asset Management – Mackenzie derives the majority of its
well as retail and institutional clients with a high level of service
mutual fund sales through third party financial advisors.
and support and a broad range of investment products, with
Financial advisors generally offer their clients investment
a focus on building enduring relationships. The Company’s
products in addition to, and in competition with Mackenzie.
subsidiaries also continually review their respective product
Mackenzie also derives sales of its investment products and
and service offering and pricing to ensure competitiveness in
services from its strategic alliance and institutional clients.
the marketplace.
We strive to deliver strong investment performance on our
products relative to benchmarks and peers. Poor investment
performance relative to benchmarks or peers could reduce
the level of assets under management and sales and asset
retention, as well as adversely impact our brands and reputation.
Due to the nature of the distribution relationship in these
relationships and the relative size of these accounts, gross
sale and redemption activity can be more pronounced in
these accounts than in a retail relationship. Mackenzie’s ability
to market its investment products is highly dependent on
continued access to these distribution networks. Lack of access
could have a material adverse effect on Mackenzie’s operating
80 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis
results and business prospects. Mackenzie is well positioned
5) ENVIRONMENTAL AND SOCIAL RISK
to manage this risk and to continue to build and enhance
(INCLUDING CLIMATE CHANGE)
its distribution relationships. Mackenzie’s diverse portfolio of
financial products and its long-term investment performance
record, marketing, educational and service support has made
Mackenzie one of Canada’s leading investment management
companies. These factors are discussed further in the Asset
Management Review of the Business section of this MD&A.
PEOPLE RISK
This risk refers to the potential inability to attract or retain
employees or Consultants, develop them to an appropriate level
of proficiency, or manage engagement and personnel succession
or transition.
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
engage sufficient numbers of qualified personnel could negatively
affect IGM Financial’s business and financial performance.
We have a Diversity, Equity and Inclusion Strategy with the
purpose of driving an inclusive, equitable and consistent
experience for employees and clients that supports our business
objectives now and into the future. To achieve the desired
outcomes, we focus on three pillars of action: raising awareness;
improving inclusive leadership behaviours; and building external
partnerships and community engagement.
We also have a Wellness Strategy to support our employees’
wellbeing with a goal to ensure our employees are physically
thriving, emotionally balanced, socially connected and
financially secure.
COVID-19 has caused significant disruption in peoples’ lives
both professionally and personally. The Company’s actions
have included:
• Implementing a work at home strategy to maintain the
health and safety of our employees and Consultants through
social distancing.
• Providing tools and processes to enable our employees and
Consultants to continue to operate effectively from home.
This is the potential for financial loss or other unfavourable
impacts resulting from environmental or social (E&S) issues
connected to our business operations, investment activities,
meeting our sustainability commitments, and increasingly for
regulatory compliance. We recognize that E&S risks can be
within our operations or impact stakeholders along our supply
chain, including clients, investee companies and suppliers.
Environmental risks include issues such as climate change,
biodiversity and land use, pollution, waste, and the unsustainable
use of energy, water and other resources. Social risks include
issues such as: human rights; labour standards; diversity; equity
and inclusion; Indigenous reconciliation; and community impacts.
IGM Financial has a long-standing commitment to responsible
management, as articulated in our Corporate Sustainability
Statement approved by the Board of Directors. Through its Risk
Committee, the Board is responsible for ensuring that material
E&S risks are appropriately identified, managed and monitored.
The Company’s executive Risk Management Committee is
responsible for oversight of the risk management process,
including E&S and climate change risks. Other management
committees provide oversight of specific risks including the
Sustainability Committee and the Diversity and Inclusion
Executive Council. The Sustainability Committee is composed
of senior executives who are responsible for ensuring
implementation of policy and strategy, establishing goals and
initiatives, measuring progress, and approving annual reporting
for environmental, social and governance (ESG) matters.
Our commitment to responsible management is demonstrated
through various mechanisms. These include our Code of
Conduct for employees, contractors, and directors; our
Supplier Code of Conduct; our Workplace Harassment and
Discrimination Prevention Policy; our Diversity Policy; our
Environmental Policy; and other related policies.
IG Wealth Management and Mackenzie Investments, and their
investment sub-advisors, are signatories to the Principles for
Responsible Investment (PRI). Under the PRI, investors formally
commit to incorporate ESG issues into their investment decision
• Providing various wellness programs including Employee
making and active ownership processes. In addition, IG Wealth
Assistance Programs, e-Health and other programs to
Management, Mackenzie Investments and Investment Planning
support the mental and physical well-being of our employees,
Counsel have implemented Sustainable Investment Policies
Consultants, and their families.
outlining the practices at each company.
• Developing a return to office strategy including the
introduction of a hybrid working model to enhance work
life flexibility and to safely allow employees and Consultants
to return to the office when appropriate.
IGM Financial reports annually on ESG management and
performance in its Sustainability Report available on our website.
The Company has been recognized for demonstrating strong
ESG performance through positions earned on the FTSE4Good
Index Series, Jantzi Social Index, Corporate Knights’ 2022 Global
100 and 2021 Best 50 Corporate Citizens.
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Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report IGM Financial is a long-standing participant in the CDP
policies; approval and oversight for investment stewardship
(formerly Carbon Disclosure Project), which promotes
priorities including climate; approval and monitoring for targets
corporate disclosures on greenhouse gas emissions and
related to climate change; and evaluation of progress relative to
climate change management including setting and monitoring
key performance indicators, strategy roadmap, and the market.
emission reduction targets. IGM Financial has been recognized
by CDP at the leadership level for the past five years for its
climate disclosures.
The IG Wealth Management Sustainable Investing Committee
is responsible for reviewing and approving sustainable investing
and ESG matters including but not limited to evaluating and
Global practices are continually evolving relating to the
considering climate-related risks and opportunities.
identification, analysis, and management of climate risks and
opportunities. The Financial Stability Board’s Task Force on
STRATEGY
Climate-related Financial Disclosures (TCFD) was established
Through IGM Financial’s wealth and asset management
in response to investor demand for enhanced information on
businesses the company plays a role in the global transition
climate-related risks and opportunities. IGM Financial and its
to a low-carbon economy. In November 2021, IGM Financial
operating companies support the TCFD recommendations which
detailed its climate commitments in a position statement on
include a framework for consistent, voluntary climate-related
our website, with a focus on three key areas:
financial disclosures that provide decision-useful information to
investors, analysts, rating agencies and other stakeholders.
TCFD DISCLOSURE
The TCFD recommends that organizations disclose information
1. Investing in a greener, climate resilient economy – Our investment
processes and products give us the opportunity to manage
climate risks and create innovative solutions to our ongoing
climate issues.
about climate-related risks and opportunities in four areas:
2. Collaborating and engaging to help shape the global transition –
governance, strategy, risk management, and metrics and targets.
We play a role in bringing climate-smart investment advice and
Full implementation of TCFD will be a multi-year journey.
solutions to clients, helping companies adapt, and participating
GOVERNANCE
Our Board is responsible for providing oversight on risk and
strategy, which includes sustainability and climate-related
matters. The Board meets with management at least annually
to discuss plans and emerging ESG issues. Through its Risk
in industry and policy advancements.
3. Demonstrating alignment through our corporate actions – We will
hold ourselves to a similar standard that we expect from the
companies we invest in and empower our employees to stand
behind our commitments.
Committee, the Board is responsible for ensuring that material
Our operating companies are active participants in collaborative
ESG risks are appropriately identified, managed and monitored.
industry groups that support our climate commitments by
The senior-most leaders at each of our operating companies
have primary ownership and accountability for the ongoing
climate risk and opportunity management associated with
their respective activities. IGM Financial’s Risk Management
and Sustainability Committees perform oversight functions,
and our Chief Financial Officer oversees implementation
of the Corporate Sustainability and Enterprise Risk
Management programs.
We have established a cross-functional, enterprise wide
TCFD Working Group of senior leaders to lead the planning
and implementation of the TCFD recommendations. This
working group is focused on enhancing our knowledge and
tools to quantify climate risks in tandem with our industry,
further integrating climate into our business strategy,
operations and product offering, evolving our engagement
approach with investee companies, and addressing increased
disclosure expectations.
engaging companies on improving climate change governance,
reducing emissions and strengthening climate-related financial
disclosures. IGM Financial also joined the Partnership for Carbon
Accounting Financials (PCAF) to support our journey to measure
and disclose the greenhouse gas emissions associated with our
mortgage loans and investments.
Climate-related risks and opportunities are identified and
assessed within IGM Financial through our business planning
processes which define our strategic priorities, initiatives and
budgets. Our climate-related risks and opportunities can be
grouped into the physical impacts of climate change and the
impacts related to the transition to a low-carbon economy.
Risks
Our climate risks relate primarily to the potential for physical
or transition risks to: negatively affect the performance of
our clients’ investments, resulting in reduced fee revenue;
harm our reputation; create market risks through shifts in
The Mackenzie Sustainability Steering Committee is responsible
product demand; or lead to new regulatory, legal or disclosure
for approving and governing corporate and sustainability related
requirements that could affect our business. Diversification
82 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis within and across our investment portfolios aids in managing
Scenarios
exposure to any one company, sector or geographic region that
We have implemented a tool for our investment funds to
might be exposed to climate-related risks. We are also exposed
enhance our quantitative assessment of climate risks by
to the impact of extreme weather events on our corporate
analyzing emissions and other climate-related information
properties which could lead to business disruption, and on the
at the investee company and portfolio levels. This system
valuations of investment properties and client mortgages, which
enables us to model potential transition pathways and track
if not addressed proactively, could affect financial performance
our portfolios against the goal of limiting global warming to
and the ability to use the assets long-term.
Our operating companies are committed to sustainable
investing programs and policies that include a focus on
climate risk. We provide data and tools for our investment
teams to carry out current and forward-looking climate analysis
and we integrate material climate risks into our investment
and oversight processes for investment management sub-
advisors. As part of the hiring process and ongoing assessment
of sub-advisors, our teams request information about how
ESG, including climate risks and opportunities, is resourced,
what processes and tools are used, metrics and targets, and
how strategy and governance are influenced. As we continue
to implement the TCFD recommendations, we are devoting
increased resources to areas such as training, analysis,
metrics, target-setting, strategy planning and working with
collaborative organizations.
Opportunities
2°C above pre-industrial levels and examine the adequacy of
emissions reductions over time in meeting the goals of the
Paris Agreement. We are exploring scenario analysis tools
with external data providers to support us in our efforts to run
climate-related scenario analysis across our business.
RISK MANAGEMENT
Assessment and management of climate-related risks is
integrated into our ERM framework. We use a consistent
methodology across our organizations and business units for
identification and assessment of risks, considering factors both
internal and external to the organization. Risks are broadly
grouped into five categories: financial, operational, strategic,
business, and environmental and social. We are increasingly
focused on defining the relationship of climate risk to other
material risks.
At Mackenzie Investments, each boutique investment team
is responsible for determining when and how climate transition
We are focused on meeting growing demand for sustainable
and physical risks are material, and for incorporating these
investing and the opportunity to invest in the transition to
risks into their investment process. At IG Wealth Management
a net-zero economy. We are also increasing our focus on
and IPC, management evaluates the sustainable investing
educating and communicating with clients and advisors on
practices of investment manager sub-advisors, including the
sustainable investing and climate change.
integration of climate risks into their investment and active
At Mackenzie Investments, sustainable investing is an area of
strategic emphasis, and we have established a dedicated team
within Mackenzie’s Sustainability Centre of Excellence who bring
focus to ESG and climate across the organization. Mackenzie
has an investment boutique, Greenchip, which is exclusively
focused on thematic investing to combat climate change. In
2021, Mackenzie also launched the Betterworld Team who
invests in companies making a positive impact on the people
and the planet, and expanded its suite of climate offerings in
2021 through the addition of the Mackenzie Greenchip Global
Balanced Fund, the Mackenzie Global Sustainable Bond ETF, and
the Mackenzie Global Green Bond Fund.
At IG Wealth Management, we have integrated environmental
and climate issues into our sub-advisory selection and oversight
processes, and product development strategy. In October 2021,
IG Wealth Management launched its Climate Action Portfolios, a
suite of four diversified managed solutions which aim to provide
clients with the opportunity to support and benefit from the
global transition to net zero emissions.
ownership practice.
Engagement
To maximize stewardship efforts, engagement at Mackenzie is
undertaken both internally and by a third-party engagement
specialist where climate change is a priority engagement topic.
At IPC, a pooled engagement service provider is used to work
with companies to enhance corporate behaviour and strategy
related to topics including climate change. At IG Wealth
Management, investment management sub-advisors including
Mackenzie are responsible for engagement activities and IG
Wealth Management monitors their practices as part of regular
due diligence and oversight.
Mackenzie Investments became a founding participant in
Climate Engagement Canada this quarter, and also participates
in CERES’ Investor Network on Climate Risk. Both Mackenzie
Investments and IG Wealth Management support Climate
Action 100+ and became founding signatories to the Canadian
Investor Statement on Climate Change in October 2021.
| 83
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report METRICS AND TARGETS
We set, monitor and report on climate change-related metrics
and targets annually in our CDP response and our Sustainability
Report which are available on our website.
We currently report Scope 1, 2 and 3 GHG emissions, where
possible, including Scope 3 investment emissions related to our
real assets in the IG Real Property Fund. We are working to
expand the measurement and reporting of emissions related to
our investment portfolios in 2022.
Through IGM Financial’s Climate Position Statement launched
in November 2021, we have set a target to be climate neutral
in our corporate offices and travel by the end of 2022. We also
commit to setting interim targets for investment portfolios
as a first step, consistent with the global ambition to achieve
net zero emissions by 2050. As such, Mackenzie Investments
joined the Net Zero Asset Managers Initiative and will set an
interim investment target in line with the attainment of net zero
emissions by 2050 or sooner by the end of 2022.
84 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis The Financial Services Environment
Canadians held $5.6 trillion in discretionary financial assets
continue to place increased emphasis on both financial planning
with financial institutions at December 31, 2020 based on
and mutual funds. In addition, each of the “big six” banks has
the most recent report from Investor Economics. The nature
one or more mutual fund management subsidiaries. Collectively,
of holdings was diverse, ranging from demand deposits held
mutual fund assets of the “big six” bank-owned mutual fund
for short-term cash management purposes to longer-term
managers and affiliated firms represented 47% of total industry
investments held for retirement purposes. Approximately 64%
long-term mutual fund assets at December 31, 2021.
($3.6 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 $2.0 trillion held outside of a financial advisory relationship,
approximately 59% consisted of bank deposits.
The Canadian mutual fund industry continues to be very
concentrated, with the 10 largest firms and their subsidiaries
representing 69% of industry long-term mutual fund assets
and 69% of total mutual fund assets under management at
December 31, 2021. We anticipate continuing consolidation in
Financial advisors represent the primary distribution channel for
this segment of the industry as smaller participants are acquired
IGM Financial’s products and services, and the core emphasis of
by larger organizations.
our 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
We believe that the financial services industry will continue to
be influenced by the following trends:
financial outcomes for Canadians who use financial advisors
• Shifting demographics as the number of Canadians in their
compared to those who do not. We actively promote the value
prime savings and retirement years continues to increase.
of financial advice and the importance of a relationship with an
advisor to develop and remain focused on long-term financial
plans and goals.
Approximately 40% of Canadian discretionary financial assets or
$2.2 trillion resided in investment funds at December 31, 2020,
making it the largest financial asset class held by Canadians.
Other asset types include deposit products and direct securities
such as stocks and bonds. Approximately 76% of investment
• Changes in investor attitudes based on economic conditions.
• Continued importance of the role of the financial advisor.
• Public policy related to retirement savings.
• Changes in the regulatory environment.
• A highly competitive landscape.
• Advancing and changing technology.
funds are comprised of mutual fund products, with other
THE COMPETITIVE LANDSCAPE
product categories including segregated funds, hedge funds,
pooled funds, closed end funds and exchange traded funds.
With $185 billion in investment fund assets under management
at December 31, 2021, IGM Financial is among the country’s
largest investment fund managers. We believe that investment
funds are likely to remain the preferred savings vehicle of
Canadians. They offer 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.
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, diversified, vertically-
integrated participants, similar to IGM Financial, that 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
Our subsidiaries, IG Wealth Management and Investment
Planning Counsel, compete directly with other retail financial
service providers in the advice segment, including other
financial planning firms, as well as full service brokerages,
banks and insurance companies. Our asset management
subsidiary, Mackenzie Investments, competes directly with
other investment managers for assets under management,
and our products compete with stocks, bonds and other asset
classes for a share of Canadians’ investment assets.
Competition from other financial service providers, alternative
product types or delivery channels, and changes in regulations
or public preferences could impact the characteristics of
our product and service offerings, including pricing, product
structures, dealer and advisor compensation and disclosure.
We monitor developments on an ongoing basis, and engage
in policy discussions and develop product and service responses
as appropriate.
IGM Financial continues to focus on our commitment to
provide quality investment advice and financial products, service
innovations, effective and responsible management of the
Company and long-term value for our clients and shareholders.
| 85
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report We are midway through a five-year transformation to
BROAD PRODUCT CAPABILITIES
modernize our digital platforms and technology infrastructure
Our subsidiaries continue to develop and launch innovative
to enhance operations, achieve efficiencies and improve the
products and strategic investment planning tools to assist
service experience for our clients. We believe that IGM Financial
advisors in building optimized portfolios for clients.
is well-positioned to meet competitive challenges and capitalize
on future growth opportunities.
Our competitive strength includes:
• Broad and diversified distribution through more than 35,000
financial advisors, with an emphasis on comprehensive
financial planning.
ENDURING CLIENT RELATIONSHIPS
IGM Financial enjoys significant advantages as a result of the
enduring relationships that advisors have developed with clients.
In addition, our subsidiaries have strong heritages and cultures
which are challenging for competitors to replicate.
• Broad product capabilities, leading brands and quality
PART OF THE POWER CORPORATION
sub-advisory relationships.
GROUP OF COMPANIES
• Enduring client relationships and the long-standing heritages
As part of the Power Corporation group of companies,
and cultures of its subsidiaries.
• Benefits of being part of the Power Corporation group
IGM Financial benefits through expense savings from shared
service arrangements, as well as through access to distribution,
of companies.
products and capital.
BROAD AND DIVERSIFIED DISTRIBUTION
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 global manufacturing and distribution entities to
provide investment management services.
86 |
2021 IGM Financial Inc. Annual Report | Management’s Discussion and Analysis Critical Accounting Estimates and Policies
SUMMARY OF CRITICAL
ACCOUNTING ESTIMATES
These tests involve the use of estimates and assumptions
appropriate in the circumstances. In assessing the recoverable
The preparation of financial statements in accordance with IFRS
amounts, valuation approaches are used that include
requires management to exercise judgment in the process of
discounted cash flow analysis and application of capitalization
applying accounting policies and requires management to make
multiples to financial and operating metrics based upon
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
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,
matters that are inherently uncertain. Many of these policies are
discount rates, and capitalization multiples.
common in the financial services industry; others are specific
The Company completed its annual impairment tests of
to IGM Financial’s businesses and operations. IGM Financial’s
goodwill and indefinite life intangible assets as at April 1,
significant accounting policies are described in detail in Note 2
2021, 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.
The major critical accounting estimates are summarized below:
• 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 Corporate investments and 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 12 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.
• 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
interpretation of tax legislation in a number of jurisdictions.
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 16
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, 2021, there were no indications of
impairment to capitalized sales commissions.
| 87
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report • Provisions – A provision is recognized when there is a present
at December 31, 2020. The increase in plan assets was due
obligation as a result of a past transaction or event, it is
to market performance of $62.0 million comprised of interest
“probable” that an outflow of resources will be required to
income of $13.8 million calculated based on the discount
settle the obligation and a reliable estimate can be made
rate, which was recorded as a reduction to the pension
of the obligation. In determining the best estimate for a
expense, and actuarial gains of $48.2 million, which were
provision, a single estimate, a weighted average of all possible
recorded in Other comprehensive income. The assets in
outcomes, or the midpoint where there is a range of equally
the Company’s registered defined benefit pension plan also
possible outcomes are all considered. A significant change in
increased due to the Company contributing $13.6 million
assessment of the likelihood or the best estimate may result
(2020 – $25.6 million) to the pension plan. The increase in
in additional adjustments to net earnings.
the discount rate utilized to value the defined benefit pension
• 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 pension plan assets and for the
accrued benefit obligations on 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, mortality and
termination rates. The discount rate assumption is determined
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
and other future benefits expenses and accrued benefit
obligations. Actual experience that differs from the actuarial
plan obligation resulted in actuarial gains of $75.5 million
which were recorded in Other comprehensive income.
Demographic assumptions and experience adjustments
were revised which resulted in $3.3 million in net actuarial
gains. The total defined benefit pension plan obligation
was $588.4 million at December 31, 2021 compared to
$650.1 million at December 31, 2020. As a result of these
changes, the defined benefit pension plan had an accrued
benefit liability of $21.7 million at December 31, 2021
compared to $133.1 million at the end of 2020. The unfunded
SERPs and other post-retirement benefits plans had an
accrued benefit liability of $71.6 million and $32.6 million,
respectively, at December 31, 2021 compared to $74.8 million
and $42.1 million in 2020.
A decrease of 0.25% in the discount rate utilized in 2021
would result in a change of $30.2 million in the accrued
pension obligation, $27.8 million in other comprehensive
income, and $2.4 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 15 of the Consolidated
Financial Statements.
assumptions will result in actuarial gains or losses as well as
CHANGES IN ACCOUNTING POLICIES
changes in benefits expense. The Company records actuarial
IGM Financial has not adopted any changes in accounting
gains and losses on all of its defined benefit plans in Other
policies in 2021.
comprehensive income.
During 2021, the performance of the defined benefit
pension plan assets was positively impacted by market
conditions. Corporate bond yields increased in 2021 thereby
impacting the discount rate used to measure the Company’s
accrued benefit liability. The discount rate utilized to value
the defined benefit pension plan accrued benefit liability
at December 31, 2021 was 3.30% compared to 2.70%
at December 31, 2020. Pension plan assets increased to
$566.7 million at December 31, 2021 from $517.0 million
FUTURE ACCOUNTING CHANGES
The Company continuously monitors the potential changes
proposed by the International Accounting Standards Board
(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.
88 |
2021 IGM Financial Inc. Annual Report | 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, 2021, 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
published by The Committee of Sponsoring Organizations of the
designed to provide reasonable assurance regarding the
Treadway Commission. The Company transitioned to the COSO
reliability of financial reporting and the preparation of financial
2013 Framework during 2014. Based on their evaluations
statements for external purposes in accordance with IFRS. The
as of December 31, 2021, the President and Chief Executive
Company’s management is responsible for establishing and
Officer and the Chief Financial Officer have concluded that the
maintaining adequate internal control over financial reporting.
Company’s internal control over financial reporting is effective
All internal control systems have inherent limitations and may
become inadequate because of changes in conditions. Therefore,
even those systems determined to be effective can provide
in providing reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS.
only reasonable assurance with respect to financial statement
Notwithstanding the above, during the fourth quarter of 2021,
preparation and presentation.
The Company’s management, under the supervision of the
President and Chief Executive Officer and the Chief Financial
Officer, has evaluated the effectiveness of the Company’s
internal control over financial reporting based on the Internal
Control – Integrated Framework (COSO 2013 Framework)
there have been no changes in the Company’s internal control
over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal
control over financial reporting.
| 89
Management’s Discussion and Analysis | 2021 IGM Financial Inc. Annual Report Other Information
TRANSACTIONS WITH RELATED PARTIES
On January 5, 2022, the Company entered into an agreement
IGM Financial enters into transactions with The Canada Life
to acquire an additional interest in ChinaAMC from Power
Assurance Company (Canada Life), which is a subsidiary of
Corporation of Canada. The Company’s Board of Directors
its affiliate, Lifeco, which is a subsidiary of Power Corporation
(Board) established a special committee of independent directors
of Canada. These transactions are in the normal course of
(Committee) to assess, review and supervise negotiations
operations and have been recorded at fair value:
regarding the proposed terms of the purchase of Power’s equity
• During 2021 and 2020, the Company provided to and
received from Canada Life certain administrative services
enabling each organization to take advantage of economies
of scale and areas of expertise.
interest in ChinaAMC and the sale of Lifeco shares and to make
recommendations relating to the transactions to the Board.
Having received and considered the recommendation of the
Committee, the Board unanimously determined that each of the
transactions is in the best interests of the Company and approved
• The Company distributes insurance products under a
distribution agreement with Canada Life and received
the transactions.
$52.7 million in distribution fees (2020 – $45.1 million). The
Company received $63.3 million (2020 – $18.4 million) and
paid $22.6 million (2020 – $29.6 million) to Canada Life and
related subsidiary companies for the provision of sub-advisory
services for certain investment funds. The Company paid
$15.5 million (2020 – $78.3 million) to Canada Life related to
the distribution of certain mutual funds of the Company.
In 2020, additional transactions with related parties included
the sale of Personal Capital, the investment in Northleaf, the
acquisition of GLC Asset Management Group Ltd. and the sale
of Quadrus Group of Funds (Notes 9 and 30 of the Consolidated
Financial Statements).
For further information on transactions involving related
parties, see Notes 9, 27 and 30 to the Company’s Consolidated
• In order to manage its overall liquidity position, the
Financial Statements.
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 2021,
the Company sold residential mortgage loans to Canada Life
for $11.9 million compared to $20.9 million in 2020.
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. On December 31, 2020, the
OUTSTANDING SHARE DATA
Outstanding common shares of IGM Financial as at
December 31, 2021 totalled 239,679,043. Outstanding
stock options as at December 31, 2021 totalled 11,712,164
of which 6,179,244 were exercisable. As at February 4,
2022, outstanding common shares totalled 239,727,142
and outstanding stock options totalled 11,655,519 of which
6,131,145 were exercisable.
Company acquired shares of such loss companies and recorded
the benefit of the tax losses acquired. The benefits from these tax
SEDAR
loss consolidation arrangements ended at December 31, 2020.
Additional information relating to IGM Financial, including
the Company’s most recent financial statements and Annual
Information Form, is available at www.sedar.com.
90 |
2021 IGM Financial Inc. Annual Report | 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 Revenues from contracts with customers
Note 4 Expenses
Note 5 Other investments
Note 6
Loans
Note 7
Securitizations
Note 8 Other assets
Note 9
Investment in associates
Note 10 Capital assets
Note 11 Capitalized sales commissions
Note 12 Goodwill and intangible assets
Note 13 Deposits and certificates
Note 14 Other liabilities
Note 15 Employee benefits
Note 16 Income taxes
Note 17 Long-term debt
Note 18 Share capital
Note 19 Capital management
Note 20 Share-based payments
Note 21 Accumulated other comprehensive income (loss)
Note 22 Risk management
Note 23 Derivative financial instruments
Note 24 Fair value of financial instruments
Note 25 Earnings per common share
Note 26 Contingent liabilities and guarantees
Note 27 Related party transactions
Note 28 COVID-19
Note 29 Segmented information
Note 30 Acquisitions
Note 31 Subsequent event
92
93
96
97
98
99
100
101
101
106
106
107
108
108
109
110
112
112
113
114
114
114
118
119
120
120
120
122
123
126
127
130
130
130
131
132
135
135
| 91
2021 IGM Financial Inc. Annual Report 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.
James O’Sullivan
President and Chief Executive Officer
Luke Gould
Executive Vice-President and
Chief Financial Officer
92 |
2021 IGM Financial Inc. Annual Report | 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, 2021 and 2020, 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, 2021 and 2020, 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.
KEY AUDIT MATTERS
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2021. This matter was addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Other investments – Wealthsimple Financial Corp. (“Wealthsimple”) — Refer to Notes 2, 5 and 24 to the financial statements
Key Audit Matter Description
The Company’s Other investments balance includes an equity investment in Wealthsimple, which is recognized at fair value through
other comprehensive income. On May 3, 2021, Wealthsimple announced a $750 million equity fundraising, implying a fair value of
the Company’s investment in Wealthsimple of $1,153 million (“May 2021 transaction”). Given that Wealthsimple is a private company,
significant management judgment is required in the determination of the fair value of the investment as at December 31, 2021. In
determining fair value, recent arm’s length market transactions, a market approach using observable valuation metrics, including
revenue multiples, and discounted cash flow analysis were considered. Significant management judgment was required in determining
the most appropriate valuation approaches and the related revenue multiples applied in the market approach. Management
determined that the fair value was $1,153 million as at December 31, 2021.
Auditing the fair value of Wealthsimple as at December 31, 2021 required a high degree of auditor judgment which resulted in an
increased extent of audit effort, including the use of fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
With the assistance of fair value specialists, our audit procedures related to the fair value of Wealthsimple included the following,
among others:
• We obtained the underlying source documents of the May 2021 transaction and analyzed the terms and determined if the
transaction represented an appropriate estimate of fair value at the date of the transaction.
• We independently performed a retrospective evaluation and analyzed Wealthsimple’s financial performance between the May 2021
transaction and December 31, 2021 using private investment financial information provided to the Company by Wealthsimple in
order to determine the impact, if any, on the fair value determination as at December 31, 2021.
• We evaluated relevant internal and external information, including industry information, and assessed the reasonability of
unobservable market inputs in instances where these inputs were more subjective.
• We evaluated other available information and considered whether this information corroborated or contradicted the Company’s conclusions.
• We evaluated the appropriateness of fair value approaches and developed independent fair value estimates using an independent
market approach by using private investment financial information provided to the Company by Wealthsimple, and analyzed
comparable public company multiples and transactions.
| 93
Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report Independent Auditor’s Report (continued)
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.
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.
94 |
2021 IGM Financial Inc. Annual Report | Consolidated Financial Statements Independent Auditor’s Report (continued)
• 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.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is David Dalziel.
Chartered Professional Accountants
Winnipeg, Manitoba
February 10, 2022
| 95
Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(in thousands of Canadian dollars, except per share amounts)
Revenues
Wealth management (Note 3)
Asset management
Dealer compensation expense
Net asset management (Note 3)
Net investment income and other (Notes 9 and 30)
Proportionate share of associates’ earnings (Note 9)
Expenses (Note 4)
Advisory and business development
Operations and support
Sub-advisory
Interest (Note 17)
Earnings before income taxes
Income taxes (Note 16)
Net earnings
Non-controlling interest (Note 9)
2021
2020
$ 2,553,600
$ 2,259,576
1,011,456
(335,970)
675,486
22,542
196,367
812,931
(283,163)
529,768
78,209
150,429
3,447,995
3,017,982
1,178,009
1,040,146
806,380
82,020
113,936
830,650
71,213
110,597
2,180,345
2,052,606
1,267,650
286,763
980,887
(1,938)
965,376
200,770
764,606
(198)
Net earnings available to common shareholders
$
978,949
$
764,408
Earnings per share (in dollars) (Note 25)
– Basic
– Diluted
(See accompanying notes to consolidated financial statements.)
$
$
4.10
4.08
$
$
3.21
3.21
96 |
2021 IGM Financial Inc. Annual Report | 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
2021
2020
$
980,887
$
764,606
Other comprehensive income (loss) (Note 5), net of tax of $(130,242) and $(38,565)
834,519
247,085
Employee benefits
Net actuarial gains (losses), net of tax of $(37,466) and $11,461
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 $(4,284) and $(1,900)
Total comprehensive income
(See accompanying notes to consolidated financial statements.)
101,283
(31,002)
23,519
(2,906)
(3,787)
955,534
50,889
264,066
$ 1,936,421
$ 1,028,672
| 97
Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Other investments (Note 5)
Client funds on deposit
Accounts and other receivables
Income taxes recoverable
Loans (Note 6)
Derivative financial instruments (Note 23)
Other assets (Note 8)
Investment in associates (Note 9)
Capital assets (Note 10)
Capitalized sales commissions (Note 11)
Deferred income taxes (Note 16)
Intangible assets (Note 12)
Goodwill (Note 12)
Liabilities
Accounts payable and accrued liabilities
Income taxes payable
Derivative financial instruments (Note 23)
Deposits and certificates (Note 13)
Other liabilities (Note 14)
Obligations to securitization entities (Note 7)
Lease obligations
Deferred income taxes (Note 16)
Long-term debt (Note 17)
Shareholders’ Equity
Share capital (Note 18)
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss) (Note 21)
Non-controlling interest (Note 9)
2021
2020
$ 1,292,446
$
771,585
1,398,023
2,238,624
387,157
17,344
632,300
1,063,442
444,458
30,366
5,353,842
6,331,855
41,172
54,298
37,334
49,782
2,048,255
1,931,168
315,964
325,424
29,269
1,356,704
2,802,066
329,690
231,085
84,624
1,321,590
2,803,075
$ 17,660,588
$ 16,062,354
$
553,429
$
486,575
104,113
17,773
7,146
34,514
2,220,274
1,104,889
382,466
536,141
5,057,917
6,173,886
197,969
525,476
188,334
388,079
2,100,000
2,100,000
11,159,417
11,019,564
1,658,680
1,598,381
51,069
51,663
3,856,996
3,207,469
883,083
51,343
136,364
48,913
6,501,171
5,042,790
$ 17,660,588
$ 16,062,354
These financial statements were approved and authorized for issuance by the Board of Directors on February 10, 2022.
James O’Sullivan
Director
John McCallum
Director
(See accompanying notes to consolidated financial statements.)
98 |
2021 IGM Financial Inc. Annual Report | Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands of Canadian dollars)
2021
SHARE CAPITAL
– COMMON
SHARES
(Note 18)
CONTRIBUTED
SURPLUS
RETAINED
EARNINGS
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
(Note 21)
NON-
CONTROLLING
INTEREST
TOTAL
SHAREHOLDERS
EQUITY
Balance, beginning of year
$ 1,598,381
$
51,663
$ 3,207,469
$
136,364
$
48,913
$ 5,042,790
Net earnings
Other comprehensive income (loss),
net of tax
Total comprehensive income
Common shares
–
–
–
Issued under stock option plan
60,299
Stock options
Current period expense
Exercised
Common share dividends
Non-controlling interest
Transfer out of fair value through other
comprehensive income (Note 5)
Other
–
–
–
–
–
–
–
–
–
–
3,802
(4,396)
–
–
–
–
980,887
–
–
980,887
955,534
955,534
–
–
–
(537,795)
(1,938)
–
–
–
–
–
208,815
(208,815)
(442)
–
–
–
–
–
–
–
–
2,430
–
–
980,887
955,534
1,936,421
60,299
3,802
(4,396)
(537,795)
492
–
(442)
Balance, end of year
$ 1,658,680
$
51,069
$ 3,856,996
$
883,083
$
51,343
$ 6,501,171
2020
Balance, beginning of year
$ 1,597,860
$
48,677
$ 2,980,260
$
(127,702)
$
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
Common share dividends
Non-controlling interest
Other
Balance, end of year
–
–
–
521
–
–
–
–
–
–
–
–
–
3,010
(24)
–
–
–
764,606
–
–
764,606
264,066
264,066
–
–
–
(536,194)
(198)
(1,005)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,913
–
$ 4,499,095
764,606
264,066
1,028,672
521
3,010
(24)
(536,194)
48,715
(1,005)
$ 1,598,381
$
51,663
$ 3,207,469
$
136,364
$
48,913
$ 5,042,790
(See accompanying notes to consolidated financial statements.)
| 99
Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
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
Gain on sale of Personal Capital Corporation
Gain on sale of Quadrus Group of Funds
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 common shares
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
Investment in Northleaf Capital Group Ltd. (Note 9)
Acquisition of GLC Asset Management Group Ltd. (Note 30)
Proceeds from sale of Personal Capital Corporation (Note 9)
Proceeds from sale of Quadrus Group of Funds (Note 9)
Increase 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.)
100 |
2021
2020
$ 1,267,650
$
965,376
(153,501)
(172,319)
56,683
(151,022)
99,818
(102,134)
14,403
–
–
–
(38,342)
993,555
(49,965)
943,590
36,433
(117,652)
83,498
(71,328)
(4,758)
74,460
(37,232)
(30,000)
26,772
753,250
(16,625)
736,625
(3,861)
(5,832)
1,428,861
1,568,521
(2,442,698)
(2,359,844)
(23,023)
55,904
(537,027)
(25,579)
498
(536,186)
(1,521,844)
(1,358,422)
(131,778)
348,206
(32,651)
38,840
(1,776,070)
(1,792,995)
2,744,676
2,679,740
(10,643)
(75,276)
–
–
–
–
1,099,115
520,861
771,585
(38,991)
(68,808)
(198,793)
(175,788)
232,823
30,000
673,377
51,580
720,005
$ 1,292,446
$
771,585
$
326,225
$
76,617
966,221
694,968
$ 1,292,446
$
771,585
$
$
247,377
221,129
$
$
267,369
256,272
2021 IGM Financial Inc. Annual Report | Consolidated Financial Statements
Notes to Consolidated Financial Statements
December 31, 2021 and 2020 (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 Corporation of Canada.
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 (Mackenzie).
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 5, 7, 9, 11, 12, 14, 15, 16, 24 and 30. The
twelve months ended December 31, 2020 and 2021, were characterized by increased uncertainty due to COVID-19. The Company is
closely monitoring the current environment and assessing the impacts, if any, on its significant assumptions related to critical estimates.
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. (ChinaAMC) and Northleaf Capital
Group Ltd. (Northleaf) 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. The equity method was used to account for the Company’s equity interest in Personal
Capital Corporation (Personal Capital) until the announcement of the sale of the investment on June 29, 2020.
REVENUE RECOGNITION
Wealth management revenue is earned for providing financial planning, investment advisory and related financial services. Revenues
from financial advisory fees and investment management and related administration fees are based on the net asset value of
investment funds or other assets under advisement and are accrued as services are performed. Distribution revenue associated with
insurance and banking products and services are also recognized on an accrual basis while distribution fees derived from investment
fund and securities transactions are recognized on a trade date basis.
Asset management revenue related to investment management advisory and administrative services is based on the net asset value
of investment funds and other assets under management and is accrued as services are performed.
| 101
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FINANCIAL INSTRUMENTS
All financial assets are initially recognized at fair value in the Consolidated Balance Sheets and are subsequently classified as measured
at 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.
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. Revenues from mortgage activities are included in Wealth Management revenues in the Consolidated Statement
of Earnings.
Changes in fair value of loans measured at FVTPL are recorded in Wealth management revenue 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 Wealth management revenue 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.
102 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 Wealth management revenue 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.
Commissions paid on investment product sales where the Company earns fees from a 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 Advisory and business development and Operations and support expenses.
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).
| 103
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GOODWILL AND INTANGIBLE ASSETS (continued)
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.
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 Operations and support 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.
104 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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 23). The effective portion of changes in fair value are initially recorded in Other comprehensive income and subsequently
recorded in Wealth management revenue 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 Wealth management revenue 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 Operations
and support expenses 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.
| 105
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 and has determined that amendments effective January 1, 2022, will have no material impact.
NOTE 3 REVENUES FROM CONTRACTS WITH CUSTOMERS
Advisory fees
Product and program fees
Redemption fees
Other financial planning revenues
Wealth management
Asset management
Dealer compensation expense
Net asset management
Net revenues from contracts with customers
2021
2020
$ 1,397,859
$ 1,229,299
961,122
846,341
2,358,981
2,075,640
10,029
184,590
15,965
167,971
2,553,600
2,259,576
1,011,456
(335,970)
812,931
(283,163)
675,486
529,768
$ 3,229,086
$ 2,789,344
Wealth management revenue is earned by providing financial planning, investment advisory and related financial services. Advisory
fees, related to financial planning, are associated with assets under management and advisement. Product and program fees, related
to investment management and administration services, are associated with assets under management. Other financial planning
revenues include insurance, banking products and services, and mortgage lending activities.
Asset management revenue, related to investment management advisory and administrative services, depends on the level and
composition of assets under management.
NOTE 4 EXPENSES
Commissions
Salaries and employee benefits
Restructuring and other
Occupancy
Amortization of capital, intangible and other assets
Other
Sub-advisory
Interest
2021
2020
$
918,793 $
787,684
590,388
556,115
–
27,117
99,818
74,460
28,608
83,498
348,273
340,431
1,984,389
1,870,796
82,020
113,936
71,213
110,597
$
2,180,345 $
2,052,606
During 2020, the Company incurred restructuring and other charges of $74.5 million related to the ongoing multi-year transformation
initiatives and efforts to enhance our operational effectiveness and also from the acquisition of GLC Asset Management (GLC)
and other changes to our investment management teams. As a result of these initiatives, the Company recorded costs relating to
restructuring and downsizing certain related party sharing services activities as well as impairment of redundant internally generated
software assets.
106 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 5 OTHER INVESTMENTS
Fair value through other comprehensive income (FVTOCI)
Corporate investments
Fair value through profit or loss (FVTPL)
Equity securities
Proprietary investment funds
2021
2020
COST
FAIR VALUE
COST
FAIR VALUE
$ 226,220 $ 1,291,434
$ 251,417
$ 593,273
1,173
1,552
101,327
105,037
102,500
106,589
1,499
35,254
36,753
1,513
37,514
39,027
$ 328,720 $ 1,398,023
$ 288,170
$ 632,300
FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Corporate investments is primarily comprised of the Company’s investments in Wealthsimple Financial Corp. (Wealthsimple), and
Portag3 Ventures LP, Portag3 Ventures II LP and Portage Ventures III LP (Portag3). Portag3 is an early-stage investment fund dedicated
to backing innovating financial services companies. Portag3 is controlled by Power Corporation of Canada.
The total fair value of Corporate investments of $1,291.4 million is presented net of certain costs incurred within the limited partnership
structures holding the underlying investments.
Investment in Wealthsimple
Wealthsimple Financial Corp. (Wealthsimple) is an online investment manager that provides financial investment guidance. The
Company’s investment in Wealthsimple is held through a limited partnership controlled by Power Corporation of Canada. The
investment is classified at Fair Value Through Other Comprehensive Income.
On May 3, 2021, Wealthsimple announced a $750 million equity fundraising, valuing IGM Financial Inc.’s investment in Wealthsimple
at $1,448 million. As part of the transaction, IGM Financial Inc. disposed of a portion of its investment for proceeds of $294 million
($258 million after-tax).
In 2021, a realized gain of $241 million ($209 million after-tax) was transferred from Accumulated other comprehensive income to
Other retained earnings.
On October 14, 2020, Wealthsimple announced a $114 million equity fundraising. The purchase price associated with this fundraising
valued the common equity of Wealthsimple at $1.5 billion ($1.4 billion pre-money valuation).
IGM Financial Inc. holds directly and indirectly a 23% interest in Wealthsimple (2020 – 36%) valued at $1,153 million at December 31,
2021 (2020 – $550 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, 2021, there were $184.5 billion in investment fund
assets under management (2020 – $159.5 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. The Company’s maximum exposure to loss is limited to its direct
investment in the proprietary investment funds.
Certain investment funds are consolidated where the Company has made the assessment that it controls the investment fund. As
at December 31, 2021, the underlying investments related to these consolidated investment funds primarily consisted of cash and
short-term investments of $25.1 million (2020 – $7.5 million), equity securities of $50.9 million (2020 – $10.9 million) and fixed
income securities of $13.0 million (2020 – $5.8 million). The underlying securities of these funds are classified as FVTPL and recognized
at fair value.
| 107
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 6 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
CONTRACTUAL MATURITY
1 YEAR
OR LESS
1 – 5
YEARS
OVER
5 YEARS
2021
TOTAL
2020
TOTAL
$ 1,162,460 $ 4,131,098 $
3,496
$ 5,297,054 $ 6,329,342
648
778
5,296,406
6,328,564
57,436
3,291
$ 5,353,842 $ 6,331,855
$
778 $
(407)
277
$
648 $
675
(562)
665
778
Total credit impaired loans as at December 31, 2021 were $2,822 (2020 – $4,807).
Total interest income on loans was $154.7 million (2020 – $191.2 million). Total interest expense on obligations to securitization
entities, related to securitized loans, was $111.4 million (2020 – $148.5 million). Gains realized on the sale of residential mortgages
totalled $3.9 million (2020 – $9.8 million). Fair value adjustments related to mortgage banking operations totalled $1.4 million (2020
– negative $5.1 million). These amounts were included in Wealth management revenue. Wealth management revenue also includes
other mortgage banking related items including portfolio insurance, issue costs, and other items.
NOTE 7 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, and the hedging swap used to manage exposure to
changes in variable rate investment returns, are recorded as derivatives with a fair value of $4.5 million at December 31, 2021 (2020 –
negative $1.2 million).
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.
108 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 7 SECURITIZATIONS (continued)
2021
Carrying value
NHA MBS and CMB Program
Bank sponsored ABCP
Total
Fair value
2020
Carrying value
NHA MBS and CMB Program
Bank sponsored ABCP
Total
Fair value
SECURITIZED
MORTGAGES
OBLIGATIONS TO
SECURITIZATION
ENTITIES
NET
$ 2,653,682
$ 2,651,293
$
2,389
2,371,320
2,406,624
$ 5,025,002
$ 5,057,917
$ 5,083,991
$ 5,146,420
(35,304)
(32,915)
(62,429)
$
$
$ 3,216,158
$ 3,307,428
$
(91,270)
2,767,743
2,866,458
(98,715)
$ 5,983,901
$ 6,173,886
$ 6,186,410
$ 6,345,189
$
$
(189,985)
(158,779)
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 8 OTHER ASSETS
Deferred and prepaid expenses
Other
2021
2020
$
52,225
$
48,763
2,073
1,019
$
54,298
$
49,782
Total other assets of $29.6 million as at December 31, 2021 (2020 – $24.2 million) are expected to be realized within one year.
| 109
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 9 INVESTMENT IN ASSOCIATES
2021
Balance, beginning of year
Additions
Dividends
Proportionate share of:
Earnings
Other comprehensive income (loss)
and other adjustments
Balance, end of year
2020
Balance, beginning of year
Investment
Dividends
Proportionate share of:
Earnings (losses)
Associate’s adjustments
Other comprehensive income (loss)
and other adjustments
Disposition
Balance, end of year
LIFECO
ChinaAMC
NORTHLEAF
PERSONAL
CAPITAL
TOTAL
$
962,388 $
720,282 $
248,498 $
– $ 1,931,168
–
–
(67,356)
(26,877)
643
–
125,103
61,574
9,690(1)
565
13,745
–
–
–
–
–
643
(94,233)
196,367
14,310
$ 1,020,700 $
768,724 $
258,831 $
– $ 2,048,255
$
896,651 $
662,694 $
– $
194,537 $ 1,753,882
–
–
247,508
(65,415)
(13,686)
–
–
–
247,508
(79,101)
109,148
41,531
3,400
–
18,604
29,743
–
–
990(1)
–
–
–
(4,640)
147,029
–
3,400
8,817
57,164
(198,714)
(198,714)
$
962,388 $
720,282 $
248,498 $
– $ 1,931,168
(1) The Company’s proportionate share of Northleaf’s earnings, net of Non-controlling interest, was $7,752 in 2021 (2020 – $792).
The Company uses the equity method to account for its investments in Great-West Lifeco Inc. (Lifeco), China Asset Management Co.,
Ltd. (ChinaAMC) and Northleaf Capital Group Ltd. (Northleaf) as it exercises significant influence. The equity method was used up to
June 29, 2020 to account for the Company’s 24.8% equity interest in Personal Capital Corporation (Personal Capital), as it exercised
significant influence.
On January 5, 2022, the Company entered into an agreement with Power Corporation of Canada to acquire an additional interest in
ChinaAMC and to sell a portion of its investment in Lifeco (Note 31).
GREAT-WEST LIFECO INC. (LIFECO)
Lifeco is a publicly listed company that is incorporated and domiciled in Canada and is controlled by Power Corporation of Canada.
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, 2021, the Company held 37,337,133 (2020 – 37,337,133) shares of Lifeco, which represented an equity interest of
4.0% (2020 – 4.0%). Significant influence arises from several factors, including but not limited to the following: common control of
Lifeco by Power Corporation of Canada, directors common to the boards of the Company and Lifeco, certain shared strategic alliances
and significant intercompany transactions 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 December 2020, Lifeco recorded a gain in relation to the revaluation of a deferred tax asset less certain restructuring and transaction
costs. The Company’s after-tax proportionate share of these adjustments was $3.4 million.
The fair value of the Company’s investment in Lifeco totalled $1,415.5 million at December 31, 2021 (2020 – $1,133.2 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, 2021 (2020 – 9,200,000).
Lifeco’s financial information as at December 31, 2021 can be obtained in its publicly available information.
110 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 9 INVESTMENT IN ASSOCIATES (continued)
CHINA ASSET MANAGEMENT CO., LTD. (ChinaAMC)
ChinaAMC is an asset management company established in Beijing, China and is controlled by CITIC Securities Company Limited.
As at December 31, 2021, the Company held a 13.9% ownership interest in ChinaAMC (2020 – 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 ChinaAMC:
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
3,241
996
1,560
449
444
2021
CHINESE
YUAN
16,295
5,007
8,015
2,312
2,287
CANADIAN
DOLLARS
2,672
720
1,078
311
300
2020
CHINESE
YUAN
13,695
3,688
5,539
1,598
1,542
NORTHLEAF CAPITAL GROUP LTD. (NORTHLEAF)
On October 28, 2020, the Company’s subsidiary, Mackenzie, together with Lifeco, acquired a non-controlling interest in Northleaf
Capital Group Ltd. (Northleaf), a global private equity, private credit and infrastructure fund manager headquartered in Toronto, Canada.
The transaction was executed through an acquisition vehicle 80% owned by Mackenzie and 20% owned by Lifeco for cash
consideration of $241.0 million and up to an additional $245.0 million in consideration at the end of five years from the acquisition date
subject to the business achieving exceptional growth in certain performance measures over the period. Any additional consideration
will be recognized as expense over the five year period based on the fair value of the expected payment, which is revalued at each
reporting period date.
The acquisition vehicle acquired a 49.9% non-controlling voting interest and a 70% economic interest in Northleaf. Mackenzie and
Lifeco have an obligation and right to purchase the remaining economic and voting interest in Northleaf commencing in approximately
five years from the acquisition date and extending into future periods. The equity method is used to account for the acquisition vehicle’s
70% economic interest as it exercises significant influence. Significant influence arises from board representation, participation in the
policy making process and shared strategic initiatives.
The Company controls the acquisition vehicle and therefore recognizes the full 70% economic interest in Northleaf and recognizes
Non-controlling interest (NCI) related to Lifeco’s net interest in Northleaf of 14%.
The following table sets forth certain summary financial information from Northleaf:
AS AT DECEMBER 31 (millions)
Total assets
Total liabilities
FOR THE PERIOD ENDED DECEMBER 31(1)
Revenue
Net earnings available to common shareholders
Total comprehensive income
(1) 2020 results include only fourth quarter; however, the Company’s proportionate share of Northleaf’s earnings was effective October 28, 2020.
2021
$ 119.6
106.0
$ 99.8
17.9
17.9
2020
$ 115.9
98.5
$ 21.7
3.1
3.1
| 111
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 9 INVESTMENT IN ASSOCIATES (continued)
PERSONAL CAPITAL CORPORATION (PERSONAL CAPITAL)
In 2020, the Company sold its equity interest in Personal Capital to a subsidiary of Lifeco, Empower Retirement, for proceeds of
$232.8 million (USD $176.2 million) and up to an additional USD $24.6 million in consideration subject to Personal Capital achieving
certain target growth objectives. As a result of the sale, the Company has derecognized its investment in Personal Capital and recorded
an accounting gain of $37.2 million ($31.4 million net of tax) in Net investment income and other. During the fourth quarter of 2021,
the Company recorded additional consideration receivable of $10.6 million ($7.7 million after-tax) in Net investment income and other.
NOTE 10 CAPITAL ASSETS
2021
Cost
Less: accumulated amortization
Changes in capital assets:
Balance, beginning of year
Additions
Disposals
Amortization
Balance, end of year
2020
Cost
Less: accumulated amortization
Changes in capital assets:
Balance, beginning of year
Additions
Disposals
Amortization
Balance, end of year
NOTE 11 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
112 |
FURNITURE AND
EQUIPMENT
BUILDING AND
COMPONENTS
RIGHT-OF-USE
ASSETS
TOTAL
$
336,025
$
69,349
$
260,530
$
665,904
(254,602)
(18,244)
(77,094)
(349,940)
$
$
$
$
81,423
99,036
9,296
(9,166)
(17,743)
51,105
$
183,436
$
315,964
51,411
$
179,243
$
329,690
1,339
–
(1,645)
32,658
–
(28,465)
43,293
(9,166)
(47,853)
$
81,423
$
51,105
$
183,436
$
315,964
$
$
$
$
357,351
$
$
(258,315)
99,036
84,299
37,799
(3,653)
(19,409)
68,009
$
227,872
$
653,232
(16,598)
(48,629)
(323,542)
51,411
$
179,243
$
329,690
51,801
$
80,856
$
216,956
1,192
–
(1,582)
123,529
–
(25,142)
162,520
(3,653)
(46,133)
$
99,036
$
51,411
$
179,243
$
329,690
2021
2020
$
461,149
$
310,127
(135,725)
(79,042)
$
325,424
$
231,085
$
231,085
$
149,866
151,022
(56,683)
94,339
117,652
(36,433)
81,219
$
325,424
$
231,085
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 12 GOODWILL AND INTANGIBLE ASSETS
FINITE LIFE
DISTRIBUTION
AND OTHER
MANAGEMENT
CONTRACTS
INVESTMENT
FUND
MANAGEMENT
CONTRACTS
SOFTWARE
INDEFINITE LIFE
TRADE
NAMES
TOTAL
INTANGIBLE
ASSETS
GOODWILL
2021
Cost
$
325,123
$
270,327
$
740,559
$
285,177
$ 1,621,186
$ 2,802,066
Less: accumulated amortization
(164,787)
(99,695)
–
–
(264,482)
–
$
160,336
$
170,632
$
740,559
$
285,177
$ 1,356,704
$ 2,802,066
Changes in goodwill and intangible assets:
Balance, beginning of year
$
155,923
$
139,931
$
740,559
$
285,177
$ 1,321,590
$ 2,803,075
Additions(1)
Disposals
Amortization
38,865
(19)
(34,433)
44,072
(867)
(12,504)
–
–
–
–
–
–
82,937
(886)
(46,937)
(1,009)
–
–
Balance, end of year
$
160,336
$
170,632
$
740,559
$
285,177
$ 1,356,704
$ 2,802,066
2020
Cost
$
293,412
$
228,167
$
740,559
$
285,177
$ 1,547,315
$ 2,803,075
Less: accumulated amortization
(137,489)
(88,236)
–
–
(225,725)
–
$
155,923
$
139,931
$
740,559
$
285,177
$ 1,321,590
$ 2,803,075
Changes in goodwill and intangible assets:
Balance, beginning of year
$
138,499
$
Additions(1)
Disposals
Amortization
43,606
(1,421)
(24,761)
65,892
81,950
(490)
(7,421)
$
740,559
$
285,177
$ 1,230,127
$ 2,660,267
–
–
–
–
–
–
125,556
(1,911)
(32,182)
142,808
–
–
Balance, end of year
$
155,923
$
139,931
$
740,559
$
285,177
$ 1,321,590
$ 2,803,075
(1) The Company completed its acquisition of GLC on December 31, 2020 and Greenchip on December 22, 2020 and finalized the purchase price allocations in 2021 (Note 30).
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:
Wealth Management
Asset Management
Total
2021
INDEFINITE
LIFE
INTANGIBLE
ASSETS
GOODWILL
2020
INDEFINITE
LIFE
INTANGIBLE
ASSETS
GOODWILL
$ 1,491,687
$
23,055
$ 1,491,687
$
23,055
1,310,379
1,002,681
1,311,388
1,002,681
$ 2,802,066
$ 1,025,736
$ 2,803,075
$ 1,025,736
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.
In assessing the recoverable amounts, valuation approaches are used that may 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 in discounted cash flows include future changes in assets under management resulting from net
sales and investment returns, pricing and profit margin changes and discount rates, which represent level 3 fair value inputs. 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.
| 113
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 12 GOODWILL AND INTANGIBLE ASSETS (continued)
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 13 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 $2,220.3 million (2020 – $1,104.9 million) related to deposits and certificates.
Deposits
Certificates
NOTE 14 OTHER LIABILITIES
Dividends payable
Interest payable
Accrued benefit liabilities (Note 15)
Provisions
Other
DEMAND
1 YEAR
OR LESS
TERM TO MATURITY
1–5
YEARS
OVER
5 YEARS
2021
TOTAL
2020
TOTAL
$
2,218,611
$
–
$
–
$
–
$
2,218,611
$
1,103,127
–
387
538
738
1,663
1,762
$
2,218,611
$
387
$
538
$
738
$
2,220,274
$
1,104,889
2021
2020
$ 134,816
$ 134,048
26,775
125,732
26,674
68,469
27,500
250,079
77,495
47,019
$ 382,466
$ 536,141
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 2021 consisted of additional estimates of $7.3 million
(2020 – $77.8 million), provision reversals of $4.0 million (2020 – $2.2 million) and payments of $54.1 million (2020 – $18.6 million).
Total other liabilities of $244.9 million as at December 31, 2021 (2020 – $276.0 million) are expected to be settled within one year.
NOTE 15 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.
114 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 15 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
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, 2020, was completed in June 2021. 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 $61.3 million compared to $47.2 million in the previous
actuarial valuation, which was based on a measurement date of December 31, 2017. The increase in the solvency deficit resulted
primarily as a result of lower interest rates and is required to be funded over five years. The registered pension plan had a going
concern surplus of $79.2 million compared to $46.1 million in the previous valuation. The next required actuarial valuation will be
based on a measurement date of December 31, 2021. During the year, the Company has made contributions of $13.6 million (2020
– $25.5 million). The Company expects annual contributions of approximately $14.1 million in 2022. 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. Effective December 20, 2021, the Government of Manitoba
implemented funding changes for defined benefit pension plans. The changes include funding the solvency deficit only if it falls below
85% (previously was required to fund the entire solvency deficit). In determining the funding for going concern deficits, a margin known
as the provision for adverse deviation will be added to the going concern deficit. The minimum provision is 5% of the going concern
liabilities and can increase up to 22% based on the pension’s target asset allocation. The funding period for going concern deficits will
decrease from 15 years to 10 years. The changes in the funding requirements will be considered as part of the valuation of the pension
plan that will be based on a measurement date of December 31, 2021. The changes also allow an employer to establish a solvency
reserve account which is a separate account within the pension fund to which the employer can remit solvency deficiency payments.
The administrator can refund all or a portion of the assets in this separate account to the employer provided the plan remains fully
funded on a going concern basis and maintains a solvency ratio of at least 105%. Benefit improvements under the plan are not allowed
if the solvency ratio is less than 85%.
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.
| 115
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 15 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
Plan assets, benefit obligations and funded status:
DEFINED BENEFIT
PENSION PLAN
SERPS
2021
OTHER POST–
EMPLOYMENT
BENEFITS
DEFINED BENEFIT
PENSION PLAN
SERPS
2020
OTHER POST–
EMPLOYMENT
BENEFITS
Fair value of plan assets
Balance, beginning of year
$
516,945
$
Employee contributions
Employer contributions
Benefits paid
Interest income
Additions
Remeasurements:
Return on plan assets
Balance, end of year
Accrued benefit obligation
Balance, beginning of year
Benefits paid
Current service cost
Past service costs
Employee contributions
Interest expense
Additions
Remeasurements:
Actuarial losses (gains)
Demographic assumption
Experience adjustments
Financial assumptions
Balance, end of year
1,964
13,598
(27,748)
13,774
–
48,194
566,727
650,064
(27,748)
25,707
–
1,964
17,177
–
–
(3,348)
(75,465)
588,351
$
–
–
–
–
–
–
–
–
74,825
(3,853)
2,107
–
–
1,668
–
–
1,861
(5,051)
71,557
–
–
–
–
–
–
–
–
42,135
(2,671)
679
–
–
960
–
–
(6,402)
(2,150)
32,551
$
466,547
$
1,979
25,468
(27,792)
14,935
11,200
24,608
516,945
565,606
(27,792)
20,728
–
1,979
17,688
14,700
–
(33)
57,188
650,064
$
–
–
–
–
–
–
–
–
69,236
(3,267)
1,639
(1,588)
–
2,072
–
–
1,345
5,388
–
–
–
–
–
–
–
–
39,147
(1,942)
587
–
–
1,156
–
830
(535)
2,892
74,825
42,135
Accrued benefit liability
$
21,624
$
71,557
$
32,551
$
133,119
$
74,825
$
42,135
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
PENSION PLAN
3.30%
3.75%
N/A
SERPS
2.65%-3.10%
3.75%
N/A
2021
OTHER POST–
EMPLOYMENT
BENEFITS
3.00%
N/A
5.50%
DEFINED BENEFIT
PENSION PLAN
2.70%
3.75%
N/A
SERPS
1.85%-2.50%
3.75%
N/A
2020
OTHER POST–
EMPLOYMENT
BENEFITS
2.35%
N/A
5.60%
23.1 years
23.1 years
23.1 years
23.0 years
23.0 years
23.0 years
(1) Trending to 4.00% in 2040 and remaining at that rate thereafter.
The weighted average duration of the pension plan’s defined benefit obligation at the end of the reporting period is 20.7 years (2020 –
19.3 years).
116 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 15 EMPLOYEE BENEFITS (continued)
DEFINED BENEFIT PLANS (continued)
Benefit expense:
DEFINED
BENEFIT
PENSION PLAN
2021
OTHER POST–
EMPLOYMENT
BENEFITS
SERPS
DEFINED
BENEFIT
PENSION PLAN
2020
OTHER POST–
EMPLOYMENT
BENEFITS
SERPS
$
25,707
$
2,107
$
–
3,403
–
1,668
679
–
960
$
20,728
$
1,639
$
–
2,753
(1,588)
2,072
$
29,110
$
3,775
$
1,639
$
23,481
$
2,123
$
587
–
1,156
1,743
Current service cost
Past service costs
Net interest cost
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
INCREASE
(DECREASE)
IN LIABILITY
2021
INCREASE
(DECREASE)
IN EXPENSE
INCREASE
(DECREASE)
IN LIABILITY
2020
INCREASE
(DECREASE)
IN EXPENSE
$
(28,634)
30,242
$
(2,391)
2,389
$
(29,334)
31,391
$
(2,081)
2,110
7,805
(7,674)
11,214
(1,683)
1,755
30
(26)
1,415
(763)
797
659
(574)
807
838
(822)
721
82
(87)
12
(13)
48
42
(44)
20
(17)
30
11,121
(10,981)
1,075
(1,057)
14,339
849
(1,922)
2,001
41
(42)
1,645
(1,056)
1,106
1,476
(1,273)
1,270
87
(93)
21
(15)
45
52
(55)
35
(30)
42
| 117
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 15 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
2021
61.5 %
30.2
7.3
1.0
2020
60.8 %
29.6
8.6
1.0
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 Advisory
and business development and Operations and support expenses was $6.9 million (2020 – $6.2 million).
GROUP RETIREMENT SAVINGS PLAN (RSP)
The Company maintains a group RSP for eligible employees. The Company’s contributions are recorded in Advisory and business
development and Operations and support expenses as paid and totalled $8.6 million (2020 – $7.6 million).
NOTE 16 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 9)
Proportionate share of associate’s adjustments (Note 9)
Tax loss consolidation (Note 27)
Disposition of assets and other acquisition costs
Other items
Effective income tax rate
118 |
2021
2020
$
230,651
$
170,441
(676)
229,975
56,788
(2,003)
168,438
32,332
$
286,763
$
200,770
2021
26.63 %
2020
26.68 %
(3.65)
–
–
–
(0.36)
(3.71)
(0.09)
(1.15)
(0.82)
(0.11)
22.62 %
20.80 %
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 16 INCOME TAXES (continued)
DEFERRED INCOME TAXES
Composition and changes in net deferred taxes are as follows:
ACCRUED
BENEFIT
LIABILITIES
LOSS
CARRYFORWARDS
CAPITALIZED
SALES
COMMISSIONS
INTANGIBLE
ASSETS
OTHER
INVESTMENTS
OTHER
TOTAL
FOR THE YEAR ENDED
DECEMBER 31, 2021
Balance, beginning of year
$
67,467 $
27,604 $
(61,579) $
(288,229) $
(45,961) $
(2,757) $
(303,455)
Recognized in statements of:
Earnings
Comprehensive income
Equity
Foreign exchange rate
charges and other
3,885
(37,466)
–
(21,145)
–
–
(25,037)
–
–
(1,605)
–
–
(1,371)
(97,653)
3,438
(11,515)
(4,284)
–
(56,788)
(139,403)
3,438
–
–
–
(1)
(1,204)
1,206
1
Balance, end of year
$
33,886 $
6,459 $
(86,616) $
(289,835) $
(142,751) $
(17,350) $
(496,207)
FOR THE YEAR ENDED
DECEMBER 31, 2020
Balance, beginning of year
$
55,994
$
33,700
$
(40,006)
$
(268,734)
$
(8,104)
$
(1,382)
$
(228,532)
Recognized in statements of:
Earnings
Comprehensive income
Business acquisitions
Foreign exchange rate
charges and other
(933)
11,461
945
(6,096)
–
–
(21,573)
–
–
(4,485)
–
(15,010)
708
(38,565)
–
47
(1,900)
488
(32,332)
(29,004)
(13,577)
–
–
–
–
–
(10)
(10)
Balance, end of year
$
67,467
$
27,604
$
(61,579)
$
(288,229)
$
(45,961)
$
(2,757)
$
(303,455)
Deferred income tax assets and liabilities are presented on the Consolidated Balance Sheets as follows:
Deferred income tax assets
Deferred income tax liabilities
NOTE 17 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
2021
2020
$
29,269
$
84,624
(525,476)
(388,079)
$
(496,207)
$
(303,455)
RATE
3.44 %
6.65 %
7.45 %
7.00 %
7.11 %
6.00 %
4.56 %
4.115 %
4.174 %
4.206 %
2021
400,000
125,000
150,000
175,000
150,000
200,000
200,000
250,000
200,000
250,000
2020
400,000
125,000
150,000
175,000
150,000
200,000
200,000
250,000
200,000
250,000
$ 2,100,000
$ 2,100,000
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 $106.6 million (2020 – $106.7 million).
| 119
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 18 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
Common shares:
Balance, beginning of year
Issued under Stock Option Plan (Note 20)
Balance, end of year
NOTE 19 CAPITAL MANAGEMENT
SHARES
2021
STATED
VALUE
SHARES
2020
STATED
VALUE
238,308,284
1,370,759
$
1,598,381
60,299
238,294,090
14,194
$
1,597,860
521
239,679,043
$
1,658,680
238,308,284
$
1,598,381
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. 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, 2021, unchanged from December 31, 2020. 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.
Other activities in 2021 included the declaration of common share dividends of $537.8 million or $2.25 per share. Changes in common
share capital are reflected in the Consolidated Statements of Changes in Shareholders’ Equity.
NOTE 20 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, 2021,
19,030,398 (2020 – 20,401,157) common shares were reserved for issuance under the Plan.
During 2021, the Company granted 1,648,345 options to employees (2020 – 2,104,365). The weighted-average fair value of options
granted during the year ended December 31, 2021 has been estimated at $2.73 per option (2020 – $1.43) using the Black-Scholes
option pricing model. The weighted-average closing share price at the grant dates was $35.19 (2020 – $35.05). Other assumptions
used in these valuation models include:
120 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 20 SHARE-BASED PAYMENTS (continued)
STOCK OPTION PLAN (continued)
Exercise price
Risk-free interest rate
Expected option life
Expected volatility
Expected dividend yield
2021
$ 35.29
1.29 %
7 years
23.00 %
6.41 %
2020
$ 36.82
1.11 %
7 years
18.62 %
6.45 %
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 2021 and the average share price in 2021 was $43.18
(2020 – $32.65).
The Company recorded compensation expense related to its stock option program of $3.8 million (2020 – $3.0 million).
Balance, beginning of year
Granted
Exercised
Forfeited
Balance, end of year
Exercisable, end of year
OPTIONS OUTSTANDING AT DECEMBER 31, 2021
NUMBER OF
OPTIONS
11,930,224
1,648,345
(1,370,759)
(495,646)
11,712,164
6,179,244
2021
WEIGHTED
AVERAGE
EXERCISE PRICE
40.37
$
35.29
40.78
46.08
$
$
39.36
41.83
NUMBER OF
OPTIONS
10,529,360
2,104,365
(14,194)
(689,307)
11,930,224
6,326,067
EXPIRY
DATE
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
EXERCISE
PRICE $
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
31.85 – 38.65
35.01 – 46.02
OPTIONS
OUTSTANDING
364,700
825,885
701,459
861,986
1,523,860
1,091,764
1,249,071
1,391,493
2,066,571
1,635,375
11,712,164
2020
WEIGHTED
AVERAGE
EXERCISE PRICE
41.22
$
36.82
35.08
42.64
$
$
40.37
43.00
OPTIONS
EXERCISABLE
364,700
825,885
701,459
764,534
1,139,960
731,808
728,031
522,816
400,051
–
6,179,244
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
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 $31.5 million in 2021 (2020 – $16.8 million) and a liability of $45.8 million at December 31, 2021 (2020 –
$31.5 million).
| 121
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 20 SHARE-BASED PAYMENTS (continued)
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 Advisory and business development and Operations and support expenses as paid and totalled
$4.4 million (2020 – $3.8 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, 2021, the fair value of the DSUs outstanding was $31.8 million (2020 – $21.2 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 Operations and support expense in the period in which the change occurs.
NOTE 21 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
2021
Balance, beginning of year
Other comprehensive income (loss)
Transfer out of FVTOCI
Balance, end of year
2020
Balance, beginning of year
Other comprehensive income (loss)
Balance, end of year
Amounts are recorded net of tax.
EMPLOYEE
BENEFITS
OTHER
INVESTMENTS
INVESTMENT
IN ASSOCIATES
AND OTHER
TOTAL
$
(196,949) $
101,283
293,448 $
834,519
39,865 $
19,732
136,364
955,534
–
(208,815)
–
(208,815)
$
(95,666) $
919,152 $
59,597 $
883,083
$
$
(165,947)
$
46,363
$
(8,118)
$
(127,702)
(31,002)
247,085
47,983
264,066
(196,949)
$
293,448
$
39,865
$
136,364
In 2021, the Company recorded after-tax gains in Other Comprehensive Income of $834.5 million due to fair value changes in the
Company’s investments, primarily related to a $776.3 million fair value adjustment in the first quarter related to Wealthsimple.
122 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 22 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 an 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 management by the Financial Risk Management Committee, a committee of finance and other business leaders.
A key funding requirement 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. 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, 2021 ($ millions)
Derivative financial instruments
Deposits and certificates
Obligations to securitization entities
Leases(1)
Long-term debt
Pension funding(2)
Total contractual maturities
DEMAND
LESS THAN
1 YEAR
1 – 5 YEARS
AFTER 5 YEARS
TOTAL
$
$
–
2,218.6
–
–
–
$
$
6.7
0.4
1,157.8
31.8
–
14.1
11.1
0.5
3,893.3
98.3
–
–
–
0.8
6.8
125.2
2,100.0
–
$
17.8
2,220.3
5,057.9
255.3
2,100.0
14.1
$
2,218.6
$
1,210.8
$
4,003.2
$
2,232.8
$
9,665.4
(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, 2021. Pension funding requirements beyond 2022 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.
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, 2021,
unchanged from December 31, 2020. The lines of credit at December 31, 2021 consisted of committed lines of $650 million and
uncommitted lines of $175 million, unchanged from December 31, 2020. Any advances made by a bank under the uncommitted
lines of credit are at the bank’s sole discretion. As at December 31, 2021 and December 31, 2020, 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, 2020.
| 123
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 22 RISK MANAGEMENT (continued)
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS
This is the risk of 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, 2021, cash and cash equivalents of $1,292.4 million (2020 – $771.6 million) consisted of cash balances of
$326.2 million (2020 – $76.6 million) on deposit with Canadian chartered banks and cash equivalents of $966.2 million (2020 –
$695.0 million). Cash equivalents are comprised of Government of Canada treasury bills totalling $358.7 million (2020 – $96.0 million),
provincial government treasury bills and promissory notes of $350.6 million (2020 – $148.8 million), bankers’ acceptances of
$198.3 million (2020 – $450.2 million) and other corporate commercial paper of $58.6 million (2020 – nil).
Client funds on deposit of $2,238.6 million (2020 – $1,063.4 million) represent cash balances held in client accounts deposited at
Canadian financial institutions.
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, 2021, residential mortgages, recorded on the Company’s balance sheet, of $5.4 billion (2020 – $6.3 billion)
consisted of $5.0 billion sold to securitization programs (2020 – $6.0 billion), $315.8 million held pending sale or securitization (2020 –
$334.5 million) and $13.7 million related to the Company’s intermediary operations (2020 – $14.1 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 $2.6 billion (2020 – $3.2 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 $2.4 billion (2020 – $2.8 billion) is
limited to amounts held in cash reserve accounts and future net interest income, the fair values of which were $67.6 million (2020 –
$73.0 million) and $34.1 million (2020 – $45.6 million), respectively, at December 31, 2021. 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.
At December 31, 2021, residential mortgages recorded on balance sheet were 53.1% insured (2020 – 55.3%). As at December 31,
2021, impaired mortgages on these portfolios were $2.8 million, compared to $4.8 million at December 31, 2020. Uninsured non-
performing mortgages over 90 days on these portfolios were $1.5 million at December 31, 2021, compared to $2.3 million at
December 31, 2020.
The Company also retains certain elements of credit risk on mortgage loans sold to the IG Mackenzie Mortgage and Short-Term
Income Fund and to the IG Mackenzie 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.
124 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 22 RISK MANAGEMENT (continued)
CREDIT RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
The Company’s allowance for expected credit losses was $0.6 million at December 31, 2021, compared to $0.8 million at December 31,
2020, and is considered adequate by management to absorb all credit-related losses in the mortgage portfolios based on: i) historical
credit performance experience, ii) recent trends including the economic impact of COVID-19 and Canada’s COVID-19 Economic
Response Plan to support Canadians and businesses, iii) current portfolio credit metrics and other relevant characteristics, iv) our strong
financial planning relationship with our clients, and v) 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, 2020.
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
$39.5 million (2020 – $35.8 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, 2021 (2020 – $3.8 million). 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, 2021. Management of
credit risk related to derivatives has not changed materially since December 31, 2020.
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS
This is the risk of loss arising from changes in the values of the Company’s financial instruments due to changes in interest rates, equity
prices or foreign exchange rates.
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 fair value of $1.0 million (2020 – negative $21.1 million) and an outstanding notional amount of
$0.3 billion at December 31, 2021 (2020 – $0.7 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 totalled $3.5 million (2020 – $19.9 million), on an outstanding notional amount of $1.3 billion at
December 31, 2021 (2020 – $1.3 billion). The net fair value of these swaps of $4.5 million at December 31, 2021 (2020 – negative
$1.2 million) is recorded on the balance sheet and has an outstanding notional amount of $1.6 billion (2020 – $2.0 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. 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 Wealth Management revenue over the term of
the related Obligations to securitization entities. The fair value of these swaps was $0.6 million (2020 – negative $0.3 million) on an
outstanding notional amount of $128.6 million at December 31, 2021 (December 31, 2020 – $191.3 million).
| 125
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 22 RISK MANAGEMENT (continued)
MARKET RISK RELATED TO FINANCIAL INSTRUMENTS (continued)
As at December 31, 2021, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease
of approximately $3.0 million (2020 – decrease of $1.3 million). The Company’s exposure to and management of interest rate risk have
not changed materially since December 31, 2020.
Equity Price Risk
The Company is exposed to equity price risk on its equity investments (Note 5) which are classified as either fair value through other
comprehensive income or fair value through profit or loss or investments in associates. The fair value of the equity investments was
$1.4 billion at December 31, 2021 (2020 – $632.3 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 investment in ChinaAMC. Changes to the carrying value due to changes in
foreign exchange rates is recognized in Other comprehensive income. As at December 31, 2021, a 5% appreciation (depreciation) in
Canadian currency relative to foreign currencies would decrease (increase) the aggregate carrying value of foreign investments by
approximately $36.3 million ($40.2 million).
The Company’s proportionate share of ChinaAMC’s earnings, recorded in Proportionate share of associates’ earnings in the
Consolidated Statements of Earnings, is also affected by changes in foreign exchange rates. For the year ended December 31, 2021,
the impact to net earnings of 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 $2.9 million ($3.2 million).
RISKS RELATED TO ASSETS UNDER MANAGEMENT AND ADVISEMENT
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 and advisement. These changes in
assets under management and advisement directly impact earnings.
NOTE 23 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.
126 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 23 DERIVATIVE FINANCIAL INSTRUMENTS (continued)
The following table summarizes the Company’s derivative financial instruments:
1 YEAR
OR LESS
1–5
YEARS
OVER
5 YEARS
TOTAL
CREDIT
RISK
ASSET
LIABILITY
NOTIONAL AMOUNT
FAIR VALUE
2021
Swaps
Hedge accounting
No hedge accounting
$
–
769,567
$
42,227
972,623
$
–
771
$
42,227
1,742,961
$
–
20,401
$
–
20,401
$
90
17,683
Forward contracts
Hedge accounting
2020
Swaps
16,167
38,341
–
54,508
20,771
20,771
–
$
785,734
$ 1,053,191
$
771
$ 1,839,696
$
41,172
$
41,172
$
17,773
Hedge accounting
No hedge accounting
$
–
992,444
$
20,831
1,058,001
$
135,731
15,081
$
156,562
2,065,526
$
–
35,770
$
–
35,770
$
214
32,854
Forward contracts
Hedge accounting
14,890
36,650
–
51,540
1,564
1,564
1,446
$ 1,007,334
$ 1,115,482
$
150,812
$ 2,273,628
$
37,334
$
37,334
$
34,514
The credit risk related to the Company’s derivative financial instruments after giving effect to any netting agreements was $5.8 million
(2020 – $3.8 million).
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 (2020 – $3.8 million). Rights to future net interest income are related to the Company’s
securitization activities and are not reflected on the Consolidated Balance Sheets.
NOTE 24 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.
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.
| 127
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 24 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
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.
Valuation methods used for Other investments classified as Level 3 include comparison to market transactions with arm’s length
third parties, use of market multiples, and discounted cash flow analysis.
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
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. Level 3 Other investments of $1,291.4 million, are predominantly comprised of early-stage financial technology companies,
including Wealthsimple with a fair value of $1,153 million. Fair value is determined by using observable transactions in the investments’
securities, where available, forecasted cash flows, and other valuation metrics, including revenue multiples, used in the valuation of
comparable public companies. A 5% increase (decrease) to each of these variables, individually, would result in an increase (decrease) in
fair value of the Company’s investment in Wealthsimple of approximately $60 million.
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.
128 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 24 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
CARRYING VALUE
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
FAIR VALUE
2021
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
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long-term debt
2020
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
Financial liabilities recorded at amortized cost
Deposits and certificates
Obligations to securitization entities
Long-term debt
$
1,291,434
106,589
$
–
104,658
$
$
–
1,931
1,291,434
–
$
1,291,434
106,589
57,436
41,172
5,296,406
17,773
2,220,274
5,057,917
2,100,000
–
–
–
–
–
–
–
57,436
34,074
–
7,098
57,436
41,172
270,156
5,083,991
5,354,147
11,635
6,138
17,773
2,220,530
–
2,544,380
–
5,146,420
–
2,220,530
5,146,420
2,544,380
$
593,273
39,027
$
–
38,748
$
$
–
–
593,273
279
$
593,273
39,027
3,291
37,334
6,328,564
34,514
1,104,889
6,173,886
2,100,000
–
–
–
–
–
–
–
3,291
35,389
–
1,945
3,291
37,334
346,428
6,186,410
6,532,838
11,466
23,048
34,514
1,105,384
–
2,653,814
–
6,345,189
–
1,105,384
6,345,189
2,653,814
There were no significant transfers between Level 1 and Level 2 in 2021 and 2020.
The following table provides a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis.
BALANCE
JANUARY 1
GAINS/(LOSSES)
INCLUDED IN NET
EARNINGS(1)
GAINS/(LOSSES)
INCLUDED
IN OTHER
COMPREHENSIVE
INCOME
PURCHASES AND
ISSUANCES
SETTLEMENTS
TRANSFERS
IN/OUT
BALANCE
DECEMBER 31
2021
Other investments
– FVTOCI
– FVTPL
Derivative financial
instruments, net
2020
Other investments
– FVTOCI
– FVTPL
Derivative financial
instruments, net
$
593,273
$
279
$
–
(181)
964,761
–
$
15,868
–
$
282,468(2)
98
$
(21,103)
12,852
–
1,974
(7,237)
$
301,196
$
563
$
–
(194)
285,650
–
$
6,427
–
$
$
–
90
(906)
(27,143)
–
1,727
(5,219)
(1) Included in Wealth management revenue or Net investment income and other in the Consolidated Statements of Earnings.
(2) Related to disposition of a portion of IGM Financial Inc.’s investment in Wealthsimple (Note 5).
–
–
–
–
–
–
$ 1,291,434
–
960
$
593,273
279
(21,103)
| 129
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 25 EARNINGS PER COMMON SHARE
Earnings
Net earnings
Non-controlling interest
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
2021
2020
$
980,887
$
764,606
(1,938)
(198)
$
978,949
$
764,408
238,841
1,178
240,019
238,307
–
238,307
$
$
4.10
4.08
$
$
3.21
3.21
(1) Excludes 272 thousand shares in 2021 related to outstanding stock options that were anti-dilutive (2020 – 2,934 thousand).
NOTE 26 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 27 RELATED PARTY TRANSACTIONS
TRANSACTIONS AND BALANCES WITH RELATED ENTITIES
The Company enters into transactions with The Canada Life Assurance Company (Canada Life), which is a subsidiary of its affiliate,
Lifeco, which is a subsidiary of Power Corporation of Canada. These transactions are in the normal course of operations and have been
recorded at fair value:
• During 2021 and 2020, the Company provided to and received from Canada Life certain administrative services. The Company
distributes insurance products under a distribution agreement with Canada Life and received $52.7 million in distribution fees (2020
– $45.1 million). The Company received $63.3 million (2020 – $18.4 million) and paid $22.6 million (2020 – $29.6 million) to Canada
Life and related subsidiary companies for the provision of sub-advisory services for certain investment funds. The Company paid
$15.5 million (2020 – $78.3 million) to Canada Life related to the distribution of certain investment funds of the Company.
• During 2021, the Company sold residential mortgage loans to Canada Life for $11.9 million (2020 – $20.9 million).
130 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 27 RELATED PARTY TRANSACTIONS (continued)
TRANSACTIONS AND BALANCES WITH RELATED ENTITIES (continued)
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. On December 31, 2020, the Company acquired shares of such loss companies and recorded the benefit of the tax
losses acquired. The benefits from these tax loss consolidation arrangements ended at December 31, 2020.
In 2020, additional transactions with related parties included the sale of Personal Capital (Note 9), the investment in Northleaf
(Note 9), the acquisition of GLC Asset Management Group Ltd. and the sale of Quadrus Group of Funds (Note 30). On January 5, 2022,
the Company entered into an agreement to acquire an additional interest in ChinaAMC from Power Corporation of Canada (Note 31).
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
2021
$ 3,981
3,793
1,066
$ 8,840
2020
$ 3,848
13,522
1,431
$ 18,801
Share-based payments exclude the fair value remeasurement of the deferred share units associated with changes in the Company’s
share price (Note 20).
NOTE 28 COVID-19
Governments worldwide have enacted emergency measures to combat the spread of a novel strain of coronavirus (COVID-19). These
measures, which include the implementation of travel bans, closing of non-essential businesses, self-imposed quarantine periods and
social distancing, have caused significant volatility in global equity markets and material disruption to global businesses. Governments
and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.
The Company has implemented its business continuity plan as a result of these events, which has included moving substantially all
employees and consultants to work from home and further supporting the Company’s information technology infrastructure.
The distribution of vaccines has resulted in the easing of restrictions in many economies and has contributed to strong gains in certain
economic sectors during 2021. However, there is uncertainty regarding the effectiveness of vaccines against new variants of the virus,
and this contributes towards uncertainty of the timing of a full economic recovery. As a result, it is not possible to reliably estimate
the length and severity of these developments and the impact on the financial results and condition of the Company and its operating
subsidiaries in future periods.
| 131
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report NOTE 29 SEGMENTED INFORMATION
The Company’s reportable segments are:
• Wealth Management
• Asset Management
• Strategic Investments and Other
These segments reflect the Company’s internal financial reporting and performance measurement.
Wealth Management – reflects the activities of operating companies that are principally focused on providing financial planning and
related services to Canadian households. This segment includes the activities of IG Wealth Management and Investment Planning
Counsel. These firms are retail distribution organizations who serve Canadian households through their securities dealers, mutual
fund dealers and other subsidiaries licensed to distribute financial products and services. A majority of the revenues of this segment
are derived from providing financial advice and distributing financial products and services to Canadian households. This segment also
includes the investment management activities of these organizations, including mutual fund management and discretionary portfolio
management services.
Asset Management – reflects the activities of operating companies primarily focused on providing investment management services,
and represents the operations of Mackenzie Investments. Investment management services are provided to a suite of investment funds
that are distributed through third party dealers and financial advisors, and also through institutional advisory mandates to financial
institutions, pensions and other institutional investors.
Strategic Investments and Other – primarily represents the key strategic investments made by the Company, including China Asset
Management Co., Ltd., Great-West Lifeco Inc., Northleaf Capital Group Ltd., Wealthsimple Financial Corp., and Portag3 Ventures LPs.
Unallocated capital is also included within this segment.
Effective January 1, 2021, the Company expanded its reportable segment disclosures to report to Net earnings, whereas previously
it was reported to Earnings before interest and taxes. The Company restated comparative figures in its segment results to conform
to the current period’s presentation. These changes further build on the disclosure enhancements announced by the Company in the
third quarter of 2020, which were introduced to improve transparency into key drivers of each business line and help stakeholders
understand and assess components of value.
132 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements NOTE 29 SEGMENTED INFORMATION (continued)
2021
Revenues
WEALTH
MANAGEMENT
ASSET
MANAGEMENT
STRATEGIC
INVESTMENTS
TOTAL
AND OTHER INTERSEGMENT
SEGMENT ADJUSTMENTS(1)
TOTAL
Wealth management
$ 2,572,891 $
– $
– $
(19,291) $ 2,553,600 $
– $ 2,553,600
Asset management
Dealer compensation
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
Expenses
Advisory and business
development
Operations and support
Sub-advisory
Interest expense(2)
Earnings before income taxes
Income taxes
Non-controlling interest
Gain on sale of Personal
Capital, net of tax
Net earnings available to
common shareholders
–
–
–
1,126,007
(355,242)
770,765
–
–
–
(114,551)
1,011,456
19,272
(335,970)
(95,279)
675,486
–
–
–
1,011,456
(335,970)
675,486
3,619
5,850
2,722
(249)
11,942
10,600
22,542
–
–
196,367
–
196,367
–
196,367
2,576,510
776,615
199,089
(114,819)
3,437,395
10,600
3,447,995
1,089,282
466,170
189,678
1,745,130
831,380
90,284
741,096
197,959
543,137
–
88,746
335,544
6,892
431,182
345,433
23,652
321,781
81,026
240,755
–
–
4,916
–
4,916
194,173
–
194,173
4,916
189,257
(1,938)
$
543,137 $
240,755 $
187,319 $
(19)
(250)
(114,550)
1,178,009
806,380
82,020
(114,819)
2,066,409
–
–
–
–
–
–
–
1,370,986
113,936
1,257,050
283,901
973,149
(1,938)
971,211
–
–
–
–
1,178,009
806,380
82,020
2,066,409
10,600
1,381,586
–
113,936
10,600
1,267,650
2,862
7,738
–
7,738
286,763
980,887
(1,938)
978,949
7,738
(7,738)
–
$
978,949 $
– $
978,949
Identifiable assets
$ 9,237,235 $ 1,514,124 $ 4,107,163 $
– $ 14,858,522 $
– $ 14,858,522
Goodwill
Total assets
1,491,687
1,310,379
–
–
2,802,066
–
2,802,066
$ 10,728,922 $ 2,824,503 $ 4,107,163 $
– $ 17,660,588 $
– $ 17,660,588
(1) Gain on sale of Personal Capital is not related to a specific segment and therefore excluded from segment results. This item has been added back to Net investment income and
other and Income taxes to reconcile Total Segment results to the Company’s Consolidated Statements of Earnings.
(2) Interest expense includes interest on long-term debt and interest on leases.
| 133
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
NOTE 29 SEGMENTED INFORMATION (continued)
2020
Revenues
WEALTH
MANAGEMENT
ASSET
MANAGEMENT
STRATEGIC
INVESTMENTS
AND OTHER
INTERSEGMENT
TOTAL
SEGMENT
ADJUSTMENTS(1)
TOTAL
Wealth management
$ 2,275,955
$
–
$
–
–
–
913,579
(299,530)
614,049
–
–
–
–
$
(16,379)
$ 2,259,576
$
(100,648)
16,367
812,931
(283,163)
(84,281)
529,768
–
–
–
–
$ 2,259,576
812,931
(283,163)
529,768
2,299
2,900
5,960
(182)
10,977
67,232
78,209
–
–
2,278,254
616,949
959,946
453,738
163,197
1,576,881
701,373
89,925
611,448
162,604
448,844
–
80,212
293,755
8,664
382,631
234,318
20,672
213,646
55,663
157,983
–
147,029
152,989
–
4,063
–
4,063
148,926
–
148,926
(7,333)
156,259
(198)
$
448,844
$
157,983
$
156,061
$
–
147,029
3,400
150,429
(100,842)
2,947,350
70,632
3,017,982
(12)
1,040,146
–
1,040,146
(182)
(100,648)
751,374
71,213
79,276
–
830,650
71,213
(100,842)
1,862,733
79,276
1,942,009
–
–
–
–
–
–
–
1,084,617
(8,644)
1,075,973
110,597
974,020
210,934
763,086
(198)
762,888
–
(8,644)
(10,164)
1,520
–
110,597
965,376
200,770
764,606
(198)
1,520
764,408
Asset management
Dealer compensation
Net asset management
Net investment income
and other
Proportionate share of
associates’ earnings
Expenses
Advisory and business
development
Operations and support
Sub-advisory
Interest expense(2)
Earnings before income taxes
Income taxes
Non-controlling interest
Gain on sale of Personal
Capital, net of tax
Gain on sale of QGOF net of
acquisition costs, net of tax
Proportionate share of
associate’s adjustments
Restructuring and other
charges, net of tax
Net earnings available to
common shareholders
31,387
(31,387)
21,374
(21,374)
3,400
(3,400)
(54,641)
54,641
–
–
–
–
$
764,408
$ 13,259,279
2,803,075
$
$
$ 16,062,354
$
–
–
–
–
–
–
–
$
764,408
$ 13,259,279
2,803,075
$ 16,062,354
Identifiable assets
$ 8,984,472
$ 1,509,729
$ 2,765,078
$
Goodwill
Total assets
1,491,687
1,311,388
–
$ 10,476,159
$ 2,821,117
$ 2,765,078
$
(1) Gain on sale of Personal Capital, Gain on sale of Quadrus Group of Funds (QGOF) net of acquisition costs, Proportionate share of associate’s adjustments, and Restructuring
and other changes 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.
(2) Interest expense includes interest on long-term debt and interest on leases.
134 |
2021 IGM Financial Inc. Annual Report | Notes to Consolidated Financial Statements
NOTE 30 ACQUISITIONS
GLC Asset Management Group Ltd. (GLC)
On December 31, 2020, the Company’s subsidiary, Mackenzie, acquired all of the common shares of GLC, a wholly-owned subsidiary of
Great-West Lifeco Inc. (Lifeco), for cash consideration of $185.0 million. Net cash outflow related to the transaction was $175.8 million,
including acquisition costs of $3.8 million and $13.0 million in cash acquired.
In a separate transaction, Lifeco’s subsidiary, Canada Life Assurance Company (Canada Life) acquired the fund management contracts
relating to private label Quadrus Group of Funds (QGOF) from Mackenzie for cash consideration of $30.0 million. Mackenzie
was previously the manager and trustee of the QGOF. Subsequent to the sale, Mackenzie continues to provide investment and
administration services to the QGOF.
The fair value of the identifiable assets of GLC at the date of acquisition were:
Purchase price allocation
Cash and cash equivalents
Other current assets
Deferred tax asset
Intangible assets
Goodwill(1)
Accounts payable and accrued liabilities
Deferred tax liability
(1) nil deductible for tax purposes
$
13,003
2,528
945
56,763
134,799
(8,482)
(14,522)
$
185,034
Goodwill is attributable to synergies including expansion of Mackenzie’s distribution reach into the fast-growing group retirement
business. Identified intangible assets are comprised of finite life management contracts valued at $56.8 million.
As GLC was acquired on December 31, 2020, it did not impact the Company’s revenues and expenses in 2020.
GREENCHIP FINANCIAL CORP. (GREENCHIP)
On December 22, 2020, Mackenzie acquired 100% of Greenchip, a Canadian firm focused exclusively on the environmental economy
since 2007. During 2021, the Company finalized the purchase price allocation which resulted in an increase to the fair value of
identifiable assets of $1.0 million and an offsetting decrease to goodwill of $1.0 million.
NOTE 31 SUBSEQUENT EVENT
On January 5, 2022, the Company entered into an agreement to acquire an additional 13.9% interest in ChinaAMC for cash
consideration of $1.15 billion from Power Corporation of Canada (Power), which will increase the Company’s equity interest in
ChinaAMC from 13.9% to 27.8%. To partially fund the transaction, the Company will sell 15,200,662 common shares of Lifeco to
Power for cash consideration of $575 million, which will reduce the Company’s equity interest in Lifeco from 4.0% to 2.4%. These
transactions are expected to close in the first half of 2022, subject to customary closing conditions, including Chinese regulatory
approvals. The sale of Lifeco shares is conditional on the Company’s purchase of the ChinaAMC shares.
| 135
Notes to Consolidated Financial Statements | 2021 IGM Financial Inc. Annual Report
Quarterly Review
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
($ millions, except per share amounts)
Q4
Q3
Q2
2021
Q1
Q4
Q3
Q2
2020
Q1
Revenues
Wealth management
Asset management
Dealer compensation expense
Net asset management
Net investment income and other
Proportionate share of associates’ earnings
Expenses
Advisory and business development
Operations and support
Sub-advisory
Interest
Earnings before income taxes
Income taxes
Net earnings
Non-controlling interest
Net earnings available to
common shareholders
Reconciliation of Non-IFRS
financial measures(1) ($ millions)
Adjusted net earnings available to common
shareholders – non-IFRS measure
Other items:
$
667.5
$
655.0
$
627.6
$
603.5
$
594.2
$
571.6
$
531.1
$
562.7
266.8
(86.7)
180.1
14.4
50.7
263.4
(85.9)
177.5
2.5
55.9
248.3
(82.7)
165.6
2.5
48.2
233.0
(80.7)
152.3
3.1
41.6
216.3
(74.3)
142.0
33.2
43.5
207.4
(71.3)
136.1
39.4
43.5
190.7
(66.1)
124.6
7.6
43.3
912.7
890.9
843.9
800.5
812.9
790.6
706.6
308.9
205.5
21.1
28.6
564.1
348.6
79.4
269.2
(0.7)
294.0
197.6
20.7
28.7
541.0
349.9
78.4
271.5
(0.7)
291.1
196.8
20.4
28.5
536.8
307.1
69.3
237.8
(0.4)
284.0
206.5
19.8
28.1
538.4
262.1
59.7
202.4
(0.2)
283.1
193.8
18.3
27.9
523.1
289.8
60.5
229.3
(0.2)
252.6
256.4
18.5
27.9
555.4
235.2
44.3
190.9
–
245.4
185.4
16.9
27.5
475.2
231.4
47.9
183.5
–
198.5
(71.4)
127.1
(2.0)
20.1
707.9
259.1
195.1
17.5
27.3
499.0
208.9
48.0
160.9
–
$
268.5
$
270.8
$
237.4
$
202.2
$
229.1
$
190.9
$
183.5
$
160.9
$
260.8
$
270.8
$
237.4
$
202.2
$
204.3
$
214.2
$
183.5
$
160.9
Gain on sale of Personal Capital, net of tax
7.7
Gain on sale of Quadrus Group of Funds
net of acquisition costs, net of tax
Proportionate share of associate’s
adjustments
Restructuring and other, net of tax
Net earnings available to common
shareholders – IFRS
Diluted Earnings per Share ($)
Adjusted net earnings available to
common shareholders(1)
Net earnings available to common shareholders
–
–
–
–
–
–
–
–
–
–
–
–
–
31.4
21.4
3.4
–
–
–
(54.7)
–
–
–
–
–
–
–
–
–
–
–
$
268.5
$
270.8
$
237.4
$
202.2
$
229.1
$
190.9
$
183.5
$
160.9
1.08
1.11
1.13
1.13
0.99
0.99
0.85
0.85
0.86
0.96
0.90
0.80
0.77
0.77
0.68
0.68
Dividends per Share ($)
0.5625
0.5625
0.5625
0.5625
0.5625
0.5625
0.5625
0.5625
(1) Refer to page 18 of the MD&A for an explanation of the Company’s use of non-IFRS financial measures.
136 |
2021 IGM Financial Inc. Annual Report | Quarterly Review
Quarterly Review
STATISTICAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31
($ millions, except per share amounts)
Q4
Q3
Q2
Mutual fund gross sales
Wealth management(1)
2021
Q1
Q4
Q3
Q2
2020
Q1
IG Wealth Management
$
2,959
$
2,741
$
2,794
$
3,351
$
2,572
$
1,949
$
1,780
$
2,686
IPC
Asset management
Mackenzie Investments
IGM Consolidated
Dealer gross inflows
IG Wealth Management
IPC
IGM Wealth management(1)
Net flows – by segment
IG Wealth Management net flows
IPC net flows
Wealth management net flows(1)
Asset Management net sales(2)
Eliminations(3)
IGM Consolidated
Net flows – by product
Mutual fund gross sales
Mutual fund redemptions
Mutual fund net sales
ETFs(4)
Investment funds
Institutional SMA
Consolidated AUM
Other AUA
IGM Consolidated
Redemption rate – long-term funds (%)
IG Wealth Management
IPC
Mackenzie Investments
Assets under management and
advisement – by segment
IG Wealth AUA
IPC AUA
174
3,133
2,592
5,725
3,437
1,509
4,946
985
123
1,109
181
(56)
1,234
5,725
4,885
840
245
1,085
(576)
509
725
1,234
9.2
22.3
13.6
188
2,929
2,476
5,405
3,141
1,137
4,278
1,014
258
1,275
1,092
(119)
2,248
5,405
4,020
1,385
320
1,705
(27)
1,678
570
2,248
9.6
23.0
15.0
182
2,976
2,923
5,899
3,220
1,121
4,341
670
116
787
2,286
(156)
2,917
5,899
4,573
1,326
562
1,888
617
2,505
412
2,917
10.0
23.4
15.4
230
3,581
4,031
7,612
3,636
1,599
5,235
1,015
(9)
1,007
1,575
(280)
2,302
7,612
5,730
1,882
405
2,287
(320)
1,967
335
2,302
9.7
22.3
15.8
177
2,749
4,501
7,250
2,938
1,487
4,425
485
249
737
1,673
(189)
2,221
7,250
5,972
1,278
372
1,650
(75)
1,575
646
2,221
9.8
20.1
16.6
97
2,046
2,903
4,949
2,132
892
3,024
(9)
(146)
(155)
627
(64)
408
4,949
4,436
513
97
610
(319)
291
117
408
9.8
19.0
16.2
110
1,890
2,505
4,395
1,901
1,063
2,964
(62)
154
93
3,599
(43)
3,649
4,395
4,212
183
681
864
2,542
3,406
243
3,649
10.0
19.3
16.5
193
2,879
3,656
6,535
3,006
1,318
4,324
381
116
498
351
(28)
821
6,535
6,311
224
82
306
(86)
220
601
821
10.7
20.7
17.0
119,557
113,958
112,185
106,995
103,273
33,077
31,515
31,171
29,891
29,318
97,538
27,484
93,836
26,637
85,834
24,372
Wealth Management AUA(1)
152,623
145,462
143,345
136,876
132,583
125,015
120,467
110,199
Asset Management AUM (ex sub-advisory
to Wealth Management)(5)
129,115
124,098
122,913
115,524
110,938
Sub-advisory to Wealth Management
81,228
79,242
78,788
76,041
74,210
74,600
71,388
70,821
68,927
60,898
64,068
Asset Management AUM
Asset Management through
Wealth Management
Consolidated assets under
management & advisement
Assets under management and
advisement – by product
Mutual fund AUM(5)
ETF AUM(4)
Investment Fund AUM
Institutional SMA
Sub-Advisory to Canada Life(5)
Total Institutional SMA
Consolidated AUM
Other AUA
Consolidated assets under
management & advisement
Consolidated AUM, excluding
Asset Management segment AUM
210,343
203,340
201,701
191,565
185,148
145,988
139,748
124,966
(85,825)
(83,588)
(83,040)
(79,967)
(77,781)
(74,583)
(71,955)
(66,809)
277,141
265,214
262,006
248,474
239,950
196,420
188,260
168,356
179,139
171,775
169,468
161,363
155,715
161,612
154,706
140,887
5,393
5,068
4,889
4,174
3,788
3,330
3,132
2,335
184,532
176,843
174,357
165,537
159,503
164,942
157,838
143,222
7,948
52,805
60,753
8,178
51,131
59,309
8,167
51,092
59,259
7,272
48,768
56,040
7,293
47,175
54,468
7,671
7,557
4,275
245,285
236,152
233,616
221,577
213,971
172,613
165,395
147,497
31,856
29,062
28,390
26,897
25,979
23,807
22,865
20,859
277,141
265,214
262,006
248,474
239,950
196,420
188,260
168,356
34,942
32,812
31,915
30,012
28,823
26,625
25,647
22,531
Corporate assets
$ 17,661
$ 16,995
$ 16,897
$ 16,866
$
16,062
$
15,863
$
15,449
$
15,553
(1) Assets under management recorded within both operating companies’ results are eliminated on consolidation.
(2) Asset Management flows activity excludes sub-advisory to Canada Life and the Wealth Management segment.
(3) Mackenzie investment funds distributed through Wealth Management.
(4) Excludes IGM investment fund investments in ETFs.
(5) The fourth quarter of 2020 reflects the impact of net business acquisitions of $30.3 billion, which included the acquisitions of GLC Asset Management Group Ltd. (GLC) and
Greenchip Financial Corporation (Greenchip), and the divestiture of the fund management contracts relating to private label Quadrus Group of Funds (QGOF). As a result, mutual
fund AUM decreased by $13.2 billion and institutional SMA increased by $43.5 billion.
| 137
Quarterly Review | 2021 IGM Financial Inc. Annual Report
Ten Year Review
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31
($ millions, except
per share amounts)
Revenues(2)
Wealth and Asset
Management revenues
Net investment income
and other
Proportionate share of
associate’s earnings
2021
2020
2019
2018
2017
CAGR(1)
5 YEAR
%
2016
2015
2014
2013
2012
RESTATED
3,229.1
2,789.4
2,814.3
2,792.1
2,749.1
4.1
2,642.9
2,607.2
2,520.1
2,307.4
2,231.6
22.5
78.2
24.8
20.0
13.8
13.8
11.8
11.0
16.5
21.6
18.6
196.4
150.4
105.2
150.0
95.6
13.5
104.2
111.0
96.5
93.8
72.0
3,448.0
3,018.0
2,944.3
2,962.1
2,858.5
4.6
2,758.9
2,729.2
2,633.1
2,422.8
2,322.2
Expenses(2)
2,180.3
2,052.7
1,975.7
1,976.0
2,073.9
3.8
1,812.0
1,738.4
1,668.2
1,441.4
1,364.1
Earnings before undernoted
1,267.7
286.8
965.3
200.7
968.6
219.7
986.1
210.0
784.6
173.9
6.0
11.3
946.9
167.6
990.8
210.3
964.9
202.8
981.4
210.7
958.1
190.5
CAGR(1)
10 YEAR
%
3.2
7.7
9.5
3.5
4.9
1.5
1.4
Income taxes
Net earnings
980.9
764.6
748.9
776.1
610.7
4.7
779.3
780.5
762.1
770.7
767.6
0.8
Non-controlling interest
(2.0)
(0.2)
–
–
–
–
–
–
–
–
Perpetual preferred
share dividends
Net earnings available to
common shareholders
Adjusted net earnings
available to
common shareholders(3)
Diluted earnings per share ($)
Net earnings
Adjusted net earnings(3)
Dividends per share ($)
Return on average common
equity (ROE) (%)
–
–
(2.2)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
(8.8)
978.9
764.4
746.7
767.3
601.9
4.9
770.5
771.7
753.3
761.9
758.8
0.8
971.2
762.9
763.9
791.8
727.8
5.7
736.5
796.0
826.1
763.5
746.4
1.5
4.05
4.08
2.25
3.21
3.20
2.25
3.12
3.19
2.25
3.18
3.29
2.25
2.50
3.02
2.25
4.9
6.0
–
3.19
3.05
2.25
3.11
3.21
2.25
2.98
3.27
2.18
3.02
3.02
2.15
2.97
2.92
2.15
1.5
2.4
0.7
Net earnings
Adjusted net earnings(3)
16.5
16.4
16.1
16.1
16.9
17.2
17.7
18.2
12.9
15.6
17.1
16.3
16.9
17.4
16.2
17.8
17.3
17.3
17.6
17.3
Average shares
outstanding (thousands)
– Basic
– Diluted
238,841
238,307
239,105
240,815
240,585
241,300
248,173
252,108
252,013
254,853
240,019
238,307
239,181
240,940
240,921
241,402
248,299
252,778
252,474
255,277
Share price (closing $)
45.62
34.51
37.28
31.03
44.15
3.6
38.20
35.34
46.31
56.09
41.60
0.3
(1) Compound annual growth rate.
(2) Revenues and expense have been restated to retroactively reflect the disclosure enhancements introduced in 2020, as disclosed in Note 2 to the 2020 Consolidated Financial Statements.
(3) Non-IFRS Financial Measures – Excludes other items as follows:
2021 – Additional consideration receivable of $7.7 million after-tax related to the sale in 2020 of the Company’s equity interest in Personal Capital Corporation.
2020 – After-tax gain of $31.4 million on sale of Personal Capital Corporation, after-tax gain on sale of Quadrus Group of Funds net of acquisition costs of $21.4 million, the Company’s
proportionate share in Great-West Lifeco Inc.’s (Lifeco) after-tax adjustments of $3.4 million, and restructuring and other charges of $54.7 million after-tax.
2019 – After-tax charge of $17.2 million representing the Company’s proportionate share in Lifeco’s 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 $6.4 million resulting from increases in Ontario corporate income tax rates and their effect on the
deferred income tax liability related to indefinite life intangible assets arising from prior business acquisitions.
138 |
2021 IGM Financial Inc. Annual Report | Ten Year Review
Ten Year Review
STATISTICAL INFORMATION
FOR THE YEARS ENDED DECEMBER 31
($ millions)
2021
2020
2019
2018
2017
CAGR(1)
5 YEAR
%
2016
2015
2014
2013
2012
CAGR(1)
10 YEAR
%
Wealth Management
IG Wealth Management(2)
Assets under management
Mutual fund gross sales
Mutual fund redemption
rate – long-term funds (%)
Net sales (redemptions)
Ending assets
Assets under advisement(3)
11,845
8,987
8,723
9,075
9,693
8.8
7,760
7,890
7,461
6,668
5,778
7.0
9.2
1,813
110,541
9.8
(451)
97,713
10.3
(1,089)
93,161
9.2
485
83,137
8.4
1,944
88,008
8.8
366
81,242
8.7
754
74,897
8.7
651
73,459
9.4
159
68,255
10.0
(724)
60,595
37.7
6.4
N/M
6.7
Net flows
Ending assets
3,684
119,557
795
103,273
(780)
97,100
739
86,422
Investment Planning Counsel(2)
Assets under management
Mutual fund gross sales
Mutual fund redemption
rate – long-term funds (%)
Net sales (redemptions)
Assets under management
Assets under advisement(3)
774
577
694
960
889
(4.1)
955
741
682
485
401
3.6
22.3
(288)
5,629
20.1
(307)
5,320
19.3
(272)
5,391
19.2
(18)
5,125
16.7
79
5,377
15.7
293
4,908
13.6
177
4,452
12.6
207
3,850
13.2
52
3,406
14.3
(24)
2,950
N/M
2.8
N/M
7.2
Net flows
Ending assets
488
33,077
373
29,318
(589)
27,728
(148)
25,706
Asset Management
(Mackenzie Investments)
Mutual fund gross sales
12,022
13,565
9,886
9,951
9,124
11.6
6,939
6,965
7,070
6,700
5,490
7.9
Mutual fund redemption
rate – long-term funds (%)
Investment fund net sales
(redemptions)
Assets under management
Mutual fund
ETF
ETFs excluding those held
by IGM investment funds
Investment fund(4)
Total assets under management
excluding subadvisory to
Wealth Management(3)
Total assets under
management(3)
Consolidated assets
under management(5)
Investment fund assets
under management
Assets under management
Assets under management
and advisement
13.6
16.6
15.6
17.1
14.8
15.0
16.2
14.6
16.0
17.9
5,440
4,188
1,219
973
1,780
N/M
(555)
(1,258)
(209)
(487)
(1,974)
N/M
62,969
12,674
52,682
8,451
60,839
4,748
53,407
2,949
55,615
1,296
4.2
51,314
113
48,445
48,782
46,024
40,394
4.9
5,393
68,362
3,788
56,470
2,372
63,211
1,613
55,020
928
56,543
113
51,427
4.2
48,445
48,782
46,024
40,394
4.9
129,115
110,938
68,257
60,804
210,343
185,148
140,984
129,863
184,532
245,285
159,503
213,971
161,763
166,809
143,282
149,066
149,818
156,513
6.0
11.4
137,575
142,688
127,791
134,398
126,039
141,919
117,649
131,777
103,915
120,694
6.4
7.5
277,141
239,950
190,035
170,216
Corporate assets
17,661
16,062
15,391
15,609
16,499
2.5
15,625
14,831
14,417
12,880
11,962
4.7
(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) As a result of revised segment reporting introduced in 2020, as discussed in the MD&A included in this Annual Report, these metrics were not reported on this basis prior to 2018.
(4) Excludes IGM investment fund investments in ETFs.
(5) Adjusted for inter-segment assets.
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Ten Year Review | 2021 IGM Financial Inc. Annual Report
Board of Directors
and Executive Leadership
BOARD OF DIRECTORS
Marc A. Bibeau (1,3)
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
BEAUWARD REAL ESTATE INC.
Marcel R. Coutu (3)
CORPORATE DIRECTOR
André Desmarais,
O.C., O.Q. (2,3)
DEPUTY CHAIRMAN
POWER CORPORATION OF CANADA
Paul Desmarais, Jr.,
O.C., O.Q. (2)
CHAIRMAN
POWER CORPORATION OF CANADA
Gary Doer (2)
SENIOR BUSINESS ADVISOR
DENTONS CANADA LLP
Susan Doniz (1,5)
CHIEF INFORMATION OFFICER
THE BOEING COMPANY
R. Jeffrey Orr (2,3,5)
CHAIR OF THE BOARD
IGM FINANCIAL INC.
Claude Généreux (3,5)
EXECUTIVE VICE-PRESIDENT
POWER CORPORATION OF CANADA
Sharon L. Hodgson (1,4,5)
DEAN
IVEY BUSINESS SCHOOL
Sharon MacLeod (1,3)
CORPORATE DIRECTOR
Susan J. McArthur (2,3,5)
CO-FOUNDER AND
EXECUTIVE CHAIR
LOCKDOCS INC.
John McCallum (1,2,4)
CORPORATE DIRECTOR
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER CORPORATION OF CANADA
James O’Sullivan
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL INC.
Gregory D. Tretiak,
FCPA, FCA (5)
EXECUTIVE VICE-PRESIDENT
AND CHIEF FINANCIAL OFFICER
POWER CORPORATION OF CANADA
Beth Wilson (4,5)
CORPORATE DIRECTOR
(1) AUDIT COMMITTEE
Chair: John McCallum
(2) GOVERNANCE AND
NOMINATING COMMITTEE
Chair: R. Jeffrey Orr
(3) HUMAN RESOURCES
COMMITTEE
Chair: Claude Généreux
(4) RELATED PARTY AND CONDUCT
REVIEW COMMITTEE
Chair: John McCallum
(5) RISK COMMITTEE
Chair: Gregory D. Tretiak
EXECUTIVE LEADERSHIP
James O’Sullivan
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IGM FINANCIAL
Barry McInerney
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
MACKENZIE INVESTMENTS
Damon Murchison
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
IG WEALTH MANAGEMENT
Blaine Shewchuk
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
INVESTMENT PLANNING COUNSEL
Luke Gould
EXECUTIVE VICE-PRESIDENT,
CHIEF FINANCIAL OFFICER
IGM FINANCIAL
Cynthia Currie
EXECUTIVE VICE-PRESIDENT,
CHIEF HUMAN RESOURCES
OFFICER
IGM FINANCIAL
Michael Dibden
CHIEF OPERATING OFFICER
IGM FINANCIAL
Rhonda Goldberg
EXECUTIVE VICE-PRESIDENT,
GENERAL COUNSEL
IGM FINANCIAL
Douglas Milne
EXECUTIVE VICE-PRESIDENT,
CHIEF MARKETING AND
STRATEGY OFFICER
IGM FINANCIAL
R. Jeffrey Orr
CHAIR OF THE BOARD
IGM FINANCIAL INC.
140 |
2021 IGM Financial Inc. Annual Report | Board of Directors and Executive Leadership 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: 1 800 564 6253
service@computershare.com
800, 324 – 8th Avenue S.W.
Calgary, Alberta T2P 2Z2
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 8259 or visit
our website at igmfinancial.com
ANNUAL MEETING
The Annual Meeting of IGM Financial Inc.
will be held at The Metropolitan
Entertainment Centre, 281 Donald Street,
Winnipeg, Manitoba and online at
https://web.lumiagm.com/272979158
on Friday, May 6, 2022 at 11:00 a.m.,
Eastern Time.
WEBSITES
Visit our websites at
igmfinancial.com
ig.ca
mackenzieinvestments.com
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. 2021 Annual Report” © Copyright IGM Financial Inc. 2022
A MEMBER OF THE POWER CORPORATION GROUP OF COMPANIES
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Shareholder Information | 2021 IGM Financial Inc. Annual Report