The credited rate for iA's Stabilized Return Index Account (SRIA) for 2021 will decrease from 3.00% to 2.75%. As a result, the CLF loan rate for 2021 will decrease from 4.50% to 4.25%. Please review the information below concerning the SRIA and the reasons for these changes. Investment markets and smoothed-return account Recent years have been challenging from an investment perspective due to the impact of prolonged low interest rates. The table below shows the actual gross and net market returns realized by the SRIA for the period of 2015 to 2019 in comparison to credited rates. | 2015 | 2016 | 2017 | 2018 | 2019 | Gross rate of return | 4.88% | 6.67% | 5.96% | 3.85% | 6.60% | Net rate of return | 3.38% | 5.17% | 4.46% | 2.35% | 5.10% | Credited rate | 4.60% | 4.60% | 4.60% | 4.00% | 3.50% |
Results for the period of January 1 to October 31, 2020
As occurred in 2019, in 2020,our bond portfolio, on a market-value basis, appreciated due to a decrease in interest rates. However, such appreciation is only realized if the bonds are liquidated, and given that we expect to keep bonds until their maturity, it has no direct impact on the gross smoothed yield established for the SRIA. In the first 10 months of 2020, the new bonds purchased at the lower market yields to support new deposits and to replace loans that were repaid had the effect of decreasing the returns realized by the SRIA. Consequently, the 2021 gross smoothed yield for the SRIA and the 2021 SRIA credited rate will decrease respectively to 4.25% and 2.75% (with an MER of 1.50%). The CLF loan rate will also decrease to 4.25%. SRIA As at October 31, 2020, the total asset value of the SRIA was $1.227 billion. As at thatdate, approximately 47% of the assets were invested in private loans, 49% in high-quality bonds and 4% in common shares. The average duration of the bonds is approximately eleven years. Genesis IRIS and leveraging Your clients have purchased Genesis IRIS to fund an important insurance need. Some have used leveraging to enhance the total long-term economic benefits that can be realized. It is important to keep in mind that the economic gain realized by leveraging will vary from year to year and could be compressed in some years, depending on market conditions. This does not undermine the fact that significant, long-term benefits can still be realized by your clients from the use of this strategy. | 