14:03:35 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



Industrial Alliance Insurance and Financial S
Symbol IAG
Shares Issued 100,774,924
Close 2015-02-11 C$ 40.44
Market Cap C$ 4,075,337,927
Recent Sedar Documents

Industrial Alliance earns $435-million in fiscal 2014

2015-02-12 09:10 ET - News Release

Mr. Yvon Charest reports

INDUSTRIAL ALLIANCE REPORTS FOURTH QUARTER AND YEAR-END RESULTS FOR 2014

For the fourth quarter ended Dec. 31, 2014, Industrial Alliance Insurance and Financial Services Inc. had net income attributed to common shareholders of $112.4-million, up 23 per cent over the previous year. After accounting for the premium of four cents per share related to the redemption of the Series E preferred shares on Dec. 31, diluted earnings per common share rose to $1.11 from 91 cents a year ago. The annualized return on shareholders' equity was 13.4 per cent.

For the 12-month period, net income attributed to common shareholders was $400.4-million, a year-over-year increase of 14 per cent. Diluted EPS, after payment of the previously mentioned premium, amounted to $3.97 compared with guidance of $3.40 to $3.80, and ROE was 12.4 per cent compared with guidance of 11.0 per cent to 12.5 per cent. This represents the third consecutive year that the company has exceeded its annual earnings guidance.

At Dec. 31, 2014, the company's solvency ratio of 209 per cent was above its target range of 175 per cent to 200 per cent. Book value per share closed at $33.83, representing a gain of 10 per cent in 2014.

Yvon Charest, president and chief executive officer, commented: "Q4 was definitely a strong ending to the year. In terms of business growth, the highlights were the pickup in individual insurance sales and the continued improvement in segmented funds, which together make up more than half of our net income. Policyholder experience improved quarter over quarter, particularly in individual insurance. Despite the decline in interest rates this year, our balance sheet is still robust with good protection to weather short-term turbulence and room to fund growth opportunities."

Rene Chabot, executive vice-president and chief actuary, added: "Earnings in the quarter were strong, which pushed our earnings above the range we provided for the full year. Items of note include a significant tax recovery and a hedging loss. For the second quarter in a row, IA Auto and Home delivered a good contribution to our income on capital. Our year-end assumption review, which was in line with the indications given at our investor day in June, also took into account the subsequent decline in interest rates in the last quarter of 2014. Turning to 2015, we are introducing our new EPS guidance of $3.80 to $4.20."

                                                                                                                       
                                      HIGHLIGHTS
                     (In millions, unless otherwise indicated)

                                                   Fourth quarter          Full year
                                                    2014     2013      2014     2013

Net income attributed to shareholders             $123.7   $ 99.8    $432.9   $384.5
Less preferred share dividends                       7.3      8.7      28.5     34.6
Less premium on preferred share redemption           4.0        -       4.0        -
Net income attributed to common shareholders       112.4     91.1     400.4    349.9
Earnings per common share (diluted)                $1.11    $0.91     $3.97    $3.57
Return on common shareholders' equity               13.4%    12.2%     12.4%    12.6%

Fourth quarter highlights

Profitability

For the fourth quarter ended Dec. 31, 2014, Industrial Alliance reports net income attributed to common shareholders of $112.4-million, up 23 per cent year over year. Diluted EPS of $1.11 compares with 91 cents in the same quarter a year ago. The annualized ROE was 13.4 per cent.

The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.

Expected profit on in force increased by 15 per cent to $116.7-million pretax over the last year, mainly attributed to growth in assets under management in the wealth management businesses. Expected profit on in force for the wealth management businesses is updated on a quarterly basis to reflect market growth and net fund sales.

Year-end assumption changes

Under the new actuarial standards published by the Canadian Institute of Actuaries in October, 2014, the company increased its ultimate reinvestment rate from 3.1 per cent to 4.0 per cent at year-end, which contributed positively to reserves. However, additional reserves were required to reflect the significant drop in long-term interest rates during the year to strengthen the lapse assumption and to increase the protection against a drop in equity markets. Overall actuarial reserves were strengthened by a net amount of $3.2-million, a loss of three cents per share.

Individual insurance reported an experience gain of seven cents per share ($6.5-million). Favourable developments included equity markets (two cents), mortality (two cents) as well as lower expenses (three cents).

Individual wealth management had an experience loss of 17 cents per share ($16.6-million). Of this amount, 12 cents per share relates to a hedging loss in the quarter. (This is the first hedging loss in the last three years.) Other items of note in the quarter were adverse longevity and higher expenses (five cents).

Group insurance reported an experience loss of one cent per share ($1.2-million). Dealer services and special markets solutions both reported higher-than-expected claims representing two cents per share and one cent per share, respectively, while employee plans had a gain of two cents per share.

Group savings and retirement reported a loss of one cent per share ($700,000) related to lower growth in assets under management.

Strain

In the individual insurance sector, the strain-to-new-business ratio of 26 per cent was higher than the target of 20 per cent for the fourth quarter. Management estimates that the higher strain represented a loss of two cents per share ($1.7-million).

Income on capital

Total income on capital of $28.1-million pretax is similar to the previous quarter ($27.3-million) attributed to the seasonally higher contribution from IA Auto and Home for the second quarter in a row.

Income taxes

The company realized an extraordinary tax recovery in the fourth quarter of 32 cents per share ($32.7-million). Of this amount, 17 cents per share is related to tax-exempt investment income since 2006 under the company's status as a multinational insurer, and the remaining 15 cents is related to a tax-loss recovery in U.S. operations.

Business growth

Total fee-earning assets under management and administration rose 2 per cent in the quarter and ended the period at $109.5-billion. Premiums and deposits of $1.8-billion were down by 2 per cent in the quarter, reflecting lower wealth management inflows.

In the retail sectors, insurance sales rose to $62.1-million (plus-9 per cent) in the fourth quarter, reflecting favourable results in the Canadian and U.S. life operations, as well as in the adjustable disability business (Excellence). Net investment fund inflows were $20.7-million, representing net sales of segregated funds ($88.7-million) offset by negative mutual fund sales (negative $68.0-million).

For the three group insurance divisions, sales grew by a total of 5 per cent in the fourth quarter. In dealer services, sales of P&C products amounted to $37.6-million (plus-15 per cent) while creditor insurance sales were stable at $90.5-million. Special markets solutions delivered $53.5-million in sales (plus-10 per cent). Finally, employee plans sales of $7.5-million were down by 7 per cent in the fourth quarter.

In group savings and retirement, where the top line can fluctuate widely because of the size of mandates awarded, sales of $229.1-million were down by 10 per cent in the quarter.

Capital

At Dec. 31, 2014, the solvency ratio was 209 per cent versus 215 per cent at the previous quarter-end. The decrease in the quarter is related primarily to the redemption of the Series E preferred shares and the decline in interest rates, offset by the fourth quarter earnings contribution.

Quality of investments

At Dec. 31, 2014, net impaired investments stood at 0.07 per cent of total investments, the proportion of bonds rated BB and lower was 0.74 per cent and the real estate occupancy rate was 91.0 per cent. With respect to in the news items, the company's direct exposure to the oil and gas sector is limited to 0.5 per cent of the total bond portfolio.

Dividend

The board of directors approved today a dividend of 28 cents per share on the company's outstanding common shares. This dividend is payable on March 16, 2015, to shareholders of record at Feb. 27, 2015.

Dividend reinvestment and share purchase plan

Registered shareholders wishing to enroll in the company's dividend reinvestment and share purchase plan so as to be eligible to reinvest the next dividend payable on March 16, 2015, must ensure that the duly completed form is delivered to Computershare no later than 4 p.m. on Feb. 20, 2015. Enrolment information is provided on the company's website under investor relations/dividends.

Macroeconomic sensitivity at Dec. 31, 2014

  • The company can absorb a sudden decrease of about 32 per cent in the S&P/TSX index before having to strengthen reserves for future policyholder benefits (26 per cent at Sept. 30, 2014).
  • The company can absorb a sudden decrease of 39 per cent in the S&P/TSX index before the solvency ratio drops below 175 per cent (41 per cent at Sept. 30, 2014) and a decrease of 51 per cent before the solvency ratio drops below 150 per cent (54 per cent at Sept. 30, 2014).
  • The full year impact on net income attributed to common shareholders of a sudden 10-per-cent decrease in the stock markets is $28-million ($28-million also at Sept. 30, 2014). This does not take into consideration any potential reserve strengthening.
  • The impact on net income attributed to common shareholders of a 10-basis-point decrease in the initial and ultimate reinvestment rates totals $94-million ($91-million at Sept. 30, 2014).

Market guidance for 2015

  • Earnings per common share: new target range of $3.80 to $4.20;
  • Return on common shareholders' equity (ROE): target range remains at 11.0 per cent to 12.5 per cent;
  • Solvency ratio: target range remains at 175 per cent to 200 per cent;
  • Dividend payout ratio: payout range remains at 25 per cent to 35 per cent with the target being the midpoint;
  • Effective tax rate: new target range of 18 per cent to 20 per cent;
  • Strain on new business: new target of 30 per cent (plus or minus 5 per cent) of sales in individual insurance.

Guidance for ROE and earnings per common share excludes any potential reserve strengthening in 2015.

Redemption of preferred shares

On Dec. 31, 2014, Industrial Alliance redeemed all of its non-cumulative Class A preferred shares Series E then outstanding. The redemption price was $26 per share plus an amount equal to all declared and unpaid dividends, less any tax required to be deducted and withheld by Industrial Alliance.

                                   CONSOLIDATED INCOME STATEMENTS
                                  (In millions, except per share)

                                                       Quarter ended Dec. 31, 12 months ended Dec. 31,
                                                            2014        2013          2014       2013
Revenues
Premiums
Gross premiums                                             1,461       1,364         5,872      5,431
Premiums ceded                                              (115)       (108)         (446)      (424)
Net premiums                                               1,346       1,256         5,426      5,007
Investment income
Interest and other investment income                         282         229         1,007        924
Change in fair value of financial assets classified
at fair value through profit or loss                         658         113         2,163       (839)
                                                             940         342         3,170         85
Other revenues                                               270         252         1,084        931
                                                           2,556       1,850         9,680      6,023
Policy benefits and expenses
Gross benefits on contracts                                1,151         969         4,156      3,845
Ceded benefits on contracts                                 (171)        (75)         (415)      (318)
Net transfer to segregated funds                              69          73           425        208
Increase (decrease) in insurance contract liabilities        660          16         2,572       (678)
Increase (decrease) in investment contract liabilities         7           4            38          9
Decrease (increase) in reinsurance assets                    184         216           317        466
                                                           1,900       1,203         7,093      3,532
Commissions                                                  284         260         1,119      1,038
General expenses                                             233         233           898        816
Premium and other taxes                                       18          19            85         86
Financing charges                                             14          11            50         60
                                                           2,449       1,726         9,245      5,532
Income before income taxes                                   107         124           435        491
Income taxes                                                 (18)         23             -        103
Net income                                                   125         101           435        388
Net income attributed to participating policyholders           1           1             2          3
Net income attributed to shareholders                        124         100           433        385
Dividends attributed to preferred shares                       8           9            29         35
Redemption premium on preferred shares                         4           -             4          -
Net income attributed to common shareholders                 112          91           400        350
Earnings per common share
Basic                                                       1.12        0.92          4.01       3.60
Diluted                                                     1.11        0.91          3.97       3.57

We seek Safe Harbor.

© 2024 Canjex Publishing Ltd. All rights reserved.