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Enter Symbol
or Name
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Industrial Alliance Insurance and Financial S
Symbol IAG
Shares Issued 101,174,223
Close 2015-05-06 C$ 45.13
Market Cap C$ 4,565,992,684
Recent Sedar Documents

Industrial Alliance earns $104.9-million in Q1

2015-05-07 09:13 ET - News Release

Mr. John LeBoutillier reports

INDUSTRIAL ALLIANCE REPORTS FIRST QUARTER RESULTS - SOLID QUARTER FOR GROWTH, PROFIT AND SHAREHOLDER VALUE CREATION

For the first quarter ended March 31, 2015, Industrial Alliance Insurance and Financial Services Inc. had net income attributed to common shareholders of $104.9-million, up 27 per cent over the previous year. After accounting for the premium of four cents per share related to the redemption of the Series F preferred shares on March 31, diluted earnings per common share (EPS) rose to $1.03 from 83 cents a year ago. The annualized return on shareholders' equity was 12.1 per cent, and the solvency ratio at quarter-end was 211 per cent.

  • First quarter earnings up 27 per cent to $104.9-million ($1.03 EPS);
  • Annualized ROE (return on equity) of 12.1 per cent;
  • AUA/AUM (assets under administration/assets under management) up 12 per cent year over year (YoY) to $114.7-billion;
  • BVPS (book value per share) up 11 per cent YoY to $34.94;
  • Solvency ratio of 211 per cent.

A full discussion of the company's results is available at its website in the investor relations section.

Yvon Charest, president and chief executive officer, commented: "Our first quarter represents a solid start to the year. In retail insurance, growth was sustained for minimum premiums and individual disability in Canada, iA Auto and Home, and in the U.S. On the group side, employee plans, special markets solutions and the P&C [property and casualty] segment of dealer services also made a positive contribution to top-line growth. In our wealth management business where segregated fund sales continue to gain momentum, assets under management and administration were up 12 per cent in the last year despite weakness in our mutual fund flows. As for long-term shareholder value creation, book value per share grew by 11 per cent over the last 12 months."

Rene Chabot, executive vice-president and chief actuary, added: "First quarter earnings exceed our guidance provided to the Street. This result includes a significant tax gain and better-than-expected equity returns, partially offset by adverse mortality across all our insurance operations, and higher-than-usual claims for iA Auto and Home. Our capital position remains strong, and we have the flexibility on our balance sheet to expand our operations through internal and strategic initiatives."

                                   HIGHLIGHTS
              (In millions of dollars, unless otherwise indicated)
                                                                    First quarter
                                                                2015            2014

Net income attributed to shareholders                        $ 114.4          $ 90.0
Less: preferred share dividends                                  5.5             7.1
Less: premium on preferred share redemption                      4.0               -
Net income attributed to common shareholders                   104.9            82.9
Earnings per common share (diluted)                          $  1.03          $ 0.83
Return on common shareholders' equity (1)                       12.1%           10.7%

(1) Annualized for the quarter.

                                                      March 31, 2015     Dec. 31, 2014   March 31, 2014

Solvency ratio                                                   211%              209%             212%
Book value per share                                       $   34.94         $   33.83        $   31.49
Assets under management and administration                 $ 114,671         $ 109,481        $ 102,784
Net impaired investments as a percentage 
of total investments                                            0.07%             0.07%            0.06%

First quarter highlights

Profitability

For the first quarter ended March 31, 2015, Industrial Alliance reports net income attributed to common shareholders of $104.9-million, an increase of 27 per cent over the previous year. Diluted earnings per share of $1.03, after accounting for the premium of four cents per share on the redemption of the company's Series F preferred shares on March 31, compare with 83 cents in the same quarter a year ago. The annualized shareholders' return on equity was 12.1 per cent versus 10.7 per cent a year ago, the former being at the high end of the guidance provided by management to the financial markets for 2015.

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

Expected profit on in force increased by a strong 15 per cent to $120.6-million pretax over the same quarter last year, which is attributed mainly to the retail insurance and wealth management sectors. In addition, Industrial Alliance realized a net experience gain of $3.7-million pretax for the quarter. A detailed analysis of gains and losses is provided below.

Individual insurance reported an experience gain of one cent per share ($600,000). Adverse mortality (six-cent EPS) in the quarter was completely offset by a gain from favourable equity markets (five-cent EPS) and miscellaneous items (two-cent EPS).

Individual wealth management had an experience gain of four cents per share ($4.4-million), attributed equally to the impact of market growth on assets and favourable longevity.

Group insurance reported a net experience loss of three cents per share (minus $3.2-million) related to adverse mortality across the three divisions, despite lower disability claims in employee plans (plus one-cent EPS).

Group savings and retirement reported a gain of one cent per share ($900,000) related to favourable longevity.

Strain

In the individual insurance sector, the strain-to-new business ratio was 39 per cent compared with guidance of 35 per cent that includes typical first quarter seasonality. Management estimates that the higher strain ratio, which is attributed to an unfavourable product mix in the quarter, represented a loss of two cents per share.

Income on capital

Total income on capital of $13.6-million pretax compares with $28.1-million in the previous quarter. The decrease is mainly attributed to higher-than-expected claims for iA Auto and Home as a result of unusually harsh winter conditions.

Income taxes

The company realized a tax recovery of 19 cents per share in the quarter related principally to tax-exempt investment income. The recovery relates specifically to the IA Pacific subsidiary for the years from 2008 to 2012 prior to its merger with the parent company.

Business growth

Total assets under management and administration of $114.7-billion increased by 5 per cent in the quarter and 12 per cent in the last year. Premiums and deposits of $2.0-billion were down 7 per cent over the previous year, mainly attributed to lower gross mutual fund sales.

In retail insurance, sales of $55.1-million (plus 16 per cent) reflect growth in minimum premiums in Canada (plus 14 per cent) and the United States (plus 42 per cent). Canadian sales include Excellence, the company's adjustable disability business, where sales were up by 25 per cent. (Note that a correction of $9.5-million was made to retail insurance sales in the first quarter of 2014 to reverse an overstatement of excess premiums in Canada.)

In retail wealth management, net sales of segregated funds (plus $170.8-million) were offset by mutual fund outflows of $267.0-million, resulting in net investment fund outflows of $96.2-million.

In the group insurance sector, which had total sales of $163.9-million (plus 4 per cent), employee plans achieved sales of $15.3-million (plus 70 per cent), and special markets solutions delivered sales of $47.5-million (minus 1 per cent). In dealer services, sales totalled $65.4-million (minus 7 per cent) in creditor insurance and $35.7-million (plus 19 per cent) in P&C products.

In group savings and retirement, sales were $250.9-million, 15 per cent lower than the previous year.

Capital

At March 31, 2015, the solvency ratio was 211 per cent compared with 209 per cent at the end of the previous quarter. The increase reflects the net proceeds of the subordinated debt issue in the quarter (plus 7 per cent), and the contribution from first quarter earnings and other items (plus 2 per cent), offset by the decline in long-term interest rates (minus 7 per cent).

Dividend

The board of directors approved a dividend of 28 cents per share on the company's outstanding common shares, representing a payout ratio of 27 per cent. This dividend is payable on June 15, 2015, to shareholders of record at May 22, 2015.

Dividend reinvestment and share purchase

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 June 15, 2015, must ensure that the duly completed form is delivered to Computershare no later than 4 p.m. on May 14, 2015. Enrolment information is provided on the company's website under in the investor relations/dividends section.

Market guidance for 2015:

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

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

Issuance of subordinated debt and redemption of preferred shares

During the first quarter of 2015, Industrial Alliance issued $250-million of fixed/floating subordinated debentures due Feb. 23, 2027. The net proceeds were added to the company's general funds and used for general corporate purposes including the redemption on March 31, 2015, of its four million non-cumulative Class A preferred shares, Series F, 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.

General information

Non-IFRS (international financial reporting standards) financial information

The company reports its financial results in accordance with IFRS. It also publishes certain non-IFRS financial measures that do not have an IFRS equivalent, including sales, value of new business and solvency ratio, or which have an IFRS equivalent such as data on operating profit and income taxes on earnings. The company also uses non-IFRS adjusted data in relation to net income, earnings per share and return on equity. These non-IFRS financial measures are often accompanied by and reconciled with IFRS financial measures. The company believes that these non-IFRS financial measures provide investors and analysts with additional information to better understand the company's financial results, as well as assess its growth and earnings potential. Since non-IFRS financial measures do not have a standardized definition, they may differ from the non-IFRS financial measures used by other institutions. The company strongly encourages investors to review its financial statements and other publicly filed reports in their entirety, and not to rely on any single financial measure.

Conference call

Management will hold a conference call to present the company's results on Thursday, May 7, 2015, at 11:30 a.m. (ET). To listen in on the conference call, dial 1-800-738-1032 (toll-free). A replay of the conference call will also be available for a one-week period, starting at 2 p.m. on May 7, 2015. To listen to the conference call replay, dial 1-800-558-5253 (toll-free) and enter access code 21765621. A webcast of the conference call (in listen-only mode) will also be available on the Industrial Alliance website.

Documents related to the financial results

For a detailed discussion of the company's first quarter results, investors are invited to consult the management discussion and analysis for the quarter ended March 31, 2015, related consolidated financial statements, and accompanying notes, as well as the company's supplemental information package, all of which are available on the Industrial Alliance website in the investor relations section and on SEDAR.

Annual meeting

Industrial Alliance is holding its annual meeting at 2 p.m. on Thursday, May 7, 2015, at the Quebec City Convention Centre, located at 1000 Rene-Levesque Blvd. East in Quebec City. Media will have the opportunity to meet with the chairman of the board, John LeBoutillier, as well as president and chief executive officer Mr. Charest, immediately after the annual meeting at approximately 3:30 p.m. A video cast of the meeting as well as a copy of the management presentation will be available on the Industrial Alliance website.

We seek Safe Harbor.

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