Industrial Alliance Reports Third Quarter Results - Earnings momentum sustained by strong operating results

• Q3 earnings up 24% to $113.1M ($1.11 EPS)
• Annualized ROE of 12.3%
• BVPS up 10% YoY to $36.45
• Solvency ratio of 225%
• Retail insurance sales up 25% (+17% YTD)
• Q4 charge to net income for reserve strengthening

QUEBEC CITY, Nov. 4, 2015 /CNW Telbec/ - For the third quarter ended September 30, 2015, Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) reports net income attributed to common shareholders of $113.1 million, up 24% over the previous year. Diluted earnings per common share (EPS) rose to $1.11 from $0.91 a year ago, the annualized return on shareholders' equity was 12.3% and the solvency ratio at quarter-end was 225%.

Yvon Charest, President and Chief Executive Officer commented, "In line with the year to date, we are reporting another strong quarter with earnings above guidance.  Our business growth continues to be highlighted by our retail insurance operations in Canada and the US that have been gaining momentum over the last quarters, as well as our segregated funds that continue to capture a bigger piece of the industry's assets. In early October, we announced the acquisition of CTL Corporation that enhances our product shelf for car dealers and we completed another acquisition that adds distribution in our wealth management operations. I am satisfied that we are continuing  to execute on our strategy to deliver profitable organic growth in all our lines of business, while pursuing additional opportunities for value-creating EPS expansion through acquisitions."

René Chabot, Executive Vice-President, CFO and Chief Actuary added, "Despite the unfavourable impact of equity markets during the quarter, we delivered strong year-over-year earnings growth that topped our guidance. We are especially pleased to note the favourable policyholder experience in retail insurance as well as in all our group businesses.  Strain on new business was better than expected for the second consecutive quarter and our auto and home subsidiary delivered an excellent quarter. Our solvency ratio remains above our target range, which together with our balance sheet flexibility gives us the capacity to invest in the continued growth of our operations."

THIRD QUARTER HIGHLIGHTS

Profitability - For the third quarter ended September 30, 2015, Industrial Alliance reports net income attributed to common shareholders of $113.1 million, an increase of 24% over the previous year. Diluted earnings per share of $1.11 compare with $0.91 in the same quarter a year ago and with guidance of $1.00 to $1.10 for the quarter. The annualized shareholders' return on equity of 12.3% compares with 11.2% a year ago, and is at the top of the guidance provided by management to the financial markets for 2015 (11.0% to 12.5%).

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

Expected profit on in-force increased by 14% to $136.4 million pre-tax over the same quarter last year, and is attributed mainly to the retail insurance and wealth management sectors. In addition, Industrial Alliance realized a net experience gain of $1.2 million pre-tax ($0.01 EPS) related to favourable policyholder experience. A detailed analysis of gains and losses follows.

Individual Insurance reported a net experience gain of $0.02 per share ($2.1 million). Favourable morbidity, expenses and other experience gains ($0.09 EPS) were mostly offset by a loss of $0.07 EPS related to the drop in equity markets during the quarter.

Individual Wealth Management had an experience loss of $0.08 per share (-$8.1 million), of which $0.03 EPS is attributed to the dynamic hedging program for the segregated fund guarantee, $0.01 EPS to lower fees on assets under management and the remainder related to lower profitability from iA affiliates.

Group Insurance reported an experience gain of $0.05 per share ($5.4 million) related to lower claims for Special Markets Solutions and Dealer Services. Employee Plans performed in line with expectations.

Group Savings and Retirement reported a longevity gain of $0.02 per share ($1.5 million) in the third quarter.

Strain - In the Individual Insurance sector, strain on new business amounted to $15.2 million pre-tax, or 24% of sales, compared with guidance of 30% for the quarter. Management estimates that the lower strain ratio, which is attributed to higher sales and a favourable product mix, represented a gain of $0.02 per share.

Income on capital - Total income on capital of $23.5 million pre-tax compares with $20.2 million in the previous quarter. The increase in the third quarter is mainly attributed to an excellent quarter for IA Auto and Home.

Income taxes - The effective tax rate was 19%, which is in line with the Company's guidance of 18%-20%.

Business Growth - Premiums and deposits of $1.8 billion were down 3% year over year because of lower inflows in the individual and group wealth management sectors. Likewise, assets under management and administration of $111.2 billion were down by 1% in the third quarter but up by 4% over the last twelve months.

In retail insurance, business growth continued to maintain good momentum for the third quarter in a row. Total sales of $63.8 million (+25%) reflect growth in Canada (+16%) and the US (+47%). Sales in our adjustable disability business, which is continuing its cross-Canada rollout, were up by 13%.

In retail wealth management, gross sales of segregated funds increased to $358.2 million (+12%) reflecting the ongoing success of our cross-Canada distribution strategy; net inflows increased to $80.5 million (+18%) in the quarter. Gross sales of mutual funds amounted to $313.7 million (-24%) while net outflows were $315.7 million for the quarter.

The group insurance sector reported total sales of $220.3 million. Special Markets Solutions had sales of $41.9 million (+3%). In Dealer Services, sales amounted to $56.4 million (+31%) in P&C products and $109.1 million (-3%) in creditor insurance for an overall increase of 6%. In the Employee Plans segment, sales amounted to $12.9 million (-72%).

In Group Savings and Retirement, sales were $246.0 million, 5% lower than the previous year, reflecting a weaker quarter for insured annuities. 

Capital - At September 30, 2015, the solvency ratio was 225% compared with 223% at the end of the previous quarter. The increase is related to changes in interest rates (+1%) and the contribution from third-quarter earnings (+1%).

Dividend - The Board of Directors approved a dividend of 30 cents per share on the Company's outstanding common shares. This dividend is payable on December 15, 2015 to shareholders of record at November 20, 2015.

Dividend Reinvestmentand 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 December 15, 2015 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on November 13, 2015. Enrollment information is provided on the Company's website at www.ia.ca under About iA, in the Investor Relations/Dividends section.

Year-end Preview - Subject to completion of our year-end review and according to management's best estimates on this date, the Company anticipates a charge to net income attributed to common shareholders of approximately $100 million after-tax related principally to the lapse assumption in the actuarial reserve. This charge takes into consideration, among other things, the study disclosed by the Canadian Institute of Actuaries in September 2015. The final results of the Company's year-end review, which will be reported on February 11, 2016 as part of its fourth quarter disclosure, could vary from this preliminary estimate.

Transactions Subsequent to Quarter-end
On October 1, 2015, the Company acquired all the outstanding shares of FIN-XO Securities, a full-service securities broker operating in the provinces of Québec, Ontario, Alberta, Manitoba, British Columbia, Saskatchewan and New Brunswick. This transaction adds $700 million in assets under administration and further expands the company's affiliated distribution network. Terms of the transaction were not disclosed.

On October 2, 2015, the Company acquired all the outstanding shares of CTL Corporation, the largest privately-owned consumer vehicle finance company in Canada. CTL has a loan portfolio of more than $100 million originated through a network of car dealers located across Canada. This acquisition, which increases the Company's current product shelf for car dealers, is immediately accretive and expected to contribute full-year earnings of $0.04 per share. The impact on the solvency ratio will be a decrease of approximately four percentage points.

GENERAL INFORMATION

Non-IFRS Financial Information
The Company reports its financial results in accordance with International Financial Reporting Standards (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 presented in the sources of earnings table. 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.

Forward-looking Statements
This press release may contain statements relating to strategies used by Industrial Alliance or statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "may", "will", "could", "should", "would", "suspect", "expect", "anticipate", "intend", "plan", "believe", "estimate", and "continue" (or the negative thereof), as well as words such as "objective" or "goal" or other similar words or expressions. Such statements constitute forward‑looking statements within the meaning of securities laws. Forward‑looking statements include, but are not limited to, information concerning the Company's possible or assumed future operating results. These statements are not historical facts; they represent only the Company's expectations, estimates and projections regarding future events.

Although Industrial Alliance believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Factors that could cause actual results to differ materially from expectations include, but are not limited to: general business and economic conditions; level of competition and consolidation; changes in laws and regulations including tax laws; liquidity of Industrial Alliance including the availability of financing to meet existing financial commitments on their expected maturity dates when required; accuracy of information received from counterparties and the ability of counterparties to meet their obligations; accuracy of accounting policies and actuarial methods used by Industrial Alliance; insurance risks including mortality, morbidity, longevity and policyholder behaviour including the occurrence of natural or man-made disasters, pandemic diseases and acts of terrorism.

Additional information about the material factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the "Risk Management" section of the 2014 Management's Discussion and Analysis and in the "Management of Risks Associated with Financial Instruments" note to Industrial Alliance's consolidated financial statements, and elsewhere in Industrial Alliance's filings with Canadian securities regulators, which are available for review at www.sedar.com.

The forward-looking statements in this news release reflect the Company's expectations as of the date of this press release. Industrial Alliance does not undertake to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, except as required by law.

Documents Related to the Financial Results
For a detailed discussion of the Company's third quarter results, investors are invited to consult the MD&A for the quarter ended September 30, 2015, related consolidated financial statements and accompanying notes as well as our supplemental information package, all of which are available on the iA Financial Group website at www.ia.ca under About iA, in the Investor Relations/Financial Reports section and on SEDAR at www.sedar.com.

Conference Call
Management will hold a conference call to present the Company's results on Wednesday, November 4, 2015, at 2:00 p.m. (ET). The toll-free dial-in number is 1-800-381-7839. A replay of the conference call will be available for a one‑week period, starting at 4:30 p.m. on November 4, 2015. To access the the conference call replay, dial 1‑800‑558‑5253 (toll-free) and enter access code 21774496. A webcast of the conference call ( listen-only mode) will also be available on the iA Financial Group website at www.ia.ca.

About iA Financial GroupFounded in 1892, iA Financial Group offers life and health insurance products, mutual and segregated funds, savings and retirement plans, RRSPs, securities, auto and home insurance, mortgages and car loans and other financial products and services for both individuals and groups. It is one of the four largest life and health insurance companies in Canada and one of the largest publicly-traded companies in the country. iA Financial Group stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.

iA Financial Group is a business name and trademark of Industrial Alliance Insurance and Financial Services Inc.

SOURCE Industrial Alliance Insurance and Financial Services Inc.