A Solid First Quarter for Industrial Alliance
All lines of business deliver revenue and earnings growth
- Net income attributed to common shareholders of $79.7 million
- Diluted and adjusted EPS of $0.85
- Return on shareholders' equity of 12.0%
- Solvency ratio of 237% at March 31st
- Premiums and deposits of $2.1 billion
- Assets under management and administration of $87.5 billion
- Book value per share of $28.67
|A full discussion of our first-quarter results is available at www.inalco.com under Investor Relations/Financial Reports.|
QUEBEC CITY, May 9, 2013 /CNW Telbec/ - For the quarter ended March 31, 2013, Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) reports net income attributed to common shareholders of $79.7 million versus $62.2 million a year earlier. Diluted earnings per share, adjusted for the dilutive impact of the Company's innovative Tier 1 debt instruments (IATS) and reflecting the equity issue completed on February 27, 2013, amounted to $0.85 compared with $0.69 a year earlier. Premiums and deposits exceeded the $2 billion mark, the highest in the Company's history.
"Our first quarter performance was solid on all metrics," commented Yvon Charest, President and Chief Executive Officer. "Industrial Alliance set another record for both premiums and deposits as well as net earnings from continuing operations. In terms of financial flexibility, our solvency ratio remains extremely strong and our leverage ratio shows meaningful improvement as a result of our recent capital strategy."
"All our lines of business delivered experience gains in the quarter together with higher sales," added René Chabot, Senior Vice-President and Appointed Actuary. "In Individual Insurance, our strain-to-new business ratio was above our target level but with the new price increase introduced at the end of March, we are in line to achieve our average of 25% for the full year."
|(In millions of dollars, unless otherwise indicated)||2013||20121||Variation|
|Net income attributed to shareholders||88.4||68.2||30%|
|Less: preferred share dividends||8.7||6.0||45%|
|Net income attributed to common shareholders||79.7||62.2||28%|
|Earnings per common share (diluted)||$0.83||$0.66||$0.17|
|Earnings per common share (diluted and adjusted2)||$0.85||$0.69||$0.16|
|Return on common shareholders' equity3||12.0%||11.0%||100 bps|
|March 31, 2013||December 31, 2012||March 31, 2012|
|Book value per share||$28.67||$27.451||$25.961|
|Assets under management and administration||87,509||83,3161||76,2291|
|Net impaired investments||8.7||9.0||9.3|
|Net impaired investments as a % of total investments||0.04%||0.04%||0.04%|
1 Restated for comparability following the amendment to IAS-19 (Employee
Benefits) effective January 1, 2013.
2 Excludes the dilutive impact of the innovative Tier 1 debt instruments (IATS).
3 Annualized for the quarter.
FIRST QUARTER HIGHLIGHTS
Profitability - Industrial Alliance reports net income attributed to common shareholders of $79.7 million, an increase of 28% from one year ago. Diluted and adjusted earnings per share amounted to $0.85 ($0.69 in 2012), and the annualized return on common shareholders' equity was 12.0% (11.0% in 2012). The 2012 figures have been restated for comparability following the amendment to IAS-19 for employee benefits effective January 1, 2013.
The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.
Individual Insurance had a net experience gain of $0.02 per share ($2.0 million). Equity market growth provided a benefit of $0.04 per share ($4.3 million) on Universal Life policies. Unfavourable mortality represented $0.02 per share ($1.9 million).
Individual Wealth Management had a net experience gain of $0.11 per share ($9.8 million). The dynamic hedging program for the segregated funds guarantee provided a benefit of $0.11 per share ($10.3 million), and equity market growth had a positive impact on fund management fees of $0.02 per share ($1.4 million). Higher commissions and expenses related to higher fund sales accounted for an experience loss of $0.02 per share ($1.9 million).
Group Insurance reported a net experience gain of $0.01 per share ($1.4 million). Dealer Services provided $0.02 per share ($2.7 million) and Special Markets Solutions added $0.01 per share ($0.6 million). This was offset by a loss of $0.02 per share ($1.7 million) by Employee Plans for dental and health claims. Disability was in line with expectations.
Group Savings and Retirement contributed $0.01 per share ($0.8 million) related to investment income gains and favourable annuitant behavior.
Strain - In the Individual Insurance sector, the strain-to-new business ratio was 30% in the first quarter, which is above the expectation for the full year. The first quarter ratio is explained by the 2012 year-end assumption changes together with seasonally higher expenses. Management estimates that the higher percentage reduced first quarter earnings by $0.03 per share ($2.8 million).
Management reiterates that strain should represent approximately 25% of Individual Insurance sales in 2013 as new pricing implemented at the end of March becomes reflected in sales.
Income on capital - Total income on capital was $18.6 million pre-tax in the first quarter versus $23.2 million a year earlier. The year-over-year decrease is mainly due to the seasonally in-line contribution from IA Auto and Home (loss of $3.1 million pre-tax) compared with the first quarter of 2012 (gain of $1.7 million pre-tax).
Income taxes - The Company reported a tax gain of $0.02 per share ($2.2 million) in the first quarter. The benefit is mostly attributed to a tax recovery in the US, resulting in an effective tax rate of 19%.
Business Growth - Assets under management and administration reached a new high of $87.5 billion at March 31st, up 5% over the last quarter and 15% year over year. Premiums and deposits grew by 12%, also reaching a new quarterly high of $2.1 billion. An outstanding contribution was made by the wealth management and individual insurance lines of business.
Sales of Individual Insurance products grew by 23%, reaching $65.8 million in the first quarter, driven by a very strong performance from the Canadian operations.
Individual Wealth Management gross sales gathered momentum in the first quarter, reflecting strong demand for mutual funds. Gross sales of all funds totalled $1.1 billion, up 9% over the previous year. Net sales of mutual funds more than doubled to $318.6 million. Segregated funds had net sales of $36.9 million.
In Group Insurance, sales of creditor insurance and P&C products (Dealer Services) continued to grow with a year over year increase of 5% to $94.8 million. Special Market Solutions gained momentum, with sales increasing 23% to $48.3 million. Employee Plans had an exceptionally strong quarter, with sales improving by 49% to $29.3 million.
Group Savings and Retirement reported sales of $251.6 million, an increase of 54% over the previous year.
Capital - At March 31, 2013, the solvency ratio was 237% compared with 217% at December 31, 2012. The key elements contributing to the increase include regulatory capital relief for lapse effective January 1st and the equity issue of $237 million in February. On April 1, 2013, the Company redeemed all its 8.25% subordinated debt with a nominal value of $100 million and will redeem on or about June 30, 2013 all the 5.714% Industrial Alliance Trust Securities - Series A (IATS) with a nominal value of $150 million. Following these buybacks, the solvency ratio stands at 221% and the Company's leverage ratio improves to 29% from 36% at December 31, 2012.
Quality of Investments - At March 31, 2013, both net impaired investments (0.04% of total investments) and the real estate occupancy rate (95%) remained unchanged from the last two quarters. The proportion of bonds rated BB and lower increased slightly to 0.11%.
Dividend - The Board of Directors declared a quarterly dividend of $0.245 per common share, which corresponds to a payout of 29% of net income attributed to common shareholders. This dividend is payable on June 17, 2013 to shareholders of record as at May 24, 2013.
Registered shareholders wishing to enroll in the Company's Dividend Reinvestment and Share Purchase Plan so as to be eligible to reinvest the June 17th dividend must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on May 16, 2013. Enrollment information is provided on the Company's website at www.inalco.com under Investor Relations/Dividends.
Macroeconomic sensitivity - Following the update of its sensitivity analysis at March 31, 2013:
The Company can absorb a decrease of about 16% (14% at December 31,
2012) in the S&P/TSX index before having to strengthen reserves for
The Company can absorb a decrease of 40% (35% at December 31, 2012) in
the S&P/TSX index before the solvency ratio drops below 175% and a
decrease of 51% (46% at December 31, 2012) before the solvency ratio
drops below 150%.
The full-year impact on net income attributed to common shareholders of
a sudden 10% decrease in the stock markets is $24 million ($23 million
at December 31, 2012).
- The impact on net income attributed to common shareholders of a 10 basis point decrease in the initial and ultimate re-investment rates totals $80 million versus $89 million a year ago, attributed to ongoing improvement in the matching of asset-liability cash flows.
Market Guidance for 2013
- Earnings per common share: target range of $3.00 to $3.40.
- Return on common shareholders' equity (ROE): target range of 10.5% to 12.0%
- Solvency ratio: target range of 175% to 200%
- Dividend payout ratio: medium-term payout range of 25% to 35%
- Effective tax rate: target range of 21% to 24%
Guidance for ROE and earnings per common share excludes any potential reserve strengthening in 2013.
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, embedded value 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 always 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.
Management will hold a conference call to present the Company's results on Thursday, May 9, 2013 at 11:30 a.m. (ET). To access the conference call, dial 1 800 408-6335 (toll-free). A replay of the conference call will be available for a one-week period, starting at 2:00 p.m. on Thursday, May 9, 2013. To access the conference call replay, dial 1 800 558-5253 (toll-free) and enter access code 21653328. A webcast of the conference call (in listen only mode) will be available on the Industrial Alliance website at www.inalco.com.
Documents Related to the Financial Results
A detailed discussion of the Company's first quarter results is provided in the MD&A, financial statements and accompanying notes as well as our supplemental information package, all of which are available on the Industrial Alliance website at www.inalco.com under Investor Relations / Financial Reports and on SEDAR at www.sedar.com.
Annual General Meeting of Shareholders
Industrial Alliance is holding its Annual General Meeting of Shareholders this afternoon at 2:00 p.m. at the Quebec City Convention Centre located at 1000 René-Lévesque Boulevard East in Québec City. Media will have the opportunity to meet with Chairman of the Board John LeBoutillier as well as President and Chief Executive Officer Yvon Charest immediately after the AGM at approximately 3:30 p.m. A videocast of the meeting as well as a copy of the management presentation will be available on the Industrial Alliance website at www.inalco.com.
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 2012 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.
About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and health insurance company with operations in all regions of Canada as well as in the United States. The Company offers a wide range of life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities, auto and home insurance, mortgage loans and other financial products and services for both individuals and groups. The fourth largest life and health insurance company in Canada, Industrial Alliance contributes to the financial wellbeing of over three million Canadians, employs 4,300 people and has assets under management and administration of more than $87 billion. Industrial Alliance stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.
SOURCE Industrial Alliance Insurance and Financial Services Inc.