Industrial Alliance Reports Excellent Third Quarter - Earnings from continuing activities increase by 61% and ROE reaches 14.9%
|A full discussion of our third-quarter results is available at www.inalco.com under Investor Relations/Financial Reports.|
Third-quarter highlights from continuing activities
- Net income of $105.8 million (+61% YoY)
- Diluted EPS of $1.07 (+$0.34 YoY)
- Return on shareholders' equity of 14.9% (+370 bps YoY)
- Solvency ratio is robust at 227%
- Book value of $29.34 (+7.6% YoY)
AUA/AUM reach $89 billion ($95 billion post quarter-end with Jovian
QUEBEC CITY, Nov. 6, 2013 /CNW Telbec/ - For the third quarter ended September 30, 2013, Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) reports net income attributed to common shareholders of $105.8 million and diluted earnings per share of $1.07. Excluding the gain on the sale of the US annuity business in 2012, net income from continuing activities increased year over year by 61% and earnings per share were up by $0.34, while the annualized return on shareholders' equity rose 370 basis points to 14.9%.
"This is clearly one of our best quarters ever and very satisfying on a number of levels," commented Yvon Charest, President and Chief Executive Officer. "Over the past year, we have successfuly executed on a number of initiatives to reduce strain on new business and to strengthen our balance sheet, while continuing to grow our business organically and through acquisition. Together with the improvement in the overall macroeconomic environment, we are encouraged by our results this quarter and the year thus far."
"We are particularly pleased to see the excellent results from Individual Insurance," continued René Chabot, Senior Vice-President and Appointed Actuary. "Strain on new business came in lower than expected and mortality experience was favourable, which allowed us to exceed our plan for the quarter. Looking forward, we feel confident based on the year to date that we are in line to meet our expectations for 2013."
|Third quarter||Year-to-date as at September 30|
|(In millions of dollars, unless otherwise indicated)||2013||20121||Variation||2013||20121||Variation|
|Net income attributed to shareholders||114.4||112.3||2%||284.7||253.0||13%|
|Less: preferred share dividends||8.6||9.0||(4%)||25.9||21.5||20%|
|Net income attributed to common shareholders||105.8||103.3||2%||258.8||231.5||12%|
|Less: gain on sale of US annuity business||--||37.4||--||--||37.4||--|
|Net income attributed to common shareholders on continuing activities||105.8||65.9||61%||258.8||194.1||33%|
|Earnings per common share (diluted)||$1.07||$1.09||($0.02)||$2.66||$2.45||$0.21|
|Earnings per common share on continuing activities (adjusted)2, 3||$1.07||$0.73||$0.34||$2.66||$2.14||$0.52|
|Return on common shareholders' equity2, 4||14.9%||11.2%||370 bps||12.3%||4.8%||750 bps|
|Book value per share||$29.34||$28.55||$27.451||$27.271|
|Assets under management and administration||89,028||86,847||83,4661||81,1401|
|Net impaired investments as a % of total investments||0.06%||0.04%||0.04%||0.04%|
|1||Restated for comparability following the amendment to IAS-19 (Employee Benefits) effective January 1, 2013.|
|2||The third quarter of 2012 excludes the gain of $37.4 million on sale of the US annuity business.|
|3||Excludes the dilutive impact of the innovative Tier 1 debt instruments (IATS) redeemed on June 30, 2013.|
|4||Annualized for the quarter. Trailing twelve months for the year to date.|
THIRD QUARTER HIGHLIGHTS
Profitability - For the third quarter ended September 30, 2013, Industrial Alliance reports net income attributed to common shareholders of $105.8 million and diluted earnings per share of $1.07. Excluding the gain on the sale of the US annuity business a year ago, net income increased by 61% and earnings per share were up by $0.34, while the annualized return on shareholders' equity reached 14.9% compared with 11.2% in the same quarter a year ago.
The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.
Individual Insurance reported an experience gain of $0.14 per share ($13.6 million). Insurance-related gains consisting primarily of favourable mortality amounted to $0.11 per share ($10.3 million). The increase in equity markets contributed $0.03 per share ($3.3 million).
Individual Wealth Management had an experience gain of $0.08 per share ($7.4 million). The dynamic hedging program for the segregated funds guarantee provided a benefit of $0.06 per share ($5.7 million) and the growth in equity markets contributed $0.03 per share ($2.6 million). This was offset by higher business development expenses representing $0.01 per share ($0.9 million).
Group Insurance reported an experience gain of $0.02 per share ($1.4 million) attributed to Dealer Services. In Employee Plans, insurance claims for long-term disability and group benefits were in line with expectations.
Group Savings and Retirement contributed $0.01 per share ($1.0 million) related to longevity gains.
Strain - In the Individual Insurance sector, the strain-to-new business ratio of 20% was better than expected for the third quarter. Management estimates that strain improvement represented $0.03 per share ($3.4 million) and is attributed to a better than expected sales mix.
Income on capital - Total income on capital of $24.2 million pre-tax compares with $32.3 million in the second quarter before the debt redemption fee of $9.3 million. The third quarter reflects a decrease in gains on assets available for sale (-$9.3 million), a lower contribution from IA Auto and Home (-$2.7 million), lower financing costs (+$2.2 million) and other investment gains (+$1.7 million).
Income taxes - The effective tax rate in the third quarter was 23% which is in line with our guidance of 21-24%.
Business Growth - Premiums and deposits amounted to $1.6 billion in the third quarter, which is comparable to the same quarter last year. Assets under management and administration reached $89.0 billion, mostly reflecting the increase in equity markets during the quarter. Subsequent to quarter-end, Industrial Alliance completed the acquisition of Jovian Capital Corporation, bringing assets under management and administration close to $95 billion.
In the Individual sectors, insurance sales amounted to $54.1 million versus $58.5 million in the same quarter in 2012. Overall wealth management sales were comparable to the previous year, however, the mutual fund segment experienced strong growth for a fourth consecutive quarter with gross sales of $438.3 million (+24%). Net mutual fund sales of $61.1 million more than offset the decrease in net sales of segregated funds during the quarter.
In the Group sectors, business growth was lead by Dealer Services, where sales of creditor insurance increased 13% to $117.7 million and sales of P&C products increased 26% to $46.1 million. Special Market Solutions continued to report steady growth with sales of $37.1 million (+6%). Employee Plans reported sales of $8.8 million, down by 17% for the quarter. Group Savings and Retirement reported sales of $179.7 million.
Capital - At September 30, 2013, the solvency ratio was 227% compared with 224% at June 30, 2013. Among the key elements explaining the increase are macroeconomic factors which reduced capital requirements for balance sheet items while recurring items like profit increased available capital.
Quality of Investments - At September 30, 2013, net impaired investments stood at 0.06% of total investments (0.04% at June 30, 2013). The proportion of bonds rated BB and lower was 0.18% (0.17% as at June 30, 2013) and the real estate occupancy rate was 94% (93% at June 30, 2013).
Dividend - The Board of Directors declared a quarterly dividend of $0.2450 per common share. This dividend is payable on December 16, 2013 to shareholders of record as at November 22, 2013.
Registered shareholders wishing to enroll in the Company's Dividend Reinvestment and Share Purchase Plan so as to be eligible to reinvest the December 16th dividend must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on November 15th, 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 September 30, 2013:
The Company can absorb a sudden decrease of about 16% (13% at June 30,
2013) in the S&P/TSX index before having to strengthen reserves for
The Company can absorb a sudden decrease of 37% (31% at June 30, 2013)
in the S&P/TSX index before the solvency ratio drops below 175% and a
decrease of 49% (42% at June 30, 2013) before the solvency ratio drops
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 June 30, 2013). This does not take into consideration any potential
- The impact on net income attributed to common shareholders of a 10 basis point decrease in the initial and ultimate reinvestment rates totals $73 million ($75 million at June 30, 2013).
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.
Agreement to Acquire Jovian Capital Corporation
Subsequent to quarter end on October 1, 2013, the Company completed the acquisition through a plan of arrangement of all the outstanding common shares of Jovian Capital Corporation at $10.23 per share for an aggregate consideration of $92.0 million, composed of $79.3 million in cash and the issuance of 295,253 common shares of Industrial Alliance at $43.07 per share for a total of $12.7 million. Jovian, which has since been delisted from the TSX, serves the private wealth management market through a portfolio of financial services companies.
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 Wednesday, November 6, 2013 at 2 p.m. (ET). To listen in on the conference call, dial 1 800 699-3658 (toll-free). A replay of the conference call will also be available for a one-week period, starting at 4:30 p.m. on Wednesday, November 6, 2013. To listen to the conference call replay, dial 1 800 558-5253 (toll-free) and enter access code 21672152. A webcast of the conference call (in listen only mode) will also be available on the Industrial Alliance website at www.inalco.com.
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, 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.
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 security of over three million Canadians and employs 4,400 people. With the recent acquisition of Jovian Capital Corporation on October 1st, the Company now manages and administers about $95 billion in assets. Industrial Alliance stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.
SOURCE Industrial Alliance Insurance and Financial Services Inc.