The Westaim Corporation Reports 2012 Second Quarter Results

TORONTO, Aug. 14, 2012 /CNW/ - The Westaim Corporation ("Westaim") today announced it recorded net income of $1.9 million or $0.00 per share for the quarter ended June 30, 2012, compared to net income of $6.5 million or $0.01 per share for the quarter ended June 30, 2011.  For the six months ended June 30, 2012, Westaim recorded net income of $6.3 million or $0.01 per share compared to net income of $12.2 million or $0.02 per share for the six months ended June 30, 2011.  At June 30, 2012, Westaim's consolidated shareholders' equity was $425.9 million or $0.66 per share, an increase from $417.3 million or $0.65 per share at December 31, 2011.

Westaim's wholly-owned subsidiary, Jevco Insurance Company ("Jevco"), is a leading Canadian specialty insurer offering products through two divisions.  The Personal Lines Division provides insurance in the non-standard automobile, standard automobile, motorcycle and recreational vehicles product lines.  The Commercial Lines Division offers property and liability, niche commercial automobile and surety product lines.

In the second quarter of 2012, direct premiums written were $135.6 million and net premiums written were $130.9 million, compared to $123.9 million in direct premiums written and $119.5 million in net premiums written in the same quarter of 2011.  In the three months ended June 30, 2012, net premiums earned were $97.9 million, producing a Combined Ratio of 90.9%.  In the comparable quarter in 2011, net premiums earned were $88.4 million, producing a Combined Ratio of 94.6%.  In the six months ended June 30, 2012, net premiums earned were $174.9 million, producing a Combined Ratio of 92.0%.  In the comparable six months in 2011, net premiums earned were $158.9 million, producing a Combined Ratio of 96.9%.

The increase in stock price has resulted in an increase in the share-based compensation expense for the quarter and six months ended June 30, 2012 compared to the comparable periods in 2011.  During the quarter ended June 30, 2012, expenses of $1.4 million were incurred related to the sale of Jevco.

Total assets of Westaim were $1.3 billion at June 30, 2012 compared to $1.3 billion at December 31, 2011.  At June 30, 2012, the Company's investment portfolio of $1.0 billion was invested predominantly in corporate and government bonds.  In the three months ended June 30, 2012, net investment income and net realized investment gains, net of impairment of investments, of $7.7 million were included in net income. In the comparable quarter in 2011, net investment income and net realized investment gains of $8.6 million were included in net income; and net unrealized investment gains, net of income taxes, of $5.0 million were included in other comprehensive income. 

At June 30, 2012, Jevco had an MCT ratio of 314% and in March 2012, A.M. Best affirmed its financial strength rating of Jevco of B++ (Good) and revised the outlook for the rating to positive from stable.

On May 2, 2012, Westaim announced that it had entered into an agreement with Intact Financial Corporation  ("Intact") pursuant to which, subject to regulatory approval and other terms and conditions, Westaim agreed to sell to a wholly-owned subsidiary of Intact all of the issued and outstanding shares in the capital of Jevco for $530 million in cash (the "Transaction").  Shareholder approval for the Transaction was received at the special shareholder meeting on June 28, 2012.  The Transaction is expected to close in the fall of 2012. 

 "Westaim completed a positive second quarter with the insurance operations of Jevco reporting solid operating results.  We expect the improved performance of Jevco to continue throughout the remainder of 2012." said Cameron MacDonald, President and Chief Executive Officer of Westaim.

Westaim is a financial holding company focused on the property and casualty insurance industry. Westaim's common shares are listed on The Toronto Stock Exchange under the trading symbol WED.

Certain portions of this press release as well as other public statements by Westaim contain forward-looking statements.  Such forward-looking statements include but are not limited to statements concerning the proposed sale of Jevco; Jevco's business and the industry in which it operates; investment strategies and expected rates of return; and strategic alternatives to maximize value for shareholder.  These statements are based on current expectations that are subject to risks, uncertainties and assumptions and Westaim can give no assurance that these expectations are correct.  Westaim's actual results could differ materially from those anticipated by forward-looking statements for various reasons generally beyond our control, including but not limited to: (i) failure to complete the sale of Jevco on the terms contemplated or at all, (ii) changes in market conditions or deterioration in underlying investments; (iii) general economic, market, financing, regulatory and industry developments and conditions; (iv) the risks relating to Jevco's business; and (v) other risk factors set forth in Westaim's Annual Report, Quarterly Reports or Annual Information Form.  Westaim disclaims any intention or obligation to revise forward-looking statements whether as a result of new information, future developments or otherwise except as required by law.  All forward-looking statements are expressly qualified in their entirety by this cautionary statement.


THE WESTAIM CORPORATION                
Financial Highlights                
(unaudited)                
(thousands of Canadian dollars except percentage, share and per share data)                
               
               
  Three Months Ended June 30   Six Months Ended June 30
    2012   2011   2012   2011
                     
Direct premiums written   $ 135,570   $ 123,906   $ 214,879   $ 190,210
Net premiums written   $ 130,869   $ 119,491   $ 206,682   $ 182,388
                       
Net premiums earned   $ 97,946   $ 88,404   $ 174,918   $ 158,941
Underwriting expenses     (88,999)     (83,626)     (160,770)     (154,051)
Underwriting income     8,947     4,778     14,148     4,890
Net investment income and net realized investment gains     7,686     8,628     17,328     18,029
Foreign exchange gain (loss)     321     (74)     17     (793)
Corporate costs     (9,757)     (3,318)     (16,430)     (6,506)
Costs related to sale of subsidiary     (1,413)     -     (1,413)     -
Site restoration provision (expense) recovery     (12)     (28)     (24)     119
Other income     -     -     -     2,250
Income before income taxes     5,772     9,986     13,626     17,989
Income tax expense     (3,869)     (3,481)     (7,369)     (5,752)
Net income   $ 1,903   $ 6,505   $ 6,257   $ 12,237
                       
                       
Earnings per share                      
  Net income - basic and diluted   $   $ 0.01   $ 0.01   $ 0.02
                       
Weighted average number of common and                          
  Series 1 Class A preferred shares outstanding                        
  (in thousands)                        
  - basic    644,197     649,208     644,197     646,857
  - diluted    667,584     659,916     666,025     659,436
                       
                       
Loss ratio     60.2%     70.0%     61.4%     71.1%
Expense ratio     30.7%     24.6%     30.6%     25.8%
Combined ratio     90.9%     94.6%     92.0%     96.9%
                       
                       
Net income   $ 1,903   $ 6,505   $ 6,257   $ 12,237
Other comprehensive income, net of income taxes     (36)     5,032     2,373     2,480
Comprehensive income   $ 1,867   $ 11,537   $ 8,630   $ 14,717
                       
                       
Book value per common share at June 30               $ 0.66   $ 0.61
                 
                 
                 
                 
          June 30, 2012   December 31, 2011
               
Cash and cash equivalents         $ 57,115   $ 24,347
Investments           989,195     1,018,559
Other           292,910     253,227
Total assets         $ 1,339,220   $ 1,296,133
                   
Total liabilities         $ 913,327   $ 878,870
Shareholders' equity           425,893     417,263
Total liabilities and shareholders' equity         $ 1,339,220   $ 1,296,133
                   

SOURCE Westaim Corporation



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