The dividend is increased by 11%
QUEBEC CITY, July 31 /CNW Telbec/ - Industrial Alliance Insurance and
Financial Services Inc. ("Industrial Alliance" or "the Company") ended the
second quarter of 2007 with net income to common shareholders of
$62.1 million, which translates into diluted earnings per common share of
$0.77 and a return on equity attributable to common shareholders of 15.8% for
the quarter on an annualized basis. This result compares to income of
$63.7 million for the second quarter of 2006 ($0.78 per diluted common share)
or $53.1 million ($0.65 per diluted common share) if last year's data are
adjusted to take into account the exceptional gain of $11.5 million resulting
from the reduction in federal corporate tax rates on the future income tax
liability and the unusual charge of $0.9 million (after taxes) related to the
integration of the National Life subsidiary.
The increased income from core operations primarily results from strong
business growth and strict management of profitability in the Individual
Insurance sector.
After an already very strong first quarter, record mutual fund entries
for this period of the year carried premiums and deposits to $1.5 billion in
the second quarter, which is 16% higher than the same period last year. Almost
all sectors recorded growth in premiums or deposits during the quarter.
Premiums and deposits have reached a new high of $3.2 billion after six
months, a 15% increase compared to the first half of 2006.
"We are continuing our momentum," stated Yvon Charest, President and
Chief Executive Officer. "We have once again achieved a double-digit increase
in the income on our core operations. The return on equity has surpassed the
15% threshold for the fifth straight quarter. For the second time this year,
the board of directors has announced an increase in the dividend, this time by
11%. Our IA Clarington subsidiary continues to post record mutual fund sales.
Sales outside Quebec have once again exceeded sales within the province in all
lines of business. And we are confident that individual insurance sales will
soon start to grow again, based on how our agents have responded to the
improvements made to our product line in the last few months."-------------------------------------------------------------------------
Highlights
-------------------------------------------------------------------------
Year-to-date
Second quarter as at June 30
(Millions of --------------------------------------------------------
dollars,unless
otherwise Varia- Varia-
indicated) 2006 2007 tion 2006 2007 tion
-------------------------------------------------------------------------
Net income
to common
shareholders 63.7 62.1 (3%) 111.9 120.0 7%
Restructuring
charges, net
of taxes 0.9 - - 1.5 - -
Impact of the
reduction of
income tax
rates on the
future tax
liability (11.5) - - (11.5) - -
-------------------------------------------------------------------------
Net income to
common
shareholders,
adjusted 53.1 62.1 17% 101.9 120.0 18%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per
common share
(diluted) $0.78 $0.77 ($0.01) $1.37 $1.48 $0.11
Earnings per
common share
(diluted),
adjusted $0.65 $0.77 $0.12 $1.24 $1.48 $0.24
-------------------------------------------------------------------------
Return on
common
shareholders'
equity(1) 18.3% 15.8% (250 bps) -- -- --
Return on
common
shareholders'
equity(1),
adjusted 15.3% 15.8% 50 bps -- -- --
-------------------------------------------------------------------------
Premiums and
deposits 1,308.5 1,512.8 16% 2,789.2 3,206.8 15%
-------------------------------------------------------------------------
June 30, Dec. 31, March 31, June 30,
2006 2006 2007 2007
-------------------------------------------------------------------------
Assets under
management
and under
administra-
tion 39,682.8 46,904.1 49,995.4 50,601.6
-------------------------------------------------------------------------
Highlights
Following are a few highlights from the second quarter of 2007.
Profitability - All sectors contributed to the income during the quarter.
The increased income primarily results from the following three factors:
- The substantial decrease in new business strain in the Individual
Insurance sector. The strain decreased from $28.5 million in the second
quarter of 2006 to $22.3 million in the second quarter of 2007. This
decrease primarily results from the pricing adjustments made to the
individual life insurance product line in 2006, in addition to lower
individual life insurance sales and the change that occurred in the
sales mix during the quarter (sales of yearly renewable term Universal
Life insurance policies, which are less strain intensive, jumped 16% in
the second quarter compared to the same period in 2006, whereas level
cost Universal Life insurance policies, which are more strain
intensive, decreased by 25%).
The strain, expressed as a percentage of sales (measured in terms of
first-year annualized premiums), decreased from 69% of individual
insurance sales in the second quarter of 2006, to 61% in the second
quarter of 2007. However, this rate is higher than the 55% rate
obtained in the first quarter of 2007. This decline primarily results
from the sales mix, which was a little less favourable than expected
this quarter. However, the Company is maintaining its objective to
reduce the strain to around 50% to 55% in the medium term, even though
it could fluctuate around the upper end of this range in the next few
quarters.
- The sustained growth of the expected profit on in-force business, which
was 10% higher in the second quarter compared to the same period last
year. This growth primarily results from strong business growth in the
last few years, particularly in the Individual Wealth Management and
Group Insurance sectors.
- The increase in the income on capital, which grew 19% compared to the
same quarter last year. This increase results from the normal growth of
the capital base, which essentially increases with the addition of
retained earnings.
Four other points are worthy of note in terms of profitability:
- Experience gains were high this quarter ($5.1 million), but did not
contribute to the increase in income since they were also high in the
second quarter of last year ($5.9 million). The gains come primarily
from the Individual Wealth Management sector, owing to the very good
performance of mutual funds, which were sustained by positive stock
markets, and the Group Insurance sector, which continues to record very
favourable experience.
- As with the first quarter, the new accounting standards that took
effect did not have a significant impact on the earnings for the
quarter. The Company recorded $2.3 million in gains (before taxes)
resulting from transactions involving certain assets that are matched
the shareholders equity. These gains somewhat replaced the $1.3 million
in income (before taxes) that the Company recorded in the second
quarter of 2006 from the amortization of realized and unrealized gains
for assets other than real estate matched to the shareholders' equity.
Under the new accounting standards, this income is no longer amortized
on the income statement.
- The effective tax rate was 28.9% for the second quarter, which is in
line with the Company's expectations. The Company expects this rate to
remain around this level in the medium term.
- The operating profit is up in all sectors, except Group Pensions.
Individual Insurance is the sector that has made the greatest
contribution to growth of the operating profit, benefiting from a
strict management of the strain and, to a lesser extent, a new
reallocation of general expenses between business sectors. Individual
Wealth Management benefited from strong mutual fund sales, but this
sector must now assume a larger portion of the Company's general
expenses (about $1.5 million per quarter). Experience gains were good
in Group Insurance, even though they were not as high as last year's
exceptional gains for the same period. In Group Pensions, the operating
profit was impacted by increased strain, due to higher insured annuity
sales.
Business growth - Business growth continued in the second quarter, with
sustained fund entries in all lines of business, even though there was a
slight dip in new policy sales in a few sectors, after a very strong
first quarter overall. Nevertheless, sales are up after six months compared to
the same period last year in almost all lines of business.
- Second quarter sales were down 12% in the Individual Insurance sector
compared to the same period last year (the decrease is 9% after
six months). This decrease is explained by strong sales in the
second quarter of last year (sales reached a historical high) and the
price adjustments made to products in 2006. However, based on the
volume of business submitted to the Company in the last few weeks, the
Company is confident that the decline in sales in this sector has come
to an end. It appears that the numerous changes made to the product
line in the last few months to improve the Company's competitive
position have been well received by the agents.
- The Individual Wealth Management sector obtained the strongest growth
once again, with a 32% increase in sales in the second quarter (and 23%
for the first six months) compared to the corresponding periods last
year. This result was mainly driven by strong mutual fund entries,
which benefited from favourable stock markets, as well as the
successful integration of the operations of Clarington Corporation with
those of Industrial Alliance.
- After a very strong first quarter, sales were down 29% in the Group
Insurance Employee Plans sector in the second quarter, due to a lack of
activity in the market and a lack of sales to large groups. Sales can
fluctuate from one quarter to another in this sector, due to the size
of the groups underwritten. Nevertheless, sales are up 9% for the first
six months.
- The Group Creditor Insurance sector continues to generate very good
results. Sales have increased for an eleventh consecutive quarter,
growing 15% in the second quarter (and 13% for the first six months).
This success depends on the expansion of the automobile dealer base
(through which this product is mainly distributed) and the increase in
the penetration rate among clients of automobile dealers.
- Special Markets Group continues to grow steadily, with sales up 13% in
the second quarter (and 21% for the first six months) compared to the
same periods in 2006. This increase is primarily attributable to the
growth of the travel insurance block of business.
- After growing 15% in the first quarter, sales in the Group Pensions
sector decreased by 12% in the second quarter compared to the same
period last year. Sales in the second quarter of 2006 were among the
best in this sector, after the Company obtained a large mandate. As
with the Group Insurance Employee Plans sector, sales can fluctuate
substantially from one quarter to another in this sector, due to the
size of certain groups with whom new agreements are signed.
-------------------------------------------------------------------------
Business Growth
-------------------------------------------------------------------------
Year-to-date
Second quarter as at June 30
-------------------------------------------------------------------------
(Millions of
dollars, unless
otherwise Varia- Varia-
indicated) 2006 2007 tion 2006 2007 tion
-------------------------------------------------------------------------
Premiums and
deposits 1,308.5 1,512.8 16% 2,789.2 3,206.8 15%
-------------------------------------------------------------------------
Sales(2)
-------------------------------------------------------------------------
Individual
Insurance 41.5 36.7 (12%) 75.8 68.8 (9%)
Individual
Wealth
Management
-------------------------------------------------------------------------
General fund 68.9 78.0 13% 153.2 177.9 16%
Segregated
funds 225.9 229.2 1% 595.8 609.3 2%
Mutual funds 301.6 482.1 60% 704.2 998.7 42%
-------------------------------------------------------------------------
Total 596.4 789.3 32% 1,453.2 1,785.9 23%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Group insurance
Employee
Plans 18.1 12.9 (29%) 34.0 37.0 9%
Creditor
Insurance 49.4 56.8 15% 82.5 93.0 13%
Special
Markets
Group
(SMG) 20.7 23.4 13% 41.6 50.2 21%
-------------------------------------------------------------------------
Group
Pensions 288.9 254.9 (12%) 510.5 509.3 0%
-------------------------------------------------------------------------
June 30, Dec. 31, March 31, June 30,
2006 2006 2007 2007
-------------------------------------------------------------------------
Assets
Assets under
management 26,993.3 29,091.5 31,432.5 32,097.4
Assets under
adminis-
tration 12,689.5 17,812.6 18,562.8 18,504.2
-------------------------------------------------------------------------
Total 39,682.8 46,904.1 49,995.4 50,601.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Assets under management and under administration - Assets under management
grew $665 million in the second quarter, amounting to $32.1 billion as at June
30, 2007, up 2% compared to the end of the first quarter of 2007. Strong net
segregated fund and mutual fund sales, premium growth in the various lines of
business and the stock market upswing contributed to this increase. The
increase in general fund assets was slowed by the interest rate hikes in the
second quarter, which reduced the market value of bonds (since January 1,
2007, general fund assets are recognized at the market value). It is estimated
that assets under management would have grown about 4% if it weren't for the
increase in interest rates.
In total, assets under management and under administration grew 1% during
the quarter and are up 8% since the end of 2006, surpassing the $50 billion
mark for the first time, to total $50,601.6 million as at June 30, 2007.
Assets under management and under administration have almost quadrupled since
the Company demutualized at the beginning of 2000.
Value of new business - The value of new business grew 36%
(or $7.9 million) in the second quarter compared to the same period last year,
totalling $30.1 million ($0.38 per common share). As with previous quarters,
the growth of the value of new business was driven by strong sales, primarily
mutual funds, which accounted for $2.7 million of the increase in the value of
new business, and improved profit margins, primarily in the Individual
Insurance sector, which accounted for $5.2 million of this increase.
Capitalization - The Company's capital totalled $2.1 billion as at
June 30, 2007, which represents an increase of $30.3 million (or 1%) compared
to March 31, 2007. This growth is primarily the result of the increase in
retained earnings for the period and the issuance of 110,750 common shares
following the exercise of options under the Company's stock option plan.
Financial leverage - The Company still has a great deal of flexibility in
terms of financial leverage, since the debt ratio amounted to 15.1% as at
June 30, 2007, if the subordinated debentures alone are included in the debt
items, and 21.1%, if the preferred shares are added. These rates are slightly
lower compared to the end of the first quarter.
Solvency - The solvency ratio remained stable in the second quarter,
totalling 197% as at June 30, 2007. This ratio remains in the upper end of the
Company's 175% to 200% target range. No material unusual items affected the
solvency ratio during the quarter.
Excess capital - The excess capital increased in the second quarter, from
$144 million as at March 31, 2007 to $152 million as at June 30, 2007. This
increase is the result of normal business growth.
Quality of investments - There was little change in the quality of
investments during the quarter, which remained excellent, other than the
addition of a few mortgage loans in default totalling $1.0 million.
Net impaired investments totalled $9.3 million as at June 30, 2007
($8.3 million as at March 31, 2007), which represents just 0.07% of total
investments (0.06% as at March 31, 2007). No bonds defaulted during the
quarter and the portfolio does not contain any new bonds rated BB or lower.
The quality of the mortgage portfolio remains excellent. The delinquent
mortgage loans portfolio stands at just $2.7 million of a total portfolio of
$2.6 billion. Two thirds of delinquent loans are insured. Finally, Industrial
Alliance does not have any exposure to the U.S. subprime mortgage market.
Industrial Alliance increases its ownership in FundEX - On June 29, 2007,
the Company increased its ownership in FundEX Investments Inc. ("FundEX") from
91.75% to 100%. Industrial Alliance originally took a 25% minority position in
FundEX in June 2002, increased it to 83.50% in 2004, then to 91.75% in June
2006 and finally to 100% in June 2007. FundEX is a mutual fund broker that has
some 600 representatives and administers $10.2 billion in assets (as at
June 30, 2007).
Dividend - The favourable results for the quarter have enabled the board
of directors to announce an 11% increase in the quarterly dividend, which will
increase from $0.18 to $0.20 per common share. This is the second time this
year that the board is announcing an increase in the dividend. This dividend
corresponds to a payout ratio of 26% of the net earnings for the quarter, an
increase over the 25% ratio paid out in the first quarter. This increase is in
keeping with the Company's desire to increase the payout ratio to 28% of the
sustainable net earnings by early or mid-2008. The Company's policy provides
for a dividend that corresponds to 20% to 30% of the sustainable net earnings.
This dividend is payable in cash on September 17, 2007 to the shareholders of
record as at August 24, 2007.
The Board of Directors has also declared the payment of a quarterly
dividend of $0.2875 per non-cumulative class A preferred share series B. The
dividend is payable in cash on October 1, 2007, to the preferred shareholders
of record as at August 31, 2007.
For the purposes of the enhanced dividend tax credit rules contained in
the Income Tax Act (Canada) and any corresponding provincial and territorial
tax legislation, all dividends paid by Industrial Alliance on its common and
preferred shares since January 1, 2006 are eligible dividends. Unless
otherwise indicated, all dividends paid are now eligible dividends for the
purposes of such rules.
A.M. Best increases Industrial Alliance's outlook to "positive" from
"stable" - On May 31, 2007, the A.M. Best rating agency affirmed the financial
strength rating of A (Excellent) and issuer credit ratings of "a+" of
Industrial Alliance. A.M. Best also affirmed the debt ratings of Industrial
Alliance. The outlook for all ratings has been increased to "positive" from
"stable".
Non-GAAP Financial Measures
The Company reports its financial results in accordance with generally
accepted accounting principles (GAAP). It also occasionally uses certain
non-GAAP financial measures - adjusted data - concerning mainly the profit,
earnings per share and return on shareholders equity. These non-GAAP financial
measures are always clearly indicated, and are always accompanied by and
reconciled with GAAP financial measures. The Company believes that these
non-GAAP financial measures provide investors and analysts with useful
information so that they can better understand the financial results and
perform a better analysis of the Company's growth and profitability potential.
These non-GAAP financial measures provide a different way of assessing various
aspects of the Company's operations and may facilitate the comparison of
results from one period to another. Since non-GAAP financial measures do not
have a standardized definition, they may differ from the non-GAAP 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. The data related to
the solvency ratio, embedded value and the value of new business, as well as
adjusted data, as indicated above, are not subject to GAAP.
Forward-looking Statements
This news release may contain forward-looking statements about the
operations, objectives and strategies of Industrial Alliance, as well as its
financial situation and performance. The forward-looking nature of these
statements can generally, though not always, be identified by the use of words
such as "may," "expect," "anticipate," "intend," "believe," "estimate,"
"feel," "continue," or other similar expressions, in the affirmative, negative
or conditional. These statements entail risks and uncertainties that may cause
the actual results, performance or achievements of Industrial Alliance to
differ materially from the future results, performance or achievements
expressed or implied by the forward-looking statements. Factors that could
cause the Company's actual results to differ from expected results include
changes in government regulations or tax laws, competition, technological
changes, global capital market activity, interest rates, changes in
demographic data, changes in consumer behaviour and demand for the Company's
products and services, catastrophic events, and general economic conditions in
Canada or elsewhere in the world. This list is not exhaustive of the factors
that may affect any of Industrial Alliance's forward-looking statements. These
and other factors must be examined carefully and readers should not place
undue reliance on Industrial Alliance's forward-looking statements. Industrial
Alliance is not obligated to revise or update these forward-looking statements
to reflect events, circumstances or situations that occur after the date of
this news release, or following unforeseen events, except as required by
applicable securities legislation.
Documents Related to the Financial Results
All documents related to Industrial Alliance's financial results,
including the Management's Discussion and Analysis, are available on the
Company's website at www.inalco.com, in the Investor Relations section, under
Financial Reports. More information about the Company can be found on the
SEDAR website at www.sedar.com, as well as in the Company's Annual Information
Form, which can be found on the Company website or the SEDAR website.
Conference Call
Management will hold a conference call to present its results on Tuesday,
July 31, 2007, at 3:00 p.m. (ET). To listen in on the conference call, dial 1
888 391-0236 (toll free). A replay of the conference call will also be
available for a one-week period, starting at 6:00 p.m. on Tuesday, July 31,
2007. To listen to the conference call replay, dial 1 800 558-5253 (toll free)
and enter access code 21339996.
A webcast of the conference call (in listen only mode) will also be
available on the Industrial Alliance website at www.inalco.com, as well as on
the CNW website at www.cnw.ca.
About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services Inc.
is a life and health insurance company that 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. The fifth largest life and health
insurance company in Canada, Industrial Alliance is at the head of a large
financial group, which has operations across Canada as well as in the western
United States. Industrial Alliance contributes to the financial well-being of
over 3 million Canadians, employs more than 2,900 people and manages and
administers over $50 billion in assets. Industrial Alliance stock is listed on
the Toronto Stock Exchange under the ticker symbol IAG. Industrial Alliance is
among the 100 largest public companies in Canada.
Notes
-----
1) The calculation of the return on common shareholders' equity excludes
accumulated other comprehensive income.
2) Sales (new business) are defined as follows for each sector:
Individual Insurance: first-year annualized premiums; Individual
Wealth Management: premiums for the general fund and segregated funds
and deposits for mutual funds; Group Insurance: first-year annualized
premiums for Employee Plans, including premium equivalents
(Administrative Services Only (ASO) contracts), gross premiums (before
reinsurance) for Creditor Insurance and premiums for Special Markets
Group (SMG); Group Pensions: premiums.
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
Consolidated Financial Statements
as at June 30, 2007 and 2006
These consolidated financial statements
have not been reviewed by the external auditors.
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
CONSOLIDATED INCOME STATEMENTS
(in millions of dollars, unless otherwise indicated)
Quarters ended Six months ended
June 30 June 30
--------------------- --------------------
2007 2006 2007 2006
-------- --------- -------- --------
$ $ $ $
(unaudited)
REVENUES
Premiums (note 9) 1,030.7 1,006.9 2,208.1 2,085.0
Net investment income (79.9) 133.1 90.4 356.7
Fees and other revenues 91.7 73.2 178.1 146.7
-------------------------------------------------------------------------
1,042.5 1,213.2 2,476.6 2,588.4
POLICY BENEFITS AND EXPENSES
Change in provisions for
future policy benefits (87.7) 120.0 36.2 276.5
Payments to policyholders
and beneficiaries 438.8 386.6 876.6 817.5
Net transfer to segregated
funds 375.1 419.8 927.6 907.8
Dividends, experience rating
refunds and interest on
amounts on deposit 5.5 3.8 14.8 20.0
Commissions 127.6 121.5 251.3 235.1
Premium and other taxes 14.9 14.2 29.1 27.6
General expenses 83.0 79.4 167.1 158.2
Financing expenses (5.3) 4.3 (1.1) 9.3
-------------------------------------------------------------------------
951.9 1,149.6 2,301.6 2,452.0
INCOME BEFORE INCOME TAXES 90.6 63.6 175.0 136.4
Income taxes (26.1) 2.4 (50.5) (21.3)
-------------------------------------------------------------------------
NET INCOME 64.5 66.0 124.5 115.1
-------------------------------------------------------------------------
Less: net income attributable
to participating
policyholders 0.9 0.9 1.6 1.2
-------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO
SHAREHOLDERS 63.6 65.1 122.9 113.9
-------------------------------------------------------------------------
Less: preferred shareholders
dividends 1.5 1.4 2.9 2.0
-------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS 62.1 63.7 120.0 111.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per common share
(note 6)
basic (in dollars) 0.78 0.79 1.50 1.38
diluted (in dollars) 0.77 0.78 1.48 1.37
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
CONSOLIDATED BALANCE SHEETS
(in millions of dollars)
As at
As at December As at
June 30 31 June 30
--------- ---------- ----------
2007 2006 2006
--------- ---------- ----------
$ $ $
(unaudited) (unaudited)
ASSETS
Invested assets
Bonds 8,123.6 7,189.4 6,872.0
Mortgages 2,639.3 2,457.2 2,447.7
Stocks 1,690.4 1,453.5 1,252.9
Real estate 477.2 451.8 447.6
Policy loans 258.3 220.3 219.6
Short-term investments - - 5.1
Cash and cash equivalents 322.1 371.8 226.8
Other invested assets 173.9 112.2 98.9
-------------------------------------------------------------------------
13,684.8 12,256.2 11,570.6
Goodwill 67.7 67.7 288.4
Intangible assets 297.6 297.6 67.9
Other assets 510.0 469.2 439.0
Derivative products 5.7 - -
-------------------------------------------------------------------------
881.0 834.5 795.3
TOTAL GENERAL FUND ASSETS 14,565.8 13,090.7 12,365.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SEGREGATED FUNDS NET ASSETS 10,051.6 9,204.1 8,060.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Policy liabilities
Provisions for future policy benefits 11,291.7 9,446.6 8,977.0
Provisions for dividends to
policyholders and experience rating
refunds 35.3 38.6 45.3
Benefits payable and provision for
unreported claims 150.5 146.6 153.9
Policyholders' amounts on deposit 177.6 175.2 163.0
-------------------------------------------------------------------------
11,655.1 9,807.0 9,339.2
Other liabilities 505.3 494.8 418.3
Future income tax 319.4 285.7 263.8
Deferred net realized gains 9.1 558.2 491.3
Debentures 313.8 310.1 310.1
Participating policyholders' account 24.7 23.1 20.9
EQUITY
Share capital (note 5) 640.1 632.7 630.4
Contributed surplus 15.2 14.6 13.3
Retained earnings 1,072.4 971.3 885.7
Currency translation account - (6.8) (7.1)
Accumulated other comprehensive income 10.7 - -
-------------------------------------------------------------------------
1,738.4 1,611.8 1,522.3
TOTAL GENERAL FUND LIABILITIES AND
EQUITY 14,565.8 13,090.7 12,365.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SEGREGATED FUNDS LIABILITIES 10,051.6 9,204.1 8,060.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
CONSOLIDATED PARTICIPATING POLICYHOLDERS' ACCOUNT
(in millions of dollars)
Six months ended
June 30
-------------------
2007 2006
------ -------
$ $
(unaudited)
Balance at beginning 23.1 19.7
Income for the period 3.4 3.1
Dividends (1.6) (1.7)
Transfer to the shareholders' account (0.2) (0.2)
-------------------------------------------------------------------------
Net income attributable to participating
policyholders 1.6 1.2
-------------------------------------------------------------------------
Balance at end 24.7 20.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED CONTRIBUTED SURPLUS
(in millions of dollars)
Six months ended
June 30
-------------------
2007 2006
------ -------
$ $
(unaudited)
Balance at beginning 14.6 12.3
Current period contribution for the stock option plan 1.9 1.6
Stock options exercised (1.3) (0.6)
-------------------------------------------------------------------------
Balance at end 15.2 13.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED SHAREHOLDERS' RETAINED EARNINGS
(in millions of dollars)
Six months ended
June 30
-------------------
2007 2006
------ -------
$ $
(unaudited)
Balance at beginning 971.3 845.4
Impact of the new accounting standards (note 2) 9.9 -
Net income attributable to shareholders 122.9 113.9
Common shareholders dividends (28.8) (22.8)
Preferred shareholders dividends (2.9) (2.0)
Issue cost of preferred shares, net of taxes - (2.3)
Cancellation following the redemption of common
shares - (46.5)
-------------------------------------------------------------------------
Balance at end 1,072.4 885.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
CONSOLIDATED COMPREHENSIVE INCOME
(in millions of dollars)
Quarters Six months
ended ended
June 30 June 30
---------- ------------
2007 2007
---------- ------------
$ $
(unaudited)
NET INCOME 64.5 124.5
Other comprehensive income, net of income tax:
Available-for-sale
Unrealized gains (losses) arising during the period:
Bonds (10.2) (10.2)
Stocks (0.1) 2.8
Other (0.3) (0.3)
Reclassification adjustment for (gains) losses
included in the net income:
Bonds - (1.5)
Stocks (1.5) (1.5)
-------------------------------------------------------------------------
Change in unrealized gains (losses) on assets
available-for-sale (12.1) (10.7)
Currency translation account
Unrealized gains (losses) on foreign currency
translation - -
-------------------------------------------------------------------------
Total other comprehensive income (12.1) (10.7)
-------------------------------------------------------------------------
Comprehensive income 52.4 113.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Comprehensive income attributable to shareholders 51.5 112.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Comprehensive income attributable to participating
policyholders 0.9 1.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME
(in millions of dollars)
As at June 30, 2007
--------------------------------------------------
Currency
Available-for-sales transla-
--------------------- tion
Bonds Stocks Other account Total
--------------------------------------------------
$ $ $ $ $
(unaudited)
Balance at beginning - - - - -
Impact of the new
accounting standards
(note 2) 5.7 22.4 0.1 (6.8) 21.4
Total other
comprehensive income (11.7) 1.3 (0.3) - (10.7)
-------------------------------------------------------------------------
Balance at end (6.0) 23.7 (0.2) (6.8) 10.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
CONSOLIDATED CASH FLOWS STATEMENTS
(in millions of dollars)
Quarters ended Six months ended
June 30 June 30
------------------ --------------------
2007 2006 2007 2006
------ ------ ------ -------
$ $ $ $
(unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income 64.5 66.0 124.5 115.1
Items not affecting cash
and cash equivalents:
Change in provision for
future policy benefits (77.7) 119.6 46.2 276.1
Share of results of entity
subject to significant
influence (1.0) (0.2) (1.5) (0.6)
Amortization of realized
and unrealized (gains)
losses (2.1) 3.9 (4.3) (58.5)
Amortization of premiums
and discounts 0.2 (45.7) 0.5 (89.6)
Variation of unrealized
(gains) losses 180.3 - 130.6 -
Realized (gains) losses on
assets available-for-sale (2.3) - (4.5) -
Future income taxes 16.6 (14.6) 20.0 (0.3)
Stock option plan 0.9 0.9 1.9 1.6
Provision on invested
assets - - 0.1 (0.1)
Deferred sales commissions
and fixed assets
depreciation 8.9 5.0 17.0 18.8
Other (16.4) (9.1) (7.9) (3.9)
-------------------------------------------------------------------------
171.9 125.8 322.6 258.6
Other changes in other
assets and liabilities 8.7 (9.8) (59.5) (68.4)
-------------------------------------------------------------------------
Cash flows from operating
activities 180.6 116.0 263.1 190.2
-------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Sales, maturities and
repayments of the
following items:
Bonds 425.9 556.7 725.9 951.2
Mortgages 89.3 88.0 175.2 169.9
Stocks 82.3 95.8 149.4 224.9
Real estate - - 0.2 1.9
Policy loans 25.2 22.4 45.9 39.6
Other invested assets 0.2 9.5 1.0 21.1
-------------------------------------------------------------------------
622.9 772.4 1,097.6 1,408.6
Purchases of the following
items:
Bonds (379.5) (609.1) (716.5) (1,039.0)
Mortgages (212.2) (110.3) (354.6) (195.3)
Stocks (72.7) (74.5) (152.5) (291.5)
Real estate (20.2) (0.2) (21.2) (0.2)
Policy loans (18.8) (15.2) (81.7) (74.3)
Other invested assets (42.0) (28.3) (65.8) (55.9)
-------------------------------------------------------------------------
(745.4) (837.6) (1,392.3) (1,656.2)
Cash flows from investing
activities (122.5) (65.2) (294.7) (247.6)
-------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issue of common shares 2.4 0.3 6.0 3.1
Redemption of common shares - (44.9) - (57.9)
Issue of preferred shares - - - 125.0
Cost of issuance of preferred
shares - - - (3.4)
Increase of debenture - - - 4.7
Redemption of debentures - - - (67.7)
Preferred shareholders
dividends (1.5) (1.4) (2.9) (2.0)
Common shareholders dividends (14.4) (11.4) (28.8) (22.8)
Increase (decrease) in
mortgage debts 7.9 (0.3) 7.6 (0.5)
-------------------------------------------------------------------------
Cash flows from financing
activities (5.6) (57.7) (18.1) (21.5)
-------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 52.5 (6.9) (49.7) (78.9)
CASH AND CASH EQUIVALENTS
AT BEGINNING 269.6 233.7 371.8 305.7
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END 322.1 226.8 322.1 226.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary information:
Cash and Cash equivalents:
Cash (4.1) (31.1)
Cash equivalents 326.2 257.9
-------------------------------------------------------------------------
322.1 226.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interest paid 5.4 3.5 10.2 9.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income taxes paid,
net of refunds 11.9 11.4 30.5 27.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC. 7
CONSOLIDATED FINANCIAL STATEMENTS OF SEGREGATED FUNDS
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in millions of dollars)
Six Twelve Six
months months months
ended ended ended
June 30 December 31 June 30
-------- ------------ ----------
2007 2006 2006
-------- ------------ ----------
$ $ $
(unaudited) (unaudited)
Balance at beginning 9,204.1 7,348.8 7,348.8
Impact of the new accounting
standards (note 2) (2.3) - -
Additions:
Amounts received from policyholders 1,048.1 1,676.5 1,005.8
Investment income 137.7 221.1 104.9
Net realized gains 151.2 462.4 160.4
Net increase in market value 34.6 381.3 (140.6)
-------------------------------------------------------------------------
10,573.4 10,090.1 8,479.3
-------------------------------------------------------------------------
Deductions:
Amounts withdrawn by policyholders 429.7 736.2 343.5
Operating expenses 92.1 149.8 75.2
-------------------------------------------------------------------------
521.8 886.0 418.7
-------------------------------------------------------------------------
Balance at end 10,051.6 9,204.1 8,060.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF NET ASSETS
(in millions of dollars)
As at As at As at
June 30 December 31 June 30
-------- ------------ ---------
2007 2006 2006
-------- ------------ ---------
$ $ $
(unaudited) (unaudited)
Assets
Bonds 2,769.5 2,679.4 2,427.6
Mortgages and mortgage-backed
securities 20.3 21.2 19.5
Stocks 2,653.2 2,411.6 2,204.7
Fund units 4,128.1 3,624.9 3,001.3
Cash and short-term investments 491.0 438.1 378.0
Other assets 32.7 50.1 64.7
-------------------------------------------------------------------------
10,094.8 9,225.3 8,095.8
Liabilities
Accounts payable and accrued expenses 43.2 21.2 35.2
-------------------------------------------------------------------------
Net assets 10,051.6 9,204.1 8,060.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 2007 and 2006 (unaudited)
(in millions of dollars, unless otherwise indicated)
1- ACCOUNTING POLICIES
These interim Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements for the year ended
December 31, 2006, as set out in the 2006 Annual Report. The significant
accounting policies followed in the preparation of these interim Consolidated
Financial Statements are consistent with those found in the 2006 Annual
Report, except as described in note 2 below.
2- CHANGE IN ACCOUNTING POLICIES
Financial Instruments
On January 1, 2007, the Company adopted the following accounting
standards: Handbook Section 1530, Comprehensive Income, Handbook Section 3855,
Financial Instruments - Recognition and Measurement, Handbook Section 3865,
Hedges and Handbook section 4211 Life insurance enterprise-specific items.
Financial Instruments - Recognition and Measurement
Financial assets subject to the new standard are classified as one of the
following: Held-for-trading, Available-for-sale, Held-to-maturity, Loans and
Receivables. Financial liabilities subject to the new standard are classified
as Held-for-trading or Other. Held-for-trading financial instruments are
measured at fair value with gains and losses recognized in Net income.
Available-for-sale financial instruments are measured at fair value and any
unrealized gains and losses are recognized in other comprehensive income.
Held-to-maturity, Loans and Receivables financial assets and financial
liabilities classified as Other are measured at amortized cost using the
effective interest rate method. The new standard allows an entity to designate
financial instruments as Held-for-trading at the initial accounting or at the
adoption of the standard even if this financial instrument does not satisfy
the definition of financial instruments Held-for-trading. Financial
instruments classified as Held-for-trading under the fair value option should
have a reliable fair value.
When a financial instrument is acquired, it should be recorded on the
balance sheet at fair value except for the related party transactions.
Subsequent measurement of the financial instruments will be determined by
their initial classification.
The fair value of a financial instrument is the amount at which the
financial instrument could be exchanged in an arm's length transaction between
knowledgeable and willing parties. Fair value is based on quoted market rates
(bid/ask) prices. If not, the fair value is based on prevailing market prices
for instruments with similar characteristics and risk profiles or internal or
external valuation models using observable market based inputs.
For the asset with a regular-way contract, the Company continues to apply
the settlement-date accounting method. Under this method, the gain or loss in
value between the transaction date and the settlement date is assumed in the
Net income for assets Held-for-trading and in the other comprehensive income
for the assets Available-for-sale.
Derivatives must be accounted for at the fair value, unless they are
specifically designated within an effective hedging relation. The change in
fair value will be presented directly in Net income.
The Company has chosen to classify assets matching the provisions for
future policy benefits as Held-for-trading with the exception of mortgages, as
well as private stocks and private bonds that are not quoted on an active
market. This is because the provisions for future policy benefits are excluded
from the new standards. The provisions for future policy benefits are
calculated based on the Canadian Asset Liability Method (CALM). Under this
method, the carrying value of assets matching these liabilities is considered
in the basis of the calculation. Therefore, any changes in fair value of
assets matching these liabilities will be taken into account in the
calculation.
Bonds and stocks quoted on an active market, but which do not match the
provisions for future policy benefits are classified as Available-for-sale.
The change in fair value of these assets will therefore be presented in the
comprehensive income statement. Mortgages and private bonds not quoted on an
active market are classified as Loans and Receivables and measured at
amortized cost using the effective interest rate method. Private stocks are
classified Available-for-sale but will be valued at cost.
The Company has chosen to classify the debentures as Held-for-trading. The
debentures are measured at fair value with gains and losses presented as
financing expense.
Transaction fees related to financial assets and liabilities classified as
Available-for-sale or Held-for-trading are assumed in the net income when they
are incurred. Transaction fees related to assets classified as Loans and
Receivables and liabilities classified in the Other category are capitalized
and amortized according to the effective interest rate method.
Real estate is excluded from this new standard and continues to be
presented at the moving average method. The realized gains and losses on
disposal continues to be deferred and amortized at 3% per quarter on a
declining balance basis.
Comprehensive Income
As a result of adopting these standards, a new category, Accumulated other
comprehensive income, has been added to Shareholders' equity on the
Consolidated Balance Sheets. This new category includes unrealized gains and
losses net of income taxes for financial assets classified as
Available-for-sale as well as unrealized foreign currency translation gains
and losses for self-sustaining establishments.
Hedges
This new standard specifies the criteria under which hedge accounting can
be applied and how hedge accounting can be executed for each of the permitted
hedging strategies. The Company doesn't use hedge accounting.
The impact of initial adoption of new standards
Market value adjustments attributable to the classification of certain
assets and liabilities as instruments Held-for-trading and the elimination of
unamortized deferred gains and losses, impact the provisions for future policy
benefits due to the re-evaluation of the financial assets matching these
liabilities. These adjustments are recognized in the opening balance of the
retained earnings on January 1, 2007. The impact is a $9.9 increase in the
retained earnings (RE).
The adjustments resulting from the re-evaluation of financial assets
classified as Available-for-sale are recognized in the opening balance of the
accumulated other comprehensive income (OCI) on January 1, 2007. The impact is
a $28.2 increase.
The results for the previous periods have not been restated, except for
the reclassification of the opening balance of the currency translation
account in the accumulated other comprehensive income and commission and
interest expenses discounted as mortgage loans.
The adjustments from the re-evaluation of segregated fund assets to use
the Bid price are a $2.3 reduction of the net assets.
Impact of the new accounting standard on the opening balance sheet
As at Impact of the As at
December 31 new standard January 1
------------ ----------------------- ------------
Retained
2006 earnings OCI 2007
------------ ----------- ----------- ------------
$ $ $ $
(unaudited)
ASSETS
Invested assets
Bonds 7,189.4 1,160.6 8.3 8,358.3
Mortgages 2,457.2 2.8 - 2,460.0
Stocks 1,453.5 114.6 32.8 1,600.9
Real estate 451.8 - - 451.8
Policy loans 220.3 - - 220.3
Cash and cash equivalents 371.8 - - 371.8
Other invested assets 112.2 0.9 0.1 113.2
-------------------------------------------------------------------------
12,256.2 1,278.9 41.2 13,576.3
Goodwill 67.7 - - 67.7
Intangible assets 297.6 - - 297.6
Other assets 469.2 (3.9) - 465.3
-------------------------------------------------------------------------
834.5 (3.9) - 830.6
TOTAL GENERAL FUND ASSETS 13,090.7 1,275.0 41.2 14,406.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Policy liabilities
Provisions for future
policy benefits 9,446.6 1,798.9 - 11,245.5
Provisions for dividends
to policyholders and
experience rating refunds 38.6 - - 38.6
Benefits payable and
provision for unreported
claims 146.6 - - 146.6
Policyholders' amounts
on deposit 175.2 - - 175.2
-------------------------------------------------------------------------
9,807.0 1,798.9 - 11,605.9
Other liabilities 780.5 1.5 13.0 795.0
Deferred net realized gains 558.2 (548.5) - 9.7
Debentures 310.1 13.2 - 323.3
Participating policyholders'
account 23.1 - - 23.1
EQUITY
Share capital 632.7 - - 632.7
Contributed surplus 14.6 - - 14.6
Retained earnings 971.3 9.9 - 981.2
Currency translation account (6.8) - 6.8 -
Accumulated other
comprehensive income - - 21.4 21.4
-------------------------------------------------------------------------
1,611.8 9.9 28.2 1,649.9
TOTAL GENERAL FUND
LIABILITIES AND EQUITY 13,090.7 1,275.0 41.2 14,406.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distribution of investments according to the categories of financial
instruments
As at January 1, 2007
-----------------------------------------------------------
Desi-
gnated Avai- Loans
Held- Held- lable- and
for- for- for- Recei-
trading trading sale vables Other Total
-----------------------------------------------------------
$ $ $ $ $ $
(unaudited)
Bonds - 6,753.1 911.7 693.5 - 8,358.3
Mortgages - - - 2,460.0 - 2,460.0
Stocks - 1,308.9 292.0 - - 1,600.9
Real estate - - - - 451.8 451.8
Policy loans - - - 220.3 - 220.3
Cash and cash
equivalents 371.8 - - - - 371.8
Other invested
assets - - - 98.0 15.2 113.2
-----------------------------------------------------------
Total 371.8 8,062.0 1,203.7 3,471.8 467.0 13,576.3
-----------------------------------------------------------
-----------------------------------------------------------
3- ACQUISITION OF BUSINESS
On June 29, 2007, the Company completed the acquisition of the remaining
8.25% of FundEX for a cash consideration of $0.8, which had already been
accounted as at December 31, 2006.
4- RESTRUCTURING COSTS
IA Clarington Investments Inc.
In acquiring Clarington Corporation on December 28, 2005, the Company
established a plan to restructure and consolidate the activities involving
Clarington's business operations, locations and back-office systems. Related
costs include back office conversion expenses, penalties to third parties and
compensation costs. These costs, which have been accounted for as part of the
purchase price, amount to $18.5.
In acquiring BLC-Edmond de Rothschild Asset Management Inc. (BLCER) on
December 31, 2004, the Company developed a plan to restructure the operations.
Costs of $3.4 were expected to be incurred as a result of consolidating
activities involving operations and systems and compensation costs. These
costs were accounted for as part of the purchase price.
On June 30, 2006, Industrial Alliance Fund Management Inc. (formerly
BLCER) and Clarington were merged to create a single entity, IA Clarington
Investments Inc.
Accrued on acquisition
-----------------------------------------------------------
Cumulative
amount
incurred Cumulative
Expected as at Amounts amount Balance as
future December 31, incurred incurred at June 30,
costs 2006 in 2007 to date 2007
$ $ $ $ $
--------- ----------- ----------- ----------- -------------
(unaudited)
Cost of
restructuring
operations 21.9 11.8 1.3 13.1 8.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
5- Share Capital
Six months ended June 30 (unaudited)
------------------------------------------------
2007 2006
----------------------- ------------------------
Number of Number of
shares Amount shares Amount
----------- ----------- ----------- ------------
(in $ (in $
thousands) thousands)
Common shares
Balance at beginning 79,919.1 507.9 81,387.2 510.8
Shares issued on exercise
of stock options 287.8 7.4 150.3 3.7
Shares issued on
acquisition of business - - 90.2 2.5
Cancellation of shares
issued at
demutualization - - (3.0) -
Cancellation following
the repurchase
of common shares - - (1,800.0) (11.4)
-------------------------------------------------------------------------
Balance at end 80,206.9 515.3 79,824.7 505.6
Shares held in treasury (21.6) (0.2) (21.6) (0.2)
-------------------------------------------------------------------------
80,185.3 515.1 79,803.1 505.4
----------- -----------
----------- -----------
Preferred shares, class A
- Series A
Balance at beginning 4.0 0.1 4.0 0.1
Shares issued - - - -
-------------------------------------------------------------------------
Balance at end 4.0 0.1 4.0 0.1
Shares held in treasury (4.0) (0.1) (4.0) (0.1)
-------------------------------------------------------------------------
- - - -
----------- -----------
----------- -----------
Preferred shares, class A
- Series B
Balance at beginning 5,000.0 125.0 - -
Shares issued - - 5,000.0 125.0
-------------------------------------------------------------------------
Balance at end 5,000.0 125.0 5,000.0 125.0
----------- -----------
----------- -----------
Total share capital 640.1 630.4
----------- ------------
----------- ------------
The number of outstanding stock options (in thousands) as at June 30, 2007
is 3,331.8 (3,210.5 in 2006).
On February 24, 2006, the Company issued 5,000,000 class A - Series B
preferred shares for an amount of $125.0.
6- EARNINGS PER COMMON SHARE
Quarters ended Six months ended
June 30 June 30
------------------------------------------------
2007 2006 2007 2006
----------- ----------- ----------- ------------
$ $ $ $
(unaudited)
Common shareholders'
net income 62.1 63.7 120.0 111.9
Weighted daily average
number of common
shares outstanding 80,102,843 80,780,885 80,047,770 81,137,385
Add: diluted effect of
stock options granted
and outstanding 974,089 733,933 944,637 719,470
-------------------------------------------------------------------------
Weighted daily average
number of common shares
outstanding on a
diluted basis 81,076,932 81,514,818 80,992,407 81,856,855
Earnings per common
share (in dollars)
basic 0.78 0.79 1.50 1.38
diluted 0.77 0.78 1.48 1.37
7- EMPLOYEE FUTURE BENEFITS
Six months ended June 30
------------------------------------------------
2007 2006
----------------------- ------------------------
$ $ $ $
(unaudited)
Benefit plan expenses
Current service cost 9.0 1.4 8.3 0.5
Interest cost 10.8 0.8 8.4 0.5
Return on plan assets (12.9) - (12.1) -
Actuarial loss (gain) on plan 1.2 0.3 0.4 -
Amortization of the
transitional obligation (0.2) - (0.2) -
Amortization of plan amendment 0.2 - 0.2 -
-------------------------------------------------------------------------
Defined benefit plan
costs recognized 8.1 2.5 5.0 1.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Defined contribution plan
costs recognized 0.2 - 0.2 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
8- SEGMENTED INFORMATION
The Company operates principally in one dominant industry segment, the
life and health insurance industry, and offers individual and group life and
health insurance products, savings and retirement plans, and segregated funds.
The Company also operates mutual fund, securities brokerage and trust
businesses. These businesses are principally related to the Individual Wealth
Management segment and are included in that segment with the Individual
Annuities. The Company operates mainly in Canada and the operations outside
Canada are not significant.
Segmented income statements
Quarter ended June 30, 2007 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Revenues
Premiums 220.7 307.2 218.9 254.9 29.0 1,030.7
Net investment
income (88.8) 7.5 2.3 (2.1) 1.2 (79.9)
Fees and other
revenues 0.4 81.6 2.4 6.3 1.0 91.7
-------------------------------------------------------------------------
132.3 396.3 223.6 259.1 31.2 1,042.5
-------------------------------------------------------------------------
Operating
expenses
Cost of
commitments to
policyholders 19.6 20.2 141.8 154.6 20.4 356.6
Net transfer to
segregated
funds - 282.7 - 92.4 - 375.1
Commissions,
general and
other expenses 77.0 63.3 64.5 6.7 8.7 220.2
-------------------------------------------------------------------------
96.6 366.2 206.3 253.7 29.1 951.9
-------------------------------------------------------------------------
Income before
income taxes 35.7 30.1 17.3 5.4 2.1 90.6
Income taxes (9.8) (9.2) (4.9) (1.3) (0.9) (26.1)
-------------------------------------------------------------------------
Net income
before allo-
cation of
other
activities 25.9 20.9 12.4 4.1 1.2 64.5
Allocation of
other
activities 0.8 - 0.3 0.1 (1.2) -
-------------------------------------------------------------------------
Net income for
the period 26.7 20.9 12.7 4.2 - 64.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Attributable to
shareholders 26.0 20.9 12.7 4.0 - 63.6
Attributable to
participating
policyholders 0.7 - - 0.2 - 0.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarter ended June 30, 2006 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Revenues
Premiums 209.3 294.8 187.6 288.9 26.3 1,006.9
Net investment
income 42.7 31.3 16.8 44.8 (2.5) 133.1
Fees and other
revenues 0.4 64.6 3.4 4.3 0.5 73.2
-------------------------------------------------------------------------
252.4 390.7 207.8 338.0 24.3 1,213.2
-------------------------------------------------------------------------
Operating
expenses
Cost of
commitments to
policyholders 145.6 59.4 132.2 154.9 18.3 510.4
Net transfer to
segregated
funds - 247.6 - 172.2 - 419.8
Commissions,
general and
other expenses 91.1 56.6 59.1 6.7 5.9 219.4
-------------------------------------------------------------------------
236.7 363.6 191.3 333.8 24.2 1,149.6
-------------------------------------------------------------------------
Income before
income taxes 15.7 27.1 16.5 4.2 0.1 63.6
Income taxes 7.2 (4.2) (1.3) (0.2) 0.9 2.4
-------------------------------------------------------------------------
Net income
before allo-
cation of
other
activities 22.9 22.9 15.2 4.0 1.0 66.0
Allocation of
other
activities 0.9 (0.1) - 0.2 (1.0) -
-------------------------------------------------------------------------
Net income for
the period 23.8 22.8 15.2 4.2 - 66.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Attributable to
shareholders 23.2 22.8 15.2 3.9 - 65.1
Attributable to
participating
policyholders 0.6 - - 0.3 - 0.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(*) Includes other segments and intercompany eliminations.
Segmented income statements
Six months ended June 30, 2007 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Revenues
Premiums 435.4 787.2 419.1 509.3 57.1 2,208.1
Net investment
income 1.9 32.0 20.0 36.6 (0.1) 90.4
Fees and other
revenues 1.0 158.7 4.4 12.0 2.0 178.1
-------------------------------------------------------------------------
438.3 977.9 443.5 557.9 59.0 2,476.6
-------------------------------------------------------------------------
Operating
expenses
Cost of
commitments to
policyholders 209.2 61.5 287.9 327.5 41.5 927.6
Net transfer to
segregated
funds - 722.0 - 205.6 - 927.6
Commissions,
general and
other expenses 153.5 139.2 125.0 13.2 15.5 446.4
-------------------------------------------------------------------------
362.7 922.7 412.9 546.3 57.0 2,301.6
-------------------------------------------------------------------------
Income before
income taxes 75.6 55.2 30.6 11.6 2.0 175.0
Income taxes (21.1) (16.8) (8.6) (3.0) (1.0) (50.5)
-------------------------------------------------------------------------
Net income
before allo-
cation of
other
activities 54.5 38.4 22.0 8.6 1.0 124.5
Allocation of
other
activities 0.7 - 0.2 0.1 (1.0) -
-------------------------------------------------------------------------
Net income for
the period 55.2 38.4 22.2 8.7 - 124.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Attributable to
shareholders 54.0 38.4 22.2 8.3 - 122.9
Attributable to
participating
policyholders 1.2 - - 0.4 - 1.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended June 30, 2006 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Revenues
Premiums 413.1 749.0 361.1 510.5 51.3 2,085.0
Net investment
income 174.6 55.4 34.3 90.8 1.6 356.7
Fees and other
revenues 1.0 126.8 7.4 10.0 1.5 146.7
-------------------------------------------------------------------------
588.7 931.2 402.8 611.3 54.4 2,588.4
-------------------------------------------------------------------------
Operating
expenses
Cost of
commitments to
policyholders 370.4 115.2 262.6 328.0 37.8 1,114.0
Net transfer to
segregated
funds - 647.7 - 260.1 - 907.8
Commissions,
general and
other expenses 172.4 119.5 112.3 13.1 12.9 430.2
-------------------------------------------------------------------------
542.8 882.4 374.9 601.2 50.7 2,452.0
-------------------------------------------------------------------------
Income before
income taxes 45.9 48.8 27.9 10.1 3.7 136.4
Income taxes (2.9) (8.3) (5.1) (1.9) (3.1) (21.3)
-------------------------------------------------------------------------
Net income
before allo-
cation of
other
activities 43.0 40.5 22.8 8.2 0.6 115.1
Allocation of
other
activities 0.5 (0.1) 0.1 0.1 (0.6) -
-------------------------------------------------------------------------
Net income for
the period 43.5 40.4 22.9 8.3 - 115.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Attributable to
shareholders 42.8 40.4 22.9 7.8 - 113.9
Attributable to
participating
policyholders 0.7 - - 0.5 - 1.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(*) Includes other segments and intercompany eliminations.
Segmented general fund assets
As at June 30, 2007 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Assets
Invested
assets 7,412.2 1,866.6 1,350.9 2,859.6 195.5 13,684.8
Goodwill 30.5 17.3 19.9 - - 67.7
Intangible
assets - 297.6 - - - 297.6
Other assets 142.8 146.5 82.1 55.1 89.2 515.7
-------------------------------------------------------------------------
Total 7,585.5 2,328.0 1,452.9 2,914.7 284.7 14,565.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at December 31, 2006
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Assets
Invested
assets 6,271.9 1,879.1 1,289.0 2,623.7 192.5 12,256.2
Goodwill 30.5 17.3 19.9 - - 67.7
Intangible
assets - 297.6 - - - 297.6
Other
assets 133.9 137.5 74.4 45.9 77.5 469.2
-------------------------------------------------------------------------
Total 6,436.3 2,331.5 1,383.3 2,669.6 270.0 13,090.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at June 30, 2006 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth Other
Life and manage- Life and acti-
Health ment Health Pensions vities(*) Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Assets
Invested
assets 5,809.2 1,820.9 1,216.6 2,539.7 184.2 11,570.6
Goodwill 30.5 238.0 19.9 - - 288.4
Intangible
assets - 67.9 - - - 67.9
Other
assets 125.9 128.2 72.8 47.7 64.4 439.0
-------------------------------------------------------------------------
Total 5,965.6 2,255.0 1,309.3 2,587.4 248.6 12,365.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(*) Includes other segments and intercompany eliminations.
9- PREMIUMS
Quarter ended June 30, 2007 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth
Life and manage- Life and General
Health ment Health Pensions Insurance Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Invested in
general fund 220.7 78.0 218.9 75.8 29.0 622.4
Invested in
segregated
funds - 229.2 - 179.1 - 408.3
-------------------------------------------------------------------------
Total 220.7 307.2 218.9 254.9 29.0 1,030.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Quarter ended June 30, 2006 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth
Life and manage- Life and General
Health ment Health Pensions Insurance Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Invested in
general fund 209.3 68.9 187.6 60.3 26.3 552.4
Invested in
segregated
funds - 225.9 - 228.6 - 454.5
-------------------------------------------------------------------------
Total 209.3 294.8 187.6 288.9 26.3 1,006.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended June 30, 2007 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth
Life and manage- Life and General
Health ment Health Pensions Insurance Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Invested in
general fund 435.4 177.9 419.1 153.3 57.1 1,242.8
Invested in
segregated
funds - 609.3 - 356.0 - 965.3
-------------------------------------------------------------------------
Total 435.4 787.2 419.1 509.3 57.1 2,208.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six months ended June 30, 2006 (unaudited)
------------------------------------------------------------
Individual Group
------------------------------------------------------------
Wealth
Life and manage- Life and General
Health ment Health Pensions Insurance Total
-------------------------------------------------------------------------
$ $ $ $ $ $
Invested in
general fund 413.1 153.2 361.1 119.6 51.3 1,098.3
Invested in
segregated
funds - 595.8 - 390.9 - 986.7
-------------------------------------------------------------------------
Total 413.1 749.0 361.1 510.5 51.3 2,085.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------10- Comparative Figures
Certain comparative figures have been reclassified to comply with the
current year's presentation.
For further information: Jacques Carrière, Vice-President, Investor
Relations, (418) 684-5275, cell: (418) 576-3624, jacques.carriere@inalco.com,
www.inalco.com
