Industrial Alliance Reports Net Income of $66 Million in the First Quarter

Premiums and Deposits Reach a New High of Almost $2 Billion

QUEBEC CITY, May 4 /CNW Telbec/ - Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) announces its results for the first quarter ended March 31, 2011. Beginning this quarter, all financial results are based on International Financial Reporting Standards ("IFRS") unless otherwise noted. A detailed discussion of the first quarter results is available at www.inalco.com under Investor Relations / Financial Reports.

Overview

  • Net income to common shareholders of $66.1 million, up 12%
  • Diluted and adjusted EPS of $0.78, up $0.07
  • Annualized ROE of 12.6% versus 12.7% a year ago
  • Premiums and deposits of almost $2.0 billion, up 8%
  • AUM/AUA of $71.2 billion, up 4% from 2010 year-end
  • Solvency ratio of 196% versus 202% at year-end
  • Effective tax rate of 23% versus 26% a year ago
  • Dividend payout of 31% compared with 33% a year ago.

               
Highlights
  First quarter
(In millions of dollars, unless otherwise indicated) 2011
IFRS
  2010
IFRS
  Variation   2010
CGAAP
Net income to common shareholders 66.1   59.2   11.7%   60.3
Earnings per common share (diluted and adjusted1) $0.78   $0.71   $0.07   --
Earnings per common share (diluted) $0.76   $0.69   $0.07   $0.73
Return on common shareholders' equity (annualized) 12.6%   12.7%   --   12.7%
Premiums and deposits 1,982.5   1,839.6   7.8%   1,842.5
Effective tax rate (%) 23.1%   26.0%   --   26.0%
  March 31,
2011
  December 31, 2010   March 31,
2010
  IFRS   IFRS   CGAAP   CGAAP
Solvency ratio 196%   202%   205%   223%
Book value per share $25.24   $24.77   $25.49   $23.68
Assets under management and administration 71,231.6   68,811.4   68,474.0   62,162.0
Net impaired investments 19.8   21.5   22.8   13.3
Net impaired investments as a % of total investments 0.10%   0.12%   0.12%   0.08%

1 Adjusted for innovative Tier 1 debt instruments (IATS) in 2011.

"We are pleased to note that our strong performance in 2010 has carried over into the first quarter of 2011," stated Yvon Charest, President and Chief Executive Officer. "Our Individual Insurance operations delivered a sixth consecutive quarter of solid growth while our Individual Wealth Management sector has truly hit its stride in terms of net fund entries and assets under management. During the quarter, premiums and deposits across all business lines reached almost $2 billion and our assets under management and administration passed the $70 billion mark, both of which represent new highs for Industrial Alliance."

"In conjunction with the increased pace of business development, we continue to generate higher levels of profitability while maintaining a healthy balance sheet," added Mr. Charest. "In that regard we have proven to be a consistent performer, one quarter at a time, on our key performance measures including earnings per share, quality of our investment portfolio, as well as our ability to manage market risk."

First Quarter Highlights

Profitability - Industrial Alliance ended the first quarter with diluted earnings per share of $0.78, adjusted for the potential conversion of the Company's innovative Tier 1 debt instruments (IATS) into common shares as required under IFRS. Net income to common shareholders increased 12% to $66.1 million, and diluted earnings per share were $0.76 before the IATS adjustment.

The adjusted return on common shareholders' equity was 12.6% on an annualized basis, which is in line with the Company's target range of 12-14% and comparable with the previous year.

Stock market growth generated a pre-tax experience gain of $1.8 million ($1.3 million after tax, or $0.02 per share), related to the Individual Insurance and Wealth Management sectors.

Individual Wealth Management was the quarter's primary driver of profitability with pre-tax experience gains of $6.1 million ($4.1 million after tax or $0.05 per share excluding the stock market gain). In addition to the positive impact of the stock market on assets under management, the sector once again achieved excellent sales results, as well as benefiting from the good performance of the Industrial Alliance distribution affiliates and favourable mortality experience in insured annuities.

In the group sectors, Group Savings and Retirement (formerly Group Pensions) recorded a pre-tax experience gain of $2.7 million ($2.1 million after tax, or $0.02 per share), resulting primarily from favourable experience on three key sources of gains that include investments, mortality and expenses. The Group Insurance sector had a pre-tax experience loss of $2.7 million ($2.1 million after tax, or $0.02 per share) related to higher health, dental and short-term disability claims.

In the Individual Insurance sector, strain was 65% of sales compared with 55% in the fourth quarter of 2010. This increase was due to a timing difference between the introduction of higher pricing on new products in the latter part of January and uptake of these products by the market during the quarter. This situation is temporary as the new pricing will be fully reflected in second-quarter sales. It is estimated that if the higher pricing had been fully reflected in the quarter, strain would have been less than 50% of sales. Management estimates that the additional strain reduced earnings by at least $0.04 per share in the first quarter of 2011.

Income on capital of $21.3 million compares with $22.4 a year ago. Investment income reflects the decreased contribution from IAAH, which had an operating loss of $1.1 million versus operating income of $4.1 million a year ago arising from unseasonably mild winter conditions (difference of $5.2 million before tax). This was offset by an additional gain of $5.3 million pre-tax on assets available for sale.

The effective tax rate in the first quarter was 23.1% compared with our target range of 26-27%, adding $0.02 to earnings per share.  As part of a series of management initiatives put in place in the last quarter of 2010, the Company is now invested in more high-yield dividend stocks, which are non-taxable.

Business growth - Business growth maintained strong momentum for the sixth consecutive quarter. Premiums and deposits increased 8% year over year to reach a new high of almost $2.0 billion, driven by strong sales in the Individual Insurance and Wealth Management sectors.

In Individual Wealth Management, net sales of segregated and mutual funds reached $618.1 million, up 17% over the first quarter last year. At the end of the first quarter, Industrial Alliance ranked number one for sales of segregated funds in Canada, and 11th for mutual fund sales.

In Individual Insurance, total sales increased 14% to $45.5 million, led primarily by growth in minimum premiums.

In Group Insurance, sales growth was led for the fourth consecutive quarter by creditor insurance, up 28% to $38.7 million, as well as by Special Markets Group, up 9% to $32.8 million,

At March 31, 2011, assets under management and administration reached a new high of $71.2 billion under the effect of the strong increase in premiums and deposits, growth in net fund entries and sustained stock market growth.

Solvency - At March 31, 2011, the solvency ratio was 196% compared with 205% (CGAAP) at December 31, 2010. The decrease is explained by the adoption of IFRS at the beginning of 2011, the acquisition of Protection V.A.G. inc. on February 14, 2011, the impact of the new capital requirements for segregated fund contracts issued after December 31, 2010, the increased proportion of stocks in the investment portfolio as well as the positive stock market performance in the first quarter that increased the market value of stocks. The solvency ratio at March 31, 2011 is in line with the Company's target range of 175-200%.

Quality of investments -The overall quality of our investment portfolio remains very high.  At March 31, 2011,

  • impaired loans decreased to 0.10% of total investments from 0.12% at December 31, 2010 with the change in definition of invested assets under IFRS; this includes the addition of two mortgage loans on multi-residential properties in the first quarter.
  • the delinquency rate of the mortgage loan portfolio decreased to 0.46% at March 31, 2011 from 0.47% at December 31, 2010, as a result of an improvement in delinquent loans in Canada.
  • the proportion of bonds rated BB and lower decreased to 0.11% from 0.12% as at December 31, 2010, as a result of transactions that reduced the total value of corporate bonds in this category.

Dividend - The Board of Directors declared a quarterly dividend of $0.2450 per common share. This corresponds to a payout ratio of 31% of net earnings, which falls within the Company's 25% to 35% target range for the medium term.

Sensitivity Analysis- The Company's ability to absorb potential stock market downturns remains very high. As at March 31, 2011, the Company can absorb a decrease of about 24% (up from 21% at 2010 year-end) in the S&P/TSX index before having to strengthen stocks matching long-term liabilities. This means that the index would have to decrease to 10,700 points from its level of 14,116 at March 31, 2011.

IMPACT OF TRANSITION TO IFRS
The Company has adopted Internationational Financial Reporting Standards (IFRS) beginning with the first quarter of 2011. Certain prior period amounts for the year 2010 have been adjusted or reclassified to conform to IFRS presentation, including the following:

Book value per share - The balance sheet was adjusted by $72.1 million at December 31, 2010 to recognize an unamortized actuarial loss on employee benefits, resulting in a decrease of $0.72 in book value per share from $25.49 on a CGAAP basis to $24.77.

Solvency ratio -  The solvency ratio was reduced by 3 percentage points at December 31, 2010 as a result of accounting adjustments on real estate held for investment and the reclassification of certain debentures from held to trading to available for sale.

Diluted earnings per share - For the quarter ended March 31, 2010, diluted earnings per share decreased from $0.73 (CGAAP) to $0.69 (IFRS). The difference is explained by the dilutive impact of the potential conversion of the Company's innovative Tier 1 debt instruments (IATS) into common shares ($0.02 per share), as well as the impact  on net income to shareholders ($0.02 per share) primarily related to the employee pension plan, own-use real estate, acquisition transaction costs, an additional future tax loss and debt asymmetry.  For the full year ended December 31, 2010, diluted earnings per share decreased from $2.99 (CGAAP) to $2.87 (IFRS).

Premiums and deposits - The impact on premiums and deposits relates primarily to a change in the definition of insurance contracts and has no significant impact on net income to shareholders.

A detailed description of the impact of the transition to IFRS is provided in Note 4 Transition to International Financial Reporting Standards (IFRS) accompanying the unaudited condensed financial statements for the period ended March 31, 2011.

GENERAL INFORMATION
Internal Control over Financial Reporting
No changes were made in the Company's internal control over financial reporting during the interim period ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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.

Conference Call
Management will hold a conference call to present the Company's results on Wednesday, May 4, 2011 at 11:30 a.m. (ET). To listen in on the conference call, dial 1 800 745-8951 (toll-free). A replay of the conference call will also be available for a one-week period, starting at 2:00 p.m. on Wednesday, May 4, 2011. To listen to the conference call replay, dial 1 800 558-5253 (toll-free) and enter access code 21516599. 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 first 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.

Annual General Meeting of Shareholders
Industrial Alliance will hold its Annual General Meeting of Shareholders this afternoon at 2:00 p.m. at its head office located at 1080 Grande Allée West in Québec City.  Media will have the opportunity to meet with Chairman of the Board John LeBoutillier as well as President and Chief Executive Officer Yvon Charest immediately after the AGM at approximately 3 p.m.

Forward-looking Statements
This Management's Discussion and Analysis 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; and 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 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 Industrial Alliance's most recent annual report under the "Risk Management" section of the Management's Discussion and Analysis and in the "Management of Risks Associated with Financial Instruments" note to Industrial Alliance's consolidated financial statements, available for review at www.sedar.com.

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 Management's Discussion and Analysis or to reflect the occurrence of unanticipated events, except as required by law.

About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and health insurance company with operations in all regions of Canada as well as in the United States.  The Company offers a wide range of life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities, auto and home insurance, mortgage loans and other financial products and services for both individuals and groups.  The fourth largest life and health insurance company in Canada, Industrial Alliance contributes to the financial wellbeing of over three million Canadians, employs more than 3,700 people and manages and administers more than $70 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.

For further information:

Grace Pollock
Director, Investor Relations
Office: 418 780-5945
Email: grace.pollock@inalco.com
Website: www.inalco.com

Organization Profile

INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890