EPS of $1.13, annualized ROE of 14.2%
Net income of $113.6 M
Annualized ROE of 14.2%
BVPS of $32.47
Solvency ratio of 215%
Dividend of 26¢ per share
A full discussion of our results is available at www.inalco.com under Investor Relations/Financial Reports.
QUEBEC CITY, July 31, 2014 /CNW Telbec/ - For the second quarter ended
June 30, 2014, Industrial Alliance Insurance and Financial Services
Inc. (TSX: IAG) reports net income attributed to common shareholders of
$113.6 million and diluted earnings per common share of $1.13. The
annualized return on shareholders' equity was 14.2%, and the solvency
ratio at quarter-end was 215%. All these results exceed guidance
provided by management for the quarter.
Yvon Charest, President and Chief Executive Officer commented, "The
first half of 2014 closed on a strong note. Second-quarter earnings
reflect both market- and business-related gains. Top-line growth was
mixed but overall continues to show good momentum, notably for Dealer
Services, segregated funds, the US, IA Auto and Home and Excellence,
our adjustable disability business. In addition, the Jovian acquisition
is on track, including the integration of their IIROC business into IA
Securities on April 1st."
"Our second quarter profit was strong and had the benefit of a 15 cent
tax gain," continued René Chabot, Executive Vice-President and
Appointed Actuary. "The two main drivers were our retail insurance and
wealth management businesses. In Individual Insurance, strain on new
business and mortality both made a favourable contribution. In
addition, the rise in equity markets benefited our retail insurance as
well as our wealth management results. Equity markets are an important
driver of our fee-earnings assets, up 3% for the quarter and 21% over
the last year."
Year-to-date as at June 30
(In millions of dollars, unless otherwise indicated)
Net income attributed to shareholders
Less: preferred share dividends
Net income attributed to common shareholders
Earnings per common share (diluted)
Return on common shareholders' equity 1
Book value per share
Assets under management and administration
Net impaired investments as a % of total investments
1 Annualized for the quarter. Trailing twelve months for the year to
SECOND QUARTER HIGHLIGHTS
Profitability - For the second quarter ended June 30, 2014, Industrial Alliance reports
net income attributed to common shareholders of $113.6 million. Diluted
earnings per share of $1.13 compare with $0.74 a year earlier, an
increase of $0.39 per share. The annualized shareholders' return on
equity of 14.2% compares with 10.5% a year earlier. Earnings in the
second quarter of 2014 principally reflect growth in equity markets, a
benefit from our hedging program, favourable mortality experience and
tax gains, offset by a loss in group insurance benefits.
The key elements that explain profitability follow. All figures are
after taxes unless otherwise indicated.
Expected profit on in-force increased by 17% to $115.7 million pre-tax over the last year, mainly
attributed to growth in assets under management in the wealth
management businesses. Beginning in 2014, expected profit on in-force
for the wealth management businesses is updated on a quarterly basis to
reflect market growth and net fund sales.
Individual Insurance reported a net experience gain of $0.04 per share ($4.0 million). Equity
markets contributed $0.02 per share, while mortality gains offset by
adverse lapse and morbidity contributed the remaining $0.02 per share.
Individual Wealth Management had an experience gain of $0.08 per share ($8.0 million). The dynamic
hedging program for the segregated fund guarantee provided $0.06 per
share. Equity markets contributed $0.01 per share, as did favourable
Group Insurance reported an experience loss of $0.07 per share ($7.0 million). Employee Plans experienced higher than expected disability, dental and health claims
resulting in a loss of $0.06 per share. The remaining $0.01 per share
is attributed to adverse disability in Special Market Solutions.
Strain - In the Individual Insurance sector, the strain-to-new business ratio of 23% compared with guidance of 25%
for the quarter. Management estimates that the lower strain ratio,
attributed to a favourable sales mix, represented a gain of $0.02 per
Income on capital - Total income on capital of $19.9 million pre-tax compares with $16.1
million in the previous quarter. The variation is due primarily to the
results of IA Auto and Home.
Income taxes - The effective tax rate is 7% compared with the Company's guidance of 18%
to 22%. The second quarter gain of $0.15 per share, relative to the low
end of our guidance, is related to adjustments following the completion
of tax reviews.
Business Growth - Fee-earning assets, an important driver of long-term earnings growth,
benefited from strong equity markets in the quarter. Assets under
management and administration rose 3%, ending the period at
$105.3 billion. Premiums and deposits of $1.7 billion compared with
$1.9 billion last year, when a single transfer related to a large
mandate was recorded.
Sales growth in the quarter was mixed. In the retail sectors, insurance
sales of $55.5 million reflect a decline in excess premiums. Net sales
of segregated funds ($35.7 million) were positive for the second
quarter in a row, but offset by negative net mutual fund sales (-$98.0
million). In the group sectors, Dealer Services reported strong sales
of P&C products of $46.5 million (+23%), while creditor insurance sales
of $105.6 million were comparable to the previous year. Employee Plans
sales of $8.1 million were in line with the last three quarters.
Special Markets Solutions had sales of $37.6 million, slightly above
the previous year. In Group Savings and Retirement, where results can
fluctuate significantly because of the size of mandates awarded, sales
were $206.5 million versus $340.2 million a year earlier when funds
related to a large mandate were transferred.
Capital - At June 30, 2014, the solvency ratio stood at 215% compared with 212% at
March 31, 2014. The increase is primarily attributed to the debt
issuance during the quarter as well as the strong earnings
contribution, offset by the decrease in long-term interest rates.
Dividend - The Board of Directors today approved a dividend of 26 cents per share
on the Company's outstanding common shares representing a payout ratio
of 23%. This dividend is payable on September 15, 2014 to shareholders
of record at August 22, 2014.
Dividend Reinvestment and Share Purchase - Registered shareholders wishing to enroll in the Company's Dividend
Reinvestment and Share Purchase Plan so as to be eligible to reinvest
the next dividend payable on September 15th must ensure that the duly completed form is delivered to Computershare
no later than 4:00 p.m. on August 15, 2014. Enrollment information is
provided on the Company's website at www.inalco.com under Investor Relations/Dividends.
Macroeconomic Sensitivity at June 30, 2014
The Company can absorb a sudden decrease of about 30% in the S&P/TSX
index before having to strengthen reserves for policyholder liabilities
(27% at March 31, 2014).
The Company can absorb a sudden decrease of 43% in the S&P/TSX index
before the solvency ratio drops below 175% (40% at March 31, 2014) and
a decrease of 55% before the solvency ratio drops below 150% (52% at
March 31, 2014).
The full-year impact on net income attributed to common shareholders of
a sudden 10% decrease in the stock markets is $26 million ($25 million
at March 31, 2014). This does not take into consideration any potential
The impact on net income attributed to common shareholders of a 10 basis
point decrease in the initial and ultimate reinvestment rates totals
$84 million ($80 million at March 31, 2014).
Market Guidance for 2014
Earnings per common share: target range of $3.40 to $3.80
Return on common shareholders' equity (ROE): target range of 11.0% to
Solvency ratio: target range of 175% to 200%
Dividend payout ratio: payout range of 25% to 35% with the target being
Effective tax rate: target range of 18% to 22%
Strain on new business: 25% of sales
Guidance for ROE and earnings per common share excludes any potential
reserve strengthening in 2014.
Issuance of Subordinated Debentures
On May 16, 2014, Industrial Alliance completed an offering of $250
million of subordinated debentures bearing interest of 2.80% due May
16, 2024. The net proceeds were used for general corporate purposes
including the redemption of Industrial Alliance's $150 million 5.13%
subordinated debentures due June 30, 2019. The debentures were redeemed
effective June 30, 2014 at $1,025.65 per $1000.
Change in Actuarial Standard
On May 15, 2014, the Canadian Institute of Actuaries published its
revised standard with respect to the economic reinvestment assumptions
and assumed investment strategies utilized under the Canadian asset
liability method for the valuation of long-tail liability cash flows.
The final standard, which takes effect on October 15, 2014, fixes the
ultimate reinvestment rate (URR) at 3.3% and introduces a maximum
credit spread of 80 basis points over the risk-free rate. At the
Company's Investor Day on June 11, 2014, management disclosed its
intention to use a combined rate of 4.0% at the end of 2014, an
increase of 90 basis points over its current URR of 3.1%. The new
standard represents a favourable development that will reduce the
overall sensitivity of the Company's actuarial reserves to the
macroeconomic environment. Industrial Alliance will provide full
disclosure of the impact of the revised standard after completion of
its year-end assumption review in the fourth quarter of 2014.
Investor Day 2014
Industrial Alliance held its biennial Investor Day on June 11, 2014. A
written transcript, webcast and audio recording of management's
presentations are available at www.inalco.com under Investor Relations/Events and Presentations.
Non-IFRS Financial Information
The Company reports its financial results in accordance with
International Financial Reporting Standards(IFRS). It also publishes
certain non-IFRS financial measures that do not have an IFRS
equivalent, including sales, value of new business, embedded value and
solvency ratio, or which have an IFRS equivalent such as data on
operating profit and income taxes on earnings presented in the sources
of earnings table. The Company also uses non-IFRS adjusted data in
relation to net income, earnings per share and return on equity. These
non-IFRS financial measures are always accompanied by and reconciled
with IFRS financial measures. The Company believes that these non-IFRS
financial measures provide investors and analysts with additional
information to better understand the Company's financial results as
well as assess its growth and earnings potential. Since non-IFRS
financial measures do not have a standardized definition, they may
differ from the non-IFRS financial measures used by other institutions.
The Company strongly encourages investors to review its financial
statements and other publicly-filed reports in their entirety and not
to rely on any single financial measure.
Management will hold a conference call to present the Company's results
on Thursday, July 31, 2014 at 2:00 p.m. (ET). To listen in on the
conference call, dial 1-800-667-8757 (toll-free). A replay of the
conference call will also be available for a one-week period, starting
at 4:30 p.m. on Thursday, July 31, 2014. To listen to the conference
call replay, dial 1 800 558-5253 (toll-free) and enter access code
21720488. 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 second quarter results,
investors are invited to consult the MD&A for the quarter ended June
30, 2014, related consolidated financial statements and accompanying
notes as well as our supplemental information package, all of which are
available on the Industrial Alliance website at www.inalco.com under Investor Relations / Financial Reports and on SEDAR at www.sedar.com.
This press release may contain statements relating to strategies used by
Industrial Alliance or statements that are predictive in nature, that
depend upon or refer to future events or conditions, or that include
words such as "may", "will", "could", "should", "would", "suspect",
"expect", "anticipate", "intend", "plan", "believe", "estimate", and
"continue" (or the negative thereof), as well as words such as
"objective" or "goal" or other similar words or expressions. Such
statements constitute forward-looking statements within the meaning of
securities laws. Forward-looking statements include, but are not
limited to, information concerning the Company's possible or assumed
future operating results. These statements are not historical facts;
they represent only the Company's expectations, estimates and
projections regarding future events.
Although Industrial Alliance believes that the expectations reflected in
such forward-looking statements are reasonable, such statements involve
risks and uncertainties, and undue reliance should not be placed on
such statements. Certain material factors or assumptions are applied in
making forward-looking statements, and actual results may differ
materially from those expressed or implied in such statements. Factors
that could cause actual results to differ materially from expectations
include, but are not limited to: general business and economic
conditions; level of competition and consolidation; changes in laws and
regulations including tax laws; liquidity of Industrial Alliance
including the availability of financing to meet existing financial
commitments on their expected maturity dates when required; accuracy of
information received from counterparties and the ability of
counterparties to meet their obligations; accuracy of accounting
policies and actuarial methods used by Industrial Alliance; insurance
risks including mortality, morbidity, longevity and policyholder
behaviour including the occurrence of natural or man-made disasters,
pandemic diseases and acts of terrorism.
Additional information about the material factors that could cause
actual results to differ materially from expectations and about
material factors or assumptions applied in making forward-looking
statements may be found in the "Risk Management" section of the 2013
Management's Discussion and Analysis and in the "Management of Risks
Associated with Financial Instruments" note to Industrial Alliance's
consolidated financial statements, and elsewhere in Industrial
Alliance's filings with Canadian securities regulators, which are
available for review at www.sedar.com.
The forward-looking statements in this news release reflect the
Company's expectations as of the date of this press release. Industrial
Alliance does not undertake to update or release any revisions to these
forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated
events, except as required by law.
About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services
Inc. operates throughout Canada as well as in the United States. The
Company offers life and health insurance, mutual and segregated funds,
savings and retirement plans, securities, auto and home insurance,
mortgage and car loans and other financial products and services for
both individuals and groups. Ranked among the top four life and health
insurance companies in Canada, Industrial Alliance is one of Canada's
largest public companies and trades on the Toronto Stock Exchange under
the ticker symbol IAG.
SOURCE: Industrial Alliance Insurance and Financial Services Inc.
For further information:
Office: 418 780-5945
Office: 418 684-5000, ext. 1660