Western Financial Group announces Q2 results

NET INCOME INCREASED BY 37% AND EARNINGS PER SHARE UP BY 13%

HIGH RIVER, AB, Aug. 12 /CNW/ - (TSX - WES) - Western Financial Group ("the Company") announced today its operating and financial results for the three and six months ended June 30, 2010.

    
    Financial
     Highlights
    (unaudited)
    (in $ thousands         Three Months ended              Six Months ended
     except for per                    June 30                       June 30
     share amounts)    2010      2009 % Change       2010      2009 % Change
    ------------------------------------------- -----------------------------
    The Network
    Commissions and
     other customer
     revenue      $  31,249 $  23,109    35.2%  $  53,668 $  40,631    32.1%
    Operating
     expenses        20,373    14,882    36.9%     38,834    28,813    34.8%
    ------------------------------------------- -----------------------------

    Operating
     income       $  10,876 $   8,227    32.2%  $  14,834 $  11,818    25.5%
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------

    Bank West
    Interest and
     investment
     income       $   6,961 $   6,685     4.1%  $  13,571 $  12,224    11.0%
    Interest
     expense -
     customer
     deposits         3,176     3,778   -15.9%      6,153     7,432   -17.2%
    ------------------------------------------- -----------------------------
    Net interest and
     investment
     income           3,785     2,907    30.2%      7,418     4,792    54.8%
    Provisions for
     credit losses      748       517    44.7%        924       806    14.6%
    Operating
     expenses         2,447     2,625    -6.8%      4,764     4,724     0.8%
    ------------------------------------------- -----------------------------

    Operating
     income
     (loss)       $     590 $    (235)  350.9%  $   1,730 $    (738)  334.5%
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------

    Western Life
    Premium and
     investment
     income       $  13,608 $  10,841    25.5%  $  24,411 $  18,791    29.9%
    Policyholder
     benefits         6,910     5,199    32.9%     12,637     8,832    43.1%
    Operating
     expenses         4,766     3,995    19.3%      8,643     7,373    17.2%
    ------------------------------------------- -----------------------------

    Operating
     income       $   1,932 $   1,647    17.3%  $   3,131 $   2,586    21.1%
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------

    Western Financial
     Insurance
    Premium and
     investment
     income       $   9,189 $       -        -  $  18,221 $       -        -
    Policyholder
     benefits         4,790         -        -      8,732         -        -
    Operating
     expenses         3,278         -        -      6,328         -        -
    ------------------------------------------- -----------------------------

    Operating
     income       $   1,121 $       -        -  $   3,161 $       -        -
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------

    Corporate and
     all other
    Other
     revenues     $     295 $     243    21.3%  $     709 $     612    15.8%
    Operating
     expenses         3,173     2,602    21.9%      5,647     4,752    18.8%
    ------------------------------------------- -----------------------------

    Operating
     loss         $  (2,878)$  (2,359)   22.0%  $  (4,938)$  (4,140)   19.3%
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------
    Total
     operating
     income       $  11,641 $   7,280    59.9%  $  17,918 $   9,526    88.1%
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------

    Net income    $   5,742 $   4,925    16.6%  $   8,013 $   5,839    37.2%
    Preferred
     dividends       (1,797)   (1,002)   79.3%     (3,629)   (2,005)   81.0%
    ------------------------------------------- -----------------------------

    Earnings (loss)
     available to
     common
     shareholders $   3,945 $   3,923     0.6%  $   4,384 $   3,834    14.3%
    ------------------------------------------- -----------------------------
    ------------------------------------------- -----------------------------

    Earnings per
     share
      - basic ($)      0.08 $    0.08                0.09 $    0.08
      - diluted ($)    0.08 $    0.07                0.09 $    0.07



        --------------------------------------------------------------
        2010 KEY OBJECTIVES
        --------------------------------------------------------------
        Network Same Store Sales                          4%-7% growth
        Network Operating Margin                                   28%
        Bank West Specific Provisions                   75 bps or less
        Western Financial Insurance Loss Ratio             55% or less
        Western Life Loss Ratio                            45% or less
        Overall 2010 Net Income                   $18.5 to $20 million
        --------------------------------------------------------------
    

Western Financial Group today announced its second quarter 2010 financial numbers which show net income increased by 37%, with Earnings Per Share up by 13% over the same period in 2009. All Business Units showed positive results year over year, with Bank West reporting its second profitable quarter in a row and record profits for the year to date.

"We are pleased with the Company's performance for all our business units in what appears to be a moderate economy in western Canada," said Scott Tannas, President and CEO. "We are making good progress towards achieving our year-end financial objectives. The Bank is now contributing to our overall profitability, and with our recent financing behind us, we are well positioned with a strong balance sheet to take advantage of opportunities in the second half of this year", he said.

The Network

The Network combined margin for the quarter was 28%, with Group Insurance Solutions' margin at 19% and the retail division at 30%. Retail same store sales are at 4.7%, and same store customer count grew by 2.2% on a YTD, annualized basis.

Bank West

The Bank's loan book increased slightly over the quarter, to $378.9 million. Our specific charges for loan losses stand at 27 basis points at 6 months, which on an annualized basis is tracking toward a significant improvement over 2009. The gross non performing loan ratio also continues to improve over prior quarters, standing now at 1.36%

Western Life

Western Life's growth continued with premium income up by 11% year over year, gaining momentum over Q1. Their loss ratio abated significantly in the quarter bringing their year to date ratio to 45%. Cross sales within the Western Financial Group, continue to increase and are now at record levels.

Western Financial Insurance

Western Financial Insurance's premium revenue is up 15% with improved loss ratios year over year of 46% compared to 51%.

Strategic Partnership Portfolio

The Company's partnerships in investment banking, insurance distribution and manufacturing provided positive income for the quarter, with all units tracking toward our 2010 expectations.

Conference Call

Western Financial Group will host a conference call to discuss the Company's second quarter financial results on Tuesday, August 17, 2010 at 9:15 am Mountain time (11:15 am Eastern time). To participate in the live conference call, please dial (888) 231-8191 or (647) 427-7450 (Toronto). A replay of the call will be available from August 17th at 12:45 pm Mountain time until August 31st at 21:59 PM MT. To access the replay please dial either (800) 642-1687 or (416) 849-0833 and enter pass code 90465222. The conference will also be broadcast live over the internet and archived through the Company's website at www.westernfinancialgroup.ca.

Western Financial Group is a leader in providing insurance, financial services and banking services in over 90 communities, to more than 500,000 individuals and businesses in Western Canada through its wholly owned network of offices, its affiliated insurance brokers, Western Life Assurance Company, Bank West and Western Financial Insurance Company.

The Company's Financial Report for the second quarter of 2010 will be filed on SEDAR on or before August 13, 2010.

Forward-looking statements involve numerous assumptions, risks and uncertainties, including the risk that prediction and other forward-looking statements may not prove to be accurate. We caution the reader not to place undue reliance on these disclosures, as a number of important factors could cause actual results to differ materially from the estimates and comments expressed in them. Such factors may include, but are not limited to: changing financial and economic conditions in Canada, particularly in Western Canada; regulatory developments; competition industry trends and availability of capital resources; and our anticipated success in managing our risks. We caution readers that the foregoing list is not exhaustive. Except required by law, we do not undertake to update any forward-looking statements, written or oral, that we may make from time to time regarding our operations and performance.

    
    CONSOLIDATED BALANCE SHEETS
    (unaudited)
    (in thousands, except for per share
     amounts)
                                                          As at        As at
                                                        June 30  December 31
                                              Note         2010         2009
    -------------------------------------------------------------------------
    ASSETS
    Cash and cash equivalents                         $  82,867    $  58,463
    Securities - held-for-trading                        65,514       61,373
    Securities - available-for-sale             3        36,357       30,901
    Mortgages, loans and leases, net of
     allowance for credit losses                4       374,252      355,621
    Interest rate swaps                                       -           90
    Equity investments                                   12,152       11,591
    Capital assets                                       22,785       21,630
    Goodwill                                    6       160,825      148,205
    Intangible assets                                    65,162       66,719
    Accounts receivable                                  49,590       51,114
    Prepaid expenses                                      8,394        7,231
    Future income taxes                                   1,283        1,102
    Other assets                                          1,890        2,286
    -------------------------------------------------------------------------
    Total assets                                      $ 881,071    $ 816,326
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Customer deposits                                 $ 337,409    $ 317,953
    Actuarial liabilities                                42,483       40,032
    Provision for unpaid and unreported claims           16,289       13,919
    Debt                                                 76,318       79,771
    Interest rate swaps                                     169            -
    Due to policyholders                                 19,384       20,392
    Accounts payable and accrued liabilities             98,146       82,700
    Income taxes payable                                  1,327        1,809
    Future income taxes                                  13,376       13,199
    -------------------------------------------------------------------------
    Total liabilities                                   604,901      569,775
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital                               7       233,356      206,905
    Other paid in capital                                   268          268
    Contributed surplus                                   2,112        2,041
    -------------------------------------------------------------------------
                                                        235,736      209,214
    Accumulated other comprehensive loss        8          (248)        (129)
    Retained earnings                                    40,682       37,466
    -------------------------------------------------------------------------
    Total shareholders' equity                          276,170      246,551
    -------------------------------------------------------------------------
                                                      $ 881,071    $ 816,326
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS
     OF INCOME
    (unaudited)
    (in thousands, except
     for per share
     amounts)
                        Three months ended June 30  Six months ended June 30
                                 2010         2009         2010         2009
    -------------------------------------------------------------------------
    REVENUE
    Commission and other
     customer income        $  32,190    $  24,540    $  55,561    $  42,981
    Premium income             19,823        9,678       37,843       18,125
    Interest income on
     customer loans             6,386        5,451       12,560       10,373
    Investment income
      Change in fair value
       of held-for-trading
       securities               2,240          758        3,272          627
      Realized gain (loss)
       on sales of
       available-for-sale
       assets                      52           (3)          88         (731)
      Realized gain (loss)
       on sales of
       held-for-trading
       securities                 (32)          24            7           30
      Other net investment
       income                     643          430        1,249          853
    -------------------------------------------------------------------------
                               61,302       40,878      110,580       72,258

    EXPENSES
      Operating expenses       34,037       24,104       64,216       45,662
      Policyholder benefits    11,700        5,199       21,369        8,832
      Interest expense -
       customer deposits        3,176        3,778        6,153        7,432
      Provision for credit
       losses                     748          517          924          806
    -------------------------------------------------------------------------
    Income before the
     following:                11,641        7,280       17,918        9,526
      Income from equity
       investments                449        1,088          592          835
      Interest and financing
       costs on debt           (1,595)      (1,041)      (3,005)      (1,603)
      Amortization of
       capital assets            (893)        (736)      (1,692)      (1,427)
      Amortization of
       intangible
       assets                    (779)        (450)      (1,557)        (862)
    -------------------------------------------------------------------------
    Income before income
     taxes                      8,823        6,141       12,256        6,469
    Income taxes               (3,081)      (1,216)      (4,243)        (630)
    -------------------------------------------------------------------------

    NET INCOME FOR THE
     PERIOD                 $   5,742    $   4,925    $   8,013    $   5,839
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Preferred share
     dividends              $  (1,797)   $  (1,002)   $  (3,629)   $  (2,005)
    -------------------------------------------------------------------------
    Net income available to
     common shareholders    $   3,945    $   3,923    $   4,384    $   3,834

    Average number of
     common shares             49,507       49,345       49,507       49,345
    Average number of
     diluted common
     shares                    49,548       54,915       49,553       54,920
    Earnings per common
     share
      Basic                 $    0.08    $    0.08    $    0.09    $    0.08
    -------------------------------------------------------------------------
      Diluted               $    0.08    $    0.07    $    0.09    $    0.07
    

SOURCE Western Financial Group

For further information: For further information: Arlene Beggs, Executive Assistant to the CEO, Western Financial Group, 403-652-2663, info@westernfg.ca


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