Western Financial Group reports first quarter 2009 results



    HIGH RIVER, AB, May 14 /CNW/ - (TSX - WES) - Western Financial Group
("the Company") announced today its operating and financial results for the
three months ended March 31, 2009. Revenue from the Network's property and
casualty operations increased from $16.5 million to $17.5 million, Western
Life increased net premium revenue to $8.5 million from $7.2 million year over
year, and Bank West increased interest and investment income to $5.5 million
from $4.9 million. Overall operating income declined from $4.0 million $2.2
million for the first quarter as a result of non-recurring restructuring
costs, increased loan provisions and increased salary and wage costs over the
same period in 2008.
    "We are pleased with our first quarter results given the challenging
environment," said Scott Tannas, President and CEO. "Our operations remain
strong through these turbulent times, and given the very different economic
conditions we saw in the same period last year, it is gratifying that we are
keeping up the pace on our revenue side that we set a year ago for the first
quarter of 2009. Expenses are up, which we budgeted for, after restructuring
our overall compensation for our employees last year. Bank West has had a
reversal in the first quarter, falling from a small operating profit to a
small loss but we expect to see that overcome in the second and third quarters
as much of their additional increase in expenses relate to taking over
expenses at AgriFinance, without the benefit of its revenue which is derived
in large part from the summer and fall months," he said.
    "Given the trends of the first quarter, and some early indications from
the current quarter underway, we remain optimistic that our stated 2009
Objectives can be achieved."

    
    -------------------------------------------------------
    2009 OBJECTIVES

    Same Store Revenue                        5%-8% growth
    Network Operating Margin                           29%
    Bank West Specific Provisions           50 bps or less
    Western Life Loss Ratio                  less than 45%
    Overall 2009 Net Income         $14.5 to $16.5 million
    -------------------------------------------------------



    FINANCIAL HIGHLIGHTS
    THREE MONTHS ENDED MARCH 31
    (in $ thousands except for
     per share amounts)                         2009        2008    % Change

    The Network
    Commissions and other customer
     revenue                               $  17,522   $  16,489       6.3 %
    Operating expenses                        13,932      12,639      10.2 %
                                          ----------- -----------

    Operating income                       $   3,590   $   3,850      (6.7)%
                                          ----------- -----------
                                          ----------- -----------
    Bank West
    Interest and investment income             5,537       4,942      12.0 %
    Interest expense - customer deposits       3,654       3,396       7.6 %
                                          ----------- -----------
    Net interest and investment income         1,882       1,546      21.8 %
    Provisions for credit losses                 289          80     261.1 %
    Operating expenses                         2,096         769     172.6 %
                                          ----------- -----------

    Operating (loss) income                $    (502)  $     697    (172.0)%
                                          ----------- -----------
                                          ----------- -----------
    Western Life
    Premium and investment income              7,950       8,004      (0.7)%
    Policyholder benefits                      3,633       3,705      (1.9)%
    Operating expenses                         3,377       3,123       8.1 %
                                          ----------- -----------

    Operating income                       $     940   $   1,176     (20.0)%
                                          ----------- -----------
                                          ----------- -----------
    Corporate and all other
    Other revenues                               372         667     (44.2)%
    Operating expenses                         2,154       2,397     (10.1)%
                                          ----------- -----------

    Operating (loss) income                $  (1,782)  $  (1,730)      3.0 %
                                          ----------- -----------
                                          ----------- -----------

    Total operating income                 $   2,246   $   3,993     (43.8)%
                                          ----------- -----------
                                          ----------- -----------

    Net income                                   914       2,386     (61.7)%
    Preferred dividends                       (1,003)          -         - %
                                          ----------- -----------
    Earnings available to common
     shareholders                                (89)      2,386    (103.7)%

    Earnings per common share
      - basic ($)                          $    0.00   $    0.05    (100.0)%
      - diluted ($)                        $    0.00   $    0.04    (100.0)%
    


    The Network

    The Network increased revenues by 6.3% to $17.5 million, while expenses
also increased by 10.2% from $12.6 million to $13.9 million year over year for
the first quarter. Same store revenue increased 5.2%, products per customer
account (PPCA) increased to 2.33 and same store customer count increased 1.2%.

    Bank West

    Bank West saw a 21.8% increase in its net interest and investment income
from $1.5 million to $1.9 million. Provisions for credit losses rose from
$80,000 to $289,000 as a result of market conditions, and operating expenses
increased from $769,000 to $2.1 million. The increases were due to expenses
related to the AgriFinance purchase coupled with seasonality in their revenue
which traditionally is small in the first quarter and strong in the second and
third quarters. One time restructuring charges, including severance and
technology investment costs toward the completion of the Wealthview management
platform, also contributed to the differences.

    Western Life

    Western Life achieved a strong start to the year, with net premium
revenue at $8.5 million from $7.2 million. Our investment portfolio continued
to reflect the impact of the current economic conditions decreasing total
revenue by $800,000.

    Strategic Partnership Portfolio

    The Company's equity partners at Falkins Insurance and Harvard Western
Ventures had positive starts to the year. Jennings Capital has successfully
weathered the storm in the investment banking business and is in the process
of returning to positive numbers which it anticipates in the second quarter.

    Conference Call

    Western Financial Group will host a conference call to discuss the
Company's first quarter financial results on Tuesday, May 19, 2009 at 10:00 am
Mountain time (12:00 pm Eastern time). To participate in the live conference
call, please dial either (416) 644-3418 or (800) 590-1817. A replay of the
call will be available from May 19th at 12:00 pm Mountain time until June 2nd
at 11:59 PM MT. To access the replay please dial either (416) 640-1917 or
(877) 289-8525 and enter the passcode 21306198 followed by the pound sign. The
conference will also be broadcast live over the internet and archived through
the Company's website at www.westernfinancialgroup.net.

    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 WFG Agency Network
locations, its affiliated insurance brokers, Western Life Assurance Company
and Bank West.
    The Company's Financial Report for the first quarter of 2009 will be
filed on SEDAR on or before May 15, 2009

    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 SHEET
    (unaudited)
    (in thousands, except for per share amounts)

                                                        As at       As at
                                                       March 31  December 31
                                                         2009       2008
    -------------------------------------------------------------------------
    ASSETS
    Cash and cash equivalents                        $   41,166   $   28,563
    Marketable securities - held-for-trading
     (Note 12)                                           51,526       53,091
    Marketable securities - available-for-sale
     (Note 12)                                           15,326      103,808
    Mortgages and loans (Note 6 and 12)                 339,449      272,135
    Equity investments                                   40,646       38,040
    Accounts receivable                                  21,221       23,999
    Prepaid expenses                                      6,365        8,039
    Income taxes recoverable                                  2          800
    Future income taxes                                     345          539
    Capital assets                                       16,329       15,325
    Intangible assets                                    34,854       27,996
    Goodwill                                            117,629      105,285
    -------------------------------------------------------------------------
                                                     $  684,858   $  677,620
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Customer deposits                                $  327,655   $  333,130
    Actuarial liabilities                                37,380       38,256
    Provision for unpaid and unreported claims            9,409        8,510
    Accounts payable and accrued liabilities             52,889       50,378
    Interest rate swap (Note 12)                            680            -
    Long-term debt                                       49,644       38,151
    Future income taxes                                   4,940        5,480
    -------------------------------------------------------------------------
    Total liabilities                                   482,597      473,905
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital                                       173,438      173,438
    Contributed surplus                                   2,012        1,975
    -------------------------------------------------------------------------
                                                        175,450      175,413
    Accumulated other comprehensive loss                 (1,170)        (296)
    Retained earnings                                    27,981       28,598
    -------------------------------------------------------------------------
    Total shareholders' equity                          202,261      203,715
    -------------------------------------------------------------------------
                                                     $  684,858   $  677,620
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these consolidated
    financial statements.


               Approved:         (signed)                     (signed)
                         ----------------------------------------------------
                         Scott Tannas, Director        Greg Speirs, Director



    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
    (unaudited)
    FOR THE THREE MONTHS ENDED MARCH 31
    (in thousands, except for per share amounts)


                                                        2009         2008
    -------------------------------------------------------------------------
    REVENUE
    Commission and other customer income             $   18,441   $   16,798
    Premium income                                        8,447        7,161
    Interest income on customer loans                     4,922        4,941
    Investment income
      Change in fair value of held-for-trading
       securities                                          (131)         457
      Realized gain on sales of held-for-trading
       securities                                             6           21
      Realized loss on sales of available-for-sale
       assets                                              (728)           -
      Other net investment income                           424          724
    -------------------------------------------------------------------------
                                                         31,381       30,102
    EXPENSES
      Operating expenses                                 21,559       18,928
      Policyholder benefits                               3,633        3,705
      Interest expense - customer deposits                3,654        3,396
      Provision for credit losses (Note 12)                 289           80
    -------------------------------------------------------------------------
    Income before the following:                          2,246        3,993
      Income from equity investments                       (253)         613
      Interest and financing costs on long-term debt       (562)        (583)
      Amortization of intangible assets                    (412)        (352)
      Amortization of capital assets                       (691)        (515)
    -------------------------------------------------------------------------
    Income before income taxes                              328        3,156
    Income taxes                                            586         (770)
    -------------------------------------------------------------------------

    NET INCOME FOR THE PERIOD                        $      914   $    2,386
    -------------------------------------------------------------------------

    Retained earnings, beginning of period           $   28,598   $   28,015
      Preferred share dividends                          (1,003)           -
      Common share dividends                               (528)        (478)
    -------------------------------------------------------------------------
    Retained earnings, end of period                 $   27,981   $   29,923
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share (Note 7)
      Basic                                          $     0.00   $     0.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted                                        $     0.00   $     0.04
    





For further information:

For further information: Jodi Greig, Manager Investor Relations, Western
Financial Group, (403) 652-2663, info@westernfinancialgroup.net


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