Industrial Alliance Reports First Quarter Results - Solid quarter for growth, profit and shareholder value creation

• Q1 earnings up 27% to $104.9 million ($1.03 EPS)
• Annualized ROE of 12.1%
• AUA/AUM up 12% YoY to $114.7 billion
• BVPS up 11% YoY to $34.94
• Solvency ratio of 211%

 

A full discussion of our results is available at www.ia.ca under About iA, in the Investor Relations section.

QUEBEC CITY, May 7, 2015 /CNW Telbec/ - For the first quarter ended March 31, 2015, Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) reports net income attributed to common shareholders of $104.9 million, up 27% over the previous year. After accounting for the premium of $0.04 per share related to the redemption of the Series F preferred shares on March 31st, diluted earnings per common share (EPS) rose to $1.03 from $0.83 a year ago. The annualized return on shareholders' equity was 12.1%, and the solvency ratio at quarter-end was 211%.

Yvon Charest, President and Chief Executive Officer commented, "Our first quarter represents a solid start to the year. In retail insurance, growth was sustained for minimum premiums and individual disability in Canada, iA Auto and Home and in the US. On the group side, Employee Plans, Special Markets Solutions and the P&C segment of Dealer Services also made a positive contribution to top-line growth. In our wealth management business where segregated fund sales continue to gain momentum, assets under management and administration were up 12% in the last year despite weakness in our mutual fund flows. As for long-term shareholder value creation, book value per share grew by 11% over the last twelve months."

René Chabot, Executive Vice-President and Chief Actuary added, "First-quarter earnings exceed our guidance provided to the Street. This result includes a significant tax gain and better than expected equity returns, partially offset by adverse mortality across all our insurance operations and higher than usual claims for iA Auto and Home. Our capital position remains strong and we have the flexibility on our balance sheet to expand our operations through internal and strategic initiatives."

Highlights
	First quarter
(In millions of dollars, unless otherwise indicated)	2015	2014	Variation
Net income attributed to shareholders	114.4	90.0	27 %
Less: preferred share dividends	5.5	7.1	(23 %)
Less: premium on preferred share redemption	4.0	—	—
Net income attributed to common shareholders	104.9	82.9	27 %
Earnings per common share (diluted)	$ 1.03	$ 0.83	$ 0.20
Return on common shareholders' equity^1	12.1 %	10.7 %	140 bps
^1 Annualized for the quarter.
Highlights
	March 31, 2015	December 31, 2014	March 31, 2014
Solvency ratio	211 %	209 %	212 %
Book value per share	$ 34.94	$ 33.83	$ 31.49
Assets under management and administration	$ 114,671	$ 109,481	$ 102,784
Net impaired investments as a % of total investments	0.07 %	0.07 %	0.06 %

FIRST QUARTER HIGHLIGHTS

Profitability - For the first quarter ended March 31, 2015, Industrial Alliance reports net income attributed to common shareholders of $104.9 million, an increase of 27% over the previous year. Diluted earnings per share of $1.03, after accounting for the premium of $0.04 per share (EPS) on the redemption of our series F preferred shares on March 31st, compare with $0.83 in the same quarter a year ago. The annualized shareholders' return on equity was 12.1% versus 10.7% a year ago, the former being at the high end of the guidance provided by management to the financial markets for 2015.

The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.

Expected profit on in-force increased by a strong 15% to $120.6 million pre-tax over the same quarter last year, which is attributed mainly to the retail insurance and wealth management sectors. In addition, Industrial Alliance realized a net experience gain of $3.7 million pre-tax for the quarter. A detailed analysis of gains and losses is provided below.

Individual Insurance reported an experience gain of $0.01 per share ($0.6 million). Adverse mortality (‑$0.06 EPS) in the quarter was completely offset by a gain from favourable equity markets ($0.05 EPS) and miscellaneous items ($0.02 EPS).

Individual Wealth Management had an experience gain of $0.04 per share ($4.4 million) attributed equally to the impact of market growth on assets and favourable longevity.

Group Insurance reported a net experience loss of $0.03 per share (-$3.2 million) related to adverse mortality across the three divisions, despite lower disability claims in Employee Plans (+$0.01 EPS).

Group Savings and Retirement reported a gain of $0.01 per share ($0.9 million) related to favourable longevity.

Strain - In the Individual Insurance sector, the strain-to-new business ratio was 39% compared with guidance of 35% that includes typical first-quarter seasonality. Management estimates that the higher strain ratio, which is attributed to an unfavourable product mix in the quarter, represented a loss of $0.02 per share.

Income on capital - Total income on capital of $13.6 million pre-tax compares with $28.1 million in the previous quarter. The decrease is mainly attributed to higher than expected claims for iA Auto and Home as a result of unusually harsh winter conditions.

Income taxes - The Company realized a tax recovery of $0.19 per share in the quarter related principally to tax-exempt investment income. The recovery relates specifically to the IA Pacific subsidiary for the years 2008-2012 prior to its merger with the parent company.

Business Growth - Total assets under management and administration of $114.7 billion increased by 5% in the quarter and 12% in the last year. Premiums and deposits of $2.0 billion were down 7% over the previous year mainly attributed to lower gross mutual fund sales.

In retail insurance, sales of $55.1 million (+16%) reflect growth in minimum premiums in Canada (+14%) and the US (+42%). Canadian sales include Excellence, our adjustable disability business, where sales were up by 25%. (Note that a correction of $9.5 million was made to retail insurance sales in the first quarter of 2014 to reverse an overstatement of excess premiums in Canada.)

In retail wealth management, net sales of segregated funds (+$170.8 million) were offset by mutual fund outflows of $267.0 million, resulting in net investment fund outflows of $96.2 million.

In the group insurance sector, which had total sales of $163.9 million (+4%), Employee Plans achieved sales of $15.3 million (+70%) and Special Markets Solutions delivered sales of $47.5 million (-1%). In Dealer Services, sales totalled $65.4 million (-7%) in creditor insurance and $35.7 million (+19%) in P&C products.

In Group Savings and Retirement, sales were $250.9 million, 15% lower than the previous year.

Capital - At March 31, 2015, the solvency ratio was 211% compared with 209% at the end of the previous quarter. The increase reflects the net proceeds of the subordinated debt issue in the quarter (+7%) and the contribution from first-quarter earnings and other items (+2%), offset by the decline in long-term interest rates (-7%).

Dividend - The Board of Directors approved a dividend of 28 cents per share on the Company's outstanding common shares, representing a payout ratio of 27%. This dividend is payable on June 15, 2015 to shareholders of record at May 22, 2015.

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 June 15, 2015 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on May 14, 2015. Enrollment information is provided on the Company's website at www.ia.ca under About iA, in the Investor Relations/Dividends section.

Market Guidance for 2015

• Earnings per common share: target range of $3.80 to $4.20
• Return on common shareholders' equity (ROE): target range of 11.0% to 12.5%
• Solvency ratio: target range of 175% to 200%
• Dividend payout ratio: payout range of 25% to 35% with the target being the mid-point
• Effective tax rate: target range of 18% to 20%
• Strain on new business: 30% ±5% of sales

Guidance for ROE and earnings per common share excludes any potential reserve strengthening in 2015.

Issuance of Subordinated Debt and Redemption of Preferred Shares
During the first quarter of 2015, Industrial Alliance issued $250 million of fixed/floating subordinated debentures due February 23, 2027. The  net proceeds were added to the Company's general funds and used for general corporate purposes including the redemption on March 31, 2015 of its 4,000,000 Non-Cumulative Class A Preferred Shares Series F then outstanding. The redemption price was $26.00 per share plus an amount equal to all declared and unpaid dividends, less any tax required to be deducted and withheld by Industrial Alliance.

GENERAL INFORMATION

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 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 often 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 Thursday, May 7, 2015, at 11:30 a.m. (ET). To listen in on the conference call, dial 1-800-738-1032 (toll-free). A replay of the conference call will also be available for a one‑week period, starting at 2:00 p.m. on May 7, 2015. To listen to the conference call replay, dial 1‑800‑558‑5253 (toll-free) and enter access code 21765621. A webcast of the conference call (in listen only mode) will also be available on the Industrial Alliance website at www.ia.ca.

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 for the quarter ended March 31, 2015, 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.ia.ca under About iA, in the Investor Relations section and on SEDAR at www.sedar.com.

Annual Meeting
Industrial Alliance is holding its Annual Meeting at 2:00 p.m. on Thursday, May 7, 2015 at the Quebec City Convention Centre located at 1000 René-Lévesque Boulevard East in Quebec City. Media will have the opportunity to meet with Chairman of the Board John LeBoutillier as well as President and Chief Executive Office Yvon Charest immediately after the Annual Meeting at approximately 3:30 p.m. A videocast of the meeting as well as a copy of the management presentation will be available on the Industrial Alliance website at www.ia.ca

Forward-looking Statements
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 2014 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 iA Financial Group
iA Financial Group is a trademark under which Industrial Alliance Insurance and Financial Services Inc. operates in Canada and the United States. This new brand name may also be used to collectively refer to all companies under the Industrial Alliance group banner, including Industrial Alliance Insurance and Financial Services Inc. and its subsidiaries. Founded in 1892, iA Financial Group offers life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities, auto and home insurance, mortgages and car loans and other financial products and services for both individuals and groups. It is one of the fourth largest life and health insurance companies in Canada and one of the largest publicly-traded companies in the country. iA Financial Group stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.

SOURCE Industrial Alliance Insurance and Financial Services Inc.

Investor Relations, Grace Pollock, Office: 418 780-5945, Email: [email protected]; Media Relations, Pierre Picard, Office: 418 684-5000, ext. 1660, Email: [email protected]

Related Links

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