| A full discussion of our first-quarter results is available at www.inalco.com under Investor Relations/Financial Reports. |
Earnings per share at top of guidance for the quarter
- Net income of $82.9M
- Diluted EPS of $0.83 (guidance of $0.75-$0.85)
- Return on shareholders' equity of 10.7%
- Book value of $31.49 per share
- Solvency ratio of 212%
- AUA/AUM exceeds $100B
QUEBEC CITY, May 8, 2014 /CNW Telbec/ - For the first quarter ended March 31, 2014, Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) reports net income attributed to common shareholders of $82.9 million and diluted earnings per common share of $0.83. The annualized return on shareholders' equity was 10.7%, which is consistent with the seasonality implicit in our quarterly earnings guidance.
The Company's book value grew by 3% in the first quarter to $31.49. The solvency ratio stood at 212% at March 31, 2014, well above our guidance of 175-200%.
"Our results represent a solid start to the year," commented Yvon Charest, President and Chief Executive Officer. "With the increase in equity markets together with our fund inflows during the quarter, our assets under management and administration exceeded the $100 billion mark, representing growth of 17% for the last twelve months. Our premiums and deposits were also strong at more than $2.1 billion for the quarter, due principally to growth in Group Savings and Retirement and segregated funds."
René Chabot, Senior Vice-President and Appointed Actuary added, "We finished the quarter at the high end of our earnings guidance, despite adverse long-term disability experience. For the fourth quarter in a row we benefited from a favourable product mix in our Individual Insurance operations that lowered our strain-to-new business ratio, and we had a strong contribution from equity markets."
| Highlights | |||||
| First quarter | |||||
| (In millions of dollars, unless otherwise indicated) | 2014 | 2013 | Variation | ||
| Net income attributed to shareholders | 90.0 | 88.4 | 2% | ||
| Less: preferred share dividends | 7.1 | 8.7 | (18%) | ||
| Net income attributed to common shareholders | 82.9 | 79.7 | 4% | ||
| Earnings per common share (diluted) | $0.83 | $0.83 | -- | ||
| Return on common shareholders' equity 1 | 10.7% | 12.0% | (130 bps) | ||
| March 31, 2014 | December 31, 2013 | March 31, 2013 | |||
| Solvency ratio | 212% | 217% | 237% | ||
| Book value per share | $31.49 | $30.67 | $28.67 | ||
| Assets under management and administration | 102,697 | 98,693 | 87,630 | ||
| Net impaired investments as a % of total investments | 0.06% | 0.06% | 0.04% | ||
| ________________________________________ 1 Annualized for the quarter. |
FIRST QUARTER HIGHLIGHTS
Profitability - For the first quarter ended March 31, 2014, Industrial Alliance reports net income attributed to common shareholders of $82.9 million, a year-over-year increase of 4%. Diluted earnings per share of $0.83 is comparable to the previous year, reflecting the impact of the equity issue in February 2013. The annualized shareholders' return on equity of 10.7% compares with 12.0% in the same quarter a year earlier when we strongly exceeded our earnings guidance.
The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.
Expected profit on in-force increased by 14% to $104.9 million pre-tax year over year, mainly attributed to the growth in assets under management in Individual Wealth Management. Expected profit on in-force reflects the best estimates of management in its 2014 earnings guidance. During the quarter, the Company also realized a net experience gain of $3.0 million pre-tax. A detailed analysis of experience gains and losses for the quarter is provided below.
Individual Insurance reported a net experience loss of $0.01 per share ($1.0 million). Favourable equity markets contributed a gain of $0.03 per share but this was more than offset by higher than expected mortality claims representing $0.04 per share. The adverse mortality was neutralized by favourable longevity in the wealth sectors.
Individual Wealth Management had an experience gain of $0.06 per share ($6.3 million). The growth in equity markets had a positive impact on fee-earning assets, generating a benefit of $0.03 per share. The dynamic hedging program for the segregated fund guarantee provided $0.02 per share and favourable longevity contributed $0.03 per share. Lower net sales of mutual funds resulted in a loss of $0.02 per share.
Group Savings and Retirement contributed $0.01 per share ($1.0 million) primarily for favourable longevity.
Group Insurance - Employee Plans reported higher than expected disability claims resulting in a loss of $0.04 per share ($4.0 million). The results of both Dealer Services and Special Market Solutions were in line with expectations.
Strain - In the Individual Insurance sector, the strain-to-new business ratio of 22% compared with guidance of 30% for the quarter. Management estimates that the lower strain ratio, attributed to a favourable sales mix and lower sales, represented a gain of $0.03 per share.
Income on capital - Total income on capital of $16.1 million pre-tax compares with $17.5 million in the previous quarter and $18.6 million a year ago. The first quarter of 2014 reflects an operating loss from IA Auto and Home that was $0.01 per share higher than expected.
Income taxes - The effective tax rate of 18% was at the low end of our 2014 guidance (18% to 22%).
Business Growth - Premiums and deposits exceeded $2.1 billion in the first quarter, slightly above our best results on record. Assets under management and administration amounted to $102.7 billion, reflecting the increase in equity markets during the quarter and fund inflows.
In the Individual sectors, gross fund sales of $1.1 billion were comparable to the previous year. Net sales of segregated funds amounted to $95.8 million and net sales of mutual funds amounted to $57.8 million, for a total of $153.6 million. Retail insurance sales were $56.8 million in the first quarter, down by 14% over the same quarter last year that was exceptionally strong.
In the Group sectors, Group Savings and Retirement led the way with sales growth of 17% ($293.9 million). In Dealer Services, sales of creditor insurance amounted to $70.0 million (+2%) and sales of P&C products increased to $29.9 million (+13%). Special Market Solutions reported sales of $48.1 million, comparable to the previous year. Employee Plans had sales of $9.0 million, comparable to the last three quarters.
Capital - At March 31, 2014, the solvency ratio stood at 212% compared with 217% at December 31, 2013, primarily attributed to the decrease in long-term interest rates during the quarter.
Quality of Investments - At March 31, 2014, net impaired investments stood at 0.06% of total investments, the proportion of bonds rated BB and lower was 0.43% and the real estate occupancy rate was 93%. These measures attest to the quality of the Company's investment portfolio.
Dividend - The Board of Directors approved a dividend of 26 cents per share on its outstanding common shares representing a payout ratio of 31%. This dividend is payable on June 16, 2014 to shareholders of record at May 23, 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 June 16th must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on May 15, 2014. Enrollment information is provided on the Company's website at www.inalco.com under Investor Relations/Dividends.
Macroeconomic Sensitivity - At March 31, 2014:
- The Company can absorb a sudden decrease of about 27% in the S&P/TSX index before having to strengthen reserves for policyholder liabilities (23% at December 31, 2013).
- The Company can absorb a sudden decrease of 40% in the S&P/TSX index before the solvency ratio drops below 175% (36% at December 31, 2013) and a decrease of 52% before the solvency ratio drops below 150% (48% at December 31, 2013).
- The full-year impact on net income attributed to common shareholders of a sudden 10% decrease in the stock markets is $25 million ($25 million at December 31, 2013). This does not take into consideration any potential reserve strengthening.
- The impact on net income attributed to common shareholders of a 10 basis point decrease in the initial and ultimate reinvestment rates totals $80 million ($79 million at December 31, 2013).
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 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 22%
- Strain on new business: 25% of sales
Guidance for ROE and earnings per common share excludes any potential reserve strengthening in 2014.
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, 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 Thursday, May 8, 2014 at 11:30 a.m. (ET). To listen in on the conference call, dial 1 800 619-2686 (toll-free). A replay of the conference call will also be available for a one-week period, starting at 2:00 p.m. on Thursday, May 8, 2014. To listen to the conference call replay, dial 1 800 558-5253 (toll-free) and enter access code 21711067. 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 for the quarter ended March 31, 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.
Annual General Meeting of Shareholders
Industrial Alliance is holding its Annual General Meeting of Shareholders this afternoon at 2:00 p.m. at the Quebec City Convention Centre located at 1000 René-Lévesque Boulevard East 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 3:30 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.inalco.com.
Investor Day
Industrial Alliance will hold its biennial investor day on Wednesday, June 11, 2014, in Toronto, from 8:30 a.m. to 1:30 p.m. (ET). Details on accessing the event will be provided at a later date.
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 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 products, 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.
Investor Relations
Grace Pollock
Office: 418 780-5945
Email: [email protected]
Media Relations
Pierre Picard
Office: 418 684-5000, ext. 1660
Email: [email protected]
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