Industrial Alliance Reports Its Second Quarter Results - Very Strong earnings anchored by favourable policyholder experience in all lines of business Français
QUEBEC CITY, Aug. 4, 2016 /CNW Telbec/ -
(TSX: IAG)
Q2-2016 Highlights
- Diluted EPS of $1.35, 17% above top of Q2 guidance ($1.05-$1.15)
- Annualized return on equity of 14.7% (guidance of 11.0% to 12.5%)
- Favourable policyholder experience of $0.10 EPS ($0.19 EPS year to date)
- New business strain ratio of 13% versus guidance of 15%
- Continued strong sales growth for retail insurance in Canada and the US (+18%)
- Number one position maintained for net sales of segregated funds in Canada
- Solvency ratio of 199% reflects Q2 macroeconomics (guidance of 175%-200%)
"Our excellent second quarter results clearly demonstrate the underlying strength of our operations," commented Yvon Charest, President and Chief Executive Officer. "Our two largest business segments continue to perform extremely well, with retail insurance maintaining strong momentum in both Canada and the US and our segregated funds still leading the industry in terms of net sales. Among our subsidiaries, Excellence continues the successful roll-out of its adjustable disability product across Canada, iA Auto and Home is starting to generate sales from new partnerships concluded in the last year, and our wealth management distribution affiliates benefitted from the market growth this quarter. Despite recent turbulence in the macroeconomic environment, our investment portfolio remains healthy and our solvency ratio is well within our comfort zone."
"We are extremely encouraged by the quality of our earnings in the second quarter," added René Chabot, Executive Vice-President, CFO and Chief Actuary. "In addition to delivering on the cornerstone of our 2016 plan, which is to lower strain on new sales and improve profit in Employee Plans and our US operations, policyholder experience was favourable in all lines of business. As a result of our very strong financial performance during the first half of the year, with earnings ahead of our guidance, we are well‑positioned to achieve our 2016 plan."
Highlights |
||||||
Second quarter |
Year-to-date at June 30 |
|||||
(In millions of dollars, unless otherwise indicated) |
2016 |
2015 |
Variation |
2016 |
2015 |
Variation |
Net income attributed to shareholders |
143.6 |
146.1 |
(2%) |
246.0 |
260.5 |
(6%) |
Less: preferred share dividends |
4.1 |
3.9 |
5% |
8.2 |
9.4 |
(13%) |
Less: redemption premium on preferred shares |
— |
— |
— |
— |
4.0 |
— |
Net income attributed to common shareholders |
139.5 |
142.2 |
(2%) |
237.8 |
247.1 |
(4%) |
Earnings per common share (diluted) |
$1.35 |
$1.402 |
($0.05) |
2.31 $ |
$2.432 |
($0.12) |
Return on common shareholders' equity 1 |
14.7% |
15.8% |
(110 bps) |
9.4% |
13.1% |
(370 bps) |
June 30, 2016 |
March 31, 2016 |
December 31, 2015 |
June 30, 2015 |
|||
Solvency ratio |
199% |
205% |
213% |
223% |
||
Book value per share |
$37.60 |
$36.48 |
$36.76 |
$36.11 |
||
Assets under management and administration |
$121.9B |
$117.7B |
$115.8B |
$112.9B |
||
Net impaired investments as a % of total investments |
0.04% |
0.04% |
0.05% |
0.07% |
1 Annualized for the quarter. Trailing twelve months for year-to-date. 2 2015 results include a tax recovery of $0.17 per share.
SECOND QUARTER HIGHLIGHTS
Profitability - For the second quarter ended June 30, 2016, Industrial Alliance Insurance and Financial Services Inc. reports net income attributed to common shareholders of $139.5 million, diluted earnings per common share (EPS) of $1.35 , and annualized return on shareholders' equity (ROE) of 14.7%, all surpassing our guidance for the quarter. This compares with net income to common shareholders of $142.2 million, EPS of $1.40 and ROE of 15.8% a year earlier. Notably, last year's Q2 results included a tax recovery of $0.17 per share.
The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.
Expected profit on in-force increased by 6% to $140.4 million pre-tax over the same quarter last year and is attributed mainly to the retail and group insurance sectors. In addition, the Company reported gains of $0.26 per share, of which $0.10 is attributed to favourable policyholder experience across all lines of business, $0.11 per share to market-related items and $0.05 per share to strain, income taxes and income on capital. A detailed analysis of gains and losses follows.
Individual Insurance reported an experience gain of $0.04 per share ($4.4 million), mainly for favourable morbidity.
Individual Wealth Management reported an experience gain of $0.14 per share ($14.4 million) attributed to the dynamic hedging program for the segregated fund guarantee ($0.10 EPS), mortality on single-premium immediate annuities ($0.02 EPS), lower expenses ($0.01 EPS) and higher fees on assets under management ($0.01 EPS).
Group Insurance reported a net experience gain of $0.01 per share ($0.6 million) explained principally by favourable long term disability for Employee Plans ($0.02 EPS), offset by higher claims for Special Markets Solutions ($0.01 EPS).
Group Savings and Retirement reported an experience gain of $0.02 per share ($1.4 million) related to investment and expense gains.
Strain - In the Individual Insurance sector, strain on new business amounted to $9.3 million pre-tax, or 13% of sales, compared with guidance of 15%. Management estimates that the lower strain ratio, which is attributed mainly to the higher sales volume in both Canada and the US, represented a gain of $0.01 per share.
Income on Capital - Total income on capital amounted to $17.5 million pre-tax which is in line with the Company's quarterly run rate. Higher investment income was partially offset by seasonally lower results at iA Auto and Home, giving rise to a gain of $0.01 EPS.
Income Taxes - The Company realized a net tax gain of $0.03 EPS on true-ups relating to 2015.
Business Growth - Assets under management and administration of $121.9 billion progressed by 4% in the second quarter (8% year over year), principally due to market growth. Premiums and deposits of $1.9 billion were stable year over year, reflecting strong results in the insurance sectors offset by the decrease in gross mutual fund sales.
The retail insurance sector continues to experience strong sales growth across all segments. Total sales of $72.9 million (+18%) progressed by 11% in Canada and 35% in the US. Sales in our adjustable disability business, which continues its cross‑Canada expansion, were up by 37%. Sales in Canada amounted to $48.4 million (including $5.2 million for adjustable disability) and the US accounted for $24.5 million.
In retail wealth management, the Company recorded its tenth consecutive quarter of positive net segregated fund sales while the industry as a whole in Canada is in net redemptions. The Company, which holds first position for net sales and third for assets, had gross segregated fund sales of $352.1 million ($366.5 million in 2015) and net segregated fund inflows of $53.4 million ($88.8 million in 2015). In the mutual fund business, gross sales amounted to $316.7 million ($383.0 million in 2015) while net outflows slowed to $121.3 million from $165.1 million in the same quarter a year ago.
The group insurance sector reported total sales of $217.3 million (-2%). In Dealer Services, sales of P&C products and creditor insurance amounted to $58.0 million (+3%) and $101.6 million (+2%), respectively, for an overall increase of 3%. In the remaining two segments, Special Markets Solutions had sales of $40.6 million (-3%) and Employee Plans had sales of $17.1 million (-32%).
In Group Savings and Retirement, total sales were $325.2 million, 5% lower than the previous year.
At iA Auto and Home, written premiums in the second quarter grew by 12% to $91.6 million, attributed to organic growth and new partnerships.
Capital - At June 30, 2016, the solvency ratio was 199% compared with 205% at the end of the previous quarter. Most of the decrease is related to changes in the macroeconomic environment.
Dividend - The Board of Directors approved a dividend of 32 cents per share on the Company's outstanding common shares. This dividend is payable on September 15, 2016 to shareholders of record at August 19, 2016.
Dividend Reinvestment and Share Purchase Plan - Registered shareholders wishing to enrol in the Company's Dividend Reinvestment and Share Purchase Plan (DRIP) so as to be eligible to reinvest the next dividend payable on September 15, 2016 must ensure that the duly completed form is delivered to Computershare no later than 4:00 p.m. on August 12, 2016. Enrolment information is provided on the Company's website at www.ia.ca under About iA, in the Investor Relations/Dividends section. Common shares issued under the Company's DRIP will be purchased on the secondary market and no discount will be applicable.
Market Guidance for 2016
- Earnings per common share: target range of $4.20 to $4.60
- 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: target of 15% (±5%) of sales in Individual Insurance
Guidance for ROE and earnings per common share excludes any potential reserve strengthening in 2016.
GENERAL INFORMATION
Non-IFRS Financial Information
iA Financial Group 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.
Forward-looking Statements
This press release may contain statements relating to strategies used by iA Financial Group 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 iA Financial Group 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 iA Financial Group 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 iA Financial Group; 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 2015 Management's Discussion and Analysis and in the "Management of Risks Associated with Financial Instruments" note to iA Financial Group's consolidated financial statements, and elsewhere in iA Financial Group'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. iA Financial Group 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.
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, 2016, related consolidated financial statements and accompanying notes as well as our supplemental information package, all of which are available on the iA Financial Group website at www.ia.ca under About iA, in the Investor Relations/Financial Reports section and on SEDAR at www.sedar.com.
Conference Call
Management will hold a conference call to present the Company's results on Thursday, August 4, 2016, at 5:00 p.m. (ET). The toll‑free dial-in number is 1-888-225-7896. A replay of the conference call will be available for a one‑week period, starting at 7:30 p.m. on August 4, 2016. To access the conference call replay, dial 1‑800‑558‑5253 (toll-free) and enter access code 21812614. A webcast of the conference call ( listen-only mode) will also be available on the company's website at www.ia.ca.
About iA Financial Group
Founded in 1892, iA Financial Group offers life and health insurance products, mutual and segregated funds, savings and retirement plans, RRSPs, 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 four largest life and health insurance companies in Canada and among the largest publicly-traded companies in the country. iA Financial Group stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.
iA Financial Group is a business name and trademark of Industrial Alliance Insurance and Financial Services Inc.
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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