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04.08.2016 17:50
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Industrial Alliance Reports Its Second Quarter Results - Very Strong earnings anchored by favourable policyholder experience in all lines of business
Ein Business-Meeting (Symbolbild).
© gilaxia / E+ / Getty Images
Canada NewsWire
QUEBEC CITY, Aug. 4, 2016
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.
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