Industrial Alliance Annual Meeting: Making Strides in a Consolidated Environment
Shareholders approve stock split
"2004 was probably the year we most effectively proved to the financial markets that not only are we able to compete successfully in the industry, but we can also gain market share in an increasingly competitive environment while maintaining our profit margins." This was how Yvon Charest, President and Chief Executive Officer of Industrial Alliance Insurance and Financial Services Inc., described the 2004 results to the shareholders and participating policyholders at today’s annual general and special meeting.
Mr. Charest first noted that 2004 was a profitable year in all respects. In terms of profitability, the Company obtained record net income of $161.2 million ($155.1 million including the $6.1 million integration charge for National Life), an 18% increase over the previous year and a 14.1% return on equity.
With respect to business growth, in spite of the intense competition brought about by the current consolidation, Industrial Alliance has continued to gain market share, particularly in the two retail products and services sectors. The Company’s individual insurance sales grew 9% in 2004 compared to the previous year, while industry sales decreased by 1%. This result ranks the Company third in Canada (one ranking higher than in 2003), with 13.2% of the market (11.9% in 2003). Individual Annuity sales were also excellent, with a 38% increase in 2004, compared to 28% for the mutual funds industry.
"Once again we have proven that we can respect our commitments to the financial community," Mr. Charest commented. "In terms of profitability, we succeeded in obtaining a return that is within our 13% to 15% target range, and in terms of business growth, we reached our sales growth objective of five percentage points higher than the industry, particularly in the Individual Insurance and Annuities sectors." Mr. Charest further added that the Company has enough confidence in its strategy to renew these two objectives for the next few years.
Mr. Charest also pointed out that February 3 was the fifth anniversary of Industrial Alliance’s listing on the Toronto Stock Exchange. In the last five years, shareholder net income has grown 107%, diluted earnings per share have increased by 96%, insurance and annuity premiums are up 79%, assets under management and under administration have increased by 119%, and the Company’s market capitalization jumped by 285% between February 3, 2000 and February 3, 2005, owing to a 266% increase in the share price. "These results prove that in keeping with the theme of its annual report, Industrial Alliance can indeed Make Strides in a Consolidated Environment."
Main Achievements in 2004 and Development Strategy
Mr. Charest also emphasized that 2004 was marked by several achievements that will further strengthen Industrial Alliance’s competitive position over the next few years. Among the main achievements for the year, Mr. Charest mentioned: the Company’s decision to integrate the operations of its National Life subsidiary with its own operations; the purchase of BLC-Edmond de Rothschild Asset Management Inc., a mutual fund manager; the signing of a 10-year exclusive distribution agreement with the Laurentian Bank to sell Industrial Alliance mutual funds; the purchase of a majority interest in FundEX Investments Inc., a mutual fund brokerage firm; the purchase of Lynch Investments Inc. and KingsGate Securities Limited (at the beginning of 2005 for this the latter), two securities brokerage companies; and the pursuit of the development strategy for the Group Insurance and Pension sectors outside of Quebec.
"These achievements are part of a more global strategy that targets four objectives: to improve our efficiency, to actively develop the wealth management sector, to pursue our geographic diversification, particularly for the group product and services sectors, and to expand our distribution networks," Mr. Charest explained.
Mr. Charest then provided a number of details regarding the Company’s strategy.
Improve efficiency – To make the Industrial Alliance Group more efficient, Mr. Charest recalled that on December 1, 2004, the Company announced that it was going to integrate the operations of its National Life subsidiary with those of the parent company. This combination is designed to streamline the structure of the Group, thereby allowing it to become even more competitive and profitable. The Company believes that this integration should increase the Company’s net income by $6.6 million per year ($0.17 per diluted share) starting in 2007, once the integration is completed. For 2005, the integration should have a neutral impact on profitability.
Develop the wealth management sector – For the wealth management sector, Mr. Charest explained that the Company’s strategy is to actively pursue its development in this sector by favouring the growth of products manufactured by Industrial Alliance Group companies. Industrial Alliance began developing the wealth management sector just five years ago. Since then, the Company has made no less than 10 acquisitions. In addition to gaining access to new distribution networks, these acquisitions have allowed the Company to achieve critical mass in several segments of the wealth management sector, including mutual funds, where the Company is a manufacturer and distributor, securities, private wealth management and institutional management. As at December 31, 2004, the Company was managing and administering $8.5 billion in assets in these segments.
Pursue geographic diversification – For the group products and services sectors, i.e., Group Insurance and Pensions, Mr. Charest reiterated the Company’s objective to be recognized in the group sector as a national insurer, the same way as it is in the individual sector. About one half of the Company’s sales come from outside of Quebec, all sectors combined. In the retail products and services sector, almost 60% of sales are made outside of Quebec, compared to just under 40% in the group products and services sector. In 2004, the Company implemented what could become the cornerstone of its future development outside Quebec in the group sector, by opening new offices in Western Canada, and by strengthening its sales teams in various regions of the country. As in Quebec, development outside the province will take place by developing business relationships with preferred distributors, focusing primarily on medium-sized businesses while being opportunistic with respect to the underwriting of larger groups.
Expand the distribution networks – In the retail products and services sectors, i.e., Individual Insurance and Annuities, Mr. Charest pointed out that for several years Industrial Alliance has been recognized for the strength and size of its distribution networks. The Company relies on multi-channel networks to distribute its products, including three so-called "traditional" networks, namely the Career network (made up of 1,400 dedicated agents), the General Agents network (made up of over 12,000 insurance brokers) and the National Accounts network (made up of some 200 securities brokers and financial planners). Over the last few years, the Company has also decided to develop two new distribution networks to take advantage of the convergence in distribution. These networks are the mutual fund brokers network (where the Company now has some 1,500 representatives) and its own securities brokerage network (where the Company has just over 100 brokers). Finally, in December, following the acquisition of BLC-Edmond de Rothschild Asset Management Inc., the Laurentian Bank was added as a new distribution network for the sale of mutual funds. The Company has signed a 10-year exclusive distribution agreement with the Laurentian Bank, which is made up of some 500 representatives. The Company’s strategy consists of growing these various distribution networks Canada-wide in order to become the "insurer of choice" for an increasing number of representatives.
"As we have done in the past, we are determined to focus all our efforts on achieving our objectives," Mr. Charest concluded. "What sets us apart in the market is a strategic combination of several attributes: an entrepreneurial culture that favours innovation and performance; a well-thought-out and efficient business strategy that focuses on mutually profitable relationships with representatives; a reputation for excellence in terms of managing insurance and investment risks; and qualified personnel that who are trained internally and who focus on achieving the Company’s long-term objectives, in terms of both business growth and profitability."
At the annual meeting, the shareholders approved a resolution to carry out a two-for-one split of the Company’s common stock. The split will take effect on May 18, 2005 and the common shares will commence trading on a split-adjusted basis on May 16, 2005, in accordance with the rules of the Toronto Stock Exchange, where the Company’s stock is trading under the ticker symbol IAG. On a split-adjusted basis, the dividend of $0.25 per common share announced this morning equals a dividend of $0.125 per common share. This dividend will be payable in cash on June 15, 2005 to the shareholders of record on May 20, 2005.
About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and health insurance company that offers a wide range of life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities, auto and home insurance, mortgage loans and other financial products and services. The fifth largest life and health insurance company in Canada, Industrial Alliance is at the head of a large financial group – the Industrial Alliance Group – which has operations across Canada. Industrial Alliance insures over 1.7 million Canadians, employs over 2,600 people and manages and administers $30.0 billion in assets. Industrial Alliance stock is listed on the Toronto Stock Exchange under the ticker symbol IAG. Industrial Alliance is among the 100 largest public companies in Canada.
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Vice-President, Investor Relations
Office phone: (418) 684-5275
Cell phone: (418) 576-3624