Industrial Alliance Annual Meeting: Breaking New Ground - from Insurance to Wealth Management
"Few events in themselves can transform an organization. At Industrial Alliance, the transformation took place gradually. Over the years, in a tradition all our own, we have quietly gone from an insurance company to a financial institution, and from a Quebec company to a Canada-wide organization." These remarks were made today by Yvon Charest, President and Chief Executive Officer of Industrial Alliance Insurance and Financial Services Inc. while commenting on achievements in 2005 and reiterating the Company’s growth strategy before shareholders and participating policyholders who attended the Industrial Alliance annual general meeting.
Main Achievements in 2005
Drawing on the theme of the Company’s 2005 annual report, Breaking New Ground: From Insurance to Wealth Management, Mr. Charest began by stating that 2005 was marked by many achievements that will strengthen Industrial Alliance’s competitive position for the long term.
Among the year’s main achievements, Mr. Charest mentioned: the acquisition of Clarington Corporation, a mutual fund management company that has enabled Industrial Alliance to become a scale player in the Canadian investment fund market; the integration of BLC-Edmond de Rothschild Asset Management Inc., a mutual fund management company acquired at the end of 2004; the integration of National Life, an Industrial Alliance life and health insurance /subsidiary; the restructuring of the retail sector distribution networks; ongoing development outside Quebec; and the acquisition of KingsGate Securities, a full service securities brokerage firm.
"These achievements are part of a larger strategy that targets five objectives," continued Mr. Charest: "developing the wealth management sector; expanding our distribution networks; geographically diversifying our activities; pursuing acquisitions, primarily in Canada but also in the United States if attractive acquisition opportunities arise; and maximizing synergy between Industrial Alliance Group companies."
Mr. Charest went on to provide more details about the Company’s growth strategy.
Development of 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, mainly by manufacturing its own products and developing its own distribution networks.
Industrial Alliance considers the development of the wealth management sector to be important because it complements the Company’s insurance activities, it’s a high growth sector, it has the potential to generate higher returns than those currently targeted by the Company (i.e., return on equity of between 13% and 15%), it provides access to new distribution networks, and it will provide a better diversification of the Company’s sources of earnings.
Although Industrial Alliance has been a Canada-wide player in the segregated fund market for several years, it only began to develop the mutual fund and securities market five years ago. During this period, the Company has made eleven acquisitions in the wealth management sector. As at March 31, 2006, the Company managed $6.0 billion in mutual fund assets and $5.3 billion in segregated fund assets in the retail market, for a total of $11.3 billion. The Company now ranks among the top 20 investment fund managers in Canada in the retail market and among the top 10 in the independent advisors channel. As at March 31, 2006, Industrial Alliance was also administering $9.6 billion in mutual fund assets through its two mutual fund brokerage firms, Investia and FundEX, and its securities subsidiary, Industrial Alliance Securities.
Expansion of distribution networks – In the Personal Financial Services sector, i.e., Individual Insurance and Individual Wealth Management, Mr. Charest pointed out that Industrial Alliance has long been known for the diversity, scope and depth of its distribution networks. Over the years, the Company has put significant efforts into growing its distribution networks in all regions of the country with the goal of becoming the "insurer of choice" for an ever-growing number of representatives.
Today, the Company relies on multiple networks to distribute its products, including: a Career Agents network (over 1,400 dedicated insurance agents); a General Agents network (some 12,000 insurance brokers); a National Accounts network (approximately 200 securities brokers and financial planners); a mutual fund advisors network (over 1,000 advisors affiliated with its Investia and FundEX subsidiaries); its own securities distribution network (about 150 brokers); a bank network (some 500 Laurentian Bank Financial Services representatives with whom the Company has signed an exclusive 10-year distribution agreement for the sale of Industrial Alliance mutual funds); and, since the Clarington acquisition, a vast network of independent mutual fund brokers (the Company currently does business with some 10,000 representatives in this network).
"We are particularly well-positioned to take advantage of the convergence in distribution," stated Mr. Charest. "In fact, we now do business with representatives from all areas, including insurance, mutual funds, securities and the banking industry."
Geographic diversification of activities – With respect to the geographic distribution of activities, Mr. Charest reiterated the Company’s objective to be recognized in all lines of business as a Canada-wide company. Industrial Alliance has long been known as a national player in the Individual Insurance sector. However, the Company’s three other major activity sectors have been working hard for many years to achieve the same status. In 2005, their efforts finally paid off since, for the first time, sales outside Quebec were higher than those inside the province in most activity sectors. The Company therefore plans to actively pursue its Canada-wide development efforts in all sectors of activity.
Pursuit of acquisitions – In terms of acquisitions, Mr. Charest began by mentioning that the Company has good financial flexibility with which to pursue its growth through acquisitions, since it estimates its current excess capital at some $70 million, an amount that could increase to between $100 and $125 million by the end of 2006.
Mr. Charest reiterated that the Company is looking for acquisitions in the wealth management sector, as it has been over the last few years, in the core life insurance sector, as well as in the health sector, an area in which the Company intends to explore business opportunities.
Mr. Charest added however that the Company feels ready to bring its strategy to another level and start expanding in the United States. "Now that we have made a significant breakthrough in the Canadian wealth management sector and that more than half of our sales are from outside Quebec, we believe it’s time to actively explore the possibilities that are available on the vast American market," explained Mr. Charest. "If we enter the U.S., it will be in a niche market where we feel we can carve out a good market position and generate competitive advantages."
Maximization of synergy within the Industrial Alliance Group – Since one of Industrial Alliance’s objectives is to improve its competitiveness while remaining a low-cost producer, the Company is constantly seeking to maximize synergy between Industrial Alliance Group companies in order to streamline its structure and thereby become a more competitive and more profitable company.
It is in this spirit that the Company pursued the integration of its National Life subsidiary in 2005, the operations of which are currently being merged with those of the parent company, and also integrated the operations of BLC-Edmond de Rothschild with its mutual fund subsidiary. In 2006, the Company plans to continue on this same path by combining Clarington Corporation with its other mutual fund activities in order to form a new entity: IA Clarington.
"We are determined to put everything in place to allow Industrial Alliance to progress, just as we have in the past," concluded Mr. Charest. "We have succeeded in standing out in the market through a skilful blend of a number of attributes including an entrepreneurial culture that encourages innovation and performance, a well-thought-out business strategy based on a mutually rewarding relationship with representatives, a reputation for excellence in terms of risk management, and qualified personnel that are trained internally and focused on achieving the Company’s long-term objectives in terms of both business growth and profitability."
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 as well as in the Northwestern United States. Industrial Alliance insures over 2 million Canadians, employs more than 2,700 people and manages and administers over $40 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
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