Industrial Alliance Announces Acquisition of U.S. Life Insurance Company
Texas-based American-Amicable Group Expands Platform for Growth in the U.S. Market
Industrial Alliance Insurance and Financial Services Inc. ("Industrial Alliance" or "the Company") announced today the signing of an agreement to acquire all the outstanding shares of American-Amicable Holding, Inc. ("American-Amicable") for a cash consideration of approximately $145 million including estimated excess capital of $45 million (all amounts in Canadian dollars). The transaction, which will be carried out through the Company’s wholly-owned U.S. subsidiary IA American Life Insurance Company ("IA American"), will be financed from cash on hand. The acquisition is expected to be immediately accretive to earnings by $0.05 per share on an annual basis. Post-transaction the Company’s solvency ratio will be 217% compared with 226% on a pro forma basis as at December 31, 2009 following share issues in February 2010. The agreement with American-Amicable is subject to the usual regulatory approvals and expected to close in the summer of 2010.
"This agreement with American-Amicable is an important milestone in our U.S. growth strategy," said Yvon Charest, President and Chief Executive Officer of Industrial Alliance. "Building on our local operations in Scottsdale, Arizona, it provides us with the scale and presence to accelerate our U.S. growth plan. With 100 years in the business, American-Amicable brings a stable stream of revenues and profits, a low-risk investment portfolio, a well-developed distribution network and an experienced management team. Its life insurance products target the middle-income market which is under-served and offers significant growth opportunities."
"Strategically and operationally, this is an excellent fit for both American-Amicable and Industrial Alliance," added Mike Stickney, President of IA American. "It brings together two organizations with long track records of profitable growth that share philosophies of prudent risk management and cost efficiency. We look forward to working with Lanny Peavy and his senior management team as we continue to expand our footprint in the U.S."
Broader Platform for Growth in the U.S.
Upon completion, the acquisition of American-Amicable by Industrial Alliance will significantly increase the Company’s scale and presence in the U.S. Founded in 1910, American-Amicable is based in Waco, Texas and employs about 115 persons. It operates through four Texas-domiciled subsidiaries: Pioneer Security Life Insurance Company, American-Amicable Life Insurance Company of Texas, Pioneer American Insurance Company and Occidental Life Insurance Company of North Carolina.
"We are pleased with the commitment that Industrial Alliance has made to our community by maintaining a strong corporate presence and offering continued employment to all our staff," said Lanny Peavy, President of American-Amicable. "We will do our utmost to assure a smooth transition going forward, not only for our employees but also for the many distributors and policyholders who have been our valued partners for so many years."
American-Amicable markets primarily traditional life insurance products to mid-market customers in the individual and final expense markets. It is licensed to sell life insurance in 49 states and territories, and its products are marketed through a national distribution network of more than 6000 independent agents. American-Amicable has a strong presence in the South, Southwest and Southeast portions of the U.S., with its primary markets being Texas, Puerto Rico, California, Illinois, Alabama and North Carolina.
American-Amicable currently has $7.1 billion of life insurance in force covering a policy base of more than 211,500. For the year ended December 31, 2009, total premiums amounted to $86 million and total assets were $687 million. New business written over the last five years has averaged almost $24 million, representing a compound annual growth rate of 13% in their current markets. American-Amicable’s balance sheet is debt-free and its portfolio is invested in primarily low-risk, fixed income securities. On March 2, 2010, its financial strength ratings were upgraded to A- (Excellent) by A.M. Best.
Subsequent to closing, American-Amicable will become a wholly-owned subsidiary of IA American. IA American intends to maintain the American-Amicable platform in Waco, Texas as well as the existing IA American presence in Scottsdale, Arizona.
Oppenheimer & Co. Inc. acted as financial advisor to American-Amicable Holding, Inc. on this transaction.
Caution Regarding Forward-looking Statements
This news release may contain statements relating to strategies of 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", "objective" and "continue" (or the negative thereof) or similar words or expressions. Such statements are forward-looking statements within the meaning of securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of the Company. These statements are not historical facts but instead 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 (including but not limited to performance of equity markets, interest rate fluctuations, currency rates, investment losses and defaults, movements in credit spreads, market liquidity and creditworthiness of guarantors and counterparties); level of competition and consolidation; changes in laws and regulations including tax laws; liquidity of Industrial Alliance including the availability of financing to satisfy existing financial liabilities 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; failure of information systems and Internet-enabled technology; breaches of computer security and privacy; dependence on third-party relationships including outsourcing arrangements; ability to maintain Industrial Alliance’s reputation; regulatory investigations and proceedings and private legal proceedings and class actions relating to practices in the mutual fund, insurance, annuity and financial product distribution industries; the ability to adapt products and services to the changing market; the ability to implement effective hedging strategies; the ability to attract and retain key executives; the ability to complete acquisitions including the availability of equity and debt financing when required for this purpose; the ability to execute strategic plans; the disruption of or changes to key elements of Industrial Alliance's or public infrastructure systems; and environmental concerns. Additional information about 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 Industrial Alliance's most recent Annual report, namely under the "Risk Management" section in the 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.
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 news release 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. 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 fourth largest life and health insurance company in Canada, Industrial Alliance is at the head of a large financial group, which has operations in all regions of Canada, as well as in the United States. Industrial Alliance contributes to the financial wellbeing of over three million Canadians, employs more than 3,400 people and manages and administers over $58 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: 418 684-5275