Canadian Underwriter

Industrial Alliance net income reaches $155 million in Q4 2016 from $4.2 million in Q4 2015

February 16, 2017   by Canadian Underwriter

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Industrial Alliance Insurance and Financial Services Inc. has reported a net income attributed to common shareholders of $155 million in the fourth quarter of 2016 ending Dec. 31, up dramatically from net income of $4.2 million in the same quarter of 2015. Year-to-date net income was $553.7 million compared to $386.4 million in 2015.

Quebec City-based Industrial Alliance (iA) offers home and auto insurance, as well as life and health insurance products, mutual and segregated funds, savings and retirement plans, RRSPs, securities, mortgages and car loans and other financial products and services for both individuals and groups, released its financial results on Thursday.

At iA Auto and Home, written premiums in the fourth quarter grew by 14% to $59.4 million, iA noted in a statement. Almost three-quarters of the new growth in the quarter was driven by the company’s car dealer distribution network and strategic partnerships.

The company’s 2016 Management’s Discussion and Analysis (MD&A) said that the “highlight” of 2016 was the expansion of the new iA Auto and Home Insurance subsidiary (iAAH) called Prysm General Insurance Inc. The first policies were underwritten in November 2015.

For the last five years, compound annual growth rate in direct written premiums was close to 10% (compared to 3% for the industry), bringing iAAH business volume to $278.6 million in 2016, up 13% over the previous year, primarily attributable to Prysm.

“In auto insurance, inflation related to the cost of parts and labour exceeded the decrease in claims frequency, unlike in past years,” the MD&A read. “In home insurance, the first half of the year was impacted by an exceptional number of major fires. These events pushed up the claims ratio and kept the combined ratio (claims plus operating expenses) up above 100%. In addition, the costs relative to the creation of the Prysm subsidiary put downward pressure on the consolidated claims experience.”

In 2016, the combined ratio was 105.5%.

Given the startup of the Prysm subsidiary and the increase in claims, iAAH ended the year with a loss of $8.5 million, the MD&A said.

“2016 was clearly an excellent year for Industrial Alliance and for our shareholders,” said Yvon Charest, president and chief executive officer, in the statement. “I want to highlight the outstanding results of our retail insurance operations both in Canada and the [United States], the industry-leading growth of our segregated fund business, and the successful turnaround in gross and net sales by our mutual fund business. As we celebrate our 125th anniversary this year, we are extremely enthusiastic about the opportunities for continued growth and development as a leading financial services organization.”

“Our earnings in 2016 reflect another year of strong policyholder experience, a significant turnaround in profit from Employee Plans and, like the last four years, lower strain on new business in our retail insurance operations in both Canada and the U.S.,” added René Chabot, executive vice president, chief financial officer and chief actuary.