PrefBlog

Industrial Alliance has released its 1Q09 results, so we can take a quick look at their exposures.

Industrial Alliance ended the first quarter of 2009 with net income to common shareholders of $46.2 million, compared to $61.7 million for the same period in 2008. This result translates into diluted earnings per common share of $0.58 ($0.76 in the first quarter of 2008) and a return on common shareholders equity of 11.2% on an annualized basis (14.5% in the first quarter of 2008).

The results for the quarter benefited from a $7.5 million gain after taxes ($0.10 per common share) resulting from the favourable evolution of the gap between the market value of the debt instruments and that of the underlying assets. Debt instruments were classified as “held-for-trading” when the new accounting standards took effect on January 1, 2007. Hence, any difference between the variation in the market value of the debt instruments and the corresponding assets must be recognized immediately on the income statement. However, this difference should be gradually eliminated by the time the debt instruments mature, which is in the next five years.

On the other hand, the results for the quarter were affected by the current economic and financial environment, which reduced the Company’s expected income by about $9.9 million after taxes ($0.12 per common share).

Profit declined somewhat due to weaker equity & credit markets; $89-million due to lower fee income on Assets Under Management; $25-million due to increased actuarial liabilities; but mainly provisions for credit losses $138-million and other provisions, $19-million.

Exposures:

Despite including this post in the “Regulatory Capital” category of PrefBlog, I will not discuss MCCSR. This figure is useless for analytical purposes, since:

• Corresponding US calculations are not disclosed
• As preferred share investors we are interested in the publicly issued preferred shares, at the holdco level

As noted by DBRS:

The incurrence of debt at the holding company to provide equity capital to operating subsidiaries constitutes double leverage, the use of which should be conservative. The analysis of double leverage requires a review of the unconsolidated financial statements of the holding company, which are generally not in the public domain.

Great-West Lifecol has released its 1Q09 results, so we can take a quick look at their exposures.

I won’t be quoting from the earnings release. GWO considers their press release to be TOP SECRET and has encrypted the PDF: “All contents of the document are encrypted and search engines cannot access the document’s metadata … Content Copying: Not Allowed”. I asked them (or one of their affilliated companies, can’t remember which) about this some time ago but, being mere investor scum, was not favoured with a reply.

Profit declined somewhat due to weaker equity & credit markets; $89-million due to lower fee income on Assets Under Management; $25-million due to increased actuarial liabilities; but mainly provisions for credit losses $138-million and other provisions, $19-million.

Exposures:

Despite including this post in the “Regulatory Capital” category of PrefBlog, I will not discuss MCCSR. This figure is useless for analytical purposes, since:

• Corresponding US calculations are not disclosed
• As preferred share investors we are interested in the publicly issued preferred shares, at the holdco level

As noted by DBRS:

The incurrence of debt at the holding company to provide equity capital to operating subsidiaries constitutes double leverage, the use of which should be conservative. The analysis of double leverage requires a review of the unconsolidated financial statements of the holding company, which are generally not in the public domain.

Manulife Financial has released its 1Q09 results, so we can take a quick look at their exposures.

Earnings suffered with the markets:

The quarter’s net loss was primarily driven by continued declines across all equity markets, particularly in the U.S. Reserve strengthening for segregated fund guarantees resulted in an accounting charge of $1,146 million and credit impairments were $121 million. Also affecting earnings this quarter were fair value adjustments of $277 million primarily for declines in commercial real estate values, $255 million of equity related charges and $72 million related to credit downgrades. Earnings for the quarter, excluding these items, totaled $803 million and cash provided by operating activities of $2.5 billion reflected the non-cash nature of these charges.
…
In light of continued equity market volatility and sensitivity, the Company conducted a strategic review of its segregated fund product portfolio and started implementing changes to its product offerings in the quarter. In the U.S., fees were increased, deferral bonuses were reduced, additional features were withdrawn, and equity exposure was reduced in several key funds. In Canada, the hedging program for new segregated fund business was successfully implemented at the end of March, and $1.5 billion of inforce business was hedged. New business in North America is now hedged on an ongoing basis.

Does a phrase involving barn doors and stolen horses come to anybody else’s mind, or is it just me?

Exposures:

Despite including this post in the “Regulatory Capital” category of PrefBlog, I will not discuss MCCSR. This figure is useless for analytical purposes, since:

• Corresponding US calculations are not disclosed
• As preferred share investors we are interested in the publicly issued preferred shares, at the holdco level

As noted by DBRS:

The incurrence of debt at the holding company to provide equity capital to operating subsidiaries constitutes double leverage, the use of which should be conservative. The analysis of double leverage requires a review of the unconsolidated financial statements of the holding company, which are generally not in the public domain.

HSBC Bank of Canada has released its 1Q09 Results but full details are not yet available.

I will update when possible.