western financial group 2009 year end financial results conference call march 17, 2010
TRANSCRIPT
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Western Financial Group2009 Year End Financial Results
Conference Call
March 17, 2010
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Forward-Looking StatementsThis presentation contains certain forward-looking statements. Forward-looking statements include, without limitation, statements regarding the future financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes and plans and objectives of or involving Western Financial Group Inc. (the “Company”) or its subsidiaries. Many of these statements can be identified by looking for words such as ‘‘believe’’, ‘‘expects’’, ‘‘expected’’, ‘‘will’’, ‘‘intends’’, ‘‘projects’’, ‘‘anticipates’’, ‘‘estimates’’, ‘‘continues’’ or similar words. The Company believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties only some of which are described herein. Many factors could cause the Company’s actual results, performance or achievements to, or future events or developments to, differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risk factors, which are discussed in greater detail in the ‘‘Risk Factors’’ section of the prospectus. Any forward-looking statements are made as of the date hereof and the Company does not assume any obligation to publicly update or revise such statements to reflect new information, subsequent events or otherwise.Non-GAAP MeasuresThroughout this presentation, the Company may use the term ‘‘operating income’’ to refer to earnings, including investment income, before interest expense, taxes, depreciation and amortization of intangible and capital assets, excluding gain (loss) from the sale of assets and income (loss) from equity investments. The Company uses ‘‘operating income’’ to assist it in measuring corporate performance before the costs of capital and amortization of capital and intangible assets. Operating income is not a measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, this measure may not be comparable to similar measures presented by other issuers and investors are cautioned that it should not be used as an alternative to ‘‘net income’’ or other measures of financial performance calculated in accordance with GAAP.
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Today’s Remarks• Operational progress in 2009
• Top achievements and disappointments in 2009
• 2009 financial review
• Priorities for 2010
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Operational Progress in 2009
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The Network
• Same store customer count +1.1%• Same store sales +4.2%• Improving loss ratios at insurance companies
in 2nd half cause positive adjustment of $1.0 million to 2009 profit share commission estimates
• Financial Services – Life sales up 20% and accelerating
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Acquisitions:• Bakes-Jarvie• H.E.D. – Association/Group Insurance Solutions
The Network
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Western Life Assurance• Sales and production increases – all lines except
Creditor• Certificate count growth 6.0% in 2009• Bolt-on product for network is at 6,900+ policies.
Target of 7,500 for Y/E 2009• Western & Affiliates account for $10.6 million (20%
+) of 2009 premium revenue• Signed significant creditor life program – effective
2010
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Bank West
• Loan book at $360.5 MM
• AgriFinancial added in 2009
• Non-performing loans – 2.0% at year end
• Specific provisions at 75 bps
• Four core areas emerging
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Business Lines @ Dec. 31/09
Point of Sale/Finance-RV Loans-Boat Loans-Power Sport Loans
Specialty Agricultural-Agrifinance-AgriCard
Syndication/Securitizations-Prospera Pools/Syndications-Travellers Acceptance-RIFCO-Waterpoint/SNAP
Relationship/Community Lending-Network Premium Finance-Commercial Loans/Leases-Residential/Commercial/Farm Mortgages-Personal Loans
$105 MM
$85 MM
$45 MM
$125 MM
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Top Achievements in 2009
• Network margin
• HED/SecuriCan acquisition
• Western Life growth/profit
• Sunset brand project
• Consumer credit quality
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Top Disappointments in 2009
• Bank West loss
• Equity sale – Western Life January 2009
• Agrifinancial flat sales
• Saskatchewan growth
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2009 Financial Review
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Total Revenue
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Overall
2009 2008
Revenue ($)
Income from Equity Investments ($)
Net Income ($)
Earnings per share ($) – Basic
– Diluted
166,076
2,859
15,961
0.22
0.22
124,855
2,172
6,548
0.05
0.05
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The Network2009 2008
Commission & other customer revenue ($)
89,144 75,424
Operating expenses ($) 63,261 54,710
Operating income ($) 25,883 20,714
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Bank West
2009 2008
Interest & investment income ($) 25,514 18,596
Net interest & investment income ($) 10,349 6,041
Operating & provision expenses ($) 10,894 4,804
Operating income/loss ($) (545) 1,237
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Western Life Assurance
2009 2008
Premium income ($) 37,491 31,309
Investment income ($) 3,200 1,614
Policyholder benefits ($) 20,123 14,789
Operating expenses ($) 15,565 13,907
Operating income ($) 5,003 4,227
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SecuriCan
2009 2008
Premium income ($) 8,975 -
Investment income ($) 102 -
Policyholder benefits ($) 3,951 -
Operating expenses ($) 3,052 -
Operating income ($) 2,074 -
Impairment on AFS Investments 0 -
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Corporate & All Other2009 2008
Other revenues ($) 1,650 1,959
Operating expenses ($) 9,692 9,223
Operating loss ($) (8,042) (7,264)
Impairment on AFS Investments 0 (1,542)
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Western Financial GroupHistorical Consolidated ROE
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Earnings Per Share
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Priorities for 2010
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2010 Priorities
• Winnipeg Teamworks
• Sustainable profit / market niche Bank West
• Metro market strategy – P & C insurance
• Network / Partnership expansion
• “Next Step” on EPS growth ladder
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Questions