TORONTO, ONTARIO–(Marketwired – March 3, 2017) – E-L Financial Corporation Limited (“E-L Financial”) (TSX:ELF)(TSX:ELF.PR.F)(TSX:ELF.PR.G)(TSX:ELF.PR.H) today reported for the year ended December 31, 2016, consolidated shareholders’ net income of $333.1 million or $80.88 per share compared with $534.6 million or $132.18 per share in 2015. For the fourth quarter of 2016, E-L Financial had consolidated net income of $100.1 million or $24.49 per share compared with $207.7 million or $51.90 per share in 2015.
E-L Financial’s net equity value per Common Share was $1,159.26 at December 31, 2016, an increase from $1,089.23 as at December 31, 2015.
“Empire Life continues to deliver strong results with record earnings for 2016 despite challenges associated with the current economic and political environments along with the impact of low interest rates. With a common shareholder return of 13%, Empire Life continues to demonstrate sustained profitable organic growth. Although E-L Financial’s investment returns declined from 2015, which were mostly driven by currency movements, the global investment portfolio has had continued momentum through 2016. I am proud to report continued growth in our net equity value to our common shareholders with a total return of 6.8% for 2016,” said Duncan Jackman, Chairman, President and CEO of E-L Financial.
E-L Corporate
For the year ended December 31, 2016, E-L Corporate earned net income of $181.6 million compared to $447.2 million in 2015. The decrease in net income is primarily due to E-L Corporate’s net gain on investments of $155.8 million compared to $568.9 million in 2015. E-L Corporate’s investments in 2016 yielded a pre-tax total return of 6% mainly due to positive investment returns on global equities which was partially offset by the strengthening of the Canadian dollar against the U.S. dollar and Euro. The net gain on investments in 2015 was mostly attributed to the favourable impact of a lower Canadian dollar. At December 31, 2016, 84.0% (2015 – 85%) of E-L Corporate’s investments were denominated in foreign currencies with 49% (2015 – 48%) and 12% (2015 – 14%) exposed to U.S. and European equities respectively.
E-L Corporate 2016 fourth quarter net income was $47.9 million, a decrease of $146.8 million compared to 2015. The return on investments for the fourth quarter decreased compared to the prior year primarily due to lower investment returns and the impact of foreign currencies in the fourth quarter of 2015.
Empire Life
For the year ended December 31, 2016 Empire Life’s net income attributable to E-L Financial was $151.5 million compared to $87.4 million for the comparable period in 2015. The increase in net income was due to higher profits from the Individual Insurance product line primarily resulting from improved stock market conditions in 2016, a favourable update of policy liability assumptions and management actions to improve asset/liability matching in 2016.
Empire Life’s fourth quarter net income attributable to E-L Financial was $52.1 million compared to $13.0 million in 2015. The increase in net income was primarily due to higher profit from the Individual Insurance product line primarily attributable to improved stock market conditions in 2016, a favourable update of policy liability assumptions for the Individual Insurance product line in 2016 (compared to an unfavourable update in 2015) and management actions to improve asset/liability matching in 2016.
Empire Life’s assets under management (including segregated fund and mutual fund assets) increased 10% over December 31, 2015 levels to reach $16.1 billion.
Empire Life’s Minimum Continuing Capital and Surplus Requirements ratio increased to 248% at December 31, 2016 compared to 201% at December 31, 2015 resulting from Empire Life’s issuance of $149.5 million of preferred shares during the first quarter of 2016 and the issuance of $200 million of subordinated debentures during the fourth quarter of 2016.
| CONSOLIDATED SUMMARY OF NET INCOME (UNAUDITED) | |||||||||||||||
| E-L Financial Consolidated | Fourth quarter | Year | |||||||||||||
| (thousands of dollars) | 2016 | 2015 | 2016 | 2015 | |||||||||||
| Contribution to net income | |||||||||||||||
| E-L Corporate1 | $ | 47,896 | $ | 194,670 | $ | 181,644 | $ | 447,205 | |||||||
| Empire Life2 | 52,173 | 13,027 | 151,499 | 87,404 | |||||||||||
| Net income | $ | 100,069 | $ | 207,697 | $ | 333,143 | $ | 534,609 | |||||||
| E-L Corporate | Fourth quarter | Year | |||||||||||||
| (thousands of dollars) | 2016 | 2015 | 2016 | 2015 | |||||||||||
| Revenue | |||||||||||||||
| Net gain on investments3 | $ | 65,934 | $ | 270,126 | $ | 155,793 | $ | 568,917 | |||||||
| Investment and other income | 22,918 | 25,785 | 107,584 | 109,090 | |||||||||||
| Share of associates (loss) income | (31,249 | ) | 7,316 | (12,084 | ) | 24,829 | |||||||||
| 57,603 | 303,227 | 251,293 | 702,836 | ||||||||||||
| Expenses | |||||||||||||||
| Operating | 7,202 | 6,842 | 25,302 | 24,156 | |||||||||||
| Income taxes | 7,288 | 41,165 | 31,211 | 96,051 | |||||||||||
| Non-controlling interests | (4,783 | ) | 60,550 | 13,136 | 135,424 | ||||||||||
| 9,707 | 108,557 | 69,649 | 255,631 | ||||||||||||
| Net income | $ | 47,896 | $ | 194,670 | $ | 181,644 | $ | 447,205 | |||||||
| Empire Life | Fourth quarter | Year | |||||||||||||
| (thousands of dollars) | 2016 | 2015 | 2016 | 2015 | |||||||||||
| Revenue | |||||||||||||||
| Net premiums | $ | 222,493 | $ | 206,253 | $ | 881,500 | $ | 835,216 | |||||||
| Net (loss) gain on investments3 | (374,397 | ) | 61,694 | 43,726 | (24,316 | ) | |||||||||
| Investment and other income | 68,735 | 66,871 | 254,913 | 259,210 | |||||||||||
| Fee income | 58,226 | 56,037 | 228,369 | 216,818 | |||||||||||
| (24,943 | ) | 390,855 | 1,408,508 | 1,286,928 | |||||||||||
| Expenses | |||||||||||||||
| Benefits and expenses | (98,698 | ) | 368,338 | 1,182,108 | 1,142,752 | ||||||||||
| Income and other taxes | 21,919 | 7,561 | 69,234 | 41,718 | |||||||||||
| Non-controlling and participating policyholders’ interests | (337 | ) | 1,929 | 5,667 | 15,054 | ||||||||||
| (77,116 | ) | 377,828 | 1,257,009 | 1,199,524 | |||||||||||
| Net income | $ | 52,173 | $ | 13,027 | $ | 151,499 | $ | 87,404 | |||||||
| 1 Net of non-controlling interests |
| 2 Net of non-controlling interests and participating policyholders’ income (loss) |
| 3 Includes fair value change on FVTPL investments and realized gains on AFS investments |
Non-GAAP Measures
The Company uses non-GAAP measures including net equity value per Common share to provide investors with supplemental measures of its operating performance that may not otherwise be apparent when relying solely on International Financial Reporting Standards (“IFRS”) financial measures. Net equity value per Common share provides an indication of the accumulated shareholder value, adjusting shareholders’ equity to reflect investments in associates at fair value, net of tax, as opposed to their carrying value.
The Company also uses assets under management to provide investors with a supplemental measure of Empire Life’s performance and to highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers.
About E-L Financial
E-L Financial operates as an investment and insurance holding company. In managing its operations, E-L Financial distinguishes between two operating segments, E-L Corporate and The Empire Life Insurance Company (“Empire Life”).
E-L Corporate represents investments in stocks and fixed income securities held directly and indirectly through pooled funds, closed-end investment companies and other investment companies. The investment strategy is to accumulate shareholder value through long-term capital appreciation and dividend income from its investments.
Empire Life is a subsidiary of E-L Financial Corporation Limited. Since 1923, Empire Life has provided competitive individual and group life and health insurance, investment and retirement products to Canadians. Empire Life’s mission is to make it simple, fast and easy for Canadians to get the investment, insurance and group benefits coverage they need to build wealth, generate income, and achieve financial security.
Scott F. Ewert
Vice President and Chief Financial Officer
(416) 947-2578
(416) 362-0792 (FAX)