Western Financial Group reports first quarter 2010 results

HIGH RIVER, AB, May 14 /CNW/ - (TSX - WES) - Western Financial Group ("the Company") announced today its operating and financial results for the three months ended March 31, 2010.

     <<     Financial Highlights     Three Months Ended March 31     (unaudited)     (in $ thousands except for per      share amounts)                             2010        2009    % Change     -------------------------------------------------------------------------     The Network     Commissions and other customer revenue $  22,420   $  17,522       28.0%     Operating expenses                        18,460      13,932       32.5%     -------------------------------------------------------------------------      Operating income                           3,960       3,590       10.3%     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Bank West     Interest and investment income         $   6,610   $   5,537       19.4%     Interest expense - customer deposits       2,977       3,654      -18.5%     -------------------------------------------------------------------------     Net interest and investment income         3,633       1,883       92.9%     Provisions for credit losses                 176         289      -39.1%     Operating expenses                         2,317       2,096       10.6%     -------------------------------------------------------------------------      Operating (loss) income                $   1,140   $    (502)     327.1%     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Western Life     Premium and investment income          $  10,804   $   7,950       35.9%     Policyholder benefits                      5,727       3,633       57.6%     Operating expenses                         3,878       3,377       14.8%     -------------------------------------------------------------------------      Operating income                       $   1,199   $     940       27.6%     -------------------------------------------------------------------------     -------------------------------------------------------------------------      SecuriCan     Premium and investment income              9,032           -           -     Policyholder benefits                      3,943           -           -     Operating expenses                         3,050           -           -     -------------------------------------------------------------------------      Operating income                           2,039   $       -     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Corporate and all other     Other revenues                               413   $     372       11.1%     Operating expenses                         2,474       2,154       14.9%     -------------------------------------------------------------------------      Operating loss                         $  (2,061)  $  (1,782)      15.7%     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Total operating income                 $   6,277   $   2,246      179.5%     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Net income                                 2,269   $     914      148.2%     Preferred dividends                       (1,832)     (1,003)      82.7%     -------------------------------------------------------------------------      Earnings (loss) available to common      shareholders                          $     437   $     (89)     590.6%     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Earnings per share       - basic ($)                               0.01        0.00       - diluted ($)                             0.01        0.00        -----------------------------------------------     2010 KEY OBJECTIVES     -----------------------------------------------     Network Same Store Sales          4%-7% growth     Network Operating Margin                   28%     Bank West Specific Provisions   75 bps or less     SecuriCan Loss Ratio               55% or less     Western Life Loss Ratio            45% or less     Overall 2010 Net Income   $18.5 to $20 million     -----------------------------------------------     >> 

"We are pleased to report early success in achieving our goal for a strong 2010 financial result," said Scott Tannas, President and CEO. "Our net income is ahead of budget for the quarter with a number of bright spots, including our first ever $1 million + quarter of operating income at Bank West. Our Network indicators are in line with expectations, and we noticed an acceleration in same store growth as the quarter progressed. The Network margin is lower than this time last year, as a result of the addition of Group Insurance Solutions (formerly HED), which has magnified the Network's seasonal revenue characteristics. Both Western Life and SecuriCan are ahead of budget after the quarter. As a result, we remain confident that we are on track to achieve our 2010 financial goals."

The Network

The Network combined margin for the quarter was 18%, with Group Insurance Solutions margin at 8% and the retail division at 20%. Retail same store sales are at 4.7%, and same store customer count growth grew by 2.0% on a YTD, annualized basis.

Bank West

The Bank's loan book increased slightly over the quarter, to $360.7 million. Specific and general loan loss reserves were significantly lower compared to the prior quarter, the result of an improved credit environment. Net interest margin stands at a record high of 4%.

Western Life

Western Life's industry leading growth continued with premium sales up by 10% year over year, the result of expanding distribution of creditor life products, and growing cross sales within the Western Financial Group family, including a substantial increase in Term Life sales by the Network.

SecuriCan

SecuriCan's premium revenue is up 15% and we saw improved loss ratios year over year at 44% compared to 50%.

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Strategic Partnership Portfolio

The Company's partnerships in investment banking, insurance distribution and manufacturing provided positive income for the quarter, with all units delivering combined results in line with our budget expectations.

Conference Call

Western Financial Group will host a conference call to discuss the Company's first quarter financial results on Thursday, May 20, 2010 at 8:00 am Mountain time (10:00 am Eastern time). To participate in the live conference call, please dial (888) 231-8191 or (647) 427-7450 (Toronto). A replay of the call will be available from May 20th at 11:30 am Mountain time until June 3rd at 11:59 PM MT. To access the replay please dial either (800) 642-1687 or (416) 849-0833 and enter pass code 73235868. The conference will also be broadcast live over the internet and archived through the Company's website at www.westernfinancialgroup.ca.

Western Financial Group is a leader in providing insurance, financial services and banking services in over 90 communities, to more than 500,000 individuals and businesses in Western Canada through its wholly owned network of offices, its affiliated insurance brokers, Western Life Assurance Company, Bank West and SecuriCan General Insurance Company.

The Company's Financial Report for the first quarter of 2010 will be filed on SEDAR on or before May 14, 2010.

Forward-looking statements involve numerous assumptions, risks and uncertainties, including the risk that prediction and other forward-looking statements may not prove to be accurate. We caution the reader not to place undue reliance on these disclosures, as a number of important factors could cause actual results to differ materially from the estimates and comments expressed in them. Such factors may include, but are not limited to: changing financial and economic conditions in Canada, particularly in Western Canada; regulatory developments; competition industry trends and availability of capital resources; and our anticipated success in managing our risks. We caution readers that the foregoing list is not exhaustive. Except required by law, we do not undertake to update any forward-looking statements, written or oral, that we may make from time to time regarding our operations and performance.

     <<     CONSOLIDATED BALANCE SHEETS     (unaudited)     (in thousands, except for per share amounts)                                                            As at       As at                                                         March 31 December 31                                                 Note        2010        2009     -------------------------------------------------------------------------     ASSETS     Cash and cash equivalents                          $  62,419   $  58,463     Securities - held-for-trading                         62,742      61,373     Securities - available-for-sale                3      41,068      30,901     Mortgages, loans and leases, net of      allowance for credit losses                   4     356,177     355,621     Interest rate swaps                                      216          90     Equity investments                                    11,693      11,591     Capital assets                                        21,752      21,630     Goodwill                                             156,205     148,205     Intangible assets                                     65,940      66,719     Accounts receivable                                   48,145      51,114     Prepaid expenses                                       7,405       7,231     Future income taxes                                    1,325       1,102     Other assets                                           2,417       2,286     -------------------------------------------------------------------------                                                        $ 837,504   $ 816,326     -------------------------------------------------------------------------     -------------------------------------------------------------------------      LIABILITIES     Customer deposits                                  $ 323,160   $ 317,953     Actuarial liabilities                                 40,445      40,032     Provision for unpaid and unreported claims            15,262      13,919     Debt                                                  78,712      79,771     Due to policyholders                                  19,632      20,392     Accounts payable and accrued liabilities             100,140      82,700     Income taxes payable                                     667       1,809     Future income taxes                                   12,993      13,199     -------------------------------------------------------------------------     Total liabilities                                    591,011     569,775     -------------------------------------------------------------------------      SHAREHOLDERS' EQUITY     Share capital                                        206,905     206,905     Other paid in capital                                    268         268     Contributed surplus                                    2,068       2,041     -------------------------------------------------------------------------                                                          209,241     209,214     Accumulated other comprehensive loss           5        (123)       (129)     Retained earnings                                     37,375      37,466     -------------------------------------------------------------------------     Total shareholders' equity                           246,493     246,551     -------------------------------------------------------------------------                                                        $ 837,504   $ 816,326     -------------------------------------------------------------------------     -------------------------------------------------------------------------        CONSOLIDATED STATEMENTS OF INCOME     FOR THE THREE MONTHS ENDED MARCH 31     (unaudited)     (in thousands, except for per share amounts)                                                              2010        2009     -------------------------------------------------------------------------     REVENUE     Commission and other customer income               $  23,371   $  18,441     Premium income                                        18,020       8,447     Interest income on customer loans                      6,174       4,922     Investment income       Change in fair value of held-for-trading        securities                                          1,032        (131)       Realized gain (loss) on sales of available-        for-sale assets                                        36        (728)       Realized gain on sales of held-for-trading        securities                                             39           6       Other net investment income                            607         424     -------------------------------------------------------------------------                                                           49,279      31,381     EXPENSES       Operating expenses                                  30,179      21,559       Policyholder benefits                                9,670       3,633       Interest expense - customer deposits                 2,977       3,654       Provision for credit losses                            176         289     -------------------------------------------------------------------------     Income before the following:                           6,277       2,246       Income (loss) from equity investments                  143        (253)       Interest and financing costs on debt                (1,410)       (562)       Amortization of capital assets                        (800)       (412)       Amortization of intangible assets                     (778)       (691)     -------------------------------------------------------------------------     Income before income taxes                             3,432         328     Income taxes                                          (1,163)        586     -------------------------------------------------------------------------      NET INCOME FOR THE PERIOD                          $   2,269   $     914     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Preferred share dividends                          $  (1,832)  $  (1,003)     -------------------------------------------------------------------------     Net income (loss) available to common      shareholders                                      $     437   $     (89)      Average number of common shares                       49,367      49,333     Average number of diluted common shares               49,419      49,333     Earnings per common share       Basic                                            $    0.01   $    0.00     -------------------------------------------------------------------------       Diluted                                          $    0.01   $    0.00     >>