TORONTO, March 7, 2019 /CNW/ - 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, 2018, consolidated shareholders' net income
of $31 million, or $3.96 per common share, compared with
$668 million, or $166.17 per common share in 2017. For the fourth
quarter of 2018, E-L Financial had a consolidated net loss of
$238 million, or $61.62 per common share, compared to net income
of $257 million, or $64.47 per common share in 2017.
E-L Financial's net equity value per common share was
$1,295.65 as at December 31,
2018, a decrease of 2% from $1,316.64 as at December 31, 2017.
"I am proud to report that this year we publish E-L Financial's
50th annual report. Although 2018 brought several challenges,
including global equity market declines occurring during the latter
part of the year, we continue to be focused on our strategic
priorities both within the E-L Corporate and Empire Life business
segments. The strong investments returns of 2017 were not repeated
in 2018, however Empire Life continues to produce strong results
with a common shareholder equity return of 9.4% for the 2018 year.
At United Corporations Limited a detailed review of the investment
managers was undertaken resulting in two new managers engaged to
manage a portion of the portfolio. Overall our investment
portfolios continue to have a large concentration of global
equities and we will be exposed to the market volatility and the
impacts of economic trends and the extent that geopolitical events
will have on these investments," said Duncan N.R. Jackman, Chairman, President and CEO
of E-L Financial.
E-L Corporate
For the year ended December 31,
2018, E-L Corporate reported a net loss of $105 million compared to net income of
$498 million in 2017. The decrease in
net income is due to net losses on investments within the E-L
Corporate segment. E-L Corporate reported a net loss on investments
of $206 million in 2018 compared to a
net gain of $544 million in 2017. E-L
Corporate's global investment portfolio had a negative pre-tax
total return of 2% in 2018 compared to a pre-tax return of 14% in
the prior year.
E-L Corporate reported a net loss of $244
million in the fourth quarter of 2018 compared to net income
of $209 million for the comparable
period in 2017. The fourth quarter loss for 2018 was due to a net
loss on investments of $324 million.
This compared to a net gain of $257
million for the same period in 2017. The pre-tax total
return on E-L Corporate's investments was negative 6% in 2018
compared to a positive return of 6% in the prior year.
Empire Life
The Empire Life segment reported net income attributable to E-L
Financial of $136 million in 2018
compared to $170 million in 2017. The
net income for 2018 decreased primarily due to the impacts of
changes made in the assumptions used by Empire Life in the
estimation of insurance contract liabilities. During 2018 and 2017
changes were made to the company's bond portfolios which improved
the matching of these investments to the estimated duration of the
insurance contract liabilities. These changes positively impacted
net income and were more significant in the prior year. In addition
fourth quarter equity market declines reduced net income compared
to the prior year.
For the quarter ended December 31, 2018, Empire Life's net
income attributable to E-L Financial was $6
million compared to $48
million for the comparable period in 2017. The decrease in
earnings for the fourth quarter of 2018 was primarily a result of
the items noted above.
Effective January 1, 2018, Minimum
Continuing Capital and Surplus Requirements ("MCCSR") has been
replaced by the Life Insurance Capital Adequacy Test ("LICAT"). The
LICAT is intended to improve the quality of available capital and
provide a better alignment of the risk measures with the long-term
economics of the life insurance business. The LICAT will behave
differently under various economic scenarios when compared to
MCCSR. As a result, LICAT ratios are not comparable to the MCCSR
ratio. Empire Life's LICAT total ratio was 149% at
December 31, 2018, well above the requirements set by the
Office of the Superintendent of Financial Institutions Canada as
well as Empire Life's minimum internal targets.
CONSOLIDATED SUMMARY OF NET INCOME (UNAUDITED)
E-L Financial
Consolidated
|
Fourth
quarter
|
|
Year
|
(millions of
dollars)
|
2018
|
2017
|
|
2018
|
2017
|
Contribution to
net (loss) income
|
|
|
|
|
|
E-L
Corporate1
|
$
|
(244)
|
|
$
|
209
|
|
$
|
(105)
|
$
|
498
|
Empire
Life2
|
6
|
|
48
|
|
136
|
170
|
Net (loss)
income
|
$
|
(238)
|
|
$
|
257
|
|
$
|
31
|
$
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E-L
Corporate
|
Fourth
quarter
|
|
Year
|
(millions of
dollars)
|
2018
|
2017
|
|
2018
|
2017
|
Revenue
|
|
|
|
|
|
Net (loss) gain on
investments3
|
$
|
(324)
|
|
$
|
257
|
|
$
|
(206)
|
$
|
544
|
Investment and other
income
|
27
|
|
26
|
|
134
|
118
|
Share of associates
(loss) income
|
(5)
|
|
14
|
|
10
|
36
|
|
(302)
|
|
297
|
|
(62)
|
698
|
|
|
|
|
|
|
|
Operating
|
9
|
|
9
|
|
34
|
29
|
Income
taxes
|
(41)
|
|
37
|
|
(6)
|
92
|
Non-controlling
interests
|
(26)
|
|
42
|
|
15
|
79
|
|
(58)
|
|
88
|
|
43
|
200
|
Net (loss)
income
|
$
|
(244)
|
|
$
|
209
|
|
$
|
(105)
|
$
|
498
|
|
|
|
|
|
|
|
|
|
|
|
Empire
Life
|
Fourth
quarter
|
|
Year
|
(millions of
dollars)
|
2018
|
2017
|
|
2018
|
2017
|
Revenue
|
|
|
|
|
|
Net
premiums
|
$
|
237
|
|
$
|
210
|
|
|
$
|
874
|
$
|
834
|
Net (loss) gain on
investments3
|
(95)
|
|
269
|
|
|
(308)
|
302
|
Investment and other
income
|
83
|
|
78
|
|
|
307
|
281
|
Fee income
|
65
|
|
70
|
|
|
264
|
257
|
|
290
|
|
627
|
|
|
1,137
|
1,674
|
|
|
|
|
|
|
|
|
Benefits and
expenses
|
275
|
|
553
|
|
|
934
|
1,428
|
Income and other
taxes
|
4
|
|
20
|
|
|
56
|
70
|
|
|
|
|
|
|
|
|
Non-controlling and
participating policyholders' interests
|
5
|
|
6
|
|
|
11
|
6
|
|
284
|
|
579
|
|
|
1,001
|
1,504
|
Net
income
|
$
|
6
|
|
$
|
48
|
|
|
$
|
136
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Net of non-controlling
interests
|
2 Net
of non-controlling interests and participating
policyholders' net income (loss)
|
3 Includes fair value change on FVTPL
investments and realized gains on AFS investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Empire Life's
Sources of Earnings
|
Fourth
quarter
|
|
Year
|
(millions of
dollars)
|
2018
|
2017
|
|
2018
|
2017
|
Expected profit on
in-force business
|
$
|
51
|
$
|
53
|
|
$
|
194
|
$
|
183
|
Impact of new
business
|
(12)
|
(8)
|
|
(16)
|
(22)
|
Experience (losses)
gains
|
(26)
|
8
|
|
(3)
|
16
|
Management actions
and changes in assumptions
|
(22)
|
4
|
|
(20)
|
32
|
(Loss) earnings on
operations before income taxes
|
(9)
|
58
|
|
154
|
209
|
Earnings on
surplus
|
15
|
9
|
|
37
|
28
|
Income
taxes
|
3
|
(15)
|
|
(40)
|
(56)
|
Non-controlling
interests
|
(3)
|
(4)
|
|
(15)
|
(11)
|
Net
income
|
$
|
6
|
$
|
48
|
|
$
|
136
|
$
|
170
|
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 sources of earnings and assets under
management to provide investors with supplemental measures 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 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 and income from its
investments.
Empire Life is a subsidiary of E-L Financial. Since 1923, Empire
Life has provided 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. As
of December 31, 2018 Empire Life had total assets under
management of $16 billion.
SOURCE E-L Financial Corporation Limited