Q4 2004 ING Canada Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, ladies and gentlemen and welcome to the ING Canada fourth quarter 2004 earnings release conference call. My name is Rachel and I will be your coordinator for today. [Caller instructions.] We will be facilitating a question-and-answer session towards the end of today's conference. [Caller instructions.] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Brian Lynch, Investor Relations Consultant. Please proceed, sir.

BRIAN LYNCH, INVESTOR RELATIONS CONSULTANT, ING CANADA: Thank you, Rachel. Good morning and welcome, everyone. Our call today is being broadcast over the Internet at ingcanada.com where you will find supporting presentation materials including a slide number 2 regarding forward-looking statements. We ask everyone to refrain from placing undue reliance on any such statements we might make for the reasons detailed in the slide. This call will be archived on our Website in French and English transcripts - - excuse me will additionally be posted to the site within the next several days. Claude Dussault, CEO will make some introductory remarks and Mike Cunningham, CFO will briefly review several key aspects of our financial performance. Following we will open the call to questions in either French or English from financial analysts and investors. Charles Brindamour, Executive Vice President is also in attendance to field your questions. With that I will turn the call over to Claude.

CLAUDE DUSSAULT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ING CANADA: Good morning, everyone. I'm pleased to report on our earnings for the first time to our new shareholders. The performance of our employees in 2004 and the support that we have received from our brokers is really making this presentation easier for my colleagues and I this morning. As you have seen in our release earlier today, or this morning, the fourth quarter was quite consistent with the first 3 quarters general trends that we had observed, and presented in our prospectus. Some of the highlights of last year for ING Canada: First I would like to point out that we've seen some good strong improvement in our underwriting results. Driven mainly by a significant drop in frequency of claims in all lines of business across all regions. We have also been helped by a significant improvement in the Facility Association pool across the country. Those are basically the pools for higher risk drivers, which had been a negative factor in the past, in the previous 3 year and has been dragging down the results. And this turned around in 2004 and was a positive contributor to the improvement in results.

We've also benefited from strong investment results driven by an exceptional year from a capital gains point of view. So the capital markets were quite positive and it has been a strong contributor to our overall results. Automobile insurance reforms in Nova Scotia, New Brunswick, Prince Edward Island, Ontario and Alberta are working as expected. The integration of Allianz Canada is working according to plan and we are very positive about the value that this acquisition is bringing to ING Canada. As you know, we completed the IPO in December and the response we received from investors was beyond our initial expectations. Our customers have enjoyed the benefit of these positive trends that I just described. And of the other reforms through greater stability of premium in some lines of business and significant rate decreases, particularly in automobile insurance in provinces where those reforms were put in place. The market condition of the industry; we have observed increased competition in 2004 and we expect that it will continue this year.

Prices are going down in automobile insurance, competition has intensified in commercial lines. We expect lower than historical growth in total premium for the industry, driven particularly by the continued reduction in automobile insurance rates on the renewals. And we expect the underwriting results will return gradually over time to historical levels. Our key objective moving into 2005 is to continue to grow our business organically and through acquisition over time. We want to continue to improve the value for our clients through better products, price - - competitive price, and improved service. We want to continue to leverage our scale and improve our efficiency. And finally, we want to produce at attractive returns for our shareholders. So we will turn the meeting over to Mike Cunningham our CFO who will now comment on some of the financial highlights of 2004.

MICHAEL CUNNINGHAM, CHIEF FINANCIAL OFFICER, ING CANADA: Thank you, Claude. I will cover a few of the items that are perhaps a little bit out of the ordinary, mostly driven - - or several of them driven by the fact that we did an acquisition in December and we also did the IPO in December. So the first comment I would make is about a measurement we've included, that's called earnings per adjusted share. This is a measure that we believe gives the better reflection of the earnings per share approach by taking the constant number of shares outstanding, we've assumed that the 133 million shares that were issued and outstanding after the exercise of the over allotment have been outstanding for the entire period. And therefore we think that gives us a better calculation. The measure in that regard is $1.29 per share for the fourth quarter and $4.67 for the full year. The calculation of the earnings per share in the GAAP financials is influenced by the fact that the IPO occurred in December so the weighted average number of shares is skewed towards being much less for the majority of the year. So we get a calculation that we thought gave somewhat of an unusual result. So we've provided the other measure for purposes of looking at earnings in a different - - slightly different way.

The second comment I would make is the increase of over $1 billion in our shareholder's equity. Of course driven by the net income of $624 million for the year. But also the initial public offering in December increased equity on a net basis by $875 million. And we - - as we had indicated in the prospectus, we used the proceeds of the offerings to repay debt, including the $200 million bridge loan that was used for the acquisition of Allianz. And we also then paid the notes to our controlling shareholder, ING Group, as had been planned. We did also, since the over allotment option was exercised in January, the proceeds of that offering were used to pay the final note that had been established from the recapitalization plan. And at the - - while at the end of the year, our debt to total capital ratio was 11 percent, with the …