Empire Life: wealth management sales pass $1 billion

By Alain Thériault | June 27 2007 08:33PM

In 2006, sales of wealth management products at Empire Life passed the $1 billion mark for the first time. Excellent results in segregated funds fuelled this growth, the company says.

“Gross deposits for our segregated fund products were 30% higher than for 2005 and net sales once again reached record levels,” Douglas Hogeboom, president and CEO of Empire Life, stated in the insurer’s annual report. The wealth management division also includes guaranteed interest investment products.

Mr. Hogeboom attributes the excellent performance of Empire Life segregated funds to favorable stock market conditions and competitive historical returns.

Seg fund assets under management topped $3.8 billion.

In an interview with The Insurance Journal, Mike Schneider, senior vice-president, corporate affairs at Empire Life, said he is not surprised by the strong performance of wealth management.

“We’re pretty pleased with our results in wealth management for the last four years and even more for the last two. We’ve got great support from our distribution partners and we’ll continue to put the focus on that.

It’s important, because we see that baby boomers are looking for capital preservation and risk management products,” he says.

This is the second consecutive year of superb profitability at Empire Life. Total net earnings were $57.5 million in 2006, compared with $30.6 million in 2005, amounting to an astonishing 87.9% increase.

Net earnings in Empire Life’s wealth management division advanced by 12.5% to $7.2 million in 2006 from $6.4 million in 2005. This business sector was the insurer’s earnings engine.

Yet it was individual life insurance that really made the difference. This business sector rocketed from a net loss of $20.0 million in 2005 to net earnings of $6.2 million in 2006.

Factors that spurred this incredible turnaround include 28% growth in sales in 2006 compared with 2005, mainly linked to excess premiums that insured deposited in universal life insurance policies. In addition, Empire Life actuaries improved their matching of assets and liabilities, and an adjustment to actuarial assumptions had a major negative impact in 2005.

Net earnings in group insurance were less impressive in 2005, at $6.2 million compared with $9.6 million in 2005, or a 35.4% decline. This setback occurred despite 10% sales growth in this sector between 2005 and 2006. One reason: the insurer paid out more in claims in 2006.

The remainder of Empire Life’s net earnings for 2006 originate from capital and excess. These earnings were $37.5 million in 2006, versus $34.6 million in 2005, corresponding to an 8.4% increase. Capital and excess earnings represent income from investments made on the excess attributable to policyholders and shareholders’ equity.

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