LS Mutual reports record earnings in 2009 stoked by efficiency gains

par Alain Thériault | June 26 2000 01:37PM

LS Mutual garnered exceptional sales in 2009 despite a climate of uncertainty. Pursuing its plan to boost efficiency, LS deftly managed a growth thrust as it soared to record net profits. 

Revenue at the Saint-Hyacinthe, Quebec-based mutual specializing in living benefits reached $77.39 million in 2009. This amounts to growth of 30% compared with 2008. At the same time, the insurer posted record net income of $4.4 million, for a return on equity of 12.9%.

The year 2009 was fantastic, LS Mutual president and CEO Richard Gagnon enthuses. "We're particularly proud of our record profit, because it is not easy to reconcile strong growth and earnings," he says.

Mr. Gagnon says that these returns affirm that the company's financial structure is solid. "We adopted a structured risk management profile 18 months ago. We were one of the first insurers in Quebec to do so," he says. "We closely follow over 30 main risks that can affect insurance companies: volatility, interest rate fluctuations, possibility of a national catastrophe, etc. We measure the impact, frequency and probability of these risks to avoid unpleasant surprises," he explains.

The three-year strategic plan put in place in 2008 emphasizes efficiency gains. "For several years we have been trying to raise our revenue more quickly than our expenses. We have reviewed our methods and tools, particularly in organization of work and technology. This is how we successfully absorbed additional sales volume while maintaining service quality." LS Mutual has already invested nearly $2 million in its technology and plans to invest another $1 million by the end of its strategic plan in 2011.

Aside from efficiency gains, two other factors explain the insurer's record net profits: good investment strategies and elevated prudence. "Because of the liquidity problems that even the solid large companies faced, we were able to procure corporate bonds at extremely advantages rates," Mr. Gagnon says. Notably, LS Mutual acquired long-term instruments of financial institutions, with 30-year horizons, at rates of 7% to 8%.

As for prudence, LS Mutual benefited from an unexpected cushion. It had set aside a provision for a government decision on taxation. The insurer reclaimed the amount after the decision was handed down earlier this year.

Ontario expansion

For a small player like LS Mutual, specialization is crucial for survival. Despite its size, though, it is determined to increase its presence. Its penetration of Ontario is another major growth engine.

Its foray is particularly advantageous for its subsidiary Tour+Med Travel Insurance. "We achieved growth of 20% last year compared with 2008 in travel insurance, with noteworthy profitability. Fifteen per cent of sales come from Ontario," Mr. Gagnon says, adding that Jean Hervieux oversees travel insurance activities in Ontario.

Aiming for gradual development in Ontario, the company recently appointed Michael Suska, as regional sales director. Formerly of Great-West Life, Mr. Suska is upholding the objective of doing "the same thing in individual life insurance as travel insurance" in 2010, Mr. Gagnon says.

Mr. Gagnon thinks Ontario has great potential when it comes to specialized products. "Our specialized disability insurance products for blue collar workers and the middle income market have a quality that is unmatched on the Ontario market. Their structure, the guarantees offered and commissions are all different," he explains.