Iamgold Earnings Call Insights: Dividend, Strain

On Thursday, Iamgold Corp (NYSE:IAG) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with investors.


Peter Routledge – National Bank Financial: Just like to talk about the dividend, we are near the top of the payout range and capital is a little constrained, albeit in a difficult market environment, but that market environment may not lift for some time. So, what options are you think about with respect to the dividend, in particular, would you look at putting a discount on the dividend reinvestment?

A Closer Look: Einhorn and Ron Paul on Bernanke’s Wealth Effect Fed Policy>>

Yvon Charest – President and CEO: When we look at the dividend to shareholder one of the thing that matters to us is the regulatory environment, and the requirement from regulators. Right now, we all know that the capital are a lot more punitive in the low interest environment, many lifecos in Canada have made study, they have shared the info, they went to the regulator and they have shared with them that probably the formula needs some refinement. The industry is saying that when you sell seg fund product with completely edging the risk that it’s not necessarily making sense to have those expensive capital requirements. So, I would say that, the main items that force us to postpone a bit any changes in dividend is related with the uncertainty on the regulatory side. That’s the main factor affecting our thinking. So, right now, at the beginning of 2012, we are in about the same position in 2011, which is to say, that the payout would be closer to the top of the range.

Peter Routledge – National Bank Financial: The market may move faster than the regulators, at what point do you just sort of put that aside and just address the dividend?

Yvon Charest – President and CEO: I am sorry, Peter. I don’t understand exactly what you have in mind?

Peter Routledge – National Bank Financial: You say you don’t want to address policy as I interpret it because you are anticipating some regulatory capital changes. Is that correct?

Yvon Charest – President and CEO: I’m saying that right now there is quite a bit of uncertainty in terms of capital requirements from regulators. So, it’s tough, it’s more difficult for us to have clarity about what is the development of excess capital we have on the regular basis in our operation. Given that uncertainty, we haven’t had that much discussion with the Board concerning any movement in relation to dividend to shareholders.

Peter Routledge – National Bank Financial: I guess the follow-up was just, that uncertainty may go on longer than ideal and that the market may move in an unfavorable way in the MCCSR or solvency as reported will drop down and might that be a time to think about getting some capital support via the institution or via putting into dividend reinvestment plan with that?

Yvon Charest – President and CEO: Well, Peter, I am not the market. Let’s see what the market will be doing. What I’m telling you is that right now in terms of capital, we have indicated that contrary to other lifecos that are telling you, charges that are coming in the next following quarters, we are doing just the opposite. We have already done so and incorporate those costs in the balance sheet. So, when I look at my capital, if I want to compare and apple-on-apple with some other companies, I could easily claim that I am at 202%. I’m not facing any issue concerning the holding company issue with (indiscernible). I just would draw from the capital expensive seg fund business, because we have decided to stop waiting for credit (indiscernible) there, so we have done quite a bit to improve the situation on that front.


Robert Sedran – CIBC World Markets: Couple of quick questions for you in terms of first of all reconciling some of the comments on strain and I apologize if I missed this, but is it fair to say that the 50% to 55% range for strain is no longer operative considering the price increase?

Normand Pepin – EVP, Life Subsidiaries and Individual Insurance and Annuities: There was noise when you mentioned. If I understand correctly, you mentioned that the 50% to 55% guidance with respect to strain is you mentioned no longer — Could you repeat that again please.

Robert Sedran – CIBC World Markets: Sorry, I’m not sure what’s going on with the line here today. I am just wondering given the price increases and given the performance, should we be thinking more in the area of 45% to 50% for strain going forward?

Normand Pepin – EVP, Life Subsidiaries and Individual Insurance and Annuities: This is what I tried to provide as information. We haven’t changed our guidance for the moment which is still 50% to 55%, but I mentioned to everybody that if we have done all of our sales with our new price, the strength for that specific quarter would have been 46% and 45% to 50% would be probably the target, I would expect in the coming quarter.

Robert Sedran – CIBC World Markets: I’m assuming you can hear me. Just a quick follow-up question regarding the URR, when I think about, because the information on the Slide 17 I guess is suggesting about 16 percentage points, is the cost of the extra conservatism I guess in the reserving. Would you think about perhaps staying at the maximum prescribed range rather than lowering it if you could save yourself some capital that way?

Rene Chabot – SVP and Chief Actuary: No, We wouldn’t do this. Okay, we will maintain the cap with what has been our high approach for so many years and what we want to share it with the people is what is the value of that conservatism that we have for so many years within that company and this is what we try to provide to the people over there.

Robert Sedran – CIBC World Markets: So it is fair to assume that if you don’t have to move you may still move to URR this year again?

Rene Chabot – SVP and Chief Actuary: Yes, I may still move the URR this year again, this is one of our tough priority within that organization. We are already in action with respect to that, and that’s one of the reason you have seen some improvement in our IRR proxy that show you that we have made some asset liability matching improvement and we would give you more information at the investor day that where we are with respect to that plan.

Yvon Charest – President and CEO: Just to make sure everyone is on the same line here, if you go on to Slide 5, when Rene is saying that we are already in action under URR in fact we are already in action to make sure that we’ll deliver enough management action so that we could absorb an URR decrease without impacting the net income. So I think the key message there and as far moving from 186% to 202% most of it is URR but you could see again on Slide 5 that it is a combination and URR and using current IRR rates.