Transcript Western Financial Group Q2 2008 Financial Results Conference Call August 12, 2008 Forward-Looking Statements This presentation contains certain forward-looking statements.

Western Financial Group
Q2 2008 Financial Results
Conference Call
August 12, 2008
Forward-Looking Statements
This presentation contains certain forward-looking statements. Forward-looking statements include, without
limitation, statements regarding the future financial position, business strategy, budgets, litigation, projected
costs, capital expenditures, financial results, taxes and plans and objectives of or involving Western
Financial Group Inc. (the “Company”) or its subsidiaries. Many of these statements can be identified by
looking for words such as ‘‘believe’’, ‘‘expects’’, ‘‘expected’’, ‘‘will’’, ‘‘intends’’, ‘‘projects’’, ‘‘anticipates’’,
‘‘estimates’’, ‘‘continues’’ or similar words. The Company believes the expectations reflected in such
forward-looking statements are reasonable but no assurance can be given that these expectations will
prove to be correct and such forward-looking statements should not be unduly relied upon. Forwardlooking statements are not guarantees of future performance and involve a number of risks and
uncertainties only some of which are described herein. Many factors could cause the Company’s actual
results, performance or achievements to, or future events or developments to, differ materially from those
expressed or implied by the forward-looking statements, including, without limitation, the risk factors, which
are discussed in greater detail in the ‘‘Risk Factors’’ section of the prospectus. Any forward-looking
statements are made as of the date hereof and the Company does not assume any obligation to publicly
update or revise such statements to reflect new information, subsequent events or otherwise.
Non-GAAP Measures
Throughout this presentation, the Company may use the term ‘‘operating income’’ to refer to earnings,
including investment income, before interest expense, taxes, depreciation and amortization of intangible
and capital assets, excluding gain (loss) from the sale of assets and income (loss) from equity investments.
The Company uses ‘‘operating income’’ to assist it in measuring corporate performance before the costs of
capital and amortization of capital and intangible assets. Operating income is not a measure recognized by
GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, this measure may not
be comparable to similar measures presented by other issuers and investors are cautioned that it should
not be used as an alternative to ‘‘net income’’ or other measures of financial performance
calculated in accordance with GAAP.
Today’s Remarks
•
•
•
•
Operational Progress in Q2
Strategic Events in Q2
Financial Update
Priorities for Q3
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Operational Progress
in Q2 2008
WFG Agency Network
• Same store customer count 4.5% YTDA
• Same store sales 9.5% - Market share gains
• Soft market continues – AB Auto Increase
approved
• 5% on mandatory
• Acquisition of Simpson, Trochu, AB and
Woodland, Grande Cache, AB
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Western Life Assurance
• Creditor Life still strong
• Certificate count and growth highest ever 13% over Q2/07
• Bolt-on product for network is at 5,554
policies. Target of 20,000 by Q2/09
• Westguard employee benefits program
underway and gaining traction
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Bank West
• Negative portfolio growth in Q1, Summer
funding season slower than 2007.
Opportunity rich environment. Guarding
capacity and reviewing opportunities.
• Portfolio target for 2008 - $320 million
• Very low specific provisions in H1, credit
quality solid
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Strategic Events in Q2
Q2 Strategic Events
• Agency acquisition pipeline active –
price/value expectations are still high
• Loan portfolio acquisition opportunities
• Business development discussions with
Partners continue
• Significant advertising increase in advance of
2009 local name “Sunset” plan
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Financial Update
($ Millions)
Total Revenue
140
120
100
80
60
40
20
0
114
127
CAGR 28.0%
83
64
28
20
22
33
42
00 001 002 003 004 005 006 007 TM
0
L
2
2
2
2
2
2
2
2
8
0
0
2
2
Q
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Earnings Per Share
0.30
CAGR 32%
CAGR 31%
0.25
0.20
0.15
0.10
0.05
0.00
2000
2001
2002
2003
2004
2005
2006
2007
Q2
2008
LTM
Basic
0.03
0.09
0.08
0.11
0.18
0.17
0.22
0.24
0.23
Diluted
0.03
0.07
0.08
0.10
0.16
0.15
0.20
0.22
0.23
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Overall
Revenue ($000)
Income from Equity
Investments ($000)
Net Income ($000)
Earnings per share ($)
Basic
Diluted
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2008
2007
64,473
51,204
1,458
8,225
1,594
6,635
0. 13
0. 13
0.14
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The Network
2008
2007
Commission & other
customer revenue ($000)
38,361
32,282
Operating expenses ($000)
26,568
21,146
Operating income ($000)
11,793
11,136
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Bank West
2008
2007
Interest & investment income ($000)
9,551
5,320
Net interest & investment income ($000)
3,052
1,913
Operating & provision expenses ($000)
1,920
1,667
Operating income ($000)
1,132
246
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Western Life Assurance
2008
14,913
579
2007
12,714
(579)
Policyholder benefits ($000)
6,487
4,856
Operating expenses ($000)
6,569
5,498
Operating income ($000)
2,436
1,781
Premium income ($000)
Investment income ($000)
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Corporate & All Other
Other revenues ($000)
2008
1,069
2007
1,467
Operating expenses ($000)
4,290
4,556
(3,221)
(3,089)
Operating loss ($000)
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Western Financial Group
Historical Consolidated ROE
12
9.4
8
7.2
7.5
8.3
8.1
CAGR 24.1%
8.4
5.6
6
4
2
1.9
0
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
Q 07
2
LT
M
Percent
10
9.6
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200
180
160
140
120
100
80
60
40
20
0
173
131
115
81
59
19
17
18
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Q
2
20
08
Percent
Western Financial Group
Debt to Equity Ratio
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Priorities for Q3
Q3 Priorities
•
•
•
•
Agency acquisitions
Ubiquity Bank / Wealthview integration
Network/Life WFGO
Bank portfolio growth and acquisition and/or
new loans
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Questions
…because we live here.