Western Financial GroupQ3 2008 Financial Results
Conference Call
November 17, 2008
Forward-Looking StatementsThis 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. Forward-looking 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 MeasuresThroughout 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.
TSX: WES3
Today’s Remarks
• Operational Progress in Q3
• Strategic Events in Q3
• Financial Update
• Priorities for Q4
Operational Progressin Q3 2008
TSX: WES5
WFG Agency Network
• Same store customer count 4.3% YTDA.• Same store sales 9.7% - Market share gains.• Soft market “at bottom” – AB Auto increase
approved; anecdotal increases in personal and small commercial.
• Acquisition of Vets (Crowsnest Pass, AB), Dunn (Wolseley, SK) and Boyd (Prince Albert, SK).
TSX: WES6
Western Life Assurance
• Creditor Life still strong.• Certificate count and growth 9.6% over
Q3/07.• Bolt-on product for network is at 6,159
policies. Target of 20,000 by Q2/09.• TotalGuard employee benefits program
transfer underway at HED. $5 million + synergy in 2009.
TSX: WES7
Bank West
• Negative portfolio growth YTD 2008. Summer funding season slower than 2007.
• Portfolio target for 2008 - $360 million.
• Very low specific provisions in H1, “lumpy” in Q3.
• Credit quality solid - > 30 day delinquency improved slightly in Q3.
TSX: WES8
AgriFinancial Canada(Proposed acquisition, subject to OSFI approval)
• Farm credit card – 25,000 farmers.
• Equipment loans and leases.
• $90 million loan book.
• Profitable operation – bolt-on to Bank West.
• Geographic and customer synergy.
Strategic Events in Q3
TSX: WES10
Q3 Strategic Events
• Agency acquisition pipeline active – price/value expectations are still high.
• Loan portfolio acquisition opportunities = AgriFinancial.
• Business development discussions with Partners - TotalGuard transfer.
• Significant advertising increase in advance of 2009 local name “Sunset” plan.
Financial Update
TSX: WES12
Total Revenue
130114
20
64
3342
2822
83
020406080
100120140
2000
2001
2002
2003
2004
2005
2006
2007
Q3
2008
LTM
($ M
illi
on
s)
CAGR 27.0%
TSX: WES13
Earnings Per Share
0.00
0.05
0.10
0.15
0.20
0.25
0.30
Basic 0.03 0.09 0.08 0.11 0.18 0.17 0.22 0.24 0.22
Diluted 0.03 0.07 0.08 0.10 0.16 0.15 0.20 0.22 0.22
2000 2001 2002 2003 2004 2005 2006 2007Q3
2008 LTM
CAGR 32%CAGR 31%
TSX: WES14
Overall
2008 2007
Revenue ($000) 96,485 80,758
Income from Equity Investments ($000) 1,525 1,850
Net Income ($000) 10,325 8,979
Earnings per share ($)
Basic
Diluted
0. 17
0. 17
0.19
0.17
TSX: WES15
The Network
2008 2007
Commission & other customer revenue ($000) 58,186 49,290
Operating expenses ($000) 40,810 33,210
Operating income ($000) 17,376 16,080
TSX: WES16
Bank West
2008 2007
Interest & investment income ($000) 14,228 8,632
Net interest & investment income ($000) 4,544 2,953
Operating & provision expenses ($000) 3,444 2,704
Operating income ($000) 1,100 249
TSX: WES17
Western Life Assurance
2008 2007
Premium income ($000) 23,055 20,044
Investment income ($000) (471) 396
Policyholder benefits ($000) 9,037 9,168
Operating expenses ($000) 10,025 8,758
Operating income ($000) 3,522 2,514
TSX: WES18
Corporate & All Other
2008 2007
Other revenues ($000) 1,487 2,396
Operating expenses ($000) 6,895 6,828
Operating loss ($000) (5,408) (4,432)
TSX: WES19
Western Financial GroupHistorical Consolidated ROE
1.9
8.59.4
5.6
7.2
8.37.5 8.18.4
0123456789
10
2000
2001
2002
2003
2004
2005
2006
2007
Q3
LTM
Per
cen
t
CAGR 24.1%
TSX: WES20
Western Financial GroupDebt to Equity Ratio
1717
131
19
115
173
81
59
020406080
100120140160180200
2001
2002
2003
2004
2005
2006
2007
Q3
2008
Per
cen
t
Priorities for Q4
TSX: WES22
Q4 Priorities
• Budget and capital planning.
• Network/Life WFGO.
• AgriFinancial approvals.
• Bank West CEO search.
Questions
…because we live here.