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Press release from CNW Group

Great-West Lifeco reports 2010 results

Thursday, February 10, 2011

Great-West Lifeco reports 2010 results13:36 EST Thursday, February 10, 2011TSX:GWOReaders are referred to the cautionary notes regarding Forward-Looking Information and Non-GAAP Financial Measures at the end of this release. All figures are expressed in Canadian dollars.WINNIPEG, Feb. 10 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $508 million for the three months ended December 31, 2010, compared to $443 million in 2009, an increase of 14.7%. On a per share basis, this represents $0.535 per common share for the three months ended December 31, 2010, compared to $0.468 per common share for 2009.Fourth quarter results include a favourable $35 million adjustment of prior year overstatements of tax liabilities in the United States segment. Asset impairment provisions of $57 million and the related impact on actuarial liabilities of $71 million negatively impacted in quarter earnings by $128 million, primarily in the Europe segment. There was also a positive in quarter contribution of $43 million from excess interest margins in actuarial liabilities in the Europe segment. Fourth quarter results also include the favourable after-tax impact of a $68 million adjustment relating to the cost of acquiring Canada Life Financial Corporation in 2003.For the twelve months ended December 31, 2010, operating earnings attributable to common shareholders were $1,861 million, compared to $1,627 million a year ago, an increase of 14.4%. On a per share basis, this represents $1.964 per common share ($1.962 diluted) for 2010, compared to $1.722 per common share ($1.719 diluted) a year ago.Operating earnings, a non-GAAP financial measure, exclude the impact of an incremental litigation provision established in the third quarter in the amount of $225 million after-tax ($204 million attributable to the common shareholders or $0.216 per common share and $21 million to non-controlling interests).Currency headwinds persisted in the quarter as the Canadian dollar continued to strengthen against the U.S. dollar, the British pound and the euro. For the three months ended December 31, 2010, the negative currency impact on Lifeco's net earnings was $17 million or $0.02 per common share compared to the same period in 2009. For the twelve months ended December 31, 2010, the negative currency impact on net earnings was $103 million or $0.11 per common share compared to 2009.Consolidated assets under administration at December 31, 2010 were $484 billion, up $25 billion from December 31, 2009.Highlights << - In Canada, sales of individual life insurance increased 20% in the quarter compared to the same quarter of 2009 and full year sales of group insurance increased 8% compared to 2009. - In US Financial Services, sales of single premium whole life insurance increased 104% on a constant currency basis in the quarter compared to the same quarter in 2009. - Putnam mutual fund sales increased 16% on a constant currency basis in the quarter compared to the same quarter in 2009 and the Putnam suite of absolute return mutual funds reached US$2.7 billion in assets under management. - U.K. sales increased 57% on a constant currency basis in the quarter compared to the same quarter in 2009. - Return on common shareholders' equity was 16.0% based on operating earnings and 14.4% on net earnings. - The Company declared a quarterly common dividend of $0.3075 per common share payable March 31, 2011, unchanged from the previous quarter. - The Company's capital position remains very strong. Lifeco's Canadian operating subsidiary, Great-West Life, reported a Minimum Continuing Capital and Surplus (MCCSR) ratio of 203% at December 31, 2010. At December 31, 2010 Lifeco held, at the holding company level, approximately $800 million in liquid assets derived from capital raising initiatives since the fourth quarter of 2008, which is not reflected in the Great-West Life MCCSR ratio. >>SEGMENTED OPERATING RESULTSConsolidated net earnings for Lifeco comprise the net earnings of The Great-West Life Assurance Company (Great-West Life), Canada Life Financial Corporation (CLFC), London Life Insurance Company (London Life), Great-West Life & Annuity Insurance Company (GWL&A), and Putnam Investments, LLC (Putnam), together with Lifeco's corporate results.CANADANet earnings attributable to common shareholders for the fourth quarter of 2010 were down slightly to $238 million compared to $246 million in the fourth quarter of 2009. Fourth quarter results include the favourable after-tax impact of a $44 million adjustment relating to the cost of acquiring Canada Life Financial Corporation in 2003. The fourth quarter 2009 results had included a favourable provision release of $29 million related to litigation for certain Canadian retirement plans and a gain recognized on the redemption of Lifeco Preferred Shares, Series E of $15 million.For the twelve months ended December 31, 2010, net earnings attributable to common shareholders were $940 million compared to $883 million in 2009.Total sales for the twelve months ended December 31, 2010 were up 23% to $9.5 billion compared to $7.7 billion after adjusting the 2009 twelve month period for the impact of the group retirement assets acquired from Fidelity Investments Canada. This growth was driven by strong sales of proprietary retail investment funds which were up 31%, payout annuity products which were up 11% and individual life product sales which increased 26% compared to the twelve month period in 2009.Total assets under administration at December 31, 2010 were $125.5 billion, compared to $114.6 billion at December 31, 2009.UNITED STATESNet earnings attributable to common shareholders for the fourth quarter of 2010 were $133 million compared to $36 million in the fourth quarter of 2009. Fourth quarter results include a favourable $35 million adjustment of prior year overstatements of tax liabilities. In quarter earnings contribution from Putnam was a positive $1 million compared to a negative $37 million a year ago primarily driven by lower expenses of $43 million, releases of legal provisions of $16 million and a reduction of performance fee income by $21 million.For the twelve months ended December 31, 2010, net earnings attributable to common shareholders were $343 million compared to $228 million in 2009.As a result of currency movement, net earnings were negatively impacted by $6 million compared to the fourth quarter of 2009 and by $32 million compared to the twelve months of 2009.Total sales for the twelve months ended December 31, 2010 were $38.1 billion compared to $32.4 billion in 2009.Total assets under administration at December 31, 2010 were $293.7 billion compared to $277.8 billion at December 31, 2009. Included in assets under administration at December 31, 2010 were $120.0 billion of mutual fund and institutional account assets managed by Putnam.EUROPENet earnings attributable to common shareholders for the fourth quarter of 2010 were $138 million compared to $165 million in the fourth quarter of 2009. Asset impairment provisions of $50 million and the related impact on actuarial liabilities of $71 million negatively impacted in quarter earnings by $121 million. There was also a positive in quarter contribution of $43 million from excess interest margins in actuarial liabilities. In quarter results also include the favourable after-tax impact of a $24 million adjustment relating to the cost of acquiring Canada Life Financial Corporation in 2003.For the twelve months ended December 31, 2010, net earnings attributable to common shareholders were $578 million compared to $529 million in 2009.As a result of currency movement, net earnings were negatively impacted by $11 million when compared to the fourth quarter of 2009 and by $71 million when compared to the twelve months of 2009.Total sales for the twelve months ended December 31, 2010 were $4.5 billion, compared to $4.0 billion in 2009. Sales increased by 27% in local currency, however, this was partly offset by the negative effect of currency movement.Total assets under administration at December 31, 2010 were $64.7 billion, compared to $66.2 billion at December 31, 2009.CORPORATECorporate net earnings for Lifeco attributable to common shareholders was a net loss of $1 million for the fourth quarter compared to a net loss of $4 million in the fourth quarter of 2009. For the twelve months ended December 31, 2010 net earnings for Lifeco attributable to common shareholders was a net loss of $204 million, which includes the impact of the litigation provision established in the third quarter, compared to a net loss of $13 million for the twelve months ended December 31, 2009.QUARTERLY DIVIDENDSAt its meeting today, the Board of Directors approved a quarterly dividend of $0.3075 per share on the common shares of the Company payable March 31, 2011 to shareholders of record at the close of business March 3, 2011.In addition, the Directors approved quarterly dividends on: << - Series F First Preferred Shares of $0.36875 per share; - Series G First Preferred Shares of $0.3250 per share; - Series H First Preferred Shares of $0.30313 per share; - Series I First Preferred Shares of $0.28125 per share; - Series J First Preferred Shares of $0.3750 per share; - Series L First Preferred Shares of $0.353125 per share; and - Series M First Preferred Shares of $0.36250 per share >>all payable March 31, 2011 to shareholders of record at the close of business March 3, 2011.For purposes of the Income Tax Act (Canada), and any similar provincial legislation, the dividends referred to above are eligible dividends.GREAT-WEST LIFECOGreat-West Lifeco Inc. (TSX:GWO) is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses. The Company has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance Company and Putnam Investments, LLC. Lifeco and its companies have $484 billion in assets under administration and are members of the Power Financial Corporation group of companies.Cautionary note regarding Forward-Looking InformationThis release contains some forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or negative versions thereof and similar expressions. In addition, any statement that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, possible future action by the Company including statements made by the Company with respect to the expected benefits of acquisitions or divestitures are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally, including the insurance and mutual fund industries. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Company due to, but not limited to, important factors such as sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, taxes, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, changes in accounting policies and the effect of applying future accounting changes (including adoption of International Financial Reporting Standards), unexpected judicial or regulatory proceedings, catastrophic events, and the Company's ability to complete strategic transactions and integrate acquisitions. The reader is cautioned that the foregoing list of important factors is not exhaustive, and there may be other factors, including factors set out under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates" in the Company's 2010 Annual Management's Discussion and Analysis and any listed in other filings with securities regulators, which are available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Company has no intention to update any forward-looking statements whether as a result of new information, future events or otherwise.Cautionary note regarding Non-GAAP Financial MeasuresThis release contains some non-GAAP financial measures. Terms by which non-GAAP financial measures are identified include but are not limited to "operating earnings", "constant currency basis", "premiums and deposits", "sales", and other similar expressions. Non-GAAP financial measures are used to provide management and investors with additional measures of performance. However, non-GAAP financial measures do not have standard meanings prescribed by GAAP and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP.Further informationSelected financial information is attached.Great-West Lifeco's fourth quarter conference call and audio webcast will be held Thursday, February 10, 2011 at 3:30 p.m. (EST). The call and webcast can be accessed through www.greatwestlifeco.com or by phone at: << - Participants in the Toronto area: 416-340-8018 - Participants from North America: 1-866-223-7781 - Participants from Overseas: Dial international access code first, then 800-6578-9898 >>A replay of the call will be available from February 10th to February 17th, 2011, and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto (passcode: 1367585 followed by the number sign). The archived webcast will be available on www.greatwestlifeco.com from approximately 7:00 p.m. (EST) on February 10, 2011 until February 9, 2012.Additional information relating to Lifeco, including the 2010 audited consolidated financial statements, Management's Discussion and Analysis (MD&A), Annual Information Form (AIF), and CEO/CFO certificates will be filed on SEDAR at www.sedar.com. << FINANCIAL HIGHLIGHTS (unaudited) (in $ millions except per share amounts) As at or for the For the three months ended twelve months ended ------------------------------------------------------ December September December December December 31 2010 30 2010 31 2009 31 2010 31 2009 ------------------------------------------------------------------------- Premiums and deposits: Life insurance, guaranteed annuities and insured health products $ 4,610 $ 4,313 $ 4,324 $ 17,748 $ 18,033 Self-funded premium equivalents (ASO contracts) 654 619 632 2,575 2,499 Segregated funds deposits: Individual products 2,158 1,703 2,036 7,284 6,229 Group products 1,385 1,340 1,626 6,790 8,470 Proprietary mutual funds and institutional deposits 6,667 6,407 6,042 24,654 21,507 ------------------------------------------------------ Total premiums and deposits 15,474 14,382 14,660 59,051 56,738 ------------------------------------------------------ Fee and other income 729 691 765 2,874 2,839 Paid or credited to policyholders 3,553 7,317 4,283 23,063 23,809 Operating earnings - common shareholders 508 479 443 1,861 1,627 Net earnings - common shareholders 508 275 443 1,657 1,627 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Per common share Operating earnings $ 0.535 $ 0.505 $ 0.468 $ 1.964 $ 1.722 Basic earnings 0.535 0.289 0.468 1.748 1.722 Dividends paid 0.3075 0.3075 0.3075 1.230 1.230 Book value 12.15 12.35 12.17 ------------------------------------------------------------------------- Return on common shareholders' equity (12 months): Operating earnings 16.0% 15.5% 13.8% Net earnings 14.4% 13.8% 13.8% ------------------------------------------------------------------------- Total assets $ 131,514 $ 135,567 $ 128,369 Segregated funds net assets 94,827 92,167 87,495 Proprietary mutual funds and institutional net assets 123,273 126,362 123,504 -------------------------------- Total assets under management 349,614 354,096 339,368 Other assets under administration 134,308 131,557 119,207 -------------------------------- Total assets under administration $ 483,922 $ 485,653 $ 458,575 -------------------------------- -------------------------------- Share capital and surplus $ 13,420 $ 13,361 $ 13,003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The Company uses operating earnings as a non-GAAP financial measure of earnings performance, which excludes the litigation provision described in Note 25 to the December 31, 2010 financial statements. SUMMARIES OF CONSOLIDATED OPERATIONS (unaudited) (in $ millions except per share amounts) For the three months For the years ended December 31 ended December 31 ------------------------------------------- 2010 2009 2010 2009 ------------------------------------------- Income Premium income $ 4,610 $ 4,324 $ 17,748 $ 18,033 Net investment income Regular net investment income 1,475 1,461 5,743 6,179 Changes in fair value on held for trading assets (1,555) (549) 3,633 3,490 ------------------------------------------- Total net investment income (80) 912 9,376 9,669 Fee and other income 729 765 2,874 2,839 ------------------------------------------- 5,259 6,001 29,998 30,541 ------------------------------------------- Benefits and expenses Policyholder benefits 4,037 3,915 15,342 16,568 Policyholder dividends and experience refunds 350 328 1,466 1,479 Change in actuarial liabilities (834) 40 6,255 5,762 ------------------------------------------- Total paid or credited to policyholders 3,553 4,283 23,063 23,809 Commissions 430 391 1,523 1,370 Operating expenses 568 673 2,797 2,600 Premium taxes 59 65 256 257 Financing charges 71 62 283 336 Amortization of finite life intangible assets 23 21 92 89 ------------------------------------------- Earnings before income taxes 555 506 1,984 2,080 Income taxes - current 219 (162) 168 (102) - future (178) 209 59 447 ------------------------------------------- Net earnings before non-controlling interests 514 459 1,757 1,735 Non-controlling interests (16) (4) 14 36 ------------------------------------------- Net earnings 530 463 1,743 1,699 Perpetual preferred share dividends 22 20 86 72 ------------------------------------------- Net earnings - common shareholders $ 508 $ 443 $ 1,657 $ 1,627 ------------------------------------------- ------------------------------------------- Earnings per common share Basic $ 0.535 $ 0.468 $ 1.748 $ 1.722 ------------------------------------------- ------------------------------------------- Diluted $ 0.535 $ 0.467 $ 1.746 $ 1.719 ------------------------------------------- ------------------------------------------- CONSOLIDATED BALANCE SHEETS (unaudited) (in $ millions) December 31 --------------------- 2010 2009 --------------------- Assets Bonds $ 72,203 $ 66,147 Mortgage loans 16,115 16,684 Stocks 6,700 6,442 Real estate 3,273 3,099 Loans to policyholders 6,827 6,957 Cash and cash equivalents 1,840 3,427 Funds held by ceding insurers 9,860 10,839 Goodwill 5,397 5,406 Intangible assets 3,108 3,238 Other assets 6,191 6,130 --------------------- Total assets $ 131,514 $ 128,369 --------------------- --------------------- Liabilities Policy liabilities Actuarial liabilities $ 100,394 $ 98,059 Provision for claims 1,331 1,308 Provision for policyholder dividends 629 606 Provision for experience rating refunds 311 317 Policyholder funds 2,452 2,361 --------------------- 105,117 102,651 Debentures and other debt instruments 4,323 4,142 Funds held under reinsurance contracts 152 186 Other liabilities 4,686 4,608 Repurchase agreements 1,041 532 Deferred net realized gains 115 133 --------------------- 115,434 112,252 Preferred shares - 203 Capital trust securities and debentures 535 540 Non-controlling interests Participating account surplus in subsidiaries 2,013 2,004 Preferred shares issued by subsidiaries - 157 Perpetual preferred shares issued by subsidiaries - 147 Non-controlling interests in capital stock and surplus 112 63 Share capital and surplus Share capital Preferred shares 1,897 1,497 Common shares 5,802 5,751 Accumulated surplus 7,844 7,367 Accumulated other comprehensive loss (2,177) (1,664) Contributed surplus 54 52 --------------------- 13,420 13,003 --------------------- Total liabilities, share capital and surplus $ 131,514 $ 128,369 --------------------- --------------------- Segmented Information (unaudited) Consolidated Operations For the three months ended December 31, 2010 United Lifeco Canada States Europe Corporate Total ------------------------------------------------------ Income: Premium income $ 2,425 $ 900 $ 1,285 $ - $ 4,610 Net investment income Regular net investment income 653 332 488 2 1,475 Changes in fair value on held for trading assets (118) (325) (1,112) - (1,555) ------------------------------------------------------ Total net investment income 535 7 (624) 2 (80) Fee and other income 263 311 155 - 729 ------------------------------------------------------ Total income 3,223 1,218 816 2 5,259 ------------------------------------------------------ Benefits and expenses: Paid or credited to policyholders 2,306 742 505 - 3,553 Other 608 367 151 2 1,128 Amortization of finite life intangible assets 11 10 2 - 23 ------------------------------------------------------ Earnings before income taxes 298 99 158 - 555 Income taxes 65 (35) 10 1 41 ------------------------------------------------------ Net earnings before non-controlling interests 233 134 148 (1) 514 Non-controlling interests (23) 1 6 - (16) ------------------------------------------------------ Net earnings 256 133 142 (1) 530 Perpetual preferred share dividends 18 - 4 - 22 ------------------------------------------------------ Net earnings - common shareholders $ 238 $ 133 $ 138 $ (1) $ 508 ------------------------------------------------------ ------------------------------------------------------ For the three months ended December 31, 2009 United Lifeco Canada States Europe Corporate Total ------------------------------------------------------ Income: Premium income $ 2,386 $ 685 $ 1,253 $ - $ 4,324 Net investment income Regular net investment income 633 332 491 5 1,461 Changes in fair value on held for trading assets (179) (15) (355) - (549) ------------------------------------------------------ Total net investment income 454 317 136 5 912 Fee and other income 249 358 158 - 765 ------------------------------------------------------ Total income 3,089 1,360 1,547 5 6,001 ------------------------------------------------------ Benefits and expenses: Paid or credited to policyholders 2,233 853 1,197 - 4,283 Other 530 457 196 8 1,191 Amortization of finite life intangible assets 8 11 2 - 21 ------------------------------------------------------ Earnings before income taxes 318 39 152 (3) 506 Income taxes 66 13 (28) (4) 47 ------------------------------------------------------ Net earnings before non-controlling interests 252 26 180 1 459 Non-controlling interests (5) (10) 11 - (4) ------------------------------------------------------ Net earnings 257 36 169 1 463 Perpetual preferred share dividends 11 - 4 5 20 ------------------------------------------------------ Net earnings - common shareholders $ 246 $ 36 $ 165 $ (4) $ 443 ------------------------------------------------------ ------------------------------------------------------ For the twelve months ended December 31, 2010 United Lifeco Canada States Europe Corporate Total ------------------------------------------------------ Income: Premium income $ 9,220 $ 3,216 $ 5,312 $ - $ 17,748 Net investment income Regular net investment income 2,547 1,332 1,854 10 5,743 Changes in fair value on held for trading assets 1,604 719 1,310 - 3,633 ------------------------------------------------------ Total net investment income 4,151 2,051 3,164 10 9,376 Fee and other income 1,025 1,246 603 - 2,874 ------------------------------------------------------ Total income 14,396 6,513 9,079 10 29,998 ------------------------------------------------------ Benefits and expenses: Paid or credited to policyholders 10,665 4,609 7,789 - 23,063 Other 2,495 1,489 597 278 4,859 Amortization of finite life intangible assets 40 45 7 - 92 ------------------------------------------------------ Earnings before income taxes 1,196 370 686 (268) 1,984 Income taxes 186 25 80 (64) 227 ------------------------------------------------------ Net earnings before non-controlling interests 1,010 345 606 (204) 1,757 Non-controlling interests (2) 2 14 - 14 ------------------------------------------------------ Net earnings 1,012 343 592 (204) 1,743 Perpetual preferred share dividends 72 - 14 - 86 ------------------------------------------------------ Net earnings - common shareholders $ 940 $ 343 $ 578 $ (204) $ 1,657 ------------------------------------------------------ ------------------------------------------------------ For the twelve months ended December 31, 2009 United Lifeco Canada States Europe Corporate Total ------------------------------------------------------ Income: Premium income $ 8,946 $ 2,973 $ 6,114 $ - $ 18,033 Net investment income Regular net investment income 2,610 1,521 2,025 23 6,179 Changes in fair value on held for trading assets 1,316 981 1,193 - 3,490 ------------------------------------------------------ Total net investment income 3,926 2,502 3,218 23 9,669 Fee and other income 938 1,240 661 - 2,839 ------------------------------------------------------ Total income 13,810 6,715 9,993 23 30,541 ------------------------------------------------------ Benefits and expenses: Paid or credited to policyholders 10,354 4,778 8,677 - 23,809 Other 2,205 1,594 746 18 4,563 Amortization of finite life intangible assets 32 51 6 - 89 ------------------------------------------------------ Earnings before income taxes 1,219 292 564 5 2,080 Income taxes 268 68 7 2 345 ------------------------------------------------------ Net earnings before non-controlling interests 951 224 557 3 1,735 Non-controlling interests 26 (4) 14 - 36 ------------------------------------------------------ Net earnings 925 228 543 3 1,699 Perpetual preferred share dividends 42 - 14 16 72 ------------------------------------------------------ Net earnings - common shareholders $ 883 $ 228 $ 529 $ (13) $ 1,627 ------------------------------------------------------ ------------------------------------------------------ >>For further information: Marlene Klassen, APR, Assistant Vice-President, Communication Services, (204) 946-7705