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Press release from CNW Group

Great-West Lifeco reports first quarter 2011 results

Thursday, May 05, 2011

Great-West Lifeco reports first quarter 2011 results12:05 EDT Thursday, May 05, 2011TSX:GWOReaders are referred to the cautionary notes regarding Forward-Looking Information and Non-IFRS Financial Measures at the end of this release. All figures are expressed in Canadian dollars.WINNIPEG, May 5, 2011 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $415 million for the three months ended March 31, 2011, compared to $428 million in 2010. On a per share basis, this represents $0.438 per common share for the three months ended March 31, 2011, compared to $0.452 per common share for 2010.Included in net earnings for the first quarter was the establishment of catastrophe provisions, relating to the earthquake events in Japan and New Zealand, which negatively impacted earnings by $75 million or $0.08 per common share.Consolidated assets under administration at March 31, 2011 were $495.2 billion, up $8.2 billion from December 31, 2010. << Highlights - The Company successfully completed the transition to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Prior period results have been restated to reflect the adoption of IFRS effective January 1, 2010. - Sales in Canada of individual insurance products in the quarter were 8% higher than 2010, with sales of participating whole life insurance up 15% and sales of universal life insurance up 18% over 2010. - In the United States, Financial Services launched its new Hybrid Business Owned Life Insurance (BOLI) product in the first quarter. This product, which combines both General Account and Separate Account product features, is being marketed to community banks purchasing life insurance to help finance the cost of employee benefits. Hybrid BOLI products have captured an increasing share of sales recently, and adding this product to the Company's portfolio should result in additional sales in 2011. - Putnam net asset inflows for the three months ended March 31, 2011 were US$1.8 billion, compared to net outflows of US$0.1 billion over the same period a year ago. - In Europe, Insurance and Annuities sales increased by $18 million from the first quarter of 2010 and by $51 million or 5% in constant currency. - Return on common shareholders' equity was 16.4% based on operating earnings. - The Company declared a quarterly common dividend of $0.3075 per common share payable June 30, 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 200% at March 31, 2011. >>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 first quarter of 2011 were up 3% to $245 million compared to $237 million in the first quarter of 2010 reflecting earnings growth from Individual Insurance and Wealth Management.Total sales for the three months ended March 31, 2011 were $2.5 billion compared to $2.7 billion in 2010. Sales of individual insurance were up 8% and sales of proprietary mutual funds increased 22% while group retirement investment only sales and group large case sales decreased by $125 million and $60 million respectively reflecting the volatility of sales in the large case market.Total assets under administration at March 31, 2011 were $128.2 billion, compared to $126.9 billion at December 31, 2010.UNITED STATESNet earnings attributable to common shareholders for the first quarter of 2011 were $88 million compared to $65 million in the first quarter of 2010. First quarter results include higher investment income on surplus assets and the realization of a deferred tax asset of $9 million relating to prior years. In-quarter earnings from Putnam were a negative $13 million compared to a negative $15 million a year ago. The change in Putnam earnings was primarily due to a mix shift in revenue and reduced operating expenses.As a result of currency movement, net earnings were negatively impacted by $4 million compared to the first quarter of 2010.Total sales for the three months ended March 31, 2011 were $11.0 billion compared to $11.6 billion in 2010. The decrease is primarily due to one large plan sale in the Financial Services public non-profit market of $3.2 billion in the first quarter of 2010. This decrease was offset by improved sales in the Putnam segment of $2.9 billion compared to the same period in 2010. These improvements are primarily due to an increase in sales as a result of improved economic conditions and performance, and the introduction of new products.Total assets under administration at March 31, 2011 were $300.2 billion compared to $294.1 billion at December 31, 2010. Included in assets under administration at March 31, 2011 were $176.8 billion of assets under management, consisting of $123.4 billion of mutual fund and institutional account assets managed by Putnam and $53.4 billion of general account, separate account and proprietary mutual fund assets managed by Financial Services.EUROPENet earnings attributable to common shareholders for the first quarter of 2011 were $86 million compared to $130 million in the first quarter of 2010. In-quarter results include the establishment of catastrophe provisions relating to the earthquake events in Japan and New Zealand with an after tax shareholder earnings impact of $75 million.As a result of currency movement, net earnings were negatively impacted by $2 million compared to the first quarter of 2010.Total sales for the three months ended March 31, 2011 were $1.1 billion, compared to $1.1 billion in 2010. Sales increased by 5% in local currency, however, this was mostly offset by the negative effect of currency movement upon translation of sales in Canadian currency.Total assets under administration at March 31, 2011 were $66.8 billion, compared to $66.0 billion at December 31, 2010.CORPORATECorporate net earnings for Lifeco attributable to common shareholders was a net loss of $4 million for the first quarter compared to a net loss of $4 million in the first quarter of 2010.MANAGEMENT APPOINTMENTSAt Great-West Lifeco's annual meeting, held today in Winnipeg, it was announced that William L. Acton, President and Chief Executive Officer, Canada Life Capital Corporation, had indicated his intention to retire following 36 years of distinguished service. In recent years, Bill has been responsible for the Company's Europe and Reinsurance operations, which have shown strong growth and profitability under his leadership. The following Management appointments were announced at the annual meeting: << - Arshil Jamal, formerly Executive Vice-President, Capital Management at Lifeco and Executive Vice-President, Chief Actuary at Great-West Life, London Life and Canada Life, is appointed President and Chief Operating Officer, Europe at Great-West Lifeco, Great-West Life, London Life and Canada Life. - Garry MacNicholas, formerly Senior Vice-President, Reinsurance, is appointed Senior Vice-President Capital Management at Great-West Lifeco and Senior Vice-President, Chief Actuary at Great-West Life, London Life and Canada Life. >>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 June 30, 2011 to shareholders of record at the close of business June 2, 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; - Series M First Preferred Shares of $0.36250 per share; and - Series N First Preferred Shares of $0.228125 per share all payable June 30, 2011 to shareholders of record at the close of business June 2, 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 $495 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-IFRS Financial MeasuresThis release contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include but are not limited to "operating earnings", "constant currency basis", "premiums and deposits", "sales", and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.Further informationSelected financial information is attached.Great-West Lifeco's first quarter conference call and audio webcast will be held Thursday, May 5, 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 May 5 to May 12, 2011, and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto (passcode: 1367585 followed by the pound key). The archived webcast will be available on www.greatwestlifeco.com from approximately 7:00 p.m. (ET) on May 5, 2011 until May 4, 2012.Additional information relating to Lifeco, including the most recent interim unaudited consolidated financial statements, interim Management's Discussion and Analysis (MD&A), and CEO/CFO certificates will be filed on SEDAR at www.sedar.com. << FINANCIAL HIGHLIGHTS (unaudited) (in Canadian $ millions except per share amounts) As at or for the three months ended -------------------------------------- March 31 December 31 March 31 2011 2010 2010 ------------------------------------------------------------------------- Premiums and deposits: Life insurance, guaranteed annuities and insured health products $ 4,295 $ 4,610 $ 4,610 Self-funded premium equivalents (ASO contracts) 670 654 645 Segregated funds deposits: Individual products 1,905 2,158 1,790 Group products 1,493 1,385 1,730 Proprietary mutual funds and institutional deposits 9,083 6,667 6,191 -------------------------------------- Total premiums and deposits 17,446 15,474 14,966 -------------------------------------- Fee and other income 720 713 724 Paid or credited to policyholders 4,579 3,578 6,632 Net earnings - common shareholders 415 480 428 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Per common share Basic earnings $ 0.438 $ 0.506 $ 0.452 Dividends paid 0.3075 0.3075 0.3075 Book value 11.56 11.52 11.29 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Return on common shareholders' equity (12 months): Operating earnings 16.4% 16.7% n/a Net earnings 14.7% 14.8% n/a ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total assets $ 231,327 $ 229,405 $ 217,336 Proprietary mutual funds and institutional net assets 129,470 126,053 125,667 -------------------------------------- Total assets under management 360,797 355,458 343,003 Other assets under administration 134,412 131,528 123,327 -------------------------------------- Total assets under administration $ 495,209 $ 486,986 $ 466,330 -------------------------------------- -------------------------------------- Total equity $ 14,997 $ 14,989 $ 14,760 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of the provision described in note 25 to the Company's December 31, 2010 consolidated financial statements. CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (in Canadian $ millions except per share amounts) For the three months ended -------------------------------------- March 31 December 31 March 31 2011 2010 2010 -------------------------------------- Income Premium income Gross premiums written $ 4,941 $ 5,313 $ 5,248 Ceded premiums (646) (703) (638) -------------------------------------- Total net premiums 4,295 4,610 4,610 -------------------------------------- Net investment income Regular net investment income 1,427 1,464 1,417 Changes in fair value through profit or loss (187) (1,540) 1,576 -------------------------------------- Total net investment income 1,240 (76) 2,993 Fee and other income 720 713 724 -------------------------------------- 6,255 5,247 8,327 -------------------------------------- Benefits and expenses Policyholder benefits 4,090 4,037 3,888 Policyholder dividends and experience refunds 353 350 383 Change in insurance and investment contract liabilities 136 (809) 2,361 -------------------------------------- Total paid or credited to policyholders 4,579 3,578 6,632 Commissions 377 413 363 Operating expenses 645 568 630 Premium taxes 56 58 65 Financing charges 72 73 74 Amortization of finite life intangible assets 23 23 23 -------------------------------------- Earnings before income taxes 503 534 540 Income taxes 69 46 90 -------------------------------------- Net earnings before non-controlling interests 434 488 450 Attributable to non-controlling interests (5) (14) 2 -------------------------------------- Net earnings 439 502 448 Perpetual preferred share dividends 24 22 20 -------------------------------------- Net earnings - common shareholders $ 415 $ 480 $ 428 -------------------------------------- -------------------------------------- Earnings per common share Basic $ 0.438 $ 0.506 $ 0.452 -------------------------------------- -------------------------------------- Diluted $ 0.436 $ 0.503 $ 0.450 -------------------------------------- -------------------------------------- CONSOLIDATED BALANCE SHEETS (unaudited) (in Canadian $ millions) March 31 December 31 January 1 2011 2010 2010 -------------------------------------- Assets Cash and cash equivalents $ 2,070 $ 1,840 $ 3,427 Bonds 71,096 72,203 66,147 Mortgage loans 16,437 16,115 16,684 Stocks 7,036 6,700 6,442 Investment properties 3,100 2,957 2,613 Loans to policyholders 6,734 6,827 6,957 Funds held by ceding insurers 9,776 9,856 10,984 Reinsurance assets 2,575 2,533 2,800 Goodwill 5,395 5,397 5,406 Intangible assets 3,079 3,108 3,238 Other assets 5,645 5,905 5,745 Deferred tax assets 1,104 1,137 1,193 Segregated funds for the risk of unit holders 97,280 94,827 87,495 -------------------------------------- Total assets $ 231,327 $ 229,405 $ 219,131 -------------------------------------- -------------------------------------- Liabilities Insurance contract liabilities $ 107,281 $ 107,367 $ 104,988 Investment contract liabilities 747 791 841 Debentures and other debt instruments 4,371 4,288 4,106 Funds held under reinsurance contracts 146 149 331 Other liabilities 4,284 4,662 4,647 Deferred tax liabilities 693 755 623 Repurchase agreements 993 1,042 532 Capital trust securities 535 535 540 Preferred shares - - 199 Investment and insurance contracts on account of unit holders 97,280 94,827 87,495 -------------------------------------- Total liabilities 216,330 214,416 204,302 Equity Non-controlling interests Participating account surplus in subsidiaries 2,033 2,050 2,050 Preferred shares issued by subsidiaries - - 157 Perpetual preferred shares issued by subsidiaries - - 147 Non-controlling interests in capital stock 93 112 63 Shareholders' equity Share capital Perpetual preferred shares 1,897 1,897 1,497 Common shares 5,816 5,802 5,751 Accumulated surplus 5,625 5,501 5,062 Accumulated other comprehensive income (loss) (562) (467) 19 Contributed surplus 95 94 83 -------------------------------------- Total equity 14,997 14,989 14,829 -------------------------------------- Total liabilities and equity $ 231,327 $ 229,405 $ 219,131 -------------------------------------- -------------------------------------- Segmented Information (unaudited) During the year, the Company established a capital allocation model to better measure the performance of the operating segments. The segmented information below including the comparative figures reflects the impact of the capital allocation model implemented. Consolidated Earnings For the three months ended March 31, 2011 United Lifeco Canada States Europe Corporate Total ------------------------------------------------------ Income: Premium income $ 2,279 $ 752 $ 1,264 $ - $ 4,295 Net investment income Regular net investment income 616 328 481 2 1,427 Changes in fair value through profit or loss (64) 31 (154) - (187) ------------------------------------------------------ Total net investment income 552 359 327 2 1,240 Fee and other income 276 314 130 - 720 ------------------------------------------------------ Total income 3,107 1,425 1,721 2 6,255 ------------------------------------------------------ Benefits and expenses: Paid or credited to policyholders 2,181 950 1,448 - 4,579 Other 615 335 125 3 1,078 Financing charges 34 33 5 - 72 Amortization of finite life intangible assets 10 11 2 - 23 ------------------------------------------------------ Earnings before income taxes 267 96 141 (1) 503 Income taxes 22 9 38 - 69 ------------------------------------------------------ Net earnings before non-controlling interests 245 87 103 (1) 434 Non-controlling interests - (2) (3) - (5) ------------------------------------------------------ Net earnings 245 89 106 (1) 439 Perpetual preferred share dividends 19 - 5 - 24 ------------------------------------------------------ Net earnings before capital allocation 226 89 101 (1) 415 Impact of capital allocation 19 (1) (15) (3) - ------------------------------------------------------ Net earnings - common shareholders $ 245 $ 88 $ 86 $ (4) $ 415 ------------------------------------------------------ ------------------------------------------------------ For the three months ended March 31, 2010 United Lifeco Canada States Europe Corporate Total ------------------------------------------------------ Income: Premium income $ 2,268 $ 826 $ 1,516 $ - $ 4,610 Net investment income Regular net investment income 605 331 480 1 1,417 Changes in fair value through profit or loss 423 301 852 - 1,576 ------------------------------------------------------ Total net investment income 1,028 632 1,332 1 2,993 Fee and other income 256 317 151 - 724 ------------------------------------------------------ Total income 3,552 1,775 2,999 1 8,327 ------------------------------------------------------ Benefits and expenses: Paid or credited to policyholders 2,681 1,299 2,652 - 6,632 Other 557 343 158 - 1,058 Financing charges 36 35 3 - 74 Amortization of finite life intangible assets 9 12 2 - 23 ------------------------------------------------------ Earnings before income taxes 269 86 184 1 540 Income taxes 39 20 30 1 90 ------------------------------------------------------ Net earnings before non-controlling interests 230 66 154 - 450 Non-controlling interests (2) 1 3 - 2 ------------------------------------------------------ Net earnings 232 65 151 - 448 Perpetual preferred share dividends 17 - 3 - 20 ------------------------------------------------------ Net earnings before capital allocation 215 65 148 - 428 Impact of capital allocation 22 - (18) (4) - ------------------------------------------------------ Net earnings - common shareholders $ 237 $ 65 $ 130 $ (4) $ 428 ------------------------------------------------------ ------------------------------------------------------ >>For further information: Marlene Klassen, APR Assistant Vice-President, Communication Services, (204) 946-7705