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Press release from CNW Group

Great-West Lifeco reports fourth quarter 2011 results

Thursday, February 09, 2012

Great-West Lifeco reports fourth quarter 2011 results12:51 EST Thursday, February 09, 2012TSX:GWO Readers 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, except as noted.WINNIPEG, Feb. 9, 2012 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported operating earnings attributable to common shareholders of $500 million for the three months ended December 31, 2011, compared to $465 million in the fourth quarter of 2010.  On a per common share basis, this represents $0.528 per common share ($0.523 diluted) for the three months ended December 31, 2011, compared to $0.491 per common share for the same period in 2010.For the twelve months ended December 31, 2011, operating earnings attributable to common shareholders were $1,898 million, compared to $1,819 million a year ago.  This represents $2.000 per common share ($1.984 diluted) for the twelve months ended December 31, 2011, compared to $1.920 per common share for the same period in 2010.Operating earnings, a non-IFRS financial measure, exclude the net impact of two unrelated litigation provisions which increased net earnings by $124 million after-tax. The provisions are described more fully in the Corporate section of this release.Net earnings attributable to common shareholders, as reported, were $624 million, or $0.657 per common share ($0.651 diluted) for the fourth quarter, and $2,022 million, or $2.129 per common share ($2.112 diluted) for the twelve months ended December 31, 2011.HighlightsConsolidated assets under administration at December 31, 2011 now exceed one-half trillion dollars at $502 billion, up $15 billion from December 31, 2010.Return on common shareholders' equity was 17.6% based on net earnings and 16.6% based on operating earnings.Sales in Canada showed strong growth in the fourth quarter compared to 2010, with Group Insurance sales increasing by 23% and Individual participating life insurance sales increasing by 13%.Sales in U.S. Financial Services were US$3.4 billion in the fourth quarter, compared to US$2.0 billion in 2010 due to higher sales in the 401(k) and public/non-profit retirement services markets.Putnam net sales for the twelve months ended December 31, 2011 increased by US$4.3 billion over the same period a year ago, resulting in positive net sales of US$183 million.Europe net earnings remained strong at $181 million for the quarter compared to $119 million a year ago.The Company's capital position remained very strong despite the volatility in equity markets and continued declines in interest rates.  Lifeco's Canadian operating subsidiary, The Great-West Life Assurance Company, reported a Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of 204% at December 31, 2011.The Company declared a quarterly common dividend of $0.3075 per common share payable March 30, 2012.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 2011 were $244 million compared to $237 million in the fourth quarter of 2010.  For the twelve months ended December 31, 2011, net earnings attributable to common shareholders were $986 million compared to $975 million for the same period in 2010.Total premiums and deposits for the twelve months ended December 31, 2011 were $19.4 billion, compared to $18.8 billion in 2010. Total sales for the twelve months were $8.9 billion compared to $9.5 billion for 2010.Total assets under administration at December 31, 2011 were $129.3 billion, compared to $126.9 billion at December 31, 2010.UNITED STATESNet earnings attributable to common shareholders for the fourth quarter of 2011 were $79 million compared to $113 million in the fourth quarter of 2010. Fourth quarter 2010 earnings included a favourable $35 million adjustment of prior year overstatements of tax liabilities. For the twelve months ended December 31, 2011, net earnings attributable to common shareholders were $370 million compared to $326 million for the same period in 2010.Total sales for the twelve months ended December 31, 2011 were $36.8 billion compared to $38.1 billion in 2010.  Sales in Putnam were $28.1 billion for the full year 2011, up 17% compared to $24.1 billion a year ago. Sales in Financial Services were $8.7 billion for the full year 2011 compared to $14 billion in 2010.  Sales in 2010 included two large public/non-profit sales of $5.8 billion which were not repeated in 2011.Total assets under administration at December 31, 2011 were $302.9 billion compared to $294.1 billion at December 31, 2010.EUROPENet earnings attributable to common shareholders for the fourth quarter of 2011 were $181 million compared to $119 million in the fourth quarter of 2010. The increase in net earnings is driven by improved investment experience, the timing of surrender fees in the U.K. and increased Reinsurance renewal profits. These increases were partly offset by less favourable U.K. mortality experience.  For the twelve months ended December 31, 2011, net earnings attributable to common shareholders were $562 million compared to $532 million for the same period in 2010.Total sales for the twelve months ended December 31, 2011 were $4.1 billion compared to $4.5 billion in 2010.Total assets under administration at December 31, 2011 increased to $69.8 billion from $66.0 billion at December 31, 2010.CORPORATENet earnings in the Lifeco corporate segment attributable to common shareholders were $120 million in the fourth quarter of 2011 compared to a net loss of $4 million for the fourth quarter of 2010.  For the twelve months ended December 31, 2011 net earnings in the Lifeco corporate segment attributable to common shareholders were $104 million compared to a net loss of $218 million for the same period in 2010.During the fourth quarter of 2011 the Company re-evaluated and reduced the litigation provision established in the third quarter of 2010, which positively impacted common shareholders net earnings by $223 million after-tax.  Additionally, the Company established a provision for $99 million after-tax in respect of the settlement of a litigation relating to the Company's investment in a U.S.A. based private equity firm.  The net impact of these two unrelated matters was $124 million after-tax or $0.129 per common share.  The twelve months 2010 results include the impact of an incremental litigation provision of $204 million attributable to common shareholders.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 30, 2012 to shareholders of record at the close of business March 2, 2012.For purposes of the Income Tax Act (Canada), and any similar provincial legislation, the dividends referred to above are eligible dividends.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; andSeries N First Preferred Shares of $0.228125 per shareall payable March 30, 2012 to shareholders of record at the close of business March 2, 2012.GREAT-WEST LIFECOGreat-West Lifeco Inc. (TSX:GWO) is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses.  Great-West Lifeco 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.  Great-West Lifeco and its companies have $502 billion in assets under administration and are members of the Power Financial Corporation group of companies.Cautionary note regarding Forward-Looking Information This 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" and similar expressions or negative versions thereof.  In addition, any statement that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and 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 and taxes, as well as 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 policy changes required under IFRS, 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" in the Company's 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 to not 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 fourth quarter conference call and audio webcast will be held Thursday, February 9, 2012 at 3:30 p.m. (ET).  The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:Participants in the Toronto area:  416-340-8018Participants from North America: 1-866-223-7781Participants from Overseas:  Dial international access code first, then 800-6578-9898A replay of the call will be available from February 9 to 16, 2012, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 1367585#). The archived webcast will be available on www.greatwestlifeco.com from approximately 6:00 p.m. (ET) on February 9, 2012 until December 31, 2012.Additional information relating to Lifeco, including the 2011 audited consolidated financial statements, Management's Discussion and Analysis (MD&A), Annual Information Form (AIF), and CEO/CFO certification 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 endedFor the twelve months ended December 31September 30December 31December 31December 31 20112011201020112010Premiums and deposits:     Life insurance, guaranteed annuities      and insured health products$ 4,334 $ 4,392 $ 4,610 $ 17,293 $ 17,748 Self-funded premium equivalents (ASO contracts)       651        660       654       2,645       2,575 Segregated funds deposits:                Individual products       1,829        1,975       2,158       7,345       7,284       Group products       1,777        1,420       1,385       6,117        6,790 Proprietary mutual funds and institutional deposits       5,624       5,892       6,667       28,888       24,654 Total premiums and deposits       14,215        14,339        15,474       62,288       59,051            Fee and other income       740        704        713       2,903       2,821 Paid or credited to policyholders       6,340       6,826       3,578       23,043       23,225            Operating earnings -    common shareholders       500        457        465       1,898       1,819 Net earnings - common shareholders      624        457        465       2,022       1,615 Per common share                Operating earnings$ 0.528 $ 0.481 $0.491 $ 2.000 $ 1.920       Basic earnings       0.657        0.481        0.491       2.129       1.704       Dividends paid       0.3075       0.3075        0.3075       1.2300       1.2300       Book value      12.61        12.46        11.46     Return on common shareholders' equity (trailing four quarters*):               Operating earnings       16.6%        16.7%  16.7%          Net earnings      17.6%        16.7%  14.8%          Total assets$ 238,768 $ 237,048 $ 229,421     Proprietary mutual funds and institutional net assets      125,390        124,343       126,053           Total assets under management      364,158        361,391       355,474           Other assets under administration      137,807       131,853       131,528           Total assets under administration$ 501,965 $ 493,244 $ 487,002     Total equity $ 16,104 $ 15,837 $ 14,816     The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of the provisions described in note 30 to the Company's December 31, 2011 consolidated financial statements.*Return on common shareholders' equity is the trailing four quarter calculation of net earnings divided by common shareholders' equity.CONSOLIDATEDSTATEMENTS OF EARNINGS (unaudited)(in Canadian $ millions except per share amounts)   For the three monthsended December 31For the yearsended December 31 2011201020112010Income     Premium income       Gross premiums written$ 5,033 $ 5,313 $ 20,013 $ 20,404    Ceded premiums      (699)        (703)       (2,720)        (2,656)  Total net premiums      4,334       4,610       17,293        17,748  Net investment income           Regular net investment income      1,365       1,464       5,538        5,709    Changes in fair value through profit or loss      1,564       (1,540)       4,164        3,825  Total net investment income      2,929       (76)       9,702        9,534  Fee and other income       740       713       2,903        2,821        8,003       5,247       29,898       30,103 Benefits and expenses         Policyholder benefits           Insurance and investment contracts                   Gross      4,165       4,619       16,591       17,550      Ceded      (275)        (582)       (1,217)       (2,208)            3,890       4,037       15,374       15,342  Policyholder dividends and experience refunds      309       350        1,424       1,466  Change in insurance and investment contract liabilities      2,141       (809)       6,245       6,417  Total paid or credited to policyholders      6,340       3,578       23,043       23,225           Commissions       409       413       1,548        1,477  Operating and administrative expenses       142       587       1,950       2,801  Premium taxes       76        58        264        256  Financing charges       73        73        289       288  Amortization of finite life intangible assets       28        23        100        92 Earnings before income taxes       935       515        2,704       1,964 Income taxes       181        42        465        256 Net earnings before non-controlling interests      754       473        2,239        1,708 Attributable to non-controlling interests       106        (14)        121        7 Net earnings       648       487       2,118        1,701 Perpetual preferred share dividends       24        22        96        86 Net earnings - common shareholders$ 624 $ 465 $ 2,022 $ 1,615          Earnings per common share        Basic$ 0.657 $ 0.491 $ 2.129 $ 1.704  Diluted$ 0.651 $0.488 $ 2.112 $ 1.695 CONSOLIDATED BALANCE SHEETS(unaudited)(in Canadian $ millions)       December 31December 31January 1 201120102010Assets   Cash and cash equivalents$ 2,056 $ 1,840 $ 3,427 Bonds       78,073       72,203       66,147 Mortgage loans       17,432        16,115       16,684 Stocks       6,704       6,700        6,442 Investment properties       3,201       2,957        2,613 Loans to policyholders       7,162       6,827        6,957         114,628       106,642       102,270 Funds held by ceding insurers       9,923        9,856       10,984 Goodwill       5,401        5,397        5,406 Intangible assets       3,154        3,108        3,238 Derivative financial instruments       968        984        717 Owner occupied properties       491        439        429 Fixed assets       137        121        138 Reinsurance assets       2,061       2,533        2,800 Other assets       4,283       4,361        4,461 Deferred tax assets       1,140        1,153        1,206 Segregated funds for the risk of unit holders       96,582       94,827        87,495 Total assets$ 238,768 $ 229,421 $ 219,144        Liabilities      Insurance contract liabilities$114,730 $107,405 $105,028 Investment contract liabilities       782        791       841 Debentures and other debt instruments       4,313       4,288       4,106 Funds held under reinsurance contracts       169        149        331 Derivative financial instruments       316        165        251 Other liabilities       4,287        4,637        4,479 Deferred tax liabilities       929        766       634 Repurchase agreements       23        1,042        532 Capital trust securities       533        535        540 Preferred shares        -        -        199 Investment and insurance contracts on account of unit      holders      96,582        94,827       87,495 Total liabilities      222,664       214,605       204,436        Equity      Non-controlling interests            Participating account surplus in subsidiaries      2,227       2,045       2,045       Preferred shares issued by subsidiaries       -        -       157       Perpetual preferred shares issued by subsidiaries       -        -       147       Non-controlling interests in capital stock       3        2        2 Shareholders' equity            Share capital                  Perpetual preferred shares      1,894       1,897       1,497             Common shares      5,828       5,802       5,751       Accumulated surplus       6,327       5,474       5,038       Accumulated other comprehensive income (loss)       (233)        (459)        19       Contributed surplus       58        55        52 Total equity      16,104       14,816       14,708 Total liabilities and equity$ 238,768 $ 229,421 $ 219,144 Segmented Information (unaudited)Consolidated Net EarningsThe major reportable segments of the Company are Canada, United States, Europe and Lifeco Corporate.  These segments reflect the Company's management structure and internal financial reporting and are aligned to its geographic operations.  Each of these segments operates in the financial services industry and the revenues from these segments are derived principally from life, health and disability insurance, annuity products, investment management services, savings products and life, property and casualty, accident and health reinsurance.  Business activities that are not associated with the specific business units are attributed to the Lifeco Corporate segment.Transactions between operating segments occur at market terms and conditions and have been eliminated upon consolidation.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.For the three months ended December 31, 2011         United Lifeco  CanadaStatesEuropeCorporateTotalIncome:      Premium income$ 2,424 $ 820 $ 1,090 $ - $ 4,334  Net investment income                 Regular net investment income       701        331        479       (146)       1,365     Changes in fair value through profit or loss      778       (7)        793       -       1,564  Total net investment income      1,479       324       1,272        (146)        2,929  Fee and other income      266        304        170       -       740 Total income      4,169       1,448        2,532       (146)       8,003            Benefits and expenses:           Paid or credited to policyholders      3,255        956       2,129       -       6,340  Other      415        343       157       (288)       627  Financing charges      34        34        4        1       73  Amortization of finite life intangible assets      10        12        6        -       28            Earnings before income taxes      455       103       236       141       935            Income taxes      114       23       26       18       181            Net earnings before non-controlling interests       341       80       210       123       754            Non-controlling interests      99       (1)       8        -       106            Net earnings      242       81       202       123       648            Perpetual preferred share dividends      18       -        6        -        24            Net earnings before capital allocation      224       81       196       123       624 Impact of capital allocation       20       (2)       (15)       (3)       - Net earnings -common shareholders$ 244 $ 79 $ 181 $ 120 $ 624 For the three months ended December 31, 2010          United Lifeco  CanadaStatesEuropeCorporateTotalIncome:      Premium income$ 2,425 $ 900 $ 1,285 $ - $ 4,610  Net investment income                    Regular net investment income      636       329       497       2       1,464     Changes in fair value through profit or loss      (119)       (318)       (1,103)       -       (1,540)  Total net investment income       517        11        (606)       2       (76)  Fee and other income      263        311        139        -        713 Total income      3,205       1,222        818        2       5,247            Benefits and expenses:           Paid or credited to policyholders      2,306       750       522        -       3,578  Other       574       353       130        1       1,058  Financing charges       34       34        4        1        73  Amortization of finite life intangible assets       11       10        2        -        23            Earnings before income taxes       280        75        160       -        515            Income taxes      69       (40)        12       1        42            Net earnings before non-controlling interests      211       115        148       (1)        473            Non-controlling interests      (23)       1        8       -       (14)            Net earnings      234       114        140       (1)        487            Perpetual preferred share dividends       18        -        4       -        22            Net earnings before capital allocation      216       114        136        (1)        465 Impact of capital allocation       21       (1)       (17)       (3)        - Net earnings - common shareholders$ 237 $ 113 $ 119 $ (4) $ 465 For the twelve months ended December 31, 2011          United   Lifeco    Canada States Europe Corporate TotalIncome:           Premium income$9,285 $3,126 $4,882 $- $ 17,293  Net investment income              Regular net investment income       2,470        1,311        1,891        (134)        5,538     Changes in fair value through profit or loss       1,853        454        1,857        -        4,164  Total net investment income       4,323        1,765        3,748        (134)        9,702  Fee and other income       1,088        1,232        583        -        2,903 Total income       14,696        6,123        9,213        (134)        29,898            Benefits and expenses:           Paid or credited to policyholders       10,971        4,229        7,843        -        23,043  Other       2,207        1,240        586        (271)        3,762  Financing charges       136        134        18        1        289  Amortization of finite life intangible assets       41        46        13        -        100            Earnings before income taxes       1,341        474        753        136        2,704            Income taxes       252        98        96        19        465            Net earnings before non-controlling interests       1,089        376        657        117        2,239            Non-controlling interests       108        (1)        14        -        121            Net earnings       981        377        643        117        2,118            Perpetual preferred share dividends       73        -        23        -        96            Net earnings before capital allocation       908        377        620        117        2,022 Impact of capital allocation       78        (7)        (58)        (13)        - Net earnings - common shareholders$986 $370 $562 $104 $ 2,022 For the twelve months ended December 31, 2010           United   Lifeco    Canada States Europe Corporate TotalIncome:           Premium income$ 9,220 $ 3,216 $ 5,312 $ - $ 17,748  Net investment income                 Regular net investment income       2,481        1,326        1,892        10        5,709     Changes in fair value through profit or loss       1,624        734        1,467        -        3,825  Total net investment income       4,105        2,060        3,359        10        9,534  Fee and other income       1,025        1,246        550        -        2,821 Total income       14,350        6,522        9,221        10        30,103            Benefits and expenses:           Paid or credited to policyholders       10,669        4,625        7,931        -        23,225  Other       2,361        1,360        536        277        4,534  Financing charges       135        138        14        1        288 Amortization of finite life intangible assets       40        45        7        -        92            Earnings before income taxes       1,145        354        733        (268)        1,964            Income taxes       193        22        104        (63)        256            Net earnings before non-controlling interests       952        332        629        (205)        1,708            Non-controlling interests       (9)        4        12        -        7            Net earnings       961        328        617        (205)        1,701            Perpetual preferred share dividends       72        -        14        -        86            Net earnings before capital allocation       889        328        603        (205)        1,615 Impact of capital allocation       86        (2)        (71)        (13)        - Net earnings - common shareholders$ 975 $ 326 $ 532 $ (218) $ 1,615      For further information: Marlene Klassen, APR Assistant Vice-President, Communication Services (204) 946-7705