The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Great-West Lifeco reports first quarter 2012 results

Thursday, May 03, 2012

Great-West Lifeco reports first quarter 2012 results10:49 EDT Thursday, May 03, 2012Readers 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.TSX: GWOTORONTO, May 3, 2012 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $451 million for the three months ended March 31, 2012, compared to $415 million in the first quarter of 2011.  On a per common share basis, this represents $0.475 per common share for the three months ended March 31, 2012, compared to $0.438 per common share for the same period in 2011.HighlightsConsolidated assets under administration grew to $523 billion at March 31, 2012, up $21 billion from December 31, 2011.The Company's ROE continues to lead the industry at 17.5% based on net earnings and 16.5% based on operating earnings.Sales in Canada for Individual Insurance products were up 17% and Wealth Management group retirement sales were up 46% compared to the first quarter of 2011.Sales in U.S. Financial Services were US$2.4 billion compared to US$2.2 billion in the first quarter of 2011 reflecting continued strong sales in both Individual Markets and Retirement Services.Putnam assets under management grew by US$7.6 billion during the quarter due to strong market performance.   Net in quarter redemptions were US$2 billion.The Company raised $250 million of 5.40% fixed rate perpetual preferred share capital in the quarter.The Company's capital position remained very strong.  The Great-West Life Assurance Company reported a Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of 205% at March 31, 2012, up from 204% in the previous quarter.Credit experience continued to be favourable for the Company during the first quarter resulting in a net positive impact of $13 million.  Invested asset exposure to Eurozone peripheral countries continued to decline through both asset disposals and maturities.The Company declared a quarterly common dividend of $0.3075 per common share payable June 29, 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 first quarter of 2012 were $242 million compared to $245 million in the first quarter of 2011.Total premiums and deposits for the three months ended March 31, 2012 were $5.3 billion, compared to $5.1 billion in 2011. Total sales in first quarter of 2012 were $2.5 billion, the same level as the same period a year ago.  Individual Insurance product sales increased 17%, Wealth Management group retirement sales were up 46% and sales of proprietary retail investments funds were down 8% compared to the first quarter of 2011.Total assets under administration at March 31, 2012 were $132.7 billion, compared to $128.2 billion at March 31, 2011.UNITED STATESNet earnings attributable to common shareholders for the first quarter of 2012 were $75 million compared to $88 million in the first quarter of 2011. The decrease was primarily due to abnormally high mortality claims experience in the closed blocks of business.Total sales for the three months ended March 31, 2012 were $8.1 billion compared to $11.0 billion in 2011.  Sales in Putnam were $5.7 billion for the three months ending March 31, 2012 compared to $8.8 billion a year ago. Sales in Financial Services were $2.4 billion for the first quarter of 2012 compared to $2.2 billion in 2011.Total assets under administration at March 31, 2012 were $318.9 billion compared to $300.2 billion at March 31, 2011.EUROPENet earnings attributable to common shareholders for the first quarter of 2012 were $141 million compared to $86 million in the first quarter of 2011.  Included in net earnings for the first quarter of 2011 was the establishment of catastrophe provisions relating to earthquake events in Japan and New Zealand with an after-tax shareholders net earnings impact of $75 million.Total sales for the three months ended March 31, 2012 were $0.8 billion compared to $1.1 billion in 2011 reflecting challenging current market conditions and economic uncertainty.Total assets under administration at March 31, 2012 increased to $71.4 billion from $66.8 billion at March 31, 2011.CORPORATENet earnings in the Lifeco corporate segment attributable to common shareholders was a net loss of $7 million in the first quarter of 2012 compared to a net loss of $4 million for the first quarter of 2011.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 29, 2012 to shareholders of record at the close of business June 1, 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;Series N First Preferred Shares of $0.228125 per share; andSeries P First Preferred Shares of $0.477120 per shareall payable June 29, 2012 to shareholders of record at the close of business June 1, 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 $523 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 actions by the Company including statements made with respect to the expected benefits of acquisitions and divestitures are also forward-looking statements.  Forward-looking statements are based on expectations and projections about future events that were current at the time of the statements 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 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, 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 first quarter conference call and audio webcast will be held Thursday, May 3, 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 May 3 to 12, 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 7:00 p.m. (ET) on May 3, 2012 until May 2, 2013.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 thethreemonths ended     March 31   December 31   March 31     2012   2011   2011Premiums and deposits:             Life insurance, guaranteed annuities      and insured health products   $4,529  $4,334  $4,295Self-funded premium equivalents (ASO contracts)          685         651         670Segregated funds deposits:                   Individual products          1,559         1,829         1,905      Group products          1,770         1,777         1,493Proprietary mutual funds and institutional deposits          5,939         5,624         9,083Total premiums and deposits          14,482         14,215         17,446              Fee and other income          724         740         720Paid or credited to policyholders          4,743         6,340         4,579              Operating earnings -    common shareholders          451         500         415Net earnings - common shareholders          451         624         415Per common share                   Operating earnings   $0.475  $0.528  $0.438      Basic earnings          0.475         0.657         0.438      Dividends paid          0.3075         0.3075         0.3075      Book value          12.69         12.61         11.50Return on common shareholders' equity (trailing four quarters*):                    Operating earnings          16.5%         16.6%      16.5%      Net earnings          17.5%         17.6%   14.6%      Total assets   $243,702  $238,768  $231,343      Proprietary mutual funds and institutional net assets          131,140         125,390         129,470      Total assets under management          374,842         364,158         360,813      Other assets under administration          148,068         137,807         134,412      Total assets under administration   $522,910  $501,965  $495,225Total equity    $16,406  $16,104  $14,844              The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of certain litigation 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. CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)(in Canadian $ millions except per share amounts)                        For the three months ended      March 31   December 31   March 31      2012   2011   2011Income                   Premium income                    Gross premiums written    $  5,198  $5,033  $  4,941  Ceded premiums             (669)         (699)           (646) Total net premiums             4,529         4,334           4,295 Net investment income                    Regular net investment income             1,439         1,365           1,427  Changes in fair value through profit or loss             (196)         1,564           (187) Total net investment income             1,243         2,929           1,240 Fee and other income             724         740           720              6,496         8,003           6,255Benefits and expenses                   Policyholder benefits                    Insurance and investment contracts                                         Gross             4,606         4,165           4,423    Ceded             (387)         (275)           (333)                  4,219         3,890           4,090 Policyholder dividends and experience refunds             364         309           353 Change in insurance and investment contract liabilities             160         2,141           136 Total paid or credited to policyholders             4,743         6,340           4,579                    Commissions             410         409           377 Operating and administrative expenses             640         142           645 Premium taxes             72         76           56 Financing charges             72         73           72 Amortization of finite life intangible assets             26         28           23Earnings before income taxes             533         935           503Income taxes             57         181           69Net earnings before non-controlling interests             476         754           434Attributable to non-controlling interests             -         106           (5)Net earnings             476         648           439Perpetual preferred share dividends             25         24           24Net earnings - common shareholders    $  451  $624  $  415                   Earnings per common share                    Basic    $  0.475  $0.657  $  0.438 Diluted    $  0.472  $0.651  $  0.436                                        CONSOLIDATED BALANCE SHEETS(unaudited)(in Canadian $ millions)                   March 31   December 31       2012   2011Assets           Cash and cash equivalents     $1,621  $2,056Bonds            79,323         78,073Mortgage loans            17,368         17,432Stocks            6,918         6,704Investment properties            3,263         3,201Loans to policyholders            7,013         7,162             115,506         114,628Funds held by ceding insurers             10,127         9,923Goodwill            5,398         5,401Intangible assets            3,124         3,154Derivative financial instruments            930         968Owner occupied properties            501         491Fixed assets            139         137Reinsurance assets             1,983         2,061Other assets            4,409         4,283Deferred tax assets            1,111         1,140Segregated funds for the risk of unitholders            100,474         96,582            Total assets     $243,702  $238,768            Liabilities           Insurance contract liabilities     $114,798  $114,730Investment contract liabilities            763         782Debentures and other debt instruments            4,426         4,313Funds held under reinsurance contracts            169         169Derivative financial instruments            290         316Other liabilities            4,119         4,287Deferred tax liabilities            890         929Repurchase agreements            833         23Capital trust securities            534         533Investment and insurance contracts on account of unitholders            100,474         96,582            Total liabilities            227,296         222,664            Equity           Non-controlling interests                 Participating account surplus in subsidiaries            2,208         2,227      Non-controlling interests in capital stock            3         3Shareholders' equity                 Share capital                       Perpetual preferred shares            2,144         1,894            Common shares            5,829         5,828      Accumulated surplus            6,481         6,327      Accumulated other comprehensive income (loss)            (319)         (233)      Contributed surplus            60         58Total equity            16,406         16,104            Total liabilities and equity     $243,702  $238,768                       Segmented Information(unaudited)                                          Consolidated Net Earnings                    For the three months ended March 31, 2012                            United       Lifeco        Canada   States   Europe   Corporate   TotalIncome:                     Premium income  $2,365  $821  $1,343  $-  $4,529 Net investment income                      Regular net investment income         654         324         463         (2)         1,439  Changes in fair value through profit or loss         (150)         21         (67)         -         (196) Total net investment income         504         345         396         (2)         1,243 Fee and other income         277         302         145         -         724Total income         3,146         1,468         1,884         (2)         6,496                     Benefits and expenses:                     Paid or credited to policyholders         2,185         1,003         1,555         -         4,743 Other         647         330         141         4         1,122 Financing charges         34         33         5         -         72 Amortization of finite life intangible assets         11         13         2         -         26                     Earnings before income taxes         269         89         181         (6)         533                     Income taxes         34         9         16         (2)         57                     Net earnings before non-controlling                     interests         235         80         165         (4)         476                     Non-controlling interests         (6)         2         4         -         -                     Net earnings         241         78         161         (4)         476                     Perpetual preferred share dividends         18         -         6         1         25                     Net earnings before capital allocation         223         78         155         (5)         451Impact of capital allocation         19         (3)         (14)         (2)         -Net earnings - common shareholders  $242  $75  $141  $(7)  $451                                         For the three months ended March 31, 2011                            United       Lifeco        Canada   States   Europe   Corporate   TotalIncome:                     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         -         720Total 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)         415Impact of capital allocation         19         (1)         (15)         (3)         -Net earnings - common shareholders  $245  $88  $86  $(4)  $415      For further information: Marlene Klassen, APR Assistant Vice-President, Communication Services (204) 946-7705