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Press release from CNW Group

Great-West Lifeco reports second quarter 2012 results

Wednesday, August 01, 2012

Great-West Lifeco reports second quarter 2012 results18:49 EDT Wednesday, August 01, 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:GWOWINNIPEG, Aug. 1, 2012 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $491 million for the three months ended June 30, 2012, compared to $526 million in the second quarter of 2011.  On a per common share basis, this represents $0.517 per common share for the three months ended June 30, 2012, compared to $0.553 per common share for the same period in 2011.For the six months ended June 30, 2012, net earnings attributable to common shareholders were $942 million, compared to $941 million a year ago.  This represents $0.992 per common share for the six months ended June 30, 2012, compared to $0.991 per common share for the same period in 2011.During the second quarter, the Company concluded on certain income tax matters which positively impacted net earnings by $47 million. The second quarter 2011 comparative results included a release of a legal provision of $55 million. The six months 2011 results also included catastrophe provisions of $75 million relating to earthquake events in Japan and New Zealand.Consolidated assets under administration at June 30, 2012 were $524 billion, up $22 billion from December 31, 2011.HighlightsSales in Canada for Individual participating life insurance were up 22% and Group sales were up 58% compared to the second quarter of 2011.Sales in U.S. Financial Services were US$2.0 billion compared to US$1.5 billion in the second quarter of 2011 reflecting continued strong sales in both Individual Markets and Retirement Services.Sales in UK Payout Annuity products increased by $103 million or 47% compared to the same period of 2011 resulting from the Company's improved competitive position.The Company raised $200 million of 5.15% fixed rate perpetual preferred share capital on July 6, 2012.The Company's ROE continues to lead the industry at 16.8% based on net earnings and 15.8% based on operating earnings.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 June 30, 2012.Credit experience remained favourable. There were no new impaired securities in the quarter.The Company declared a quarterly common dividend of $0.3075 per common share payable September 28, 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 second quarter of 2012 were $254 million compared to $262 million in the second quarter of 2011.  Net earnings for the second quarter of 2012 include the impact of strengthening of reinvestment risk margins of $49 million and a conclusion on certain income tax matters which positively impacted net earnings by $22 million. For the six months ended June 30, 2012 net earnings attributable to common shareholders were $496 million compared to $507 million for the same period in 2011.Total sales in the second quarter of 2012 were $2.1 billion compared to $2.2 billion in 2011.  Individual Insurance product sales increased 8%, Group sales increased 58% driven by large case sales in both the Creditor and Life and Health segments, Wealth Management group retirement sales were up 12% and sales of proprietary retail investments funds were down 7% compared to the second quarter of 2011.  Total sales for the six months ended June 30, 2012 were $4.6 billion compared to $4.8 billion in 2011.Total assets under administration at June 30, 2012 were $133 billion, compared to $129 billion at December 31, 2011.UNITED STATESNet earnings attributable to common shareholders for the second quarter of 2012 were $86 million compared to $128 million in the second quarter of 2011.  The 2011 comparative results included a release of a legal provision of $55 million from a settlement of a lawsuit in Putnam.  For the six months ended June 30, 2012 net earnings attributable to common shareholders were $161 million compared to $216 million for the same period in 2011.Financial Services sales in the second quarter of 2012 were US$2.0 billion compared to US$1.5 billion in 2011 reflecting increases in both Retirement Services and Individual Markets.  Sales for the six months ended June 30, 2012 were US$4.4 billion compared to US$3.7 billion in 2011.Putnam average assets under management for the three months ended June 30, 2012 were US$121 billion compared to US$128 billion a year ago. The decrease was primarily due to net asset outflows during the previous four quarters and the impact of negative market performance during that period.  Net asset outflows in second quarter 2012 were US$271 million, an improvement of US$1.7 billion over the previous quarter.Putnam average assets under management for the six months ended June 30, 2012 were US$121 billion down from US$126 billion a year ago.  Net asset outflows for the six months ended 2012 were US$2.2 billion compared to net inflows of US$3.5 billion a year ago.Total United States segment assets under administration at June 30, 2012 were $320 billion compared to $303 billion at December 31, 2011.EUROPENet earnings attributable to common shareholders for the second quarter of 2012 were $160 million compared to $147 million in the second quarter of 2011.  Net earnings for the second quarter of 2012 include the impact of strengthening of reinvestment risk margins of $39 million and a conclusion on certain income tax matters which positively impacted net earnings by $25 million. For the six months ended June 30, 2012 net earnings attributable to common shareholders were $301 million compared to $233 million for the same period in 2011. The 2011 results included catastrophe provisions of $75 million relating to earthquake events in Japan and New Zealand.Sales for the second quarter of 2012 were $828 million compared to $876 million in 2011. Sales in single premium savings products in the Isle of Man decreased by $138 million compared to 2011, reflecting the generally difficult market environment and normal fluctuations in the number of large cases.  Sales of U.K. payout annuities grew by $103 million compared to 2011, resulting from the Company's improved competitive position. Sales of guaranteed variable annuity products in Ireland, which were launched in the fourth quarter of 2011, grew by 40% from the previous quarter.Total sales for the six months ended June 30, 2012 were $1.6 billion compared to $2.0 billion in 2011 due mainly to the decline in single premium savings products in both the U.K. and Isle of Man reflecting the general market slowdown and normal fluctuations in the number of large cases in the Isle of Man.Total assets under administration at June 30, 2012 increased to $71 billion from $70 billion at December 31, 2011.CORPORATENet earnings in the Lifeco corporate segment attributable to common shareholders was a net loss of $9 million in the second quarter of 2012 compared to a net loss of $11 million for the second quarter of 2011.   For the six months ended June 30, 2012 net earnings attributable to common shareholders was a net loss of $16 million compared to a net loss of $15 million for the same period in 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 September 28, 2012 to shareholders of record at the close of business August 31, 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;Series P First Preferred Shares of $0.3375 per share; andSeries Q First Preferred Shares of $0.30336 per shareall payable September 28, 2012 to shareholders of record at the close of business August 31, 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 $524 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" 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 second quarter conference call and audio webcast will be held Thursday, August 2, 2012 at 9:00 a.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 August 2 to 9, 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 2:00 p.m. (ET) on August 2, 2012 until August 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 the three months ended For the six months ended    June 30  March 31  June 30  June 30  June 30    2012  2012  2011  2012  2011Premiums and deposits:                Life insurance, guaranteed annuities      and insured health products  $4,524 $4,529 $4,272 $9,053 $8,567Self-funded premium equivalents (ASO contracts)         673        685        664        1,358        1,334Segregated funds deposits:                      Individual products         1,436        1,559        1,636        2,995        3,541      Group products         1,595        1,770        1,427        3,365        2,920Proprietary mutual funds and institutional deposits         4,898        5,939        8,289        10,837        17,372Total premiums and deposits         13,126        14,482        16,288        27,608        33,734                 Fee and other income         734        724        739        1,458        1,459Paid or credited to policyholders         5,979        4,743        5,298        10,722        9,877Net earnings - common shareholders         491        451        526        942        941Per common share                    Basic earnings  $0.517 $0.475 $0.553 $0.992 $0.991    Dividends paid         0.3075        0.3075        0.3075        0.615        0.615    Book value         12.97        12.69        11.72      Return on common shareholders' equity (trailing four quarters*):              Operating earnings         15.8%        16.5%  17.1%          Net earnings         16.8%        17.5%  15.2%          Total assets  $245,297 $243,702 $232,137          Proprietary mutual funds and     institutional net assets         129,028        131,140        130,066          Total assets under management         374,325        374,842        362,203          Other assets under administration         149,258        148,068        134,822          Total assets under administration  $523,583 $522,910 $497,025      Total equity   $16,692 $16,406 $15,079                       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 For the six months ended     June 30  March 31  June 30  June 30  June 30     2012  2012  2011  2012  2011Income                     Premium income                       Gross premiums written   $5,233 $5,198 $4,980 $10,431 $9,921      Ceded premiums          (709)        (669)        (708)        (1,378)        (1,354)    Total net premiums          4,524        4,529        4,272        9,053        8,567    Net investment income                       Regular net investment income          1,428        1,439        1,416        2,867        2,843      Changes in fair value through profit or loss          1,106        (196)        707        910        520    Total net investment income          2,534        1,243        2,123        3,777        3,363    Fee and other income          734        724        739        1,458        1,459           7,792        6,496        7,134        14,288        13,389Benefits and expenses                     Policyholder benefits                       Insurance and investment contracts                                            Gross          4,311        4,606        4,006        8,917        8,429        Ceded          (367)        (387)        (316)        (754)        (649)               3,944        4,219        3,690        8,163        7,780    Policyholder dividends and experience     refunds          367        364        377        731        730    Change in insurance and investment     contract liabilities          1,668        160        1,231        1,828        1,367    Total paid or credited to policyholders          5,979        4,743        5,298        10,722        9,877                      Commissions          415        410        390        825        767    Operating and administrative expenses          637        640        558        1,277        1,203    Premium taxes          72        72        68        144        124    Financing charges          72        72        72        144        144    Amortization of finite life intangible assets          28        26        25        54        48Earnings before income taxes          589        533        723        1,122        1,226Income taxes          72        57        161        129        230Net earnings before non-controlling interests          517        476        562        993        996Attributable to non-controlling interests          (2)        -        12        (2)        7Net earnings          519        476        550        995        989Perpetual preferred share dividends          28        25        24        53        48Net earnings - common shareholders   $491 $451 $526 $942 $941                  Earnings per common share                     Basic   $0.517 $0.475 $0.553 $0.992 $0.991    Diluted   $0.513 $0.472 $0.550 $0.985 $0.986                                    CONSOLIDATED BALANCE SHEETS(unaudited)(in Canadian $ millions)       June 30   December 31       2012   2011Assets           Cash and cash equivalents     $1,739  $2,056Bonds            82,120         78,073Mortgage loans            17,200         17,432Stocks            6,670         6,704Investment properties            3,298         3,201Loans to policyholders            7,153         7,162             118,180         114,628Funds held by ceding insurers             10,121         9,923Goodwill            5,401         5,401Intangible assets            3,150         3,154Derivative financial instruments            927         968Owner occupied properties            509         491Fixed assets            147         137Reinsurance assets            1,946         2,061Other assets            4,596         4,283Deferred tax assets            1,112         1,140Segregated funds for the risk of unitholders            99,208         96,582            Total assets     $245,297  $238,768            Liabilities           Insurance contract liabilities     $116,985  $114,730Investment contract liabilities            762         782Debentures and other debt instruments            4,398         4,313Funds held under reinsurance contracts            167         169Derivative financial instruments            399         316Other liabilities            4,265         4,287Deferred tax liabilities            948         929Repurchase agreements            1,120         23Capital trust securities            353         533Investment and insurance contracts on account of unitholders            99,208         96,582            Total liabilities            228,605         222,664            Equity           Non-controlling interests             Participating account surplus in subsidiaries            2,227         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            6,680         6,327  Accumulated other comprehensive income (loss)            (253)         (233)  Contributed surplus            62         58Total equity            16,692         16,104            Total liabilities and equity     $245,297  $238,768                         Segmented Information (unaudited)Consolidated Net EarningsFor the three months ended June 30, 2012                        Canada   UnitedStates    Europe   LifecoCorporate    TotalIncome:                    Premium income $2,351  $706  $1,467  $-  $4,524 Net investment income                     Regular net investment income        621         327         477         3         1,428  Changes in fair value through profit or loss        412         177         517         -         1,106 Total net investment income        1,033         504         994         3         2,534 Fee and other income        270         306         158         -         734Total income        3,654         1,516         2,619         3         7,792                    Benefits and expenses:                    Paid or credited to policyholders        2,681         1,025         2,273         -         5,979 Other        636         333         149         6         1,124 Financing charges        34         34         4         -         72 Amortization of finite life intangible assets        11         14         3         -         28                    Earnings before income taxes        292         110         190         (3)         589                    Income taxes        43         22         7         -         72                    Net earnings before non-controlling                   interests        249         88         183         (3)         517                    Non-controlling interests        (4)         (2)         4         -         (2)                    Net earnings        253         90         179         (3)         519                    Perpetual preferred share dividends        19         -         5         4         28                    Net earnings before capital allocation        234         90         174         (7)         491Impact of capital allocation        20         (4)         (14)         (2)         -Net earnings - common shareholders $254  $86  $160  $(9)  $491                                        For the three months ended June 30, 2011                            Canada   UnitedStates    Europe   LifecoCorporate    TotalIncome:                      Premium income   $2,353  $602  $1,317  $-  $4,272 Net investment income                       Regular net investment income          618         328         466         4         1,416  Changes in fair value through profit or loss          315         126         266         -         707 Total net investment income          933         454         732         4         2,123 Fee and other income          277         318         144         -         739Total income          3,563         1,374         2,193         4         7,134                      Benefits and expenses:                      Paid or credited to policyholders          2,585         890         1,823         -         5,298 Other          598         251         156         11         1,016 Financing charges          34         34         4         -         72 Amortization of finite life intangible assets          11         12         2         -         25                      Earnings before income taxes          335         187         208         (7)         723                      Income taxes          69         55         37         -         161                      Net earnings before non-controlling                     interests          266         132         171         (7)         562                      Non-controlling interests          6         2         4         -         12                      Net earnings          260         130         167         (7)         550                      Perpetual preferred share dividends          18         -         6         -         24                      Net earnings before capital allocation          242         130         161         (7)         526Impact of capital allocation          20         (2)         (14)         (4)         -Net earnings - common shareholders   $262  $128  $147  $(11)  $526                                            For the six months ended June 30, 2012                          Canada   UnitedStates    Europe   LifecoCorporate    TotalIncome:                     Premium income  $4,716  $1,527  $2,810  $-  $9,053 Net investment income                      Regular net investment income         1,275         651         940         1         2,867  Changes in fair value through profit or loss         262         198         450         -         910 Total net investment income         1,537         849         1,390         1         3,777 Fee and other income         547         608         303         -         1,458Total income         6,800         2,984         4,503         1         14,288                     Benefits and expenses:                     Paid or credited to policyholders         4,866         2,028         3,828         -         10,722 Other         1,283         663         290         10         2,246 Financing charges         68         67         9         -         144 Amortization of finite life intangible assets         22         27         5         -         54                     Earnings before income taxes         561         199         371         (9)         1,122                     Income taxes         77         31         23         (2)         129                     Net earnings before non-controlling                    interests         484         168         348         (7)         993                     Non-controlling interests         (10)         -         8         -         (2)                     Net earnings         494         168         340         (7)         995                     Perpetual preferred share dividends         37         -         11         5         53                     Net earnings before capital allocation         457         168         329         (12)         942Impact of capital allocation         39         (7)         (28)         (4)         -Net earnings - common shareholders  $496  $161  $301  $(16)  $942                                          For the six months ended June 30, 2011                            Canada   UnitedStates    Europe   LifecoCorporate    TotalIncome:                      Premium income   $4,632  $1,354  $2,581  $-  $8,567 Net investment income                       Regular net investment income          1,234         656         947         6         2,843  Changes in fair value through profit or loss          251         157         112         -         520 Total net investment income          1,485         813         1,059         6         3,363 Fee and other income          553         632         274         -         1,459Total income          6,670         2,799         3,914         6         13,389                      Benefits and expenses:                      Paid or credited to policyholders          4,766         1,840         3,271         -         9,877 Other          1,213         586         281         14         2,094 Financing charges          68         67         9         -         144 Amortization of finite life intangible assets          21         23         4         -         48                      Earnings before income taxes          602         283         349         (8)         1,226                      Income taxes          91         64         75         -         230                      Net earnings before non-controlling                     interests          511         219         274         (8)         996                      Non-controlling interests          6         -         1         -         7                      Net earnings          505         219         273         (8)         989                      Perpetual preferred share dividends          37         -         11         -         48                      Net earnings before capital allocation          468         219         262         (8)         941Impact of capital allocation          39         (3)         (29)         (7)         -Net earnings - common shareholders   $507  $216  $233  $(15)  $941    SOURCE: Great-West Lifeco Inc.For further information: Marlene Klassen, APR Assistant Vice-President, Communication Services 204-946-7705