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Press release from CNW Group

Great-West Lifeco reports third quarter 2012 results

Thursday, November 08, 2012

Great-West Lifeco reports third quarter 2012 results13:11 EST Thursday, November 08, 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, MB, Nov. 8, 2012 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $520 million for the three months ended September 30, 2012, compared to $457 million in the third quarter of 2011.  On a per common share basis, this represents $0.547 per common share for the three months ended September 30, 2012, compared to $0.481 per common share for the same period in 2011.For the nine months ended September 30, 2012, net earnings attributable to common shareholders were $1,462 million, compared to $1,398 million a year ago.  This represents $1.539 per common share for the nine months ended September 30, 2012, compared to $1.473 per common share for the same period in 2011.Consolidated assets under administration at September 30, 2012 were $532 billion, up $30 billion from December 31, 2011.HighlightsIn quarter consolidated net earnings of $520 million are up 13.8% from third quarter 2011, with solid earnings growth in all geographic segments.Total Company premiums and deposits grew by 8% from third quarter 2011, reflecting continued strong persistency.Total Company sales grew by 13% from third quarter 2011, notably the following:In quarter sales in Canada for Individual participating life insurance were up 34% and Wealth Management group retirement sales were up 41% compared to the third quarter of 2011.In quarter sales in U.S. Financial Services were US$2.4 billion, up 46% compared to the third quarter of 2011, reflecting continued strong sales in both Individual Markets and Retirement Services.In quarter sales in U.K. Payout Annuity  were up 105% compared to the third quarter of 2011, and are up 31% year to date compared to 2011.Putnam net asset inflows in third quarter 2012 were US$602 million.During the third quarter, Canada Life's Reinsurance Division entered into retrocession agreements with a U.K. domiciled insurance company covering closed blocks of approximately 1.2 million bank distributed protection policies in Spain and approximately 575,000 bank distributed protection policies in Portugal.The Company raised $200 million of 4.80% fixed rate perpetual preferred share capital on October 11, 2012.The Company's ROE continues to lead the industry at 17.1% based on net earnings and 16.1% 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 201% at September 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 December 31, 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 third quarter of 2012 were $281 million compared to $235 million in the third quarter of 2011.  For the nine months ended September 30, 2012 net earnings attributable to common shareholders were $777 million compared to $742 million for the same period in 2011.Total sales in the third quarter of 2012 were $2.0 billion compared to $1.9 billion in 2011.  Individual Insurance product sales increased 17%, Group sales decreased 43% driven by lower sales in large case markets, Wealth Management group retirement sales were up 41% and sales of proprietary retail investments funds were up 12% compared to the third quarter of 2011.  Total sales for the nine months ended September 30, 2012 were $6.6 billion, the same level as 2011.Total assets under administration at September 30, 2012 were $136 billion, compared to $129 billion at December 31, 2011.UNITED STATESNet earnings attributable to common shareholders for the third quarter of 2012 were $87 million compared to $75 million in the third quarter of 2011.  For the nine months ended September 30, 2012 net earnings attributable to common shareholders were $248 million compared to $291 million for the same period in 2011 which included a $55 million release of legal provisions in Putnam.Financial Services sales in the third quarter of 2012 were US$2.4 billion, up 46% compared to the third quarter of 2011 reflecting increases in both Retirement Services and Individual Markets.  Sales for the nine months ended September 30, 2012 were US$6.9 billion compared to US$5.3 billion in 2011.Putnam assets under management at September 30, 2012 were US$127 billion compared to US$114 billion a year ago. Net asset inflows in third quarter 2012 were US$602 million compared to net outflows of US$1.5 billion for the same period in 2011. Net asset outflows for the nine months ended September 30, 2012 were US$1.6 billion compared to net inflows of US$2.0 billion a year ago.Total United States segment assets under administration at September 30, 2012 were $324 billion compared to $303 billion at December 31, 2011.EUROPENet earnings attributable to common shareholders for the third quarter of 2012 were $165 million compared to $148 million in the third quarter of 2011.  Net earnings for the third quarter of 2012 include the impact of new life retrocession agreements of $24 million. For the nine months ended September 30, 2012 net earnings attributable to common shareholders were $466 million compared to $381 million for the same period in 2011.  The 2011 results include catastrophe provisions of $84 million relating to earthquake events in Japan and New Zealand.Sales for the third quarter of 2012 were $866 million compared to $1.3 billion in 2011. The decrease was due to a decline in single premium savings products in the Isle of Man reflecting the normal fluctuations in the number of large cases.  This decrease was partially offset by strong sales of payout annuities in the U.K.Total sales for the nine months ended September 30, 2012 were $2.4 billion compared to $3.3 billion in 2011 due mainly to a decline in single premium savings products in both the U.K. and Isle of Man.  This reflects the general market slowdown and normal fluctuations in the number of large cases in the Isle of Man.  This decrease was partially offset by strong sales of payout annuities in the U.K.Total assets under administration at September 30, 2012 increased to $72 billion from $70 billion at December 31, 2011.CORPORATENet earnings in the Lifeco corporate segment attributable to common shareholders was a loss of $13 million in the third quarter of 2012 compared to a loss of $1 million for the third quarter of 2011.   For the nine months ended September 30, 2012 net earnings attributable to common shareholders was a loss of $29 million compared to a loss of $16 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 December 31, 2012 to shareholders of record at the close of business December 3, 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;Series Q First Preferred Shares of $0.321875 per share; andSeries R First Preferred Shares of $0.2663 per shareall payable December 31, 2012 to shareholders of record at the close of business December 3, 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 $532 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 third quarter conference call and audio webcast will be held November 8, 2012 at 3:00 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 November 8, 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 November 9, 2012 until November 9, 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 endedFor the nine months ended September 30June 30September 30September 30September 30 20122012201120122011Premiums and deposits:      Life insurance, guaranteed annuities      and insured health products$ 4,940 $ 4,524 $ 4,392 $ 13,993 $ 12,959 Self-funded premium equivalents (ASO contracts)       631        673        660       1,989       1,994 Segregated funds deposits:                Individual products       1,490       1,436        1,975       4,485       5,516       Group products       1,681       1,595        1,420       5,046       4,340 Proprietary mutual funds and institutional deposits       6,779       4,898        5,892       17,616       23,264 Total premiums and deposits       15,521       13,126       14,339       43,129       48,073            Fee and other income       720        734        704       2,178       2,163 Paid or credited to policyholders      6,607       5,979       6,826       17,329       16,703 Net earnings - common shareholders       520       491        457       1,462       1,398 Per common share                Basic earnings$ 0.547 $ 0.517 $ 0.481 $ 1.539 $ 1.473       Dividends paid      0.3075       0.3075       0.3075       0.9225       0.9225       Book value       13.01        12.97       12.46     Return on common shareholders' equity (trailing four quarters*):               Operating earnings      16.1%       15.8%     16.7%           Net earnings 17.1%     16.8%     16.7%           Total assets$ 249,043 $ 245,297 $ 237,048           Proprietary mutual funds and institutional net assets 131,604  129,028    124,343           Total assets under management 380,647  374,325    361,391           Other assets under administration 151,604     149,258  131,853           Total assets under administration$ 532,251 $ 523,583 $493,244     Total equity $ 17,004 $ 16,692 $15,837                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 endedFor the nine months ended September 30June 30September 30September 30September 30 20122012201120122011Income           Premium income                 Gross premiums written$ 5,645 $ 5,233 $ 5,059 $ 16,076 $14,980             Ceded premiums      (705)       (709)       (667)       (2,083)       (2,021)       Total net premiums      4,940       4,524        4,392       13,993       12,959       Net investment income                      Regular net investment income      1,425       1,428       1,330       4,292       4,173             Changes in fair value through profit or loss      1,551       1,106       2,080       2,461       2,600       Total net investment income      2,976       2,534       3,410       6,753       6,773       Fee and other income       720        734        704       2,178       2,163        8,636       7,792       8,506       22,924       21,895 Benefits and expenses                Policyholder benefits                 Insurance and investment contracts                                      Gross      4,137       4,311       3,988       13,054       12,417           Ceded       (304)       (367)       (284)       (1,058)       (933)       Total net policyholder benefits      3,833       3,944       3,704       11,996       11,484       Policyholder dividends and experience refunds       414        367        385       1,145       1,115       Change in insurance and investment contract liabilities       2,360       1,668       2,737       4,188       4,104       Total paid or credited to policyholders       6,607       5,979       6,826       17,329       16,703                  Commissions      441       415       372       1,266        1,139       Operating and administrative expenses      653       637       605       1,930       1,808       Premium taxes       74        72        64        218        188       Financing charges       70        72        72        214        216       Amortization of finite life intangible assets       25        28        24        79       72 Earnings before income taxes       766        589       543        1,888        1,769 Income taxes       141        72        54       270       284 Net earnings before non-controlling interests       625        517       489        1,618       1,485 Attributable to non-controlling interests       75        (2)        8        73        15 Net earnings       550        519       481       1,545       1,470 Perpetual preferred share dividends       30        28        24        83       72 Net earnings - common shareholders$ 520 $ 491 $ 457 $ 1,462 $ 1,398            Earnings per common share            Basic$ 0.547 $ 0.517 $ 0.481 $ 1.539 $ 1.473    Diluted$ 0.543 $ 0.513 $ 0.478 $ 1.529 $ 1.461                       CONSOLIDATED BALANCE SHEETS(unaudited)(in Canadian $ millions)    September 30December 31 20122011Assets  Cash and cash equivalents$ 1,871 $ 2,056 Bonds      82,660       78,073 Mortgage loans      17,559       17,432 Stocks       6,929       6,704 Investment properties       3,446        3,201 Loans to policyholders       6,989        7,162        119,454       114,628 Funds held by ceding insurers        10,336        9,923 Goodwill       5,396        5,401 Intangible assets       3,084       3,154 Derivative financial instruments       1,141        968 Owner occupied properties       508        491 Fixed assets       142        137 Reinsurance assets       1,846       2,061 Other assets       4,585       4,283 Deferred tax assets       1,025        1,140 Segregated funds for the risk of unitholders      101,526       96,582 Total assets$ 249,043 $238,768      Liabilities    Insurance contract liabilities$ 117,891 $ 114,730 Investment contract liabilities       759        782 Debentures and other debt instruments       4,273       4,313 Funds held under reinsurance contracts       181        169 Derivative financial instruments       269        316 Other liabilities       4,408        4,287 Deferred tax liabilities       936        929 Repurchase agreements       1,444        23 Capital trust securities       352        533 Investment and insurance contracts on account of unitholders      101,526       96,582 Total liabilities      232,039       222,664      Equity    Non-controlling interests          Participating account surplus in subsidiaries      2,301       2,227       Non-controlling interests in capital stock       4        3 Shareholders' equity          Share capital                Perpetual preferred shares      2,344        1,894             Common shares      5,832       5,828       Accumulated surplus       6,904        6,327       Accumulated other comprehensive income (loss)       (443)       (233)       Contributed surplus       62        58 Total equity       17,004       16,104 Total liabilities and equity$ 249,043 $ 238,768            Segmented Information (unaudited)                             Consolidated Net EarningsFor the three months ended September 30, 2012      United Lifeco  CanadaStatesEuropeCorporateTotalIncome:      Premium income$ 2,397 $ 879 $ 1,664 $ - $ 4,940  Net investment income             Regular net investment income      664       332       433       (4)       1,425    Changes in fair value through profit or loss      493       244        814       -        1,551  Total net investment income      1,157       576       1,247       (4)       2,976  Fee and other income       271       304        145        -        720 Total income      3,825       1,759       3,056       (4)       8,636            Benefits and expenses:           Paid or credited to policyholders      2,733       1,246       2,628       -       6,607  Other       629       340       192       7       1,168  Financing charges       31        34        5        -       70  Amortization of finite life intangible assets       11        11        3        -       25            Earnings before income taxes      421       128       228       (11)       766            Income taxes      66        38        40       (3)       141            Net earnings before non-controlling          interests      355        90       188       (8)       625            Non-controlling interests      73        (1)        3        -       75            Net earnings      282        91       185       (8)       550            Perpetual preferred share dividends      21        -        6        3       30            Net earnings before capital allocation      261        91       179       (11)       520 Impact of capital allocation      20        (4)       (14)       (2)       - Net earnings - common shareholders$ 281 $ 87 $165 $ (13) $ 520            For the three months ended September 30, 2011            United   Lifeco   Canada States Europe CorporateTotalIncome:           Premium income$ 2,229 $ 952 $ 1,211 $ - $ 4,392  Net investment income             Regular net investment income       535        324        465        6       1,330    Changes in fair value through profit or loss       824        304        952        -       2,080  Total net investment income       1,359        628        1,417        6       3,410  Fee and other income       269        296        139        -        704 Total income       3,857        1,876        2,767        6       8,506            Benefits and expenses:           Paid or credited to policyholders       2,950        1,433        2,443        -       6,826  Other       579        311        148        3       1,041  Financing charges       34        33        5        -        72  Amortization of finite life intangible assets       10        11        3        -        24            Earnings before income taxes       284        88        168        3        543            Income taxes       47        11        (5)        1        54            Net earnings before non-controlling          interests       237        77        173        2       489            Non-controlling interests       3        -        5        -        8            Net earnings       234        77        168        2       481            Perpetual preferred share dividends       18        -        6        -        24            Net earnings before capital allocation       216        77        162        2       457 Impact of capital allocation       19        (2)        (14)        (3)        - Net earnings - common shareholders$ 235 $ 75 $ 148 $ (1) $ 457 For the nine months ended September 30, 2012           United   Lifeco   Canada States Europe CorporateTotalIncome:          Premium income$ 7,113 $ 2,406 $ 4,474 $ - $ 13,993  Net investment income             Regular net investment income       1,939        983        1,373        (3)        4,292    Changes in fair value through profit or loss       755        442        1,264        -       2,461  Total net investment income       2,694        1,425        2,637        (3)       6,753  Fee and other income       818        912        448        -        2,178 Total income       10,625        4,743        7,559        (3)       22,924            Benefits and expenses:           Paid or credited to policyholders       7,599        3,274        6,456        -       17,329  Other       1,912        1,003        482        17       3,414  Financing charges       99        101        14        -        214  Amortization of finite life intangible assets       33        38        8        -        79            Earnings before income taxes       982        327        599        (20)       1,888            Income taxes       143        69        63        (5)       270            Net earnings before non-controlling          interests       839        258        536        (15)       1,618            Non-controlling interests       63        (1)        11        -        73            Net earnings       776        259        525        (15)       1,545            Perpetual preferred share dividends       58        -        17        8        83            Net earnings before capital allocation       718        259        508        (23)       1,462 Impact of capital allocation       59        (11)        (42)        (6)        - Net earnings - common shareholders$ 777 $ 248 $ 466 $ (29) $ 1,462 For the nine months ended September 30, 2011            United   Lifeco   Canada States Europe CorporateTotalIncome:          Premium income$ 6,861 $ 2,306 $ 3,792 $ - $ 12,959  Net investment income             Regular net investment income       1,769        980        1,412        12       4,173    Changes in fair value through profit or loss       1,075        461        1,064        -       2,600  Total net investment income       2,844        1,441        2,476        12       6,773  Fee and other income       822        928        413        -       2,163 Total income       10,527        4,675        6,681        12       21,895            Benefits and expenses:           Paid or credited to policyholders       7,716        3,273        5,714        -       16,703  Other       1,792        897        429        17       3,135  Financing charges       102        100        14        -        216 Amortization of finite life intangible assets       31        34        7        -        72            Earnings before income taxes       886        371        517        (5)       1,769            Income taxes       138        75        70        1        284            Net earnings before non-controlling          interests       748        296        447        (6)       1,485            Non-controlling interests       9        -        6        -        15            Net earnings       739        296        441        (6)       1,470            Perpetual preferred share dividends       55        -        17        -        72            Net earnings before capital allocation       684        296        424        (6)       1,398 Impact of capital allocation       58        (5)        (43)        (10)        - Net earnings - common shareholders$ 742 $ 291 $ 381 $ (16) $ 1,398    SOURCE: Great-West Lifeco Inc.For further information: Marlene Klassen, APR Assistant Vice-President, Communication Services 204-946-7705