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Press release from CNW Group

Great-West Lifeco reports fourth quarter 2012 results

Thursday, February 07, 2013

Great-West Lifeco reports fourth quarter 2012 results13:03 EST Thursday, February 07, 2013Readers 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, Feb. 7, 2013 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported operating earnings attributable to common shareholders of $493 million for the three months ended December 31, 2012, compared to $500 million in the fourth quarter of 2011.  Operating earnings per common share for the current quarter were $0.520 ($0.518 diluted) compared to $0.528 ($0.523 diluted) for the same period in 2011.For the twelve months ended December 31, 2012, operating earnings attributable to common shareholders were $1,955 million compared to $1,898 million a year ago.  Operating earnings per common share for the twelve months 2012 were $2.059 ($2.046 diluted) compared to $2.000 ($1.984 diluted) for the same period in 2011.Operating earnings, a non-IFRS measure, exclude the impact of litigation provision adjustments of $140 million after-tax or $0.147 per common share in the fourth quarter of 2012 as well as the net impact of litigation provisions which increased net earnings in the fourth quarter of 2011 by $124 million after-tax or $0.129 per common share.Net earnings attributable to common shareholders were $353 million or $0.373 per common share ($0.372 diluted) for the fourth quarter of 2012, compared to $624 million or $0.657 per common share ($0.651 diluted) a year ago.  For the twelve months ended December 31, 2012, net earnings attributable to common shareholders were $1,815 million or $1.912 per common share ($1.900 diluted), compared to $2,022 million or $2.129 per common share ($2.112 diluted) a year ago. Net earnings include the impacts of the litigation provisions described above.HighlightsConsolidated assets under administration at December 31, 2012 grew to nearly $546 billion, up $44 billion from December 31, 2011.Total Company in quarter premiums and deposits grew by 17% as compared to fourth quarter 2011, reflecting strong sales performance and continued strong persistency.Total Company sales grew by 12% from fourth quarter 2011, notably the following:In quarter sales in Canada for Individual Insurance were up 18% and Wealth Management sales were up 18% compared to the fourth quarter of 2011.In quarter sales in United States Great-West Financial Individual Markets were up 23% compared to the fourth quarter of 2011. Sales in  Individual Retirement Accounts were up 91% compared to the fourth quarter of 2011, and were up 50% for the full year of 2012 compared to 2011.In quarter sales in U.K. Payout Annuity were up 187% compared to the fourth quarter of 2011, and were up 55% for the full year of 2012 compared to 2011.Putnam's sales increased by US$1.4 billion to US$6.8 billion in the fourth quarter of 2012 compared to US$5.4 billion in the fourth quarter of 2011 reflecting strong institutional sales.Return on common shareholders' equity was 15.9% based on operating earnings and 14.7% based on net earnings.The Company's capital position remained very strong. The Great-West Life Assurance Company, reported a Minimum Continuing Capital and Surplus Requirement (MCCSR) ratio of 207% at December 31, 2012.The Company declared a quarterly common dividend of $0.3075 per common share payable March 28, 2013.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 (Great-West Financial), and Putnam Investments, LLC (Putnam), together with Lifeco's corporate results.CANADANet earnings attributable to common shareholders for the fourth quarter of 2012 were $263 million compared to $244 million in the fourth quarter of 2011.  For the twelve months ended December 31, 2012, net earnings attributable to common shareholders were $1,040 million compared to $986 million for the same period in 2011.Total premiums and deposits for the twelve months ended December 31, 2012 were $20.8 billion, compared to $19.4 billion in 2011. Total sales for the twelve months were $9.3 billion compared to $8.9 billion for 2011.Total assets under administration at December 31, 2012 were $138 billion, compared to $129 billion at December 31, 2011.UNITED STATESNet earnings attributable to common shareholders for the fourth quarter of 2012 were $77 million compared to $79 million in the fourth quarter of 2011. Great-West Financial reported earnings of $96 million in the fourth quarter of 2012 compared to $87 million a year ago.  Putnam reported a net loss of $19 million in the fourth quarter of 2012 compared to a net loss of $8 million a year ago.For the twelve months ended December 31, 2012, net earnings attributable to common shareholders were $325 million compared to $370 million for the same period in 2011. Great-West Financial reported earnings of $365 million for the full year 2012 compared to $355 million a year ago.  Putnam reported a net loss of $40 million for the full year 2012 compared to net earnings of $15 million a year ago.Great-West Financial sales in the fourth quarter of 2012 were US$2.9 billion compared to US$3.4 billion in 2011.  The fourth quarter of 2011 reflected two large plan sales for the public/non-profit market which did not repeat in the fourth quarter of 2012.  Sales for the twelve months ended December 31, 2012 were US$9.7 billion compared to US$8.7 billion in 2011.Putnam assets under management at December 31, 2012 were US$128 billion, up over 9% as compared to US$117 billion a year ago. Net asset outflows in fourth quarter of 2012 were US$151 million compared to net outflows of US$1.8 billion for the same period in 2011. Net asset outflows for the twelve months ended December 31, 2012 were US$1.8 billion compared to net inflows of US$183 million a year ago.Total assets under administration at December 31, 2012 were $333 billion compared to $303 billion at December 31, 2011.EUROPENet earnings attributable to common shareholders for the fourth quarter of 2012 were $152 million compared to $181 million in the fourth quarter of 2011. While in quarter net earnings reflect strong UK payout annuity new business margins, favourable investment performance and an additional contribution from the third quarter's large reinsurance transaction, contributions from actuarial liability basis changes were significantly lower than the fourth quarter of 2011.  For the twelve months ended December 31, 2012, net earnings attributable to common shareholders were $618 million compared to $562 million for the same period in 2011. The 2011 results included catastrophe provisions of $84 million relating to the earthquake events in Japan and New Zealand.Total sales for the twelve months ended December 31, 2012 were $3.7 billion compared to $4.1 billion in 2011.Total assets under administration at December 31, 2012 increased to $75 billion from $70 billion at December 31, 2011.CORPORATEFor the three months ended December 31, 2012, Lifeco Corporate had a net loss of $139 million compared to net earnings of $120 million in the fourth quarter of 2011.  Included in Lifeco Corporate net earnings were litigation provisions of $140 million in 2012 and net litigation provision releases of $124 million in 2011. Fourth quarter 2012 results include a decrease in reserves for uncertain tax positions  which positively impacted net earnings by $20 million, partly offset by the impact of mark-to-market losses related to a macro balance sheet credit hedge of $8 million.For the twelve months ended December 31, 2012, Lifeco Corporate had a net loss of $168 million compared to net earnings of $104 million for the same period in 2011 largely due to the change in litigation provisions noted above.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 28, 2013 to shareholders of record at the close of business February 28, 2013.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 $0.33750 per share;Series Q First Preferred Shares of $0.321875 per share; andSeries R First Preferred Shares of $0.3000 per shareall payable March 28, 2013 to shareholders of record at the close of business February 28, 2013.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 $546 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 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 7, 2013 at 3:30 pm (ET).  The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:Participants in the Toronto area:  416-340-8527Participants from North America: 1-877-240-9772Participants from Overseas:  Dial international access code first, then 800-2787-2090A replay of the call will be available from February 7 to 14, 2013, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 8898149#). The archived webcast will be available on www.greatwestlifeco.com from February 8, 2013 until February 7, 2014.Additional information relating to Lifeco, including the 2012 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 ended  For the twelve months ended    December 31  September 30  December 31  December 31  December 31    2012  2012  2011  2012  2011Premiums and deposits:                Life insurance, guaranteed annuities      and insured health products  $4,827  $4,940  $4,334  $18,820  $17,293 Self-funded premium equivalents (Administrative services only contracts)         677         631         651         2,666         2,645 Segregated funds deposits:                      Individual products         2,072         1,490         1,829         6,557         7,345       Group products         2,216         1,681         1,777         7,262         6,117 Proprietary mutual funds and institutional deposits         6,880         6,779         5,624         24,496         28,888 Total premiums and deposits         16,672         15,521         14,215         59,801         62,288                  Fee and other income         767         720         740         2,945         2,903 Paid or credited to policyholders         5,122         6,607         6,340         22,451         23,043 Operating earnings -    common shareholders         493         520         500         1,955         1,898 Net earnings - common shareholders         353         520         624         1,815         2,022 Per common share                      Operating earnings  $0.520  $0.547  $0.528  $2.059  $2.000       Basic earnings         0.373         0.547         0.657         1.912         2.129       Dividends paid         0.3075         0.3075         0.3075         1.2300         1.2300       Book value         13.18         13.01         12.61       Return on common shareholders' equity (trailing four quarters*):        Operating earnings         15.9%         16.1%   16.6%             Net earnings         14.7%         17.1%   17.6%             Total assets  $253,718  $249,043  $238,768             Proprietary mutual funds and institutional net assets         134,598         131,604         125,390             Total assets under management         388,316         380,647         364,158             Other assets under administration         157,455         151,604         137,807             Total assets under administration  $545,771  $532,251  $501,965       Total equity   $17,586  $17,004  $16,104                        The Company uses operating earnings, a non-International Financial Reporting Standards financial measure, which excludes the impact of certain litigation provisions described in note 30 the Company's December 31, 2012 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 monthsended December 31  For the yearsended December 31     2012  2011  2012  2011Income                    Premium income                          Gross premiums written   $5,763  $5,033  $21,839  $20,013             Ceded premiums          (936)         (699)         (3,019)         (2,720)       Total net premiums          4,827         4,334         18,820         17,293       Net investment income                          Regular net investment income          1,361         1,365         5,653         5,538             Changes in fair value through profit or loss          182         1,564         2,643         4,164       Total net investment income          1,543         2,929         8,296         9,702       Fee and other income          767         740         2,945         2,903            7,137         8,003         30,061         29,898 Benefits and expenses                    Policyholder benefits                         Insurance and investment contracts                                    Gross          4,377         4,174         17,431         16,591                 Ceded          (399)         (284)         (1,457)         (1,217)       Total net policyholder benefits          3,978         3,890         15,974         15,374       Policyholder dividends and experience refunds          292         309         1,437         1,424       Change in insurance and investment contract liabilities    852   2,141   5,040   6,245       Total paid or credited to policyholders          5,122         6,340         22,451         23,043                      Commissions          515         409         1,781         1,548       Operating and administrative expenses          642         142         2,572         1,950       Premium taxes          75         76         293         264       Financing charges          71         73         285         289       Amortization of finite life intangible assets          24         28         103         100 Earnings before income taxes          688         935         2,576         2,704 Income taxes          98         181         368         465 Net earnings before non-controlling interests          590         754         2,208         2,239 Attributable to non-controlling interests          205         106         278         121 Net earnings          385         648         1,930         2,118 Preferred share dividends          32         24         115         96 Net earnings - common shareholders   $353  $624  $1,815  $2,022                Earnings per common share                   Basic   $0.373  $0.657  $1.912  $2.129      Diluted   $0.372  $0.651  $1.900  $2.112                CONSOLIDATED BALANCE SHEETS(unaudited)(in Canadian $ millions)      December 31      2012   2011Assets          Cash and cash equivalents    $1,895   $2,056 Bonds           82,536          78,073 Mortgage loans           17,875          17,432 Stocks           7,098          6,704 Investment properties           3,525          3,201 Loans to policyholders           7,082          7,162             120,011          114,628 Funds held by ceding insurers           10,537          9,923 Goodwill           5,397          5,401 Intangible assets           3,115          3,154 Derivative financial instruments           997          968 Owner occupied properties           514          491 Fixed assets           154          137 Reinsurance assets           2,064          2,061 Other assets           4,893          4,283 Deferred tax assets           1,088          1,140 Investments on account of segregated fund policyholders           104,948          96,582 Total assets    $253,718   $238,768            Liabilities          Insurance contract liabilities    $119,919   $114,730 Investment contract liabilities           739          782 Debentures and other debt instruments           4,283          4,313 Funds held under reinsurance contracts           335          169 Derivative financial instruments           342          316 Other liabilities           4,579          4,287 Deferred tax liabilities           868          929 Repurchase agreements           -          23 Capital trust securities           119          533 Investment and insurance contracts on account of segregated fund  policyholders           104,948          96,582 Total liabilities           236,132          222,664            Equity          Non-controlling interests                Participating account surplus in subsidiaries           2,505          2,227       Non-controlling interests in subsidiaries           5          3 Shareholders' equity                Share capital                      Preferred shares           2,544          1,894             Common shares           5,848          5,828       Accumulated surplus           6,954          6,327       Accumulated other comprehensive loss           (330)          (233)       Contributed surplus           60          58 Total equity           17,586          16,104 Total liabilities and equity    $253,718   $238,768            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.The Company has established a capital allocation model to better measure the performance of the operating segments.  This segmented information is presented below.For the three months ended December 31, 2012                   United     Lifeco       Canada  States  Europe  Corporate  TotalIncome:                 Premium income  $2,468  $984  $1,375  $-  $4,827  Net investment income                   Regular net investment income         603         326         441         (9)         1,361    Changes in fair value through profit or loss         (97)         34         245         -         182  Total net investment income         506         360         686         (9)         1,543  Fee and other income         283         314         170         -         767 Total income         3,257         1,658         2,231         (9)         7,137                  Benefits and expenses:                 Paid or credited to policyholders         2,171         1,163         1,788         -         5,122  Other         502         368         219         143         1,232  Financing charges         32         34         4         1         71  Amortization of finite life intangible assets         12         10         2         -         24                  Earnings before income taxes         540         83         218         (153)         688                  Income taxes         69         (1)         52         (22)         98                  Net earnings before non-controlling                 interests         471         84         166         (131)         590                  Non-controlling interests         206         4         (5)         -         205                  Net earnings         265         80         171         (131)         385                  Preferred share dividends         21         -         5         6         32                  Net earnings before capital allocation         244         80         166         (137)         353 Impact of capital allocation         19         (3)         (14)         (2)         - Net earnings - common shareholders  $263  $77  $152  $(139)  $353                  For the three months ended December 31, 2011                   United     Lifeco       Canada  States  Europe  Corporate  TotalIncome:                 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                  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 twelve months ended December 31, 2012                   United     Lifeco       Canada  States  Europe  Corporate  TotalIncome:                 Premium income  $9,581  $3,390  $5,849  $-  $18,820  Net investment income                   Regular net investment income         2,542         1,309         1,814         (12)         5,653    Changes in fair value through profit or loss         658         476         1,509         -         2,643  Total net investment income         3,200         1,785         3,323         (12)         8,296  Fee and other income         1,101         1,226         618         -         2,945 Total income         13,882         6,401         9,790         (12)         30,061                  Benefits and expenses:                 Paid or credited to policyholders         9,770         4,437         8,244         -         22,451  Other         2,414         1,371         701         160         4,646  Financing charges         131         135         18         1         285  Amortization of finite life intangible assets         45         48         10         -         103 Earnings before income taxes         1,522         410         817         (173)         2,576                  Income taxes         212         68         115         (27)         368                  Net earnings before non-controllinginterests         1,310         342         702         (146)         2,208                  Non-controlling interests         269         3         6         -         278                  Net earnings         1,041         339         696         (146)         1,930                  Preferred share dividends         79         -         22         14         115                  Net earnings before capital allocation         962         339         674         (160)         1,815                  Impact of capital allocation         78         (14)         (56)         (8)         -                  Net earnings - common shareholders  $1,040  $325  $618  $(168)  $1,815                  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                  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          SOURCE: Great-West Lifeco Inc.For further information: Marlene Klassen, APR Assistant Vice-President, Communication Services (204) 946-7705