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Press release from CNW Group

Great-West Lifeco reports first quarter 2013 results

Thursday, May 02, 2013

Great-West Lifeco reports first quarter 2013 results

10:23 EDT Thursday, May 02, 2013

TSX:GWO

Readers are referred to the cautionary notes regarding Forward-Looking Information and Non-IFRS Financial Measures at the end of this release.  All figures are expressed in Canadian dollars, except as noted.

WINNIPEG, May 2, 2013 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $517 million for the three months ended March 31, 2013, an increase of 15% compared to $449 million in the first quarter of 2012.  On a per common share basis, this represents $0.544 per common share for the three months ended March 31, 2013, compared to $0.474 per common share for the same period in 2012.

Highlights - Operating Results

  • Consolidated assets under administration at March 31, 2013 were $582 billion, up $36 billion from December 31, 2012.
  • Total Company premiums and deposits were $16.6 billion, up 15% from the first quarter of 2012, reflecting continued strong sales in each of its operating segments.
  • Total Company sales in the first quarter of 2013 grew by 23% from first quarter 2012, notably the following:
  • Canada sales were $3 billion, up 13% compared to the first quarter of 2012.
  • Great-West Financial sales were US$2.5 billion, up 13% compared to the first quarter of 2012.
  • Europe sales were $961 million up 27% compared to the first quarter of 2012.
  • Putnam sales were US$7.4 billion, up 28% compared to the first quarter of 2012. Net asset outflows in first quarter 2013 were US$314 million compared to net outflows of US$1,969 million for the same period in 2012.
  • The Company maintained a strong ROE of 16.8% based on operating earnings and 15.7% 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 Requirements (MCCSR) ratio of 210% at March 31, 2013.
  • Credit experience remained favourable with minimal impacts from credit downgrade and impairment activity.
  • The Company declared a quarterly common dividend of $0.3075 per common share payable June 28, 2013.

Highlights - Proposed Acquisition and Capital Markets Activity

On February 19, 2013 the Company announced that it had reached an agreement with the Government of Ireland to acquire, through its subsidiary Canada Life Limited, all of the shares of Irish Life Group Limited (Irish Life) for $1.75 billion (€1.3 billion).  In conjunction with the proposed acquisition, the Company has successfully completed two significant capital market transactions:

  • On March 12, 2013, the Company completed an issuance of subscription receipts in both public and private offerings with aggregate gross proceeds to Lifeco of approximately $1.25 billion.
  • On April 18, 2013, the Company issued €500 million of euro denominated ten year bonds, at an annual coupon of 2.50%, which were rated A+ by Standard & Poor's Ratings Services.

The Company has now raised all the funding required to complete the acquisition of Irish Life Group and has hedged all related euro currency exposures associated with the €1.3 billion purchase price.

OPERATING RESULTS

Consolidated 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.

CANADA

Net earnings attributable to common shareholders for the first quarter of 2013 were $265 million compared to $242 million in the first quarter of 2012.

Total sales in the first quarter of 2013 were $3.0 billion compared to $2.7 billion in 2012, an increase of 13%.  Sales of Group insurance products were up significantly for the quarter at $288 million from $134 million a year ago reflecting strong large case creditor/direct marketing sales.   Wealth Management sales were $2.6 billion for the quarter, up 8% from a year ago, reflecting a 30% increase in sales of group retirement products. Wealth Management net cash flows for the quarter were $542 million.  Individual Insurance product sales were down 8% year over year reflecting lower universal life sales.

Total Canada segment assets under administration at March 31, 2013 were $143 billion, compared to $138 billion at December 31, 2012.

UNITED STATES

Net earnings attributable to common shareholders for the first quarter of 2013 were $71 million compared to $74 million in the first quarter of 2012.  Great-West Financial reported net earnings of $85 million in the first quarter compared to $86 million for the same period last year.  Putnam reported a net loss of $14 million in the first quarter compared to a net loss of $12 million a year ago.

Great-West Financial sales in the first quarter of 2013 were US$2.5 billion, up 13% compared to the first quarter of 2012 reflecting strong sales in Retirement Services.

Putnam assets under management as at March 31, 2013 were US$135 billion compared to US$124 billion a year ago. Sales in the first quarter were US$7.4 billion, up 28% from a year ago, however redemptions at US$7.7 billion were at the same level as a year ago. Net asset outflows in first quarter 2013 were US$314 million compared to net outflows of US$1,969 million for the same period in 2012.

Total United States segment assets under administration at March 31, 2013 were $365 billion compared to $333 billion at December 31, 2012.

EUROPE

Net earnings attributable to common shareholders for the first quarter of 2013 were $192 million compared to $140 million in the first quarter of 2012.

Sales for the first quarter of 2013 were $961 million, up 27% compared to $755 million a year ago, reflecting strong sales of single premium savings products in the Isle of Man and payout annuities in the United Kingdom.

Total Europe segment assets under administration at March 31, 2013 were $74 billion, down slightly from $75 billion at December 31, 2012 primarily due to the strengthening of the Canadian dollar against the British pound.

CORPORATE

Net earnings in the Lifeco corporate segment attributable to common shareholders were a net loss of $11 million in the first quarter of 2013 compared to a net loss of $7 million in the first quarter of 2012.

QUARTERLY DIVIDENDS

At 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 28, 2013 to shareholders of record at the close of business May 31, 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 $0.3375 per share;
  • Series Q First Preferred Shares of $0.321875 per share; and
  • Series R First Preferred Shares of $0.3000 per share

all payable June 28, 2013 to shareholders of record at the close of business May 31, 2013.

GREAT-WEST LIFECO

Great-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 $582 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 Measures
This 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 information
Selected financial information is attached.

Great-West Lifeco's first quarter conference call and audio webcast will be held May 2, 2013 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:  416-340-8527
  • Participants from North America: 1-877-240-9772
  • Participants from Overseas:  Dial international access code first, then 800-2787-2090

A replay of the call will be available from May 2, 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 May 2, 2013 until May 3, 2014.

Additional information relating to Lifeco, including the most recent interim unaudited condensed 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
    March 31   December 31   March 31
    2013   2012   2012
Premiums and deposits:            
Life insurance, guaranteed annuities                  
  and insured health products   $  4,580    $  4,827    4,529
Self-funded premium equivalents                 
 (Administrative services only contracts)   644   677   685
Segregated funds deposits:            
  Individual products         1,768         2,072         1,559
  Group products         2,006         2,216         1,770
Proprietary mutual funds and institutional deposits         7,642         6,880         5,939
Total premiums and deposits         16,640         16,672         14,482
             
Fee and other income         778         767         724
Paid or credited to policyholders         5,215         5,122         4,743
Operating earnings -                 
  common shareholders   517   491   449
Net earnings - common shareholders         517         351         449
Per common share            
  Operating earnings   $  0.544   $  0.517   $  0.474
  Basic earnings         0.544         0.370         0.474
  Dividends paid         0.3075         0.3075         0.3075
  Book value         12.87         12.64         12.28
Return on common shareholders' equity (trailing four quarters*):              
  Operating earnings         16.8%         16.5%   16.6%
  Net earnings         15.7%         15.3%          17.6%
  Total assets   $  261,338   $  253,612   $  243,759
  Proprietary mutual funds and institutional net assets      146,031      134,598      131,140
  Total assets under management         407,369         388,210         374,899
  Other assets under administration   174,487         157,455         148,068
  Total assets under administration   $  581,856   $  545,665   $  522,967
Total equity    $  17,268   $  17,011   $  15,974
             

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 to 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.

Comparative figures throughout this document, where impacted, have been restated for the retroactive impact of new and revised International Financial Reporting Standards effective during 2013 most notably IAS 19R, Employee Benefits.

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(in Canadian $ millions except per share amounts)
 
    For the three months ended
    March 31   December 31   March 31
    2013   2012   2012
             
Income            
  Premium income            
    Gross premiums written   $  5,319    $  5,763    $  5,198 
    Ceded premiums         (739)          (936)          (669) 
  Total net premiums         4,580          4,827          4,529 
  Net investment income            
    Regular net investment income         1,362          1,364          1,443 
    Changes in fair value through profit or loss         465          182          (196) 
  Total net investment income         1,827          1,546          1,247 
  Fee and other income         778          767          724 
            7,185          7,140          6,500 
Benefits and expenses            
  Policyholder benefits            
    Insurance and investment contracts                               
      Gross         4,755          4,377          4,606 
      Ceded         (374)          (399)          (387) 
  Total net policyholder benefits         4,381          3,978          4,219 
  Policyholder dividends and experience refunds         367          292          364 
  Change in insurance and investment contract liabilities         467          852          160 
  Total paid or credited to policyholders         5,215          5,122          4,743 
               
  Commissions         432          515          410 
  Operating and administrative expenses         674          645          643 
  Premium taxes         74          75          72 
  Financing charges         67          74          76 
  Amortization of finite life intangible assets         27          24          26 
Earnings before income taxes         696          685          530 
Income taxes         128          97          56 
Net earnings before non-controlling interests         568          588          474 
Attributable to non-controlling interests         18          205          - 
Net earnings         550          383          474 
Preferred share dividends         33          32          25 
Net earnings - common shareholders   $  517    $  351    $  449 
             
Earnings per common share            
  Basic   $  0.544    $  0.370    $  0.474 
  Diluted   $  0.544    $  0.369    $  0.471 


CONSOLIDATED BALANCE SHEETS (unaudited)
(in Canadian $ millions)
 
    March 31   December 31   January 1
    2013   2012   2012
             
Assets            
Cash and cash equivalents   $  2,084    $  1,895    $  2,056 
Bonds         85,895          82,581          78,355 
Mortgage loans         17,853          17,875          17,432 
Stocks         7,296          7,051          6,656 
Investment properties         3,456          3,572          3,249 
Loans to policyholders         7,140          7,082          7,162 
          123,724          120,056          114,910 
Funds held by ceding insurers          9,759          10,537          9,923 
Goodwill         5,400          5,397          5,401 
Intangible assets         3,152          3,115          3,154 
Derivative financial instruments         862          997          968 
Owner occupied properties         518          514          491 
Fixed assets         153          154          137 
Reinsurance assets         2,097          2,064          2,061 
Other assets         5,247          4,688          4,062 
Deferred tax assets         1,170          1,142          1,163 
Investments on account of segregated fund policyholders         109,256          104,948          96,582 
Total assets   $  261,338    $  253,612    $  238,852 
             
Liabilities            
Insurance contract liabilities   $  119,609    $  119,919    $  114,730 
Investment contract liabilities         726          739          782 
Debentures and other debt instruments         4,483          4,283          4,313 
Funds held under reinsurance contracts         333          335          169 
Derivative financial instruments         477          342          316 
Other liabilities         6,387          5,163          4,600 
Deferred tax liabilities         688          708          810 
Repurchase agreements         1,948          -          23 
Capital trust debentures         163          164          815 
Investment and insurance contracts on account of segregated fund policyholders         109,256         104,948          96,582 
Total liabilities         244,070          236,601          223,140 
             
Equity            
Non-controlling interests            
  Participating account surplus in subsidiaries         2,477          2,451          2,187 
  Non-controlling interests in subsidiaries                  5          3 
Shareholders' equity            
  Share capital            
    Preferred shares         2,544          2,544          1,894 
    Common shares         5,868          5,848          5,828 
  Accumulated surplus         7,260          7,035          6,417 
  Accumulated other comprehensive loss         (949)          (932)          (675) 
  Contributed surplus         62          60          58 
Total equity         17,268          17,011          15,712 
Total liabilities and equity   $  261,338    $  253,612    $  238,852 

 

Segmented Information (unaudited)
 
Consolidated Net Earnings
For the three months ended March 31, 2013            
        United       Lifeco    
    Canada   States   Europe   Corporate   Total
Income:                    
  Premium income   $  2,515    $  629    $  1,436    $  -    $  4,580 
  Net investment income                    
    Regular net investment income         619          323          427          (7)          1,362 
    Changes in fair value through profit or loss         56          (6)          415                   465 
  Total net investment income         675          317          842          (7)          1,827 
  Fee and other income         289          331          158                   778 
Total income         3,479          1,277          2,436          (7)          7,185 
                     
Benefits and expenses:                    
  Paid or credited to policyholders         2,456          760          1,999                   5,215 
  Other         633          372          172                   1,180 
  Financing charges         29          34                            67 
  Amortization of finite life intangible assets         12          13                            27 
                     
Earnings before income taxes         349          98          259          (10)          696 
                     
Income taxes         67          20          43          (2)          128 
                     
Net earnings before non-controlling                    
  interests         282          78          216          (8)          568 
                     
Non-controlling interests         15                                     18 
                     
Net earnings         267          75          216          (8)          550 
                     
Preferred share dividends         27                                     33 
                     
Net earnings before capital allocation         240          75          210          (8)          517 
Impact of capital allocation         25          (4)          (18)          (3)          
Net earnings - common shareholders   $  265    $  71    $  192    $  (11)    $  517 


For the three months ended March 31, 2012                    
        United       Lifeco    
    Canada   States   Europe   Corporate   Total
Income:                    
  Premium income   $  2,365    $  821    $  1,343    $  -    $  4,529 
  Net investment income                    
    Regular net investment income         658          324          463          (2)          1,443 
    Changes in fair value through profit or loss         (150)          21          (67)          -          (196) 
  Total net investment income         508          345          396          (2)          1,247 
  Fee and other income         277          302          145          -          724 
Total income         3,150          1,468          1,884          (2)          6,500 
                     
Benefits and expenses:                    
  Paid or credited to policyholders         2,185          1,003          1,555          -          4,743 
  Other         648          331          142          4          1,125 
  Financing charges         38          33          5          -          76 
  Amortization of finite life intangible assets         11          13          2          -          26 
                     
Earnings before income taxes         268          88          180          (6)          530 
                     
Income taxes         33          9          16          (2)          56 
                     
Net earnings before non-controlling                    
  interests         235          79          164          (4)          474 
                     
Non-controlling interests         (6)          2          4          -          - 
                     
Net earnings         241          77          160          (4)          474 
                     
Preferred share dividends         18          -          6          1          25 
                     
Net earnings before capital allocation         223          77          154          (5)          449 
Impact of capital allocation         19          (3)          (14)          (2)          - 
Net earnings - common shareholders   $  242    $  74    $  140    $  (7)    $  449 

 

 

 

 

 

SOURCE: Great-West Lifeco Inc.

For further information:

Marlene Klassen, APR
Assistant Vice-President, Communication Services
204-946-7705

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