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Press release from CNW Group

Great-West Lifeco reports second quarter 2013 results

Wednesday, July 31, 2013

Great-West Lifeco reports second quarter 2013 results

17:49 EDT Wednesday, July 31, 2013

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.

TSX:GWO

WINNIPEG, July 31, 2013 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $521 million for the three months ended June 30, 2013, an increase of 7% compared to $488 million in the second quarter of 2012.  On a per common share basis, this represents $0.548 per common share for the three months ended June 30, 2013, compared to $0.512 per common share for the same period in 2012.

For the six months ended June 30, 2013, net earnings attributable to common shareholders were $1,038 million, compared to $937 million a year ago.  This represents $1.092 per common share for the six months ended June 30, 2013, compared to $0.986 per common share for the same period in 2012.

Highlights - Operating Results

  • Consolidated assets under administration at June 30, 2013 were $596 billion, up $50 billion from December 31, 2012.
  • Total Company premiums and deposits during the quarter were $15.0 billion, up 14% from a year ago.
  • Total Company sales in the second quarter of 2013 were up 30% from the same period in 2012, reflecting strong momentum and growth across all geographies:
  • Canada sales were $2.5 billion, up 17% compared to the second quarter of 2012.
  • Great-West Financial sales were US$2.5 billion, up 34% compared to the second quarter of 2012.
  • Europe Insurance & Annuities sales were $889 million up 7% compared to the second quarter of 2012.
  • Putnam sales were US$6.4 billion, up 36% compared to the second quarter of 2012.
  • The Company maintained a strong ROE of 16.8% based on operating earnings and 15.6% 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 233% at June 30, 2013. This includes the impact of capital activity in advance of the closing of the Irish Life Group Limited (Irish Life) acquisition which contributed approximately 15 points to the ratio.
  • Credit experience remained benign with minimal impacts from credit downgrade and impairment activity.
  • The Company declared a quarterly common dividend of $0.3075 per common share payable September 30, 2013.

Highlights - Irish Life Acquisition

On July 18, 2013, the Company, through its wholly-owned subsidiary Canada Life Limited, completed its previously announced €1.3 billion acquisition of Irish Life.  Coincident with the closing, Lifeco's 48,660,000 outstanding subscription receipts have been exchanged, on a one for one basis, for common shares of Great-West Lifeco Inc. The subscription receipt exchange increased the total number of outstanding common shares at July 18, 2013 to 1,000,450,840.

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 second quarter of 2013 were $281 million compared to $253 million in the second quarter of 2012.  For the six months ended June 30, 2013 net earnings attributable to common shareholders were $546 million compared to $495 million for the same period in 2012.

Total sales in the second quarter of 2013 were $2.5 billion, an increase of 17% compared to the second quarter of 2012.   This increase was due to strong Wealth Management sales which were up 22% from a year ago, reflecting a 49% increase in sales of group retirement products. Wealth Management had positive net cash flow of $162 million during the quarter.  Individual Insurance and Group insurance sales were lower than a year ago by 11% and 24% respectively.  Total sales for the six months ended June 30, 2013 were $5.6 billion compared to $4.8 billion in 2012.

Total Canada segment assets under administration at June 30, 2013 were $142 billion, compared to $138 billion at December 31, 2012.

UNITED STATES

Net earnings attributable to common shareholders for the second quarter of 2013 were $73 million compared to $85 million in the second quarter of 2012.  Great-West Financial reported net earnings of $87 million in the second quarter compared to $90 million for the same period last year.  Putnam reported a net loss of $14 million in the second quarter compared to a net loss of $5 million a year ago.  For the six months ended June 30, 2013 net earnings attributable to common shareholders were $144 million compared to $159 million in 2012.

Great-West Financial sales in the second quarter of 2013 were US$2.5 billion, up 34% compared to the second quarter of 2012 reflecting strong sales results in both the public/non-profit and 401(k) markets.  Sales for the six months ended June 30, 2013 were US$5.0 billion compared to US$4.1 billion in 2012.

Putnam assets under management as at June 30, 2013 were US$134 billion compared to US$120 billion a year ago.  Sales in the second quarter were US$6.4 billion, up 36% from a year ago. In quarter redemptions of US$6.8 billion resulted in net asset outflows of US$0.4 billion compared to net outflows of US$0.3 billion for the same period in 2012.

Total United States segment assets under administration at June 30, 2013 were $378 billion compared to $333 billion at December 31, 2012.

EUROPE

Net earnings attributable to common shareholders for the second quarter of 2013 were $178 million compared to $159 million in the second quarter of 2012.  For the six months ended June 30, 2013 net earnings attributable to common shareholders were $370 million compared to $299 million for the same period in 2012.

Sales in Insurance & Annuities for the second quarter of 2013 were $889 million, up 7% compared to $828 million a year ago, reflecting higher payout annuity sales in the U.K. partly offset by lower wealth management single premiums in the U.K.  Total sales for the six months ended June 30, 2013 were $1.9 billion compared to $1.6 billion in 2012.

Total Europe segment assets under administration at June 30, 2013 were $76 billion, up slightly from $75 billion at December 31, 2012.

CORPORATE

Net earnings in the Lifeco corporate segment attributable to common shareholders were a net loss of $11 million in the second quarter of 2013 compared to a net loss of $9 million in the second quarter of 2012.  For the six months ended June 30, 2013 net earnings attributable to common shareholders was a net loss of $22 million compared to a net loss of $16 million for the same period in 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 September 30, 2013 to shareholders of record at the close of business August 30, 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 September 30, 2013 to shareholders of record at the close of business August 30, 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 Great-West Life, London Life, Canada Life, Irish Life, Great-West Financial and Putnam Investments. Effective July 18, 2013 Irish Life is part of Great-West Lifeco's operations.  Irish Life assets and earnings are not reflected in the second quarter financial results. Great-West Lifeco and its companies have $596 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 second quarter conference call and audio webcast will be held August 1, 2013 at 10:00 a.m.(ET).  The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:

  • Participants in the Toronto area:  416-340-8061
  • Participants from North America: 1-866-225-0198
  • Participants from Overseas:  Dial international access code first, then 800-6578-9898

A replay of the call will be available from August 1 to 8, 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 August 1, 2013 until August 2, 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     For the six months ended
      June 30     March 31     June 30     June 30     June 30
      2013     2013     2012(2)     2013     2012(2)
Premiums and deposits:                              
Life insurance, guaranteed annuities
  and insured health products   $  4,332    4,580    $  4,524    $  8,912    9,053 
Self-funded premium equivalents
 (Administrative services only contracts)           654            644            673            1,298            1,358 
Segregated funds deposits:                              
  Individual products           1,431            1,768            1,436            3,199            2,995 
  Group products           1,900            2,006            1,595            3,906            3,365 
Proprietary mutual funds and
  institutional deposits           6,677            7,642            4,898            14,319            10,837 
Total premiums and deposits           14,994            16,640            13,126            31,634            27,608 
                               
Fee and other income           811            778            734            1,589            1,458 
Paid or credited to policyholders(1)           1,321            5,215            5,979            6,536            10,722 
Net earnings - common shareholders(2)           521            517            488            1,038            937 
Per common share                              
  Basic earnings(2)   $  0.548    $  0.544    0.512    $  1.092    $  0.986 
  Dividends paid           0.3075            0.3075            0.3075            0.615            0.615 
  Book value(2)           13.48            12.87            12.42             
Return on common shareholders' equity:                  
  Net operating earnings(2)           16.8%            16.8%      16.0%    
  Net earnings(2)           15.6%            15.7%      17.1%    
  Total assets(2)   $  264,158    $  261,338    245,232     
  Proprietary mutual funds and
  institutional net assets           149,273            146,031            129,028     
  Total assets under management(2)           413,431            407,369            374,260     
  Other assets under administration           182,305            174,487            149,258     
  Total assets under administration(2)   595,736    $  581,856    523,518     
Total equity(2)   17,843    17,268    $  16,121     
                       

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.

(1)  Paid or credited to policyholders includes the impact of changes in fair values of assets supporting liabilities.
(2)  Comparative figures, where impacted, have been restated for the retrospective 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     For the six months ended
      June 30     March 31     June 30     June 30     June 30
      2013     2013     2012     2013     2012
                               
Income                              
  Premium income                              
    Gross premiums written   $  5,113    5,319    5,233    10,432    10,431 
    Ceded premiums           (781)            (739)            (709)            (1,520)            (1,378) 
  Total net premiums           4,332            4,580            4,524            8,912            9,053 
  Net investment income                              
    Regular net investment income           1,401            1,362            1,433            2,763            2,876 
    Changes in fair value through profit or loss           (3,200)            465            1,106            (2,735)            910 
  Total net investment income           (1,799)            1,827            2,539            28            3,786 
  Fee and other income           811            778            734            1,589           1,458 
            3,344            7,185            7,797            10,529           14,297 
Benefits and expenses                              
  Policyholder benefits                              
    Insurance and investment contracts                                                 
      Gross           3,967            4,755            4,311            8,722           8,917 
      Ceded           (362)            (374)            (367)            (736)           (754) 
  Total net policyholder benefits           3,605            4,381            3,944            7,986            8,163 
  Policyholder dividends and experience refunds           363            367            367            730            731 
  Changes in insurance and investment
contract liabilities
          (2,647)            467            1,668            (2,180)            1,828 
  Total paid or credited to policyholders           1,321            5,215            5,979            6,536           10,722 
                               
  Commissions           443            432            415            875            825 
  Operating and administrative expenses           704            674            642            1,378           1,285 
  Premium taxes           72            74            72            146            144 
  Financing charges           74            67            77            141            153 
  Amortization of finite life intangible assets           29            27            28            56            54 
Earnings before income taxes           701            696            584            1,397            1,114 
Income taxes           128            128            70            256            126 
Net earnings before non-controlling interests           573            568            514            1,141            988 
Attributable to non-controlling interests           20            18            (2)            38           (2) 
Net earnings           553            550            516            1,103           990 
Preferred share dividends           32            33            28            65            53 
Net earnings - common shareholders   $  521    $  517    488    1,038    $  937 
                               
Earnings per common share                            
  Basic   $  0.548    $  0.544    $  0.512    $  1.092    0.986 
  Diluted   $  0.547    $  0.544    $  0.509    1.091    0.980 



CONSOLIDATED BALANCE SHEETS (unaudited)
(in Canadian $ millions)

      June 30     December 31     January 1
      2013     2012     2012
                   
Assets                  
Cash and cash equivalents   $  2,788    $  1,895    $  2,056 
Bonds           85,566            82,581            78,355 
Mortgage loans           18,482            17,875            17,432 
Stocks           7,278            7,051            6,656 
Investment properties           3,566            3,572            3,249 
Loans to policyholders           7,281            7,082            7,162 
            124,961            120,056            114,910 
Funds held by ceding insurers            9,640            10,537            9,923 
Goodwill           5,404            5,397            5,401 
Intangible assets           3,204            3,115            3,154 
Derivative financial instruments           640            997            968 
Owner occupied properties           525            514            491 
Fixed assets           159            154            137 
Reinsurance assets           2,204            2,064            2,061 
Other assets           5,572            4,688            4,062 
Deferred tax assets           1,208            1,142            1,163 
Investments on account of segregated fund policyholders           110,641            104,948            96,582 
Total assets   $  264,158    $  253,612    $  238,852 
                   
Liabilities                  
Insurance contract liabilities   $   119,223    $   119,919    114,730 
Investment contract liabilities           710            739            782 
Debentures and other debt instruments           5,166            4,283            4,313 
Funds held under reinsurance contracts           355            335            169 
Derivative financial instruments           584            342            316 
Other liabilities           6,828            5,163            4,600 
Deferred tax liabilities           656            708            810 
Repurchase agreements           1,989            -            23 
Capital trust debentures           163            164            815 
Investment and insurance contracts on account of segregated fund
  policyholders           110,641            104,948            96,582 
Total liabilities           246,315            236,601            223,140 
                   
Equity                  
Non-controlling interests                  
  Participating account surplus in subsidiaries           2,466            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           5,878            5,848            5,828 
  Accumulated surplus           7,488            7,035            6,417 
  Accumulated other comprehensive loss           (597)            (932)            (675) 
  Contributed surplus           58            60            58 
Total equity           17,843            17,011            15,712 
Total liabilities and equity   $  264,158    253,612    $  238,852 



Segmented Information (unaudited)

Consolidated Net Earnings

For the three months ended June 30, 2013                            
            United           Lifeco      
      Canada     States     Europe     Corporate     Total
Income:                              
  Premium income   2,469    $  700    $  1,163    $  -    $  4,332 
  Net investment income                              
    Regular net investment income           620            342            436                      1,401 
    Changes in fair value through profit or loss           (1,276)            (501)            (1,423)                      (3,200) 
  Total net investment income           (656)            (159)            (987)                      (1,799) 
  Fee and other income           295            343            173                       811 
Total income           2,108            884            349                      3,344 
                               
Benefits and expenses:                              
  Paid or credited to policyholders           1,053            366            (98)                      1,321 
  Other           645            373            194                      1,219 
  Financing charges           28            34                                  74 
  Amortization of finite life intangible assets           13            13                                  29 
                               
Earnings before income taxes           369            98            245            (11)           701 
                               
Income taxes           67            20            44            (3)           128 
                               
Net earnings before non-controlling                              
interests           302            78            201            (8)           573 
                               
Non-controlling interests           19                                             20 
                               
Net earnings           283            77            201            (8)           553 
                               
Preferred share dividends           27                                            32 
                               
Net earnings before capital allocation           256            77            196            (8)           521 
Impact of capital allocation           25            (4)            (18)            (3)            
Net earnings - common shareholders   $  281    73    178    (11)    521 






For the three months ended June 30, 2012
                             
            United           Lifeco      
      Canada     States     Europe     Corporate     Total
Income:                              
  Premium income   2,351    706    $  1,467    $  -    $  4,524 
  Net investment income                              
    Regular net investment income           626            327            477            3           1,433 
    Changes in fair value through profit or loss           412            177            517            -           1,106 
  Total net investment income           1,038            504            994            3           2,539 
  Fee and other income           270            306            158            -            734 
Total income           3,659            1,516            2,619            3           7,797 
                               
Benefits and expenses:                              
  Paid or credited to policyholders           2,681            1,025            2,273            -           5,979 
  Other           638            335            150            6           1,129 
  Financing charges           39            34            4            -            77 
  Amortization of finite life intangible assets           11            14            3            -            28 
                               
Earnings before income taxes           290            108            189            (3)           584 
                               
Income taxes           42            21            7            -           70 
                               
Net earnings before non-controlling                              
  interests           248            87            182            (3)           514 
                               
Non-controlling interests           (4)            (2)            4            -           (2) 
                               
Net earnings           252            89            178            (3)           516 
                               
Preferred share dividends           19            -            5            4           28 
                               
Net earnings before capital allocation           233            89            173            (7)           488 
Impact of capital allocation           20            (4)            (14)            (2)            - 
Net earnings - common shareholders   $  253    $  85    $  159    (9)    488 




For the six months ended June 30, 2013
                           
            United           Lifeco      
      Canada     States     Europe     Corporate     Total
Income:                              
  Premium income   $  4,984    $  1,329    2,599    $  -    $  8,912 
  Net investment income                              
    Regular net investment income           1,239            665            863            (4)            2,763 
    Changes in fair value through profit or loss           (1,220)            (507)            (1,008)                      (2,735) 
  Total net investment income           19            158            (145)            (4)            28 
  Fee and other income           584            674            331                       1,589 
Total income           5,587            2,161            2,785            (4)           10,529 
                               
Benefits and expenses:                              
  Paid or credited to policyholders           3,509            1,126            1,901                      6,536 
  Other           1,278            745            366            10           2,399 
  Financing charges           57            68                                  141 
  Amortization of finite life intangible assets           25            26                                  56 
                               
Earnings before income taxes           718            196            504            (21)           1,397 
                               
Income taxes           134            40            87            (5)           256 
                               
Net earnings before non-controlling                              
interests           584            156            417            (16)           1,141 
                               
Non-controlling interests           34                                             38 
                               
Net earnings           550            152            417            (16)           1,103 
                               
Preferred share dividends           54                       11                       65 
                               
Net earnings before capital allocation           496            152            406            (16)           1,038 
Impact of capital allocation           50            (8)            (36)            (6)            
Net earnings - common shareholders   546    $  144    370    (22)    $  1,038 




For the six months ended June 30, 2012
                             
            United           Lifeco      
      Canada     States     Europe     Corporate     Total
Income:                              
  Premium income   4,716    $  1,527    $  2,810    $  -    $  9,053 
  Net investment income                              
    Regular net investment income           1,284            651            940            1            2,876 
    Changes in fair value through profit or loss           262            198            450            -            910 
  Total net investment income           1,546            849            1,390            1            3,786 
  Fee and other income           547            608            303            -            1,458 
Total income           6,809            2,984            4,503            1            14,297 
                               
Benefits and expenses:                              
  Paid or credited to policyholders           4,866            2,028            3,828            -            10,722 
  Other           1,286            666            292            10            2,254 
  Financing charges           77            67            9            -            153 
  Amortization of finite life intangible assets           22            27            5            -            54 
                               
Earnings before income taxes           558            196            369            (9)            1,114 
                               
Income taxes           75            30            23            (2)            126 
                               
Net earnings before non-controlling                              
  interests           483            166            346            (7)            988 
                               
Non-controlling interests           (10)            -            8            -            (2) 
                               
Net earnings           493            166            338            (7)            990 
                               
Preferred share dividends           37            -            11            5            53 
                               
Net earnings before capital allocation           456            166            327            (12)            937 
Impact of capital allocation           39            (7)            (28)            (4)            - 
Net earnings - common shareholders   495    $  159    $  299    (16)    937 

 

 

SOURCE: Great-West Lifeco Inc.

For further information:

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

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