Great-West Lifeco maintains a strong capital position and reports first quarter 2017 adjusted net earnings of $619 million and ROE of 13.9%

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 4, 2017 /CNW/ - Great-West Lifeco Inc. (Lifeco or the Company) today announced net earnings attributable to common shareholders of $591 million or $0.598 per common share compared to $620 million or $0.625 per common share for the same quarter last year.  Included in Lifeco's net earnings for the first quarter of 2017 were restructuring costs of $28 million, primarily related to the Company's health and retail businesses in Ireland and the completion of integration activities for Empower Retirement.  Excluding these costs, net earnings for the first quarter of 2017 were $619 million or $0.627 per common share and were comparable to the same quarter last year as good business performance was offset by currency headwinds, which impacted earnings by $44 million, primarily due to the decline in the British pound.

"First quarter earnings reflect strong sales in our Canadian and European businesses and the benefits of cost reduction initiatives in the U.S.," said Paul Mahon, President and Chief Executive Officer. "While underlying business fundamentals were positive in the quarter, earnings were impacted by currency headwinds and restructuring charges related to business integration activities and right-sizing of our cost base. We remain focused on advancing our business strategies by balancing efficiency gains with necessary investments in future growth across the Company."

Consolidated assets under administration at March 31, 2017 were approximately $1.3 trillion, an increase of $47.4 billion from December 31, 2016.

Highlights – In Quarter

Lifeco reports premiums and deposits growth of 12%

• Lifeco premiums and deposits in the first quarter of 2017 were $33.5 billion, up 12% compared to the same quarter in 2016, reflecting higher premiums and deposits across all segments.

Capital position remains strong

• The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 239% at March 31, 2017.
• Lifeco declared a quarterly common dividend of $0.3670 per common share payable June 30, 2017.
• Return on Equity (ROE), excluding the impact of restructuring costs, was 13.9%.
• Irish Life Assurance plc, a subsidiary of the Company, redeemed its 5.25% 200 million euro-denominated subordinated debenture notes at their principal amount together with accrued interest during the quarter.

$1 billion hybrid subordinated debt redemption announced

• On April 24, 2017, Great-West Lifeco Finance (Delaware) LP, a subsidiary of the Company, announced its intention to redeem all $1 billion principal amount of its 5.691% subordinated debentures due June 21, 2067 on June 21, 2017 at a redemption price equal to 100% of the principal amount of the debentures, plus any accrued interest up to but excluding the redemption date.

SEGMENTED OPERATING RESULTS

For reporting purposes, Lifeco's consolidated operating results are grouped into four reportable segments - Canada, United States, Europe and Lifeco Corporate - reflecting geographic lines as well as the management and corporate structure of the companies. For more information, please refer to the Company's 2017 Q1 MD&A.

CANADA

• Canada advances business transformation to drive future growth - Lifeco recently realigned its Canadian operations into two new business units: one focused on individual customers and the other on group customers.  As part of the realignment, a new strategic customer marketing function has been created to provide a more holistic customer experience through digital and innovative capabilities and services. In conjunction with this, on April 25, 2017, the Company announced it was undertaking $200 million pre-tax of annualized expense reductions expected to be complete by the first quarter of 2019. As part of this effort, the Company expects to incur $215 million of restructuring costs (allocated between participating and non-participating accounts) which are expected to reduce net earnings by $127 million in the second quarter of 2017.
  
  
• Q1 Canada sales increased to $3.7 billion - Sales in the first quarter of 2017 were $3.7 billion, up 12% from the first quarter of 2016.  The increase reflects solid individual wealth sales which were up 14% compared to the first quarter of 2016, primarily due to strong segregated funds and mutual funds sales, and group wealth sales which were up 13% year over year. Individual insurance sales also increased significantly as participating life sales carried over from the fourth quarter 2016 activity.
  
  
• Q1 Canada segment net earnings of $255 million - Net earnings attributable to common shareholders for the first quarter of 2017 were $255 million compared to $276 million in the first quarter of 2016.

UNITED STATES

• Empower Retirement integration complete, US$8 million of restructuring costs recorded - Following the finalization of the Empower Retirement integration activities, Great-West Financial executed a restructuring action to right-size the cost structure and better position the business competitively with associated restructuring costs of US$8 million. Annualized synergies of US$34 million achieved through this initiative were mostly offset by the reinvestment in ongoing development as well as customer acquisition and retention.
  
  
• Empower Retirement announces new product offering - Empower Retirement, together with health services leader Optum, announced an innovative health savings account for retirement plan participants - The Empower Health Savings Account (HSA).  Available this summer to employers, the Empower HSA will provide plan participants access to an online seamless financial-planning solution that integrates retirement savings with health care savings, helping them to prepare for health care expenses in retirement.
  
  
• Putnam sales up 17% and average assets up 4% - Putnam sales were US$10.6 billion, an increase of US$1.5 billion compared to the same period last year, reflecting a 31% increase in institutional asset sales and a 5% increase in mutual fund sales. Putnam average assets under management for the three months ended March 31, 2017 were US$157.4 billion compared to US$151.9 billion for the three months ended December 31, 2016, an increase of 4%, primarily due to market performance and net asset inflows. Putnam ending assets under management at March 31, 2017 were US$159.9 billion.
  
  
• Q1 U.S. segment net earnings excluding restructuring costs up 6% - Net earnings attributable to common shareholders for the first quarter of 2017 were US$50 million excluding restructuring costs, up 6%, compared to net earnings of US$47 million in the first quarter of 2016. 

EUROPE

• Q1 Europe segment net earnings up 7% excluding restructuring costs - Net earnings attributable to common shareholders for the first quarter of 2017, excluding restructuring costs of $17 million, were $306 million compared to $287 million in the first quarter of 2016.  Europe net earnings were negatively impacted by currency movement of $42 million in the quarter compared to the same period last year, primarily due to a weakening of the British pound against the Canadian dollar.
  
  
• Q1 Europe sales up 6% in constant currency - Total sales in the first quarter of 2017 were up 6% in constant currency reflecting strong annuity and wealth management sales in the U.K. and Ireland, partially offset by lower fund management sales. Reported sales of $4.4 billion, were down from $4.6 billion in the first quarter of 2016 due to currency movements.
  
  
• Irish Life Health integration continues to progress - As of March 31, 2017, the Company has achieved €5 million of annualized synergies to date relating to the integration of the Irish Life Health operations and remains on track to achieve targeted annual cost savings of €16 million pre-tax within the next 9 months.

QUARTERLY DIVIDENDS

At its meeting today, the Board of Directors approved a quarterly dividend of $0.3670 per share on the common shares of Lifeco payable June 30, 2017 to shareholders of record at the close of business June 2, 2017.

In addition, the Directors approved quarterly dividends on Lifeco's preferred shares, as follows:

First Preferred Shares	Record Date	Payment Date	Amount, per share
Series F	June 2, 2017	June 30, 2017	$0.36875
Series G	June 2, 2017	June 30, 2017	$0.3250
Series H	June 2, 2017	June 30, 2017	$0.30313
Series I	June 2, 2017	June 30, 2017	$0.28125
Series L	June 2, 2017	June 30, 2017	$0.353125
Series M	June 2, 2017	June 30, 2017	$0.3625
Series N	June 2, 2017	June 30, 2017	$0.1360
Series O	June 2, 2017	June 30, 2017	$0.110945
Series P	June 2, 2017	June 30, 2017	$0.3375
Series Q	June 2, 2017	June 30, 2017	$0.321875
Series R	June 2, 2017	June 30, 2017	$0.3000
Series S	June 2, 2017	June 30, 2017	$0.328125

For purposes of the Income Tax Act (Canada), and any similar provincial legislation, the dividends referred to above are eligible dividends.

Selected financial information is attached.

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.  Lifeco has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company (Great-West Life) and its operating subsidiaries, London Life Insurance Company (London Life) and The Canada Life Assurance Company (Canada Life); Great-West Life & Annuity Insurance Company (Great-West Financial) and Putnam Investments, LLC (Putnam).  Lifeco and its companies have approximately $1.3 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies.  To learn more, visit www.greatwestlifeco.com.

Basis of presentation
The consolidated financial statements of Lifeco have been prepared in accordance with International Financial Reporting Standards (IFRS) and are the basis for the figures presented in this release, unless otherwise noted.

Cautionary note regarding Forward-Looking Information
This release may contain forward-looking statements.  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 other similar expressions or negative versions thereof.  These statements may include, without limitation, statements about the Company's operations, business, financial condition, expected 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.  Forward-looking statements are based on expectations, forecasts, predictions, projections and conclusions 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 the reader is cautioned that actual events and results could differ materially from those expressed or implied by forward-looking statements.  Material factors and assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting the Company's operations will continue substantially in their current state, including, without limitation, with respect to customer behaviour, the Company's reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, global equity and capital markets, business competition and other general economic, political and market factors in North America and internationally.  Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct.  Other important factors and assumptions that could cause actual results to differ materially from those contained in forward-looking statements include customer responses to new products, impairments of goodwill and other intangible assets, the Company's ability to execute strategic plans and changes to strategic plans, technological changes, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial or regulatory proceedings, catastrophic events, continuity and availability of personnel and third party service providers, the Company's ability to complete strategic transactions and integrate acquisitions and unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements.  The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company's 2016 Annual MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates", which, along with other filings, is available for review at www.sedar.com.  The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to place undue reliance on forward-looking statements.  Other than as specifically required by applicable law, the Company does not intend 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", "assets under management", "assets under administration" and other similar expressions.  Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists.  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.  Refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

First Quarter Conference Call

Lifeco's first quarter conference call and audio webcast will be held May 4, 2017 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:  416-340-2218      
• Participants from North America: 1-866-225-0198
• For International participants:  Look up the dial-in information for your location here:
  https://www.confsolutions.ca/ILT?oss=1P49R8662250198

A replay of the call will be available from May 4, 2017 to May 11, 2017, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 7905788#). The archived webcast will be available on www.greatwestlifeco.com from May 4, 2017 to May 3, 2018.

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 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
			March 31 2017		December 31 2016		March 31 2016
Premiums and deposits:
	Net premium income (Life insurance,
		guaranteed annuities and insured
		health products)	$	9,365	$	8,905	$	7,015
	Policyholder deposits (segregated funds):
		Individual products	3,897		3,399		3,689
		Group products	2,185		1,875		2,238
	Self-funded premium equivalents
		(Administrative services only
		contracts)^(1)	716		691		698
	Proprietary mutual funds and institutional
		deposits^(1)	17,386		15,169		16,354
Total premiums and deposits^(1)			33,549		30,039		29,994
Fee and other income			1,305		1,345		1,254
Net policyholder benefits, dividends and
	experience refunds		8,543		7,841		6,539
Earnings
Net earnings - common shareholders			$	591	$	676	$	620
	Per common share
		Basic earnings	0.598		0.686		0.625
		Dividends paid	0.367		0.346		0.346
		Book value^(2)	19.99		19.76		19.28
Return on common shareholders' equity^(3)
	Net earnings		13.6%		13.8%		14.0%
Total assets			$	405,632	$	399,912	$	390,245
	Proprietary mutual funds and institutional
		net assets^(4)	270,121		259,215		237,984
Total assets under management^(4)			675,753		659,127		628,229
	Other assets under administration^(5)		620,064		589,291		558,290
Total assets under administration			$	1,295,817	$	1,248,418	$	1,186,519
Total equity			$	25,372	$	25,008	$	24,531

^(1)	In addition to premiums and deposits reported in the financial statements, the Company includes premium equivalents on self-funded group insurance administrative services only (ASO) contracts and deposits on proprietary mutual funds and institutional accounts to calculate total premiums and deposits (a non-IFRS financial measure).  This measure provides useful information as it is an indicator of top line growth.
^(2)	Certain comparative figures have been adjusted as described in note 33 to the Company's December 31, 2016 financial statements.
^(3)	Return on common shareholders' equity is detailed within the "Capital Allocation Methodology" section of the Company's March 31, 2017 Management's Discussion and Analysis.
^(4)	Total assets under management (a non-IFRS financial measure) provides an indicator of the size and volume of the overall business of the Company.  Services provided in respect of assets under management include the selection of investments, the provision of investment advice and discretionary portfolio management on behalf of clients.  This includes internally and externally managed funds where the Company has oversight over the investment policies.
^(5)	Other assets under administration (a non-IFRS financial measure) includes assets where the Company only provides administration services for which the Company earns fee and other income.  These assets are beneficially owned by clients and the Company does not direct the investing activities.  Services provided relating to assets under administration includes recordkeeping, safekeeping, collecting investment income, settling of transactions or other administrative services.  Administrative services are an important aspect of the overall business of the Company and should be considered when comparing volumes, size and trends.

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(in Canadian $ millions except per share amounts)
			For the three months ended
			March 31		December 31		March 31
			2017		2016		2016
Income
	Premium income
		Gross premiums written	$	10,484	$	9,989	$	7,926
		Ceded premiums	(1,119)		(1,084)		(911)
	Total net premiums		9,365		8,905		7,015
	Net investment income
		Regular net investment income	1,469		1,507		1,673
		Changes in fair value through profit or loss	735		(3,943)		2,410
	Total net investment income (loss)		2,204		(2,436)		4,083
	Fee and other income		1,305		1,345		1,254
			12,874		7,814		12,352
Benefits and expenses
	Policyholder benefits
		Gross	8,595		8,078		6,642
		Ceded	(610)		(585)		(472)
	Total net policyholder benefits		7,985		7,493		6,170
	Policyholder dividends and experience
		refunds	558		348		369
	Changes in insurance and investment
		contract liabilities	1,319		(3,468)		3,139
	Total paid or credited to policyholders		9,862		4,373		9,678
	Commissions		753		853		566
	Operating and administrative expenses		1,233		1,250		1,208
	Premium taxes		123		112		92
	Financing charges		76		75		78
	Amortization of finite life intangible assets		45		44		46
	Restructuring and acquisition expenses		37		35		4
Earnings before income taxes			745		1,072		680
Income taxes			96		188		24
Net earnings before non-controlling
	interests		649		884		656
Attributable to non-controlling interests			27		177		5
Net earnings			622		707		651
Preferred share dividends			31		31		31
Net earnings - common shareholders			$	591	$	676	$	620
Earnings per common share
	Basic		$	0.598	$	0.686	$	0.625
	Diluted		$	0.597	$	0.685	$	0.623

CONSOLIDATED BALANCE SHEETS (unaudited)
(in Canadian $ millions)
			March 31		December 31
			2017		2016
Assets
Cash and cash equivalents			$	3,042	$	3,259
Bonds			117,841		116,773
Mortgage loans			22,027		21,651
Stocks			8,677		8,665
Investment properties			4,421		4,340
Loans to policyholders			8,436		8,467
			164,444		163,155
Funds held by ceding insurers			10,496		10,781
Goodwill			5,976		5,977
Intangible assets			3,952		3,972
Derivative financial instruments			476		528
Owner occupied properties			648		649
Fixed assets			298		304
Other assets			2,384		2,263
Premiums in course of collection, accounts and interest receivable			4,776		4,311
Reinsurance assets			5,579		5,627
Current income taxes			103		97
Deferred tax assets			1,834		1,845
Investments on account of segregated fund policyholders			204,666		200,403
Total assets			$	405,632	$	399,912
Liabilities
Insurance contract liabilities			$	157,319	$	155,940
Investment contract liabilities			2,000		2,009
Debentures and other debt instruments			5,688		5,980
Capital trust securities			161		161
Funds held under reinsurance contracts			326		320
Derivative financial instruments			1,880		2,012
Accounts payable			2,375		2,049
Other liabilities			3,620		3,836
Current income taxes			573		549
Deferred tax liabilities			1,652		1,645
Investment and insurance contracts on account of segregated fund policyholders			204,666		200,403
Total liabilities			380,260		374,904
Equity
Non-controlling interests
	Participating account surplus in subsidiaries		2,810		2,782
	Non-controlling interests in subsidiaries		263		224
Shareholders' equity
	Share capital
		Preferred shares	2,514		2,514
		Common shares	7,254		7,130
	Accumulated surplus		11,674		11,465
	Accumulated other comprehensive income		744		746
	Contributed surplus		113		147
Total equity			25,372		25,008
Total liabilities and equity			$	405,632	$	399,912

Segmented Information (unaudited)
Consolidated Net Earnings
For the three months ended March 31, 2017
			Canada		United States		Europe		Lifeco Corporate		Total
Income
	Total net premiums		$	3,295	$	1,229	$	4,841	$	—	$	9,365
	Net investment income
		Regular net investment income	613		455		402		(1)		1,469
		Changes in fair value through profit or loss	375		102		258		—		735
	Total net investment income (loss)		988		557		660		(1)		2,204
	Fee and other income		387		594		324		—		1,305
			4,670		2,380		5,825		(1)		12,874
Benefits and expenses
	Paid or credited to policyholders		3,245		1,552		5,065		—		9,862
	Other ^(1)		1,028		686		386		9		2,109
	Financing charges		30		34		12		—		76
	Amortization of finite life intangible assets		17		21		7		—		45
	Restructuring and acquisition expenses		—		17		20		—		37
Earnings (loss) before income taxes			350		70		335		(10)		745
Income taxes (recovery)			65		11		23		(3)		96
Net earnings (loss) before non-controlling
	interests		285		59		312		(7)		649
Non-controlling interests			29		(1)		(1)		—		27
Net earnings (loss)			256		60		313		(7)		622
Preferred share dividends			26		—		5		—		31
Net earnings (loss) before capital allocation			230		60		308		(7)		591
Impact of capital allocation			25		(4)		(19)		(2)		—
Net earnings (loss) - common shareholders			$	255	$	56	$	289	$	(9)	$	591
^(1)Includes commissions, operating and administrative expenses and premium taxes.
For the three months ended March 31, 2016
			Canada		United States		Europe		Lifeco Corporate		Total
Income
	Total net premiums		$	2,861	$	1,380	$	2,774	$	—	$	7,015
	Net investment income
		Regular net investment income	736		454		483		—		1,673
		Changes in fair value through profit or loss	537		481		1,392		—		2,410
	Total net investment income		1,273		935		1,875		—		4,083
	Fee and other income		362		571		321		—		1,254
			4,496		2,886		4,970		—		12,352
Benefits and expenses
	Paid or credited to policyholders		3,301		2,112		4,265		—		9,678
	Other ^(1)		817		686		359		4		1,866
	Financing charges		29		37		12		—		78
	Amortization of finite life intangible assets		16		22		8		—		46
	Restructuring and acquisition expenses		—		3		1		—		4
Earnings (loss) before income taxes			333		26		325		(4)		680
Income taxes (recovery)			51		(40)		13		—		24
Net earnings (loss) before non-controlling
	interests		282		66		312		(4)		656
Non-controlling interests			5		1		(1)		—		5
Net earnings (loss)			277		65		313		(4)		651
Preferred share dividends			26		—		5		—		31
Net earnings (loss) before capital allocation			251		65		308		(4)		620
Impact of capital allocation			25		(2)		(21)		(2)		—
Net earnings (loss) - common shareholders			$	276	$	63	$	287	$	(6)	$	620
^(1)Includes commissions, operating and administrative expenses and premium taxes.

SOURCE Great-West Lifeco Inc.

Media Contact: Marlene Klassen, APR, 204-946-7705, Email: [email protected]; Investor Relations Contact: Deirdre Neary, 416-552-3208, Email: [email protected]

Related Links

www.greatwestlifeco.com