Great-West Lifeco reports first quarter 2013 results

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			6			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			3			1,180
	Financing charges			29			34			4			-			67
	Amortization of finite life intangible assets			12			13			2			-			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			3			-			-			18
Net earnings				267			75			216			(8)			550
Preferred share dividends				27			-			6			-			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.

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