Great-West Lifeco reports fourth quarter 2011 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, Feb. 9, 2012 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported operating earnings attributable to common shareholders of $500 million for the three months ended December 31, 2011, compared to $465 million in the fourth quarter of 2010.  On a per common share basis, this represents $0.528 per common share ($0.523 diluted) for the three months ended December 31, 2011, compared to $0.491 per common share for the same period in 2010.

For the twelve months ended December 31, 2011, operating earnings attributable to common shareholders were $1,898 million, compared to $1,819 million a year ago.  This represents $2.000 per common share ($1.984 diluted) for the twelve months ended December 31, 2011, compared to $1.920 per common share for the same period in 2010.

Operating earnings, a non-IFRS financial measure, exclude the net impact of two unrelated litigation provisions which increased net earnings by $124 million after-tax. The provisions are described more fully in the Corporate section of this release.

Net earnings attributable to common shareholders, as reported, were $624 million, or $0.657 per common share ($0.651 diluted) for the fourth quarter, and $2,022 million, or $2.129 per common share ($2.112 diluted) for the twelve months ended December 31, 2011.

Highlights

• Consolidated assets under administration at December 31, 2011 now exceed one-half trillion dollars at $502 billion, up $15 billion from December 31, 2010.
• Return on common shareholders' equity was 17.6% based on net earnings and 16.6% based on operating earnings.
• Sales in Canada showed strong growth in the fourth quarter compared to 2010, with Group Insurance sales increasing by 23% and Individual participating life insurance sales increasing by 13%.
• Sales in U.S. Financial Services were US$3.4 billion in the fourth quarter, compared to US$2.0 billion in 2010 due to higher sales in the 401(k) and public/non-profit retirement services markets.
• Putnam net sales for the twelve months ended December 31, 2011 increased by US$4.3 billion over the same period a year ago, resulting in positive net sales of US$183 million.
• Europe net earnings remained strong at $181 million for the quarter compared to $119 million a year ago.
• The Company's capital position remained very strong despite the volatility in equity markets and continued declines in interest rates.  Lifeco's Canadian operating subsidiary, The Great-West Life Assurance Company, reported a Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of 204% at December 31, 2011.
• The Company declared a quarterly common dividend of $0.3075 per common share payable March 30, 2012.

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 (GWL&A), and Putnam Investments, LLC (Putnam), together with Lifeco's corporate results.

CANADA

Net earnings attributable to common shareholders for the fourth quarter of 2011 were $244 million compared to $237 million in the fourth quarter of 2010.  For the twelve months ended December 31, 2011, net earnings attributable to common shareholders were $986 million compared to $975 million for the same period in 2010.

Total premiums and deposits for the twelve months ended December 31, 2011 were $19.4 billion, compared to $18.8 billion in 2010. Total sales for the twelve months were $8.9 billion compared to $9.5 billion for 2010.

Total assets under administration at December 31, 2011 were $129.3 billion, compared to $126.9 billion at December 31, 2010.

UNITED STATES

Net earnings attributable to common shareholders for the fourth quarter of 2011 were $79 million compared to $113 million in the fourth quarter of 2010. Fourth quarter 2010 earnings included a favourable $35 million adjustment of prior year overstatements of tax liabilities. For the twelve months ended December 31, 2011, net earnings attributable to common shareholders were $370 million compared to $326 million for the same period in 2010.

Total sales for the twelve months ended December 31, 2011 were $36.8 billion compared to $38.1 billion in 2010.  Sales in Putnam were $28.1 billion for the full year 2011, up 17% compared to $24.1 billion a year ago. Sales in Financial Services were $8.7 billion for the full year 2011 compared to $14 billion in 2010.  Sales in 2010 included two large public/non-profit sales of $5.8 billion which were not repeated in 2011.

Total assets under administration at December 31, 2011 were $302.9 billion compared to $294.1 billion at December 31, 2010.

EUROPE

Net earnings attributable to common shareholders for the fourth quarter of 2011 were $181 million compared to $119 million in the fourth quarter of 2010. The increase in net earnings is driven by improved investment experience, the timing of surrender fees in the U.K. and increased Reinsurance renewal profits. These increases were partly offset by less favourable U.K. mortality experience.  For the twelve months ended December 31, 2011, net earnings attributable to common shareholders were $562 million compared to $532 million for the same period in 2010.

Total sales for the twelve months ended December 31, 2011 were $4.1 billion compared to $4.5 billion in 2010.

Total assets under administration at December 31, 2011 increased to $69.8 billion from $66.0 billion at December 31, 2010.

CORPORATE

Net earnings in the Lifeco corporate segment attributable to common shareholders were $120 million in the fourth quarter of 2011 compared to a net loss of $4 million for the fourth quarter of 2010.  For the twelve months ended December 31, 2011 net earnings in the Lifeco corporate segment attributable to common shareholders were $104 million compared to a net loss of $218 million for the same period in 2010.

During the fourth quarter of 2011 the Company re-evaluated and reduced the litigation provision established in the third quarter of 2010, which positively impacted common shareholders net earnings by $223 million after-tax.  Additionally, the Company established a provision for $99 million after-tax in respect of the settlement of a litigation relating to the Company's investment in a U.S.A. based private equity firm.  The net impact of these two unrelated matters was $124 million after-tax or $0.129 per common share.  The twelve months 2010 results include the impact of an incremental litigation provision of $204 million attributable to common shareholders.

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 March 30, 2012 to shareholders of record at the close of business March 2, 2012.

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; and
• Series N First Preferred Shares of $0.228125 per share

all payable March 30, 2012 to shareholders of record at the close of business March 2, 2012.

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 $502 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 action by the Company including statements made by the Company with respect to the expected benefits of acquisitions or divestitures are also forward-looking statements.  Forward-looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally, including the insurance and mutual fund industries.  They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Company due to, but not limited to, important factors such as sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates and taxes, as well as general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, changes in accounting policies and the effect of applying future accounting policy changes required under IFRS, unexpected judicial or regulatory proceedings, catastrophic events, and the Company's ability to complete strategic transactions and integrate acquisitions.  The reader is cautioned that the foregoing list of important factors is not exhaustive, and there may be other factors, including factors set out under "Risk Management and Control Practices" in the Company's Annual Management's Discussion and Analysis and any listed in other filings with securities regulators, which are available for review at www.sedar.com.  The reader is also cautioned to consider these and other factors carefully and to not place undue reliance on forward-looking statements.  Other than as specifically required by applicable law, the Company has no intention to update any forward-looking statements whether as a result of new information, future events or otherwise.

Cautionary note regarding Non-IFRS Financial 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 fourth quarter conference call and audio webcast will be held Thursday, February 9, 2012 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:  416-340-8018
• Participants from North America: 1-866-223-7781
• Participants from Overseas:  Dial international access code first, then 800-6578-9898

A replay of the call will be available from February 9 to 16, 2012, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 1367585#). The archived webcast will be available on www.greatwestlifeco.com from approximately 6:00 p.m. (ET) on February 9, 2012 until December 31, 2012.

Additional information relating to Lifeco, including the 2011 audited consolidated financial statements, Management's Discussion and Analysis (MD&A), Annual Information Form (AIF), and CEO/CFO certification will be filed on SEDAR at www.sedar.com.

FINANCIAL HIGHLIGHTS (unaudited) (in Canadian $ millions except per share amounts)
	As at or for the three months ended						For the twelve months ended
	December 31		September 30		December 31		December 31		December 31
	2011		2011		2010		2011		2010
Premiums and deposits:
Life insurance, guaranteed annuities       and insured health products	$	4,334	$	4,392	$	4,610	$	17,293	$	17,748
Self-funded premium equivalents  (ASO contracts)		651		660		654		2,645		2,575
Segregated funds deposits:
Individual products		1,829		1,975		2,158		7,345		7,284
Group products		1,777		1,420		1,385		6,117		6,790
Proprietary mutual funds and institutional deposits		5,624		5,892		6,667		28,888		24,654
Total premiums and deposits		14,215		14,339		15,474		62,288		59,051
Fee and other income		740		704		713		2,903		2,821
Paid or credited to policyholders		6,340		6,826		3,578		23,043		23,225
Operating earnings -     common shareholders		500		457		465		1,898		1,819
Net earnings - common shareholders		624		457		465		2,022		1,615
Per common share
Operating earnings	$	0.528	$	0.481	$	0.491	$	2.000	$	1.920
Basic earnings		0.657		0.481		0.491		2.129		1.704
Dividends paid		0.3075		0.3075		0.3075		1.2300		1.2300
Book value		12.61		12.46		11.46
Return on common shareholders' equity (trailing four quarters*):
Operating earnings		16.6%		16.7%		16.7%
Net earnings		17.6%		16.7%		14.8%
Total assets	$	238,768	$	237,048	$	229,421
Proprietary mutual funds and institutional net assets		125,390		124,343		126,053
Total assets under management		364,158		361,391		355,474
Other assets under administration		137,807		131,853		131,528
Total assets under administration	$	501,965	$	493,244	$	487,002
Total equity	$	16,104	$	15,837	$	14,816

The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of the provisions described in note 30 to the Company's December 31, 2011 consolidated financial statements.

*Return on common shareholders' equity is the trailing four quarter calculation of net earnings divided by common shareholders' equity.

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) (in Canadian $ millions except per share amounts)
				For the three months ended December 31				For the years ended December 31
				2011		2010		2011		2010
Income
	Premium income
		Gross premiums written		$	5,033	$	5,313	$	20,013	$	20,404
		Ceded premiums			(699)		(703)		(2,720)		(2,656)
	Total net premiums				4,334		4,610		17,293		17,748
	Net investment income
		Regular net investment income			1,365		1,464		5,538		5,709
		Changes in fair value through profit or loss			1,564		(1,540)		4,164		3,825
	Total net investment income				2,929		(76)		9,702		9,534
	Fee and other income				740		713		2,903		2,821
					8,003		5,247		29,898		30,103
Benefits and expenses
	Policyholder benefits
		Insurance and investment contracts
			Gross		4,165		4,619		16,591		17,550
			Ceded		(275)		(582)		(1,217)		(2,208)
					3,890		4,037		15,374		15,342
	Policyholder dividends and experience refunds				309		350		1,424		1,466
	Change in insurance and investment contract liabilities				2,141		(809)		6,245		6,417
	Total paid or credited to policyholders				6,340		3,578		23,043		23,225
	Commissions				409		413		1,548		1,477
	Operating and administrative expenses				142		587		1,950		2,801
	Premium taxes				76		58		264		256
	Financing charges				73		73		289		288
	Amortization of finite life intangible assets				28		23		100		92
Earnings before income taxes					935		515		2,704		1,964
Income taxes					181		42		465		256
Net earnings before non-controlling interests					754		473		2,239		1,708
Attributable to non-controlling interests					106		(14)		121		7
Net earnings					648		487		2,118		1,701
Perpetual preferred share dividends					24		22		96		86
Net earnings - common shareholders				$	624	$	465	$	2,022	$	1,615
Earnings per common share
	Basic			$	0.657	$	0.491	$	2.129	$	1.704
	Diluted			$	0.651	$	0.488	$	2.112	$	1.695

CONSOLIDATED BALANCE SHEETS (unaudited) (in Canadian $ millions)
	December 31		December 31		January 1
	2011		2010		2010
Assets
Cash and cash equivalents	$	2,056	$	1,840	$	3,427
Bonds		78,073		72,203		66,147
Mortgage loans		17,432		16,115		16,684
Stocks		6,704		6,700		6,442
Investment properties		3,201		2,957		2,613
Loans to policyholders		7,162		6,827		6,957
		114,628		106,642		102,270
Funds held by ceding insurers		9,923		9,856		10,984
Goodwill		5,401		5,397		5,406
Intangible assets		3,154		3,108		3,238
Derivative financial instruments		968		984		717
Owner occupied properties		491		439		429
Fixed assets		137		121		138
Reinsurance assets		2,061		2,533		2,800
Other assets		4,283		4,361		4,461
Deferred tax assets		1,140		1,153		1,206
Segregated funds for the risk of unit holders		96,582		94,827		87,495
Total assets	$	238,768	$	229,421	$	219,144
Liabilities
Insurance contract liabilities	$	114,730	$	107,405	$	105,028
Investment contract liabilities		782		791		841
Debentures and other debt instruments		4,313		4,288		4,106
Funds held under reinsurance contracts		169		149		331
Derivative financial instruments		316		165		251
Other liabilities		4,287		4,637		4,479
Deferred tax liabilities		929		766		634
Repurchase agreements		23		1,042		532
Capital trust securities		533		535		540
Preferred shares		-		-		199
Investment and insurance contracts on account of unit       holders		96,582		94,827		87,495
Total liabilities		222,664		214,605		204,436
Equity
Non-controlling interests
Participating account surplus in subsidiaries		2,227		2,045		2,045
Preferred shares issued by subsidiaries		-		-		157
Perpetual preferred shares issued by subsidiaries		-		-		147
Non-controlling interests in capital stock		3		2		2
Shareholders' equity
Share capital
Perpetual preferred shares		1,894		1,897		1,497
Common shares		5,828		5,802		5,751
Accumulated surplus		6,327		5,474		5,038
Accumulated other comprehensive income (loss)		(233)		(459)		19
Contributed surplus		58		55		52
Total equity		16,104		14,816		14,708
Total liabilities and equity	$	238,768	$	229,421	$	219,144

Segmented Information (unaudited)
Consolidated Net Earnings

The major reportable segments of the Company are Canada, United States, Europe and Lifeco Corporate.  These segments reflect the Company's management structure and internal financial reporting and are aligned to its geographic operations.  Each of these segments operates in the financial services industry and the revenues from these segments are derived principally from life, health and disability insurance, annuity products, investment management services, savings products and life, property and casualty, accident and health reinsurance.  Business activities that are not associated with the specific business units are attributed to the Lifeco Corporate segment.

Transactions between operating segments occur at market terms and conditions and have been eliminated upon consolidation.

During the year, the Company established a capital allocation model to better measure the performance of the operating segments.  The segmented information below including the comparative figures reflects the impact of the capital allocation model implemented.

For the three months ended December 31, 2011
					United				Lifeco
			Canada		States		Europe		Corporate		Total
Income:
	Premium income		$	2,424	$	820	$	1,090	$	-	$	4,334
	Net investment income
		Regular net investment income		701		331		479		(146)		1,365
		Changes in fair value through profit or loss		778		(7)		793		-		1,564
	Total net investment income			1,479		324		1,272		(146)		2,929
	Fee and other income			266		304		170		-		740
Total income				4,169		1,448		2,532		(146)		8,003
Benefits and expenses:
	Paid or credited to policyholders			3,255		956		2,129		-		6,340
	Other			415		343		157		(288)		627
	Financing charges			34		34		4		1		73
	Amortization of finite life intangible assets			10		12		6		-		28
Earnings before income taxes				455		103		236		141		935
Income taxes				114		23		26		18		181
Net earnings before non-controlling interests				341		80		210		123		754
Non-controlling interests				99		(1)		8		-		106
Net earnings				242		81		202		123		648
Perpetual preferred share dividends				18		-		6		-		24
Net earnings before capital allocation				224		81		196		123		624
Impact of capital allocation				20		(2)		(15)		(3)		-
Net earnings - common shareholders			$	244	$	79	$	181	$	120	$	624

For the three months ended December 31, 2010
					United				Lifeco
			Canada		States		Europe		Corporate		Total
Income:
	Premium income		$	2,425	$	900	$	1,285	$	-	$	4,610
	Net investment income
		Regular net investment income		636		329		497		2		1,464
		Changes in fair value through profit or loss		(119)		(318)		(1,103)		-		(1,540)
	Total net investment income			517		11		(606)		2		(76)
	Fee and other income			263		311		139		-		713
Total income				3,205		1,222		818		2		5,247
Benefits and expenses:
	Paid or credited to policyholders			2,306		750		522		-		3,578
	Other			574		353		130		1		1,058
	Financing charges			34		34		4		1		73
	Amortization of finite life intangible assets			11		10		2		-		23
Earnings before income taxes				280		75		160		-		515
Income taxes				69		(40)		12		1		42
Net earnings before non-controlling interests				211		115		148		(1)		473
Non-controlling interests				(23)		1		8		-		(14)
Net earnings				234		114		140		(1)		487
Perpetual preferred share dividends				18		-		4		-		22
Net earnings before capital allocation				216		114		136		(1)		465
Impact of capital allocation				21		(1)		(17)		(3)		-
Net earnings - common shareholders			$	237	$	113	$	119	$	(4)	$	465

For the twelve months ended December 31, 2011
						United				Lifeco
				Canada		States		Europe		Corporate		Total
Income:
	Premium income		$	9,285	$	3,126	$	4,882	$	-	$	17,293
	Net investment income
		Regular net investment income		2,470		1,311		1,891		(134)		5,538
		Changes in fair value through profit or loss		1,853		454		1,857		-		4,164
	Total net investment income			4,323		1,765		3,748		(134)		9,702
	Fee and other income			1,088		1,232		583		-		2,903
Total income				14,696		6,123		9,213		(134)		29,898
Benefits and expenses:
	Paid or credited to policyholders			10,971		4,229		7,843		-		23,043
	Other			2,207		1,240		586		(271)		3,762
	Financing charges			136		134		18		1		289
	Amortization of finite life intangible assets			41		46		13		-		100
Earnings before income taxes				1,341		474		753		136		2,704
Income taxes				252		98		96		19		465
Net earnings before non-controlling interests				1,089		376		657		117		2,239
Non-controlling interests				108		(1)		14		-		121
Net earnings				981		377		643		117		2,118
Perpetual preferred share dividends				73		-		23		-		96
Net earnings before capital allocation				908		377		620		117		2,022
Impact of capital allocation				78		(7)		(58)		(13)		-
Net earnings - common shareholders			$	986	$	370	$	562	$	104	$	2,022

For the twelve months ended December 31, 2010
						United				Lifeco
				Canada		States		Europe		Corporate		Total
Income:
	Premium income		$	9,220	$	3,216	$	5,312	$	-	$	17,748
	Net investment income
		Regular net investment income		2,481		1,326		1,892		10		5,709
		Changes in fair value through profit or loss		1,624		734		1,467		-		3,825
	Total net investment income			4,105		2,060		3,359		10		9,534
	Fee and other income			1,025		1,246		550		-		2,821
Total income				14,350		6,522		9,221		10		30,103
Benefits and expenses:
	Paid or credited to policyholders			10,669		4,625		7,931		-		23,225
	Other			2,361		1,360		536		277		4,534
	Financing charges			135		138		14		1		288
Amortization of finite life intangible assets				40		45		7		-		92
Earnings before income taxes				1,145		354		733		(268)		1,964
Income taxes				193		22		104		(63)		256
Net earnings before non-controlling interests				952		332		629		(205)		1,708
Non-controlling interests				(9)		4		12		-		7
Net earnings				961		328		617		(205)		1,701
Perpetual preferred share dividends				72		-		14		-		86
Net earnings before capital allocation				889		328		603		(205)		1,615
Impact of capital allocation				86		(2)		(71)		(13)		-
Net earnings - common shareholders			$	975	$	326	$	532	$	(218)	$	1,615

 

 

 

 

 

Marlene Klassen, APR
Assistant Vice-President, Communication Services
[phone]