Great-West Lifeco reports third quarter 2012 results

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, MB, Nov. 8, 2012 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $520 million for the three months ended September 30, 2012, compared to $457 million in the third quarter of 2011.  On a per common share basis, this represents $0.547 per common share for the three months ended September 30, 2012, compared to $0.481 per common share for the same period in 2011.

For the nine months ended September 30, 2012, net earnings attributable to common shareholders were $1,462 million, compared to $1,398 million a year ago.  This represents $1.539 per common share for the nine months ended September 30, 2012, compared to $1.473 per common share for the same period in 2011.

Consolidated assets under administration at September 30, 2012 were $532 billion, up $30 billion from December 31, 2011.

Highlights

• In quarter consolidated net earnings of $520 million are up 13.8% from third quarter 2011, with solid earnings growth in all geographic segments.
• Total Company premiums and deposits grew by 8% from third quarter 2011, reflecting continued strong persistency.
• Total Company sales grew by 13% from third quarter 2011, notably the following:
• In quarter sales in Canada for Individual participating life insurance were up 34% and Wealth Management group retirement sales were up 41% compared to the third quarter of 2011.
• In quarter sales in U.S. Financial Services were US$2.4 billion, up 46% compared to the third quarter of 2011, reflecting continued strong sales in both Individual Markets and Retirement Services.
• In quarter sales in U.K. Payout Annuity  were up 105% compared to the third quarter of 2011, and are up 31% year to date compared to 2011.
• Putnam net asset inflows in third quarter 2012 were US$602 million.
• During the third quarter, Canada Life's Reinsurance Division entered into retrocession agreements with a U.K. domiciled insurance company covering closed blocks of approximately 1.2 million bank distributed protection policies in Spain and approximately 575,000 bank distributed protection policies in Portugal.
• The Company raised $200 million of 4.80% fixed rate perpetual preferred share capital on October 11, 2012.
• The Company's ROE continues to lead the industry at 17.1% based on net earnings and 16.1% based on operating 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 201% at September 30, 2012.
• Credit experience remained favourable. There were no new impaired securities in the quarter.
• The Company declared a quarterly common dividend of $0.3075 per common share payable December 31, 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 third quarter of 2012 were $281 million compared to $235 million in the third quarter of 2011.  For the nine months ended September 30, 2012 net earnings attributable to common shareholders were $777 million compared to $742 million for the same period in 2011.

Total sales in the third quarter of 2012 were $2.0 billion compared to $1.9 billion in 2011.  Individual Insurance product sales increased 17%, Group sales decreased 43% driven by lower sales in large case markets, Wealth Management group retirement sales were up 41% and sales of proprietary retail investments funds were up 12% compared to the third quarter of 2011.  Total sales for the nine months ended September 30, 2012 were $6.6 billion, the same level as 2011.

Total assets under administration at September 30, 2012 were $136 billion, compared to $129 billion at December 31, 2011.

UNITED STATES

Net earnings attributable to common shareholders for the third quarter of 2012 were $87 million compared to $75 million in the third quarter of 2011.  For the nine months ended September 30, 2012 net earnings attributable to common shareholders were $248 million compared to $291 million for the same period in 2011 which included a $55 million release of legal provisions in Putnam.

Financial Services sales in the third quarter of 2012 were US$2.4 billion, up 46% compared to the third quarter of 2011 reflecting increases in both Retirement Services and Individual Markets.  Sales for the nine months ended September 30, 2012 were US$6.9 billion compared to US$5.3 billion in 2011.

Putnam assets under management at September 30, 2012 were US$127 billion compared to US$114 billion a year ago. Net asset inflows in third quarter 2012 were US$602 million compared to net outflows of US$1.5 billion for the same period in 2011. Net asset outflows for the nine months ended September 30, 2012 were US$1.6 billion compared to net inflows of US$2.0 billion a year ago.

Total United States segment assets under administration at September 30, 2012 were $324 billion compared to $303 billion at December 31, 2011.

EUROPE

Net earnings attributable to common shareholders for the third quarter of 2012 were $165 million compared to $148 million in the third quarter of 2011.  Net earnings for the third quarter of 2012 include the impact of new life retrocession agreements of $24 million. For the nine months ended September 30, 2012 net earnings attributable to common shareholders were $466 million compared to $381 million for the same period in 2011.  The 2011 results include catastrophe provisions of $84 million relating to earthquake events in Japan and New Zealand.

Sales for the third quarter of 2012 were $866 million compared to $1.3 billion in 2011. The decrease was due to a decline in single premium savings products in the Isle of Man reflecting the normal fluctuations in the number of large cases.  This decrease was partially offset by strong sales of payout annuities in the U.K.

Total sales for the nine months ended September 30, 2012 were $2.4 billion compared to $3.3 billion in 2011 due mainly to a decline in single premium savings products in both the U.K. and Isle of Man.  This reflects the general market slowdown and normal fluctuations in the number of large cases in the Isle of Man.  This decrease was partially offset by strong sales of payout annuities in the U.K.

Total assets under administration at September 30, 2012 increased to $72 billion from $70 billion at December 31, 2011.

CORPORATE

Net earnings in the Lifeco corporate segment attributable to common shareholders was a loss of $13 million in the third quarter of 2012 compared to a loss of $1 million for the third quarter of 2011.   For the nine months ended September 30, 2012 net earnings attributable to common shareholders was a loss of $29 million compared to a loss of $16 million for the same period in 2011.

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 December 31, 2012 to shareholders of record at the close of business December 3, 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;
• 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 $0.2663 per share

all payable December 31, 2012 to shareholders of record at the close of business December 3, 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 $532 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 third quarter conference call and audio webcast will be held November 8, 2012 at 3:00 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 November 8, 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 November 9, 2012 until November 9, 2013.

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 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 nine months ended
	September 30		June 30		September 30		September 30		September 30
	2012		2012		2011		2012		2011
Premiums and deposits:
Life insurance, guaranteed annuities       and insured health products	$	4,940	$	4,524	$	4,392	$	13,993	$	12,959
Self-funded premium equivalents  (ASO contracts)		631		673		660		1,989		1,994
Segregated funds deposits:
Individual products		1,490		1,436		1,975		4,485		5,516
Group products		1,681		1,595		1,420		5,046		4,340
Proprietary mutual funds and institutional deposits		6,779		4,898		5,892		17,616		23,264
Total premiums and deposits		15,521		13,126		14,339		43,129		48,073
Fee and other income		720		734		704		2,178		2,163
Paid or credited to policyholders		6,607		5,979		6,826		17,329		16,703
Net earnings - common shareholders		520		491		457		1,462		1,398
Per common share
Basic earnings	$	0.547	$	0.517	$	0.481	$	1.539	$	1.473
Dividends paid		0.3075		0.3075		0.3075		0.9225		0.9225
Book value		13.01		12.97		12.46
Return on common shareholders' equity (trailing four quarters*):
Operating earnings		16.1%		15.8%		16.7%
Net earnings		17.1%		16.8%		16.7%
Total assets	$	249,043	$	245,297	$	237,048
Proprietary mutual funds and institutional net assets		131,604		129,028		124,343
Total assets under management		380,647		374,325		361,391
Other assets under administration		151,604		149,258		131,853
Total assets under administration	$	532,251	$	523,583	$	493,244
Total equity	$	17,004	$	16,692	$	15,837

The Company uses operating earnings, a non-IFRS financial measure, which excludes the impact of certain litigation 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						For the nine months ended
	September 30		June 30		September 30		September 30		September 30
	2012		2012		2011		2012		2011
Income
Premium income
Gross premiums written	$	5,645	$	5,233	$	5,059	$	16,076	$	14,980
Ceded premiums		(705)		(709)		(667)		(2,083)		(2,021)
Total net premiums		4,940		4,524		4,392		13,993		12,959
Net investment income
Regular net investment income		1,425		1,428		1,330		4,292		4,173
Changes in fair value through profit or loss		1,551		1,106		2,080		2,461		2,600
Total net investment income		2,976		2,534		3,410		6,753		6,773
Fee and other income		720		734		704		2,178		2,163
		8,636		7,792		8,506		22,924		21,895
Benefits and expenses
Policyholder benefits
Insurance and investment contracts
Gross		4,137		4,311		3,988		13,054		12,417
Ceded		(304)		(367)		(284)		(1,058)		(933)
Total net policyholder benefits		3,833		3,944		3,704		11,996		11,484
Policyholder dividends and experience refunds		414		367		385		1,145		1,115
Change in insurance and investment contract liabilities		2,360		1,668		2,737		4,188		4,104
Total paid or credited to policyholders		6,607		5,979		6,826		17,329		16,703
Commissions		441		415		372		1,266		1,139
Operating and administrative expenses		653		637		605		1,930		1,808
Premium taxes		74		72		64		218		188
Financing charges		70		72		72		214		216
Amortization of finite life intangible assets		25		28		24		79		72
Earnings before income taxes		766		589		543		1,888		1,769
Income taxes		141		72		54		270		284
Net earnings before non-controlling interests		625		517		489		1,618		1,485
Attributable to non-controlling interests		75		(2)		8		73		15
Net earnings		550		519		481		1,545		1,470
Perpetual preferred share dividends		30		28		24		83		72
Net earnings - common shareholders	$	520	$	491	$	457	$	1,462	$	1,398
Earnings per common share
Basic	$	0.547	$	0.517	$	0.481	$	1.539	$	1.473
Diluted	$	0.543	$	0.513	$	0.478	$	1.529	$	1.461

CONSOLIDATED BALANCE SHEETS (unaudited) (in Canadian $ millions)
	September 30		December 31
	2012		2011
Assets
Cash and cash equivalents	$	1,871	$	2,056
Bonds		82,660		78,073
Mortgage loans		17,559		17,432
Stocks		6,929		6,704
Investment properties		3,446		3,201
Loans to policyholders		6,989		7,162
		119,454		114,628
Funds held by ceding insurers		10,336		9,923
Goodwill		5,396		5,401
Intangible assets		3,084		3,154
Derivative financial instruments		1,141		968
Owner occupied properties		508		491
Fixed assets		142		137
Reinsurance assets		1,846		2,061
Other assets		4,585		4,283
Deferred tax assets		1,025		1,140
Segregated funds for the risk of unitholders		101,526		96,582
Total assets	$	249,043	$	238,768
Liabilities
Insurance contract liabilities	$	117,891	$	114,730
Investment contract liabilities		759		782
Debentures and other debt instruments		4,273		4,313
Funds held under reinsurance contracts		181		169
Derivative financial instruments		269		316
Other liabilities		4,408		4,287
Deferred tax liabilities		936		929
Repurchase agreements		1,444		23
Capital trust securities		352		533
Investment and insurance contracts on account of unitholders		101,526		96,582
Total liabilities		232,039		222,664
Equity
Non-controlling interests
Participating account surplus in subsidiaries		2,301		2,227
Non-controlling interests in capital stock		4		3
Shareholders' equity
Share capital
Perpetual preferred shares		2,344		1,894
Common shares		5,832		5,828
Accumulated surplus		6,904		6,327
Accumulated other comprehensive income (loss)		(443)		(233)
Contributed surplus		62		58
Total equity		17,004		16,104
Total liabilities and equity	$	249,043	$	238,768

 Segmented Information (unaudited)                            

Consolidated Net Earnings

For the three months ended September 30, 2012
			United				Lifeco
	Canada		States		Europe		Corporate		Total
Income:
Premium income	$	2,397	$	879	$	1,664	$	-	$	4,940
Net investment income
Regular net investment income		664		332		433		(4)		1,425
Changes in fair value through profit or loss		493		244		814		-		1,551
Total net investment income		1,157		576		1,247		(4)		2,976
Fee and other income		271		304		145		-		720
Total income		3,825		1,759		3,056		(4)		8,636
Benefits and expenses:
Paid or credited to policyholders		2,733		1,246		2,628		-		6,607
Other		629		340		192		7		1,168
Financing charges		31		34		5		-		70
Amortization of finite life intangible assets		11		11		3		-		25
Earnings before income taxes		421		128		228		(11)		766
Income taxes		66		38		40		(3)		141
Net earnings before non-controlling
interests		355		90		188		(8)		625
Non-controlling interests		73		(1)		3		-		75
Net earnings		282		91		185		(8)		550
Perpetual preferred share dividends		21		-		6		3		30
Net earnings before capital allocation		261		91		179		(11)		520
Impact of capital allocation		20		(4)		(14)		(2)		-
Net earnings - common shareholders	$	281	$	87	$	165	$	(13)	$	520

For the three months ended September 30, 2011
				United				Lifeco
		Canada		States		Europe		Corporate	Total
Income:
Premium income	$	2,229	$	952	$	1,211	$	-	$	4,392
Net investment income
Regular net investment income		535		324		465		6		1,330
Changes in fair value through profit or loss		824		304		952		-		2,080
Total net investment income		1,359		628		1,417		6		3,410
Fee and other income		269		296		139		-		704
Total income		3,857		1,876		2,767		6		8,506
Benefits and expenses:
Paid or credited to policyholders		2,950		1,433		2,443		-		6,826
Other		579		311		148		3		1,041
Financing charges		34		33		5		-		72
Amortization of finite life intangible assets		10		11		3		-		24
Earnings before income taxes		284		88		168		3		543
Income taxes		47		11		(5)		1		54
Net earnings before non-controlling
interests		237		77		173		2		489
Non-controlling interests		3		-		5		-		8
Net earnings		234		77		168		2		481
Perpetual preferred share dividends		18		-		6		-		24
Net earnings before capital allocation		216		77		162		2		457
Impact of capital allocation		19		(2)		(14)		(3)		-
Net earnings - common shareholders	$	235	$	75	$	148	$	(1)	$	457

For the nine months ended September 30, 2012
				United				Lifeco
		Canada		States		Europe		Corporate	Total
Income:
Premium income	$	7,113	$	2,406	$	4,474	$	-	$	13,993
Net investment income
Regular net investment income		1,939		983		1,373		(3)		4,292
Changes in fair value through profit or loss		755		442		1,264		-		2,461
Total net investment income		2,694		1,425		2,637		(3)		6,753
Fee and other income		818		912		448		-		2,178
Total income		10,625		4,743		7,559		(3)		22,924
Benefits and expenses:
Paid or credited to policyholders		7,599		3,274		6,456		-		17,329
Other		1,912		1,003		482		17		3,414
Financing charges		99		101		14		-		214
Amortization of finite life intangible assets		33		38		8		-		79
Earnings before income taxes		982		327		599		(20)		1,888
Income taxes		143		69		63		(5)		270
Net earnings before non-controlling
interests		839		258		536		(15)		1,618
Non-controlling interests		63		(1)		11		-		73
Net earnings		776		259		525		(15)		1,545
Perpetual preferred share dividends		58		-		17		8		83
Net earnings before capital allocation		718		259		508		(23)		1,462
Impact of capital allocation		59		(11)		(42)		(6)		-
Net earnings - common shareholders	$	777	$	248	$	466	$	(29)	$	1,462

For the nine months ended September 30, 2011
				United				Lifeco
		Canada		States		Europe		Corporate	Total
Income:
Premium income	$	6,861	$	2,306	$	3,792	$	-	$	12,959
Net investment income
Regular net investment income		1,769		980		1,412		12		4,173
Changes in fair value through profit or loss		1,075		461		1,064		-		2,600
Total net investment income		2,844		1,441		2,476		12		6,773
Fee and other income		822		928		413		-		2,163
Total income		10,527		4,675		6,681		12		21,895
Benefits and expenses:
Paid or credited to policyholders		7,716		3,273		5,714		-		16,703
Other		1,792		897		429		17		3,135
Financing charges		102		100		14		-		216
Amortization of finite life intangible assets		31		34		7		-		72
Earnings before income taxes		886		371		517		(5)		1,769
Income taxes		138		75		70		1		284
Net earnings before non-controlling
interests		748		296		447		(6)		1,485
Non-controlling interests		9		-		6		-		15
Net earnings		739		296		441		(6)		1,470
Perpetual preferred share dividends		55		-		17		-		72
Net earnings before capital allocation		684		296		424		(6)		1,398
Impact of capital allocation		58		(5)		(43)		(10)		-
Net earnings - common shareholders	$	742	$	291	$	381	$	(16)	$	1,398

 

 

 

SOURCE: Great-West Lifeco Inc.

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