Great-West Lifeco reports first quarter 2014 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 8, 2014 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $587 million or $0.587 per common share for the three months ended March 31, 2014 compared to $517 million or $0.544 per common share for the same period in 2013, an increase of 13.5%.

Consolidated assets under administration at March 31, 2014 grew to $806 billion, up $48 billion from December 31, 2013.

Highlights - In Quarter

  • Lifeco premiums and deposits during the quarter were $23.9 billion, up 41% from a year ago, including $2.9 billion from Irish Life Group Limited (Irish Life), reflecting continued strong persistency and growth.

  • Total Company sales in the first quarter of 2014 were up 43% compared to the same period in 2013:
    • Canada sales were $3.2 billion, up 6%.
    • Europe Insurance & Annuities sales were $3.5 billion, up 265%, including sales of $2.6 billion from Irish Life.
    • Putnam sales were US$9.1 billion, up 23%, driven by an increase in mutual fund sales of US$2.7 billion which were at their highest level since the first quarter of 2003.
    • Great-West Financial sales were US$2.9 billion, up 16%.
  • Irish Life contributed $52 million of net earnings to Lifeco in the first quarter of 2014 up from $44 million in the fourth quarter of 2013.

  • On April 3, 2014, the Company announced that Great-West Financial reached an agreement to acquire the J.P. Morgan Retirement Plan Services large-market recordkeeping business. The transaction is scheduled to close in the third quarter of 2014, subject to regulatory approval in the U.S.

  • The Company maintained a strong ROE of 16.0% based on net earnings. ROE based on adjusted operating earnings was 15.2%, which excludes the impact of Irish Life related restructuring and acquisition costs and certain litigation provisions.

  • The Company's capital position remained very strong.  The Great-West Life Assurance Company, Lifeco's major operating subsidiary, reported a Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of 230% at March 31, 2014.

  • The Company declared a quarterly common dividend of $0.3075 per common share payable June 30, 2014.

OPERATING RESULTS

Consolidated net earnings of Lifeco include the net earnings of 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), together with Lifeco's Corporate operating results.

CANADA
The Canada segment of Lifeco includes the operating results of the Canadian businesses operated by Great-West Life, London Life and Canada Life.  The three primary business units included in this segment are Individual Insurance, Wealth Management and Group Insurance.  The Company provides accumulation, annuity, life, disability and critical illness insurance products to individual and group clients.

Net earnings attributable to common shareholders for the first quarter of 2014 were $294 million, up 11% compared to $265 million in the first quarter of 2013.

Total sales in the first quarter of 2014 were $3.2 billion, compared to $3.0 billion in the first quarter of 2013.   This reflects a 14% increase in Individual Insurance sales and a 12% increase in Wealth Management sales partially offset by lower Group creditor sales.

Total Canada segment assets under administration at March 31, 2014 were $153 billion, compared to $149 billion at December 31, 2013.

UNITED STATES
The United States operating results for Lifeco include the results of Great-West Financial, Putnam and the insurance businesses in the United States branches of Great-West Life and Canada Life, together with an allocation of a portion of Lifeco's corporate results.

Great-West Financial provides an array of financial security products, including employer-sponsored defined contribution plans, administrative and record-keeping services, fund management and investment and advisory services.  It also provides individual retirement accounts, life insurance and annuity products and executive benefits products.  Putnam provides investment management, certain administrative functions, distributions and related services through a broad range of investment products.

Net earnings attributable to common shareholders for the first quarter of 2014 were $41 million compared to $71 million in the first quarter of 2013.  Great-West Financial reported net earnings of $94 million in the first quarter compared to $85 million for the same period last year.  Putnam reported a net loss of $53 million in the first quarter compared to a net loss of $14 million a year ago.

Great-West Financial sales in the first quarter of 2014 were US$2.9 billion, up from US$2.5 billion in the first quarter of 2013 due to positive results from both Retirement Services and Individual Markets.  Retirement Services experienced higher sales from the Institutional market's group annuity product and higher transferred assets from plan mergers and participants of existing plans.  Individual Markets experienced sales increases in the individual retirement account and the executive benefits markets.

Putnam assets under management as at March 31, 2014 were US$153.4 billion compared to US$134.7 billion a year ago, an increase of 14%. Net asset inflows for the first quarter of 2014 were US$1.1 billion compared to net asset outflows of US$0.3 billion for the same period in 2013, driven by mutual fund net inflows of US$2.4 billion, which were their highest level since the first quarter of 2001.

Total United States segment assets under administration at March 31, 2014 were $453 billion compared to $421 billion at December 31, 2013.

EUROPE
The Europe segment comprises two distinct business units: Insurance & Annuities and Reinsurance, together with an allocation of Lifeco's corporate results.  Insurance & Annuities provides protection and wealth management products including payout annuities, through subsidiaries of Canada Life in the U.K., Isle of Man and Germany, and through Irish Life in Ireland.  Reinsurance operates primarily in the U.S., Barbados and Ireland, and is conducted through Canada Life, London Life and their subsidiaries.

Net earnings attributable to common shareholders for the first quarter of 2014 were $259 million, which includes the impact of $5 million of restructuring costs related to the Irish Life acquisition.  Excluding these costs net earnings were $264 million for the quarter, including a $52 million contribution from Irish Life, compared to $192 million in the first quarter of 2013.

Insurance & Annuities sales for the first quarter of 2014 were $3.5 billion, including $2.6 billion related to Irish Life, up 265% as compared to $961 million a year ago.

Total Europe segment assets under administration at March 31, 2014 were $200 billion, up from $188 billion at December 31, 2013.

LIFECO CORPORATE
The Lifeco Corporate segment includes operating results for activities of Lifeco that are not associated with the major business units of the Company.

Net earnings in the Lifeco Corporate segment attributable to common shareholders were a net loss of $7 million in the first quarter of 2014 compared to a net loss of $11 million in the first quarter of 2013.

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 30, 2014 to shareholders of record at the close of business June 2, 2014.

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 L First Preferred Shares of $0.353125 per share;
  • Series M First Preferred Shares of $0.3625 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 30, 2014 to shareholders of record at the close of business June 2, 2014.

.…4/

GREAT-WEST LIFECO

Great-West Lifeco Inc. (TSX:GWO) is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. Great-West Lifeco has operations in Canada, the United States, Europe and Asia through Great-West Life, London Life, Canada Life, Irish Life, Great-West Financial and Putnam Investments. Great-West Lifeco and its companies have $806 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.  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 market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, taxes, inflation, information systems, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, continuity and availability of personnel and third party service providers, and the Company's ability to complete strategic transactions and integrate acquisitions, and that there will be no unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements.  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 technological change, investment values, payments required under investment products, reinsurance, 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 and catastrophic events.  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 2013 Annual Management Discussion & Analysis (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 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", 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 8, 2014 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:  416-340-8061
  • Participants from North America: 1-866-225-0198
  • Participants from Overseas:  Dial international access code first, then 800-6578-9898

A replay of the call will be available from May 8, 2014, 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 8, 2014 until May 7, 2015.

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
2014
  December 31
2013
  March 31
2013*
           
Premiums and deposits:          
Life insurance, guaranteed annuities and insured health products   $  5,267    $ 5,850    $ 4,931 
Self-funded premium equivalents (Administrative services only contracts)           658      649         644 
Segregated funds deposits:        
    Individual products          2,946      2,757        1,768 
    Group products          3,364      1,809           2,006 
Proprietary mutual funds and institutional deposits       11,662      11,491      7,642 
Total premiums and deposits      23,897        22,556       16,991 
           
Fee and other income      1,059       1,001           798 
Paid or credited to policyholders(1)         7,489      5,647       5,560 
Operating earnings - common shareholders           587          491           517 
Net earnings - common shareholders           587            717      517 
Per common share        
  Operating earnings   $ 0.587    $ 0.491    $ 0.544 
  Basic earnings          0.587        0.717      0.544 
  Dividends paid     0.3075       0.3075      0.3075 
  Book value     16.05        15.33      12.87 
Return on common shareholders' equity:      
  Operating earnings     14.5%      15.0%        16.8% 
  Net earnings     16.0%         16.6%       15.7% 
  Total assets   $  342,860    $ 325,905    $ 261,954 
  Proprietary mutual funds and institutional net assets     199,921      185,243      145,838 
  Total assets under management      542,781      511,148      407,792 
  Other assets under administration                                      263,113      247,139      174,487 
  Total assets under administration   $ 805,894    $ 758,287    $ 582,279 
Total equity   $ 20,964    $ 19,999    $ 17,268 
                   
The Company uses operating earnings, a non-International Financial Reporting Standards financial measure, which excludes
the impact of certain litigation provisions described in note 33 to the Company's December 31, 2013 consolidated financial
statements.
 
(1) Paid or credited to policyholders includes the impact of changes in fair values of assets supporting insurance and
investment contract liabilities.
* Certain comparative figures have been reclassified for presentation adjustments.




       
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(in Canadian $ millions except per share amounts)
       
      For the three months ended
 
 
    March 31
2014
    December 31
2013
    March 31
2013
                         
Income                      
  Premium income                      
    Gross premiums written   $  6,111    $ 6,739    $ 5,670 
    Ceded premiums     (844)      (889)         (739) 
  Total net premiums     5,267      5,850      4,931 
  Net investment income                      
    Regular net investment income     1,489      1,430      1,362 
    Changes in fair value through profit or loss      2,122      (225)      465 
  Total net investment income     3,611      1,205      1,827 
  Fee and other income     1,059      1,001      798 
      9,937      8,056      7,556 
Benefits and expenses                  
  Policyholder benefits                  
    Insurance and investment contracts                  
      Gross      4,801      4,835      5,027 
      Ceded       (475)      (597)      (374) 
  Total net policyholder benefits     4,326      4,238      4,653 
  Policyholder dividends and experience refunds     388      312      375 
  Changes in insurance and investment contract liabilities     2,775      1,097      532 
  Total paid or credited to policyholders     7,489      5,647      5,560 
                         
  Commissions     505      531      432 
  Operating and administrative expenses     933      929       696 
  Premium taxes     85      83      74 
  Financing charges     76      76      67 
  Amortization of finite life intangible assets      33      33      27 
  Restructuring and acquisition expenses         27     
Earnings before income taxes     811      730      696 
Income taxes     173      128      128 
Net earnings before non-controlling interests       638      602      568 
Attributable to non-controlling interests     22      (148)      18 
Net earnings     616      750       550 
Preferred share dividends     29        33      33 
Net earnings - common shareholders   $ 587    $ 717    $ 517 
                         
Earnings per common share                    
  Basic   $ 0.587    $ 0.717    $ 0.544 
  Diluted   $ 0.587    $  0.716    $ 0.544 

 


               
CONSOLIDATED BALANCE SHEETS (unaudited)
(in Canadian $ millions)
               
 
 
      March 31
2014
    December 31
2013
                 
Assets                
Cash and cash equivalents     $ 3,196      $ 2,791 
Bonds         95,368        89,914 
Mortgage loans         19,882        19,063 
Stocks            7,843          8,554 
Investment properties         4,481          4,288 
Loans to policyholders          7,552        7,332 
        138,322        131,942 
Funds held by ceding insurers        11,322        10,832 
Goodwill         5,831          5,812 
Intangible assets         3,548           3,456 
Derivative financial instruments            547             593 
Owner occupied properties        601            590 
Fixed assets         213             211 
Reinsurance assets        5,444           5,070 
Premiums in course of collection, accounts and interest receivable         3,526           3,068 
Other assets           2,398        2,220 
Current income taxes            193        165 
Deferred tax assets       1,225        1,167 
Investments on account of segregated fund policyholders       169,690        160,779 
                 
Total assets     $ 342,860      $ 325,905 
                 
Liabilities                
Insurance contract liabilities     $ 137,675      $ 131,174 
Investment contract liabilities       851          889 
Debentures and other debt instruments       5,778           5,740 
Funds held under reinsurance contracts       297         270 
Derivative financial instruments        952        744 
Accounts payable          1,788        1,583 
Other liabilities           3,035          2,807 
Current income taxes            825           981 
Deferred tax liabilities       842        776 
Capital trust debentures       163         163 
Investment and insurance contracts on account of segregated fund policyholders       169,690        160,779 
                 
Total liabilities       321,896        305,906 
                 
Equity                
Non-controlling interests                
  Participating account surplus in subsidiaries       2,390        2,354 
  Non-controlling interests in subsidiaries       220           8 
Shareholders' equity                
  Share capital                
    Preferred shares        2,314        2,314 
    Common shares       7,115           7,112 
  Accumulated surplus       8,328         8,067 
  Accumulated other comprehensive income       514           87 
  Contributed surplus       83          57 
Total equity       20,964        19,999 
                 
Total liabilities and equity     $ 342,860      $ 325,905 

  

                   
Segmented Information (unaudited)                  
                   
Consolidated Net Earnings
For the three months ended March 31, 2014
                 
 
 
 
Canada United
States
 
Europe
Lifeco
Corporate
 
Total
Income:                    
  Premium income $ 2,613  $ 812  $ 1,842  $  -  $ 5,267 
  Net investment income                    
    Regular net investment income        638         357         498         (4)         1,489 
    Changes in fair value through profit or loss        947          323          852                 2,122 
  Total net investment income        1,585         680         1,350         (4)         3,611 
  Fee and other income      344         419          296                 1,059 
Total income      4,542         1,911         3,488         (4)         9,937 
                     
Benefits and expenses:                    
  Paid or credited to policyholders         3,365         1,298         2,826                  7,489 
  Other*         715         494         310                 1,523 
  Financing charges        29         35         12                 76 
  Amortization of finite life intangible assets     13         15                          33 
  Restructuring and acquisition expenses                                          
                     
Earnings before income taxes      420         69         330         (8)         811 
                     
Income taxes        105         23          47         (2)         173 
                     
Net earnings before non-controlling interests       315         46         283         (6)         638 
                     
Non-controlling interests        22                 (1)                  22 
                     
Net earnings       293          45         284         (6)         616 
                     
Preferred share dividends         23                                  29 
                     
Net earnings before capital allocation    270         45         278         (6)         587 
Impact of capital allocation        24         (4)         (19)         (1)         
Net earnings - common shareholders $ 294  $ 41  $ 259  $ (7)  $ 587 
 
* Includes commissions, operating and administrative expenses and premium taxes.
                 
For the three months ended March 31, 2013                
 
 
 
Canada United
States
 
Europe
Lifeco
Corporate
 
Total
Income:                    
  Premium income $ 2,515  $  629  $ 1,787  $ $ 4,931 
  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     309          337          152         -         798 
Total income    3,499         1,283         2,781         (7)         7,556 
                     
Benefits and expenses:                    
  Paid or credited to policyholders      2,456         760         2,344         -         5,560 
  Other*      653         378         168         3         1,202 
  Financing charges        29          34          4         -         67 
  Amortization of finite life intangible assets    12         13         2         -         27 
  Restructuring and acquisition expenses         -          -         4         -         4 
                     
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 

* Includes commissions, operating and administrative expenses and premium taxes.

 

 

 

 

SOURCE: Great-West Lifeco Inc.

For further information:

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


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