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                  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 

 

 

 

 

 

SOURCE Great-West Lifeco Inc.

For further information:

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


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