Great-West Lifeco reports continued strong sales for the first quarter of 2016

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 5, 2016 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $620 million or $0.625 per common share for the three months ended March 31, 2016 compared to $700 million or $0.702 per common share for the same period in 2015.

Consolidated assets under administration at March 31, 2016 were approximately $1.2 trillion, a decrease of $26.0 billion from December 31, 2015.

Highlights - In Quarter

  • Lifeco sales in the first quarter of 2016 of $48.0 billion were up 73% from the same quarter in 2015:
    • Canada sales were $3.3 billion, up 3%, primarily due to strong sales in Group and Individual Insurance.
    • Europe sales were $4.6 billion, up 60% compared to the first quarter of 2015, excluding the acquisition of Equitable Life's U.K. annuity business in 2015.  The increase was primarily due to strong sales in the U.K., Ireland and Germany.
    • Great-West Financial sales were US$20.3 billion, up 154%, primarily due to higher large plan sales in Empower Retirement.
    • Putnam gross sales were US$9.0 billion, up 10% overall.  Institutional sales increased 54% as the pipeline continues to remain strong, while mutual fund sales decreased by 12%, reflective of the decline in industry flows in the segments where Putnam operates.
  • Lifeco maintained a strong ROE of 14.0%.
  • Lifeco's capital position remained very strong. The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 236% at March 31, 2016.
  • Lifeco declared a quarterly common dividend of $0.3460 per common share payable June 30, 2016.
  • On March 9, 2016, Lifeco announced that it had reached an agreement to acquire Aviva Health Insurance Ireland Limited (Aviva Health), an Irish health insurance provider, and to increase its 49% interest in GloHealth Financial Services Limited (GloHealth) to 100% ownership.  Aviva Health and GloHealth will combine to become one of the leading providers in the Irish health insurance market, servicing a customer base of more than 400,000 participants in Ireland.  The transaction is expected to close in the third quarter of 2016.

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. For reporting purposes, the consolidated operating results are grouped into four reportable segments - Canada, United States, Europe and Lifeco Corporate - reflecting geographic lines as well as the management and corporate structure of the companies.

CANADA
Net earnings attributable to common shareholders for the first quarter of 2016 were $276 million compared to $299 million in the first quarter of 2015. 

Total sales in the first quarter of 2016 of $3.3 billion increased compared to $3.2 billion in the first quarter of 2015, reflecting strong sales in both Group and Individual Insurance. 

Total Canada segment assets under administration at March 31, 2016 were $167 billion compared to $166 billion at December 31, 2015.

UNITED STATES
Net earnings attributable to common shareholders for the first quarter of 2016 were $63 million, reflecting Great-West Financial net earnings of $88 million and a net loss of $25 million for Putnam, compared to $121 million in the first quarter of 2015. 

Great-West Financial sales in the first quarter of 2016 were US$20.3 billion, up from US$8.0 billion in the first quarter of 2015, primarily due to an increase in Empower Retirement driven by large plan sales. Approximately 90% of the in-quarter sales increase related to one new client with over 200,000 participants. 

Putnam assets under management as at March 31, 2016 were US$145.8 billion compared to US$148.4 billion at December 31, 2015, a decrease of 2%, primarily due to mutual fund net asset outflows.  Net asset outflows for the first quarter of 2016 were US$1.7 billion compared to nominal net asset inflows for the same quarter in 2015, as in-quarter institutional net asset inflows of US$0.9 billion were more than offset by mutual fund net asset outflows of US$2.6 billion.

Total United States segment assets under administration at March 31, 2016 were $790 billion compared to $808 billion at December 31, 2015.

EUROPE
Net earnings attributable to common shareholders for the first quarter of 2016 were $287 million compared to $286 million in the first quarter of 2015. 

Insurance & Annuities sales for the first quarter of 2016 were $4.6 billion, compared to $4.5 billion a year ago, which included the $1.6 billion acquisition of The Equitable Life Assurance Society's (Equitable Life) U.K. annuity business.  Excluding the Equitable Life acquisition in 2015, sales increased by 60%, driven by higher fund management sales in Ireland, higher pension sales in Ireland and Germany and higher sales of retail payout annuities in the U.K. as well as the impact of currency movement.

Total Europe segment assets under administration at March 31, 2016 were $230 billion compared to $238 billion at December 31, 2015.

LIFECO CORPORATE
Lifeco Corporate segment's net loss attributable to common shareholders of $6 million in the first quarter of 2016 was comparable to a net loss of $6 million in the first quarter of 2015. 

QUARTERLY DIVIDENDS

At its meeting today, the Board of Directors approved a quarterly dividend of $0.3460 per share on the common shares of Lifeco payable June 30, 2016 to shareholders of record at the close of business June 2, 2016.

In addition, the Directors approved quarterly dividends on Lifeco's preferred shares, as follows:

First Preferred Shares Record Date Payment Date Amount, per share
Series F June 2, 2016 June 30, 2016 $0.36875
Series G June 2, 2016 June 30, 2016 $0.3250
Series H June 2, 2016 June 30, 2016 $0.30313
Series I June 2, 2016 June 30, 2016 $0.28125
Series L June 2, 2016 June 30, 2016 $0.353125
Series M June 2, 2016 June 30, 2016 $0.3625
Series N June 2, 2016 June 30, 2016 $0.1360
Series O June 2, 2016 June 30, 2016 $0.109823
Series P June 2, 2016 June 30, 2016 $0.3375
Series Q June 2, 2016 June 30, 2016 $0.321875
Series R June 2, 2016 June 30, 2016 $0.3000
Series S June 2, 2016 June 30, 2016 $0.328125

 

For purposes of the Income Tax Act (Canada), and any similar provincial legislation, the dividends referred to above are eligible dividends.

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.  Lifeco has operations in Canada, the United States, Europe and Asia through Great-West Life, London Life, Canada Life, Irish Life Group Limited, Great-West Financial and Putnam Investments.  Lifeco and its companies have approximately $1.2 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies.  To learn more, visit www.greatwestlifeco.com.

Basis of presentation
The consolidated financial statements of Lifeco have been prepared in accordance with International Financial Reporting Standards (IFRS) and are the basis for the figures presented in this release, unless otherwise noted.

Cautionary note regarding Forward-Looking Information
This release may contain forward-looking statements.  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 other similar expressions or negative versions thereof.  These statements may include, without limitation, statements about Lifeco's operations, business, financial condition, expected financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by Lifeco, including statements made with respect to the expected benefits of acquisitions and divestitures.  Forward-looking statements are based on expectations, forecasts, predictions, projections and conclusions 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 Lifeco, economic factors and the financial services industry generally, including the insurance and mutual fund industries.  They are not guarantees of future performance, and the reader is cautioned that 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 Lifeco's operations will continue substantially in their current state, including, without limitation, with respect to customer behaviour, Lifeco's reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, global equity and capital markets, business competition and other general economic, political and market factors in North America and internationally.  Many of these assumptions are based on factors and events that are not within the control of Lifeco 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 customer responses to new products, impairments of goodwill and other intangible assets, Lifeco's ability to execute strategic plans and changes to strategic plans, technological changes, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, 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, catastrophic events, continuity and availability of personnel and third party service providers, Lifeco's ability to complete strategic transactions and integrate acquisitions and unplanned material changes to Lifeco's facilities, customer and employee relations or credit arrangements.  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 Lifeco's 2015 Annual 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, uncertainties and potential events carefully and not to place undue reliance on forward-looking statements.  Other than as specifically required by applicable law, Lifeco 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", "assets under management", "assets under administration" and other similar expressions.  Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists.  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.  Refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

Further information
Selected financial information is attached.

Lifeco's first quarter conference call and audio webcast will be held May 5, 2016 at 3:30 p.m. (ET).  The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:

A replay of the call will be available from May 5, 2016 to May 12, 2016, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 6396358#). The archived webcast will be available on www.greatwestlifeco.com from May 5, 2016 to May 4, 2017.

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 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
    March 31
2016
    December 31
2015
    March 31
2015
 
Premiums and deposits:                    
  Net premium income (Life insurance,                  
    guaranteed annuities and insured health                  
    products) $ 7,015   $ 6,162   $ 6,932  
  Policyholder deposits (segregated funds):                  
    Individual products   3,689     3,814     2,981  
    Group products   2,238     2,001     2,035  
  Self-funded premium equivalents                  
    (Administrative services only contracts)(1)   698     665     662  
  Proprietary mutual funds and institutional                  
    deposits(1)   16,354     15,480     12,938  
Total premiums and deposits(1)   29,994     28,122     25,548  
Fee and other income   1,254     1,333     1,258  
Paid or credited to policyholders(2)   9,678     5,532     9,889  
Earnings                  
Net earnings - common shareholders $ 620   $ 683   $ 700  
  Per common share                  
    Basic earnings   0.625     0.688     0.702  
    Dividends paid   0.346     0.326     0.326  
    Book value   19.29     20.07     17.68  
Return on common shareholders' equity(3)                  
  Net earnings   14.0 %   14.7 %   16.0 %
Total assets $ 390,245   $ 399,935   $ 381,331  
  Proprietary mutual funds and institutional                  
    net assets(4)   237,984     252,480     238,650  
Total assets under management(4)   628,229     652,415     619,981  
  Other assets under administration(5)   558,290     560,102     556,893  
Total assets under administration $ 1,186,519   $ 1,212,517   $ 1,176,874  
Total equity $ 24,531   $ 25,260   $ 22,888  
                       

(1) In addition to premiums and deposits reported in the financial statements, the Company includes premium equivalents on
self-funded group insurance administrative services only (ASO) contracts and deposits on proprietary mutual funds and
institutional accounts to calculate total premiums and deposits (a non-IFRS financial measure).  This measure provides
useful information as it is an indicator of top line growth.
(2) Paid or credited to policyholders includes the impact of changes in fair values of assets supporting insurance and
investment contract liabilities.
(3) Return on common shareholders' equity is detailed within the "Capital Allocation Methodology" section of the Company's
March 31, 2016 Management's Discussion and Analysis.
(4) Total assets under management (a non-IFRS financial measure) provides an indicator of the size and volume of the overall
business of the Company.  Services provided in respect of assets under management include the selection of investments,
the provision of investment advice and discretionary portfolio management on behalf of clients.  This includes internally and
externally managed funds where the Company has oversight over the investment policies.
(5) Other assets under administration (a non-IFRS financial measure) includes assets where the Company only provides
administration services for which the Company earns fee and other income.  These assets are beneficially owned by clients
and the Company does not direct the investing activities.  Services provided relating to assets under administration includes
recordkeeping, safekeeping, collecting investment income, settling of transactions or other administrative services. 
Administrative services are an important aspect of the overall business of the Company and should be considered when
comparing volumes, size and trends.
   

CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
(in Canadian $ millions except per share amounts)
 
  For the three months ended
  March 31   December 31   March 31  
  2016   2015   2015  
                   
Income                  
  Premium income                  
    Gross premiums written $ 7,926   $ 7,117   $ 7,806  
    Ceded premiums   (911)     (955)     (874)  
  Total net premiums   7,015     6,162     6,932  
  Net investment income                  
    Regular net investment income   1,673     1,670     1,536  
    Changes in fair value through profit or loss   2,410     (844)     2,953  
  Total net investment income   4,083     826     4,489  
  Fee and other income   1,254     1,333     1,258  
    12,352     8,321     12,679  
Benefits and expenses                  
  Policyholder benefits                  
    Gross   6,642     6,060     5,640  
    Ceded   (472)     (546)     (483)  
  Total net policyholder benefits   6,170     5,514     5,157  
  Policyholder dividends and experience refunds   369     321     381  
  Changes in insurance and investment contract liabilities   3,139     (303)     4,351  
  Total paid or credited to policyholders   9,678     5,532     9,889  
  Commissions   566     584     515  
  Operating and administrative expenses   1,208     1,175     1,078  
  Premium taxes   92     92     84  
  Financing charges   78     73     77  
  Amortization of finite life intangible assets   46     37     36  
  Restructuring and acquisition expenses   4     7     7  
Earnings before income taxes   680     821     993  
Income taxes   24     66     224  
Net earnings before non-controlling interests   656     755     769  
Attributable to non-controlling interests   5     41     37  
Net earnings   651     714     732  
Preferred share dividends   31     31     32  
Net earnings - common shareholders $ 620   $ 683   $ 700  
                   
Earnings per common share                  
  Basic $ 0.625   $ 0.688   $ 0.702  
  Diluted $ 0.623   $ 0.686   $ 0.700  
                   

CONSOLIDATED BALANCE SHEETS (unaudited)
(in Canadian $ millions)
 
  March 31   December 31  
  2016   2015 (1)  
Assets            
Cash and cash equivalents $ 2,923   $ 2,813  
Bonds   114,141     114,943  
Mortgage loans   21,402     22,021  
Stocks   7,827     7,873  
Investment properties   5,049     5,237  
Loans to policyholders   8,321     8,694  
    159,663     161,581  
Funds held by ceding insurers   12,954     15,512  
Goodwill   5,896     5,913  
Intangible assets   3,878     4,036  
Derivative financial instruments   602     461  
Owner occupied properties   638     653  
Fixed assets   296     298  
Other assets      2,471     2,643  
Premiums in course of collection, accounts and            
  interest receivable   3,833     3,553  
Reinsurance assets   5,144     5,131  
Current income taxes   99     69  
Deferred tax assets   1,770     1,891  
Investments on account of segregated fund            
  policyholders   193,001     198,194  
Total assets $ 390,245   $ 399,935  
             
Liabilities            
Insurance contract liabilities $ 155,352   $ 158,492  
Investment contract liabilities   2,116     2,253  
Debentures and other debt instruments   5,284     5,395  
Capital trust securities   161     161  
Funds held under reinsurance contracts   324     356  
Derivative financial instruments   2,015     2,624  
Accounts payable   1,983     1,755  
Other liabilities                                3,494     3,367  
Current income taxes   514     492  
Deferred tax liabilities   1,470     1,586  
Investment and insurance contracts on account            
  of segregated fund policyholders   193,001     198,194  
Total liabilities   365,714     374,675  
             
Equity            
Non-controlling interests            
  Participating account surplus in subsidiaries   2,608     2,611  
  Non-controlling interests in subsidiaries   248     195  
Shareholders' equity            
  Share capital            
    Preferred shares   2,514     2,514  
    Common shares   7,167     7,156  
  Accumulated surplus   10,672     10,431  
  Accumulated other comprehensive income   1,216     2,218  
  Contributed surplus   106     135  
Total equity   24,531     25,260  
Total liabilities and equity $ 390,245   $ 399,935  

(1)  Certain comparative figures have been reclassified as described in note 16 to the Company's March 31,
2016 condensed consolidated interim unaudited financial statements.
   

Segmented Information (unaudited)
Consolidated Net Earnings
 
For the three months ended March 31, 2016
  Canada   United
States
  Europe   Lifeco
Corporate
  Total  
Income                              
  Total net premiums $ 2,861   $ 1,380   $ 2,774   $   $ 7,015  
  Net investment income                              
    Regular net investment income   736     454     483         1,673  
    Changes in fair value through profit or loss   537     481     1,392         2,410  
  Total net investment income   1,273     935     1,875         4,083  
  Fee and other income   362     571     321         1,254  
    4,496     2,886     4,970         12,352  
                               
Benefits and expenses                              
  Paid or credited to policyholders   3,301     2,112     4,265         9,678  
  Other (1)   817     686     359     4     1,866  
  Financing charges   29     37     12         78  
  Amortization of finite life intangible assets   16     22     8         46  
  Restructuring and acquisition expenses       3     1         4  
Earnings (loss) before income taxes   333     26     325     (4)     680  
Income taxes (recovery)   51     (40)     13         24  
Net earnings (loss) before non-controlling                              
  interests   282     66     312     (4)     656  
Non-controlling interests   5     1     (1)         5  
Net earnings (loss)   277     65     313     (4)     651  
Preferred share dividends   26         5         31  
Net earnings (loss) before capital allocation   251     65     308     (4)     620  
Impact of capital allocation   25     (2)     (21)     (2)      
Net earnings (loss) - common shareholders $ 276   $ 63   $ 287   $ (6)   $ 620  

(1) Includes commissions, operating and administrative expenses and premium taxes.
   

For the three months ended March 31, 2015
  Canada   United
States
  Europe   Lifeco
Corporate
  Total  
Income                              
  Total net premiums $ 2,667   $ 729   $ 3,536   $   $ 6,932  
  Net investment income                              
    Regular net investment income   629     395     513     (1)     1,536  
    Changes in fair value through profit or loss   1,376     232     1,345         2,953  
  Total net investment income   2,005     627     1,858     (1)     4,489  
  Fee and other income   358     573     327         1,258  
    5,030     1,929     5,721     (1)     12,679  
                               
Benefits and expenses                              
  Paid or credited to policyholders   3,765     1,121     5,003         9,889  
  Other (1)   763     586     324     4     1,677  
  Financing charges   29     36     12         77  
  Amortization of finite life intangible assets   14     17     5         36  
  Restructuring and acquisition expenses       1     6         7  
Earnings (loss) before income taxes   459     168     371     (5)     993  
Income taxes (recovery)   123     44     58     (1)     224  
Net earnings (loss) before non-controlling                            
  interests   336     124     313     (4)     769  
Non-controlling interests   33     2     2         37  
Net earnings (loss)   303     122     311     (4)     732  
Preferred share dividends   26         6         32  
Net earnings (loss) before capital allocation   277     122     305     (4)     700  
Impact of capital allocation   22     (1)     (19)     (2)      
Net earnings (loss) - common shareholders $ 299   $ 121   $ 286   $ (6)   $ 700  

(1) Includes commissions, operating and administrative expenses and premium taxes.

SOURCE Great-West Lifeco Inc.

For further information:

Media Relations Contact:
Marlene Klassen, APR
204-946-7705
Email: marlene.klassen@gwl.ca

Investor Relations Contact:
Wendi Thiessen
204-946-7452
Email: wendi.thiessen@gwl.ca


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