Great-West Lifeco reports second quarter 2007 results and dividend increase



    Readers are referred to the cautionary note regarding Forward-Looking
    Information and Non-GAAP Financial Measures at the end of this Release.

    TSX:GWO

    WINNIPEG, Aug. 1, 2007 /CNW/ - Great-West Lifeco Inc. (Lifeco) has
reported net income attributable to common shareholders of $544 million for
the three months ended June 30, 2007 compared to net income of $461 million
reported a year ago. On a per share basis, this represents $0.610 per common
share for the three months ended June 30, 2007, an increase of 18% compared to
$0.516 per common share for 2006.
    For the six months ended June 30, 2007 net income attributable to common
shareholders was $1,058 million compared to $907 million reported a year ago.
On a per share basis, this represents $1.186 per common share for the six
months ended June 30, 2007, an increase of 17% compared to $1.017 per common
share for 2006.
    Lifeco reported earnings growth in all reporting segments, with
significant growth in the Company's European segment.

    
    Highlights
    -   Quarterly dividends declared were $0.2750 per common share, an
        increase of 2 cents per common share, or 8%, payable
        September 28, 2007. Dividends paid on common shares for the six
        months ended June 30, 2007 were 14% higher than a year ago.
    -   Earnings per common share for the second quarter of 2007 increased
        18% compared to a year ago.
    -   Return on common shareholders' equity was 21.5% for the twelve months
        ended June 30, 2007
    

    Consolidated net income for Lifeco is comprised of the net income of The
Great-West Life Assurance Company (Great-West Life), Canada Life Financial
Corporation (CLFC), London Life Insurance Company (London Life) and Great-West
Life & Annuity Insurance Company (GWL&A), together with Lifeco's corporate
results.

    CANADA

    Net income attributable to common shareholders for the second quarter of
2007 was $257 million compared to $245 million in 2006, an increase of 5%.
    For the six months ended June 30, 2007, net income attributable to common
shareholders was up 7% to $482 million from $449 million for the six months
ended June 30, 2006. Individual Insurance & Investment Products earnings at
$321 million were up 12% while Group Insurance earnings of $179 million were
up 8%. Corporate earnings were down $16 million from 2006 reflecting the
positive impact in 2006 of a change in Federal Corporate tax rates.
    Total sales for the six months ended June 30, 2007 were $5,033 million,
compared to $4,315 million in 2006, an increase of 17%.
    Total assets under administration at June 30, 2007 were $101.1 billion, 
compared to $96.6 billion at December 31, 2006.

    UNITED STATES

    Net income attributable to common shareholders for the second quarter of
2007 increased 7% to $136 million from $127 million for the second quarter of
2006. For the six months ended June 30, 2007, net income attributable to
common shareholders was up 7% to $278 million from $261 million for the six
months ended June 30, 2006.
    Total sales for the six months ended June 30, 2007 were $3,155 million,
compared to $2,130 million in 2006, an increase of 48%.
    Total assets under administration at June 30, 2007 were $45.9 billion,
compared to $48.2 billion at December 31, 2006.

    EUROPE

    Net income attributable to common shareholders for the second quarter of
2007 increased 59% to $153 million from $96 million for the second quarter of
2006. For the six months ended June 30, 2007, net income attributable to
common shareholders was up 45% to $300 million from $207 million for the six
months ended June 30, 2006.
    Total sales for the six months ended June 30, 2007 were $3,425 million,
compared to $2,660 million in 2006, an increase of 29%.
    Total assets under administration at June 30, 2007 were $64.5 billion,
compared to $67.8 billion at December 31, 2006.

    CORPORATE

    Corporate net income for Lifeco attributable to common shareholders was a
net charge of $2 million for the second quarter of 2007 and $2 million for the
six months ended June 30, 2007 compared to net charges of $7 million and $10
million in 2006.

    QUARTERLY DIVIDENDS

    At its meeting today, the Board of Directors approved a quarterly
dividend of $0.2750 per share on the common shares of the Company payable
September 28, 2007 to shareholders of record at the close of business
August 31, 2007.

    
    In addition, the Directors approved quarterly dividends on:
    -   Series D First Preferred Shares of $0.293750 per share;
    -   Series E First Preferred Shares of $0.30 per share;
    -   Series F First Preferred Shares of $0.36875 per share;
    -   Series G First Preferred Shares of $0.325 per share;
    -   Series H First Preferred Shares of $0.30313 per share; and
    -   Series I First Preferred Shares of $0.28125 per share;
    all payable September 28, 2007 to shareholders of record at the close of
business August 31, 2007.
    
    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 a financial services holding company
with interests in the life insurance, health insurance, retirement savings,
and reinsurance businesses. The Company has operations in Canada, the United
States and Europe through The Great-West Life Assurance Company, London Life
Insurance Company, The Canada Life Assurance Company and Great-West Life &
Annuity Insurance Company. Lifeco and its companies have over $211 billion in
assets under administration. Great-West Lifeco is a member 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" or negative versions thereof and similar expressions.
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 Company action is also a
forward-looking statement. 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,
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 listed in other
filings with securities regulators, including factors set out under "Risk
Management and Control Practices" in the Company's 2006 Annual Management's
Discussion and Analysis, 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 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-GAAP Financial Measures

    This release contains some non-GAAP financial measures. Terms by which
non-GAAP financial measures are identified include but are not limited to
"earnings before restructuring charges", "adjusted net income", "earnings
before adjustments", "premiums and deposits", "sales", and other similar
expressions. Non-GAAP financial measures are used to provide management and
investors with additional measures of performance. However, non-GAAP financial
measures do not have standard meanings prescribed by GAAP and are not directly
comparable to similar measures used by other companies. Please refer to the
appropriate reconciliations of these non-GAAP financial measures to measures
prescribed by GAAP.

    Further information
    Selected financial information is attached.

    Great-West Lifeco's second quarter analyst teleconference will be held
Wednesday, August 1 at 3:00 p.m. (Eastern). The call can be accessed through
www.greatwestlifeco.com or by phone, through listen-only lines at:
    
    -   Participants in the Toronto area: 416-406-6419
    -   Participants from North America: 1-888-575-8232
    -   Participants from Overseas: Dial international access code first,
        then 800-9559-6849
    

    A replay of the call will be available from August 1, until August 8,
2007, and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto
(passcode: 3217094 followed by the number sign).

    Additional information relating to Lifeco, including the most recent
interim unaudited 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 $ millions except per share amounts)

                              For the three months      For the six months
                                 ended June 30            ended June 30
                          ------------------------- -------------------------
                                               %                         %
                            2007      2006   Change   2007      2006   Change
    -------------------------------------------------------------------------
    Premiums:
    Life insurance,
     guaranteed annuities
     and insured health
     products             $  4,266  $  4,444   -4%  $  9,879  $  8,139   21%
    Self-funded premium
     equivalents (ASO
     contracts)              1,843     1,886   -2%     3,807     3,805    -
    Segregated funds
     deposits:
      Individual products    2,352     2,148    9%     5,053     4,169   21%
      Group products         1,428     1,168   22%     3,144     2,721   16%
    Proprietary mutual
     funds deposits            203       163   25%       423       324   31%
                          ------------------------- -------------------------
    Total premiums and
     deposits               10,092     9,809    3%    22,306    19,158   16%
                          ------------------------- -------------------------

    Fee and other income       749       667   12%     1,513     1,324   14%
    Paid or credited to
     policyholders           2,764     4,959  -44%     8,348     8,960   -7%

    Net income - common
     shareholders              544       461   18%     1,058       907   17%

    -------------------------------------------------------------------------
    Per common share
      Basic earnings      $  0.610  $  0.516   18%  $  1.186  $  1.017   17%
      Dividends paid         0.255   0.22375   14%     0.510    0.4475   14%
      Book value                                       11.02     10.17    8%
    -------------------------------------------------------------------------
    Return on common
     shareholders' equity
     (12 months):                                      21.5%     21.7%
    -------------------------------------------------------------------------
    At June 30
      Total assets                                  $117,056  $113,019    4%
      Segregated funds
       net assets                                     92,224    78,349   18%
      Proprietary mutual
       funds net assets                                2,252     1,577   43%
                                                    -------------------------
      Total assets under
       administration                               $211,532  $192,945   10%
                                                    -------------------------
                                                    -------------------------
      Share capital and
       surplus                                      $ 10,934  $ 10,162    8%
    -------------------------------------------------------------------------



               SUMMARY OF CONSOLIDATED OPERATIONS (unaudited)
                  (in $ millions except per share amounts)

                                  For the three months   For the six months
                                      ended June 30         ended June 30
                                  --------------------- ---------------------
                                     2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------
                                  (note 1(a))           (note 1(a))
    Income
      Premium income               $  4,266   $  4,444   $  9,879   $  8,139
      Net investment income
       (note 3)
        Regular net investment
         income                       1,487      1,516      2,905      2,839
        Changes in fair value on
         held for trading assets     (1,931)         -     (2,347)         -
                                  ---------- ---------- ---------- ----------
      Total net investment income      (444)     1,516        558      2,839
      Fee and other income              749        667      1,513      1,324
                                  ---------- ---------- ---------- ----------

                                      4,571      6,627     11,950     12,302
                                  ---------- ---------- ---------- ----------

    Benefits and expenses
      Policyholder benefits           3,742      3,898      9,188      7,482
      Policyholder dividends
       and experience refunds           307        286        472        565
      Change in actuarial
       liabilities                   (1,285)       775     (1,312)       913
                                  ---------- ---------- ---------- ----------
      Total paid or credited to
       policyholders                  2,764      4,959      8,348      8,960

      Commissions                       374        332        752        674
      Operating expenses                560        541      1,155      1,103
      Premium taxes                      58         66        122        126
      Financing charges (note 4)         53         51        104         98
      Amortization of finite
       life intangible assets             7          5         15          9
                                  ---------- ---------- ---------- ----------
    Net income before income taxes      755        673      1,454      1,332

    Income taxes  - current             205        110        354        227
                  - future              (51)        26        (62)        78
                                  ---------- ---------- ---------- ----------
    Net income before non-
     controlling interests              601        537      1,162      1,027

    Non-controlling interests
     (note 9)                            43         62         76         96
                                  ---------- ---------- ---------- ----------
    Net income                          558        475      1,086        931

    Perpetual preferred
     share dividends                     14         14         28         24
                                  ---------- ---------- ---------- ----------
    Net income - common
     shareholders                  $    544   $    461   $  1,058   $    907
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    Earnings per common share
     (note 13)

      Basic                        $  0.610   $  0.516   $  1.186   $  1.017
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
      Diluted                      $  0.606   $  0.513   $  1.177   $  1.010
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------



                   CONSOLIDATED BALANCE SHEETS (unaudited)
                               (in $ millions)

                                        June 30,   December 31,     June 30,
                                         2007         2006           2006
                                     ------------  ------------  ------------
                                      (note 1(a))
    Assets

    Bonds (note 2)                    $   69,456    $   65,246    $   60,479
    Mortgage loans (note 2)               15,172        15,334        14,855
    Stocks (note 2)                        5,866         4,766         4,236
    Real estate (note 2)                   2,207         2,216         1,868
    Loans to policyholders                 6,496         6,776         6,670
    Cash and cash equivalents              4,132         3,083         3,186
    Funds held by ceding insurers          1,720        12,371        11,526
    Goodwill                               5,439         5,444         5,324
    Intangible assets                      1,541         1,575         1,452
    Other assets (note 5)                  5,027         3,717         3,423
                                     ------------  ------------  ------------
    Total assets                      $  117,056    $  120,528    $  113,019
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------

    Liabilities

    Policy liabilities
      Actuarial liabilities           $   87,773    $   89,490    $   81,221
      Provision for claims                 1,238         1,266         1,110
      Provision for policyholder
       dividends                             562           568           537
      Provision for experience
       rating refunds                        225           452           378
      Policyholder funds                   2,243         2,202         2,134
                                     ------------  ------------  ------------
                                          92,041        93,978        85,380

    Debentures and other debt
     instruments (note 6)                  3,014         1,980         2,204
    Funds held under reinsurance
     contracts                             1,944         1,822         3,954
    Other liabilities (note 7)             4,138         4,167         3,977
    Repurchase agreements                    975           997         1,049
    Deferred net realized gains              176         2,821         2,693
                                     ------------  ------------  ------------
                                         102,288       105,765        99,257

    Preferred shares (note 10)               813           756           775
    Capital trust securities and
     debentures (note 8)                     638           646           647
    Non-controlling interests (note 9)
      Participating account surplus
       in subsidiaries                     2,021         1,884         1,814
      Preferred shares issued
       by subsidiaries                       209           209           209
      Perpetual preferred shares
       issued by subsidiaries                153           154           155

    Share capital and surplus

    Share capital (note 10)
      Perpetual preferred shares           1,099         1,099         1,099
      Common shares                        4,688         4,676         4,671
    Accumulated surplus                    6,093         5,858         5,338
    Accumulated other comprehensive
     income                                 (977)            -             -
    Contributed surplus                       31            28            23
    Currency translation account               -          (547)         (969)
                                     ------------  ------------  ------------
                                          10,934        11,114        10,162
                                     ------------  ------------  ------------
    Liabilities, share capital
     and surplus                      $  117,056    $  120,528    $  113,019
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------



               CONSOLIDATED STATEMENTS OF SURPLUS (unaudited)
                               (in $ millions)


                                                       For the six months
                                                         ended June 30
                                                   --------------------------
                                                       2007          2006
                                                   ------------  ------------

    Accumulated surplus
    Balance, beginning of year                      $    5,858    $    4,860
    Change in accounting policy (note 1(a))               (368)            -
    Net income                                           1,086           931
    Common share cancellation excess                         -           (24)
    Share issue costs - preferred shares                     -            (6)
    Dividends to shareholders
      Perpetual preferred shareholders                     (28)          (24)
      Common shareholders                                 (455)         (399)
                                                   ------------  ------------
    Balance, end of period                          $    6,093    $    5,338
                                                   ------------  ------------
                                                   ------------  ------------

    Accumulated other comprehensive income,
     net of income taxes (note 14)
    Balance, beginning of year                      $        -    $        -
    Reclassification from currency translation
     account (note 1(a))                                  (547)            -
    Change in accounting policy (note 1(a))                257             -
    Other comprehensive income                            (687)            -
                                                   ------------  ------------
    Balance, end of period                          $     (977)   $        -
                                                   ------------  ------------
                                                   ------------  ------------

    Contributed surplus
    Balance, beginning of year                      $       28    $       19
    Stock option expense
      Current year expense (note 11)                         3             5
      Exercised                                              -            (1)
                                                   ------------  ------------
    Balance, end of period                          $       31    $       23
                                                   ------------  ------------
                                                   ------------  ------------

    Currency translation account
    Balance, beginning of year                      $     (547)   $     (849)
    Reclassification to accumulated other
     comprehensive income (note 1(a))                      547             -
    Change during the period                                 -          (120)
                                                   ------------  ------------
    Balance, end of period                          $        -    $     (969)
                                                   ------------  ------------
                                                   ------------  ------------



          SUMMARY OF CONSOLIDATED COMPREHENSIVE INCOME (unaudited)
                               (in $ millions)

                                                  For the three  For the six
                                                   months ended  months ended
                                                      June 30       June 30
                                                   ------------  ------------
                                                       2007          2007
                                                   ------------  ------------
                                                    (note 1(a))   (note 1(a))

    Net income                                      $      558    $    1,086

    Other comprehensive income (loss),
     net of income taxes
      Unrealized foreign exchange gains (losses)
       on translation of foreign operations,
       net of tax of $0 and $0                            (513)         (588)
      Unrealized gains (losses) on available for
       sale assets, net of tax of $22 and $26              (83)          (98)
      Unrealized gains (losses) on cash flow
       hedges, net of tax of $21 and $21                   (38)          (38)
      Reclassification of realized gains (losses)
       on available for sale assets, net of
       tax of $5 and $12, to net income                     (2)          (23)
      Non-controlling interests (note 9)                    60            60
                                                   ------------  ------------
                                                          (576)         (687)
                                                   ------------  ------------
    Comprehensive income                            $      (18)   $      399
                                                   ------------  ------------
                                                   ------------  ------------



              CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
                               (in $ millions)

                                  For the three months   For the six months
                                      ended June 30         ended June 30
                                  --------------------- ---------------------
                                     2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------

    Operations
      Net income                   $    558   $    475   $  1,086   $    931
      Adjustments:
        Change in policy
         liabilities                 (1,496)       274     (1,548)       403
        Change in funds held by
         ceding insurers                153        379        441        431
        Change in funds held under
         reinsurance contracts           24        (19)        50        (97)
        Change in current income
         taxes payable                   14         15        (30)       (74)
        Future income tax expense       (51)        26        (62)        78
        Changes in fair value of
         financial instruments        1,919          -      2,333          -
        Other                           153        649       (818)        75
                                  ---------- ---------- ---------- ----------
    Cash flows from operations        1,274      1,799      1,452      1,747

    Financing Activities
      Issue of common shares              1          5         12         17
      Issue of preferred shares           -        300          -        300
      Purchased and cancelled
       common shares                      -        (15)         -        (30)
      Redemption of preferred shares      -        (12)         -        (12)
      Issue of subordinated
       debentures in subsidiary       1,000        336      1,000        336
      Issue of short term
       commercial paper                 124          -        124          -
      Repayment of debentures and
       other debt instruments           (18)       (10)       (27)       (22)
      Share issue costs                   -         (6)         -         (6)
      Dividends paid                   (242)      (213)      (483)      (423)
                                  ---------- ---------- ---------- ----------
                                        865        385        626        160

    Investment Activities
      Bond sales and maturities       5,287      6,200     11,819     13,332
      Mortgage loan repayments          502        473        971        911
      Stock sales                       424        262        777        556
      Real estate sales                  15        (74)        34         45
      Change in loans to
       policyholders                   (126)      (133)      (160)      (220)
      Change in repurchase
       agreements                       160          4       (267)       118
      Investment in bonds            (5,362)    (7,412)   (11,305)   (14,505)
      Investment in mortgage loans     (690)      (673)    (1,284)    (1,205)
      Investment in stocks             (664)      (285)    (1,236)      (638)
      Investment in real estate         (83)       (44)      (196)      (116)
                                  ---------- ---------- ---------- ----------
                                       (537)    (1,682)      (847)    (1,722)
    Effect of changes in exchange
     rates on cash and cash
     equivalents                       (166)        10       (182)        40

    Increase in cash and cash
     equivalents                      1,436        512      1,049        225

    Cash and cash equivalents,
     beginning of period              2,696      2,674      3,083      2,961
                                  ---------- ---------- ---------- ----------
    Cash and cash equivalents,
     end of period                 $  4,132   $  3,186   $  4,132   $  3,186
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------



    Notes to Interim Consolidated Financial Statements (unaudited)
    (in $ millions except per share amounts)


    1.  Basis of Presentation and Summary of Accounting Policies

        The interim unaudited consolidated financial statements of Great-West
        Lifeco Inc. (Lifeco or the Company) at June 30, 2007 have been
        prepared in accordance with Canadian generally accepted accounting
        principles, using the same accounting policies and methods of
        computation followed in the consolidated financial statements for the
        year ended December 31, 2006 except as noted below.  These interim
        consolidated financial statements should be read in conjunction with
        the consolidated financial statements and notes thereto in the
        Company's annual report dated December 31, 2006.

        (a) Financial Instruments

            Effective January 1, 2007, the Company adopted the Canadian
            Institute of Chartered Accountants (CICA) Handbook Section 4211,
            Life Insurance Enterprises; Section 3855, Financial Instruments -
            Recognition and Measurement; Section 3865, Hedges; Section 1530,
            Comprehensive Income.

            In addition to the adoption of the CICA standards, the Company
            adopted The Office of the Superintendent of Financial
            Institutions Canada Guideline D-10, Accounting for Financial
            Instruments Designated as "Held for Trading" (Fair Value
            Option) (OSFI D-10), which provides additional guidance to
            certain federally regulated financial institutions, including
            life insurance companies.

            Under the new guidance, all financial assets, including
            derivatives, must be classified as available for sale, held for
            trading, held to maturity, or loans and receivables. All
            financial liabilities, including derivatives, must be classified
            as held for trading or other. All financial instruments
            classified as available for sale or held for trading are
            recognized at fair value on the Consolidated Balance Sheets while
            financial instruments classified as loans and receivables or
            other will continue to be measured at amortized cost using the
            effective interest rate method. The standards allow the Company
            to designate certain financial instruments, on initial
            recognition, as held for trading. This option has been limited by
            the requirements of OSFI D-10.

            Changes in the fair value of financial instruments classified as
            held for trading are reported in net income. Unrealized gains or
            losses on financial instruments classified as available for sale
            are reported in Other Comprehensive Income until they are
            realized by the Company.

            The new guidance introduces the concept of Consolidated Other
            Comprehensive Income, which tracks unrealized gains and losses
            experienced by the Company on certain investments and derivative
            instruments, and the currency translation account movement.
            Consolidated Other Comprehensive Income together with
            Consolidated Net Income provides the financial statement reader
            with Consolidated Comprehensive Income. Consolidated
            Comprehensive Income is the total of all realized and unrealized
            income, expenses, gains and losses related to the Consolidated
            Balance Sheets including currency translation gains and losses on
            foreign subsidiary operations.

            Unless otherwise stated below, financial assets and liabilities
            will remain on the Consolidated Balance Sheets at amortized cost.

            Certain investments, primarily investments actively traded in a
            public market, and certain financial liabilities are measured at
            their fair value. Investments backing actuarial liabilities,
            investments backing participating account surplus in The Canada
            Life Assurance Company (Canada Life), and preferred shares
            classified as liabilities are designated as held for trading
            using the fair value option. Changes in the fair value of these
            investments flow through net income. This impact is largely
            offset by corresponding changes in the actuarial liabilities
            which also flow through net income. Investments backing
            shareholder capital and surplus, with the exception of the
            investments backing participating account surplus in Canada Life,
            are classified as available for sale. Unrealized gains and losses
            on these investments flow through Other Comprehensive Income
            until they are realized. Certain investment portfolios are
            classified as held for trading as a reflection of their
            underlying nature. Changes in the fair value of these investments
            flow through net income. There has been no change to the
            Company's method of accounting for real estate or loans.

            Derivative instruments, previously off-balance sheet, are
            recognized at their market value in the Consolidated Balance
            Sheets (note 5 and 7). Changes in the fair value of derivatives
            are recognized in net income except for derivatives designated as
            effective cash flow hedges.

            Derivatives embedded in financial instruments, or other
            contracts, which are not closely related to the host financial
            instrument, or contract, must be bifurcated and recognized
            independently. The change in accounting policy related to
            embedded derivatives did not have a significant impact on the
            financial statements of the Company.

            Three types of hedging relationships are permitted under the new
            guidance: fair value hedges, cash flow hedges, and hedges of net
            investments in self-sustaining foreign operations. Changes in
            fair value hedges are recognized in net income. The effective
            portion of cash flow hedges and hedges of net investments in
            self-sustaining foreign operations is offset through Other
            Comprehensive Income until the variability in cash flows being
            hedged is recognized in net income.

            Trade-date accounting will be used to account for all regular-way
            purchase or sale of investments traded on a public market and
            derivative instruments. Settlement-date accounting will be used
            to account for all regular-way purchase or sale of investments
            not traded on a public market.

            Transaction costs for financial assets and liabilities classified
            or designated as held for trading will be recognized immediately
            in net income. Transaction costs for financial assets classified
            as available for sale or loans and receivables will be added to
            the value of the instrument at acquisition and be taken into net
            income using the effective interest rate method. Transaction
            costs for financial liabilities classified as other than held for
            trading will be recognized immediately in net income.

            On January 1, 2007, transition adjustments were made to certain
            existing financial instruments to adjust their carrying value to
            market, to recognize derivative financial instruments on the
            balance sheet, to eliminate the recognition of deferred realized
            gains with corresponding adjustments to actuarial liabilities and
            opening accumulated surplus.

            The following table summarizes the adjustments made to adopt the
            new standards:

                                      December 31,                 Adjusted
                                          2006        Opening     January 1,
                                      as reported   adjustments      2007
                                     ------------- ------------- ------------
                                      (note 1(d))
            Assets

            Bonds                     $   65,246    $  (65,246)   $        -
              Classified as available
               for sale                        -         5,675         5,675
              Classified as held
               for trading                     -        48,799        48,799
              Designated as held
               for trading                     -         1,650         1,650
              Loans and receivables            -        10,035        10,035
                                     ------------  ------------  ------------
                                          65,246           913        66,159

            Mortgage loans                15,334           (46)       15,288

            Stocks                         4,766        (4,460)          306
              Classified as
               available for sale              -           904           904
              Classified as held
               for trading                     -         4,210         4,210
                                     ------------  ------------  ------------
                                           4,766           654         5,420

            All other assets              35,182           (43)       35,139
                                     ------------  ------------  ------------
            Total assets              $  120,528    $    1,478    $  122,006
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------

            Liabilities

            Policy liabilities        $   93,978    $    3,896    $   97,874
            Funds held under
             reinsurance contracts         1,822           121         1,943
            Deferred net realized
             gains                         2,821        (2,628)          193
            Preferred share liability
             (Series D and E)                756            71           827
            All other liabilities          7,790             -         7,790
                                     ------------  ------------  ------------
                                         107,167         1,460       108,627

            Non-controlling interests
            Participating account
             surplus in subsidiaries       1,884           129         2,013
            Other non-controlling
             interests                       363             -           363

            Share capital and surplus

            Share capital                  5,775             -         5,775

            Shareholder surplus
              Accumulated surplus          5,858          (368)        5,490
              Accumulated other
               comprehensive income            -          (290)         (290)
              Contributed surplus             28             -            28
              Currency translation
               account                      (547)          547             -
                                     ------------  ------------  ------------
                                          11,114          (111)       11,003
                                     ------------  ------------  ------------
            Liabilities, share
             capital and surplus      $  120,528    $    1,478    $  122,006
                                     ------------  ------------  ------------
                                     ------------  ------------  ------------

        (b) Determining Variable Interest Entities

            The Company adopted the Emerging Issues Committee (EIC) of the
            CICA EIC-163, Determining the Variability to be Considered in
            Applying AcG-15 on January 1, 2007. EIC-163 provides additional
            guidance on consolidation of variable interest entities.

        (c) New Accounting Requirements

            Capital Disclosures
            -------------------
            Effective January 1, 2008, the Company will be required to comply
            with CICA Handbook Section 1535, Capital Disclosures. The section
            establishes standards for disclosing information that enables
            users of financial statements to evaluate the entity's
            objectives, policies and processes for managing capital. The new
            requirements are for disclosure only and will not impact
            financial results of the Company.

            Financial Instrument Disclosure and Presentation
            ------------------------------------------------
            Effective January 1, 2008, the Company will be required to comply
            with CICA Handbook Section 3862, Financial Instruments -
            Disclosures, and Section 3863, Financial Instruments -
            Presentation. These sections will replace existing Section 3861,
            Financial Instruments - Disclosure and Presentation. Presentation
            standards are carried forward unchanged. Disclosure standards are
            enhanced and expanded to complement the changes in accounting
            policy adopted in accordance with Section 3855, Financial
            Instruments - Recognition and Measurement.

        (d) Comparative Figures

            Certain of the 2006 amounts presented for comparative purposes
            have been reclassified to conform to the presentation adopted in
            the current year. This reclassification has resulted in an
            increase to total assets of $65 at December 31, 2006 and $74 at
            June 30, 2006, with a corresponding increase in total
            liabilities.

            Comparative figures have not been restated to conform with the
            new Financial Instruments accounting policies adopted January 1,
            2007. CICA guidance explicitly prevents restatement of
            comparative information under the new standards.


    2.  Portfolio Investments

        (a) Carrying values of the portfolio investments are as follows:

                                        June 30, 2007
                 ------------------------------------------------------------
                         Market Value               Amortized Cost     Total
                 ------------------------------ ---------------------- ------
                            Held for trading(1)
                            -------------------                Non-
                 Available    Desig-  Classi-  Loans and    financial
                  for sale    nated     fied  receivables  instruments
                 ---------- -------- -------- ----------- ------------ ------

    Bonds
    - government   $ 1,850   $18,855  $   908    $ 1,977   $     -   $23,590
    - corporate      3,213    34,646      684      7,323         -    45,866
                  --------- --------- -------- ---------- --------- ---------
                     5,063    53,501    1,592      9,300         -    69,456
                  --------- --------- -------- ---------- --------- ---------
    Mortgage loans
    - residential        -         -        -      7,230         -     7,230
    - non-residential    -         -        -      7,942         -     7,942
                  --------- --------- -------- ---------- --------- ---------
                         -         -        -     15,172         -    15,172
                  --------- --------- -------- ---------- --------- ---------
    Stocks             844     4,709        -          -       313     5,866

    Real estate          -         -        -          -     2,207     2,207
                  --------- --------- -------- ---------- --------- ---------
                   $ 5,907   $58,210  $ 1,592    $24,472   $ 2,520   $92,701
                  --------- --------- -------- ---------- --------- ---------
                  --------- --------- -------- ---------- --------- ---------


                  December    June
                     31,       30,
                    2006      2006
                 ---------- ---------

                  Carrying  Carrying
                   value     value
                 ---------- ---------

    Bonds
    - government   $22,069   $19,217
    - corporate     43,177    41,262
                  --------- ---------
                    65,246    60,479
                  --------- ---------
    Mortgage loans
    - residential    7,342     7,272
    - non-
       residential   7,992     7,583
                  --------- ---------
                    15,334    14,855
                  --------- ---------
    Stocks           4,766     4,236

    Real estate      2,216     1,868
                  --------- ---------
                   $87,562   $81,438
                  --------- ---------
                  --------- ---------

        (1) Investments can be held for trading in two ways: designated as
            held for trading at the option of management; or, classified as
            held for trading if they are actively traded for the purpose of
            earning investment income.


        (b) Stocks include the Company's investment in an affiliated company,
            IGM Financial Inc. (IGM), a member of the Power Financial
            Corporation group of companies, over which it exerts significant
            influence but does not control. As a result of changes in
            circumstances, the investment is accounted for using the equity
            method of accounting as at January 1, 2007. The portfolio method
            of accounting was used to account for the Company's investment in
            IGM in prior years.

                                         June 30,   December 31,   June 30,
                                           2007        2006          2006
                                       ------------ ------------ ------------

            Carrying value,
             beginning of year          $      306   $      276   $      276
            Equity method earnings              14            -            -
            Dividends                           (7)           -            -
            Portfolio method earnings            -           30           15
                                       ------------ ------------ ------------
            Carrying value,
             end of period              $      313   $      306   $      291
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------
            Share of equity,
             end of period              $      142   $      133   $      127
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------
            Fair value, end of period   $      476   $      452   $      410
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

            The Company owns 9,205,911 shares of IGM at June 30, 2007
            (9,205,933 at December 31, 2006; 9,205,705 at June 30, 2006)
            representing a 3.48% ownership interest (3.48% at December 31,
            2006; 3.48% at June 30, 2006).

    3.  Net Investment Income

        Net investment income is comprised of the following:


    For the three months            Mortgage          Real
     ended June 30, 2007     Bonds   loans   Stocks  estate   Other   Total
    ----------------------- ------- -------- ------- ------- ------- --------

    Regular net investment
     income:
      Investment income
       earned               $   950  $  224  $   44  $   26  $  212  $ 1,456
      Net realized gains
       (losses)
        (available for sale)      7       -       -       -       -        7
      Net realized gains
       (losses)
        (other classifications)  11       9       -       -       -       20
      Recovery of credit losses   -       4       -       -       -        4
      Amortization of deferred
       net realized gains         -       -       -      18       -       18
      Other income and expenses   -       -       -       -     (18)     (18)
                            -------- ------- ------- ------- ------- --------
                                968     237      44      44     194    1,487

    Changes in fair value on
     held for trading assets:
      Net realized/unrealized
       gains (losses)
        (classified held
         for trading)           (18)      -       -       -       -      (18)
      Net realized/unrealized
       gains (losses)
        (designated held
         for trading)        (1,967)      -     133       -     (79)  (1,913)
                            -------- ------- ------- ------- ------- --------
                             (1,985)      -     133       -     (79)  (1,931)
                            -------- ------- ------- ------- ------- --------

    Net investment income   $(1,017) $  237  $  177  $   44  $  115  $  (444)
                            -------- ------- ------- ------- ------- --------
                            -------- ------- ------- ------- ------- --------


    For the three months            Mortgage          Real
     ended June 30, 2006     Bonds   loans   Stocks  estate   Other   Total
    ----------------------- ------- -------- ------- ------- ------- --------

    Investment income
     earned                 $ 1,009  $  215  $   32  $   28  $  107  $ 1,391
    Amortization of net
     realized and
     unrealized gains            63      12      48      15       -      138
    Recovery for credit
     losses                       4       1       -       -       -        5
    Investment expenses           -       -       -       -     (18)     (18)
                            -------- ------- ------- ------- ------- --------

    Net investment income   $ 1,076  $  228  $   80  $   43  $   89  $ 1,516
                            -------- ------- ------- ------- ------- --------
                            -------- ------- ------- ------- ------- --------


    For the six months              Mortgage          Real
     ended June 30, 2007     Bonds   loans   Stocks  estate   Other   Total
    ----------------------- ------- -------- ------- ------- ------- --------

    Regular net investment
     income:
      Investment income
       earned               $ 1,875  $  448  $   88  $   61  $  364  $ 2,836
      Net realized gains
       (losses)
        (available for sale)     32       -       3       -       -       35
      Net realized gains
       (losses)
        (other classifications)  13      15       -       -       -       28
      Recovery of credit losses   1       4       -       -       -        5
      Amortization of deferred
       net realized gains         -       -       -      37       -       37
      Other income and
       expenses                   -       -       -       -     (36)     (36)
                            -------- ------- ------- ------- ------- --------
                              1,921     467      91      98     328    2,905

    Changes in fair value on
     held for trading assets:
      Net realized/unrealized
       gains (losses)
        (classified held
         for trading)           (21)      -       -       -       -      (21)
      Net realized/unrealized
       gains (losses)
        (designated held
         for trading)        (2,446)      -     212       -     (92)  (2,326)
                            -------- ------- ------- ------- ------- --------
                             (2,467)      -     212       -     (92)  (2,347)
                            -------- ------- ------- ------- ------- --------

    Net investment income   $  (546) $  467  $  303  $   98  $  236  $   558
                            -------- ------- ------- ------- ------- --------
                            -------- ------- ------- ------- ------- --------


    For the six months              Mortgage          Real
     ended June 30, 2006     Bonds   loans   Stocks  estate   Other   Total
    ----------------------- ------- -------- ------- ------- ------- --------

    Investment income
     earned                 $ 1,809  $  431  $   65  $   54  $  206  $ 2,565
    Amortization of net
     realized and
     unrealized gains           124      24     124      29       -      301
    Recovery for credit
     losses                       6       1       -       -       -        7
    Investment expenses           -       -       -       -     (34)     (34)
                            -------- ------- ------- ------- ------- --------

    Net investment income   $ 1,939  $  456  $  189  $   83  $  172  $ 2,839
                            -------- ------- ------- ------- ------- --------
                            -------- ------- ------- ------- ------- --------


    4.  Financing Charges

        Financing charges consist of the following:

                                  For the three months   For the six months
                                      ended June 30         ended June 30
                                  --------------------- ---------------------
                                     2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------
        Interest on long-term
         debentures and other
         debt instruments          $     32   $     30   $     62   $     57
        Preferred share dividends         9          9         18         19
        Unrealized gains on
         preferred shares classified
         as held for trading            (12)         -        (14)         -
        Subordinated debenture
         issue costs                     13          -         13          -
        Other                             1          2          6          3
        Interest on capital trust
         debentures                      12         12         24         24
        Distributions on capital
         trust securities held by
         consolidated group as
         temporary investments           (2)        (2)        (5)        (5)
                                  ---------- ---------- ---------- ----------
        Total                      $     53   $     51   $    104   $     98
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    5.  Other Assets

        Other assets consist of the following:

                                         June 30,   December 31,   June 30,
                                           2007        2006          2006
                                       ------------ ------------ ------------

        Premiums in course of
         collection                     $      535   $      566   $      572
        Interest due and accrued             1,049        1,009          927
        Derivative financial
         instruments (note 1(a))               796            -            -
        Other investment receivables           319            -            -
        Future income taxes                    398          369          367
        Fixed assets                           259          263          256
        Prepaid expenses                        55           64           76
        Accounts receivable                    709          754          648
        Accrued pension asset                  202          189          181
        Other                                  705          503          396
                                       ------------ ------------ ------------
                                        $    5,027   $    3,717   $    3,423
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------


    6.  Debentures and Other Debt Instruments

        Debentures and other debt instruments consist of the following:

                                         June 30,   December 31,   June 30,
                                           2007        2006          2006
                                       ------------ ------------ ------------
        Short term
          Commercial paper and other
           short term debt instruments
           with interest rates from
           5.3% to 5.4% (5.2% to 5.3%
           in 2006)                     $      200   $      110   $      103
          Revolving credit in respect
           of reinsurance business
           with interest rates of 6.0%
           maturing within one year
           (6.0% in 2006)                        1            1            2
                                       ------------ ------------ ------------
        Total short term                       201          111          105
        Long term
          Operating:
            Note payable with interest
             rate of 8.0%                        7            8            8
          Capital:
            Lifeco
              6.75% Debentures due
               August 10, 2015,
               unsecured                       200          200          200
              6.14% Debentures due
               March 21, 2018,
               unsecured                       200          200          200
              6.74% Debentures due
               November 24, 2031,
               unsecured                       200          200          200
              6.67% Debentures due
               March 21, 2033,
               unsecured                       400          400          400
                                       ------------ ------------ ------------
                                             1,000        1,000        1,000

            Canada Life
              Subordinated debentures
               due September 19, 2011
               bearing a fixed rate of
               8% until 2006 and,
               thereafter, at a rate
               equal to the Canadian
               90-day Bankers'
               Acceptance rate plus 1%,
               unsecured                         -            -          250
              Subordinated debentures
               due December 11, 2013
               bearing a fixed rate of
               5.8% until 2008 and,
               thereafter, at a rate
               equal to the Canadian
               90-day Bankers'
               Acceptance rate plus 1%,
               unsecured                       200          200          200
              6.40% Subordinated
               debentures due
               December 11, 2028,
               unsecured                       100          100          100
              Acquisition related fair
               market value adjustment           4            5            8
                                       ------------ ------------ ------------
                                               304          305          558

            Great-West Life & Annuity
             Insurance Capital, LP
              6.625% Deferrable
               debentures due
               November 15, 2034,
               unsecured (U.S.$175)            184          205          197

            Great-West Life & Annuity
             Insurance Capital, LP II
              7.153% Subordinated
               debentures due May 16,
               2046, unsecured
               (U.S.$300)                      318          351          336

            Great-West Lifeco Finance
             (Delaware) LP
              Subordinated debentures
               due June 21, 2067
               bearing an interest rate
               of 5.691% until 2017 and,
               thereafter, at a rate
               equal to the Canadian
               90-day Bankers'
               Acceptance rate plus
               1.49%, unsecured              1,000            -            -
                                       ------------ ------------ ------------
        Total long term                      2,813        1,869        2,099
                                       ------------ ------------ ------------
        Total debentures and other
         debt instruments               $    3,014   $    1,980   $    2,204
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

        On June 20, 2007, Lifeco borrowed $124 under an existing revolving
        line of credit facility with a Canadian chartered bank.


        During the second quarter of 2007, the Company issued $1.0 billion of
        5.691% Subordinated Debentures through its wholly-owned subsidiary
        Great-West Lifeco Finance (Delaware) LP. The subordinated debentures
        are due June 21, 2067 and bear an interest rate of 5.691% until
        June 21, 2017. After June 21, 2017, the subordinated debentures will
        bear an interest rate of the three month bankers' acceptance rate
        plus 1.49%. The subordinated debentures may be redeemed by the
        Company at the principal amount plus any unpaid and accrued interest
        after June 21, 2017.

    7.  Other Liabilities

        Other liabilities consist of the following:

                                         June 30,   December 31,   June 30,
                                           2007        2006          2006
                                       ------------ ------------ ------------

        Current income taxes            $      214   $      246   $      260
        Accounts payable                       383          459          384
        Post-retirement benefits
         provision                             521          520          521
        Bank overdraft                         430          446          464
        Future income taxes                    373          369          306
        Derivative financial
         instruments (note 1(a))               154            -            2
        Other                                2,063        2,127        2,040
                                       ------------ ------------ ------------
                                        $    4,138   $    4,167   $    3,977
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------


    8.  Capital Trust Securities and Debentures

                                         June 30,   December 31,   June 30,
                                           2007        2006          2006
                                       ------------ ------------ ------------
        Capital trust debentures:
          5.995% Senior debentures due
           December 31, 2052,
           unsecured (GWLCT)                   350          350          350
          6.679% Senior debentures due
           June 30, 2052,
           unsecured (CLCT)                    300          300          300
          7.529% Senior debentures due
           June 30, 2052, unsecured
           (CLCT)                              150          150          150
                                       ------------ ------------ ------------
                                               800          800          800
        Acquisition related fair market
         value adjustment                       29           31           32
        Trust securities held by
         consolidated group as
         temporary investments                (191)        (185)        (185)
                                       ------------ ------------ ------------
        Total                           $      638   $      646   $      647
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------

        Great-West Life Capital Trust (GWLCT), a trust established by The
        Great-West Life Assurance Company (Great-West Life), had issued $350
        of capital trust securities, the proceeds of which were used by GWLCT
        to purchase Great-West Life senior debentures in the amount of $350,
        and Canada Life Capital Trust (CLCT), a trust established by Canada
        Life, had issued $450 of capital trust securities, the proceeds of
        which were used by CLCT to purchase Canada Life senior debentures in
        the amount of $450.

    9.  Non-Controlling Interests

        The Company controlled a 100% equity interest in Great-West Life,
        London Life Insurance Company (London Life), Canada Life and Great-
        West Life & Annuity Insurance Company (GWL&A) at June 30, 2007 and
        June 30, 2006.

        (a) The non-controlling interests of Great-West Life, London Life,
            Canada Life, GWL&A and their subsidiaries reflected in the
            Summary of Consolidated Operations are as follows:

                                  For the three months   For the six months
                                      ended June 30         ended June 30
                                  --------------------- ---------------------
                                     2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------

            Participating account
              Net income
               attributable to
               participating
               account before
               policyholder
               dividends
                Great-West Life    $     31   $     30   $     61   $     59
                London Life             180        190        346        352
                Canada Life              52         45        105         92
                GWL&A                    24         26         74         69
                                  ---------- ---------- ---------- ----------
                                        287        291        586        572

              Policyholder
               dividends
                Great-West Life         (27)       (25)       (54)       (51)
                London Life            (149)      (141)      (295)      (280)
                Canada Life             (51)       (44)      (103)       (90)
                GWL&A                   (22)       (24)       (67)       (64)
                                  ---------- ---------- ---------- ----------
                                       (249)      (234)      (519)      (485)
                                  ---------- ---------- ---------- ----------
              Net income -
               participating
               account                   38         57         67         87
                                  ---------- ---------- ---------- ----------

            Preferred shareholder
             dividends of
             subsidiaries                 5          5          9          9
                                  ---------- ---------- ---------- ----------

            Total                  $     43   $     62   $     76   $     96
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------


        (b) The carrying value of non-controlling interests consist of the
            following:

                                         June 30,   December 31,   June 30,
                                           2007        2006          2006
                                       ------------ ------------ ------------
            Participating account
             surplus:
              Great-West Life           $      409   $      370   $      380
              London Life                    1,430        1,275        1,218
              Canada Life                       30           35           27
              GWL&A                            243          204          189

            Participating account
             accumulated other
             comprehensive income:
              Great-West Life                    5            -            -
              London Life                      (49)           -            -
              Canada Life                        2            -            -
              GWL&A                            (49)           -            -
                                       ------------ ------------ ------------
                                        $    2,021   $    1,884   $    1,814
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------
            Preferred shares issued by
             subsidiaries:
              Great-West Life Series L,
               5.20% Non-Cumulative     $       52   $       52   $       52
              Great-West Life Series O,
               5.55% Non-Cumulative            157          157          157
                                       ------------ ------------ ------------
                                        $      209   $      209   $      209
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------
            Perpetual preferred shares
             issued by subsidiaries:
              CLFC Series B,
               6.25% Non-Cumulative     $      145   $      145   $      145
              Acquisition related fair
               market value adjustment           8            9           10
                                       ------------ ------------ ------------
                                        $      153   $      154   $      155
                                       ------------ ------------ ------------
                                       ------------ ------------ ------------


        (c) The non-controlling interests of Great-West Life, London Life,
            Canada Life, GWL&A and their subsidiaries reflected in Other
            Comprehensive Income are as follows:

                                                        For the      For the
                                                   three months   six months
                                                          ended        ended
                                                        June 30      June 30
                                                   ------------- ------------
                                                           2007         2007
                                                   ------------- ------------
            Participating account
              Other comprehensive income
               attributable to participating
               account
                Great-West Life                      $       (4)  $       (5)
                London Life                                 (34)         (34)
                Canada Life                                   -            -
                GWL&A                                       (22)         (21)
                                                   ------------- ------------
              Other comprehensive income -
               participating account                 $      (60)  $      (60)
                                                   ------------- ------------
                                                   ------------- ------------


    10. Capital

        Authorized

        Unlimited First Preferred Shares, Class A Preferred Shares and Second
        Preferred Shares, Unlimited Common Shares

        Issued and outstanding

                                   June 30, 2007         December 31, 2006
                              ----------------------- -----------------------
                                            Carrying                 Stated
                                 Number      value       Number       value
                              ------------- --------- ------------- ---------
    Classified as liabilities
    Preferred shares:
    Designated as held for
     trading (1)
    Series D, 4.70% Non-
     Cumulative
     First Preferred Shares      7,978,900   $   206     7,978,900   $   199
    Series E, 4.80% Non-
     Cumulative
     First Preferred Shares     22,282,215       607    22,282,215       557
                              ------------- --------- ------------- ---------
                                30,261,115   $   813    30,261,115   $   756
                              ------------- --------- ------------- ---------
                              ------------- --------- ------------- ---------

    Classified as equity
    Perpetual preferred shares:
    Series F, 5.90% Non-
     Cumulative
     First Preferred Shares      7,957,001   $   199     7,957,001   $   199
    Series G, 5.20% Non-
     Cumulative
     First Preferred Shares     12,000,000       300    12,000,000       300
    Series H, 4.85% Non-
     Cumulative
     First Preferred Shares     12,000,000       300    12,000,000       300
    Series I, 4.50% Non-
     Cumulative
     First Preferred Shares     12,000,000       300    12,000,000       300
                              ------------- --------- ------------- ---------
                                43,957,001   $ 1,099    43,957,001   $ 1,099
                              ------------- --------- ------------- ---------
                              ------------- --------- ------------- ---------

    Common shares:
    Balance, beginning of
     year                      891,151,789   $ 4,676   890,689,076   $ 4,660
    Purchased and cancelled
     under Normal Course
     Issuer Bid                          -         -    (1,847,300)       (9)
    Issued under Stock Option
     Plan                        1,082,557        12     2,310,013        25
                              ------------- --------- ------------- ---------
    Balance, end of period     892,234,346   $ 4,688   891,151,789   $ 4,676
                              ------------- --------- ------------- ---------
                              ------------- --------- ------------- ---------


                                   June 30, 2006
                              -----------------------
                                             Stated
                                 Number      value
                              ------------- ---------
    Classified as liabilities
    Preferred shares:
    Designated as held for
     trading (1)
    Series D, 4.70% Non-
     Cumulative
     First Preferred Shares      7,978,900   $   199
    Series E, 4.80% Non-
     Cumulative
     First Preferred Shares     23,022,915       576
                              ------------- ---------
                                31,001,815   $   775
                              ------------- ---------
                              ------------- ---------

    Classified as equity
    Perpetual preferred shares:
    Series F, 5.90% Non-
     Cumulative
     First Preferred Shares      7,957,001   $   199
    Series G, 5.20% Non-
     Cumulative
     First Preferred Shares     12,000,000       300
    Series H, 4.85% Non-
     Cumulative
     First Preferred Shares     12,000,000       300
    Series I, 4.50% Non-
     Cumulative
     First Preferred Shares     12,000,000       300
                              ------------- ---------
                                43,957,001   $ 1,099
                              ------------- ---------
                              ------------- ---------

    Common shares:
    Balance, beginning of
     year                      890,689,076   $ 4,660
    Purchased and cancelled
     under Normal Course
     Issuer Bid                 (1,023,300)       (6)
    Issued under Stock Option
     Plan                        1,604,850        17
                              ------------- ---------
    Balance, end of period     891,270,626   $ 4,671
                              ------------- ---------
                              ------------- ---------

    (1) The Company has elected to designate the outstanding Preferred Shares
        Series D and Series E, as held for trading resulting in an increase
        of $71 in the carrying value effective January 1, 2007 (see
        note 1(a)). The effect of the change at June 30, 2007 is an increase
        of $57 (Series D - $7, Series E -$50). The stated value at maturity
        is $25.00 per share plus accrued dividends.


    11. Stock Based Compensation

        No options were granted under the Company's stock option plan during
        the second quarter 2007 and 1,749,000 options were granted during the
        first quarter of 2007 (no options were granted during the first
        quarter of 2006 and 50,000 options were granted during the second
        quarter of 2006). The weighted-average fair value of options granted
        during the six months ended June 30, 2007 were $7.49 per option
        ($5.48 per option during the six months ended June 30, 2006).
        Compensation expense of $3 after tax has been recognized in the
        Summary of Consolidated Operations for the six months ended June 30,
        2007 ($5 after tax for the six months ended June 30, 2006).

    12. Pension Plans and Other Post Retirement Benefits

        The total benefit costs included in operating expenses are as
        follows:

                                  For the three months   For the six months
                                      ended June 30         ended June 30
                                  --------------------- ---------------------
                                     2007       2006       2007       2006
                                  ---------- ---------- ---------- ----------

        Pension benefits           $     11   $     19   $     22   $     39
        Other benefits                    5          5         10         11
                                  ---------- ---------- ---------- ----------
        Total                      $     16   $     24   $     32   $     50
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------


    13. Earnings Per Common Share

                             For the three months       For the six months
                                 ended June 30             ended June 30
                          ------------------------- -------------------------
                               2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
        a) Earnings

           Net income -
            common
            shareholders  $       544  $       461  $     1,058  $       907
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
        b) Number of
            common shares

           Average number
            of common
            shares
            outstanding   892,170,991  890,989,489  891,871,142  890,989,489
           Add:
             - Potential
               exercise
               of out-
               standing
               stock
               options      6,612,015    6,649,699    6,818,203    6,649,699
                          ------------ ------------ ------------ ------------
           Average number
            of common
            shares out-
            standing -
            diluted
            basis         898,783,006  897,639,188  898,689,345  897,639,188
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
        Earnings per
         common share

           Basic          $     0.610  $     0.516  $     1.186  $     1.017
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

           Diluted        $     0.606  $     0.513  $     1.177  $     1.010
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


    14. Accumulated Other Comprehensive Income

                                For the six months ended June 30, 2007
                          ---------------------------------------------------
                           Unrealized
                              foreign
                             exchange
                                gains   Unrealized
                              (losses)       gains   Unrealized
                             on trans-     (losses)       gains
                               lation     on avail-     (losses)
                           of foreign     able for      on cash
                           operations  sale assets  flow hedges        Total
                          ------------ ------------ ------------ ------------
    Balance, beginning of
     year                     $     -      $     -      $     -      $     -

    Opening transition
     adjustment                  (591)         379            -         (212)
    Income tax                      -         (108)           -         (108)
                          ------------ ------------ ------------ ------------
                                 (591)         271            -         (320)

    Other comprehensive
     income                      (588)        (159)         (59)        (806)
    Income tax                      -           38           21           59
                          ------------ ------------ ------------ ------------
                                 (588)        (121)         (38)        (747)

                          ------------ ------------ ------------ ------------
    Balance, end of period    $(1,179)     $   150      $   (38)     $(1,067)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


                   For the six months ended June 30, 2007
                          -------------------------
                                  Non-
                          controlling        Share-
                             interest       holder
                          ------------ ------------
    Balance, beginning of
     year                     $     -      $     -

    Opening transition
     adjustment                    26         (186)
    Income tax                      4         (104)
                          ------------ ------------
                                   30         (290)

    Other comprehensive
     income                        64         (742)
    Income tax                     (4)          55
                          ------------ ------------
                                   60         (687)

                          ------------ ------------
    Balance, end of period    $    90      $  (977)
                          ------------ ------------
                          ------------ ------------


    15. Acquisitions

        (a) Putnam Investment Trust

            On February 1, 2007, Lifeco announced that it had entered into
            agreements with Marsh & McLennan Companies, Inc. whereby Lifeco
            will acquire the asset management business of Putnam Investment
            Trust (Putnam), and Great-West Life will acquire Putnam's 25%
            interest in T.H. Lee Partners for approximately $371 (U.S. $350).
            The parties will make an election under section 338(h)(10) of the
            U.S. Internal Revenue Code that will result in a tax benefit that
            Lifeco intends to securitize for approximately $583 (U.S. $550).
            In aggregate these transactions represent a value of
            approximately $4.1 billion (U.S. $3.9 billion).

            Funding for the transaction will come from internal resources as
            well as from proceeds of an issue of Lifeco common shares of no
            more than $1.2 billion, the issuance of debentures and hybrids, a
            bank credit facility, and an acquisition tax benefit
            securitization. Also refer to note 17, Subsequent Events.

        (b) Other Acquisitions

            On May 31, 2007, GWL&A acquired an 80% equity interest in
            Benefits Management Corporation (BMC). The assets acquired,
            liabilities assumed and the Company's equity interest in the
            results of BMC's operations have been included in its
            consolidated financial statements since that date. The
            acquisition will add approximately 90,000 members to the
            Company's medical membership. BMC's principal subsidiary,
            Allegiance Benefit Management, Inc., is a Montana-based third-
            party administrator of employee health plans.

            The value of identifiable intangible assets acquired reflects the
            estimated fair value of the Company's interest in BMC's customer
            base at the time of acquisition. The value of the identifiable
            intangible assets will be amortized in relation to the expected
            economic benefits of the business acquired. If actual experience
            differs from expectations, the amortization will be adjusted to
            reflect actual experience.

    16. Segmented Information
        Consolidated Operations
        For the three months ended June 30, 2007

                                                             Lifeco
                                           United             Cor-
                                  Canada   States   Europe   porate   Total
                                 -------- -------- -------- -------- --------

    Income:
      Premium income             $ 1,888  $   673  $ 1,705  $     -  $ 4,266
      Net investment income
        Regular net investment
         income                      621      359      496       11    1,487
        Changes in fair value
         on held for trading
         assets                     (643)    (229)  (1,059)       -   (1,931)
                                 -------- -------- -------- -------- --------
      Total net investment
       income                        (22)     130     (563)      11     (444)
      Fee and other income           254      326      169        -      749
                                 -------- -------- -------- -------- --------

    Total income                   2,120    1,129    1,311       11    4,571
                                 -------- -------- -------- -------- --------

    Benefits and expenses:
      Paid or credited to
       policyholders               1,222      609      933        -    2,764
      Other                          519      319      192       15    1,045
      Amortization of finite
       life intangible assets          3        3        1        -        7
                                 -------- -------- -------- -------- --------

    Net operating income
     before income taxes             376      198      185       (4)     755

    Income taxes                      75       60       21       (2)     154
                                 -------- -------- -------- -------- --------

    Net income before
     non-controlling
     interests                       301      138      164       (2)     601

    Non-controlling interests         34        2        7        -       43
                                 -------- -------- -------- -------- --------

    Net income - shareholders        267      136      157       (2)     558

    Perpetual preferred share
     dividends                        10        -        4        -       14
                                 -------- -------- -------- -------- --------

    Net income - common
     shareholders                $   257  $   136  $   153  $    (2) $   544
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------


    For the three months ended June 30, 2006

                                                             Lifeco
                                           United             Cor-
                                  Canada   States   Europe   porate   Total
                                 -------- -------- -------- -------- --------
    Income:
      Premium income             $ 1,636  $   677  $ 2,131  $     -  $ 4,444
      Net investment income          686      337      493        -    1,516
      Fee and other income           223      290      154        -      667
                                 -------- -------- -------- -------- --------

    Total income                   2,545    1,304    2,778        -    6,627
                                 -------- -------- -------- -------- --------

    Benefits and expenses:
      Paid or credited to
       policyholders               1,617      843    2,499        -    4,959
      Other                          527      286      176        1      990
      Amortization of finite
       life intangible assets          4        -        1        -        5
                                 -------- -------- -------- -------- --------

    Net operating income
     before income taxes             397      175      102       (1)     673

    Income taxes                      91       44       (5)       6      136
                                 -------- -------- -------- -------- --------

    Net income before
     non-controlling
     interests                       306      131      107       (7)     537

    Non-controlling interests         50        4        8        -       62
                                 -------- -------- -------- -------- --------

    Net income - shareholders        256      127       99       (7)     475

    Perpetual preferred
     share dividends                  11        -        3        -       14
                                 -------- -------- -------- -------- --------

    Net income - common
     shareholders                $   245  $   127  $    96  $    (7) $   461
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------


    For the six months ended June 30, 2007

                                                             Lifeco
                                           United             Cor-
                                  Canada   States   Europe   porate   Total
                                 -------- -------- -------- -------- --------
    Income:
     Premium income              $ 3,693  $ 1,547  $ 4,639  $     -  $ 9,879
     Net investment income
      Regular net investment
       income                      1,246      740      907       12    2,905
      Changes in fair value on
       held for trading assets      (674)    (191)  (1,482)       -   (2,347)
                                 -------- -------- -------- -------- --------
     Total net investment income     572      549     (575)      12      558
     Fee and other income            509      673      331        -    1,513
                                 -------- -------- -------- -------- --------

    Total income                   4,774    2,769    4,395       12   11,950
                                 -------- -------- -------- -------- --------

    Benefits and expenses:
      Paid or credited to
       policyholders               2,990    1,698    3,660        -    8,348
      Other                        1,097      657      363       16    2,133
      Amortization of finite life
       intangible assets               7        6        2        -       15
                                 -------- -------- -------- -------- --------

    Net operating income
    before income taxes              680      408      370       (4)   1,454

    Income taxes                     119      122       53       (2)     292
                                 -------- -------- -------- -------- --------

    Net income before
     non-controlling
     interests                       561      286      317       (2)   1,162

    Non-controlling interests         58        8       10        -       76
                                 -------- -------- -------- -------- --------

    Net income - shareholders        503      278      307       (2)   1,086

    Perpetual preferred
     share dividends                  21        -        7        -       28
                                 -------- -------- -------- -------- --------

    Net income - common
     shareholders                $   482  $   278  $   300  $    (2) $ 1,058
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------


    For the six months ended June 30, 2006

                                                             Lifeco
                                           United             Cor-
                                  Canada   States   Europe   porate   Total
                                 -------- -------- -------- -------- --------

    Income:
      Premium income             $ 3,211  $ 1,369  $ 3,559  $     -  $ 8,139
      Net investment income        1,370      672      797        -    2,839
      Fee and other income           439      587      298        -    1,324
                                 -------- -------- -------- -------- --------
    Total income                   5,020    2,628    4,654        -   12,302
                                 -------- -------- -------- -------- --------

    Benefits and expenses:
      Paid or credited to
       policyholders               3,145    1,681    4,134        -    8,960
      Other                        1,147      575      277        2    2,001
      Amortization of finite
       life intangible assets          7        -        2        -        9
                                 -------- -------- -------- -------- --------

    Net operating income
     before income taxes             721      372      241       (2)   1,332

    Income taxes                     173      105       19        8      305
                                 -------- -------- -------- -------- --------

    Net income before
     non-controlling
     interests                       548      267      222      (10)   1,027

    Non-controlling interests         78        6       12        -       96
                                 -------- -------- -------- -------- --------

    Net income - shareholders        470      261      210      (10)     931

    Perpetual preferred
     share dividends                  21        -        3        -       24
                                 -------- -------- -------- -------- --------

    Net income - common
     shareholders                $   449  $   261  $   207  $   (10) $   907
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------

    17. Subsequent Events

    (a) On July 5, 2007, Canada Life acquired all of the remaining
        outstanding common shares of Crown Life Insurance Company
        (Crown Life) for cash consideration of $115. The allocation of the
        purchase price to the assets acquired and liabilities assumed is
        expected to be completed during the remainder of 2007. It is
        anticipated that the acquisition will result in an increase in
        invested assets of approximately $533, an increase in other assets of
        approximately $32, an increase in policyholder liabilities of
        approximately $383 and an increase in other liabilities of
        approximately $67. Results of Crown Life will be included in the
        Summary of Consolidated Operations from the date of acquisition and
        are not expected to have a material impact to the financial results
        of the Company.

    (b) On July 23, 2007, Great-West Life announced its intention to redeem
        all 2,093,032 Non-Cumulative Preferred Shares, Series L on
        October 31, 2007 for cash redemption price of $25.00 per share.

    (c) Putnam Investment Trust

        Related to the acquisition of Putnam Investment Trust, all regulatory
        approvals have been received and the pre-closing conditions have been
        satisfied. The transaction is expected to close in the third quarter.
    





For further information:

For further information: Marlene Klassen, Director, Media & Public
Relations, (204) 946-7705


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