February 9, 2017
Great-West Lifeco reports fourth quarter 2016 results, increases dividend by 6%
Readers are referred to the cautionary notes regarding Forward-Looking Information and Non-IFRS Financial Measures at the end of this release. All figures are expressed in Canadian dollars, except as noted.
Winnipeg, February 9, 2017 … Great-West Lifeco Inc. (Lifeco or the Company) has reported net earnings attributable to common shareholders (net earnings) of $676 million or $0.686 per common share for the three months ended December 31, 2016 compared to $683 million or $0.688 per common share for the same period in 2015. Included in Lifeco’s net earnings for the fourth quarter of 2016 are restructuring costs related to a realignment of Putnam Investments, LLC (Putnam) of $20 million. Excluding these costs, Lifeco’s net earnings for the fourth quarter of 2016 were $696 million or $0.707 per common share.
For the twelve months ended December 31, 2016, net earnings were $2,641 million compared to $2,762 million for the same period in 2015. This represents $2.668 per common share for the twelve months ended December 31, 2016 compared to $2.774 per common share for the same period in 2015.
Consolidated assets under administration at December 31, 2016 were over $1.2 trillion, an increase of $36 billion from December 31, 2015.
Highlights – In Quarter
- The Company declared a quarterly common dividend of $0.3670 per common share payable March 31, 2017, a 6% increase from the previous quarter.
- Lifeco sales in the fourth quarter of 2016 were $26.7 billion:
- Canada sales were $3.9 billion, up 11%, primarily due to Individual Life Insurance sales up 161% from the fourth quarter of 2015. Group Insurance led the market in sales both in the quarter and for the full year 2016.
- Europe sales were $4.4 billion, up 13%, primarily due to strong fund management sales in Ireland partially offset by lower wealth management sales in the U.K. and the negative impact of currency movement.
- Great-West Financial sales were US$5.5 billion, down 65%, primarily due to fewer Empower Retirement large plan sales reflecting the variability of the large plan market.
- Putnam gross sales were US$8.4 billion, up 3% overall, primarily due to strong mutual fund sales. Mutual fund sales increased 9%, while institutional sales decreased 3%.
- The Company’s capital position remained very strong. The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 240% at December 31, 2016.
- Lifeco reported a ROE of 13.8%.
- Lifeco returned to the European capital markets in December 2016 with the issuance of 500 million euro-denominated 10-year bonds. The bonds pay an annual coupon of 1.75% and are listed on the Irish Stock Exchange.
- During the fourth quarter of 2016, Putnam announced that it was undertaking US$65 million in expense reductions and was realigning its resources to better position itself for current and future opportunities. For the three months ended December 31, 2016, the Company incurred restructuring costs relating to these initiatives that reduced net earnings by $20 million.
Consolidated net earnings of Lifeco include the net earnings of The Great-West Life Assurance Company (Great-West Life) and its operating subsidiaries, London Life Insurance Company (London Life), The Canada Life Assurance Company (Canada Life) and Irish Life Group Limited (Irish Life); Great-West Life & Annuity Insurance Company (Great-West Financial) and Putnam Investments, LLC (Putnam), together with Lifeco’s Corporate operating results. For reporting purposes, the consolidated operating results are grouped into four reportable segments – Canada, United States, Europe and Lifeco Corporate – reflecting geographic lines as well as the management and corporate structure of the companies.
Net earnings for the fourth quarter of 2016 were $326 million compared to $262 million in the fourth quarter of 2015. For the twelve months ended December 31, 2016, net earnings were $1,218 million compared to $1,195 million for the same period in 2015.
Total sales in the fourth quarter of 2016 of $3.9 billion increased from $3.5 billion in the fourth quarter of 2015. This reflects very strong Individual Life Insurance sales up 161% over fourth quarter 2015, strong Group Insurance sales up 33% over fourth quarter 2015 and solid Wealth Group Retirement sales up 29% over the prior year. Total sales for the twelve months ended December 31, 2016 were $12.9 billion compared to $12.6 billion for the same period in 2015.
Total Canada segment assets under administration at December 31, 2016 were $175 billion compared to $166 billion at December 31, 2015.
Net earnings for the fourth quarter of 2016 were $55 million compared to $125 million in the fourth quarter of 2015. Net earnings for the fourth quarter of 2016 reflect Great-West Financial net earnings of $78 million and a net loss for Putnam of $3 million, which excludes restructuring costs of $20 million. For the twelve months ended December 31, 2016, net earnings were $249 million compared to $409 million for the same period in 2015.
Great-West Financial sales in the fourth quarter of 2016 were US$5.5 billion, down from US$15.5 billion in the fourth quarter of 2015, primarily due to fewer Empower Retirement large plan sales. Sales for the twelve months ended December 31, 2016 were US$39.3 billion compared to US$43.2 billion in 2015.
Putnam assets under management as at December 31, 2016 were US$152.1 billion compared to US$148.4 billion a year ago, an increase of 3%, primarily due to the cumulative impact of positive markets and net asset inflows during the year from the institutional business. Net asset outflows for the fourth quarter of 2016 were US$1.5 billion compared to US$1.2 billion for the same quarter in 2015.
Total United States segment assets under administration at December 31, 2016 were $841 billion compared to $808 billion at December 31, 2015.
Net earnings for the fourth quarter of 2016 were $307 million, compared to $303 million in the fourth quarter of 2015. While the Company’s domestic businesses continue to perform well following the U.K.’s vote to leave the European Union in June of 2016, net earnings were negatively impacted by $30 million as a result of a decrease in the exchange rate of the British pound to the Canadian dollar compared to the same quarter last year. For the twelve months ended December 31, 2016, net earnings were $1,200 million compared to $1,174 million for the same period in 2015.
Insurance & Annuities sales for the fourth quarter of 2016 were $4.4 billion, compared to $3.9 billion a year ago. The increase primarily reflects higher fund management sales in Ireland, partially offset by lower wealth management sales in the U.K. and the impact of currency movement driven by the weakening of the British pound compared to the Canadian dollar. Sales for the twelve months ended December 31, 2016 were $19.2 billion compared to $19.5 billion for the same period in 2015, which included two large institutional sales in 2015. Excluding the impact of these two large sales, sales increased by $4.8 billion primarily due to higher fund management sales in Ireland and higher sales of payout annuities in the U.K., partially offset by the impact of currency movement.
Total Europe segment assets under administration at December 31, 2016 were $232 billion compared to $238 billion at December 31, 2015.
Lifeco Corporate segment’s net loss was $12 million in the fourth quarter of 2016 compared to $7 million in the fourth quarter of 2015. For the twelve months ended December 31, 2016, the net loss was $26 million compared to a net loss of $16 million for the same period in 2015.
At its meeting today, the Board of Directors approved a quarterly dividend of $0.3670 per share on the common shares of the Company payable March 31, 2017 to shareholders of record at the close of business March 3, 2017.
In addition, the Directors approved quarterly dividends on Lifeco’s preferred shares, as follows:
|First Preferred Shares||Record Date||Payment Date||Amount, per share|
|Series F||March 3, 2017||March 31, 2017||$0.36875|
|Series G||March 3, 2017||March 31, 2017||$0.3250|
|Series H||March 3, 2017||March 31, 2017||$0.30313|
|Series I||March 3, 2017||March 31, 2017||$0.28125|
|Series L||March 3, 2017||March 31, 2017||$0.353125|
|Series M||March 3, 2017||March 31, 2017||$0.3625|
|Series N||March 3, 2017||March 31, 2017||$0.1360|
|Series O||March 3, 2017||March 31, 2017||$0.111513|
|Series P||March 3, 2017||March 31, 2017||$0.3375|
|Series Q||March 3, 2017||March 31, 2017||$0.321875|
|Series R||March 3, 2017||March 31, 2017||$0.3000|
|Series S||March 3, 2017||March 31, 2017||$0.328125|
For purposes of the Income Tax Act (Canada), and any similar provincial legislation, the dividends referred to above are eligible dividends.
Great-West Lifeco Inc. (TSX:GWO) is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. Lifeco has operations in Canada, the United States, Europe and Asia through Great-West Life, London Life, Canada Life, Irish Life Group Limited, Great-West Financial and Putnam Investments. Lifeco and its companies have over $1.2 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies. To learn more, visit www.greatwestlifeco.com.
Basis of presentation
The consolidated financial statements of Lifeco, which are the basis for data presented in this release, have been prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted.
Cautionary note regarding Forward-Looking Information
This release may contain forward-looking statements. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” and other similar expressions or negative versions thereof. These statements may include, without limitation, statements about the Company’s operations, business, financial condition, expected financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by the Company, including statements made with respect to the expected benefits of acquisitions and divestitures. Forward-looking statements are based on expectations, forecasts, predictions, projections and conclusions about future events that were current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about 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 the reader is cautioned that actual events and results could differ materially from those expressed or implied by forward-looking statements. Material factors and assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting the Company’s operations will continue substantially in their current state, including, without limitation, with respect to customer behaviour, the Company’s reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, global equity and capital markets, business competition and other general economic, political and market factors in North America and internationally. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct. Other important factors and assumptions that could cause actual results to differ materially from those contained in forward-looking statements include customer responses to new products, impairments of goodwill and other intangible assets, the Company’s ability to execute strategic plans and changes to strategic plans, technological changes, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial or regulatory proceedings, catastrophic events, continuity and availability of personnel and third party service providers, the Company’s ability to complete strategic transactions and integrate acquisitions and unplanned material changes to the Company’s facilities, customer and employee relations or credit arrangements. The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company’s 2016 Annual MD&A under “Risk Management and Control Practices” and “Summary of Critical Accounting Estimates”, which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Company does not intend to update any forward-looking statements whether as a result of new information, future events or otherwise.
Cautionary note regarding Non-IFRS Financial Measures
This release contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include, but are not limited to, “operating earnings”, “constant currency basis”, “premiums and deposits”, “sales”, “assets under management”, “assets under administration” and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.
Selected financial information is attached.
Lifeco’s fourth quarter conference call and audio webcast will be held February 9, 2017 at 3:30 p.m. (ET). The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:
- Participants in the Toronto area: 416-340-2218
- Participants from North America: 1-866-225-0198
- For International participants: Look up the dial-in information for your location here:
A replay of the call will be available from February 9, 2017 to February 16, 2017, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 7905788#). The archived webcast will be available on www.greatwestlifeco.com from February 9, 2017 to February 8, 2018.
Additional information relating to Lifeco, including the 2016 audited consolidated financial statements, Management’s Discussion and Analysis (MD&A), Annual Information Form (AIF) and CEO/CFO certification will be filed on SEDAR at www.sedar.com.
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