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Great-West Lifeco reports second quarter 2016 results

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.

Great-West Lifeco Inc. (Lifeco or the Company) has reported net earnings attributable to common shareholders of $671 million or $0.675 per common share for the three months ended June 30, 2016 compared to $659 million or $0.661 per common share for the same period in 2015. Net earnings attributable to common shareholders in the second quarter of 2016 increased $51 million or 8% as compared to the previous quarter.

For the six months ended June 30, 2016, net earnings attributable to common shareholders were $1,291 million, compared to $1,359 million for the same period in 2015. This represents $1.300 per common share for the six months ended June 30, 2016, compared to $1.363 per common share for the same period in 2015.

Consolidated assets under administration at June 30, 2016 were approximately $1.2 trillion, a decrease of $28.7 billion from December 31, 2015.

Highlights – In Quarter

  • Lifeco premiums and deposits in the second quarter of 2016 of $28.2 billion were up 28% from the same quarter in 2015:
    • Canada premiums and deposits were $5.9 billion, comparable to the same quarter last year, primarily due to strong Group and Individual Insurance premium growth, offset by lower Wealth Management deposits.
    • Europe premiums and deposits were $8.3 billion, up 60%, primarily due to higher fund management sales in Ireland.
    • Great-West Financial premiums and deposits were US$2.6 billion, up 27%, primarily as a result of higher deposits into Empower Retirement investment products from sales.
  • Lifeco sales in the second quarter of 2016 of $24.9 billion were up 1% compared to the same quarter in 2015.
  • Lifeco maintained a strong ROE of 14.0%.
  • Lifeco’s capital position remained very strong. The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 232% at June 30, 2016.
  • Lifeco declared a quarterly common dividend of $0.3460 per common share payable September 30, 2016.
  • Lifeco, through its subsidiary Irish Life Group Limited (Irish Life), has completed its previously announced transactions to acquire Aviva Health Insurance Ireland Limited (Aviva Health) and assume control of GloHealth Financial Services Limited (GloHealth). Aviva Health and GloHealth will combine to become one of the leading providers in the Irish health insurance market.

OPERATING RESULTS
Consolidated net earnings of Lifeco include the net earnings of The Great-West Life Assurance Company (Great-West Life) and its operating subsidiaries, London Life Insurance Company (London Life) and The Canada Life Assurance Company (Canada Life); Great-West Life & Annuity Insurance Company (Great-West Financial) and Putnam Investments, LLC (Putnam), together with Lifeco’s Corporate operating results. For reporting purposes, the consolidated operating results are grouped into four reportable segments – Canada, United States, Europe and Lifeco Corporate – reflecting geographic lines as well as the management and corporate structure of the companies.

CANADA
Net earnings attributable to common shareholders for the second quarter of 2016 were $327 million compared to $308 million in the second quarter of 2015. For the six months ended June 30, 2016, net earnings attributable to common shareholders were $603 million compared to $607 million for the same period in 2015.

Total sales in the second quarter of 2016 of $2.7 billion were down from $3.0 billion in the second quarter of 2015, as a result of lower Wealth Management sales, consistent with a decline in industry asset cash flows for segregated funds and mutual funds. Individual Insurance sales were up 12% while Group Insurance sales were comparable to the prior year. Total sales for the six months ended June 30, 2016 were $5.9 billion compared to $6.2 billion for the same period in 2015.

Total Canada segment assets under administration at June 30, 2016 were $171 billion compared to $166 billion at December 31, 2015.

UNITED STATES
Net earnings attributable to common shareholders for the second quarter of 2016 were $53 million, reflecting Great-West Financial net earnings of $71 million and a net loss of $18 million for Putnam, compared to net earnings of $67 million in the second quarter of 2015. For the six months ended June 30, 2016, net earnings attributable to common shareholders were $116 million compared to $188 million for the same period in 2015.

Great-West Financial sales in the second quarter of 2016 were US$4.7 billion, down from US$7.8 billion in the second quarter of 2015, primarily due to lower Empower Retirement large plan sales. Sales for the six months ended June 30, 2016 were US$25.0 billion compared to US$15.8 billion in 2015.

Putnam assets under management as at June 30, 2016 were US$147.7 billion compared to US$156.3 billion at June 30, 2015, a decrease of 6%, primarily due to net asset outflows and lower market levels. Net asset outflows for the second quarter of 2016 were US$0.7 billion compared to US$1.8 billion for the same quarter in 2015. In-quarter institutional net asset inflows of US$1.7 billion were more than offset by mutual fund net asset outflows of US$2.4 billion.

Total United States segment assets under administration at June 30, 2016 were $786 billion compared to $808 billion at December 31, 2015.

EUROPE
On June 23, 2016, the U.K. voted to leave the European Union. The Company has undertaken an in-depth analysis of the potential risks to the Company’s businesses, and notwithstanding the uncertainty and increased market volatility, the businesses are resilient and the Company maintains significant financial flexibility. The Company’s operations in Europe have strong, stable businesses and a diversified investment portfolio. These businesses are appropriately capitalized and the Company remains committed to these markets. Customer needs for insurance, wealth and annuity products remain as before and the Company is well placed to continue to serve these customers.

Net earnings attributable to common shareholders for the second quarter of 2016 were $293 million compared to $289 million in the second quarter of 2015. For the six months ended June 30, 2016, net earnings attributable to common shareholders were $580 million compared to $575 million for the same period in 2015.

Insurance & Annuities sales for the second quarter of 2016 were $5.6 billion, compared to $3.4 billion a year ago, an increase of 63%. The increase primarily reflects continued strong fund management sales in Ireland and higher sales of payout annuities in the U.K. Sales for the six months ended June 30, 2016 were $10.1 billion compared to $7.9 billion for the same period in 2015.

Total Europe segment assets under administration at June 30, 2016 were $227 billion compared to $238 billion at December 31, 2015.

LIFECO CORPORATE
Lifeco Corporate segment’s net loss attributable to common shareholders was $2 million in the second quarter of 2016 compared to a net loss of $5 million in the second quarter of 2015. For the six months ended June 30, 2016, the net loss of $8 million was comparable to a net loss of $11 million for the same period in 2015.

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

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

First Preferred Shares Record Date Payment Date Amount, per share
Series F September 2, 2016 September 30, 2016 $0.36875
Series G September 2, 2016 September 30, 2016 $0.3250
Series H September 2, 2016 September 30, 2016 $0.30313
Series I September 2, 2016 September 30, 2016 $0.28125
Series L September 2, 2016 September 30, 2016 $0.353125
Series M September 2, 2016 September 30, 2016 $0.3625
Series N September 2, 2016 September 30, 2016 $0.1360
Series O September 2, 2016 September 30, 2016 $0.116638
Series P September 2, 2016 September 30, 2016 $0.3375
Series Q September 2, 2016 September 30, 2016 $0.321875
Series R September 2, 2016 September 30, 2016 $0.3000
Series S September 2, 2016 September 30, 2016 $0.328125

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

GREAT-WEST LIFECO

Great-West Lifeco Inc. (TSX:GWO) is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. Lifeco has operations in Canada, the United States, Europe and Asia through Great-West Life, London Life, Canada Life, Irish Life, Great-West Financial and Putnam Investments. Lifeco and its companies have approximately $1.2 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies. To learn more, visit www.greatwestlifeco.com.

Basis of presentation

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

Cautionary note regarding Forward-Looking Information

This release may contain forward-looking statements. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” and other similar expressions or negative versions thereof. These statements may include, without limitation, statements about Lifeco’s operations, business, financial condition, expected financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by Lifeco, including statements made with respect to the expected benefits of acquisitions and divestitures. Forward-looking statements are based on expectations, forecasts, predictions, projections and conclusions about future events that were current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about Lifeco, economic factors and the financial services industry generally, including the insurance and mutual fund industries. They are not guarantees of future performance, and the reader is cautioned that actual events and results could differ materially from those expressed or implied by forward-looking statements. Material factors and assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting Lifeco’s operations will continue substantially in their current state, including, without limitation, with respect to customer behaviour, Lifeco’s reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, global equity and capital markets, business competition and other general economic, political and market factors in North America and internationally. Many of these assumptions are based on factors and events that are not within the control of Lifeco and there is no assurance that they will prove to be correct. Other important factors and assumptions that could cause actual results to differ materially from those contained in forward-looking statements include customer responses to new products, impairments of goodwill and other intangible assets, Lifeco’s ability to execute strategic plans and changes to strategic plans, technological changes, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial or regulatory proceedings, catastrophic events, continuity and availability of personnel and third party service providers, Lifeco’s ability to complete strategic transactions and integrate acquisitions and unplanned material changes to Lifeco’s facilities, customer and employee relations or credit arrangements. The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in Lifeco’s 2015 Annual MD&A under “Risk Management and Control Practices” and “Summary of Critical Accounting Estimates”, which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, Lifeco does not intend to update any forward-looking statements whether as a result of new information, future events or otherwise.

Cautionary note regarding Non-IFRS Financial Measures

This release contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include, but are not limited to, “operating earnings”, “constant currency basis”, “premiums and deposits”, “sales”, “assets under management”, “assets under administration” and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

Further information

Selected financial information is attached.

Lifeco’s second quarter conference call and audio webcast will be held August 4, 2016 at 10:00 a.m. (ET). The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:

  • Participants in the Toronto area: 416-340-2216
  • Participants from North America: 1-866-223-7781
  • For International participants: Look up the dial-in information for your location here:

https://www.confsolutions.ca/ILT?oss=1P49R8662237781

A replay of the call will be available from August 4, 2016 to August 11, 2016, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 6396358#). The archived webcast will be available on www.greatwestlifeco.com from August 4, 2016 to August 3, 2017.

Additional information relating to Lifeco, including the most recent interim unaudited consolidated financial statements, interim Management’s Discussion and Analysis (MD&A) and CEO/CFO certification will be filed on SEDAR at www.sedar.com.

For more information:

Media Contact:                                            Investor Relations Contact:

Marlene Klassen, APR                                    Wendi Thiessen

204-946-7705                                               204-946-7452

Email: marlene.klassen@gwl.ca                      Email: wendi.thiessen@gwl.ca

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