Great-West Lifeco reports third quarter 2019 earnings per common share of $0.79

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, October 30, 2019 ... Great-West Lifeco Inc. (Lifeco or the Company) today announced net earnings attributable to common shareholders (net earnings) of $730 million, or $0.79 per common share, for the third quarter of 2019 compared to $689 million, or $0.70 per common share, for the same quarter last year.  Adjusted net earnings for the third quarter of 2018 were $745 million, or $0.75 per common share, which exclude restructuring costs of $56 million related to the Company’s U.K. operations.

Earnings per common share (EPS) of $0.79 increased $0.04 from adjusted EPS of $0.75 in 2018, reflecting strong operating results as well as the sale, via indemnity reinsurance, of the U.S. individual life insurance and annuity business and the successful Substantial Issuer Bid share buyback, which were both completed in the second quarter of 2019.

“The Company delivered healthy EPS growth, reflecting solid operating performance in the quarter and strategic decisions made earlier in the year,” said Paul Mahon, President and Chief Executive Officer, Great-West Lifeco Inc. “Business fundamentals remain sound, our capital position is strong and we continue to move forward with our strategic priorities.”

Highlights

Sales of $41.9 billion up 22%

• Sales for the third quarter of 2019 were $41.9 billion, up 22% from the third quarter of 2018, primarily driven by a 29% increase in the U.S., reflecting higher Empower Retirement sales and a 22% increase in Canada, driven by higher Group Customer sales in both Insurance and Wealth.

Capital strength and financial flexibility maintained

• The Great-West Life Assurance Company reported a Life Insurance Capital Adequacy Test (LICAT) ratio of 139% at September 30, 2019.
• Adjusted return on equity, which excludes the net charge of $199 million relating to the U.S. sale in the second quarter of 2019, was 13.4% for the third quarter of 2019.

Consolidated assets under administration of $1.6 trillion

• Consolidated assets under administration at September 30, 2019 were approximately $1.6 trillion, a 14% increase from December 31, 2018.

SEGMENTED OPERATING RESULTS

For reporting purposes, Lifeco’s 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 Company.  For more information, please refer to the Company’s 2019 third quarter Management’s Discussion and Analysis (MD&A).

CANADA

• Q3 Canada segment net earnings of $300 million – Net earnings for the third quarter of 2019 were $300 million compared to $315 million in the third quarter of 2018, a decrease of 5%. The decrease was primarily due to lower contributions from insurance contract liability basis changes, including the impact of actuarial standards updates, partially offset by higher contributions from investment experience.
• Q3 Canada segment sales of $3.5 billion, up 22% – Canada sales in the third quarter of 2019 of $3.5 billion were up 22% from the third quarter of 2018 and 20% from the second quarter of 2019 due to higher large case sales in Group Customer.
• Major milestone met for Great-West Life, London Life and Canada Life amalgamation – On October 3, 2019, The Great-West Life Assurance Company (Great-West Life), London Life Insurance Company (London Life) and The Canada Life Assurance Company (Canada Life), announced that their respective voting policyholders have voted in favour of their amalgamation plans.  Subject to regulatory approvals, the amalgamation is expected to be completed by January 1, 2020.  Upon approval, the companies will be combined into one single life insurance company operating under The Canada Life Assurance Company name.  The amalgamation is expected to create operating efficiencies and simplify the Company's capital structure to allow for more efficient use of capital.  Great-West Lifeco will remain the parent company, and the amalgamated company will retain all of the amalgamating companies’ current corporate office locations.

UNITED STATES

• Q3 U.S. segment net earnings of US$59 million – Net earnings for the third quarter of 2019 were US$59 million.  Excluding the US$44 million third quarter 2018 contribution from the U.S. individual life insurance and annuity business, which was sold via indemnity reinsurance, net earnings increased US$16 million or 37% primarily due to improved Putnam net earnings driven by expense reduction initiatives.
• Q3 U.S. Financial Services fee and other income up 11% – Fee and other income for the three months ended September 30, 2019 was US$280 million compared to US$252 million for the same quarter last year, an increase of 11%, primarily due to growth in Empower Retirement participants and assets.

EUROPE

• Q3 Europe segment net earnings of $357 million – Net earnings for the third quarter of 2019 were $357 million, up 12% compared to adjusted net earnings of $319 million in the third quarter of 2018, which excluded restructuring charges of $56 million.  The increase was primarily due to higher contributions from insurance contract liability basis changes and investment experience, partially offset by adverse morbidity experience in Ireland and the impact of currency movement.
• U.K. operations advance transformation activities – As of September 30, 2019, £11 million of pre-tax annualized expense reductions have been achieved relating to the U.K. restructuring program.  The Company remains on track to achieve targeted annual expense reductions of £20 million pre-tax by the end of the fourth quarter of 2020 from various sources including systems and process improvements and a reduction in headcount.
• Court approval received for Scottish Friendly sale – In 2018, Canada Life Limited, an indirect wholly-owned U.K. subsidiary of the Company, announced an agreement to sell a heritage block of individual policies to Scottish Friendly, comprised of unit-linked policies and non unit-linked policies.  Subsequent to September 30, 2019, on October 22, 2019, the required court approval for the transfer of these policies has been received and this transfer is expected to be effective November 1, 2019.
• Brexit plans in place – Some market volatility continues with global economic uncertainty and the U.K. due to leave the European Union (EU). The Company's U.K. and other European businesses have plans which have been executed, or are ready to be executed, that will address and minimize the impact of Brexit under several different outcomes, including where the U.K. has no exit agreements with the EU.

QUARTERLY DIVIDENDS

The Board of Directors approved a quarterly dividend of $0.4130 per share on the common shares of Lifeco payable December 31, 2019 to shareholders of record at the close of business December 3, 2019.

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

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

Selected financial information is attached.

GREAT-WEST LIFECO INC.

Great-West Lifeco is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. We operate in Canada, the United States and Europe under the brands Canada Life, Empower Retirement, Putnam Investments, and Irish Life.  At the end of 2018, our companies had approximately 24,200 employees, 240,000 advisor relationships, and thousands of distribution partners – all serving our more than 31 million customer relationships across these regions.

Great-West Lifeco and its companies have approximately $1.6 trillion in consolidated assets under administration as at September 30, 2019 and are members of the Power Financial Corporation group of companies. Great-West Lifeco trades on the Toronto Stock Exchange (TSX) under the ticker symbol GWO. To learn more, visit greatwestlifeco.com. 

Basis of presentation

The condensed consolidated interim unaudited 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 information.  Forward-looking information includes 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 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, expected capital management activities and use of capital, expected cost reductions and savings and the impact of regulatory developments on the Company’s business strategy and growth objectives.  Forward-looking statements are based on expectations, forecasts, estimates, 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 2018 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 information.  Other than as specifically required by applicable law, the Company does not intend to update any forward-looking information 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", "adjusted net earnings", "adjusted net earnings (US$)", "adjusted net earnings per common share", "adjusted return on equity", "core net earnings", "constant currency basis", "impact of currency movement", "premiums and deposits", "pre-tax operating margin", "return on equity – adjusted net earnings", "sales", "assets under management" and "assets under administration".  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 where applicable.

Third Quarter Conference Call

Lifeco's third quarter conference call and audio webcast will be held October 31, 2019 at 10 a.m. (ET).  The call and webcast can be accessed through greatwestlifeco.com/news-events/events or by phone at:

• Participants in the Toronto area:  416-340-2218      
• Participants from North America: 1-800-377-0758

A replay of the call will be available from October 31, 2019 to November 30, 2019 and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 4233177#).  The archived webcast will be available on greatwestlifeco.com.

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.comOpens a new website in a new window.

For more information contact:

Media Relations
Liz Kulyk
204-926-5012
media.relations@gwl.ca

Investor Relations
Deirdre Neary
416-552-3208
deirdre.neary@gwl.ca

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