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Great-West Lifeco maintains a strong capital position and reports first quarter 2017 adjusted net earnings of $619 million and ROE of 13.9%

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 maintains a strong capital position and reports first quarter 2017 adjusted net earnings of $619 million and ROE of 13.9%

Winnipeg, May 4, 2017 ... Great-West Lifeco Inc. (Lifeco or the Company) today announced net earnings attributable to common shareholders of $591 million or $0.598 per common share compared to $620 million or $0.625 per common share for the same quarter last year.  Included in Lifeco's net earnings for the first quarter of 2017 were restructuring costs of $28 million, primarily related to the Company's health and retail businesses in Ireland and the completion of integration activities for Empower Retirement.  Excluding these costs, net earnings for the first quarter of 2017 were $619 million or $0.627 per common share and were comparable to the same quarter last year as good business performance was offset by currency headwinds, which impacted earnings by $44 million, primarily due to the decline in the British pound.

“First quarter earnings reflect strong sales in our Canadian and European businesses and the benefits of cost reduction initiatives in the U.S.,” said Paul Mahon, President and Chief Executive Officer. “While underlying business fundamentals were positive in the quarter, earnings were impacted by currency headwinds and restructuring charges related to business integration activities and right-sizing of our cost base. We remain focused on advancing our business strategies by balancing efficiency gains with necessary investments in future growth across the Company.”

Consolidated assets under administration at March 31, 2017 were approximately $1.3 trillion, an increase of $47.4 billion from December 31, 2016.

Highlights – In Quarter

Lifeco reports premiums and deposits growth of 12%

  • Lifeco premiums and deposits in the first quarter of 2017 were $33.5 billion, up 12% compared to the same quarter in 2016, reflecting higher premiums and deposits across all segments.

Capital position remains strong

  • The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 239% at March 31, 2017.
  • Lifeco declared a quarterly common dividend of $0.3670 per common share payable June 30, 2017.
  • Return on Equity (ROE), excluding the impact of restructuring costs, was 13.9%.
  • Irish Life Assurance plc, a subsidiary of the Company, redeemed its 5.25% 200 million euro-denominated subordinated debenture notes at their principal amount together with accrued interest during the quarter.

$1 billion hybrid subordinated debt redemption announced

  • On April 24, 2017, Great-West Lifeco Finance (Delaware) LP, a subsidiary of the Company, announced its intention to redeem all $1 billion principal amount of its 5.691% subordinated debentures due June 21, 2067 on June 21, 2017 at a redemption price equal to 100% of the principal amount of the debentures, plus any accrued interest up to but excluding the redemption date.

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 companies. For more information, please refer to the Company's 2017 Q1 MD&A.

CANADA

  • Canada advances business transformation to drive future growth - Lifeco recently realigned its Canadian operations into two new business units: one focused on individual customers and the other on group customers.  As part of the realignment, a new strategic customer marketing function has been created to provide a more holistic customer experience through digital and innovative capabilities and services. In conjunction with this, on April 25, 2017, the Company announced it was undertaking $200 million pre-tax of annualized expense reductions expected to be complete by the first quarter of 2019. As part of this effort, the Company expects to incur $215 million of restructuring costs (allocated between participating and non-participating accounts) which are expected to reduce net earnings by $127 million in the second quarter of 2017.
  • Q1 Canada sales increased to $3.7 billion - Sales in the first quarter of 2017 were $3.7 billion, up 12% from the first quarter of 2016.  The increase reflects solid individual wealth sales which were up 14% compared to the first quarter of 2016, primarily due to strong segregated funds and mutual funds sales, and group wealth sales which were up 13% year over year. Individual insurance sales also increased significantly as participating life sales carried over from the fourth quarter 2016 activity.
  • Q1 Canada segment net earnings of $255 million - Net earnings attributable to common shareholders for the first quarter of 2017 were $255 million compared to $276 million in the first quarter of 2016.

UNITED STATES

  • Empower Retirement integration complete, US$8 million of restructuring costs recorded - Following the finalization of the Empower Retirement integration activities, Great-West Financial executed a restructuring action to right-size the cost structure and better position the business competitively with associated restructuring costs of US$8 million. Annualized synergies of US$34 million achieved through this initiative were mostly offset by the reinvestment in ongoing development as well as customer acquisition and retention.
  • Empower Retirement announces new product offering - Empower Retirement, together with health services leader Optum, announced an innovative health savings account for retirement plan participants - The Empower Health Savings Account (HSA).  Available this summer to employers, the Empower HSA will provide plan participants access to an online seamless financial-planning solution that integrates retirement savings with health care savings, helping them to prepare for health care expenses in retirement.
  • Putnam sales up 17% and average assets up 4% - Putnam sales were US$10.6 billion, an increase of US$1.5 billion compared to the same period last year, reflecting a 31% increase in institutional asset sales and a 5% increase in mutual fund sales. Putnam average assets under management for the three months ended March 31, 2017 were US$157.4 billion compared to US$151.9 billion for the three months ended December 31, 2016, an increase of 4%, primarily due to market performance and net asset inflows. Putnam ending assets under management at March 31, 2017 were US$159.9 billion.
  • Q1 U.S. segment net earnings excluding restructuring costs up 6% - Net earnings attributable to common shareholders for the first quarter of 2017 were US$50 million excluding restructuring costs, up 6%, compared to net earnings of US$47 million in the first quarter of 2016.

EUROPE

  • Q1 Europe segment net earnings up 7% excluding restructuring costs - Net earnings attributable to common shareholders for the first quarter of 2017, excluding restructuring costs of $17 million, were $306 million compared to $287 million in the first quarter of 2016.  Europe net earnings were negatively impacted by currency movement of $42 million in the quarter compared to the same period last year, primarily due to a weakening of the British pound against the Canadian dollar.
  • Q1 Europe sales up 6% in constant currency - Total sales in the first quarter of 2017 were up 6% in constant currency reflecting strong annuity and wealth management sales in the U.K. and Ireland, partially offset by lower fund management sales. Reported sales of $4.4 billion, were down from $4.6 billion in the first quarter of 2016 due to currency movements.
  • Irish Life Health integration continues to progress - As of March 31, 2017, the Company has achieved €5 million of annualized synergies to date relating to the integration of the Irish Life Health operations and remains on track to achieve targeted annual cost savings of €16 million pre-tax within the next 9 months.

QUARTERLY DIVIDENDS

At its meeting today, the Board of Directors approved a quarterly dividend of $0.3670 per share on the common shares of Lifeco payable June 30, 2017 to shareholders of record at the close of business June 2, 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

June 2, 2017

June 30, 2017

$0.36875

Series G

June 2, 2017

June 30, 2017

$0.3250

Series H

June 2, 2017

June 30, 2017

$0.30313

Series I

June 2, 2017

June 30, 2017

$0.28125

Series L

June 2, 2017

June 30, 2017

$0.353125

Series M

June 2, 2017

June 30, 2017

$0.3625

Series N

June 2, 2017

June 30, 2017

$0.1360

Series O

June 2, 2017

June 30, 2017

$0.110945

Series P

June 2, 2017

June 30, 2017

$0.3375

Series Q

June 2, 2017

June 30, 2017

$0.321875

Series R

June 2, 2017

June 30, 2017

$0.3000

Series S

June 2, 2017

June 30, 2017

$0.328125

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

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 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).  Lifeco and its companies have approximately $1.3 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 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.  Refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

First Quarter Conference Call

Lifeco's first quarter conference call and audio webcast will be held May 4, 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:

https://www.confsolutions.ca/ILT?oss=1P49R8662250198

A replay of the call will be available from May 4, 2017 to May 11, 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 May 4, 2017 to May 3, 2018.

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

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

 

 

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