Readers are referred to the disclaimer regarding Forward-Looking
Information and Non-GAAP Financial Measures at the end of this Release.
TSX:GWO
WINNIPEG, Aug. 4 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net
income attributable to common shareholders, excluding restructuring charges
related to the acquisition of Canada Life Financial Corporation (CLFC), of
$455 million for the three months ended June 30, 2005, compared to $407
million reported a year ago, an increase of 12%. On a per share basis, this
represents $0.511 per common share for the second quarter of 2005, an increase
of 12% compared to a year ago. Net income, after restructuring costs,
attributable to common shareholders for the second quarter was $446 million,
or $0.500 per common share.
For the six months ended June 30, 2005, net income attributable to common
shareholders, excluding restructuring charges was $878 million, an increase of
11% compared to $790 million for 2004, or $0.986 per common share, an increase
of 12% compared to $0.884 per common share for 2004. Net income, after
restructuring costs, attributable to common shareholders was $865 million or
$0.971 per common share for the six months of 2005.
Lifeco experienced solid operating results in all major business segments
and significant growth in net income attributable to common shareholders.
Highlights
- In May, the Company's U.K. subsidiary, Canada Life Limited, reached an
agreement to acquire the payout annuity business of Phoenix and London
Assurance Company Limited, part of the Resolution Life Group. Assets
and liabilities were valued at $5.1 billion at year-end 2004. The
Company began to assume the risk effective July 1, 2005. The
transaction is expected to close in the fourth quarter.
- Earnings per common share for the second quarter of 2005, excluding
restructuring charges, increased 12% compared to a year ago.
- Return on common shareholders' equity, excluding restructuring costs,
was 20.6% for the twelve months ended June 30, 2005.
- Assets under administration at June 30, 2005 totalled $170.1 billion,
up $5.2 billion from December 31, 2004 levels.
- Quarterly dividends declared were 21 cents per common share, an
increase of 1.5 cents per share, payable September 30, 2005.
Dividends paid on common shares for the six months ended June 30, 2005
were 21% higher than a year ago.
Consolidated net earnings for Lifeco are the net operating earnings 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
Consolidated net earnings of the Canadian segment of Lifeco attributable
to common shareholders for the second quarter of 2005 increased 17% to
$212 million from $181 million a year ago. For the six months ended June 30,
2005, earnings were up 21% to $398 million, compared to $328 million at
June 30, 2004.
Total sales for the six months ended June 30, 2005 were $3.4 billion, an
increase of $521 million over June 30, 2004 levels. Fee income for the period
increased $38 million.
Total assets under administration at June 30, 2005 were $84.4 billion, up
$2.6 billion from December 31, 2004 levels, with increases in the general fund
of $0.8 billion and in segregated funds of $1.8 billion.
EUROPE
Consolidated net earnings of the European segment of Lifeco attributable
to common shareholders for the second quarter of 2005 increased 33% to
$101 million from $76 million a year ago. For the six months ended June 30,
2005, earnings were up 32% to $202 million, compared to $153 million at
June 30, 2004.
Total sales for the six months ended June 30, 2005 were $4.0 billion, an
increase of $142 million over June 30, 2004 levels. Fee income for the period
increased $75 million.
Total assets under administration at June 30, 2005 were $39.4 billion, up
$0.5 billion from December 31, 2004 levels, essentially due to increases in
segregated funds.
UNITED STATES
Consolidated net earnings of the United States segment of Lifeco
attributable to common shareholders for the second quarter of 2005 in US $,
increased 12% to $109 million from $97 million a year ago. For the six months
ended June 30, 2005, earnings in US $ were up 11% to $219 million, compared to
$198 million at June 30, 2004. Translated to Canadian $, earnings for the six
months ended June 30, 2005 were $294 million, compared to $313 million a year
ago.
Total sales for the six months ended June 30, 2005 were US $1.1 billion,
reflecting an increase in Financial Services sales, offset by lower Healthcare
sales compared to June 30, 2004. Fee income for the period increased by
US $34 million.
Total assets under administration at US $37.7 billion at June 30, 2005,
up $0.8 billion from December 31, 2004 levels, essentially due to increases in
general funds.
CORPORATE
Corporate net earnings for Lifeco attributable to common shareholders
were a net charge of $17 million for the second quarter of 2005, and a net
charge of $29 million for the six months ended June 30, 2005. Restructuring
costs related to the CLFC acquisition were a major contributor to these
results.
QUARTERLY DIVIDENDS
At its meeting today, the Board of Directors approved a quarterly
dividend of $0.21 per share on the common shares of the Company payable
September 30, 2005 to shareholders of record at the close of business
September 2, 2005.
In addition, the Directors approved quarterly dividends on:
- Series D First Preferred Shares $0.293750 per share;
- Series E First Preferred Shares $0.30 per share;
- Series F First Preferred Shares $0.36875 per share;
- Series G First Preferred Shares of $0.325 per share; and
- Series H First Preferred Shares of $0.16277 per share, conditional
upon issuance,
all payable September 30, 2005 to shareholders of record at the close of
business September 2, 2005.
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 and
internationally through The Great-West Life Assurance Company, London Life
Insurance Company and The Canada Life Assurance Company, and in the United
States through Great-West Life & Annuity Insurance Company and The Canada Life
Assurance Company. Lifeco and its companies have $170 billion in assets under
administration. Great-West Lifeco is a member of the Power Financial
Corporation group of companies.
Forward-Looking Information and Non-GAAP Financial Measures
This release may contain 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 insurance industry generally. 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 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. The reader is also cautioned to consider these and
other factors carefully and not place undue reliance on forward-looking
statements. Other than as specifically required by applicable law, the Company
has no specific intention to update any forward-looking statements whether as
a result of new information, future events or otherwise.
Net income, basic earnings per common share and return on common
shareholders' equity are presented before restructuring as a measure of
earnings performance excluding acquisition related restructuring charges.
These are non-GAAP financial measures that do not have standard meanings and
are not directly comparable to similar measures used by other issuers.
Further information
Selected financial information is attached.
Great-West Lifeco's second quarter analyst teleconference will be held
Thursday, August 4, 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: 416-340-8010
- Participants from North America: 1-866-540-8136
- Participants from Overseas: Dial international access code first, then
800-3207-7500
A replay of the call will be available from August 4, until August 11,
and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto
(passcode: 3158756 followed by the number sign).
Additional information relating to Lifeco, including 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.
<<
GREAT-WEST LIFECO INC.
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (unaudited)
(in $ millions except per share amounts)
For the three months ended For the six months ended
June 30 June 30
-------------------------- -------------------------
% %
2005 2004 Change 2005 2004 Change
-------------------------------------------------------------------------
Premiums:
Life insurance,
guaranteed annuities
and insured health
products $ 3,788 $ 3,940 -4% $ 8,316 $ 7,351 13%
Self-funded premium
equivalents
(ASO contracts) 1,945 2,047 -5% 3,835 4,054 -5%
Segregated funds
deposits:
Individual products 1,411 1,320 7% 2,983 2,978 0%
Group products 1,322 1,473 -10% 2,550 4,086 -38%
------------------------- -------------------------
Total premiums and
deposits 8,466 8,780 -4% 17,684 18,469 -4%
------------------------- -------------------------
Fee and other income 616 587 5% 1,230 1,119 10%
Paid or credited to
policyholders 4,081 4,333 -6% 8,897 8,102 10%
Net income - common
shareholders before
restructuring costs(1) 455 407 12% 878 790 11%
Restructuring costs
after tax(1) 9 6 50% 13 13
Net income - common
shareholders 446 401 11% 865 777 11%
-------------------------------------------------------------------------
Per Common Share
Basic earnings before
restructuring
costs(1) $ 0.511 $ 0.456 12% $ 0.986 $ 0.884 12%
Restructuring costs
after tax(1) 0.011 0.008 38% 0.015 0.015
Basic earnings after
restructuring costs 0.500 0.448 12% 0.971 0.869 12%
Dividends paid 0.195 0.16125 21% 0.39 0.3225 21%
Book value 9.64 9.07 6%
-------------------------------------------------------------------------
Return on common
shareholders' equity
(12 months):
Net income before
restructuring costs(1) 20.6% 19.4%
Net income 20.3% 19.0%
-------------------------------------------------------------------------
At June 30
Total assets $ 98,254 $100,149 -2%
Segregated funds
assets 71,878 67,200 7%
-------------------------
Total assets under
administration $170,132 $167,349 2%
-------------------------
-------------------------
Share capital and
surplus $ 9,085 $ 8,286 10%
(1) Following the acquisition of Canada Life Financial Corporation (CLFC)
by the Company, a plan was developed to restructure and exit selected
operations of CLFC (see note 2 in the Company's interim financial
statements). The costs include $350 that was recognized as part of
the purchase equation of CLFC, and $98 to be charged to income as it
is incurred. Net income, basic earnings per common share and return
on common shareholders' equity are presented before restructuring as
a measure of earnings performance, excluding restructuring charges
related to the acquisition of CLFC, and incurred during the period.
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
-------------------------------------------
2005 2004 2005 2004
-------------------------------------------
Income
Premium income $ 3,788 $ 3,940 $ 8,316 $ 7,351
Net investment income 1,327 1,357 2,619 2,715
Fee and other income 616 587 1,230 1,119
-------------------------------------------
5,731 5,884 12,165 11,185
-------------------------------------------
Benefits and Expenses
Paid or credited to
policyholders and
beneficiaries including
policyholder dividends
and experience refunds 4,081 4,333 8,897 8,102
Commissions 331 314 660 605
Operating expenses 553 572 1,117 1,156
Premium taxes 64 63 125 115
Financing charges (note 3) 49 50 97 102
Amortization of finite life
intangible assets 4 4 9 7
Restructuring costs (note 2) 11 9 18 18
-------------------------------------------
Net income before income taxes 638 539 1,242 1,080
Income taxes
- current 170 40 199 204
- future (18) 90 102 63
-------------------------------------------
Net income before non-controlling
interests 486 409 941 813
Non-controlling interests
(note 6) 33 5 62 30
-------------------------------------------
Net income - shareholders 453 404 879 783
Perpetual preferred share
dividends 7 3 14 6
-------------------------------------------
Net income - common
shareholders $ 446 $ 401 $ 865 $ 777
-------------------------------------------
-------------------------------------------
Earnings per common share
(note 10)
Basic $ 0.500 $ 0.448 $ 0.971 $ 0.869
-------------------------------------------
-------------------------------------------
Diluted $ 0.496 $ 0.444 $ 0.962 $ 0.861
-------------------------------------------
-------------------------------------------
CONSOLIDATED BALANCE SHEET (unaudited)
(in $ millions)
June 30, December 31, June 30,
2005 2004 2004
----------- ----------- -----------
Assets
Bonds $ 56,446 $ 54,960 $ 56,560
Mortgage loans 14,659 14,554 15,058
Stocks 3,635 3,405 3,395
Real estate 1,785 1,646 1,629
Loans to policyholders 6,778 6,499 6,918
Cash and certificates of deposit 2,826 2,472 2,336
Funds held by ceding insurers 2,106 2,337 3,872
Goodwill 5,329 5,328 5,332
Intangible assets 1,483 1,508 1,530
Other assets 3,207 3,142 3,519
----------- ----------- -----------
Total assets $ 98,254 $ 95,851 $ 100,149
----------- ----------- -----------
----------- ----------- -----------
Liabilities
Policy liabilities
Actuarial liabilities $ 67,183 $ 65,822 $ 69,866
Provision for claims 1,209 997 1,060
Provision for policyholder dividends 591 589 541
Provision for experience rating
refunds 468 611 639
Policyholder funds 2,048 2,076 2,180
----------- ----------- -----------
71,499 70,095 74,286
Debentures and other borrowings
(note 4) 2,073 2,088 2,385
Funds held under reinsurance contracts 4,331 4,374 4,630
Other liabilities 4,190 4,356 4,213
Repurchase agreements 1,095 676 626
Deferred net realized gains 2,453 2,164 2,300
----------- ----------- -----------
85,641 83,753 88,440
Preferred shares (note 7) 797 797 927
Capital trust securities and debentures
(note 5) 650 651 543
Non-controlling interests (note 6)
Participating surplus in subsidiaries 1,714 1,654 1,584
Preferred shares issued by subsidiaries 209 209 209
Perpetual preferred shares issued by
subsidiaries 158 159 160
Share capital and surplus
Share capital (note 7)
Perpetual preferred shares 499 499 199
Common shares 4,658 4,651 4,654
Surplus 4,402 3,904 3,437
Currency translation account (474) (426) (4)
----------- ----------- -----------
9,085 8,628 8,286
----------- ----------- -----------
Liabilities, share capital and
surplus $ 98,254 $ 95,851 $ 100,149
----------- ----------- -----------
----------- ----------- -----------
CONSOLIDATED STATEMENT OF SURPLUS (unaudited)
(in $ millions)
For the six months
ended June 30
---------------------------
2005 2004
------------- -------------
Balance, beginning of year $ 3,904 $ 2,993
Net income 879 783
Change in accounting policy - stock option
expense - (4)
Contributed surplus - Stock option expense
Change in accounting policy - 5
Current year expense (note 8) 3 3
Repatriation of Canada Life seed capital from
participating policyholder account - 21
Common share cancellation excess (22) (70)
Dividends to shareholders
Perpetual preferred shareholders (14) (6)
Common shareholders (348) (288)
------------- -------------
Balance, end of period $ 4,402 $ 3,437
------------- -------------
------------- -------------
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(in $ millions)
For the three months For the six months
ended June 30 ended June 30
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Operations
Net income $ 453 $ 404 $ 879 $ 783
Adjustments for non-cash
items:
Change in policy liabilities 579 1,003 1,458 1,680
Change in funds held by
ceding insurers 102 42 230 270
Change in funds held under
reinsurance contracts (70) (160) (68) (334)
Change in current income
taxes payable 82 (147) (71) (218)
Future income tax expense (18) 90 102 63
Other 364 (400) 2 (442)
---------- ---------- ---------- ----------
Cash flows from operations 1,492 832 2,532 1,802
Financing Activities
Issue of common shares 2 3 12 15
Purchased and cancelled common
shares (14) (55) (27) (88)
Repayment of debentures and
other borrowings (21) 6 (22) (2)
Partial repayment of five-year
term facility - (200) - (200)
Dividends paid (181) (147) (362) (294)
---------- ---------- ---------- ----------
(214) (393) (399) (569)
Investment Activities
Bond sales and maturities 11,326 9,988 20,549 20,203
Mortgage loan repayments 725 646 1,567 1,101
Stock sales 360 232 600 650
Real estate sales 32 21 68 55
Change in loans to
policyholders (135) (181) (172) (192)
Change in repurchase agreements 278 (124) 390 103
Reinsurance transactions - (8) - (436)
Investment in bonds (12,535) (10,257) (22,063) (21,170)
Investment in mortgage loans (771) (349) (1,741) (815)
Investment in stocks (363) (290) (752) (790)
Investment in real estate (173) (46) (225) (67)
---------- ---------- ---------- ----------
(1,256) (368) (1,779) (1,358)
Increase (decrease) in cash
and certificates of deposit 22 71 354 (125)
Cash and certificates of
deposit, beginning of period 2,804 2,265 2,472 2,461
---------- ---------- ---------- ----------
Cash and certificates of
deposit, end of period $ 2,826 $ 2,336 $ 2,826 $ 2,336
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Notes to Interim Consolidated Financial Statements (unaudited)
(in $ millions except per share amounts)
1. Basis of Presentation and Summary of Accounting Policies
(a) The interim unaudited consolidated financial statements of
Great-West Lifeco Inc. (Lifeco or the Company) at June 30, 2005
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, 2004, 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, 2004.
(b) New Accounting Requirements for 2005
Consolidation of Variable Interest Entities
Effective January 1, 2005, the Company adopted the Canadian
Institute of Chartered Accountants (CICA) Handbook Accounting
Guideline on Consolidation of Variable Interest Entities. As a
result, the Company will no longer consolidate Great-West Life
Capital Trust (GWLCT) and Canada Life Capital Trust (CLCT) but
will recognize the related debentures, refer to note 5. There is
no impact of this change in accounting policy to common
shareholder net income or basic earnings per common share.
Financial Instruments - Disclosure and Presentation
Effective January 1, 2005, the CICA Handbook Section on Financial
Instruments - Disclosure and Presentation was amended to require
liability classification, for certain financial instruments. This
change in accounting policy has been applied retroactively, refer
to notes 5 and 7. There is no impact of this change in accounting
policy to common shareholder net income or basic earnings per
common share.
(c) Certain of 2004 amounts presented for comparative purposes have
been reclassified to conform to the presentation adopted in the
current year.
2. Restructuring Costs
Restructuring costs related to the acquisition of Canada Life
Financial Corporation (CLFC) incurred for the six months ended
June 30, 2005 were $68 ($110 for the six months ended June 30, 2004).
Of this amount $18 before tax ($13 after tax) ($18 before tax
($13 after tax) in 2004) was charged to income and $50 ($92 in 2004)
was charged against the amount accrued as part of the purchase
equation of CLFC. Of the $448 total estimated restructuring costs,
$413 of these costs have been utilized with the remaining $35
expected to be utilized in 2005. These restructuring costs are
related to the elimination of duplicate systems, exiting and
consolidating operations and compensation costs. These activities are
expected to be substantially completed by the end of 2005.
3. Financing Charges
Financing charges include interest on long-term debentures and other
borrowings, previously classified as part of net investment income,
together with distributions and interest on capital trust securities
and debentures and preferred shares now classified as liabilities as
described in notes 5 and 7 to the financial statements.
For the three months For the six months
ended June 30 ended June 30
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Interest on long-term
debentures and other
borrowings $ 30 $ 32 $ 59 $ 66
Preferred share dividends 9 11 19 22
Distributions and interest
on capital trust
securities and debentures 12 12 24 24
Distributions on capital
trust securities held by
consolidated group as
temporary investments (2) (5) (5) (10)
---------- ---------- ---------- ----------
Total $ 49 $ 50 $ 97 $ 102
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
4. Debentures and Other Borrowings
Debentures and other borrowings consist of the following:
June 30, December 31, June 30,
2005 2004 2004
----------- ----------- -----------
Short Term
Commercial paper and other
short term borrowings with
interest rates from 3.0% to
3.6% (2.2% to 2.5% in 2004) $ 97 $ 114 $ 130
Revolving credit in respect of
reinsurance business with
interest rates from 3.3% to
4.1% maturing within one year
(2.2% to 3.2% in 2004) 18 20 25
----------- ----------- -----------
Total Short Term 115 134 155
Long Term
Operating:
Notes payable with interest
rate of 8.0% 10 10 11
Capital:
Lifeco
Five year term facility at
rates of: $119 at Canadian
90-day Bankers' Acceptance;
$31 at 90-day LIBOR rate 150 149 398
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
----------- ----------- -----------
1,150 1,149 1,398
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 250 250 250
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 32 35 37
----------- ----------- -----------
582 585 587
Great-West Life & Annuity Insurance
Capital, LP
6.625% Deferrable debentures
due November 15, 2034, unsecured 216 210 -
GWL&A
7.25% Subordinated capital income
securities redeemable by the
Company on or after June 30, 2004,
due June 30, 2048, unsecured
(U.S.$175) - - 234
----------- ----------- -----------
Total Long Term 1,958 1,954 2,230
----------- ----------- -----------
Total Debentures and Other
Borrowings $ 2,073 $ 2,088 $ 2,385
----------- ----------- -----------
----------- ----------- -----------
5. Capital Trust Securities and Debentures
June 30, December 31, June 30,
2005 2004 2004
----------- ----------- -----------
Capital trust securities:
Trust securities issued by
GWLCT $ - $ 350 $ 350
Trust securities issued by
CLCT - 450 450
----------- ----------- -----------
- 800 800
Capital trust debentures:
5.995% Senior debentures due
December 31, 2052, unsecured
(GWLCT) 350 - -
6.679% Senior debentures due
June 30, 2052, unsecured (CLCT) 300 - -
7.529% Senior debentures due
June 30, 2052, unsecured (CLCT) 150 - -
----------- ----------- -----------
800 - -
Acquisition related fair market
value adjustment 36 37 39
Trust securities held by
consolidated group as temporary
investments (186) (186) (296)
----------- ----------- -----------
Total $ 650 $ 651 $ 543
----------- ----------- -----------
----------- ----------- -----------
GWLCT, a trust established by The Great-West Life Assurance Company
(Great-West), had issued $350 of capital trust securities, the
proceeds of which were used by GWLCT to purchase Great-West senior
debentures in the amount of $350, and CLCT, a trust established by
The Canada Life Assurance Company (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.
Effective January 1, 2005 the Company is not consolidating GWLCT and
CLCT. The impact of this is to not recognize the capital trust
securities issued by GWLCT and CLCT and to recognize the debentures
issued to the trusts by Great-West and Canada Life. As a result,
distributions and interest on the capital trust securities have been
reclassified to financing charges on the Summary of Consolidated
Operations (see note 3).
6. Non-Controlling Interests
The Company controlled a 100% equity interest in Great-West, London
Life Insurance Company (London Life), Canada Life and Great-West Life
& Annuity Assurance Company (GWL&A) at June 30, 2005 and June 30,
2004.
(a) The non-controlling interests of GWL&A, Great-West, London Life,
Canada Life 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
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Participating
policyholder
Net income
attributable to
participating
policyholder before
policyholder
dividends
Great-West $ 30 $ 25 $ 60 $ 49
London Life 155 136 304 278
Canada Life 47 39 90 85
GWL&A 30 43 80 101
Policyholder dividends
Great-West (24) (22) (48) (44)
London Life (135) (128) (267) (258)
Canada Life (46) (49) (89) (95)
GWL&A (28) (43) (77) (95)
---------- ---------- ---------- ----------
Net income 29 1 53 21
---------- ---------- ---------- ----------
Preferred shareholder
dividends of
subsidiaries 4 4 9 9
---------- ---------- ---------- ----------
Total $ 33 $ 5 $ 62 $ 30
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(b) The carrying value of non-controlling interests consist of the
following:
June 30, December 31, June 30,
2005 2004 2004
----------- ----------- -----------
Participating surplus
Great-West $ 372 $ 360 $ 349
London Life 1,118 1,081 1,007
Canada Life 18 17 12
GWL&A 206 196 216
----------- ----------- -----------
$ 1,714 $ 1,654 $ 1,584
----------- ----------- -----------
----------- ----------- -----------
Preferred shares issued by
subsidiaries:
Great-West Series L, 5.20%
Non-Cumulative $ 52 $ 52 $ 52
Great-West 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 13 14 15
----------- ----------- -----------
$ 158 $ 159 $ 160
----------- ----------- -----------
----------- ----------- -----------
7. Share Capital
Authorized
Unlimited First Preferred Shares, Class A Preferred Shares and
Second Preferred Shares
Unlimited Common Shares
Issued and Outstanding
June 30, 2005 December 31, 2004 June 30, 2004
------------------- ------------------- -------------------
Stated Stated Stated
Number Value Number Value Number Value
------------------- ------------------- -------------------
Preferred Shares:
Classified as
liabilities(1)
Series D, 4.70%
Non-Cumulative,
First Preferred
Shares 8,000,000 $ 200 8,000,000 $ 200 8,000,000 $ 200
Series E, 4.80%
Non-Cumulative,
First Preferred
Shares 23,868,115 597 23,868,115 597 23,868,131 597
Series 1, 5.00%
Non-Cumulative,
First
Preferred
Shares - - - - 5,192,242 130
------------------- ------------------- -------------------
31,868,115 $ 797 31,868,115 $ 797 37,060,373 $ 927
------------------- ------------------- -------------------
------------------- ------------------- -------------------
Perpetual
Preferred
Shares:
Classified as
equity
Series F, 5.90%
Non-Cumulative
First
Preferred
Shares 7,957,001 $ 199 7,957,001 $ 199 7,957,006 $ 199
Series G, 5.20%
Non-Cumulative
First
Preferred
Shares 12,000,000 300 12,000,000 300 - -
------------------- ------------------- -------------------
19,957,001 $ 499 19,957,001 $ 499 7,957,006 $ 199
------------------- ------------------- -------------------
------------------- ------------------- -------------------
Common Shares:
Balance,
beginning of
year 890,592,348 $4,651 893,123,924 $4,657 893,123,924 $4,657
Purchased and
cancelled
under Normal
Course
Issuer Bid (989,100) (5) (5,217,700) (26) (3,550,200) (18)
Issued under
Stock Option
Plan 1,375,830 12 2,686,124 20 2,070,878 15
------------------- ------------------- -------------------
Balance, end
of period 890,979,078 $4,658 890,592,348 $4,651 891,644,602 $4,654
------------------- ------------------- -------------------
------------------- ------------------- -------------------
(1) The adoption of the amendments to the CICA Handbook section on
Financial Instruments - Disclosure and Presentation (refer to
note 1(b)) resulted in the reclassification of the Series D, 4.70%
Non-Cumulative, First Preferred Shares and the Series E, 4.80%
Non-Cumulative, First Preferred Shares to liabilities. Dividends on
preferred shares classified as liabilities have been reclassified as
financing charges (refer to note 3).
8. Stock Based Compensation
Under the Company's stock option plan 100,000 options were granted
during the first quarter and no options were granted during the
second quarter of 2005 (282,000 options were granted during the first
quarter and 285,000 options were granted during the second quarter of
2004). The weighted-average fair value of options granted during the
six months ended June 30, 2005 was $6.68 per option ($6.45 per option
during the six months ended June 30, 2004). Compensation expense of
$3 after tax has been recognized in the Summary of Consolidated
Operations for the six months ended June 30, 2005 ($3 after tax for
the six months ended June 30, 2004).
9. 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
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Pension benefits $ 15 $ 13 $ 33 $ 29
Other benefits 12 14 22 28
---------- ---------- ---------- ----------
Total $ 27 $ 27 $ 55 $ 57
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
10. Earnings Per Common Share
The following table provides the reconciliation between basic and
diluted earnings per common share:
For the three months For the six months
ended June 30 ended June 30
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
a) Earnings
Net income
- common
shareholders $ 446 $ 401 $ 865 $ 777
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
b) Number of
Common Shares
at June 30
Average number of
common shares
outstanding 890,986,618 893,035,904
Add:
- Potential
exercise of
outstanding
stock
options 7,892,591 8,221,656
------------ ------------
Average number of
common shares
outstanding -
diluted basis 898,879,209 901,257,560
------------ ------------
------------ ------------
Earnings per Common
Share
Basic $ 0.500 $ 0.448 $ 0.971 $ 0.869
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted $ 0.496 $ 0.444 $ 0.962 $ 0.861
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
11. Related Party Transactions (changes since December 31, 2004 annual
report)
GWL&A received $414 of funds that were invested by affiliated
mutual funds and other investment options of the Company's
segregated funds. The Company recorded this transaction as premium
income in the general account. All transactions were at market terms
and conditions.
12. Segmented Information
Consolidated Operations
For the three months ended June 30, 2005
United Lifeco
Canada Europe States Corporate Total
-------- -------- -------- --------- -------
Income:
Premium income $ 1,593 $ 1,623 $ 572 $ - $ 3,788
Net investment income 693 252 385 (3) 1,327
Fee and other income 189 131 296 - 616
-------- -------- -------- -------- --------
Total income 2,475 2,006 1,253 (3) 5,731
-------- -------- -------- -------- --------
Benefits and Expenses:
Paid or credited to
policyholders 1,666 1,683 732 - 4,081
Other 497 191 308 1 997
Restructuring costs - - - 11 11
Amortization of
intangible assets 3 1 - - 4
-------- -------- -------- -------- --------
Net operating income
before income taxes 309 131 213 (15) 638
Income taxes 64 25 61 2 152
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 245 106 152 (17) 486
Non-controlling interests 26 5 2 - 33
-------- -------- -------- -------- --------
Net income - shareholders 219 101 150 (17) 453
Perpetual preferred share
dividends 7 - - - 7
-------- -------- -------- -------- --------
Net income - common
shareholders $ 212 $ 101 $ 150 $ (17) $ 446
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the three months ended June 30, 2004
United Lifeco
Canada Europe States Corporate Total
-------- -------- -------- --------- -------
Income:
Premium income $ 1,597 $ 1,883 $ 460 $ - $ 3,940
Net investment income 652 273 432 - 1,357
Fee and other income 169 104 314 - 587
-------- -------- -------- -------- --------
Total income 2,418 2,260 1,206 - 5,884
-------- -------- -------- -------- --------
Benefits and Expenses:
Paid or credited to
policyholders 1,687 2,005 641 - 4,333
Other 509 157 331 2 999
Restructuring costs - - - 9 9
Amortization of
intangible assets 3 1 - - 4
-------- -------- -------- -------- --------
Net operating income
before income taxes 219 97 234 (11) 539
Income taxes 29 24 78 (1) 130
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 190 73 156 (10) 409
Non-controlling interests 6 (3) 2 - 5
-------- -------- -------- -------- --------
Net income - shareholders 184 76 154 (10) 404
Perpetual preferred share
dividends 3 - - - 3
-------- -------- -------- -------- --------
Net income - common
shareholders $ 181 $ 76 $ 154 $ (10) $ 401
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the six months ended June 30, 2005
United Lifeco
Canada Europe States Corporate Total
-------- -------- -------- --------- -------
Income:
Premium income $ 3,102 $ 3,438 $ 1,776 $ - $ 8,316
Net investment income 1,377 492 756 (6) 2,619
Fee and other income 378 262 590 - 1,230
-------- -------- -------- -------- --------
Total income 4,857 4,192 3,122 (6) 12,165
-------- -------- -------- -------- --------
Benefits and Expenses:
Paid or credited to
policyholders 3,185 3,624 2,088 - 8,897
Other 1,076 309 612 2 1,999
Restructuring costs - - - 18 18
Amortization of
intangible assets 7 2 - - 9
-------- -------- -------- -------- --------
Net operating income
before income taxes 589 257 422 (26) 1,242
Income taxes 125 48 125 3 301
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 464 209 297 (29) 941
Non-controlling interests 52 7 3 - 62
-------- -------- -------- -------- --------
Net income - shareholders 412 202 294 (29) 879
Perpetual preferred share
dividends 14 - - - 14
-------- -------- -------- -------- --------
Net income - common
shareholders $ 398 $ 202 $ 294 $ (29) $ 865
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the six months ended June 30, 2004
United Lifeco
Canada Europe States Corporate Total
-------- -------- -------- --------- -------
Income:
Premium income $ 3,475 $ 3,185 $ 691 $ - $ 7,351
Net investment income 1,327 521 867 - 2,715
Fee and other income 340 187 592 - 1,119
-------- -------- -------- -------- --------
Total income 5,142 3,893 2,150 - 11,185
-------- -------- -------- -------- --------
Benefits and Expenses:
Paid or credited to
policyholders 3,703 3,400 999 - 8,102
Other 1,004 302 670 2 1,978
Restructuring costs - - - 18 18
Amortization of
intangible assets 6 1 - - 7
-------- -------- -------- -------- --------
Net operating income
before income taxes 429 190 481 (20) 1,080
Income taxes 71 38 161 (3) 267
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 358 152 320 (17) 813
Non-controlling interests 24 (1) 7 - 30
-------- -------- -------- -------- --------
Net income - shareholders 334 153 313 (17) 783
Perpetual preferred share
dividends 6 - - - 6
-------- -------- -------- -------- --------
Net income - common
shareholders $ 328 $ 153 $ 313 $ (17) $ 777
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
13. Subsequent Events
On May 12, 2005, Canada Life, through its wholly owned United Kingdom
subsidiary, Canada Life Limited, entered into an agreement to acquire
the assets and liabilities associated with the in-force annuity in
payment business of Phoenix and London Assurance Company Limited,
part of the Resolution Life Group which is based in the United
Kingdom. The assets and liabilities were valued at $5.1 billion as at
December 31, 2004. Under the agreement, from July 1, 2005, Canada
Life Limited assumed 100% of this business block on an indemnity
reinsurance basis and, subject to the sanction of the Court in
London, this reinsured business is expected formally to transfer to
Canada Life Limited on December 31, 2005. Although the final
transaction amount will depend on the value of the liabilities at the
date of closing, it is anticipated to result in an increase in
invested assets and a corresponding increase in policyholder
liabilities of approximately $5.1 billion.
On July 21, 2005, the Company entered into an agreement with a
syndicate of underwriters under which the underwriters have agreed to
buy 12,000,000 4.85% Non-cumulative First Preferred Shares Series H
from the Company for sale to the public at a price of $25 per
Preferred Share, representing an aggregate issue amount of $300. The
Company has granted the underwriters an option to purchase up to an
additional 2,000,000 Preferred Shares. The offering is expected to
close August 12, 2005.
>>
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Great-West Lifeco Inc. (GWO) Exchange: Toronto Stock Exchange
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May 20, 2013, 2:59 PM EDT
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Great-West Lifeco reports second quarter 2005 results and dividend increase
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