Readers are referred to the cautionary note regarding Forward-Looking
Information and Non-GAAP Financial Measures at the end of this Release.
TSX:GWO
WINNIPEG, Aug. 1, 2007 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net income attributable to common shareholders of $544 million for the three months ended June 30, 2007 compared to net income of $461 million reported a year ago. On a per share basis, this represents $0.610 per common share for the three months ended June 30, 2007, an increase of 18% compared to $0.516 per common share for 2006.
For the six months ended June 30, 2007 net income attributable to common shareholders was $1,058 million compared to $907 million reported a year ago. On a per share basis, this represents $1.186 per common share for the six months ended June 30, 2007, an increase of 17% compared to $1.017 per common share for 2006.
Lifeco reported earnings growth in all reporting segments, with significant growth in the Company's European segment.
Highlights
- Quarterly dividends declared were $0.2750 per common share, an
increase of 2 cents per common share, or 8%, payable
September 28, 2007. Dividends paid on common shares for the six
months ended June 30, 2007 were 14% higher than a year ago.
- Earnings per common share for the second quarter of 2007 increased
18% compared to a year ago.
- Return on common shareholders' equity was 21.5% for the twelve months
ended June 30, 2007
Consolidated net income for Lifeco is comprised of the net income 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
Net income attributable to common shareholders for the second quarter of 2007 was $257 million compared to $245 million in 2006, an increase of 5%.
For the six months ended June 30, 2007, net income attributable to common shareholders was up 7% to $482 million from $449 million for the six months ended June 30, 2006. Individual Insurance & Investment Products earnings at $321 million were up 12% while Group Insurance earnings of $179 million were up 8%. Corporate earnings were down $16 million from 2006 reflecting the positive impact in 2006 of a change in Federal Corporate tax rates.
Total sales for the six months ended June 30, 2007 were $5,033 million, compared to $4,315 million in 2006, an increase of 17%.
Total assets under administration at June 30, 2007 were $101.1 billion, compared to $96.6 billion at December 31, 2006.
UNITED STATES
Net income attributable to common shareholders for the second quarter of 2007 increased 7% to $136 million from $127 million for the second quarter of 2006. For the six months ended June 30, 2007, net income attributable to common shareholders was up 7% to $278 million from $261 million for the six months ended June 30, 2006.
Total sales for the six months ended June 30, 2007 were $3,155 million, compared to $2,130 million in 2006, an increase of 48%.
Total assets under administration at June 30, 2007 were $45.9 billion, compared to $48.2 billion at December 31, 2006.
EUROPE
Net income attributable to common shareholders for the second quarter of 2007 increased 59% to $153 million from $96 million for the second quarter of 2006. For the six months ended June 30, 2007, net income attributable to common shareholders was up 45% to $300 million from $207 million for the six months ended June 30, 2006.
Total sales for the six months ended June 30, 2007 were $3,425 million, compared to $2,660 million in 2006, an increase of 29%.
Total assets under administration at June 30, 2007 were $64.5 billion, compared to $67.8 billion at December 31, 2006.
CORPORATE
Corporate net income for Lifeco attributable to common shareholders was a net charge of $2 million for the second quarter of 2007 and $2 million for the six months ended June 30, 2007 compared to net charges of $7 million and $10 million in 2006.
QUARTERLY DIVIDENDS
At its meeting today, the Board of Directors approved a quarterly dividend of $0.2750 per share on the common shares of the Company payable September 28, 2007 to shareholders of record at the close of business August 31, 2007.
In addition, the Directors approved quarterly dividends on: - Series D First Preferred Shares of $0.293750 per share; - Series E First Preferred Shares of $0.30 per share; - Series F First Preferred Shares of $0.36875 per share; - Series G First Preferred Shares of $0.325 per share; - Series H First Preferred Shares of $0.30313 per share; and - Series I First Preferred Shares of $0.28125 per share; all payable September 28, 2007 to shareholders of record at the close of business August 31, 2007.
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 a financial services holding company with interests in the life insurance, health insurance, retirement savings, and reinsurance businesses. The Company has operations in Canada, the United States and Europe through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company and Great-West Life & Annuity Insurance Company. Lifeco and its companies have over $211 billion in assets under administration. Great-West Lifeco is a member of the Power Financial Corporation group of companies.
Cautionary note regarding Forward-Looking Information
This release contains some 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 financial services industry generally, including the insurance and mutual fund industries. 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 sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates and taxes, as well 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, and there may be other factors listed in other filings with securities regulators, including factors set out under "Risk Management and Control Practices" in the Company's 2006 Annual Management's Discussion and Analysis, which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and to not place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Company has no intention to update any forward-looking statements whether as a result of new information, future events or otherwise.
Cautionary note regarding Non-GAAP Financial Measures
This release contains some non-GAAP financial measures. Terms by which non-GAAP financial measures are identified include but are not limited to "earnings before restructuring charges", "adjusted net income", "earnings before adjustments", "premiums and deposits", "sales", and other similar expressions. Non-GAAP financial measures are used to provide management and investors with additional measures of performance. However, non-GAAP financial measures do not have standard meanings prescribed by GAAP and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP.
Further information
Selected financial information is attached.
Great-West Lifeco's second quarter analyst teleconference will be held Wednesday, August 1 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: 416-406-6419
- Participants from North America: 1-888-575-8232
- Participants from Overseas: Dial international access code first,
then 800-9559-6849
A replay of the call will be available from August 1, until August 8, 2007, and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto (passcode: 3217094 followed by the number sign).
Additional information relating to Lifeco, including the 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.
FINANCIAL HIGHLIGHTS (unaudited)
(in $ millions except per share amounts)
For the three months For the six months
ended June 30 ended June 30
------------------------- -------------------------
% %
2007 2006 Change 2007 2006 Change
-------------------------------------------------------------------------
Premiums:
Life insurance,
guaranteed annuities
and insured health
products $ 4,266 $ 4,444 -4% $ 9,879 $ 8,139 21%
Self-funded premium
equivalents (ASO
contracts) 1,843 1,886 -2% 3,807 3,805 -
Segregated funds
deposits:
Individual products 2,352 2,148 9% 5,053 4,169 21%
Group products 1,428 1,168 22% 3,144 2,721 16%
Proprietary mutual
funds deposits 203 163 25% 423 324 31%
------------------------- -------------------------
Total premiums and
deposits 10,092 9,809 3% 22,306 19,158 16%
------------------------- -------------------------
Fee and other income 749 667 12% 1,513 1,324 14%
Paid or credited to
policyholders 2,764 4,959 -44% 8,348 8,960 -7%
Net income - common
shareholders 544 461 18% 1,058 907 17%
-------------------------------------------------------------------------
Per common share
Basic earnings $ 0.610 $ 0.516 18% $ 1.186 $ 1.017 17%
Dividends paid 0.255 0.22375 14% 0.510 0.4475 14%
Book value 11.02 10.17 8%
-------------------------------------------------------------------------
Return on common
shareholders' equity
(12 months): 21.5% 21.7%
-------------------------------------------------------------------------
At June 30
Total assets $117,056 $113,019 4%
Segregated funds
net assets 92,224 78,349 18%
Proprietary mutual
funds net assets 2,252 1,577 43%
-------------------------
Total assets under
administration $211,532 $192,945 10%
-------------------------
-------------------------
Share capital and
surplus $ 10,934 $ 10,162 8%
-------------------------------------------------------------------------
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
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
(note 1(a)) (note 1(a))
Income
Premium income $ 4,266 $ 4,444 $ 9,879 $ 8,139
Net investment income
(note 3)
Regular net investment
income 1,487 1,516 2,905 2,839
Changes in fair value on
held for trading assets (1,931) - (2,347) -
---------- ---------- ---------- ----------
Total net investment income (444) 1,516 558 2,839
Fee and other income 749 667 1,513 1,324
---------- ---------- ---------- ----------
4,571 6,627 11,950 12,302
---------- ---------- ---------- ----------
Benefits and expenses
Policyholder benefits 3,742 3,898 9,188 7,482
Policyholder dividends
and experience refunds 307 286 472 565
Change in actuarial
liabilities (1,285) 775 (1,312) 913
---------- ---------- ---------- ----------
Total paid or credited to
policyholders 2,764 4,959 8,348 8,960
Commissions 374 332 752 674
Operating expenses 560 541 1,155 1,103
Premium taxes 58 66 122 126
Financing charges (note 4) 53 51 104 98
Amortization of finite
life intangible assets 7 5 15 9
---------- ---------- ---------- ----------
Net income before income taxes 755 673 1,454 1,332
Income taxes - current 205 110 354 227
- future (51) 26 (62) 78
---------- ---------- ---------- ----------
Net income before non-
controlling interests 601 537 1,162 1,027
Non-controlling interests
(note 9) 43 62 76 96
---------- ---------- ---------- ----------
Net income 558 475 1,086 931
Perpetual preferred
share dividends 14 14 28 24
---------- ---------- ---------- ----------
Net income - common
shareholders $ 544 $ 461 $ 1,058 $ 907
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per common share
(note 13)
Basic $ 0.610 $ 0.516 $ 1.186 $ 1.017
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted $ 0.606 $ 0.513 $ 1.177 $ 1.010
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
CONSOLIDATED BALANCE SHEETS (unaudited)
(in $ millions)
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
(note 1(a))
Assets
Bonds (note 2) $ 69,456 $ 65,246 $ 60,479
Mortgage loans (note 2) 15,172 15,334 14,855
Stocks (note 2) 5,866 4,766 4,236
Real estate (note 2) 2,207 2,216 1,868
Loans to policyholders 6,496 6,776 6,670
Cash and cash equivalents 4,132 3,083 3,186
Funds held by ceding insurers 1,720 12,371 11,526
Goodwill 5,439 5,444 5,324
Intangible assets 1,541 1,575 1,452
Other assets (note 5) 5,027 3,717 3,423
------------ ------------ ------------
Total assets $ 117,056 $ 120,528 $ 113,019
------------ ------------ ------------
------------ ------------ ------------
Liabilities
Policy liabilities
Actuarial liabilities $ 87,773 $ 89,490 $ 81,221
Provision for claims 1,238 1,266 1,110
Provision for policyholder
dividends 562 568 537
Provision for experience
rating refunds 225 452 378
Policyholder funds 2,243 2,202 2,134
------------ ------------ ------------
92,041 93,978 85,380
Debentures and other debt
instruments (note 6) 3,014 1,980 2,204
Funds held under reinsurance
contracts 1,944 1,822 3,954
Other liabilities (note 7) 4,138 4,167 3,977
Repurchase agreements 975 997 1,049
Deferred net realized gains 176 2,821 2,693
------------ ------------ ------------
102,288 105,765 99,257
Preferred shares (note 10) 813 756 775
Capital trust securities and
debentures (note 8) 638 646 647
Non-controlling interests (note 9)
Participating account surplus
in subsidiaries 2,021 1,884 1,814
Preferred shares issued
by subsidiaries 209 209 209
Perpetual preferred shares
issued by subsidiaries 153 154 155
Share capital and surplus
Share capital (note 10)
Perpetual preferred shares 1,099 1,099 1,099
Common shares 4,688 4,676 4,671
Accumulated surplus 6,093 5,858 5,338
Accumulated other comprehensive
income (977) - -
Contributed surplus 31 28 23
Currency translation account - (547) (969)
------------ ------------ ------------
10,934 11,114 10,162
------------ ------------ ------------
Liabilities, share capital
and surplus $ 117,056 $ 120,528 $ 113,019
------------ ------------ ------------
------------ ------------ ------------
CONSOLIDATED STATEMENTS OF SURPLUS (unaudited)
(in $ millions)
For the six months
ended June 30
--------------------------
2007 2006
------------ ------------
Accumulated surplus
Balance, beginning of year $ 5,858 $ 4,860
Change in accounting policy (note 1(a)) (368) -
Net income 1,086 931
Common share cancellation excess - (24)
Share issue costs - preferred shares - (6)
Dividends to shareholders
Perpetual preferred shareholders (28) (24)
Common shareholders (455) (399)
------------ ------------
Balance, end of period $ 6,093 $ 5,338
------------ ------------
------------ ------------
Accumulated other comprehensive income,
net of income taxes (note 14)
Balance, beginning of year $ - $ -
Reclassification from currency translation
account (note 1(a)) (547) -
Change in accounting policy (note 1(a)) 257 -
Other comprehensive income (687) -
------------ ------------
Balance, end of period $ (977) $ -
------------ ------------
------------ ------------
Contributed surplus
Balance, beginning of year $ 28 $ 19
Stock option expense
Current year expense (note 11) 3 5
Exercised - (1)
------------ ------------
Balance, end of period $ 31 $ 23
------------ ------------
------------ ------------
Currency translation account
Balance, beginning of year $ (547) $ (849)
Reclassification to accumulated other
comprehensive income (note 1(a)) 547 -
Change during the period - (120)
------------ ------------
Balance, end of period $ - $ (969)
------------ ------------
------------ ------------
SUMMARY OF CONSOLIDATED COMPREHENSIVE INCOME (unaudited)
(in $ millions)
For the three For the six
months ended months ended
June 30 June 30
------------ ------------
2007 2007
------------ ------------
(note 1(a)) (note 1(a))
Net income $ 558 $ 1,086
Other comprehensive income (loss),
net of income taxes
Unrealized foreign exchange gains (losses)
on translation of foreign operations,
net of tax of $0 and $0 (513) (588)
Unrealized gains (losses) on available for
sale assets, net of tax of $22 and $26 (83) (98)
Unrealized gains (losses) on cash flow
hedges, net of tax of $21 and $21 (38) (38)
Reclassification of realized gains (losses)
on available for sale assets, net of
tax of $5 and $12, to net income (2) (23)
Non-controlling interests (note 9) 60 60
------------ ------------
(576) (687)
------------ ------------
Comprehensive income $ (18) $ 399
------------ ------------
------------ ------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in $ millions)
For the three months For the six months
ended June 30 ended June 30
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Operations
Net income $ 558 $ 475 $ 1,086 $ 931
Adjustments:
Change in policy
liabilities (1,496) 274 (1,548) 403
Change in funds held by
ceding insurers 153 379 441 431
Change in funds held under
reinsurance contracts 24 (19) 50 (97)
Change in current income
taxes payable 14 15 (30) (74)
Future income tax expense (51) 26 (62) 78
Changes in fair value of
financial instruments 1,919 - 2,333 -
Other 153 649 (818) 75
---------- ---------- ---------- ----------
Cash flows from operations 1,274 1,799 1,452 1,747
Financing Activities
Issue of common shares 1 5 12 17
Issue of preferred shares - 300 - 300
Purchased and cancelled
common shares - (15) - (30)
Redemption of preferred shares - (12) - (12)
Issue of subordinated
debentures in subsidiary 1,000 336 1,000 336
Issue of short term
commercial paper 124 - 124 -
Repayment of debentures and
other debt instruments (18) (10) (27) (22)
Share issue costs - (6) - (6)
Dividends paid (242) (213) (483) (423)
---------- ---------- ---------- ----------
865 385 626 160
Investment Activities
Bond sales and maturities 5,287 6,200 11,819 13,332
Mortgage loan repayments 502 473 971 911
Stock sales 424 262 777 556
Real estate sales 15 (74) 34 45
Change in loans to
policyholders (126) (133) (160) (220)
Change in repurchase
agreements 160 4 (267) 118
Investment in bonds (5,362) (7,412) (11,305) (14,505)
Investment in mortgage loans (690) (673) (1,284) (1,205)
Investment in stocks (664) (285) (1,236) (638)
Investment in real estate (83) (44) (196) (116)
---------- ---------- ---------- ----------
(537) (1,682) (847) (1,722)
Effect of changes in exchange
rates on cash and cash
equivalents (166) 10 (182) 40
Increase in cash and cash
equivalents 1,436 512 1,049 225
Cash and cash equivalents,
beginning of period 2,696 2,674 3,083 2,961
---------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 4,132 $ 3,186 $ 4,132 $ 3,186
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Notes to Interim Consolidated Financial Statements (unaudited)
(in $ millions except per share amounts)
1. Basis of Presentation and Summary of Accounting Policies
The interim unaudited consolidated financial statements of Great-West
Lifeco Inc. (Lifeco or the Company) at June 30, 2007 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, 2006 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, 2006.
(a) Financial Instruments
Effective January 1, 2007, the Company adopted the Canadian
Institute of Chartered Accountants (CICA) Handbook Section 4211,
Life Insurance Enterprises; Section 3855, Financial Instruments -
Recognition and Measurement; Section 3865, Hedges; Section 1530,
Comprehensive Income.
In addition to the adoption of the CICA standards, the Company
adopted The Office of the Superintendent of Financial
Institutions Canada Guideline D-10, Accounting for Financial
Instruments Designated as "Held for Trading" (Fair Value
Option) (OSFI D-10), which provides additional guidance to
certain federally regulated financial institutions, including
life insurance companies.
Under the new guidance, all financial assets, including
derivatives, must be classified as available for sale, held for
trading, held to maturity, or loans and receivables. All
financial liabilities, including derivatives, must be classified
as held for trading or other. All financial instruments
classified as available for sale or held for trading are
recognized at fair value on the Consolidated Balance Sheets while
financial instruments classified as loans and receivables or
other will continue to be measured at amortized cost using the
effective interest rate method. The standards allow the Company
to designate certain financial instruments, on initial
recognition, as held for trading. This option has been limited by
the requirements of OSFI D-10.
Changes in the fair value of financial instruments classified as
held for trading are reported in net income. Unrealized gains or
losses on financial instruments classified as available for sale
are reported in Other Comprehensive Income until they are
realized by the Company.
The new guidance introduces the concept of Consolidated Other
Comprehensive Income, which tracks unrealized gains and losses
experienced by the Company on certain investments and derivative
instruments, and the currency translation account movement.
Consolidated Other Comprehensive Income together with
Consolidated Net Income provides the financial statement reader
with Consolidated Comprehensive Income. Consolidated
Comprehensive Income is the total of all realized and unrealized
income, expenses, gains and losses related to the Consolidated
Balance Sheets including currency translation gains and losses on
foreign subsidiary operations.
Unless otherwise stated below, financial assets and liabilities
will remain on the Consolidated Balance Sheets at amortized cost.
Certain investments, primarily investments actively traded in a
public market, and certain financial liabilities are measured at
their fair value. Investments backing actuarial liabilities,
investments backing participating account surplus in The Canada
Life Assurance Company (Canada Life), and preferred shares
classified as liabilities are designated as held for trading
using the fair value option. Changes in the fair value of these
investments flow through net income. This impact is largely
offset by corresponding changes in the actuarial liabilities
which also flow through net income. Investments backing
shareholder capital and surplus, with the exception of the
investments backing participating account surplus in Canada Life,
are classified as available for sale. Unrealized gains and losses
on these investments flow through Other Comprehensive Income
until they are realized. Certain investment portfolios are
classified as held for trading as a reflection of their
underlying nature. Changes in the fair value of these investments
flow through net income. There has been no change to the
Company's method of accounting for real estate or loans.
Derivative instruments, previously off-balance sheet, are
recognized at their market value in the Consolidated Balance
Sheets (note 5 and 7). Changes in the fair value of derivatives
are recognized in net income except for derivatives designated as
effective cash flow hedges.
Derivatives embedded in financial instruments, or other
contracts, which are not closely related to the host financial
instrument, or contract, must be bifurcated and recognized
independently. The change in accounting policy related to
embedded derivatives did not have a significant impact on the
financial statements of the Company.
Three types of hedging relationships are permitted under the new
guidance: fair value hedges, cash flow hedges, and hedges of net
investments in self-sustaining foreign operations. Changes in
fair value hedges are recognized in net income. The effective
portion of cash flow hedges and hedges of net investments in
self-sustaining foreign operations is offset through Other
Comprehensive Income until the variability in cash flows being
hedged is recognized in net income.
Trade-date accounting will be used to account for all regular-way
purchase or sale of investments traded on a public market and
derivative instruments. Settlement-date accounting will be used
to account for all regular-way purchase or sale of investments
not traded on a public market.
Transaction costs for financial assets and liabilities classified
or designated as held for trading will be recognized immediately
in net income. Transaction costs for financial assets classified
as available for sale or loans and receivables will be added to
the value of the instrument at acquisition and be taken into net
income using the effective interest rate method. Transaction
costs for financial liabilities classified as other than held for
trading will be recognized immediately in net income.
On January 1, 2007, transition adjustments were made to certain
existing financial instruments to adjust their carrying value to
market, to recognize derivative financial instruments on the
balance sheet, to eliminate the recognition of deferred realized
gains with corresponding adjustments to actuarial liabilities and
opening accumulated surplus.
The following table summarizes the adjustments made to adopt the
new standards:
December 31, Adjusted
2006 Opening January 1,
as reported adjustments 2007
------------- ------------- ------------
(note 1(d))
Assets
Bonds $ 65,246 $ (65,246) $ -
Classified as available
for sale - 5,675 5,675
Classified as held
for trading - 48,799 48,799
Designated as held
for trading - 1,650 1,650
Loans and receivables - 10,035 10,035
------------ ------------ ------------
65,246 913 66,159
Mortgage loans 15,334 (46) 15,288
Stocks 4,766 (4,460) 306
Classified as
available for sale - 904 904
Classified as held
for trading - 4,210 4,210
------------ ------------ ------------
4,766 654 5,420
All other assets 35,182 (43) 35,139
------------ ------------ ------------
Total assets $ 120,528 $ 1,478 $ 122,006
------------ ------------ ------------
------------ ------------ ------------
Liabilities
Policy liabilities $ 93,978 $ 3,896 $ 97,874
Funds held under
reinsurance contracts 1,822 121 1,943
Deferred net realized
gains 2,821 (2,628) 193
Preferred share liability
(Series D and E) 756 71 827
All other liabilities 7,790 - 7,790
------------ ------------ ------------
107,167 1,460 108,627
Non-controlling interests
Participating account
surplus in subsidiaries 1,884 129 2,013
Other non-controlling
interests 363 - 363
Share capital and surplus
Share capital 5,775 - 5,775
Shareholder surplus
Accumulated surplus 5,858 (368) 5,490
Accumulated other
comprehensive income - (290) (290)
Contributed surplus 28 - 28
Currency translation
account (547) 547 -
------------ ------------ ------------
11,114 (111) 11,003
------------ ------------ ------------
Liabilities, share
capital and surplus $ 120,528 $ 1,478 $ 122,006
------------ ------------ ------------
------------ ------------ ------------
(b) Determining Variable Interest Entities
The Company adopted the Emerging Issues Committee (EIC) of the
CICA EIC-163, Determining the Variability to be Considered in
Applying AcG-15 on January 1, 2007. EIC-163 provides additional
guidance on consolidation of variable interest entities.
(c) New Accounting Requirements
Capital Disclosures
-------------------
Effective January 1, 2008, the Company will be required to comply
with CICA Handbook Section 1535, Capital Disclosures. The section
establishes standards for disclosing information that enables
users of financial statements to evaluate the entity's
objectives, policies and processes for managing capital. The new
requirements are for disclosure only and will not impact
financial results of the Company.
Financial Instrument Disclosure and Presentation
------------------------------------------------
Effective January 1, 2008, the Company will be required to comply
with CICA Handbook Section 3862, Financial Instruments -
Disclosures, and Section 3863, Financial Instruments -
Presentation. These sections will replace existing Section 3861,
Financial Instruments - Disclosure and Presentation. Presentation
standards are carried forward unchanged. Disclosure standards are
enhanced and expanded to complement the changes in accounting
policy adopted in accordance with Section 3855, Financial
Instruments - Recognition and Measurement.
(d) Comparative Figures
Certain of the 2006 amounts presented for comparative purposes
have been reclassified to conform to the presentation adopted in
the current year. This reclassification has resulted in an
increase to total assets of $65 at December 31, 2006 and $74 at
June 30, 2006, with a corresponding increase in total
liabilities.
Comparative figures have not been restated to conform with the
new Financial Instruments accounting policies adopted January 1,
2007. CICA guidance explicitly prevents restatement of
comparative information under the new standards.
2. Portfolio Investments
(a) Carrying values of the portfolio investments are as follows:
June 30, 2007
------------------------------------------------------------
Market Value Amortized Cost Total
------------------------------ ---------------------- ------
Held for trading(1)
------------------- Non-
Available Desig- Classi- Loans and financial
for sale nated fied receivables instruments
---------- -------- -------- ----------- ------------ ------
Bonds
- government $ 1,850 $18,855 $ 908 $ 1,977 $ - $23,590
- corporate 3,213 34,646 684 7,323 - 45,866
--------- --------- -------- ---------- --------- ---------
5,063 53,501 1,592 9,300 - 69,456
--------- --------- -------- ---------- --------- ---------
Mortgage loans
- residential - - - 7,230 - 7,230
- non-residential - - - 7,942 - 7,942
--------- --------- -------- ---------- --------- ---------
- - - 15,172 - 15,172
--------- --------- -------- ---------- --------- ---------
Stocks 844 4,709 - - 313 5,866
Real estate - - - - 2,207 2,207
--------- --------- -------- ---------- --------- ---------
$ 5,907 $58,210 $ 1,592 $24,472 $ 2,520 $92,701
--------- --------- -------- ---------- --------- ---------
--------- --------- -------- ---------- --------- ---------
December June
31, 30,
2006 2006
---------- ---------
Carrying Carrying
value value
---------- ---------
Bonds
- government $22,069 $19,217
- corporate 43,177 41,262
--------- ---------
65,246 60,479
--------- ---------
Mortgage loans
- residential 7,342 7,272
- non-
residential 7,992 7,583
--------- ---------
15,334 14,855
--------- ---------
Stocks 4,766 4,236
Real estate 2,216 1,868
--------- ---------
$87,562 $81,438
--------- ---------
--------- ---------
(1) Investments can be held for trading in two ways: designated as
held for trading at the option of management; or, classified as
held for trading if they are actively traded for the purpose of
earning investment income.
(b) Stocks include the Company's investment in an affiliated company,
IGM Financial Inc. (IGM), a member of the Power Financial
Corporation group of companies, over which it exerts significant
influence but does not control. As a result of changes in
circumstances, the investment is accounted for using the equity
method of accounting as at January 1, 2007. The portfolio method
of accounting was used to account for the Company's investment in
IGM in prior years.
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
Carrying value,
beginning of year $ 306 $ 276 $ 276
Equity method earnings 14 - -
Dividends (7) - -
Portfolio method earnings - 30 15
------------ ------------ ------------
Carrying value,
end of period $ 313 $ 306 $ 291
------------ ------------ ------------
------------ ------------ ------------
Share of equity,
end of period $ 142 $ 133 $ 127
------------ ------------ ------------
------------ ------------ ------------
Fair value, end of period $ 476 $ 452 $ 410
------------ ------------ ------------
------------ ------------ ------------
The Company owns 9,205,911 shares of IGM at June 30, 2007
(9,205,933 at December 31, 2006; 9,205,705 at June 30, 2006)
representing a 3.48% ownership interest (3.48% at December 31,
2006; 3.48% at June 30, 2006).
3. Net Investment Income
Net investment income is comprised of the following:
For the three months Mortgage Real
ended June 30, 2007 Bonds loans Stocks estate Other Total
----------------------- ------- -------- ------- ------- ------- --------
Regular net investment
income:
Investment income
earned $ 950 $ 224 $ 44 $ 26 $ 212 $ 1,456
Net realized gains
(losses)
(available for sale) 7 - - - - 7
Net realized gains
(losses)
(other classifications) 11 9 - - - 20
Recovery of credit losses - 4 - - - 4
Amortization of deferred
net realized gains - - - 18 - 18
Other income and expenses - - - - (18) (18)
-------- ------- ------- ------- ------- --------
968 237 44 44 194 1,487
Changes in fair value on
held for trading assets:
Net realized/unrealized
gains (losses)
(classified held
for trading) (18) - - - - (18)
Net realized/unrealized
gains (losses)
(designated held
for trading) (1,967) - 133 - (79) (1,913)
-------- ------- ------- ------- ------- --------
(1,985) - 133 - (79) (1,931)
-------- ------- ------- ------- ------- --------
Net investment income $(1,017) $ 237 $ 177 $ 44 $ 115 $ (444)
-------- ------- ------- ------- ------- --------
-------- ------- ------- ------- ------- --------
For the three months Mortgage Real
ended June 30, 2006 Bonds loans Stocks estate Other Total
----------------------- ------- -------- ------- ------- ------- --------
Investment income
earned $ 1,009 $ 215 $ 32 $ 28 $ 107 $ 1,391
Amortization of net
realized and
unrealized gains 63 12 48 15 - 138
Recovery for credit
losses 4 1 - - - 5
Investment expenses - - - - (18) (18)
-------- ------- ------- ------- ------- --------
Net investment income $ 1,076 $ 228 $ 80 $ 43 $ 89 $ 1,516
-------- ------- ------- ------- ------- --------
-------- ------- ------- ------- ------- --------
For the six months Mortgage Real
ended June 30, 2007 Bonds loans Stocks estate Other Total
----------------------- ------- -------- ------- ------- ------- --------
Regular net investment
income:
Investment income
earned $ 1,875 $ 448 $ 88 $ 61 $ 364 $ 2,836
Net realized gains
(losses)
(available for sale) 32 - 3 - - 35
Net realized gains
(losses)
(other classifications) 13 15 - - - 28
Recovery of credit losses 1 4 - - - 5
Amortization of deferred
net realized gains - - - 37 - 37
Other income and
expenses - - - - (36) (36)
-------- ------- ------- ------- ------- --------
1,921 467 91 98 328 2,905
Changes in fair value on
held for trading assets:
Net realized/unrealized
gains (losses)
(classified held
for trading) (21) - - - - (21)
Net realized/unrealized
gains (losses)
(designated held
for trading) (2,446) - 212 - (92) (2,326)
-------- ------- ------- ------- ------- --------
(2,467) - 212 - (92) (2,347)
-------- ------- ------- ------- ------- --------
Net investment income $ (546) $ 467 $ 303 $ 98 $ 236 $ 558
-------- ------- ------- ------- ------- --------
-------- ------- ------- ------- ------- --------
For the six months Mortgage Real
ended June 30, 2006 Bonds loans Stocks estate Other Total
----------------------- ------- -------- ------- ------- ------- --------
Investment income
earned $ 1,809 $ 431 $ 65 $ 54 $ 206 $ 2,565
Amortization of net
realized and
unrealized gains 124 24 124 29 - 301
Recovery for credit
losses 6 1 - - - 7
Investment expenses - - - - (34) (34)
-------- ------- ------- ------- ------- --------
Net investment income $ 1,939 $ 456 $ 189 $ 83 $ 172 $ 2,839
-------- ------- ------- ------- ------- --------
-------- ------- ------- ------- ------- --------
4. Financing Charges
Financing charges consist of the following:
For the three months For the six months
ended June 30 ended June 30
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Interest on long-term
debentures and other
debt instruments $ 32 $ 30 $ 62 $ 57
Preferred share dividends 9 9 18 19
Unrealized gains on
preferred shares classified
as held for trading (12) - (14) -
Subordinated debenture
issue costs 13 - 13 -
Other 1 2 6 3
Interest on capital trust
debentures 12 12 24 24
Distributions on capital
trust securities held by
consolidated group as
temporary investments (2) (2) (5) (5)
---------- ---------- ---------- ----------
Total $ 53 $ 51 $ 104 $ 98
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
5. Other Assets
Other assets consist of the following:
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
Premiums in course of
collection $ 535 $ 566 $ 572
Interest due and accrued 1,049 1,009 927
Derivative financial
instruments (note 1(a)) 796 - -
Other investment receivables 319 - -
Future income taxes 398 369 367
Fixed assets 259 263 256
Prepaid expenses 55 64 76
Accounts receivable 709 754 648
Accrued pension asset 202 189 181
Other 705 503 396
------------ ------------ ------------
$ 5,027 $ 3,717 $ 3,423
------------ ------------ ------------
------------ ------------ ------------
6. Debentures and Other Debt Instruments
Debentures and other debt instruments consist of the following:
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
Short term
Commercial paper and other
short term debt instruments
with interest rates from
5.3% to 5.4% (5.2% to 5.3%
in 2006) $ 200 $ 110 $ 103
Revolving credit in respect
of reinsurance business
with interest rates of 6.0%
maturing within one year
(6.0% in 2006) 1 1 2
------------ ------------ ------------
Total short term 201 111 105
Long term
Operating:
Note payable with interest
rate of 8.0% 7 8 8
Capital:
Lifeco
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
------------ ------------ ------------
1,000 1,000 1,000
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
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 4 5 8
------------ ------------ ------------
304 305 558
Great-West Life & Annuity
Insurance Capital, LP
6.625% Deferrable
debentures due
November 15, 2034,
unsecured (U.S.$175) 184 205 197
Great-West Life & Annuity
Insurance Capital, LP II
7.153% Subordinated
debentures due May 16,
2046, unsecured
(U.S.$300) 318 351 336
Great-West Lifeco Finance
(Delaware) LP
Subordinated debentures
due June 21, 2067
bearing an interest rate
of 5.691% until 2017 and,
thereafter, at a rate
equal to the Canadian
90-day Bankers'
Acceptance rate plus
1.49%, unsecured 1,000 - -
------------ ------------ ------------
Total long term 2,813 1,869 2,099
------------ ------------ ------------
Total debentures and other
debt instruments $ 3,014 $ 1,980 $ 2,204
------------ ------------ ------------
------------ ------------ ------------
On June 20, 2007, Lifeco borrowed $124 under an existing revolving
line of credit facility with a Canadian chartered bank.
During the second quarter of 2007, the Company issued $1.0 billion of
5.691% Subordinated Debentures through its wholly-owned subsidiary
Great-West Lifeco Finance (Delaware) LP. The subordinated debentures
are due June 21, 2067 and bear an interest rate of 5.691% until
June 21, 2017. After June 21, 2017, the subordinated debentures will
bear an interest rate of the three month bankers' acceptance rate
plus 1.49%. The subordinated debentures may be redeemed by the
Company at the principal amount plus any unpaid and accrued interest
after June 21, 2017.
7. Other Liabilities
Other liabilities consist of the following:
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
Current income taxes $ 214 $ 246 $ 260
Accounts payable 383 459 384
Post-retirement benefits
provision 521 520 521
Bank overdraft 430 446 464
Future income taxes 373 369 306
Derivative financial
instruments (note 1(a)) 154 - 2
Other 2,063 2,127 2,040
------------ ------------ ------------
$ 4,138 $ 4,167 $ 3,977
------------ ------------ ------------
------------ ------------ ------------
8. Capital Trust Securities and Debentures
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
Capital trust debentures:
5.995% Senior debentures due
December 31, 2052,
unsecured (GWLCT) 350 350 350
6.679% Senior debentures due
June 30, 2052,
unsecured (CLCT) 300 300 300
7.529% Senior debentures due
June 30, 2052, unsecured
(CLCT) 150 150 150
------------ ------------ ------------
800 800 800
Acquisition related fair market
value adjustment 29 31 32
Trust securities held by
consolidated group as
temporary investments (191) (185) (185)
------------ ------------ ------------
Total $ 638 $ 646 $ 647
------------ ------------ ------------
------------ ------------ ------------
Great-West Life Capital Trust (GWLCT), a trust established by The
Great-West Life Assurance Company (Great-West Life), had issued $350
of capital trust securities, the proceeds of which were used by GWLCT
to purchase Great-West Life senior debentures in the amount of $350,
and Canada Life Capital Trust (CLCT), a trust established by 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.
9. Non-Controlling Interests
The Company controlled a 100% equity interest in Great-West Life,
London Life Insurance Company (London Life), Canada Life and Great-
West Life & Annuity Insurance Company (GWL&A) at June 30, 2007 and
June 30, 2006.
(a) The non-controlling interests of Great-West Life, London Life,
Canada Life, GWL&A 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
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Participating account
Net income
attributable to
participating
account before
policyholder
dividends
Great-West Life $ 31 $ 30 $ 61 $ 59
London Life 180 190 346 352
Canada Life 52 45 105 92
GWL&A 24 26 74 69
---------- ---------- ---------- ----------
287 291 586 572
Policyholder
dividends
Great-West Life (27) (25) (54) (51)
London Life (149) (141) (295) (280)
Canada Life (51) (44) (103) (90)
GWL&A (22) (24) (67) (64)
---------- ---------- ---------- ----------
(249) (234) (519) (485)
---------- ---------- ---------- ----------
Net income -
participating
account 38 57 67 87
---------- ---------- ---------- ----------
Preferred shareholder
dividends of
subsidiaries 5 5 9 9
---------- ---------- ---------- ----------
Total $ 43 $ 62 $ 76 $ 96
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
(b) The carrying value of non-controlling interests consist of the
following:
June 30, December 31, June 30,
2007 2006 2006
------------ ------------ ------------
Participating account
surplus:
Great-West Life $ 409 $ 370 $ 380
London Life 1,430 1,275 1,218
Canada Life 30 35 27
GWL&A 243 204 189
Participating account
accumulated other
comprehensive income:
Great-West Life 5 - -
London Life (49) - -
Canada Life 2 - -
GWL&A (49) - -
------------ ------------ ------------
$ 2,021 $ 1,884 $ 1,814
------------ ------------ ------------
------------ ------------ ------------
Preferred shares issued by
subsidiaries:
Great-West Life Series L,
5.20% Non-Cumulative $ 52 $ 52 $ 52
Great-West Life 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 8 9 10
------------ ------------ ------------
$ 153 $ 154 $ 155
------------ ------------ ------------
------------ ------------ ------------
(c) The non-controlling interests of Great-West Life, London Life,
Canada Life, GWL&A and their subsidiaries reflected in Other
Comprehensive Income are as follows:
For the For the
three months six months
ended ended
June 30 June 30
------------- ------------
2007 2007
------------- ------------
Participating account
Other comprehensive income
attributable to participating
account
Great-West Life $ (4) $ (5)
London Life (34) (34)
Canada Life - -
GWL&A (22) (21)
------------- ------------
Other comprehensive income -
participating account $ (60) $ (60)
------------- ------------
------------- ------------
10. Capital
Authorized
Unlimited First Preferred Shares, Class A Preferred Shares and Second
Preferred Shares, Unlimited Common Shares
Issued and outstanding
June 30, 2007 December 31, 2006
----------------------- -----------------------
Carrying Stated
Number value Number value
------------- --------- ------------- ---------
Classified as liabilities
Preferred shares:
Designated as held for
trading (1)
Series D, 4.70% Non-
Cumulative
First Preferred Shares 7,978,900 $ 206 7,978,900 $ 199
Series E, 4.80% Non-
Cumulative
First Preferred Shares 22,282,215 607 22,282,215 557
------------- --------- ------------- ---------
30,261,115 $ 813 30,261,115 $ 756
------------- --------- ------------- ---------
------------- --------- ------------- ---------
Classified as equity
Perpetual preferred shares:
Series F, 5.90% Non-
Cumulative
First Preferred Shares 7,957,001 $ 199 7,957,001 $ 199
Series G, 5.20% Non-
Cumulative
First Preferred Shares 12,000,000 300 12,000,000 300
Series H, 4.85% Non-
Cumulative
First Preferred Shares 12,000,000 300 12,000,000 300
Series I, 4.50% Non-
Cumulative
First Preferred Shares 12,000,000 300 12,000,000 300
------------- --------- ------------- ---------
43,957,001 $ 1,099 43,957,001 $ 1,099
------------- --------- ------------- ---------
------------- --------- ------------- ---------
Common shares:
Balance, beginning of
year 891,151,789 $ 4,676 890,689,076 $ 4,660
Purchased and cancelled
under Normal Course
Issuer Bid - - (1,847,300) (9)
Issued under Stock Option
Plan 1,082,557 12 2,310,013 25
------------- --------- ------------- ---------
Balance, end of period 892,234,346 $ 4,688 891,151,789 $ 4,676
------------- --------- ------------- ---------
------------- --------- ------------- ---------
June 30, 2006
-----------------------
Stated
Number value
------------- ---------
Classified as liabilities
Preferred shares:
Designated as held for
trading (1)
Series D, 4.70% Non-
Cumulative
First Preferred Shares 7,978,900 $ 199
Series E, 4.80% Non-
Cumulative
First Preferred Shares 23,022,915 576
------------- ---------
31,001,815 $ 775
------------- ---------
------------- ---------
Classified as equity
Perpetual preferred shares:
Series F, 5.90% Non-
Cumulative
First Preferred Shares 7,957,001 $ 199
Series G, 5.20% Non-
Cumulative
First Preferred Shares 12,000,000 300
Series H, 4.85% Non-
Cumulative
First Preferred Shares 12,000,000 300
Series I, 4.50% Non-
Cumulative
First Preferred Shares 12,000,000 300
------------- ---------
43,957,001 $ 1,099
------------- ---------
------------- ---------
Common shares:
Balance, beginning of
year 890,689,076 $ 4,660
Purchased and cancelled
under Normal Course
Issuer Bid (1,023,300) (6)
Issued under Stock Option
Plan 1,604,850 17
------------- ---------
Balance, end of period 891,270,626 $ 4,671
------------- ---------
------------- ---------
(1) The Company has elected to designate the outstanding Preferred Shares
Series D and Series E, as held for trading resulting in an increase
of $71 in the carrying value effective January 1, 2007 (see
note 1(a)). The effect of the change at June 30, 2007 is an increase
of $57 (Series D - $7, Series E -$50). The stated value at maturity
is $25.00 per share plus accrued dividends.
11. Stock Based Compensation
No options were granted under the Company's stock option plan during
the second quarter 2007 and 1,749,000 options were granted during the
first quarter of 2007 (no options were granted during the first
quarter of 2006 and 50,000 options were granted during the second
quarter of 2006). The weighted-average fair value of options granted
during the six months ended June 30, 2007 were $7.49 per option
($5.48 per option during the six months ended June 30, 2006).
Compensation expense of $3 after tax has been recognized in the
Summary of Consolidated Operations for the six months ended June 30,
2007 ($5 after tax for the six months ended June 30, 2006).
12. 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
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Pension benefits $ 11 $ 19 $ 22 $ 39
Other benefits 5 5 10 11
---------- ---------- ---------- ----------
Total $ 16 $ 24 $ 32 $ 50
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
13. Earnings Per Common Share
For the three months For the six months
ended June 30 ended June 30
------------------------- -------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
a) Earnings
Net income -
common
shareholders $ 544 $ 461 $ 1,058 $ 907
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
b) Number of
common shares
Average number
of common
shares
outstanding 892,170,991 890,989,489 891,871,142 890,989,489
Add:
- Potential
exercise
of out-
standing
stock
options 6,612,015 6,649,699 6,818,203 6,649,699
------------ ------------ ------------ ------------
Average number
of common
shares out-
standing -
diluted
basis 898,783,006 897,639,188 898,689,345 897,639,188
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per
common share
Basic $ 0.610 $ 0.516 $ 1.186 $ 1.017
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted $ 0.606 $ 0.513 $ 1.177 $ 1.010
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
14. Accumulated Other Comprehensive Income
For the six months ended June 30, 2007
---------------------------------------------------
Unrealized
foreign
exchange
gains Unrealized
(losses) gains Unrealized
on trans- (losses) gains
lation on avail- (losses)
of foreign able for on cash
operations sale assets flow hedges Total
------------ ------------ ------------ ------------
Balance, beginning of
year $ - $ - $ - $ -
Opening transition
adjustment (591) 379 - (212)
Income tax - (108) - (108)
------------ ------------ ------------ ------------
(591) 271 - (320)
Other comprehensive
income (588) (159) (59) (806)
Income tax - 38 21 59
------------ ------------ ------------ ------------
(588) (121) (38) (747)
------------ ------------ ------------ ------------
Balance, end of period $(1,179) $ 150 $ (38) $(1,067)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
For the six months ended June 30, 2007
-------------------------
Non-
controlling Share-
interest holder
------------ ------------
Balance, beginning of
year $ - $ -
Opening transition
adjustment 26 (186)
Income tax 4 (104)
------------ ------------
30 (290)
Other comprehensive
income 64 (742)
Income tax (4) 55
------------ ------------
60 (687)
------------ ------------
Balance, end of period $ 90 $ (977)
------------ ------------
------------ ------------
15. Acquisitions
(a) Putnam Investment Trust
On February 1, 2007, Lifeco announced that it had entered into
agreements with Marsh & McLennan Companies, Inc. whereby Lifeco
will acquire the asset management business of Putnam Investment
Trust (Putnam), and Great-West Life will acquire Putnam's 25%
interest in T.H. Lee Partners for approximately $371 (U.S. $350).
The parties will make an election under section 338(h)(10) of the
U.S. Internal Revenue Code that will result in a tax benefit that
Lifeco intends to securitize for approximately $583 (U.S. $550).
In aggregate these transactions represent a value of
approximately $4.1 billion (U.S. $3.9 billion).
Funding for the transaction will come from internal resources as
well as from proceeds of an issue of Lifeco common shares of no
more than $1.2 billion, the issuance of debentures and hybrids, a
bank credit facility, and an acquisition tax benefit
securitization. Also refer to note 17, Subsequent Events.
(b) Other Acquisitions
On May 31, 2007, GWL&A acquired an 80% equity interest in
Benefits Management Corporation (BMC). The assets acquired,
liabilities assumed and the Company's equity interest in the
results of BMC's operations have been included in its
consolidated financial statements since that date. The
acquisition will add approximately 90,000 members to the
Company's medical membership. BMC's principal subsidiary,
Allegiance Benefit Management, Inc., is a Montana-based third-
party administrator of employee health plans.
The value of identifiable intangible assets acquired reflects the
estimated fair value of the Company's interest in BMC's customer
base at the time of acquisition. The value of the identifiable
intangible assets will be amortized in relation to the expected
economic benefits of the business acquired. If actual experience
differs from expectations, the amortization will be adjusted to
reflect actual experience.
16. Segmented Information
Consolidated Operations
For the three months ended June 30, 2007
Lifeco
United Cor-
Canada States Europe porate Total
-------- -------- -------- -------- --------
Income:
Premium income $ 1,888 $ 673 $ 1,705 $ - $ 4,266
Net investment income
Regular net investment
income 621 359 496 11 1,487
Changes in fair value
on held for trading
assets (643) (229) (1,059) - (1,931)
-------- -------- -------- -------- --------
Total net investment
income (22) 130 (563) 11 (444)
Fee and other income 254 326 169 - 749
-------- -------- -------- -------- --------
Total income 2,120 1,129 1,311 11 4,571
-------- -------- -------- -------- --------
Benefits and expenses:
Paid or credited to
policyholders 1,222 609 933 - 2,764
Other 519 319 192 15 1,045
Amortization of finite
life intangible assets 3 3 1 - 7
-------- -------- -------- -------- --------
Net operating income
before income taxes 376 198 185 (4) 755
Income taxes 75 60 21 (2) 154
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 301 138 164 (2) 601
Non-controlling interests 34 2 7 - 43
-------- -------- -------- -------- --------
Net income - shareholders 267 136 157 (2) 558
Perpetual preferred share
dividends 10 - 4 - 14
-------- -------- -------- -------- --------
Net income - common
shareholders $ 257 $ 136 $ 153 $ (2) $ 544
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the three months ended June 30, 2006
Lifeco
United Cor-
Canada States Europe porate Total
-------- -------- -------- -------- --------
Income:
Premium income $ 1,636 $ 677 $ 2,131 $ - $ 4,444
Net investment income 686 337 493 - 1,516
Fee and other income 223 290 154 - 667
-------- -------- -------- -------- --------
Total income 2,545 1,304 2,778 - 6,627
-------- -------- -------- -------- --------
Benefits and expenses:
Paid or credited to
policyholders 1,617 843 2,499 - 4,959
Other 527 286 176 1 990
Amortization of finite
life intangible assets 4 - 1 - 5
-------- -------- -------- -------- --------
Net operating income
before income taxes 397 175 102 (1) 673
Income taxes 91 44 (5) 6 136
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 306 131 107 (7) 537
Non-controlling interests 50 4 8 - 62
-------- -------- -------- -------- --------
Net income - shareholders 256 127 99 (7) 475
Perpetual preferred
share dividends 11 - 3 - 14
-------- -------- -------- -------- --------
Net income - common
shareholders $ 245 $ 127 $ 96 $ (7) $ 461
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the six months ended June 30, 2007
Lifeco
United Cor-
Canada States Europe porate Total
-------- -------- -------- -------- --------
Income:
Premium income $ 3,693 $ 1,547 $ 4,639 $ - $ 9,879
Net investment income
Regular net investment
income 1,246 740 907 12 2,905
Changes in fair value on
held for trading assets (674) (191) (1,482) - (2,347)
-------- -------- -------- -------- --------
Total net investment income 572 549 (575) 12 558
Fee and other income 509 673 331 - 1,513
-------- -------- -------- -------- --------
Total income 4,774 2,769 4,395 12 11,950
-------- -------- -------- -------- --------
Benefits and expenses:
Paid or credited to
policyholders 2,990 1,698 3,660 - 8,348
Other 1,097 657 363 16 2,133
Amortization of finite life
intangible assets 7 6 2 - 15
-------- -------- -------- -------- --------
Net operating income
before income taxes 680 408 370 (4) 1,454
Income taxes 119 122 53 (2) 292
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 561 286 317 (2) 1,162
Non-controlling interests 58 8 10 - 76
-------- -------- -------- -------- --------
Net income - shareholders 503 278 307 (2) 1,086
Perpetual preferred
share dividends 21 - 7 - 28
-------- -------- -------- -------- --------
Net income - common
shareholders $ 482 $ 278 $ 300 $ (2) $ 1,058
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the six months ended June 30, 2006
Lifeco
United Cor-
Canada States Europe porate Total
-------- -------- -------- -------- --------
Income:
Premium income $ 3,211 $ 1,369 $ 3,559 $ - $ 8,139
Net investment income 1,370 672 797 - 2,839
Fee and other income 439 587 298 - 1,324
-------- -------- -------- -------- --------
Total income 5,020 2,628 4,654 - 12,302
-------- -------- -------- -------- --------
Benefits and expenses:
Paid or credited to
policyholders 3,145 1,681 4,134 - 8,960
Other 1,147 575 277 2 2,001
Amortization of finite
life intangible assets 7 - 2 - 9
-------- -------- -------- -------- --------
Net operating income
before income taxes 721 372 241 (2) 1,332
Income taxes 173 105 19 8 305
-------- -------- -------- -------- --------
Net income before
non-controlling
interests 548 267 222 (10) 1,027
Non-controlling interests 78 6 12 - 96
-------- -------- -------- -------- --------
Net income - shareholders 470 261 210 (10) 931
Perpetual preferred
share dividends 21 - 3 - 24
-------- -------- -------- -------- --------
Net income - common
shareholders $ 449 $ 261 $ 207 $ (10) $ 907
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
17. Subsequent Events
(a) On July 5, 2007, Canada Life acquired all of the remaining
outstanding common shares of Crown Life Insurance Company
(Crown Life) for cash consideration of $115. The allocation of the
purchase price to the assets acquired and liabilities assumed is
expected to be completed during the remainder of 2007. It is
anticipated that the acquisition will result in an increase in
invested assets of approximately $533, an increase in other assets of
approximately $32, an increase in policyholder liabilities of
approximately $383 and an increase in other liabilities of
approximately $67. Results of Crown Life will be included in the
Summary of Consolidated Operations from the date of acquisition and
are not expected to have a material impact to the financial results
of the Company.
(b) On July 23, 2007, Great-West Life announced its intention to redeem
all 2,093,032 Non-Cumulative Preferred Shares, Series L on
October 31, 2007 for cash redemption price of $25.00 per share.
(c) Putnam Investment Trust
Related to the acquisition of Putnam Investment Trust, all regulatory
approvals have been received and the pre-closing conditions have been
satisfied. The transaction is expected to close in the third quarter.
