EX-22 3 pressrelease.htm

Great-West

                LIFECOINC.

 

RELEASE

 

 

Readers are referred to the disclaimer regarding Forward-Looking Information and Non-GAAP Financial Measures at the end of this Release.

 

TSX:GWO

 

Great-West Lifeco reports first quarter 2006 results

 

Toronto, May 4, 2006 ... Great-West Lifeco Inc. (Lifeco) has reported net income attributable to common shareholders of $446 million for the three months ended March 31, 2006 compared to net income of $419 million reported a year ago. On a per share basis, this result represents $0.501 per common share for the three months ended March 31, 2006, an increase of 6% (14% on a constant currency basis) compared to $0.471 per common share for 2005. Net income in 2005 included $4 million, or $0.004 per common share, for restructuring charges related to the acquisition of Canada Life Financial Corporation.

 

Lifeco experienced solid operating results in all major business segments and significant growth in net income attributable to common shareholders.

 

Highlights

•

Earnings per common share for the first quarter of 2006 increased 6% (14% on a constant currency basis) compared to a year ago.

•

Return on common shareholders’ equity was 20.4% for the twelve months ended March 31, 2006.

•

Assets under administration at March 31, 2006 totalled $182.3 billion, up $5.0 billion from December 31, 2005 levels.

•

Quarterly dividends declared were $0.22375 per common share payable June 30, 2006. Dividends paid on common shares for the three months ended March 31, 2006 were 15% 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.

 

 

 

 

.../2

100 Osborne Street North, Winnipeg, MB Canada R3C 3A5

 

A member of the Power Financial Corporation group of companies.

 

 


 

 

- 2 -

 

CANADA

 

Consolidated net earnings of the Canadian segment of Lifeco attributable to common shareholders for the first quarter of 2006 increased 10% to $204 million from $186 million at March 31, 2005.

 

Total sales for the three months ended March 31, 2006 were $2.4 billion, an increase of 34% over the first quarter of 2005. Fee income for the period increased $27 million to $216 million.

 

Total assets under administration at March 31, 2006 were $90.3 billion, up $2.2 billion from December 31, 2005 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 first quarter of 2006 decreased 7% (an increase of 6% on a constant currency basis) to $134 million from $144 million at March 31, 2005.

 

Total sales for the three months ended March 31, 2006 were $869 million an increase of 9% (an increase of 17% on a constant currency basis) over the first quarter of 2005. Fee income for the period increased by $3 million to $297 million.

 

Total assets under administration of $44.9 billion at March 31, 2006 were up $0.6 billion from December 31, 2005 levels, essentially due to increases in segregated funds.

 

EUROPE

 

Consolidated net earnings of the European segment of Lifeco attributable to common shareholders for the first quarter of 2006 increased 10% (an increase of 24% on a constant currency basis) to $111 million from $101 million at March 31, 2005.

 

Total sales for the three months ended March 31, 2006 were $1.9 billion, a decrease of 7% (an increase of 3% on a constant currency basis) over the first quarter of 2005. Fee income for the period increased by $8 million to $139 million.

 

Total assets under administration at March 31, 2006 were $47.1 billion, up $2.2 billion from December 31, 2005 levels, with increases in the general fund of $0.4 billion and in segregated funds of $1.8 billion.

 

CORPORATE

 

Corporate net earnings for Lifeco attributable to common shareholders were a net charge of $3 million for the first quarter of 2006 compared to a net charge of $12 million for the first quarter of 2005.

 

.../3

 

 


 

 

- 3 -

 

CONSTANT CURRENCY

 

The geographic diversification of Lifeco's business operations creates exposure to movement in foreign exchange rates affecting the translation of operating results to Canadian dollars from foreign currencies, principally US dollars, British Pounds and euros.

 

Compared to the first quarter of 2005, the translation of foreign currency denominated earnings to Canadian dollars in 2006 has resulted in a decrease in the Company's Canadian dollar equivalent earnings of approximately $23 million as a result of movement in translation rates, as well as a decrease of $9 million from the expiry in 2005 of favourable forward foreign exchange contracts. Adjusting for the $32 million negative impact of currency, net income attributable to common shareholders for the three months ended March 31, 2006 increased by 14%.

 

QUARTERLY DIVIDENDS

 

At its meeting today, the Board of Directors approved a quarterly dividend of $0.22375 per share on the common shares of the Company payable June 30, 2006 to shareholders of record at the close of business June 2, 2006.

 

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;

 

•

Series H First Preferred Shares of $0.30313 per share; and

 

•

Initial dividend on Series I First Preferred Shares of $0.24349 per share,

all payable June 30, 2006 to shareholders of record at the close of business June 2, 2006.

 

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 $182 billion in assets under administration. Great-West Lifeco is a member of the Power Financial Corporation group of companies.

 

 

 

 

.../4

 

 


 

 

- 4 -

 

 

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 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. 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 specific intention to update any forward-looking statements whether as a result of new information, future events or otherwise.

 

This release may also contain non-GAAP financial measures. Terms by which non-GAAP financial measures are identified include but are not limited to "net income on a constant currency basis", "net income excluding the negative impact of currency", “adjusted net income”, “earnings before adjustments”, “net income before adjustments” 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.

 

 

 

 

 

 

 

 

 

.../5

 

 


 

 

- 5 -

 

 

Further information

Selected financial information is attached.

 

Great-West Lifeco's first quarter analyst teleconference will be held Thursday, May 4, at 2:00 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: 416-641-6108

•

Participants from North America: 1-866-542-4237

•

Participants from Overseas: Dial international access code first, then 800-9559-6853

 

A replay of the call will be available from May 4, until May 11, and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto (passcode: 3170771#).

 

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.

 

 

- end -

 

For more information contact:

 

Marlene Klassen

Director, Media & Public Relations

(204) 946-7705

 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

FINANCIAL  HIGHLIGHTS  (unaudited)

(in  $  millions  except  per  share  amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

  

  

  

  

  

2006

2005

%  Change

 

 

 

 

 

 

 

 

 

 

 

For  the  three  months  ended  March  31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums:

 

 

 

 

 

 

 

 

 

 

Life  insurance,  guaranteed  annuities  and  insured  health  products

 

 

$

3,700  

$4,528  

-18%

 

Self-funded  premium  equivalents  (ASO  contracts)

 

 

 

 

1,919  

1,890  

2%

 

Segregated  funds  deposits:

 

 

 

 

 

 

 

 

Individual  products

 

 

 

 

 

2,021  

1,572  

29%

 

Group  products

 

 

 

 

 

1,553  

1,228  

26%

 

Total  premiums  and  deposits

 

 

 

 

9,193  

9,218  

0%

 

 

 

 

 

 

 

 

 

 

 

 

Fee  and  other  income

 

 

 

 

 

      652  

      614  

6%

 

Paid  or  credited  to  policyholders

 

 

 

 

4,001  

4,816  

-17%

 

 

 

 

 

 

 

 

 

 

 

 

Net  income  -  common  shareholders  before  adjustments  (1)

 

 

 

      446  

      423  

5%

 

Adjustments  after  tax  (1)

 

 

 

 

 

          -  

              4  

 

 

Net  income  -  common  shareholders

 

 

 

 

      446  

      419  

6%

  

  

  

  

  

  

  

  

  

  

  

Per  common  share

 

 

 

 

 

 

 

 

 

Basic  earnings  before  adjustments  (1)

 

 

 

$

0.501  

$0.475  

5%

 

Adjustments  after  tax  (1)

 

 

 

 

 

          -

    0.004  

 

 

Basic  earnings  after  adjustments

 

 

 

 

0.501  

    0.471  

6%

 

Dividends  paid

 

 

 

 

 

0.22375  

    0.195  

15%

 

Book  value  

 

 

 

 

 

 

10.06  

    9.38  

7%

  

  

  

  

  

  

  

  

  

  

  

 

 

 

 

 

 

 

 

 

 

 

Return  on  common  shareholders'  equity  (12  months):

 

 

 

 

 

 

 

 

Net  income  before  adjustments  (1)

 

 

 

 

20.5%

20.7%

 

 

Net  income

 

 

 

 

 

 

20.4%

20.4%

 

  

  

  

  

  

  

  

  

  

  

  

At  March  31

 

 

 

 

 

 

 

 

 

 

Total  assets  

 

 

 

 

$

102,306  

$    97,036  

5%

 

Segregated  funds  assets

 

 

 

 

 

    79,997  

        69,927  

14%

 

Total  assets  under  administration

 

 

 

$

182,303  

$166,963  

9%

 

 

 

 

 

 

 

 

 

 

 

 

Share  capital  and  surplus

 

 

 

$

      9,767  

$        8,857  

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. Shareholder net income for the three months ended March 31, 2005 includes restructuring costs related

 


GREAT-WEST

LIFECO INC.

 

to the acquisition of $4 after tax, or $0.004 per common share. Net income, basic earnings per common share and return on common shareholders’ equity are presented before restructuring costs as a non-GAAP financial measure of earnings performance.

 

 


GREAT-WEST

LIFECO INC.

 

 

 

SUMMARY OF CONSOLIDATED OPERATIONS (unaudited)

'(in $ millions except per share amounts)

 

 

 

 

 

For the three months

 

 

 

 

 

ended March 31

 

 

 

 

 

2006

 

2005

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

Premium income

 

$

          3,700 

$

           4,528 

 

Net investment income (note 2)

 

 

            1,323 

 

             1,292 

 

Fee and other income

 

 

               652 

 

               614 

 

 

 

 

 

            5,675 

 

             6,434 

 

 

 

 

 

 

 

 

Benefits and expenses

 

 

 

 

 

 

Paid or credited to policyholders and beneficiaries

 

 

 

 

 

including policyholder dividends and experience refunds

 

            4,001 

 

             4,816 

 

Commissions

 

 

 

               342 

 

               329 

 

Operating expenses

 

 

               562 

 

               564 

 

Premium taxes

 

 

 

                 60 

 

                 61 

 

Financing charges (note 3)

 

 

                 47 

 

                 48 

 

Amortization of finite life intangible assets

 

                  4 

 

                   5 

 

Restructuring costs

 

 

                 -   

 

                   7 

 

 

 

 

 

 

 

 

Net income before income taxes

 

 

               659 

 

               604 

 

 

 

 

 

 

 

 

Income taxes

- current

 

 

               117 

 

                 29 

 

 

- future

 

 

                 52 

 

               120 

 

 

 

 

 

 

 

 

Net income before non-controlling interests

 

               490 

 

               455 

 

 

 

 

 

 

 

 

Non-controlling interests (note 8)

 

 

                 34 

 

                 29 

 

 

 

 

 

 

 

 

Net income - shareholders

 

 

               456 

 

               426 

 

 

 

 

 

 

 

 

Perpetual preferred share dividends

 

 

                 10 

 

                   7 

 

 

 

 

 

 

 

 

Net income - common shareholders

$

             446 

$

              419 

 

 

 

 

 

 

 

 

Earnings per common share (note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

          0.501 

$

           0.471 

 

 

 

 

 

 

 

 

 

Diluted

 

 

$

          0.497 

$

           0.466 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

CONSOLIDATED BALANCE SHEET (unaudited)

(in $ millions)

 

 

 

March 31,

 

December 31,

 

March 31, 

 

 

 

2006

 

2005

 

2005

Assets

 

 

 

 

 

 

 

Bonds

 

 

$        59,481 

 

$        59,298 

 

$        55,439 

Mortgage loans

 

 

14,693 

 

14,605 

 

14,643 

Stocks

 

 

4,182 

 

4,028 

 

3,567 

Real estate

 

 

1,839 

 

1,842 

 

1,679 

Loans to policyholders

 

 

6,735 

 

6,646 

 

6,572 

Cash and certificates of deposit

 

2,674 

 

2,961 

 

2,804 

Funds held by ceding insurers

 

2,504 

 

2,556 

 

2,209 

Goodwill

 

 

5,327 

 

5,327 

 

5,328 

Intangible assets

 

 

1,453 

 

1,453 

 

1,498 

Other assets (note 4)

 

 

3,418 

 

3,445 

 

3,297 

Total assets

 

 

$      102,306 

 

$      102,161 

 

$        97,036 

Liabilities

 

 

 

 

 

 

 

Policy liabilities

 

 

 

 

 

 

 

Actuarial liabilities 

 

 

$        71,611 

 

$        71,263 

 

$        66,704 

Provision for claims 

 

 

1,010 

 

999 

 

1,081 

Provision for policyholder dividends

 

546 

 

535 

 

595 

Provision for experience rating refunds

 

352 

 

401 

 

507 

Policyholder funds

 

 

2,112 

 

2,088 

 

2,067 

 

 

 

75,631 

 

75,286 

 

70,954 

 

 

 

 

 

 

 

 

Debentures and other debt instruments (note 5)

 

1,891 

 

1,903 

 

2,092 

Funds held under reinsurance contracts

 

4,009 

 

4,089 

 

4,376 

Other liabilities (note 6)

 

 

3,787 

 

4,318 

 

4,295 

Repurchase agreements  

 

 

996 

 

936 

 

800 

Deferred net realized gains

 

 

2,654 

 

2,598 

 

2,168 

 

 

 

88,968 

 

89,130 

 

84,685 

 

 

 

 

 

 

 

 

Preferred shares (note 9)

 

 

787 

 

787 

 

797 

Capital trust securities and debentures (note 7)

 

648 

 

648 

 

650 

Non-controlling interests (note 8)

 

 

 

 

 

 

Participating surplus in subsidiaries

 

1,771 

 

1,741 

 

1,680 

Preferred shares issued by subsidiaries

 

209 

 

209 

 

209 

Perpetual preferred shares issued by subsidiaries

156 

 

157 

 

158 

Share capital and surplus

 

 

 

 

 

 

Share capital (note 9)

 

 

 

 

 

 

 

Perpetual preferred shares

 

799 

 

799 

 

499 

Common shares

 

 

4,668 

 

4,660 

 

4,659 

Accumulated surplus

 

 

5,095 

 

4,860 

 

4,124 

Contributed surplus

 

 

21 

 

19 

 

16 

Currency translation account

 

(816)

 

(849)

 

(441)

 

 

 

9,767 

 

9,489 

 

8,857 

 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

Liabilities, share capital and surplus

 

$      102,306 

 

$      102,161 

 

$        97,036 

 

CONSOLIDATED STATEMENT OF SURPLUS (unaudited)

(in $ millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

 

 

 

ended March 31

 

 

 

 

 

2006

 

2005

 

 

 

 

 

 

 

 

Accumulated surplus

 

 

 

 

 

 

 

Balance, beginning of year

 

 

 

$

4,860 

$

3,890 

Net income

 

 

 

 

456 

 

426 

Common share cancellation excess

 

 

 

 

(11)

 

(11)

Dividends to shareholders

 

 

 

 

 

 

 

Perpetual preferred shareholders

 

 

 

(10)

 

(7)

Common shareholders

 

 

 

 

(200)

 

(174)

Balance, end of period

 

 

 

$

5,095 

$

4,124 

 

 

 

 

 

 

 

 

Contributed surplus

 

 

 

 

 

 

 

Balance, beginning of year

 

 

 

$

19 

$

14 

Stock option expense (note 10)

 

 

 

 

2 

 

2 

Balance, end of period

 

 

 

$

21 

$

16 

 

 

 

 

 

 

 

 

Currency translation account

 

 

 

 

 

 

 

Balance, beginning of year

 

 

 

$

(849)

$

(426)

Change during the period

 

 

 

 

33 

$

(15)

Balance, end of period

 

 

 

$

(816)

$

(441)

 

 

 

 

 

 

 

 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

 

(in $ millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

 

 

 

 

ended March 31

 

 

 

 

 

 

 

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

Operations

 

 

 

 

 

 

 

 

 

 

Net income 

 

 

 

 

 

$

            456 

$

            426 

 

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

 

Change in policy liabilities

 

 

 

 

 

            129 

 

            879 

 

Change in funds held by ceding insurers

 

 

 

 

 

              52 

 

            128 

 

Change in funds held under reinsurance contracts

 

 

 

 

             (78)

 

                2 

 

Change in current income taxes payable

 

 

 

 

 

             (89)

 

           (153)

 

Future income tax expense

 

 

 

 

 

              52 

 

            120 

 

Other

 

 

 

 

 

 

           (574)

 

           (336)

 

Cash flows from operations

 

 

 

 

 

 

             (52)

 

         1,066 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

 

 

 

Issue of common shares

 

 

 

 

 

 

              12 

 

              10 

 

Purchased and cancelled common shares

 

 

 

 

 

             (15)

 

             (13)

 

Repayment of debentures and other debt instruments

 

 

 

 

             (12)

 

               (1)

 

Dividends paid

 

 

 

 

 

 

           (210)

 

            (181)

 

 

 

 

 

 

 

 

           (225)

 

            (185)

 

 

 

 

 

 

 

 

 

 

 

 

Investment Activities

 

 

 

 

 

 

 

 

 

 

Bond sales and maturities

 

 

 

 

 

          8,016 

 

          9,223 

 

Mortgage loan repayments

 

 

 

 

 

            438 

 

             842 

 

Stock sales

 

 

 

 

 

 

            294 

 

             240 

 

Real estate sales

 

 

 

 

 

 

            119 

 

               36 

 

Change in loans to policyholders

 

 

 

 

 

             (87)

 

              (37)

 

Change in repurchase agreements

 

 

 

 

 

            114 

 

             112 

 

Investment in bonds

 

 

 

 

 

 

         (7,977)

 

          (9,528)

 

Investment in mortgage loans

 

 

 

 

 

            (532)

 

            (970)

 

Investment in stocks

 

 

 

 

 

 

            (353)

 

            (389)

 

Investment in real estate

 

 

 

 

 

 

              (72)

 

              (52)

 

 

 

 

 

 

 

 

              (40)

 

            (523)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of changes in exchange rates on cash and certificates of deposit

 

               30 

 

              (26)

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and certificates of deposit

 

 

 

 

            (287)

 

             332 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and certificates of deposit, beginning of year

 

 

 

 

           2,961 

 

           2,472 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

Cash and certificates of deposit, end of period

 

 

 

$

          2,674 

$

2,804 

 

 

 


GREAT-WEST

LIFECO INC.

 

 

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 March 31, 2006 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, 2005. 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, 2005.

 

(b)

Certain of 2005 amounts presented for comparative purposes have been reclassified to conform to the presentation adopted in the current year.

2.

Net Investment Income

Net Investment income is comprised of the following:

 

 

 

For the three months ended March 31, 2006

 

 

 

Investment income earned

 

Amortization of net realized and unrealized gains

 

Provision for credit losses

 

Investment expenses

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

Bonds

 

$

  800

$

  61

$

   2

$

        -   

$

  863

Mortgage loans

 

  216

 

  12

 

        -   

 

        -   

 

  228

Stocks

 

 

    33

 

  76

 

        -   

 

        -   

 

  109

Real estate

 

 

    26

 

  14

 

        -   

 

        -   

 

    40

Other

 

 

    99

 

        -   

 

        -   

 

 (16)

 

    83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,174

$

163

$

   2

$

 (16)

$

1,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2005

 

 

 

Investment income earned

 

Amortization of net realized and unrealized gains

 

Provision for credit losses

 

Investment expenses

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

Bonds

 

$

  778

$

  60

$

1

$

              -   

$

  839

Mortgage loans

 

  227

 

  13

 

2

 

              -   

 

  242

Stocks

 

 

    37

 

  43

 

           -   

 

              -   

 

    80

Real estate

 

 

    46

 

    8

 

           -   

 

              -   

 

    54

Other

 

 

    90

 

              -   

 

           -   

 

            (13)

 

    77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,178

$

124

$

3

$

            (13)

$

1,292

 

 


GREAT-WEST

LIFECO INC.

 

 

 

3.

Financing Charges

Financing charges include interest on long-term debentures and other debt instruments together with distributions and interest on capital trust securities and debentures and preferred shares classified as liabilities

 

 

 

For the three months

 

 

ended March 31

 

 

2006

 

2005

 

 

 

 

 

Interest on long-term debentures and other debt instruments

$

              27 

$

              29 

Preferred share dividends

 

                10 

 

                10 

Interest on capital trust debentures

 

                12 

 

                12 

Other

 

                  1 

 

                  - 

Distributions on capital trust securities held by 

 

 

 

 

consolidated group as temporary investments

 

              (3)

 

         (3)

Total

$

                47 

$

              48 

 

4.

Other Assets

Other assets consist of the following:

 

Other Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

 

 

 

2006

 

2005

 

2005

 

 

 

 

 

 

 

 

 

 

 

Premiums in course of collection

 

$

633 

$

623 

$

562 

Interest due and accrued

 

 

 

936 

 

893 

 

881 

Future income taxes

 

 

 

338 

 

363 

 

313 

Fixed assets

 

 

 

 

271 

 

279 

 

300 

Prepaid expenses

 

 

 

 

60 

 

76 

 

74 

Accounts receivable

 

 

 

659 

 

716 

 

648 

Accrued pension asset

 

 

 

171 

 

179 

 

174 

Other

 

 

 

 

 

350 

 

316 

 

345 

 

 

 

 

 

$

3,418 

$

3,445 

$

3,297 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

5.

Debentures and Other Debt Instruments

 

Debentures and other debt instruments consist of the following:

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

2006

 

2005

 

2005

Short term

 

 

 

 

 

 

 

 

Commercial paper and other short term debt instruments with interest 

 

 

 

 

 

 

rates from 4.5% to 4.9% (4.0% to 5.0% in 2005)

$

110

$

         112 

$

    114 

 

Revolving credit in respect of reinsurance business with interest rates from

 

 

5.4% to 5.5% maturing within one year (5.0% to 5.2% in 2005)

 

3

 

           14 

 

      18 

Total short term

 

113

 

          126 

 

    132 

Long term

 

 

 

 

 

 

Operating:

 

 

 

 

 

 

 

Notes payable with interest rate of 8.0%

 

9

 

              9 

 

      10 

Capital:

 

 

 

 

 

 

Lifeco

 

 

 

 

 

 

 

Five year term facility

 

        -   

 

            -   

 

    150 

 

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 

 

 1,150 

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

 

      10 

 

            13 

 

      34 

 

 

 

 

 

 

 

 

 

 

 

    560 

 

          563 

 

    584 

Great-West Life & Annuity Insurance Capital, LP

 

 

 

 

 

 

 

6.625% Deferrable debentures due November 15, 2034,

 

    209 

 

          205 

 

    216 

 

unsecured (U.S.$175)

 

 

 

 

 

 

Total long term

 

 1,778 

 

       1,777 

 

  ,960 

 

 

 

 

 

 

 

 

Total debentures and other debt instruments

$

 1,891 

$

       1,903 

$

 2,092 

6.

Other Liabilities

Other liabilities consist of the following:

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

 

 

2006

 

2005

 

2005

 

 

 

 

 

 

 

 

 

 

Current income taxes

 

$

        285

$

        374

$

        251

Accounts payable

 

 

 

        513

 

        511

 

        491

Liability for restructuring costs

 

         -   

 

          -   

 

         48

Post retirement benefits provision

 

        525

 

        508

 

       489

Bank overdraft

 

 

 

        445

 

        449

 

       651

Future income taxes

 

 

        332

 

        317

 

       272

Other

 

 

 

 

     1,687

 

     2,159

 

    2,093

 

 

 

 

$

     3,787

$

     4,318

$

    4,295

 

 


GREAT-WEST

LIFECO INC.

 

 

7.

Capital Trust Securities and Debentures

 

 

March 31,

 

December 31,

 

March 31,

 

 

2006

 

2005

 

2005

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

 

                33

 

                 34

 

                 36 

Capital trust securities held by consolidated group 

 

 

 

 

 

 

as temporary investments

 

             (185)

 

               (186)

 

               (186)

Total

$

              648

$

                648

$

                 650

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 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.

8.

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 March 31, 2006 and March 31, 2005.

 

(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:

(a)

 

 

 

 

 

 

 For the three months 

 

 

 

 

 

 

 

 ended March 31, 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2006

 

2005

 

Participating policyholder

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to participating

 

 

 

 

 

 

 

 

 

policyholder before policyholder dividends

 

 

 

 

 

 

 

 

 

Great-West Life

 

 

 

 

 

 

$

              29 

 

 $           30 

 

London Life

 

 

 

 

 

 

 

              162 

 

            149 

 

Canada Life

 

 

 

 

 

 

 

                47 

 

              43 

 

GWL&A

 

 

 

 

 

 

 

                43 

 

              50 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policyholder dividends

 

 

 

 

 

 

 

 

 

 

Great-West Life

 

 

 

 

 

 

 

              (26)

 

            (24)

 

London Life

 

 

 

 

 

 

 

            (139)

 

          (132)

 

Canada Life

 

 

 

 

 

 

 

              (46)

 

            (43)

 

GWL&A

 

 

 

 

 

 

 

              (40)

 

            (49)

 

Net income

 

 

 

 

 

 

 

                30 

 

              24 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shareholder dividends of subsidiaries

 

 

 

 

 

                  4 

 

                5 

 

Total

 

 

 

 

 

 

$

 $             34 

 

 $           29 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


GREAT-WEST

LIFECO INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b)

 

 

 

 

 

 

March 31,

 

December 31,

 

March 31,

 

 

 

 

 

 

 

2006

 

2005

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

Participating surplus:

 

 

 

 

 

 

 

 

 

 

 

Great-West Life

 

 

 

 

$

          375 

 

 $           372 

 

 $         366 

 

London Life

 

 

 

 

 

         1,174 

 

           1,151 

 

         1,098 

 

Canada Life

 

 

 

 

 

             26 

 

                25 

 

              17 

 

GWL&A

 

 

 

 

 

           196 

 

              193 

 

            199 

 

 

 

 

 

 

$

        1,771 

 

 $        1,741 

 

 $      1,680 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

Acquisition related fair market value adjustment

 

 

 

 

                12 

 

              13 

 

 

 

 

 

$

          156 

 

 $           157 

 

 $         158 

 

 


GREAT-WEST

LIFECO INC.

 

 

9.

Share Capital

 

Authorized

 

 

Unlimited First Preferred Shares, Class A Preferred Shares and Second Preferred Shares,

 

Unlimited Common Shares

 

Issued and outstanding

 

 

March 31, 2006

 

December 31, 2005

 

March 31, 2005

 

 

Number

 

Stated value

 

Number

 

Stated value

 

Number

 

Stated value

Preferred shares:

 

 

 

 

 

 

 

 

 

 

 

 

Classified as liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Series D, 4.70% Non-Cumulative

 

 

 

 

 

 

 

 

 

 

 

 

First Preferred Shares

 

     7,978,900 

$

            199 

 

      7,978,900 

$

          199 

 

     8,000,000 

$

          200 

Series E, 4.80% Non-Cumulative

 

 

 

 

 

 

 

 

 

 

 

 

First Preferred Shares

 

   23,499,915 

 

              588 

 

    23,499,915 

 

            588 

 

   23,868,115 

 

            597 

 

 

   31,478,815 

$

            787 

 

    31,478,815 

$

          787 

 

   31,868,115 

$

          797 

 

 

 

 

 

 

 

 

 

 

 

 

 

Perpetual preferred shares:

 

 

 

 

 

 

 

 

 

 

 

 

Classified as equity

 

 

 

 

 

 

 

 

 

 

 

 

Series F, 5.90% Non-Cumulative

 

 

#

 

#

 

#

 

 

 

#

 

First Preferred Shares

 

     7,957,001 

$

            199 

 

      7,957,001 

$

          199 

 

     7,957,001 

$

          199 

Series G, 5.20% Non-Cumulative

 

 

#

 

#

 

#

 

 

 

#

 

First Preferred Shares

 

   12,000,000 

 

              300 

 

    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 

 

                  - 

 

              -   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   31,957,001 

$

            799 

 

    31,957,001 

$

          799 

 

   19,957,001 

$

          499 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of year

 

 890,689,076 

$

         4,660 

 

  890,592,348 

$

       4,651 

 

 890,592,348 

$

       4,651 

Purchased and cancelled under

 

 

 

 

 

 

 

 

 

   

 

 

Normal Course Issuer Bid

 

      (504,000)

 

                (4)

 

     (2,012,600)

 

            (11)

 

      (476,000)

 

              (2)

Issued under Stock Option Plan

 

     1,154,095 

 

                12 

 

      2,109,328 

 

             20 

 

     1,102,790 

 

             10 

Balance, end of period

 

 891,339,171 

$

         4,668 

 

  890,689,076 

$

       4,660 

 

 891,219,138 

$

       4,659 

10.

Stock Based Compensation

No options were granted under the Company’s stock option plan for the three months ended March 31, 2006 (100,000 options were granted during the first quarter of 2005). The weighted-average fair value of options granted during the three months ended March 31, 2005 were $6.68 per option. Compensation expense of $2 after tax has been recognized in the Summary of Consolidated Operations for the three months ended March 31, 2006 ($2 after tax for the three months


GREAT-WEST

LIFECO INC.

 

ended March 31, 2005).

 

 

11.

Pension Plans and Other Post Retirement Benefits

The total benefit costs included in operating expenses are as follows:

 

 

For the three months

 

 

ended March 31

 

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

Pension benefits

$

              19 

$

              18 

Other benefits

 

                  7 

 

                10 

Total

$

              26 

$

              28 

 

12.

Earnings Per Common Share

 

 

 

 

For  the  three  months

 

 

 

 

ended  March  31,

 

 

 

 

2006

 

2005

a)

Earnings

 

 

 

 

 

 

 

 

 

 

 

 

Net  income  -  common  shareholders

$

                            446  

$

                            419  

 

 

 

 

 

 

 

b)

Number  of  common  shares

 

 

 

 

 

 

 

 

 

 

 

 

Average  number  of  common  shares  outstanding

 

    890,681,974  

 

    890,865,663  

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

-Potential  exercise  of  outstanding  stock  options

 

            7,060,652  

 

            8,206,778  

 

 

 

 

 

 

 

 

Average  number  of  common  shares  outstanding  -  diluted  basis

    897,742,626  

 

    899,072,441  

 

 

 

 

 

 

 

Earnings  per  common  share  

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

                      0.501  

$

                      0.471  

 

 

 

 

 

 

 

 

Diluted

$

                      0.497  

$

                      0.466  

13.

Segmented Information

Consolidated Operations

For the three months ended March 31, 2006 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 United 

 

 

 

 Lifeco 

 

 

 

 

 

 

 Canada 

 

 States 

 

 Europe 

 

 Corporate 

 

 Total 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income: 

 

 

 

 

 

 

 

 

 

 

 

 

Premium income 

 

$

       1,575 

$

           692 

$

       1,433 

$

              -   

$

         3,700 

Net investment income 

 

             684 

 

             335 

 

             304 

 

               -  

 

           1,323 

Fee and other income 

 

 

             216 

 

             297 

 

             139 

 

              -   

 

               652 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income 

 

 

          2,475 

 

          1,324 

 

          1,876 

 

               -   

 

           5,675 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses: 

 

 

 

 

 

 

 

 

 

 

Paid or credited to policyholders 

 

          1,528 

 

             838 

 

          1,635 

 

               -   

 

           4,001 

Other  

 

 

 

             620 

 

             289 

 

             101 

 

                  1 

 

           1,011 

Amortization of finite life intangible assets 

                  3 

 

               -   

 

                  1 

 

               -   

 

                   4 

Restructuring costs 

 

 

                -   

 

                -   

 

                -   

 

                -   

 

                -   

Net operating income  

 

 

 

 

 

 

 

 

 

 

 

before income taxes 

 

 

             324 

 

             197 

 

             139 

 

                (1)

 

               659 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes 

 

 

               82 

 

               61 

 

               24 

 

                  2 

 

               169 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income before non-controlling 

 

 

 

 

 

 

 

 

 

 

interests 

 

 

 

             242 

 

             136 

 

             115 

 

                (3)

 

               490 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interests 

 

               28 

 

                  2 

 

                  4 

 

                -   

 

                 34 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income - shareholders 

 

             214 

 

             134 

 

             111 

 

                (3)

 

               456 

 

 

 

 

 

 

 

 

 

 

 

 

 

Perpetual preferred share dividends 

 

               10 

 

                -   

 

                -   

 

                -   

 

                 10 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income - common shareholders 

$

           204 

$

           134 

$

           111 

$

              (3)

$

            446 

For the three months ended March 31, 2005 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 United 

 

 

 

 Lifeco 

 

 

 

 

 

 

 Canada 

 

 States 

 

 Europe 

 

 Corporate 

 

 Total 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income: 

 

 

 

 

 

 

 

 

 

 

 

 

Premium income 

 

$

       1,509 

$

       1,204 

$

       1,815 

$

              -   

$

         4,528 

Net investment income 

 

             684 

 

             371 

 

             240 

 

                (3)

 

           1,292 

Fee and other income 

 

 

             189 

 

             294 

 

             131 

 

                 -   

 

               614 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income 

 

 

          2,382 

 

          1,869 

 

          2,186 

 

                (3)

 

           6,434 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses: 

 

 

 

 

 

 

 

 

 

 

Paid or credited to policyholders 

 

          1,519 

 

          1,356 

 

          1,941 

 

                 -   

 

           4,816 

Other  

 

 

 

             579 

 

             304 

 

             118 

 

                  1 

 

           1,002 

   Amortization of finite life intangible assets 

                  4 

 

                 -   

 

                  1 

 

                 -   

 

                   5 

Restructuring costs 

 

 

                 -   

 

                 -   

 

                 -   

 

                  7 

 

                   7 

Net operating income  

 

 

 

 

 

 

 

 

 

 

 

before income taxes 

 

 

             280 

 

             209 

 

             126 

 

              (11)

 

               604 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes 

 

 

               61 

 

               64 

 

               23 

 

                  1 

 

               149 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income before non-controlling 

 

 

 

 

 

 

 

 

 

 

interests 

 

 

 

             219 

 

             145 

 

             103 

 

              (12)

 

               455 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interests 

 

               26 

 

                  1 

 

                  2 

 

                 -   

 

                 29 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income - shareholders 

 

             193 

 

             144 

 

             101 

 

              (12)

 

               426 

 

 

 

 

 

 

 

 

 

 

 

 

 

Perpetual preferred share dividends 

 

                  7 

 

                 -   

 

                 -   

 

                 -   

 

                   7 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income - common shareholders 

$

           186 

$

           144 

$

           101 

$

           (12)

$

            419 

 

14.

Subsequent Events

On March 30, 2006, the Company entered into an agreement with a syndicate of underwriters under which the underwriters have agreed to buy 12,000,000 4.50% Non-cumulative First Preferred Shares Series I from the Company for sale to the public at a price of $25 per Preferred Share, representing an aggregate issue amount of $300. The offering closed April 12, 2006.

 

On April 24, 2006, Crown Life Insurance Company (Crown Life) served notice, pursuant to the terms of the 1999 acquisition of the majority of the insurance operations of Crown Life by Canada Life, commencing a process under which Canada Life may be required to acquire the common shares of Crown Life. This transaction is not expected to have a material impact on the financial position of the Company.