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Classified in: Business, Covid-19 virus
Subject: ERN

Great-West Lifeco reports second quarter 2020 base earnings of $706 million up 13% from the second quarter of 2019 and net earnings of $863 million


This earnings news release for Great-West Lifeco Inc. should be read in conjunction with the Company's interim Management's Discussion & Analysis (MD&A) and condensed consolidated interim unaudited Financial Statements for the period ended June 30, 2020, prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted. These reports are available on greatwestlifeco.com under Financial Reports. Additional information relating to Lifeco is available on sedar.com. Readers are referred to the cautionary notes regarding Forward-Looking Information and Non-IFRS Financial Measures at the end of this release. All figures are expressed in Canadian dollars, unless otherwise noted.

TSX: GWO

WINNIPEG, MB, Aug. 4, 2020 /CNW/ - Great-West Lifeco Inc. (Lifeco or the Company) today announced its second quarter 2020 results.  

"Our strong results this quarter reflect our disciplined and resilient business model, robust balance sheet, effective risk framework and high-quality investment portfolio," said Paul Mahon, President and Chief Executive Officer, Great-West Lifeco Inc. "While concurrently managing our COVID-19 pandemic response, we've moved key strategic initiatives forward, including digital technology investments, and mergers and acquisitions such as the sale of GLC Asset Management and addition of Personal Capital. Lifeco remains well-positioned to drive business growth through differentiation and capital deployment."

Net earnings attributable to common shareholders (net earnings) were $863 million, or $0.93 per common share (EPS), for the second quarter of 2020 compared to $459 million, or $0.49 per common share, for the same quarter last year. Base earnings for the second quarter of 2020 of $706 million or $0.76 per common share compared to $627 million or $0.67 per common share a year ago.

Common Shareholders

Q2 2020

Q2 2019

Base earnings(1)



Canada

$315

$292

United States

83

101

Europe

179

155

Capital and Risk Solutions

137

84

Lifeco Corporate

(8)

(5)

Total base earnings(1)

$706

$627




Items excluded from base earnings(2)

157

(168)

Net earnings

$863

$459







   Base EPS(1)

$0.76

$0.67

   Net EPS

$0.93

$0.49







   Base return on equity(1)(3)

13.7%

11.1%

   Return on equity(3)

12.1%

12.0%



(1)

Represents a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's second quarter of 2020 interim MD&A for additional details.

(2)

Items excluded from base earnings are actuarial assumption changes and management actions, market-related impacts and the net charge on sale of the U.S. Individual Markets business. Refer to the "Non-IFRS Financial Measures" section of the Company's second quarter of 2020 interim MD&A for additional details.

(3)

Base return on equity and return on equity are calculated using the trailing four quarters of applicable earnings and common shareholders' equity.

Base EPS for the second quarter of 2020 of $0.76, increased 13% from $0.67 a year ago primarily due to business growth in the Capital and Risk Solutions segment and strong investment experience. Reported net EPS for the second quarter of 2020 was $0.93, up from $0.49 in 2019, primarily due to favourable contributions from insurance contract liability basis changes and market-related impacts, driven by equity market recoveries in-quarter. In addition, reported net EPS in the second quarter of 2019 included the net charge of $199 million (US$148 million) relating to the sale, via indemnity reinsurance, of the U.S. individual life insurance and annuity business to Protective Life Insurance Company.

Highlights ? In Quarter
COVID-19 Pandemic Impacts

Capital strength and financial flexibility maintained

SEGMENTED OPERATING RESULTS
For reporting purposes, Lifeco's consolidated operating results are grouped into five reportable segments ? Canada, United States, Europe, Capital and Risk Solutions and Lifeco Corporate ? reflecting the management and corporate structure of the Company. For more information, refer to the Company's second quarter of 2020 interim Management's Discussion and Analysis (MD&A).

CANADA

UNITED STATES

EUROPE

CAPITAL AND RISK SOLUTIONS

QUARTERLY DIVIDENDS
The Board of Directors approved a quarterly dividend of $0.4380 per share on the common shares of Lifeco payable September 30, 2020 to shareholders of record at the close of business September 2, 2020.

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

First Preferred Shares

Record Date

Payment Date

Amount, per share

Series F

September 2, 2020

September 30, 2020

$0.36875

Series G

September 2, 2020

September 30, 2020

$0.3250

Series H

September 2, 2020

September 30, 2020

$0.30313

Series I

September 2, 2020

September 30, 2020

$0.28125

Series L

September 2, 2020

September 30, 2020

$0.353125

Series M

September 2, 2020

September 30, 2020

$0.3625

Series N

September 2, 2020

September 30, 2020

$0.1360

Series O

September 2, 2020

September 30, 2020

$0.0979875

Series P

September 2, 2020

September 30, 2020

$0.3375

Series Q

September 2, 2020

September 30, 2020

$0.321875

Series R

September 2, 2020

September 30, 2020

$0.3000

Series S

September 2, 2020

September 30, 2020

$0.328125

Series T

September 2, 2020

September 30, 2020

$0.321875

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

Selected financial information is attached.

GREAT-WEST LIFECO INC.
Great-West Lifeco is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. We operate in Canada, the United States and Europe under the brands Canada Life, Empower Retirement, Putnam Investments, and Irish Life. At the end of 2019, our companies had approximately 24,000 employees, 197,000 advisor relationships, and thousands of distribution partners ? all serving our more than 31 million customer relationships across these regions.

Great-West Lifeco and its companies have $1.7 trillion in consolidated assets under administration as at June 30, 2020 and are members of the Power Corporation group of companies. Great-West Lifeco trades on the Toronto Stock Exchange (TSX) under the ticker symbol GWO. To learn more, visit greatwestlifeco.com.?

Basis of presentation
The condensed consolidated interim unaudited financial statements of Lifeco have been prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted and are the basis for the figures presented in this release, unless otherwise noted.

Cautionary note regarding Forward-Looking Information
This release may contain forward-looking information. Forward-looking information includes statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" and other similar expressions or negative versions thereof. These statements include, without limitation, statements about the Company's operations, business, financial condition, expected financial performance (including revenues, earnings or growth rates), estimates of capital adequacy risk sensitivities, ongoing business strategies or prospects, the timing, cost (including deferred consideration) and expected benefits of the acquisition of Personal Capital Corporation and sources of funding therefor, the expected quantum of one-time integration expenses related to the acquisition of the Personal Capital Corporation and the timing thereof, and possible future actions by the Company, including statements made with respect to the expected benefits of acquisitions and divestitures, expected capital management activities and use of capital, expected dividend levels, expected cost reductions and savings, the impact of regulatory developments on the Company's business strategy and growth objectives and the expected impact of the current pandemic health event resulting from the novel coronavirus (COVID-19) and related economic and market impacts on the Company's business operations, financial results and financial condition. Forward-looking statements are based on expectations, forecasts, estimates, predictions, projections and conclusions about future events that were current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally, including the insurance and mutual fund industries. They are not guarantees of future performance, and the reader is cautioned that actual events and results could differ materially from those expressed or implied by forward-looking statements. Whether or not actual results differ from forward-looking information may depend on numerous factors, developments and assumptions, including, without limitation, customer behaviour, the Company's reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, longevity experience, policy lapse rates, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, the effectiveness of processes for matching asset and liability cash flows, global equity and capital markets (including continued access to equity and debt markets), industry sector and individual debt issuers' financial conditions (including developments and volatility arising from the COVID-19 pandemic, particularly in certain industries that may comprise part of the Company's investment portfolio), business competition and other general economic, political and market factors in North America and internationally. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct. Other important factors and assumptions that could cause actual results to differ materially from those contained in forward-looking statements include customer responses to new products, impairments of goodwill and other intangible assets, the Company's ability to execute strategic plans and changes to strategic plans, technological changes, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial or regulatory proceedings, catastrophic events, continuity and availability of personnel and third party service providers, the Company's ability to complete strategic transactions and integrate acquisitions, achievement or waiver of conditions to closing of the acquisition of Personal Capital Corporation, unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements, levels of administrative and operational efficiencies, and the severity, magnitude and impact of the COVID-19 pandemic (including the effects of the COVID-19 pandemic, and the effects of the governments' and other businesses' responses to the COVID-19 pandemic, on the economy and the Company's financial results, financial condition and operations). The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company's 2019 Annual MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates" and in the Company's annual information form dated February 12, 2020 under "Risk Factors", which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to place undue reliance on forward-looking information. Other than as specifically required by applicable law, the Company does not intend to update any forward-looking information whether as a result of new information, future events or otherwise.

Cautionary note regarding Non-IFRS Financial Measures
This release contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include, but are not limited to, "base earnings", "base earnings (US$)", "base earnings per common share", "return on equity", "base return on equity", "core net earnings", "constant currency basis", "impact of currency movement", "premiums and deposits", "pre-tax operating margin", "sales", "assets under management" and "assets under administration".  Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Refer to the "Non-IFRS Financial Measures" section in the Company's second quarter of 2020 interim MD&A for the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS as well as additional details on each measure. 

Second quarter Conference Call
Lifeco's second quarter conference call and audio webcast will be held August 5, 2020 at 2:30 p.m. (ET). The call and webcast can be accessed through greatwestlifeco.com/news-events/events or by phone at:

A replay of the call will be available from August 5 to September 5, 2020 and can be accessed by calling 1-855-669-9658 or 604-674-8052 (passcode: 4853#). The archived webcast will be available on greatwestlifeco.com.

FINANCIAL HIGHLIGHTS (unaudited)
(in Canadian $ millions except per share amounts)


As at or for the three months ended


For the six months ended


June 30
2020

March 31
2020

June 30
2019


June 30
2020

June 30
2019

Earnings







Base earnings(1)(2)

$

706

$

543

$

627


$

1,249

$

1,196

Net earnings - common shareholders

863

342

459


1,205

1,116

Per common share







Basic:







Base earnings(1)(2)

0.761

0.585

0.668


1.347

1.241

Net earnings

0.930

0.369

0.489


1.299

1.159

Diluted net earnings

0.930

0.369

0.489


1.299

1.158

Dividends paid

0.438

0.438

0.413


0.876

0.826

Book value

21.98

22.34

20.84











Base return on equity(1)(2)(3)

13.7%

13.5%

11.1%




Return on equity(1)(3)

12.1%

10.3%

12.0%











Total premiums and deposits(1)

$

43,076

$

46,365

$

34,280


$

89,441

$

75,125

Fee and other income

1,406

1,441

2,591


2,847

4,070

Net policyholder benefits, dividends and experience refunds

9,659

9,429

8,957


19,088

17,944








Total assets

$

457,996

$

436,903

$

441,897




Proprietary mutual funds and institutional net assets(1)

315,326

288,309

305,252




Total assets under management(1)

773,322

725,212

747,149




Other assets under administration(1)

889,929

798,847

820,808




Total assets under administration(1)

$

1,663,251

$

1,524,059

$

1,567,957











Total equity

$

26,109

$

26,441

$

24,955











The Canada Life Assurance Company consolidated LICAT Ratio(4)

132%

133%

136%











(1)

This metric is a non-IFRS measure.  Refer to the "Non-IFRS Financial Measures" section of the Company's June 30, 2020 Management's Discussion and Analysis for additional details.

(2)

Effective the first quarter of 2020, the Company introduced an enhanced non-IFRS earnings measure.  Base earnings (loss) are defined as net earnings excluding the impact of actuarial assumption changes and management actions, direct equity and interest rate market impacts on insurance and investment contract liabilities, net of hedging, and related deferred tax liabilities, and items that management believes are not indicative of the Company's underlying business results. These items would include restructuring costs, material legal settlements, material impairment charges related to goodwill and intangible assets, legislative tax changes and other tax impairments, and gains or losses related to the disposition of a business.

(3)

Refer to the "Return on Equity" section of the Company's June 30, 2020 Management's Discussion and Analysis for additional details.

(4)

The Life Insurance Capital Adequacy Test (LICAT) ratio is based on the consolidated results of The Canada Life Assurance Company (Canada Life), Lifeco's major Canadian operating subsidiary. Refer to the "Capital Management and Adequacy" section of the Company's June 30, 2020 Management's Discussion and Analysis for additional details.

 

Base earnings(1) and Net earnings - common shareholders (unaudited)



For the three months ended


For the six months ended


June 30
2020

March 31
2020

June 30
2019


June 30
2020

June 30
2019

Base earnings (loss)(1)







Canada

$

315

$

273

$

292


$

588

$

549

United States

83

17

101


100

182

Europe

179

132

155


311

318

Capital and Risk Solutions

137

119

84


256

158

Lifeco Corporate

(8)

2

(5)


(6)

(11)

Lifeco base earnings(1)

$

706

$

543

$

627


$

1,249

$

1,196








Items excluded from base earnings(2)







Actuarial assumption changes and management actions(2)

$

122

$

(52)

$

38


$

70

$

167

Market-related impacts on liabilities(2)

35

(149)

(7)


(114)

(48)

Net charge on sale, via reinsurance, of a U.S. business(2)

?

?

(199)


?

(199)

Items excluded from Lifeco base earnings(2)

$

157

$

(201)

$

(168)


$

(44)

$

(80)








Net earnings (loss) - common shareholders







Canada

$

353

$

151

$

280


$

504

$

563

United States

78

5

(98)


83

(17)

Europe

253

91

193


344

387

Capital and Risk Solutions

187

93

89


280

194

Lifeco Corporate

(8)

2

(5)


(6)

(11)

Lifeco net earnings - common shareholders

$

863

$

342

$

459


$

1,205

$

1,116








(1)

This metric is a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's June 30, 2020 Management's Discussion and Analysis for additional details.

(2)

Items excluded from base earnings, a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's June 30, 2020 Management's Discussion and Analysis for additional details.

 

SOURCE Great-West Lifeco Inc.


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