Great-West Lifeco reports fourth quarter 2014 results and increases dividend by 6%

TSX:GWO

Readers are referred to the cautionary notes regarding Forward-Looking Information and Non-IFRS Financial Measures at the end of this release. All figures are expressed in Canadian dollars, except as noted.

WINNIPEG, Feb. 12, 2015 /CNW/ - Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $657 million or $0.658 per common share for the three months ended December 31, 2014 compared to $717 million or $0.717 per common share a year ago.  In the fourth quarter of 2013, net earnings included a litigation recovery of $226 million after-tax or $0.226 per common share.  Excluding the litigation recovery in 2013, the year-over-year growth in net earnings was 34%.

For the twelve months ended December 31, 2014, Lifeco's net earnings attributable to common shareholders were $2,546 million or $2.549 per common share, compared to $2,278 million or $2.340 per common share a year ago.  Excluding the litigation recovery in 2013, the year-over-year growth in net earnings was 24%.

Total assets under administration grew to approximately $1.1 trillion at December 31, 2014, up 40% from December 31, 2013.  This includes $207 billion of assets under administration related to the J.P. Morgan Retirement Plan Services large-market recordkeeping business, which was acquired in the third quarter of 2014, and reflects strong organic growth in all geographies.

Highlights

• The Company declared a quarterly common dividend of $0.3260 per common share payable March 31, 2015, a 6% increase from the previous quarter.
• Total Company premiums and deposits in the fourth quarter of 2014 of $24.0 billion were up 4% from the same quarter in 2013:
  • Canada premium and deposits were $5.9 billion, up over 9%, primarily driven by a 16% increase in Wealth Management premiums and deposits.
  • Europe premiums and deposits were $5.3 billion, down 21%, primarily as a result of lower Ireland fund management sales and lower U.K. payout annuity sales.
  • Great-West Financial premiums and deposits were US$2.0 billion, down 6% compared to the fourth quarter of 2013. Individual Market segment sales increased 15%, offset by a decrease in Retirement Services sales due to a large public/non-profit plan sale in the fourth quarter of 2013 that did not recur.
• Lifeco sales during the quarter were $21.6 billion, down 1% from a year ago, as strong results in Canada and Putnam were offset by lower sales in Europe and Great-West Financial.
  • Putnam gross sales were US$9.2 billion, up 12% compared to the fourth quarter of 2013, driven by growth in both mutual funds and institutional products.
• The Irish Life Group Limited (Irish Life) continued to generate strong earnings contributing $70 million to Lifeco's Q4 2014 earnings.  Year-to-date Irish Life contributed $261 million to Lifeco's full year 2014 results, reflecting strong investment performance and growth in underlying core earnings.
• Significant elements of the Irish Life integration were completed in 2014 and annualized synergies of €40.8 million have now been achieved.  Lifeco expects to exceed the original €40 million synergy target by at least 10%.  While focused on integration, Irish Life exceeded sales targets and increased their market share.
• Lifeco launched a new brand, Empower Retirement, following the acquisition of J.P. Morgan Retirement Plan Services (RPS) large-market recordkeeping business and its plan to consolidate RPS with the retirement services businesses of Great-West Financial and Putnam.
• The Company maintained a strong ROE of 15.7% based on net earnings. 
• The Company's capital position remained very strong. The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 224% at December 31, 2014.

OPERATING RESULTS
Consolidated net earnings of Lifeco include the net earnings of The Great-West Life Assurance Company (Great-West Life) and its operating subsidiaries London Life Insurance Company (London Life) and The Canada Life Assurance Company (Canada Life); Great-West Life & Annuity Insurance Company (Great-West Financial) and Putnam Investments, LLC (Putnam), together with Lifeco's Corporate operating results.

CANADA
The Canada segment of Lifeco includes the operating results of the Canadian businesses operated by Great-West Life, London Life and Canada Life, together with an allocation of a portion of Lifeco's corporate results.  The three primary business units included in this segment are Individual Insurance, Wealth Management and Group Insurance.  The Company provides accumulation, annuity, life, disability and critical illness insurance products to individual and group clients.

Net earnings attributable to common shareholders for the fourth quarter of 2014 were $300 million, up 11% compared to $270 million in the fourth quarter of 2013.  For the twelve months ended December 31, 2014, net earnings attributable to common shareholders were $1,228 million, up 7% compared to $1,148 million for the same period in 2013. 

Total sales in the fourth quarter of 2014 were $3.3 billion, an increase of 16% compared to $2.9 billion in the fourth quarter of 2013.  The increase was primarily driven by a 19% increase in Wealth Management sales, partially offset by lower Individual life insurance sales.  Total sales for the twelve months ended December 31, 2014 were $12.2 billion compared to $10.8 billion in 2013.

Total Canada segment assets under administration at December 31, 2014 were $161 billion, compared to $149 billion at December 31, 2013.

UNITED STATES
The United States operating results for Lifeco include the results of Great-West Financial, Putnam and the insurance businesses in the United States branches of Great-West Life and Canada Life, together with an allocation of a portion of Lifeco's corporate results.

Great-West Financial provides an array of financial security products, including employer-sponsored defined contribution plans, administrative and recordkeeping services, fund management and investment and advisory services.  It also provides individual retirement accounts, life insurance and annuity products and executive benefits products.  Putnam provides investment management, certain administrative functions, distribution and retirement services through a broad range of investment products.

During the fourth quarter of 2014, as part of the acquisition of J.P. Morgan Retirement Plan Services large-market recordkeeping business completed on August 29, 2014, a new combined brand - Empower Retirement - was launched to consolidate and support the retirement services businesses of Great-West Financial, the acquired J.P. Morgan Retirement Plan Services and Putnam.  Effective January 1, 2015, these retirement services businesses have merged, creating the second largest recordkeeping provider in the U.S. with 7.1 million participant accounts.

Net earnings attributable to common shareholders for the fourth quarter of 2014 were $89 million compared to $56 million in the fourth quarter of 2013.  Great-West Financial reported net earnings of $93 million in the fourth quarter compared to $81 million for the same quarter last year.  Putnam reported a net loss of $1 million in the fourth quarter compared to a net loss of $25 million a year ago.  For the twelve months ended December 31, 2014 net earnings attributable to common shareholders were $306 million compared to $276 million in 2013.

Great-West Financial sales in the fourth quarter of 2014 were US$4.0 billion, down from US$5.3 billion in the fourth quarter of 2013.  Lower Retirement Services sales in 2014, as a result of a large public/non-profit plan sale in the prior year that was not repeated in current quarter, were partially offset by an increase in sales in Individual Markets.  Sales for the twelve months ended December 31, 2014 were US$15.3 billion compared to US$12.5 billion in 2013, a 22% increase.

Putnam assets under management as at December 31, 2014 were US$158 billion compared to US$150 billion a year ago, an increase of 5%.  Net asset outflows for the fourth quarter of 2014 were US$1.2 billion compared to net asset inflows of US$0.3 billion for the same quarter in 2013. Mutual funds net inflows of $0.7 billion were offset by institutional net outflows of US$1.9 billion. In January 2015, Jeffrey L. Gould became the Head of Putnam Global Institutional Management business.  As a deeply experienced, highly regarded industry leader, Mr. Gould is expected to benefit Putnam's presence and impact in the institutional asset management market going forward.

Putnam net asset inflows for the twelve months ended December 31, 2014 were US$1.3 billion compared to net inflows of US$0.7 billion in the prior year, driven by an improvement in mutual fund inflows of US$2.2 billion. 

Total United States segment assets under administration at December 31, 2014 were $697 billion compared to $422 billion at December 31, 2013.

EUROPE
The Europe segment comprises two distinct business units: Insurance & Annuities and Reinsurance, together with an allocation of Lifeco's corporate results.  Insurance & Annuities provides protection and wealth management products including payout annuities, through subsidiaries of Canada Life in the U.K., Isle of Man and Germany, and through Irish Life in Ireland.  Reinsurance operates primarily in the U.S., Barbados and Ireland, and is conducted through Canada Life, London Life and their subsidiaries.

Net earnings attributable to common shareholders for the fourth quarter of 2014 were $274 million compared to $202 million in the fourth quarter of 2013.  Restructuring costs related to the integration of Irish Life were $6 million in-quarter, compared to $23 million in the fourth quarter of 2013.  For the twelve months ended December 31, 2014 net earnings attributable to common shareholders were $1,038 million compared to $701 million for the same period in 2013.  On a year-to-date basis, net earnings in 2014 include $25 million of restructuring costs related to the integration of Irish Life, compared to $97 million of acquisition and restructuring costs for the same period in 2013.   The 2014 year-to-date results include twelve months of Irish Life results while 2013 year-to-date results include Irish Life results from the date of acquisition, July 18, 2013 (approximately six months).

Insurance & Annuities sales for the fourth quarter of 2014 were $3.2 billion, compared to $4.8 billion a year ago, a decrease of 34%, primarily driven by lower wealth and investment fund management sales and by a 72% reduction in U.K. payout annuity sales resulting from changes announced in the 2014 U.K. Budget.  Total sales for the twelve months ended December 31, 2014 were $12.4 billion, up 25%, compared to $9.9 billion in 2013.

Total Europe segment assets under administration at December 31, 2014 were $205 billion, up from $188 billion at December 31, 2013.

LIFECO CORPORATE
The Lifeco Corporate segment includes operating results for activities of Lifeco that are not associated with the major business units of the Company.

Lifeco Corporate segment net losses attributable to common shareholders were $6 million in the fourth quarter of 2014 compared to net earnings of $189 million in the fourth quarter of 2013.  In the fourth quarter of 2013, Lifeco Corporate segment net earnings included a litigation recovery of $226 million.

For the twelve months ended December 31, 2014 Lifeco Corporate segment net losses attributable to common shareholders were $26 million compared to net earnings of $153 million in 2013, including the 2013 litigation recovery noted above.

QUARTERLY DIVIDENDS

At its meeting, the Board of Directors approved a quarterly dividend of $0.3260 per share on the common shares of the Company payable March 31, 2015 to shareholders of record at the close of business March 3, 2015.

In addition, the Directors approved quarterly dividends on:

• Series F First Preferred Shares of $0.36875 per share;
• Series G First Preferred Shares of $0.3250 per share;
• Series H First Preferred Shares of $0.30313 per share;
• Series I First Preferred Shares of $0.28125 per share;
• Series L First Preferred Shares of $0.353125 per share;
• Series M First Preferred Shares of $0.36250 per share;
• Series N First Preferred Shares of $0.228125 per share;
• Series P First Preferred Shares of $0.3375 per share;
• Series Q First Preferred Shares of $0.321875 per share;
• Series R First Preferred Shares of $0.3000 per share; and
• Series S First Preferred Shares of $0.328125 per share

all payable March 31, 2015 to shareholders of record at the close of business March 3, 2015.

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 an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses.  Great-West Lifeco has operations in Canada, the United States, Europe and Asia through Great-West Life, London Life, Canada Life, Irish Life, Great-West Financial and Putnam Investments.  Great-West Lifeco and its companies have $1.1 trillion in assets under administration and are members 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" and similar expressions or negative versions thereof.  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 actions by the Company, including statements made with respect to the expected benefits of acquisitions and divestitures, are also forward-looking statements.  Forward-looking statements are based on expectations and projections 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 actual events and results could differ materially from those expressed or implied by forward-looking statements.  Material factors and assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting the Company's operations will continue substantially in their current state, including, without limitation, with respect to market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, taxes, inflation, information systems, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, continuity and availability of personnel and third party service providers, the Company's ability to complete strategic transactions and integrate acquisitions and that there will be no unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements.  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 technological change, investment values, payments required under investment products, reinsurance, 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 and catastrophic events.  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 this MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates", which, along with other filings, is available for review at www.sedar.com.  The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements.  Other than as specifically required by applicable law, the Company does not intend to update any forward-looking statements whether as a result of new information, future events or otherwise.

Cautionary note regarding Non-IFRS Financial Measures
This release contains some non-IFRS financial measures.  Terms by which non-IFRS financial measures are identified include, but are not limited to, "operating earnings", "constant currency basis", "premiums and deposits", "sales" and other similar expressions.  Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists.  However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies.  Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

Further information
Selected financial information is attached.

Great-West Lifeco's fourth quarter conference call and audio webcast will be held February 12, 2015 at 4:00 p.m. (ET).  The call and webcast can be accessed through www.greatwestlifeco.com or by phone at:

• Participants in the Toronto area:  416-340-8061      
• Participants from North America: 1-866-225-0198
• Participants from Overseas:  Dial international access code first, then 800-6578-9898

A replay of the call will be available from February 13, 2015, and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 8898149#). The archived webcast will be available on www.greatwestlifeco.com from February 13, 2015 until February 11, 2016.

Additional information relating to Lifeco, including the 2014 audited consolidated financial statements, MD&A, Annual Information Form (AIF), and CEO/CFO certification will be filed on SEDAR at www.sedar.com.