Great-West Lifeco reports first quarter 2019 results

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, May 2, 2019 ... Great-West Lifeco Inc. (Lifeco or the Company) today announced net earnings attributable to common shareholders (net earnings) of $657 million or $0.67 per common share for the first quarter of 2019 compared to $731 million or $0.74 per common share for the same quarter last year.  Net earnings in the first quarter of 2019 of $657 million decreased from $731 million in the prior year, primarily due to higher income taxes, lower net fee income in Canada and the U.S., and unfavourable claims experience in Europe.

“Sales growth was strong and business fundamentals remained sound despite the weaker earnings performance in the first quarter,” said Paul Mahon, President and Chief Executive Officer, Great-West Lifeco Inc. “We have undertaken a number of strategic actions since the beginning of the year to position the Company for long-term sustainable growth. Our capital position remains robust and we continue to evaluate opportunities, including acquisitions, to advance our business strategies and drive profitable growth.”

Highlights

Sales up $55.6 billion to $90.2 billion

• Sales for the first quarter of 2019 were $90.2 billion, up 160% from the first quarter of 2018, primarily driven by a very large sale at Empower Retirement and a large fund management mandate in Europe.

Capital strength and financial flexibility maintained

• The Great-West Life Assurance Company reported a Life Insurance Capital Adequacy Test (LICAT) ratio of 140% at March 31, 2019.
• Adjusted return on equity, which excludes the impact of restructuring costs, was 13.7% for the first quarter of 2019.
• Subsequent to March 31, 2019, on April 17, 2019, the Company announced that it will take up and purchase for cancellation 59,700,974 of its common shares at a purchase price of $33.50 per share under the Company’s Substantial Issuer Bid, for aggregate consideration of $2.0 billion.

SEGMENTED OPERATING RESULTS

For reporting purposes, Lifeco’s consolidated operating results are grouped into four reportable segments – Canada, United States, Europe and Lifeco Corporate – reflecting geographic lines as well as the management and corporate structure of the Company.  For more information, please refer to the Company’s 2019 first quarter Management’s Discussion and Analysis (MD&A).

CANADA

• Q1 Canada segment net earnings of $283 million – Net earnings for the first quarter of 2019 were $283 million compared to $316 million in the first quarter of 2018, a decrease of 10%. Growth in net earnings related to group and individual insurance, which included strong morbidity and investment results, was more than offset by lower earnings from wealth business, due to lower average assets and margin compression, and by higher taxes than in the prior year.
• Canadian companies moving to one brand – Canada Life – On April 3, 2019, the Company announced its three Canadian life insurance companies, The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company, are moving to one brand in Canada: Canada Life. Canada Life will become the brand under which the organization will create, deliver and communicate products and services in Canada across all of its lines of business. In addition to the move to a new brand, Great-West Life, London Life, Canada Life and their holding companies, Canada Life Financial Corporation and London Insurance Group Inc., have also begun the process to formally amalgamate as one company: The Canada Life Assurance Company. This initiative is separate from, but aligned with, the move to one brand and will further simplify the business. The proposed amalgamation is a multi-step process that would occur only after obtaining required board, regulatory and policyholder approvals.

UNITED STATES

• Q1 U.S. segment net earnings up 3% – Net earnings for the first quarter of 2019 were US$61 million, up 3%, compared to net earnings of US$59 million in the first quarter of 2018, primarily driven by improved results at Putnam as a result of higher net investment income on seed capital and lower operating expenses.
• Sale of U.S. individual life insurance and annuity business – On January 24, 2019, the Company announced that its subsidiary, Great-West Life & Annuity Insurance Company, was selling substantially all of its U.S. individual life insurance and annuity business, via an indemnity reinsurance agreement, to Protective Life Insurance Company. The business to be transferred contributed $33 million (US$25 million) to the Company’s first quarter of 2019 net earnings, compared to $31 million (US$24 million) for the same quarter last year.  The transaction is expected to close in the second quarter of 2019, subject to regulatory and customary closing conditions.
• Q1 U.S. segment sales up 187% – U.S. sales in the first quarter of 2019 of US$57.0 billion were up 187% from the first quarter of 2018, primarily driven by Empower Retirement large plan sales. Putnam sales were US$10.9 billion, an increase of US$0.4 billion compared to the same period last year, driven by a 14% increase in institutional asset sales partially offset by a 1% decrease in mutual fund sales.

EUROPE

• Q1 Europe segment net earnings of $299 million – Net earnings for the first quarter of 2019 were $299 million, down 13% compared to net earnings of $344 million in the first quarter of 2018, primarily driven by higher taxes and unfavourable claims experience in Ireland and Reinsurance.
• Q1 Europe segment sales up 95% – Europe sales in the first quarter of 2019 of $11.2 billion were up 95% from the first quarter of 2018, reflecting higher fund management sales in Ireland and higher bulk annuity sales in the U.K.
• U.K. operations advance transformation activities – The U.K. operations made progress on the previously announced targeted annual expense reductions of £20 million pre-tax by the end of the fourth quarter of 2020. Annualized savings achieved to March 31, 2019 on the U.K. restructuring program were £8 million pre-tax compared to £3 million pre-tax at December 31, 2018.

QUARTERLY DIVIDENDS

The Board of Directors approved a quarterly dividend of $0.4130 per share on the common shares of Lifeco payable June 28, 2019 to shareholders of record at the close of business May 31, 2019.

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

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

Great-West Lifeco Inc. is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses.

Lifeco has operations in Canada, the United States and Europe through 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), Putnam Investments, LLC (Putnam) and Irish Life Group Limited (Irish Life).  Lifeco and its companies have approximately $1.6 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies.  Great-West Lifeco Inc. 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) 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), 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, expected capital management activities and use of capital and expected cost reductions and savings.  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.  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 customer behaviour, the Company's reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, global equity and capital markets, 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 and unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements.  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 2018 Annual 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, 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, "operating earnings", "adjusted net earnings", "adjusted return on equity", "core net earnings", "constant currency basis", “impact of currency movement”, "premiums and deposits", "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 appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS where applicable.

First Quarter Conference Call

Lifeco's first quarter conference call and audio webcast will be held May 2, 2019 at 3:30 p.m. (ET).  The call and webcast can be accessed through greatwestlifeco.com or by phone at:

• Participants in the Toronto area:  416-340-2218      
• Participants from North America: 1-800-377-0758

A replay of the call will be available from May 3, 2019 to June 2, 2019 and can be accessed by calling 1-800-408-3053 or 905-694-9451 in Toronto (passcode: 6044345#).  The archived webcast will be available on greatwestlifeco.com from May 3, 2019 to May 2, 2020.

Additional information relating to Lifeco, including the most recent interim unaudited consolidated financial statements, interim Management's Discussion and Analysis (MD&A), and CEO/CFO certification will be filed on SEDAR at www.sedar.com.

For more information contact:

Media Relations
Liz Kulyk
204-926-5012
media.relations@gwl.ca

Investor Relations
Deirdre Neary
416-552-3208
deirdre.neary@gwl.ca

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