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February 11, 2016

Great-West Lifeco reports fourth quarter 2015 results and increases dividend by 6.1%

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, February 11, 2016 ... Great-West Lifeco Inc. (Lifeco) has reported net earnings attributable to common shareholders of $683 million, or $0.688 per common share, for the three months ended December 31, 2015, compared to $657 million, or $0.658 per common share for the same period in 2014.

For the twelve months ended December 31, 2015, net earnings attributable to common shareholders were $2,762 million, compared to $2,546 million for the same period in 2014, an increase of 8.5%. This represents $2.774 per common share for the twelve months ended December 31, 2015, compared to $2.549 per common share for the same period in 2014.

Consolidated assets under administration at December 31, 2015, grew to over $1.2 trillion, up $149 billion from December 31, 2014.

Quarterly highlights

  • Lifeco declared a quarterly common dividend of $0.3460 per common share payable March 31, 2016, a 6.1% increase from the previous quarter.
  • Lifeco sales in the fourth quarter of 2015 of $39.0 billion were up 81% from the same quarter in 2014:
    • Canada sales were $3.5 billion, up 5%, reflecting solid sales across all lines of business.
    • Europe sales were $3.9 billion, up 24%, reflecting strong pension and savings sales across all regions.
    • Great-West Financial sales were US$15.5 billion, up 287%, driven by an increase in large plan sales in Empower Retirement.
    • Putnam gross sales were US$8.1 billion, down 12% overall. Institutional sales increased 28%, while mutual fund sales decreased by 32%, reflecting the decline in industry flows in the segments where Putnam operates.
  • Lifeco maintained a strong ROE of 14.7% based on net earnings.
  • Lifeco’s capital position remained very strong. The Great-West Life Assurance Company reported a Minimum Continuing Capital Surplus Requirements (MCCSR) ratio of 238% at December 31, 2015.
  • Lifeco announced today its intention, subject to the approval of the Toronto Stock Exchange, to increase the previously announced normal course issuer bid limit from 8 million common shares to 20 million common shares.

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. Lifeco 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 2015 were $262 million, compared to $300 million in the fourth quarter of 2014. For the twelve months ended December 31, 2015, net earnings attributable to common shareholders were $1,195 million, compared to $1,228 million for the same period in 2014.

Total sales in the fourth quarter of 2015 of $3.5 billion were up from $3.3 billion in the fourth quarter of 2014. The increase in sales reflects strong Group sales in mid-size and large case markets, continued strength in participating life sales and solid wealth management sales in segregated funds, proprietary mutual funds and single premium group annuities. Total sales for the twelve months ended December 31, 2015, were $12.6 billion, compared to $12.2 billion for the same period in 2014.

Total Canada segment assets under administration at December 31, 2015, were $166 billion, compared to $161 billion at December 31, 2014.

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

Net earnings attributable to common shareholders for the fourth quarter of 2015 were $125 million, reflecting Great-West Financial net earnings of $84 million and net earnings of $41 million for Putnam, compared to $89 million in the fourth quarter of 2014. For the twelve months ended December 31, 2015, net earnings attributable to common shareholders were $409 million compared to $306 million for the same period in 2014.

Great-West Financial sales in the fourth quarter of 2015 were US$15.5 billion, up from US$4.0 billion in the fourth quarter of 2014, primarily due to an increase in large plan sales. Approximately 50% of the in-quarter sales increase related to two new clients with approximately 140,000 participants. Sales for the 12 months ended December 31, 2015, were US$43.2 billion, compared to US$15.3 billion in 2014, an increase of 182%.

Putnam average assets under management for the three months ended December 31, 2015, were US$151.2 billion, compared to US$157.2 billion a year ago, a decrease of 4%, primarily due to net asset outflows and the impact of negative markets. Compared to the prior quarter, Putnam’s ending assets under management increased by US$1.7 billion. Net asset outflows for the fourth quarter of 2015 of US$1.2 billion were comparable to the same quarter in 2014, reflecting strong institutional flows of US$1.1 billion, an increase of US$3.0 billion from the same quarter last year, more than offset by net outflows for mutual funds due to a decline of flows in the overall mutual fund sector.

Total United States segment assets under administration at December 31, 2015, were $808 billion, compared to $697 billion at December 31, 2014.

EUROPE

The Europe segment comprises two distinct business units: Insurance & Annuities and Reinsurance, together with an allocation of a portion 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., the Isle of Man and Germany, and through Irish Life Group Limited (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 2015 were $303 million, up 11% compared to $274 million in the fourth quarter of 2014. For the 12 months ended December 31, 2015, net earnings attributable to common shareholders were $1,174 million, compared to $1,038 million for the same period in 2014.

Insurance & Annuities sales for the fourth quarter of 2015 were $3.9 billion, compared to $3.2 billion a year ago, an increase of 24%. The increase reflects higher sales across most product lines in the U.K., Germany and Ireland. Sales for the 12 months ended December 31, 2015, were $19.5 billion, compared to $12.4 billion for the same period in 2014. The increase was primarily due to higher fund management sales and higher sales across most other product lines as well as the impact of the acquisition of The Equitable Life Assurance Society’s annuity business in the first quarter of 2015.

Total Europe segment assets under administration at December 31, 2015 were $238 billion compared to $205 billion at December 31, 2014.

LIFECO CORPORATE

The Lifeco Corporate segment includes operating results for activities of Lifeco that are not associated with the major business units of Lifeco. Lifeco Corporate segment’s net loss attributable to common shareholders was $7 million in the fourth quarter of 2015, compared to a net loss of $6 million in the fourth quarter of 2014. For the 12 months ended December 31, 2015, the net earnings attributable to common shareholders were a net loss of $16 million, compared to a net loss of $26 million for the same period in 2014.

QUARTERLY DIVIDENDS

At its meeting today, the Board of Directors approved a quarterly dividend of $0.3460 per share on the common shares of Lifeco payable March 31, 2016, to shareholders of record at the close of business March 3, 2016.

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 $0.3625 per share;
  • Series N First Preferred Shares of $0.1360 per share;
  • Series O First Preferred Shares of $0.108578 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, 2016 to shareholders of record at the close of business March 3, 2016.

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. 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. Lifeco and its subsidiaries have over $1.2 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies.

Basis of presentation

The consolidated 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 statements. 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 other similar expressions or negative versions thereof.

These statements may include, without limitation, statements about Lifeco's operations, business, financial condition, expected financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by Lifeco, including statements made with respect to the expected benefits of acquisitions and divestitures. Forward-looking statements are based on expectations, forecasts, 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 Lifeco, 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 Lifeco’s operations will continue substantially in their current state, including, without limitation, with respect to customer behaviour, Lifeco’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 Lifeco 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, Lifeco’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, Lifeco’s ability to complete strategic transactions and integrate acquisitions and unplanned material changes to Lifeco'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 Lifeco’s 2015 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 statements. Other than as specifically required by applicable law, Lifeco 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", "assets under management", "assets under administration" 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 11, 2016 at 3:30 p.m. (ET). The call and webcast can be accessed through greatwestlifeco.com or by phone at:

A replay of the call will be available from February 11, 2016, to February 18, 2016, and can be accessed by calling 1-800-408-3053, or 905-694-9451 in Toronto (passcode: 6396358#). The archived webcast will be available on greatwestlifeco.com from February 11, 2016, to February 10, 2017.

Additional information relating to Lifeco, including the 2015 audited consolidated financial statements, Management's Discussion and Analysis (MD&A), Annual Information Form (AIF) and CEO/CFO certification, will be filed on SEDAR at sedar.com.