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February 9, 2022

Great-West Lifeco reports fourth quarter 2021 base earnings(1) of $825 million and net earnings of $765 million

This earnings news release for Great-West Lifeco Inc. should be read in conjunction with the Company’s Management’s Discussion & Analysis (MD&A) and Consolidated Annual Financial Statements for the period ended December 31, 2021, 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.Opens a new website in a new window Readers are referred to the cautionary notes regarding Forward-Looking Information and Non-GAAP Financial Measures and Ratios at the end of this release. All figures are expressed in millions Canadian dollars, unless otherwise noted.

 

Winnipeg, February 9, 2022 ... Great-West Lifeco Inc. (Lifeco or the Company) today announced its fourth quarter 2021 results.

“Great-West Lifeco’s strong fourth quarter results are a continuation of the excellent momentum we have built through 2020 and the first three quarters of 2021,” said Paul Mahon, President and CEO of Great-West Lifeco Inc. “We are strengthening our market leadership positions through strategic and disciplined acquisition and integration efforts and targeted investments in organic growth across all segments. Looking ahead to 2022, we’ll strategically pursue further growth opportunities, while maintaining risk and expense discipline to deliver sustainable, long-term shareholder value creation while supporting the diverse needs of all stakeholders.”

Base earnings per common share (EPS) for the fourth quarter of 2021 of $0.89 increased by 11% from $0.80 a year ago, primarily due to MassMutual business related base earnings of $55 million (US$44 million), the impact of higher equity markets across all jurisdictions and overall business growth supported by strong sales activity.

Reported net EPS for the fourth quarter of 2021 was $0.82, down from $0.98 in 2020. The decrease was primarily due to the positive impact of the revaluation of a deferred tax asset of $196 million in the U.S. segment and a net gain of $143 million related to the sale of GLC Asset Management Group Ltd. (GLC) recorded in the fourth quarter of 2020. These items were partially offset by an increase in base earnings, lower restructuring and integration costs in the Canada and U.S. segments as well as favourable market-related impacts on liabilities in the fourth quarter of 2021.

Highlights

Medium-term financial objectives met or exceeded in 2021

  • Lifeco achieved base EPS1 growth of 21.9% (13.4% compound annual growth rate over the last three years) compared to 8-10% per annum objective
  • Lifeco’s base return on equity1 for 2021 was 14.6% (13.6% average base return on equity over the last three years) compared to 14-15% objective
  • Lifeco’s base dividend payout ratio1 in 2021 was 51.4% (56.7% payout ratio over the last three years) compared to 45%-55% objective

Key strategic transactions advanced in quarter

  • On November 1, 2021, a Lifeco subsidiary, Irish Life Group Limited (Irish Life) completed the acquisition of Ark Life Assurance Company dac (Ark Life) from Phoenix Group Holdings plc for a total cash consideration of €230 million. The acquisition adds scale to Irish Life’s retail division and enhances Irish Life's ability to provide customers with market-leading wealth and insurance solutions.
  • On November 19, 2021, the Company completed the sale of its United States-based subsidiaries, EverWest Real Estate Investors, LLC and EverWest Advisors, LLC (EverWest) to Sagard Holdings Inc. (Sagard), a wholly- owned subsidiary of Power Corporation, in exchange for a minority shareholding in Sagard’s subsidiary, Sagard Holdings Management Inc. As part of the transaction, the Company has made a capital commitment of approximately US$500 million into certain Sagard strategies. The Company has also committed to investing a further approximately US$2 billion in real estate investments to support EverWest’s future growth within Sagard.

Recent acquisitions are performing well

  • Recent acquisitions made in 2020 in the United States and Europe segments have performed well, resulting in pre-tax contingent consideration provisions of $52 million (US$41 million) and $14 million (€10 million), respectively, recorded in the fourth quarter of 2021.

Dividend restrictions lifted

  • On November 15, 2021, Lifeco announced an additional dividend of $0.052 per share. Combined with its previously declared quarterly dividend, total quarterly dividends increased 12% from the previous quarter to $0.490. This additional dividend follows the announcement by the Office of the Superintendent of Financial Institutions (OSFI) on November 4, 2021 that it has withdrawn its expectation that all federally regulated financial institutions halt dividend increases.

Capital strength and financial flexibility maintained

  • The Company’s capital position remained strong at December 31, 2021, with a LICAT Ratio2 for Canada Life, Lifeco's major Canadian operating subsidiary, of 124% which is above the Company’s internal target range and the supervisory target.

Consolidated assets of $630 billion and assets under administration3 of $2.3 trillion

  • Total assets were approximately $630 billion and assets under administration (AUA) were approximately $2.3 trillion at December 31, 2021, an increase of 5% and 15%, respectively, from December 31, 2020. The increases were primarily due to the impact of equity market movement and new business growth, partially offset by the impact of currency movement.


1 This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.

2 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. The LICAT Ratio is calculated in accordance with the Office of Superintendent of Financial Institutions' guideline - Life Insurance Capital Adequacy Test. Refer to the "Capital Management and Adequacy" section of the Company’s 2021 Annual MD&A for additional details.

3 This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.

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 2021 Annual Management’s Discussion and Analysis (MD&A).

CANADA

  • Q4 Canada segment base earnings of $317 million and net earnings of $307 million – Base earnings for the fourth quarter of 2021 were $317 million, down 9% compared to the fourth quarter of 2020, primarily due to less favourable morbidity experience in Group Customer and the impact of a higher tax rate. Net earnings for the fourth quarter of 2021 were $307 million, up from $300 million in the fourth quarter of 2020, primarily due to more favourable actuarial assumption changes in Individual Customer partially offset by the change in base earnings.
  • Largest sale in the history of the Group Benefit market - On December 1, 2021, Canada Life was awarded the Public Service Health Care Plan (PSHCP) in the largest sale in the history of the Canadian group benefit market. As a result, effective July 1, 2023, Group Customer will support the well-being of 1.5 million more Canadians, covering eligible public servants and their dependents from coast to coast. The Company expects to administer an estimated $26 billion in claims on behalf of the PSHCP over a 12-year contract. The PSHCP represents over 3% of the group benefit market.

UNITED STATES

  • Q4 U.S. Financial Services base earnings of US$110 million ($137 million) and net earnings of US$98 million ($123 million) – U.S. Financial Services base earnings for the fourth quarter of 2021 were US$110 million ($137 million), up US$61 million or 124% from the fourth quarter of 2020. Base earnings growth included MassMutual related base earnings of US$44 million ($55 million) and organic growth in the Empower business attributable to strong sales and higher average equity markets. On a sequential basis, Empower base earnings declined driven by seasonal and one-time items included in the fourth quarter of 2021.
  • Empower renames to bolster customer engagement – Subsequent to the fourth quarter of 2021, on February 1, 2022, Great-West Life & Annuity Insurance Company, an indirect subsidiary of the Company, announced that “Empower” replaced “Empower Retirement” as the company’s public-facing brand name. Transitioning to “Empower” and eliminating “Retirement” is a strategic approach to elevate the firm’s brand as it continues to develop its offer, increase visibility to more individuals and expand its focus to include financial wellness. In addition, the simplified name allows Empower to employ the “empower.com” domain, which makes it easier for customers to find and interact with the company’s web properties.
  • Run-rate cost synergies are on track – Annualized run rate cost synergies of US$80 million pre-tax have been achieved as of December 31, 2021 related to the Company’s acquisition of MassMutual’s retirement services business. The Company remains on track to achieve annualized run rate cost synergies of US$160 million pre-tax at the end of integration in 2022.
  • Q4 Putnam net earnings of US$35 million ($43 million) – Putnam’s net earnings for the fourth quarter of 2021 were US$35 million ($43 million), an improvement of US$9 million or 35% compared to the fourth quarter of 2020, primarily due to higher asset-based fee revenue and changes to certain tax estimates, partially offset by lower net investment income and performance fee revenue. For Putnam, there were no differences between net and base earnings.
  • Putnam continues to sustain strong investment performance – As of December 31, 2021, approximately 84% and 83% of Putnam's fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively. In addition, 50% and 37% of Putnam's fund assets were in the Lipper top quartile on a three-year and five-year basis, respectively. Putnam has 25 funds currently rated 4 or 5 stars by Morningstar Ratings.

EUROPE

  • Q4 Europe segment base earnings of $213 million and net earnings of $239 million – Base earnings for the fourth quarter of 2021 were $213 million, up 9% compared to the fourth quarter of 2020, primarily due to favourable morbidity experience and changes to certain tax estimates in the United Kingdom (U.K.) as well as fee income growth in Ireland. These items were partially offset by lower annuitant experience in the U.K., unfavourable mortality experience in Ireland and the impact of currency movement. Net earnings for the fourth quarter of 2021 were $239 million, down $14 million from the fourth quarter of 2020, primarily due to transaction costs and contingent consideration related to recent acquisitions in Ireland and lower contributions from actuarial assumption changes, partially offset by higher base earnings and growth in property market values.

CAPITAL AND RISK SOLUTIONS

  • Q4 Capital and Risk Solutions segment base earnings of $145 million and net earnings of $133 million Base earnings for the fourth quarter of 2021 were $145 million, up 17% compared to the fourth quarter of 2020, primarily due to business growth, resolution of certain tax matters and less adverse claims experience in the life business. These items were partially offset by less favourable longevity experience. Net earnings for the fourth quarter of 2021 of $133 million decreased by $34 million from the prior year, primarily due to unfavourable actuarial assumption changes, partially offset by higher base earnings.


QUARTERLY DIVIDENDS

The Board of Directors approved a quarterly dividend of $0.490 per share on the common shares of Lifeco payable March 31, 2022 to shareholders of record at the close of business March 3, 2022.

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 G

March 3, 2022

March 31, 2022

$0.3250

Series H

March 3, 2022

March 31, 2022

$0.30313

Series I

March 3, 2022

March 31, 2022

$0.28125

Series L

March 3, 2022

March 31, 2022

$0.353125

Series M

March 3, 2022

March 31, 2022

$0.3625

Series N

March 3, 2022

March 31, 2022

$0.109313

Series P

March 3, 2022

March 31, 2022

$0.3375

Series Q

March 3, 2022

March 31, 2022

$0.321875

Series R

March 3, 2022

March 31, 2022

$0.3000

Series S

March 3, 2022

March 31, 2022

$0.328125

Series T

March 3, 2022

March 31, 2022

$0.321875

Series Y

March 3, 2022

March 31, 2022

$0.28125


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, Putnam Investments, and Irish Life. At the end of 2021, our companies had approximately 28,000 employees, 215,000 advisor relationships, and thousands of distribution partners – all serving over 33 million customer relationships across these regions. Great- West Lifeco trades on the Toronto Stock Exchange (TSX) under the ticker symbol GWO and is a member of the Power Corporation group of companies.

Basis of presentation

The annual consolidated 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 "will", "may", "expects", "anticipates", "intends", "plans", "believes", "estimates", "objective", "target", "potential" 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, climate-related goals, anticipated global economic conditions and possible future actions by the Company, including statements made with respect to the expected cost (including deferred consideration), benefits, timing of integration activities and revenue and expense synergies of acquisitions and divestitures, including but not limited to the proposed acquisition of the full-service retirement business of Prudential Financial Inc. (Prudential) and the acquisitions of Personal Capital Corporation (Personal Capital) and the retirement services business of Massachusetts Mutual Life Insurance Company (MassMutual), the timing and completion of the proposed acquisition of the retirement business of Prudential, expected capital management activities and use of capital, estimates of risk sensitivities affecting capital adequacy ratios, expected dividend levels, expected cost reductions and savings, expected expenditures or investments (including but not limited to investment in technology infrastructure and digital capabilities and solutions), the expected benefits of the Company's strategic relationship with Sagard Holdings, the timing and completion of the joint venture between Allied Irish Banks plc and Canada Life Irish Holding Company Limited, the impact of regulatory developments on the Company's business strategy and growth objectives, the expected impact of the current pandemic health event resulting from the 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, mutual fund and retirement solutions 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. 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. Whether or not actual results differ from forward-looking information may depend on numerous factors, developments and assumptions, including, without limitation, the severity, magnitude and impact of the COVID-19 pandemic (including the effects of the COVID-19 pandemic and the effects of governments' and other businesses' responses to the COVID-19 pandemic on the economy and the Company's financial results, financial condition and operations), the duration of COVID-19 impacts and the availability and adoption of vaccines, the effectiveness of vaccines, the emergence of COVID-19 variants, assumptions around sales, fee rates, asset breakdowns, lapses, plan contributions, redemptions and market returns, the ability to integrate the acquisitions of Personal Capital and the retirement services business of MassMutual and Prudential, the ability to leverage Empower Retirement's, Personal Capital's, and MassMutual's and Prudential's retirement services businesses and achieve anticipated synergies, customer behaviour (including customer response to new products), the Company's reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy and plan lapse rates, participant net contribution, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, 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, 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, changes in actuarial standards, 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, unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements, levels of administrative and operational efficiencies, changes in trade organizations, and other general economic, political and market factors in North America and internationally. In addition, as we work to advance our climate goals, external factors outside of Lifeco's reasonable control may act as constraints on their achievement, including varying decarbonization efforts across economies, the need for thoughtful climate policies around the world, more and better data, reasonably supported methodologies, technological advancements, the evolution of consumer behavior, the challenges of balancing interim emissions goals with an orderly and just transition, and other significant considerations such as legal and regulatory obligations.

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 2021 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 9, 2022 under "Risk Factors", which, along with other filings, is available for review at www.sedar.com.Opens a new website in a new window 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-GAAP Financial Measures and Ratios

This release contains some non-GAAP financial measures and non-GAAP ratios as defined in National Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”. Terms by which non-GAAP financial measures are identified include, but are not limited to, "base earnings (loss)", "base earnings (loss) (US$)" and "assets under administration". Terms by which non-GAAP ratios are identified include, but are not limited to, “base earnings per common share (EPS)”, “base return on equity (ROE)” and base dividend payout ratio. Non-GAAP financial measures and ratios are used to provide management and investors with additional measures of performance to help assess results where no comparable GAAP (IFRS) measure exists. However, non-GAAP financial measures and ratios do not have standard meanings prescribed by GAAP (IFRS) and are not directly comparable to similar measures used by other companies. Refer to the "Non-GAAP Financial Measures and Ratios" section in this release for the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP as well as additional details on each measure and ratio.

Fourth Quarter Conference Call

Lifeco's fourth quarter conference call and audio webcast will be held February 10, 2022 at 3:30 p.m. (ET). The call and webcast can be accessed through greatwestlifeco.com/news-events/events or by phone at:

  • Participants in the Toronto area: 416-915-3239
  • Participants from North America: 1-800-319-4610

A replay of the call will be available from February 10 to March 11, 2022 and can be accessed by calling 1-855-669- 9658 or 604-674-8052 (passcode:8244). The archived webcast will be available on greatwestlifeco.com.

For more information:

Media Relations
Liz Kulyk
204-391-8515
media.relations@canadalife.com

Investor Relations
Deirdre Neary
647-328-2134
deirdre.neary@canadalife.com