Summary

  • 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.
  • The company operate in Canada, the United States and Europe under the brands Canada Life, Empower Retirement, Putnam Investments, and Irish Life.
  • At the end of 2020, our companies had approximately 24,500 employees, 205,000 advisor relationships, and thousands of distribution partners – all serving more than 30 million customer.

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Company Overview

Great-West Lifeco (OTC:GWLIFU, 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.1

The company operate in Canada, the United States and Europe under the brands Canada Life, Empower Retirement, Putnam Investments, and Irish Life.

At the end of 2020, its companies had approximately 24,500 employees, 205,000 advisor relationships, and thousands of distribution partners – all serving its more than 30 million customer relationships across these regions.

Great-West Lifeco and its companies have approximately $2.0 trillion in consolidated assets under administration and are members of the Power Financial Corporation group of companies.

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Canada

Canada Life is a leading insurer with interests in life insurance, health insurance, retirement savings, and investment management. The company proudly serve nearly one in three Canadians from coast to coast. Canada Life serves its customers through over 23,000 advisors, and serves group plan members through approximately 27,000 employers across the country

U.S.

Empower Retirement serves all segments of the U.S. employer-sponsored retirement plan market and offers individual retirement accounts. Putnam is a U.S.- based global asset manager with a range of investment management strategies including fixed income, equity, environmental, social and governance (ESG), and global asset allocation and alternatives. The firm’s affiliate, PanAgora provides institutional investment solutions including alternatives, risk premia and active strategies, spanning all major asset classes and risk ranges.

Europe

European subsidiaries of Canada Life and Irish Life provide insurance and wealth management products including pensions, home finance, payout annuities, investments and group and indivdual insurance in the U.K.; investments, and group insurance in the U.K.; investments, and group and individual insurance in the Isle of Man; pensions, critical illness, disability and life insurance in Germany; and life and health insurance, pension and investment products in Ireland.

Capital And Risk Solutions

The Capital and Risk Solutions business unit provides reinsurance covering mortality, longevity, health and lapse risks for insurers, reinsurers and pension funds and operates primarily in the U.S., Barbados, Bermuda, and Ireland. Its reinsurance business is conducted through branches and subsidiaries of Canada Life.

Subsidiaries

Power Corporation of Canada indirectly controlled 70.66% of the outstanding common shares of Great-West Lifeco, representing approximately 65% of the voting rights attached to all of the outstanding voting shares of Great-West Lifeco as of December 31, 2021.2

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Canada Life

Canada Life, founded in 1847, was Canada’s first domestic life insurance company.  Canada Life provides insurance and wealth management products and services in Canada, the United Kingdom, Isle of Man and Germany, and in Ireland through Irish Life.

In Canada, Canada Life offers investments, savings and retirement income, annuities, life, disability, job loss and critical illness insurance for individuals, families and business owners. Group payout products issued by Canada Life are distributed by Great-West Life.

Canada Life is also a leading provider of creditor insurance through leading financial institutions and other lending institutions.

In Europe, Canada Life and Irish Life provide individuals and their families with a broad range of protection and wealth management products.

Canada Life is a leading provider of traditional mortality, structured and longevity reinsurance solutions for life insurers in the U.S and in international markets.

As of January 1, 2020,  Great-West Life, London Life and Canada Life and their holding companies, Canada Life Financial Corporation and London Insurance Group Inc amalgamated into a single company – the Canada Life Assurance Company.

Today, Canada Life proudly serves more than 13 million customer relationships across Canada and is a member of the Power Financial Corporation group of companies.

Irish Life

Irish Life is Ireland's leading life assurance, pensions and investment management business, founded in 1939.

Irish Life provides life assurance, pension and investment products to individuals and small business owners, as well as group risk and group defined contribution pension solutions for employers and affinity groups.

Irish Life Investment Managers (ILIM), its fund management subsidiary, is the largest manager of life assurance and pension assets in Ireland.

Additionally, Irish Life operates in specialized markets through its subsidiaries, Cornmarket and Irish Progressive Services International, and has investments in a number of joint ventures.

Irish Life is a subsidiary of Great-West Lifeco and a member of the Power Financial Corporation group of companies.

Empower Retirement

The company’s Empower Retirement division is the second-largest U.S. retirement services provider by participants. Empower serves all segments of the employer-sponsored retirement plan market – small, mid-size and large corporate clients, government plans, non-profit entities and private-label record-keeping clients – and offers individual retirement accounts.

Putnam Investments

Putnam Investments, LLC is a global asset manager and retirement plan provider, offering investment management services across a range of equity, fixed income, global asset allocation and alternative strategies, including absolute return, risk parity and hedge funds for individuals and institutions. Putnam distributes those services largely through intermediaries and its own institutional sales force via its offices and strategic alliances in North America, Europe and Asia.

Putnam is a subsidiary of Great-West Lifeco Inc. and a member of the Power Financial Corporation group of companies.

Brands

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Financial Highlights

For the twelve months ended December 31, 2020, Lifeco’s base earnings were $2,669 million ($2.878 per common share) compared to $2,704 million ($2.859 per common share) a year ago. The decrease was primarily due to the resolution of an outstanding issue with a foreign tax authority in 2019 discussed for the inquarter results as well as lower base earnings in the U.S. segment. The decrease was partially offset by business growth in the Capital and Risk Solutions segment. Base earnings for the twelve months ended December 31, 2019 included $63 million of earnings related to the U.S. individual life insurance and annuity business (“Reinsured Insurance & Annuity” business unit) prior to its sale on June 1, 2019, to Protective Life.3

For the twelve months ended December 31, 2020, Lifeco’s net earnings were $2,943 million ($3.173 per common share) compared to $2,359 million ($2.494 per common share) a year ago. The increase was primarily due to the positive impact of the revaluation of a deferred tax asset and the net gain on the sale of GLC discussed for the in-quarter results as well as a net gain of $94 million related to the sale of IPSI in the third quarter of 2020. The increase was partially offset by the transaction, restructuring and integration costs incurred to date discussed for the in-quarter results and lower contributions from insurance contract liability basis changes and market-related impacts on liabilities due to significant market declines in the first quarter of 2020 driven by the COVID-19 pandemic. In addition, Lifeco’s net earnings for the twelve months ended December 31, 2019 included a 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 and the negative impact of the derecognition of a deferred tax asset of $199 million.

The Company had an effective income tax rate on base earnings of 8.7% for the twelve months ended December 31, 2020, which was comparable to 7.4% for the same period last year.

The Company recognizes deferred income tax assets based on the probability that the entity will have taxable profits and/or tax planning opportunities available to allow the deferred income tax asset to be utilized. As at December 31, 2020, the Company has recognized a deferred income tax asset of $1,411 million on tax loss carryforwards. While $344 million pertains to losses with no expiry, $454 million pertains to losses expiring between 2026 and 2030, $413 million to losses expiring between 2031 and 2035 and $200 million to losses expiring between 2036 and 2040. Included in the deferred income tax asset balance is $879 million (US$692 million) from a U.S. subsidiary with a history of losses, $496 million (US$391 million) of which relates to certain restricted losses with an expiry between 2027 and 2034.

For the twelve months ended December 31, 2020, net investment income decreased by $1,445 million compared to the same period last year. The changes in fair value for the twelve month period in 2020 were an increase of $5,699 million compared to $6,946 million during the same period in 2019. The changes in fair value were primarily due to a smaller decline in U.K. and U.S. bond yields and a smaller increase in Canadian equity markets in 2020 compared to 2019.

Other benefits and expenses increased by $297 million to $9,024 million compared to the same period last year, primarily due to same reasons discussed for the in-quarter results.

Total assets under administration at December 31, 2020 increased by $346.2 billion to $2.0 trillion compared to December 31, 2019, primarily due to the MassMutual and Personal Capital acquisitions during 2020 as well as market movement, partially offset by the sale of IPSI in the Europe segment and currency movement. The MassMutual transaction added $115 billion of total assets, $132 billion in other assets under administration and $0.5 billion in proprietary mutual funds and institutional net assets to the U.S. segment at December 31, 2020. The acquisition of Personal Capital added $21 billion of assets to the U.S. segment’s proprietary mutual funds and institutional net assets at December 31, 2020. IPSI’s assets as of December 31, 2019 were approximately $44 billion and were primarily included in other assets under administration. The impact of the sale of IPSI on the Europe segment’s other assets under administration was partially offset by the acquisitions of Conexim Advisors Limited and Acumen & Trust DAC during the first quarter of 2020 as well as APT Workplace Pensions Limited and APT Wealth Management Limited during the second quarter of 2020.

3Q 2021 Result

November 3, 2021; Great-West Lifeco Inc. announced its third quarter 2021 results.4

Net earnings attributable to common shareholders (net earnings) were $872 million, or $0.94 per common share (EPS), for the third quarter of 2021 compared to $826 million, or $0.89 per common share, for the same quarter last year. Base earnings for the third quarter of 2021 were $870 million, or $0.93 per common share, compared to $679 million or $0.73 per common share a year ago.

Base EPS for the third quarter of 2021 of $0.93, increased by 27% from $0.73 a year ago, primarily due to MassMutual business related base earnings of $68 million (US$54 million) and the impact of higher equity markets across all jurisdictions. The Company also had favourable investment experience and a pension settlement gain in Europe as well as favourable morbidity experience in Canada. These items were partially offset by estimated claims related to recent major weather events as well as unfavourable U.S. life claims experience primarily due to the direct and indirect impacts of the COVID-19 pandemic in the Capital and Risk Solutions segment.

Reported net EPS for the third quarter of 2021 was $0.94 up from $0.89 in 2020. The increase was primarily due to base earnings growth as well as favourable market-related impacts on liabilities. These items were partially offset by higher acquisition related costs and integration and restructuring costs in the U.S. and Lifeco Corporate. Net earnings for the three months ended September 30, 2020 included a net gain of $94 million related to the sale of Irish Progressive Services International Limited (IPSI).

Paul Mahon, President and CEO of Great-West Lifeco Inc comment on quarterly results- “The company made significant progress this quarter to drive value creation through both organic growth and acquisition. The transactions the company announced in the U.S., Canada and Ireland will elevate its strategies and build new muscle as the company scale and extend its business. Great-West Lifeco is pleased with the results Great-West Lifeco achieved in the third quarter, with strong underlying business performance across operating segments and the benefits of recent acquisitions driving double-digit base earnings growth and strong base ROE.”

Assets under administration (AUA) were approximately $2.2 trillion at September 30, 2021, an increase of 11% from December 31, 2020, primarily due to the impact of equity market movement and new business growth with respect to segregated funds, proprietary mutual funds and institutional net assets and other AUA, partially offset by the impact of currency movement.

Segmented Operating Results

Canada

Q3 Canada segment base earnings of $312 million and net earnings of $305 million – Base earnings for the third quarter of 2021 were $312 million, up 16% compared to the third quarter of 2020, primarily due to favourable morbidity experience in Group Customer, favourable mortality and investment experience in Individual Customer and higher fee income. Net earnings for the third quarter of 2021 were $305 million, up from $266 million in the third quarter of 2020, primarily due to growth in base earnings and market related impacts on liabilities, partially offset by unfavourable actuarial assumption changes.

United States

Q3 U.S. Financial Services base earnings of US$149 million and net earnings of US$138 million – U.S. Financial Services (primarily Empower) base earnings for the third quarter of 2021 were US$149 million, up US$93 million or 166% from the third quarter of 2020. Base earnings growth included MassMutual base earnings of US$54 million and growth in the legacy Empower business from higher average equity markets and an increase in participants, as well as higher contributions from investment experience. These items were partially offset by a Personal Capital loss of US$4 million. Net earnings for the third quarter of 2021 were US$138 million, up from US$84 million in the third quarter of 2020, primarily due to growth in base earnings.

Run-rate cost synergies are on track – Annualized run rate cost synergies of US$60 million pre-tax have been achieved as of September 30, 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.

Q3 Putnam net earnings of US$27 million – Putnam’s net earnings for the third quarter of 2021 were US$27 million, an improvement of US$17 million compared to the third quarter of 2020, primarily due to higher fee revenue and changes to certain tax estimates, partially offset by lower net investment income and higher compensation related and asset-based expenses. For Putnam, there were no differences between net and base earnings

Putnam average assets under management up 14% – Putnam’s average assets under management for the third quarter of 2021 were US$200.6 billion, an increase of US$23.9 billion compared to the same quarter last year, primarily due to cumulative positive markets over the twelve-month period. Putnam continues to sustain strong investment performance relative to its peers. As of September 30, 2021, approximately 75% and 86% of Putnam's fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively. In addition, 49% and 71% of Putnam's fund assets were in the Lipper top quartile on a three-year and five-year basis, respectively. Putnam has 28 funds currently rated 4-5 stars by Morningstar Ratings.

Europe

Q3 Europe segment base earnings of $232 million and net earnings of $357 million – Base earnings for the third quarter of 2021 were $232 million, up 27% compared to the third quarter of 2020, primarily due to favourable investment experience in the United Kingdom (U.K.), fee income growth across all business units and a $47 million pension settlement gain in Ireland. These items were partially offset by less favourable morbidity experience in the U.K. and mortality experience in Ireland. Net earnings for the third quarter of 2021 were $357 million, up $41 million from the third quarter of 2020, primarily due to base earnings growth, higher contributions from actuarial assumption changes and other management actions and higher market-related impacts, partially offset by a $94 million net gain from the sale of IPSI in the third quarter of 2020.

Q3 Europe sales included a $1.3 billion bulk annuity deal in the U.K

Capital And Risk Solutions

Q3 Capital and Risk Solutions segment base earnings of $107 million and net earnings of $102 million Base earnings for the third quarter of 2021, were $107 million, down 31% compared to the third quarter of 2020. Base earnings for the third quarter of 2021 included a loss estimate of $61 million for net estimated claims, primarily due to the impact of recent major weather events. Excluding this item, base earnings increased compared to the same quarter last year, primarily due to favourable impacts from new business and higher business volumes. This was partially offset by unfavourable U.S. life claims experience totalling $71 million primarily due to the direct and indirect impacts of the COVID-19 pandemic. Net earnings for the third quarter of 2021 of $102 million decreased $65 million from the prior year, primarily due to lower base earnings.

Continued expansion in the global reinsurance market – In the third quarter of 2021, the Company entered into a long-term reinsurance agreement with a life insurance company in Japan. In exchange for a single upfront premium payment, Canada Life will pay the actual benefit obligations incurred by the insurance company.

Lifeco Corporate

Q3 Lifeco Corporate segment base loss of $2 million and net loss of $60 million – Base loss of $2 million for the third quarter of 2021 decreased by $10 million compared to the same quarter last year, primarily due to changes in certain tax estimates and lower operating expenses. Net loss of $60 million for the third quarter of 2021 compared to net loss of $12 million for the same quarter last year was due to a provision for payments relating to the Company's 2003 acquisition of The Canada Life Assurance Company.

References

  1. ^ https://www.greatwestlifeco.com/who-we-are/overview.html
  2. ^ https://www.greatwestlifeco.com/who-we-are/our-company.html
  3. ^ https://www.greatwestlifeco.com/content/dam/gwlco/documents/reports/2021/lifeco-2020-annual-report-en.pdf
  4. ^ https://www.greatwestlifeco.com/content/dam/gwlco/documents/press-releases/2021/lifeco-q3-2021-earnings-release.pdf
Created by Asif Farooqui on 2022/01/31 14:53
     

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