Great-West Lifeco reports third quarter 2021 base earnings of $870 million and net earnings of $872 million

Canada NewsWire

WINNIPEG, MB, Nov. 3, 2021

TSX:GWO

This earnings news release for Great-West Lifeco Inc. 
 should be read in conjunction with the Company's interim 
 Management's Discussion & Analysis (MD&A) and condensed 
 consolidated interim unaudited Financial Statements 
 for the period ended September 30, 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. 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, 
 unless otherwise noted. 

WINNIPEG, MB, Nov. 3, 2021 /CNW/ - Great-West Lifeco Inc. (Lifeco or the Company) today announced its third quarter 2021 results.

"We made significant progress this quarter to drive value creation through both organic growth and acquisition. The transactions we announced in the U.S., Canada and Ireland will elevate our strategies and build new muscle as we scale and extend our business," said Paul Mahon, President and CEO of Great-West Lifeco Inc. "We are 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."

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.

Common Shareholders                    Q3 2021  Q3 2020 
Base earnings(1) 
Canada                                    $312     $270 
United States (U.S.)                       221       83 
Europe                                     232      182 
Capital and Risk Solutions                 107      156 
Lifeco Corporate                           (2)     (12) 
Total base earnings(1)                    $870     $679 
Items excluded from base earnings(2)         2      147 
Net earnings                              $872     $826 
  Base EPS(1)                            $0.93    $0.73 
  Net EPS                                $0.94    $0.89 
  Base return on equity(1)(3)            14.5%    13.5% 
  Return on equity(1)(3)                 14.9%    12.1% 
(1) Represents a non-IFRS measure. Refer to the "Non-IFRS 
 Financial Measures" section of the Company's third 
 quarter of 2021 interim MD&A for additional details. 
(2) Items excluded from base earnings are actuarial 
assumption changes and other management actions, market-related 
impacts on liabilities, transaction costs related 
to the acquisitions of Personal Capital, MassMutual 
and Prudential, a provision for payments relating 
to the Company's 2003 acquisition of The Canada Life 
Assurance Company, restructuring and integration costs 
as well as a net gain related to the sale of Irish 
Progressive Services International Limited in Q3 2020. 
Refer to the "Non-IFRS Financial Measures" section 
of the Company's third quarter of 2021 interim MD&A 
for additional details. 
(3) Base return on equity and return on equity are 
 calculated using the trailing four quarters of applicable 
 earnings and common shareholders' equity. 

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).

Highlights

Key strategic transactions announced

The Company announced several key strategic business transactions in the U.S., Canada and Ireland to add scale and grow their respective businesses as well as recent capital transactions to support this growth.

   -- On July 21, 2021, a Lifeco subsidiary, Great-West Life & Annuity 
      Insurance Company (GWL&A), which operates primarily as 'Empower 
      Retirement' (Empower) announced a definitive agreement to acquire 
      Prudential Financial, Inc.'s (Prudential) full-service retirement 
      business for a total value of US$3.55 billion. The acquisition will add 
      significant scale and capabilities and further strengthens Empower's 
      position as the second largest retirement plan service provider in the 
      United States. The transaction is expected to deliver run-rate annual 
      pre-tax expense synergies of US$180 million which are expected to be 
      phased in over 24 months, and also increases the synergy potential of 
      Empower's 2020 acquisition of hybrid wealth manager, Personal Capital, 
      across a larger combined business. Subject to regulatory approvals, the 
      transaction is expected to close in the first quarter of 2022. 
   -- On September 1, 2021, a Lifeco subsidiary, The Canada Life Assurance 
      Company (Canada Life) completed the previously announced acquisition of 
      ClaimSecure Inc., an industry-leading healthcare management firm that 
      provides health and dental claim management services to private and 
      public businesses in Canada. 
   -- Subsequent to September 30, 2021, on November 1, 2021, a Lifeco 
      subsidiary, Irish Life Group Limited (Irish Life) completed the 
      previously announced acquisition of Ark Life Assurance Company dac (Ark 
      Life) from Phoenix Group Holdings plc for a total cash consideration of 
      EUR230 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. 
   -- Subsequent to September 30, 2021, on October 7, 2021, the Company 
      announced it had agreed to enter into a long-term strategic relationship 
      with Sagard Holdings (Sagard), a wholly-owned subsidiary of Power 
      Corporation. The relationship includes the sale of its United 
      States-based subsidiaries, EverWest Real Estate Investors, LLC and 
      EverWest Advisors, LLC (EverWest) to Sagard, in exchange for a minority 
      shareholding in Sagard's subsidiary, Sagard Holdings Management Inc. The 
      strategic relationship with Sagard is intended to advance the Company's 
      strategy to further broaden its access to alternative investment options. 
      The sale of EverWest is expected to close in the fourth quarter of 2021, 
      subject to regulatory and customary closing conditions. 

Consolidated assets under administration of $2.2 trillion

   -- 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. 

Capital strength and financial flexibility maintained

   -- The Company's capital position remained strong at September 30, 2021, 
      with a LICAT Ratio for Canada Life, Lifeco's major Canadian operating 
      subsidiary, of 123% which is above the Company's internal target range 
      and the supervisory target. 
   -- On August 16, 2021, the Company issued $1.5 billion aggregate principal 
      amount 3.60% Limited Recourse Capital Notes Series 1 (Subordinated 
      Indebtedness), maturing on December 31, 2081 (LRCN Series 1). 
   -- Subsequent to September 30, 2021, on October 8, 2021, the Company issued 
      8,000,000 Series Y, 4.50% Non-Cumulative First Preferred Shares for gross 
      proceeds of $200 million. 
   -- The Company made payments of US$400 million on July 2, 2021 and US$100 
      million on September 29, 2021 on its committed line of credit related to 
      the Company's acquisition of the retirement services business from 
      MassMutual on December 31, 2020, reducing the balance drawn on this line 
      of credit to nil. 

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 third quarter of 2021 interim Management's Discussion and Analysis (MD&A).