This earnings news release for |
TSX: GWO
"We are pleased that Lifeco saw a strong close to the year, with excellent progress on integrating acquired businesses and advancing other strategic initiatives undertaken throughout the year. We consider this to be a strong performance especially considering the pandemic's ongoing impact," said
Net earnings attributable to common shareholders (net earnings) were
Common Shareholders | Q4 2020 | Q4 2019 |
Base earnings(1) | ||
90 | 89 | |
195 | 317 | |
Capital and Risk Solutions | 124 | 157 |
Lifeco Corporate | (16) | (6) |
Total base earnings(1) | ||
Items excluded from base earnings(2) | 171 | (318) |
Net earnings | ||
Base EPS(1) | ||
Net EPS | ||
Base return on equity(1)(3) | 12.8% | 13.4% |
Return on equity(1)(3) | 14.1% | 11.7% |
(1) Represents a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's 2020 Annual MD&A for additional details. |
Base EPS for the fourth quarter of 2020 of
Reported net EPS for the fourth quarter of 2020 was
Highlights –
Key strategic transactions advanced in quarter
- On
December 31, 2020 , the Company's subsidiary, Great-West Life & Annuity, through its Empower Retirement business, completed the acquisition of the retirement services business ofMassachusetts Mutual Life Insurance Company (MassMutual) forUS$2.3 billion , strengthening Empower Retirement's position as the second largest retirement services provider in theU.S. based on assets under administration and number of retirement plan participants. Empower Retirement anticipates realizing cost and revenue synergies as it integrates the business over the next two years. - On
December 31, 2020 , the Company completed the sale of GLC to Mackenzie Financial Corporation (Mackenzie), an affiliate of the Company. GLC was a wholly-owned subsidiary of Canada Life whose principal activity was the provision of investment management services to Canada Life. This transaction provides the Company with access to greater scale and more investment capabilities. - As part of the GLC transaction, the Company also established its own mutual fund manager in
Canada ,Canada Life Investment Management Ltd. (CLIML) and onDecember 31, 2020 , CLIML assumed fund management responsibilities for the Canada Life Mutual Funds, offered byQuadrus Investment Services Ltd. , a subsidiary of Canada Life, and other Canada Life branded investment funds offered inCanada . CLIML allows the Canadian business to directly control its product shelf and its pricing, while still leveraging Mackenzie for asset management and fund administration.
Capital strength and financial flexibility maintained
- The Company's capital position remained strong at
December 31, 2020 , with a LICAT Ratio for Canada Life, Lifeco's major Canadian operating subsidiary, of 129% which is above the Company's internal target range and the supervisory target.
Consolidated assets under administration of
- Assets under administration were
$2.0 trillion atDecember 31, 2020 , an increase of 21% fromDecember 31, 2019 primarily due to the MassMutual transaction.
Recognized as a leader in carbon and climate risk management, philanthropy, and community service
- The Company earned an A ('Leadership') rating on CDP's 2020 Climate Change Questionnaire, a rating which identifies the global leaders in the management of carbon, climate change risks and low carbon opportunities. The Company achieved the highest rating among Canadian insurance companies for the sixth consecutive year.
SEGMENTED OPERATING RESULTS
For reporting purposes, Lifeco's consolidated operating results are grouped into five reportable segments –
- Q4
Canada segment base earnings of$348 million and net earnings of$300 million – Base earnings for the fourth quarter of 2020 were$348 million compared to$274 million in the fourth quarter of 2019, an increase of 27%. The increase was primarily due to favourable morbidity experience in Group Customer and impact of new business in Individual Customer, partially offset by lower contributions from investment experience. Net earnings for the fourth quarter of 2020 were$300 million , up from$188 million in the fourth quarter of 2019, primarily due to the same reasons discussed for base earnings and a gain on the sale of GLC of$143 million , partially offset by unfavourable impact of insurance contract liability basis changes and restructuring costs related to strategic initiatives. - Continuing to deliver market-leading solutions to Canadians –
For Group customers inCanada , Canada Life has launched all-digital portable benefits now accessible to over 1.5 million plan members and has started to roll-out My Canada Life at Work, a fully integrated experience across wealth and insurance solutions. For Individual customers, the Company continues to enhance its wealth management product offerings including updating its target risk asset allocation funds and launching new Risk-Managed Portfolios during the fourth quarter of 2020.
Q4 U.S. Financial Services base earnings ofUS$49 million and net earnings ofUS$47 million –U.S. Financial Services (primarily Empower Retirement) base earnings for the fourth quarter of 2020 wereUS$49 million , orUS$56 million excluding the net loss ofUS$7 million from thePersonal Capital business comparable toUS$57 million in the fourth quarter of 2019. In the fourth quarter of 2020, lower contributions from investment experience were mostly offset by net business growth. Net earnings for the fourth quarter of 2020 wereUS$47 million , down fromUS$76 million in the fourth quarter of 2019, primarily due to a valuation adjustment on an employee pension plan that positively impacted the fourth quarter of 2019 and did not recur.- Empower Retirement participants up 27% – Empower Retirement participants of 11.9 million at
December 31, 2020 grew 27% from 9.4 million participants atDecember 31, 2019 . Assets under administration grew 42% over the year toUS$958 billion onDecember 31, 2020 . The increases include the addition of the MassMutual retirement services business which contributed 2.5 million participants andUS$190 billion in assets under administration. - Q4
Putnam net earnings ofUS$26 million –Putnam net earnings for the fourth quarter of 2020 wereUS$26 million up fromUS$13 million in the fourth quarter of 2019. The increase was primarily due to higher performance fee income and higher net investment income. ForPutnam , there were no differences between net and base earnings. Putnam sales up 7% –Putnam sales for the fourth quarter of 2020 wereUS$13 billion , a 7% increase fromUS$12.1 billion in the fourth quarter of 2019, reflecting strong institutional sales. Sales for the year endedDecember 31, 2020 wereUS$57 billion , an increase of 31%, compared to 2019 reflecting strong investment performance driving institutional sales.Putnam continues to sustain strong investment performance relative to its peers. As ofDecember 31, 2020 , approximately 76% and 91% ofPutnam's fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively.- Revaluation of
U.S. deferred income tax asset – During the fourth quarter of 2020, management revised its estimates of future taxable profits to reflect the impact of the completion ofU.S. acquisitions in 2020 and, as a result, recognized aUS$151 million deferred tax asset that had previously been de-recognized in 2019.
- Q4
Europe segment base earnings of$195 million and net earnings of$253 million – Base earnings for the fourth quarter of 2020 were$195 million compared to$317 million in the fourth quarter of 2019. The decrease was primarily due to the$122 million positive impact of the resolution of an outstanding issue with a foreign tax authority in the fourth quarter of 2019. Unfavourable group mortality experience in the current quarter was mostly offset by higher impact of new business and favourable morbidity and longevity experience. Net earnings for the fourth quarter of 2020 were$253 million , down from$335 million in the fourth quarter of 2019, primarily due to the same reasons discussed for base earnings partially offset by higher contributions from insurance contract liability basis changes.
CAPITAL AND RISK SOLUTIONS
Q4 Capital and Risk Solutions segment base earnings of$124 million and net earnings of $167 million – Base earnings for the fourth quarter of 2020 were$124 million , compared to$157 million in the fourth quarter of 2019. The year over year decrease primarily reflects new business strain in fourth quarter of 2020 compared to new business gains in the fourth quarter of 2019. The results in the fourth quarter of 2020 also reflected unfavourable life claims experience that was partially offset by favourable longevity experience. Net earnings for the fourth quarter of 2020 of$167 million , increased from$117 million in the fourth quarter of 2019, primarily due to the same reasons discussed for base earnings as well as higher contributions from insurance contract liability basis changes.- £3 billion longevity reinsurance agreement entered into during Q4 – On
December 15, 2020 , the Reinsurance business unit announced it had entered into a long-term longevity reinsurance agreement with an insurance company in the U.K. The agreement covers approximately £3 billion of pension liabilities and approximately 7,500 in-payment pensioners.
QUARTERLY DIVIDENDS
The Board of Directors approved a quarterly dividend of
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 F | |||
Series G | |||
Series H | |||
Series I | |||
Series L | |||
Series M | |||
Series N | |||
Series P | |||
Series Q | |||
Series R | |||
Series S | |||
Series T |
For purposes of the Income Tax Act (
Selected financial information is attached.
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, 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 the recent acquisitions of
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 novel coronavirus (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), assumptions around sales, fee rates, asset breakdowns, lapses, plan contributions, redemptions and market returns, the ability to integrate the acquisitions of
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 2020 Annual Management's Discussion and Analysis under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates" and in the Company's annual information form dated
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, "base earnings (loss)", "base earnings (loss) (US$)", "base earnings per common share", "return on equity", "base return on equity", "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 "Non-IFRS Financial Measures" section in the Company's 2020 Annual MD&A for the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS as well as additional details on each measure.
Fourth Quarter Conference Call
Lifeco's fourth quarter conference call and audio webcast will be held
- 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
FINANCIAL HIGHLIGHTS (unaudited)
(in Canadian $ millions except per share amounts)
As at or for the three months ended | For the twelve months ended | ||||||||||
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Earnings | |||||||||||
Base earnings(1)(2) | $ | 741 | $ | 679 | $ | 831 | $ | 2,669 | $ | 2,704 | |
Net earnings - common shareholders | 912 | 826 | 513 | 2,943 | 2,359 | ||||||
Per common share | |||||||||||
Basic: | |||||||||||
Base earnings(1)(2) | 0.799 | 0.732 | 0.895 | 2.878 | 2.859 | ||||||
Net earnings | 0.983 | 0.891 | 0.552 | 3.173 | 2.494 | ||||||
Diluted net earnings | 0.983 | 0.891 | 0.552 | 3.172 | 2.493 | ||||||
Dividends paid | 0.438 | 0.438 | 0.413 | 1.752 | 1.652 | ||||||
Book value | 22.97 | 22.57 | 21.53 | ||||||||
Base return on equity(1)(2)(3) | 12.8% | 13.5% | 13.4% | ||||||||
Return on equity(1)(3) | 14.1% | 12.4% | 11.7% | ||||||||
Total premiums and deposits(1)(5) | $ | 40,831 | $ | 40,903 | $ | 39,096 | $ | 171,345 | $ | 150,638 | |
Fee and other income | 1,569 | 1,486 | 1,515 | 5,902 | 7,081 | ||||||
Net policyholder benefits, dividends and | 9,916 | 9,155 | 10,003 | 38,159 | 36,415 | ||||||
Total assets per financial statements | $ | 600,490 | $ | 473,737 | $ | 451,167 | |||||
Proprietary mutual funds and institutional | 350,943 | 341,436 | 320,548 | ||||||||
Total assets under management(1) | 951,433 | 815,173 | 771,715 | ||||||||
Other assets under administration(1) | 1,024,414 | 845,862 | 857,966 | ||||||||
Total assets under administration(1) | $ | 1,975,847 | $ | 1,661,035 | $ | 1,629,681 | |||||
Total equity | $ | 27,015 | $ | 26,648 | $ | 25,543 | |||||
| 129% | 131% | 135% |
(1) | This metric is a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's |
(2) | Effective the first quarter of 2020, the Company introduced an enhanced non-IFRS earnings measure. Base earnings (loss) are defined as net earnings excluding the impact of actuarial assumption changes and other management actions, direct equity and interest rate market impacts on insurance and investment contract liabilities, net of hedging, and related deferred tax liabilities, and items that management believes are not indicative of the Company's underlying business results. These items would include restructuring and integration costs, material legal settlements, material impairment charges related to goodwill and intangible assets, legislative tax changes and other tax impairments, and gains or losses related to the disposition of a business. |
(3) | Refer to the "Return on Equity" section of the Company's |
(4) | The Life Insurance Capital Adequacy Test (LICAT) ratio is based on the consolidated results of |
(5) | Comparative figures have been reclassified to reflect presentation adjustments. |
Base earnings(1) and Net earnings - common shareholders | |||||||||||
For the three months ended | For the twelve months ended | ||||||||||
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Base earnings (loss)(1) | |||||||||||
$ | 348 | $ | 270 | $ | 274 | $ | 1,206 | $ | 1,178 | ||
90 | 83 | 89 | 273 | 350 | |||||||
195 | 182 | 317 | 688 | 796 | |||||||
Capital and Risk Solutions | 124 | 156 | 157 | 536 | 401 | ||||||
Lifeco Corporate | (16) | (12) | (6) | (34) | (21) | ||||||
Lifeco base earnings(1) | $ | 741 | $ | 679 | $ | 831 | $ | 2,669 | $ | 2,704 | |
Items excluded from base earnings(2) | |||||||||||
Actuarial assumption changes and other | |||||||||||
management actions(2) | $ | (23) | $ | 66 | $ | (78) | $ | 113 | $ | 170 | |
Market-related impacts on liabilities(2) | (31) | 18 | (13) | (127) | (89) | ||||||
Net gain/charge on business dispositions(2) | 143 | 94 | 8 | 237 | (191) | ||||||
Transaction costs related to the acquisitions | |||||||||||
of | (47) | (31) | — | (78) | — | ||||||
Revaluation of a deferred tax asset(2) | 196 | — | (199) | 196 | (199) | ||||||
Restructuring and integration costs(2) | (67) | — | (36) | (67) | (36) | ||||||
Items excluded from Lifeco base earnings(2) | $ | 171 | $ | 147 | $ | (318) | $ | 274 | $ | (345) | |
Net earnings (loss) - common shareholders | |||||||||||
$ | 300 | $ | 266 | $ | 188 | $ | 1,070 | $ | 1,051 | ||
208 | 89 | (121) | 380 | (61) | |||||||
253 | 316 | 335 | 913 | 1,004 | |||||||
Capital and Risk Solutions | 167 | 167 | 117 | 614 | 386 | ||||||
Lifeco Corporate | (16) | (12) | (6) | (34) | (21) | ||||||
Lifeco net earnings - common shareholders | $ | 912 | $ | 826 | $ | 513 | $ | 2,943 | $ | 2,359 | |
(1) | This metric is a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of of the Company's |
(2) | Items excluded from base earnings, a non-IFRS measure. Refer to the 'Non-IFRS Financial Measures" section of of the Company's |
SOURCE
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