SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31,2001
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 333-01173 84-0467907
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
8515 East Orchard Road, Greenwood Village, Colorado 80111
(Address of principal executive offices) (Zip Code)
(303) 737-3000
(Registrant's telephone number, including area code)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Number Title 99
Great-West Lifeco Press Release dated October 31, 2001
ITEM 9. REGULATION FD DISCLOSURE
On October 31, 2001, Great-West Lifeco Inc., an indirect Canadian parent company
of the Registrant, issued a press release regarding its financial results for
the third quarter and first nine months of 2001. The press release includes a
discussion of the financial results of Great-West Life & Annuity Insurance
Company, the operating subsidiary of the Registrant. A copy of the press release
is attached as Exhibit 99 hereto. The dollar amounts referred to in the press
release are in Canadian dollars unless otherwise stated.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 31, 2001
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By:_/s/ Richard G. Schultz
Name: Richard G. Schultz
Title: Vice President,
Counsel
and Associate Secretary
Great-West Lifeco reports strong third quarter results
Winnipeg, October 31, 2001 ... Great-West Lifeco Inc. has reported net income
attributable to common shareholders of $563 million or $1.516 per share for the
nine months ended September 30, 2001, an increase of 21% over 2000. This result
is before two specific adjustments, comprised of a third-quarter claims
provision in Canadian Operations of $73 million from the United States disaster
of September 11, 2001, and the previously reported second-quarter non-recurring
charge of $164 million in U.S. Operations associated with Alta Health and Life
Insurance Company (Alta). These adjustments represent $0.199 per common share
and $0.440 per common share, respectively. For the third quarter, net income
attributable to common shareholders before adjustments was $197 million or
$0.533 per share, compared to $164 million or $0.440 per share in 2000.
Including all charges, total net income attributable to common shareholders, for
the nine months ended September 30, 2001, was $326 million or $0.877 per share,
compared with $469 million or $1.254 per share in 2000. For the third quarter,
net income attributable to common shareholders including all charges was $124
million or $0.334 per share, compared to $164 million or $0.440 per share in
2000.
Highlights
o Total premiums and deposits were up 6%.
o Charges for claims provisions from the United States disaster of
September 11, 2001 included in third quarter results for common shareholders
were $73 million, essentially related to the reinsurance business associated
with Canadian operations.
o Return on common shareholders' equity on an adjusted basis was 19.6%
for the twelve months ended September 30, 2001.
o Dividends paid on common shares for nine months of 2001 were 20% higher
than a year ago.
Consolidated net earnings for Lifeco are the net operating earnings of The
Great-West Life Assurance Company (Great-West) in Canada and Great-West Life &
Annuity (GWL&A) in the United States, together with Lifeco's corporate results.
.../2
For the nine months ended September 30, 2001, adjusted consolidated net earnings
attributable to common shareholders from Lifeco's Canadian Operations were up
26% to $237 million, compared to a year ago. This Canadian adjusted result
excludes, for comparability, a third-quarter charge of $73 million related to
claims provisions from the U.S. disaster of September 11, 2001, essentially
related to the reinsurance business.
For the nine months ended September 30, 2001, Canadian consolidated net earnings
of Lifeco attributable to common shareholders, including the September 11, 2001
related charges, were $164 million compared to $189 million a year ago, and $9
million for the third quarter of 2001 compared to $65 million in 2000.
In the United States for the nine months ended September 30, 2001, GWL&A's
adjusted net operating earnings, before Alta charges, increased 19% to US $220
million. Translated to equivalent Canadian dollars, Lifeco's United States
consolidated net earnings before Alta charges were $326 million, compared to
$280 million a year ago, an increase of 17%.
The United States adjusted results above do not include a non-recurring charge
of $132 million after tax or operating losses of $32 million recognized in the
second quarter of 2001, both associated with Alta, a wholly-owned subsidiary of
GWL&A.
GWL&A's net operating earnings, including Alta charges, were US $114 million for
the nine months ended September 30, 2001. Translated to equivalent Canadian
dollars Lifeco's United States consolidated net earnings were $162 million.
For the third quarter, GWL&A's net operating earnings increased 19% to US $78
million. Translated to equivalent Canadian dollars, Lifeco's United States
consolidated net earnings were $115 million, compared to $99 million a year ago,
an increase of 16%.
The Great-West Life Assurance Company
Developments
o Great-West and London Life began giving clients access to highly trained
investment counsellors previously available only to institutional clients.
Associated with either GWL Investment Management Ltd. or London Life
Investment Management, these investment counsellors will provide asset-mix
recommendations and portfolio advice for select clients.
o Quadrus Investment Services, the expanded mutual fund dealer introduced
late last year, is experiencing faster than anticipated growth in the
number of Great-West investment representatives transferring their mutual
fund registrations to Quadrus. With more than 2,000 registered investment
representatives, Quadrus is one of the largest mutual fund dealers in
Canada, serving Great-West and Freedom 55 Financial investment
representatives.
o Great-West and London Life introduced marketing materials designed to
educate clients on the various types and uses of life insurance. As well,
term insurance sales grew by more than 10 per cent this quarter, reflecting
reduced premium rates introduced earlier this year.
.../3
o Freedom 55 Financial's seven training centres across Canada are seeing
excellent training results in their first year of operation. Approximately
600 financial security advisors are expected to graduate in 2001 from the
intensive nine-week training program, exceeding the goals set for the year.
Results
"The events of this quarter highlight the strengths inherent in the diversity
and quality of our business," says Raymond L. McFeetors, President & Chief
Executive Officer, Great-West Life. "While sales in our individual lines
reflected the continuing soft markets, persistency - a characteristic of our
advisor-based business and a reflection of client satisfaction - was excellent.
On the group insurance side, persistency also played a role in our continuing
strong performance, as did the price rationalization we're seeing in the
marketplace."
Total premiums and deposits for the nine months ended September 30, 2001 were
down 1% overall from 2000 levels. Risk-based product premiums were up 15%
including a 29% increase in reinsurance and specialty general premiums.
Self-funded premium equivalents (ASO contracts) were up 13%, while segregated
funds deposits were down 13% for individual products largely due to the
investment climate, and down 50% for group products reflecting the uneven
incidence of large case sales between years.
Fee income increased 11% in the nine months ended September 30, 2001 compared to
2000, largely associated with increased ASO contract volumes.
Total assets under administration at September 30, 2001 were $51.7 billion,
essentially unchanged from December 31, 2000.
Great-West Life & Annuity Insurance Company
Developments
o BenefitsCorp continued to build on its position as the number one provider
of services to the state government defined contribution market. The
Company was selected from 10 bidders to administer Orange County's
(California) 457, 401(a) and new 3121 defined contribution plans. The
Orange County plan has 13,000 participants and $400 million (US$) in
assets. The Company was also awarded an eight-year contract renewal for the
State of Louisiana Public Employees Deferred Compensation Plan.
BenefitsCorp has been the Plan's administrator since 1987.
o BenefitsCorp's newest service offering (EducatorsMoney) targeting the
education marketplace unveiled its new Web site - www.educatorsmoney.com .
The Web site will enable educators to self-manage their retirement accounts
via the Internet.
o The Great-West family of companies donated $200,000 to the relief efforts
underway in New York City from the September 11 attacks. Both the City of
New York and Uniformed Fire Officers Association are clients of
BenefitsCorp.
o The Company introduced a new managed care product, OnePlan, in July.
Customer interest in the new product is encouraging, with a number of cases
sold. Two sales - to the City of Memphis and to Scripts, one of the
country's most prominent hospital/medical professional organizations -
added almost 14,500 new health plan members.
.../4
Results
"Any comments I would make concerning the quarter are clearly overshadowed by
the tragedy of September 11 and the chain of events that followed," said William
T. McCallum, President & Chief Executive Officer, Great-West Life & Annuity
(GWL&A). "We were relieved that none of our New York based employees suffered
physical injury - we were saddened to realize that all of our customers were not
so fortunate. Both the Country and your Company are exhibiting great resilience
as we move forward with "business as close to usual" as possible."
"The results for the quarter reflect the strength of our well-diversified
business base and the strong fundamentals of our operating units."
The 6% increase in US $ premium income and deposits for the nine months ended
September 30, 2001 was comprised of growth in Employee Benefits of US $368
million and an increase in Financial Services premium income and deposits of US
$78 million. The increase in the Employee Benefits segment is due to the
increase in ASO equivalents reflecting higher claims volume, while the increase
in the Financial Services segment is primarily due to increased single premium
in the public non-profit business and a large Bank-Owned Life Insurance (BOLI)
case placed in the third quarter of 2001.
Fee income is derived from the management of segregated funds assets and the
administration of Group health ASO business. The increase in year-to-date fee
income in 2001 of 18% reflects price increases associated with ASO business.
Total assets under administration increased 2% to $42.1 billion at September 30,
2001 compared with December 31, 2000, mostly due to the change in foreign
exchange rates.
Quarterly Dividends
At its meeting today, the Board of Directors approved a quarterly dividend of
$0.205 per share on the common shares of the Company payable December 31, 2001
to shareholders of record at the close of business December 17, 2001.
In addition, the Directors approved quarterly dividends on the preferred shares
of the Company: o Series B First Preferred Shares $0.465625 per share; o Series
C First Preferred Shares $0.484375 per share; and o Series D First Preferred
Shares $0.293750 per share payable December 31, 2001 to
shareholders of record at the close of business December 17, 2001 o
Class A, Series 1 Preferred Shares $0.3125 per share payable January 31, 2002 to
shareholders of record at the close of business January 17, 2002.
Financial highlights and the September 30, 2001 interim unaudited consolidated
financial statements are attached.
.../5
Great-West Lifeco
Great-West Lifeco Inc. is a financial services holding company with interests in
the life insurance, health insurance, retirement savings, reinsurance and
specialty general insurance businesses, primarily in Canada and the United
States. Lifeco's subsidiaries - The Great-West Life Assurance Company in Canada
and Great-West Life & Annuity Insurance Company in the United States - serve the
financial security needs of more than 14 million people. Lifeco and its
companies have more than $93 billion in assets under administration. Great-West
Lifeco is a member of the Power Financial Corporation group of companies.
Forward-looking statements
This release may contain forward-looking statements about future operations,
financial results, objectives and strategies of the Company. Forward-looking
statements are typically identified by the words "believe", "expect",
"anticipate", "intend", "estimate" and other similar expressions.
These statements are necessarily based on estimates and assumptions that are
subject to risks and uncertainties, many of which are beyond the Company's
control. Actual results may differ materially due to a variety of factors,
including legislative or regulatory developments, competition, technological
change, global capital market activity, interest rates and general economic
conditions in Canada, North America or internationally.
These and other such factors should be taken into consideration when reading the
Company's forward-looking statements.
Great-West Lifeco's third quarter analyst teleconference will be held November
1, 10:00 a.m. (Eastern). The call can be accessed through
www.greatwestlifeco.com or by phone, through
-----------------------
listen-only lines at 1-800-387-6216 or 416-405-9328 in Toronto (passcode:
Chantal).
A replay of the call will be available following the call until November 8, at
1-800-408-3053 or 416-695-5800 in Toronto (passcode: 936388).
- end -
For more information contact:
Marlene Klassen
Director, Media & Public Relations
(204) 946-7705
marlene.klassen@gwl.ca
FINANCIAL HIGHLIGHTS (unaudited)
(in millions of dollars except per common share amounts)
2001 2000
----------------------- ------------------------
----------------------- ------------------------
Canada U.S. Total Canada U.S. Total % Change
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
For the Nine Months Ended September 30
Premiums:
Life insurance, guaranteed annuities
and insured health $2,986 $ 2,298 $ 5,284 $ 2,818 $ 2,441 $ 5,259 -%
products
Reinsurance and property 2,328 - 2,328 1,806 - 1,806 29%
and casualty
Self-funded premium equivalents
(ASO contracts) (1) 924 6,684 7,608 819 5,657 6,476 17%
Segregated funds deposits: (1)
Individual products 1,215 1,057 2,272 1,402 839 2,241 1%
Group products 700 2,878 3,578 1,394 2,770 4,164 -14%
----------------------- ------------------------ ---------
----------------------- ------------------------ ---------
Total premiums and deposits $ 8,153 $ 12,917$21,070 $ 8,239 $11,707 $19,946 6%
----------------------- ------------------------ ---------
----------------------- ------------------------ ---------
Fee and other income 286 1,128 1,414 258 954 1,212 17%
Paid or credited to policyholder5,960 2,860 8,820 5,209 2,891 8,100 9%
Net income attributable to:
Preferred shareholders 22 1 23 23 - 23 -%
Common shareholders 164 162 326 189 280 469 -30%
Adjustments (2) 73 164 237 - - -
Adjusted net income common shareho237rs 326 563 189 280 469 20%
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Return on common shareholders' equity (12 months):
Net income 13.7% 18.1%
Adjusted net income (2) 19.6% 18.1%
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Per Common Share
Basic earnings $ 0.877 $ 1.254 -30%
Diluted earnings 0.862 1.222 -29%
Adjustments (2) 0.639 -
Adjusted basic earnings 1.516 1.254 21%
Dividends paid 0.575 0.480 20%
Book value 10.16 9.51 7%
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-----------------------------------------------------------------------------------------
At September 30
Total assets $34,091 $ 24,057$58,148 $32,807 $22,647 $55,454 5%
Segregated funds assets (1) 17,642 18,060 35,702 19,009 20,081 39,090 -9%
----------------------- ------------------------ ---------
----------------------- ------------------------ ---------
Total assets under $51,733 $ 42,117$93,850 $51,816 $42,728 $94,544 -1%
administration
======================= ======================== =========
======================= ======================== =========
Capital stock and surplus $ 4,287 $ 4,075 5%
(1) Segregated funds deposits and self-funded premium equivalents (ASO
contracts) The financial statements of a life insurance company do not include
the assets, liabilities, deposits and withdrawals of segregated funds or the
claims payments related to administrative services only (ASO) Group health
contracts. However, the Company does earn fee and other income related to these
contracts.
Both segregated fund and ASO contracts are an important aspect of the overall
business of the Company and should be considered when comparing volumes, size
and trends.
(2) Results include:
a) A third quarter charge of $73 million after-tax or $0.199 per common share
from the U.S. disaster of September 11, 2001, essentially related to the
reinsurance business.
b) Special charges of $132 million plus related operating losses of $32 million
for a total of $164 million after-tax or $0.440 per common share, both related
to Alta Health & Life Insurance Company (Alta), an indirect wholly-owned
subsidiary, previously reported at June 30, 2001, as part of the Company's
United States Employee Benefits segment. The total impact of Alta on net income
for the three months ended September 30, 2001 was negligible.
SUMMARY OF CONSOLIDATED OPERATIONS (unaudited)
(in millions of dollars except earnings per common share)
for the three months for the nine months
ended September 30 ended September 30
----------------------- -----------------------
----------------------- -----------------------
2001 2000 2001 2000
Income
Premium income $ 2,545 $ 2,345 $ 7,612 $ 7,065
Net investment income 892 941 2,736 2,747
Fee and other income 485 419 1,414 1,212
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
3,922 3,705 11,762 11,024
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Benefits and Expenses
Paid or credited to policyholders and
beneficiaries including policyholder
dividends and experience refunds 2,994 2,730 8,820 8,100
Commissions 180 171 517 511
Operating expenses 455 442 1,455 1,333
Premium taxes 40 32 89 93
Special charges (note 11) - - 202 -
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net operating income before income taxes 253 330 679 987
Income taxes- current 49 149 228 364
- future 61 (17) 30 19
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net income before minority and other interests 143 198 421 604
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Minority and other interests (note 3) (4) 11 24 63
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net income before amortization of goodwill 147 187 397 541
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Amortization of goodwill 16 16 48 49
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net income $ 131 $ 171 $ 349 $ 492
=========== ========== =========== ===========
=========== ========== =========== ===========
Earnings per Common Share (note 5)
Basic $ 0.334 $ 0.440 $ 0.877 $ 1.254
=========== ========== =========== ===========
=========== ========== =========== ===========
Diluted $ 0.329 $ 0.426 $ 0.862 $ 1.222
=========== ========== =========== ===========
=========== ========== =========== ===========
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Summary of Net Income
0 1
Preferred shareholder dividends $ 7 $ 7 $ 23 $ 23
Net income - common shareholders 124 164 326 469
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net income $ 131 $ 171 $ 349 $ 492
=========== ========== =========== ===========
=========== ========== =========== ===========
Average number of shares outstanding - basic 371,743,697 373,828,360
Average number of shares outstanding - diluted 378,222,013 402,440,720
United States operating results during the first nine months of 2001 have been included at the average market rate of
$1.5380 Canadian compared with $1.4720 Canadian in 2000.
CONSOLIDATED BALANCE SHEET (unaudited)
(in millions of dollars)
September 30, December 31, September 30,
2001 2000 2000
Assets
Bonds $ 32,222 $ 30,326 $ 30,200
Mortgage loans 8,404 8,787 8,799
Stocks 1,374 1,133 1,247
Real estate 1,260 1,212 1,199
Loans to policyholders 5,992 5,583 5,488
Cash and certificates of deposit 588 740 874
Funds withheld by ceding insurers 4,098 3,555 3,340
Premiums in course of collection 371 606 505
Interest due and accrued 600 558 633
Future income taxes 239 275 188
Goodwill 1,607 1,679 1,696
Other assets 1,393 1,300 1,285
------------ ----------- -----------
------------ ----------- -----------
Total assets $ 58,148 $ 55,754 $ 55,454
============ =========== ===========
============ =========== ===========
Liabilities
Policy liabilities
Actuarial liabilities $ 43,540 $ 41,567 $ 41,231
Provision for claims 707 747 821
Provision for policyholders' dividends 356 335 345
Provision for experience rating refunds 753 661 599
Policyholders' funds 1,704 1,789 1,827
------------ ----------- -----------
------------ ----------- -----------
47,060 45,099 44,823
Commercial paper and other loans 1,002 1,032 960
Current income taxes 294 433 387
Other liabilities 2,084 1,982 2,014
Repurchase agreements 445 - -
Net deferred gains on portfolio investments sold 1,052 1,095 1,030
------------ ----------- -----------
------------ ----------- -----------
51,937 49,641 49,214
Minority and other int(notes3) 1,924 1,933 2,165
Capital Stock and Surplus
Capital stock (note 4) 2,083 2,086 2,086
Surplus 1,863 1,868 1,763
Provision for unrealized gain on translation
of net investment in foreign operations 341 226 226
------------ ----------- -----------
------------ ----------- -----------
4,287 4,180 4,075
------------ ----------- -----------
------------ ----------- -----------
Liabilities, capital stock and surplus $ 58,148 $ 55,754 $ 55,454
============ =========== ===========
============ =========== ===========
United States assets and liabilities have been translated at the market rates of $1.5790 Canadian for September 30, 2001,
$1.5000 Canadian for December 31, 2000 and $1.5070 Canadian for September 30, 2000.
CONSOLIDATED STATEMENT OF SURPLUS (unaudited)
(in millions of dollars)
for the nine months
ended September 30
----------------------------------
----------------------------------
2001 2000
Balance, beginning of year
As previously reported $ 1,868 $ 1,553
Change in accounting policy (note 2) - (44)
------------- ----------------
------------- ----------------
As restated 1,868 1,509
Net income 349 492
Acquisition discount - preferred shares of subsidiary 1 -
Common share cancellation excess (118) (36)
Dividends to shareholders
Preferred shareholders (23) (23)
Common shareholders (214) (179)
------------- ----------------
------------- ----------------
Balance, end of period $ 1,863 $ 1,763
============= ================
============= ================
for the three months for the nine months
ended September 30 ended September 30
--------------------------- --------------------------
--------------------------- --------------------------
2001 2000 2001 2000
Operations
Net income $ 131 $ 171 $ 349 $ 492
Adjustments for non-cash items:
Change in policy liabilities 432 321 968 604
Change in funds withheld by ceding insurers (294) (307) (543) (914)
Change in current income taxes payable (31) 73 (139) 68
Future income tax expense 61 (17) 30 19
Amortization of goodwill 16 16 48 49
Other 69 (294) 278 (420)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Cash flows from operations 384 (37) 991 (102)
Financing Activities
Issue of common shares 6 1 14 2
Purchased and cancelled common shares (69) (24) (135) (43)
Issue of debentures - 200 - 200
Issue (repayment) of commercial paper and other lo(17) (51) (52) 55
Dividends paid (84) (70) (237) (202)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
(164) 56 (410) 12
Investment Activities
Bond sales and maturities 3,510 3,149 13,597 11,852
Mortgage loan repayments 610 317 1,497 1,263
Stock sales 42 83 393 170
Real estate sales 6 7 6 17
Change in loans to policyholders (178) 65 (409) (152)
Change in repurchase agreements 94 (1) 445 (119)
Investment in subsidiaries - - (15) -
Investment in bonds (3,968) (3,315) (14,543) (11,069)
Investment in mortgage loans (320) (238) (1,070) (1,066)
Investment in stocks (31) (96) (612) (571)
Investment in real estate (9) (32) (22) (107)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
(244) (61) (733) 218
Increase in cash and certificates of deposit (24) (42) (152) 128
Cash and certificates of deposit,
beginning of period 612 916 740 746
Cash and certificates of deposit,
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
end of period $ 588 $ 874 $ 588 $ 874
=========== =========== ========== ===========
=========== =========== ========== ===========
Notes to Interim Consolidated Financial Statements (unaudited)
(Amounts in millions of dollars unless otherwise noted)
1. Basis of Presentation
The interim unaudited consolidated financial statements of Great-West
Lifeco Inc. (Lifeco) at September 30, 2001 have been prepared in accordance
with Canadian generally accepted accounting principles, using the same
accounting policies and methods of computation followed at the most recent
annual report dated December 31, 2000.
2. Change in Accounting Policies
The adoption of the Canadian Institute of Chartered Accountants (CICA)
Handbook Section 3461 Employee Future Benefits effective January 1, 2000
resulted in the recognition of the cost of all post retirement benefits
other than pensions over the periods of employee service. This change in
accounting policy was applied retroactively without restatement of prior
years' financial statements and resulted in a charge to surplus of $44
million, an increase in other liabilities of $77 million, an increase in
future income taxes receivable of $30 million and a reduction in minority
interest of $3 million at January 1, 2000. The impact of this change in
accounting policy on net income was not material.
The adoption of the new standards in the CICA Handbook Section 3500
Earnings Per Share effective January 1, 2001 resulted in the presentation
of diluted earnings per share in the Company's financial statements. The
new section harmonizes Canadian standards with the United States standards
in the calculation of diluted earnings per share. This change in accounting
policy has been applied retroactively. The impact of this change in
accounting policy to the financial statements was not material.
3. Minority and Other Interests
The Company holds a 100% interest in The Great-West Life Assurance Company
(Great-West) and Great-West Life & Annuity Insurance Company (GWL&A) at
September 30, 2001 and September 30, 2000. The minority and other interests
of GWL&A and Great-West and its subsidiaries are:
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
a) For the nine months ended September 30 2001 2000
------------ -------------
------------ -------------
Participating policyholders
Net income attributable to participating policyholders
before policy dividends
Great-West $ 75 $ 72
London Life 355 363
GWL&A 155 137
Policyholder dividends
Great-West 64 60
London Life 366 344
GWL&A 151 132
------------ -------------
------------ -------------
Net income $ 4 $ 36
------------ -------------
------------ -------------
Preferred shareholder dividends 16 25
Minority shareholders' interest 4 2
------------ -------------
------------ -------------
Total $ 24 $ 63
============ =============
============ =============
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b) At the end of September 30, December 31, September 30,
2001 2000 2000
----------- ------------ -------------
----------- ------------ -------------
Participating policyholders' share of
undistributed surplus
Great-West $ 339 $ 328 $ 337
London Life 889 899 897
GWL&A 235 219 222
----------- ------------ -------------
----------- ------------ -------------
1,463 1,446 1,456
Preferred shareholders 459 477 700
Minority interests in capital stock and surplus 2 10 9
----------- ------------ -------------
----------- ------------ -------------
$ 1,924 $ 1,933 $ 2,165
=========== ============ =============
=========== ============ =============
Preferred Shareholders
In January 2001, as a result of a joint offer dated December 14, 2000 by
Lifeco and Great-West, the Company through a wholly-owned subsidiary,
purchased 658,311 Series L 5.20% Non-Cumulative Preferred Shares of
Great-West. The purchase price was $23.00 per share for an aggregate
purchase price of $15.1 million. The discount of $2.00 per share, or $1.3
million, was recorded on consolidation as an increase in surplus.
4. Capital Stock
Authorized
Unlimited First Preferred Shares
Unlimited Class A Preferred Shares
Unlimited Second Preferred Shares
Unlimited Common Shares
Issued and Outstanding
September 30, 2001 September 30, 2000
--------------------------- ---------------------------------
--------------------------- ---------------------------------
Stated Value Stated Value
Number (thousands) Number (thousands)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Preferred Shares:
Series B, 7.45% Non-Cumulative
First Preferred Shares 4,000,000 $ 100,000 4,000,000 $ 100,000
Series C, 7.75% Non-Cumulative
First Preferred Shares 4,000,000 100,000 4,000,000 100,000
Series D, 4.70% Non-Cumulative
First Preferred Shares 8,000,000 200,000 8,000,000 200,000
Series 1, 5.00% Non-Cumulative
Class A Preferred Shares5,192,242 129,806 5,192,242 129,806
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Balance, end of period 21,192,242 $ 529,806 21,192,242 $ 529,806
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Common Shares:
Balance, beginning of year372,404,725 $ 1,556,559 374,380,245 $ 1,560,892
Purchased and cancelled under
Normal Course Issuer Bid(3,958,800) (16,598) (1,738,500) (7,251)
Issued under Stock Option 1,485,079 13,443 244,400 2,293
Plan
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Balance, end of period 369,931,004 $ 1,553,404 372,886,145 $ 1,555,934
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Total Capital Stock $ 2,083,210 $ 2,085,740
============ ============
============ ============
Stock Option Plan
At September 30, 2001, options to purchase up to an aggregate of 12,519,642
(13,994,251 at September 30, 2000) common shares at various prices from
$8.48 to $35.06 were outstanding. The options outstanding have a weighted
average exercise price of $18.55 and a weighted average remaining
contractual life of 6.6 years at September 30, 2001.
5. Earnings Per Common Share
The following table provides the reconciliation between basic and diluted
earnings per common share:
for the three montfor the nine months
ended September 30 ended September 30
-----------------------------------
---------------- -----------------
2001 2000 2001 2000
---------------- -----------------
---------------- -----------------
a) Earnings
Net income - common shareholders $ 124 $ 164 $ 326 $ 469
Add:
-Dividends on convertible preferred shares (1) - 7 - 23
------- ------- -------- --------
------- ------- -------- --------
Net income - common shareholders - diluted basis$ 124 $ 171 $ 326 $ 492
======= ======= ======== ========
======= ======= ======== ========
b) Number of Common Shares
Average number of common shares outstanding 372 374 372 374
Add:
-Potential conversion of preferred shares - 24 (1) - 24
to common shares
-Potential exercise of outstanding stock 6 4 6 4
options
------- ------- -------- --------
------- ------- -------- --------
Average number of common shares outstanding 378 402 378 402
======= ======= ======== ========
======= ======= ======== ========
Earnings per Common Share ( a) divided by b) )
Basic $ 0.334 $0.440 $ 0.877 $1.254
======= ======= ======== ========
======= ======= ======== ========
Diluted $ 0.329 $0.426 $ 0.862 $1.222
======= ======= ======== ========
======= ======= ======== ========
(1) If dilutive
6. Related Party Transactions (changes since December 31, 2000 annual report)
On April 19, 2001, Great-West successfully completed its previously
announced investment of $230 million to acquire 9,200,000 Investors Group
treasury common shares.
7. Contingent Liabilities (changes since December 31, 2000 annual report)
On June 29, 2001, London Life announced an agreement to settle proposed
class actions related to the availability of policyholder dividends to pay
future premiums. The settlement agreement, which covers five of six such
actions, has been approved by the Supreme Court of British Columbia, the
Quebec Superior Court, and the Ontario Superior Court of Justice. Estimated
future settlement benefits of $180 million and expenses related to the
administration of the settlement in the amount of $20 million have been
fully provided for in existing reserves in London Life's participating
account. Actual results could differ from those estimates.
8. U.S. disaster of September 11, 2001
Results include a third quarter charge of $73 million after-tax in the
shareholder account and $9 million after-tax in the participating
policyholder account related to claims provisions from the U.S. disaster of
September 11, 2001, essentially related to the reinsurance business. Actual
results could differ from those estimates.
9. Commitments (changes since December 31, 2000 annual report)
On August 3, 2001, an agreement was entered into for the sale of London
Insurance Group Inc.'s indirect holdings in London Guarantee Insurance
Company, subject to regulatory approval and the satisfaction of certain
conditions contained in the agreement. The investment in London Guarantee
Insurance Company is carried at cost, effective August 3, 2001 resulting in
the Company ceasing consolidating operating results and the assets and
liabilities of London Guarantee Insurance Company in its accounts.
10. Segmented Information
Consolidated Operations
For the three months ended September 30, 2001
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholders Policyholders
-------------------------------------------------- ----------
-------------------------------------------------- --------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 515 $ 155 $ 853 $ 3 $ 1,526 $ 319 $ 1,845
Net investment income 55 121 115 29 320 217 537
Fee and other income 15 80 - 3 98 - 98
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 585 356 968 35 1,944 536 2,480
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 440 197 1,017 6 1,660 477 2,137
Other 97 89 12 6 204 61 265
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 48 70 (61) 23 80 (2) 78
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 18 26 (7) 6 43 9 52
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 30 44 (54) 17 37 (11) 26
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - 1 5 6 (11) (5)
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 30 44 (55) 12 31 - 31
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 6 7 2 - 15 - 15
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 24 $ 37 $ (57) $ 12 $ 16 $ - $ 16
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 7 $ 7 $ - $ 7
Net income - common shareholders 24 37 (57) 5 9 - 9
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 24 $ 37 $ (57) $ 12 $ 16 $ - $ 16
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended September 30, 2001
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholders Policyholders
--------------------------------------- -------------------
--------------------------------------- -----------
Employee* Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 439 $ 183 $ - $ 622 $ 78 $ 700 $ 2,545
Net investment income 36 187 (2) 221 134 355 892
Fee and other income 332 55 - 387 - 387 485
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 807 425 (2) 1,230 212 1,442 3,922
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 379 272 - 651 206 857 2,994
Other 321 82 4 407 3 410 675
Special Charges - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 107 71 (6) 172 3 175 253
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 36 23 (3) 56 2 58 110
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 71 48 (3) 116 1 117 143
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - - - 1 1 (4)
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 71 48 (3) 116 - 116 147
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill - - 1 1 - 1 16
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 71 $ 48 $ (4) $ 115 $ - $ 115 $ 131
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 7
Net income - common shareholders 71 48 (4) 115 - 115 124
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 71 $ 48 $ (4) $ 115 $ - $ 115 $ 131
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
* See Note 11
For the three months ended September 30, 2000
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholders Policyholders
-------------------------------------------------- ---------------------
-------------------------------------------------- ---------------------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
------------------- ----------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 473 $ 81 $ 599 $ - $ 1,153 $ 318 $ 1,471
Net investment income 53 127 124 31 335 239 574
Fee and other income 12 72 1 3 88 - 88
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 538 280 724 34 1,576 557 2,133
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 411 122 690 (3) 1,220 465 1,685
Other 87 97 16 6 206 72 278
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 40 61 18 31 150 20 170
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 16 23 2 14 55 18 73
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 24 38 16 17 95 2 97
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - 1 7 8 2 10
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 24 38 15 10 87 - 87
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 5 7 3 - 15 - 15
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 19 $ 31 $ 12 $ 10 $ 72 $ - $ 72
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 7 $ 7 $ - $ 7
Net income - common shareholders 19 31 12 3 65 - 65
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 19 $ 31 $ 12 $ 10 $ 72 $ - $ 72
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended September 30, 2000
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholders Policyholders
--------------------------------------- -------------------
--------------------------------------- -----------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 455 $ 344 $ - $ 799 $ 75 $ 874 $ 2,345
Net investment income 35 199 11 245 122 367 941
Fee and other income 285 46 - 331 - 331 419
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 775 589 11 1,375 197 1,572 3,705
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 385 470 1 856 189 1,045 2,730
Other 305 54 2 361 6 367 645
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 85 65 8 158 2 160 330
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 28 21 8 57 2 59 132
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 57 44 - 101 - 101 198
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - 1 1 - 1 11
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 57 44 (1) 100 - 100 187
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 1 - - 1 - 1 16
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 56 $ 44 $ (1) $ 99 $ - $ 99 $ 171
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 7
Net income - common shareholders 56 44 (1) 99 - 99 164
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 56 $ 44 $ (1) $ 99 $ - $ 99 $ 171
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
Consolidated Operations
For the nine months ended September 30, 2001
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholders Policyholders
-------------------------------------------------- ---------------------
-------------------------------------------------- ----------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------------------------------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,505 $ 484 $ 2,328 $ 11 $ 4,328 $ 986 $ 5,314
Net investment income 162 382 337 88 969 663 1,632
Fee and other income 45 229 1 11 286 - 286
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,712 1,095 2,666 110 5,583 1,649 7,232
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 1,293 612 2,631 20 4,556 1,404 5,960
Other 289 276 50 16 631 212 843
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 130 207 (15) 74 396 33 429
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 51 77 (3) 20 145 33 178
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 79 130 (12) 54 251 - 251
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - 4 16 20 - 20
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 79 130 (16) 38 231 - 231
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 17 21 6 1 45 - 45
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 62 $ 109 $ (22) $ 37 $ 186 $ - $ 186
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 22 $ 22 $ - $ 22
Net income - common shareholders 62 109 (22) 15 164 - 164
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 62 $ 109 $ (22) $ 37 $ 186 $ - $ 186
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the nine months ended September 30, 2001
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholders Policyholders
--------------------------------------- -------------------
--------------------------------------- ---------
Employee* Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,305 $ 696 $ - $ 2,001 $ 297 $2,298 $ 7,612
Net investment income 102 606 (3) 705 399 1,104 2,736
Fee and other income 969 159 - 1,128 - 1,128 1,414
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 2,376 1,461 (3) 3,834 696 4,530 11,762
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 1,150 1,041 (1) 2,190 670 2,860 8,820
Other 1,000 197 7 1,204 14 1,218 2,061
Special Charges 202 - - 202 - 202 202
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 24 223 (9) 238 12 250 679
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 3 69 - 72 8 80 258
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 21 154 (9) 166 4 170 421
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - - - 4 4 24
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 21 154 (9) 166 - 166 397
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 2 - 1 3 - 3 48
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 19 $ 154 $ (10) $ 163 $ - $ 163 $ 349
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 23
Net income - common shareholders 19 154 (11) 162 - 162 326
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 19 $ 154 $ (10) $ 163 $ - $ 163 $ 349
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
* See Note 11
For the nine months ended September 30, 2000
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholders Policyholders
-------------------------------------------------- ---------------------
-------------------------------------------------- ----------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------------------------------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,398 $ 448 $ 1,806 $ - $ 3,652 $ 972 $ 4,624
Net investment income 157 397 319 80 953 714 1,667
Fee and other income 38 210 2 8 258 - 258
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,593 1,055 2,127 88 4,863 1,686 6,549
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 1,218 571 2,038 (2) 3,825 1,384 5,209
Other 260 297 41 9 607 204 811
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 115 187 48 81 431 98 529
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 47 71 1 31 150 67 217
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 68 116 47 50 281 31 312
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - 2 21 23 31 54
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 68 116 45 29 258 - 258
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 17 21 6 2 46 - 46
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 51 $ 95 $ 39 $ 27 $ 212 $ - $ 212
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 23 $ 23 $ - $ 23
Net income - common shareholders 51 95 39 4 189 - 189
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 51 $ 95 $ 39 $ 27 $ 212 $ - $ 212
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the nine months ended September 30, 2000
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholders Policyholders
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,360 $ 802 $ - $ 2,162 $ 279 $2,441 $ 7,065
Net investment income 100 591 35 726 354 1,080 2,747
Fee and other income 820 134 - 954 - 954 1,212
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 2,280 1,527 35 3,842 633 4,475 11,024
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 1,120 1,166 1 2,287 604 2,891 8,100
Other 937 166 6 1,109 17 1,126 1,937
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 223 195 28 446 12 458 987
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 75 65 19 159 7 166 383
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 148 130 9 287 5 292 604
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Minority and other interests - - 4 4 5 9 63
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 148 130 5 283 - 283 541
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Amortization of goodwill 3 - - 3 - 3 49
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 145 $ 130 $ 5 $ 280 $ - $ 280 $ 492
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 23
Net income - common shareholders 145 130 5 280 - 280 469
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 145 $ 130 $ 5 $ 280 $ - $ 280 $ 492
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
11. Special Charges
Results include a non-recurring charge of $202 million pre-tax ($132 million
after-tax) plus related operating losses of $32 million after-tax, both related
to Alta Health & Life Insurance Company (Alta) an indirect wholly-owned
subsidiary, previously reported as part of the Company's United States Employee
Benefits segment. The total impact of Alta on net income for the three months
ended September 30, 2001 was negligible.