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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) July 30, 2002
--------------
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
Colorado 333-1173 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 July 30, 2002
ITEM 9. REGULATION FD DISCLOSURE
On July 30, 2002, Great-West Lifeco Inc., an indirect Canadian parent company of
the Registrant, issued a press release regarding its financial results for the
second quarter of 2002. The press release includes a discussion of the financial
results 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.
This Form 8-K contains forward-looking statements. Forward-looking statements
are statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. In particular,
statements using verbs such as "expect," "anticipate," "believe" or words of
similar import generally involve forward-looking statements. Without limiting
the foregoing, forward-looking statements include statements which represent the
Registrant's beliefs concerning future or projected levels of sales of the
Registrant's products, investment spreads or yields, or the earnings or
profitability of the Registrant's activities. Forward-looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond the Registrant's control and many of which, with
respect to future business decisions, are subject to change. These uncertainties
and contingencies can affect actual results and could cause actual results to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Registrant. Whether or not actual results differ
materially from forward-looking statements may depend on numerous foreseeable
and unforeseeable events or developments, some of which may be national in
scope, such as general economic conditions and interest rates, some of which may
be related to the insurance industry generally, such as pricing competition,
regulatory developments and industry consolidation, and others of which may
relate to the Registrant specifically, such as credit, volatility and other
risks associated with the Registrant's investment portfolio, and other factors.
Readers are also directed to consider other risks and uncertainties discussed in
documents filed by the Registrant and certain of its subsidiaries with the
Securities and Exchange Commission.
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: July 30, 2002
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 second quarter results and dividend increase
Winnipeg, July 30, 2002 ... Great-West Lifeco Inc. has reported net income
attributable to common shareholders of $456 million or $1.236 per common share
for the six months ended June 30, 2002, compared to $0.543 per common share
reported a year ago.
This result represents an increase of 16% over 2001, after adjusting the first
six months of 2001 for non-recurring charges relating to goodwill amortization
and Alta Health and Life Insurance Company (Alta) to facilitate comparison
between years.
For the second quarter, net income attributable to common shareholders was $234
million, compared to adjusted 2001 results of $216 million.
Highlights - six months 2002
o Earnings per common share increased 16% over 2001 levels, reflecting
solid increases in earnings from both its Canadian and United States
operations.
o The overall quality of the Company's investment portfolio remains
high, with exposure to non-investment grade bonds essentially unchanged, at
2% of the bond portfolio.
o Return on common shareholders' equity was 22.5% for the twelve
months ended June 30, 2002, compared to 20.9% in 2001, using adjusted 2001
results.
o Quarterly dividends declared were increased by 10% or 2.25(cent) to
24.75(cent) per common share for September 30, 2002. Dividends paid on
common shares for six months of 2002 were 22% 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.
The following comparative figures for 2001 have been adjusted to exclude
goodwill amortization and Alta charges.
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Great-West (Canada) six months net income attributable to common shareholders
increased 16% to $220 million from $189 million at June 30, 2001. For the second
quarter, Canadian net income was $113 million compared to $97 million at June
30, 2001, up 16%.
Including the Canadian portion of Lifeco Corporate results, Canadian
Consolidated net earnings of Lifeco for the first six months of 2002 were $211
million compared to $185 million a year ago.
GWL&A's six months net income attributable to common shareholders increased 12%
to US $161 million from US $144 million at June 30, 2001. For the second
quarter, United States earnings were $82 million essentially unchanged from a
year ago, after adjusting for charges relating to Alta Health and Life Insurance
Company in 2001.
Including the United States portion of Lifeco Corporate results and translated
to Canadian dollars, Lifeco's United States consolidated net earnings for the
first six months of 2002 increased 15% to $245 million from $213 million a year
ago.
The Great-West Life Assurance Company
Developments
o Sales during the quarter were exceptionally strong in Group
Insurance, Individual Insurance and Group Retirement lines, compared with
the same period last year.
o For the first six months of the year, the Company's segregated and
mutual fund business experienced positive net cash flow, reflecting the high
persistency that is characteristic of the advisor-based distribution system.
o The recently released Brendan Wood International Benchmark study
gave the Company's Group Retirement Services division top ratings for
quality of service, client loyalty, and overall selection criteria.
o Great-West Life, in partnership with Investors Group and parent
company Power Financial Corporation, contributed $5 million to the
University of Manitoba to establish a Research Investment Fund. The fund
will be used to build the University's capacity in current and emerging
research strengths.
Results
"Great-West's performance this quarter is indicative of the strengths inherent
in our business," says Raymond L. McFeetors, President & Chief Executive
Officer, Great-West Life. "In particular, our advisor-based business is more
resistant to investment market fluctuations, because of the value our advisors
offer clients in planning for the long term. In addition, we have a
well-diversified portfolio of investments, which we continue to manage prudently
and pro-actively to maintain its high quality."
- 3 -
Total premiums and deposits for the six months ended June 30, 2002, including
reinsurance premiums, were up 9% from 2001 levels. Risk-based premiums, other
than reinsurance, were up 5%, self-funded premium equivalents (ASO contracts) up
8%, and segregated funds deposits up 10%. Reinsurance premiums were up 12%.
Fee income increased 14% in the six months ended June 30, 2002 compared to 2001,
associated with increases in both segregated funds assets and ASO contract
volumes.
Total assets under administration at June 30, 2002 were $53.7 billion, up 3%
from a year ago and essentially the same as at December 31, 2001.
Great-West Life & Annuity Insurance Company
Developments
o To leverage the Great-West brand identity and lessen confusion among
its customers, the Company integrated its Great-West Life & Annuity (GWL&A)
and New England Financial Employee Benefits sales organizations. As a
result, all new business that would have been written on New England
Financial contracts is being written on GWL&A contracts, and GWL&A will be a
preferred carrier for the more than 200 New England Financial, Metropolitan
Life, and General American agencies around the United States.
o The Company renewed several key government pension contracts, including the
County of Los Angeles, California; the Cities of Livonia, Michigan,
Virginia Beach, Virginia, and Wichita, Kansas; and the Port of Oakland,
California, and the Port of Seattle, Washington. It also was just awarded
the County of Orange, California, and Gwinnett County, Georgia.
o The Company formed its latest life insurance bank partnership with
TCF Bank - bringing to seven the number of major U.S. banks and financial
institutions that partner with GWL&A to sell life insurance products to bank
customers. Policies placed through the Company's bank markets business have
exceeded year-to-date expectations.
o EducatorsMoneySM, the Company's Internet retirement savings plan for
educators, added three new school district partners: Illinois'
second-largest district, located near Chicago; Howard County Public School
System, located in Maryland; and the University of Texas, located in Austin.
Results
"The results for the quarter demonstrate once again that we are in solid
businesses directed by focused managers producing superior results for
shareholders," says William T. McCallum, President & Chief Executive Officer,
Great-West Life & Annuity.
The decrease in US $ premium income and deposits for the six months ended June
30, 2002 of 13% was comprised of reductions in both Employee Benefits and
Financial Services. The change in the Employee Benefits segment is due to a
contraction in health care medical membership, while the change in the Financial
Services segment is primarily due to lower 401(k) single premium deposits.
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Fee income is derived from the management of segregated funds assets and the
administration of Group health ASO business. The decrease in year-to-date fee
income in 2002 arises out of both the health care business and the effects of
the U.S. equity markets on segregated fund fees.
Total assets under administration were $41.3 billion at June 30, 2002,
relatively unchanged from a year ago, and down $2.9 billion compared with
December 31, 2001, essentially due to changes in foreign exchange translation
rates.
Quarterly Dividends
At its meeting today, the Board of Directors approved a quarterly dividend of
$0.2475 per share on the common shares of the Company payable September 30, 2002
to shareholders of record at the close of business September 16, 2002.
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
September 30, 2002 to shareholders of record at the close of business
September 16, 2002
o Class A, Series 1 Preferred Shares $0.3125 per share payable
October 31, 2002 to shareholders of record at the close of business
October 17, 2002.
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 13 million people. Lifeco and its
companies have $95 billion in assets under administration. Great-West Lifeco is
a member of the Power Financial Corporation group of companies.
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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
inherently 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 and political conditions in Canada, North America or internationally.
Readers are urged to consider these and other such factors carefully and not
place undue emphasis on the Company's forward-looking statements.
Unless otherwise required by securities laws, the Company does not intend or
have any obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Further information
Financial highlights and the June 30, 2002 interim unaudited consolidated
financial statements are attached.
Great-West Lifeco's second quarter analyst teleconference will be held
Wednesday, July 31, at 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
(passcode: Chantal) or 416-405-9328 in Toronto.
A replay of the call will be available from 3:00 p.m. July 31, until August 7,
and can be accessed by calling 1-800-408-3053 (passcode: 1223280) or
416-695-5800 in Toronto.
- end -
For more information contact:
Valerie Mollison
Manager, Communication Services
(204) 946-7663
valerie.mollison@gwl.ca
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For the Six Months Ended June 30
Premiums:
Life insurance, guaranteed annuities
and insured health product $ 2,096 $ 1,446 $ 3,542 $ 1,994 $ 1,598 $ 3,592 -1%
Reinsurance & specialty general 1,655 - 1,655 1,475 - 1,475 12%
insurance
Self-funded premium equivalents
(ASO contracts) (1) 670 4,159 4,829 620 4,565 5,185 -7%
Segregated funds deposits: (1)
Individual products 1,012 327 1,339 926 283 1,209 11%
Group products 590 1,858 2,448 532 2,236 2,768 -12%
--------------------------- --------------------------- -----------
--------------------------- --------------------------- -----------
Total premiums and deposits $ 6,023 $ 7,790 $13,813 $ 5,547 $ 8,682 $14,229 -3%
--------------------------- --------------------------- -----------
--------------------------- --------------------------- -----------
Fee and other income 214 724 938 188 741 929 1%
Paid or credited to policyholders 4,141 1,771 5,912 3,823 2,003 5,826 1%
Net income attributable to:
Preferred shareholders 15 1 16 15 1 16 0%
Common shareholders 211 245 456 155 47 202 126%
2001 adjustments (2)
Goodwill amortization - - - 30 2 32
Alta - - - - 164 164
Adjusted net income common shareholders211) 245 456 185 213 398 15%
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Return on common shareholders' equity (12 months):
Net income 20.1% 15.2%
Adjusted net income (2) 22.5% 20.9%
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Per Common Share
Basic earnings $ 1.236 $ 0.543 128%
2001 adjustments (2)
Goodwill amortization - 0.086
Alta - 0.440
Adjusted basic earnings (2) 1.236 1.069 16%
Dividends paid 0.450 0.370 22%
Book value 10.80 9.92 9%
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At June 30
Total assets $34,494 $ 23,529 $58,023 $33,542 $22,911 $56,453 3%
Segregated funds assets (1) 19,153 17,814 36,967 18,464 18,473 36,937 0%
--------------------------- --------------------------- -----------
--------------------------- --------------------------- -----------
Total assets under administration $53,647 $ 41,343 $94,990 $52,006 $41,384 $93,390 2%
=========================== =========================== ===========
=========================== =========================== ===========
Capital stock and surplus $ 4,510 $ 4,214 7%
(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) In addition to net income (Canadian GAAP basis), adjusted net income for
2001 is presented for information. 2001 results include: (i) A charge of $32
after-tax or $0.086 per common share related to the amortization of goodwill. On
January 1, 2002, the Company stopped amortizing goodwill in accordance with new
Canadian Institute of Chartered Accountants standard 3062 Goodwill and Other
Intangible Assets (see note 2 of the Company's 2002 interim financial
statements); (ii) A charge of $164 after-tax or $0.440 per common share related
to Alta Health & Life Insurance Company (Alta), an indirect wholly-owned
subsidiary and part of the Company's United States Employee Benefits segment.
Return on common shareholders' equity is also presented excluding 2001
adjustments.
Income
Premium income $ 2,289 $ 2,661 $ 5,197 $ 5,067
Net investment income 884 940 1,826 1,844
Fee and other income 475 450 938 929
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
3,648 4,051 7,961 7,840
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Benefits and Expenses
Paid or credited to policyholders and
beneficiaries including policyholder
dividends and experience refunds 2,610 3,006 5,912 5,826
Commissions 194 167 365 337
Operating expenses 446 520 916 1,000
Premium taxes 33 19 61 49
Special char(note 10) - 202 - 202
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Net operating income before income taxes 365 137 707 426
Income taxes- current 115 119 176 179
- future 4 (67) 47 (31)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Net income before minority and other interests 246 85 484 278
Minority and other interests (note 4) 3 24 12 28
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Net income before amortization of goodwill 243 61 472 250
Amortization of goodwill - 16 - 32
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Net income $ 243 $ 45 $ 472 $ 218
=========== =========== =========== ==========
=========== =========== =========== ==========
Earnings per Common Share (note 6)
Basic $ 0.634 $ 0.097 $ 1.236 $ 0.543
=========== =========== =========== ==========
=========== =========== =========== ==========
Diluted $ 0.630 $ 0.095 $ 1.219 $ 0.533
=========== =========== =========== ==========
=========== =========== =========== ==========
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ 9 $ 9 $ 16 $ 16
Net income - common shareholders 234 36 456 202
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Net income $ 243 $ 45 $ 472 $ 218
=========== =========== =========== ==========
=========== =========== =========== ==========
Average number of shares outstanding - basic 368,822,686 372,009,113
Average number of shares outstanding - diluted 373,963,643 378,769,182
United States operating results during the first six months of
2002 have been included at the average market rate of $1.5740
Canadian compared with $1.5340 Canadian in 2001.
------------ ----------- -----------
Assets
Bonds $ 31,919 $ 32,581 $ 30,731
Mortgage loans 8,095 8,369 8,666
Stocks 1,606 1,379 1,426
Real estate 1,240 1,272 1,228
Loans to policyholders 6,156 6,213 5,814
Cash and certificates of deposit 921 837 612
Funds withheld by ceding insurers 4,122 4,477 3,804
Premiums in course of collection 448 410 484
Interest due and accrued 507 543 528
Future income taxes 167 317 288
Goodwill and intangible assets (note 3) 1,684 1,604 1,624
Other assets 1,158 1,157 1,248
------------ ----------- -----------
------------ ----------- -----------
Total assets $ 58,023 $ 59,159 $ 56,453
============ =========== ===========
============ =========== ===========
Liabilities
Policy liabilities
Actuarial liabilities $ 42,935 $ 43,909 $ 42,440
Provision for claims 654 753 695
Provision for policyholder dividends 352 355 336
Provision for experience rating refunds 722 834 597
Policyholder funds 1,788 1,748 1,792
------------ ----------- -----------
------------ ----------- -----------
46,451 47,599 45,860
Commercial paper and other loans 1,047 1,075 1,002
Current income taxes 545 508 324
Other liabilities 2,085 2,181 1,699
Repurchase agreements 479 400 351
Net deferred gains on portfolio investments sold 976 1,049 1,070
------------ ----------- -----------
------------ ----------- -----------
51,583 52,812 50,306
Minority and other int(notes4) 1,930 1,950 1,933
Capital Stock and Surplus
Capital stock (note 5) 2,086 2,083 2,087
Surplus 2,176 1,951 1,876
Provision for unrealized gain on translation
of net investment in foreign operations 248 363 251
------------ ----------- -----------
------------ ----------- -----------
4,510 4,397 4,214
------------ ----------- -----------
------------ ----------- -----------
Liabilities, capital stock and surplus $ 58,023 $ 59,159 $ 56,453
============ =========== ===========
============ =========== ===========
United States assets and liabilities have been translated at the market
rates of $1.5190 Canadian for June 30, 2002, $1.5930 Canadian for
December 31, 2001 and $1.5180 Canadian for June 30, 2001.
Balance, beginning of year $ 1,951 $ 1,868
Net income 472 218
Acquisition discount - preferred shares of subsidiary - 1
Common share cancellation excess (65) (58)
Dividends to shareholders
Preferred shareholders (16) (16)
Common shareholders (166) (137)
------------- ----------------
------------- ----------------
Balance, end of period $ 2,176 $ 1,876
============= ================
Operations
Net income $ 243 $ 45 $ 472 $ 218
Adjustments for non-cash items:
Change in policy liabilities (15) (37) (128) 536
Change in funds withheld by ceding insurers 140 84 355 (249)
Change in current income taxes payable 51 42 40 (108)
Future income tax expense 4 (67) 47 (31)
Amortization of goodwill - 16 - 32
Other 491 97 (275) (239)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Cash flows from operations 914 180 511 159
Financing Activities
Issue of common shares 7 2 12 8
Purchased and cancelled common shares (36) (34) (74) (66)
Issue (repayment) of commercial paper and other (4) (6) (8) (35)
loans
Dividends paid (92) (77) (182) (153)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
(125) (115) (252) (246)
Investment Activities
Bond sales and maturities 4,897 5,358 10,488 10,087
Mortgage loan repayments 436 442 867 887
Stock sales 71 219 131 351
Real estate sales 2 - 38 -
Change in loans to policyholders (152) (148) (170) (182)
Change in repurchase agreements 67 13 102 355
Investment in subsidiaries - - 72 (15)
Investment in bonds (5,067) (5,587) (10,679) (10,180)
Investment in mortgage loans (438) (294) (609) (750)
Investment in stocks (356) (310) (396) (581)
Investment in real estate (11) (10) (19) (13)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
(551) (317) (175) (41)
Increase in cash and certificates of deposit 238 (252) 84 (128)
Cash and certificates of deposit,
beginning of period 683 864 837 740
Cash and certificates of deposit,
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
end of period $ 921 $ 612 $ 921 $ 612
=========== =========== ========== ===========
Notes to Interim Consolidated Financial Statements (unaudited)
($ amounts in millions unless otherwise noted)
1. Basis of Presentation
The interim unaudited consolidated financial statements of Great-West
Lifeco Inc. (Lifeco) at June 30, 2002 have been prepared in accordance with
Canadian generally accepted accounting principles, using the same
accounting policies and methods of computation followed in the consolidated
financial statements for the year ended December 31, 2001, except as noted
below. These interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto in
the Company's annual report dated December 31, 2001.
2. Change in Accounting Policies
(a) Business Combinations, Goodwill and Other Intangible Assets
On January 1, 2002, the Company adopted the recommendations of the Canadian
Institute of Chartered Accountants (CICA) Handbook Section 1581 Business
Combinations and Section 3062 Goodwill and Other Intangible Assets.
In accordance with the requirements of the new standards, as at January 1,
2002, the Company: - analyzed existing goodwill and reclassified items
that should be recognized as separate intangible assets; - completed
impairment testing of all indefinite life intangible assets; - ceased
amortizing goodwill and indefinite life intangible assets; - allocated
goodwill to reporting units and completed the related transitional
impairment testing of allocated goodwill.
No impairment loss resulted from the transitional impairment testing of
allocated goodwill. During the second quarter, the Company reduced the
amount reclassified during the first quarter between goodwill and future
taxes by $43, reflecting revised tax inclusion rate estimates. Other than
the elimination of goodwill amortization charges from the Summary of
Consolidated Operations, and the reclassifications on the Consolidated
Balance Sheet as described in Note 3, the new standards had no impact on
the financial statements for the six months ended June 30, 2002.
The following table provides a reconciliation between reported net income,
earnings per share and diluted earnings per share adjusted to exclude
amortization of goodwill, on an after-tax basis:
For the three months For the six months
ended June 30 ended June 30
----------------------- ----------------------------
----------------------- ----------------------------
2002 2001 2002 2001
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Net income:
Reported net income $ 243 $ 45 $ 472 $ 218
Add back: amortization of goodwill, - 16 - 32
net of tax
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Net income adjusted for amortization
of goodwill $ 243 $ 61 $ 472 $ 250
=========== ========== ============ =============
=========== ========== ============ =============
Basic earnings per common share:
Reported earnings per common share $ 0.634 $ 0.097 $ 1.236 $ 0.543
Add back: amortization of goodwill, - 0.043 - 0.086
net of tax
----------- ---------- ------------ -------------
------------------------------------------------ ---------- ------------ -------------
Basic earnings per common share adjusted
for amortization of goodwill $ 0.634 $ 0.140 $ 1.236 $ 0.629
=========== ========== ============ =============
=========== ========== ============ =============
Diluted earnings per common share:
Reported diluted earnings per common sha$e0.630 $ 0.095 $ 1.219 $ 0.533
Add back: amortization of goodwill, net of tax- 0.043 - 0.085
----------- ---------- ------------ -------------
------------------------------------------------ ---------- ------------ -------------
Diluted earnings per common share adjusted
for amortization of goodwill $ 0.630 $ 0.138 $ 1.219 $ 0.618
=========== ========== ============ =============
=========== ========== ============ =============
5. Capital Stock
Authorized
Unlimited First Preferred Shares, Class A Preferred Shares and Second Preferred Shares
Unlimited Common Shares
Issued and Outstanding
June 30, 2002 June 30, 2001
--------------------------- ---------------------------
--------------------------- ---------------------------
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 Shares 5,192,242 129,806 5,192,242 129,806
----------- ------------- ------------ ------------
----------- ------------- ------------ ------------
Balance, end of period 21,192,242 $ 529,806 21,192,242 $ 529,806
----------- ------------- ------------ ------------
----------- ------------- ------------ ------------
Common Shares:
Balance, beginning of year 369,459,808 $ 1,553,294 372,404,725 $ 1,556,559
Purchased and cancelled under
Normal Course Issuer Bid (2,082,200) (8,770) (1,861,000) (7,792)
Issued under Stock Option 1,027,451 11,553 923,855 8,630
Plan
----------- ------------- ------------ ------------
----------- ------------- ------------ ------------
Balance, end of period 368,405,059 $ 1,556,077 371,467,580 $ 1,557,397
----------- ------------- ------------ ------------
----------- ------------- ------------ ------------
Total Capital Stock $ 2,085,883 $ 2,087,203
============= ============
6. Earnings Per Common Share
The following table provides the reconciliation between basic and diluted
earnings per common share:
For the three months For the six months
ended June 30 ended June 30
------------------- -------------------
------------------- -------------------
2002 2001 2002 2001
------------------- -------------------
------------------- -------------------
a) Earnings
Net income - common shareholders $ 234 $ 36 $ 456 $ 202
========= ======== ========= ========
========= ======== ========= ========
b) Number of Common Shares at June 30 2002 2001
--------- --------
--------- --------
Average number of common shares outstanding 369 372
Add:
-Potential exercise of outstanding stock options 5 7
--------- --------
--------- --------
Average number of common shares outstanding - diluted basis 374 379
========= ========
========= ========
Earnings per Common Share ( a) divided by b) )
Basic $0.634 $0.097 $ 1.236 $0.543
========= ======== ========= ========
========= ======== ========= ========
Diluted $0.630 $0.095 $ 1.219 $0.533
========= ======== ========= ========
========= ======== ========= ========
7. Contingencies (changes since December 31, 2001 annual report)
The Ontario Court of Appeal determined that the appeal of the approval of
the London Life settlement agreement relating to the proposed class actions
should not proceed. The approval is now final.
8. Commitments (changes since December 31, 2001 annual report)
On March 21, 2002, London Life completed its previously announced sale of
its 82.9% indirect interest in London Guarantee Insurance Company which
resulted in an after-tax gain of $31.
9. Segmented Information
Consolidated Operations
For the three months ended June 30, 2002
Canadian Operations
-------------------------------------------------------------------------
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Participating
Shareholder Policyholder
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-------------------------------------------------- ----------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------------------------------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 547 $ 156 $ 530 $ 5 $ 1,238 $ 355 $ 1,593
Net investment income 51 114 99 27 291 218 509
Fee and other income 17 89 1 5 112 - 112
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 615 359 630 37 1,641 573 2,214
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 461 182 605 7 1,255 509 1,764
Other 105 93 6 7 211 66 277
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 49 84 19 23 175 (2) 173
Income taxes 18 33 - 2 53 2 55
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 31 51 19 21 122 (4) 118
Minority and other interests - - 1 5 6 (4) 2
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 31 51 18 16 116 - 116
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 31 $ 51 $ 18 $ 16 $ 116 $ - $ 116
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 8 $ 8 $ - $ 8
Net income - common shareholders 31 51 18 8 108 - 108
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 31 $ 51 $ 18 $ 16 $ 116 $ - $ 116
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended June 30, 2002
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 365 $ 218 $ - $ 583 $ 113 $ 696 $ 2,289
Net investment income 26 207 1 234 141 375 884
Fee and other income 273 90 - 363 - 363 475
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 664 515 1 1,180 254 1,434 3,648
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 273 328 (1) 600 246 846 2,610
Other 295 87 7 389 7 396 673
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 96 100 (5) 191 1 192 365
Income taxes 35 34 (5) 64 - 64 119
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 61 66 - 127 1 128 246
Minority and other interests - - - - 1 1 3
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 61 66 - 127 - 127 243
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 61 $ 66 $ - $ 127 $ - $ 127 $ 243
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 9
Net income - common shareholders 61 66 (1) 126 - 126 234
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 61 $ 66 $ - $ 127 $ - $ 127 $ 243
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended June 30, 2001
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholder Policyholder
-------------------------------------------------- ---------------------
-------------------------------------------------- ----------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------------------------------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 502 $ 173 $ 875 $ 4 $ 1,554 $ 345 $ 1,899
Net investment income 52 130 107 28 317 245 562
Fee and other income 15 73 1 4 93 - 93
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 569 376 983 36 1,964 590 2,554
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 429 209 940 7 1,585 470 2,055
Other 96 91 20 4 211 85 296
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 44 76 23 25 168 35 203
Income taxes 18 28 1 11 58 19 77
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 26 48 22 14 110 16 126
Minority and other interests - - 1 6 7 16 23
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 26 48 21 8 103 - 103
Amortization of goodwill 5 7 3 - 15 - 15
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 21 $ 41 $ 18 $ 8 $ 88 $ - $ 88
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 8 $ 8 $ - $ 8
Net income - common shareholders 21 41 18 - 80 - 80
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 21 $ 41 $ 18 $ 8 $ 88 $ - $ 88
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended June 30, 2001
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits* Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 412 $ 224 $ - $ 636 $ 126 $ 762 $ 2,661
Net investment income 24 221 (1) 244 134 378 940
Fee and other income 269 88 - 357 - 357 450
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 705 533 (1) 1,237 260 1,497 4,051
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 343 358 - 701 250 951 3,006
Other 311 91 2 404 6 410 706
Special charges 202 - - 202 - 202 202
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes (151) 84 (3) (70) 4 (66) 137
Income taxes (54) 26 - (28) 3 (25) 52
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests (97) 58 (3) (42) 1 (41) 85
Minority and other interests - - - - 1 1 24
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization (97) 58 (3) (42) - (42) 61
Amortization of goodwill 1 - - 1 - 1 16
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ (98) $ 58 $ (3) $ (43) $ - $ (43) $ 45
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 9
Net income - common shareholders (98) 58 (4) (44) - (44) 36
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ (98) $ 58 $ (3) $ (43) $ - $ (43) $ 45
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
* see note 10
For the six months ended June 30, 2002
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholder Policyholder
-------------------------------------------------- ---------------------
-------------------------------------------------- ----------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------------------------------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,077 $ 323 $ 1,655 $ 8 $ 3,063 $ 688 $ 3,751
Net investment income 102 233 254 37 626 448 1,074
Fee and other income 34 170 1 9 214 - 214
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,213 726 1,910 54 3,903 1,136 5,039
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 911 367 1,847 18 3,143 998 4,141
Other 211 193 13 12 429 128 557
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 91 166 50 24 331 10 341
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 34 61 3 (5) 93 11 104
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 57 105 47 29 238 (1) 237
Minority and other interests - - 1 11 12 (1) 11
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 57 105 46 18 226 - 226
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 57 $ 105 $ 46 $ 18 $ 226 $ - $ 226
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 15 $ 15 $ - $ 15
Net income - common shareholders 57 105 46 3 211 - 211
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 57 $ 105 $ 46 $ 18 $ 226 $ - $ 226
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the six months ended June 30, 2002
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 783 $ 461 $ - $ 1,244 $ 202 $1,446 $ 5,197
Net investment income 54 422 (3) 473 279 752 1,826
Fee and other income 545 179 - 724 - 724 938
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,382 1,062 (3) 2,441 481 2,922 7,961
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 609 699 (2) 1,306 465 1,771 5,912
Other 585 175 13 773 12 785 1,342
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 188 188 (14) 362 4 366 707
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 67 61 (12) 116 3 119 223
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 121 127 (2) 246 1 247 484
Minority and other interests - - - - 1 1 12
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 121 127 (2) 246 - 246 472
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 121 $ 127 $ (2) $ 246 $ - $ 246 $ 472
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 16
Net income - common shareholders 121 127 (3) 245 - 245 456
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 121 $ 127 $ (2) $ 246 $ - $ 246 $ 472
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the six months ended June 30, 2001
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholder Policyholder
-------------------------------------------------- ---------------------
-------------------------------------------------- ----------
Individual Individual
Insurance & Insurance &
Group Investment Reinsurance Investment Total
Insurance Products & SpecialtCorporate Total Products Canada
-------------------------------------------------- ---------------------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 990 $ 329 $ 1,475 $ 8 $ 2,802 $ 667 $ 3,469
Net investment income 107 261 222 59 649 446 1,095
Fee and other income 30 149 1 8 188 - 188
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,127 739 1,698 75 3,639 1,113 4,752
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 853 415 1,614 14 2,896 927 3,823
Other 192 187 38 10 427 151 578
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 82 137 46 51 316 35 351
Income taxes 33 51 4 14 102 24 126
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 49 86 42 37 214 11 225
Minority and other interests - - 3 11 14 11 25
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 49 86 39 26 200 - 200
Amortization of goodwill 11 14 4 1 30 - 30
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 38 $ 72 $ 35 $ 25 $ 170 $ - $ 170
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 15 $ 15 $ - $ 15
Net income - common shareholders 38 72 35 10 155 - 155
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 38 $ 72 $ 35 $ 25 $ 170 $ - $ 170
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the six months ended June 30, 2001
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits* Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 845 $ 534 $ - $ 1,379 $ 219 $1,598 $ 5,067
Net investment income 51 434 (1) 484 265 749 1,844
Fee and other income 559 182 - 741 - 741 929
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,455 1,150 (1) 2,604 484 3,088 7,840
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 742 798 (1) 1,539 464 2,003 5,826
Other 612 182 3 797 11 808 1,386
Special charges 202 - - 202 - 202 202
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes (101) 170 (3) 66 9 75 426
Income taxes (38) 51 3 16 6 22 148
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests (63) 119 (6) 50 3 53 278
Minority and other interests - - - - 3 3 28
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization (63) 119 (6) 50 - 50 250
Amortization of goodwill 2 - - 2 - 2 32
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ (65) $ 119 $ (6) $ 48 $ - $ 48 $ 218
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 16
Net income - common shareholders (65) 119 (7) 47 - 47 202
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ (65) $ 119 $ (6) $ 48 $ - $ 48 $ 218
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
* see note 10
10. Special Charges
2001 six month results include a non-recurring charge of $202 million
pre-tax ($132 million after-tax) plus operating losses of $32 million
after-tax, both related to Alta Health & Life Insurance Company (Alta), an
indirect wholly-owned subsidiary, reported as part of the Company's United
States Employee Benefits segment. The total impact of Alta on net income
for the six months ended June 30, 2001 was a reduction of $164 million
after-tax or $0.440 per common share.