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 29, 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 October 29, 2002
ITEM 9. REGULATION FD DISCLOSURE
On October 29, 2002, Great-West Lifeco Inc., an indirect Canadian parent company
of the Registrant, issued a press release regarding its financial results for
the third 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: October 29, 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 third quarter results
Winnipeg, October 29, 2002 ... Great-West Lifeco Inc. has reported net income
attributable to common shareholders of $696 million or $1.889 per common share
for the nine months ended September 30, 2002, compared to $0.877 per common
share reported a year ago.
This result represents an increase of 15% over 2001, after adjusting the first
nine months of 2001 for non-recurring charges relating to goodwill amortization,
Alta Health and Life Insurance Company (Alta), and the events of September 11,
2001 to facilitate comparison between years.
For the third quarter, net income attributable to common shareholders was $240
million, compared to adjusted 2001 results of $213 million.
Highlights - nine months 2002
o Earnings per common share increased 15% over 2001 levels, reflecting solid
increases in earnings from Lifeco's Canadian and United States operations.
o The overall quality of the Company's investment portfolio remains high, with
exposure to non-investment grade bonds at 2.1% of the bond portfolio.
o Return on common shareholders' equity was 22.3% for the twelve months ended
September 30, 2002, compared to 21.0% in 2001, using adjusted 2001 results.
o Quarterly dividends declared were 24.75(cent) per common share for December
31, 2002. Dividends paid on common shares for nine months of 2002 were 21%
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, Alta charges, and the events of September 11, 2001.
- 2 -
Canadian Consolidated net earnings of Lifeco attributable to common shareholders
for the nine months ended September 30, 2002 increased 15% to $325 million from
$282 million at September 30, 2001. For the third quarter, Canadian net income
was $114 million compared to $97 million at September 30, 2001, up 18% after
adjusting for charges relating to the events of September 11, 2001.
During the third quarter, the Company recognized a reduction in provisions for
income taxes arising from the completion of tax audits, as well as an increase
in reinsurance actuarial reserves related to potential exposures to future
risks. The net impact on earnings from these two events was not material.
Lifeco's United States Consolidated net earnings for the first nine months of
2002 increased 13% to $371 million from $329 million a year ago. For the third
quarter, United States net income was $126 million compared to $116 million at
September 30, 2001, an increase of 9%.
GWL&A's nine months net income attributable to common shareholders increased to
US $242 million from US $222 million at September 30, 2001. For the third
quarter, GWL&A's earnings were US $82 million compared to US $78 million a year
ago.
The Great-West Life Assurance Company
Developments
o As of September, Great-West and London Life's combined retail investment
funds net deposits as a percentage of opening assets were 5.5 times higher
than the industry average, as measured by the Investment Funds Institute of
Canada. The Company attributes this to the strength of its advice
distribution channels, and the asset-allocation based approach used to
assist clients in their investment planning.
o Great-West and London Life's share of the individual segregated funds market
grew to 25.9% at September 30, 2002 from 23.6% at December 31, 2001, based
on assets as reported by Investor Economics. The Company continues to lead
the industry in terms of market share.
o Great-West Life made a three-year commitment to the Foundation for the
Advancement of Aboriginal Youth, to fund scholarships for Aboriginal
students in business, arts and science programs.
Results
"Great-West continues to perform well in all fundamental measures, particularly
given the volatility of the current market environment," says Raymond L.
McFeetors, President & Chief Executive Officer, Great-West Life. "Earnings are
up in quarter and year to date, as are premiums and deposits from all lines of
business. Segregated funds continue to be a success story for Great-West and
London Life, where we've seen growth in our market share and significantly
outperformed the market in net deposits."
- 3 -
Total premiums and deposits for the nine months ended September 30, 2002,
including reinsurance premiums, were up 13% from 2001 levels.
Fee income increased 10% in the nine months ended September 30, 2002 compared to
2001, associated with increases in both segregated funds assets and ASO contract
volumes.
Total assets under administration at September 30, 2002 were $53.3 billion, up
3% from a year ago and essentially the same as at December 31, 2001.
Great-West Life & Annuity Insurance Company
Developments
o As a result of GWL&A's conservative, long-term investment strategy focusing
on high-quality assets and broad diversification, the Company's net
investment yield is above expectation and major write downs have been
avoided.
o The Company hired a new Executive Vice President, Mr. Richard Rivers, to
lead its Employee Benefits Division.
Results
"The Company's strategy continues to focus on improving the profitability of its
Employee Benefits business," says William T. McCallum, President & Chief
Executive Officer, Great-West Life & Annuity. "Price increases have resulted in
lower enrollment levels but the Company is on target in achieving better
morbidity results, lower expenses per member and overall higher margins."
The decrease in US $ premium income and deposits for the nine months ended
September 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.
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 funds fees.
Total assets under administration were $41.1 billion at September 30, 2002,
relatively unchanged from a year ago, and down $3.1 billion compared with
December 31, 2001, essentially due to reductions in market values of segregated
funds.
- 4 -
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 December 31, 2002
to shareholders of record at the close of business December 17, 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 December 31, 2002 to
shareholders of record at the close of business December 17, 2002 o
Class A, Series 1 Preferred Shares $0.3125 per share payable January 31, 2003 to
shareholders of record at the close of business January 17, 2003.
Great-West Lifeco
Great-West Lifeco Inc. is a financial services holding company with interests in
the life insurance, health insurance, retirement savings, and reinsurance
businesses, primarily in Canada and the United States. Lifeco's subsidiaries -
The Great-West Life Assurance Company and London Life Insurance Company (Freedom
55 Financial (TM)) 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 $94 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
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.
- 5 -
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 September 30, 2002 interim unaudited consolidated
financial statements are attached.
Great-West Lifeco's third quarter analyst teleconference will be held Wednesday,
October 30, 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. October 31, until November
6, and can be accessed by calling 1-800-408-3053 (passcode: 1281989) or
416-695-5800 in Toronto.
- 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)
2002 2001
---------------------------- ------------------------
---------------------------- ------------------------
Canada U.S. Total Canada U.S. Total % Change
---------------------------- ------------------------ ---------------
- -------------------------------------------------------------- ------------------------ ------
For the three months ended September 30
Premiums:
Life insurance, guaranteed annuities
and insured health products $ 1,080 $ 803 $ 1,883 $ 992 $ 700 $ 1,692 11%
Reinsurance & specialty
general insurance 1,227 - 1,227 853 - 853 44%
Self-funded premium equivalents
(ASO contracts) (1) 332 2,037 2,369 304 2,119 2,423 -2%
Segregated funds deposits: (1)
Individual products 317 173 490 289 774 1,063 -54%
Group products 239 639 878 168 642 810 8%
---------------------------- ------------------------ ------
---------------------------- ------------------------ ------
Total premiums and deposits $ 3,195 $ 3,652 $ 6,847 $ 2,606 $ 4,235 $ 6,841 -%
---------------------------- ------------------------ ------
---------------------------- ------------------------ ------
Fee and other income 102 339 441 98 387 485 -9%
Paid or credited to policyholders 2,534 988 3,522 2,137 857 2,994 18%
Net income attributable to:
Preferred shareholders 8 (1) 7 7 - 7 -%
Common shareholders 114 126 240 9 115 124 94%
2001 adjustments (2)
Goodwill amortization - - - 15 1 16
Alta - - - - - -
September 11, 2001 - - - 73 - 73
Adjusted net income common
shareholders (2) 114 126 240 97 116 213 13%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Per Common Share
Basic earnings $ 0.653 $ 0.334 96%
2001 adjustments (2)
Goodwill amortization - 0.043
Alta - -
September 11, 2001 - 0.199
Adjusted basic earnings (2) 0.653 0.576 13%
Dividends paid 0.2475 0.205 21%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
(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 $16
after-tax or $0.043 per common share for the three months ended September 30,
2001 and $48 after-tax or $0.129 per common share for the nine months ended
September 30, 2001 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 second quarter 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. (iii) A third-quarter charge of $73 after-tax or
$0.199 per common share from the events of September 11, 2001. Return on
common shareholders' equity is also presented excluding 2001 adjustments.
FINANCIAL HIGHLIGHTS (unaudited) (cont'd)
(in millions of dollars except per common share amounts)
2002 2001
---------------------------- ------------------------
---------------------------- ------------------------
Canada U.S. Total Canada U.S. Total % Change
---------------------------- ------------------------ ---------------
- -------------------------------------------------------------- ------------------------ ------
For the nine months ended September 30
Premiums:
Life insurance, guaranteed annuities
and insured health products $ 3,176 $ 2,249 $ 5,425 $ 2,986 $ 2,298 $ 5,284 3%
Reinsurance & specialty
general insurance 2,882 - 2,882 2,328 - 2,328 24%
Self-funded premium equivalents
(ASO contracts) (1) 1,002 6,196 7,198 924 6,684 7,608 -5%
Segregated funds deposits: (1)
Individual products 1,329 500 1,829 1,215 1,057 2,272 -19%
Group products 829 2,497 3,326 700 2,878 3,578 -7%
---------------------------- ------------------------ ------
---------------------------- ------------------------ ------
Total premiums and deposits $ 9,218 $ 11,442 $ 20,660 $ 8,153 $12,917 $21,070 -2%
---------------------------- ------------------------ ------
---------------------------- ------------------------ ------
Fee and other income 316 1,063 1,379 286 1,128 1,414 -2%
Paid or credited to policyholders 6,675 2,759 9,434 5,960 2,860 8,820 7%
Net income attributable to:
Preferred shareholders 23 - 23 22 1 23 -%
Common shareholders 325 371 696 164 162 326 113%
2001 adjustments (2)
Goodwill amortization - - - 45 3 48
Alta - - - - 164 164
September 11, 2001 - - - 73 - 73
Adjusted net income common
shareholders (2) 325 371 696 282 329 611 14%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Per Common Share
Basic earnings $ 1.889 $ 0.877 115%
2001 adjustments (2)
Goodwill amortization - 0.129
Alta - 0.440
September 11, 2001 - 0.199
Adjusted basic earnings (2) 1.889 1.645 15%
Dividends paid 0.6975 0.575 21%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Return on common shareholders' equity (12 months):
Net income 22.3% 13.7%
Adjusted net income (2) 22.5% 21.0%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
At September 30
Total assets $ 35,387 $ 24,048 $ 59,435 $34,091 $24,057 $58,148 2%
Segregated funds assets (1) 17,892 17,055 34,947 17,642 18,060 35,702 -2%
---------------------------- ------------------------ ------
---------------------------- ------------------------ ------
Total assets under administration $ 53,279 $ 41,103 $ 94,382 $51,733 $42,117 $93,850 1%
============================ ======================== ======
============================ ======================== ======
Capital stock and surplus $ 4,715 $ 4,287 10%
Book value per common share $ 11.40 $ 10.16 12%
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
----------------------- -----------------------
----------------------- -----------------------
2002 2001 2002 2001
Income
Premium income $ 3,110 $ 2,545 $ 8,307 $ 7,612
Net investment income 878 892 2,704 2,736
Fee and other income 441 485 1,379 1,414
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
4,429 3,922 12,390 11,762
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Benefits and Expenses
Paid or credited to policyholders and
beneficiaries including policyholder
dividends and experience refunds (note 73,522 2,994 9,434 8,820
Commissions 166 180 531 517
Operating expenses 413 455 1,329 1,455
Premium taxes 31 40 92 89
Special charge(note 13) - - - 202
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Net operating income before income taxes 297 253 1,004 679
Income taxes- current 121 49 297 228
- future (note 8) (61) 61 (14) 30
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Net income before minority and other interests 237 143 721 421
Minority and other interests (note 4) (10) (4) 2 24
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Net income before amortization of goodwill 247 147 719 397
Amortization of goodwill - 16 - 48
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Net income $ 247 $ 131 $ 719 $ 349
=========== ========== =========== ==========
=========== ========== =========== ==========
Earnings per Common Share (note 6)
Basic $ 0.653 $ 0.334 $ 1.889 $ 0.877
=========== ========== =========== ==========
=========== ========== =========== ==========
Diluted $ 0.646 $ 0.329 $ 1.865 $ 0.862
=========== ========== =========== ==========
=========== ========== =========== ==========
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ 7 $ 7 $ 23 $ 23
Net income - common shareholders 240 124 696 326
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Net income $ 247 $ 131 $ 719 $ 349
=========== ========== =========== ==========
=========== ========== =========== ==========
Average number of shares outstanding - basic 368,470,287 371,743,697
Average number of shares outstanding - diluted 373,252,342 378,222,013
United States operating results during the first nine months of 2002 have been
included at the average market rate of $1.5700 Canadian compared with $1.5380
Canadian in 2001.
CONSOLIDATED BALANCE SHEET (unaudited)
(in millions of dollars)
September 30, December 31, September 30,
2002 2001 2001
------------ ----------- -----------
------------ ----------- -----------
Assets
Bonds $ 32,428 $ 32,581 $ 32,222
Mortgage loans 8,035 8,369 8,404
Stocks 1,513 1,379 1,374
Real estate 1,258 1,272 1,260
Loans to policyholders 6,123 6,213 5,992
Cash and certificates of deposit 1,328 837 588
Funds withheld by ceding insurers 4,538 4,477 4,098
Premiums in course of collection 351 410 423
Interest due and accrued 550 543 600
Future income taxes (note 8) 240 317 239
Goodwill and intangible assets (note 3) 1,687 1,604 1,607
Other assets 1,384 1,157 1,341
------------ ----------- -----------
------------ ----------- -----------
Total assets $ 59,435 $ 59,159 $ 58,148
============ =========== ===========
============ =========== ===========
Liabilities
Policy liabilities
Actuarial liabilities (note 7) $ 44,254 $ 43,909 $ 43,510
Provision for claims 638 753 707
Provision for policyholder dividends 375 355 356
Provision for experience rating refunds 940 834 753
Policyholder funds 1,818 1,748 1,734
------------ ----------- -----------
------------ ----------- -----------
48,025 47,599 47,060
Commercial paper and other loans 1,015 1,075 1,002
Current income taxes 525 508 294
Other liabilities 1,783 2,181 2,084
Repurchase agreements 446 400 445
Net deferred gains on portfolio investments sold 1,000 1,049 1,052
------------ ----------- -----------
------------ ----------- -----------
52,794 52,812 51,937
Minority and other int(notes4) 1,926 1,950 1,924
Capital Stock and Surplus
Capital stock (note 5) 2,082 2,083 2,083
Surplus 2,278 1,951 1,863
Provision for unrealized gain on translation
of net investment in foreign operations 355 363 341
------------ ----------- -----------
------------ ----------- -----------
4,715 4,397 4,287
------------ ----------- -----------
------------ ----------- -----------
Liabilities, capital stock and surplus $ 59,435 $ 59,159 $ 58,148
============ =========== ===========
============ =========== ===========
United States assets and liabilities have been translated at the market
rates of $1.5860 Canadian for September 30, 2002, $1.5930 Canadian for
December 31, 2001 and $1.5790 Canadian for September 30, 2001.
CONSOLIDATED STATEMENT OF SURPLUS (unaudited)
(in millions of dollars)
For the nine months
ended September 30
----------------------------------
----------------------------------
2002 2001
Balance, beginning of year $ 1,951 $ 1,868
Net income 719 349
Acquisition discount - preferred shares of subsidiary - 1
Common share cancellation excess (112) (118)
Dividends to shareholders
Preferred shareholders (23) (23)
Common shareholders (257) (214)
------------- ----------------
------------- ----------------
Balance, end of period $ 2,278 $ 1,863
============= ================
============= ================
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(in millions of dollars)
For the three months For the nine months
ended September 30 ended September 30
--------------------------- --------------------------
--------------------------- --------------------------
2002 2001 2002 2001
Operations
Net income $ 247 $ 131 $ 719 $ 349
Adjustments for non-cash items:
Change in policy liabilities 738 432 610 968
Change in funds withheld by ceding insurers (416) (294) (61) (543)
Change in current income taxes payable (26) (31) 14 (139)
Future income tax expense (61) 61 (14) 30
Amortization of goodwill - 16 - 48
Other (579) 303 (854) 64
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
Cash flows from operations (97) 618 414 777
Financing Activities
Issue of common shares 2 6 14 14
Purchased and cancelled common shares (53) (69) (127) (135)
Issue (repayment) of commercial paper and other lo(50) (17) (58) (52)
Dividends paid (98) (84) (280) (237)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
(199) (164) (451) (410)
Investment Activities
Bond sales and maturities 5,456 3,510 15,944 13,597
Mortgage loan repayments 405 610 1,272 1,497
Stock sales 148 42 279 393
Real estate sales - 6 38 6
Change in loans to policyholders 238 (1) 68 (183)
Change in repurchase agreements (55) 78 47 433
Investment in subsidiaries - - 72 (15)
Investment in bonds (5,112) (4,363) (15,791) (14,543)
Investment in mortgage loans (313) (320) (922) (1,070)
Investment in stocks (55) (31) (451) (612)
Investment in real estate (9) (9) (28) (22)
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
703 (478) 528 (519)
Increase in cash and certificates of deposit 407 (24) 491 (152)
Cash and certificates of deposit,
beginning of period 921 612 837 740
Cash and certificates of deposit,
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
end of period $ 1,328 $ 588 $ 1,328 $ 588
=========== =========== ========== ===========
=========== =========== ========== ===========
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 September 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. 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 nine
months ended September 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 nine months
ended September 30 ended September 30
----------------------- ----------------------------
----------------------- ----------------------------
2002 2001 2002 2001
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Net income:
Reported net income $ 247 $ 131 $ 719 $ 349
Add back: amortization of goodwill, - 16 - 48
net of tax
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Net income adjusted for amortization
of goodwill $ 247 $ 147 $ 719 $ 397
=========== ========== ============ =============
=========== ========== ============ =============
Basic earnings per common share:
Reported earnings per common share $ 0.653 $ 0.334 $ 1.889 $ 0.877
Add back: amortization of goodwill, - 0.043 - 0.129
net of tax
----------- ---------- ------------ -------------
------------------------------------------------ ---------- ------------ -------------
Basic earnings per common share adjusted
for amortization of goodwill $ 0.653 $ 0.377 $ 1.889 $ 1.006
=========== ========== ============ =============
=========== ========== ============ =============
Diluted earnings per common share:
Reported diluted earnings per common $ 0.646 $ 0.329 $ 1.865 $ 0.862
share
Add back: amortization of goodwill, - 0.042 - 0.127
net of tax
----------- ---------- ------------ -------------
------------------------------------------------ ---------- ------------ -------------
Diluted earnings per common share adjusted
for amortization of goodwill $ 0.646 $ 0.371 $ 1.865 $ 0.989
=========== ========== ============ =============
=========== ========== ============ =============
(b) Foreign Currency Translation
On January 1, 2002, the Company adopted the recommendations of the CICA
Handbook Section 1650 Foreign Currency Translation. The amended standards
eliminate the deferral and amortization approach to exchange gains and
losses on long-term monetary items and require the disclosure of exchange
gains and losses included in the calculation of net income. There is no
material effect of this change in accounting policy on the financial
statements of the Company.
Net investment income includes pre-tax foreign exchange losses of $17 for
the nine months ended September 30, 2002 ($24 for the nine months ended
September 30, 2001) and $4 for the three months ended September 30, 2002
($8 for the three months ended September 30, 2001).
(c) Stock-Based Compensation and Other Stock-Based Payments
On January 1, 2002, the Company adopted the recommendations of the CICA
Handbook Section 3870 Stock-Based Compensation and Other Stock-Based
Payments. The new standard permits the use of the fair value based method
or an intrinsic value based method of accounting for employee stock-based
compensation. When an intrinsic value based method of accounting is used,
pro forma net income and pro forma earnings per share must be disclosed as
if the fair value based method of accounting had been used to account for
stock-based compensation cost.
26,000 options were granted during the second quarter, and 148,500 options
were granted during the third quarter. The weighted-average fair value of
options granted was $16.23 per option. The fair value of each option grant
was estimated using the Black-Scholes option-pricing model with the
following weighted average assumptions used for the options granted for the
nine months ended September 30, 2002: dividend yield 2.453%, expected
volatility 31.67%, risk-free interest rate 5.125%, and expected life of 7
years.
The Company has elected to apply the intrinsic value based method of
accounting for employee stock-based compensation. In accordance with the
intrinsic value based method of accounting for stock-based compensation, no
compensation expense has been recognized. Had the fair value based method
of accounting been applied, compensation expense, net of tax, would have
been recorded for options granted under the Company's plan during the nine
months ended September 30, 2002 based on the fair value of the options
granted, amortized over the vesting period. The Company's net income for
the nine months ended September 30, 2002 on this basis would have been
reduced by less than $1 and earnings per common share would have been
reduced by less than $.001.
(d) Moving Average Market Method
Effective July 1, 2002, the Company has implemented revised OSFI rates used
to calculate the moving average market value adjustment for stocks and real
estate. The rate used to adjust stocks towards market value has been
changed from 15% per annum to 5% per quarter and the rate used to adjust
real estate towards market value has been changed from 10% per annum to 3%
per quarter. This change in accounting estimate has been applied
prospectively and does not have a material effect on the financial
statements of the Company.
(e) Certain of 2001 amounts presented for comparative purposes have been
reclassified to conform with the presentation adopted in the current year.
3. Goodwill and Intangible Assets
(a) Goodwill
Carrying value of goodwill and changes in the carrying value of goodwill
for the nine months ended September 30, 2002 are as follows:
Canada United States Total
---------- ----------------------------
---------- ------------ -------------
Balance, beginning of year $ 1,538 $ 66 $ 1,604 1,604
Reclassification between goodwill and intangible assets (529) - (529)
Reclassification between goodwill and future taxes 86 - 86
Sale of subsidiary (3) - (3)
---------- ------------ -------------
---------- ------------ -------------
Balance, end of period $ 1,092 $ 661,092 $ 1,158 1,158
========== ============ =============
========== ============ =============
(b) Intangible Assets
The Company has identified the following indefinite life intangible assets
acquired as part of London Insurance Group in 1997, which are not subject
to amortization. Carrying value of intangible assets and changes in the
carrying value of intangible assets for the nine months ended September 30,
2002 are as follows:
Canada United States Total
---------- ------------ -------------
---------- ------------ -------------
Balance, beginning of year $ - $ - $ - -
Reclassified from goodwill
- Brands and trademarks 175 - 175
- Shareholders portion of acquired future
Participating account profits 354 - 354
---------- ------------ -------------
---------- ------------ -------------
Balance, end of period $ 529 $ - 529 $ 529 529
========== ============ =============
========== ============ =============
4. Minority and Other Interests
The Company controls a 100% equity interest in The Great-West Life
Assurance Company (Great-West) and Great-West Life & Annuity Insurance
Company (GWL&A) at September 30, 2002 and September 30, 2001. The minority
and other interests of GWL&A and Great-West and its subsidiaries are:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
a) For the three months For the nine
months ended September 30, ended
September 30,
----------------------- ----------------------------
----------------------- ----------------------------
2002 2001 2002 2001
Participating policyholder
Net income attributable to participating
policyholder before policyholder dividends
Great-West $ 20 $ 25 $ 65 $ 75
London Life 121 110 378 355
GWL&A 48 51 150 155
Policyholder dividends
Great-West 23 22 69 64
London Life 134 124 391 366
GWL&A 48 50 149 151
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Net income $ (16) $ (10) $ (16) $ 4
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Preferred shareholder dividends 6 5 17 16
Minority shareholder interest - 1 1 4
----------- ---------- ------------ -------------
----------- ---------- ------------ -------------
Total $ (10) $ (4) $ 2 $ 24
=========== ========== ============ =============
=========== ========== ============ =============
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
b) As at September
30,December 31,
September 30, 2002
2001 2001
---------- ------------ -------------
---------- ------------ -------------
Participating policyholder
undistributed surplus
Great-West $ 328 $ 332 $ 339
London Life 902 914 889
GWL&A 235 235 235
---------- ------------ -------------
---------- ------------ -------------
1,465 1,481 1,463
Preferred shareholders 459 459 459
Minority interests in capital stock and surplus 2 10 2
---------- ------------ -------------
---------- ------------ -------------
$ 1,926 $ 1,950 $ 1,924
========== ============ =============
========== ============ =============
5. Capital Stock
Authorized
Unlimited First Preferred Shares, Class A Preferred Shares and Second Preferred Shares
Unlimited Common Shares
Issued and Outstanding
September 30, 2002 September 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 (3,533,300) (14,901) (3,958,800) (16,598)
Issued under Stock Option Plan1,267,438 14,061 1,485,079 13,443
----------- ------------- ------------ ------------
----------- ------------- ------------ ------------
Balance, end of period 367,193,946 $ 1,552,454 369,931,004 $ 1,553,404
----------- ------------- ------------ ------------
----------- ------------- ------------ ------------
Total Capital Stock $ 2,082,260 $ 2,083,210
============= ============
============= ============
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 nine months
ended September 30 ended September 30
-----------------------------------------
------------------ ------------------
2002 2001 2002 2001
------------------ ------------------
------------------ ------------------
a) Earnings
Net income - common shareholders $ 240 $ 124 $ 696 $ 326
======== ======== ======== ========
======== ======== ======== ========
b) Number of Common Shares at September 30 2002 2001
---------- ----------
---------- ----------
Average number of common shares outstanding 368,470,287 371,743,697
Add:
-Potential exercise of outstanding stock options 4,782,055 6,478,316
------------- ------------
---------------------------------
Average number of common shares outstanding - diluted basis 373,252,342 378,222,013
=================================
========== ==========
Earnings per Common Share ( a) divided by b) )
Basic $0.653 $ 0.334 $ 1.889 $ 0.877
======== ======== ======== ========
======== ======== ======== ========
Diluted $0.646 $ 0.329 $ 1.865 $ 0.862
======== ======== ======== ========
======== ======== ======== ========
7. Actuarial Liabilities - Material Assumption Changes
Third quarter 2002 includes an addition of $46 ($41 in the shareholder
account and $5 in the participating policyholder account) to the Adverse
Development Reserve in London Reinsurance Group.
8. Income Taxes
Third quarter 2002 results include a $50 net reduction of provisions for
income taxes due to favourable tax experience arising from the completion
of tax audits. The impact of this reduction in provisions was an increase
in after tax income of $41 in the shareholder account and $9 in the
participating policyholder account.
9. Contingencies (changes since December 31, 2001 annual report)
During the second quarter 2002, 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.
10. Events of September 11, 2001
2001 results include a charge of $73 after-tax in the shareholder account
and $9 after-tax in the participating policyholder account related to
claims provisions from the events of September 11, 2001, related to the
reinsurance business.
11. 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.
12. Segmented Information
Consolidated Operations
For the three months ended September 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 $ 575 $ 167 $ 1,227 $ 3 $ 1,972 $ 335 $ 2,307
Net investment income 52 112 103 29 296 215 511
Fee and other income 16 81 - 5 102 - 102
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 643 360 1,330 37 2,370 550 2,920
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 481 194 1,345 11 2,031 503 2,534
Other 107 88 7 7 209 64 273
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 55 78 (22) 19 130 (17) 113
Income taxes 21 32 2 (53) 2 (1) 1
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 34 46 (24) 72 128 (16) 112
Minority and other interests - - - 6 6 (16) (10)
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 34 46 (24) 66 122 - 122
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 34 $ 46 $ (24) $ 66 $ 122 $ - $ 122
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 8 $ 8 $ - $ 8
Net income - common shareholders 34 46 (24) 58 114 - 114
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 34 $ 46 $ (24) $ 66 $ 122 $ - $ 122
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended September 30, 2002
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 416 $ 312 $ - $ 728 $ 75 $ 803 $ 3,110
Net investment income 28 202 (1) 229 138 367 878
Fee and other income 253 86 - 339 - 339 441
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 697 600 (1) 1,296 213 1,509 4,429
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 346 434 1 781 207 988 3,522
Other 262 80 (9) 333 4 337 610
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 89 86 7 182 2 184 297
Income taxes 23 25 9 57 2 59 60
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 66 61 (2) 125 - 125 237
Minority and other interests - - - - - - (10)
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 66 61 (2) 125 - 125 247
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 66 $ 61 $ (2) $ 125 $ - $ 125 $ 247
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ (1) $ (1) $ - $ (1) $ 7
Net income - common shareholders 66 61 (1) 126 - 126 240
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 66 $ 61 $ (2) $ 125 $ - $ 125 $ 247
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the three months ended September 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 $ 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
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits* Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 429 $ 193 $ - $ 622 $ 78 $ 700 $ 2,545
Net investment income 28 195 (2) 221 134 355 892
Fee and other income 297 90 - 387 - 387 485
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 754 478 (2) 1,230 212 1,442 3,922
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 365 286 - 651 206 857 2,994
Other 293 110 4 407 3 410 675
Special charges - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 96 82 (6) 172 3 175 253
Income taxes 33 26 (3) 56 2 58 110
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 63 56 (3) 116 1 117 143
Minority and other interests - - - - 1 1 (4)
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 63 56 (3) 116 - 116 147
Amortization of goodwill - - 1 1 - 1 16
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 63 $ 56 $ (4) $ 115 $ - $ 115 $ 131
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 7
Net income - common shareholders 63 56 (4) 115 - 115 124
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 63 $ 56 $ (4) $ 115 $ - $ 115 $ 131
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
* see note 13
For the nine months ended September 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 $ 1,652 $ 490 $ 2,882 $ 11 $ 5,035 $1,023 $ 6,058
Net investment income 154 345 357 66 922 663 1,585
Fee and other income 50 251 1 14 316 - 316
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 1,856 1,086 3,240 91 6,273 1,686 7,959
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 1,392 561 3,192 29 5,174 1,501 6,675
Other 318 281 20 19 638 192 830
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 146 244 28 43 461 (7) 454
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 55 93 5 (58) 95 10 105
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 91 151 23 101 366 (17) 349
Minority and other interests - - 1 17 18 (17) 1
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 91 151 22 84 348 - 348
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 91 $ 151 $ 22 $ 84 $ 348 $ - $ 348
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ 23 $ 23 $ - $ 23
Net income - common shareholders 91 151 22 61 325 - 325
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 91 $ 151 $ 22 $ 84 $ 348 $ - $ 348
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the nine months ended September 30, 2002
United States Operations
------------------------------------------------------------
------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,199 $ 773 $ - $ 1,972 $ 277 $2,249 $ 8,307
Net investment income 82 624 (4) 702 417 1,119 2,704
Fee and other income 798 265 - 1,063 - 1,063 1,379
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 2,079 1,662 (4) 3,737 694 4,431 12,390
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 955 1,133 (1) 2,087 672 2,759 9,434
Other 847 255 4 1,106 16 1,122 1,952
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes 277 274 (7) 544 6 550 1,004
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income taxes 90 86 (3) 173 5 178 283
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests 187 188 (4) 371 1 372 721
Minority and other interests - - - - 1 1 2
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization 187 188 (4) 371 - 371 719
Amortization of goodwill - - - - - - -
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 187 $ 188 $ (4) $ 371 $ - $ 371 $ 719
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 23
Net income - common shareholders 187 188 (4) 371 - 371 696
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ 187 $ 188 $ (4) $ 371 $ - $ 371 $ 719
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
For the nine months ended September 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 $ 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
Shareholder Policyholder
--------------------------------------- -------------------
--------------------------------------- ---------
Employee Financial Financial Total Total
Benefits* Services Corporate Total Services U.S. Company
-------- --------- ------------------ --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Income:
Premium income $ 1,274 $ 727 $ - $ 2,001 $ 297 $2,298 $ 7,612
Net investment income 79 629 (3) 705 399 1,104 2,736
Fee and other income 856 272 - 1,128 - 1,128 1,414
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Total income 2,209 1,628 (3) 3,834 696 4,530 11,762
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Benefits and Expenses:
Paid or credited to policyholders 1,107 1,084 (1) 2,190 670 2,860 8,820
Other 905 292 7 1,204 14 1,218 2,061
Special charges 202 - - 202 - 202 202
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net operating income
before income taxes (5) 252 (9) 238 12 250 679
Income taxes (5) 77 - 72 8 80 258
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before minority and other
interests - 175 (9) 166 4 170 421
Minority and other interests - - - - 4 4 24
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income before goodwill amortization - 175 (9) 166 - 166 397
Amortization of goodwill 2 - 1 3 - 3 48
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ (2) $ 175 $ (10) $ 163 $ - $ 163 $ 349
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 23
Net income - common shareholders (2) 175 (11) 162 - 162 326
-------- --------- -------- -------- --------- -------- -----------
-------- --------- -------- -------- --------- -------- -----------
Net income $ (2) $ 175 $ (10) $ 163 $ - $ 163 $ 349
======== ========= ======== ======== ========= ======== ===========
======== ========= ======== ======== ========= ======== ===========
* see note 13
13. Special Charges
2001 results include a non-recurring charge of $202 pre-tax ($132
after-tax) plus operating losses of $32 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 three
months ended September 30, 2001 was negligible.