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) May 1, 2003
------------
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)
- --------------------------------------------------------------------------------
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Number Title
99 Great-West Lifeco Press Release dated May 1, 2003
ITEM 9. REGULATION FD DISCLOSURE
On May 1, 2003, Great-West Lifeco Inc., an indirect Canadian parent company of
the Registrant, issued a press release regarding its financial results for the
first quarter of 2003. 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.
ITEM 12. DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 1, 2003, Great-West Lifeco Inc., an indirect Canadian parent company of
the Registrant, issued a press release regarding its financial results for the
first quarter of 2003. 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: May 1, 2003
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 Inc.
RELEASE
TSX:GWO
Great-West Lifeco reports first quarter 2003 results
Winnipeg, May 1, 2003 ... Great-West Lifeco Inc. has reported net income
attributable to common shareholders of $253 million or $0.690 per common share
for the three months ended March 31, 2003, an increase of 14.6% compared to
$0.602 per common share reported for the first quarter of 2002.
Highlights - first quarter 2003
o Earnings per common share increased 14.6% over 2002 levels, reflecting
solid increases in earnings from Lifeco's Canadian and United States
operations.
o Return on common shareholders' equity was 23.5% for the twelve months ended
March 31, 2003, compared to 21.2% in 2002.
o Quarterly dividends declared were 27(cent) per common share payable June
30, 2003. Dividends paid on common shares for the first three months of
2003 were 20% higher than a year ago.
Consolidated net earnings for Lifeco are the net operating earnings of The
Great-West Life Assurance Company (Great-West) in Canada and Great-West Life &
Annuity Insurance Company (GWL&A) in the United States, together with Lifeco's
corporate results.
Canadian consolidated net earnings of Lifeco attributable to common shareholders
for the three months ended March 31, 2003 increased 17% to $121 million from
$103 million at March 31, 2002.
Lifeco's United States consolidated net earnings for the three months ended
March 31, 2003 increased 11% to $132 million from $119 million a year ago.
- 2 -
The Great-West Life Assurance Company
Developments
o Earnings in the group insurance and individual insurance lines of business
increased significantly for the first three months of 2003, compared with
the same period last year.
o In January, the Company launched Fund Focus. Through an agreement with
Globefund, Fund Focus delivers enhanced fund information on the Company's
proprietary funds and third-party funds to Freedom 55 Financial and
Great-West distribution channels, through the Internet.
Results
"This was a very good first quarter for Great-West Life. In particular, our
traditional group and individual lines of business did very well in an
environment where consumers and businesses alike are seeking greater security.
This helped offset the impact of the markets, highlighting the strengths
inherent in the diversification of our business," says Raymond L. McFeetors,
President and Chief Executive Officer.
The 17% increase in earnings for the three months ended March 31, 2003, compared
to a year ago, was due, in large part, to favourable mortality and group
morbidity experience, combined with improved investment income margins.
Total premiums and deposits for the three months ended March 31, 2003, including
reinsurance premiums, were essentially the same as 2002 levels, with increases
in risk-based product premium offset by a reduction in segregated funds
deposits.
Fee income increased 5% in the three months ended March 31, 2003 compared to
2002, associated with both assets under administration and ASO contracts.
Total assets under administration at March 31, 2003 were $54.7 billion, up
slightly from March 31 and December 31, 2002 levels, with increases in general
funds mitigated by reductions in segregated funds.
- 3 -
Great-West Life & Annuity Insurance Company
Developments
o Health care earnings for the three months ended March 31, 2003 were up
significantly over first quarter 2002.
o GWL&A's bank market partners continued to deliver strong results, with
record sales of term life insurance products this quarter.
o The New York Metropolitan Transport Authority and the Commonwealth of
Pennsylvania selected GWL&A to provide defined contribution recordkeeping
services for their respective organizations. When the contracts are
finalized, 38,000 participants in the Transport Authority and 47,000
participants in the state of Pennsylvania will roll over approximately $1.7
billion in total assets to Great-West.
Results
"Our first quarter results attest to the importance of the diversification of
our lines of business," says William T. McCallum, President and Chief Executive
Officer, GWL&A. "Our Employee Benefits and Financial Services Divisions, as well
as our investment portfolio, are delivering solid results."
The 11% increase in earnings for the three months ended March 31, 2003, compared
to a year ago, was primarily associated with the Employee Benefits Division,
reflecting a significant improvement in both group mortality and morbidity
results.
The decrease in US $ premium income and deposits for 2003 of 16% was comprised
of reductions in both Employee Benefits and Financial Services. The reduction in
the Employee Benefits segment is due to a contraction in health care medical
membership, while the reduction in the Financial Services segment is primarily
due to lower segregated funds deposits.
Fee income is derived from the management of segregated funds assets and the
administration of Group health ASO business. The decrease in fee income in 2003
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 $38.8 billion at March 31, 2003, down
$5.3 billion and $2.9 billion compared with March 31, 2002 and December 31,
2002, respectively, essentially due to reductions in market values of segregated
funds and a change in foreign exchange translation rates.
- 4 -
Quarterly Dividends
At its meeting today, the Board of Directors approved a quarterly dividend of
$0.27 per share on the common shares of the Company payable June 30, 2003 to
shareholders of record at the close of business June 16, 2003.
In addition, the Directors approved quarterly dividends on the preferred shares
of the Company:
o Series C First Preferred Shares $0.484375 per share; and
o Series D First Preferred Shares $0.293750 per share payable June 30, 2003
to shareholders of record at the close of business June 16, 2003
o Class A, Series 1 Preferred Shares $0.3125 per share payable July 31, 2003
to shareholders of record at the close of business July 17, 2003.
CANADA LIFE
On February 17, 2003, Lifeco and Canada Life Financial Corporation announced
that Lifeco had agreed to acquire all of the outstanding common shares of Canada
Life Financial Corporation for a combination of cash and Lifeco securities then
valued at $44.50 per common share of Canada Life Financial Corporation. The
acquisition is subject to shareholder and regulatory approvals and is expected
to close in the third quarter.
Great-West Lifeco
Great-West Lifeco Inc. (TSX:GWO) 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 $93 billion in assets
under administration. Great-West Lifeco is a member of the Power Financial
Corporation group of companies.
- 5 -
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 March 31, 2003 interim unaudited consolidated
financial statements are attached.
Great-West Lifeco's first quarter analyst teleconference will be held Thursday,
May 1, at 2:30 p.m. (Eastern). The call can be accessed through
www.greatwestlifeco.com or by phone, through listen-only lines at
1-800-295-1311.
A replay of the call will be available from May 1 until May 8 and can be
accessed by calling 1-800-408-3053 (passcode: 1394337) or 416-695-5800 in
Toronto.
- end -
For more information contact:
Marlene Klassen
Director, Media & Public Relations
(204) 946-7705
marlene.klassen@gwl.ca
REPORT TO THE BOARD
AUDIT COMMITTEE REPORT
MAY 1, 2003
TABLE OF CONTENTS
PAGE DESCRIPTION
1 FINANCIAL HIGHLIGHTS
FINANCIAL STATEMENTS
2 SUMMARY OF CONSOLIDATED OPERATIONS
3 CONSOLIDATED BALANCE SHEET
4 CONSOLIDATED STATEMENT OF SURPLUS
5 CONSOLIDATED STATEMENT OF CASH FLOWS
6 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
7 EARNINGS PER COMMON SHARE
8 NET INCOME - COMMON SHAREHOLDERS
8(A) CONSOLIDATED SHAREHOLDERS NET INCOME
9 AUDIT COMMITTEE REPORT
FINANCIAL HIGHLIGHTS (unaudited)
(in millions of dollars except per common share amounts)
2003 2002
---------------------------- ------------------------------------
---------------------------- ------------------------------------
Canada U.S. Total Canada U.S. Total % Change
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
For the three months ended March 31
Premiums:
Life insurance, guaranteed annuities
and insured health products $ 1,131 $ 666 $ 1,797 $ 1,033 $ 750 $ 1,783 1%
Reinsurance 1,152 - 1,152 1,125 - 1,125 2%
Self-funded premium equivalents
(ASO contracts) (1) 358 1,808 2,166 326 2,150 2,476 -13%
Segregated funds deposits: (1)
Individual products 432 94 526 617 199 816 -36%
Group products 278 767 1,045 260 1,075 1,335 -22%
---------------------------- --------------------------- -------
---------------------------- --------------------------- -------
Total premiums and deposits $ 3,351 $ 3,335 $ 6,686 $ 3,361 $ 4,174 $ 7,535 -11%
---------------------------- --------------------------- -------
---------------------------- --------------------------- -------
Fee and other income 107 326 433 102 361 463 -6%
Paid or credited to policyholders 2,512 810 3,322 2,377 925 3,302 1%
Net income attributable to:
Preferred shareholders 6 - 6 7 - 7 -14%
Common shareholders 121 132 253 103 119 222 14%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Per Common Share
Basic earnings $ 0.690 $ 0.602 14.6%
Dividends paid 0.270 0.225 20.0%
Book value 11.47 10.77 6.5%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Return on common shareholders' equity (12 months)
Net income 23.5% 14.6%
Adjusted net income (2) - 21.2%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
At March 31
Total assets $ 36,891 $ 22,642 $ 59,533 $ 34,613 $ 23,948 $ 58,561 2%
Segregated funds assets (1) 17,825 16,113 33,938 19,708 20,152 39,860 -15%
---------------------------- --------------------------- -------
---------------------------- --------------------------- -------
Total assets under administration $ 54,716 $ 38,755 $ 93,471 $ 54,321 $ 44,100 $ 98,421 -5%
============================ =========================== =======
============================ =========================== =======
Capital stock and surplus $ 4,626 $ 4,502 3%
(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) Return on common shareholders' equity for the 12 months ended March 31, 2002
is presented, for comparative purposes, on an adjusted basis excluding
certain 2001 non-recurring items.
SUMMARY OF CONSOLIDATED OPERATIONS (unaudited)
(in millions of dollars except earnings per common share)
For the three months
ended March 31
------------------------
------------------------
2003 2002
------------ -----------
------------ -----------
Income
Premium income $ 2,949 $ 2,908
Net investment income 948 942
Fee and other income 433 463
------------ -----------
------------ -----------
4,330 4,313
------------ -----------
------------ -----------
Benefits and Expenses
Paid or credited to policyholders and
beneficiaries including policyholder
dividends and experience refunds 3,322 3,302
Commissions 170 171
Operating expenses 430 470
Premium taxes 30 28
------------ -----------
------------ -----------
Net operating income before income taxes 378 342
Income taxes- current 81 61
- future 25 43
------------ -----------
------------ -----------
Net income before non-controlling interests 272 238
Non-controlling interests (note 4) 13 9
------------ -----------
------------ -----------
Net income $ 259 $ 229
============ ===========
============ ===========
Earnings per Common Share (note 7)
Basic $ 0.690 $ 0.602
============ ===========
============ ===========
Diluted $ 0.683 $ 0.594
============ ===========
============ ===========
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Summary of Net Income
Preferred shareholder dividends $ 6 $ 7
Net income - common shareholders 253 222
------------ -----------
------------ -----------
Net income $ 259 $ 229
============ ===========
============ ===========
Average number of shares outstanding - basic 366,235,013 369,079,660
Average number of shares outstanding - diluted 370,254,386 374,032,678
United States operating results during the three months ended March 31, 2003
have been included at the average market rate of $1.5100 Canadian compared with
$1.5945 Canadian for the three months ended March 31, 2002.
CONSOLIDATED BALANCE SHEET (unaudited)
(in millions of dollars)
March 31, December 31, March 31,
2003 2002 2002
------------ ------------ ------------
------------ ------------ ------------
Assets
Bonds $ 33,884 $ 33,764 $ 32,533
Mortgage loans 7,601 7,850 8,110
Stocks 1,416 1,581 1,327
Real estate 1,215 1,267 1,241
Loans to policyholders 5,869 6,177 6,232
Cash and certificates of deposit 966 912 683
Funds withheld by ceding insurers 4,791 4,786 4,262
Premiums in course of collection 352 305 546
Interest due and accrued 538 511 592
Future income taxes 99 138 141
Goodwill and intangible assets (note 2) 1,682 1,687 1,730
Other assets 1,120 1,093 1,164
------------ ------------ ------------
------------ ------------ ------------
Total assets $ 59,533 $ 60,071 $ 58,561
============ ============ ============
============ ============ ============
Liabilities
Policy liabilities
Actuarial liabilities $ 43,332 $ 44,508 $ 43,946
Provision for claims 590 645 621
Provision for policyholder dividends 353 363 354
Provision for experience rating refunds 874 927 684
Policyholder funds 1,896 1,853 1,792
------------ ------------ ------------
------------ ------------ ------------
47,045 48,296 47,397
Commercial paper and other loans (note 3) 1,568 1,012 1,071
Current income taxes 447 454 501
Other liabilities 2,619 2,081 1,695
Repurchase agreements 220 511 434
Net deferred gains on portfolio investments sold 984 958 1,016
------------ ------------ ------------
------------ ------------ ------------
52,883 53,312 52,114
Non-controlling interests (note 4) 2,024 2,051 1,945
Capital Stock and Surplus
Capital stock (note 5) 1,981 1,982 2,083
Surplus 2,517 2,382 2,056
Provision for unrealized gain on translation
of net investment in foreign operations 128 344 363
------------ ------------ ------------
------------ ------------ ------------
4,626 4,708 4,502
------------ ------------ ------------
------------ ------------ ------------
Liabilities, capital stock and surplus $ 59,533 $ 60,071 $ 58,561
============ ============ ============
============ ============ ============
United States assets and liabilities have been translated at the market rates of
$1.4700 Canadian for March 31, 2003, $1.5800 Canadian for December 31, 2002 and
$1.5935 Canadian for March 31, 2002.
CONSOLIDATED STATEMENT OF SURPLUS (unaudited)
(in millions of dollars)
For the three months
ended March 31
---------------------------------
---------------------------------
2003 2002
------------ ----------------
------------ ----------------
Balance, beginning of year $ 2,382 $ 1,951
Net income 259 229
Common share cancellation excess (19) (34)
Dividends to shareholders
Preferred shareholders (6) (7)
Common shareholders (99) (83)
------------ ----------------
------------ ----------------
Balance, end of period $ 2,517 $ 2,056
============ ================
============ ================
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
(in millions of dollars)
For the three months
ended March 31
------------------------------
------------------------------
2003 2002
------------ ------------
------------ ------------
Operations
Net income $ 259 $ 229
Adjustments for non-cash items:
Change in policy liabilities 114 (113)
Change in funds withheld by ceding insurers (5) 215
Change in current income taxes payable (7) (11)
Future income tax expense 25 43
Other 429 (766)
------------ ------------
------------ ------------
Cash flows from operations 815 (403)
Financing Activities
Issue of common shares 2 5
Purchased and cancelled common shares (22) (38)
Issue of debentures 600 -
Repayment of commercial paper and other loans (14) (4)
Debenture Issue costs (6) -
Dividends paid (105) (90)
------------ ------------
------------ ------------
455 (127)
Investment Activities
Bond sales and maturities 6,831 5,591
Mortgage loan repayments 333 431
Stock sales 225 60
Real estate sales 56 36
Change in loans to policyholders (18) (18)
Change in repurchase agreements (262) 35
Investment in subsidiaries - 72
Investment in bonds (8,165) (5,612)
Investment in mortgage loans (123) (171)
Investment in stocks (85) (40)
Investment in real estate (8) (8)
------------ ------------
------------ ------------
(1,216) 376
Increase (decrease) in cash and certificates of deposit 54 (154)
Cash and certificates of deposit, beginning of year 912 837
------------ ------------
------------ ------------
Cash and certificates of deposit, end of period $ 966 $ 683
============ ============
============ ============
Notes to Interim Consolidated Financial Statements (unaudited)
($ amounts in millions except per share amounts)
1. Basis of Presentation and Summary of Accounting Policies
(a) The interim unaudited consolidated financial statements of Great-West Lifeco
Inc. (Lifeco or the Company) at March 31, 2003 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, 2002,
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, 2002.
(b) New Accounting Requirements for 2003
Disclosure of Guarantees
In February 2003, the CICA issued Accounting Guideline 14 (AcG-14),
Disclosure of Guarantees, which identifies disclosure requirements for
certain guarantees, for financial statements of interim and annual periods
on or after January 1, 2003.
In the normal course, the Company may enter into agreements which may
contain features which meet the AcG-14 definition of a guarantee, and while
the maximum guarantee cannot always be determined, given the nature of the
future events which may or may not occur, any such arrangements that were
material have been previously disclosed by the Company.
(c) Certain of 2002 amounts presented for comparative purposes have been
reclassified to conform with the presentation adopted in the current year.
2. Goodwill and Other Intangible Assets
(a) The carrying value of goodwill and changes in the carrying value of
goodwill are as follows:
For the three months ended March 31 2003
---------------------------------------
---------------------------------------
Canada United States Total
----------- -------------------------
----------- ----------- -----------
Balance, beginning of year $1,092 $ 66 $1,158
Changes in foreign exchange rates (1) (4) (5)
----------- ----------- -----------
----------- ----------- -----------
Balance, end of period $1,091 $ 62 $1,153
=========== =========== ===========
=========== =========== ===========
2002
---------------------------------------
---------------------------------------
Canada United States Total
----------- ----------- -----------
----------- ----------- -----------
Balance, beginning of year $1,538 $ 66 $1,604
Reclassification between goodwill and intangible assets (529) - (529)
Reclassification between goodwill and future taxes 129 - 129
Sale of subsidiary (3) - (3)
----------- ----------- -----------
----------- ----------- -----------
Balance, end of period $1,135 $ 66 $1,201
=========== =========== ===========
=========== =========== ===========
(b) The carrying value of intangible assets and changes in the carrying
value of intangible assets are as follows:
For the three months ended March 31 2003
---------------------------------------
---------------------------------------
Canada United States Total
----------- -------------------------
----------- ----------- -----------
Balance, beginning and end of period $ 529 $ - $ 529
=========== =========== ===========
=========== =========== ===========
2002
---------------------------------------
---------------------------------------
Canada United States Total
----------- ----------- -----------
----------- ----------- -----------
Balance, beginning of year $ - $ - $ -
Reclassification from goodwill
- Brands and trademarks 175 - 175
- Shareholder portion of acquired future Participating
account profits 354 - 354
----------- ----------- -----------
----------- ----------- -----------
Balance, end of period $ 529 $ - $ 529
=========== =========== ===========
=========== =========== ===========
3. Commercial Paper and Other Loans (changes since December 31, 2002 annual
report)
On March 21, 2003 the Company issued $200 principal amount of 6.14%
debentures which mature on March 21, 2018 and $400 principal amount of 6.67%
debentures which mature on March 21, 2033.
4. Non-Controlling Interests
The Company controlled a 100% equity interest in The Great-West Life
Assurance Company (Great-West) and Great-West Life & Annuity Insurance
Company (GWL&A) at March 31, 2003 and March 31, 2002. The non-controlling
interests of GWL&A and Great-West and its subsidiaries are:
a) For the three months ended March 31 2003 2002
--------- ---------
Participating policyholder
Net income attributable to participating policyholder
before policyholder dividends
Great-West $ 25 $ 22
London Life 133 130
GWL&A 47 51
Policyholder dividends
Great-West 23 22
London Life 130 127
GWL&A 47 51
--------- ---------
--------- ---------
Net income $ 5 $ 3
--------- ---------
Preferred shareholder dividends 3 6
Non-controlling interests in capital stock and surplus - -
Distribution on Great-West Life Capital Trust Securities 5 -
--------- ---------
--------- ---------
Total $ 13 $ 9
========= =========
b) As at March 31, December 31 March 31,
2003 2002 2002
---------- --------- ---------
Participating policyholder
undistributed surplus
Great-West $ 332 $ 330 $ 332
London Life 914 916 918
GWL&A 227 244 235
---------- --------- ---------
1,473 1,490 1,485
Preferred shareholders 209 209 459
Non-controlling interests in capital stock
stock and surplus 1 2 1
Trust units issued by Great-West Life Capital
Trust 350 350 -
Great-West Life Capital Trust units held by
subsidiary (9) - -
---------- --------- ---------
341 350 -
---------- --------- ---------
$ 2,024 $ 2,051 $ 1,945
========== ========= =========
5. Capital Stock
Authorized
Unlimited First Preferred Shares, Class A Preferred Shares and Second Preferred Shares
Unlimited Common Shares
Issued and Outstanding
March 31, 2003 March 31, 2002
-------------------------- ----------------------------
-------------------------------------------------------
Stated Value Stated Value
Number (thousands) Number (thousands)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Preferred Shares:
Series B, 7.45% Non-Cumulative
First Preferred Shares - $ - 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 17,192,242 $ 429,806 21,192,242 $ 529,806
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Common Shares:
Balance, beginning of year 366,376,712 $ 1,551,764 369,459,808 $ 1,553,294
Purchased and cancelled under
Normal Course Issuer Bid (600,700) (2,545) (1,134,300) (4,772)
Issued under Stock Option Plan 149,946 2,227 492,799 4,903
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Balance, end of period 365,925,958 $ 1,551,446 368,818,307 $ 1,553,425
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Total Capital Stock $ 1,981,252 $ 2,083,231
============ ============
============ ============
6. Stock-Based Compensation and Other Stock-Based Payment
367,000 options were granted under the Company's stock option plan for the
three months ended March 31, 2003. The weighted-average fair value of
options granted during the three months ended March 31, 2003 was $9.89 per
option. The fair value of each option granted was estimated using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for the options granted for the three months ended March
31, 2003: dividend yield 2.820%, expected volatility 26.16%, risk-free
interest rate 4.742%, and expected life of 7 years.
In accordance with the intrinsic value based method of accounting, no
compensation expense has been recorded for options granted under the
Company's plan. Had the fair value based method of accounting been applied,
compensation expense, net of tax, would have been recorded for the options
granted under the Company's plan since January 1, 2002 based on the fair
value of the options granted, amortized over the vesting period. The
Company's net income for 2003 and 2002 on this basis would have been reduced
by less than $1 and earnings per common share would have been reduced by
less than $0.001.
7. Earnings Per Common Share
The following table provides a reconciliation between basic and diluted
earnings per common share:
For the three months
ended March 31
---------------------------
---------------------------
2003 2002
------------ -------------
------------ -------------
a) Earnings
Net income - common shareholders $ 253 $ 222
============ =============
============ =============
b) Number of Common Shares at March 31
Average number of common shares outstanding 366,235,013 369,079,660
Add:
-Potential exercise of outstanding stock options 4,019,373 4,953,018
------------ -------------
------------ -------------
Average number of common shares outstanding
- diluted basis 370,254,386 374,032,678
============ =============
============ =============
Earnings per Common Share ( a) divided by b) )
Basic $ 0.690 $ 0.602
============ =============
============ =============
Diluted $ 0.683 $ 0.594
============ =============
============ =============
8. Proposed Acquisition
On February 14, 2003, Lifeco entered into an agreement with Canada Life
Financial Corporation (Canada Life), the parent company of The Canada Life
Assurance Company, to acquire 100% of Canada Life outstanding common shares.
The transaction is valued at $44.50 per Canada Life common share,
representing an aggregate transaction value of $7.3 billion.
The terms of the agreement allow Canada Life common shareholders to elect to
receive one of the following alternatives for each of their Canada Life
common shares:
- $44.50 in cash (to an aggregate maximum of approximately $4.4
billion); or
- 1.78 Lifeco 4.80% Non-Cumulative First Preferred Shares, Series E (to
an aggregate maximum of 24 million Lifeco Series E Shares); or
- 1.78 Lifeco 5.90% Non-Cumulative First Preferred Shares, Series F (to
an aggregate maximum of 8 million Lifeco Series F Shares); or
- 1.1849 Lifeco common shares (to an aggregate maximum of approximately
56 million Lifeco common shares); or
- any combination of the foregoing;
in each case subject to election and proration as a result of the stated
maximums.
The transaction is subject to approval by Canada Life common shareholders on May
5, 2003 and is also subject to approval by regulatory authorities. The
transaction is expected to close in the third quarter of 2003.
To support the transaction, Power Financial Corporation has committed to invest
$800 to purchase 21.302 million common shares of Lifeco from treasury via
private placement. Investors Group Inc. has also agreed to invest $100 by
purchasing 2.662 million Lifeco common shares from treasury via private
placement.
Lifeco also entered into a commitment with a Canadian chartered bank (the
"Bank") pursuant to which the Bank agreed to underwrite a credit facility in
favour of Lifeco or one or more of its subsidiaries. The credit facility
provides short-term funding alternatives, and also offers up to $600 of five
year term financing.
9.
Segmented Information
Consolidated Operations
For the Three Months Ended March 31, 2003
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------------------- --------------------
--------------------------------------------------- --------------------
Individual Individual
Insurance & Insurance &
Group Investment Investment Total
Insurance Products ReinsurancCorporate Total Products Canada
--------- -------- ------------------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Income:
Premium income $ 574 $ 205 $ 1,152 $ 3 $ 1,934 $ 349 $ 2,283
Net investment income 51 111 165 32 359 236 595
Fee and other income 17 84 - 6 107 - 107
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Total income 642 400 1,317 41 2,400 585 2,985
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Benefits and Expenses:
Paid or credited to
policyholders 474 227 1,302 9 2,012 500 2,512
Other 120 93 7 9 229 68 297
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net operating income
before income taxes 48 80 8 23 159 17 176
Income taxes 12 20 (3) (5) 24 12 36
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income before
non-controlling interests 36 60 11 28 135 5 140
Non-controlling interests - - - 8 8 5 13
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 36 $ 60 $ 11 $ 20 $ 127 $ - $ 127
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
Summary of Net Income
Preferred shareholder dividend$ - $ - $ - $ 6 $ 6 $ - $ 6
Net income - common
shareholders 36 60 11 14 121 - 121
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 36 $ 60 $ 11 $ 20 $ 127 $ - $ 127
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
For the Three Months Ended March 31, 2003
United States Operations
--------------------------------------------------------------
--------------------------------------------------------------
Participating
Shareholder Policyholder
---------------------------------------------------
---------------------------------------------------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Income:
Premium income $ 373 $ 210 $ - $ 583 $ 83 $ 666 $ 2,949
Net investment income 29 188 9 226 127 353 948
Fee and other income 240 85 1 326 - 326 433
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Total income 642 483 10 1,135 210 1,345 4,330
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Benefits and Expenses:
Paid or credited to
policyholders 288 320 (1) 607 203 810 3,322
Other 246 79 2 327 6 333 630
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net operating income
before income taxes 108 84 9 201 1 202 378
Income taxes 38 24 7 69 1 70 106
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income before
non-controlling interests 70 60 2 132 - 132 272
Non-controlling interests - - - - - - 13
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 70 $ 60 $ 2 $ 132 $ - $ 132 $ 259
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
Summary of Net Income
Preferred shareholder
dividends - $ - $ - $ - $ - $ - $ 6
Net income - common
shareholders 70 60 2 132 - 132 253
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 70 $ 60 $ 2 $ 132 $ - $ 132 $ 259
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
For the Three Months Ended March 31, 2002
Canadian Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholder Policyholder
--------------------------------------------------- ---------
--------------------------------------------------- ---------
Individual Individual
Insurance & Insurance &
Group Investment Investment Total
Insurance Products Reinsurance Corporate Total Products Canada
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Income:
Premium income $ 530 $ 167 $ 1,125 $ 3 $ 1,825 $ 333 $ 2,158
Net investment income 51 119 155 10 335 230 565
Fee and other income 17 81 - 4 102 - 102
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Total income 598 367 1,280 17 2,262 563 2,825
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Benefits and Expenses:
Paid or credited to
policyholders 450 185 1,242 11 1,888 489 2,377
Other 106 100 7 5 218 62 280
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net operating income
before income taxes 42 82 31 1 156 12 168
Income taxes 16 28 3 (7) 40 9 49
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income before
non-controlling interests 26 54 28 8 116 3 119
Non-controlling interests - - - 6 6 3 9
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 26 $ 54 $ 28 $ 2 $ 110 $ - $ 110
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
Summary of Net Income
Preferred shareholder dividend$ - $ - $ - $ 7 $ 7 $ - $ 7
Net income - common
shareholders 26 54 28 (5) 103 - 103
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 26 $ 54 $ 28 $ 2 $ 110 $ - $ 110
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
For the Three Months Ended March 31, 2002
United States Operations
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating
Shareholder Policyholder
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Employee Financial Financial Total Total
Benefits Services Corporate Total Services U.S. Company
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Income:
Premium income $ 418 $ 243 $ - $ 661 $ 89 $ 750 $ 2,908
Net investment income 24 211 4 239 138 377 942
Fee and other income 272 89 - 361 - 361 463
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Total income 714 543 4 1,261 227 1,488 4,313
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Benefits and Expenses:
Paid or credited to
policyholders 336 371 (1) 706 219 925 3,302
Other 290 88 6 384 5 389 669
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net operating income
before income taxes 88 84 (1) 171 3 174 342
Income taxes 31 25 (4) 52 3 55 104
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income before
non-controlling interests 57 59 3 119 - 119 238
Non-controlling interests - - - - - - 9
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 57 $ 59 $ 3 $ 119 $ - $ 119 $ 229
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
Summary of Net Income
Preferred shareholder
dividend $ - $ - $ - $ - $ - $ - $ 7
Net income - common
shareholders 57 59 3 119 - 119 222
--------- -------- --------- --------------------- --------- ----------
--------- -------- --------- --------------------- --------- ----------
Net income $ 57 $ 59 $ 3 $ 119 $ - $ 119 $ 229
========= ======== ========= ===================== ========= ==========
========= ======== ========= ===================== ========= ==========
Earnings Per Common Share
Comparisons
2003 2002 2001 2000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
First Quarter $ 0.690 $ 0.602 $ 0.446 $ 0.376
Goodwill Amortization - - 0.043 0.043
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Adjusted First Quarter 0.690 0.602 0.489 0.419
Second Quarter 0.634 0.097 0.438
Goodwill Amortization - 0.043 0.043
Alta Charges - 0.440 -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Adjusted Second Quarter - 0.634 0.580 0.481
Third Quarter 0.653 0.334 0.440
Goodwill Amortization - 0.043 0.044
Sept 11 Charges - 0.199 -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Adjusted Third Quarter - 0.653 0.576 0.484
Fourth Quarter 0.641 0.510 0.468
Goodwill Amortization - 0.048 0.044
Foreign Exchange - Alta - 0.004 -
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Adjusted Fourth Quarter - 0.641 0.562 0.512
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Full Year $ 0.690 $ 2.530 $ 2.207 $ 1.896
========== ========== ========== ==========
========== ========== ========== ==========
Great-West Lifeco Inc.
Canada/U.S. Analysis
March 31, 2003
YEAR TO DATE
------------------------------------------------------------------------
------------------------------------------------------------------------
Actual Budget Actual Bud-03/ Act-03/ Act-03/
2002 2003 2003 Act-02 Act-02 Bud-03
------------- ------------- ------------ --------- --------- ---------
------------- ------------- ------------ --------- --------- ---------
Canada (Millions - CDN $)
.. Operations - Great-West Life Canada $ 106.9 $ 124.8 $ 125.0 16.7% 16.9% 0.2%
.. Canada Portion of Lifeco Exp. (4.2) (3.9) (4.1)
------------- ------------- ------------ --------- --------- ---------
------------- ------------- ------------ --------- --------- ---------
Lifeco - Cdn Segment $ 102.7 $ 120.9 $ 120.9 17.7% 17.7% 0.0%
============= ============= ============ ========= ========= =========
============= ============= ============ ========= ========= =========
United States
.. Operations (GWL&A, US $) $ 80.7 $ 82.3 $ 85.9 2.0% 6.4% 4.4%
.. GWL&A Nova Scotia withholding tax (2.3) (2.5) (2.3)
------------- ------------- ------------ --------- --------- ---------
------------- ------------- ------------ --------- --------- ---------
Sub-total $ 78.4 $ 79.8 $ 83.6 1.8% 6.6% 4.8%
.. FX Translation 46.6 46.4 42.7
.. Hedge (5.1) - 5.6
------------- ------------- ------------ --------- --------- ---------
------------- ------------- ------------ --------- --------- ---------
Sub-total $ 119.9 $ 126.2 $ 131.9 5.3% 10.0% 4.5%
.. U.S. Portion of Lifeco Exp. (0.5) - -
------------- ------------- ------------ --------- --------- ---------
------------- ------------- ------------ --------- --------- ---------
Lifeco - U.S. Segment $ 119.4 $ 126.2 $ 131.9 5.7% 10.5% 4.5%
============= ============= ============ ========= ========= =========
============= ============= ============ ========= ========= =========
Total Lifeco $ 222.1 $ 247.1 $ 252.8 11.3% 13.8% 2.3%
============= ============= ============ ========= ========= =========
============= ============= ============ ========= ========= =========
EPS $ 0.602 $ 0.675 $ 0.690 12.1% 14.6% 2.2%
============= ============= ============ ========= ========= =========
============= ============= ============ ========= ========= =========
U.S. $ Conversion Rate 1.5945 1.5100
U.S. Foreign Exchange Contracts 1.5295 1.5787
U.S. Effective Rate 1.5289 1.5809 1.5774
Average # shares outstanding 369,079,660 366,245,034 366,235,013
GREAT-WEST LIFECO INC.
SUMMARY OF CONSOLIDATED NET INCOME
MARCH 31, 2003
(000,000's $)
PARTICIPATING COMMON
POLICYHOLDER SHAREHOLDER
----------------------------------- -----------------------------------
Budget Actual Actual Budget Actual Actual
Mar 03 Mar 03 Mar 02 Mar 03 Mar 03 Mar 02
------ ------ ------ ------ ------ ------
Canadian Operations
Group Insurance $ - $ - - $ 10.4 10.4 9.2
Group Health - - - 21.4 25.4 16.8
--------- ----------- ------------ ---------- ------------ -----------
Total Group Insurance - - - 31.8 35.8 26.0
Individual Insurance 12.3 4.1 1.0 16.4 22.8 16.3
Individual Health - - - 7.8 8.5 5.9
Individual Annuity - - - 16.2 18.5 21.8
Group Annuity - - - 9.8 10.4 9.9
--------- ----------- ------------ ---------- ------------ -----------
Total Ind Insur & Inv Produ12.3 4.1 1.0 50.2 60.2 53.9
Reinsurance 1.8 1.3 2.1 14.8 10.6 27.9
Corporate - - - 24.1 14.3 (5.1)
--------- ----------- ------------ ---------- ------------ -----------
Total Canadian Operations$ 14.1 $ 5.4 3.1 $ 120.9 120.9 102.7
========= =========== ============ ========== ============ ===========
United States Operations
Individual Insurance $ 0.6 $ 0.6 0.5 $ 25.2 22.1 21.2
Individual Health - - - - - -
Individual Annuity - (0.4) (0.3) 2.5 2.2 2.3
Group Annuity - (0.1) (0.1) 29.9 28.4 28.4
401(K) - - - 7.2 6.8 7.2
--------- ----------- ------------ ---------- ------------ -----------
Total Financial Services 0.6 0.1 0.1 64.8 59.5 59.1
Employee Benefits - - - 59.1 70.2 57.2
Corporate - - - 2.3 2.2 3.1
--------- ----------- ------------ ---------- ------------ -----------
Total United States Opera$ions 0.6 $ 0.1 0.1 $ 126.2 131.9 119.4
========= =========== ============ ========== ============ ===========
Total Company $ 14.7 $ 5.5 3.2 $ 247.1 252.8 222.1
- -------------
========= =========== ============ ========== ============ ===========
EARNINGS PER COMMON SHARE
Canada 0.330 0.330 0.278
US 0.345 0.360 0.324
------ ------ -----
Total 0.675 0.690 0.602
Average Number of Shares 366,245,034 366,235,013 369,079,660