TSX:GWO
This earnings news release for |
"We made significant progress this quarter to drive value creation through both organic growth and acquisition. The transactions we announced in the
Net earnings attributable to common shareholders (net earnings) were
Common Shareholders | Q3 2021 | Q3 2020 |
Base earnings(1) | ||
221 | 83 | |
232 | 182 | |
Capital and Risk Solutions | 107 | 156 |
Lifeco Corporate | (2) | (12) |
Total base earnings(1) | ||
Items excluded from base earnings(2) | 2 | 147 |
Net earnings | ||
Base EPS(1) | ||
Net EPS | ||
Base return on equity(1)(3) | 14.5% | 13.5% |
Return on equity(1)(3) | 14.9% | 12.1% |
(1)Represents a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's third quarter of 2021 interim MD&A for additional details. | ||
(2)Items excluded from base earnings are actuarial assumption changes and other management actions, market-related impacts on liabilities, transaction costs related to the acquisitions of | ||
(3)Base return on equity and return on equity are calculated using the trailing four quarters of applicable earnings and common shareholders' equity. |
Base EPS for the third quarter of 2021 of
Reported net EPS for the third quarter of 2021 was
Highlights
Key strategic transactions announced
The Company announced several key strategic business transactions in the
- On
July 21, 2021 , a Lifeco subsidiary,Great-West Life & Annuity Insurance Company (GWL&A), which operates primarily as 'Empower Retirement' (Empower) announced a definitive agreement to acquire Prudential Financial, Inc.'s (Prudential) full-service retirement business for a total value ofUS$3.55 billion . The acquisition will add significant scale and capabilities and further strengthens Empower's position as the second largest retirement plan service provider inthe United States . The transaction is expected to deliver run-rate annual pre-tax expense synergies ofUS$180 million which are expected to be phased in over 24 months, and also increases the synergy potential of Empower's 2020 acquisition of hybrid wealth manager,Personal Capital , across a larger combined business. Subject to regulatory approvals, the transaction is expected to close in the first quarter of 2022. - On
September 1, 2021 , a Lifeco subsidiary,The Canada Life Assurance Company (Canada Life) completed the previously announced acquisition ofClaimSecure Inc. , an industry-leading healthcare management firm that provides health and dental claim management services to private and public businesses inCanada . - Subsequent to
September 30, 2021 , onNovember 1, 2021 , a Lifeco subsidiary,Irish Life Group Limited (Irish Life ) completed the previously announced acquisition ofArk Life Assurance Company dac (Ark Life) from Phoenix Group Holdings plc for a total cash consideration of €230 million. The acquisition adds scale toIrish Life's retail division and enhancesIrish Life's ability to provide customers with market-leading wealth and insurance solutions. - Subsequent to
September 30, 2021 , onOctober 7, 2021 , the Company announced it had agreed to enter into a long-term strategic relationship withSagard Holdings (Sagard), a wholly-owned subsidiary ofPower Corporation . The relationship includes the sale of itsUnited States -based subsidiaries,EverWest Real Estate Investors, LLC andEverWest Advisors, LLC (EverWest) to Sagard, in exchange for a minority shareholding in Sagard's subsidiary,Sagard Holdings Management Inc. The strategic relationship with Sagard is intended to advance the Company's strategy to further broaden its access to alternative investment options. The sale of EverWest is expected to close in the fourth quarter of 2021, subject to regulatory and customary closing conditions.
Consolidated assets under administration of
- Assets under administration (AUA) were approximately
$2.2 trillion atSeptember 30, 2021 , an increase of 11% fromDecember 31, 2020 , primarily due to the impact of equity market movement and new business growth with respect to segregated funds, proprietary mutual funds and institutional net assets and other AUA, partially offset by the impact of currency movement.
Capital strength and financial flexibility maintained
- The Company's capital position remained strong at
September 30, 2021 , with a LICAT Ratio for Canada Life, Lifeco's major Canadian operating subsidiary, of 123% which is above the Company's internal target range and the supervisory target. - On
August 16, 2021 , the Company issued$1.5 billion aggregate principal amount 3.60% Limited Recourse Capital Notes Series 1 (Subordinated Indebtedness), maturing onDecember 31, 2081 (LRCN Series 1). - Subsequent to
September 30, 2021 , onOctober 8, 2021 , the Company issued 8,000,000 Series Y, 4.50% Non-Cumulative First Preferred Shares for gross proceeds of$200 million . - The Company made payments of
US$400 million onJuly 2, 2021 andUS$100 million onSeptember 29, 2021 on its committed line of credit related to the Company's acquisition of the retirement services business from MassMutual onDecember 31, 2020 , reducing the balance drawn on this line of credit to nil.
SEGMENTED OPERATING RESULTS
For reporting purposes, Lifeco's consolidated operating results are grouped into five reportable segments –
- Q3
Canada segment base earnings of$312 million and net earnings of$305 million – Base earnings for the third quarter of 2021 were$312 million , up 16% compared to the third quarter of 2020, primarily due to favourable morbidity experience in Group Customer, favourable mortality and investment experience in Individual Customer and higher fee income. Net earnings for the third quarter of 2021 were$305 million , up from$266 million in the third quarter of 2020, primarily due to growth in base earnings and market related impacts on liabilities, partially offset by unfavourable actuarial assumption changes.
Q3 U.S. Financial Services base earnings ofUS$149 million and net earnings ofUS$138 million –U.S. Financial Services (primarily Empower) base earnings for the third quarter of 2021 wereUS$149 million , upUS$93 million or 166% from the third quarter of 2020. Base earnings growth included MassMutual base earnings ofUS$54 million and growth in the legacy Empower business from higher average equity markets and an increase in participants, as well as higher contributions from investment experience. These items were partially offset by aPersonal Capital loss ofUS$4 million . Net earnings for the third quarter of 2021 wereUS$138 million , up fromUS$84 million in the third quarter of 2020, primarily due to growth in base earnings.- Run-rate cost synergies are on track – Annualized run rate cost synergies of
US$60 million pre-tax have been achieved as ofSeptember 30, 2021 related to the Company's acquisition of MassMutual's retirement services business. The Company remains on track to achieve annualized run rate cost synergies ofUS$160 million pre-tax at the end of integration in 2022. - Q3
Putnam net earnings ofUS$27 million –Putnam's net earnings for the third quarter of 2021 wereUS$27 million , an improvement ofUS$17 million compared to the third quarter of 2020, primarily due to higher fee revenue and changes to certain tax estimates, partially offset by lower net investment income and higher compensation related and asset-based expenses. ForPutnam , there were no differences between net and base earnings. Putnam average assets under management up 14% –Putnam's average assets under management for the third quarter of 2021 wereUS$200.6 billion , an increase ofUS$23.9 billion compared to the same quarter last year, primarily due to cumulative positive markets over the twelve-month period.Putnam continues to sustain strong investment performance relative to its peers. As ofSeptember 30, 2021 , approximately 75% and 86% ofPutnam's fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively. In addition, 49% and 71% ofPutnam's fund assets were in the Lipper top quartile on a three-year and five-year basis, respectively.Putnam has 28 funds currently rated 4-5 stars by Morningstar Ratings.
- Q3
Europe segment base earnings of$232 million and net earnings of$357 million – Base earnings for the third quarter of 2021 were$232 million , up 27% compared to the third quarter of 2020, primarily due to favourable investment experience in theUnited Kingdom (U.K. ), fee income growth across all business units and a$47 million pension settlement gain inIreland . These items were partially offset by less favourable morbidity experience in theU.K. and mortality experience inIreland . Net earnings for the third quarter of 2021 were$357 million , up$41 million from the third quarter of 2020, primarily due to base earnings growth, higher contributions from actuarial assumption changes and other management actions and higher market-related impacts, partially offset by a$94 million net gain from the sale of IPSI in the third quarter of 2020. - Q3
Europe sales included a$1.3 billion bulk annuity deal in theU.K.
CAPITAL AND RISK SOLUTIONS
Q3 Capital and Risk Solutions segment base earnings of$107 million and net earnings of$102 million Base earnings for the third quarter of 2021, were$107 million , down 31% compared to the third quarter of 2020. Base earnings for the third quarter of 2021 included a loss estimate of$61 million for net estimated claims, primarily due to the impact of recent major weather events. Excluding this item, base earnings increased compared to the same quarter last year, primarily due to favourable impacts from new business and higher business volumes. This was partially offset by unfavourableU.S. life claims experience totalling$71 million primarily due to the direct and indirect impacts of the COVID-19 pandemic. Net earnings for the third quarter of 2021 of$102 million decreased$65 million from the prior year, primarily due to lower base earnings.- • Continued expansion in the global reinsurance market – In the third quarter of 2021, the Company entered into a long-term reinsurance agreement with a life insurance company in
Japan . In exchange for a single upfront premium payment, Canada Life will pay the actual benefit obligations incurred by the insurance company.
LIFECO CORPORATE
- • Q3 Lifeco Corporate segment base loss of
$2 million and net loss of$60 million – Base loss of$2 million for the third quarter of 2021 decreased by$10 million compared to the same quarter last year, primarily due to changes in certain tax estimates and lower operating expenses. Net loss of$60 million for the third quarter of 2021 compared to net loss of$12 million for the same quarter last year was due to a provision for payments relating to the Company's 2003 acquisition ofThe Canada Life Assurance Company .
QUARTERLY DIVIDENDS
The Board of Directors approved a quarterly dividend of
In addition, the Directors approved quarterly dividends on Lifeco's preferred shares, as follows:
First Preferred Shares | Record Date | Payment Date | Amount, per share |
Series F | |||
Series G | |||
Series H | |||
Series I | |||
Series L | |||
Series M | |||
Series N | |||
Series P | |||
Series Q | |||
Series R | |||
Series S | |||
Series T | |||
Series Y(1) |
(1) | The Series Y First Preferred Shares were issued on |
For purposes of the Income Tax Act (
Selected financial information is attached.
Basis of presentation
The condensed consolidated interim unaudited financial statements of Lifeco have been prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted and are the basis for the figures presented in this release, unless otherwise noted.
Cautionary note regarding Forward-Looking Information
This release may contain forward-looking information. Forward-looking information includes statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "will", "may", "expects", "anticipates", "intends", "plans", "believes", "estimates", "objective", "target", "potential" and other similar expressions or negative versions thereof. These statements include, without limitation, statements about the Company's operations, business, financial condition, expected financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, anticipated global economic conditions and possible future actions by the Company, including statements made with respect to the expected cost (including deferred consideration), benefits, timing of integration activities and revenue and expense synergies of acquisitions and divestitures, including but not limited to the proposed acquisition of the full-service retirement business of Prudential Financial Inc. (Prudential) and the acquisitions of
Forward-looking statements are based on expectations, forecasts, estimates, predictions, projections and conclusions about future events that were current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally, including the insurance, mutual fund and retirement solutions industries. They are not guarantees of future performance, and the reader is cautioned that actual events and results could differ materially from those expressed or implied by forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct. Whether or not actual results differ from forward-looking information may depend on numerous factors, developments and assumptions, including, without limitation, the severity, magnitude and impact of the COVID-19 pandemic (including the effects of the COVID-19 pandemic and the effects of governments' and other businesses' responses to the COVID-19 pandemic on the economy and the Company's financial results, financial condition and operations), the duration of COVID-19 impacts and the availability and adoption of vaccines, the emergence of COVID-19 variants, assumptions around sales, fee rates, asset breakdowns, lapses, plan contributions, redemptions and market returns, the ability to integrate the acquisitions of
The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company's 2020 Annual MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates" and in the Company's annual information form dated
Other than as specifically required by applicable law, the Company does not intend to update any forward-looking information whether as a result of new information, future events or otherwise.
Cautionary note regarding Non-IFRS Financial Measures
This release contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include, but are not limited to, "base earnings (loss)", "base earnings (loss) (US$)", "base earnings per common share (EPS)", "return on equity (ROE)", "base return on equity", "core net earnings (loss)", "constant currency basis", "impact of currency movement", "premiums and deposits", "sales", "net cash flows and net asset flows", "assets under management" and "assets under administration". Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Refer to the "Non-IFRS Financial Measures" section in this MD&A for the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS as well as additional details on each measure.
Third Quarter Conference Call
Lifeco's third quarter conference call and audio webcast will be held
- Participants in the
Toronto area: 416-915-3239 - Participants from
North America : 1-800-319-4610
A replay of the call will be available from
FINANCIAL HIGHLIGHTS (unaudited)
(in Canadian $ millions except per share amounts)
As at or for the three months ended | For the nine months ended | ||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | |||||||
Earnings | |||||||||||
Base earnings(1) | $ | 870 | $ | 826 | $ | 679 | $ | 2,435 | $ | 1,928 | |
Net earnings - common shareholders | 872 | 784 | 826 | 2,363 | 2,031 | ||||||
Per common share | |||||||||||
Basic: | |||||||||||
Base earnings(1) | 0.934 | 0.889 | 0.732 | 2.620 | 2.078 | ||||||
Net earnings | 0.938 | 0.844 | 0.891 | 2.544 | 2.190 | ||||||
Diluted net earnings | 0.936 | 0.842 | 0.891 | 2.540 | 2.189 | ||||||
Dividends paid | 0.438 | 0.438 | 0.438 | 1.314 | 1.314 | ||||||
Book value | 24.40 | 23.70 | 22.57 | ||||||||
Base return on equity(1) | 14.5% | 13.9% | 13.5% | ||||||||
Return on equity(1) | 14.9% | 15.0% | 12.4% | ||||||||
Total premiums and deposits(1)(2) | $ | 39,282 | $ | 36,804 | $ | 40,903 | $ | 121,149 | $ | 130,514 | |
Fee and other income | 1,858 | 1,800 | 1,486 | 5,409 | 4,333 | ||||||
Net policyholder benefits, dividends and experience refunds | 10,915 | 12,162 | 9,155 | 35,011 | 28,243 | ||||||
Total assets per financial statements | $ | 614,962 | $ | 604,176 | $ | 473,737 | |||||
Proprietary mutual funds and institutional net assets(1) | 365,764 | 358,297 | 341,436 | ||||||||
Total assets under management(1) | 980,726 | 962,473 | 815,173 | ||||||||
Other assets under administration(1) | 1,213,074 | 1,193,449 | 845,862 | ||||||||
Total assets under administration(1) | $ | 2,193,800 | $ | 2,155,922 | $ | 1,661,035 | |||||
Total equity | $ | 30,232 | $ | 27,956 | $ | 26,648 | |||||
123% | 126% | 131% | |||||||||
(1) | This metric is a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's |
(2) | 2020 comparative figures have been reclassified to reflect presentation adjustments in the |
(3) | The Life Insurance Capital Adequacy Test (LICAT) Ratio is based on the consolidated results of |
Base earnings(1) and Net earnings - common shareholders (unaudited) | |||||||||||
For the three months ended | For the nine months ended | ||||||||||
2021 | 2021 | 2020 | 2021 | 2020 | |||||||
Base earnings (loss)(1) | |||||||||||
$ | 312 | $ | 293 | $ | 270 | $ | 903 | $ | 858 | ||
221 | 190 | 83 | 515 | 183 | |||||||
232 | 184 | 182 | 617 | 493 | |||||||
Capital and Risk Solutions | 107 | 150 | 156 | 402 | 412 | ||||||
Lifeco Corporate | (2) | 9 | (12) | (2) | (18) | ||||||
Lifeco base earnings(1) | $ | 870 | $ | 826 | $ | 679 | $ | 2,435 | $ | 1,928 | |
Items excluded from base earnings(1) | |||||||||||
Actuarial assumption changes and other management actions(1) | $ | 69 | $ | 37 | $ | 66 | $ | 111 | $ | 136 | |
Market-related impacts on liabilities(1) | 47 | (19) | 18 | 4 | (96) | ||||||
Transaction costs related to acquisitions(1)(2) | (90) | (24) | (31) | (115) | (31) | ||||||
Restructuring and integration costs(1) | (24) | (15) | — | (51) | — | ||||||
Net gain/charge on business dispositions(1) | — | — | 94 | — | 94 | ||||||
Tax legislative changes impact on liabilities(1) | — | (21) | — | (21) | — | ||||||
Items excluded from Lifeco base earnings(1) | $ | 2 | $ | (42) | $ | 147 | $ | (72) | $ | 103 | |
Net earnings (loss) - common shareholders | |||||||||||
$ | 305 | $ | 288 | $ | 266 | $ | 880 | $ | 770 | ||
168 | 150 | 89 | 407 | 172 | |||||||
357 | 185 | 316 | 737 | 660 | |||||||
Capital and Risk Solutions | 102 | 152 | 167 | 399 | 447 | ||||||
Lifeco Corporate | (60) | 9 | (12) | (60) | (18) | ||||||
Lifeco net earnings - common shareholders | $ | 872 | $ | 784 | $ | 826 | $ | 2,363 | $ | 2,031 | |
(1) | This metric is a non-IFRS measure. Refer to the "Non-IFRS Financial Measures" section of the Company's |
(2) | The transaction costs incurred to date relate to the acquisitions of the full-service retirement business of Prudential, |
SOURCE
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