Great-West Lifeco Inc. Q1 2010 Earnings Call Transcript

Great-West Lifeco Inc. Q1 2010 Earnings Call Transcript
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Great-West Lifeco Inc. (GWLOF.PK)

Q1 2010 Earnings Call

May 6, 2010 3:30 p.m. ET

Executives

Allen Loney - President, CEO & Director

Bill Lovatt - Executive Vice President and CFO

Arshil Jamal - Executive Vice President and Chief Actuary

Bob Reynolds - President & CEO, Putnam Investments

Bill Acton - President & CEO, Canada Life Capital Corporation

Peter Munro - Executive Vice-President & Chief Investment Officer

Analysts

Tom Mackinnon - BMO Capital

Michael Goldberg - Desjardins Securities

Mario Medonca - Genuity Capital Markets

Robert Sedran - CIBC

Presentation

Operator

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Good afternoon, ladies and gentlemen. Welcome to the Great West Lifeco Inc. First Quarter Conference Call. Please be advised this call is being recorded. I would now like to turn the meeting over to Mr. Allen Loney. Please go ahead Mr. Loney.

Allen Loney

Thank you very much, Operator. Good afternoon and welcome to Great West Lifeco's first quarter conference call. Joining me today is Bill Lovatt, Executive Vice President and CFO, Arshil Jamal, Executive Vice President and Chief Actuary, Paul Mahon, President and Chief Operating Officer Canada with West Life, Mitchell Graye, President and Chief Executive Officer of Great-West Life and annuity, Bill Acton, President and Chief Executive Officer, Canada Life Capital Corporation and Bob Reynolds, Chief Executive Officer of Putnam investments Corporation LLC. Also with us is Peter Munro, Executive Vice President and Chief Investment Officer for GW, and for Great-West Life, London Life and Canada Life, and Mark Corbett, the Executive Vice President and Chief Investment Officer for the United States Operations.

Before we start, I'll draw your attention to our cautionary notice regarding the forward-looking information and non-GAAP financial measures on Slides 2 & 3. These causes may note to apply to the discussion you will hear this afternoon as well as for the presentation material that has been provided. That said, earlier today, Lifeco reported its first quarter earnings and also announced a quarterly dividend on its common shares unchanged at $30.75 per share.

On slide five, we provide our consolidated net income results. For the quarter, we reported shareholder net income of $441 million or $46.6 per common share, very similar to our results for the third and fourth quarter, and up 35% over 2009, and up 45% over first quarter of 2009 on a constant currency basis. The strength of the Canadian dollar negatively impacted results by approximately $31 million or $3.2 per share.

Turning to slide six, our return on common shareholder equity was 15% for the 12 months ended March 31, 2010. This is a rolling four quarter calculation for the first quarter of 2009 which was negatively impacted by the financial crisis drops off, and the last four quarters which have been quite steady were met. The 15% ROE is noteworthy as it is consistent with our long-term return objective.

With respect to common dividends as I mentioned earlier, we have maintained our common dividend this quarter at $30.75 per share for as been for the past seven quarters. On Slide seven, looking at sales, we achieved volume results up 43% from Q1, 2009 with healthy growth in all geographies. This equates to a 66% increase on a constant currency basis. Premiums and deposits show 3% year-over-year growth, which works out to a 16% increase on a constant currency basis.

Turning to slide 8, consolidated fee income was $736 million in the quarter, compared with $680 million a year ago, and this equates to 8% growth or 21% increase on a constant currency basis. Equity markets have had a 52% positive year-over-year impact this quarter on a pretax basis as it was the main contributor to an increase in average assets under Management as compared to 2009.

The positive equity market impacts breaks down to $19 million in Canada, $29 million in the United States and $4 million in Europe. I find that the Putnam results in the fourth quarter of 2009 included a one time performance fee which skews comparisons with these quarter solid results.

On slide 9, our consolidated expenses for the quarter were $630 million down from $663 million a year ago. Expenses as reported were down 5%, but were up 5% on a constant currency basis. A good result as expenses were well contained in light of the very strong sales growth.

I'll draw your attention to Canada where the fourth quarter expenses reflect the release of a provision for certain Canadian retirement plans, otherwise first quarter results for Canada on expenses would have been flat with the fourth quarter of 2009. Putnam's expenses in the fourth quarter included $10 million of restructuring charges and high performance-based compensation accruals.

Turning to slide 10, consolidated assets were $463 billion at March 31, 2010 including $125 million of other assets under administration. Assets continue to trend upwards despite the rise of the Canadian Dollar in the quarter. The $125 million I referenced there actually should be $125 billion. Moving on to invested, credit impairment items in the quarter resulted in a net after tax recovery of $9 million.

And with that I'll pass it over to Bill Lovatt, our CFO to give further information on our assets.

Bill Lovatt

Thanks, Allen. So we're on slide 12. As Allen indicated, credit impairment items in the quarter resulted in a net after tax recovery of $9 million. This is because gains were derived on mark-to-market recoveries on impaired assets. That amount also includes an impairment charge of $5 million in connection with certain residential mortgage back securities that had been wrapped with a financial guarantee provided by MBAC Financial Group.

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