Winnipeg-based Great-West Lifeco Inc. has reported net income attributable to common shareholders of $326 million for the three months ended March 31, a drop of 34% from $493 million in 2008.
These results reflect the weaker global equity and credit market conditions that were present in the quarter, the company said in a statement. A decline in the value of publicly traded and other investment securities through March 31 has lowered the market value of assets invested in the company’s segregated and mutual funds.
Accordingly, Great-West realized lower investment management fee income. This negatively impacted net income attributable to common shareholders by $89 million, and additionally, by $25 million as a result of increased actuarial liabilities. That said, Great-West Life did not need to establish actuarial reserves with respect to segregated fund guarantees at March 31.
Great-West increased provisions for future credit losses in actuarial liabilities by $202 million in the quarter, mainly as a result of credit rating downgrades of investments held by the company. This negatively impacted earnings by $138 million.
Great-West also recorded asset impairment charges in connection with certain financial, automobile and commercial mortgage holdings. These impairment charges totalled $27 million, which negatively impacted earnings by $19 million.
Consolidated invested assets were $103.6 billion as of March 31. The gross book value of impaired investments at that date was $351 million, against which the company had recorded cumulative impairment provisions of $255 million. In addition, the total provision for future credit losses in actuarial liabilities was in excess of $2 billion.
Despite the lower net income, Great-West has maintained its quarterly common dividend at $0.3075 per common share, payable June 30. Dividends paid on common shares for the three months ended March 31, were 5% higher than a year ago.
Great-West’s capital position remains very strong. Canadian operating subsidiary Great-West Life reported a minimum continuing capital and surplus ratio of 205% at March 31, which did not include any benefit from the $1.23 billion of common and preferred share capital that Great-West raised in the fourth quarter of 2008.
Great-West and its major operating subsidiaries continue to hold strong credit ratings, which were affirmed with a stable outlook by A.M. Best on Jan. 22, Moody’s Investors Service and Standard and Poor’s Ratings Services on Feb. 12 and Fitch Ratings on April 20. The ratings affirmations are significant in light of the current economic environment.
The earnings of $493 million in the three months ended March 31, 2008, represents adjusted net income from continuing operations and, as such, excludes income from discontinued operations of $43 million as well as two non-recurring items that totalled $118 million after taxes.
Including these amounts, net income attributable to common shareholders for the three months ended March 31, 2008, as reported, was $654 million.
Great-West’s net income drops in Q1
Although market conditions took their toll, the insurer is still comfortably in the black
- By: IE Staff
- May 7, 2009 May 7, 2009
- 13:04