8-K 1 gwlafinancial8k.txt GWL&A FINANCIAL 8-K FOR MARCH 31, 2003 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 ------------ GWL&A FINANCIAL INC. (Exact name of registrant as specified in its charter) Delaware 333-64473 84-1474245 (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 Great-West Life & Annuity Insurance Company, the operating subsidiary 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 GWL&A FINANCIAL INC. 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)

(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)

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)

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)

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:

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

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:

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

GREAT-WEST LIFECO INC. SUMMARY OF CONSOLIDATED NET INCOME MARCH 31, 2003 (000,000's $)

GWL&A FINANCIAL INC 8-K