8-K 1 gwlafinancial8k.txt GWL&A FINANCIAL 8-K 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) July 31, 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 Number) (IRS Employer of incorporation) 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 July 30, 2003 ITEM 9. REGULATION FD DISCLOSURE On July 30, 2003, Great-West Lifeco Inc., an indirect Canadian parent company of the Registrant, issued a press release regarding its financial results for the second 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 July 30, 2003, Great-West Lifeco Inc., an indirect Canadian parent company of the Registrant, issued a press release regarding its financial results for the second 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: July 31, 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 Great-West Lifeco reports six months 2003 results and dividend increase TSX:GWO Winnipeg, July 30, 2003 ... Great-West Lifeco Inc. has reported net income attributable to common shareholders of $514 million or $1.405 per common share for the six months ended June 30, 2003, an increase of 14% compared to $1.236 per common share reported a year ago. For the second quarter, net income attributable to common shareholders was $261 million or $0.715 per common share, compared to $234 million or $0.634 per common share for 2002. Highlights - six months 2003 o Earnings per common share increased 14% over 2002 levels, reflecting favourable mortality experience in Canada and strong morbidity experience for both Canadian and United States operations. o Return on common shareholders' equity was 24.5% for the twelve months ended June 30, 2003, compared to 22.5% in 2002. o Quarterly dividends declared were 29.25(cent) per common share, an increase of 2.25(cent) per share, payable September 30, 2003. Dividends paid on common shares for the first six months of 2003 were 20% higher than a year ago. Lifeco completes Canada Life transaction On July 10, 2003, Lifeco completed its acquisition of Canada Life Financial Corporation, the parent company of The Canada Life Assurance Company. Lifeco acquired all outstanding common shares of Canada Life Financial that it did not already beneficially own, for an aggregate transaction value of $7.2 billion. Lifeco immediately transferred the common shares of Canada Life Financial Corporation to its Canadian subsidiary, The Great-West Life Assurance Company. Canada Life Financial Corporation is now a wholly-owned subsidiary of Great-West. "This transaction creates a market leader in the Canadian life insurance industry and a strong international competitor," says Raymond L. McFeetors, President and CEO, Great-West Life. "It enhances our competitiveness in Canadian insurance markets, increases access to distribution opportunities in the United States, and provides a strong platform for expansion in profitable, high growth markets in Europe." - 2 - 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. The Great-West Life Assurance Company Canadian consolidated net earnings of Lifeco attributable to common shareholders for the six months ended June 30, 2003 increased 18% to $250 million from $211 million at June 30, 2002. The increase in earnings was due, in large part, to favourable mortality and morbidity experience, combined with effective expense management. Total premiums and deposits for the six months ended June 30, 2003, excluding reinsurance premiums, were essentially the same as 2002 levels, with increases in risk-based product premium offset by a reduction in segregated funds deposits. Reinsurance premiums were up 30%, essentially in the life insurance product line. Fee income was essentially the same as in 2002, reflecting growth in income from ASO contracts offset in part by the effects of equity markets on segregated funds fees. For the three months ended June 30, 2003, earnings attributable to common shareholders increased 19% to $129 million, compared to $108 million a year ago. Total assets under administration at June 30, 2003 were $55.6 billion, up slightly from December 31, 2002 levels, with increases in general funds mitigated by reductions in segregated funds. Great-West Life & Annuity Insurance Company Lifeco's United States consolidated net earnings for the six months ended June 30, 2003 increased 8% to $264 million from $245 million a year ago. The increase in earnings was associated with improved morbidity for the Employee Benefits Division. The decrease in US $ premium income and deposits of 14% for the six months ended June 30, 2003 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. The decrease in fee income in 2003 arises out of both the Group health ASO business and the effects of the U.S. equity markets on segregated funds fees. For the three months ended June 30, 2003, earnings attributable to common shareholders increased 5% to $132 million, compared to $126 million a year ago. Total assets under administration were $37.2 billion at June 30, 2003, down $4.4 billion compared with December 31, 2002, essentially due to changes in foreign exchange translation rates. - 3 - Quarterly Dividends At its meeting today, the Board of Directors approved a quarterly dividend of $0.2925 per share on the common shares of the Company payable September 30, 2003 to shareholders of record at the close of business September 2, 2003. In addition, the Directors approved quarterly dividends on: o Series C First Preferred Shares $0.484375 per share; and o Series D First Preferred Shares $0.293750 per share payable September 30, 2003 to shareholders of record at the close of business September 2, 2003 o Class A, Series 1 Preferred Shares $0.3125 per share payable October 31, 2003 to shareholders of record at the close of business October 3, 2003; and initial dividends on: o Series E First Preferred Shares $0.26959 per share; and o Series F First Preferred Shares $0.33137 per share payable September 30, 2003 to shareholders of record at the close of business September 2, 2003. 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. The Company has operations in Canada and internationally through The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company, and in the United States through Great-West Life & Annuity Insurance Company and The Canada Life Assurance Company. Lifeco and its companies, including Canada Life have more than $160 billion in assets under administration. Great-West Lifeco is a member of the Power Financial Corporation group of companies. - 4 - 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 June 30, 2003 interim unaudited consolidated financial statements are attached. The second quarter analyst teleconference for Great-West Lifeco and Canada Life Financial Corporation will be held Wednesday, July 30, at 2:00 p.m. (Eastern). The call can be accessed through www.greatwestlifeco.com or by phone, through listen-only lines at: o Participants in the Toronto area: 416-405-9328 o Participants from North America: 1-800-387-6216 o Participants from Overseas: Dial international access code first, then 800-7664-7664. A replay of the call will be available from July 30, until August 6, and can be accessed by calling 1-800-408-3053 or 416-695-5800 in Toronto (passcode: 1450426). - end - For more information contact: Marlene Klassen Director, Media & Public Relations (204) 946-7705 marlene.klassen@gwl.ca 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 June 30, 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 income and expense items during the six months ended June 30, 2003 have been included at the average market rate of $1.4540 Canadian compared with $1.5740 Canadian for the six months ended June 30, 2002. CONSOLIDATED BALANCE SHEET (unaudited) (in millions of dollars)

United States assets and liabilities have been translated at the market rates of $1.3550 Canadian for June 30, 2003, $1.5800 Canadian for December 31, 2002 and $1.5190 Canadian for June 30, 2002. CONSOLIDATED STATEMENT OF SURPLUS (unaudited) (in millions of dollars)

CONSOLIDATED STATEMENT OF CASH FLOWS (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 June 30, 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 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 June 30, 2003 and June 30, 2002. The non-controlling interests of GWL&A and Great-West and its subsidiaries are:

5. Capital Stock 5. Capital Stock (a) Authorized

(b) Impact of Acquisition of Canada Life Financial Corporation (CLFC) (see note 8 - Subsequent Events) Preferred Shares: New shares issued July 10, 2003 to CLFC shareholders Lifeco 4.80% Preferred Shares, Series E 23,868,131 Lifeco 5.90% Preferred Shares, Series F 7,957,006 ___________ Total 31,825,137 The Series E, 4.80% Non-Cumulative First Preferred Shares are redeemable or convertible to common shares of the Company at the option of the Company on or after September 30, 2009, and are convertible to common shares of the Company at the option of the holder on or after September 30, 2013. The Series F, 5.90% Non-Cumulative First Preferred Shares are redeemable at the option of the Company on or after September 30, 2008. Common Shares: New share issued on or after July 10, 2003 related to the acquisition of CLFC CLFC 55,958,505 Power Financial Corporation 21,301,523 Investors Group Inc. 2,662,690 Lifeco options exchanged for CLFC options 3,278,421 ______________ Total 83,201,139 6. Stock-Based Compensation and Other Stock-Based Payment Under the Company's stock option plan 367,000 options were granted during the first quarter, and 131,750 options were granted during the second quarter of 2003 (26,000 options were granted during the second quarter of 2002). The weighted-average fair value of options granted during the six months ended June 30, 2003 was $9.93 per option ($10.89 during the six months ended June 30, 2002). 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 six months ended June 30, 2003 and June 30, 2002 respectively: dividend yield 2.815% (2.470%), expected volatility 26.18% (25.89%), risk-free interest rate 4.724% (5.467%), and expected life of 7 years (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 million 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:

b) Number of Common Shares at June 30

Earnings per Common Share ( a) divided by b) )

8. Subsequent Events Acquisition of Canada Life Financial Corporation On July 10, 2003, the Company acquired all of the outstanding common shares of CLFC, the parent company of The Canada Life Assurance Company (Canada Life), that were not already beneficially owned by the Company at a price of $44.50 per CLFC common share, representing an aggregate transaction value of $7.2 billion, including estimated transaction costs. The acquisition was completed by way of a capital reorganization of CLFC pursuant to which CLFC shareholders received as consideration one of the following alternatives for each of their CLFC 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. After election and proration, Lifeco issued 55,958,505 common shares at a price of $37.556 per common share which represents the weighted-average trading price of Lifeco common shares on the last five trading days prior to February 17, 2003, the effective date of the transaction agreement. Lifeco also issued 23,868,131 Lifeco 4.80% Non-Cumulative First Preferred Shares, Series E and 7,957,006 Lifeco 5.90% Non-Cumulative First Preferred Shares, Series F, both at a price of $25.00 per preferred share. The 607,712 common shares of CLFC that were beneficially owned by the Company had a carrying value of $21 as at the date of the acquisition. CLFC vested stock options on 2,766,834 shares, outstanding at acquisition were exchanged for new equivalent Lifeco stock options to purchase an aggregate of 3,278,421 Lifeco common shares at equivalent exercise prices based on a value of $37.556 for each Lifeco common share and $44.50 for each CLFC common share. These options expire on August 25, 2003. Total purchase consideration consisted of the following:

On July 10, 2003, to support the financing of the transaction, Power Financial Corporation invested $800 to purchase 21,301,523 common shares of Lifeco from treasury via private placement. Investors Group Inc. has also invested $100 by purchasing 2,662,690 Lifeco common shares from treasury via private placement. See note 5(b) for a summary of capital stock activity in connection with the acquistion. Lifeco also entered into an arrangement with a Canadian chartered bank (the "Bank") pursuant to which the Bank agreed to underwrite a credit facility in favour of the Company, Great-West, or one or more of its subsidiaries. The credit facility provides a one year bank facility of up to $1,400, and also up to $600 of five year term financing. The five year term financing is syndicated to a group of international financial institutions. The balances of these facilities on July 11, 2003 were $944 and $596 respectively. Immediately after the acquisition, Lifeco conveyed its ownership of CLFC common shares to its subsidiary, Great-West, at cost. The allocation of the purchase price to the CLFC assets acquired, liabilities assumed and intangible assets and goodwill acquired is expected to be completed during the third quarter of 2003. Results of CLFC will be included in the Summary of Consolidated Operations from the date of acquisition. Canada Life offers insurance and other protection and wealth management products and services to individuals and groups, including reinsurance services, primarily in Canada, the United States, the United Kingdom and the Republic of Ireland, and in several other jurisdictions. Commitments On July 14 2003, an agreement was entered into for the sale of Lifestyle Retirement Communities Ltd., a wholly-owned subsidiary of London Life, subject to the satisfaction of certain conditions contained in the agreement. The transaction is expected to close in the third quarter of 2003. 9. Segmented Information Consolidated Operations For the Three Months Ended June 30, 2003

For the Three Months Ended June 30, 2002

For the Six Months Ended June 30, 2003

For the Six Months Ended June 30, 2002

GWL&A FINANCIAL INC 8-K