8-K 1 gwlafinancial8k.txt GWLA FINANCIAL 8K 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) January 30, 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 January 30, 2003 ITEM 9. REGULATION FD DISCLOSURE On January 30, 2003, Great-West Lifeco Inc., an indirect Canadian parent company of the Registrant, issued a press release regarding its financial results for the fourth quarter of 2002. 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: January 30, 2003 GWL&A FINANCIAL INC. By:/s/Richard G. Schultz Name: Richard G. Schultz Title: Vice President, Counsel and Associate Secretary Great-West Lifeco reports 2002 results and dividend increase Winnipeg, January 30, 2003 ... Great-West Lifeco Inc. has reported net income attributable to common shareholders of $931 million or $2.530 per common share for the twelve months ended December 31, 2002, compared to $1.387 per common share reported a year ago. This result represents an increase of 15% over 2001, after adjusting for non-recurring charges relating to goodwill amortization, Alta Health and Life Insurance Company (Alta), and the events of September 11, 2001 to facilitate comparison between years. For the fourth quarter, net income attributable to common shareholders was $235 million or $0.641 per common share, compared to adjusted 2001 results of $208 million or $0.562 per common share. Highlights - twelve months 2002 o Earnings per common share increased 15% over 2001 levels, reflecting solid increases in earnings from Lifeco's Canadian and United States operations. o Return on common shareholders' equity was 22.9% for the twelve months ended December 31, 2002, compared to 20.8% in 2001, using adjusted 2001 results. o Quarterly dividends declared were 27(cent) per common share, an increase of 2.25(cent) per share, payable March 31, 2003. Dividends paid on common shares for 2002 were 21% 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 (GWL&A) in the United States, together with Lifeco's corporate results. The following comparative figures for 2001 have been adjusted to exclude goodwill amortization, Alta charges, and the events of September 11, 2001. - 2 - Canadian consolidated net earnings of Lifeco attributable to common shareholders for the twelve months ended December 31, 2002 increased 15% to $441 million from $384 million at December 31, 2001. For the fourth quarter, Canadian net income attributable to common shareholders increased to $116 million compared to $102 million at December 31, 2001. Lifeco's United States consolidated net earnings for twelve months of 2002 increased 13% to $490 million from $435 million a year ago. For the fourth quarter, United States net income increased to $119 million compared to $106 million at December 31, 2001. GWL&A's twelve months net income attributable to common shareholders increased to US $321 million from US $294 million at December 31, 2001. For the fourth quarter, GWL&A's earnings were US $79 million compared to US $72 million a year ago. The Great-West Life Assurance Company Developments o In December, Great-West completed its first innovative tier 1 capital issue, raising $350 million through an offering of Great-West Life Trust Securities (GREATs). o Great-West, together with London Life and Investors Group, signed an agreement with National Bank of Canada to offer banking products and services through their respective distribution networks. o Great-West and London Life's Group Retirement Services division enhanced its Web site, giving plan members the opportunity to do their retirement planning, including fund selection, online. Results "Great-West and London Life ended the year the same way we started, with exceptional performance from our group and individual lines of business," says Raymond L. McFeetors, President & Chief Executive Officer, Great-West Life. "Despite the decline in consumer confidence in investment markets, segregated funds deposits for the year were up over 2001. Concern for security also led to increased interest among consumers for participating life insurance, where our sales increased nearly 30% this year. Price rationalization in the group insurance market over the past couple of years set the stage for strong growth in net income from our group insurance business, which also enjoyed very strong persistency during the year." - 3 - Total premiums and deposits for full year 2002, including reinsurance premiums, were up 9% from 2001 levels. Fee income increased 7% in 2002 compared to 2001, associated with increases in both segregated funds assets and ASO contract volumes. Total assets under administration at December 31, 2002 were $54.5 billion, up 1% from December 31, 2001. Great-West Life & Annuity Insurance Company Developments o The last quarter of 2002 saw a continuation of our themes for the year-margin expansion, disciplined expense management and conservative investment selection. Results "Low interest rates, weak stock markets, and rising health care costs all combined to test our business managers in 2002. I'm very pleased with the results we achieved in 2002 in this very stormy environment," says William T. McCallum, President & Chief Executive Officer, Great-West Life & Annuity. The decrease in US $ premium income and deposits for 2002 of 12% was comprised of reductions in both Employee Benefits and Financial Services. The change in the Employee Benefits segment is due to a contraction in health care medical membership, while the change in the Financial Services segment is primarily due to lower 401(k) single premium 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 2002 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 $41.6 billion at December 31, 2002, down $2.6 billion compared with December 31, 2001, essentially due to reductions in market values of segregated funds. - 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 March 31, 2003 to shareholders of record at the close of business March 17, 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 March 31, 2003 to shareholders of record at the close of business March 17, 2003 o Class A, Series 1 Preferred Shares $0.3125 per share payable April 30, 2003 to shareholders of record at the close of business April 16, 2003. Great-West Lifeco Great-West Lifeco Inc. 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 $96 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 Selected financial information is attached. Full financial statements and notes for 2002 are available on the Great-West Lifeco Web site at www.greatwestlifeco.com/english/investor/quarterly.html. Great-West Lifeco's fourth quarter analyst teleconference will be held Thursday, January 30, at 2:00 p.m. (Eastern). The call can be accessed through www.greatwestlifeco.com or by phone, through listen-only lines at 1-800-387-6216 (passcode: Chantal) or 416-405-9328 in Toronto. A replay of the call will be available from January 30 until February 6 and can be accessed by calling 1-800-408-3053 (passcode: 1348731) or 416-695-5800 in Toronto. - end - For more information contact: Marlene Klassen Director, Media & Public Relations (204) 946-7705 marlene.klassen@gwl.ca FINANCIAL HIGHLIGHTS (in millions of dollars except per common share amounts)

~~2002 2001~~ ------------------------------------- ------------------------------ ------------------------------------- ------------------------------ Canada U.S. Total Canada U.S. Total % Change ------------------------------------- ------------------------------ --------------- ----------------------------------------------------------------------- ------------------------------ --------------- For the three months ended ~~September~~December 3031 (unaudited) Premiums: Life insurance, guaranteed annuities and insured health products $ 1,~~080~~100 $ ~~803~~740 $ 1,~~883~~840 $ ~~992~~1,010 $ ~~700~~728 $ 1,~~692~~738 116% Reinsurance & specialty general insurance 1,~~227~~040 - 1,~~227~~040 ~~853~~1,127 - ~~853~~1,127 44-8% Self-funded premium equivalents (ASO contracts) (1) ~~332~~353 2,~~037~~013 2,~~369~~366 ~~304~~314 2,~~119~~177 2,~~423~~491 -25% Segregated funds deposits: (1) Individual products ~~317~~320 ~~173~~144 ~~490~~464 ~~289~~371 ~~774~~312 ~~1,063~~683 -5432% Group products ~~239~~334 ~~639~~722 ~~878~~1,056 ~~168~~345 ~~642~~772 ~~810~~1,117 8-5% ------------------------------------- ------------------------------ ------- ------------------------------------- ------------------------------ ------- Total premiums and deposits $ 3,~~195~~147 $ 3,~~652~~619 $ 6,~~847~~766 $ 23,~~606~~167 $ 43,~~235~~989 $ 67,~~841~~156 -5% ------------------------------------- ------------------------------ ------- ------------------------------------- ------------------------------ ------- Fee and other income ~~102~~104 ~~339~~324 ~~441~~428 98105 ~~387~~339 ~~485~~444 -94% Paid or credited to policyholders 2,~~534~~303 ~~988~~856 3,~~522~~159 2,~~137~~348 ~~857~~862 23,~~994~~210 18-2% Net income attributable to: Preferred shareholders 8 ~~(1)~~- 78 78 - 78 -0% Common shareholders ~~114~~116 ~~126~~119 ~~240~~235 985 ~~115~~104 ~~124~~189 9424% 2001 adjustments (2) Goodwill amortization - - - 1517 1 1618 Alta - - - - -1 -1 September 11, 2001 - - - 73- - 73- Adjusted net income common shareholders (2) ~~114~~116 ~~126~~119 ~~240~~235 97102 ~~116~~106 ~~213~~208 13% ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ Per Common Share Basic earnings $ 0.~~653~~641 $ 0.~~334~~510 9626% 2001 adjustments (2) Goodwill amortization - 0.~~043~~048 Alta - -0.004 September 11, 2001 - ~~0.199~~- Adjusted basic earnings (2) 0.~~653~~641 0.~~576~~562 1314% Dividends paid 0.2475 0.205 21% ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------

(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) In addition to net income (Canadian GAAP basis), adjusted net income for 2001 is presented for information. 2001 results include: (i) A charge of $18 after-tax or $0.048 per common share for the three months ended December 31, 2001 and $66 after-tax or $0.177 per common share for the year ended December 31, 2001 related to the amortization of goodwill. On January 1, 2002, the Company stopped amortizing goodwill in accordance with new Canadian Institute of Chartered Accountants standard 3062 Goodwill and Other Intangible Assets (see note 1 of the Company's 2002 financial statements); (ii) A charge of $165 after-tax or $0.444 per common share related to Alta Health & Life Insurance Company (Alta), an indirect wholly-owned subsidiary and part of the Company's United States Employee Benefits segment. (iii) A charge of $73 after-tax or $0.199 per common share from the events of September 11, 2001. Return on common shareholders' equity is also presented excluding 2001 adjustments. FINANCIAL HIGHLIGHTS (cont'd) (in millions of dollars except per common share amounts)

2002 2001 ------------------------------------- ------------------------------ ------------------------------------- ------------------------------ Canada U.S. Total Canada U.S. Total % Change ------------------------------------- ------------------------------ --------------- ----------------------------------------------------------------------- ------------------------------ ------- For the ~~nine~~years ~~months~~ ended ~~September~~December 3031 Premiums: Life insurance, guaranteed annuities and insured health products $ 34,~~176~~276 $ 2,~~249~~989 $ 57,~~425~~265 $ 23,~~986~~996 $ 23,~~298~~026 $ 57,~~284~~022 3% Reinsurance & specialty general insurance 23,~~882~~922 - 23,~~882~~922 23,~~328~~455 - 23,~~328~~455 2414% Self-funded premium equivalents (ASO contracts) (1) 1,~~002~~355 68,~~196~~209 79,~~198~~564 ~~924~~1,238 68,~~684~~861 710,~~608~~099 -5% Segregated funds deposits: (1) Individual products 1,~~329~~649 ~~500~~644 12,~~829~~293 1,~~215~~586 1,~~057~~369 2,~~272~~955 -1922% Group products ~~829 2~~1,~~497~~163 3,~~326~~219 ~~700~~4,382 21,~~878~~045 3,~~578~~650 4,695 -7% ------------------------------------- ------------------------------ ------- ------------------------------------- ------------------------------ ------- Total premiums and deposits $ 912,~~218~~365 $ 1115,~~442~~061 $ 2027,~~660~~426 $ 811,~~153~~320 $12 16,~~917~~906 $21 28,~~070~~226 -23% ------------------------------------- ------------------------------ ------- ------------------------------------- ------------------------------ ------- Fee and other income ~~316~~420 1,~~063~~387 1,~~379~~807 ~~286~~391 1,~~128~~467 1,~~414~~858 -23% Paid or credited to policyholders 68,~~675~~978 23,~~759~~615 912,~~434~~593 58,~~960~~308 23,~~860~~722 812,~~820~~030 75% Net income attributable to: Preferred shareholders 2331 - 2331 2230 1 2331 -% Common shareholders ~~325~~441 ~~371~~490 ~~696~~931 ~~164~~249 ~~162~~266 ~~326~~515 ~~113~~81% 2001 adjustments (2) Goodwill amortization - - - 4562 34 4866 Alta - - - - ~~164~~165 ~~164~~165 September 11, 2001 - - - 73 - 73 Adjusted net income common shareholders (2) ~~325~~441 ~~371~~490 ~~696~~931 ~~282~~384 ~~329~~435 ~~611~~819 14% ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ Per Common Share Basic earnings $ 12.~~889~~530 $ 01.~~877~~387 ~~115~~82% 2001 adjustments (2) Goodwill amortization - 0.~~129~~177 Alta - 0.~~440~~444 September 11, 2001 - 0.199 Adjusted basic earnings (2) 12.~~889~~530 12.~~645~~207 15% Dividends paid 0.~~6975~~945 0.~~575~~780 21% ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ Return on common shareholders' equity ~~(12 months):~~ Net income 22.39% 13.7% Adjusted net income (2) ~~22.5%~~- 2120.08% ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ At ~~September~~December 3031 Total assets $ 3536,~~387~~010 $ 24,~~048~~061 $ 5960,~~435~~071 $ 34,~~091~~690 $ 24,~~057~~469 $58 59,~~148~~159 2% Segregated funds assets (1) 1718,~~892~~504 17,~~055~~544 3436,~~947~~048 1719,~~642~~093 1819,~~060~~774 3538,~~702~~867 -27% ------------------------------------- ------------------------------ ------- ------------------------------------- ------------------------------ ------- Total assets under administration $ 5354,~~279~~514 $ 41,~~103~~605 $ 9496,~~382~~119 $51 53,~~733~~783 $42 44,~~117~~243 $93 98,~~850~~026 1-2% ===================================== ============================== ======= ===================================== ============================== ======= Capital stock and surplus $ 4,~~715~~708 $ 4,~~287~~397 107% Book value per common share $ 11.4068 $ 10.1647 12%

SUMMARY OF CONSOLIDATED OPERATIONS (in millions of dollars except earnings per common share) For the three months For the ~~nine~~years ~~months~~ ended ~~September~~December 3031 ended ~~September~~December 3031 --------------------------- --------------------------- --------------------------- --------------------------- 2002 2001 2002 2001 ------------- ------------ ------------- ------------ --------------------------- ------------- ------------ (unaudited) Income Premium income $ 32,~~110~~880 $ 2,~~545~~865 $ 811,~~307~~187 $ 710,~~612~~477 Net investment income ~~878~~934 ~~892~~977 23,~~704~~638 23,~~736~~713 Fee and other income ~~441~~428 ~~485~~444 1,~~379~~807 1,~~414~~858 ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ 4,~~429~~242 34,~~922~~286 1216,~~390~~632 1116,~~762~~048 ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ Benefits and Expenses Paid or credited to policyholders and beneficiaries including policyholder dividends and experience refunds ~~(note 73~~3,~~522~~159 23,~~994~~210 912,~~434~~593 812,~~820~~030 Commissions ~~166~~187 ~~180~~179 ~~531~~718 ~~517~~696 Operating expenses ~~413~~457 ~~455~~486 1,~~329~~786 1,~~455~~941 Premium taxes 3117 4035 92109 89124 Special ~~charge(note~~charges ~~13)~~ - -2 - ~~202~~204 ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ Net operating income before income taxes ~~297~~422 ~~253~~374 1,~~004~~426 ~~679~~1,053 Income taxes - current ~~121~~100 49199 ~~297~~397 ~~228~~427 - future ~~(note~~47 8) (6160) 6133 (1430) 30 ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ Net income before ~~minority~~non-controlling ~~and other~~ interests ~~237~~275 ~~143~~235 ~~721~~996 ~~421~~656 ~~Minority~~Non-controlling ~~and other~~ interests ~~(note~~32 4)20 ~~(10)~~34 ~~(4)~~44 ~~2 24~~ ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ Net income before amortization of goodwill ~~247~~243 ~~147~~215 ~~719~~962 ~~397~~612 Amortization of goodwill - 1618 - 4866 ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ Net income $ ~~247~~243 $ ~~131~~197 $ ~~719~~962 $ ~~349~~546 ============= ============ ============= ============ ============= ============ ============= ============ Earnings per Common Share ~~(note 6)~~ Basic $ 0.~~653~~641 $ 0.~~334~~510 $ 12.~~889~~530 $ 01.~~877~~387 ============= ============ ============= ============ ============= ============ ============= ============ Diluted $ 0.~~646~~634 $ 0.~~329~~503 $ 12.~~865~~499 $ 01.~~862~~365 ============= ============ ============= ============ ============= ============ ============= ============ ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ 78 $ 78 $ 2331 $ 2331 Net income - common shareholders ~~240~~235 ~~124~~189 ~~696~~931 ~~326~~515 ------------- ------------ ------------- ------------ ------------- ------------ ------------- ------------ Net income $ ~~247~~243 $ ~~131~~197 $ ~~719~~962 $ ~~349~~546 ============= ============ ============= ============ ============= ============ ============= ============ Average number of shares outstanding - basic ~~368~~367,~~470~~987,~~287~~648 371,~~743~~244,~~697~~073 Average number of shares outstanding - diluted ~~373~~372,~~252~~607,~~342~~557 ~~378~~377,~~222~~364,~~013~~057 United States operating results during ~~the first nine months of~~ 2002 have been included at the average market rate of $1.5700 Canadian compared with $1.~~5380~~5490 Canadian in 2001.

~~September~~CONSOLIDATED ~~30,~~BALANCE SHEET (in millions of dollars) December 31, ~~September~~December 3031, 2002 2001 ~~2001~~ ------------ -- --------- ---- ------- -------~~-----~~ ----------- --~~---------~~ Assets Bonds $ 3233,~~428~~764 $ 32,581 ~~$ 32,222~~ Mortgage loans 87,~~035~~850 8,369 ~~8,404~~ Stocks 1,~~513~~581 1,379 ~~1,374~~ Real estate 1,~~258~~267 1,272 ~~1,260~~ Loans to policyholders 6,~~123~~177 6,213 ~~5,992~~ Cash and certificates of deposit ~~1,328~~912 837 ~~588~~ Funds withheld by ceding insurers 4,~~538~~786 4,477 ~~4,098~~ Premiums in course of collection ~~351~~305 410 ~~423~~ Interest due and accrued ~~550~~511 543 ~~600~~ Future income taxes ~~(note~~138 ~~8) 240~~ 317 ~~239~~ Goodwill and intangible assets ~~(note 3)~~ 1,687 1,604 ~~1,607~~ Other assets 1,~~384~~093 1,157 ~~1,341~~ ------------ -- --------- ---- ------- -------~~-----~~ ----------- --~~---------~~ Total assets $ 5960,~~435~~071 $ 59,159 ~~$ 58,148~~ ============ == ========= ==== ======= =======~~=====~~ =========== ==~~=========~~ Liabilities Policy liabilities Actuarial liabilities ~~(note 7)~~ $ 44,~~254~~508 $ 43,909 ~~$ 43,510~~ Provision for claims ~~638~~645 753 ~~707~~ Provision for policyholder dividends ~~375~~363 355 ~~356~~ Provision for experience rating refunds ~~940~~927 834 ~~753~~ Policyholder funds 1,~~818~~853 1,748 ~~1,734~~ ------------ -- --------- ---- ------- -------~~-----~~ ----------- --~~---------~~ 48,~~025~~296 47,599 ~~47,060~~ Commercial paper and other loans 1,~~015~~012 1,075 ~~1,002~~ Current income taxes ~~525~~454 508 ~~294~~ Other liabilities 12,~~783~~081 2,181 ~~2,084~~ Repurchase agreements ~~446~~511 400 ~~445~~ Net deferred gains on portfolio investments sold ~~1,000~~958 1,049 ~~1,052~~ ------------ -- --------- ---- ------- -------~~-----~~ ----------- --~~---------~~ 5253,~~794~~312 52,812 ~~51,937~~Non-controlling ~~Minority~~interests ~~and other int(notes4) 1~~2,~~926~~051 1,950 ~~1,924~~ Capital Stock and Surplus Capital stock ~~(note 5) 2~~1,~~082~~982 2,083 ~~2,083~~ Surplus 2,~~278~~382 1,951 ~~1,863~~ Provision for unrealized gain on translation of net investment in foreign operations ~~355~~344 363 ~~341~~ ------------ -- --------- ---- ------- -------~~-----~~ ----------- --~~---------~~ 4,~~715~~708 4,397 ~~4,287~~ ------------ -- --------- ---- ------- -------~~-----~~ ----------- --~~---------~~ Liabilities, capital stock and surplus $ 5960,~~435~~071 $ 59,159 ~~$ 58,148~~ ============ == ========= ==== ======= =======~~=====~~ =========== ==~~=========~~ United States assets and liabilities have been translated at the market rates of $1.5800 Canadian for December 31, 2002 and $1.5930 Canadian for December 31, 2001.

For the nine months ended September 30 ---------------------------------- ---------------------------------- 2002 2001 Balance, beginning of year $ 1,951 $ 1,868 Net income 719 349 Acquisition discount - preferred shares of subsidiary - 1 Common share cancellation excess (112) (118) Dividends to shareholders Preferred shareholders (23) (23) Common shareholders (257) (214) ------------- ---------------- ------------- ---------------- Balance, end of period $ 2,278 $ 1,863 ============= ================ ============= ================

For the three months For the nine months ended September 30 ended September 30 --------------------------- -------------------------- --------------------------- -------------------------- 2002 2001 2002 2001 Operations Net income $ 247 $ 131 $ 719 $ 349 Adjustments for non-cash items: Change in policy liabilities 738 432 610 968 Change in funds withheld by ceding insurers (416) (294) (61) (543) Change in current income taxes payable (26) (31) 14 (139) Future income tax expense (61) 61 (14) 30 Amortization of goodwill - 16 - 48 Other (579) 303 (854) 64 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- Cash flows from operations (97) 618 414 777 Financing Activities Issue of common shares 2 6 14 14 Purchased and cancelled common shares (53) (69) (127) (135) Issue (repayment) of commercial paper and other lo(50) (17) (58) (52) Dividends paid (98) (84) (280) (237) ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- (199) (164) (451) (410) Investment Activities Bond sales and maturities 5,456 3,510 15,944 13,597 Mortgage loan repayments 405 610 1,272 1,497 Stock sales 148 42 279 393 Real estate sales - 6 38 6 Change in loans to policyholders 238 (1) 68 (183) Change in repurchase agreements (55) 78 47 433 Investment in subsidiaries - - 72 (15) Investment in bonds (5,112) (4,363) (15,791) (14,543) Investment in mortgage loans (313) (320) (922) (1,070) Investment in stocks (55) (31) (451) (612) Investment in real estate (9) (9) (28) (22) ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- 703 (478) 528 (519) Increase in cash and certificates of deposit 407 (24) 491 (152) Cash and certificates of deposit, beginning of period 921 612 837 740 Cash and certificates of deposit, ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- end of period $ 1,328 $ 588 $ 1,328 $ 588 =========== =========== ========== =========== =========== =========== ========== ===========

For the three months For the nine months ended September 30 ended September 30 ----------------------- ---------------------------- ----------------------- ---------------------------- 2002 2001 2002 2001 ----------- ---------- ------------ ------------- ----------- ---------- ------------ ------------- Net income: Reported net income $ 247 $ 131 $ 719 $ 349 Add back: amortization of goodwill, - 16 - 48 net of tax ----------- ---------- ------------ ------------- ----------- ---------- ------------ ------------- Net income adjusted for amortization of goodwill $ 247 $ 147 $ 719 $ 397 =========== ========== ============ ============= =========== ========== ============ ============= Basic earnings per common share: Reported earnings per common share $ 0.653 $ 0.334 $ 1.889 $ 0.877 Add back: amortization of goodwill, - 0.043 - 0.129 net of tax ----------- ---------- ------------ ------------- ------------------------------------------------ ---------- ------------ ------------- Basic earnings per common share adjusted for amortization of goodwill $ 0.653 $ 0.377 $ 1.889 $ 1.006 =========== ========== ============ ============= =========== ========== ============ ============= Diluted earnings per common share: Reported diluted earnings per common $ 0.646 $ 0.329 $ 1.865 $ 0.862 share Add back: amortization of goodwill, - 0.042 - 0.127 net of tax ----------- ---------- ------------ ------------- ------------------------------------------------ ---------- ------------ ------------- Diluted earnings per common share adjusted for amortization of goodwill $ 0.646 $ 0.371 $ 1.865 $ 0.989 =========== ========== ============ ============= =========== ========== ============ =============

Canada United States Total ---------- ---------------------------- ---------- ------------ ------------- Balance, beginning of year $ 1,538 $ 66 $ 1,604 1,604 Reclassification between goodwill and intangible assets (529) - (529) Reclassification between goodwill and future taxes 86 - 86 Sale of subsidiary (3) - (3) ---------- ------------ ------------- ---------- ------------ ------------- Balance, end of period $ 1,092 $ 661,092 $ 1,158 1,158 ========== ============ ============= ========== ============ =============

Canada United States Total ---------- ------------ ------------- ---------- ------------ ------------- Balance, beginning of year $ - $ - $ - - Reclassified from goodwill - Brands and trademarks 175 - 175 - Shareholders portion of acquired future Participating account profits 354 - 354 ---------- ------------ ------------- ---------- ------------ ------------- Balance, end of period $ 529 $ - 529 $ 529 529 ========== ============ ============= ========== ============ =============

a) For the three months For the nine months ended September 30, ended September 30, ----------------------- ---------------------------- ----------------------- ---------------------------- 2002 2001 2002 2001 Participating policyholder Net income attributable to participating policyholder before policyholder dividends Great-West $ 20 $ 25 $ 65 $ 75 London Life 121 110 378 355 GWL&A 48 51 150 155 Policyholder dividends Great-West 23 22 69 64 London Life 134 124 391 366 GWL&A 48 50 149 151 ----------- ---------- ------------ ------------- ----------- ---------- ------------ ------------- Net income $ (16) $ (10) $ (16) $ 4 ----------- ---------- ------------ ------------- ----------- ---------- ------------ ------------- Preferred shareholder dividends 6 5 17 16 Minority shareholder interest - 1 1 4 ----------- ---------- ------------ ------------- ----------- ---------- ------------ ------------- Total $ (10) $ (4) $ 2 $ 24 =========== ========== ============ ============= =========== ========== ============ ============= --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- b) As at September 30,December 31, September 30, 2002 2001 2001 ---------- ------------ ------------- ---------- ------------ ------------- Participating policyholder undistributed surplus Great-West $ 328 $ 332 $ 339 London Life 902 914 889 GWL&A 235 235 235 ---------- ------------ ------------- ---------- ------------ ------------- 1,465 1,481 1,463 Preferred shareholders 459 459 459 Minority interests in capital stock and surplus 2 10 2 ---------- ------------ ------------- ---------- ------------ ------------- $ 1,926 $ 1,950 $ 1,924 ========== ============ ============= ========== ============ =============

Unlimited First Preferred Shares, Class A Preferred Shares and Second Preferred Shares Unlimited Common Shares Issued and Outstanding September 30, 2002 September 30, 2001 --------------------------- --------------------------- --------------------------- --------------------------- Stated Value Stated Value Number (thousands) Number (thousands) ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ Preferred Shares: Series B, 7.45% Non-Cumulative First Preferred Shares 4,000,000 $ 100,000 4,000,000 $ 100,000 Series C, 7.75% Non-Cumulative First Preferred Shares 4,000,000 100,000 4,000,000 100,000 Series D, 4.70% Non-Cumulative First Preferred Shares 8,000,000 200,000 8,000,000 200,000 Series 1, 5.00% Non-Cumulative Class A Preferred Shares 5,192,242 129,806 5,192,242 129,806 ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ Balance, end of period 21,192,242 $ 529,806 21,192,242 $ 529,806 ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ Common Shares: Balance, beginning of year 369,459,808 $ 1,553,294 372,404,725 $ 1,556,559 Purchased and cancelled under Normal Course Issuer Bid (3,533,300) (14,901) (3,958,800) (16,598) Issued under Stock Option Plan1,267,438 14,061 1,485,079 13,443 ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ Balance, end of period 367,193,946 $ 1,552,454 369,931,004 $ 1,553,404 ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ Total Capital Stock $ 2,082,260 $ 2,083,210 ============= ============ ============= ============

For the three months For the nine months ended September 30 ended September 30 ----------------------------------------- ------------------ ------------------ 2002 2001 2002 2001 ------------------ ------------------ ------------------ ------------------ a) Earnings Net income - common shareholders $ 240 $ 124 $ 696 $ 326 ======== ======== ======== ======== ======== ======== ======== ======== b) Number of Common Shares at September 30 2002 2001 ---------- ---------- ---------- ---------- Average number of common shares outstanding 368,470,287 371,743,697 Add: -Potential exercise of outstanding stock options 4,782,055 6,478,316 ------------- ------------ --------------------------------- Average number of common shares outstanding - diluted basis 373,252,342 378,222,013 ================================= ========== ========== Earnings per Common Share ( a) divided by b) ) Basic $0.653 $ 0.334 $ 1.889 $ 0.877 ======== ======== ======== ======== ======== ======== ======== ======== Diluted $0.646 $ 0.329 $ 1.865 $ 0.862 ======== ======== ======== ======== ======== ======== ======== ========

Canadian Operations ------------------------------------------------------------------------- ------------------------------------------------------------------------- Participating Shareholder Policyholder -------------------------------------------------- --------------------- -------------------------------------------------- ---------- Individual Individual Insurance & Insurance & Group Investment Reinsurance Investment Total Insurance Products & SpecialtCorporate Total Products Canada -------------------------------------------------- --------------------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 575 $ 167 $ 1,227 $ 3 $ 1,972 $ 335 $ 2,307 Net investment income 52 112 103 29 296 215 511 Fee and other income 16 81 - 5 102 - 102 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 643 360 1,330 37 2,370 550 2,920 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 481 194 1,345 11 2,031 503 2,534 Other 107 88 7 7 209 64 273 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 55 78 (22) 19 130 (17) 113 Income taxes 21 32 2 (53) 2 (1) 1 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 34 46 (24) 72 128 (16) 112 Minority and other interests - - - 6 6 (16) (10) -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 34 46 (24) 66 122 - 122 Amortization of goodwill - - - - - - - -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 34 $ 46 $ (24) $ 66 $ 122 $ - $ 122 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ - $ 8 $ 8 $ - $ 8 Net income - common shareholders 34 46 (24) 58 114 - 114 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 34 $ 46 $ (24) $ 66 $ 122 $ - $ 122 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== For the three months ended September 30, 2002 United States Operations ------------------------------------------------------------ ------------------------------------------------------------ Participating Shareholder Policyholder --------------------------------------- ------------------- --------------------------------------- --------- Employee Financial Financial Total Total Benefits Services Corporate Total Services U.S. Company -------- --------- ------------------ --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 416 $ 312 $ - $ 728 $ 75 $ 803 $ 3,110 Net investment income 28 202 (1) 229 138 367 878 Fee and other income 253 86 - 339 - 339 441 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 697 600 (1) 1,296 213 1,509 4,429 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 346 434 1 781 207 988 3,522 Other 262 80 (9) 333 4 337 610 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 89 86 7 182 2 184 297 Income taxes 23 25 9 57 2 59 60 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 66 61 (2) 125 - 125 237 Minority and other interests - - - - - - (10) -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 66 61 (2) 125 - 125 247 Amortization of goodwill - - - - - - - -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 66 $ 61 $ (2) $ 125 $ - $ 125 $ 247 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ (1) $ (1) $ - $ (1) $ 7 Net income - common shareholders 66 61 (1) 126 - 126 240 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 66 $ 61 $ (2) $ 125 $ - $ 125 $ 247 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== For the three months ended September 30, 2001 Canadian Operations ------------------------------------------------------------------------- ------------------------------------------------------------------------- Participating Shareholder Policyholder -------------------------------------------------- --------------------- -------------------------------------------------- ---------- Individual Individual Insurance & Insurance & Group Investment Reinsurance Investment Total Insurance Products & SpecialtCorporate Total Products Canada -------------------------------------------------- --------------------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 515 $ 155 $ 853 $ 3 $ 1,526 $ 319 $ 1,845 Net investment income 55 121 115 29 320 217 537 Fee and other income 15 80 - 3 98 - 98 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 585 356 968 35 1,944 536 2,480 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 440 197 1,017 6 1,660 477 2,137 Other 97 89 12 6 204 61 265 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 48 70 (61) 23 80 (2) 78 Income taxes 18 26 (7) 6 43 9 52 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 30 44 (54) 17 37 (11) 26 Minority and other interests - - 1 5 6 (11) (5) -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 30 44 (55) 12 31 - 31 Amortization of goodwill 6 7 2 - 15 - 15 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 24 $ 37 $ (57) $ 12 $ 16 $ - $ 16 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ - $ 7 $ 7 $ - $ 7 Net income - common shareholders 24 37 (57) 5 9 - 9 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 24 $ 37 $ (57) $ 12 $ 16 $ - $ 16 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== For the three months ended September 30, 2001 United States Operations ------------------------------------------------------------ ------------------------------------------------------------ Participating Shareholder Policyholder --------------------------------------- ------------------- --------------------------------------- --------- Employee Financial Financial Total Total Benefits* Services Corporate Total Services U.S. Company -------- --------- ------------------ --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 429 $ 193 $ - $ 622 $ 78 $ 700 $ 2,545 Net investment income 28 195 (2) 221 134 355 892 Fee and other income 297 90 - 387 - 387 485 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 754 478 (2) 1,230 212 1,442 3,922 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 365 286 - 651 206 857 2,994 Other 293 110 4 407 3 410 675 Special charges - - - - - - - -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 96 82 (6) 172 3 175 253 Income taxes 33 26 (3) 56 2 58 110 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 63 56 (3) 116 1 117 143 Minority and other interests - - - - 1 1 (4) -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 63 56 (3) 116 - 116 147 Amortization of goodwill - - 1 1 - 1 16 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 63 $ 56 $ (4) $ 115 $ - $ 115 $ 131 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 7 Net income - common shareholders 63 56 (4) 115 - 115 124 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 63 $ 56 $ (4) $ 115 $ - $ 115 $ 131 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== * see note 13 For the nine months ended September 30, 2002 Canadian Operations ------------------------------------------------------------------------- ------------------------------------------------------------------------- Participating Shareholder Policyholder -------------------------------------------------- --------------------- -------------------------------------------------- ---------- Individual Individual Insurance & Insurance & Group Investment Reinsurance Investment Total Insurance Products & SpecialtCorporate Total Products Canada -------------------------------------------------- --------------------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 1,652 $ 490 $ 2,882 $ 11 $ 5,035 $1,023 $ 6,058 Net investment income 154 345 357 66 922 663 1,585 Fee and other income 50 251 1 14 316 - 316 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 1,856 1,086 3,240 91 6,273 1,686 7,959 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 1,392 561 3,192 29 5,174 1,501 6,675 Other 318 281 20 19 638 192 830 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 146 244 28 43 461 (7) 454 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Income taxes 55 93 5 (58) 95 10 105 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 91 151 23 101 366 (17) 349 Minority and other interests - - 1 17 18 (17) 1 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 91 151 22 84 348 - 348 Amortization of goodwill - - - - - - - -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 91 $ 151 $ 22 $ 84 $ 348 $ - $ 348 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ - $ 23 $ 23 $ - $ 23 Net income - common shareholders 91 151 22 61 325 - 325 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 91 $ 151 $ 22 $ 84 $ 348 $ - $ 348 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== For the nine months ended September 30, 2002 United States Operations ------------------------------------------------------------ ------------------------------------------------------------ Participating Shareholder Policyholder --------------------------------------- ------------------- --------------------------------------- --------- Employee Financial Financial Total Total Benefits Services Corporate Total Services U.S. Company -------- --------- ------------------ --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 1,199 $ 773 $ - $ 1,972 $ 277 $2,249 $ 8,307 Net investment income 82 624 (4) 702 417 1,119 2,704 Fee and other income 798 265 - 1,063 - 1,063 1,379 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 2,079 1,662 (4) 3,737 694 4,431 12,390 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 955 1,133 (1) 2,087 672 2,759 9,434 Other 847 255 4 1,106 16 1,122 1,952 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 277 274 (7) 544 6 550 1,004 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Income taxes 90 86 (3) 173 5 178 283 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 187 188 (4) 371 1 372 721 Minority and other interests - - - - 1 1 2 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 187 188 (4) 371 - 371 719 Amortization of goodwill - - - - - - - -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 187 $ 188 $ (4) $ 371 $ - $ 371 $ 719 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ - $ - $ - $ - $ 23 Net income - common shareholders 187 188 (4) 371 - 371 696 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 187 $ 188 $ (4) $ 371 $ - $ 371 $ 719 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== For the nine months ended September 30, 2001 Canadian Operations ------------------------------------------------------------------------- ------------------------------------------------------------------------- Participating Shareholder Policyholder -------------------------------------------------- --------------------- -------------------------------------------------- ---------- Individual Individual Insurance & Insurance & Group Investment Reinsurance Investment Total Insurance Products & SpecialtCorporate Total Products Canada -------------------------------------------------- --------------------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 1,505 $ 484 $ 2,328 $ 11 $ 4,328 $ 986 $ 5,314 Net investment income 162 382 337 88 969 663 1,632 Fee and other income 45 229 1 11 286 - 286 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 1,712 1,095 2,666 110 5,583 1,649 7,232 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 1,293 612 2,631 20 4,556 1,404 5,960 Other 289 276 50 16 631 212 843 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes 130 207 (15) 74 396 33 429 Income taxes 51 77 (3) 20 145 33 178 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests 79 130 (12) 54 251 - 251 Minority and other interests - - 4 16 20 - 20 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization 79 130 (16) 38 231 - 231 Amortization of goodwill 17 21 6 1 45 - 45 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 62 $ 109 $ (22) $ 37 $ 186 $ - $ 186 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ - $ 22 $ 22 $ - $ 22 Net income - common shareholders 62 109 (22) 15 164 - 164 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ 62 $ 109 $ (22) $ 37 $ 186 $ - $ 186 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== For the nine months ended September 30, 2001 United States Operations ------------------------------------------------------------ ------------------------------------------------------------ Participating Shareholder Policyholder --------------------------------------- ------------------- --------------------------------------- --------- Employee Financial Financial Total Total Benefits* Services Corporate Total Services U.S. Company -------- --------- ------------------ --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Income: Premium income $ 1,274 $ 727 $ - $ 2,001 $ 297 $2,298 $ 7,612 Net investment income 79 629 (3) 705 399 1,104 2,736 Fee and other income 856 272 - 1,128 - 1,128 1,414 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Total income 2,209 1,628 (3) 3,834 696 4,530 11,762 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Benefits and Expenses: Paid or credited to policyholders 1,107 1,084 (1) 2,190 670 2,860 8,820 Other 905 292 7 1,204 14 1,218 2,061 Special charges 202 - - 202 - 202 202 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net operating income before income taxes (5) 252 (9) 238 12 250 679 Income taxes (5) 77 - 72 8 80 258 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before minority and other interests - 175 (9) 166 4 170 421 Minority and other interests - - - - 4 4 24 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income before goodwill amortization - 175 (9) 166 - 166 397 Amortization of goodwill 2 - 1 3 - 3 48 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ (2) $ 175 $ (10) $ 163 $ - $ 163 $ 349 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Summary of Net Income Preferred shareholder dividends $ - $ - $ 1 $ 1 $ - $ 1 $ 23 Net income - common shareholders (2) 175 (11) 162 - 162 326 -------- --------- -------- -------- --------- -------- ----------- -------- --------- -------- -------- --------- -------- ----------- Net income $ (2) $ 175 $ (10) $ 163 $ - $ 163 $ 349 ======== ========= ======== ======== ========= ======== =========== ======== ========= ======== ======== ========= ======== =========== * see note 13 13. Special Charges 2001 results include a non-recurring charge of $202 pre-tax ($132 after-tax) plus operating losses of $32 after-tax, both related to Alta Health & Life Insurance Company (Alta), an indirect wholly-owned subsidiary, reported as part of the Company's United States Employee Benefits segment. The total impact of Alta on net income for the three months ended September 30, 2001 was negligible.

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