13 February 2009

Great-West Lifeco Q4 2008 Earnings

Scotia Capital, 13 February 2009

• EPS of $0.59 beat our $0.54 estimate (consensus at $0.49), ex a $1.51 goodwill hit and $0.08 EPS in other Putnam-related items (restructuring charges and income tax valuation allowance).

What It Means

• GWO continues its track record of posting results essentially in line. Always encouraging, especially in these markets.

• A $1.51 EPS goodwill hit (essentially all of the $900 million in goodwill plus 35% of $2.5B in intangibles) of this size was somewhat of a surprise. Outside of the charge Putnam results were poor with margins at negative 12%. No doubt these unprecedented markets have hurt Putnam, and long-term sustainable growth at Putnam will take some time, despite the significant changes to investment management personnel, processes, and product.

• No material equity market issues and no capital issues. No credit issues in quarter - but $0.77 in after-tax exposure to U.K. Banks Tier 1 and upper Tier 2 (SLF had $0.50 after-tax exposure and MFC had $0.10).

• Fundamentals good outside of Putnam.