Great-West Lifecol has released its 1Q09 results, so we can take a quick look at their exposures.
I won’t be quoting from the earnings release. GWO considers their press release to be TOP SECRET and has encrypted the PDF: “All contents of the document are encrypted and search engines cannot access the document’s metadata … Content Copying: Not Allowed”. I asked them (or one of their affilliated companies, can’t remember which) about this some time ago but, being mere investor scum, was not favoured with a reply.
Profit declined somewhat due to weaker equity & credit markets; $89-million due to lower fee income on Assets Under Management; $25-million due to increased actuarial liabilities; but mainly provisions for credit losses $138-million and other provisions, $19-million.
Exposures:
| GWO Exposures | |
| Tangible Holdco Equity* CAD Millions |
3,474 |
| Other Tier 1 | 81.5% |
| Stock Leverage | 157%** |
| Bond Leverage | 2,644% *** |
| Seg Fund Leverage | 2,214% |
| Effect of +1% Interest Rates | 15.2% |
| Effect of -10% Equity Market | 16.6% |
| Tangible Holdco Equity is Common Shares (5,737) plus Accumulated & Contributed Surplus (6,988) plus Non-controlling interests (2,365) less Accumulated other Comprehensive Loss (754) less Goodwill (5,431) and Intangibles (3,582) = 3,474. | |
| Other Tier 1 = Capital Trust securities & debentures (755) + Preferred Shares (748) + Perpetual Preferred Shares (1,328) = 2,831 / THE | |
| Stock Leverage is Stocks on the balance sheet (5,459) divided by Tangible Holdco Equity. | |
| Bond Leverage is bonds on the balance sheet (66,715) + mortgages (17,312) + Policy Loans (7,842) = 91,869 divided by Tangible Holdco Equity. | |
| Equity effect = 184 / THE | |
| Interest rate effect = 169 / THE | |
| Sources: Financial Supplement and Earnings Release. | |
Despite including this post in the “Regulatory Capital” category of PrefBlog, I will not discuss MCCSR. This figure is useless for analytical purposes, since:
- Corresponding US calculations are not disclosed
- As preferred share investors we are interested in the publicly issued preferred shares, at the holdco level
As noted by DBRS:
The incurrence of debt at the holding company to provide equity capital to operating subsidiaries constitutes double leverage, the use of which should be conservative. The analysis of double leverage requires a review of the unconsolidated financial statements of the holding company, which are generally not in the public domain.