Great-West Lifeco to take a charge of $216 million due to U.S. tax reform

par The IJ Staff | February 01 2018 01:30PM

Photo: Freepik

Great-West Lifeco Inc. has announced the estimated impact of U.S. tax reform on the company's 2017 fourth quarter results. It expects to take a charge of $216 million or $0.22 per share when it reports its results on Feb. 8.

The U.S. Tax Reconciliation Act, which took effect on Jan. 1, reduces the U.S. corporate federal tax rate from 35 per cent to 21 per cent. In a press release issued Feb. 1, Great-West states that the charge “reflects the revaluation of certain deferred tax balances as well as the impact on insurance contract liabilities and expense provisions. The Company expects the lower U.S. corporate tax rate to benefit future net earnings.”

Agreement to sell investment in Nissay

Great-West also announced that during the fourth quarter of 2017 it agreed, through its subsidiary Putnam Investments, to sell an equity investment in Nissay Asset Management Corporation, a subsidiary of Nippon Life Insurance Company, to Nippon. Concurrently, Great-West Lifeco will acquire Nippon's minority stake in PanAgora, an institutional asset manager that is a majority-owned subsidiary of Putnam. “Nippon and Putnam intend to continue their successful business alliance,” says the press release.

Great-West Lifeco says the disposal of the Nissay shares will result in a gain on sale that will be offset “by a non-cash write-off of an associated indefinite life intangible asset established when the Company acquired Putnam in 2007.”

$122 million charge

The company says the estimated net impact of the sale is a charge of $122 million or $0.12 per share, to be included in its Q4 2017 net earnings.

Manulife and Sun Life

Other insurers have also announced that they will be taking charges in their Q4 results due to the U.S. tax reform. Manulife announced Dec. 22 that it expects to take an estimated charge of approximately $1.9 billion, after-tax, or $0.96 per common share. Sun Life announced Jan. 12 that it expects to take a $200 million charge due to the impact of U.S. tax reform.