Great-West Life expecting $216m earnings hit from tax changes

The company says its fourth-quarter earnings will likely be dented by US tax reform

Great-West Life expecting $216m earnings hit from tax changes
Changes in corporate tax rates have benefited companies in the US, but one Canadian insurer is expecting a negative impact on its own bottom line.

In a recent statement, Great West Lifeco noted that the Tax Reconciliation Act has reduced the US corporate federal tax rate from 35% to 21%.

“As a result, the company expects to take a charge of $216 million or $0.22 per share when it reports its fourth quarter results on February 8, 2018,” the company said. The charge stems from the revaluation of certain deferred tax balances, as well as adjustments to certain contract liabilities and expense provisions.

A decision the company made to sell a US equity investment is also projected to have an impact. During the fourth quarter of 2017, Great-West Lifeco, through its subsidiary Putnam Investments, agreed in principle to sell an equity stake in Nissay Asset Management to Nissay’s parent company, Nippon Life Insurance Company. Concurrent with the sale, Nippon will give up its own minority stake in PanAgora, which is a majority-owned subsidiary of Putnam.

“Nippon and Putnam intend to continue their successful business alliance,” Great-West Lifeco noted.

With the disposal of the Nissay shares, the company said it expects a “gain on sale offset by a non-cash write-off of an associated indefinite life intangible asset established when [Great-West Lifeco] acquired Putnam.” The upshot, according to Great-West Life, is a charge of $122 million or $0.12 per share, to be included in its net earnings for the fourth quarter of 2017.

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