Great-West Lifeco Inc.

Thank you, Wayne. Good afternoon and welcome to Great-West Lifeco's fourth quarter 2015 conference call.

I'm joined today by Garry MacNicholas, Executive Vice President and Chief Financial Officer, Dave Johnston, President and Chief Operating Officer of Canada, Bob Reynolds, President and Chief Executive Officer Great-West Lifeco U.S., Arshil Jamal, President and Chief Operating Officer Europe and Mark Corbett, Lifeco's Chief Investment Officer. There are also a number of senior officers available on the call to respond to specific questions as required.

The format of our presentation has been amended and the segment details are now in the appendix. I will review the highlights of Lifeco's fourth quarter results first, including headlines from our Canadian, U.S.

and European business operations Garry MacNicholas will then provide a more detailed financial review and after our prepared remarks, we will open the line for questions. Before we start, I'll draw your attention to our cautionary notes regarding forward-looking financial information and non-IFRS financial measures on slide 2.

These cautionary notes will be applied to the discussion you will hear today as well as to the presentation material which we have provided. Now, turning to slide 4, earlier today, Lifeco reported its fourth quarter earnings and declared a quarterly dividend on its common shares of $0.346 per share, a 6.1% increase from last quarter.

We finished the year well with operating earnings of $683 million in the quarter, or $0.69 per share. Earnings were up 4% year-over-year.

We benefited from our business mix and geographic diversity, as economic headwinds were offset by the weakening of the Canadian dollar. Lifeco's full-year earnings in 2015 grew by 8.5% to $2.7 billion.

Looking at our balance sheet, our financial flexibility and strength continues to improve. Our regulatory capital position strengthened with Great-West Life's MCCSR climbing to 238%, up 4% from last quarter.

Our cash position is approximately $900 million at the Lifeco level and our leverage ratio continued to trend downward and stand at the 26.2%. Consolidated assets under administration ended the year at $1.2 trillion with assets under management exceeding $650 billion.

We also announced our intention to increase our normal course issuer bid limit from 8 million to 20 million common shares subject to TSX approval. This provides additional flexibility to pro-collectively manage our capital while preserving our balance sheet strength and the ability to act on potential growth opportunities.

Turning to slide 5, our sales performance this quarter was outstanding, an increase of 81% from Q4 2014. This reflects very strong contributions from the U.S.

and Europe segments, even on a constant currency basis. Canada had solid sales results from all of its business lines and in particular, individual insurance sales grew 17% compared to Q4 2014.

Group insurance saw another strong quarter with sales up in each of our small, mid and large case segments. We continue to have a very strong pipeline of large case sales for 2016.

Group retirement sales matched last year's levels in spite of business headwinds, given the uncertainty with employers, regarding the new ORPP, that’s the Ontario Registered Pension Plan and weaker economic growth observed in Western Canada. I would also highlight that this is our 21st consecutive quarter in Canada where individual and group retirement services businesses saw positive net cash flows.

In the U.S., sales of Great-West financial were significantly higher, buoyed by large flat sales at Empower. Empower Retirement sales were up CAD16.6 billion compared to Q4 2014.

The sales pipeline remains strong across all business lines with several large case sales expected to fund in early 2016. Putnam's gross sales were down by 12% in local currency compared to the fourth quarter 2014.

Institutional sales increased by 28% while mutual fund sales decreased by 32%, reflecting the decline in industry flows in the segments where Putnam operates. In Europe we have a strong sales result during the quarter with growth across each of UK, Ireland and German businesses.

The UK sales results also included offshore investment bond sales rising from our acquisition of legal and general international Ireland, which closed during the third-quarter of 2015. Now, to slide 6, while consolidated expenses were up 16% in 2015, on a constant currency basis, the increase was 6%.

The growth in expenses is driven by increased sales volumes and an increased spend on strategic initiatives in all of our segments. In Canada, expense growth was 10% for the quarter, which is somewhat higher than historic levels.

Excluding increased pension expense our core business operating expense growth was just over 8%. This level of expense growth reflects normal business operations expense growth of approximately 5% and continued strategic investment within the Canadian business.

In the U.S., expenses were up 5% in local currency with much of the increase related to projects undertaken by Empower as well as the significant business growth rising from a sales noted earlier. Empower has successfully reached the midway point of its integration.

For Putnam, excluding one-time items, operating expenses were down $15 million from Q4 2014. This decrease was related to it lowering sensitive related compensation and lower sales and volume related expenses.

Europe's reported operating expenses are up 9%, but close to flat using constant currency. While the spend on solvency to preparation is leveling up, Europe's expenses include the cost associated with both the integration and the ongoing operation of the newly acquired offshore Wealth Management business of legal and general.

Irish Life expense synergies are now fully realized and the level of the run rate expenses and integration costs are falling away. Turning to slide 7, fee income was up 15% as assets under management grew by 14% and up 5% on a constant currency basis.

Canada's fee income was up 6%, driven by Wealth Management fees. While Canadian stock markets were down meaningfully quarter over quarter, foreign market performance in Canadian dollar terms was generally positive.

U.S. fee income was up by 4%, overall with Great-West financial fee income up 28%.

The primary driver of growth was Empower strong sales results. Putnam's end quarter fee income was down in local currency due to negative impacts of markets and net outflows.

In Europe, fee income increased 13% due to the favorable impact of positive cash flows and market and currency exchange rate movements. Slide 8, provides an overview of key strategic projects that are focused on driving organic growth by improving our value propositions for both customers and advisors.

In Canada, our goal is to protect and extend our leading market position through innovation and differentiation. This fall we launched a pilot of an innovative health and wellness platform to improve health outcomes of members and healthcare costs for sponsors.

We also introduced HelloLife to help individuals create a retirement program tailored to their specific needs. In the U.S., the integration of Empower is on track and plan to be completed by mid-2017.

The $150 million U.S. investment in Empower is about 75% complete with the remaining system development plan for 2016 and early 2017.

Another wave of the empower integration plan finished in Q4. The benefits of the acquisition along with new plan sales have increased the number of participants to just over 7.6 million.

The expense impacts will continue to decline as the integration winds down. Empower synergy assets are $40 million to $50 million per year will be harvested over a number of years beginning in 2017.

Putnam recently launched Maneuver in Markets, a program to assist advisors and their clients in navigating today's difficult investment climate and challenges with a focus on pursuing return while diversifying to reduce risk. Our European insurance subsidiaries are now operating under the new Solvency II regime, having secured the regulatory approval as planned.

And the Irish Life integration is now concluded and annualized synergies are estimated at €48 million. Over the past 2.5 years, while integration was under way, Irish Life's market share also grew which is an outstanding achievement.

Now, I will turn the call over to Garry to review Lifeco's financial results. Garry?

Thank you, Paul. Starting with slide 10, net operating earnings for the fourth quarter was $683 million, up 4%.

Canada's earnings were down 13% or 38 million year-over-year but within this bases changes were down $44 million for the prior year as changes to the Canadian actuarial standards drove significant actual reserves in 2014. Canada earnings were also impacted by unfavorable long-term disability claims experienced in our group business.

A downturn in the Western Canadian economy has had an impact on both incident rate and termination rates. Pricing actions have been taken which will have an impact over the next 12 months as contracts are renewed.

Investment gains continued to contribute positively to Canadian results. In the U.S., earnings were up 19% from Q4, 2014 on a constant currency basis.

Putnam's earnings of U.S. dollars $31 million benefited from the impact of a $27 million tax adjustment.

As noted in the appendix, core net earnings were $70 million at Putnam resulting in an operating margin of 13.5%. Great-West financial earnings were impacted by higher expenses driven by business growth and also lower yield enhancement as compared to 2014.

Europe's operating earnings of $303 million are up 11% and actual exchange rates and 2% in constant currency compared to the same quarter in 2014. The quarter's earnings result reflects continuing strong contribution from Ireland and reassurance.

Our Irish business contributed $110 million to earnings which is $40 million higher than in Q4 2014 reflecting strong investment results and the benefits of integration synergies. UK earnings declined compared to the fourth quarter of last year, primarily as a result from lowering contribution from bases changes and last year included the impact of those actuarial standards changes.

In addition, the fourth quarter saw an uptick in group life plans in the UK. Equity markets in the fourth quarter had little impact on our results.

In the credit market, we saw an increase in ratings downgrades, particularly in Europe with the negative impact of $26 million. I would note that very little of this relates to the oil and gas sector and overall, our oil and gas exposure is quite modest.

We have provided additional disclosure on this in the MD&A, as well as in the appendix of this deck. Turning to slide 11, the source of earnings display, and as a reminder, the SOE categories are shown pretax.

Lifeco's year-over-year expected profit increased $53 million or 8%. This was largely a result of favorable currency movements and higher expected net fee income of Wealth Management asset base.

Higher pension costs and increased strategic investments in the business help back expected profit growth. New business strain of $60 million increased $5 million year-over-year.

We saw an increase in the non-deferrable acquisition expenses at Empower due to sales growth and also a shift in mix to more fee-based investment business which is partially offset by beneficial impact of repricing activity in other areas of the company. Experience gains and changes in assumptions taken together were $88 million, which was $153 million lower, year-over-year and $87 million lower quarter over quarter.

While the combined experience gains and changes in assumptions have consistently contributed to the bottom line, historically, there could be quarter to quarter fluctuations as we have seen this year. To help with this in perspective we have included in the appendix on slide 33, a longer term history showing an average contribution of about 20% from this source.

Experience losses of $61 million are in contrast with last quarter's gain of $48 million and the prior year's gain of $20 million, reflecting a number of headwinds, including unfavorable morbidity in Canada, higher expenses and higher credit downgrades. We also had unfavorable mortality in most lines partially offset by training gains that continued to attribute positively.

There were a number of actuarial studies concluded in the fourth quarter. Assumption updates and other management actions resulted in the release of $149 million compared to $127 million last quarter and $221 million in the prior year which included the change in actuarial standards.

The principle contributors were updated mortality assumptions in Canada, updated economic assumptions for Canada and Europe, partially offset by the strengthening of policy holder behavior assumptions in Canada and the strengthening of expense assumptions in European operations. The earnings and surplus of $33 million increased $28 million year-over-year and $43 million quarter over quarter.

The increase over last year as a result of higher investment income, primarily due to currency movements and higher mark-to-market real estate gains for Canada and returns from [indiscernible] partially offset by lower OCI gains in the U.S. and Europe.

And, quarter over quarter with the benefit from seed capital mark-to-market that had been a drag in Q3. The decrease in effective income tax rate for the fourth quarter of 2015 was primarily due to the higher percentage of the company's income subject to lower rates of income tax in foreign jurisdictions as well as changes in certain tax estimates which included the positive impact and were adjustment of CAD36 million at Putnam.

Slide 12 is a full-year review of our SOE, Lifeco's expected profit in 2015 was $2.763 billion, which is an increase of $150 million or 6% from the expected profit in 2014. This increase is largely a result of favorable currency and growth in the business partially offset by higher expenses.

New business strain of $219 million in 2015 was $85 million higher compared to last year. The higher strain in 2015 as a result of an increase in non-deferrable acquisition expenses in Empower due to significantly higher volumes.

Experience gains and changes in assumptions taken together contribute favorably to the bottom line. In 2015, total experience gains and changes were $759 million which is slightly lower than 2014.

Experience gains in particular were $295 million in 2015, $72 million lower than the Experience gains lastly, primarily due to the overall Experience losses this quarter that I commented on earlier. Assumption updates and other management actions contributed to a release of $464 million this year compared to a release of $422 million in 2014.

The principle contributors to the 2015 release were updates to a [indiscernible] mortality, life mortality and economic consumptions partially offset by the strengthening of policyholder behavior assumptions and modeling refinements. Earnings on surplus were $79 million in 2015 which were $47 million higher than last year as result of higher OCI gains , gains on sales of assets and surplus, gain from property sale in Ireland and higher mark-to-market real estate gains in Canada.

The decrease in the company's effective income tax rate was primarily due to the same reasons discussed at the end quarter results as well as higher adjustments of prior year tax provisions in 2015 compared to 2014. Turning to slide 13, Lifeco's uncommitted cash position remained strong at almost $900 million.

This would add about 13 points to the MCCSR ratio at Great-West Life. Our book value per share increased to $20.07 up 19% from Q4 2014.

Return on equity was 14.7%, this being the trailing four quarter average reflecting the impact of currency on average equity. ROE continued to be strong in Canada and Europe, our 7.8% return in the U.S.

is a combination of 1.4% for Putnam and 13% ROE of Great-West financial which reflect the earning pressure of the integration and strategy investments. And finally, on slide 14, we show assets under administration which grew 14%.

Assets under administration grew in all geographies 16% in Europe and 16% in the U.S. with the currency contributing significantly in those areas at 3% growth in Canada.

And of the total AUA of $1.2 trillion, $653 billion are assets under management, which is up 14% from Q4 2014 and on the right hand side of the page are two pie charts which provide further breakdown of assets under administration and you can see there that has been good growth across all components. Paul, that concludes my remarks.

Thanks, Garry. To conclude we’ve ended 2015 in great shape and in a strong position to weather market conditions and take advantage of growth opportunities.

I will now turn the call back over to the operator so we can take questions. Thank you.

Just first question, Garry, I think I just want to make sure I understand this on the Putnam side. You had $41 million of earnings to common shareholders.

Then, I think you mentioned correct me if I'm wrong $31 million positive income from on tax in Canadian dollars. So the net of the two normalized would be $4 million positive earnings?

I'm getting to the right number?

You are close. In Canadian dollars, the tax adjustment was $36 million, that was the adjustment there.

Okay. Was there anything else in Putnam that came through in terms of performance fees or anything else or was it excluding the tax item, was it relatively clean for Putnam?

Putnam has seen some decline in the income and the fee income as the markets and cash flows are down but have also seen a commensurate decline in expenses from on both the investment side and in the operating expenses. So the two of netted up to a small positive for the quarter, which helps the core income.

And just on the expense side for Putnam, has there been a concerted effort to manage expenses lower I think before the strategy was not necessarily to bring expenses down to improve profitability, but try to grow the top line. Has that view changed, Paul?

Are you more focused on trying to rationalize expenses?

I will let Bob speaking for this but we’re so very much focused on ensuring that we maintained a very strong investment performance to drive the business forward. As we look at the business, it's critically important that we maintain the diversified product shell and continue to launch innovative products.

Clearly, we want to look at the variable costs and bring those down in keeping with the business and that's what you're seeing the benefit of. But, we still remain committed to making sure that we've got good performance, good product offerings for advisors and their customers.

Bob, I'm not sure if there's anything you would want to add?

I would say that we have been managing costs, trying to make operating costs flat. I think, as we've talked about before, a lot of the pay at Putnam is pay for performance.

We went through a period of years where performance was really off the charts and we're still performing quite well but because of that compensation will go down.

Okay. Just on Solvency II, I think the question has been asked before.

But obviously, it's more punitive than under the MCCSR, you’ve got a big European business. The concern was around trapped capital in Europe.

But you’re approaching or trying to get -- you applied for some leeway on some of these. Can you give an update, in terms of that -- are you subject to trap capital in Europe under Solvency II?

As outlined in my comments and then Garry echoed it, we were able to get all of the approvals we needed to move forward in the Solvency II environment. I'm going to let Arshil speak to a number of the waivers and things that we were able to achieve as part of that process.

So just as a reminder, our UK business, our Irish business and our German business the insurance subsidiaries they are subject to Solvency II as well as a couple of our reinsurance subsidiaries. But the vast majority of our reinsurance operations operate outside Solvency II and we have the ability through internal reinsurance to take some of the risks in our European insurance companies and transfer them across.

So, while the majority of the business is written into Solvency II regulated companies, a substantial portion of the profits emerge and the capital is held in non-solvency II companies so it is really a mix of Solvency II requirements and MCCSR requirements. We've always had local capital constraints that impacted our ability to move capital, even pre-solvency II, and we've always very carefully managed the relationship between the local capital requirements and the parent company, Great-West Life MCCSR consolidator requirements.

And so we've always operated to both bases, both bases have been reflected in our pricing. And as of January 1, we believe that we have a structure in place that has the right balance between respecting the local requirements and managing any trapped capital.

The one thing that I would add is that the Solvency II requirements, going forward, are a little bit more volatile than the old regime would have been and we’re taking steps in the coming weeks and months to manage some of that volatility. So that while we've got the best majority of our Solvency II worked done and we've got our matching adjustment approval in which will less [indiscernible] UK have annuity business in the capital efficient and effective way and we will see the transitional approval and our volatility adjustment approval and our waiver approval, so that approvals we’re seeking that they all came through.

But some of the work that we need to do to manage the volatility, going forward as this work that will continue on in Q1 and into Q2 this year.

Okay. So I can clarify, Arshil, there is a lot in there and I appreciate the content -- so you’re able to essentially move some of the profit and the required capital out of the Solvency II regime areas into reinsurance that's not captured under Solvency II and you received approval, how much of that is moved out and you received approval for that, I guess is essentially what you're saying?

So we would have internal reinsurance in place even before Solvency II to help us make manage the local capital requirements relative to the Canadian ones. So, there were modest adjustments to those programs, modest increases in places and we have further work to do in that area.

The details of the internal reinsurance arrangements we never really discussed in detail and I wouldn't propose to go through them in the call today.

I would also note, Doug, that the approvals that Arshil is referencing were not specifically related to reinsurance, they were related to standard rules that are being applied for Solvency II as companies transition from the old [indiscernible] environment to Solvency II.

Okay. And then just maybe, I will take a 10,000 feet up.

So basically, we look at the MCCSR, there really is there much of a difference on that Solvency II region businesses ? Is the difference between the MCCSR and the Solvency II or is it basically a wash?

Our target ratio in Solvency II would be a little higher than the MCCSR than we are currently running at 238 and Solvency II would be a bit higher than that so it's manageable of course.

Just a couple follow-up questions just related to that. First of all, Garry, the $17 million that reported core earnings for Putnam, I assume that's inclusive of the CAD36 million or whatever it was, CAD25 million tax gain?

Are we suggesting that the core earnings were negative in Putnam of the taxing?

Tom, the core earnings did not include that tax item that it was in the contribution to Lifeco.

Okay. So the core earnings of 17 million based on what kind of tax rate for Putnam then?

The core earnings would be based on the Putnam standard tax rate which off the top of the head in the U.S. is in the 35--

Okay. And then a follow-on for Arshil with respect to the UK annuities, I think we just recently heard that through Prudential is going to be retreating from the UK annuity market.

And I know that there certainly has been issues with respect to UK payout annuities. And how are you repositioning your retirement type business and your pension business in the UK to account for this change that was brought about a couple years ago?

And then, do you need to change product sets? Do you need to change distribution points ?

Are there any potential blocks that you would be able to pick up with respect to this especially for the fact that you've got this structure that allows you to escape, if you will, some of the more onerous Solvency II requirements?

I'm just going to say Tom, I think there is two or three questions embedded in one there. One of them is a question regarding how we’re managing in the changes in the payout annuity market.

I will let Arshil speak to that. In terms of our view to the business in the UK, we clearly are looking to broaden our footprint in the UK through product expansion, through growing other businesses but at the same time, we have the opportunity to continue to participate in the payout annuity market and not in exactly the same way through the traditional retail space, but through some of the bulk purchase and through some of the larger transactions.

So I'm going to let Arshil speak to that. But our focus is to try and broaden the footprint which will allow us to have better diversification but at the same time continue to drive some growth.

Arshil?

So our [indiscernible] underlying payout annuity risks hasn't really changed in our pricing folks, really hasn't changed with the introduction of Solvency II. We always relied on a degree of internal reinsurance out of the UK into our reinsurance subsidiaries to support our payout annuity activities and we are very comfortable with the margins that we are achieving in the payout annuity marketplace.

And as Paul indicated, now we’ve diversified a little bit, historically the business there would have been predominantly retail and this year being 2015 we've done two transactions with pension plans where we've taken on annuity liabilities on pension plans to pensioners in payment. So that’s supplemented the much reduced level of retail payout annuities with the change from the Chancellor.

We've also gotten to the block acquisition from equitable which was in the first quarter of 2015 and it's only in the last week that we've had court approval, so in the coming weeks that would be moving from a reinsurance arrangement to a fully on balance sheet arrangement for us where we have exclusive control of the assets, so they will no longer be reflected in equitable's balance sheet, they will only be on our balance sheet and we will have exclusive investment control of those assets. And there is a lot of opportunity in the marketplace.

So, we're very active there and I'm cautiously optimistic that we'll continue to have contributions from both the pension buyout marketplace and the block transactions with other insurance companies.

The other point being that we've also launched alternative retirement income products in the UK and we're building out technology and sales force capabilities to try and reach both the advisors we would have traditionally sold the payout annuities through, but also new segments of the advice channel that frankly, not only need new products, they actually need a bit of advice and guidance on how to sell those because selling a payout annuity to someone when they are compelled to buy it based on legislation is very different than sitting down with the client and talking to them about their retirement income options and how to optimize given tax and other considerations.

So just rough order of magnitude, in the payout annuity space our sales in Q4 were on the order of £100 million and in these new drawdown type products, where people have more flexibility where they are not annuitizing their funds and where have property management services, the sales in the quarter were just about approaching £250 million. So that is much lower margin compared to payout annuities and it's not a marketplace that we would have historically participated in.

But, we're starting to make some modest inroads into that marketplace and that is now the larger market retail base for retirement income. So I think there's lots of opportunity in that area, as well.

But as Paul indicated, it requires up to have a proper funding shelf, which we've been investing in, proper technology book for advisors and for the end customer which we are also investing in. So we’re cautiously optimistic that over the medium-term, that will become a meaningful business for us, as well.

First of all, can you tell me what the UK payout annuity sales trend was this quarter? Then, group disability, how did the experience in Canada perform this quarter?

I'm going to direct the first one to Arshil to talk about payout annuity sales and then I will pass over to Dave Johnston who can speak to group disability and what we've observed there. Arshil?

So just very quickly in the quarter we had £95 million of payout annuity sales including our second transaction in the bulk annuity space and that was well up from a year ago but slightly down from Q3 results that we reported which was exceptionally strong.

Okay. And then just a little layer beneath that -- rough figures, here the decline in sales and payout annuities from a few years ago to your current level, it really hit your strain, it going higher, but $100 million by my math, annually.

Do we’ve visibility on recouping that strain or reducing the strain over the next few years?

I'm not sure I follow the math that you have compared to where we were a few years ago because we’ve Irish Life in -- get maturely to the European strain. But certainly payout annuity sales, overall with the changes in the tax environment in the UK we said the market would fall by about 75%.

The market has fallen by 75%. But also, the new much lower 25% base, we're starting to see some growth.

So we are cautiously optimistic that the worst is behind us and Q3 and Q4 represented new baseline level of sales for us that we can build on going forward.

Okay. And then on group disability?

So on the disability we did see our results below our expectations in the fourth quarter up until about midyear, things were really quite well behaved and they were at plan but towards the end of the third quarter, and certainly in the fourth quarter we did see some deterioration. We saw both an increase in our incidence of claims as well as lower termination rates.

We believe it's driven in part, by the economy, deteriorating economy. We certainly observed from a regional standpoint the deterioration was more pronounced in Alberta.

We also observed in our segments, in the industry segments, in particular we saw deterioration in our construction, our oil and gas and our social services segment. So, there's no question that we've observed, over the years in declining economic conditions, there is some impact on disability experience and we're seeing it, now.

This happens periodically and generally with the nature of this business, the response is through pricing action and we have undertaken pricing action and that will come through as we go to each of the client's renewals over the next 12 months. We have looked at our claim practices because that's one of the first things we would look at when we see variances to plan and certainly, our key metrics on our claims disciplines acceptance rate, that type of thing, they've been constant throughout the year.

So it does seem to be really an increase in claims coming in those more affected areas and as you can appreciate, when companies are laying off employees it's more difficult to get employers back to take back employees that are recovering. I would also note, we did see some deterioration in the financial services sector and there have certainly been layoffs in that since.

So, we're watching it very closely. We think its economy based, in part and, we've taken action and will continue to watch it very closely.

I would also note that we tend to be very proactive on pricing. This is something we've observed in the last couple of months and have already put in place pricing action in a number of different ways.

So we’re a long-term player in this business as we describe to our Board, the LTD [ph] business is not for the faint of heart, we also don’t want to be small-scale in it. We want to be prepared to weather the ups and downs but overall it's a very good margin business long term.

You have to be able to ride out economic conditions. But the reality is, you don't have to write it, you can actually deal with pricing and that's the way we are going to handle it.

So how effective can pricing action be? In some cases, it seems like squeezing blood from the stone -- if businesses are doing well, it's just big enough to eat it and that’s just another cost burden for them and precipitates even further deterioration?

I'm just thinking out loud, here. But when I hear rate action in a weak economic growth environment, it seems that would be very difficult.

The reality is and I will let Dave speak to this but the reality is, these are experience rated cases and as we work with those clients, one of the key things that they have in place our employee benefit programs for attraction and retention of their best talent and they want to have good coverage in place. Dave, I will let you speak to that.

Absolutely, and certainly, we deal with that every day, the balance between client retention and the appropriate price. The magnitude of these increases -- we are not talking 10%, 15%, 20%, 30% increases.

The margin here is -- we're probably looking at less than 5%, overall. So it is manageable.

We watch our persistency very closely. So it's a balance.

But we've gone through this. We went through this in 2008, we had a slip in 2011, in the early 2000's.

It's a fairly regular occurrence. It's part of the management of the block that's yearly renewable and some clients will see an increase in rates and some clients will see a decrease.

It's just managed overall and I don't think we'll be alone in seeing the impact of the economy. But, it's a very valid comment we have to work with our clients and sometimes, working with clients is not increasing the price, but changing the benefit structure, so that is more manageable from that perspective.

But it still gets at the required margins.

Paul, my last question here is on the buyback. I don't recall ever seeing Great West have a big buyback program in place and here we’re going from $8 million to $20 million, a pretty decent percentage of your share outstanding.

How active do you plan on being in the buyback? What was the thought process?

I can come up with some obvious conclusions myself, but I'd like to hear your words and see where the funds are coming from? Is it just $900 million or so at the holdco?

I would start off by saying that we had very strong capital position that has been strengthening, as we saw 4% up on an MCCSR basis in the last quarter. And essentially, the way we look at it is with the strengthening position, we want to add to our flexibility to proactively manage capital.

So that presents a whole range of options including share buybacks. But at the same time, the $20 million is relatively modest, relatively to the strength of our capital because we want to also maintain a strong base for strategic investment, or whether that be organic or whether that be investment in acquisition opportunity.

So we just see this as let's make sure that we have got a flexible toolkit as we move through the year. We can opportunistically take advantage of market conditions.

But at the same time, we want to make sure that we keep lots of powder dry for opportunities that we are clearly always on the hunt for.

So, you'll be really active?

The other reality is, we are in interesting market times right now, with low interest environment and with volatile and currently today declining equity markets. So I like the strong capital position that we have, both defensively in tough economic times but opportunistically from the standpoint of opportunities for growth.

One of the realities of acquisition is it takes a willing seller and a willing buyer. We are always considering and looking for growth in that way.

At the same time, we're investing in organic growth. So we're looking to grow in all ways we can and at the same time we also want to manage our capital efficiently on behalf of our shareholders.

On behalf of the management group here then, I'd like to thank all listeners and all participants in the call particularly those who asked questions and we look forward to getting back together over the phone and talking with you at the end of the first quarter when we have our call in May. Thanks very much.

Take care.