Great-West Lifeco Inc.

Thanks very much, Arnie. Good afternoon and welcome to Great-West Lifeco's first quarter 2016 conference call.

I'm joined today by Garry MacNicholas, Executive Vice President Chief Financial Officer; Dave Johnston, President and Chief Operating Officer in 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 a number of other senior officers available on the call to respond to specific questions as required.

I would note that the format of our presentation now includes the segment details in the Appendix. I will review the highlights of Lifeco's first quarter results including headlines from our Canadian, U.S., and European business units, Garry MacNicholas will then provide more detail on the financial side and after our prepared remarks, we will have the operator to open up the line for question.

Before we start, I'll draw your attention to our cautionary notes regarding forward-looking information and non-IFRS financial measures that is on Slide 2. These cautionary notes will apply to the discussion you will hear today as well as to the presentation materials that we produced for you.

Today Lifeco reported its first quarter earnings and also declared a quarterly dividend on its common shares of $0.346 per share unchanged from the prior quarter. We’re now going to get into the details of the results, so if I get you to turn to Slide 4, you will see that Q1 2016 earnings were $620 million, this was 11% lower than Q1 2015.

For bit of context, in each quarter there is typically a number of moving parts where some are positive contributors and others are a drag. Unfortunately this quarter all of them went the wrong way compared to Q1 2015 where they were mostly favorable and we’re going to give you some insight into that.

I would say as much it was disappointing quarter’s result for us really from -- more from the perspective that we don’t view it as a good reflection of the quality of the health of the underlying business. I’m now going to share a bit of context around the business drivers, and then Garry, once he gets to the source of earnings slide will give you greater insights.

First off, well targeting morbidity were essentially a challenge right across the Group. We saw some challenges in the U.S., Canada, and Europe.

One area of note was Canadian Group loan termed as ability. I would point out those and it was trending in the right direction and we saw a Group LTV morbidity results an improvement over Q4 2015 but this year’s first quarter was well below the first quarter of last year when it was actually a source of strength.

The second issue impacting earnings was equity markets which were down year-over-year in all regions and this obviously created a downward pressure on fee income. Fortunately, we are seeing a degree of market recovery in Q2 and I hope this continues.

The third area of challenge was lower contribution from yield enhancement this quarter compared to a year ago. But I would note that this quarter’s yield enhancement was actually in line with our long-term averages and Garry can provide just more color on that and that compares to Q1 2015 which was exceptionally high, there was a very high contribution in Q1 2015.

Finally basis changes and management actions were modest this quarter which is actually more than normal for Q1 versus last year when they were higher than usual. We don’t typically have a lot of basis change or reserve basis studies going on that lead into improvements in Q1.

Last year, we had a bit not so much this year. So while these improved challenges were somewhat offset by tax benefits, the net result was below our expectation.

However as I look at in total and at the underlying strength of our business I’m not concerned. MCCSR for Great-West Life Insurance Company are regulated and they remain strong at 236%.

This ratio would be approximately 13 points higher if we were to include the $840 million in cash we hold at Lifeco. An accountable position, as it stands gives us substantial capacity and flexibility as we can consider potential growth opportunities.

Turning to Slide 5, this real highlight was strong top-line growth. Sales increased 58% compared to Q1 2015 on a constant currency basis and the real leader was U.S.

Empower business being a real significant contributor. This Empower sales growth highlights one of the benefits of the investments that we are making in that business.

Empower Retirement has now more than 8 million participants and this represents a 13% growth in participants since Empower was launched and this is broadly three times the industry growth rate over the same period. So the platform we’ve built is we believe a winning platform.

Canadian insurance sales were strong in both individual and group. Individual insurance sales growth actually reflects the resolution of our new business processing issues that were holding BAT sales last year and a bit before as well.

Group sales were actually strong across all segments, and in particular, I would note we saw good growth into the small and midsized segments where we have higher margins. Canadian Wealth Management sales were down year-over-year and that’s reflecting the Q1 market volatility and lots of investor uncertainty.

However, I would also note that with draw rates were down and the net impact of that was resulted in our 22nd consecutive quarter of positive net cash flows in Canada and this is one of the key benefits we have of the integrated distribution tight coupling with our distribution organizations in Canada. For Europe, I would note that Q1 2015 sales reflect the one-time impact of $1.6 billion Canadian Equitable Life payout annuity book acquisition.

So last year first quarter there was that big bump up due to the Equitable Life acquisition. If we were to exclude the impact of that European reinsurance sales were actually up 60% year-over-year.

So again if we think about the underlying growth very strong there. The growth reflected a strong contribution from Irish investment management in the quarter.

We also benefited from actual increase in UK retail sales, annuity sales, and significant growth in German sales where our unit linked products which are less interest sensitive, less guarantee sensitive are very well-positioned in the new Solvency II environment, capital environment. Finally, I would out that in Ireland we announced the acquisition of Aviva Health.

This acquisition will actually make us a leader, a leading player in the health insurance market in Ireland and it will be accretive to earnings. Turning to Slide 6, this highlights our expenses which increased by 5% on a constant currency basis.

Canadian expense growth was moderated compared to 2015 as we’ve been seeing the benefits of continuous improvement, productivity initiatives growth may be in operation. Our U.S.

expense growth reflects continued significant investments in the Empower platform and integration, but this was actually offset by lower cost of expenses due to lower compensation and lower sales cost. And in Europe, expense growth moderated compared to last year as we move past the peak Solvency II investment.

Turning to Slide 7, I’ll touch on fee income for the quarter. Here you can see the impact of difficult equity markets in Q1.

Canada was actually able to overcome the market declines with positive net cash flows. The U.S.

was challenged by the combination of lower market levels and retail mutual fund outflows. This was a phenomenon that we saw majority of active managers, and in particular, in Q1, we also saw active and ETF managers seeing outflows.

So this was a tough, tough quarter in U.S. mutual fund space.

In Europe, we were able to partially offset significant market declines with positive net cash flows and favorable currency movement. So that kind of touches on the highlights of the business and I’m going to turn it over to Garry, who is going to review the financial results and he will turn it back to me to make few other comments before we get to the questions.

Garry?

Thanks, Paul. Starting with Slide 9, operating earnings in the first quarter were $620 million or $0.625 per share versus $0.70 a year ago.

Earnings this quarter were negatively impacted by three main issues. First, lower investment markets which have pressured net fee income in all geographies; second, unfavorable experience in both group and individual disability businesses; and third, training gains that were steady but well down compared to the very strong results in Q1 2015.

These impacts were partially offset by a lower effective rate of tax which included a number of one-off positive developments. Canada's earnings were down $23 million year-over-year.

The decrease was primarily due to less favorable long-term disability experience, where as we’ve previously noted, pricing actions have been implemented. However, it is worth noting that the Group’s non-refund disability results were an improvement from Q4 and likely reflects the early impacts of the rate increases we are implementing.

The contribution from European heads in trading activity was quite strong but lower than a record level in the prior year. These negatives were partially offset by lower income taxes.

In the U.S. earnings of U.S.

$47 million were down from U.S. $51 million from the prior year primarily due to lower net fee income reflecting lower selling assets along with a weaker investment market in the first two months of year especially and a lower contribution from trading activity.

In addition, there were higher operating expenses due to business growth particularly at Empower with a number of participants has grown by nearly 1 million to over 8 million. Earnings also benefited from a lower tax charge.

Putnam’s earnings were negative U.S. $18 million compared to positive $2 million last year reflecting a fall in net fee income of U.S.

$41 million to 183 as average assets under management fell to from U.S. $141 billion to U.S.

$158 billion largely due to market value declines and net cash outflows in the retail business. Great-West Financial’s earnings were down 32% to U.S.

$65 million impacted by a lower contribution for investment experience and a higher operating expenses noted above. First quarter earnings included U.S.

$5 million of strategic and business development expenses related to Empower similar to last year. Turning to Europe, Europe’s operating earnings of $287 million are level at actually exchange rates and down 5% in constant currency compared to the same quarter in 2015 principally reflecting lower contribution from the insurance liability base exchanges and less favorable Group disability experience.

Credit was a modest positive this quarter as a result of net bond grading upgrades compared with small negatives in Q1 2015. Turning to Slide 10, and just as a reminder, the source of earnings categories above the line are shown in pretax.

Lifeco’s year-over-year expected profit increased $27 million or 4%. This was largely a result of continued business growth and favorable currency movements but the year-over-year growth rate was muted by the lower expected net fee income on wealth management asset base particularly due to lower assets under management in the U.S.

and in particular expected profit as a percent declined $23 million year-over-year. New business stream of $68 million increased modestly from Q1 2015.

We saw an increase in non-deferrable acquisition expenses in Empower due to strong sales growth and a shift in mix to more fee-based divestment business partially offset by the benefit of higher sales compared in the UK at good margins. The big change year-over-year is in the next couple of categories.

Experienced gains and changes in assumptions including major actions when taking together were $92 million which was $250 million lower than the first quarter of 2015. While combined experienced gains and changes in assumptions have over the years consistently contributed to the bottom-line, there can be fluctuations quarter-to-quarter.

And to help with this in perspective we have again included in the Appendix on Slide 22, a longer term history showing an average contribution of about 21% from these sources of net income before tax. Q1 last year was at 36% and the contribution this quarter was 14% on an after-tax basis, this swing is approximately $179 million or $0.18 a share.

I will comment now on a couple of the drivers. Experienced gains were $38 million this quarter lower compared to the prior year’s unusually strong gains of $244 million but an improvement from last quarter’s experienced loss of $61 million.

The result reflected continued positive trading gains, partially offset by unfavorable disability income results and lower fees largely as a result of market performance early in the quarter. All else being equal reprising activity in Group business and the recent improvement in equity markets should help to regain those negative impacts.

Mortality and longevity experience is broadly offsetting as is often the case but this time netting to a small negative. Assumption updates and other management actions resulted in a lease of $54 million this quarter compared to $149 million last quarter and $98 million last year.

The release this quarter was primarily related to modeling refinements in the European segment. The earnings on surplus of $11 million, $22 million lower than last quarter, $42 million lower year-over-year.

The decrease in last year is primarily a result of lower OCI gains, gains on trading of surplus assets in Europe segment, and losses on key capital portfolios in both Canada and at Putnam partially offset by higher mark-to-market real estate gains in Canada. The decrease in effective income tax rate for the first quarter of 2016 is primarily due to a higher percentage of the company’s income consisting of non-taxable adjustment income and a more favorable mix of earnings by geography, in this case, less income subject to the higher rates of income tax in the U.S.

There were also a number of one-off positive items which totaled $66 million and we do see effective tax rate by 9%. Turning to Slide 11, Lifeco’s uncommitted cash position remained strong at $840 million.

Our book value per share was $19.29, up 9% from Q1 2015. Return on equity is 14% reflecting the impact of currency on average equity and lower in this quarter compared to Q1 2015 particularly in the U.S.

segment. ROEs continue to be strong in Canada and Europe and 6.3% return in U.S.

is a combination of 0.2% ROE for Putnam and a 11.6% at Great-West Financial reflecting the earnings pressure of continued strategic and integration spend in the phase of income pressure from earning core equity market declines and lower assets under management at Putnam. And finally on Slide 12, we show assets under administration largely unchanged growing by 1% primarily impacted by sales activity and currency.

Paul that concludes my remarks.

Thanks, Garry. Before we open up the lines for questions, I just want to take a few moments to sum up the quarter and just couple of notes there on Slide 13 that you may want to refer to.

So I would start off by saying that Q1 2016 was a challenging quarter and it was driven by multiple and serious variances versus our expected results and compared to what I would say was a record quarter last year. We’re not concerned about the in period variance as the underlying business remains strong and is supported by the same consistent underwriting investments and expense disciplines.

We remain committed to the significant investments, we’re making in our businesses to drive future growth and actually I wouldn’t just say future growth I would say current growth, we are seeing strong top-line growth and not really is and will be the lifeblood of our business and we remain confident in our strategic direction and growth prospects and we’re going to share more insight into the at our June 7 Investor Day for Institutional Investors in Toronto. So that concludes my formal comments and I would like to turn the line over to the operator, so we can get set up for some questions from the analysts participants today.

Hi good afternoon. Just want to talk to or ask you about the credit experience and then delve into that Group business a bit more.

So on the credit on Slide 28 you talked about the $10 million impact on your earnings this quarter is looks like a positive number. I’m trying to understand and this goes for you historical excuse me as well.

Does this looks like it’s what’s embedded in your reserves not necessarily an experienced gain or loss, is there a way to determine how much credit is actually going versus your assumptions?

I will turn that to Garry to start with, think that is probably one should understand the difference between our sources of earning versus the income.

Income statement because I mean there would be an offsetting adjustment in there, I guess in your liabilities right, some reserve release.

No these amounts the effective upgrades to downgrades from on the ratings those do flow those earnings. So these actually represent the change in our liabilities due to that ratings in the state upgrades.

So these are -- these -- those upgrades are actually an experienced gain and the impairments would also go through as negative experience.

Okay. With the way I read it previously there is more or like this is the investment income but there would be an adjusting item in the policyholder liability that we don’t see, so the difference would be gain or loss.

But you’re telling me this is the net result.

This is a net result going through experienced gains and losses.

Okay.

As you go through those schedule.

So a little bit surprised to see it, positive this quarter. But how is the outlook there for credit performance, it's been negative for the 2015 anyway, which is just similar to what we saw from Manulife and Sun Life, is there anything different in your portfolio that you can point to that might support continuation of those trends.

No this flows from -- I’m going to so -- Mark Corbett will speak to this -- take this certainly I mean, a little bit after Mark.

So this can move around quarter-by-quarter. What happened this quarter is we had some upgrades in our UK segment associated with some positive investments and we went from BB type credits to BBB and flow through in P&Ls and upgrades with lower required reserves.

But we’re not seeing any material credit shift in our portfolio, our energy bonds are holding up extremely well.

I would just add to that, Gabriel that we are very disciplined, very conservatively invested and we can’t project what will happen with markets but we remain equally conservative as we take on new assets matching our liabilities.

Okay. Well if I look at 2015, it was rear view mirror stuff, but for which I going back further, but it was negative, so it looks your, up until Q1, your assumptions were too optimistic is that how I would look at last year's performance?

These are based on actual movements of ratings in quarter and in period. So we are not necessarily based on estimates.

Just to add if I might that we would have well over $3 billion of asset --

Yes.

Detailed provisions, so these are actually very modest movements relative to that.

Okay. Then on a Group morbidity issue, so I’m sorry if I missed this couple of things going on today but can you quantify the impact of long-term disability experienced in your Canadian segment earnings.

I know you talked last quarter about reprising the book, is this one to two year kind of time horizon fixed and is the economic situation in Canada, is it getting worse versus your expectations and you might have to go back again or anything of that nature would be helpful?

Well this is going to echo what I said, it‘s Paul here and I’m going to turn it over to Dave to give a little more insight and perhaps Garry can quantify the actual quarter effect. In my earlier comments, I pointed out that we kind of saw, Group Canadian Group LTV bottom out a bit in Q4 and we started to see recovery and we have been taking pricing actions but this it is not like this is the first pricing action we have taken.

We still on top of price for two things obviously for clients’ incidents and things like that but also for interest rates. When we do increase rate, it does take time for the rate increases to carve into the block, it’s yearly renewable business, so that’s kind of the dynamic of it, but instead to see an immediate impact, but just on one-twelfth of business and two-twelfths and so on.

Garry can speak to the announcement and may be Dave can give a bit of insight into understanding these cycles and the way we manage to do them. Garry?

Right. And just real sorry, while you're going through that the last call you talked about obviously some issues in the Western Canadian portfolio with the unemployment trends but also hinted that there is some other areas in Ontario, for example and the financial services industry where you're also seeing some weakness is that kind of trend held?

So I will let Garry speak to the quantum and then Dave could speak to kind of the trends in the cycles that we are seeing.

So the disability experienced in Canada and this is we have done put some expectation of a decline and we experienced a whole in Q4 we put some in our expected profits in the first quarter and then something turns into experienced loss. So between those two, taking those two together pretax would be $39 million, so after we figures of pretax of $39 million Canadian.

So you can start Dave.

Yes, so we know that’s the meaningful deterioration started about mid-year last year, we talked about that at the last quarter in the latter part of the last year, we did observe some investment trends in the Western Canadian oil and gas. And as you know seen the spreads, spread to Eastern Canada we certainly observed quite a bit of job loss in the financial services sector that that always has an impact on disability.

But I wouldn’t say that it has deteriorated since the fall. I don’t think it’s anymore of an impact.

We are just about implementing our rate increases. We started those rate increases in the early fall of last year and we continue on with them.

We’re having a good success with that. The rate increases that we had in the first quarter were up substantially from the first quarter of 2015 and we did talk in the last quarter’s call about all is striking the right balance between the appropriate rate increase and client retention.

And our client retention in the first quarter in the non-refund segment which is where we’re really focused actually was a little bit better this quarter than last. So we’ve been able to maintain our client retention levels and we expect that we can do that.

But as Paul noted, this is yearly renewable business, so it does take a good part of the year. So I would say that we are halfway through that reprising exercise and we had the better Q1 then we had in Q4, and we don’t make projections but indications so far in Q2 is that improving trends is continuing and we think that’s -- this is well under control and it happens periodically every few years, we get different adjustments and you have to reprise and we have gone through this before and it’s not that just similar to what we’ve done before.

I would say we’re right on track for what we’re looking. But I would also note it’s not our entire LTV block, our small case and our large case actually has quite reasonable performance, it is the mid market that we’re really focused in on.

That’s the areas where we are running after.

Hi thanks for taking my call. I wondered if you guys will be willing to disclose the Great-West Lifeco and MCCSR.

In a word I would say no, but Garry may be you could provide a little background on the way we look at that.

Yes just I guess the first thing I would comment is we don’t actually have a Great-West Lifeco and we are up to subject to that, so we don’t have the MCCSR rules applying there. What we do provide though is a couple of things, one is we have often I think pretty much every quarter converted our holdco cash into an equivalent amount if it was down streamed into the operating company.

So we can see that back in terms of MCCSR point. And then I would also comment that as far as U.S.

insurance operations, they ran an RBC ratio which is typical to U.S. players, they run their risk based capital and RBC capital measures, they run typically in the mid-400% range and certain from my reading of rating agency reports that’s probably not just similar to well-capitalized companies on MCCSR.

That gives you some indication.

What I thought Garry might go to just add at that, we couldn’t actually -- we don’t have our capital structure set up to be able to actually come up with that calculation for you. But we came up with something it wouldn’t be right.

So if that was the case and we were going to calculate when we would probably have to look at it in a number of different ways. But I think Garry has giving a sort of a broad insight into we got the strength in the Great-West Lifeco capital position, we got the Lifeco cash, and we got a relatively strong position in the U.S.

and that would allow us to overall strength for the Group.

Okay. So the inference I might draw from that is one, it sounds like your whole MCCSR's is at least as high as your outcomes MCCSR, if you did calculate it.

And then the other thing in further is you actually don't produce this for us and Holdco and MCCSR?

We do calculations roughly at the Holdco level, which is part of it -- but it’s not a regulated MCCSR calculation originated to MCCSR final.

It sounds like you have excess capital outside TWL?

Yes that will be a fair assumption.

Yes. So then final question and it is just looking at the experience in the U.S.

business overall, is it not time to put that excess capital work in the U.S. and scale that business out?

Yes. I think that’s absolutely we are looking to scale the business out.

But I think I look at it from a couple of different perspectives. We are scaling the business up organically right now with some pretty deep investments in Empower we’ve shared up that information with you and that investment will carry on through this year, we are hoping to have Empower broadly embedded down as we get into the early part of next year through the various client transitions.

So then we can think about Empower and the question you might ask is when are we, when we would be ready to acquire more and Bob let me -- I will let you speak to this but the reality is as you bet down that, then you’re well-positioned for further growth, so that they’re for sure. As you think about the asset management space, our challenge there would be we’ve got very strong and have great discipline around our expense levels in terms of our administration, we’ve got great distribution, we’re just not at scale, we’ve got a wide range of funds crossing about 80% of the overall fund universe in the U.S.

and skill there would be key and that’s just finding the right fit, best fit in an asset management acquisition would not be a good thing is finding the right fit. And so yes and so we’re sure.

That’s the plan to get to scale profitability, step change increase via acquisition.

That would be, that is absolutely something we look to try and achieve and just so finding the right ones Bob anything to add on that.

No just saw in the Empower business right now there is 50 plus record pieces, we certainly look for that consolidation of industry and we look to be a major player just moving forward. So we’re -- have our eyes open and I think over the next three to five years you will see tremendous consolidation at those things.

And it’s true like we are nearing a stage on the Empower training where once we have that better done we are going to be well-positioned with the right interface for the clients, market leading back office, so obviously we’re hungry for and interested in continuing to grow that business.

Yes, then on the investment business I think it is scaly as well to grow organically, the environment is not lending itself to that tight strategy does not to say that can change. So you would have to have your eyes open for potential acquisitions.

Thanks, good afternoon. Paul, I appreciate your comments.

There was the certainly some volatility in the quarter-end and may be some moving parts for GWO as well. But I wanted go specifically to the source of earnings.

You mentioned, and I think it's fair to say with the management actions or experienced gains, we can see some volatility in those lines, the one that I was more surprised at was the expected profit which I always look at as the sustainable part of the operation if you will in terms of what you expect to deliver. And when I look at both Canada and the U.S.

and maybe U.S. is explained by Putnam will talk about that in a second.

But the drop in your Canadian expected profit is there some changes that you made with the start of the New Year that would explain that differential or just may be you could help me figure out what you’re thinking about in terms of that decline, we see sequentially?

I’m going to there is a lot of moving parts there, part of it relates to the way our expectations on fee income and I’m going to let Garry to speak some of the underlying drivers of that.

Sure. So overall I think you have at the overall level, I think I mentioned this in the comments that while it increased $27 million over 4%, Putnam was a downturn of $23 million, so that’s again almost another 4% on top of that.

So the underlying growth, the lot of the sort of using of the growth was through the asset management and after starting the quarter at lower assets under management with any expected profits. And the second part of it, I mentioned briefly well may not picked it up with.

We’d also in the Canadian operations reflected lower that we were anticipating continued pressures from the long-term visibility first of all in Q4 and so going into the first quarter, we actually factored some of that into our expected profit because we expected that it would take a while for the pricing actions to come through, so that our expected profits from that business would be lower in the first part of the year. So that was factored to that.

And I’d say to the extent that we see a stronger recovery than that, then that is going to come through in experienced gains or if markets we do grow fast than expected than we see that as well. So I think we’re just trying to be fully recognizing the where was the starting point at each quarter.

And I will apologize, I was late getting on the call, so I may have missed some of this and may be if you would explain some of it there was the drop in asset values and what that may have meant but to see Putnam showing a negative in that expected profit line is something we haven’t seen in a while certainly on the numbers you provide us in the -- in your supplement that is the case and again is that just a reflection of the fact that you’re starting with lower assets on the outlook for flows, I know your mutual fund outflows were some of the biggest we’ve seen in a number of years, is that just a reflection on may be greater challenges that you anticipate in this business than you had off late?

Well I will start off by saying that Q1 well I hope it was good in the outset in the U.S. asset management space overall.

What you saw was lot of cash on the sidelines, you saw outflows with active cost and ETF providers and Putnam is right in the midst of that. So we start off with lower asset levels at the end of the day it’s the average assets under management that are going to drive your fee income in an asset management business, so if you start lower, then you have that sort of volatility, and you have got outflows which is sort of what the industries are, the net impact is you sort of have the layering of some negatives and that was the challenge.

Bob, I don’t if you wanted much more color on that.

No, I think the first two months of the quarter saw a significant downturn in the markets and as Paul mentioned, we have paid in the mutual fund business on average assets that you calculate every day and it had a impact and I would say on the fixed income, the rates dropping was a surprise to us in our fixed income strategies we were looking for increasing rates. So we would be hurt their versus the market but I think it’s just a nature of a top first quarter and one that obviously recovered and April was looking better.

Yes, and after that one of the challenges we always I get tied up sometimes in endpoint, and I’m asking endpoint is sort of an insurance view of the world; asset management is an average view of the world. So if we have a big claim in March, it does help you in January and February.

Ebbs and flows, Paul.

Yes, keep trying.

Two, hopefully, quick ones here to wrap it up for me. One, just numbers wise.

On the tax rate, it seems like now for four quarters you had for one reason or another a material drop in the total company tax rate, and let me just ask it blunt like what do you envision the average tax rate for the company being, that would be in a row and that's may be just for the modeling purposes. But then number two, Peter was asking about excess capital and you certainly communicated, I'm sure more about your Investor Day, what your plans are for the Empower business?

But separate to that, I did know that in January you renewed your NCIB for CAD8 million and then about a month later, you stepped that out or you amended it, such that you could buy back CAD20 million. You've been active on your buyback, but it hasn't been in material amounts, was that simply a reflection of where markets were in January and February and you wanted the option to be able to step-in in bigger amounts.

Or are you signaling to us that capital deployment through repurchases is something that we should expect to be more bigger part of the capital return story from the company.

I’ll let Gary start off on both of those, so Garry.

Sure. First of all on the taxes certainly the one-off this quarter contributed both 9% benefit to the effective tax rate.

If I look at the 2015 full-year tax rate, there is about just under 13.5%. One of the big drivers though setting aside one-offs is actually the mix of the jurisdictions where we earn our income and that does ebb and flow on so giving the average tax rates sounds quite dangerous, but I start to guess where the earnings might come from.

But I would note that from a taxable income point of view in Q1 last year, the U.S. was 17% whereas in Q1 this year the U.S.

3% and the U.S. has the highest tax rate of the various jurisdictions that we operate in by a fair margin.

So that difference alone was probably worth 6% year-over-year just by the mix of business of our jurisdiction. So in average we have typically run in the high-teens and as the growth in Europe and some of the jurisdictions in Europe little lower tax rates, some of the tax rates in those countries have come down, it might be interesting to the lower end of that range but it’s still in that I would say somewhere in that 15, 16, 17 range --

Then given the high-teens.

Given the high-teens, given the reasonable mix of business. So that’s on the taxes.

On the NCIB program you’re correct, we did increase that from CAD8 million up to CAD20 million. We did that really for flexibility.

As Paul has mentioned, we are looking, we are interested in growing through acquisitions as well as organically but also if we’re not finding the right opportunity, we want to make sure we have the flexibility to manage our capital appropriately. So that’s something we monitor actively and at this stage we actively as more being in managing the provision which we have done historically through the NCIB.

What I would add to that is that we have an appetite for growth. We’ve got to find the right targets in terms of growth.

We will continue to invest organically. But to the extent that we think we would have a significant time delay in terms of being able to deploy that capital, we would like to get working for us in the most effective way and some share buybacks could be an effective way and we will make that judgment at the right time but we are also not going to take our eye off the ball in terms of looking for acquisition driven growth.

Yes thanks very much. I have a question for Garry on this Putnam source of earnings thing.

I can understand may be the earnings in the quarter on Putnam but I can’t figure out really in the supplemental information package in the last page of that, why the expected profits on Putnam was negative. Do you said that thing at the start of the quarter because really the assets at the end of December were actually modestly higher than they were at the beginning of the fourth quarter and in the fourth quarter of 2015, you would have expect CAD28 million in profits.

So I’m wondering why it the expected profit on Putnam was negative and may be just presentation purposes and then really what was the experienced gains and losses associated with that? May be just help me understand how you put together this source of earnings for Putnam and I understand you’re really just jamming in some of that shouldn’t be reported this way into that construct?

Garry.

Sure, I will take that one, Paul. I think you summed up well at the end of the talk where this is something that is jammed into an insurance contract.

What we do though is we do look to reduce some of the starting assets and we look at the mixes. We probably need to look at one is not just the totaling the mix between retail and institutional so to keep an eye because the pieces are different.

Also in Putnam, and this is unusual in the asset management business has some seasonality securing this performance piece only come in certain quarters and so if you’re looking from Q4 to Q1 you will see that seasonality come through. So we would have sat down and said okay based on these starting assets, where we see based on expenses which ironically don't have the same seasonality in them and it turned out be a negative based on our low profile in that quarter.

We had some one-time expense pressures that we knew were coming and those were factored into our expected profit as well. The experienced gains and losses the majority of that is the sharp downturn of AUM was quite a bit under the start period assets, and that’s because of the sharp downturn in the markets in January and February.

That was the bulk of that the downturn on our expected team loss. But I think there is some additional one-time expense items but the majority was the markets.

Okay, so but going forward if I look at the trend the way this thing went last year the expected profit in the first quarter of '14 then 23, 29, 28, I mean would we expect this expected profit move out of this negative territory going forward?

Certainly we would hope it would. In terms of thing I was --

You guys said it.

The thing I would caution though is when looking at last year if you recall the first two quarters of last year were sharp increases in markets. The markets are quite strong in early 2015 and then fell in the last two quarters.

And so you can see it in the average AUM we're in the high 150s as you got to the second quarter last year, first and second quarter. So the -- that would have been -- we reset it each quarter.

So we do reset, so we will look at the end of the first quarter, we'll look at the seasonality that we expect in Q2 and we will reestablish the expected profit.

Yes, for what it’s worth I'd like to when you had Putnam out just as a separate line rather than jammed into it, I think it just helps out with some of the experienced gains and losses and then growth in expected profit. It was a little bit easier to look at.

And that is why I think we separated out so people can go back to their old format.

Yes, okay, that's good. And Garry, you mentioned something about Canadian disability being $39 million pretax and that was sort of the -- what you recall the experienced loss in the quarter; is that right or is that you said it was a combination of both expected profit and experienced losses in the quarter?

Yes, we had put a bit of combination that you meaning we had expected some deterioration. So we put that right in the expected profit and then we saw further than our initial expectation.

So it’s just a balancing act. We'd seen the Q4 with negative; and we expected an improvement in Q1.

So it’s just sort of gauging how much improvement we're going to see. So between the two there's still relative to our overall expectations for that line we're still $30 million down pretax.

And then finally, you had mentioned something about a benefit in the area of $179 million after-tax or $0.18, and I think that's looking at the combination of experience gains and management actions being what percentage of total pretax profit? May be just refresh me as to how you do that calculation.

So just to be clear, Tom, what I was looking at there was the experienced gains and the base exchange transaction. Those two lines taken together Q1 last year was $250 million pretax or $179 million post-tax higher than this quarter.

So the last past year benefitted from the $0.18 a share over the relative to this quarter.

And it's important that that is sort of a tale of two issues. Number one would be the unexpected weaker performance this year in combination with better than expected performance last year.

So we're talking about an $0.18 differential part of it being higher than normal performance in Q1 to this and 2015, the other part of it being worse than normal or expected performance in Q1 '16 and that's the gap of $0.18.

If it's helpful that enough while you put those percentages in the back that the last year would have been about 36%, this year 14%. So of that $0.18 about two-thirds of that would be last year's very strong outperformance at about relative to historic averages and one-third would be this quarter being lower than our typical averages.

So does that maybe give you a bit more color?

Yes, yes, I think so except for the fact that the expected profit already included some of these group losses, right so it’s just not on those two items but --

Well you could add that to.

Yes.

Thanks, Tom.

My questions are asked and answered, thank you very much.

Thanks, Mario.

Hi good afternoon. Just a bit of clarification, Garry I guess just on the Putnam side, do you put your acquisition cost to expected profit for Putnam, I think you do but I just wanted to clarify?

The acquisition costs that go into sales will go in your impact of new business to the extent of non-deferrable.

Okay. So it suits your business trend.

Okay and then the tax benefit, the one-time item in the quarter, can you what was the dollar figure for that?

The one-time items in total were $66 million.

And that’s been -- that’s for the tax?

No, it’s for the tax, the one-time tax that was $66 million.

Okay. And then just I know you guys have property casualty catastrophic coverage correct me if I’m wrong and I know it’s early days but I think you have high attachment points on this stuff.

So I don’t think this is an issue but I would just trying to get some clarification obviously the forest fires and destruction we have seen in Fort McMurray, what your type of exposure would be and I think you guys have high attachment, I don’t think this is an issue but I just wanted to confirm that?

Doug it’s Paul. You have very high or quite high attachment.

I will let Arshil give a little bit of context.

Historically what you guys in insurance losses that sort of on the order of $5 billion to $10 billion is when we first started to keep some losses in our portfolio and our first event limits sort of constraint the total amount that we have exposed and you really need interest insured losses to be up about $15 billion to $20 billion range before we get to our full portfolio of loss. So historically in the past and I think you would have to go back a number of years before that was a material loss for us but that was off of the industry insured loss estimates that were well above $10 billion and so at this stage despite the devastation that we are seeing and all of the evacuation net of the estimates would approach that $10 billion mark.

Thanks very much operator. So to all of those who participated in the call and listened in thank you very much for being with us on this.

As I outlined we have an Investor Day for institutional investors organized for June 7 in Toronto and we look forward to sharing more information and insight into our business and we will see many of you there and thank you again.