Great-West Lifeco Inc.

Good afternoon and welcome to Great-West Lifeco's Third Quarter 2015 Conference Call. Joining me today to discuss our results are Garry MacNicholas, EVP and Chief Financial Officer of Lifeco; Dave Johnston, President and Chief Operating Officer, Canada; Bob Reynolds, President and Chief Executive Officer, Great-West Lifeco U.S.; and Arshil Jamal, President and Chief Operating Officer, European Operations.

We also have a number of other senior officers available on the call to respond to any specific questions. Before we start, I'll draw your attention to our cautionary notes regarding forward-looking information and non-IFRS financial measures on slide two.

These cautionary notes will apply to the discussion you'll hear today, as well as to the presentation material that we have provided. Today, Lifeco reported its third quarter earnings and also declared a quarterly dividend on its common shares of $0.326 per share, unchanged from the prior quarter.

Let's begin our call by turning to slide four. Lifeco's operating earnings were $720 million in the third quarter, $0.72 per share, and up 5% year-over-year.

Sales were up 71% driven by contributions from our diverse geographies with excellent results in Europe and from Empower Retirement in the U.S. Now to slide five.

Great-West Life's consolidated MCCSR was 234%, that's a 5% increase from June 2015 as a result of strong earnings and favorable currency impacts. Lifeco's trailing four quarters operating return on equity was 15.2%.

ROEs continue to be strong in Canada and Europe and our 7.5% return in the U.S. reflects the combination of breakeven results at Putnam and a solid performance at Great-West Financial.

Now to slide six. Assets under administration were just over $1.2 trillion at the end of Q3, with the increase mainly driven by currency offsetting the impact of declining equity markets.

Slide seven summarizes our strategic direction and the priorities that will drive our future growth. Our strategy is to build the business through organic growth in all regions.

This will be complemented by acquisition opportunities in the U.S. where we can take advantage of significant consolidation.

We also looked at targeted growth through acquisition in Europe. In Canada, our goal is to protect and expand our leading market position through innovation and differentiation.

In addition to a number of technology enhancements in the quarter, we launched HelloLife, an innovative package of customer solutions in the retirement income market. In Europe, in-quarter developments included Irish Life Investment Manager's new fund mandate with Ark life, the completion of the Legal and General Ireland acquisition and a significant longevity reinsurance transaction.

In the U.S., Putnam had another quarter of good investment performance and achieved strong net asset inflows in institutional. Moving to slide eight, we provide additional color on the investment in Empower Retirement, where the team is focused on integration, growth and efficiencies.

About half of our $150 million investment in Empower is focused on the effective integration of our three recently combined blocks of business. Through this investment we'll realize synergies as we move to a common platform while maintaining excellent client service to retain and grow revenue.

The other half of our investment encompasses the front-end customer experience enhancement to drive sales growth and retention. This will also position Empower well as the market continues to consolidate.

The Empower integration plan is expected to generate $40 million to $50 million of annual pretax efficiencies. This will in part be driven by Great-West Life Global, Great-West Global, a new offshore operation in Bangalore, India that is delivering non-customer-facing functionality.

In summary, this investment in Empower will position the platform for both organic growth and consolidation opportunities. Finally, I want to highlight that these investments in our growth across our businesses globally will be supported by continuing risk management and expense disciplines.

I'll now turn the call over to Garry MacNicholas to review Lifeco's financial results. Garry?

Thank you Paul. Starting with slide 10, operating earnings in the third quarter reached $720million, up 5% year-over-year.

Currency impact was a tailwind to earnings, adding $40 million over last year, while volatile equity markets were a headwind that reduced earnings by $33 million, mainly through lower than expected wealth management fees and mark-to-market losses on seed capital at the end of the period. Turning to Slide 11, and as a reminder, Putnam is included in the source of earnings categories within the U.S.

segment. Putnam's fees net of expenses drive expected profit, while non-deferrable sales costs show up in the impacted new business.

Lifeco's year-over-year expected profit increased $38 million, or 5%. This was largely a result of favorable currency movements and higher expected net fee income on wealth management asset base.

I emphasized are expected since the actuals, which are lower this period, impact experience losses. Higher pension cost and increased strategic investments in the business held back the expected profit growth.

New business gain of $46 million was generally in line with previous quarter and prior year. The small improvement over last quarter was primarily due to the impact of reprising activity.

The increase over last year is due to the increase in non-deferrable acquisition expenses in Empower and that's due to shift in sales mix to more fee-based investment business. It's primarily these type of investment business that drives our gain both in the U.S.

and Europe. Experience gains and changes in assumptions taken together were $175 million, which was $31 million lower year-over-year, but $21 million ahead of last quarter.

While the combined experience gains and changes in assumptions have consistently contributed to the bottom line historically, there can be intra-quarter fluctuations as we have seen this year. The experience gains of $48 million were lower than last quarter and the prior year, while trading gains continue to contribute positively especially in Canada, longevity and morbidity were primary contributes in Europe.

Market related impacts were a negative factor across all markets. There were a number of actuarial studies concluded in the third quarter.

Assumption updates and other management actions resulted in the release of $127 million compared to $112 million in the prior period and $90 million in Q2. The principle contributors were updates to mortality and morbidity assumptions in Canada, updates to provisions for future credit losses in the U.S.

and refinements to annuitant longevity assumptions in Europe, partially offset also in Europe by strengthening of mortality provisions in the reinsurance business unit. The category other reflects restructuring and other costs related to the legal and general international Ireland acquisition and JPMorgan Retirement Plan Services acquisitions.

The earnings on surplus are broadly in line with those reported last year. Finally, the effective tax rate benefited primarily from the jurisdictional mix of earnings this quarter, and a through-up of prior year provisions against tax filings.

Now to slide 12, sales. Total sales were very strong, up 71% year-over-year, or 50% on a constant currency basis.

Sales were driven by new fund mandates won by Irish Life Investment Managers, an increase in large plan sales at Empower, as well as by solid performance at all business clients in Canada. Turning to slide 13, fee income.

Fee income was up 14%, or 4% on a constant currency basis. Growth in fee income was driven by Empower due to higher average asset levels through acquisitions and organic growth.

This was partly offset by the negative impact of equity markets mentioned earlier. On slide 14 we show our operating expenses.

Operating expenses were 14% higher than Q3 on a constant currency basis. The growth in U.S.

expenses reflects the inclusion of ongoing RPS and Putnam expenses, as well as the continued investment in and organic growth of Empower Retirement. Expense growth in Canada and Europe remained higher than normal, mainly due to strategic investments in technology and solvency to implementation costs as well as higher pension costs in both regions and the respective business leaders will provide more detail.

Paul, that concludes my remarks.

Thanks very much Garry. I'll now turn the call over to Dave Johnston who can speak to our Canadian results.

Dave?

Thank you Paul. Turning to slide 16, overall insurance sales were strong in the quarter, up 16% to $393 million.

We had continued excellent insurance sales which were up 16%, and our Living Benefit sales were also strong, up 13%. New business application service issues, which were impacting sales earlier on in the year, have now been largely addressed.

Group Insurance sales were up 20% this quarter, driven in part by increased sales in the large case market. I would note we continue to have very strong sales pipeline for group sales.

Wealth Management sales noted on the right-hand side of this slide shows continued growth in our individual wealth business in what we would characterize as a somewhat volatile sales environment in Q3. Mutual Fund sales increased by 22% in the quarter, however this growth was offset by lower sales in guaranteed and annual products due in part to the lower interest rate environment.

Segregated Funds were even as compared to the very strong sales growth we had in Q3 2014 of 25%. We continue to have a leading market share of over 30% in the gross seg funds market in-quarter.

Group Retirement Services sales were up 18%, driven primarily by a strong quarter in single premium group annuity sales. We again had positive wealth management net cash flows in the quarter.

Slide 17 details fee income, and you will note modest growth at 2% year-over-year, with growth muted by lower markets. Group insurance fees are reflective of our administrative services only business and the 3% fee growth here generally represents in-force claims growth.

Turning to expenses on slide 18, expense growth was 12% for the quarter. This level of expense growth is certainly higher than normal, and does reflect a one-time expense credit of $8 million that happened in Q3 2014.

Excluding this one-time credit and increased pension expense, our core business operating expense growth in the quarter was 8%. This elevated level reflects continued spend in strategic investments and increased oversight capabilities within the Canadian business.

Adjusting for these strategic investment and oversight expenses brings our operations expense growth into the 4 to 5% range which is closer to our historical levels. We expect that future expense growth will moderate to this level over the next two years.

Turning to slide 19, Q3 results for Canada are even with last year, and up 6% over the prior quarter. Overall, we had strong mortality and investment gains, however these were offset by lower bases changes and group health results.

Group earnings of $153 million are up significantly, however this is largely the result of certain tax benefits. Stripping out tax, strong investment gains were offset by lower-than-expected morbidity results.

Long-term disability continued to perform well in the quarter. The lower morbidity results were in our group health lines, group health rate increases in our large claim pooling charges and health trend rates were implemented in the quarter and these rate adjustments will take effect at the next client renewal date.

Wealth results continued to show strong growth, up 21% driven by improved investment and mortality gains along with higher bases changes. Individual insurance earnings at $91 million were down 17% over the prior year.

We experienced very good morbidity and mortality results in the quarter, however these were offset by the impact of lower new business gains due in part to lower interest rates and the one-time expense levels we incurred related to addressing our application service issues. A significant driver of year-over-year lower individual earnings were bases changes which were $41 million lower than Q3 of 2014.

I would also note that Canada corporate line experienced a loss in the quarter, and this was driven primarily by lower tax benefits. This concludes my remarks, Paul.

Thanks Dave. I'll now turn to Bob Reynolds to speak to our U.S.

operations results. Bob?

Thank you Paul. Just a reminder for everyone that as I review the results of our U.S.

businesses, I will be quoting U.S. dollars.

Let's turn to slide 22, which highlights business developments at Empower. Paul talked earlier about our three-pronged strategy of integration, growth and efficiencies.

As part of that strategy, we are making investments in the business of $150 million over three years. About half of that investment is for integration and that will generate $40 million to $50 million of annual pretax savings.

The other half is investment in new growth that encompasses the front-end customer experience and a systems functionality that will enable us to add significant scale with participant growth to over 10 million over the next three years. The P&L impact of the integration spend is largely over 2014, '15 and '16, but a small portion amortizes out through 2020.

Empower is positioned both for organic growth and as a consolidator in this market driven by the best-in-class systems and diversified product offering, all at lower unit cost. Turning to slide 22, Great-West Financial sales increased 93% compared to the same period a year ago, driven by the increasing sales of $6.2 million in Empower Retirement.

The Empower sales increase was driven by large plan sale in the government market and continued growth in the core market. The sales pipeline remains strong across all segments, with several large cases expected to fund in the fourth quarter and in early 2016.

The decrease in individual market sales was primarily due to lower sales of our bank distributed Life product and lower sales on Executive Benefits, as well as the movement of the IRA business into Empower starting in 2015. Putnam, we're on slide 23 now, Putnam in-quarter average assets under management decreased $5 billion compared to Q3 a year ago due largely to the negative performance of market especially during the current quarter.

Year-to-date average assets under management increased by $3 billion from the year-ago period. Overall net inflows during the quarter were $136 million, an improvement of over $1.8 billion in net outflows during Q2.

Putnam's mutual fund gross sales in-quarter were $4.2 billion. However net outflows were $1.3 billion which is reflective of the decline in flows in our segment of the market.

Putnam Institutional had net inflows of $1.4 billion, a $1.2 billion improvement from a year ago. The institutional pipeline remains strong.

Putnam also continues to build momentum in its defined contribution and investment only channel with positive net flows year-to-date of $425 million. Investment performance continues to be good.

As of September 30, 2015 approximately 85% and 63% of Putnam's fund assets performed at levels above the Lipper median on a three-year and five-year basis, respectively. Turning to slide 24, fee income of $450 million is an increase of 11% from the same period a year ago.

Excluding the transfer of the DC full service business to employees, Putnam's in-quarter fee income was down $10 million compared to the same period a year ago due to the negative impact of markets on assets under management. However, fee income year-to-date increased $17 million compared to the prior year-to-date figure.

Empower drove $215 million of fees in the quarter, an increase of $66 million from a year ago. Approximately 55% or $36 million of the increase in fees resulted from the acquisitions of the RPS and Putnam businesses.

The remaining increase was due to increased average asset levels driven by organic growth. Now to slide 25.

Total expenses increased by 20% to $403 million from a year ago, driven by higher business development expenses and growth in the business. For Putnam, excluding the impact of the DC legacy block of business of $16 million, expenses were down $4 million from the same period a year ago.

Great-West Financial's increase in expenses was driven by higher Empower expenses of $94 million, approximately 49% or $48 million of that increase is attributable to the ongoing expenses related to RPS and Putnam business, while another $11 million is due to transition cost and business development cost incurred to integrate the businesses. The remainder of the increase was primarily driven by organic growth in the business.

Including restructuring cost, Great-West incurred $14 million of integration expenses in the quarter. Turning to slide 26, U.S.

operating earnings were $75 million in-quarter, a decrease of $24 million from the same period last year. Net earnings from Great-West Financial of $81 million decreased by $26 million after tax from the prior year primarily due to the impact of lower bases changes, the transfer of the Putnam DC business and higher Empower integration expenses.

This was partially offset by favorable contributions from investment experience. Excluding the impact of the DC transfer, Putnam's operating loss of $6 million was a decrease of $2 million from the year-ago period as an improvement of $6 million in core earnings was more than offset by the impact of the release of certain income tax reserves of $8 million in the prior year results, which did not recur in this quarter.

Turning to slide 27, Putnam's after-tax core income in the quarter was $6 million, an improvement of $11 million from the year ago, as a significant negative impact to markets on fee income was somewhat offset by expense reductions and the impact of the transfer of the DC business and a one-time through-up in expenses of $13 million in the prior-year quarter. That concludes my remarks, Paul.

Thanks Bob. I'll now turn it over to Arshil Jamal who will speak to our Europe and reinsurance results.

Arshil?

Thank you Paul. As you can see on page 29, we had a very strong European sales result during the quarter with particularly strong performances across our Irish businesses and in Germany.

Of particular note, our Irish Life Investment Managers' subsidiary won a large third party institutional sub-advisory asset management mandate during the quarter that contributed $3.5 billion to the third quarter sales result. Our UK sales also improved from the level that we recorded in the second quarter reflecting an increased level of retail annuity sales and a strong result in our offshore wealth management business reflecting our acquisition of legal and general Irish-based UK offshore provider.

Turning to Page 30, fee income was largely unchanged on a sequential basis as the favorable impact of positive cash flows and currency movements was largely offset by the impact of market movements. On Page 31, you can see that operating expenses are up 4% at actual exchange rates but down 2% in constant currency compared to the second quarter.

This constant currency decrease is largely a result of lower restructuring cost. While we continue to benefit from the realization of Irish Life expense synergies, this year's operating expenses reflect an increased level of project spend including Solvency II and a higher level of pension expense compared to last year.

Europe operating earnings of $296 million are up 14% at actual exchange rates, and 5% in constant currency compared to the same quarter in 2014. This quarter's results reflect the net overall benefit of actuarial liability bases changes primarily due to refinements to our UK annuity longevity improvement assumption, partially offset by the strengthening of mortality assumptions on our U.S.

traditional life reinsurance business. Underlying mortality and morbidity experience was more favorable this quarter compared to the same quarter a year ago but investment experience was weaker than the same quarter a year ago.

This is particularly evidenced in Ireland where our investments in Alliance Ireland and Glo Health contributed less this year than the same period a year ago. Overall though it was a very strong earnings and sales result for the Europe segment.

Thanks very much Arshil. Now before we turn to the Q&A portion of our call, I just wanted to ask that the analysts please direct your questions to me, I'm going to play a coordination role and either respond myself or redirect to members of the team as appropriate.

So with that said, I think we're ready to begin questions, operator. Thank you.

Thanks very much. A couple of questions.

So to start, the effective tax rate of under 10% in the quarter, that's obviously quite low in absolute terms and year-on-year. Can you give us some detail on what's driving this?

I know Dave mentioned some tax gains in the quarter, so maybe you could size that. Is there, can you direct us towards some range of tax rate you'd view as normalized or sustainable?

Yes, I'll start off on that one. Obviously we get the impact of jurisdictional tax rates, so depending on where we've had stronger or weaker growth.

The other issue is there's also the currency impact. So it's all going to net out in terms of when you think of taxes that way.

The other reality is that we're always working through our various tax years and closing out tax years, so you'll have the impact of benefits coming through that way, but I'll turn that one over to Garry to provide a little bit more color.

Sure. Thanks Paul.

One of the elements, I made a brief reference to this, we estimate our prior year's taxes, so we're filling 2014 when we're doing our finances, we're estimating our tax provisions and then we actually do our tax filings the following year, and so typically in the third quarter is a through-up and we reviewed the various provisions. That would - added about $33 million this year which is a little bit higher.

So that was a benefit. Then in the U.S.

there was a one-time pick up of $8 million for clearing up some old tax matters back to the Canada Life acquisition. So a couple of unusual items.

You asked about the run rate. Typically our tax rate over the years, especially if you look on an annual basis, would run in the mid to high teens and that would be given our current mix, jurisdictional mix of earnings but it does vary quarter to quarter.

Yes.

So Steve, you had a second question?

Yes, so the - I think Paul you mentioned a large reinsurance transaction in Europe. Wondering, so not sure of the size, but wondering if there's any material reduction in earnings power that we sometimes see on the back of these deals?

I will actually direct that one to Arshil.

So just to be clear, this was where we were acting as a reinsurer and reinsuring somebody else, so this was a Dutch longevity transaction converting €6 billion of payout annuity and liabilities in the Netherlands and what we've gotten through our reinsurance business is provided. I would have the money protection on the downside for what we think is a very appropriate margin that we will earn over the next 10 years or so.

So it's a longer term arrangement protecting another company's downside.

Yes, so it's Paul. Just to echo that, this was actually a sale that we booked in-quarter that has - that is revenue and earnings accretive to us.

Gotcha. I misunderstood.

Maybe while we have Arshil I could just ask, you started to touch on the decline in earnings in Ireland which looks like $40 million, a pretty steep decline year-on-year. You started to touch on it but could you just expand a bit on what drove the pretty significant year-on-year decline?

Yes, so certainly this quarter we're highlighting that the investment contribution in Ireland has been weaker than the run rate and off of a very strong contribution a year ago, particularly in the Alliance Ireland joint venture that we have in general insurance in Ireland. Also in the prior year we would have had some bases changes that would have favorably impacted the Irish results and the way the bases changes fell this time, They were largely in the UK and in reinsurance and there wasn't a material bases change contribution in Ireland.

So I'd encourage you not to just look at the one quarter result in Ireland but I think if you look at the previous four quarters and the strength of the sales that we're booking in the - across all of the Irish businesses, I think we're well placed to grow sort of the earnings on a go-forward basis from where we are today.

That'd be growing off - when I think of those figures over the course of the last year, that's probably in the range of $60-ish million on average? Am I thinking of that right?

Yes, and I'm just going to jump in. The reality is we've got obviously variability in earnings from quarter to quarter with the various moving parts and I think what Arshil's suggesting is that if you look at the core earnings we've had over that period and if you think of that sort of on average, then we believe we can grow from there.

Thanks for the time.

Good afternoon. Just a couple - a number of questions and one on the Empower investment initiative.

On the numbers, can you just explain the net investment income in Putnam? It was negative $17 million.

Every now and then we see that turn positive from performance fees. Just wondering why it's negative this quarter.

Then could you walk me through the moving pieces behind the negative experience in the U.S., that's a pretty big negative there and just want to make sure I got all that. Thanks.

Yes, I'll start off with the negative investment income related to Empower. That relates to seed capital.

In past periods we would have had gains on seed capital but when you look at the market volatility and the decline in asset values we would have seen we wouldn't have had that - those seed capital gains. Your second question, I'll turn it over to Garry.

Oh, can you just repeat your second question there? We were...

If I can...

We were still focused on the first.

Right. The $30 million experience loss, you went through it in your preamble there.

Just wanted to get all the elements behind the negative experience in the U.S. segment.

In the U.S. segment there's the two main drives of the U.S.

segment, one was just the expense was higher than we had put in our expected profit, and that would - but the biggest one by far and away was the equity markets impact and that's just lower fee income. That comes through as the experience loss, so there were - there's a bit of an acceleration of the Empower spend which is a good thing, but most of the experience loss was fee income.

Yes. Just to echo that, when we look at expected profit we're assuming certain market levels and then when market levels don't perform the way we want...

Right.

Then we have an experience again - or if they perform better we have an experience gain or loss.

Yes. Okay, so there wasn't any mortality/morbidity issues were in Canada and the U.S.

- or to Europe, right? Is that what you were seeing?

The mortality and morbidity for the U.S. there was - very, very minor.

A couple of million, mortality that was a loss, so very small in the U.S. As I was indicating it's almost all fee income.

Okay.

The other area is there were pluses and minuses across the other jurisdictions. But the bigger change is morbidity/mortality gains were primarily in Europe.

Okay. Then on the Empower, the $150 million investment initiative you had clarified that the half of that's going to go towards revenue or frontend type of investments and then the other half is going to go to investment - sorry, efficiency initiatives.

So, let's talk more about the efficiency or cost improvement type stuff. When I see these types of investments I usually think either you're going to get a dollar for dollar return on that or even more.

Is that maybe how we should think about the benefit of that type of investment?

No, I don't think that's a good way to - that's not the way I would look at that. When I think about the - when we talk about half of the expense being in efficiency, that is really our cost of - let's call it, you know, what it is, it's an integration cost.

We're taking three separate platforms, we're moving them all together and when you think about integration we're moving to a more efficient platform where we're operating with a single platform. So those are the efficiencies and essentially the expense benefits we're going to see out of that is $40 million to $50 million.

So that would be sort of the first order. The second order is really us investing in capability that's going to allow us to differentiate and to drive the business forward, and Bob referenced our expectation is to see significant growth in participants and that following of that will be assets under management and obviously the follow-on earnings impact.

So, that's the way I would characterize the $150 million investment.

Okay. Thank you for that.

Yes. I wonder if you could go into what's going on in the UK business.

It looked like you've had a good quarter and I was wondering what was behind that.

Well, if I think about our UK business, you know, it's not a - I think sometimes we get lost and think it's all paid out annuity. We've got a strong group business there, leading market position and it continued to perform well delivering strong earnings.

We had the benefits of the - of our offshore business continuing to move forward so we're making margins and gains there. Our reinsurance business in particular had a good quarter.

When I look to the UK in particular this quarter, we had the benefits of higher regular payout annuity sales and we also booked a bulk annuity payout sale in-quarter. So all of those things together meant we're driving the business forward and we're getting the benefits of that.

Anything you'd add to that, Arshil?

Yes. I think that covers it well.

So you said, you mentioned higher payout annuity sales. So is your new product design getting traction?

Is that what we should read from that?

You know, well I would say our new product design has the potential to attract attention and interest but the market is still kind of restructuring around the new retirement payout regime, which will be new products providing clients with greater flexibility. What I would say is that the changes to the legislative environment around payout annuities have kind of settled out and this was a particular quarter where we saw more clients seeking a payout annuity solution for their retirement income.

So we were just able to benefit from that by continuing to have a competitive offering and a strong reputation for service in that market.

Okay. Thanks.

Hi, good afternoon. I guess just a follow-up on Peter's - your answer to Peter's question.

You said there's a bulk annuity sale in the UK and I guess that's - if that's the acquisition I assume that you made, and was that - and the gains related to that was that around yield enhancement?

Yes, I'm going to turn that one to Arshil just to sort of characterize. There's really three types of annuity sales.

There's our regular new business we'd have on retail, there is bulk and then there would be acquisitions. Arshil, you might just provide some context around the growth.

So in the quarter we reported £105 million of retail payout annuity sales, so those are one at a time through IFAs into the retirement market. We also had a £5 million bulk sale in the UK and we've had bulk sales in the past in Canada and in Ireland but that's not a market we would have historically participated in in the UK so that was the first one of that in the UK Earlier in the year we had the acquisition of the Equitable block but this quarter there were no acquisitions of blocks of business, just that single bulk sale and then strong performance in the retail payout annuity arena.

That bulk sale I mean the earnings would come through in terms of gains on new business similar to when you sell it as - to the retail. Is that how to think about it?

There are slight variances but as a first approximation absolutely. We're trying to make the same margins on the bulk business as we do in the direct retail annuity business.

Then just in terms of yield enhancement, was there any - can you quantify what that would have been this quarter?

I'm going to turn that one to Garry.

Yes. The numbers would have been - it'd be similar to our historical average which has typically been in the $75 million to $85 million a quarter range, the go through experience gains.

This time it was largely in Canada. There was a little bit in the U.S.

and only a modest amount in Europe. So it was mostly Canadian this time, but it's in that same sort of historic range.

Okay. Then this is a tougher one so I'm just going to throw it out there and I hope that you can kind of guide me through.

But the Solvency II that's pending, can you talk a bit about the impact that has in terms of capital in Europe and how that could or may trap capital? Then I guess I'm trying to just get a sense of when I think of MCCSRs, you know, for your operations we try to kind of take a look at what a minimum would be to see what excess capital would be.

I would assume under Solvency II because it's more restrictive than the MCCSR that there is going to be less flexibility. So I'm trying to understand what the implications could be from the adoption of Solvency II.

I'm going to - it's Paul. I'm going to take that and start off at a high level here and just sort of provide some background.

As we've approached Solvency II we've been working very hard to meet the regulator requirements around that and part of that obviously is to come up with your Solvency II ratio that you ultimately have as sort of your opening ratio. It's a complex transition when you move from one solvency regime to another one, but suffice it to say we're quite comfortable that as we transition we'll be well capitalized under the new regime, and that includes a number of different moving parts including transition rules, it includes management actions we have taken to leverage reinsurance and ultimately what we're trying to do is leave us in a situation where we're equally as flexible in our capital structures on a go-forward basis as we have been historically.

The reality is that, you know, we're comfortable with it but we obviously await the PRA's communication with all affected companies which is everybody in that environment as to whether all of the transition rules and everything else that we've submitted are going to ultimately be approved. But I would say we're pretty comfortable but our goal is to not end up in a situation where we have significantly more or less trapped capital.

So it sounds like you're fairly comfortable you can get to a similar spot that you would be today. I mean I guess what could go wrong on that?

You know what, I guess lots in the world can go wrong, but what we would say is that we've been working very closely with the PRA, we've been meeting all of our timelines, we've been communicating effectively, we've been responding to questions as other players have been doing in that industry and all of our foresight would say that we think we're in solid shape. I guess what could go wrong is I guess if there's - well, who knows?

But at this stage, you know, the PRA is really seeing that they believe they have the right amount of capital in the industry there and it's just going to be a question of making sure that at the end we end up in a place that is sound and stable; most fundamentally for our clients going forward, that's where we're very much focused on. But we think we're in good shape.

Okay. Just lastly, and I'll stop, but the minimum MCCSR, you know, we kind of a sense where you're willing to take your debt to cap ratio, but where would you be willing to take your MCCSR?

Is it 200? Is it 210?

Do you have any guidance on that side?

Sure. We tend to think in terms of an upper end of a ratio, Garry.

I mean we focus on having - maintaining a strong capital position even in events when we might be under stress or when we might be thinking about, you know, trying to deploy capital for acquisitions. So on a business as usual basis, we're trying to maintain levels that are going to be sort of in and around the 215 level or ahead of that.

That's kind of what we think is a healthy place to be operating in that sort of upper range of 175 to 215.

Okay. Thank you.

Yes, thanks very much. I've got one - all right, you can you can direct them however you want to go, but the question was with respect to Empower and what respect to commitments.

I wonder if you can put in a little bit more color on what the level of commitment you've got for the fourth quarter and into the first quarter of next year and how those level of commitments have trended? You certainly get some very good sales momentum there.

So any color with respect to the commitment would be great.

Okay. I'm actually going to let Bob cover that off.

I - it looks like that by the end of the first quarter and that this is going to take place throughout the first quarter and in the first quarter there will be a million new participants out on that platform. When we say a million new participants these are new sales outside of the RPS Putnam business.

These are new to the enterprise so to speak, so we - it's a very, very significant year for us and I think Empower just celebrated its first anniversary as the name employees and the brand, etc. has been very, very well received in the marketplace.

As a follow-up, when do you think you might be able to be in a position to - you talk about with respect to Empower being able to be a consolidator as well. When do you think you'd be in a position to consolidate in that marketplace and what are - and maybe a little bit about some of the opportunities there?

Well I'm going to - I'll start with that one, Tom. So the way we think about it, the first and foremost issue we have before us is to build this platform for the future for exactly that opportunity, consolidation.

So we are in the midst of our investment in both the back office and the customer-facing capabilities and as those are built out it's enabling us to attract and grow. As Bob just referenced, we're going to add a million net new participants outside of those that we were trying to capture and bring forward as part of the integration.

I would say that we would not want to put our goal at risk but if opportunities come along depending on the complexity of those opportunities, we could actually move them right into the frame. So as we make large sales, whether it's a plan that has 20, 30, 40,000 participants, we could also look to the right size of acquisition and move those into the plan.

So our view would be to get through the first couple of phases of integration of clients on to this system, make sure we've built out the functionality and at the point where an acquisition is not going to put the larger strategy at risk and that that plan actually fits with our built-out functionality we would look to move them into that same pipeline and view it as a source of growth. So I would say, you know, over the next year we'll be in a position to do that.

Thanks. The final question, you know, I haven't seen the MCCSR this high for Great-West in a long time, nor the leverage ratio this low for a long time.

You talk about opportunities in Empower. You talk about organic and growing through acquisition in the UK or in Europe.

Why is the capital so high now, and maybe as a follow-up, would Solvency II actually present opportunities for you to build out your Europe bulk through an acquisition growth story?

I would characterize our acquisition growth opportunities as a function of many different things. Bob spoke to the consolidation opportunity in the Empower space.

So when we're ready we want to make sure that we've got the firepower and we've clearly got a strong capital position. I will turn it in a momentum to Garry.

But when I think about the European opportunity for sure Solvency II is creating capital challenges for various businesses, so as we look again to opportunity you're always thinking about, you know, timing is everything and the target and something that's going to be accretive and build shareholder value. So I would say Solvency II is another driver where that could create opportunity for us.

Garry, anything you'd add?

Yes, I'd just add often - and Tom, you focused on the potential acquisition opportunities themselves and the two in Europe, but we shouldn't set aside the reinsurance opportunities which are quite strong. We've seen activity, there's been good growth in our reinsurance operations, as you've seen from the slides or the past few quarters, and this opportunity would as expected to certainly continue into 2016 as our various potential clients for reinsurance become more accustomed to Solvency II.

So I think there's reinsurance opportunities as well there.

Yes. I would - it's Paul.

I would just finally point out, and we've said it in the past, that we continue to be also very open to finding the right target for us to augment the Putnam platform in the U.S. So it's not just an Empower play in the U.S.

where we know there's good consolidation where we can find the right business to complement what we've got in the U.S. We'll take that and we're very active on all fronts.

You know, way better to have a strong capital position and a range of opportunities than otherwise.

Okay. Thanks for the detail.

Good afternoon. This should be quick.

Your original - the first question that came out today was on tax - on any tax gains, and I had trouble following. You referred to a $33 million and then $8 million.

Can you just cover that again?

Yes, I'm going to turn that back to Garry for a do over here.

Yes, sure. The $33 million was what we call a through-up to our tax filings, just truing up our estimated provisions for the prior year to our actual tax filings, and as long as - as well as the associated provisioning that goes with that.

So that was $33 million and that obviously is to the bottom line. Then the $8 million was in the U.S.

segment and that was a tidy up of some long-term legacy tax matters that we got through this quarter related back to the Canada Life and Crown Life acquisitions. So that's definitely a one-timer.

Okay, but so we're looking at like maybe translating that $8 million into Canadian dollars something like $43 million tax gain in the quarter then.

Yes, it'd be just in the low 40s, yes.

Okay. Related - so unrelated question, the expected profit growth in the U.S.

caught me a little off-guard and I appreciate that the flows have been very strong and that you're making efforts to improve the efficiency in that business, but was there anything else - is there anything else you can point me to that would have driven that growth?

Again, I'll turn that one to Garry. I think that fundamentally is as I said before our expected profit is where we'd be thinking about projecting our fee income, so that would be a large driver of it, but Garry, I'll turn that to you.

Yes. The other thing to bear in mind here is this has been in the U.S.

segment the year-over-year growth of U.S. dollars fairly significant as well, so we are picking up currency gain on the expected profit in the U.S.

segment. I think it was close to 20% currency growth year-over-year in U.S.

Yes.

Then you've got, say you've got the growth in fees from both the Empower and the Putnam side went into our expectations. It was the actual equity market falls that occurred later on.

Okay.

But the reinsurance, yes, and about looking at this I'd say the growth in the U.S. is probably fairly evenly split between the currency and the higher asset levels in our...

That's helpful.

In our expectations.

That's helpful, thank you.

Thanks. Good afternoon.

First, just on the management actions and assumptions line, a couple of your counterparts had made reference to having to strengthen the reserves as a result of a study disclosed by the CIA. I apologize if I missed it, did you comment on whether that was a factor for TWO as well?

I don't believe that came out in our commentary but I'm going to allow Garry to speak to that one.

You're correct, Paul, we didn't comment on it because it didn't have an impact on us this quarter. We have reviewed the industry study of course and as well as our own experience and our current bases and did not see a need and didn't see any surprises in that or need to take action.

In Q3 we did have in our Europe, the good result in the European reinsurance segment there was about $20 million related to a lapsed-based change, it was a negative, but that was unrelated to the Canadian study and that's just normal course businesses, pluses and minuses every quarter.

So it's not that the impact for the Canadian business we're going to see in Q4, it's something you considered this quarter and no strengthening was required.

No, our basis reviews are more spread out during the year, so there will be some basis action in Q4 across our various businesses. Policyholder reviews will be done, again it'll be the normal course with all the other reviews with pluses, minuses and don't know where the net will come out.

But it's obviously historically tended to be positive. But no, there's nothing particularly in the regular course of business.

All right. Thanks for that.

Then back to Paul on Empower. I think in a couple of questions you've kind of touched on it.

You certainly made it clear to us that you view this as certainly seems like the primary consolidation opportunity not just for GWO but the sector as a whole. My question really comes out as to what goal post have to be checked for you in terms of the integration and the positioning of the platform before you feel like, okay, we're ready to go and participate in this consolidation?

Is there specific operational achievements that you want to see in this business before you would go out and add to it via acquisition?

Yes, I'd say there's two, I'm going to say there's kind of two internal goal posts and then there's kind of an external consideration. The two internal goal posts are we want to ensure that we've got all of our integration conversion capabilities well tested and working.

So we've gone through our Wave 1 migrations, we've got significant new client revenue on Wave 2 migrations coming through the latter part of this year and that really tests the metal of our systems and our capabilities and we've got good confidence there. The second one is functionality.

Any book of clients that's going to have certain functionality requirements and if it was to be a large, mega case client with unique and complex functionality, we might not be quite ready; on the other hand if it was a good fit relative to our functionality and we've tested our metal there, we would be open to looking at it as an incremental source of growth. The third one, as I said, the external environment one is really the measure of that - of any book of business.

We just want to make sure that it's a good fit for us, that it's going to grow and complement our business and that it fits with the functionality that we're building.

So it sounds like a lot of it is the technology; you want to make sure the system is flexible enough that you're able to not only reduce cost as business comes aboard but ensure there's no challenges from that angle.

Absolutely. I'm going to turn it to Bob to provide a little more color on that.

Yes, hi. I mean we're building out functionality, there's no question about it, but so much of the decision would be on the complexity of the book of business where we're looking at acquiring.

So, it could be a book of business that fits readily on our platform so there's no technology build so you gladly go after that. If it's something that adds further complexity it would give us second thoughts at this time, but I think the opportunities are coming fast and furious across the board.

Yes. Bob, I'd augment that by noting that the acquisition of the JP Morgan Retirement Plan Services business we acquired some of the most complex cases that exists in the United States, so as we build out this capability, this functionality, this client-facing functionality, our view is we're building a platform that will be frankly second to none and able to take on pretty much any client but it's all a question of timing, where we are in our build.

That's correct.

Thanks for that color guys.

Thank you very much, Operator. Well, I would like to thank all of the participants for your time today and the analysts in particular.

Our next scheduled call will be at the end of Q4 and that's targeted for February. I don't have the date here in front of me but I know it's - I know we've got a date and I know you know it as well, but in the meantime I'd also want to note that we're planning an investor day following that Q1 reporting period and we look forward to hopefully most of you wanting to participate in that as well.

Thank you.