Great-West Lifeco subsidiary to sell its U.S. health care business - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, ladies and gentlemen. Welcome to the Great-West Lifeco conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Raymond McFeetors. Please go ahead, Mr. McFeetors.

RAYMOND MCFEETORS, PRESIDENT & CEO, GREAT-WEST LIFECO: Well, good morning, everyone. Thank you for joining us on short notice. First, I would ask Marlene to read the usual disclaimer.

MARLENE KLASSEN, DIRECTOR, MEDIA & PUBLIC RELATIONS, GREAT-WEST LIFECO: Statements to be made by us on this conference call, including remarks and the question period to follow, may contain forward-looking information, which are subject to inherent risks and uncertainties. Actual results could differ materially from any conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions are applied in drawing conclusions or making forecasts or projections as reflected in the forward-looking information.

Our remarks may also contain non-GAAP financial measures, which do not have standard meanings prescribed by GAAP. Additional information about material factors that could cause actual results to differ and material factors or assumptions applied, as well as information relating to non-GAAP financial measures are set out in the news release issued by Lifeco yesterday with respect to the sale of Great-West Healthcare. This warning qualifies all forward-looking information and non-GAAP financial measures that may be discussed today.

RAYMOND MCFEETORS: Thank you, Marlene. As everyone knows at eight o'clock Eastern time last night, we announced the sale of our Healthcare division to CIGNA. Commencing with the announcement of our acquisition of Putnam back in February, we started to get unsolicited calls inquiring as to the possible availability of the Healthcare division.

We thought it desirable to have a look at it and so beginning in May, we started a process aimed at the potential sale of Healthcare, but we had no predetermined plan to sell it and we were only going to be prepared -- we would only proceed with a sale if we got a price that met our targets. Needless to say, we have a sale that meets and even exceeds our target. A number of -- in addition to CIGNA, of course, the property was offered through our investment banker to a number of healthcare providers in the United States, but CIGNA turned out to be the best and most determined buyer.

So what we are selling is by way of indemnity reinsurance and except for our health -- HMO subs in California, which will be by share purchase, but the majority of the business will be sold by way of indemnity reinsurance to CIGNA. It's all our healthcare business and Great-West Life & Annuity, First Great-West, which is our New York subsidiary, and a little bit of business in Canada Life, some medical stoploss insurance that is resident in Canada Life.

The total transaction value, $2.25 billion. $1.5 billion will be in cash and about $750 million of equity is the anticipated amount that will be released at the closing. So in total $2.25 billion.

The one piece that is not being sold is our contract with American Dental Association, which Great-West has had since 1934 and we will continue with that piece. It is not medical insurance in any case.

We are selling the business at about 13 times '07 earnings. We are having a very good year in healthcare in 2007. We think that 2008 will be more challenging, but as analysts would know, the healthcare business is challenging in itself.

Comparable market transactions that were done we think very similar in the 13 times multiple, so we figure we are right on market with the business we have, which frankly is growth-challenged.

Going forward, of course, analysts would know that we bought Putnam at about 14.5 times earnings on a fully synergized basis, so it is roughly equivalent to what we are selling and what we are buying. The difference being, of course, is the fact that we are going to have to pay some tax on the sale of our Healthcare business and we are going to lose the income on the amount of tax paid.

There are, of course, a number of complex terms associated with this transaction, including a price adjustment mechanism, which we believe will not apply. Our projections suggest that the price adjustment mechanism that is embedded in the contracts will not, in all likelihood, act to reduce the price at all, but that will be determined at the closing date.

I think that CIGNA will continue to …