##### 



Exhibit 99.3

MANAGEMENTS DISCUSSION AND ANALYSIS

CONTENTS

|      |                                                                                                               
|----- | --------------------------------------------------------------------------------------------------------------
|Pages |                                                                                                               
|      |                                                                                                               
|1-2   | Overview  Financial Highlights, Business Acquisitions, Embedded Value and
Outlook Regarding Company Ownership
|3-6   | Income Statement Review                                                                                       
|7     | Quarterly Results                                                                                             
|7-27  | Performance by Business Segment                                                                               
|28-30 | Financial Position                                                                                            
|31-32 | Capital Resources and Liquidity                                                                               
|32-37 | Risk Management                                                                                               
|38    | Accounting Policies                                                                                           

Canada Life Financial Corporation (we, us, our or the Company) is an
international financial services company with primary operations in Canada, the
United Kingdom, the United States and the Republic of Ireland, and with
subsidiaries and businesses in the Isle of Man, Germany, Brazil, Hong Kong,
Macau, Bahamas, Hungary and Bermuda. Our core business is to offer products and
services that meet our clients needs for accumulation and preservation of
assets in the form of annuity, pension and investment products; financial and
investment management; and financial protection in the event of certain risks,
including death, illness and disability.

This Managements Discussion and Analysis provides an opportunity to review the
financial performance and condition of the Company for the year ended December
31, 2002 and to give some general indication of our expectations for future
performance. Performance is reviewed both in total and for each of the primary
business segments through which we manage the Company.

This report also describes the policies and procedures used to manage the risks
related to the Companys activities. The Company must comply with the legal and
regulatory requirements in all of the countries in which it operates. The
primary regulator is the Office of the Superintendent of Financial
Institutions, Canada. As a publicly listed company in Canada and the United
States, it must also adhere to securities regulations and stock exchange
requirements in each of these countries.

The Companys Consolidated Financial Statements are prepared in accordance with
Canadian Generally Accepted Accounting Principles (GAAP). The Company manages
its operations based on Canadian GAAP, and the discussion and analysis
contained in this report are based on Canadian GAAP. Both changes in and a
summary of critical accounting policies are included in this document. In
addition, as a requirement of listing on the New York Stock Exchange, a
reconciliation of certain Canadian GAAP financial information to U.S. GAAP has
been prepared and is included in note 23 to our Consolidated Financial
Statements.

This Management Discussion and Analysis provides management with the
opportunity to discuss the financial performance and condition of the Company
and, as such, may contain forward-looking statements about the Company,
including its business operations and strategy and expected financial
performance and condition. Statements that are predictive in nature, depend
upon or refer to future events or conditions, or include words such as
expects, anticipates, intends, plans, believes, estimates or
negative versions thereof and similar expressions are forward-looking
statements. In addition, any statement that may be made concerning future
financial performance (including revenues, earnings or growth rates), ongoing
business strategies or prospects, and possible future Company action, is also
a forward-looking statement. Forward-looking statements are based on current
expectations and projections about future events and are subject to, among
other things, risks, uncertainties and assumptions about the Company, economic
factors and the insurance industry generally. They are not guarantees of
future performance, and the Company has no specific intentions to update these
statements whether as a result of new information, future events or otherwise.
Accordingly, the reader is cautioned against undue reliance on these
forward-looking statements. Actual events and results could differ materially
from those expressed or implied by forward-looking statements made by the
Company due to, but not limited to, important factors such as general economic
and market factors, interest rates, equity markets, business competition and
changes in government regulations.





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##### 



OVERVIEW

FINANCIAL HIGHLIGHTS

|                                               |  |      |        |      |  |      |        |          |  |          |        |   |  |         |    |         |  |  |    |  
|---------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | -------- |  | -------- | ------ | - |  | ------- | -- | ------- |  |  | -- | -
|                                               |  |      |        |      |  |      |        |          |  |          |        |   |  | 2002    |    | 2001   
|                                               |  |      |        |      |  |      |        |          |  |          |        |   |  | vs 2001 |    | vs 2000
|(in millions of Canadian dollars except        |  |      |        |      |  |      |        |          |  |          |        |   |  |         |    |        
|percentage amounts)                            |  | 2002 |        | 2001 |  | 2000 |        | % Change |  | % Change
|                                               |  |      |        |      |  |      |        |          |  |         
|Common shareholders net income                |  | $    | 490    |      |  | $    | 342    |          |  | $        | 356    |   |  |         | 43 |         |  |  | (4 | )
|Return on common shareholders equity          |  |      | 14.0   | %    |  |      | 11.1   | %        |  |          | 12.9   | % |  |         |    |         |  |  |    |  
|                                               |  |      |        |      |  |      |        |          |  |          |        |   |  |         |    |         |  |  |    |  
|Premiums, premium equivalents and
new deposits |  |      | 12,008 |      |  |      | 11,229 |          |  |          | 9,250  |   |  |         | 7  |         |  |  | 21 |  
|Assets under administration                    |  |      | 68,003 |      |  |      | 65,425 |          |  |          | 63,257 |   |  |         | 4  |         |  |  | 3  |  
|                                               |  |      |        |      |  |      |        |          |  |          |        |   |  |         |    |         |  |  |    |  
|Common shareholders equity                    |  |      | 3,774  |      |  |      | 3,238  |          |  |          | 2,892  |   |  |         | 17 |         |  |  | 12 |  
|Embedded Value                                 |  |      | 6,300  |      |  |      | 5,450  |          |  |          | 5,000  |   |  |         | 16 |         |  |  | 9  |  
|Embedded Value of new business                 |  |      | 220    |      |  |      | 159    |          |  |          | 128    |   |  |         | 38 |         |  |  | 24 |  
|Ratio of Embedded Value to book value          |  |      | 167    | %    |  |      | 168    | %        |  |          | 161    | % |  |         |    |         |  |  |    |  
|MCCSR
ratio(1)                                 |  |      | 202    | %    |  |      | 191    | %        |  |          | 197    | % |  |         |    |         |  |  |    |  
|                                               |  |      |        |      |  |      |        |          |  |          |        |   |  |         |    |         |  |  |    |  



|(1) |  | Minimum Continuing Capital and Surplus Requirements (MCCSR) is calculated in accordance with capital standards set by the
Companys primary regulator, the Office of the Superintendent of Financial Institutions, Canada.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Common shareholders net income of $490 million increased by $148 million or
43% over 2001. Excluding the $85 million provision taken in 2001 for claims
arising from September 11, 2001, net income was up $63 million or 15% over
2001. This increase was primarily the result of growth in business, favourable
mortality and morbidity experience, general expense efficiencies and a lower
effective tax rate, and was realized despite reserve strengthening in the
United Kingdom and significant decreases in global equity markets. The change
in accounting policy adopted in 2002 whereby goodwill is no longer amortized as
it was in 2001 contributed $25 million to the increase in net income.

Return on equity for the year was 14.0%, within our target range of 13.5% and
14.5%, ahead of 11.1% reported for 2001 (13.7% adjusted for September 11, 2001)
and ahead of 12.9% for 2000.

Premiums, premium equivalents and new deposits, as well as assets under
administration, were up 7% and 4% respectively over 2001 reflecting the growth
in our business, the impact of acquisitions completed during the latter part of
the year, and the strengthening of the British pound and Euro against the
Canadian dollar. (For a summary of currency impacts on financial information,
see page 34 of this document.)

Embedded Value increased to $6.3 billion in 2002, up 16% from $5.45 billion in
2001.

MCCSR grew to 202%, primarily as a result of new capital raised and the growth
in retained earnings. This ratio declined to approximately 197% after December
31, 2002 as a result of a business acquisition that was completed on January 1,
2003.

BUSINESS ACQUISITIONS

We completed two business acquisitions during 2002 and a third on January 1,
2003.

On October 1, 2002, we concluded an agreement to acquire a significant block
of group life and long term disability insurance business in the United
Kingdom, and reinsured the risks on that date. Formal transfer of the business
will occur after court approval, expected in mid-2003. For cash consideration
of $53 million, we acquired assets of $822 million and liabilities of $946
million. The acquisition added premium revenue of approximately $70 million in
2002 with no significant impact on net income for the year. The acquisition
made us the market share leader for group insurance in the United Kingdom and
is expected to be accretive to earnings in 2003.

On October 31, 2002, we purchased a leading provider of preferred term life
insurance products in Canada. For cash consideration of $58 million, we
acquired assets of $26 million, negative actuarial liabilities of $24 million
and other liabilities of $7 million. The transaction is projected to achieve
economies of scale for the Canadian Division and to be accretive to earnings in
2003.

On January 1, 2003, we completed the acquisition of the German life insurance
operations of a significant international insurer. Cash consideration was $205
million. This acquisition makes Canada Life Europe one of the top five
companies in the German broker unit linked market and the German market leader
in critical illness insurance. The acquisition will add immediate critical mass
to our existing German business and is expected to be accretive to earnings in
2003.

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -1-





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##### 



EMBEDDED VALUE

Embedded Value is a measure of the economic net worth of a life insurance
company. It consists of the present value of projected future after-tax
distributable net income generated from the current in-force business, plus the
market value of shareholders equity. It excludes value attributed to, or
expenses associated with, obtaining future new business. Embedded Value varies
from the book value or common shareholders equity of a company, which is
calculated in accordance with Canadian GAAP and includes conservative
provisions for adverse deviations.

The Embedded Value of the Company was $6.3 billion as at December 31, 2002, up
16% from $5.45 billion as at December 31, 2001. This significant increase was
recognized despite the negative impact of global stock markets. At December 31,
2002, the ratio of Embedded Value to common shareholders equity was 167%. The
Embedded Value of new business added during 2002 was $220 million, up 38% from
the $159 million added to Embedded Value by new business during 2001. This
reflects the strong growth in new business profitability this year.

OUTLOOK REGARDING COMPANY OWNERSHIP

On December 9, 2002, Manulife Financial Corporation (Manulife) announced its
intention to make an unsolicited offer to acquire all of the outstanding common
shares of the Company and via circular dated December 27, 2002, made its formal
offer to Canada Life shareholders. On January 13, 2003, the Companys Board of
Directors responded with a recommendation to the Companys common shareholders to reject the offer on
the basis that the offer was inadequate. During the course of December 2002
and January and February of 2003, the Canada Life Board of Directors, through
its investment advisors solicited a large number of parties to ascertain their
interest in Canada Life. Management of Canada Life, working with a special
committee of the Board of Directors, also gave consideration to a number of
strategic initiatives to create more value for shareholders.

On February 14, 2003 the Board of Directors unanimously approved entering into a transaction
agreement with Great-West Lifeco Inc. (Great West) for that company to acquire
the shares of Canada Life and recommended to shareholders that they
approve the transaction. Under the terms of the agreement, Great West would
acquire all of Canada Lifes common shares for a combination of cash and Great
West stock valued at $44.50 per Canada Life common share at the time. The
transaction provides for a maximum of approximately 60% cash, 29% Great West
common shares and 11% Great West preferred shares to be paid or issued to
Canada Lifes common shareholders.

On February 28, 2003, Manulife announced that it would not extend its offer and
would return any shares tendered.

The completion of the transaction with Great West is subject to the satisfaction of certain conditions, including:



| |  | the approval of the transaction by at least two-thirds of the votes
cast at a special meeting of Canada Lifes common shareholders,
scheduled for May 5 2003;        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the approval of the transaction by, among others, the Minister of
Finance (Canada), the Superintendent of Financial Institutions
(Canada) and foreign regulators; and
| 
| |  | the receipt of approval or expiration or termination of waiting
periods under Canadian, United States and European competition or
antitrust laws.                    

The timing of completion of the transaction will depend upon, among other
things, the timing of the receipt of all required regulatory approvals.
The closing date will occur on the later of (i) July 10, 2003 and (ii) the
twelfth business day after all conditions to the completion of the transaction have been
satisfied or waived, or such other date as may be agreed to by Canada Life and Great West.

The remainder of this document focuses on describing the results of operations
and outlook for the existing businesses of Canada Life on a status quo basis
and without consideration of the impact of the Great West transaction.

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -2-





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##### 



INCOME STATEMENT REVIEW

SUMMARY STATEMENT OF NET INCOME

|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |     | 
|------------------------------------------------------------------- | ---------------------------------------------------------------- | ---- | ----- | ---- |  | ---- | ----- | -------- | - | -------- | ----- | -- |  | - | ---------------- | -- |  |  | --- | --- | 
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   | 2002 versus 2001
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                 
|(in millions of Canadian dollars)                                   |                                                                  | 2002 |       | 2001 |  | 2000 |       | $ Change |   | % Change
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |         
|Revenues                                                            |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Premiums                                                            |                                                                  | $    | 5,915 |      |  | $    | 5,358 |          |   | $        | 4,676 |    |  | $ | 557              |    |  |  | 10  |    
|Net investment income                                               |                                                                  |      | 2,154 |      |  |      | 2,241 |          |   |          | 2,306 |    |  |   | (87              | )  |  |  | (4  | )  
|Fee and other income                                                |                                                                  |      | 529   |      |  |      | 465   |          |   |          | 479   |    |  |   | 64               |    |  |  | 14  |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|                                                                    |                                                                  |      | 8,598 |      |  |      | 8,064 |          |   |          | 7,461 |    |  |   | 534              |    |  |  | 7   |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Expenditures                                                        |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Policyholders benefits                                             |                                                                  |      | 6,481 |      |  |      | 6,190 |          |   |          | 5,631 |    |  |   | 291              |    |  |  | 5   |    
|Other expenses                                                      |                                                                  |      | 1,482 |      |  |      | 1,383 |          |   |          | 1,283 |    |  |   | 99               |    |  |  | 7   |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|                                                                    |                                                                  |      | 7,963 |      |  |      | 7,573 |          |   |          | 6,914 |    |  |   | 390              |    |  |  | 5   |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Net income before income tax provision                              |                                                                  |      | 635   |      |  |      | 491   |          |   |          | 547   |    |  |   | 144              |    |  |  | 29  |    
|Income tax provision                                                |                                                                  |      | 133   |      |  |      | 153   |          |   |          | 195   |    |  |   | (20              | )  |  |  | (13 | )  
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Net income including participating
policyholders net income (loss) |                                                                  |      | 502   |      |  |      | 338   |          |   |          | 352   |    |  |   | 164              |    |  |  | 49  |    
|Participating policyholders net income (loss)                      |                                                                  |      | 3     |      |  |      | (4    | )        |   |          | (4    | )  |  |   | 7                |    |  |  | 175 |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Shareholders net income                                            |                                                                  |      | 499   |      |  |      | 342   |          |   |          | 356   |    |  |   | 157              |    |  |  | 46  |    
|Preferred share dividends                                           |                                                                  |      | 9     |      |  |      |      |          |   |          |      |    |  |   | 9                |    |  |  |    |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Common shareholders net income                                     |                                                                  | $    | 490   |      |  | $    | 342   |          |   | $        | 356   |    |  | $ | 148              |    |  |  | 43  |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Pro forma common shareholders net income
before the following:     |                                                                  |      | 490   |      |  |      | 427   |          |   |          | 328   |    |  |   | 63               |    |  |  | 15  |    
|                                                                    | Provision for expected claims arising
from September 11, 2001(1) |      |       |     |  |      |       | (85      | ) |          |       |   |  |   |                  | 85 |  |  |     | 100 | 
|                                                                    | Disposed of operations(2)                                        |      |       |     |  |      |       |         |   |          |       | 28 |  |   |                  |   |  |  |     |    | 
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    
|Common shareholders net income                                     |                                                                  | $    | 490   |      |  | $    | 342   |          |   | $        | 356   |    |  | $ | 148              |    |  |  | 43  |    
|                                                                    |                                                                  |      |       |      |  |      |       |          |   |          |       |    |  |   |                  |    |  |  |     |    



|(1) |  | In 2001, the results of operations were impacted by the effect of
expected claims arising from September 11, 2001 for which we have recorded
an $85 million provision net of reinsurance recoveries and tax.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Comprised of the gain on sale and results of general insurance operations
disposed of in December 2000.                                                                                                     

Common shareholders net income was $490 million, an increase of $148 million
or 43% over the year ended December 31, 2001.

While net income before tax of $635 million for the year has increased $144
million over the prior years $491 million, the provision for income taxes of
$133 million was down $20 million year over year. Favourable impacts of $22
million in respect of tax in 2002 related to the benefits of some corporate
restructuring, the use of previously unrecognized loss carryforwards and lower
statutory rates all of which are expected to continue into the future. In
addition, a one-time release of a provision no longer required in the United
Kingdom has contributed a $24 million favourable impact and the write-off of
future tax assets in 2001, that did not recur in 2002 contributed $17 million.

The increase in common shareholders net income included the following:

|                                                                                                                           |  |                        |     |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --- | -
|(in millions of Canadian dollars)                                                                                          |  | Variance to prior year
|                                                                                                                           |  |                       
|Growth in in-force less investment in new business, favourable mortality
and morbidity experience, expense and tax savings |  | $                      | 100 |  
|Impact of declines in global stock markets                                                                                 |  |                        | (60 | )
|Release of tax provision and sales force restructuring in the United Kingdom                                               |  |                        | 6   |  
|Write-down in 2001 of future tax assets                                                                                    |  |                        | 17  |  
|                                                                                                                           |  |                        |     |  
|Increases before the following:                                                                                            |  |                        | 63  |  
|Impact of September 11, 2001                                                                                               |  |                        | 85  |  
|                                                                                                                           |  |                        |     |  
|Increase in common shareholders net income                                                                                |  | $                      | 148 |  
|                                                                                                                           |  |                        |     |  

A number of factors have contributed to the $100 million increase in
year-over-year net income from business in-force, new business, experience and
other factors:

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -3-





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##### 





| |  | Net income from new business improved $35 million over 2001 as a
result of both product pricing margins and more efficient use of
reinsurance.                                                                                                                                                                                                                               
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Favourable mortality and morbidity experience, expense efficiencies
and favourable asset liability management contributed to the increase
for the year despite reserve strengthening to cover improving
annuitant mortality in the United Kingdom.                                                                                                                           
| 
| |  | The change in accounting policy adopted in 2002 whereby goodwill is no
longer amortized as it was in 2001 contributed $25 million to the
increase in net income.                                                                                                                                                                                                             
| 
| |  | Tax benefits arising from business acquisitions and restructuring
activities have enabled the use of previously unrecognized tax loss
carryforwards, which, together with lower statutory tax rates in some
jurisdictions, have contributed to improve after-tax earnings by $22
million this year and are expected to continue to have a positive
impact on future earnings.

Declines in global stock markets had a negative impact on net income. As at
December 31, 2002, stock market indices in Canada, the United States and the
United Kingdom were on average 21% lower than a year ago. The negative impact
of the declines in markets on earnings was $60 million for the year.

Two non-recurring items in the United Kingdom resulted in a net non-recurring
gain of $6 million this year. These included the release of a $24 million tax
provision as a result of the favourable settlement of certain outstanding tax
issues and a provision of $18 million after tax that was taken to cover costs
of exiting the in-house sales force.

There was a year-over-year reduction in tax and improvement in net income due
to the one-time write-down of future tax assets of $17 million following the
2001 substantially enacted reductions in the Canadian statutory tax rate.

Lastly, the provision taken in 2001 for claims arising from September 11
reduced net income last year by $85 million. We continue to hold prudent
provisions for these losses and did not realize any adverse development in
2002.

PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS

|                                           |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   |                  |     |  |  |    |    | 
|------------------------------------------ | ------------------------------------ | ---- | ------ | ----- |  | ---- | ------ | -------- |  | -------- | ----- | ----- |  | - | ---------------- | --- |  |  | -- | -- | 
|                                           |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   | 2002 versus 2001
|                                           |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   |                 
|(in millions of Canadian dollars)          |                                      | 2002 |        | 2001  |  | 2000 |        | $ Change |  | % Change
|                                           |                                      |      |        |       |  |      |        |          |  |         
|Premiums                                   |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   |                  |     |  |  |    |   
|                                           | Annuities                            |      | $      | 2,474 |  |      | $      | 2,272    |  |          | $     | 1,746 |  |   | $                | 202 |  |  |    | 9  | 
|                                           | Individual life and health insurance |      |        | 1,510 |  |      |        | 1,428    |  |          |       | 1,384 |  |   |                  | 82  |  |  |    | 6  | 
|                                           | Group life and health insurance      |      |        | 1,931 |  |      |        | 1,658    |  |          |       | 1,546 |  |   |                  | 273 |  |  |    | 16 | 
|                                           |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   |                  |     |  |  |    |    | 
|General fund premiums                      |                                      |      | 5,915  |       |  |      | 5,358  |          |  |          | 4,676 |       |  |   | 557              |     |  |  | 10 |   
|Segregated funds deposits                  |                                      |      | 3,721  |       |  |      | 3,828  |          |  |          | 3,692 |       |  |   | (107             | )   |  |  | (3 | ) 
|ASO premium equivalents and other deposits |                                      |      | 2,372  |       |  |      | 2,043  |          |  |          | 882   |       |  |   | 329              |     |  |  | 16 |   
|                                           |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   |                  |     |  |  |    |    | 
|Total                                      |                                      | $    | 12,008 |       |  | $    | 11,229 |          |  | $        | 9,250 |       |  | $ | 779              |     |  |  | 7  |   
|                                           |                                      |      |        |       |  |      |        |          |  |          |       |       |  |   |                  |     |  |  |    |    | 

General fund premium income increased by $557 million or 10% from 2001 with
strong sales in annuities and group life and health insurance across the
Company. As a result of volatile global stock markets, consumer preferences
appeared to shift from equity based products to fixed income products. Payout
annuity sales were particularly strong in Canada and the United Kingdom.
Premiums from group life and health insurance rose as a result of strong
growth in both new sales and renewal business in Canada, the United Kingdom
and the United States and from the U.K. group business acquisition in the
latter part of 2002.

Segregated funds deposits decreased by $107 million or 3% compared to 2001.
Year-over-year changes in segregated funds deposits varied across the Company
with an increase of $120 million in the United States as a result of enhanced
variable annuity fund offerings, and decreases in Canada due to changes in
customer preferences, and in the United Kingdom due to a lower number of large
single premium cases from the Isle of Man business.

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -4-





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##### 



NET INVESTMENT INCOME

|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  
|------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | -------- |  | -------- | ----- |  |  | ---------------- | --- | - |  |  | ---- | -
|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  | 2002 versus 2001
|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  |                 
|(in millions of Canadian dollars)                 |  | 2002 |       | 2001 |  | 2000 |       | $ Change |  | % Change
|                                                  |  |      |       |      |  |      |       |          |  |         
|Bonds (1)                                         |  | $    | 1,450 |      |  | $    | 1,371 |          |  | $        | 1,268 |  |  | $                | 79  |   |  |  | 6    |  
|Mortgages (1)                                     |  |      | 625   |      |  |      | 632   |          |  |          | 614   |  |  |                  | (7  | ) |  |  | (1   | )
|Common and preferred stocks (2)                   |  |      | 67    |      |  |      | 136   |          |  |          | 203   |  |  |                  | (69 | ) |  |  | (51  | )
|Real estate (2)                                   |  |      | 98    |      |  |      | 81    |          |  |          | 80    |  |  |                  | 17  |   |  |  | 21   |  
|Policy loans                                      |  |      | 79    |      |  |      | 75    |          |  |          | 70    |  |  |                  | 4   |   |  |  | 5    |  
|Cash, cash equivalents and
short-term investments |  |      | 31    |      |  |      | 56    |          |  |          | 83    |  |  |                  | (25 | ) |  |  | (45  | )
|Other                                             |  |      | (137  | )    |  |      | (57   | )        |  |          | 34    |  |  |                  | (80 | ) |  |  | (140 | )
|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  
|Total investment income                           |  |      | 2,213 |      |  |      | 2,294 |          |  |          | 2,352 |  |  |                  | (81 | ) |  |  | (4   | )
|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  
|Less: investment expenses                         |  |      | 59    |      |  |      | 53    |          |  |          | 46    |  |  |                  | 6   |   |  |  | 11   |  
|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  
|Net investment income                             |  | $    | 2,154 |      |  | $    | 2,241 |          |  | $        | 2,306 |  |  | $                | (87 | ) |  |  | (4   | )
|                                                  |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  

| |  | 
| |  | 



|(1) |  | Includes amortized realized gains as follows: bonds $100 million ($102
million in 2001 and $63 million in 2000); and mortgages $12 million ($11
million in 2001 and $10 million in 2000).                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes amortized realized and unrealized gains as follows: common and
preferred stocks $27 million ($78 million in 2001 and $153 million in
2000); and real estate $22 million ($20 million in both 2001 and 2000).

Net investment income of $2,154 million decreased from $2,241 million in 2001.
The decrease was primarily due to the negative impact of stock market
declines, partially offset by the positive impact of the strengthening British
pound and Euro and increased income on a larger bond portfolio. The overall
rate of investment income earned on general fund invested assets was 6.8%
compared to 7.3% in 2001.

Investment income from bonds rose to $1,450 million, up $79 million or 6% over
2001, primarily due to growth in the bond portfolio, which was $22,317 million
in 2002, up from $19,046 million in 2001.

Investment income from common and preferred stocks of $67 million was down $69
million from 2001 as a result of poor performance in global stock markets.
Amortization of net realized and unrealized gains decreased to $27 million in
2002, down $51 million from 2001. During 2002, stock markets in the principal
countries in which the Company operates showed negative returns. The TSX
Composite Index in Canada experienced a 14% decrease in 2002, the U.S.
Standard & Poors (S&P) 500 Index dropped 23%, and the United Kingdom FTSE 100
and Irish ISEQ had losses of 24% and 30% respectively.

Investment income from real estate rose to $98 million in 2002, up from $81
million in 2001, primarily due to increased rental income in the United
Kingdom and the positive impact of the strengthening British pound.

Investment income from cash, cash equivalents and short-term investments
dropped to $31 million in 2002 from $56 million in 2001 as short-term interest
rates declined throughout 2002.

Other investment income dropped $80 million from 2001 as a result of a decline
in market value for investments supporting certain equity based insurance
products. The change in value was offset by a corresponding decrease in
actuarial liabilities.

FEE AND OTHER INCOME

Fee income is earned principally from the management of segregated funds assets
and is generally based on a percentage of the market values of the assets under
administration. The Company also earns fee income from the administration of
unit trusts in the United Kingdom, investment management services provided to
third parties and administrative services (such as claims administration)
provided to employer and other groups. During 2002, we reclassified our Irish
Unitized with Profit Fund business from the general fund to segregated funds
without a restatement of 2001. This has impacted the comparability of fee
income year over year.

Fee and other income of $529 million was up $64 million compared to 2001, of
which $34 million was a result of the reclassification of our Irish Unitized
with Profit Fund business. Increases occurred in the U.K. Division for our
Isle of Man business and in Canada with growth in our Administrative Services
Only (ASO) business.

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -5-





---



##### 



POLICYHOLDERS BENEFITS

|                                            |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |      |   |  |  |     |  
|------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | -------- |  | -------- | ----- |  |  | ---------------- | ---- | - |  |  | --- | -
|                                            |  |      |       |      |  |      |       |          |  |          |       |  |  | 2002 versus 2001
|                                            |  |      |       |      |  |      |       |          |  |          |       |  |  |                 
|(in millions of Canadian dollars)           |  | 2002 |       | 2001 |  | 2000 |       | $ Change |  | % Change
|                                            |  |      |       |      |  |      |       |          |  |         
|Annuity payments                            |  | $    | 1,352 |      |  | $    | 1,246 |          |  | $        | 1,128 |  |  | $                | 106  |   |  |  | 9   |  
|Life, health and general benefits           |  |      | 2,193 |      |  |      | 1,987 |          |  |          | 1,670 |  |  |                  | 206  |   |  |  | 10  |  
|Maturities, surrender payments and other    |  |      | 1,512 |      |  |      | 1,680 |          |  |          | 1,837 |  |  |                  | (168 | ) |  |  | (10 | )
|Participating policyholder dividends        |  |      | 295   |      |  |      | 305   |          |  |          | 289   |  |  |                  | (10  | ) |  |  | (3  | )
|                                            |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |      |   |  |  |     |  
|Payments to policyholders and beneficiaries |  |      | 5,352 |      |  |      | 5,218 |          |  |          | 4,924 |  |  |                  | 134  |   |  |  | 3   |  
|Increase in actuarial liabilities           |  |      | 1,129 |      |  |      | 972   |          |  |          | 707   |  |  |                  | 157  |   |  |  | 16  |  
|                                            |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |      |   |  |  |     |  
|Policyholders benefits                     |  | $    | 6,481 |      |  | $    | 6,190 |          |  | $        | 5,631 |  |  | $                | 291  |   |  |  | 5   |  
|                                            |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |      |   |  |  |     |  

Payments to policyholders and beneficiaries of $5,352 million rose by $134
million or 3% over 2001. In the United Kingdom, we had an increase of $203
million, primarily due to higher group life insurance claims, which included
the acquired group business, and higher payout annuity payments arising from
growth in new business. There was a decrease of $103 million relating to our
reinsurance operations primarily because the provision for September 11 claims
recorded in 2001 did not recur.

Changes in actuarial liabilities from year to year are a function of business
volumes, underlying experience factors, changes in assumptions and refinements
in the calculation of these liabilities. When payments are made to
policyholders and beneficiaries, the Companys obligation under the policy is
either partially or completely fulfilled and, consequently, the actuarial
liability held at the time of the claim or payment is released. Different
products have different actuarial liability requirements, and depending on
expected future payments (which vary between protection and wealth management
products), a change in claims or premiums by $1 does not always result in a $1
change in actuarial liabilities. Refinements in calculating actuarial
liabilities are adjustments made by the Companys actuaries as a result of
changes in expected future experience arising from analysis of recent actual
experience.

(Further information regarding the changes in actuarial liabilities is provided
in note 9 to the Consolidated Financial Statements.)

GENERAL OPERATING, COMMISSIONS AND OTHER EXPENSES

|                                                                                     |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  
|------------------------------------------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- | -------- |  | -------- | ----- |  |  | ---------------- | --- | - |  |  | ---- | -
|                                                                                     |  |      |       |      |  |      |       |          |  |          |       |  |  | 2002 versus 2001
|                                                                                     |  |      |       |      |  |      |       |          |  |          |       |  |  |                 
|(in millions of Canadian dollars)                                                    |  | 2002 |       | 2001 |  | 2000 |       | $ Change |  | % Change
|                                                                                     |  |      |       |      |  |      |       |          |  |         
|General operating expenses                                                           |  | $    | 814   |      |  | $    | 794   |          |  | $        | 743   |  |  | $                | 20  |   |  |  | 3    |  
|Commissions                                                                          |  |      | 539   |      |  |      | 461   |          |  |          | 409   |  |  |                  | 78  |   |  |  | 17   |  
|Premium and other taxes, interest
expense and non-controlling interest in subsidiary |  |      | 129   |      |  |      | 103   |          |  |          | 107   |  |  |                  | 26  |   |  |  | 25   |  
|Goodwill amortization                                                                |  |      |      |      |  |      | 25    |          |  |          | 24    |  |  |                  | (25 | ) |  |  | (100 | )
|                                                                                     |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  
|                                                                                     |  | $    | 1,482 |      |  | $    | 1,383 |          |  | $        | 1,283 |  |  | $                | 99  |   |  |  | 7    |  
|                                                                                     |  |      |       |      |  |      |       |          |  |          |       |  |  |                  |     |   |  |  |      |  

General operating expenses in 2002 were $11 million or 1% less than 2001,
excluding the impact of acquisitions and non-recurring charges, of which $7
million related to the group insurance acquisition and $24 million for costs to
exit our Financial Consultancy sales force, both in the United Kingdom. Keeping
recurring expenses at or below the level of 2001 was a key focus for the
Company in 2002 and was achieved despite the effect of the strengthening of the
British pound and Euro against the Canadian dollar. Including the impact of
acquisitions and non-recurring charges, general expenses of $814 million in
2002 rose $20 million or 3% over 2001.

As a result of strong sales across all of our operating divisions, commissions
increased by $78 million or 17% from 2001.

As a result of raising $450 million of new capital by the issuance of Canada
Life Capital Securities in March 2002, we had an additional $25 million in
financing expense in the current year. This was recorded in the Consolidated
Statement of Net Income as non-controlling interest in subsidiary.

The Company adopted new accounting recommendations for goodwill and other
intangible assets effective January 1, 2002. As a result, goodwill is no longer
amortized to shareholders net income. As well, the Company adopted new
accounting requirements for stock-based compensation and other stock-based
payments for which an expense of $2 million was recorded this year. (See page 38
for a description of these changes in accounting policies.)

INCOME TAXES

The Companys effective tax rate for 2002 was 20.9% compared to 31.2% in 2001.
The lower effective tax rate was due to the favourable settlement of certain
outstanding tax issues, lower statutory tax rates in various jurisdictions and
benefits relating to business acquisitions and restructuring activities. The
Companys 2001 effective tax rate was higher than expected as a result of a
write-down of its future tax asset following substantially enacted reductions
in the Canadian federal and provincial statutory tax rates. Without the
non-recurring items, the sustainable tax rate for 2002 was 26.5% compared to
30% for 2001.

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -6-





---



##### 



QUARTERLY RESULTS

|                                                          |  |      |        |         |  |    |        |    |  |       |        |    |  |    |        |    |  |    |       |       |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |       | 
|--------------------------------------------------------- |  | ---- | ------ | ------- |  | -- | ------ | -- |  | ----- | ------ | -- |  | -- | ------ | -- |  | -- | ----- | ----- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ----- | 
|                                                          |  | 2002 |        | 2001(1)
|                                                          |  |      |        |        
|(in millions of Canadian dollarsexcept per share amounts) |  | Q4   |        | Q3      |  | Q2 |        | Q1 |  | Total |        | Q4 |  | Q3 |        | Q2 |  | Q1 |       | Total
|                                                          |  |      |        |         |  |    |        |    |  |       |        |    |  |    |        |    |  |    |       |      
|Total revenue                                             |  |      | 2,349  |         |  |    | 2,188  |    |  |       | 2,023  |    |  |    | 2,038  |    |  |    | 8,598 |       |  |  | 2,159  |  |  |  | 1,904  |  |  |  | 2,019  |  |  |  | 1,982  |  |  |  | 8,064 | 
|Common shareholders net income                           |  |      | 131    |         |  |    | 114    |    |  |       | 125    |    |  |    | 120    |    |  |    | 490   |       |  |  | 38     |  |  |  | 91     |  |  |  | 114    |  |  |  | 99     |  |  |  | 342   | 
|Earnings per common share-basic and diluted               |  |      | 0.81   |         |  |    | 0.71   |    |  |       | 0.78   |    |  |    | 0.75   |    |  |    | 3.05  |       |  |  | 0.23   |  |  |  | 0.57   |  |  |  | 0.71   |  |  |  | 0.62   |  |  |  | 2.13  | 
|Assets under administration                               |  |      | 68,003 |         |  |    | 65,164 |    |  |       | 65,449 |    |  |    | 66,523 |    |  |    |       |       |  |  | 65,425 |  |  |  | 62,606 |  |  |  | 62,440 |  |  |  | 62,799 |  |  |  |       | 



|(1) |  | Shareholders net income in the third and fourth quarters of 2001 was
impacted by the $85 million provision, net of tax, taken in respect of the
estimate for claims arising from September 11, 2001 for our special risk
reinsurance contracts. Of the $85 million provision, $15 million was taken
in the third quarter and $70 million in the fourth quarter. Excluding
these provisions, common shareholders net income for the third and fourth
quarter respectively was $106 million and $108 million.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

REVIEW OF FOURTH QUARTER OPERATING PERFORMANCE

Total revenue in the fourth quarter of 2002 increased by $161 million or 7%
over the third quarter, due in part to the two business acquisitions during the
quarter, and by $190 million or 9% over the fourth quarter of 2001. This is not
indicative of any particular trend or quarterly pattern but a function of stock
market and currency impacts, as well as the business acquisitions and general
growth in business in the current year.

Shareholders net income was $131 million in the fourth quarter of 2002, up $17
million from the third quarter of 2002 and $23 million from the fourth quarter
of 2001 (excluding the provision for September 11, 2001). Reserve
strengthening and the impact of the declines in global stock markets continued
to lower net income before tax for the fourth quarter compared to the prior
quarter and prior year fourth quarter. However, a net tax recovery resulted in
relatively higher after-tax profit in the fourth quarter compared with prior
quarters.

Assets under administration were up 4% in the fourth quarter compared to the
prior quarter. The growth is consistent with the average growth in stock market
indices of 7% for the fourth quarter of 2002 in Canada, the United States and
the United Kingdom.

PERFORMANCE BY BUSINESS SEGMENT

The Companys operations are broadly organized along geographic market lines,
and we conduct our business through operating divisions in Canada, the United
Kingdom, the United States, the Republic of Ireland and through a globally
oriented International and Reinsurance Division. Each operating division
focuses on its defined markets, with local responsibility for product
development, marketing, distribution and pricing functions. Each division is
required to meet corporate-wide strategic, business growth and expense
objectives and to adhere to corporate risk management policies and guidelines.
In addition, a corporate group oversees the management of invested assets via
the Investment Division, provides certain administrative services for the
operating divisions and is responsible for capital management. Capital is
allocated to support the business within each division using an MCCSR-based
allocation model. Income on that capital is credited to each division.

DIVISIONAL PERCENTAGE OF TOTAL

|                              |  |                                 |     |                  |  |                             |     |      |  |      |     |      |  |                               |     |      |  |      |     |   |  |  |     |   |  |  |     |   |  |  |     |   |  |  |     |  
|----------------------------- |  | ------------------------------- | --- | ---------------- |  | --------------------------- | --- | ---- |  | ---- | --- | ---- |  | ----------------------------- | --- | ---- |  | ---- | --- | - |  |  | --- | - |  |  | --- | - |  |  | --- | - |  |  | --- | -
|                              |  |                                 |     |                  |  |                             |     |      |  |      |     |      |  | Premiums, premium equivalents |     |      |  |      |     |   |  |  |     |   |  | 
|                              |  | Common
shareholders net income |     | and new deposits |  | Assets under administration
|                              |  |                                 |     |                  |  |                            
|                              |  | 2002                            |     | 2001             |  | 2000                        |     | 2002 |  | 2001 |     | 2000 |  | 2002                          |     | 2001 |  | 2000
|                              |  |                                 |     |                  |  |                             |     |      |  |      |     |      |  |                               |     |      |  |     
|Canada                        |  |                                 | 39  | %                |  |                             | 47  | %    |  |      | 35  | %    |  |                               | 47  | %    |  |      | 47  | % |  |  | 48  | % |  |  | 42  | % |  |  | 46  | % |  |  | 47  | %
|United Kingdom                |  |                                 | 30  | %                |  |                             | 36  | %    |  |      | 31  | %    |  |                               | 26  | %    |  |      | 27  | % |  |  | 25  | % |  |  | 32  | % |  |  | 29  | % |  |  | 30  | %
|United States                 |  |                                 | 21  | %                |  |                             | 26  | %    |  |      | 23  | %    |  |                               | 17  | %    |  |      | 16  | % |  |  | 16  | % |  |  | 17  | % |  |  | 18  | % |  |  | 17  | %
|Republic of Ireland           |  |                                 | 6   | %                |  |                             | 10  | %    |  |      | 6   | %    |  |                               | 7   | %    |  |      | 7   | % |  |  | 8   | % |  |  | 7   | % |  |  | 6   | % |  |  | 5   | %
|International and
Reinsurance |  |                                 | 5   | %                |  |                             | (20 | )%   |  |      | 5   | %    |  |                               | 3   | %    |  |      | 3   | % |  |  | 3   | % |  |  | 2   | % |  |  | 1   | % |  |  | 1   | %
|Corporate                     |  |                                 | (1  | )%               |  |                             | 1   | %    |  |      |    |      |  |                               |    |      |  |      |    |   |  |  |    |   |  |  |    |   |  |  |    |   |  |  |    |  
|                              |  |                                 |     |                  |  |                             |     |      |  |      |     |      |  |                               |     |      |  |      |     |   |  |  |     |   |  |  |     |   |  |  |     |   |  |  |     |  
|                              |  |                                 | 100 | %                |  |                             | 100 | %    |  |      | 100 | %    |  |                               | 100 | %    |  |      | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | %
|                              |  |                                 |     |                  |  |                             |     |      |  |      |     |      |  |                               |     |      |  |      |     |   |  |  |     |   |  |  |     |   |  |  |     |   |  |  |     |  

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -7-





---



##### 



DIVISIONAL FINANCIAL HIGHLIGHTS

|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|---------------------------------------------- |  | ------ | ------ | ------- |  | ------ | ------ | ---------- |  | ----------- | ------ | ----- |  | - | ----- | - |  | ------------- | ----- | -- |  | - | ------ | ---
|(in millions of Canadian dollars               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  | International |       |    |  |  
|except percentage amounts)                     |  |        |        |         |  | United |        | United     |  | Republic    |        | and   |  |   |       |  
|2002                                           |  | Canada |        | Kingdom |  | States |        | of Ireland |  | Reinsurance |        | Total
|                                               |  |        |        |         |  |        |        |            |  |             |        |      
|Common shareholders net income                |  | $      | 192    |         |  | $      | 148    |            |  | $           | 101    |       |  | $ | 30    |   |  | $             | 24    |    |  | $ | 490    | (1)
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Return on common shareholders equity          |  |        | 17.5   | %       |  |        | 15.7   | %          |  |             | 14.9   | %     |  |   | 10.1  | % |  |               | 14.9  | %  |  |   | 14.0   | %  
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Premiums, premium equivalents and new
deposits |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|General fund premiums                          |  | $      | 2,103  |         |  | $      | 1,508  |            |  | $           | 1,784  |       |  | $ | 139   |   |  | $             | 381   |    |  | $ | 5,915  |    
|Segregated funds deposits                      |  |        | 1,283  |         |  |        | 1,554  |            |  |             | 222    |       |  |   | 660   |   |  |               | 2     |    |  |   | 3,721  |    
|ASO premium equivalents and other deposits     |  |        | 2,311  |         |  |        | 58     |            |  |             |       |       |  |   |      |   |  |               | 3     |    |  |   | 2,372  |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|                                               |  | $      | 5,697  |         |  | $      | 3,120  |            |  | $           | 2,006  |       |  | $ | 799   |   |  | $             | 386   |    |  | $ | 12,008 |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Assets under administration                    |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|General fund                                   |  | $      | 14,119 |         |  | $      | 10,345 |            |  | $           | 10,990 |       |  | $ | 1,401 |   |  | $             | 1,336 |    |  | $ | 38,191 |    
|Segregated funds                               |  |        | 7,397  |         |  |        | 10,671 |            |  |             | 698    |       |  |   | 3,128 |   |  |               | 5     |    |  |   | 21,899 |    
|Other assets                                   |  |        | 7,346  |         |  |        | 553    |            |  |             |       |       |  |   |      |   |  |               | 14    |    |  |   | 7,913  |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|                                               |  |        | 28,862 |         |  | $      | 21,569 |            |  | $           | 11,688 |       |  | $ | 4,529 |   |  | $             | 1,355 |    |  | $ | 68,003 |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|2001                                           |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Common shareholders net income                |  | $      | 161    |         |  | $      | 122    |            |  | $           | 87     |       |  | $ | 34    |   |  | $             | (68   | )  |  | $ | 342    | (1)
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Return on common shareholders equity          |  |        | 15.6   | %       |  |        | 14.8   | %          |  |             | 13.4   | %     |  |   | 16.7  | % |  |               | (51.7 | )% |  |   | 11.1   | %  
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Premiums, premium equivalents and new
deposits |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|General fund premiums                          |  | $      | 1,893  |         |  | $      | 1,079  |            |  | $           | 1,671  |       |  | $ | 391   |   |  | $             | 324   |    |  | $ | 5,358  |    
|Segregated funds deposits                      |  |        | 1,395  |         |  |        | 1,888  |            |  |             | 102    |       |  |   | 442   |   |  |               | 1     |    |  |   | 3,828  |    
|ASO premium equivalents and other deposits     |  |        | 1,960  |         |  |        | 83     |            |  |             |       |       |  |   |      |   |  |               |      |    |  |   | 2,043  |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|                                               |  | $      | 5,248  |         |  | $      | 3,050  |            |  | $           | 1,773  |       |  | $ | 833   |   |  | $             | 325   |    |  | $ | 11,229 |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Assets under administration                    |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|General fund                                   |  |        | 14,031 |         |  | $      | 7,421  |            |  | $           | 10,942 |       |  | $ | 1,609 |   |  | $             | 948   |    |  | $ | 34,951 |    
|Segregated funds                               |  |        | 8,118  |         |  |        | 11,053 |            |  |             | 825    |       |  |   | 2,090 |   |  |               | 4     |    |  |   | 22,090 |    
|Other assets                                   |  |        | 7,756  |         |  |        | 615    |            |  |             |       |       |  |   |      |   |  |               | 13    |    |  |   | 8,384  |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|                                               |  |        | 29,905 |         |  | $      | 19,089 |            |  | $           | 11,767 |       |  | $ | 3,699 |   |  | $             | 965   |    |  | $ | 65,425 |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|2000                                           |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Common shareholders net income                |  | $      | 123    |         |  | $      | 112    |            |  | $           | 82     |       |  | $ | 22    |   |  | $             | 17    |    |  | $ | 356    | (1)
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Return on common shareholders equity          |  |        | 12.3   | %       |  |        | 13.1   | %          |  |             | 12.9   | %     |  |   | 13.7  | % |  |               | 16.4  | %  |  |   | 12.9   | %  
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Premiums, premium equivalents and new
deposits |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|General fund premiums                          |  | $      | 1,749  |         |  | $      | 955    |            |  | $           | 1,351  |       |  | $ | 344   |   |  | $             | 277   |    |  | $ | 4,676  |    
|Segregated funds deposits                      |  |        | 1,909  |         |  |        | 1,258  |            |  |             | 115    |       |  |   | 407   |   |  |               | 3     |    |  |   | 3,692  |    
|ASO premium equivalents and other deposits     |  |        | 775    |         |  |        | 107    |            |  |             |       |       |  |   |      |   |  |               |      |    |  |   | 882    |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|                                               |  | $      | 4,433  |         |  | $      | 2,320  |            |  | $           | 1,466  |       |  | $ | 751   |   |  | $             | 280   |    |  | $ | 9,250  |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|Assets under administration                    |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|General fund                                   |  | $      | 13,970 |         |  | $      | 6,855  |            |  | $           | 9,870  |       |  | $ | 1,300 |   |  | $             | 741   |    |  | $ | 32,736 |    
|Segregated funds                               |  |        | 8,326  |         |  |        | 11,219 |            |  |             | 854    |       |  |   | 1,980 |   |  |               | 4     |    |  |   | 22,383 |    
|Other assets                                   |  |        | 7,470  |         |  |        | 668    |            |  |             |       |       |  |   |      |   |  |               |      |    |  |   | 8,138  |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    
|                                               |  | $      | 29,766 |         |  | $      | 18,742 |            |  | $           | 10,724 |       |  | $ | 3,280 |   |  | $             | 745   |    |  | $ | 63,257 |    
|                                               |  |        |        |         |  |        |        |            |  |             |        |       |  |   |       |   |  |               |       |    |  |   |        |    



|(1) |  | Total common shareholders net income for 2002 includes a loss of $5
million, income of $6 million in 2001 and nil in 2000 from the Corporate
Division.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -8-





---



##### 



Canadian Division

The Canadian Division offers a wide range of protection and wealth management
products and related services through four distinct business units: individual
life and health insurance, group life and health insurance, individual wealth
management and group wealth management:

|                     |  |                                      |  |                                            
|-------------------- |  | ------------------------------------ |  | -------------------------------------------
|Protection           |  | Wealth Management                   
|                     |  |                                     
|Individual Life and  |  | Group Life and Health                |  |                                            
|Health Insurance     |  | Insurance                            |  | Individual and Group                       
|                     |  |                                      |  |                                            
| Term Life          |  |  Life                               |  | Products:                                  
| Universal Life     |  |  Disability                         |  |  Retirement Savings Plans                 
| Participating Life |  |  Critical Illness                   |  |  Non-registered Savings Programs          
| Disability         |  |  Accidental Death
and Dismemberment |  |  Deferred Profit Sharing Plans            
| Critical Illness   |  |  Dental                             |  |  Defined Contribution Pension Plans       
|                     |  |  Creditor Life                      |  |  Payout Annuities                         
|                     |  |  Creditor Health                    |  |  Deferred Annuities                       
|                     |  |  Creditor Job Loss                  |  |  Investment Management Services Only Plans
|                     |  |  Expatriate Coverage                |  |  Retirement Income Funds                  
|                     |  |  Extended Health Care Plans         |  |  Life Income Funds                        
|                     |  |                                      |  |                                            
|                     |  |                                      |  | Administrative Services:                   
|                     |  |                                      |  |  Employee Stock Purchase
and Options Plans
|                     |  |                                      |  |  Incentive Plans                          

The Division operates across Canada through five regional marketing centres,
nine sales offices and three servicing centres for individual business, and
nine sales offices and six regional claims and services offices for group
business. Our products are marketed through independent brokers, independent
financial advisors, Managing General Agents, national accounts, and pension and
benefit consultants, as well as our
e-commerce subsidiary, Kanetix Ltd.

HIGHLIGHTS



| |  | Shareholders net income increased to $192 million, up 19% over 2001.                                                                                                                        
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Premiums, premium equivalents and new deposits increased $449 million to $5,697 million compared to 2001.                                                                                    
| 
| |  | Completed the acquisition and integration of a leading provider of
preferred term life insurance products in Canada in the fourth quarter
of 2002.                                           
| 
| |  | Introduced a critical illness insurance product in January 2003 that
offers new protection options to our customers.                                                                         
| 
| |  | Established Canada Life Securities Inc. as well as filed an
application with OSFI for the establishment of a trust company to
enhance support for our trust based wealth management products.

FINANCIAL PERFORMANCE

Shareholders net income of $192 million grew by $31 million or 19% over 2001.
Premium revenue growth, favourable mortality and morbidity experience, improved
operating efficiencies and the reduction in the statutory tax rate over 2001
were the key contributors to the strong performance, together with income tax
provisions arising from a write-down of future tax assets in 2001 that did not
recur this year. These increases were partially offset by the impact of the
stock market declines and a benefit from investment spreads in 2001 that did
not recur in 2002.

|                                  |  |    
|--------------------------------- |  | ---
|Canada Life Financial Corporation |  | -9-





---



##### 



|                                                                        |  |      |     |      |  |         |     |          |  |          |     |  |  |                  |    |   |  |  |     |  
|----------------------------------------------------------------------- |  | ---- | --- | ---- |  | ------- | --- | -------- |  | -------- | --- |  |  | ---------------- | -- | - |  |  | --- | -
|                                                                        |  |      |     |      |  |         |     |          |  |          |     |  |  | 2002 versus 2001
|Canadian Division's shareholders' net income                            |  |      |     |      |  |         |     |          |  |          |     |  |  |                 
|(in millions of Canadian dollars)                                       |  | 2002 |     | 2001 |  | 2000(1) |     | $ Change |  | % Change
|                                                                        |  |      |     |      |  |         |     |          |  |         
|Individual life and health insurance                                    |  | $    | 70  |      |  | $       | 45  |          |  | $        | 33  |  |  | $                | 25 |   |  |  | 56  |  
|Group life and health insurance                                         |  |      | 48  |      |  |         | 33  |          |  |          | 25  |  |  |                  | 15 |   |  |  | 45  |  
|Investments and pensions                                                |  |      | 74  |      |  |         | 83  |          |  |          | 37  |  |  |                  | (9 | ) |  |  | (11 | )
|                                                                        |  |      |     |      |  |         |     |          |  |          |     |  |  |                  |    |   |  |  |     |  
|Canadian Divisions shareholders net income from continuing operations |  |      | 192 |      |  |         | 161 |          |  |          | 95  |  |  |                  | 31 |   |  |  | 19  |  
|Disposed of operations(1)                                               |  |      |    |      |  |         |    |          |  |          | 28  |  |  |                  |   |   |  |  |    |  
|                                                                        |  |      |     |      |  |         |     |          |  |          |     |  |  |                  |    |   |  |  |     |  
|Canadian Divisions shareholders net income                            |  | $    | 192 |      |  | $       | 161 |          |  | $        | 123 |  |  | $                | 31 |   |  |  | 19  |  
|                                                                        |  |      |     |      |  |         |     |          |  |          |     |  |  |                  |    |   |  |  |     |  



|(1) |  | 2000 results included $10 million of shareholders net income from
operations and an $18 million after-tax gain on the sale of our general
insurance subsidiary on December 31, 2000.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SUMMARY STATEMENT OF OPERATIONS

|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|--------------------------------------- |  | ---- | ----- | ---- |  | ------- | ----- | -------- |  | -------- | ----- | - |  | ---------------- | --- | - |  |  | -- | -
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  | 2002 versus 2001
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                 
|(in millions of Canadian dollars)       |  | 2002 |       | 2001 |  | 2000(1) |       | $ Change |  | % Change
|                                        |  |      |       |      |  |         |       |          |  |         
|Revenues                                |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Premiums                                |  | $    | 2,103 |      |  | $       | 1,893 |          |  | $        | 1,749 |   |  | $                | 210 |   |  |  | 11 |  
|Net investment income                   |  |      | 897   |      |  |         | 951   |          |  |          | 995   |   |  |                  | (54 | ) |  |  | (6 | )
|Fee and other income                    |  |      | 182   |      |  |         | 177   |          |  |          | 177   |   |  |                  | 5   |   |  |  | 3  |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|                                        |  |      | 3,182 |      |  |         | 3,021 |          |  |          | 2,921 |   |  |                  | 161 |   |  |  | 5  |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Expenditures                            |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Policyholder benefits                   |  |      | 2,317 |      |  |         | 2,183 |          |  |          | 2,096 |   |  |                  | 134 |   |  |  | 6  |  
|General operating expenses              |  |      | 328   |      |  |         | 323   |          |  |          | 348   |   |  |                  | 5   |   |  |  | 2  |  
|Commissions                             |  |      | 173   |      |  |         | 175   |          |  |          | 155   |   |  |                  | (2  | ) |  |  | (1 | )
|Other                                   |  |      | 58    |      |  |         | 55    |          |  |          | 77    |   |  |                  | 3   |   |  |  | 5  |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|                                        |  |      | 2,876 |      |  |         | 2,736 |          |  |          | 2,676 |   |  |                  | 140 |   |  |  | 5  |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Net income before income taxes          |  |      | 306   |      |  |         | 285   |          |  |          | 245   |   |  |                  | 21  |   |  |  | 7  |  
|Income tax provision                    |  |      | 113   |      |  |         | 123   |          |  |          | 122   |   |  |                  | (10 | ) |  |  | (8 | )
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Net income                              |  |      | 193   |      |  |         | 162   |          |  |          | 123   |   |  |                  | 31  |   |  |  | 19 |  
|Participating policyholders net income |  |      | 1     |      |  |         | 1     |          |  |          |      |   |  |                  |    |   |  |  |   |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Common shareholders net income         |  | $    | 192   |      |  | $       | 161   |          |  | $        | 123   |   |  | $                | 31  |   |  |  | 19 |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Return on common shareholders equity   |  |      | 17.5  | %    |  |         | 15.6  | %        |  |          | 12.3  | % |  |                  |     |   |  |  |    |  
|                                        |  |      |       |      |  |         |       |          |  |          |       |   |  |                  |     |   |  |  |    |  



|(1) |  | 2000 results included $124 million of premiums, $8 million of investment
income, $18 million gain on sale in other income, $114 million of
expenditures and $8 million of income taxes, resulting in $28 million of
shareholders net income from disposed general insurance operations.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS

|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|(in millions of Canadian dollars)    |  | 2002 |       | 2001 |  | 2000
|                                     |  |      |       |      |  |     
|Annuities                            |  | $    | 600   |      |  | $    | 499   |  |  | $ | 312   | 
|Individual life and health insurance |  |      | 595   |      |  |      | 548   |  |  |   | 547   | 
|Group life and health insurance      |  |      | 908   |      |  |      | 846   |  |  |   | 766   | 
|General insurance                    |  |      |      |      |  |      |      |  |  |   | 124   | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|General fund premiums                |  |      | 2,103 |      |  |      | 1,893 |  |  |   | 1,749 | 
|Segregated funds deposits            |  |      | 1,283 |      |  |      | 1,395 |  |  |   | 1,909 | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|                                     |  |      | 3,386 |      |  |      | 3,288 |  |  |   | 3,658 | 
|Other deposits                       |  |      | 1,902 |      |  |      | 1,582 |  |  |   | 410   | 
|ASO premium equivalents              |  |      | 409   |      |  |      | 378   |  |  |   | 365   | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|                                     |  | $    | 5,697 |      |  | $    | 5,248 |  |  | $ | 4,433 | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -10-





---



##### 



Premiums, premium equivalents and new deposits

(PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS BAR CHART)

Premiums, premium equivalents and new deposits of $5,697 million increased $449
million, up 9% over 2001, primarily due to increases in general fund premiums
and other deposits, partially offset by declines in segregated funds deposits.
Our diversified product portfolio has enabled us to increase our premium
revenues as we offer fixed income products such as guaranteed and payout
annuities, which customers prefer over equity based products in weak stock
markets.

Premiums, premium equivalents and new deposits of $5,248 million for 2001 were
up $815 million from 2000. The growth in 2001 of 18% over 2000 resulted from a
significant rise in other deposits relating to customer contributions to group
retirement savings plans and non-registered savings plans in the group savings
business acquired in December 2000. There was also a reduction in segregated
funds deposits with lower conversion between segregated funds deposits in 2001
and customer preferences shifting away from equity based products.

NET INVESTMENT INCOME, FEE INCOME AND OTHER INCOME

Net investment income was down by $54 million or 6% from 2001 due to the
decline in stock markets, most impacted by the TSX and S&P 500 declines of 14%
and 23% year-over-year respectively, as well as lower interest rates on our
fixed income investments.

Fee income rose by $5 million, primarily due to growth in our Administrative
Services Only (ASO) business of $6 million and growth in our e-commerce
subsidiary, Kanetix Ltd., of $1 million. This was partially offset by a
reduction in segregated funds fee income of $2 million resulting from the lower
market values of segregated funds assets in 2002.

EXPENDITURES

Policyholder benefits represent payments to policyholders as well as the change
in actuarial liabilities. Policyholder benefits increased by $134 million or 6%
from 2001 due to an increase in the change in actuarial liabilities. Our
payments to policyholders were largely unchanged from 2001.

General operating expenses were up by $5 million or 2% from 2001. The increase
was due to continued investment in new administrative systems and integration
of the group savings business acquired in December 2000, partly offset by
efficiencies in our individual and wealth management operations and reduced
expenditures to maintain existing systems. One-time expenses of $4 million
relating to restructuring activities in IT were included in 2002.

Commission expenses decreased $2 million or 1% below 2001. Commission growth
was seen in participating life, payout annuities and group health insurance
lines, consistent with the revenue growth for these products. These increases
were more than offset by the impact of lower sales in individual health, as
well as individual market based Universal Life products.

The effective tax rate declined to 37% in 2002 from 43% in 2001 due to a
reduction of 3.25% in the statutory tax rate and higher income tax provisions
taken in 2001, which reflected the cumulative effect of federal and provincial
substantially enacted tax rate reductions on future tax assets.

PRODUCTS AND SERVICES

INDIVIDUAL LIFE AND HEALTH INSURANCE

Premiums increased by $47 million or 9% from 2001 levels, led by premium growth
in participating life and non-participating life insurance business lines. The
growth came from a combination of renewal activity resulting from strong new
business generated in 2001 and reinvestment of dividends by participating
policyholders due to the strong performance achieved.

Earnings were up by $25 million to $70 million, primarily due to favourable
mortality experience and operating efficiencies during the year. Our continued
focus on increasing operational efficiencies and effective expense management
has resulted in a reduction of the change in actuarial liabilities and
contributed $21 million to earnings in 2002. In October 2002, we completed the
acquisition of a leading provider of preferred term life insurance in Canada.
This transaction is projected to achieve economies of scale and to be accretive
to earnings in 2003.

We introduced a suite of enhanced individual protection products including
Universal Life, disability and term insurance, as well as an innovative
critical illness product that offers new protection options to our customers.
We continue to reach our customers through our strong relationship with
Managing General Agents, as well as by leveraging our expanded distribution
capabilities through Kanetix Ltd., our e-commerce subsidiary, and CWMG, our
Canadian worksite marketing group.

GROUP LIFE AND HEALTH INSURANCE

Premiums rose by $62 million or 7% over 2001, primarily due to new sales and
additional premiums on existing cases in group health insurance. This was
driven in part by our new online services for group benefit clients and their
employees. This Internet based initiative enables insured individuals to track
claims payments online, reducing call centre inquiries and improving operating
efficiencies.

Earnings increased by $15 million to $48 million mainly due to favourable
morbidity experience in group health insurance and general business growth.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -11-





---



##### 



INVESTMENTS AND PENSIONS

Premiums grew by $101 million or 20% over 2001 due to strong sales in
individual guaranteed and payout annuity products. The premium increases in
individual guaranteed annuities reflected customers preference for fixed
income products in response to the poor performance of the stock market. Payout
annuity premiums grew as a result of our competitively priced products,
increased demand by retiree clients seeking secure investment vehicles, and our
enhanced web based quotation system that provides our distribution network
better access to our products.

Fee and other income was unchanged over last year. Fee income on individual
segregated funds declined due to generally weak market performance in 2002. Fee
income on group segregated funds was slightly improved over last year, as
strong net cash flows in 2001 carried over into the early part of 2002
offsetting the impact of the weak equity markets in the year.

Segregated funds deposits of $1,283 million were down $112 million from 2001.
Individual segregated funds deposits of $351 million were down $9 million from
2001, primarily due to customers preference shifting away from equity based
products. Group segregated funds deposits fell $103 million to $932 million,
primarily due to employers contributing less to employee benefit programs in
poor market conditions.

Other deposits grew by $320 million over 2001, primarily due to the growth in
customer contributions to group retirement savings plans and non-registered
savings programs in the group savings operation acquired in December 2000,
together with growth in assets administered for third parties.

Earnings decreased by $9 million to $74 million mostly related to the impact of
poor market performance, together with a benefit from investment spreads in
2001 that did not recur in 2002, partially offset by favourable mortality gains
in payout annuities.

With our vision to integrate and to support all of the Canadian Divisions
trust and insurance based wealth management products, we established Canada
Life Securities Inc. (CLSI), a member of the Investment Dealers Association.
CLSI executes mutual fund, pooled fund, GIC and company stock transactions for
its trust based clients. In addition, we have filed an application with the
Office of the Superintendent of Financial Institutions for the establishment of
a trust company.

ASSETS UNDER ADMINISTRATION

|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|--------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|(in millions of Canadian dollars) |  | 2002 |        | 2001 |  | 2000
|                                  |  |      |        |      |  |     
|General fund                      |  | $    | 14,119 |      |  | $    | 14,031 |  |  | $ | 13,970 | 
|Segregated funds                  |  |      | 7,397  |      |  |      | 8,118  |  |  |   | 8,326  | 
|Other assets (1)                  |  |      | 7,346  |      |  |      | 7,756  |  |  |   | 7,470  | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|                                  |  | $    | 28,862 |      |  | $    | 29,905 |  |  | $ | 29,766 | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 



|(1) |  | Other assets under administration represent group-sponsored retirement
savings plans, non-registered savings programs and other investments under
management.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

Assets under administration

(BAR CHART)

Assets under administration of $28,862 million decreased by $1,043 million
compared to 2001, primarily due to declines in market values of segregated
funds and other assets.

Segregated funds assets decreased $721 million or 9%, against a TSX Composite
Index decline of 14% for 2002. The change in segregated funds assets was better
than the composite index as a result of market performance from the portfolio
exceeding the overall market level, coupled with positive net cash flows for
the year, primarily in the group segregated funds portfolio.

Other assets under administration decreased by $410 million or 5% primarily due
to impact of market declines. The portfolio performed better than the overall
equity markets as it is a diversified portfolio that has a significant element
of fixed income investments.

COMPETITIVE CONDITIONS

Individual Insurance

We offer a full suite of competitive individual insurance products
(participating, term, Universal Life, disability and critical illness) to meet
our customers needs. With our acquisition of a leading provider of preferred
term life insurance in the fourth quarter of 2002, we have regained our top
place in the term life insurance market in Canada based on September 30, 2002
market share data. We will continue to increase our presence in this market
segment by focusing on the introduction of new products and enhanced
intermediary relationships through business-to-business back office integration
with large producer organizations.

Group Life and Health Insurance

We continue to maintain our position in the highly competitive group life and
health insurance market place. We are the fifth largest provider in Canada of
group life and health insurance as measured by total life, health and ASO
premium equivalents for the year ended 2001. We are maintaining our focus on
implementing state-of-the-art technology to improve our product development
cycle time and to lower unit costs. This will allow us to better penetrate the
large case market (i.e., more than 500 lives covered) in the future.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -12-





---



##### 



Our group creditor insurance business continues to lead the market with more
than 50% market share and counts the top four credit-granting institutions in
Canada within its customer base. We intend to retain this position by
continuing to provide superior service to our financial institution business
partners through innovative technology solutions and continuous process
improvement.

Wealth Management

The ageing of the Canadian population is continuing to make saving for
retirement a priority for many Canadians. Throughout 2002, we restructured our
distribution models to enhance the relationship with our advisory channels. We
will maintain our focus on growing our presence in wealth management markets.

Group Wealth Management and Payout Annuities

Our group savings business ranked second in the fast growing defined
contribution plans market as at September 30, 2002, primarily due to our
leading-edge customer-oriented web and reporting capabilities and enhanced
member education capability through the Internet, print materials and call
centre. We will focus on providing seamless, one-stop service to group
customers by integrating our insurance and trust businesses on a new platform
over the next few years.

Our payout annuities also ranked second in the market place as at September 30,
2002, reflecting our competitive annuity rates made available to intermediaries
through our web based quotation system.

Individual Wealth Management

Our individual savings business remained in eighth place in the Canadian market
as at September 30, 2002. We offer a selection of three best-in-class
investment products and a family of guaranteed products to preserve, grow and
manage family wealth. Our segregated funds family includes more than 60
different funds, providing a wide range of traditional and specialized
investments to deal with increasing scope and complexity of client needs. At
the end of December 2002, we had more than $980 million in our guaranteed term
investments and $2.5 billion in segregated funds investments.

We plan to improve our market position by continuing to listen to the needs of
our customers through regular customer satisfaction surveys, expanding our
product and service offerings, improving the time we take to market a new
product by significantly shortening the product development cycle, and
increasing our distribution capabilities.

We will continue to build on the market success of this business, to
re-engineer processes and to assess changes to our technology platform in order
to improve customer service and retention.

DIVISIONAL OUTLOOK

Building on a strong year in 2002, we aim to deliver solid financial
performance in support of the overall corporate goal of increasing shareholder
value.

Consistent with our strategy to grow through value-added acquisitions, the
transaction completed this year is projected to deliver economies of scale and
to be accretive to earnings in 2003.

We continue to expand our product offerings and product diversification to meet
a broad range of customer needs for protection and wealth management and have
implemented a new best practice product development approach to reduce time to
market.

In terms of product delivery, greater attention will be paid to Internet based
distribution channels and work site access. We will also build on our recently
restructured distribution model to offer better service to our advisory
channels through our five regional marketing centres across Canada.

Leveraging technology is essential to providing superior customer service. Our
innovative web based self-serve and policy administration systems replacement
in our group life and health operations is on track for completion in the third
quarter of 2003 and will further solidify our position in this market.
Leveraging technology is also integral to achieving a leadership position in
the Canadian wealth management marketplace. A major technology project is
underway to integrate and to support all of the Canadian Divisions trust and
insurance based wealth management products over the next few years. The
business value of our technology investment is expected to cut costs, to
enhance quality and customer service and, ultimately, to generate revenue and
earnings growth. We have implemented strong project management practices to run
these initiatives as they are critical to achieving our business objectives.

We reached a key milestone in our pursuit of Business Excellence journey by
receiving the National Quality Institutes Progressive Excellence Program (PEP)
level 2 certification. This award recognizes our continued focus on increasing
customer service and satisfaction in a cost-efficient and effective way. A key
focus of this program is process management, and we currently have 27 process
improvement projects underway. Since 2001, we have realized $6 million in
benefits as a result of these initiatives.

United Kingdom Division

The U.K. Division offers a focused range of protection and wealth management
products and related services in three main areas: individual life and health
insurance, group life and health insurance, and wealth management and
retirement protection:

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -13-





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##### 



|                       |  |                     |  |                                                                                 
|---------------------- |  | ------------------- |  | --------------------------------------------------------------------------------
|Protection             |  | Wealth Management  
|                       |  |                    
|Individual Life and    |  | Group Life and      |  |                                                                                 
|Health Insurance       |  | Health Insurance    |  | Investments and Pensions                                                        
|                       |  |                     |  |                                                                                 
| Term Life            |  |  Term Life         |  |  Immediate and
Deferred Individual
Annuities                                   
| Long Term Disability |  |  Disability Income |  |  Payout Annuities for individuals retiring from company sponsored pension plans
| Critical Illness     |  |  Critical illness  |  |  Segregated Funds                                                              
|                       |  |                     |  |  Unit Trusts                                                                   

Individual

Individual customers in the United Kingdom are now serviced through various
Independent Financial Advisors (IFAs). This follows the decision in the fourth
quarter of 2002 to cease operating the in-house Financial Consultancy sales
force.

We are continuing to strengthen our Isle of Man operations, selling through
IFAs in the United Kingdom and brokers in other selected territories.

Group

The transaction to acquire a significant block of group life and long term
disability insurance business was completed on October 1, 2002. The U.K.
Division is now the U.K. market leader in the group protection business,
ranking first in group life and second in group income protection. The process
of integrating this significant block of business with our existing group
business has begun and is expected to be completed by the end of 2003. This
business is distributed through IFAs, mainly employee benefit consultants.

HIGHLIGHTS



| |  | 44% increase in premiums from group life and disability income protection insurance.                                                                                                                                       
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 50% increase in premiums from payout annuities.                                                                                                                                                                            
| 
| |  | Ceased operating the in-house Financial Consultancy sales force in November 2002.                                                                                                                                          
| 
| |  | Acquired a significant block of group life and long term disability
insurance business in October 2002, ranking us as the market leader in
the group protection business. Integration of this business is
progressing well.
| 
| |  | Significant investment in our customer support and information systems
completed in 2002.                                                                                                                                  

FINANCIAL PERFORMANCE

Shareholders net income increased to $148 million for the year, a $26 million
or 21% increase over 2001. Contributing to this increase was the favourable
impact of growth in business, as well as gains from asset liability management,
offset somewhat by the impact of negative stock markets.

There were a number of non-recurring items that affected the results of
operations for 2002 and the comparability of results for 2002 and 2001.



| |  | Net income before tax of $118 million fell $29 million from 2001.
Actuarial liabilities were strengthened to cover improving annuitant
mortality while liabilities related to prior period pension sales and
guaranteed annuity options that were no longer required were released.
A gross provision of $26 million ($18 million after tax) was taken to
cover the costs of the exit of the Financial Consultancy sales force.
The change in accounting policy in 2002, whereby goodwill is no longer
amortized as it was in 2001, contributed a $20 million favourable
variance in 2002 compared to 2001.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The tax recovery of $30 million in 2002 included benefits of $22
million arising from the business acquisition, restructuring
activities and the use of previously unrecognized tax loss
carryforwards. As well, as a result of the favourable settlement of
certain outstanding tax issues, a $24 million tax provision was
released.                                                                                                                                                                                                                                                                     

Foreign currency fluctuations have had an impact on the results of operations
and financial position of the U.K. Division in 2002. With the strengthening of
the British pound to the Canadian dollar, the average exchange rate increased
5% over 2001, resulting in corresponding increases in the income statement, and
the year-end exchange rate increased by 9%, affecting the balance sheet and
assets under administration.

|                                         |  |      |     |      |  |      |     |          |  |          |     |   |  |                  |    |   |  |  |     |  
|---------------------------------------- |  | ---- | --- | ---- |  | ---- | --- | -------- |  | -------- | --- | - |  | ---------------- | -- | - |  |  | --- | -
|                                         |  |      |     |      |  |      |     |          |  |          |     |   |  | 2002 versus 2001
|U.K. Division's shareholders' net income |  |      |     |      |  |      |     |          |  |          |     |   |  |                 
|(in millions of Canadian dollars)        |  | 2002 |     | 2001 |  | 2000 |     | $ Change |  | % Change
|                                         |  |      |     |      |  |      |     |          |  |         
|Investments and pensions                 |  | $    | 142 |      |  | $    | 110 |          |  | $        | 134 |   |  | $                | 32 |   |  |  | 29  |  
|Group life and health insurance          |  |      | 16  |      |  |      | 18  |          |  |          | (6  | ) |  |                  | (2 | ) |  |  | (11 | )
|Individual life and health insurance     |  |      | (10 | )    |  |      | (6  | )        |  |          | (16 | ) |  |                  | (4 | ) |  |  | (67 | )
|                                         |  |      |     |      |  |      |     |          |  |          |     |   |  |                  |    |   |  |  |     |  
|U.K. Divisions shareholders net income |  | $    | 148 |      |  | $    | 122 |          |  | $        | 112 |   |  | $                | 26 |   |  |  | 21  |  
|                                         |  |      |     |      |  |      |     |          |  |          |     |   |  |                  |    |   |  |  |     |  

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -14-





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##### 



SUMMARY STATEMENT OF OPERATIONS

|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | -------- |  | -------- | ----- | - |  | ---------------- | --- | - |  |  | ---- | -
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  | 2002 versus 2001
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                 
|(in millions of Canadian dollars)     |  | 2002 |       | 2001 |  | 2000 |       | $ Change |  | % Change
|                                      |  |      |       |      |  |      |       |          |  |         
|Revenues                              |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|Premiums                              |  | $    | 1,508 |      |  | $    | 1,079 |          |  | $        | 955   |   |  | $                | 429 |   |  |  | 40   |  
|Net investment income                 |  |      | 384   |      |  |      | 422   |          |  |          | 475   |   |  |                  | (38 | ) |  |  | (9   | )
|Fee and other income                  |  |      | 225   |      |  |      | 208   |          |  |          | 221   |   |  |                  | 17  |   |  |  | 8    |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|                                      |  |      | 2,117 |      |  |      | 1,709 |          |  |          | 1,651 |   |  |                  | 408 |   |  |  | 24   |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|Expenditures                          |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|Policyholder benefits                 |  |      | 1,698 |      |  |      | 1,270 |          |  |          | 1,243 |   |  |                  | 428 |   |  |  | 34   |  
|General operating expenses            |  |      | 216   |      |  |      | 206   |          |  |          | 172   |   |  |                  | 10  |   |  |  | 5    |  
|Commissions                           |  |      | 81    |      |  |      | 66    |          |  |          | 73    |   |  |                  | 15  |   |  |  | 23   |  
|Other                                 |  |      | 4     |      |  |      | 20    |          |  |          | 20    |   |  |                  | (16 | ) |  |  | (80  | )
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|                                      |  |      | 1,999 |      |  |      | 1,562 |          |  |          | 1,508 |   |  |                  | 437 |   |  |  | 28   |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|Net income before income taxes        |  |      | 118   |      |  |      | 147   |          |  |          | 143   |   |  |                  | (29 | ) |  |  | (20  | )
|Income tax provision (recovery)       |  |      | (30   | )    |  |      | 25    |          |  |          | 31    |   |  |                  | (55 | ) |  |  | (220 | )
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|Common shareholders net income       |  | $    | 148   |      |  | $    | 122   |          |  | $        | 112   |   |  | $                | 26  |   |  |  | 21   |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  
|Return on common shareholders equity |  |      | 15.7  | %    |  |      | 14.8  | %        |  |          | 13.1  | % |  |                  |     |   |  |  |      |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |      |  

PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS

|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|(in millions of Canadian dollars)    |  | 2002 |       | 2001 |  | 2000
|                                     |  |      |       |      |  |     
|Annuities                            |  | $    | 1,009 |      |  | $    | 674   |  |  | $ | 589   | 
|Individual life and health insurance |  |      | 144   |      |  |      | 159   |  |  |   | 160   | 
|Group life and health insurance      |  |      | 355   |      |  |      | 246   |  |  |   | 206   | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|General fund premiums                |  |      | 1,508 |      |  |      | 1,079 |  |  |   | 955   | 
|Segregated funds deposits            |  |      | 1,554 |      |  |      | 1,888 |  |  |   | 1,258 | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|                                     |  |      | 3,062 |      |  |      | 2,967 |  |  |   | 2,213 | 
|Other deposits                       |  |      | 58    |      |  |      | 83    |  |  |   | 107   | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|                                     |  | $    | 3,120 |      |  | $    | 3,050 |  |  | $ | 2,320 | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 

General fund premiums and segregated funds deposits

(BAR CHART)


Total premiums, premium equivalents and new deposits of $3,120 million were up
$70 million or 2% over 2001. Strong payout annuity sales in the year and the
impact of favourable currency movement were partly offset by a decrease in
segregated funds deposits.

General fund premiums of $1,508 million were up $429 million or 40% over 2001.
The majority of this increase was driven by strong sales of competitively
priced payout annuities, supported by a strong investment performance and a
growing market. This is in line with our strategic focus on building our
retirement income business. Group life and health insurance premiums increased
by 44% over the prior year, assisted by the newly acquired group business.

Segregated funds deposits of $1,554 million were down $334 million or 18% from
2001. The majority of this decrease was due to difficult market conditions and
a lower number of large single premium cases from the Isle of Man relative to
2001.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -15-





---



##### 



NET INVESTMENT INCOME, FEE INCOME AND OTHER INCOME

Net investment income of $384 million decreased by $38 million or 9% from 2001.
This decline was due primarily to the sale of two tranches of equity
instruments that had been backing products in the general fund, which matured
in 2002. The decline in investment income was offset by a corresponding
reduction in actuarial liabilities and, therefore, resulted in no impact on net
income.

Fee and other income of $225 million increased by $17 million or 8% over 2001.
This increase was consistent with the increase in offshore business, which has
grown despite the drop in single premium cases relative to 2001 and also
includes $7 million from the impact of currency movements.

EXPENDITURES

Policyholder benefits rose by $428 million or 34% over 2001. Payments to
policyholders increased by $203 million or 22%, primarily due to higher group
life insurance claims, which included the acquired group business, and higher
payout annuity payments arising from growth in new business. The change in
actuarial liabilities increased by $225 million from 2001, primarily due to the
growth in new business in payout annuities.

General expenses of $216 million were up $10 million or 5% over 2001. Excluding
the $24 million in expenses relating to the closure of the Financial
Consultancy sales force and $10 million of currency translation impact,
expenses decreased by $24 million over 2001 as a result of lower expenditures
for the review of past pension sales and improved operational efficiencies.
Commissions rose by $15 million or 23% over 2001 due mainly to the growth in
new business and a higher proportion of the business on the Isle of Man
attracting commission payments relative to 2001.

PRODUCTS AND SERVICES

INDIVIDUAL LIFE AND HEALTH INSURANCE

Total non-participating and participating individual life and health insurance
premiums decreased by $15 million or 9% from 2001. Non-participating
individual life and health insurance premiums decreased by $12 million or 18%
from 2001 due in part to a fall-off of sales in the latter part of the year as
a result of the exit of the Financial Consultancy sales force and to the
cumulative effect of a small reclassification of reinsurance that reduced
premiums and the change in actuarial liabilities.

Having exited the Financial Consultancy sales force, the distribution of
individual life and health insurance products will continue through IFAs.

Our strategy going forward is to develop unit linked types of protection
products instead of the more conventional non-linked types of products that we
currently offer.

GROUP LIFE AND HEALTH INSURANCE

In group life and health insurance, premium income increased by $109 million or
44% over 2001, of which $70 million was due to the acquisition of the block of
group business and the remainder due to new business and strong renewal premium
growth during the year.

Combining both the existing and new business acquired together, on an
annualized basis, the group business grew 4% in premium revenue over the year
2001. There was particular strength in the life product, where premiums grew by
almost 7%. The number of lives covered increased by 4.5%. The level of in-force
business for the combined group business has been maintained over the first
three months of combined operations in 2002.

INVESTMENTS AND PENSIONS

In total, wealth management premiums and deposits were relatively flat year
over year. However, excluding a large single premium case for $400 million
that enhanced the 2001 figures, premiums grew by 17%, much of which was due to
the strong payout annuity sales. Sales of our unique retirement income product,
the Annuity Growth Account, are now beginning to reach expectations with sales
in 2002 of $167 million, a growth of 66% over 2001.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -16-





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##### 



ASSETS UNDER ADMINISTRATION

|                  |  |      |        |      |  |      |        |  |  |   |        | 
|----------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|(in millions of   |  |      |        |      |  |      |        |  |  |   |        | 
|Canadian dollars) |  | 2002 |        | 2001 |  | 2000
|                  |  |      |        |      |  |     
|General fund      |  | $    | 10,345 |      |  | $    | 7,421  |  |  | $ | 6,855  | 
|Segregated funds  |  |      | 10,671 |      |  |      | 11,053 |  |  |   | 11,219 | 
|Other assets      |  |      | 553    |      |  |      | 615    |  |  |   | 668    | 
|                  |  |      |        |      |  |      |        |  |  |   |        | 
|                  |  | $    | 21,569 |      |  | $    | 19,089 |  |  | $ | 18,742 | 
|                  |  |      |        |      |  |      |        |  |  |   |        | 

Assets under administration

(BAR CHART)

Total assets under administration of $21,569 million increased $2,480 million
or 13% over 2001. The impact of currency translation due to the change in
rates over 2001 was an increase of $1,810 million. In local currency, total
assets increased by 3%.

General fund assets grew by $2,924 million or 39% over 2001. In local currency,
these assets increased by 27%. This increase is a result of the level of growth
in new business for payout annuities and the group acquisition.

Segregated funds assets fell by $382 million or 3% from 2001. In local
currency, these assets fell by 12% due to the impact of the fall in the U.K.
stock market during 2002, partially offset by increases in the business written
through Canada Life International.

Other assets include unit trusts held by outside investors. These assets have
fallen by 10% due to the drop in the U.K. stock market in 2002 and the
reduction of sales of these products following the closure of the Financial
Consultancy sales force.

COMPETITIVE CONDITIONS

The U.K. market is the third largest life insurance market in the world and the
largest market for life insurance in Europe. It is also one of the fastest
growing life insurance markets for protection and wealth management products.
These opportunities have resulted in a large number of international and
domestic based competitors operating in the United Kingdom.

Canada Life is in the top 30 of life insurance companies operating in the
United Kingdom, and we hold strong positions in several niche areas:



| |  | In the group protection business, we are the market leader, ranking first
in group life with approximately 30% of that market and second in the
group income protection market with a 21% market share.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | In the wealth management business, we are a top provider of offshore
single premium investment products into the United Kingdom.                                                                       
| 
| |  | In the retirement business, we are a top five payout annuity provider
based on latest industry data.                                                                                                   

DIVISIONAL OUTLOOK

With the acquisition of the group business in 2002, a primary target for 2003
is to maintain current business levels and to integrate the acquired business
with our existing operations with minimal impact on customer service levels.
The integration process is progressing well, and we expect this to be completed
by the end of 2003. Our goal is to have the lowest unit costs and best customer
service in this market segment.

The U.K. regulatory environment is expected to change within the next year or
so. The strictly polarized selling regime, under which companies can sell only
those investment and savings products they themselves manufacture or sell
through IFAs, is expected to change. We expect the new regime will enable
strong niche providers such as Canada Life to leverage its expertise and
manufacture some of its products for other providers lacking that expertise.
This is a new and potentially exciting distribution method for Canada Life in
the United Kingdom. We also expect the IFA channel to maintain an important
distribution role going forward, and we believe our strong niche position will
continue to be favoured by IFAs in the new regulatory environment.

We have continued our focus on growing our retirement income business in 2002
with the sales of payout annuities and our innovative new Annuity Growth
Account. This led to sales in 2002 that were 66% higher than the previous year.
Given an ageing U.K. population with accumulated pension funds vesting, the
prospect for the sales of payout annuities is good.

A new onshore investment product with options to invest with a variety of fund
managers was launched in late 2002. It is expected to be one of the important
products for growth in 2003 new business. We believe the design of the product
is consistent with the direction of the new regulatory environment.

The Division has made major strides forward in systems rationalization, with
our recent group acquisition, and in establishing a clear and focused strategy
in preparation for the new regulatory environment. We believe we are well
positioned for future growth.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -17-





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##### 



United States Division

The U.S. Division offers a wide range of protection and wealth management
products and related services. It is organized into two operational areas that
market (i) group life insurance, disability income insurance and other group
protection products and (ii) individual life insurance, and savings and
investment products. For ease of comparison among divisions, the U.S.
Divisions discussion and analysis is broken down by product grouping rather
than by distribution channels:

|                                             |  |                                      |  |                                        
|-------------------------------------------- |  | ------------------------------------ |  | ---------------------------------------
|Protection                                   |  | Wealth Management                   
|                                             |  |                                     
|Individual Life and Health Insurance         |  | Group Life and Health Insurance      |  | Investments and Pensions               
|                                             |  |                                      |  |                                        
| Whole Life                                 |  |  Long Term Disability               |  |  Fixed Annuities                      
| Term Life                                  |  |  Short Term Disability              |  |  Variable Annuities (Segregated Funds)
| Universal Life                             |  |  Accidental Death and
Dismemberment |  |                                        
| Critical Illness                           |  |  Dental                             |  |                                        
| Variable Universal Life (Segregated Funds) |  |  Critical Illness                   |  |                                        
|                                             |  |  Medical Stop Loss                  |  |                                        
|                                             |  |  Group Life                         |  |                                        

The Division carries on business in all 50 states and in the District of
Columbia through 30 group offices and 20 individual offices, which support
distribution of its products through independent personal producing agents,
brokers, consultants and salaried group sales representatives.

HIGHLIGHTS



| |  | Shareholders net income increased by $14 million or 16% over 2001.                                                                                                            
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Group premiums increased by $104 million or 23% over 2001.                                                                                                                     
| 
| |  | General expenses decreased by $5 million compared to 2001 due to continued focus on cost containment.                                                                          
| 
| |  | Completed the relocation of 90 service positions to the Companys
Canadian western headquarters in Regina, which is expected to generate
expense savings of $3 million in 2003.

FINANCIAL PERFORMANCE

Shareholders net income increased 16% to $101 million for 2002 compared to $87
million in 2001. Improved mortality experience, increases in investment
performance resulting from continued asset and liability matching improvements
and a positive impact from revised assumptions in individual insurance
actuarial liabilities contributed to the increase. These favourable factors
were partially offset by poor morbidity experience in the group health line,
and higher income taxes in wealth management.

|                                         |  |      |     |      |  |      |    |          |  |          |    |  |  |                  |    |   |  |  |     |  
|---------------------------------------- |  | ---- | --- | ---- |  | ---- | -- | -------- |  | -------- | -- |  |  | ---------------- | -- | - |  |  | --- | -
|                                         |  |      |     |      |  |      |    |          |  |          |    |  |  | 2002 versus 2001
|U.S. Division's shareholders' net income |  |      |     |      |  |      |    |          |  |          |    |  |  |                 
|(in millions of Canadian dollars)        |  | 2002 |     | 2001 |  | 2000 |    | $ Change |  | % Change
|                                         |  |      |     |      |  |      |    |          |  |         
|Individual life and health insurance     |  | $    | 51  |      |  | $    | 38 |          |  | $        | 31 |  |  | $                | 13 |   |  |  | 34  |  
|Group life and health insurance          |  |      | 1   |      |  |      | (3 | )        |  |          | 15 |  |  |                  | 4  |   |  |  | 133 |  
|Investments and pensions                 |  |      | 49  |      |  |      | 52 |          |  |          | 36 |  |  |                  | (3 | ) |  |  | (6  | )
|                                         |  |      |     |      |  |      |    |          |  |          |    |  |  |                  |    |   |  |  |     |  
|U.S. Divisions shareholders net income |  | $    | 101 |      |  | $    | 87 |          |  | $        | 82 |  |  | $                | 14 |   |  |  | 16  |  
|                                         |  |      |     |      |  |      |    |          |  |          |    |  |  |                  |    |   |  |  |     |  

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -18-





---



##### 



SUMMARY STATEMENT OF OPERATIONS

|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | -------- |  | -------- | ----- | - |  | ---------------- | --- | - |  |  | -- | -
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  | 2002 versus 2001
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                 
|(in millions of Canadian dollars)     |  | 2002 |       | 2001 |  | 2000 |       | $ Change |  | % Change
|                                      |  |      |       |      |  |      |       |          |  |         
|Revenues                              |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Premiums                              |  | $    | 1,784 |      |  | $    | 1,671 |          |  | $        | 1,351 |   |  | $                | 113 |   |  |  | 7  |  
|Net investment income                 |  |      | 705   |      |  |      | 692   |          |  |          | 698   |   |  |                  | 13  |   |  |  | 2  |  
|Fee and other income                  |  |      | 21    |      |  |      | 16    |          |  |          | 21    |   |  |                  | 5   |   |  |  | 31 |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|                                      |  |      | 2,510 |      |  |      | 2,379 |          |  |          | 2,070 |   |  |                  | 131 |   |  |  | 6  |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Expenditures                          |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Policyholder benefits                 |  |      | 2,074 |      |  |      | 1,992 |          |  |          | 1,730 |   |  |                  | 82  |   |  |  | 4  |  
|General operating expenses            |  |      | 150   |      |  |      | 155   |          |  |          | 128   |   |  |                  | (5  | ) |  |  | (3 | )
|Commissions                           |  |      | 119   |      |  |      | 106   |          |  |          | 86    |   |  |                  | 13  |   |  |  | 12 |  
|Other                                 |  |      | 18    |      |  |      | 18    |          |  |          | 27    |   |  |                  |    |   |  |  |   |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|                                      |  |      | 2,361 |      |  |      | 2,271 |          |  |          | 1,971 |   |  |                  | 90  |   |  |  | 4  |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Net income before income taxes        |  |      | 149   |      |  |      | 108   |          |  |          | 99    |   |  |                  | 41  |   |  |  | 38 |  
|Income tax provision                  |  |      | 51    |      |  |      | 30    |          |  |          | 25    |   |  |                  | 21  |   |  |  | 70 |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Net income                            |  |      | 98    |      |  |      | 78    |          |  |          | 74    |   |  |                  | 20  |   |  |  | 26 |  
|Participating policyholders net loss |  |      | (3    | )    |  |      | (9    | )        |  |          | (8    | ) |  |                  | 6   |   |  |  | 67 |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Common shareholders net income       |  | $    | 101   |      |  | $    | 87    |          |  | $        | 82    |   |  | $                | 14  |   |  |  | 16 |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  
|Return on common shareholders equity |  |      | 14.9  | %    |  |      | 13.4  | %        |  |          | 12.9  | % |  |                  |     |   |  |  |    |  
|                                      |  |      |       |      |  |      |       |          |  |          |       |   |  |                  |     |   |  |  |    |  

PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS

|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|------------------------------------ |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|(in millions of Canadian dollars)    |  | 2002 |       | 2001 |  | 2000
|                                     |  |      |       |      |  |     
|Annuities                            |  | $    | 805   |      |  | $    | 790   |  |  | $ | 580   | 
|Individual life and health insurance |  |      | 427   |      |  |      | 433   |  |  |   | 428   | 
|Group life and health insurance      |  |      | 552   |      |  |      | 448   |  |  |   | 343   | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|General fund premiums                |  |      | 1,784 |      |  |      | 1,671 |  |  |   | 1,351 | 
|Segregated funds deposits            |  |      | 222   |      |  |      | 102   |  |  |   | 115   | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 
|                                     |  | $    | 2,006 |      |  | $    | 1,773 |  |  | $ | 1,466 | 
|                                     |  |      |       |      |  |      |       |  |  |   |       | 

General fund premiums and segregated funds deposits

(GENERAL FUND PREMIUMS AND SEGREGATED FUNDS DEPOSITS BAR CHART)


General fund premiums of $1,784 million in 2002 increased by $113 million or 7%
from 2001. Strong group life and health premium income in addition to higher
individual annuity sales contributed to the increase, which was partially
offset by a decrease in GIC sales. The slight decrease in individual insurance
is due to lower premiums in older closed blocks of business.

Segregated funds deposits of $222 million in 2002 were $120 million or 118%
higher than 2001 due to enhanced variable annuity fund offerings.

NET INVESTMENT INCOME, FEE INCOME AND OTHER INCOME

Net investment income of $705 million increased $13 million from 2001. A
decrease in income due to poor stock market performance was more than offset by
the positive impact of recoveries on impaired investments and strengthening of
the U.S. dollar.
Fee
and other income increased by $5 million or 31% over 2001. The increase
was due to a non-recurring gain resulting from a reinsurance treaty.

EXPENDITURES

Policyholder benefits increased by $82 million or 4% over 2001, primarily due
to the growth of the group life and health protection business. In addition,
individual annuity actuarial liabilities were up as a result of higher sales.
General expenses of $150 million decreased $5 million or 3% compared to 2001.
The general expenses for the year included a one-time cost of $3 million
associated with the transfer of 90 service positions to the Companys western
headquarters in Regina from Atlanta.

The increase in the effective rate of income tax in 2002 is due to the change
in mix of income.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -19-



---



##### 



PRODUCTS AND SERVICES

INDIVIDUAL LIFE AND HEALTH INSURANCE

The Divisions transition to a focus on non-participating insurance products
continued with a 28% increase in sales of non-participating insurance as
measured by new annualized premiums over 2001. Individual life and health
premiums decreased primarily due to lower premiums in the reinsured Crown Life
business as that business declines over time.

The focus in the individual insurance operation was concentrated on maintaining
the competitiveness of its product portfolio and enhancing customer service. In
the fourth quarter of 2002, a new Variable Universal Life administration
platform was implemented. The platform will enable a greater variety of
Variable Universal Life products to be offered. Moreover, several enhancements
were made to the non-participating term insurance product offerings. Further
product development work was completed on a new Universal Life product for
introduction early in 2003. As announced in the third quarter of 2002, 50 full
time support service positions were relocated to the Companys western
headquarters in Regina from Atlanta. The associated expense savings resulting
from this move are expected in 2003.

GROUP LIFE AND HEALTH INSURANCE

Premium revenues increased by $104 million or 23% compared to 2001, driven by a
combination of new sales and completion of the Ohio National transaction. In
2001, a strategic alliance was established with Ohio National, which allowed us
to renew their in-force block of business beginning with July 2001 renewals.

A major focus in 2002 included re-pricing of a significant portion of the
product portfolio and fine tuning underwriting to address product lines where
profitability did not meet managements expectations. Also, in the third
quarter of 2002, 40 full time service positions were relocated to the Companys
western headquarters in Regina from Atlanta. The benefits of these initiatives
are expected to impact positively on 2003 results.

INVESTMENTS AND PENSIONS

While protection products are the U.S. Divisions primary focus, the Division
will continue to look for opportunities to write wealth accumulation business
where our profitability objectives can be met.

Strong single premium annuity sales offset by reduced GIC premiums accounted
for the 2% increase in annuity premiums. GIC sales were below 2001 as the
marketplace did not present the same opportunities to achieve favourable
spreads. Segregated funds deposits of $222 million in 2002 were $120 million or
118% higher than 2001 due to enhanced variable annuity fund offerings.

ASSETS UNDER ADMINISTRATION

|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|--------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|(in millions of Canadian dollars) |  | 2002 |        | 2001 |  | 2000
|                                  |  |      |        |      |  |     
|General fund                      |  | $    | 10,990 |      |  | $    | 10,942 |  |  | $ | 9,870  | 
|Segregated funds                  |  |      | 698    |      |  |      | 825    |  |  |   | 854    | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 
|                                  |  | $    | 11,688 |      |  | $    | 11,767 |  |  | $ | 10,724 | 
|                                  |  |      |        |      |  |      |        |  |  |   |        | 

Assets under administration

(BAR CHART)


Total assets decreased by $79 million or 1% compared to 2001. Total general
fund assets grew by $48 million or 0.4% over 2001. Total segregated funds
assets decreased by $127 million or 15% from 2001, primarily attributable to a
decline in U.S. stock markets. As protection products remain the primary focus
for the Division, asset growth is expected to be lower than the overall
corporate growth rate.

COMPETITIVE CONDITIONS

The Companys U.S. Division operates in a large, competitive and highly
fragmented market. In addition, certain of the Divisions products compete with
similar products offered by banks, mutual funds companies and other companies
outside the insurance industry. Over the past 10 years, the industry has
undergone significant consolidation, and management believes this consolidation
trend will continue. Distribution channels continue to evolve, and the
competition for distribution relationships is significant. While industry
distribution through the Internet remains limited, technology and the use of
the Internet are required in the areas of providing customer information and
self-service capabilities for clients and producers.

DIVISIONAL OUTLOOK

Advancing into 2003, we will continue to add to our competitive product
portfolio in individual protection through the release of several new and
updated product offerings. We will also be expanding distribution relationships
including expansion of our Variable Universal Life wholesaling network. In
addition to a continued focus on group profitability, a main initiative for
group protection is to develop additional business through our in-force groups.

Continuing to enhance service to producers and policyholders is a focus through
both technology and process improvement initiatives. This includes enhancement
of the Divisions Internet self-service portals.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -20-





---



##### 



Irish Division

The Irish Division offers a wide range of protection and wealth management
products in the Republic of Ireland and Germany. Asset management services are
also offered through our subsidiary, Setanta.

|                              |  |                                        |  |                                        
|----------------------------- |  | -------------------------------------- |  | ---------------------------------------
|Protection                    |  | Wealth Management                     
|                              |  |                                       
|Individual Life and           |  | Group Life and Health                  |  |                                        
|Health Insurance              |  | Insurance                              |  | Investments and Pensions               
|                              |  |                                        |  |                                        
| Term Life                   |  |  Short Term Single Premium Group Life |  |  Regular Premium Pension Accumulation 
| Regular Premium Unit Linked |  |  Disability Insurance                 |  |  Single Premium Pension Accumulation  
| Critical Illness            |  |                                        |  |  Single Premium Fixed Payout Annuities
|                              |  |                                        |  |  Single Premium Investments           
|                              |  |                                        |  |  Regular Premium Savings              
|                              |  |                                        |  |  Participating Endowments             

The Division operates through 13 branch offices in the Republic of Ireland.
With the recent acquisition on January 1, 2003, of the German operation of a
major international insurer, we have expanded our presence with an office in
Frankfurt as well as our existing Cologne office.

Our 240,000 policies in Ireland are serviced through two major distribution
channels: Independent Brokers and the Financial Consultancy Division (direct
sales). Following the acquisition, Canada Life Europe has become a new force in
the German market with 120,000 policies and close to 7,000 broker contacts.

HIGHLIGHTS



| |  | Effective January 1, 2003, the Division completed the acquisition of
the German life operations of a major international insurer making
Canada Life Europe one of the top five companies in the German broker
unit linked market and the German market leader in critical illness
insurance.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Maintained business volumes in the Republic of Ireland despite
difficult stock market conditions including strong sales of the
government-sponsored Special Savings Incentive Accounts, which
generated $65 million of premium revenue.                                                   
| 
| |  | Developed a Personal Retirement Savings Account product in line
with new pension regulations, which will begin to be sold in 2003.                                                                                                                                                        

FINANCIAL PERFORMANCE

Foreign currency fluctuations had an impact on the results of operations and
financial position of the Irish Division in 2002. The average exchange rate for
the Euro increased by 7% over 2001, which has resulted in a corresponding
increase in the income statement and the year-end exchange rate increased by
17%, which affected the balance sheet and assets under administration.

Shareholders net income was $30 million for the year, a $4 million or 12%
decrease from 2001. Net income from wealth management was adversely impacted by
poor stock markets, which have reduced new business volumes and investment and
fee income and also required increases in policy liabilities for the Unitized
with Profit Fund business. However, net income from our protection business
increased by $3 million, primarily as a result of favourable claims experience.

|                                               |  |      |    |      |  |      |    |          |  |          |    |  |  |                  |    |   |  |  |     |  
|---------------------------------------------- |  | ---- | -- | ---- |  | ---- | -- | -------- |  | -------- | -- |  |  | ---------------- | -- | - |  |  | --- | -
|                                               |  |      |    |      |  |      |    |          |  |          |    |  |  | 2002 versus 2001
|Irish Divisions shareholders net income      |  |      |    |      |  |      |    |          |  |          |    |  |  |                 
|(in millions of Canadian dollars)              |  | 2002 |    | 2001 |  | 2000 |    | $ Change |  | % Change
|                                               |  |      |    |      |  |      |    |          |  |         
|Individual and group life and health insurance |  | $    | 16 |      |  | $    | 13 |          |  | $        | 11 |  |  | $                | 3  |   |  |  | 23  |  
|Investments and pensions                       |  |      | 14 |      |  |      | 21 |          |  |          | 11 |  |  |                  | (7 | ) |  |  | (33 | )
|                                               |  |      |    |      |  |      |    |          |  |          |    |  |  |                  |    |   |  |  |     |  
|Irish Divisions shareholders net income      |  | $    | 30 |      |  | $    | 34 |          |  | $        | 22 |  |  | $                | (4 | ) |  |  | (12 | )
|                                               |  |      |    |      |  |      |    |          |  |          |    |  |  |                  |    |   |  |  |     |  

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -21-





---



##### 



SUMMARY STATEMENT OF OPERATIONS

|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|--------------------------------------- |  | ---- | ---- | ----- |  | --------- | ---- | ----------- |  | ---- | ---- | - |  | - | ---- | - |  | - | ---- | -
|                                        |  |      |      |       |  | Restated* |      | As reported
|                                        |  |      |      |       |  |           |      |            
|(in millions of Canadian dollars)       |  | 2002 |      | 2001* |  | 2000*     |      | 2001        |  | 2000
|                                        |  |      |      |       |  |           |      |             |  |     
|Revenues                                |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Premiums                                |  | $    | 139  |       |  | $         | 159  |             |  | $    | 134  |   |  | $ | 391  |   |  | $ | 344  |  
|Net investment income                   |  |      | 55   |       |  |           | 52   |             |  |      | 54   |   |  |   | 65   |   |  |   | 77   |  
|Fee and other income                    |  |      | 95   |       |  |           | 92   |             |  |      | 74   |   |  |   | 58   |   |  |   | 57   |  
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|                                        |  |      | 289  |       |  |           | 303  |             |  |      | 262  |   |  |   | 514  |   |  |   | 478  |  
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Expenditures                            |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Policyholder benefits                   |  |      | 101  |       |  |           | 133  |             |  |      | 118  |   |  |   | 344  |   |  |   | 334  |  
|General operating expenses              |  |      | 88   |       |  |           | 74   |             |  |      | 68   |   |  |   | 74   |   |  |   | 68   |  
|Commissions                             |  |      | 70   |       |  |           | 54   |             |  |      | 42   |   |  |   | 54   |   |  |   | 42   |  
|Other                                   |  |      | (12  | )     |  |           | (9   | )           |  |      | (2   | ) |  |   | (9   | ) |  |   | (2   | )
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|                                        |  |      | 247  |       |  |           | 252  |             |  |      | 226  |   |  |   | 463  |   |  |   | 442  |  
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Net income before income taxes          |  |      | 42   |       |  |           | 51   |             |  |      | 36   |   |  |   | 51   |   |  |   | 36   |  
|Income tax provision                    |  |      | 7    |       |  |           | 13   |             |  |      | 11   |   |  |   | 13   |   |  |   | 11   |  
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Net income                              |  |      | 35   |       |  |           | 38   |             |  |      | 25   |   |  |   | 38   |   |  |   | 25   |  
|Participating policyholders net income |  |      | 5    |       |  |           | 4    |             |  |      | 3    |   |  |   | 4    |   |  |   | 3    |  
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Common shareholders net income         |  | $    | 30   |       |  | $         | 34   |             |  | $    | 22   |   |  | $ | 34   |   |  | $ | 22   |  
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  
|Return on common shareholders equity   |  |      | 10.1 | %     |  |           | 16.7 | %           |  |      | 13.7 | % |  |   | 16.7 | % |  |   | 13.7 | %
|                                        |  |      |      |       |  |           |      |             |  |      |      |   |  |   |      |   |  |   |      |  



|* |  | With new actuarial standards introduced in 2001, the Unitized with
Profit Fund business was reclassified from general fund to segregated
fund business commencing in 2002. The transfer of this business has no
impact on net income, but it changes year-over-year comparability of
general and segregated funds premiums and assets. For ease of comparison,
the 2001 and 2000 numbers are also shown on a comparable basis in the
tables above and below.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS

|                                  |  |      |     |       |  |           |     |             |  |      |     |  |  |   |     |  |  |   |     | 
|--------------------------------- |  | ---- | --- | ----- |  | --------- | --- | ----------- |  | ---- | --- |  |  | - | --- |  |  | - | --- | 
|                                  |  |      |     |       |  | Restated* |     | As reported
|                                  |  |      |     |       |  |           |     |            
|(in millions of Canadian dollars) |  | 2002 |     | 2001* |  | 2000*     |     | 2001        |  | 2000
|                                  |  |      |     |       |  |           |     |             |  |     
|Wealth management                 |  | $    | 112 |       |  | $         | 130 |             |  | $    | 107 |  |  | $ | 362 |  |  | $ | 317 | 
|Protection                        |  |      | 27  |       |  |           | 29  |             |  |      | 27  |  |  |   | 29  |  |  |   | 27  | 
|                                  |  |      |     |       |  |           |     |             |  |      |     |  |  |   |     |  |  |   |     | 
|General fund premiums             |  |      | 139 |       |  |           | 159 |             |  |      | 134 |  |  |   | 391 |  |  |   | 344 | 
|Segregated funds deposits         |  |      | 660 |       |  |           | 674 |             |  |      | 617 |  |  |   | 442 |  |  |   | 407 | 
|                                  |  |      |     |       |  |           |     |             |  |      |     |  |  |   |     |  |  |   |     | 
|                                  |  | $    | 799 |       |  | $         | 833 |             |  | $    | 751 |  |  | $ | 833 |  |  | $ | 751 | 
|                                  |  |      |     |       |  |           |     |             |  |      |     |  |  |   |     |  |  |   |     | 

General fund premiums and segregated funds deposits

(BAR CHART)


Premiums and new deposits fell $34 million or 4% from 2001. A decline in the
sale of single premium equity backed products was offset somewhat by currency
rate movements and strong sales of the government-sponsored Special Savings
Incentive Accounts, which generated premiums totalling $65 million. Canada
Life Europe generated premiums of $23 million in 2002, a $19 million increase
over 2001. Sales of regular premium pension accumulation products have been
particularly strong in Germany.

INVESTMENT INCOME, FEE INCOME AND OTHER INCOME

Net investment income increased by $3 million over 2001. The impact of the drop
in stock markets was more than offset by increased investment income arising
from growth in general fund assets.

Fee and other income rose by $3 million over 2001. The higher fee income from
business growth in Germany was partly offset by a decline in fee income in
Ireland as a result of poor stock markets.

EXPENDITURES

Policyholder benefits fell by $32 million from 2001. Payments to policyholders
fell $22 million as a result of a lower level of guaranteed bond maturities
than in 2001.

Commissions increased by $16 million or 30% over 2001. This was due to
commissions paid on German business.

General expenses increased by $14 million or 19% over 2001. Expansion in
Germany and the strengthening of the Euro against the Canadian dollar caused
most of the increase. Expenses in Ireland increased by 6% in local currency.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -22-





---



##### 



The effective tax rate fell from 25% in 2001 to 17% in 2002. This reflects a
general reduction in statutory tax rates in Ireland, with average statutory tax
rates decreasing from 21% in 2001 to 16% in 2002.

PRODUCTS AND SERVICES

INDIVIDUAL AND GROUP LIFE AND HEALTH INSURANCE

Total individual protection premiums increased by $5 million to $89 million in
2002, including $66 million of segregated funds deposits. We continue to be
one of the leading writers of protection business in Ireland with an estimated
market share of 10%. We focus on the segregated funds protection market, where
margins are higher. During 2002, we added an innovative disability benefit to
our product, which we believe will help us retain our strong position in this
market.

Group products represent a very small part of the Irish Divisions business. In
2002, premium income dropped by $3 million from 2001. The competitive rates
available in this market are too low to satisfy our targets for return and
profit objectives. As a result, we expect to see revenues decline further over
the coming years.

We sell both disability benefit and critical illness products in Germany, and
these represent approximately 30% of our existing business in Germany. This
business will be enhanced by the recent acquisition, increasing the existing
number of protection policies from 4,000 to 40,000 and making Canada Life
Europe the market leader in critical illness insurance.

INVESTMENTS AND PENSIONS

The Irish Division continues to focus on wealth management business as an area
of growth. This business was impacted by the decline in global stock markets.
However, the lower sales of single premium equity backed products were offset
somewhat by the launch of an innovative guaranteed investment bond. In
addition, regular premium income rose 16% over 2002. Sales of the
government-sponsored Special Savings Incentive Accounts were particularly
strong, generating $42 million of new annualized premiums and $65 million in
premium income.

The company-sponsored pensions market is growing rapidly and continues to be
the focus of our back office administration and information system
developments. During 2002, we developed a Personal Retirement Savings Account
product, in line with new pension regulation. Sales of this product will begin
in 2003.

Investment and pensions represent 70% of our business in Canada Life Europe.
2002 was our second full year of operation in the German market, and the
operation reported break-even income for the year. The recent acquisition
increases the existing number of pension policies from 8,000 to 80,000 and will
fuel further growth in this line of business.

ASSETS UNDER ADMINISTRATION

|                                  |  |      |       |       |  |           |       |             |  |      |       |  |  |   |       |  |  |   |       | 
|--------------------------------- |  | ---- | ----- | ----- |  | --------- | ----- | ----------- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                  |  |      |       |       |  | Restated* |       | As reported
|                                  |  |      |       |       |  |           |       |            
|(in millions of Canadian dollars) |  | 2002 |       | 2001* |  | 2000*     |       | 2001        |  | 2000
|                                  |  |      |       |       |  |           |       |             |  |     
|General fund                      |  | $    | 1,401 |       |  | $         | 953   |             |  | $    | 844   |  |  | $ | 1,609 |  |  | $ | 1,300 | 
|Segregated funds                  |  |      | 3,128 |       |  |           | 2,746 |             |  |      | 2,436 |  |  |   | 2,090 |  |  |   | 1,980 | 
|                                  |  |      |       |       |  |           |       |             |  |      |       |  |  |   |       |  |  |   |       | 
|                                  |  | $    | 4,529 |       |  | $         | 3,699 |             |  | $    | 3,280 |  |  | $ | 3,699 |  |  | $ | 3,280 | 
|                                  |  |      |       |       |  |           |       |             |  |      |       |  |  |   |       |  |  |   |       | 



|* |  | As a result of the change to the classification of Unitized with Profit
Fund, the split of assets between general fund and segregated funds has
changed since 2001. Unitized with Profit Fund assets were recorded in
the general fund in 2001 at $656 million (2000  $456 million).
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Assets under administration

(BAR CHART)


Total assets increased $830 million or 22% over 2001 as a result of business
growth, increased capital to fund organic growth of the business and the impact
of currency strengthening offset somewhat by the impact of stock market
declines.

COMPETITIVE CONDITIONS

The life insurance market in Ireland is very mature with one of the highest
penetration rates in the world. The larger companies hold a significant share
of the market. Canada Life has the fifth largest life insurance operation in
Ireland as measured by new business market share.

We operate in all segments of the market. We focus on higher margin products
including segregated funds protection, pensions and single premium business. We
write smaller amounts of group risk and term assurance business, which command
lower margins.

During 2002, we successfully established ourselves in the broker market in
Germany. The completion of the acquisition of the German life operations
previously noted, will rapidly expand Canada Lifes presence in this market.
Canada Life Europe will be one of the top five companies in the broker unit
linked market and the market leader in critical illness insurance.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -23-





---



##### 



DIVISIONAL OUTLOOK

Our focus in Ireland for 2003 will continue to be on the major growth areas
within wealth management. The buoyant pensions market is likely to expand
further with recent changes to pension regulation. We have achieved rapid
sales growth over a number of years in this market. We will continue to invest
in our back office administration systems to enhance and to streamline customer
service in this area. Value-added customer service, combined with Setantas
above-average investment performance, will support our growth plans in this
market.

We are looking for investor confidence in stock market performance to improve
during 2003, which we expect would bring a consequent increase in sales of
single premium products. We will continue to offer a wide range of investment
alternatives including our successful guaranteed investment bond.

In 2003, we will focus on integrating the acquisition in Germany into our
existing operation and on the retention of the business, as well as building
future growth. The Company is well positioned to benefit from strong growth in
the private pensions market. The German acquisition also provides the
opportunity to gain from operational efficiencies, as this business will be
administered from Dublin using existing information systems. This is expected
to lead to lower unit costs in both Ireland and Germany.

International and Reinsurance Division

This Division is organized into two areas of business offering the following
products:

|                    |  |                   |  |                   |  |                        
|------------------- |  | ----------------- |  | ----------------- |  | -----------------------
|International       |  | Reinsurance      
|                    |  |                  
|                    |  |                   |  |                   |  | Accident & Health      
|Protection          |  | Wealth Management |  | Life Insurance    |  | Insurance*             
|                    |  |                   |  |                   |  |                        
| Individual Life   |  |  Pension Plans   |  |  Individual Life |  |  Catastrophe          
| Individual Health |  |                   |  |  Group Life      |  |  Personal Accident    
| Group Life        |  |                   |  |  Financial       |  |  Workers Compensation
| Group Health      |  |                   |  |                   |  |  Disability           



|* |  | The Company is not selling any new accident and health insurance business
but is only administering the run-off of existing business.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------

The International operation manages subsidiary operations in Puerto Rico and
Brazil, as well as business in Hong Kong, Macau, Bermuda and Bahamas.

Through our Reinsurance operation we are a reinsurer of regular life insurance.
We also manage the services of Canada Life International Re Ltd. Having
previously acted as both a reinsurer and a retrocessionaire in the accident and
health insurance business, we ceased writing new business in 2001 and now only
administer the run-off of these contracts. We also administer a small number of
financial reinsurance contracts. The majority of the Divisions reinsurance
business is in the United States.

HIGHLIGHTS



| |  | 51% increase in life reinsurance premiums.                                                                    
|- |  | --------------------------------------------------------------------------------------------------------------
| 
| |  | Canada Life International Re Ltd. wrote several significant reinsurance arrangements.                         
| 
| |  | Slowed growth in pension premiums due to Brazil currency devaluation and election.                            
| 
| |  | For September 11, 2001 claims, continued to hold a prudent provision consistent with that established in 2001.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -24-





---



##### 



FINANCIAL PERFORMANCE

Shareholders net income of $24 million for 2002 increased by $7 million or 41%
over 2001 excluding the 2001 provision related to September 11, 2001 claims.
The year-over-year growth in net income from our reinsurance operations arose
from favourable mortality experience and improved morbidity experience in the
run-off of our block of accident and health business. The small decline in net
income from the International operations was the result of less favourable than
expected experience in the Caribbean region.

|                                                                                        |  |      |    |      |  |      |     |          |  |          |    |  |  |                  |    |   |  |  |     |  
|--------------------------------------------------------------------------------------- |  | ---- | -- | ---- |  | ---- | --- | -------- |  | -------- | -- |  |  | ---------------- | -- | - |  |  | --- | -
|                                                                                        |  |      |    |      |  |      |     |          |  |          |    |  |  |                  |    |   |  |  |     |  
|                                                                                        |  |      |    |      |  |      |     |          |  |          |    |  |  | 2002 versus 2001
|International and Reinsurance Divisions shareholders net income                       |  |      |    |      |  |      |     |          |  |          |    |  |  |                 
|(in millions of Canadian dollars)                                                       |  | 2002 |    | 2001 |  | 2000 |     | $ Change |  | % Change
|                                                                                        |  |      |    |      |  |      |     |          |  |         
|International                                                                           |  | $    | 4  |      |  | $    | 5   |          |  | $        | 5  |  |  | $                | (1 | ) |  |  | (20 | )
|Reinsurance                                                                             |  |      | 20 |      |  |      | 12  |          |  |          | 12 |  |  |                  | 8  |   |  |  | 67  |  
|                                                                                        |  |      |    |      |  |      |     |          |  |          |    |  |  |                  |    |   |  |  |     |  
|International and Reinsurance
Divisions shareholders net
income before the following: |  |      | 24 |      |  |      | 17  |          |  |          | 17 |  |  |                  | 7  |   |  |  | 41  |  
|Provision for claims arising
from September 11, 2001                                    |  |      |   |      |  |      | (85 | )        |  |          |   |  |  |                  | 85 |   |  |  | 100 |  
|                                                                                        |  |      |    |      |  |      |     |          |  |          |    |  |  |                  |    |   |  |  |     |  
|International and Reinsurance
Divisions shareholders net
income (loss)                |  | $    | 24 |      |  | $    | (68 | )        |  | $        | 17 |  |  | $                | 92 |   |  |  | 135 |  
|                                                                                        |  |      |    |      |  |      |     |          |  |          |    |  |  |                  |    |   |  |  |     |  

SUMMARY STATEMENT OF OPERATIONS

|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|--------------------------------------- |  | ---- | --- | ---- |  | ---- | ---- | -------- |  | -------- | --- |  |  | ---------------- | ---- | - |  |  | --- | -
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  | 2002 versus 2001
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                 
|(in millions of Canadian dollars)       |  | 2002 |     | 2001 |  | 2000 |      | $ Change |  | % Change
|                                        |  |      |     |      |  |      |      |          |  |         
|Revenues                                |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|Premiums                                |  | $    | 381 |      |  | $    | 324  |          |  | $        | 277 |  |  | $                | 57   |   |  |  | 18  |  
|Net investment income                   |  |      | 67  |      |  |      | 66   |          |  |          | 61  |  |  |                  | 1    |   |  |  | 2   |  
|Fee and other income                    |  |      | 5   |      |  |      | 5    |          |  |          | 3   |  |  |                  |     |   |  |  |    |  
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|                                        |  |      | 453 |      |  |      | 395  |          |  |          | 341 |  |  |                  | 58   |   |  |  | 15  |  
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|Expenditures                            |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|Policyholder benefits                   |  |      | 291 |      |  |      | 401  |          |  |          | 228 |  |  |                  | (110 | ) |  |  | (27 | )
|General operating expenses              |  |      | 33  |      |  |      | 35   |          |  |          | 27  |  |  |                  | (2   | ) |  |  | (6  | )
|Commissions                             |  |      | 96  |      |  |      | 60   |          |  |          | 53  |  |  |                  | 36   |   |  |  | 60  |  
|Other                                   |  |      | 3   |      |  |      | 9    |          |  |          | 9   |  |  |                  | (6   | ) |  |  | (67 | )
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|                                        |  |      | 423 |      |  |      | 505  |          |  |          | 317 |  |  |                  | (82  | ) |  |  | (16 | )
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|Net income (loss) before income taxes   |  |      | 30  |      |  |      | (110 | )        |  |          | 24  |  |  |                  | 140  |   |  |  | 127 |  
|Income tax provision (recovery)         |  |      | 6   |      |  |      | (42  | )        |  |          | 6   |  |  |                  | 48   |   |  |  | 114 |  
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|Net income (loss)                       |  |      | 24  |      |  |      | (68  | )        |  |          | 18  |  |  |                  | 92   |   |  |  | 135 |  
|Participating policyholders net income |  |      |    |      |  |      |     |          |  |          | 1   |  |  |                  |     |   |  |  |    |  
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  
|Common shareholders net income (loss)  |  | $    | 24  |      |  | $    | (68  | )        |  | $        | 17  |  |  | $                | 92   |   |  |  | 135 |  
|                                        |  |      |     |      |  |      |      |          |  |          |     |  |  |                  |      |   |  |  |     |  

PREMIUMS, PREMIUM EQUIVALENTS AND NEW DEPOSITS

|                                  |                     |      |     |      |  |      |     |     |  |   |     |     | 
|--------------------------------- | ------------------- | ---- | --- | ---- |  | ---- | --- | --- |  | - | --- | --- | 
|(in millions of Canadian dollars) |                     | 2002 |     | 2001 |  | 2000
|                                  |                     |      |     |      |  |     
|International                     |                     | $    | 145 |      |  | $    | 155 |     |  | $ | 124 |    
|Reinsurance                       |                     |      |     |      |  |      |     |     |  |   |     |    
|                                  | Life                |      |     | 221  |  |      |     | 146 |  |   |     | 122 | 
|                                  | Accident and health |      |     | 15   |  |      |     | 23  |  |   |     | 31  | 
|                                  |                     |      |     |      |  |      |     |     |  |   |     |    
|General fund premiums             |                     |      | 381 |      |  |      | 324 |     |  |   | 277 |    
|Segregated funds deposits         |                     |      | 2   |      |  |      | 1   |     |  |   | 3   |    
|                                  |                     |      |     |      |  |      |     |     |  |   |     |    
|                                  |                     | $    | 383 |      |  | $    | 325 |     |  | $ | 280 |    
|                                  |                     |      |     |      |  |      |     |     |  |   |     |    

General fund premiums and segregated funds deposits

(BAR CHART)


INTERNATIONAL OPERATIONS

Our International operations offer life, health and pension insurance products
through multiple distribution channels including agents, insurance brokers and
the Internet. The already established Beijing representative office continued
to study market conditions in the Peoples Republic of China.

Premium income for the International operation was $145 million in 2002, down
$10 million or 6% from 2001 on a comparative basis. Group sales in Puerto Rico
declined with more focus on profitability. On January 2, 2002, the Puerto Rico
subsidiary, Canada Life Insurance Company Inc. of Puerto Rico, became

operational, thereby eliminating the 4% premium tax applied to branch
operations in that jurisdiction. Group life premiums in Brazil grew in 2002
although overall premium revenue in Brazil declined by $5 million or 25% due
to the weakening of the Real and the uncertainty surrounding the October 2002
election in that country. During 2002, our Brazilian operations continued to
focus on increasing our profile with targeted clients and building
infrastructure to deliver superior customer service in the pension and group
life markets. Participating premiums decreased by $2 million in 2002,
reflecting the ongoing planned run-off of the closed funds since
demutualization.

REINSURANCE OPERATIONS

Life Reinsurance

The Life Reinsurance operation expanded during 2002 with many new customer
relationships. Life reinsurance premiums increased to $221 million up 51% from
$146 million in 2001 with an associated increase in commissions, primarily due
to strong growth in U.S. sales to our expanding client base. The return on
investment that was priced for on new business sales increased during 2002,
reflecting both increased opportunities in the U.S. life reinsurance
marketplace and efficiencies gained from Canada Life International Re Ltd.

During 2002, Canada Life International Re Ltd. continued to provide traditional
life reinsurance and retrocession to customers in North America and Europe, as
well as supporting the Companys operations in all major territories.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -25-





---



##### 



Accident and Health Insurance

Within the accident and health reinsurance business, the Company has provided
catastrophe reinsurance coverage to various insurance entities on a
non-proportional excess-of-loss basis. The risks underlying the catastrophe
reinsurance coverage include life insurance, accidental death and life and
health insurance associated with workers compensation. The results of this
business were significantly impacted in 2001 by the effect of claims arising
from the terrorist attack of September 11, 2001 in the United States for which
we recorded an $85 million provision, net of reinsurance recoveries, the
Companys catastrophe protection and tax for the year ended December 31, 2001.
During 2002, losses emerged in line with our original provision although our
outlook for loss estimates has been favourably reduced by approximately 11%. As
at December 31, 2002, we prudently continued to hold an overall provision
consistent with the level established in 2001.

Due to the nature of risk inherent in this business, we ceased writing new
accident and health (including catastrophe) reinsurance business shortly after
September 11, 2001. The existing catastrophe reinsurance coverage continues to
run-off over time. Relative to the coverage in place at September 11, 2001, our
in-force catastrophe reinsurance coverage has reduced by approximately 96% by
December 2002 and the remaining 4% will reduce gradually over 2003 and 2004 to
nil by June 30, 2004.

During 2002, the run-off of contracts acquired from Crown Life in 1999
continued to progress as anticipated, causing the drop in premium income from
$23 million in 2001 to $15 million in 2002 and a corresponding decrease in
policyholder benefits associated with this business. Overall claims experience
on these run-off contracts was favourable during 2002.

ASSETS UNDER ADMINISTRATION

|                                  |  |      |       |      |  |      |     |  |  |   |     | 
|--------------------------------- |  | ---- | ----- | ---- |  | ---- | --- |  |  | - | --- | 
|(in millions of Canadian dollars) |  | 2002 |       | 2001 |  | 2000
|                                  |  |      |       |      |  |     
|General fund                      |  | $    | 1,336 |      |  | $    | 948 |  |  | $ | 741 | 
|Segregated funds                  |  |      | 5     |      |  |      | 4   |  |  |   | 4   | 
|Other assets                      |  |      | 14    |      |  |      | 13  |  |  |   |    | 
|                                  |  |      |       |      |  |      |     |  |  |   |     | 
|                                  |  | $    | 1,355 |      |  | $    | 965 |  |  | $ | 745 | 
|                                  |  |      |       |      |  |      |     |  |  |   |     | 

Assets under administration

(BAR CHART)


Total assets increased by $390 million or 40% from 2001. The increase was due
to general growth in the business, particularly life reinsurance, and a higher
allocation of capital to this Division to fund organic growth and liability for
claims.

COMPETITIVE CONDITIONS

We continued to focus on business expansion in Brazil, which is viewed as a
strong emerging market for group pension and group life products in particular.

The Life Reinsurance operation assumes individual mortality risk from our
ceding company clients on both a coinsurance and a yearly renewable term basis.
The risks assumed by the Life Reinsurance operation are located almost entirely
in the United States. The U.S. life reinsurance marketplace has approximately
15 significant participants, a number that has reduced recently due to
consolidation. At the end of 2001, the Company ranked 13 in this market with a
market share in excess of 2%.

DIVISIONAL OUTLOOK

We will look to focus the growth in our Caribbean operations and to increase
profitability through improved underwriting and claims management practices. In
Brazil, we anticipate growth in all lines of business as the economic and
political climates stabilize, and corporations focus on employee benefit plan
reviews and enhancements.

During 2003, we will focus on growing our Life Reinsurance operation through
quality-driven offerings to our expanding client base. Enhanced abilities to
analyze mortality against underwriting programs will allow selective pricing
advantages. Information technology systems enhancements will allow more
efficient and timely client service.

INVESTMENT DIVISION

HIGHLIGHTS



| |  | Quality of bond portfolio remained high. Average quality rating of A+ was unchanged from last year.              
|- |  | -----------------------------------------------------------------------------------------------------------------
| 
| |  | Total losses on impaired investments of $31 million in 2002 increased slightly from $30 million in 2001.         
| 
| |  | Ratio of net impaired assets to total general fund net invested assets decreased to 0.3%, down from 0.5% in 2001.
| 
| |  | General fund invested assets increased by $3 billion, up 9% from 2001.                                           
| 
| |  | Excess of fair value over carrying value was $2,398 million, an increase of $867 million over 2001.              

OPERATIONS

Operating out of Toronto, London and Dublin (1), the Companys Investment
Division is a global investment services organization responsible for
managing the Companys invested assets across all business units. The
Toronto group develops investment policy for worldwide operations and
manages the North American based assets. London and Dublin personnel
directly manage the U.K. and Irish investment operations respectively, to
capitalize on the asset selection and management expertise within these
local markets.

MANDATE

The Investment Division objectives are to support the Companys objectives
with regard to growth, earnings and financial strength; to achieve
top-quality investment performance by consistently exceeding benchmarks
within appropriate risk/reward parameters; and to protect the contractual
benefits of the Companys customers and policyholders.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -26-





---



##### 



The Investment Divisions role is primarily that of risk manager. By
undertaking risk, returns are increased through disciplined, systematic
processes executed by experienced staff. Considerable effort is directed
toward total portfolio results and asset/liability matching, focusing on
key areas where sustainable value can be added. Our objectives include
maximizing overall returns on investments while considering the
characteristics of the liabilities, regulatory requirements, investment
goals and risk parameters in an efficient and effective manner. Results
are monitored through key performance measures, including return on
invested assets, and are compared against benchmarks established for
invested assets both in the operating funds and corporate equity.

DIVISIONAL OUTLOOK

Looking forward to 2003, the Investment Division will continue to focus on
providing industry leading investment management services by optimizing
investment returns within acceptable risk/reward parameters and enhancing
customer service. The ongoing success in maintaining a high-quality investment
portfolio will continue to enable the Company to meet policyholders future
needs while contributing to the return on shareholders equity.

Assets under administration

(BAR CHART)






|(1) |  | The Canada Life Assurance Companys principal operating investment subsidiaries are:
|--- |  | ------------------------------------------------------------------------------------



| |  |  | Canada Life Mortgage Services Ltd. (CLMS), which specializes in originating and servicing mortgage investment loans for institutional
clients.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Setanta Asset Management Limited, which manages the assets in the Republic of Ireland on behalf of the Company.                               



| | In addition, the Company owns 40% of Laketon Investment Management Ltd. (Laketon), which manages assets on behalf of the Companyand third parties.
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                   

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -27-





---



##### 



FINANCIAL POSITION

ASSETS UNDER ADMINISTRATION

|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  |                  |    |  
|--------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | -------- |  | - | ------ |  |  | ---------------- | -- | -
|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  | 2002 versus 2001
|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  |                 
|(in millions of Canadian dollars) |  | 2002 |        | 2001 |  | 2000 |        | % Change
|                                  |  |      |        |      |  |      |        |         
|Invested assets                   |  | $    | 36,474 |      |  | $    | 33,445 |          |  | $ | 31,123 |  |  |                  | 9  |  
|Other                             |  |      | 1,717  |      |  |      | 1,506  |          |  |   | 1,613  |  |  |                  | 14 |  
|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  |                  |    |  
|General fund assets               |  |      | 38,191 |      |  |      | 34,951 |          |  |   | 32,736 |  |  |                  | 9  |  
|Segregated funds assets           |  |      | 21,899 |      |  |      | 22,090 |          |  |   | 22,383 |  |  |                  | (1 | )
|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  |                  |    |  
|                                  |  |      | 60,090 |      |  |      | 57,041 |          |  |   | 55,119 |  |  |                  | 5  |  
|Other assets under administration |  |      | 7,913  |      |  |      | 8,384  |          |  |   | 8,138  |  |  |                  | (6 | )
|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  |                  |    |  
|                                  |  | $    | 68,003 |      |  | $    | 65,425 |          |  | $ | 63,257 |  |  |                  | 4  |  
|                                  |  |      |        |      |  |      |        |          |  |   |        |  |  |                  |    |  

GENERAL FUND INVESTED ASSETS

|                                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |   |        |        |  |  |     |  | 
|------------------------------------------------- | ------------ | ---- | ------ | ------ |  | ---- | --- | - |  | ---- | ------ | ------ |  |  | --- |  |  | - | ------ | ------ |  |  | --- |  | 
|Invested assets                                   |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |   |        |        |  |  |     | 
|(in millions of Canadian dollars)                 |              | 2002 |        | %      |  | 2001 |     | % |  | 2000 |        | %     
|                                                  |              |      |        |        |  |      |     |   |  |      |        |       
|Bonds                                             |              | $    | 22,317 |        |  |      | 61  |   |  | $    | 19,046 |        |  |  | 57  |  |  | $ | 17,681 |        |  |  | 57  | 
|Mortgages                                         |              |      | 7,622  |        |  |      | 21  |   |  |      | 7,996  |        |  |  | 24  |  |  |   | 7,583  |        |  |  | 24  | 
|Common and preferred stocks                       |              |      | 2,073  |        |  |      | 6   |   |  |      | 2,475  |        |  |  | 7   |  |  |   | 2,002  |        |  |  | 6   | 
|Real estate                                       |              |      | 1,066  |        |  |      | 3   |   |  |      | 941    |        |  |  | 3   |  |  |   | 851    |        |  |  | 3   | 
|Policy loans                                      |              |      | 1,113  |        |  |      | 3   |   |  |      | 1,070  |        |  |  | 3   |  |  |   | 988    |        |  |  | 3   | 
|Cash, cash equivalents and short-term
investments |              |      | 1,159  |        |  |      | 3   |   |  |      | 1,142  |        |  |  | 3   |  |  |   | 1,424  |        |  |  | 5   | 
|Other investments                                 |              |      | 1,124  |        |  |      | 3   |   |  |      | 775    |        |  |  | 3   |  |  |   | 594    |        |  |  | 2   | 
|                                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |   |        |        |  |  |     | 
|Total invested assets  carrying value            |              | $    | 36,474 |        |  |      | 100 |   |  | $    | 33,445 |        |  |  | 100 |  |  | $ | 31,123 |        |  |  | 100 | 
|                                                  |  fair value |      | $      | 38,872 |  |      |     |   |  |      | $      | 34,976 |  |  |     |  |  |   | $      | 32,786 |  |  |     |  | 
|                                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |   |        |        |  |  |     | 

The Companys general fund invested assets increased to $36,474 million in 2002
from $33,445 million in 2001. The asset mix shifted slightly as cash flow to
the general fund was invested in the bond portfolio. These assets support
$31,555 million in actuarial and other liabilities and $4,919 million in
shareholders equity and subordinated debentures of the Company. The Company
has established an investment portfolio that reflects a generally conservative
investment philosophy, the characteristics of the Companys liabilities, and
market opportunities and expectations.

BONDS

|                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |     |        |        |  |  |     |  | 
|--------------------------------- | ------------ | ---- | ------ | ------ |  | ---- | --- | - |  | ---- | ------ | ------ |  |  | --- |  |  | --- | ------ | ------ |  |  | --- |  | 
|Bond portfolio quality            |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |     |        |        |  |  |     | 
|(in millions of Canadian dollars) |              | 2002 |        | %      |  | 2001 |     | % |  | 2000 |        | %     
|                                  |              |      |        |        |  |      |     |   |  |      |        |       
|AAA                               |              | $    | 7,798  |        |  |      | 35  |   |  | $    | 6,200  |        |  |  | 32  |  |  | $   | 6,760  |        |  |  | 38  | 
|AA                                |              |      | 3,281  |        |  |      | 15  |   |  |      | 2,966  |        |  |  | 16  |  |  |     | 2,630  |        |  |  | 15  | 
|A                                 |              |      | 6,085  |        |  |      | 27  |   |  |      | 5,147  |        |  |  | 27  |  |  |     | 4,617  |        |  |  | 26  | 
|BBB                               |              |      | 4,289  |        |  |      | 19  |   |  |      | 3,915  |        |  |  | 21  |  |  |     | 3,025  |        |  |  | 17  | 
|Below BBB/ unrated                |              |      | 864    |        |  |      | 4   |   |  |      | 818    |        |  |  | 4   |  |  |     | 649    |        |  |  | 4   | 
|                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |     |        |        |  |  |     | 
|Total bonds  carrying value      |              | $    | 22,317 |        |  |      | 100 |   |  | $    | 19,046 |        |  |  | 100 |  |  | $   | 17,681 |        |  |  | 100 | 
|                                  |  fair value |      | $      | 23,982 |  |      |     |   |  |      | $      | 19,866 |  |  |     |  |  |     | $      | 18,421 |  |  |     |  | 
|                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |     |        |        |  |  |     | 
|Average bond quality              |              |      | A+     |        |  |      |     |   |  |      | A+     |        |  |  |     |  |  | AA |        |        |  | 
|                                  |              |      |        |        |  |      |     |   |  |      |        |        |  |  |     |  |  |     |        |        |  |  |     | 

The Companys bond portfolio was 61% of the total invested assets of the
general fund. The bond portfolio was comprised of 37% government bonds and 63%
corporate bonds. The portfolio is diversified within each of the four major
countries in which the Company operates. To support the business in each
division, as at December 31, 2002, the bond portfolio was distributed as
follows: 36% in Canada, 29% in the United Kingdom, 28% in the United States, 4%
in the Republic of Ireland and 3% in International and Reinsurance. The excess
of fair value over carrying value at December 31, 2002 was $1,665 million ($820
million for 2001).

The Companys policy is to maintain a bond portfolio having a minimum weighted
average rating of A, within acceptable risk levels. Bonds are rated by
independent rating agencies where available, or internally on a basis
comparable to that used by independent rating agencies. In addition, the
Investment Policy limits the permitted proportion of high yield debt
investments that are below Investment Grade (below the BBB range) to 5% of
consolidated bonds and mortgages in consideration of the higher risk profile of
these types of investments.

The quality of the Companys bond portfolio continued to be high throughout the
year. The average rating for our $22,317 million bond portfolio remained at A+
at year-end, unchanged from the previous year.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -28-





---



##### 



MORTGAGES AND REAL ESTATE

|                                   |              |              |       |       |       |      |     |   |  |      |       |       |       |  |     |  |  |   |       |       |     |  |     |  |  | 
|---------------------------------- | ------------ | ------------ | ----- | ----- | ----- | ---- | --- | - |  | ---- | ----- | ----- | ----- |  | --- |  |  | - | ----- | ----- | --- |  | --- |  |  | 
|(in millions of Canadian dollars)  |              | 2002         |       | %     |       | 2001 |     | % |  | 2000 |       | %    
|                                   |              |              |       |       |       |      |     |   |  |      |       |      
|Apartment                          |              | $            | 2,872 |       |       |      | 38  |   |  | $    | 2,888 |       |       |  | 36  |  |  | $ | 2,573 |       |     |  | 34  | 
|Retail                             |              |              | 2,135 |       |       |      | 28  |   |  |      | 2,366 |       |       |  | 30  |  |  |   | 2,519 |       |     |  | 32  | 
|Industrial                         |              |              | 1,262 |       |       |      | 17  |   |  |      | 1,349 |       |       |  | 17  |  |  |   | 1,255 |       |     |  | 17  | 
|Office                             |              |              | 956   |       |       |      | 12  |   |  |      | 1,024 |       |       |  | 13  |  |  |   | 1,029 |       |     |  | 14  | 
|Other                              |              |              | 397   |       |       |      | 5   |   |  |      | 369   |       |       |  | 4   |  |  |   | 207   |       |     |  | 3   | 
|                                   |              |              |       |       |       |      |     |   |  |      |       |       |       |  |     |  |  |   |       |       |     |  |     | 
|Total mortgages  carrying value   |              | $            | 7,622 |       |       |      | 100 |   |  | $    | 7,996 |       |       |  | 100 |  |  | $ | 7,583 |       |     |  | 100 | 
|                                   |  fair value |              | $     | 8,417 |       |      |     |   |  |      | $     | 8,514 |       |  |     |  |  |   | $     | 7,994 |     |  |     |  | 
|                                   |              |              |       |       |       |      |     |   |  |      |       |       |       |  |     |  |  |   |       |       |     |  |     | 
|Total real estate  carrying value |              | $            | 1,066 |       |       |      |     |   |  | $    | 941   |       |       |  |     |  |  | $ | 851   |       |     |  |     | 
|                                   |              |  fair value |       | $     | 1,196 |      |     |   |  |      |       | $     | 1,023 |  |     |  |  |   |       | $     | 942 |  |     |  |  | 
|                                   |              |              |       |       |       |      |     |   |  |      |       |       |       |  |     |  |  |   |       |       |     |  |     | 

As at December 31, 2002, the mortgage portfolio represented 21% of the general
fund invested assets of the Company. The portfolio is well diversified across
property types as detailed in the chart above and is primarily located in
Canada and the United States. The fair value of mortgages exceed carrying value
as at December 31, 2002 by $795 million ($518 million for 2001).

The Company actively manages the asset quality of its mortgage portfolio.
Mortgages are rated using a formal internal rating system. At the end of 2002,
the mortgage portfolio quality was high, with a weighted average rating
excluding government-insured mortgages of $968 million ($875 million for 2001)
of A. A weighted average minimum rating excluding government-insured mortgages
of BBB- has been set for the mortgage portfolio.

As at December 31, 2002, 3% of the general fund invested assets were held in
real estate. The real estate portfolio is diversified across various property
types and is primarily located in Canada and the United Kingdom. The fair value
of real estate exceeded carrying value as at December 31, 2002 by $130 million
($82 million for 2001).

COMMON AND PREFERRED STOCKS

|                                                      |              |      |       |       |  |      |     |   |  |      |       |       |  |  |     |  |  |   |       |       |  |  |     |  | 
|----------------------------------------------------- | ------------ | ---- | ----- | ----- |  | ---- | --- | - |  | ---- | ----- | ----- |  |  | --- |  |  | - | ----- | ----- |  |  | --- |  | 
|Common and preferred stocks by jurisdiction           |              |      |       |       |  |      |     |   |  |      |       |       |  |  |     |  |  |   |       |       |  |  |     | 
|(in millions of Canadian dollars)                     |              | 2002 |       | %     |  | 2001 |     | % |  | 2000 |       | %    
|                                                      |              |      |       |       |  |      |     |   |  |      |       |      
|Canada                                                |              | $    | 518   |       |  |      | 25  |   |  | $    | 543   |       |  |  | 22  |  |  | $ | 387   |       |  |  | 20  | 
|United States                                         |              |      | 456   |       |  |      | 22  |   |  |      | 459   |       |  |  | 19  |  |  |   | 306   |       |  |  | 15  | 
|United Kingdom                                        |              |      | 947   |       |  |      | 46  |   |  |      | 763   |       |  |  | 31  |  |  |   | 802   |       |  |  | 40  | 
|Republic of Ireland                                   |              |      | 152   |       |  |      | 7   |   |  |      | 710   |       |  |  | 28  |  |  |   | 507   |       |  |  | 25  | 
|                                                      |              |      |       |       |  |      |     |   |  |      |       |       |  |  |     |  |  |   |       |       |  |  |     | 
|Total common and preferred stocks  carrying value(1) |              | $    | 2,073 |       |  |      | 100 |   |  | $    | 2,475 |       |  |  | 100 |  |  | $ | 2,002 |       |  |  | 100 | 
|                                                      |  fair value |      | $     | 1,881 |  |      |     |   |  |      | $     | 2,571 |  |  |     |  |  |   | $     | 2,418 |  |  |     |  | 
|                                                      |              |      |       |       |  |      |     |   |  |      |       |       |  |  |     |  |  |   |       |       |  |  |     | 



|(1) |  | Preferred stocks comprise $51 million or 3% ($62 million or 3% for 2001)
of the carrying value and $52 million ($63 million for 2001) of the fair
value of stocks.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

As at December 31, 2002, common and preferred stocks comprise 6% of the general
fund invested assets compared to 7% in 2001. The decrease of $402 million from
2001 is primarily due to the change in classification for certain assets
between general fund and segregated funds. In 2001, $656 million of Unitized
with Profit Fund stocks were recorded as general fund assets in Ireland.
These are now included in segregated funds assets. The carrying value of common
and preferred stocks exceeded fair value as at December 31, 2002 by $192
million (fair value exceeded carrying value by $96 million for 2001).

The stock portfolio is well diversified by jurisdiction, industry
classification and issuer. As at December 31, 2002, the largest issuer
represented 2% (2% in 2001) of the common and preferred stock portfolio based
on the carrying value of those securities.

FAIR VALUE

The fair value of invested assets exceeded their carrying value by $2,398
million as at December 31, 2002, compared to $1,531 million in 2001. Total fair
value grew to $38,872 million from $34,976 million in 2001. The increase in
fair value year over year reflects the increase in assets, as well as lower
interest rates, which resulted in higher bond and mortgage fair values in 2002,
offset by the impact of weaker stock markets. Changes in the fair value of
assets supporting the actuarial and other liabilities of the Companys
operating funds generally will not result in a corresponding change in net
income due to the Companys asset/liability management practices. However, the
excess of fair value over carrying value, as well as the net deferred realized
gains, on assets supporting shareholders equity and subordinated debentures
will in time be amortized to net income. The excess totalled $191 million in
2002 compared to $360 million in 2001.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -29-





---



##### 



IMPAIRED ASSETS

|                                                              |  |          |     |           |  |       |    |          |  |           |     |       |  |       |     |           |  |          |    |  |  |   |     |          |  |   |     |  |  |   |    |  |  |   |     |  
|------------------------------------------------------------- |  | -------- | --- | --------- |  | ----- | -- | -------- |  | --------- | --- | ----- |  | ----- | --- | --------- |  | -------- | -- |  |  | - | --- | -------- |  | - | --- |  |  | - | -- |  |  | - | --- | -
|Impaired Assets and Provisions                                |  |          |     |           |  |       |    |          |  |           |     |       |  |       |     |           |  |          |    |  |  |   |     |          |  |   |     |  |  |   |    |  |  |   |     |  
|(in millions of Canadian dollars)                             |  | 2002     |     | 2001      |  | 2000 
|                                                              |  |          |     |           |  |      
|                                                              |  | Gross    |     |           |  |       |    | Net      |  | Gross     |     |       |  |       |     | Net       |  | Gross    |    |  |  |   |     | Net     
|                                                              |  | carrying |     |           |  |       |    | carrying |  | carrying  |     |       |  |       |     | carrying  |  | carrying |    |  |  |   |     | carrying
|                                                              |  | value    |     | Provision |  | value |    | value    |  | Provision |     | value |  | value |     | Provision |  | value   
|                                                              |  |          |     |           |  |       |    |          |  |           |     |       |  |       |     |           |  |         
|Bonds                                                         |  | $        | 136 |           |  | $     | 53 |          |  | $         | 83  |       |  | $     | 186 |           |  | $        | 48 |  |  | $ | 138 |          |  | $ | 61  |  |  | $ | 20 |  |  | $ | 41  |  
|Mortgages and real estate                                     |  |          | 12  |           |  |       | 3  |          |  |           | 9   |       |  |       | 36  |           |  |          | 18 |  |  |   | 18  |          |  |   | 55  |  |  |   | 27 |  |  |   | 28  |  
|Common and preferred stocks                                   |  |          | 1   |           |  |       |   |          |  |           | 1   |       |  |       |    |           |  |          |   |  |  |   |    |          |  |   | 17  |  |  |   | 3  |  |  |   | 14  |  
|Other                                                         |  |          | 19  |           |  |       | 3  |          |  |           | 16  |       |  |       | 24  |           |  |          | 5  |  |  |   | 19  |          |  |   | 5   |  |  |   | 2  |  |  |   | 3   |  
|                                                              |  |          |     |           |  |       |    |          |  |           |     |       |  |       |     |           |  |          |    |  |  |   |     |          |  |   |     |  |  |   |    |  |  |   |     |  
|Total                                                         |  | $        | 168 |           |  | $     | 59 |          |  | $         | 109 |       |  | $     | 246 |           |  | $        | 71 |  |  | $ | 175 |          |  | $ | 138 |  |  | $ | 52 |  |  | $ | 86  |  
|Net impaired assets to total
general fund net invested assets |  |          |     |           |  |       |    |          |  |           | 0.3 | %     |  |       |     |           |  |          |    |  |  |   | 0.5 | %        |  |   |     |  |  |   |    |  |  |   | 0.3 | %
|                                                              |  |          |     |           |  |       |    |          |  |           |     |       |  |       |     |           |  |          |    |  |  |   |     |          |  |   |     |  |  |   |    |  |  |   |     |  

Provisions for losses on invested assets are established when an asset or
portfolio of assets is impaired as a result of deterioration in credit quality
to the extent that timely realization of the carrying value of assets and
related investment income cannot be assured. The carrying value of an impaired
asset is reduced to the net realizable value of the asset at the time
impairment is recognized, and a corresponding provision is charged to the
income statement.

The net carrying value of impaired investments decreased to $109 million at the
end of 2002, a drop of $66 million or 38% compared to 2001. The reduction was
largely due to recoveries, redemptions and sales of impaired bonds and mortgage
portfolios.

SEGREGATED FUNDS ASSETS

The Company manages segregated funds assets on behalf of policyholders under
various arrangements. These assets are carried at market value. Segregated
funds assets decreased by less than 1% in 2002 from 2001 as growth from net
deposits in Canada, the United Kingdom and Ireland was offset by the impact of
the declines in global stock markets. In 2001, Unitized with Profit Fund
stocks of $656 million were recorded as general fund assets in Ireland. These
are now included in segregated funds assets.

OTHER ASSETS UNDER ADMINISTRATION

The Company manages, or administers for fees, other assets on behalf of third
parties, primarily group pension and RRSP plans in Canada and unit trust
arrangements in the United Kingdom. These assets are not owned by the Company
and are excluded from both the general fund and segregated funds of the
Company.

ACTUARIAL LIABILITIES

Actuarial liabilities represent the amounts required, together with future
premiums and estimated investment income, to provide for the estimated future
benefits, policyholder dividends, commissions and maintenance expenses on
policies in force. The actuarial liabilities constitute those financial
statement amounts potentially subject to the highest level of measurement
uncertainty as their determination is complex, reflecting the diversity of the
underlying products and product features as well as a variety of best estimate
assumptions. Because of the risk of mis-estimation in determining the amounts
for these liabilities, the best estimate assumptions are adjusted to include
margins for adverse deviation, which provide for unfavourable deviations from
expected experience. Due to the long-term nature of actuarial liabilities and
the incorporation of margins for adverse deviation, a fluctuation in experience
compared to any one assumption in the near term would not normally be expected
to have a significant effect on the financial results of the Company.
(Assumptions are described in note 3 to the Consolidated Financial Statements.)

As noted above, the assumptions used in the calculations are based on best
estimates and include a margin for adverse deviation. The range of these
margins is set out in the valuation standards issued by the Canadian Institute
of Actuaries (CIA). Given the diversity and size of the Companys portfolio,
the risk of deviation being significantly different from expected is relatively
low so that margins at the low end of the permissible range as prescribed by
the CIA guidelines would often be justifiable. However, we frequently follow a
more prudent practice of establishing margins generally close to the middle of
the range.

The composition of actuarial liabilities is shown below:

|                                      |                                      |      |        |        |  |      |     |    |  |      |        |        |  |  |     |    |  |   |        |        |  |  |     |    | 
|------------------------------------- | ------------------------------------ | ---- | ------ | ------ |  | ---- | --- | -- |  | ---- | ------ | ------ |  |  | --- | -- |  | - | ------ | ------ |  |  | --- | -- | 
|Actuarial liabilities                 |                                      |      |        |        |  |      |     |    |  |      |        |        |  |  |     |    |  |   |        |        |  |  |     |   
|(in millions of Canadian dollars)     |                                      | 2002 |        | %      |  | 2001 |     | %  |  | 2000 |        | %     
|                                      |                                      |      |        |        |  |      |     |    |  |      |        |       
|General fund                          |                                      |      |        |        |  |      |     |    |  |      |        |        |  |  |     |    |  |   |        |        |  |  |     |   
|Participating insurance and annuities |                                      | $    | 6,254  |        |  |      | 22  |    |  | $    | 5,680  |        |  |  | 21  |    |  | $ | 5,215  |        |  |  | 20  |   
|Non-participating:                    |                                      |      |        |        |  |      |     |    |  |      |        |        |  |  |     |    |  |   |        |        |  |  |     |   
|                                      | Annuities                            |      |        | 16,662 |  |      |     | 57 |  |      |        | 15,771 |  |  |     | 58 |  |   |        | 14,958 |  |  |     | 59 | 
|                                      | Individual life and health insurance |      |        | 3,134  |  |      |     | 11 |  |      |        | 3,773  |  |  |     | 14 |  |   |        | 3,514  |  |  |     | 14 | 
|                                      | Group life and health insurance      |      |        | 3,000  |  |      |     | 10 |  |      |        | 1,945  |  |  |     | 7  |  |   |        | 1,794  |  |  |     | 7  | 
|                                      |                                      |      |        |        |  |      |     |    |  |      |        |        |  |  |     |    |  |   |        |        |  |  |     |   
|                                      |                                      | $    | 29,050 |        |  |      | 100 |    |  | $    | 27,169 |        |  |  | 100 |    |  | $ | 25,481 |        |  |  | 100 |   
|                                      |                                      |      |        |        |  |      |     |    |  |      |        |        |  |  |     |    |  |   |        |        |  |  |     |   

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -30-





---



##### 



(A continuity of changes in general fund actuarial liabilities and a summary of
the distribution of general fund actuarial liabilities by business segment and
by major line of business are included in notes 9(a) and 9(b) respectively to
the Consolidated Financial Statements.)

CAPITAL RESOURCES AND LIQUIDITY

CAPITAL AND CAPITAL ADEQUACY

Capital strength is important for the protection of policyholders and
shareholders. Capital strength also helps to maintain strong credit ratings and
allows us to take advantage of business opportunities. However, capital levels
that are too high may lead to poor returns on shareholders equity. A balance
is maintained between the mix and level of capital to meet differing
objectives.

|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |    | 
|------------------------------------------------------------------------- | ----------------- | ---- | ----- | ----- |  | ---- | --- | -- |  | ---- | ----- | ----- |  |  | --- | -- |  | - | ----- | ----- |  |  | --- | -- | 
|Capital                                                                   |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   
|(in millions of Canadian dollars)                                         |                   | 2002 |       | %     |  | 2001 |     | %  |  | 2000 |       | %    
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |      
|Bank loans                                                                |                   | $    | 3     |       |  |      |    |    |  | $    | 3     |       |  |  |    |    |  | $ |      |       |  |  |    |   
|Subordinated debentures                                                   |                   |      | 550   |       |  |      | 11  |    |  |      | 550   |       |  |  | 14  |    |  |   | 550   |       |  |  | 16  |   
|Canada Life Capital Securities                                            |                   |      | 450   |       |  |      | 9   |    |  |      |      |       |  |  |    |    |  |   |      |       |  |  |    |   
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   
|Total debt                                                                |                   |      | 1,003 |       |  |      |     |    |  |      | 553   |       |  |  |     |    |  |   | 550   |       |  |  |     |   
|Participating policyholders equity                                       |                   |      | 48    |       |  |      | 1   |    |  |      | 40    |       |  |  | 1   |    |  |   | 44    |       |  |  | 1   |   
|Shareholders equity                                                      |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |    |   
|                                                                          | Preferred shares  |      |       | 145   |  |      |     | 3  |  |      |       | 145   |  |  |     | 4  |  |   |       |      |  |  |     |   | 
|                                                                          | Common shares     |      |       | 317   |  |      |     | 6  |  |      |       | 317   |  |  |     | 8  |  |   |       | 317   |  |  |     | 9  | 
|                                                                          | Retained earnings |      |       | 3,457 |  |      |     | 70 |  |      |       | 2,921 |  |  |     | 73 |  |   |       | 2,575 |  |  |     | 74 | 
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   
|Total shareholders equity                                                |                   |      | 3,919 |       |  |      | 79  |    |  |      | 3,383 |       |  |  | 85  |    |  |   | 2,892 |       |  |  | 83  |   
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   
|Total debt and equity                                                     |                   | $    | 4,970 |       |  |      | 100 |    |  | $    | 3,976 |       |  |  | 100 |    |  | $ | 3,486 |       |  |  | 100 |   
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   
|Total debt plus preferred shares
as a percentage of total debt and
equity |                   |      | 23.1  | %     |  |      |     |    |  |      | 17.6  | %     |  |  |     |    |  |   | 15.8  | %     |  |  |     |   
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   
|MCCSR ratio                                                               |                   |      | 202   | %     |  |      |     |    |  |      | 191   | %     |  |  |     |    |  |   | 197   | %     |  |  |     |   
|                                                                          |                   |      |       |       |  |      |     |    |  |      |       |       |  |  |     |    |  |   |       |       |  |  |     |   

Most of the Companys capital has been generated from retained earnings and
this, together with the issuance of Canada Life Capital Securities in March
2002, raised the debt-to-capital ratio to 23.1% at year-end, up from 17.6% at
the end of 2001 and close to our target of 25%.

The Company must meet the regulatory minimum capital and solvency requirements
in each jurisdiction in which it operates. In Canada, the Company is regulated
by the Office of the Superintendent of Financial Institutions, Canada, which
requires insurance companies to maintain minimum levels of capital calculated
in accordance with the Minimum Continuing Capital and Surplus Requirements
(MCCSR). The MCCSR formula prescribes the calculation of Available Capital for
regulatory purposes and of the amounts of Required Capital to be maintained,
based on the risk characteristics of the underlying assets and liabilities held
by the Company. The ratio of Available Capital to Required Capital is the
MCCSR ratio, with a minimum required ratio of 150%.

The Companys ratio at December 31, 2002 was 202%, just above our target range
of 175% to 200% and well in excess of the minimum required level. The increase
over 2001 was due to growth in retained earnings and the issuance of Canada
Life Capital Securities in March 2002 net of the additional capital required
for our business acquisitions completed in 2002. The ratio declined to
approximately 197% after December 31, 2002 as a result of the business
acquisition that was completed on January 1, 2003.

To assess capital adequacy and financial strength under adverse conditions, we
perform Dynamic Capital Adequacy Testing on an annual basis. The process
analyzes the Companys potential future financial condition over a five-year
period by reviewing the impact of a number of adverse business scenarios, which
include declining interest rates, decreasing stock market levels, worsening
mortality, higher lapse rates, and morbidity experience and increased expenses.
The results of the testing completed in 2002 confirmed the Companys current
financial strength and its ability to withstand significant possible future
adversity.

SOURCE OF FUNDS

The primary source of funds for the Company is cash provided by operating
activities including premiums, net investment income and fees. These funds are
used primarily to pay policyholder benefits including claims and expenses. Net
cash flows generated from operating activities are generally invested to
support future payment requirements and are used to pay dividends to
shareholders. In addition, the Company may raise funds from time to time
through the issue of debt or equity securities to finance growth, acquisitions
or other needs.

During 2002, the Company generated net cash flow of $74 million. Operating
activities contributed $1,020 million, financing activities generated $340
million and investing activities used $1,342 million. Two significant items in
2002 that impacted cash flow were the issuance of Canada Life Capital
Securities, which raised $445 million net of issuance costs, and the
acquisition of two businesses, which added $302 million in operating funds.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -31-





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##### 



LIQUIDITY

Our primary requirements for liquidity are for payment of benefits and expenses
as described above, to satisfy debt obligations and to pay dividends to
shareholders. We generally maintain a conservative liquidity position and
actively manage capital levels throughout the Company. As we are required to
maintain solvency and capital standards in the various countries in which we
operate, we have an asset/liability matching program and actively manage the
diversification, duration and credit quality of our investments to ensure the
Company is able to meet its obligations.

The Companys ability to meet its cash requirements and to pay dividends on the
common and preferred shares depends on the receipt of dividends and other
payments from its principal operating subsidiary, The Canada Life Assurance
Company (CLA). CLAs insurance subsidiaries and branches are required to
maintain solvency and capital standards in the jurisdictions in which they
operate. These regulatory standards may effectively restrict the amount of
dividends, distributions or other payments that may be made by such
subsidiaries and branches to CLA and to the Company.

Based on the Companys historical cash flows and current financial performance,
management believes that the cash flow from the Companys operating activities
will continue to provide sufficient liquidity for the Company to satisfy debt
service obligations and to pay other expenses.

NON-INSURANCE CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET
ARRANGEMENTS

The following table presents the principal portions of our contractual cash
flow commitments on subordinated debentures and operating leases. This table
does not reflect our obligations under other capital instruments or for our
insurance, annuity and guaranteed products contracts.

|                        |  |                        |    |           |  |           |     |               |  |   |    |  |  |   |     | 
|----------------------- |  | ---------------------- | -- | --------- |  | --------- | --- | ------------- |  | - | -- |  |  | - | --- | 
|                        |  | Payments Due by Period
|                        |  |                       
|                        |  | Under 1 year           |    | 1-3 years |  | 4-5 years |     | After 5 years
|                        |  |                        |    |           |  |           |     |              
|Subordinated debentures |  | $                      |   |           |  | $         |    |               |  | $ |   |  |  | $ | 550 | 
|Operating leases        |  |                        | 64 |           |  |           | 101 |               |  |   | 57 |  |  |   | 102 | 

In addition to the above, in the normal course of operations we have entered
into derivative financial instruments, which are discussed in more detail under
the Risk Management section below. The Company has not ulitized any off-balance
sheet special purpose entities as at December 31, 2002.

RISK MANAGEMENT

OVERVIEW

The objective of Risk Management is to manage the risks associated with the
business in order to protect policyholder interests and to enhance
shareholders value at an overall acceptable level of risk. The Company manages
risk through a comprehensive risk management framework, which includes the
identification, assessment, mitigation and monitoring of risks.

The responsibility for risk management is shared between the Board of Directors
(the Board) and management.

The Company has established a Risk Management Committee comprised of senior
management responsible for ensuring appropriate risk management policies and
procedures have been established and for recommending these policies to the
Board for approval. The Committee also ensures that appropriate monitoring and
reporting procedures are in place and provides oversight
with respect to compliance with risk management policies. The Committee reports
quarterly to the Audit and Risk Management Committee, which is comprised
entirely of non-management Board Directors.

The Company has written corporate policies that set out the principles upon
which the Company is prepared to undertake risks. These policies support
OSFIs Standards of Sound Business and Financial Practices and define the types
of risks the Company is prepared to undertake, establish limits within which
business units must operate, and set out the types of control and monitoring
programs that are required to be in place. Adherence to these policies is
monitored on a global basis at least annually. Corporate policies are reviewed
and re-approved at least annually by the Risk Management Committee and by the
Audit and Risk Management Committee.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -32-





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##### 



RISK CATEGORIES

The Company manages risk under the following major risk categories:

|                                                                                          |  |                                                                                            |  |                                                                
|----------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------
|Asset Risk                                                                                |  | Insurance Risk                                                                             |  | Business Risk                                                  
|                                                                                         
| Interest Rate Risk
 Market Risk
 Foreign Currency Risk
 Credit Risk
 Liquidity Risk |  |  Product Design and Pricing Risk
 Underwriting Risk
 Policy Liabilities and Claims Risk |  |  Operational Risk
 Legal and Regulatory Risk
 Strategic Risk

RISK MITIGATION AND MONITORING

ASSET RISK

Asset Liability Management

The goal of the Companys asset liability management program is to maximize
long-term economic value subject to a set of constraints consistent with the
structure of the insurance liabilities, which are segmented according to major
line of business. Canada Life has consistently taken the Prudent Person
approach toward asset liability management. The Companys policy is to invest
in assets that closely match the liabilities in terms of liquidity, exposure to
changes in interest rates, real estate and equity markets and foreign exchange
rates. Products offering interest rate and term guarantees, such as annuities
and pension products, are supported mainly by bonds and mortgages. Products
that allow adjustments to credited interest rates or premiums, such as
participating whole life and Universal Life insurance, are supported by a
broader range of assets including real estate and equities.

The Companys Investment Policy is designed to produce returns and risk
exposures consistent with Canada Lifes business requirements. It establishes
limits and ranges for asset mix, asset quality, liquidity and exposure to
interest rates, market values and foreign currency exchange rates, within which
each line of business must operate. Adherence to these limits is monitored
regularly by senior management and reported at least quarterly to the Board.

Interest Rate Risk



| |                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest rate riskis the risk of loss due to the exposure of assets and
liabilities to fluctuations in interest rates, including the risk of loss due
to the effect of changing interest rates if the future cash flows from the
assets supporting liabilities do not match the timing and amount of the
expected policy payments.

Interest rate risk is managed through the use of a matching policy. The Company
maintains separate funds of assets to support associated liabilities by line of
business and by country. The expected cash outflows from the liabilities are
matched, wherever possible, with equally predictable cash inflows from invested
assets through a defined asset/liability management process. The degree of
mismatch between assets and liabilities is a measure of interest rate risk and
is managed within prescribed limits at the fund level.

Proper matching of assets and liabilities is particularly critical for the
funds supporting annuity and pension products, which constitute approximately
59% (58% in 2001) of the Companys general fund actuarial liabilities. Interest
rate risk is measured through the use of duration mismatch and interest rate
scenario analysis.

Duration mismatch

Duration measures the sensitivity of the economic value of assets and
liabilities to changes in interest rates. Duration mismatch is the difference
between the duration of assets and the duration of liabilities. When the
duration of assets exceeds the duration of liabilities, an increase in interest
rates will result in a decrease in economic value. When the duration of assets
is less than the duration of liabilities, an increase in interest rates will
result in an increase in economic value. The duration mismatch associated with
annuity and pension products for the years ended December 31, 2002 and 2001 was
0.06 years and 0.02 years respectively. This level of mismatch falls within
limits established under the Investment Policy for managing this risk.

Interest rate scenario analysis

In addition to duration mismatch, interest rate risk is also measured in terms
of the effect of interest rate changes on the net economic value or Net Present
Value (NPV) of assets and liabilities. The NPV sensitivity to interest rate
changes is analyzed through various interest rate scenarios.

The NPV of future asset cash flows less future liability cash flows is
determined using the interest rates in effect at the reporting date. The NPV is
then recalculated assuming an immediate 1% parallel increase in interest rates
and an immediate 1% parallel decrease in interest rates. The resulting change
in NPV represents a measure of the degree of interest rate risk associated with
a 1% parallel change in interest rates. (See note 5(a)(ii) to the Consolidated
Financial Statements for the impact on NPV of a 1% parallel change in interest
rates.)

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -33-





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##### 



For the life insurance business, the Company guarantees cash surrender values
on most of the life insurance products. The Company would be exposed to losses
if policyholders surrendered their policies during a period when interest rates
were rising significantly. The Company has also provided minimum interest rate
guarantees on certain variable annuity and insurance contracts and, as such, is
exposed to losses if interest rates fall below certain levels. To cover this
risk, derivative contracts are used to hedge some of the exposure, and prudent
provisions are made for these guarantees in the actuarial liabilities.
Specified amounts of capital are held to cover these risks as required by
MCCSR.

The anticipated investment return on the assets supporting Company equity may
be subject to decline if interest rates fall below certain levels. To manage
this risk, the invested assets are diversified as required by the Investment
Policy, by investment type, limit, quality and geographic location. In
addition, derivative contracts are used to manage some of the exposure.

Market Risk



| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Market riskis the risk of loss that results from changes in the market value
of the Companys portfolio of securities, both on- and off- balance sheet, as
well as fluctuations in the value of mortgages and real estate holdings.

Changes in market value impact the return on general fund assets and fee income
earned on segregated funds. The Companys exposure to market risk is managed
through established limits relative to the amount and type of investments
supporting liabilities and shareholders equity. General fund investments in
stocks and real estate represent a small portion of the Companys assets under
administration and are typically held against shareholders equity or to
support a fraction of long-term general fund policy liabilities. Holdings are
also diversified by industry type, corporate group and different geographic
markets. Adherence to these limits is monitored regularly and the results are
reported quarterly to the Board.

Changes in market value also impact liabilities associated with investment
related guarantees on segregated funds. The Companys investment-related
guarantees on segregated funds include minimum death benefit and minimum
maturity benefit guarantees. Exposure to guarantees on segregated funds is
managed through product design and setting aside appropriate amounts within
liabilities and capital to support these guarantees. Adherence to these limits
is monitored regularly.

Foreign Currency Risk



| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Foreign currency riskis the risk of loss that results from changes in foreign currency exchange rates.

As a multinational company that manages operations in many currencies and
reports its results in Canadian dollars, we have an ongoing exposure to foreign
currency risk. The exposure of the operating funds to this risk is managed by
closely matching operating fund assets and liabilities by currency in each
country of operation. This, together with the use of foreign exchange
contracts, allows the Company to manage the risk associated with fluctuations
in foreign currency exchange rates.

The Company also holds assets supporting its equity in the currencies of each
jurisdiction in which it operates. This represents an exposure to movements in
foreign currency rates, as there are virtually no foreign currency liabilities
matching these assets. The amount of assets supporting equity that is
denominated in each of these foreign currencies is monitored closely and the
exposure is managed by hedging a portion of these foreign denominated assets
through the use of foreign exchange contracts as described in the Derivative
Financial Instrument Management section. (See note 5(b) to the Consolidated
Financial Statements for the impact on retained earnings and net income of a 1%
strengthening of the Canadian dollar relative to the currencies in the
jurisdictions in which the Company operates.)

The impact of the changes in currency rates in 2002 relative to 2001 on certain
selected financial information is set out in the following table:

Impact of Foreign Currency Fluctuations in 2002 Compared to 2001
(in millions of Canadian dollars except percentage amounts)

|                      |  |                 |     |           |  |          |      |                     |  |       |     |        |  |               |     |         |  |            |     |       |  |   |    |               |  |   |      |   |  |   |       |   |  |   |       |   |  |   |     |  
|--------------------- |  | --------------- | --- | --------- |  | -------- | ---- | ------------------- |  | ----- | --- | ------ |  | ------------- | --- | ------- |  | ---------- | --- | ----- |  | - | -- | ------------- |  | - | ---- | - |  | - | ----- | - |  | - | ----- | - |  | - | --- | -
|                      |  | Change in       |     |           |  |          |      | Increase (decrease)
|                      |  | average         |     | Change in |  |         
|                      |  | currency rate   |     | year-end  |  | General  |      | Segregated          |  |       |     |        |  | Shareholders |     | General |  | Segregated |     |       |  |   |    | Shareholders
|                      |  | relative to the |     | currency  |  | fund     |      | funds               |  |       |     |        |  | net           |     | fund    |  | funds      |     |       |  |   |    | equity       
|                      |  | Canadian dollar |     | rate      |  | premiums |      | deposits            |  | Total |     | income |  | assets        |     | assets  |  | Total      |     | (CTA)
|                      |  |                 |     |           |  |          |      |                     |  |       |     |        |  |               |     |         |  |            |     |      
|British pound         |  |                 | 5.4 | %         |  |          | 9.5  | %                   |  | $     | 77  |        |  | $             | 79  |         |  | $          | 156 |       |  | $ | 9  |               |  | $ | 886  |   |  | $ | 924   |   |  |   | 1,810 |   |  | $ | 112 |  
|Euro                  |  |                 | 6.5 | %         |  |          | 16.9 | %                   |  |       | 9   |        |  |               | 40  |         |  |            | 49  |       |  |   | 2  |               |  |   | 217  |   |  |   | 452   |   |  |   | 669   |   |  |   | 46  |  
|U.S. dollar and
other |  |                 | 1.3 | %         |  |          | (0.6 | )%                  |  |       | 24  |        |  |               | 3   |         |  |            | 27  |       |  |   |   |               |  |   | (105 | ) |  |   | (4    | ) |  |   | (109  | ) |  |   | (6  | )
|                      |  |                 |     |           |  |          |      |                     |  |       |     |        |  |               |     |         |  |            |     |       |  |   |    |               |  |   |      |   |  |   |       |   |  |   |       |   |  |   |     |  
|Total                 |  |                 |     |           |  |          |      |                     |  | $     | 110 |        |  | $             | 122 |         |  | $          | 232 |       |  | $ | 11 |               |  | $ | 998  |   |  | $ | 1,372 |   |  | $ | 2,370 |   |  | $ | 152 |  
|                      |  |                 |     |           |  |          |      |                     |  |       |     |        |  |               |     |         |  |            |     |       |  |   |    |               |  |   |      |   |  |   |       |   |  |   |       |   |  |   |     |  

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -34-





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##### 



Credit Risk



| |                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Credit riskis the risk of loss that arises when debtors, counterparties or
intermediaries are unable or unwilling to fulfil their obligations and includes
the risk associated with the concentration of investment holdings in specific
jurisdictions, industries or investees.

Investments

The objective of the Companys Investment Policy is to maintain a
well-diversified portfolio of relatively high overall quality. This objective
is met through policies and procedures, which guide the day-to-day management
of credit exposure. Canada Life has a well-established credit evaluation
process that aims to provide superior risk adjusted spreads, to protect
invested capital and to preserve underlying cash flows.

The Investment Policy sets limits on the quality of both on-and off-balance
sheet assets. Counterparty credit limits have been established to minimize
exposure to potential losses. Weighted average rating minimums of A and BBB-
as defined by Standard & Poors have been set for the bond and mortgage
portfolios respectively. The combined credit quality of all credit instruments,
including the credit equivalent exposure to derivatives, is required to be at
least A.

Concentration limits have also been established to limit the level of
investment that can be made in any single entity or group of related entities
by issuer, ratings, industry sector and geographic location. Adherence to this
policy is monitored regularly and the results are reported quarterly to the
Board.

Reinsurance

The Company has a variety of reinsurance business arrangements in place,
whereby the Company accepts reinsurance from other insurers and reinsurers and
uses reinsurance to manage Underwriting and Liability Risk. Reinsurance
arrangements do not relieve the Company of its liability as the primary
insurer. Therefore, the Company is exposed to credit risk with respect to
amounts ceded to reinsurers and retrocessionaires. In order to minimize the
exposure to this risk, the Company generally enters into reinsurance contracts
with properly licensed, well-established and financially strong reinsurers and
has developed a Reinsurance Policy that sets out counter party exposure limits
and minimum credit-rating criteria. Adherence to this policy is monitored on a
regular basis. At December 31, 2002, the Company had ceded 4.4% or $1,431
million (4.1% or $1,223 million at December 31, 2001) of its policy liabilities
to third parties.

The Company has made provisions in its Consolidated Balance Sheets for credit
losses in two ways:



|(i)  |  | specific provisions for assets that are currently impaired have been
included through reductions in the carrying values of the underlying
assets; and
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) |  | provisions that are included in the actuarial liabilities for assets that
may become impaired in the future.                                         

(The amounts for these provisions are identified in note 7(b) to the
Consolidated Financial Statements.)

Liquidity Risk



| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Liquidity riskis the risk that there are insufficient funds available to
honour all anticipated cash flow commitments (both on-and off-balance sheet) as
they fall due and any unanticipated cash demands.

The Companys objective with respect to liquidity is to ensure that it is able
to withstand all types of demand for cash. There are two types of liquidity
that may be required under various circumstances:



| |  |  | Operating liquidity is required to meet day-to-day cash outflow
obligations (e.g., payment of dividends, claims, expenses). Operating
liquidity risk is managed by matching the amount, currency and duration
of cash flows relating to assets and liabilities, within preset limits.
The level of this mismatch is regularly monitored and includes the
effect of all outstanding derivative financial instrument positions.
Additionally, the Company maintains an appropriate level of liquidity
by ensuring that a prescribed percentage of its assets is held in
marketable investments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Strategic liquidity is required to meet long-term obligations or to
withstand cash demand under adverse conditions (e.g., prolonged mass
liability surrenders or maturities, major investment defaults,
unexpected economic and market conditions). The strategic liquidity
measure is based on an industry accepted model and is calculated under
both immediate and ongoing stress scenarios. The Companys policy is to
maintain liquid assets at a level above a risk adjusted calculation of
those liabilities that are subject to scheduled and unscheduled
withdrawals.               

(Sources of liquidity are disclosed in note 5(d) to the Consolidated Financial
Statements.)

Derivative Financial Instruments

Derivative financial instruments are financial contracts that derive their
value from the value of the underlying financial assets, interest rates,
foreign currency rates or stock/bond/commodity indices. The increased
volatility and complexity of the financial markets over the last two decades
have led to increased risk levels because of exposures to fluctuations in
credit, interest rates, equity prices and foreign currency rates. These
increased risk levels have necessitated the development of a sophisticated,
diverse, cost effective and liquid derivative market that derives its values
from the changes in the values of the underlying financial assets, interest
rates, foreign currency rates or stock/bond indices.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -35-





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##### 



Derivatives include financial futures, forwards, options and swaps, or any
combination thereof. The Company is a limited end-user of derivatives and is
not a creator or dealer in these instruments. Derivative instruments are used
for both hedging and non-hedging purposes such as asset/liability, interest
rate, equity market price or foreign currency exchange management; or to
synthetically replicate an investment for those situations where it is deemed
to be more effective from a cost and flexibility perspective as compared to
directly investing in that particular type of investment.

The Company has established policies to limit the size and type of derivative
transactions, counterparty exposure in respect of both the notional amount
outstanding and the mark-to-market amount. As well, derivative transactions are
subject to authorization limits for specific personnel. Adherence to these
policies is monitored regularly and results are reviewed by senior management
at least monthly. Results are also reported to the Audit and Risk Management
Committee quarterly. As at December 31, 2002, the Company had $5,133 million
($4,159 million at December 31, 2001) in notional amount of derivative
contracts outstanding and a credit equivalent amount of $221 million ($182
million at December 31, 2001). (Note 20 to the Consolidated Financial
Statements describes the Companys exposure to derivative financial instruments
in greater detail.)

INSURANCE RISK

Product design and pricing risk



| |                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Product design and pricing riskis the risk that the price levied for a
product, service and/or block of insurance products is insufficient to ensure
an adequate return on capital and includes the risk of poorly designed products
due to insufficient market research or the impact that a new product
introduction will have on the sale of existing or other new products.

The process of pricing products includes the estimation of many factors such as
future investment yields, mortality and morbidity experience, expenses, policy
lapse rates and taxes. Pricing risk is the risk that actual experience in the
future will not develop as estimated at the time of pricing the products. Some
products are designed such that adjustments to premiums or benefits can be made
for variations in experience, while for other products no such adjustment is
possible.

The Company has developed the Product Design and Pricing Policy to manage this
risk. The policy specifies standards for pricing methods, the setting of
assumptions, profit margin objectives, required scenario analysis,
documentation and approval. Pricing assumptions are compared against actual
experience on an ongoing basis. Senior financial managers in each operating
division are responsible for ensuring that the design and pricing of each new
product, and revisions to assumptions for existing products, are consistent
with the Policy.

Entry into new lines of business, unusual risks not currently offered, or
deviations from the Product Design and Pricing Policy are subject to prior
approval of both the Companys Appointed Actuary and the head of the particular
division. In these instances, reinsurance may also be used to effectively
manage the risk.

Additionally, adherence to the Product Design and Pricing Policy is subject to
internal peer review and senior management in each division is required to
report compliance with this Policy annually to the Companys Appointed Actuary.

Underwriting Risk



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Underwriting riskis the risk of loss resulting from the selection and approval
of risks to be insured and the management of contractual and non-contractual
product options.

The Companys philosophy with respect to underwriting is to prudently manage
the risks with due consideration given to the Companys expertise, its ability
to absorb losses, and expected returns. For existing products, where the
Company has considerable expertise in both underwriting and claims, it will
generally manage the risk internally. Where existing products have significant
loss exposure, some form of excess loss reinsurance will generally be put in
place. For newer product areas in which the Company has little experience in
underwriting and claims, additional reinsurance may be obtained and the advice
of industry experts will generally be sought. It is the Companys policy in
underwriting cases to avoid excessive exposure with respect to any specific
risk profile. In general, concentration risk is avoided by operating
internationally and by underwriting a wide range of cases and products within
each jurisdiction.

In addition to establishing appropriate underwriting criteria to determine the
insurability of applicants, insurance risk is managed by limiting the Companys
exposure to life and health claims. The claims risk for the Company is limited
to its retention limit of $5 million for any individual life claim and various
limits for health claims, not exceeding this limit, depending on the type of
coverage. To ensure these limits continue to be appropriate, management and
the Board periodically review the policies relating to the maximum risks the
Company will assume. Claims in excess of these retention limits are reinsured
to outside reinsurers. The Company has also maintained catastrophic reinsurance
coverage with outside reinsurers in the event of a loss of three or more lives
in the same catastrophe.

Policy Liabilities and Claims Risk



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Policy liabilities and claims riskis the risk of loss resulting from
unfavourable mortality, morbidity, surrender or lapse experience or
unfavourable expense and interest rates as they relate to the actuarial
liabilities recorded by the Company. This risk also includes the risk of loss
resulting from the inappropriate adjudication of claims.

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|Canada Life Financial Corporation |  | -36-





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The projection of liability cash flows involves the use of best estimates for
setting assumptions related to mortality, morbidity, administrative expenses,
policyholder dividends, lapses and surrenders. Actual experience may vary from
these estimates, thereby subjecting the Company to potential losses. To manage
this risk, the Company has established a valuation policy in accordance with
CIA guidelines. Senior actuaries in each division are required to report on
compliance with the valuation policy annually to the Companys Chief Actuary.
Additionally, actual experience is monitored against these assumptions to
ensure they remain reasonable. (The Companys actuarial policies are described
in more detail in Note 3 to the Consolidated Financial Statements.)

BUSINESS RISK

Operational Risk



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Operational riskis the risk of direct or indirect loss that arises from
problems in the performance of business functions or processes and can result
from deficiencies or breakdowns in internal controls or processes, technology
failures, human errors or dishonesty and natural disasters.

Standards and procedures have been established to ensure that appropriate and
effective internal controls are developed and implemented to manage operational
risks and that reliable and comprehensive systems are in place to monitor
properly the effectiveness of those controls on a regular basis. The management
team actively manages the business operations and has implemented
organizational and procedural controls supported by information systems to
manage the exposure to operational risk. In addition, the Company has
procedures in place in all of its jurisdictions to ensure its continuing
operations and to minimize any disruption in service in the event of a natural
or other disaster. These procedures are reviewed and tested on a regular basis.

An independent internal audit function, reporting to the Audit and Risk
Management Committee of the Board, monitors the effectiveness of these
organizational and procedural controls, including compliance with OSFIs
Standards of Sound Business and Financial Practices and the Quebec Guideline
for Sound Risk Governance.

Legal and Regulatory Risk



| |                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Legal and regulatory riskarises as a result of non-conformance with laws,
rules, regulations, legislation, prescribed practices, or ethical standards in
any jurisdiction in which a company operates, as well as the risk of loss
resulting from an existing or proposed business arrangement.

The Company is subject to extensive regulatory requirements and oversight in
all jurisdictions in which it operates. In addition, in the normal course of
business, the Company may be exposed to liabilities arising from various
litigation.

The Company has established practices and procedures to manage legal and
regulatory risk effectively in each jurisdiction in which it operates. In order
to achieve this, the legal and compliance departments in each operating
division interpret local laws, rules and regulations, as well as global
policies and procedures, to protect the Company and its shareholders from legal
or regulatory liabilities. Corporate Legal and Compliance departments are in
place at head office to support the local legal and compliance departments.
These Corporate departments provide the Board with regular objective
assessments of the risks facing the Company from a legal and regulatory
perspective.

Strategic Risk



| |                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Strategic riskarises from the inability to plan and implement adequately
appropriate business strategies, decision-making and resource allocations, as
well as an inability to adapt to changes in the business environment, including
ensuring products and customer service are competitive and meet customer needs.

In each of its operations, the Company increasingly competes with large,
diversified and well-capitalized financial services companies such as other
life insurance companies, banks, investment dealers and mutual fund companies.
Competition may be based on the types of products sold or services provided,
price, quality of service or the relative financial strength of the Company.

The Company has a rigorous and dynamic financial and business planning process
in place. Planning is completed at all business levels. Business plans are
presented annually to the Board and include financial and other goals along
with measurement against targets. The Company also regularly conducts market
analysis to ensure it remains competitive within the current business
environment. Through the Companys commitment to customer service excellence,
service standards are developed and are monitored by management to ensure
customer satisfaction.

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -37-





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##### 



ACCOUNTING POLICIES

CHANGES IN ACCOUNTING POLICIES

GOODWILL AND OTHER INTANGIBLE ASSETS

Effective January 1, 2002, the Company adopted prospectively the new
recommendations for Goodwill and Other Intangible Assets issued by the Canadian
Institute of Chartered Accountants (CICA). Under these new requirements,
goodwill is no longer amortized to shareholders net income. Instead, goodwill
is subject to a periodic impairment review to test whether the fair value
remains greater than or equal to book value. Any excess of book value over fair
value is charged to general expenses in the period in which the impairment has
been determined. The Company completed impairment testing for 2002 and
determined that goodwill is not impaired. The adoption of this standard
eliminated approximately $25 million of goodwill amortization in 2002.

STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

Effective January 1, 2002, the Company adopted the CICAs new recommendations
for Stock-based Compensation and Other Stock-based Payments, which allow for
the use of either the fair value or intrinsic value methods to account for
certain stock-based compensation agreements. The Company has adopted these
recommendations retroactively without restatement of prior periods, as the
restatements are not material to the Consolidated Financial Statements. In
2002. the Company used the intrinsic value method of accounting for such
awards, under which no compensation expense is recognized for stock options
where the exercise price is equivalent to the closing market price of the
Companys shares on the Toronto Stock Exchange the day prior to the option
grant date. The new recommendations also require that Stock Appreciation Rights
(SARs) that can be settled in cash be recorded as liabilities for the excess of
the market value of the shares over the exercise price.

The Company has elected to adopt the fair value method of accounting for stock
options prospectively from January 1, 2003. The amount of additional
compensation expense will depend on the number of options granted and their
fair value at the date of grant.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting
principles generally accepted in Canada (GAAP) requires management to adopt
accounting policies and to make estimates and assumptions that affect amounts
reported in the Consolidated Financial Statements. The critical accounting
policies and related judgements underlying the Companys Consolidated Financial
Statements are summarized below. In applying these policies, management makes
subjective and complex judgements that frequently require estimates about
matters that are inherently uncertain. Many of these policies are common in the
insurance and other financial services industries; others are specific to the
Companys businesses and operations. (The Companys general policies are
described in detail in note 2 of the Consolidated Financial Statements.)

ACTUARIAL LIABILITIES

Actuarial liabilities represent the amounts required, in addition to future
premiums and investment income, to provide for future benefit payments,
policyholder dividends, commissions and policy administrative expenses for all
insurance and annuity policies in force with the Company. The Companys
Appointed Actuary is responsible for determining the amount of the actuarial
liabilities such that sufficient funds will be available in the future to meet
the Companys obligations. The valuation methods used by the Appointed Actuary
are determined using generally accepted actuarial practices, according to
standards established by the CIA. The valuation methodology used is the
Canadian Asset Liability Method. This method involves the projection of future
events in order to determine the amount of assets that must be set aside
currently to provide for all future obligations and involves a significant
amount of judgement. (Additional details regarding these judgements and
estimations can be found in note 3 of the Consolidated Financial Statements.)

INCOME TAXES

The Company has substantial future income tax assets. The recognition of future
tax assets depends on managements assumption that future earnings will be
sufficient to realize the deferred benefit. The amount of the asset recorded is
based on managements best estimate of the timing of reversal of the asset.

EMPLOYEE FUTURE BENEFITS

Accounting for pension and other post-retirement benefits requires estimates of
future returns on plan assets, expected increases in compensation levels,
trends in health care costs, as well as the appropriate discount rate for
accrued benefit obligations. (These estimates are discussed in note 18 of the
Consolidated Financial Statements.)

|                                  |  |     
|--------------------------------- |  | ----
|Canada Life Financial Corporation |  | -38-