Great-West Lifeco Inc. · TSX:GWO

Great-West Lifeco — Q2 2016 Earnings Presentation

34 slides from Great-West Lifeco's earnings presentation, 2016

  1. Slide 1: Quarterly Information for Analysts and Investors Q2 2016

    Quarterly Information for Analysts and Investors Q2 2016

  2. Slide 2: Cautionary notes

    Cautionary notes CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains some forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predic

  3. Slide 3: Paul Mahon, President & CEO: Summary of results

    Paul Mahon President & CEO Great-West Lifeco Summary of results 3

  4. Slide 4: Leveraging global strengths and capabilities to drive growth

    Leveraging global strengths and capabilities to drive growth Canada U.S. Europe Protection Depth of insurance expertise across life, health, wealth and retirement Asset management Diversity of platforms, investment styles, products and global reach Retirement solutions Scale and breadth of member of

  5. Slide 5: Markets – March 31st to June 30th

    Markets – March 31st to June 30th S&P TSX S&P 500 Eurostoxx 50 FTSE 100 CAD/GBP 110% $1.95 S&P TSX S&P 500 Eurostoxx 50 FTSE 100 CAD/GBP 110% $1.95 105% $1.90 105% $1.90 100% $1.85 100% $1.85 95% $1.80 95% $1.80 90% $1.75 90% $1.75 85% Can. 10 Yr. U.S. 10 Yr. U.K. 10 Yr. $1.70 $1.70 85% 2.10% Can. 1

  6. Slide 6: Summary of results

    Summary of results Earnings (C$m) 720 683 671 659 620  Earnings up 2% YoY against a challenging macro environment  Strong improvement from Q1, up 8%  Continuing capital strength and flexibility Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 • MCCSR at 232% 238% 236% 234% • Lifeco cash of $813m 229% MCCS

  7. Slide 7: Summary of results – Sales

    Summary of results – Sales  Canada Sales (C$b) • Wealth Management sales 48.0 lower, consistent with 39.0 market, partially offset by 36.5 higher Insurance results 24.5 24.9  U.S. • No mega plan sales at Empower this quarter Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 • Putnam sales up, driven by inst

  8. Slide 8: Summary of results – Expenses

    Summary of results – Expenses  Lifeco expense growth slowing, Expenses (C$m) (1) up 3% YoY on constant Y/Y currency basis 1,062 1,102 1,145 1,175 1,124 6% 6%  Canada • Continue to invest in 6% business • Expense growth 6% moderating compared to previous quarters Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2

  9. Slide 9: Summary of results – Fee Income

    Summary of results – Fee Income Fee Income Y/Y  Lifeco fee income steady YoY Fee Income (C$m) 0% • Average equity markets 1,333 1,254 (100% 1,226 1,241 1,231 lower in all segments: S&P/TSX (8%) (100% ) S&P 500 (1%) Eurostoxx 50 (18%)  Canada (100% • Positive cash flows offset Q2 2015 Q3 2015 Q4 20

  10. Slide 10: Brexit: Impact on Lifeco's Q2 earnings is not material

    Brexit Impact on Lifeco’s Q2 earnings is not material  Brexit resulted in market volatility and uncertainty, with the British pound depreciating by approximately 10% against the Canadian dollar • Lower FX rates had minimal impact on earnings as quarterly average rates are used for translation  UK

  11. Slide 11: Business developments

    Business developments  Completed transactions to acquire Aviva Health Insurance Ireland Limited and assume full control of GloHealth Financial Services Limited • Received regulatory approval and closed August 1st • Set synergy targets of €16m, with integration and restructuring costs of €16m  Cont

  12. Slide 12: Garry MacNicholas, EVP & CFO: Financial highlights

    Garry MacNicholas EVP & CFO Great-West Lifeco Financial highlights 12

  13. Slide 13: Financial highlights

    Financial highlights Earnings per Share 0.724  Q2 earnings of $671m or 0.661 0.688 0.625 0.675 $0.675 per share  Earnings up 2% YoY in challenging markets  Canada earnings strong in spite of lower TSX  Putnam fees lower, partially Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 offset by lower variable

  14. Slide 14: Financial highlights: Source of earnings

    Financial highlights For the three months ended June. 30, 2016 Q2/16 Q1/16 Q2/15 Source of Earnings (C$m) Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 288 98 252 (5) 633 653 679 Impact of new business (3) (30) (11) - (44) (68) (51) Experience gains and losses 71 5

  15. Slide 15: Financial highlights: Book value and ROE

    Financial highlights Book Value per Share 20.07 19.40 19.29 19.04 18.28  Lifeco cash at quarter end was $0.8b  Lifeco book value per share declined with recent currency movement, but up 4% YoY Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Return on Equity (Trailing 4 quarters) 19.7%  Return on Equity o

  16. Slide 16: Financial highlights: Assets under administration

    Financial highlights Assets Under Administration Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 YoY (C$b) General Fund 192 199 202 197 197 3% Segregated Fund 185 191 198 193 193 4% Mutual Fund & Institutional 232 239 253 238 244 5% Other AUA 539 525 560 559 550 2% Total 1,148 1,154 1,213 1,187 1,184 3%  O

  17. Slide 17: Questions

    GREAT-WEST FECOr« 17

  18. Slide 18: Appendix

    GREAT-WEST FECOr« 18

  19. Slide 19: Canada

    Canada (In C$m) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 YoY Sales Individual Insurance 138 142 137 125 155 12% Group Insurance 121 251 135 283 119 (2%) 259 393 272 408 274 6% Individual Wealth Management 2,092 1,970 2,411 2,267 1,907 (9%) Group Wealth Management 665 581 809 593 496 (25%) 2,757 2,551

  20. Slide 20: United States

    United States (In US$m) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 YoY GWF Sales Empower Retirement 7,562 11,720 15,153 20,029 4,438 (41%) Individual Markets 263 180 340 241 246 (6%) Total 7,825 11,900 15,493 20,270 4,684 (40%) Putnam Sales 6,916 7,818 8,111 9,042 8,236 19% Fee Income Empower Retiremen

  21. Slide 21: Europe

    Europe Constant (In C$m) Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 YoY Currency Sales UK / Isle of Man 523 821 819 651 671 28% Ireland / Germany 2,873 6,895 3,098 3,923 4,879 70% Total 3,396 7,716 3,917 4,574 5,550 63% 54% Fee Income UK / Isle of Man 74 71 69 70 74 0% Ireland / Germany 203 207 251 246

  22. Slide 22: Putnam - AUM and flows

    Putnam - AUM and flows (US$b) Putnam Mutual FundsAUM Flows Institutional 156.3 (2.8) 4.5 146.6 148.4 145.8 1.6 147.7 3.7 (6.1) 1.0 70.5 67.9 70.9 72.8 76.1 85.8 78.7 77.5 73.0 71.6 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Sales Redemptions Market Q2 2016 In-Qtr Avg. 160.4 153.3 151.2 141.4 146.7 AUM 22

  23. Slide 23: Putnam – Core net earnings

    Putnam – Core net earnings Putnam Net Earnings - Core Earnings Putnam Net Earnings - Core Earnings Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) (US$m) Expenses Income Taxes Expenses Income Taxes Fee & Net Inv. Income Operating Margin (Pre-tax) $250 35% % of Budget $250 Fee

  24. Slide 24: Consolidated MCCSR ratio

    Consolidated MCCSR ratio 238% 236% 234% 233% 232% 230% 238% 229% 236% 230% 234% 233% 233% 228% 232% 224% 223% 230% 222%229% 230% 221% 228% 224% 223% 218% 222% 221% 210% 210% 207% 218% Adjusted MCCSR 205% 205% 204% 210% 210% 200% 200% 200% 201% 207% 205% 205% 204% 201% 200% 200% 200% 190% Q1 Q2 Q3 Q4

  25. Slide 25: Stable trend over the years

    Stable trend over the years (C$m) Experience Gains (Losses), Management Actions, and Changes in Assumptions as a % of Net Income Before Tax 3,347 3,268 2,874 2,769 2,633 2,504 2,576 2,499 2,447 2,335 2,237 11 Year 26% 25% 24% 23% Average 20% 19% 20% 20% 21% 18% 20.6% 11% 2005 2006 2007 2008 2009 201

  26. Slide 26: Invested asset composition

    Invested asset composition*  Invested assets at June 30, 2016 were $170.9bln Cash & CD's 2%  Diversified high quality portfolio: • Bonds represent 73% of invested Loans to assets (99% are investment grade; Policyholders Investment Properties 3% 5% 82% rated A or higher) Gov't, Gov't Related and Ag

  27. Slide 27: Lifeco consolidated bond portfolio

    Lifeco consolidated bond portfolio* Corporate and Non-Agency Securitized Government, Government Related and Other Financial Other Corporate and % of Invested Domicile of Issuer Agency Securitized Banking Institutions and REITs Non-Agency Securitized Assets $ (millions) United States 5.9% 0.8% 1.7% 1

  28. Slide 28: Corporate and securitized bonds – Sector diversification

    Corporate and securitized bonds – Sector diversification* % of % of Invested Invested Assets Assets Corporates Non-Agency Securitized Utilities 9.1% ABS 2.1% Consumer Products 5.8% CMBS 2.2% Industrial Products 4.3% RMBS 0.9% Banking 3.3% Covered 0.6% Other Financial Institutions 3.1% Total Securiti

  29. Slide 29: Direct energy exposure – Bonds

    Direct energy exposure – Bonds (C$m) Carrying Value Credit Rating % of Amortized Sub-Sector AAA AA A BBB BB & Lower Total Lifeco IA Cost Midstream - - 1,039 1,139 67 2,245 1.3% 2,102 Integrated 4 446 531 115 - 1,096 0.7% 1,044 Independent - - 199 482 32 713 0.4% 688 Oil Field Services - 46 187 210 2

  30. Slide 30: Indirect energy exposure – Commercial mortgages and investment property

    Indirect energy exposure – Commercial mortgages and investment property (C$m) Carrying Value ‐ Property Type % of (1) (2) City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Calgary, Alberta 140 354 384 249 141 1,268 0.8% Edmonton, Alberta 485 143 186 191 56 1,061 0.6% Total Calg

  31. Slide 31: United Kingdom property related exposures: Mortgages

    United Kingdom property related exposures Mortgages ‐ (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London 302 764 505 - 63 1,634 1.0% Other United Kingdom 80 720 226 815 264 2,105 1.2% Total United Kingdom 382 1,484 731 815 3

  32. Slide 32: United Kingdom property related exposures: Investment Properties

    United Kingdom property related exposures Investment Properties ‐ (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 25 247 - 35 307 0.2% Other United Kingdom - 1,103 386 622 383 2,494 1.4% Total United Kingdom - 1,128 633

  33. Slide 33: Credit markets

    Credit markets In-quarter developments  Credit experience related to impairments and rating changes negatively impacted shareholders’ net earnings by $18 million in the quarter Total Credit Impact on Shareholders’ Net Earnings 2015 Full Year 2016 YTD ($ millions) Q1 Q2 Q3 Q4 2015 Q1 Q2 2016 Credit

  34. Slide 34: Currency

    Currency Income & Expenses Balance Sheet US$ £ € US$ £ € Q2 2016 1.29 1.85 1.46 1.30 1.72 1.44 Q1 2016 1.37 1.96 1.51 1.30 1.87 1.48 Q4 2015 1.34 2.03 1.46 1.38 2.04 1.50 Q3 2015 1.31 2.03 1.46 1.34 2.02 1.50 Q2 2015 1.23 1.89 1.36 1.25 1.96 1.39 34

Great-West Lifeco — Q2 2016 Earnings Presentation on 6ix