Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q1 2020 Earnings Presentation
38 slides from Great-West Lifeco's earnings presentation, 2020
Slide 1: Quarterly Results Presentation Q1 2020
Quarterly Results Presentation Q1 2020
Slide 2: Cautionary notes
Cautionary notes CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document may contain forward-looking information. Forward-looking information includes statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "antic
Slide 3: Summary of Results
Paul Mahon President & CEO Great-West Lifeco Summary of Results 3
Slide 4: COVID-19: Response and positioning
COVID-19: Response and positioning Operational Financial Protecting our employees with 98% of global Strong balance sheet and capital position; employees working remotely LICAT of 133%, above internal target range Leveraging digital technologies to deliver Diversified business model, balance
Slide 5: Earnings
Earnings Earnings per Share (EPS) COVID-19 negatively 0.90 0.79 impacted net earnings by 0.73 $299m 0.67 0.65 0.59 0.58 0.55 Base EPS up 2% YoY 0.49 0.37 • Strong business growth in Base1 Net Reinsurance • Seed capital losses and lower fees due to equity Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 m
Slide 6: COVID-19: Impact on our business
COVID-19: Impact on our business Impacts Near-term actions and expectations Canada Lower health and dental claims Temporary premium reductions implemented and expectation for claims level to return to normal Increase in disability claims Limited impact to date; supporting clients with resour
Slide 7: COVID-19: Impact on our business
COVID-19: Impact on our business Impacts Near-term actions and expectations Europe Slowdown in sales activity and slightly higher Pricing increases on group income protection in U.K. claims Higher persistency in group risk a mitigant Slowing of bulk annuity sales expected to be temporary D
Slide 8: Invested assets (IA) portfolio
Invested assets (IA) portfolio Actions taken since Below investment grade bond exposure reduced to $643m down from 2009 to maintain a $1,736m in 2009 Well-positioned high quality bond to weather the current European crisis. subordinate bankDiversified, high exposure $1.0b, quality down portfolio
Slide 9: Sales
Sales Sales1,3 (C$b) Canada 90.2 Strong Individual Wealth driven by new segregated fund shelf 66.5 Higher Individual Insurance driven by new par product 41.9 42.0 U.S. 34.3 Higher mid and small plan sales at Empower – Q1 2019 included a large plan with 200k Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2
Slide 10: Fee and Other Income
Fee and Other Income Fee and Other Income (C$m) Lifeco fees level YoY, excluding Q1 2019 fees related to the 1,479 1,511 1,496 1,515 1,441 U.S. Individual Markets Higher average equity markets and assets YoY U.S. up 8%, ex-Individual Markets in Q1 2019 • Participant growth at Empower Q1 2019 Q
Slide 11: Expenses
Expenses Operating Expenses (C$m) Continued expense discipline company-wide 1,295 1,247 1,253 1,290 1,333 U.S. up 10% ex-Individual Markets in Q1 2019 • Participant growth and sales at Empower Strategic investments in Ireland Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Business growth in Reinsur
Slide 12: Financial Highlights
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 12
Slide 13: Earnings
Earnings Earnings per Share1 Base EPS up 2% YoY 0.90 Canada 0.79 0.73 Trading gains partly offset 0.67 0.65 0.58 0.59 by higher disability claims 0.55 0.49 U.S. 0.37 Base1 Empower up due to Net business growth Putnam down due to seed capital losses driven by Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1
Slide 14: Earnings Reconciliation and COVID-19 Related Impacts
Earnings Reconciliation and COVID-19 Related Impacts Earnings Reconciliation Post-tax Per For the three months ended March 31, 2020 (C$) (m) Share Base earnings 1 543 0.59 Items excluded from base earnings Actuarial assumption changes and management actions (52) (0.06) Market-related impact (149) (0
Slide 15: Source of Earnings
Source of Earnings For the three months ended Mar. 31/20 Q1/20 Q4/19 Q1/19 Canada U.S. Europe CRS Corp. (C$m) Total Total Total Expected profit on in-force business1 297 95 193 149 (5) 729 762 704 Impact of new business (17) (41) (26) (2) - (86) (5) (73) Experience gains and losses2 33 (20) (152) (5
Slide 16: Source of Earnings – Additional Detail
Source of Earnings – Additional Detail Experience gains and losses Q1/20 Q1/20 For the three months ended Mar 31/20 (C$m) Post-tax Pre-tax Yield enhancement 58 80 Market related impact on liabilities (184) (215) Fee variances (market related) (31) (38) Mortality / longevity 37 42 Credit related (23)
Slide 17: Book Value per Share and LICAT
Book Value per Share and LICAT Book Value per Share (C$) Book value up 1% YoY, impacted 22.07 20.84 21.02 21.53 22.34 by the SIB and currency translation in OCI Lifeco cash $900m Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 LICAT at 133%, down 2 points from Q4 LICAT 2019 due to dividends and busine
Slide 18: Looking ahead…
Looking ahead… A focus on protecting, adapting and growing our business • Safety, security and support of employees, advisors and customers • Leverage and advance digital platforms • Prudently manage our balance sheet and capital • Proactive focus on growth opportunities Our resilient and proven b
Slide 19: Questions
Questions GREAT-WEST ECOne 19
Slide 20: Appendix
Appendix GREAT-WEST ECOne 20
Slide 21: Reporting changes
Reporting changes Reporting segment changes • Prior Europe segment divided into two separate reporting segments aligned with executive leadership changes • “New” Europe segment includes U.K, Irish and German businesses and Europe Corporate • “New” Capital and Risk Solutions (CRS) comprised of the
Slide 22: Canada
Canada (In C$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY Sales Individual Customer Individual Insurance 101 98 102 128 118 17% Individual Wealth 2,256 2,125 1,918 2,590 2,784 23% 2,357 2,223 2,020 2,718 2,902 23% Group Customer Group Insurance 186 109 237 102 119 (36%) Group Wealth 637 608 1,263
Slide 23: Canada
Canada (In C$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY Individual Customer Base Earnings 125 147 165 143 138 10% Items excluded from Base Earnings (1) (12) (80) (56) (126) Net Earnings 124 135 85 87 12 (90%) Group Customer Base Earnings 124 161 181 144 143 15% Items excluded from Base Earnings
Slide 24: United States
United States1 (In US$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY Sales Empower Retirement 45,847 8,746 12,792 11,968 25,060 (45%) Reinsured Insurance & Annuity Business 241 65 - - - Total 46,088 8,811 12,792 11,968 25,060 (46%) Putnam Sales 10,940 9,258 10,879 12,108 14,664 34% Fee and Other Inc
Slide 25: United States
United States1 (In US$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY Empower Retirement Base Earnings 30 43 46 54 40 33% Items excluded from Base Earnings - - (1) 23 (9) Net Earnings 30 43 45 77 31 3% Reinsured Insurance & Annuity Business Base Earnings 25 22 - - - 2 Items excluded from Base Earning
Slide 26: Europe
Europe (In C$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY Sales U.K. / Isle of Man 1,216 1,748 1,238 1,027 1,102 (9%) Ireland 9,888 5,313 5,784 5,393 8,480 (14%) Germany 77 70 76 146 86 12% Total 11,181 7,131 7,098 6,566 9,668 (14%) Fee and Other Income U.K. / Isle of Man 56 52 54 63 39 (30%) Irel
Slide 27: Europe
Europe (In C$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY U.K. Base Earnings 96 69 105 233 72 (25%) Items excluded from Base Earnings 26 2 62 (27) 19 Net Earnings 122 71 167 206 91 (25%) Ireland Base Earnings 31 54 29 52 27 (13%) Items excluded from Base Earnings 2 21 54 36 (43) Net Earnings 33 75
Slide 28: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 YoY Fee and Other Income Reinsurance 3 2 2 2 3 0% Operating Expenses Reinsurance 20 20 20 21 21 5% Corporate & Par 1 1 1 1 2 100% Total 21 21 21 22 23 10% Reinsurance Base Earnings 74 84 85 162 120 62% Items excluded from Ba
Slide 29: Putnam – AUM and Flows
Putnam – AUM and Flows (US$b) Mutual Funds Institutional 5.5 (11.7) 181.7 174.7 174.2 (10.7) 170.6 9.2 (14.1) 148.9 (11.0) 92.2 89.3 91.4 89.5 75.3 83.3 84.7 89.5 81.3 73.6 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Sales Redemptions Market Q1 2020 In-Qtr Avg. 168.0 172.0 174.3 178.0 172.4 AUM 29
Slide 30: Putnam – Core Net Earnings
Putnam – Core Net Earnings Expenses Income Taxes (US$m) Fee & Net Inv Income Base Margin (Pre-tax) 226 229 226 $235 $190 9.1% 9.5% 6.6% 7.2% -16.1% (208) (204) ($218) (211) ($221) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Core Net Earnings $6 $15 $17 $21 ($24) Note: Core net earnings (loss) (a non-IFR
Slide 31: Invested Assets
Invested Assets 1 Invested assets of $177.8 billion Cash & CD's Diversified high quality portfolio: 3% − Bonds represent 69%: − 99% are investment grade Loans to Gov't, Gov't Related and − 80% rated A or higher Policyholders Agency Securitized Bonds Investment Properties 3% 5% 27% − 85% of bond
Slide 32: Lifeco Consolidated Bond Portfolio
Lifeco Consolidated Bond Portfolio* *Includes certain funds held by ceding insurers 32
Slide 33: Lifeco Consolidated Bond Portfolio – By Rating
Lifeco Consolidated Bond Portfolio – By Rating* Carrying Value Rating % of Total (C$m) AAA 22,003 18.0% AA 35,662 29.1% A 40,552 33.1% BBB 23,583 19.3% BB or Lower 643 0.5% Total 122,443 100.0% Bond portfolio quality remains high, with 99% rated investment grade and 80% rated A or higher *Includes
Slide 34: Corporate and Non-Agency Securitized Bonds – Sector Diversification
Corporate and Non-Agency Securitized Bonds – Sector Diversification* % of Invested % of Invested Assets Assets Corporates Non-Agency Securitized Electric Utilities 7.2% CMBS 1.6% Consumer Products 5.1% RMBS 0.2% Banks 3.5% Other ABS 3.5% Industrial Products 3.5% Total Non-Agency Securitized 5.3% Fin
Slide 35: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type Equity % of Multi Family Retail Office Industrial Other Total City/Region Release Lifeco IA Central London 402 965 922 36 81 185 2,591 1.4% Other United Kingdom 301 562 431 842 483 1,248 3,867 2.2% Total United Ki
Slide 36: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of Multi Family Retail Office Industrial Other Total Lifeco IA City/Region Central London - 28 307 - 43 378 0.2% Other United Kingdom - 856 337 775 302 2,270 1.3% Total United Kingdom - 884 644 775 3
Slide 37: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department % of Invested Asset Type and Other Stores Grocery Total Lifeco IA Retail LTV Pre-2009 Mortgages 143 104 127 374
Slide 38: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q1 2020 1.34 1.72 1.48 1.40 1.74 1.55 Q4 2019 1.32 1.70 1.46 1.30 1.72 1.46 Q3 2019 1.32 1.63 1.47 1.32 1.63 1.44 Q2 2019 1.34 1.72 1.50 1.31 1.66 1.49 Q1 2019 1.33 1.73 1.51 1.34 1.74 1.50 38