Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Q1 2024 Earnings Presentation
39 slides from Great-west Lifeco's earnings presentation, 2024
Slide 1: Quarterly Results Presentation 1Q24
Great-West Lifeco Quarterly Results Presentation 1Q24
Slide 2: Cautionary Notes
Cautionary Notes CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains 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 "will", "may", "expe
Slide 3: Conference call participants
Conference call participants Presenters Q&A Participants Paul Mahon David Harney President & CEO President and COO, Europe and Capital and Risk Solutions Ed Murphy Linda Kerrigan President and CEO, Empower SVP & Appointed Actuary Jon Nielsen Fabrice Morin EVP & CFO President & COO, Canada Jeff Pouli
Slide 4: Business Overview
Business Overview Paul Mahon President & CEO Great-West Lifeco
Slide 5: Highlights
Highlights Strong start to the year with record base earnings for third consecutive quarter, exceeding $1B for the first time. Net earnings of $1B from continuing operations benefited from market movements Empower delivered its highest quarterly base earnings and surpassed US$1.6T of AUA • Prudentia
Slide 6: Strong start to the year
Strong start to the year Base Earnings1 Base ROE1 Base EPS1 $1,012M 17.2% $1.09 Up 23% YoY Up 1.1 pp YoY Up 22% YoY Net Earnings2 Net ROE2 14.6% Net EPS2 $1.10 $1,031M BVPS3 LICAT ratio4 Leverage Ratio5 $24.74 129% 30% Up 6% YoY 1. This metric is a non-GAAP financial measure/ratio. Refer to "Non-GAA
Slide 7: Canada: Strong average AUA growth driven by acquisitions and market performance
Canada: Strong average AUA growth driven by acquisitions and market performance, and solid organic growth in Group Life & Health Wealth and Retirement Group Life & Health Insurance & Annuities Average AUA1,2 Book premiums4 Contractual Service Margin (CSM)5 (C$B) (C$B) (C$M) +38% +19% -8% 172 14.8 15
Slide 8: Europe: Continued growth across all value drivers
Europe: Continued growth across all value drivers Wealth and Retirement Group Life & Health Insurance & Annuities Average AUA1,2 Book premiums4 Contractual Service Margin (CSM)5 (C$B) (C$M) (C$M) +14% +10% +17% 223 2,415 2,459 3,255 3,307 209 2,230 195 32 Workplace 2,837 30 28 Wealth & Asset 179 191
Slide 9: CRS: New structured reinsurance business drove growth in run-rate earnings
CRS: New structured reinsurance business drove year-over-year growth in run- rate earnings Run-Rate Reinsurance Earnings Drivers1 Reinsurance CSM (C$M) (C$M) +7% -1% 210 206 1,762 1,745 1,736 193 45 47 48 38 38 39 127 121 106 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 • Consistent results driven by strong execut
Slide 10: Empower
Empower Ed Murphy President and CEO, Empower Great-West Lifeco
Slide 11: Empower: Strong AUA growth driven by market performance
Empower: Strong AUA growth driven by market performance DC Average AUA (incl. AUM) 1 PW Average AUA (incl. AUM) 1 (US$B) +15% (US$B) +25% 1,499 74 1,309 1,384 67 59 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 Net flows3 (U$B) DC – Shock lapses Net flows3 (U$B) (2.0) (1.1) (2.4) from Prudential book2 3.1 1.7 1.3 8
Slide 12: Empower has three building blocks of success
Empower has three building blocks of success • Outpacing industry growth in retirement plan services • Expanding in retail wealth management • Executing with excellence in M&A Focus of today 12
Slide 13: Acquisitions of MassMutual and Prudential retirement businesses extended Empower leadership
Acquisitions of MassMutual and Prudential retirement businesses successfully extended Empower leadership in the market 1Q24 Surpassed US$1.6T AUA1 Retirement Services Business Retirement Services Business Full-Service Retirement Business Acquired in 2014 Acquired in 2020 Acquired in 2022 18.6M Total
Slide 14: Empower has generated significant value through technology and integration prowess
Since 2014, Empower has generated significant value by utilizing its technology and integration prowess to drive synergies and reduced cost-to-serve Empower has successfully completed 26 plan migration waves since 2014 250 48K 6.7M Cross-discipline migration Plans Participants with a balance experts
Slide 15: Exceeded retention targets and achieved stated synergies from acquisitions
Exceeded retention targets and achieved stated synergies from acquisitions Retirement Services Business Full-Service Retirement Business Retention as of integration Pre-tax expenses Retention as of integration Pre-tax expenses completion at 4Q223 (US$M) completion at 2Q244 (US$M) (%) (%) 90 -39% 94
Slide 16: Reducing cost-to-serve despite the inflationary environment
Acquisitions, strong growth and a continued focus on operational efficiencies contributed to reducing cost-to-serve despite the inflationary environment Evolution of Cost Per Participant (CPP) -6% 117% +17 pp (20) pp 100% 94% (3) pp 2020 Impact of MassMutual 2020 + pre-synergized Integration Scale &
Slide 17: Opportunities for Empower to further expand cost leadership
Opportunities for Empower to further expand cost leadership… allowing for investment in customer experience, continued organic growth and higher margins • Redesigning end-to-end processes in a scalable way with a client-centric view • Increasing utilization of AI and automation • Further leveraging
Slide 18: Financial Highlights
Financial Highlights Jon Nielsen EVP & CFO Great-West Lifeco
Slide 19: Continued momentum in global markets contributed to strong results
Continued momentum in global markets contributed to strong results Strong public equity markets performance In-quarter average Change 1Q24 1Q24 vs. 1Q24 vs. Market Indices 1Q23 4Q23 1Q24 1Q23 4Q23 1.40 +10.6% 1 S&P / TSX Composite 20,191 19,875 21,302 +6% +7% 1.35 S&P 500 4000 4,465 4,993 +25% +12%
Slide 20: Strong double-digit earnings growth at top end of base ROE objective
Delivered strong double-digit earnings growth while operating at the top end of the range of our base ROE medium-term objective Base Earnings1 (bars) and Net Earnings2 (diamonds) Base ROE1 (bars) and Net ROE2 (diamonds) (C$M) +23% Base Earnings +1.1 pp Base ROE 1,012 17.2% 1,031 16.6% 950 971 16.4%
Slide 21: Strong contributions to earnings growth across all four segments
Strong contributions to earnings growth across all four segments Base Earnings1 (bars) and Net Earnings2 (diamonds) (C$M) Canada U.S.3 Europe Capital & Risk Solutions +9% Base Earnings +31%4 Base Earnings +12%4 Base Earnings +40%4 Base Earnings 353 213 217 236 260 301 302 286 204 222 278 261 178 187
Slide 22: Continued strength in underlying business and investment results
Continued strength in underlying business and investment results Base earnings – Insurance service result Base earnings – Net investment result (C$M) (C$M) 854 297 112 763 659 23 31 212 19 214 73 36 72 57 712 742 740 194 168 125 (53) (4) (1) (47) 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 Expected Earnings on In
Slide 23: Continued strength in underlying business and investment results (cont'd)
Continued strength in underlying business and investment results (cont’d) 1Q24 Lifeco Drivers of Earnings (C$M) (279) 449 1,230 (187) 1,012 1,031 297 (31) 763 Base earnings Base earnings – Fee and Non-directly Base Income taxes NCI3, pref divds Base Net earnings – Insurance Net investment spread inc
Slide 24: 1Q24 Earnings Reconciliation
Positive market experience partly offset by restructuring and integration costs in the U.S. and Canada 1Q24 Earnings Reconciliation Interest rate Public equity Real estate and other (Post-tax C$M) 107 and other markets non-fixed income 26 140 (49) (38) 1,031 1,012 (1) (59) Base Earnings1,2 Market ex
Slide 25: Strong LICAT ratio, comfortable leverage ratio and financial flexibility
Strong LICAT ratio, comfortable leverage ratio and building substantial financial flexibility to take advantage of future opportunities LICAT Ratio1 Financial Leverage2 Lifeco Cash (C$B) 1.3 127% 128% 129% 33% 30% 30% 0.9 0.5 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 1Q23 4Q23 1Q24 Footnotes 1-2: Refer to slide
Slide 26: Paul Mahon, President & CEO
Paul Mahon President & CEO Great-West Lifeco
Slide 27: Lifeco has performed well, delivering significant shareholder return
Lifeco has performed well, delivering significant shareholder return Total return1 Annualized total return1 From March 29, 2019 to March 28, 2024 As at March 28, 2024 2.00 1 year 3 years 5 years 1.80 GWO 27.4% 15.0% 12.1% 1.60 1.40 S&P TSX Financials 18.2% 9.3% 10.7% 1.20 Over/(Under) ∆ +9.2% +5.7%
Slide 28: Questions
Questions GREAT-WEST LIFECOn« canada EMPOWER S|
Slide 29: Appendix
Appendix GREAT-WEST ——
Slide 30: Contractual Service Margin (CSM)
Contractual Service Margin (CSM) Total CSM ($CM) CSM ($CM), excluding segregated funds and par 403 13,047 36 145 127 195 25 6,232 12,644 1 6,207 12,635 6,183 (279) (52) (140) Beginning Impact of New Expected CSM Insurance CSM with Other impacts Ending Beginning Impact of New Expected CSM Insurance C
Slide 31: Reminder: How Empower makes money
Reminder: How Empower makes money Workplace 82% Personal Wealth 18 % Solutions OF 1Q24 REVENUE OF 1Q24 REVENUE Asset-based fee income (net) AUM fees (net) 26% 31% Spread income Spread income WORKPLACE 48% PERSONAL Other fees Other fees SOLUTIONS WEALTH 57% 26% 13% Revenue is a non-GAAP financial mea
Slide 32: Invested Assets
Invested Assets Conservative investment portfolio, predominantly comprised of fixed income instruments – 99% of which are investment-grade • Invested assets of ~$227.7B Invested Asset Distribution Bond Portfolio Quality • Bonds represent 69% Investment Properties Cash and CD's – 99% are investment g
Slide 33: Lifeco Consolidated Bond Portfolio
Lifeco Consolidated Bond Portfolio % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 2.4% 28.1% 30.5% Canada 7.6% 8.8% 16.4% U.K. 4.7% 6.3% 11.0% Germany 0.7% 1.1% 1.8% Ireland 0.2% 0.3% 0.5% 15.6% 4
Slide 34: Corporate and Non-Agency Securitized Bonds Sector Diversification
Corporate and Non-Agency Securitized Bonds Sector Diversification Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.3% CMBS 2.1% Consumer Products 6.5% RMBS 0.1% Industrial Products 5.2% Other ABS 5.3% Banks 3.8% Total Non-Agency Securitized 7.5% Financ
Slide 35: Lifeco Mortgage Exposures
Lifeco Mortgage Exposures (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada Par Canada Non-Par U.S. Europe CRS Insured Non-insured LTV1 DSCR1 WALT Single Family 1,463 0.6% 1,150 313 - - - 318 1,145 Equity Release 4,373 1.9% 474 1,314 - 2,093 492 - 4,373 Mult
Slide 36: United Kingdom Mortgage Exposures
United Kingdom Mortgage Exposures (C$m) Carrying Value Property Type City/Region Total % of Lifeco IA Office Buildings Industrial Retail Multi Family Other Equity Release Central London 2,824 1.2% 890 179 540 570 358 287 Other United Kingdom 7,036 3.1% 401 1,364 775 245 461 3,790 Total United Kingdo
Slide 37: Lifeco Non-Fixed Income Portfolio
Lifeco Non-Fixed Income Portfolio NFI Portfolio by Type Total % of Lifeco IA Canada Par Canada Non-Par U.S. Europe CRS Investment Properties Industrial 3,033 1.3% 1,916 272 - 845 - Office 1,650 0.7% 967 158 21 504 - Multi Family 1,477 0.6% 1,210 244 - 23 - Retail 827 0.4% 179 23 - 625 - Other 840 0.
Slide 38: Non-GAAP Financial Measures and Ratios
NON-GAAP FINANCIAL MEASURES AND RATIOS This document contains some non-Generally Accepted Accounting Principles (GAAP) financial measures and non-GAAP ratios as defined in National Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”. Terms by which non-GAAP financial measures are id
Slide 39: Footnotes
FOOTNOTES All references to the Company’s Q1 2024 MD&A in the below footnotes are to the Company’s management’s discussion and analysis for the three months ended March 31, 2024, which is available on SEDAR+ at www.sedarplus.com. Slide 6 3. Additional information regarding this financial measure or