Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q2 2024 Earnings Presentation
34 slides from Great-West Lifeco's earnings presentation, 2024
Slide 1: Quarterly Results Presentation 2Q24
Great-West Lifeco Quarterly Results Presentation 2Q24
Slide 2: Introduction
Introduction Shubha Khan SVP & Head of Investor Relations Great-West Lifeco
Slide 3: Cautionary Notes
Cautionary Notes CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains forward-looking information. In addition, in the course of the Company’s Q2 2024 earnings conference call, representatives of the Company may, in their remarks or in responses to questions, refer to forward
Slide 4: Conference call participants
Conference call participants Presenters Q&A Participants Paul Mahon David Harney Fabrice Morin Ed Murphy President & CEO President and COO, Europe and Capital President & COO, Canada President and CEO, Empower and Risk Solutions Jon Nielsen Linda Kerrigan Jeff Poulin Raman Srivastava EVP & CFO SVP &
Slide 5: Business Overview
Business Overview Paul Mahon President & CEO Great-West Lifeco
Slide 6: Highlights
Highlights Delivered record base earnings for the 4th consecutive quarter • Base and net earnings both topped $1B Empower continued to deliver double-digit earnings growth, in line with our 2024 objective • U.S. well on course to becoming our largest segment in 2024 Base ROE at the top end of the ra
Slide 7: Strong Q2 results position us well against our medium-term objectives
Strong Q2 results position us well against our medium-term objectives Base Earnings1 Base ROE1 Base EPS1 $1,038M 17.2% $1.11 Up 13% YoY Up 1.3 pp YoY Up 13% YoY Net Earnings Net ROE Net EPS $1,005M 16.2% $1.08 BVPS2 LICAT ratio3 Leverage Ratio4 $25.36 130% 29% Up 9% YoY 1. This metric is a non-GAAP
Slide 8: Canada: Strong AUA growth driven by acquisitions and market performance
Canada: Strong AUA growth driven by acquisitions and market performance Wealth and Retirement Group Life & Health Insurance & Annuities Average AUA1,2 Book premiums4 Contractual Service Margin (CSM)5 (C$B) (C$B) (C$M) +41% +17% -7% 172 177 15.0 14.9 1,213 1,166 1,124 12.8 126 67 70 Workplace 62 105
Slide 9: Empower: Robust AUA growth driven by favourable markets and positive net flows
Empower: Robust AUA growth driven by favourable markets and positive net flows in Personal Wealth DC Average AUA (incl. AUM) 1 PW Average AUA (incl. AUM) 1 (US$B) +14% (US$B) +23% 1,499 1,535 76 1,345 74 62 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 Net flows3 (U$B) DC – Shock lapses Net flows3 (U$B) (1.2) (2.4)
Slide 10: Europe: Strong growth across all value drivers
Europe: Strong growth across all value drivers for 6 straight quarters Wealth and Retirement Group Life & Health Insurance & Annuities Average AUA1,2 Book premiums4 Contractual Service Margin (CSM)5 (C$B) (C$M) (C$M) +15% +8% +13% 223 234 2,459 2,499 3,307 3,337 203 Workplace 2,306 2,943 32 34 29 We
Slide 11: CRS: Continues to be a solid contributor to earnings
CRS: Continues to be a solid contributor to earnings Run-Rate Reinsurance Earnings Drivers1 Reinsurance CSM (C$M) (C$M) +1% -2% 209 206 212 1,740 1,736 1,702 48 47 47 39 38 38 122 121 127 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 • Consistent results and growth driven by strong execution and • CSM was stable as
Slide 12: Financial Highlights
Financial Highlights Jon Nielsen EVP & CFO Great-West Lifeco
Slide 13: Global markets have been broadly supportive of asset growth in the quarter
Global markets have been broadly supportive of asset growth in the quarter Global equity markets were higher on average in 2Q241 In-quarter average Change 2Q24 2Q24 vs. 2Q24 vs. Market Indices 2Q23 1Q24 2Q24 2Q23 1Q24 1.45 +4.3% 2 S&P / TSX Composite 20,185 21,302 22,016 9% 3% 1.40 S&P 500 4,206 4,9
Slide 14: Double-digit earnings growth and base ROE at the top end of medium-term objective
Double-digit earnings growth and base ROE at the top end of our medium-term objective Base Earnings1,3 (bars) and Net Earnings2 (diamonds) Base ROE1,3 (bars) and Net ROE2 (diamonds) (C$M) +13% Base Earnings (+11% Constant Currency) +1.3 pp Base ROE 1,031 1,038 17.2% 17.0% 971 978 1,005 16.4% 16.6% 9
Slide 15: Solid underlying results across all our segments
Solid underlying results across all our segments Base Earnings1 (bars) and Net Earnings2 (diamonds) (C$M) Canada U.S.4 Europe 5 Capital & Risk Solutions 5 +14% Base Earnings +19%3 Base Earnings +12%3 Base Earnings (9)%3 Base Earnings 260 353 322 324 206 197 302 335 286 180 201 283 187 203 195 265 27
Slide 16: Underlying business bolstered by experience gains, while credit experience impacts investment result
Underlying business bolstered by experience gains, while credit experience impacts investment result Base earnings – Insurance service result Base earnings – Net investment result (C$M) (C$M) 794 763 297 711 23 44 255 266 31 40 53 73 63 80 738 740 750 194 192 144 (27) (11) (1) (40) 2Q23 1Q24 2Q24 2Q
Slide 17: Strong contribution from all base earnings drivers
Strong contribution from all base earnings drivers 2Q24 Lifeco Drivers of Earnings Includes GMT (C$M) impact of $28M (318) 1,325 594 (255) 1,038 (32) 1,005 794 255 Includes one-time fee related to Prudential of $41M Base earnings Base earnings – Fee and Non-directly Base Income taxes NCI3, pref divd
Slide 18: Modest gap between base and net earnings
Modest gap between base and net earnings 2Q24 Earnings Reconciliation Interest rate Public equity Real estate and other (Post-tax C$M) and other markets non-fixed income 28 1 1,038 53 (29) (26) (37) 1,005 (34) 39 1Q24 GMT catch-up of $34M Base Earnings1,2 Market experience Business Amortization Tax
Slide 19: Strong capital position provides downside protection and substantial financial flexibility
Strong capital position provides downside protection and substantial financial flexibility LICAT Ratio1 Financial Leverage2 Lifeco Cash (C$B) 126% 129% 130% 31% 30% 29% 1.0 0.9 0.5 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 2Q23 1Q24 2Q24 Footnotes 1-2: Refer to slide 34 19
Slide 20: Closing Remarks
Closing Remarks Paul Mahon President & CEO Great-West Lifeco
Slide 21: Questions
Questions GREAT-WEST LIFECOn« canada ENESWEe S| )
Slide 22: Appendix
Appendix GREAT-WEST ——
Slide 23: Impacts of assumption changes under IFRS 17
Impacts of assumption changes under IFRS 17 Types of Non-participating insurance and longevity Pass through and fee-based insurance Short-term business business business business Products • Term life / universal life • Segregated funds • Group life and health • Disability / critical illness • Partic
Slide 24: Net earnings and balance sheet sensitivities
Net earnings and balance sheet sensitivities1 2 3 Net earnings Equity LICAT 30-Jun 31-Dec 30-Jun 31-Dec Market movement 30-Jun 31-Dec (C$M) (C$M) (C$M) (C$M) 50 bps decrease in risk free interest (150) (225) (150) (225) 0 point 0 point rates 50 bps increase in credit spreads 225 300 275 350 0 point
Slide 25: Contractual Service Margin (CSM)
Contractual Service Margin (CSM) Total CSM ($CM) CSM ($CM), excluding segregated funds and par 145 38 82 157 6,232 13,047 43 13,008 37 6,186 (280) 12,965 (140) 6,149 (104) (63) Beginning Impact of New Expected CSM Insurance CSM with Other impacts Ending Beginning Impact of New Expected CSM Insurance
Slide 26: Reminder: How Empower makes money
Reminder: How Empower makes money Workplace 82% Personal Wealth 18 % Solutions OF 2Q24 REVENUE1 OF 2Q24 REVENUE2 21% Asset-based fee income (net) AUM fees (net) 30% Spread income 3 Spread income 3 WORKPLACE 47% PERSONAL Other fees Other fees SOLUTIONS WEALTH 58% 32% 12% 1. Includes base net investme
Slide 27: Invested Assets
Invested Assets Conservative investment portfolio, predominantly comprised of fixed income instruments – 99% of which are investment-grade • Invested assets of ~$228.6B Invested Asset Distribution Bond Portfolio Quality • Bonds represent 68% Investment Properties Cash and CD's – 99% are investment g
Slide 28: Lifeco Consolidated Bond Portfolio
Lifeco Consolidated Bond Portfolio % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 2.4% 27.7% 30.1% Canada 7.7% 9.0% 16.7% U.K. 4.5% 6.2% 10.7% Germany 0.8% 1.1% 1.9% Ireland 0.2% 0.4% 0.6% 15.6% 4
Slide 29: Corporate and Non-Agency Securitized Bonds Sector Diversification
Corporate and Non-Agency Securitized Bonds Sector Diversification Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.4% CMBS 2.0% Consumer Products 6.6% RMBS 0.1% Industrial Products 5.2% Other ABS 5.2% Financial Services 3.7% Total Non-Agency Securitize
Slide 30: Lifeco Mortgage Exposures
Lifeco Mortgage Exposures (C$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 DSCR2 WALT3 Single Family 1,406 0.6% 1,103 303 - - - 303 1,103 Equity Release 4,430 1.9% 510 1,304 - 2,105 511 - 4,430 Mul
Slide 31: 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 2,897 1.3% 920 181 572 576 361 287 Other United Kingdom 7,121 3.1% 365 1,442 743 246 498 3,827 Total United Kingdo
Slide 32: 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 3,077 1.4% 1,954 276 - 847 - Office 1,651 0.7% 955 160 21 515 - Multi Family 1,551 0.7% 1,280 248 - 23 - Retail 833 0.4% 181 24 - 628 - Other 798 0.
Slide 33: 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 34: Footnotes
FOOTNOTES All references to the Company’s Q2 2024 MD&A in the below footnotes are to the Company’s management’s discussion and analysis for the three months ended June 30, 2024, which is available on SEDAR+ at www.sedarplus.com. Slide 7 2. Additional information regarding this financial measure or r