Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q4 2021 Earnings Presentation
38 slides from Great-West Lifeco's earnings presentation, February 2022
Slide 1: Quarterly Results Presentation Q4 2021
Quarterly Results Presentation Q4 2021
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 "will", "may", "e
Slide 3: Summary of Results
SUMMARY OF RESULTS Paul Mahon President & CEO Great-West Lifeco 3
Slide 4: 2021 Overview
2021 OVERVIEW Disciplined capital deployment Our value creation priorities Advice-centered value creation Integration of acquired businesses on track Digital capabilities Workplace extensions Strong organic growth Risk & investment expertise Medium-term objectives met or exceeded 4
Slide 5: Medium-Term Financial Objectives
MEDIUM-TERM1 FINANCIAL OBJECTIVES 1-Year 3-Year 1 YR 2 2 Medium-Term Financial Objectives Base Base 8-10% base EPS growth p.a 2 21.9% 13.4% $3.51 2 2021 14-15% base ROE 14.6% 13.6% Base EPS 2 Target dividend payout ratio 45-55% of base earnings 51.4% 56.7% Net Financial Highlights EPS growth p.a 3 N
Slide 6: Earnings
EARNINGS Earnings per Share (EPS) (C$) Earnings (C$m) 0.98 912 0.93 0.94 870 872 0.89 825 0.80 0.82 741 765 Net Net Base1 Base2 Base1 Q4 2020 Q3 2021 Q4 2021 Q4 2020 Q3 2021 Q4 2021 Base Earnings and EPS Net Earnings and EPS • Base earnings and base EPS up 11% from Q4 2020 • Net earnings and net EPS
Slide 7: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Strong sales momentum in all business segments and 4,572 product types 309 3,502 3,272 1,298 227 684 • Various actions contributed to the strong results 194 189 870 111 including artificial intelligence tools and 101 2,818 2,402 3,274 116 120 enhan
Slide 8: Empower
EMPOWER Empower Sales1 (ex-Personal Capital) (US$m) • Large plan sales drove the YoY increase combined with strong growth in Retail Wealth Management segments 16,237 12,812 • Empower AUA (ex-Personal Capital) up 21% to US$1.1t 6,983 • Total Retail Wealth Management (Empower Individual Retirement Acc
Slide 9: Putnam
PUTNAM Sales1 (US$m) • US$11b increase in ending AUM YoY • Sales increase of 7% YoY driven by strong institutional 13,835 12,957 sales 8,790 6,568 8,629 • Net flows flat 4,047 • Outflows in lower-fee fixed income products 6,389 4,743 5,206 • Improved flows in higher-earning equity Q4 2020 Q3 2021 Q4
Slide 10: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) • Insurance and Annuity sales Sales1 (C$m) 1,930 2,044 • Strong growth continues in ERM 287 1,599 1,818 350 68 • Annuity sales benefited from C$320m of UK bulk 1,078 909 457 469 148 annuities sold in quarter (C$1.3b in Q3) 62 1,575 320 58 1,349 1,694 86
Slide 11: Capital and Risk Solutions
CAPITAL AND RISK SOLUTIONS • Expected profit1 up 2% YoY • Growth in Structured and Longevity reinsurance partly offset by negative currency impact of $5m Expected Profit1 (C$m) • Pipeline of new business continues to be strong in both Structured and Longevity reinsurance portfolios 174 • U.S. tradit
Slide 12: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco 12
Slide 13: Earnings
EARNINGS Earnings per Share (C$m) Earnings (C$m) (Base)1,2 (Net)2 0.98 0.93 0.94 0.89 Canada U.S. Europe CRS Lifeco Lifeco 0.80 0.82 Q4 2021 317 156 213 145 825 765 Q3 2021 312 221 232 107 870 872 Net Base1 Q4 2020 348 90 195 124 741 912 YOY (9%) 73% 9% 17% 11% (16%) 3 Q4 2020 Q3 2021 Q4 2021 Consta
Slide 14: Earnings Reconciliation
EARNINGS RECONCILIATION Q4 2021 Q3 2021 Q4 2020 Post-Tax Post-Tax Post-Tax Per Share (C$) Per Share (C$) Per Share (C$) (C$m) (C$m) (C$m) 1 Base earnings 825 0.89 870 0.93 741 0.80 Items excluded from base earnings Actuarial assumption changes and other 23 0.02 69 0.08 (23) (0.03) management actions
Slide 15: Source of Earnings [Base]
SOURCE OF EARNINGS [BASE 2] Q4/21 Q3/21 Q4/20 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 336 261 216 166 (4) 975 986 842 Impact of new business (4) (63) 4 3 - (60) (5) (86) Experience gains and losses 84 (1) 9 (34) (1) 57 40 117 Earnings on surplus (inc
Slide 16: Source of Earnings [Net Earnings]
SOURCE OF EARNINGS [NET EARNINGS] Q4/21 Q3/21 Q4/20 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 336 261 216 166 (4) 975 986 842 Impact of new business (4) (63) 4 3 - (60) (5) (86) Experience gains and losses 88 (2) 28 (34) (1) 79 92 93 Management actions
Slide 17: Source of Earnings – Additional Detail
SOURCE OF EARNINGS – ADDITIONAL DETAIL Experience gains and losses Management actions and changes in assumptions For three months ended Dec. 31/21 For three months ended Dec. 31/21 Pre-Tax Post-Tax Pre-Tax Post-Tax (C$m) (C$m) Yield enhancement 103 78 Economic Assumption Updates 82 66 Market related
Slide 18: Expenses
EXPENSES Operating and Administrative Expenses (C$m) Operating and Administrative Expenses (C$m) 1,688 (Adjusted) 1,2 (Reported)1 1,557 1,635 1,439 1,498 Canada U.S. Europe CRS Lifeco Lifeco 1,453 Q4 2021 490 789 322 29 1,635 1,688 Q3 2021 461 736 225 27 1,453 1,557 Reported1 Adjusted 1,2 Q4 2020 47
Slide 19: Book Value per Share and LICAT
BOOK VALUE PER SHARE 1 AND LICAT 2 Book Value per Share (C$) LICAT Ratio 24.40 24.71 22.97 129% 123% 124% Q4 2020 Q3 2021 Q4 2021 Q4 2020 Q3 2021 Q4 2021 •BVPS growth of 8% YoY was largely driven by strong • LICAT ratio at 124%, up 1 point QoQ, driven by retained earnings over the past 4 quarters ea
Slide 20: Looking ahead…
Looking ahead… Capitalize on strategic initiatives and investments Focus on the successful integration of acquired businesses Further establish ESG & community impact commitments and targets Continued vigilance around COVID-19 20
Slide 21: Questions
QUESTIONS 21
Slide 22: Additional Financial and Segment Information
ADDITIONAL FINANCIAL AND SEGMENT INFORMATION 22
Slide 23: Source of Earnings [Base] - Annual
SOURCE OF EARNINGS [BASE2] - ANNUAL 2021 2020 (C$m) Canada U.S. Europe CRS Corp. Total Total Expected profit on in-force business 1,314 895 889 691 (18) 3,771 3,106 Impact of new business (20) (241) (37) 90 - (208) (307) Experience gains and losses 246 133 126 (235) (21) 249 215 Earnings on surplus
Slide 24: Source of Earnings [Net] - Annual
SOURCE OF EARNINGS [NET] - ANNUAL 2021 2020 (C$m) Canada U.S. Europe CRS Corp. Total Total Expected profit on in-force business 1,314 895 889 691 (18) 3,771 3,106 Impact of new business (20) (241) (37) 90 - (208) (307) Experience gains and losses 260 128 152 (235) (21) 284 32 Management actions and
Slide 25: Canada
CANADA (In C$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Sales Individual Insurance 116 109 99 93 120 3% Individual Wealth 2,818 3,243 2,549 2,402 3,274 16% Individual Total 2,934 3,352 2,648 2,495 3,394 16% Group Insurance 111 276 101 101 189 70% Group Wealth 684 1,105 596 870 1,298 90% Group To
Slide 26: Canada
CANADA (In C$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Individual Customer Base Earnings 132 138 162 140 140 6% Items excluded from Base Earnings (141) (12) (5) (3) (20) Net Earnings (9) 126 157 137 120 Group Customer Base Earnings 205 154 189 168 194 (5%) Items excluded from Base Earnings (16)
Slide 27: United States
UNITED STATES (In US$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Sales Empower Retirement 6,983 63,833 17,965 12,812 16,237 133% Personal Capital 1,168 1,399 1,483 1,551 1,757 50% Total 8,151 65,232 19,448 14,363 17,994 121% Putnam Sales 12,957 12,674 10,120 8,790 13,835 7% Fee and Other Income E
Slide 28: United States
UNITED STATES (In US$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Empower Retirement Base Earnings 56 95 147 145 117 109% Items excluded from Base Earnings - (8) (8) (10) (11) Net Earnings 56 87 139 135 106 89% Personal Capital Base Earnings (5) (11) (7) (4) (6) Items excluded from Base Earnings (
Slide 29: Europe
EUROPE (In C$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 996 522 677 1,869 849 (15%) Ireland Insurance and Annuity 75 68 82 55 53 (29%) Germany Insurance and Annuity 7 7 7 6 7 0% Total 1,078 597 766 1,930 909 (16%) Wealth Management Sales U.K
Slide 30: Europe
EUROPE (In C$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Fee and Other Income U.K 43 46 39 48 42 (2%) Germany 119 116 115 115 122 3% Ireland 189 191 192 189 200 6% Total 351 353 346 352 364 4% Operating and Administrative Expenses U.K 77 86 92 76 82 6% Germany 40 41 38 37 48 20% Ireland 163 164 1
Slide 31: Europe
EUROPE (In C$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY U.K. Base Earnings 96 120 53 83 110 15% Items excluded from Base Earnings 60 (12) (23) 102 44 Net Earnings 156 108 30 185 154 (1%) Ireland Base Earnings 62 43 68 110 67 8% Items excluded from Base Earnings (8) 3 4 22 (5) Net Earnings 54 46
Slide 32: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 YoY Fee and Other Income Reinsurance 3 2 2 2 2 (33%) Operating and Administrative Expenses Reinsurance 23 23 23 25 26 13% Corporate & Par 2 2 2 2 3 Total 25 25 25 27 29 16% Reinsurance Base Earnings 124 146 151 108 147 19% I
Slide 33: Putnam – Earnings & Core Margin
PUTNAM – EARNINGS & CORE MARGIN (US$m) 271 255 Expenses 20.6% 250 254 231 13.1% 12.3% Fee & Net Investment Income1 11.4% Income Taxes 2.8% Core Margin (Pre-tax)2 (215) (225) (222) (219) (225) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 1 Fee & Net Investment Income 271 231 255 250 254 Less: Expenses (21
Slide 34: Invested Assets
INVESTED ASSETS 1 Loans to Investment Properties Policyholders Cash and CD's 3% Invested assets of $205.8 billion 4% 4% Gov't, Gov't Related and Agency Securitized Bonds 25% Diversified high quality portfolio: Stocks 7% Bonds represent 68%: • 99% are investment grade • 74% rated A or higher Insured
Slide 35: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO * % of Invested Assets Gov't, Gov't Related and Agency Corporate and Non-Agency Country of Domicile Securitized Bonds Securitized Bonds Total Bonds U.S. 3.0% 21.3% 24.3% Canada 9.8% 9.9% 19.7% U.K. 6.9% 6.5% 13.4% Germany 1.1% 0.9% 2.0% Ireland 0.3% 0.3% 0.6% 21.1%
Slide 36: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION * Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.2% CMBS 1.6% Consumer Products 5.4% RMBS 0.1% Industrial Products 4.1% Other ABS 3.8% Financial Services 3.3% Total Non-Agency Securi
Slide 37: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 1,979 0.9% 1,979 - - - 476 1,503 Equity Release 2,609 1.3% 1,063 - 1,546 - - 2,609 Multi Family 7,601 3.7% 4,297 2,474 792 38 2,930
Slide 38: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q4 2021 1.26 1.70 1.44 1.27 1.71 1.44 Q3 2021 1.26 1.74 1.48 1.27 1.71 1.47 Q2 2021 1.23 1.72 1.48 1.24 1.71 1.47 Q1 2021 1.27 1.75 1.53 1.26 1.73 1.47 Q4 2020 1.30 1.72 1.55 1.27 1.74 1.55 38