Great-West Lifeco Inc. · TSX:GWO

Great-West Lifeco — Q3 2016 Earnings Presentation

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

  1. Slide 1: Quarterly Information for Analysts and Investors Q3 2016

    Quarterly Information for Analysts and Investors Q3 2016

  2. Slide 2: Cautionary notes

    Cautionary notes CAUTIONARY NOTE REGARDING FORWARD-LOOKI NG INFORMATION This document may contain f orward-looking statements. Forward-looking statements include statements that are predictive in nature, depend upon or ref er to f uture events or conditions, or include words such as "expects", "anti

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

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

  4. Slide 4: Summary of results

    Summary of results Earnings (C$m) 720 683 671 674  Earnings impacted by decline in 620 CAD/GBP exchange rate  On a constant currency basis, earnings are in line with Q3 2015 and improving from Q2  Continuing capital strength and Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 flexibility • MCCSR at 227%

  5. Slide 5: Summary of results – Sales

    Summary of results – Sales  Canada Sales (C$b) • Strong Individual Insurance 48.0 and Group Wealth 39.0 Management sales 36.5 30.8  U.S. 24.9 • Lower large plan sales at Empower partially offset by higher executive benefits sales in Individual Markets Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 • Putn

  6. Slide 6: Summary of results – Expenses

    Summary of results – Expenses  Canada Expenses (C$m) (1) Y/Y • Expense growth has 1,102 1,145 1,175 1,124 1,160 5% moderated 12%  U.S. 4% • Putnam expenses down 5% YoY, due to lower variable 3% costs Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 • Empower expenses up 8% YoY, excluding restructuring expe

  7. Slide 7: Summary of results – Fee and Other Income

    Summary of results – Fee and Other Income Fee Income Y/Y  Lifeco fee income up 2% YoY Fee and Other Income (C$m) 2% • Average equity markets: 1,333 15% 1,241 1,254 1,271 1,231 S&P/TSX 4% S&P 500 7% Eurostoxx 50 (12%) (4%)  Canada • Positive impact from improvement in markets 3%  U.S. Q3 2015 Q4 2

  8. Slide 8: Brexit Impact

    Brexit Impact  CAD/GBP exchange rates CAD/GBP $1.95 CAD/GBP decreased 8% between March $1.95 31st and September 30th $1.90  UK investment property values $1.90 $1.85 stabilized, usual valuation processes resumed $1.80 $1.85 • Fair value adjustment of 3.5% applied to U.K. $1.75 $1.80 properties in

  9. Slide 9: Irish Life Health

    Irish Life Health  August 1st, Irish Life Group (ILG) completed its acquisition of Aviva Health and acquired the remaining 51% of GloHealth  The Irish Life Health (ILH) brand was successfully launched to the market in September  ILH now serves over 420,000 customers for private health insurance (

  10. Slide 10: Garry MacNicholas, EVP & CFO - Financial highlights

    Garry MacNicholas EVP & CFO Great-West Lifeco Financial highlights 10

  11. Slide 11: Financial highlights

    Financial highlights Earnings per Share 0.724  Q3 earnings of $674m or 0.688 0.675 0.682 0.625 $0.682 per share  Tax rate of 15% on shareholder earnings, up from 11% in Q3 2015  Canada experienced lower experience gains and higher Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 strain from strong Individ

  12. Slide 12: Financial highlights - Source of Earnings

    Financial highlights For the three months ended Sept. 30, 2016 Q3/16 Q2/16 Q3/15 Source of Earnings (C$m) Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 297 111 256 (3) 661 633 736 Impact of new business (11) (31) (35) - (77) (44) (46) Experience gains and losses 43

  13. Slide 13: Financial highlights - Book value and ROE

    Financial highlights Book Value per Share 20.06 19.38 19.28 19.02 19.18  Lifeco cash at quarter end was $713m  Lifeco book value per share comparable to last quarter and prior year Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Return on Equity 19.0% (Trailing 4 quarters) 16.9%  Return on Equity of 13.8

  14. Slide 14: Financial highlights - Assets Under Administration

    Financial highlights Assets Under Administration Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 YoY (C$b) General Fund 199 202 197 197 202 2% Segregated Fund 191 198 193 193 199 4% Mutual Fund & Institutional 239 253 238 244 257 8% Other AUA 525 560 559 550 571 9% Total 1,154 1,213 1,187 1,184 1,229 6%  O

  15. Slide 15: Questions

    GREAT-WEST FECOr« 15

  16. Slide 16: Appendix

    GREAT-WEST FECOr« 16

  17. Slide 17: Canada

    Canada (In C$m) Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 YoY Sales Individual Insurance 142 137 125 155 164 15% Group Insurance 251 135 283 119 90 (64%) 393 272 408 274 254 (35%) Individual Wealth Management 1,970 2,411 2,267 1,907 1,820 (8%) Group Wealth Management 581 809 593 496 1,043 80% 2,551 3,

  18. Slide 18: United States

    United States (In US$m) Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 YoY GWF Sales Empower Retirement 11,720 15,153 20,029 4,438 8,344 (29%) Individual Markets 180 340 241 246 564 213% Total 11,900 15,493 20,270 4,684 8,908 (25%) Putnam Sales 7,818 8,111 9,042 8,236 8,657 11% Fee Income Empower Retiremen

  19. Slide 19: Europe

    Europe Constant (In C$m) Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 YoY Currency Sales UK / Isle of Man 821 819 651 671 754 (8%) Ireland / Germany 6,895 3,098 3,923 4,879 3,891 (44%) Total 7,716 3,917 4,574 5,550 4,645 (40%) (38%) Fee Income UK / Isle of Man 71 69 70 74 59 (17%) Ireland / Germany 207 2

  20. Slide 20: Putnam - AUM and flows

    Putnam - AUM and flows (US$b) Putnam AUM Flows Mutual Funds Institutional 4.9 (2.8) 153.8 3.3 146.6 148.4 145.8 147.7 3.8 (5.4) 2.3 67.9 70.9 81.5 72.8 76.1 78.7 77.5 73.0 71.6 72.3 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Sales Redemptions Market Q3 2016 In-Qtr Avg. 153.3 151.2 141.4 146.7 151.7 AUM 20

  21. Slide 21: 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 $250 Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) 35% % of Budget Fee & Net

  22. Slide 22: Consolidated MCCSR ratio

    Consolidated MCCSR ratio 238% 236% 234% 233% 232% 238% 230% 229% 236% 230% 234% 233% 233% 228% 224% 232% 223% 230% 222%229% 230% 227% 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

  23. Slide 23: 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 2,504 2,576 2,633 2,499 2,447 2,335 2,237 2,299 2005-2015 11 Year 24% 23% 26% 25% 20% 19% 21% 22% Average 18% 20% 20% 11% 20.6% 2005 200

  24. Slide 24: Invested asset composition

    Invested asset composition*  Invested assets at September 30, 2016 were $174.5bln Cash & CD's 2%  Diversified high quality portfolio: • Bonds represent 73% of invested Loans to assets (99% are investment grade; Investment Properties Policyholders 3% 5% 82% rated A or higher) Gov't, Gov't Related a

  25. Slide 25: Lifeco consolidated bond portfolio

    Lifeco consolidated bond portfolio* Corporate and Non-Agency Securitized Government, Government Related and Other Financial Other Corporate and % of Invested Agency Securitized Banking Institutions and REITs Non-Agency Securitized Assets $ (millions) United States 5.5% 0.8% 1.8% 16.6% 24.7% 43,020 C

  26. Slide 26: Corporate and securitized bonds – Sector diversification

    Corporate and securitized bonds – Sector diversification* % of % of Invested Invested Assets Assets Corporates Non-Agency Securitized Utilities 9.2% ABS 2.0% Consumer Products 6.0% CMBS 2.3% Industrial Products 4.3% RMBS 0.9% Banking 3.4% Covered 0.7% Other Financial Institutions 3.2% Total Securiti

  27. Slide 27: 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 - - 1,074 1,185 65 2,324 1.3% 2,140 Integrated 4 322 710 118 - 1,154 0.7% 1,087 Independent - - 199 474 34 707 0.4% 677 Oil Field Services - 15 178 177 5

  28. Slide 28: 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 139 323 381 247 142 1,232 0.7% Edmonton, Alberta 480 142 184 179 57 1,042 0.6% Total Calgar

  29. Slide 29: 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 300 760 501 - 63 1,624 0.9% Other United Kingdom 79 693 223 952 262 2,209 1.3% Total United Kingdom 379 1,453 724 952 325

  30. Slide 30: 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 - 27 251 - 37 315 0.2% Other United Kingdom - 1,114 394 644 391 2,543 1.4% Total United Kingdom - 1,141 645 6

  31. Slide 31: Credit markets

    Credit markets In-Quarter Developments  Credit experience related to impairments and rating changes negatively impacted shareholders’ net earnings by $3 million in the quarter Total Credit Impact on Shareholders’ Net Earnings 2015 Full Year 2016 YTD ($ millions) Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 2016 Credi

  32. Slide 32: Currency

    Currency Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2016 1.31 1.71 1.46 1.31 1.71 1.47 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 32

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