Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Q2 2021 Earnings Presentation
37 slides from Great-west Lifeco's earnings presentation, 2021
Slide 1: Quarterly Results Presentation Q2 2021
Quarterly Results Presentation Q2 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: Our Four Value-Creation Priorities
OUR FOUR VALUE-CREATION PRIORITIES Advice-centered value Digital capabilities Workplace extensions Risk & investment creation expertise Continue to scale and Deliver efficient and Extend workplace Leverage capabilities to leverage millions of effective advice, participant relationships enable and au
Slide 5: Our Medium-Term Financial Objectives
OUR MEDIUM-TERM* FINANCIAL OBJECTIVES Value creation through disciplined capital deployment 8-10% base EPS growth p.a. 14-15% base ROE Strong cash generation • Organic earnings growth from • Diversified business that drives • A cash-generative business market-leading franchises in strong and stable
Slide 6: Earnings
EARNINGS Earnings per Share (EPS) (C$) Earnings (C$m) 0.93 863 0.89 826 784 0.84 0.76 0.80 0.76 706 739 707 Base1 Net Net Base1 Base1 Q2 2020 Q1 2021 Q2 2021 Q2 2020 Q1 2021 Q2 2021 Base Earnings and EPS Net Earnings and EPS • Base earnings and EPS up 17% from Q2 2020 • Net earnings and EPS down 9%
Slide 7: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Solid sales performance 385 4,348 1,105 • Individual insurance sales consistent with pre- 3,145 276 200 2,217 596 COVID levels; Group insurance sales healthy in 173 538 small/mid segments with limited large case 75 101 3,243 2,549 1,679 activity in
Slide 8: Empower
EMPOWER Empower Sales1 (ex-Personal Capital) • Large plan sales drove YoY increase combined with (US$m) continued strong growth in the Core and Retail segments 63,833 • Total Retail Wealth Management AUA (Empower IRA and 17,965 Personal Capital combined) now exceed US$40b 5,196 • Personal Capital ma
Slide 9: Putnam
PUTNAM Sales1 (US$m) • US$30b increase in ending AUM year-over-year • Sales of short duration income products have slowed 15,111 12,674 due to lower yields; equity sales improving 10,120 8,099 5,805 • Net outflows of US$3.7b 4,595 • Outflows primarily from lower-fee fixed income 7,012 6,869 5,525 pr
Slide 10: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) • Individual wealth sales are now higher than pre- Sales1 (C$m) pandemic levels 1,790 • Good momentum in annuity sales, with bulk annuity 702 597 766 1,498 287 1,163 281 pipeline strengthening 158 66 211 306 266 76 73 1,503 • Sales of Equity Release Mor
Slide 11: Capital and Risk Solutions
CAPITAL AND RISK SOLUTIONS • Strong growth in expected profit, up 10% YoY • Growth in Structured Life and Longevity Expected Profit1 (C$m) • QoQ decline primarily due to impact of currency movements 181 • Pipeline of new business continues to be strong in 170 both Structured Life and Longevity 155 •
Slide 12: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco 12
Slide 13: Earnings
EARNINGS Earnings per Share (C$m) Base Earnings1 (C$m) (Base)1,2 (Net)2 0.93 0.89 Canada U.S. Europe CRS Lifeco Lifeco 0.84 0.76 0.80 0.76 Q2 2021 293 190 184 150 826 784 Q1 2021 298 104 201 145 739 707 Net Base1 Q2 2020 315 83 179 137 706 863 YOY (7%) 129% 3% 9% 17% (9%) Constant Q2 2020 Q1 2021 Q2
Slide 14: Tax Impacts
TAX IMPACTS Q2 2021 Tax Impacts (C$m) Canada Europe Corp Lifeco Base Earnings Impacts 20 (32) 33 21 Total Items Excluded From Base Earnings - (25) - (25) Base1 Total Tax Impacts 20 (57) 33 (4) • Lifeco’s common shareholders Q2/21 effective tax rate 12% on net earnings, 9% on base earnings • Q2/21 ba
Slide 15: Source of Earnings [Base]
SOURCE OF EARNINGS [BASE] Q2/21 Q1/21 Q2/20 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 328 205 227 170 (5) 925 885 732 Impact of new business (7) (56) (12) 3 - (72) (71) (69) Experience gains and losses 16 59 26 (13) (19) 69 83 55 Earnings on surplus (i
Slide 16: Earnings Reconciliation
EARNINGS RECONCILIATION Q2 2021 Q1 2021 Q2 2020 Post-Tax Per Share Post-Tax Per Share Post-Tax Per Share (C$m) (C$) (C$m) (C$) (C$m) (C$) 1 Base earnings 826 0.89 739 0.80 706 0.76 Items excluded from base earnings Tax legislative changes/material matters 2 (25) (0.02) - - - - Actuarial assumption c
Slide 17: Source of Earnings [Net]
SOURCE OF EARNINGS [NET] Q2/21 Q1/21 Q2/20 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 328 205 227 170 (5) 925 885 732 Impact of new business (7) (56) (12) 3 - (72) (71) (69) Experience gains and losses 18 58 11 (13) (19) 55 58 98 Management actions and
Slide 18: Source of Earnings – Additional Detail
SOURCE OF EARNINGS – ADDITIONAL DETAIL Experience gains and losses Management actions and changes in assumptions For three months ended Jun. 30/21 For three months ended Jun. 30/21 Pre-Tax Post-Tax Pre-Tax Post-Tax (C$m) (C$m) Updated economic assumptions in the Yield enhancement 69 56 26 21 UK Mark
Slide 19: Expenses
EXPENSES Operating Expenses1,2 (C$m) Operating Expenses By Segment (C$m)1,2 Canada U.S.2 Europe CRS Lifeco1,2 1,527 1,527 Q2 2021 469 706 302 25 1,527 1,285 Q1 2021 461 741 295 25 1,527 Q2 2020 411 560 283 24 1,285 YOY 14% 26% 7% 4% 19% Constant Currency3 14% 42% 9% 10% 27% Q2 2020 Q1 2021 Q2 2021 •
Slide 20: Book Value per Share and LICAT
BOOK VALUE PER SHARE AND LICAT Book Value per Share (C$) LICAT Ratio 23.36 23.70 21.98 132% 126% 123% Q2 2020 Q1 2021 Q2 2021 Q2 2020 Q1 2021 Q2 2021 •BVPS growth of 8% YoY was largely driven by strong • LICAT ratio at 126%, up 3 points QoQ, primarily due to retained earnings over the past 4 quarter
Slide 21: Looking ahead…
Looking ahead… Continued vigilance around COVID-19 Capitalize on strategic initiatives and investments Focus on the successful integration of acquired businesses 21
Slide 22: Questions
QUESTIONS 22
Slide 23: Appendix
APPENDIX 23
Slide 24: Canada
CANADA (In C$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Sales Individual Insurance 98 76 116 109 99 1% Individual Wealth 1,679 1,852 2,818 3,243 2,549 52% Individual Total 1,777 1,928 2,934 3,352 2,648 49% Group Insurance 75 109 111 276 101 35% Group Wealth 538 483 684 1,105 596 11% Group Total
Slide 25: Canada
CANADA (In C$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Individual Customer Base Earnings 159 123 132 138 162 2% Items excluded from Base Earnings 36 (4) (141) (12) (5) Net Earnings 195 119 (9) 126 157 (19%) Group Customer Base Earnings 195 134 205 154 189 (3%) Items excluded from Base Earnings
Slide 26: United States
UNITED STATES (In US$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Sales Empower Retirement 5,196 6,692 6,983 63,833 17,965 246% Personal Capital - 542 1,168 1,399 1,483 Total 5,196 7,234 8,151 65,232 19,448 274% Putnam Sales 15,111 13,809 12,957 12,674 10,120 (33%) Fee and Other Income Empower Ret
Slide 27: United States
UNITED STATES (In US$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Empower Retirement Base Earnings 48 58 56 95 147 206% Items excluded from Base Earnings (4) 29 - (8) (8) Net Earnings 44 87 56 87 139 216% Personal Capital Base Earnings - (5) (5) (11) (7) Items excluded from Base Earnings - - (2) (
Slide 28: Europe
EUROPE (In C$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 644 284 996 522 677 5% Ireland Insurance and Annuity 52 63 75 68 82 58% Germany Insurance and Annuity 6 7 7 7 7 17% Total 702 354 1,078 597 766 9% Wealth Management Sales U.K. Wealth Ma
Slide 29: Europe
EUROPE (In C$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Fee and Other Income U.K 44 42 43 46 39 (11%) Germany 111 111 119 116 115 4% Ireland 185 189 189 191 192 4% Total 340 342 351 353 346 2% Operating Expenses U.K 83 85 77 86 92 11% Germany 36 37 40 41 38 6% Ireland 160 151 163 164 162 1% Corp
Slide 30: Europe
EUROPE (In C$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY U.K. Base Earnings 88 78 96 120 53 (40%) Items excluded from Base Earnings 21 (11) 60 (12) (23) Net Earnings 109 67 156 108 30 (72%) Ireland Base Earnings 53 70 62 43 68 28% Items excluded from Base Earnings 48 126 (8) 3 4 Net Earnings 101
Slide 31: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 YoY Fee and Other Income Reinsurance 2 3 3 2 2 (30%) Operating Expenses Reinsurance 23 23 23 23 23 0% Corporate & Par 1 2 2 2 2 Total 24 25 25 25 25 4% Reinsurance Base Earnings 138 157 124 146 151 9% Items excluded from Bas
Slide 32: Putnam – Core Net Earnings
PUTNAM – CORE NET EARNINGS (US$m) Expenses Fee & Net Investment Income1 Income Taxes Core Margin (Pre-tax) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 1. Fee & net investment income includes US$23m pre-tax ($17m after tax) of institutional performance fees in Q4 2020. 2. Core net earnings (loss) (a non-
Slide 33: Invested Assets
INVESTED ASSETS1 Loans to Investment Properties Policyholders Cash and CD's 3% Invested assets of $210.2 billion 3% 4% Gov't, Gov't Related and Agency Securitized Bonds Stocks 23% Diversified high quality portfolio: 6% Bonds represent 70%: Insured Residential • 99% are investment grade and Multi-fam
Slide 34: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO* % of Invested Assets Gov't, Gov't Related and Agency Corporate and Non-Agency Country of Domicile Securitized Bonds Securitized Bonds Total Bonds U.S. 2.8% 23.5% 26.3% Canada 9.3% 9.1% 18.4% U.K. 7.3% 7.3% 14.6% Germany 1.2% 0.9% 2.1% Ireland 0.3% 0.3% 0.6% 20.9%
Slide 35: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION* Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.3% CMBS 1.9% Consumer Products 6.0% RMBS 0.1% Industrial Products 4.5% Other ABS 4.2% Financial Services 3.8% Total Non-Agency Securit
Slide 36: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 2,050 1.0% 2,050 - - - 500 1,550 Equity Release 2,275 1.1% 869 - 1,406 - - 2,275 Multi Family 7,391 3.5% 4,259 2,294 799 39 3,056 4
Slide 37: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € 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 1.3 1.72 1.55 1.27 1.74 1.55 Q3 2020 1.33 1.72 1.56 1.33 1.72 1.56 Q2 2020 1.39 1.72 1.53 1.36 1.68 1.52 37