Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q2 2022 Earnings Presentation
37 slides from Great-West Lifeco's earnings presentation, Oct 15, 2022
Slide 1: Quarterly Results Presentation Q2 2022
Quarterly Results Presentation Q2 2022
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: Overview
OVERVIEW Diversified and resilient business delivered solid results; includes full quarter of Prudential transaction Higher base earnings in Canada, Europe and CRS; U.S. more impacted by markets Integration of U.S. acquired businesses on track; at or exceeding targeted benefits Strong outlook for Em
Slide 5: Performance Against Medium-Term Objectives
PERFORMANCE AGAINST MEDIUM-TERM1 OBJECTIVES 1-Year 3-Year Q2 YTD 2022 (2020 - 2021) (2018 - 2021) 1 YR Q2 YTD 2022 Medium-Term Financial Objectives Base 2 Base 2 Base 2 Base EPS 8-10% base EPS growth p.a 2 14-15% base ROE 2,4 4.6% 14.5% 21.9% 14.6% 13.4% CAGR 13.6% average $1.76 Up 4.6% YoY 2 Target
Slide 6: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Insurance sales in line with prior year 348 • Group retirement rollover sales strong in quarter; 3,145 3,956 1,009 3,021 Individual Wealth sales impacted by market 200 255 198 596 657 uncertainty 101 101 2,549 2,947 2,364 • Wealth AUA decline prima
Slide 7: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) Sales1 (C$m) • Solid Insurance and Annuity sales performance with 1,198 2,374 continued growth in Equity Release Mortgages (ERM) 924 1,790 831 1,915 766 465 278 287 • Strong individual wealth sales in the U.K. and Ireland 73 519 306 • Sequential decline
Slide 8: Putnam
PUTNAM Sales1 (US$m) •AUM down US$25b from prior quarter; net outflows 10,120 10,331 of US$4.4b 9,021 4,595 4,747 3,625 • Outflows are in lower-fee fixed income products 5,525 5,584 5,396 • Higher-earning equity products are slightly positive YTD Q2 2021 Q1 2022 Q2 2022 Mutual Funds Institutional •
Slide 9: Empower
EMPOWER Empower Sales1 (ex-Personal Capital) (US$m) 37,290 • Lower large plan sales at Empower 2,559 • Q2 2022 included 1 large plan sale totalling US$1b 17,965 compared to 3 sales totalling US$11b in Q2 2021 1,783 34,731 9,855 2,438 • Strong growth in Retail Wealth Management sales 16,182 7,417 • E
Slide 10: Update on U.S. Acquisitions
UPDATE ON U.S. ACQUISITIONS Leveraging acquired businesses to drive our growth strategy for Empower, both as a leader in DC retirement and as a growing retail wealth manager • Client, asset, and revenue retention tracking ahead of our original expectations • Completed six of eight waves of MassMutua
Slide 11: Capital and Risk Solutions (CRS)
CAPITAL AND RISK SOLUTIONS (CRS) • CRS expected profit1 steady YoY; up 6% from Q1 2022 • Strong overall growth compensated for the YoY reduction in actuarial PfAD releases CRS Expected Profit1 (C$m) • Other margins and fees are up 29% reflecting 170 169 growth in structured reinsurance and P&C busin
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 Canada U.S. Europe CRS Lifeco Lifeco 0.89 0.87 0.89 0.84 0.83 0.79 Q2 2022 296 143 208 174 830 735 Q1 2022 272 120 245 170 809 770 Base1 Net Q2 2021 293 190 184 150 826 784 YOY 1% (25%) 13% 16% 0% (6%) 3 Constant Currency 1% (27%) 23%
Slide 14: Earnings Reconciliation
EARNINGS RECONCILIATION Q2 2022 Q1 2022 Q2 2021 Post-Tax Post-Tax Post-Tax Per Share (C$) Per Share (C$) Per Share (C$) (C$m) (C$m) (C$m) Base earnings1 830 0.89 809 0.87 826 0.89 Items excluded from base earnings Actuarial assumption changes and other 21 0.02 (9) (0.01) 37 0.04 management actions M
Slide 15: Source of Earnings [Base Earnings]
SOURCE OF EARNINGS [BASE EARNINGS 2] Q2/22 Q1/22 Q2/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 336 305 207 169 (7) 1,010 935 925 Impact of new business (6) (71) (15) 5 - (87) (77) (72) Experience gains and losses 52 (65) 54 28 2 71 117 69 Earnings on
Slide 16: Source of Earnings [Net Earnings]
SOURCE OF EARNINGS [NET EARNINGS] Q2/22 Q1/22 Q2/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 336 305 207 169 (7) 1,010 935 925 Impact of new business (6) (71) (15) 5 - (87) (77) (72) Experience gains and losses 58 (86) 58 20 2 52 103 55 Management act
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 Jun. 30/22 Pre-Tax Post-Tax (C$m) For three months ended Jun. 30/22 Pre-Tax Post-Tax (C$m) Yield enhancement 76 61 Lapse Update in Germany 24 21 Market related impa
Slide 18: Expenses
EXPENSES Operating and Administrative Expenses (C$m) Operating and Administrative Expenses (C$m) (Adjusted) 1,2 (Reported) 1 1788 1855 Canada U.S. Europe CRS Lifeco Lifeco 1534 1559 1598 1600 Q2 2022 474 992 289 28 1,788 1,855 Adjusted 1,2 Q1 2022 480 789 299 29 1,598 1,600 Reported1 Q2 2021 469 713
Slide 19: Book Value per Share and LICAT
BOOK VALUE PER SHARE 1 AND LICAT 2 Book Value per Share (C$) LICAT Ratio 126% 24.57 25.00 23.70 119% 117% Q2 2021 Q1 2022 Q2 2022 Q2 2021 Q1 2022 Q2 2022 •BVPS growth of 5% YoY was largely driven by strong • LICAT ratio at 117%, down 2 points QoQ, driven by retained earnings over the past 4 quarters
Slide 20: In summary…
In summary… Benefits of diversification evident in second quarter results Focusing on the successful integration of acquired businesses Well-positioned for continued resilience and future growth 20
Slide 21: Questions
QUESTIONS 21
Slide 22: Additional Financial and Segment Information
ADDITIONAL FINANCIAL AND SEGMENT INFORMATION 22
Slide 23: Canada
CANADA (In C$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Sales Individual Insurance 99 93 120 93 97 (2%) Individual Wealth 2,549 2,402 3,274 2,947 2,364 (7%) Individual Total 2,648 2,495 3,394 3,040 2,461 (7%) Group Insurance 101 101 189 255 101 0% Group Wealth 596 870 1,298 1,009 657 10% Group T
Slide 24: Canada
CANADA (In C$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Individual Customer Base Earnings 162 140 140 124 96 (41%) Items excluded from Base Earnings (5) (3) (20) (1) 5 Net Earnings 157 137 120 123 101 (36%) Group Customer Base Earnings 189 168 194 138 207 10% Items excluded from Base Earnings -
Slide 25: United States
UNITED STATES (In US$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Sales Empower Defined Contribution 16,182 10,766 13,872 34,731 7,417 (54%) Empower Retail 1,783 2,046 2,365 2,559 2,438 37% Personal Capital 1,483 1,551 1,757 1,833 1,694 14% Total 19,448 14,363 17,994 39,123 11,549 (41%) Putnam Sal
Slide 26: United States
UNITED STATES (In US$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Empower Base Earnings 147 145 117 117 133 (10%) Items excluded from Base Earnings (8) (10) (11) (12) (39) Net Earnings 139 135 106 105 94 (32%) Personal Capital Base Earnings (7) (4) (6) (10) (10) Items excluded from Base Earnings (
Slide 27: Europe
EUROPE (In C$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 677 1,869 849 1,120 853 26% Ireland Insurance and Annuity 82 55 53 71 66 (20%) Germany Insurance and Annuity 7 6 7 7 5 (29%) Total 766 1,930 909 1,198 924 21% Wealth Management Sales U.
Slide 28: Europe
EUROPE (In C$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Fee and Other Income U.K 39 48 42 42 47 21% Ireland 192 189 200 193 186 (3%) Germany 115 115 122 119 107 (7%) Total 346 352 364 354 340 (2%) Operating and Administrative Expenses U.K 92 76 82 88 89 (3%) Ireland 162 105 185 165 154 (5%) Germ
Slide 29: Europe
EUROPE (In C$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY U.K. Base Earnings 53 83 110 138 101 91% Items excluded from Base Earnings (23) 102 44 (5) 16 Net Earnings 30 185 154 133 117 290% Ireland Base Earnings 68 110 67 69 74 9% Items excluded from Base Earnings 4 22 (5) (12) - Net Earnings 72 13
Slide 30: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YoY Fee and Other Income Reinsurance 2 2 2 2 - Operating and Administrative Expenses Reinsurance 23 25 26 26 25 9% Corporate & Par 2 2 3 3 3 Total 25 27 29 29 28 12% Reinsurance Base Earnings 151 108 147 171 176 17% Items ex
Slide 31: Putnam – Earnings & Core Margin
PUTNAM – EARNINGS & CORE MARGIN (US$m) 255 250 254 Expenses 229 204 Fee & Net Investment Income 13.1% 12.3% 11.4% Income Taxes 0.4% Core Margin (Pre-tax)1 -4.5% (222) (219) (225) (228) (213) Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Fee & Net Investment Income 255 250 254 229 204 Less: Expenses -222 -
Slide 32: Invested Assets
INVESTED ASSETS 1 Loans to Investment Properties Policyholders Cash and CD's 3% Gov't, Gov't Related and Invested assets of $232.7 billion 4% Agency Securitized Bonds 4% 18% Diversified high quality portfolio: Stocks 6% Bonds represent 67%: • 99% are investment grade Insured Residential and Multi-fa
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. 2.3% 27.4% 29.7% Canada 7.3% 8.4% 15.7% U.K. 4.8% 5.7% 10.5% Germany 0.8% 1.1% 1.9% Ireland 0.2% 0.3% 0.5% 15.4%
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 6.8% CMBS 2.6% Consumer Products 6.6% RMBS 0.1% Industrial Products 5.1% Other ABS 5.1% Banks 4.2% Total Non-Agency Securitized 7.8% Fi
Slide 35: Lifeco Consolidated Bond Portfolio – By Rating
LIFECO CONSOLIDATED BOND PORTFOLIO – BY RATING* Total excluding Prudential Prudential Acquired** Total Rating $m % $m % $m % AAA 15,748 13.0% 7,641 21.7% 23,389 15.0% AA 29,001 23.9% 3,324 9.5% 32,325 20.7% A 43,018 35.5% 11,449 32.6% 54,467 34.9% BBB 32,395 26.8% 11,573 32.9% 43,968 28.1% BB or Low
Slide 36: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment U.S. excluding Prudential Property Type Total % of Lifeco IA Canada Europe CRS Insured Non-insured Prudential Acquired Single Family 1,916 0.8% 1,916 - - - - 443 1,473 Equity Release 2,544 1.1% 1,092 - - 1,415 37 - 2,544 Mu
Slide 37: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q2 2022 1.28 1.60 1.36 1.29 1.57 1.35 Q1 2022 1.27 1.70 1.42 1.25 1.64 1.38 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 37