Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Q3 2014 Earnings Presentation
48 slides from Great-west Lifeco's earnings presentation, 2014
Slide 1: Quarterly Information For Analysts and Investors Q3 2014
Quarterly Information For Analysts and Investors Q3 2014
Slide 2: Cautionary Note Regarding Forward-Looking Information
Q3 2014 Quarterly Information Package CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains some forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include state
Slide 3: Overview
Overview Paul Mahon President & Chief Executive Officer Great-West Lifeco, Great-West Life, London Life, Canada Life
Slide 4: Third Quarter Earnings Up 31% Year Over Year
Q3 2014 Quarterly Information Package Third Quarter Earnings Up 31% Year Over Year Net earnings attributable to common shareholders increased by 31% to $687 million, or $0.687 per share, for the three months ended September 30, 2014 ($523 million or $0.527 in Q3 2013) Net earnings in Q3 2014 and
Slide 5: Assets Under Administration Exceed $1 Trillion
Q3 2014 Quarterly Information Package Assets Under Administration Exceed $1 Trillion At September 30, total AUA was $1.022 trillion, up 45% year over year ‒ The increase was driven by a combination of strong organic growth in all geographies, a $94 billion contribution in Q3 2013 from Irish Life,
Slide 6: Sales Up 28% Over Q3 2013 Driven by Canada and the US
Q3 2014 Quarterly Information Package Sales Up 28% Over Q3 2013 Driven by Canada and the US Total sales this quarter of $21.3 billion – In Canada, Insurance sales increased 32% and Wealth Management sales were up 13% year over year, reflecting strong results in Group Insurance and in Retail Invest
Slide 7: Strong Capital Position
Q3 2014 Quarterly Information Package Strong Capital Position 233% MCCSR ratio for The Great-West Life Assurance Company Holding company cash at quarter end rose to approximately $740 million Common shareholder dividend of $0.3075 per share Book Value per Share of $16.54, up 15% year over ye
Slide 8: Lifeco Summary of Results
Lifeco Summary of Results William W. Lovatt Executive Vice President & Chief Financial Officer Great-West Lifeco
Slide 9: Adjusted Operating Earnings
Q3 2014 Quarterly Information Package Adjusted Operating Earnings (C$MM) Quarterly totals include corporate operating earnings Y/Y Except earnings per share $695 19% Europe $623 $583 $592 U.S. $514 $265 40% Canada $189 $254 $264 $225 $76 $109 43% $69 $56 $41 $332 $294 $304 $330 (1%) $270 Q3 2013 Q4
Slide 10: Return on Equity – Adjusted Operating Earnings
Q3 2014 Quarterly Information Package Return on Equity – Adjusted Operating Earnings (Trailing 4 Quarters) 22.5% 17.5% 17.0% 15.2% (4.5%) (1) Canada Great-West Putnam Europe Lifeco (2) Financial Average Allocated Equity $5.3 $2.1 $2.1 $5.9 $15.9 (C$bln) ROE based on Operating Earnings was 14.9%. O
Slide 11: New Annualized Premiums (Sales) and Premiums & Deposits
Q3 2014 Quarterly Information Package New Annualized Premiums (Sales) Premiums & Deposits (C$BLN) (C$BLN) Canada Great-West Financial Putnam Europe Y/Y $21.9 $21.3 28% $23.9 Y/Y $22.6 $19.9 $4.8 $2.9 (12%) $5.1 $20.4 $20.2 1% $20.0 $3.5 $16.7 $16.2 $6.8 $4.5 $4.9 $4.0 (12%) $3.3 $2.8 $9.0 3% $8.7 $1
Slide 12: Fee Income
Q3 2014 Quarterly Information Package Fee Income (C$MM) Canada Great-West Financial Putnam Europe Y/Y $1,110 $1,092 14% $1,059 $1,001 $955 $318 $289 7% $296 $276 $269 $247 $257 27% $234 $222 $202 $185 $189 $186 14% $163 $173 $330 $344 $356 $360 12% $321 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Consta
Slide 13: Operating Expenses
Q3 2014 Quarterly Information Package Operating Expenses Restructuring Costs & Acquisition Expenses (C$MM) Canada Great-West Financial Putnam Europe Corporate (pre-tax) Y/Y $926 $918 $904 $857 $27 $876 2% $61 $196 $186 $193 $186 21% $154 $238 $267 $234 $228 11% $205 $126 $128 $131 $143 $135 7% $308
Slide 14: Total Assets under Administration
Q3 2014 Quarterly Information Package Total Assets under Administration (C$BLN) General Fund Mutual Fund & Institutional Segregated Fund Other AUA Y/Y $1,022 45% $806 $805 $758 $465 107% $705 $263 $260 $247 $225 $200 $200 $208 24% $168 $185 $150 $161 $170 $170 $171 14% $162 $165 $173 $174 $178 10% Q
Slide 15: Book Value per Share
Q3 2014 Quarterly Information Package Book Value per Share $16.54 $16.05 $16.04 $15.33 $14.39 $0.57 $13.82 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Lifeco’s BVPS at September 30, 2014 was $16.54, up 15% year over year $0.57 was added to book value per share in Q3 2013 from the $1.25 billion commo
Slide 16: Capital & Source of Earnings
Capital & Source of Earnings Garry MacNicholas Executive Vice-President, Actuarial and Risk Great-West Lifeco
Slide 17: Regulatory Capital Ratios Remain Strong – Consolidated MCCSR Ratio
Q3 2014 Quarterly Information Package Regulatory Capital Ratios Remain Strong – Consolidated MCCSR Ratio 233% 233% 230% 228% 223% 221% 218% Adjusted MCCSR 210% 207% 205% 205% 204% 203% 202% 202% 202% 201% 200% 200% 200% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 201
Slide 18: Great-West Lifeco – Source of Earnings
Q3 2014 Quarterly Information Package Great-West Lifeco – Source of Earnings For the three months ended September 30, 2014 Q3 2013 (C$MM) Canada U.S. Europe Corp Total Total Expected profit on in-force business 327 112 242 (3) 678 600 Impact of new business (3) (4) (25) - (32) 21 Experience gains an
Slide 19: Invested Assets Update
Invested Assets Update Mark Corbett Executive Vice President & Chief Investment Officer Great-West Lifeco
Slide 20: In-Quarter Developments: Credit Markets
Q3 2014 Quarterly Information Package In-Quarter Developments Credit Markets Credit experience related to impairments and rating changes negatively impacted shareholders’ net earnings by $3 million in the quarter Total Credit Impact on Shareholders’ Net Earnings Q3 Q4 Total Q1 Q2 Q3 YTD ($ million
Slide 21: Invested Asset Composition
Q3 2014 Quarterly Information Package Invested Asset Composition* Invested assets at September 30, 2014 were $153.2 billion Cash & CD's 2% Diversified high quality portfolio: Bonds represent 72% of invested assets (99% are investment grade; Loans to Investment Properties Policyholders 82% rate
Slide 22: Lifeco Consolidated Bond Portfolio
Q3 2014 Quarterly Information Package Lifeco Consolidated Bond Portfolio* Corporate and Securitized Financial Other Corporate % of Invested $ Governments Banks Services and Securitized Assets (millions) United States 5.1% 0.8% 2.3% 13.4% 21.6% 33,052 Canada 11.7% 1.1% 0.3% 8.4% 21.5% 32,826 United K
Slide 23: Canada
Canada Dave Johnston President & Chief Operating Officer Canada
Slide 24: Canada – Insurance
Q3 2014 Quarterly Information Package Canada – Insurance New Annualized Premiums (Sales) Premiums & Deposits (C$MM) (C$MM) Individual Insurance Group Insurance Y/Y Y/Y $339 32% $3,034 $3,082 7% $2,998 $2,977 $2,887 $269 $256 $260 $231 $209 54% $116 $1,886 $1,900 $1,912 $1,965 6% $136 $147 $1,852 $10
Slide 25: Canada – Wealth Management
Q3 2014 Quarterly Information Package Canada – Wealth Management New Annualized Premiums (Sales) Premiums & Deposits (C$MM) (C$MM) Individual Wealth Management Group Retirement Services $2,933 Y/Y $4,051 $2,592 $2,673 $642 $2,408 13% $1,066 ⃰ $559 $715 Y/Y $2,133 $492 (6%) $2,736 $526 $2,386 9% $2,3
Slide 26: Canada – Fee Income
Q3 2014 Quarterly Information Package Canada – Fee Income (C$MM) Segregated Funds ASO Other Y/Y $356 $360 12% $344 $321 $330 $56 $63 26% $55 $50 $52 $38 $37 3% $38 $36 $35 $251 $262 $260 11% $235 $243 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 26
Slide 27: Canada – Operating Expenses
Q3 2014 Quarterly Information Package Canada – Operating Expenses (C$MM) Group Insurance Wealth Management Individual Insurance Corporate Y/Y $332 $324 $318 $314 2% $308 $107 $108 $98 $103 $105 7% $98 $87 $88 $90 5% $86 $114 $117 $125 $116 $115 1% Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Note: Operat
Slide 28: Canada – Operating Earnings
Q3 2014 Quarterly Information Package Canada – Operating Earnings (C$MM) Group Insurance Wealth Management Individual Insurance Corporate Y/Y $332 $330 (1%) $304 $294 $270 $96 (16%) $114 $113 $105 $93 $109 7% $102 $69 $97 $73 $115 $109 $125 9% $97 $92 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 28
Slide 29: United States
United States Robert Reynolds President & Chief Executive Officer Great-West Lifeco U.S.
Slide 30: J.P. Morgan RPS Acquisition Closed in Q3 2014
Q3 2014 Quarterly Information Package J.P. Morgan RPS Acquisition Closed in Q3 2014 On August 29, 2014 Great-West Financial completed the acquisition of the J.P. Morgan Retirement Plan Services (RPS) large-market recordkeeping business ‒ Great-West Financial is now the 2nd largest retirement plan
Slide 31: Great-West Financial – Sales and Premiums & Deposits
Q3 2014 Quarterly Information Package Great-West Financial – Sales and Premiums & Deposits Sales Premiums & Deposits (US$MM) (US$MM) 401(k) P/NP Individual Markets Institutional Retirement Services Individual Markets Y/Y $6,172 180% $640 147% Y/Y $5,329 $423 $674 66% $1,643 $1,673 $1,644 $1,673 2% $
Slide 32: Great-West Financial – Fee Income
Q3 2014 Quarterly Information Package Great-West Financial – Fee Income (US$MM) Variable Asset Charges Variable Asset Fees Administrative Fees (all non-variable) Individual Market Fees Y/Y $169 $173 $170 10% $165 $154 $22 $23 $21 24% $24 $17 $45 $41 (5%) $42 $45 $43 $91 $94 16% $81 $86 $89 $13 $13 $
Slide 33: Great-West Financial – Operating Expenses
Q3 2014 Quarterly Information Package Great-West Financial – Operating Expenses (US$MM) Retirement Services Individual Markets Corporate Acquisition Expenses (pre-tax) Y/Y $131 $127 5% $121 $122 $119 $3 $5 $21 $18 $18 $17 $20 11% $101 $101 $107 $100 $99 (2%) Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 N
Slide 34: Great-West Financial – Operating Earnings
Q3 2014 Quarterly Information Package Great-West Financial – Operating Earnings (US$MM) Retirement Services Individual Markets Corporate Y/Y $105 27% $83 $85 $77 $71 $61 53% $40 $44 $32 $36 $44 $48 14% $42 $42 $36 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 34
Slide 35: Putnam – AUM & Flows
Q3 2014 Quarterly Information Package Putnam – AUM & Flows (US$BLN) Mutual Funds Institutional $2.8 ($2.6) $158.6 ($1.9) $157.1 $153.4 ($4.3) $149.6 $5.4 ($0.9) $140.8 $73.9 $72.2 $72.7 $72.8 $70.0 $80.7 $84.7 $84.9 $70.8 $76.8 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Sales Redemptions Market Q3 2014 In-Qtr
Slide 36: Putnam – Fee Income
Q3 2014 Quarterly Information Package Putnam – Fee Income (US$MM) Investment Management Fees Service Fees Underwriting & Distribution Fees Performance Fees Y/Y $236 21% $227 $211 $212 $16 60% $13 $195 $11 $12 $10 $40 $41 11% $38 $39 $37 $168 $173 18% $147 $157 $158 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3
Slide 37: Putnam – Core Earnings
Q3 2014 Quarterly Information Package Putnam – Core Earnings (US$MM) Expenses Income Taxes Fee & Net Inv Income Operating Margin (Pre-tax) $228 $217 $240 $237 $201 6.1% 5.9% 4.2% 0.5% (5.1%) ($228) ($230) ($223) ($200) ($214) ($19) Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Core Earnings $0 $8 ($13) $4
Slide 38: Putnam – Contribution to Lifeco Earnings
Q3 2014 Quarterly Information Package Putnam – Contribution to Lifeco Earnings (US$MM) Core Earnings (After-tax) Financing Expenses Other $8 $4 ($7) ($7) ($5) ($10) ($13) ($4) ($5) ($9) ($8) ($8) ($8) ($25) ($24) ($27) ($48) Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Note: Putnam’s contribution include
Slide 39: Europe
Europe Arshil Jamal President & Chief Operating Officer Europe
Slide 40: Europe – Sales and Premiums & Deposits
Q3 2014 Quarterly Information Package Europe – Sales and Premiums & Deposits Sales Premiums & Deposits (C$MM) (C$MM) UK/Isle of Man Ireland/Germany Reinsurance $6,767 $4,773 $1,538 $5,089 $4,944 Y/Y Y/Y $3,506 $3,299 $4,511 $977 $2,913 (12%) $736 $1,446 $3,986 (12%) $2,814 $3,922 $540 (27%) $4,296 $
Slide 41: Europe – Fee Income
Q3 2014 Quarterly Information Package Europe – Fee Income UK/Isle of Man Ireland/Germany Reinsurance Corporate (C$MM) Y/Y $318 $296 $11 $289 7% $276 $10 $11 (8%) $269 $10 $12 $229 $222 $217 19% $183 $210 $71 $64 $78 (14%) $55 $61 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Constant Currency Y/Y $269 $26
Slide 42: Europe – Operating Expenses
Q3 2014 Quarterly Information Package Europe – Operating Expenses (C$MM) UK/Isle of Man Ireland/Germany Restructuring Costs & Acquisition Corporate Reinsurance Expenses (pre-tax) Y/Y $223 $215 $27 $203 $191 $10 $193 (10%) $5 $7 $61 $13 $13 $11 $13 30% $10 $132 $129 $121 17% $129 $103 $47 $43 $49 $49
Slide 43: Irish Life Update: Continuing Excellent Operational and Expense Performance
Q3 2014 Quarterly Information Package Irish Life Update: Continuing Excellent Operational and Expense Performance Integration activities were expected to result in an annual reduction of Irish Life related operating costs of €40 million ‒ From July 19, 2013 to September 30, 2014 Lifeco achieved €3
Slide 44: Europe – Consolidated Operating Earnings
Q3 2014 Quarterly Information Package Europe – Consolidated Operating Earnings UK/Isle of Man Ireland/Germany Reinsurance Corporate (C$MM) Y/Y $259 $259 101% $246 $202 $59 4% $63 $72 $129 $63 $57 $63 $93 79% $40 $70 $52 $126 $137 40% $114 $115 $82 ($27) ($62) Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Slide 45: Macro Economic Environment – Equity Markets
Q3 2014 Quarterly Information Package Macro Economic Environment Equity Markets S&P TSX S&P 500 FTSE 100 Close Average Close Average Close Average Q3 2014 14,961 15,335 1,972 1,976 6,623 6,756 Q2 2014 15,146 14,674 1,960 1,900 6,744 6,762 Q1 2014 14,335 13,983 1,872 1,835 6,598 6,681 Q4 2013 13,622
Slide 46: Macro Economic Environment – Interest Rates
Q3 2014 Quarterly Information Package Macro Economic Environment Interest Rates Canada United States United Kingdom A A A 10 Year Rated 10 Year Rated 10 Year Rated Gov’t Corporate Gov’t Corporate Gov’t Corporate Spread(1) Spread(1) Spread(1) Q3 2014 2.15% 1.16% 2.49% 0.98% 2.42% 0.81% Q2 2014 2.24%
Slide 47: Macro Economic Environment – Currency
Q3 2014 Quarterly Information Package Macro Economic Environment Currency Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2014 1.09 1.82 1.44 1.12 1.82 1.42 Q2 2014 1.09 1.84 1.50 1.07 1.83 1.46 Q1 2014 1.10 1.83 1.51 1.11 1.84 1.52 Q4 2013 1.05 1.70 1.43 1.06 1.76 1.47 Q3 2013 1.04 1.61 1.38 1.0
Slide 48: Questions
GREAT-WEST INC. Questions