Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Q3 2021 Earnings Presentation
35 slides from Great-west Lifeco's earnings presentation, 2021
Slide 1: Quarterly Results Presentation Q3 2021
Quarterly Results Presentation Q3 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 Value-Creation Priorities and Medium-Term Financial Objectives
OUR VALUE-CREATION PRIORITIES Advice-centered value Digital capabilities Workplace extensions Risk & investment expertise creation Capture value through Deliver advice and Extend workplace participant Leverage capabilities to advice-based wealth and solutions through multiple relationships into life
Slide 5: Earnings
EARNINGS Earnings per Share (EPS) (C$) Earnings (C$m) 0.93 0.94 870 872 0.89 0.89 826 826 0.84 784 0.73 679 Base1 Net Net Base1 Base1 Q3 2020 Q2 2021 Q3 2021 Q3 2020 Q2 2021 Q3 2021 Base Earnings and EPS Net Earnings and EPS • Base earnings up 28% and base EPS up 27% from Q3 2020 • Net earnings and
Slide 6: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Solid momentum in insurance sales and strong wealth sales in both Group and Individual 3,145 3,272 2,335 596 870 • Further strategic advancements 185 200 194 483 101 101 • New Canada Life Sustainable Portfolios mutual 109 1,852 2,549 2,402 76 99 93
Slide 7: Empower
EMPOWER • Large plan sales drove YoY increase combined with Empower Sales1 (ex-Personal Capital) (US$m) continued strong growth in the Not-for-Profit and Retail 17,965 Wealth Management segments 12,812 6,692 • Total Retail Wealth Management (Empower IRA and Personal Capital combined) continue to exp
Slide 8: Putnam
PUTNAM Sales1 (US$m) • US$18b increase in ending AUM year-over-year • Lower sales from lower-fee fixed income products 13,809 • Net outflows of US$1.6b 6,913 10,120 8,790 • Fixed income products also driving net ouflows 4,595 4,047 6,896 • US$2.1b improvement vs. Q2 2021 5,525 4,743 • Strong investm
Slide 9: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) • Sales continue to rebound from COVID-impacts with Sales1 (C$m) a C$1.3b U.K. bulk annuity deal, strength in ERM, and 1,930 1,790 1,818 higher wealth sales in the quarter 287 68 1,404 287 469 • AUA have continued to increase in local currency: 766 550
Slide 10: Capital and Risk Solutions
CAPITAL AND RISK SOLUTIONS • Strong growth in expected profit, up 8% YoY • Growth in Structured Life and Longevity • Pipeline of new business continues to be strong in both Expected Profit1 (C$m) Structured Life and Longevity • Completed a single premium reinsurance agreement 174 170 covering a sign
Slide 11: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco 11
Slide 12: Earnings
EARNINGS Earnings per Share (C$m) Base Earnings1 (C$m) (Base)1,2 (Net)2 0.93 0.94 Canada U.S. Europe CRS Lifeco Lifeco 0.89 0.89 0.84 0.73 Q3 2021 312 221 232 107 870 872 Q2 2021 293 190 184 150 826 784 Net Base1 Q3 2020 270 83 182 156 679 826 YOY 16% 166% 27% (31%) 28% 6% 3 Q3 2020 Q2 2021 Q3 2021
Slide 13: Earnings Reconciliation
EARNINGS RECONCILIATION Q3 2021 Q2 2021 Q3 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 870 0.93 826 0.89 679 0.73 Items excluded from base earnings Actuarial assumption changes and other 2 69 0.08 37 0.04 66 0.07 management actions M
Slide 14: Source of Earnings [Base]
SOURCE OF EARNINGS [BASE] Q3/21 Q2/21 Q3/20 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 339 252 225 174 (4) 986 925 803 Impact of new business (11) (58) (21) 85 - (5) (72) (66) Experience gains and losses 82 45 72 (159) - 40 69 23 Earnings on surplus (in
Slide 15: Source of Earnings [Net]
SOURCE OF EARNINGS [NET] Q3/21 Q2/21 Q3/20 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 339 252 225 174 (4) 986 925 803 Impact of new business (11) (58) (21) 85 - (5) (72) (66) Experience gains and losses 88 44 119 (159) - 92 55 36 Management actions and
Slide 16: Source of Earnings – Additional Detail
SOURCE OF EARNINGS – ADDITIONAL DETAIL Experience gains and losses Management actions and changes in assumptions For three months ended Sept. 30/21 For three months ended Sept. 30/21 Pre-Tax Post-Tax Pre-Tax Post-Tax (C$m) (C$m) Economic Assumption Updates Yield enhancement 43 33 272 208 excluding A
Slide 17: 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 1,447 Q3 2021 461 730 225 27 1,447 1,324 Q2 2021 469 706 302 25 1,527 Q3 2020 431 587 275 25 1,324 YOY 7% 24% (18%) 8% 9% 3 Constant Currency 7% 31% (16%) 12% 13% Q2 2020 Q2 2021 Q3 20
Slide 18: Book Value per Share and LICAT
BOOK VALUE PER SHARE AND LICAT Book Value per Share (C$) LICAT Ratio 24.40 23.70 131% 22.57 126% 123% Q3 2020 Q2 2021 Q3 2021 Q3 2020 Q2 2021 Q3 2021 •BVPS growth of 8% YoY was largely driven by strong • LICAT ratio at 123%, down 3 points QoQ, mainly due to retained earnings over the past 4 quarters
Slide 19: Looking ahead…
Looking ahead… Continued vigilance around COVID-19 Capitalize on strategic initiatives and investments Focus on the successful integration of acquired businesses Further establish ESG & community impact commitments 19
Slide 20: Questions
QUESTIONS 20
Slide 21: Appendix
APPENDIX 21
Slide 22: Canada
CANADA (In C$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Sales Individual Insurance 76 116 109 99 93 22% Individual Wealth 1,852 2,818 3,243 2,549 2,402 30% Individual Total 1,928 2,934 3,352 2,648 2,495 29% Group Insurance 109 111 276 101 101 (7%) Group Wealth 483 684 1,105 596 870 80% Group Tot
Slide 23: Canada
CANADA (In C$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Individual Customer Base Earnings 123 132 138 162 140 14% Items excluded from Base Earnings (4) (141) (12) (5) (3) Net Earnings 119 (9) 126 157 137 15% Group Customer Base Earnings 134 205 154 189 168 25% Items excluded from Base Earnings -
Slide 24: United States
UNITED STATES (In US$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Sales Empower Retirement 6,692 6,983 63,833 17,965 12,812 91% Personal Capital 542 1,168 1,399 1,483 1,551 186% Total 7,234 8,151 65,232 19,448 14,363 99% Putnam Sales 13,809 12,957 12,674 10,120 8,790 (36%) Fee and Other Income Emp
Slide 25: United States
UNITED STATES (In US$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Empower Retirement Base Earnings 58 56 95 147 145 150% Items excluded from Base Earnings 29 - (8) (8) (10) Net Earnings 87 56 87 139 135 55% Personal Capital Base Earnings (5) (5) (11) (7) (4) Items excluded from Base Earnings - (2)
Slide 26: Europe
EUROPE (In C$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 284 996 522 677 1,869 Ireland Insurance and Annuity 63 75 68 82 55 (13%) Germany Insurance and Annuity 7 7 7 7 6 (14%) Total 354 1,078 597 766 1,930 Wealth Management Sales U.K. Wealth
Slide 27: Europe
EUROPE (In C$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Fee and Other Income U.K 42 43 46 39 48 14% Germany 111 119 116 115 115 4% Ireland 189 189 191 192 189 0% Total 342 351 353 346 352 3% Operating Expenses U.K 85 77 86 92 76 (11%) Germany 37 40 41 38 37 0% Ireland 151 163 164 162 105 (30%) C
Slide 28: Europe
EUROPE (In C$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY U.K. Base Earnings 78 96 120 53 83 6% Items excluded from Base Earnings (11) 60 (12) (23) 102 Net Earnings 67 156 108 30 185 176% Ireland Base Earnings 70 62 43 68 110 57% Items excluded from Base Earnings 126 (8) 3 4 22 Net Earnings 196 54
Slide 29: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YoY Fee and Other Income Reinsurance 3 3 2 2 2 (33%) Operating Expenses Reinsurance 23 23 23 23 25 9% Corporate & Par 2 2 2 2 2 Total 25 25 25 25 27 8% Reinsurance Base Earnings 157 124 146 151 108 (31%) Items excluded from
Slide 30: Putnam – Core Net Earnings
PUTNAM – CORE NET EARNINGS (US$m) 271 255 250 238 231 20.6% 11.8% 12.3% 13.1% 2.8% Expenses Fee & Net Investment Income1 Income Taxes Core Margin (Pre-tax) (210) (215) (219) (225) (222) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Core Net Earnings2: 19 37 5 25 24 1. Fee & net investment income includes
Slide 31: Invested Assets
INVESTED ASSETS 1 Loans to Investment Properties Policyholders Cash and CD's 3% Invested assets of $218.6 billion 3% 4% Gov't, Gov't Related and Stocks Agency Securitized Bonds 25% Diversified high quality portfolio: 6% Bonds represent 70%: Insured Residential • 99% are investment grade and Multi-fa
Slide 32: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO * % of Invested Assets Gov't, Gov't Related and Agency Corporate and Non-Agency Country of Domicile Securitized Bonds Securitized Bonds Total Bonds U.S. 3.4% 23.3% 26.7% Canada 9.2% 8.7% 17.9% U.K. 7.2% 6.9% 14.1% Germany 1.1% 1.0% 2.1% Ireland 0.3% 0.2% 0.5% 21.2%
Slide 33: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION * Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.0% CMBS 1.8% Consumer Products 5.9% RMBS 0.1% Industrial Products 4.5% Other ABS 4.0% Financial Services 3.6% Total Non-Agency Securi
Slide 34: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 2,018 0.9% 2,018 - - - 498 1,520 Equity Release 2,500 1.1% 994 - 1,506 - - 2,500 Multi Family 7,535 3.5% 4,284 2,414 798 39 3,001 4
Slide 35: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € 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 Q3 2020 1.33 1.72 1.56 1.33 1.72 1.56 35