Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Q4 2023 Earnings Presentation
38 slides from Great-west Lifeco's earnings presentation, 2024
Slide 1: Quarterly Results Presentation Q4 2023
Great-West Lifeco Quarterly Results Presentation Q4 2023
Slide 2: Cautionary Notes
CAUTIONARY NOTES CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains 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", "expe
Slide 3: Positioned for Sustainable Growth
Positioned for Sustainable Growth Paul Mahon President & CEO Great-West Lifeco
Slide 4: 2023 Highlights
2023 Highlights Strong results driven by disciplined capital allocation and solid execution, with record Q4 base EPS1 Generated $30B of positive net flows2 in our wealth and retirement businesses Empower crosses C$1B base earnings1, above growth objective; Prudential transaction exceeding our expect
Slide 5: 2023 Results Overview
2023 Results Overview Base Earnings1 Base EPS1 Base ROE1 $3.7B $3.94 16.6% Up 11% YoY Up 11% YoY Up 0.8 pp YoY Net Earnings2 of $2.9b Net EPS2 of $3.07 Net ROE2 of 12.4% BVPS3 LICAT ratio4 Leverage Ratio5 $24.26 128% 30% Up 4% YoY 1. This metric is a non-GAAP financial measure/ratio. Refer to "Non-G
Slide 6: Strong Performance Against Financial Objectives
Strong Performance Against Financial Objectives Medium-Term Financial Objectives 1-Year 5-Year2 1 8-10% base EPS growth p.a 11% 11% CAGR 1 3 16-17% base ROE 17% 16% average 1 Target dividend payout ratio 45-55% of base earnings 53% 56% average 1. This metric is a non-GAAP financial measure/ratio. Re
Slide 7: Strategic Repositioning of U.S. Business to Accelerate Growth in Retirement and Wealth
Strategic Repositioning of U.S. Business to Accelerate Growth in Retirement and Wealth 2018 LAST 5 YEARS 2024 2019 2020 2021 2022 2023 Acquisitions Retirement Services Business Full-Service Retirement Business Launched Divestments Personal Wealth U.S. individual life & annuity business 7
Slide 8: Canada
Group Life & Health Group Retirement CANADA Book Premium4 (C$M) AUA1,2 and Flows3 (C$M) 113 150 Q4 2023 HIGHLIGHTS 14,700 14,843 65,512 12,155 (120) 58,817 61,134 1,830 3,943 (1,395) • Workplace Solutions • Group Life & Health book premium up 22% YoY, due to the addition of the Public Service Health
Slide 9: Capital & Risk Solutions
Run-Rate Reinsurance Earnings Drivers1 CAPITAL & RISK Short-term insurance business Risk adjustment release CSM recognized for services provided SOLUTIONS 205 210 194 Q4 2023 HIGHLIGHTS 41 38 38 46 45 51 • Continued new business momentum ▪ Solid new business transactions covering 121 127 102 savings
Slide 10: Europe
Europe David Harney President and COO, Europe Great-West Lifeco
Slide 11: Europe
Group Life & Health Workplace Solutions Book Premium4 (C$M) AUA1,2 and Flows3 (C$M) EUROPE Q4 2023 HIGHLIGHTS 2,125 2,348 35 73 2 2,415 31,327 (43) 29,266 916 395 1,258 27,496 (508) • Workplace Solutions • Group Life & Health book premium up 14% YoY driven by high employment levels, salary inflation
Slide 12: Europe Actions to Enhance Returns
Europe Actions to Enhance Returns Europe has a broad market position in the strong, growing Irish economy, targeted product positions in the UK and Germany that are less dependent on economic growth We have taken deliberate actions in the fourth quarter to enhance capital returns: • Completed the sa
Slide 13: Empower
Empower Ed Murphy President and CEO, Empower Great-West Lifeco
Slide 14: Empower
Empower Defined Contribution (DC) AUA1 and Flows2 (US$B) 51 125 1,473 EMPOWER 1,256 1,340 (43) Q4 2023 HIGHLIGHTS Q4 2022 Q3 2023 Inflows Outflows Market/Other Q4 2023 • Workplace Solutions • Empower DC AUA of $1.5T, up 17% YoY Empower DC Participants (,000) • Net inflows in 2023 of $11B 17,725 17,8
Slide 15: Increased scale by acquisition
Increased scale by acquisition Empower AUA1 Total Participants/Clients ~2x ~2X 18.5M US$1.5T 9.4M US$762B 2 2020 2023 2020 2023 1. This metric is a non-GAAP financial measure. Refer to "Non-GAAP Financial Measures and Ratios” in the Appendix and in our 2023 Annual MD&A. 2. Excluding MassMutual which
Slide 16: Driving strong organic growth
Driving strong organic growth Net Inflows1 Net Inflows1 Defined Contribution Personal Wealth US$102B 4% annual 21% annual average average inflows2 US$26B inflows2 2021-2023 2021-2023 1. Additional information regarding “net cash flows and net asset flows” has been incorporated by reference and can b
Slide 17: Enhancing profitability
Enhancing profitability U.S. Base Earnings1 U.S. Base ROE1 ~4x ~2X 11.6% US$749M 5.7% C$1B US$205M 2020 2023 2020 2023 2 2 Net: US$287M Net: US$572M Net: 7.9% Net: 7.4% 1. This metric is a non-GAAP financial measure/ratio. Refer to "Non-GAAP Financial Measures and Ratios” in the Appendix and in our
Slide 18: Financial Highlights
Financial Highlights Garry MacNicholas EVP & CFO Great-West Lifeco
Slide 19: EPS and Earnings by Reporting Segment
EPS and Earnings by Reporting Segment (Base) 1,3,5 (Net) 2,3 Earnings per Share5 Earnings5 (C$M) Canada U.S. Europe CRS Lifeco Lifeco (C$M) 1.02 1.01 1.04 0.96 Q4 2023 301 261 213 236 971 743 0.80 Q3 2023 296 262 206 198 950 936 0.51 Q4 2022 260 215 256 181 894 478 Base1 Net2 YOY 16% 21% (17%) 30% 9
Slide 20: Earnings Reconciliation
Earnings Reconciliation Q4 2023 Q3 2023 Q4 2022 Post-Tax Per Share Post-Tax Per Share Post-Tax Per Share (C$m) (C$) (C$m) (C$) (C$m) (C$) 1,2 Base earnings 971 1.04 950 1.02 894 0.96 Items excluded from base earnings Market experience relative to expectations (213) (0.23) 153 0.16 (386) (0.41) Assum
Slide 21: Drivers of Earnings
Drivers of Earnings Q4/23 Q3/23 Q4/22 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected insurance earnings 325 17 191 210 - 743 732 700 Risk adjustment release 34 1 25 45 - 105 112 113 CSM recognized for services provided 99 16 93 38 - 246 244 243 Short-term insurance contracts 192 - 73
Slide 22: Key Capital Metrics
Key Capital Metrics Book Value per Share1 (C$) LICAT Ratio2 24.01 24.26 130% 23.28 128% 128% 5 Q4 2022 Q3 2023 Q4 2023 Q4 2022 Q3 2023 Q4 2023 Return on Equity1 Financial Leverage4 17.2% 16.4% 16.6% 15.8% 33% 12.4% 31% 11.2% 30% Base3 Net 3 Base Net Q4 2022 Q3 2023 Q4 2023 Q4 2022 Q3 2023 Q4 2023 Fo
Slide 23: Factors Impacting 2024 Results
Factors Impacting 2024 Results Putnam transaction closed on January 1, 2024 • Transaction resulted in a modest gain upon disposal, to be recorded in Q1 2024 • Proceeds from disposition, including Franklin Templeton shares, expected to benefit 2024 base earnings1 by approximately C$75m and increase E
Slide 24: Paul Mahon
Paul Mahon President & CEO Great-West Lifeco
Slide 25: Looking Ahead
Looking Ahead Empower is expected to become largest segment by base earnings1, with a growth objective of 15-20%2 in 2024, including: • Completing Prudential integration while delivering the remaining pre-tax run-rate cost synergies of US$100M; two-thirds of which will benefit 2024 • Prudential clie
Slide 26: Questions
Questions GREAT-WEST LIFECOn« canada EMPOWER S|
Slide 27: Appendix
Appendix GREAT-WEST ——
Slide 28: Value Drivers
Value Drivers Operating Segments1 Capital and Risk Canada U.S. Europe Solutions Workplace Group Life & Health Empower Defined Group Life & Health Solutions Group Retirement Contribution Group Retirement Empower Personal Wealth & Asset Individual Wealth Wealth Individual Wealth & Asset Management Man
Slide 29: Base Earnings By Value Driver
Base Earnings By Value Driver YoY Canada U.S. Europe CRS LIFECO 1 1 1 1 2 Value Drivers Base YoY Base YoY Base YoY Base YoY Total Base YoY Workplace Solutions 192 36% 210 15% 87 164% - - 489 37% Wealth & Asset Management 46 5% 55 20% 43 (32%) - - 144 (6%) Base1 Insurance & Risk Solutions 60 (50%) -
Slide 30: Contractual Service Margin (CSM)
Contractual Service Margin (CSM) Total CSM ($CM) Non-Par CSM ($CM), excluding segregated funds and par 167 186 104 34 205 (276) (90) (135) (41) (406) 13,054 13,041 6,183 6,016 5,978 12,635 Beginning Total Impact of new Expected CSM recognized for Insurance CSM with Other impacts Ending Total CSM CSM
Slide 31: Invested Assets
Invested Assets Invested assets of $226.8B Investment Properties Cash and CD's Gov't, Gov't Related and Agency 4% 3% Securitized Bonds Diversified high quality portfolio Stocks 19% 7% Bonds represent 69%: • 99% are investment grade Insured Residential and Multi-family • 70% rated A or higher Mortgag
Slide 32: Lifeco Consolidated Bond Portfolio
Lifeco Consolidated Bond Portfolio % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 3.2% 27.8% 31.0% Canada 7.4% 9.2% 16.6% U.K. 5.0% 5.9% 10.9% Germany 0.7% 1.1% 1.8% Ireland 0.2% 0.3% 0.5% 16.5% 4
Slide 33: Corporate and Non-Agency Securitized Bonds Sector Diversification
Corporate and Non-Agency Securitized Bonds Sector Diversification Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.3% CMBS 2.2% Consumer Products 6.4% RMBS 0.1% Industrial Products 5.2% Other ABS 5.3% Banks 3.8% Total Non-Agency Securitized 7.6% Financ
Slide 34: Lifeco Mortgage Exposures
Lifeco Mortgage Exposures (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada Par Canada Non-Par U.S. Europe CRS Insured Non-insured LTV1 DSCR1 WALT Single Family 1,511 0.7% 1,192 319 - - - 328 1,183 Equity Release 4,203 1.9% 418 1,280 - 2,042 463 - 4,203 Mult
Slide 35: United Kingdom Mortgage Exposures
United Kingdom Mortgage Exposures (C$m) Carrying Value Property Type City/Region Total % of Lifeco IA Office Buildings Industrial Retail Multi Family Other Equity Release Central London 2,777 1.2% 895 178 534 548 341 281 Other United Kingdom 7,041 3.1% 456 1,374 785 311 464 3,651 Total United Kingdo
Slide 36: Lifeco Non-Fixed Income Portfolio
Lifeco Non-Fixed Income Portfolio NFI Portfolio by Type Total % of Lifeco IA Canada Par Canada Non-Par U.S. Europe CRS Investment Properties Industrial 3,024 1.4% 1,906 271 - 847 - Office 1,661 0.7% 973 159 21 508 - Multi Family 1,472 0.6% 1,206 242 - 24 - Retail 830 0.4% 181 24 - 625 - Other 883 0.
Slide 37: Non-GAAP Financial Measures and Ratios
NON-GAAP FINANCIAL MEASURES AND RATIOS This document contains some non-Generally Accepted Accounting Principles (GAAP) financial measures and non-GAAP ratios as defined in National Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”. Non- GAAP financial measures and ratios are used
Slide 38: Footnotes
FOOTNOTES All references to the Company’s 2023 Annual MD&A in the below footnotes are to the Company’s management’s discussion and analysis for the twelve months ended December 31, 2023, which is available on SEDAR+ at www.sedarplus.com. Slide 4 2. Additional information regarding “net cash flows an