Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Investor Day (June 2021)
90 slides from Great-west Lifeco's investor day presentation, June 2021
Slide 1: Great-West Lifeco Empower Retirement Investor Day
Great-West Lifeco Empower Retirement Investor Day June 2021 Note: All figures in U.S. dollars, unless stated otherwise
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: CEO welcome & Great-West Lifeco overview
CEO welcome & Great-West Lifeco overview Paul A. Mahon President & Chief Executive Officer, Great-West Lifeco Inc.
Slide 4: Agenda
4 Agenda 9:00 – 9:15 CEO welcome & Great-West Lifeco overview Paul Mahon 9:15 – 9:50 Empower Retirement Business overview Ed Murphy Attractive retirement plan market Ed Murphy Empower — DC retirement Richard Linton 9:50 – 10:00 Break 10:00 – 10:20 Empower Retirement Growing consumer wealth managemen
Slide 5: We have built a diversified, value-creating portfolio
5 We have built a diversified, value-creating portfolio Lifeco net earnings per share1 ‘12 – ‘20 CAGR Retirement Services Business 6.6% Since 2012, we have repositioned the portfolio through disciplined Health Insurance Divestment: investments and capital deployment RPS Ireland Ltd. Divestment: acti
Slide 6: Our market-leading franchises are well positioned for growth
6 Our market-leading franchises are well positioned for growth Canada U.S. Europe Capital & Risk Solutions 45% 36% 10% 13% 26% 31% 20% 21% of base earnings1,2 of net earnings1 of base earnings1,2 of net earnings1 of base earnings1,2 of net earnings1 of base earnings1,2 of net earnings1 • A leader fo
Slide 7: Our four value-creation priorities
7 Our four value-creation priorities: Focus on the customer and leverage our risk & investment expertise Advice-centered value Digital capabilities Workplace extensions Risk & investment creation expertise Continue to scale and Deliver efficient and Extend workplace Leverage capabilities to leverage
Slide 8: Strong growth potential in customer and advisor relationships
8 Strong growth potential in the millions of customer and deep advisor relationships across our businesses Customer relationships 32M 12M 2 5M 15M 5 Plan participant relationships 20M 4M 3 4M 12M+ Workplace focus1 Plan sponsor relationships 167K 39K4 60K 67K Advisor relationships 200K+ 23K 10K 170K6
Slide 9: Digitally enabled advice is a key value driver delivered across channels
9 Digitally enabled advice is a key value driver delivered across channels Workplace Hybrid Advisor Direct access to retirement Digital advice & Advice & solutions through & group benefits with plan solutions plus access independent advisors sponsor support to in-house advisors Plan Hybrid advice In
Slide 10: Our four priorities are expected to drive growth across Lifeco's portfolio
10 Our four priorities are expected to drive growth across Lifeco’s portfolio Higher impact Lower impact Advice-centered value creation Digital capabilities Workplace extensions Risk & investment expertise
Slide 11: Our medium-term financial objectives
11 Our medium-term* financial objectives are supported by a diversified portfolio with significant organic and extension growth potential 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 m
Slide 12: Sustainability, DEI and ESG are core to our value-creation objectives
12 Sustainability, DEI and ESG are core to our value- creation objectives Environmental Diversity, Equity ESG stewardship & Inclusion investing • “A” rating from CDP (formerly the Carbon • Lifeco’s Diversity Policy focuses on • Developing a fully integrated approach to Disclosure Project); top 5% of
Slide 13: Empower Retirement
Empower Retirement FOR INTERNAL USE ONLY.
Slide 14: Today's presenters
14 Today’s presenters Edmund F. Murphy III Richard Linton Carol E. Waddell President and CEO President, Executive Vice President, Head of Workplace Solutions Retirement Solutions Group Jay Shah Christine Moritz Andra S. Bolotin President, Senior Vice President, Executive Vice President, CFO Personal
Slide 15: Key messages & agenda
15 Key messages & agenda Business overview - Murphy • Empower is a leading financial services franchise serving businesses and individuals Attractive retirement plan market - Murphy • The large and shifting U.S. market landscape creates a highly attractive growth opportunity. Winning in defined cont
Slide 16: Business overview
Business overview
Slide 17: Empower Retirement overview
17 Empower Retirement overview All figures in presentation are in U.S. $ Key figures Clients 2020 revenue of $1.2 billion with a 2016-to-2020 revenue 12 million individuals and over CAGR of 10% 67,000 organizations In January of 2021, passed $1 trillion in assets under administration Over $35B in re
Slide 18: Empower targets a large and growing market
18 Used 2020 report Empower targets a large and growing market numbers updated U.S. household investable assets 2019 ($T) DC (defined contribution) Tax-advantaged defined contribution retirement savings plans offered by employers 6.6 5.1 IRA (individual retirement account) Tax-advantaged retirement
Slide 19: Market-leading franchises in synergistic markets
19 Market-leading franchises in 2 synergistic markets B2B solutions to manage DC (defined contribution) One at-scale platform retirement benefits for employers Shared technology capabilities Synergistic client acquisition Complementary brands B2C wealth management solutions (rollover/IRA & taxable)
Slide 20: We serve our customers
20 We serve our customers Our culture Our values Customer obsessed We do the right thing Accountable We own it Growth mindset We lead Constantly improving We simplify Inclusive We collaborate FOR INTERNAL USE ONLY.
Slide 21: Brand
21 Brand • Empower and Personal Capital brands have increasing awareness numbers with positive brand attributes. • Significant planned ongoing investment in brand awareness NFL stadium naming rights & sports sponsorships National television spots
Slide 22: Consistent history of growth and ambitious financial targets
22 Consistent history of growth and ambitious financial targets • Empower has seen consistent organic growth since inception. • The Personal Capital and MassMutual acquisitions position Empower to accelerate the growth trajectory moving forward. 2016 2020 CAGR 16-20 Assets under administration ($B)
Slide 23: Personal Capital acquisition enhances value proposition
23 Personal Capital acquisition enhances DC retirement plan and wealth management value proposition Organizations receive a state-of-the-art financial Personal Capital tools are 92% highly persistent, with over wellness offering bundled with their retirement plan benefit. Individuals receive a 3-dim
Slide 24: MassMutual acquisition drives scale
24 MassMutual acquisition drives scale Summary Composition of client assets1 Defined Benefit • Transaction strengthens Empower’s #21 position in the Taft-Hartley 12% 4% defined contribution recordkeeping market Retirement solutions Not-for-Profit provider with Corporate • Increases scale advantages
Slide 25: Community involvement: ACT Program
25 Community involvement: ACT Program (Associates, Community, Together) 63% of our corporate giving dollars went to nonprofits that primarily serve under-resourced communities. SUPPORTED FRONT-LINE OVER COVID ORGANIZATIONS WITH 1,173 7,420 $250K NONPROFITS FINANCIALLY SUPPORTED VOLUNTEER HOURS DESPI
Slide 26: Empower has leading Glassdoor employee ratings
26 Empower has leading Glassdoor employee ratings Score (on a scale of 5) Empower Retirement 4.2 Fidelity 4.2 Principal 4.1 4.2 T. Rowe Price 3.8 John Hancock 3.8 Prudential 3.8 Voya 3.8 SCORE Vanguard 3.5 Alight 3.3 Transamerica 2.9 ICMA-RC 2.9 Ratings as of 3/31/21 Source: Glassdoor
Slide 27: Experienced management team with proven track record
27 Experienced management team with proven track record Edmund F. Murphy III John Bevacqua Andra S. Bolotin Richard Linton Stephen E. Jenks Carol Kline Jonathan D. Kreider President and CEO Chief Risk Officer Executive Vice President, CFO President, Senior Vice President, CMO Senior Vice President,
Slide 28: Empower overview video
Empower overview video ( — EMPOWER
Slide 29: Attractive market – DC retirement
Attractive market – DC retirement
Slide 30: Market – Key messages
30 Market – Key messages The DC market is large and complex, with many different segments and industry participants. Organizations have increased interest in financial wellness and bundling benefits. Shifting DC market dynamics are changing industry economics and how to compete. As a result, DC reco
Slide 31: DC market continues to grow
31 DC market continues to grow • Corporate DC flows have declined due to aging workforce. • Closing the access gap offers opportunity to increase flows. Corporate DC assets (market), excluding government & not-for-profit ($B) CAGR 8.7% 4,095 4,835 5,114 5,078 5,436 6,313 6,025 7,327 Year ended 2012
Slide 32: Large opportunity to increase retirement plan access
32 New Slide Large opportunity to increase retirement plan access for working Americans Workforce size and participation (in %) as of end of 2019 Private sector Public sector ~62.8 million 9% 19.4 33% 39.6M either do not participate or do not have access to employer-sponsored retirement plans 139.6M
Slide 33: Employers are focusing on financial wellness programs
33 Employers are focusing on financial wellness programs for employees % of employees who find it stressful dealing with their financial situation Majority of employers believe FW delivers tangible benefits; 52% have 67% implemented while 25% are implementing (2020) 61% Top reasons for offering fina
Slide 34: Significant shifts in the DC market have led to evolution of business model
34 Significant shifts in the DC market have led to an evolution of the business model for recordkeepers Historic model Market forces Future model 1 2 3 Revenue driven from investments Pressure on investment and fee Revenue driven from rollovers, revenue managed accounts and consumer Pure B2B recordk
Slide 35: Defined contribution market share as measured by participants
35 Defined contribution market share as measured by participants Total participants Total participants Market share Market share Rank Recordkeeper YoY change (M) YoY change (%) as of Sep 2020 (M) as of Sep 2019 (M) as of Sep 2020 as of Sep 2019 1 Fidelity 25.7 23.7 2.03 8.6% 24.5% 23.2% 2 Empower 11
Slide 36: Largest DC providers are gaining share
36 Updated Largest DC providers are gaining share Top 5 recordkeepers increased market share from 43% in 2012 to 58% in 2020. Consolidation is likely to continue as business models evolve. Top 5 recordkeepers 13 industry transactions have Top 5 43% recordkeepers 58% occurred since 2019. The likely e
Slide 37: Shifting market creates imperatives for recordkeepers
37 Shifting market creates imperatives for recordkeepers Operate at scale Provide strong Establish robust Scale distribution Own the last mile to consumer advice & revenue streams the participant financial wellness beyond proprietary offering asset revenue Industry dynamics will The winning offering
Slide 38: Empower – DC retirement
Empower – DC retirement
Slide 39: Empower DC value proposition
39 Empower DC value proposition Powerful online financial tools complemented by human-delivered advice Industry-leading service as measured by Net Promoter Score (NPS) Brand viewed as innovative industry leader Focus on retirement and financial wellness Segmented offering that aligns service model w
Slide 40: Leader across the DC market
40 Leader across the DC market Empower serves the entire business-to-business market, including large and small companies, state and municipal governments, not-for-profit organizations, and unions. 2 24 1st Recordkeeping Serving of the 5 largest DC plans state government Largest provider to small an
Slide 41: Customer experience demonstration video
41 Customer experience demonstration video
Slide 42: High customer satisfaction
42 High customer satisfaction Net Promoter Score (NPS range -100 to +100) Net Promoter Score is the percentage of customers rating their likelihood to recommend a company, product or service to a friend or colleague as 9 or 10 minus the percentage of those rating it 6 or below 2020 2019 2018 2017 on
Slide 43: Awards and recognition
43 Awards and recognition A recognized leader among advisors and plan sponsors Participant experience and communications 152 awards 93 awards 11 P&I Eddy awards 4 Signature awards 89 awards for service excellence – More #1 rankings than any #1 among the 10 largest providers other recordkeeper — 2020
Slide 44: Business results: Empower totals
44 Business results: Empower totals AUA ($B) Ending participants (000s) Sales ($B) 516 673 958 8,370 8,768 11,903 31 74 44 2018* 2019 2020 2018 2019 2020 2018 2019 2020 2018 does not include investment only. Assets under administration is a non-IFRS measure. Refer to the discussion of these measures
Slide 45: MassMutual integration status
45 MassMutual integration status Strategy Moving clients to Empower recordkeeping platform • Three legacy recordkeeping platforms 2021 2022 transitioning to the Empower Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 recordkeeping platform J F M A M J J A S O N D J F M A M J J A S O N D • Seven migration waves through Sept
Slide 46: Attractive market – Consumer wealth management
Attractive market – Consumer wealth management
Slide 47: Targeting assets beyond DC plans increases addressable market 4-5x
47 Used 2020 report Targeting assets beyond DC plans increases numbers updated Empower’s addressable market 4-5x U.S. household investable assets 2019 ($T) DC (defined contribution) Tax-advantaged defined contribution retirement savings plans offered by employers 6.6 5.1 IRA (individual retirement a
Slide 48: Mass affluent households represent ~50% of investable assets
48 Within this large market, mass affluent households represent ~50% of investable assets ~50% of mass affluent assets are outside retirement accounts Ultra high/High net worth wealth market Distribution of investible assets by account / type 47% of assets 1% of households >$5M investable Other Bank
Slide 49: Financial concerns of mass affluent customers
49 Financial concerns of mass affluent customers Mass affluent investors are concerned … About being financially secure in retirement 51% That I have not properly tax optimized my portfolio 46% That my portfolio won't withstand a market downturn 42% I have not created a long-term estate plan 40% Tha
Slide 50: IRAs drive overall growth for the industry
50 New Slide The most popular retirement saving vehicle, IRAs drive overall growth for the industry IRA assets are expected to surpass $17T (baseline) by 2025 and Rollovers compose majority of 2Q 2020 Market share remain the most popular retirement saving vehicle in the U.S. all IRA contributions As
Slide 51: Addressable market and money-in-motion insights suggest B2C opportunities
51 Addressable market and money-in-motion insights suggest 3 B2C opportunities for Empower Shifting money to a different institution Rollovers Held-away assets Direct client acquisition On average, ~6% of plan assets roll For every dollar in a DC account, there There are ~$35T of investible Opportun
Slide 52: How to win in the wealth management market
52 How to win in the wealth management market Advice-based value Focus on asset Efficient client Digital capabilities Scale proposition allocation and access acquisition to low-cost products Market is moving to fee- As competition High client-acquisition Competitive digital Absorbing increasing base
Slide 53: Empower & Personal Capital – Consumer wealth management
Empower & Personal Capital – Consumer wealth management
Slide 54: Consumer wealth management – Key messages
54 Consumer wealth management – Key messages Empower wealth management services are a key part of our retirement plan service offering to over 12 million individuals. The Personal Capital offering is targeted to the large and underserved mass affluent market. Personal Capital and Empower consumer of
Slide 55: Fast-growing consumer wealth management franchise
55 Fast-growing consumer wealth management franchise Direct markets to mass affluent investors using unique blend Markets to individuals in Empower-administered retirement of digital tools and human advice plans to capture IRA rollovers & investment accounts $1M – Wirehouses, HNW 12+ million retirem
Slide 56: Personal Capital is different
Unique digital & human hybrid platform: Personal Capital is different
Slide 57: Meet Personal Capital: The future of wealth management
57 Meet Personal Capital: The future of wealth management Company overview Platform “at a glance” as of March 31, 2021 Users (aggregation) ~2.9M Total assets: ~$1T (>1% of U.S. investable assets) registered users Total liabilities: ~$155B MISSION VISION BRAND ~1.7M To transform financial To be a tru
Slide 58: A unique digital and human hybrid platform
58 A unique digital and human hybrid platform that tackles real and complex challenges Credit Student cards Joint loan IRA Trust account account Nancy faces a daunting challenge of understanding Savings Advisor her financial life Challenges facing mass affluent Mortgage customers Checking Stock opti
Slide 59: Nancy sees where she stands
59 Nancy sees where she stands – and connects all her money in minutes What’s my net worth? Do I spend more than I save? Is my portfolio diversified? Will I outlive my money?
Slide 60: Nancy realizes what's possible
60 Nancy realizes what’s possible – maps her financial life Create a comprehensive plan Gain insights into spending, saving, and retirement goals See projected outcomes and run “what if” scenarios Simplify complexity around constantly evolving life
Slide 61: Nancy transforms her financial life
61 Nancy transforms her financial life – with an advisor she can trust • Holistic view of entire financial life • Dedicated advisor who guides her through a shared experience • “Show not tell” what is possible • Personalized portfolios plus full financial planning • Confidence in life goals, not jus
Slide 62: Personal Capital is Nancy's trusted money advisor
62 Personal Capital is Nancy’s trusted money advisor World-class tools and technology • Holistic view of Nancy’s entire financial life in real time • Personal, relevant, data-driven planning Investment methodology: Personal Strategy™ Tax Smart • Strategy selection based on sophisticated set optimiza
Slide 63: Engaging personal financial management drives hyper-engagement
63 Engaging personal financial management drives hyper-engagement among customers Persistent engagement is the Frequently Dashboard login frequency key to building trust and being engaged 90-day active1 (monthly average) 90-day active1 at the right place at the right 92% 62% 40% time to win clients
Slide 64: Personal Capital wins consumer trust
64 Personal Capital wins Has advisors I can trust consumer trust Personal Capital 85% Vanguard 85% Fidelity Investments 85% We have achieved the highest level of advisor trust in the industry* Betterment 84% Edward Jones 83% • Personal Capital is a leading authority in TIAA 83% “advisors I can trust
Slide 65: Personal Capital business results
65 Personal Capital business results High-growth business Highly attractive business model Gross revenue CAGR of ~55% from 2015 to 2020 Profitable business today prior to new customer-acquisition costs AUM CAGR of ~55% since 2015 • Currently unprofitable given investment in customer-acquisition spen
Slide 66: Empower Retirement Services Group
Empower Retirement Services Group Direct to consumer wealth management enabled by DC plan relationships
Slide 67: Empower wealth management value proposition
67 Empower wealth management value proposition EMPOWER WILL DELIVER STRAIGHTFORWARD, GOALS-BASED ADVICE AND SOLUTIONS THAT TAKE INTO ACCOUNT YOUR FULL FINANCIAL PICTURE (DEBTS AND ASSETS) Customer experience Exceptional digital experience + trusted advisor driven by Empower values ONE SIMPLE AGGREGA
Slide 68: Empower wealth management captured $10B in 2020
68 Empower wealth management captured $10B in 2020 through money rolled into and out of Empower plans • Assets roll into Empower retirement plans from individuals who join Empower plans. • Assets roll into Empower IRAs from individuals who leave Empower plans. • This money in motion is expected to g
Slide 69: Empower wealth management funnel
69 Empower wealth management funnel Roughly 6% of assets are distributed from our $59B total distributable assets (includes assets not eligible for rollover) recordkeeping platform each year. $40B Gross rollover opportunity Empower contacts 50% of distributable assets. • Influenced by sponsor partic
Slide 70: Guidance and advice through entire journey
70 GUIDANCE AND ADVICE THROUGH ENTIRE JOURNEY Welcome/ Financial Closed savings Consolidated Best-interest Investment Other goals Managed Financial Job changes/ Onboarding wellness gaps accounts advice strategy accounts planning retirement Integrated experience Advisory, wellness and financial plann
Slide 71: Business results: Retirement Solutions Group
71 Business results: Retirement Solutions Group AUA ($B) Ending customers (000s) Sales ($B) 8.5 12.0 16.2 104 126 150 3.1 4.3 5.3 2018 2019 2020 2018 2019 2020 2018 2019 2020 Assets under administration is a non-IFRS measure. Refer to the discussion of these measures in Great-West Lifeco’s Q1 2021 M
Slide 72: Financials
Financials
Slide 73: Financials – Key messages
73 Financials – Key messages Strong earnings growth across workplace and individual wealth management Growth potential to come from high-ROI business and generate strong cash flow Resilient business with diversified earnings sources Strong capital ratios and investment portfolio Backed by financial
Slide 74: Strong track record of growing earnings
74 Strong track record of growing earnings Earnings ($s) 206 194 153 121 Base earnings after-tax: 76 Empower BAU Base earnings after-tax: Personal Capital 69 120 149 172 202 Net earnings after-tax ($s) 2016 2017 2018 2019 2020 -10 Revenues ($M) 821 930 984 1,065 1,195 Revenues are Net Fees and Net I
Slide 75: Resilient business with diversified sources of revenues
75 Resilient business with diversified sources of revenues Estimated revenue mix ~60% of fees are asset-based… …and 68% of assets are equities Fees by type Assets by type 22% Equities 68% Asset-based fees Managed account fees Non asset-based fees 51% 18% General account margin 9% Fixed income 32% an
Slide 76: Diversified client mix
76 Diversified client mix 88% of revenue 40% Core 65K plans 12M participants 15% Govt B2B 25% Large/Mega Revenues by plan segment (%) 15% NFP/Taft 5% Inst B2C 12% of revenue 211K clients Note: Asset-based fees include administration, AUM and other asset-based fees net of PEA and commissions; Figures
Slide 77: Personal Capital growth
77 Personal Capital growth Personal Capital’s historical financial performance Personal Capital AUM and revenue were at a ~55% CAGR between 2015 and 2020. Gross revenue ($M) $82 $106 $59 $39 Personal Capital has been profitable based on $12 $22 serving its existing clients but has been investing 201
Slide 78: MassMutual acquisition offers meaningful synergistic opportunities
78 MassMutual acquisition offers meaningful synergistic opportunities Following a proven track record, including the similar integration of the J.P. Morgan RPS business Opportunities Expected run-rate impacts $160M • MassMutual business was managed across 3 different recordkeeping Tangible expense s
Slide 79: Looking forward
Looking forward
Slide 80: The next 18 months will see rapid change
80 The next 18 months will see rapid change Deliver powerful new Move waves of MassMutual Deliver Personal Capital’s Integrate Personal Capital’s Leverage Empower’s and story to the marketplace retirement plans to the personal financial tools, technology and Lifeco’s scale and Empower recordkeeping
Slide 81: Creating value at Empower Retirement
81 Creating value at Empower Retirement 7 6 5 4 M&A strategy 3 Organic growth 2 Modern Proven leadership • Well positioned to 1 technology • Proven ability to grow take advantage of Scale • Deep industry faster than industry industry consolidation Tangible • Highly secure & experience • Expanding in
Slide 82: Wrap-up
Wrap-up 4 GREAT-WEST LIFECOn: EMPOWER
Slide 83: Our medium-term financial objectives are supported by a diversified portfolio
83 Our medium-term financial objectives are supported by a diversified, value-creating portfolio with a focus on long-term resilience and relevance Leading customer-centered franchises Diversified business supports strong, stable returns 32M customer relationships, including 20M Portfolio-wide wealt
Slide 84: If you wish to ask a question, please dial
If you wish to ask a question, please dial one of these numbers and ask the operator to join you to the Empower conference call Toll free (North America): 1-844-763-8274 Q&A Toll: 1-647-484-8814 Alternatively, please click on the link in the webcast window to receive a call on your phone. Once you a
Slide 85: Glossary
Glossary
Slide 86: Glossary of terms and acronyms
86 Glossary of terms and acronyms 401(k)/401(a) plans – Internal Revenue Code 401(k)/401(a)-governed defined contribution retirement plans for private and public sector employers, excluding federal government employees. 457 plans – Internal Revenue Code Section 457-governed defined contribution reti
Slide 87: Glossary of terms and acronyms
87 Glossary of terms and acronyms DB plan – A defined benefit retirement plan. DC plan – A defined contribution plan (401(k), 457, 403(b), etc.) Defined contribution investment only (DCIO) – When an investment product is sold without recordkeeping services. Default fund – An investment option in a D
Slide 88: Glossary of terms and acronyms
88 Glossary of terms and acronyms Great-West Trust Company, LLC (GWTC) – A wholly owned subsidiary of GWLA and a Colorado state-chartered trust company that provides trust services to plans and collective trust investment options to DC plans. Guaranteed lifetime withdrawal benefit (GLWB) Guaranteed
Slide 89: Glossary of terms and acronyms
89 Glossary of terms and acronyms Mapping funds – When a plan sponsor directs all plan participants to a default fund or qualified default investment alternative. Non-balance sheet funds – Investment products where liabilities are NOT included on the balance sheet of GWLA. Participant and plan wrapp
Slide 90: Glossary of terms and acronyms
90 Glossary of terms and acronyms Sales – Assets transferred from prior recordkeepers for new plan sales and participant roll-ins. SecureFoundation® – A GWLA GLWB/GMWB product. Separate account – An account established or maintained by an insurer under which the account’s income, gains and losses ar