Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q2 2019 Earnings Presentation
28 slides from Great-West Lifeco's earnings presentation, Sep 16, 2019
Slide 1: Quarterly Results Presentation Q2 2019
Quarterly Results Presentation Q2 2019
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 "expects", "antic
Slide 3: Summary of Results
Paul Mahon President & CEO Great-West Lifeco Summary of Results 3
Slide 4: Earnings
Earnings Adjusted Net Earnings1 (C$m) ▪ Adjusted net earnings of $658m, down 831 21% YoY 745 710 • Includes U.K. retail property 657 658 investment losses of $84m • Q2 2018 included $60m gain from U.S. refinancing ▪ Net earnings of $459m • Includes $199m net charge related to Q2 2018 Q3 2018 Q4 2018
Slide 5: Strategy update
Strategy update Canada Europe & Reinsurance U.S. Protect and extend leadership Targeted growth through Invest for significant organic positions through organic acquisition and product growth and consolidation growth expansion opportunities ▪ Significant progress on ▪ Capitalizing on the European ▪ C
Slide 6: Sales
Sales Sales1 (C$b) Canada 90.2 ▪ Lower large case and creditor sales in Group Insurance partly offset by higher Group Wealth ▪ Lower Individual Wealth sales; 41.5 34.4 34.3 higher Individual Insurance 33.1 U.S. ▪ Empower sales up 25% YoY in USD with growth in all product Q2 2018 Q3 2018 Q4 2018 Q1 2
Slide 7: Fee and Other Income
Fee and Other Income Adjusted Y/Y 2% Canada Fee and Other Income2 (C$m) ▪ Higher fees in Group offset (2%) 1,483 1,483 1,479 1,511 1,420 by lower margins in Individual 4% U.S. ▪ Higher fees at Empower due to participant and AUA1 2% growth ▪ Lower fees at Putnam due Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2
Slide 8: Expenses
Expenses Adjusted Expenses1 (C$m) Canada 1,311 1,295 1,216 1,237 1,247 ▪ Continued investments in technology, with expense growth moderating U.S. ▪ Higher at Empower due to participant growth Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 ▪ Lower operating expenses at Lifeco Putnam Canada U.S.1 Europe (Adj
Slide 9: Financial Highlights
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 9
Slide 10: Earnings
Earnings ▪ Adjusted EPS of $0.70, down Adjusted Net Earnings per Share1 17% YoY 0.84 ▪ Includes $0.09 per share 0.75 0.72 0.70 impact of U.K. retail 0.67 property investment losses Canada ▪ Lower basis changes partly offset by trading gains U.S. Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 ▪ Up 25% in co
Slide 11: Source of Earnings
Source of Earnings Q2/19 Q1/19 Q2/18 For the three months ended Jun. 30/19 Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 296 123 321 (6) 734 704 723 Impact of new business 9 (31) 5 - (17) (73) (58) Experience gains and losses 76 16 (53) (2) 37 18 69 Management actio
Slide 12: Source of Earnings – Experience Gains and Losses
Source of Earnings – Experience Gains and Losses Q2/19 For the three months ended Jun. 30/19 Total Yield enhancement 143 U.K. retail property-related losses (98) Expenses and fees 20 Policyholder behavior (26) Mortality / morbidity / other (2) Total experience gains / losses 37 12
Slide 13: United Kingdom Retail Property Related Exposures
United Kingdom Retail Property Related Exposures (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department Retail and Other Stores Grocery Total LTV Pre-2008 Mortgages 167 90 156 413 79% Post-2008 Mortgages 625 426 59 1,110 39% Total Mortgages 792 516 215
Slide 14: Book Value per Share and Return on Equity
Book Value per Share and Return on Equity Book Value per Share 22.08 22.07 21.22 21.25 20.84 ▪ Book value down 6% from last quarter due to the SIB and currency ▪ LICAT at 136% Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Adjusted ROE1 (Trailing 4 quarters) ▪ Adjusted ROE1 of 13.2% 17.1% 16.6% 13.2% ▪ Net
Slide 15: Assets under Administration
Assets under Administration1 Assets Under Administration Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 YoY (C$b) General Fund 210 209 214 220 218 4% Segregated Fund 221 220 213 223 224 2% Mutual Fund & Institutional 295 294 282 304 305 3% Other AUA 698 718 690 804 821 18% Total 1,423 1,441 1,399 1,551 1,5
Slide 16: Questions
GREAT-WEST FECOne Questions 16
Slide 17: Appendix
Appendix GREAT-WEST FECOne 17
Slide 18: Canada
Canada (In C$m) Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 YoY Sales Individual Customer Individual Insurance 88 109 145 101 98 11% Individual Wealth 2,165 1,921 2,334 2,256 2,125 (2%) 2,253 2,030 2,479 2,357 2,223 (1%) Group Customer Group Insurance 251 104 151 186 109 (57%) Group Wealth 536 743 817 6
Slide 19: United States
United States1 (In US$m) Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 YoY GWF Sales Empower Retirement 6,979 7,426 10,783 45,847 8,746 25% Reinsured Insurance & Annuity Business 390 327 275 241 65 (83%) Total 7,369 7,753 11,058 46,088 8,811 20% Putnam Sales 11,630 10,785 13,245 10,940 9,258 (20%) Fee and
Slide 20: Europe
Europe (In C$m) Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 YoY Sales UK / Isle of Man 1,151 3,274 1,096 1,216 1,748 52% Ireland / Germany 4,384 3,961 4,876 9,965 5,383 23% Total 5,535 7,235 5,972 11,181 7,131 29% Fee and Other Income UK / Isle of Man 58 54 52 56 52 (10%) Ireland / Germany 334 316 293 3
Slide 21: Putnam – AUM and Flows
Putnam – AUM and Flows (US$b) Mutual Funds Institutional 177.2 3.1 (3.6) 172.4 2.6 174.7 170.6 160.2 6.1 (6.2) 2.1 94.1 91.4 93.1 89.3 84.6 79.3 83.1 75.6 81.3 83.3 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Sales Redemptions Market Q2 2019 In-Qtr Avg. 172.8 175.2 168.7 168.0 172.0 AUM 21
Slide 22: Putnam – Core Net Earnings
Putnam – Core Net Earnings Putnam Net Earnings - Core Earnings Expenses Income Taxes (US$m) Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) Fee & Net Inv Income Operating Margin (Pre-tax) 35% % of Budget $220 25% 231 231 202 226 229 98% Core Earnings (US$mm) $120 15% Operating
Slide 23: Experience Gains (Losses), Management Actions, and Changes in Assumptions
Experience Gains (Losses), Management Actions, and Changes in Assumptions (C$m) 3,556 3,347 3,268 3,133 2,732 2,576 2,633 2,504 2,447 2,237 1,424 2009-2018 Historical Average1 24% 23% 21% 20% 21% 23% 23% 20% 18% 20% 11% 14% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD'19 Note: Experience Ga
Slide 24: Invested Assets
Invested Assets 1 ▪ Invested assets of $171.8 billion ▪ Diversified high quality portfolio: Cash & CD's 2% • Bonds represent 70%: − 99% are investment grade Investment Properties Loans to Policyholders − 82% rated A or higher Gov't, Gov't Related and 3% 5% Agency Securitized Bonds 29% − 85% of bond
Slide 25: United Kingdom Property Related Exposures – Mortgages
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type Equity % of Multi Family Retail Office Industrial Other Total City/Region Release Lifeco IA Central London 428 912 558 35 42 137 2,112 1.2% Other United Kingdom 320 611 180 790 480 842 3,223 1.9% Total United King
Slide 26: United Kingdom Property Related Exposures – Investment Properties
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of Multi Family Retail Office Industrial Other Total Lifeco IA City/Region Central London - 27 296 - 39 362 0.2% Other United Kingdom - 892 345 744 311 2,292 1.3% Total United Kingdom - 919 641 744 3
Slide 27: United Kingdom Property Related Exposures – Retail
United Kingdom Property Related Exposures Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department % of Invested Asset Type and Other Stores Grocery Total Lifeco IA Mortgages 792 516 215 1,523 0.9% Investment Pr
Slide 28: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q2 2019 1.34 1.72 1.50 1.31 1.66 1.49 Q1 2019 1.33 1.73 1.51 1.34 1.74 1.50 Q4 2018 1.32 1.70 1.51 1.36 1.74 1.56 Q3 2018 1.31 1.70 1.52 1.29 1.69 1.50 Q2 2018 1.29 1.76 1.54 1.31 1.73 1.53 28