Great-west Lifeco Inc. · TSX:GWO
Great-west Lifeco — Q2 2023 Earnings Presentation
27 slides from Great-west Lifeco's earnings presentation, 2023
Slide 1: Quarterly Results Presentation Q2 2023
Quarterly Results Presentation Q2 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: Summary of Results
SUMMARY OF RESULTS Paul Mahon President & CEO Great-West Lifeco
Slide 4: Highlights
HIGHLIGHTS Q2 2023 Financial Highlights Strategic Highlights Base EPS1 $0.99 • Announced sale of Putnam3 to Franklin Resources, unlocking shareholder value and • Strong base earnings across segments further focusing the U.S. business on Net EPS $0.53 retirement and personal wealth at Empower • Items
Slide 5: Canada
CANADA Group Life & Health Group Retirement • Workplace Solutions Book Premium4 (C$m) AUA1,2 and Flows3 (C$m) 96 191 12,761 • Group Life & Health book premium up 8% YoY, reflecting 11,808 12,583 1,710 866 62,688 61,665 strong employment in Canada and price adjustments (109) 56,112 (1,553) • Continue
Slide 6: Europe
EUROPE Group Life & Health Workplace Solutions Book Premium4 (C$m) AUA1,2 and Flows3 (C$m) • Workplace Solutions 2,306 34,600 1,000 35,176 2,230 14 26 524 26 ( 40 ) • Group Life & Health book premium up 12% YoY due to 2,051 30,449 (470) (478) 33 ( 20 ) 29 8 strong sales and organic growth from tight
Slide 7: U.S. – Empower
U.S. – EMPOWER Empower Defined Contribution (DC) AUA1 and Flows2 (US$b) 1,388 1,325 40 60 • Workplace Solutions 1,226 (37) • Empower DC AUA of $1.4T, up 13% YoY • DC participants up 4% YoY, reflecting strong organic growth Q2 2022 Q1 2023 Inflows Outflows Market/Other Q2 2023 • Prudential integratio
Slide 8: Capital & Risk Solutions (CRS)
CAPITAL & RISK SOLUTIONS (CRS) Run-Rate Reinsurance • Strong pipeline and business expansion Earnings Drivers1 209 ▪ Solid new business transactions covering health and 187 193 other non-life businesses in core markets 48 48 55 ▪ Good developments in new markets and new 39 39 products 38 106 122 • C
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco
Slide 10: Quarterly Update
QUARTERLY UPDATE • The successful implementation of IFRS 17 has now transitioned to regular reporting • Improvements to Supplemental Information Package (SIP) disclosures • Enhanced the Drivers of Earnings (DOE) to provide greater insights into business performance • Separate sub-total for organic C
Slide 11: EPS and Earnings by Reporting Segment
EPS AND EARNINGS BY REPORTING SEGMENT Earnings per Share4 (C$m) Earnings4(C$m) (Base)1,2,4 (Net)2 Canada U.S. Europe CRS Lifeco Lifeco 0.97 0.99 0.88 0.89 Q2 2023 283 265 180 203 920 498 0.64 Q1 2023 278 218 178 157 826 595 0.53 Base1 Q2 2022 340 164 210 190 903 823 Net YOY (17%) 62% (14%) 7% 2% (39
Slide 12: Earnings Reconciliation
EARNINGS RECONCILIATION Q2 2023 Q1 2023 Q2 2022 Post-Tax Post-Tax Post-Tax Per Share (C$) Per Share (C$) Per Share (C$) (C$m) (C$m) (C$m) Base earnings1,2 920 0.99 826 0.89 903 0.97 Items excluded from base earnings Market experience relative to expectations (79) (0.08) (168) (0.18) 79 0.08 Realized
Slide 13: Drivers of Earnings (DOE) [Base Earnings]
DRIVERS OF EARNINGS (DOE) [BASE EARNINGS 1,2] Q2/23 Q1/23 Q2/22 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected insurance earnings 332 18 180 209 - 739 713 694 Risk adjustment release 35 2 29 48 - 114 109 120 CSM recognized for services provided 108 16 86 39 - 249 249 247 Short-term in
Slide 14: Book Value per Share, LICAT, ROE and Financial Leverage
BOOK VALUE PER SHARE 1, LICAT 2, ROE 1 and FINANCIAL LEVERAGE 4 Book Value per Share1 (C$) LICAT Ratio2 127% 126% 126% 23.45 23.22 22.11 5 5 Q2 2022 Q1 2023 Q2 2023 Q2 2022 Q1 2023 Q2 2023 Return on Equity1 Financial Leverage4 17.2% 15.8% 16.1% 15.9% 33% 33% 13.4% 11.7% 31% Base3 Net Q4 2022 Q1 2023
Slide 15: Questions
GREAT-WEST LIFECO QUESTIONS INVESTMENTS
Slide 16: Appendix
GREAT-WEST LIFECO APPENDIX INVESTMENTS
Slide 17: Value Drivers
VALUE DRIVERS Operating Segments1 Capital and Risk Value Drivers Canada U.S. Europe Solutions Group Life & Health Empower Defined Group Life & Health Workplace Solutions Contribution Group Retirement Group Retirement Empower Personal Wealth & Asset Individual Wealth Wealth Individual Wealth & Manage
Slide 18: Earnings by Value Drivers
EARNINGS BY VALUE DRIVERS YoY Canada U.S. Europe CRS LIFECO 1 1 1 1 2 Value Drivers Base YoY Base YoY Base YoY Base YoY Total Base YoY Workplace Solutions 164 (23%) 234 50% 56 (24%) - - 454 2% Wealth & Asset Management 46 (12%) 50 233% 23 (66%) - - 119 (11%) Insurance & Risk Solutions 63 (3%) - - 11
Slide 19: Contractual Service Margin (CSM)
CONTRACTUAL SERVICE MARGIN (CSM) Total CSM ($Cm) Non-Par CSM ($Cm), excluding segregated funds and par 147 30 86 156 41 18 (283) (23) (133) (2) 13,043 13,040 13,058 5,905 5,927 5,886 Beginning Total Impact of new Expected CSM recognized for Insurance CSM from organic Other impacts Ending Total CSM B
Slide 20: Invested Assets
INVESTED ASSETS Investment Properties Cash and CD's Gov't, Gov't Related and 4% 3% Agency Securitized Bonds Stocks 7% 19% Invested assets of $219.4 billion Insured Residential Diversified high quality portfolio: and Multi-family Mortgages Bonds represent 69%: 1% • 99% are investment grade • 71% rate
Slide 21: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 3.1% 28.5% 31.6% Canada 8.0% 8.8% 16.8% U.K. 4.7% 5.4% 10.1% Germany 0.8% 1.0% 1.8% Ireland 0.2% 0.3% 0.5% 16.8% 4
Slide 22: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.1% CMBS 2.3% Consumer Products 6.7% RMBS 0.1% Industrial Products 5.3% Other ABS 5.4% Banks 3.8% Total Non-Agency Securitized 7.8% Fina
Slide 23: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 1,655 0.7% 1,655 - - - 368 1,287 Equity Release 3,625 1.7% 1,474 - 1,770 381 - 3,625 Multi Family 9,078 4.1% 4,333 3,866 843 36 2,49
Slide 24: Drivers of Earnings (DOE) – Reconciliation
DRIVERS OF EARNINGS (DOE) – RECONCILIATION (C$MM) Q2/23 Q1/23 Q2/22 Canada U.S. Europe CRS Corp. Drivers of earnings analysis (base)1 Total Total Total Base earnings: insurance service result (ISR) 320 11 178 202 — 711 659 784 Base earnings: net investment result (NIR) 74 42 128 26 9 279 218 198 Bas
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures The Company uses several non-GAAP financial measures to measure overall performance of the Company and to assess each of its business units. A financial measure is considered a non-GAAP measure for Canadian securities law purposes if it is presented other than in accordan
Slide 26: Footnotes
Footnotes Slide 4 2. The Life Insurance Capital Adequacy Test (LICAT) Ratio is based on the consolidated results of The Canada Life Assurance Company (Canada Life), Lifeco's major Canadian operating subsidiary. The LICAT Ratio is calculated in accordance with the Office of Superintendent of Financia
Slide 27: Footnotes
Footnotes Slide 24 1. Q1 2023 and prior period results are restated to exclude discontinued operations related to Putnam Investments from base earnings. On May 31, 2023, Lifeco agreed to sell Putnam Investments to Franklin Templeton. The transaction is expected to close in the fourth quarter of 2023