Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2022 Earnings Presentation
35 slides from Great-West Lifeco's earnings presentation, November 2022
Slide 1: Quarterly Results Presentation Q3 2022
Quarterly Results Presentation Q3 2022
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 3
Slide 4: Overview
OVERVIEW Discipline and diversification underpinning resilient business performance Steady results excluding reinsurance provision MassMutual integration completed post-quarter end, Prudential integration on track Business remains strongly positioned in the current environment 4
Slide 5: Performance against medium-term objectives
PERFORMANCE AGAINST MEDIUM-TERM1 OBJECTIVES 1-Year 3-Year Q3 YTD 2022 (2020 - 2021) (2018 - 2021) Q31 YR YTD 2022 Medium-Term Financial Objectives Base 2 Base 2 Base 2 Base EPS 8-10% base EPS growth p.a 2 14-15% base ROE 2,4 (4.6%) 21.9% 13.4% CAGR $2.50 13.5% 14.6% 13.6% average Down -4.6% YoY 4 Ta
Slide 6: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Strong momentum in Group insurance sales and strong persistency. Individual insurance sales in line 3,272 with prior year 209 3,021 2,878 194 198 870 657 890 • Group retirement sales strong in quarter. Individual 101 101 116 2,402 2,364 wealth sale
Slide 7: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) Sales1 (C$m) • Insurance and Annuity sales performance solid 1,930 1,915 • Q3 2021 included a C$1.3b large bulk annuity 287 68 1,818 278 1,558 469 deal in the U.K. 924 966 375 1,575 • Continued strong ERM sales in Q3 until temporary 519 70 483 59 1,349
Slide 8: Putnam
PUTNAM Sales1 (US$m) US$39B decrease in ending AUM YoY 8,790 9,021 8,500 •Net outflows of $2.0B 4,047 3,625 3,803 • Improvement of $2.4B from Q2 2022 5,396 4,743 4,697 • Outflows are largely in lower-fee fixed income Q3 2021 Q2 2022 Q3 2022 products Mutual Funds Institutional • Higher-earning fundam
Slide 9: Empower
EMPOWER Empower Sales1 (ex-Personal Capital) (US$m) • Higher DC sales driven by US$5b large plan sale 17,526 2,242 • Strong YoY growth in Empower IRA sales 12,812 2,046 9,855 • MassMutual integration program complete 2,438 15,284 10,766 • Final wave of plan conversions post-quarter end 7,417 • US$10
Slide 10: Capital and Risk Solutions (CRS)
CAPITAL AND RISK SOLUTIONS (CRS) • CRS expected profit1 down 4% YoY • Strong overall growth mostly offset the YoY reduction in actuarial PfAD releases CRS Expected Profit1 (C$m) • Other margins and fees are up 18% reflecting 174 169 167 growth in structured reinsurance and improved margins for the P
Slide 11: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco 11
Slide 12: Earnings
EARNINGS Earnings per Share (C$m) Earnings (C$m) (Base)1,2 (Net)2 0.93 0.94 Canada U.S. Europe CRS Lifeco Lifeco 0.89 0.79 0.74 0.74 Q3 2022 283 204 200 1 688 688 Q2 2022 296 143 208 174 830 735 Base1 Net Q3 2021 312 221 232 107 870 872 YOY (9%) (8%) (14%) (99%) (21%) (21%) 3 Constant Currency (9%)
Slide 13: Earnings reconciliation
EARNINGS RECONCILIATION Q3 2022 Q2 2022 Q3 2021 Post-Tax Post-Tax Post-Tax Per Share (C$) Per Share (C$) Per Share (C$) (C$m) (C$m) (C$m) 1 Base earnings 688 0.74 830 0.89 870 0.93 Items excluded from base earnings Actuarial assumption changes and other 68 0.07 21 0.02 69 0.08 management actions Mar
Slide 14: Source of earnings (base earnings)
SOURCE OF EARNINGS [BASE EARNINGS 2] Q3/22 Q2/22 Q3/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 328 226 200 167 (4) 917 1,010 986 Impact of new business (6) (78) (20) 12 - (92) (87) (5) Experience gains and losses (2) 78 36 (159) - (47) 71 40 Earnings
Slide 15: Source of earnings (net earnings)
SOURCE OF EARNINGS [NET EARNINGS] Q3/22 Q2/22 Q3/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 328 226 200 167 (4) 917 1,010 986 Impact of new business (6) (78) (20) 12 - (92) (87) (5) Experience gains and losses (6) 50 19 (164) - (101) 52 92 Management
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 Sep. 30/22 Pre-Tax Post-Tax (C$m) For three months ended Sep. 30/22 Pre-Tax Post-Tax (C$m) Yield enhancement 89 73 Canada Policyholder Behaviour Update (312) (229)
Slide 17: Expenses
EXPENSES Operating and Administrative Expenses (C$m) Operating and Administrative Expenses (C$m) (Adjusted) 1,2 (Reported)1 1,788 1,855 1,768 1,711 Canada U.S. Europe CRS Lifeco Lifeco 1,557 1,453 Q3 2022 471 982 282 28 1,768 1,711 Adjusted 1,2 Q2 2022 474 992 289 28 1,788 1,855 Reported1 Q3 2021 46
Slide 18: Book value per share and LICAT
BOOK VALUE PER SHARE 1 AND LICAT 2 Book Value per Share (C$) LICAT Ratio 25.61 25.00 123% 24.40 117% 118% Q3 2021 Q2 2022 Q3 2022 Q3 2021 Q2 2022 Q3 2022 •BVPS growth of 5% YoY was largely driven by strong • LICAT ratio at 118%, up 1 point QoQ, driven by impact retained earnings over the past 4 quar
Slide 19: In summary…
In summary… Benefits of diversification evident in third quarter results Focusing on the successful integration of acquired businesses Well-positioned for continued resilience and future growth 19
Slide 20: Questions
QUESTIONS 20
Slide 21: Additional financial and segment information
ADDITIONAL FINANCIAL AND SEGMENT INFORMATION 21
Slide 22: Canada
CANADA (In C$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Sales Individual Insurance 93 120 93 97 93 0% Individual Wealth 2,402 3,274 2,947 2,364 1,988 (17%) Individual Total 2,495 3,394 3,040 2,461 2,081 (17%) Group Insurance 101 189 255 101 116 15% Group Wealth 870 1,298 1,009 657 890 2% Group T
Slide 23: Canada
CANADA (In C$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Individual Customer Base Earnings 140 140 124 96 91 (35%) Items excluded from Base Earnings (3) (20) (1) 5 (127) Net Earnings 137 120 123 101 (36) Group Customer Base Earnings 168 194 138 207 178 6% Items excluded from Base Earnings (4) 10
Slide 24: United States
UNITED STATES (In US$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Sales Empower Defined Contribution 10,766 13,872 34,731 7,417 15,284 42% Empower Retail 2,046 2,365 2,559 2,438 2,242 10% Personal Capital 1,551 1,757 1,833 1,694 1,344 (13%) Total 14,363 17,994 39,123 11,549 18,870 31% Putnam Sales
Slide 25: United States
UNITED STATES (In US$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Empower Base Earnings 145 117 117 133 171 18% Items excluded from Base Earnings (10) (11) (12) (39) (33) Net Earnings 135 106 105 94 138 2% Personal Capital Base Earnings (4) (6) (10) (10) (8) Items excluded from Base Earnings (1) (
Slide 26: Europe
EUROPE (In C$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 1,869 849 1,120 853 748 (60%) Ireland Insurance and Annuity 55 53 71 66 213 Germany Insurance and Annuity 6 7 7 5 5 (17%) Total 1,930 909 1,198 924 966 (50%) Wealth Management Sales U.K
Slide 27: Europe
EUROPE (In C$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Fee and Other Income U.K 48 42 42 47 37 (23%) Ireland 189 200 193 186 174 (8%) Germany 115 122 119 107 101 (12%) Total 352 364 354 340 312 (11%) Operating and Administrative Expenses U.K 76 82 88 89 83 9% Ireland 105 185 165 154 153 46% Ger
Slide 28: Europe
EUROPE (In C$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY U.K. Base Earnings 83 110 138 101 105 27% Items excluded from Base Earnings 102 44 (5) 16 57 Net Earnings 185 154 133 117 162 (12%) Ireland Base Earnings 110 67 69 74 65 (41%) Items excluded from Base Earnings 22 (5) (12) - - Net Earnings 1
Slide 29: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 YoY Fee and Other Income Reinsurance 2 2 2 - - Operating and Administrative Expenses Reinsurance 25 26 26 25 25 0% Corporate & Par 2 3 3 3 3 Total 27 29 29 28 28 4% Reinsurance Base Earnings 108 147 171 176 3 (97%) Items exc
Slide 30: Putnam – Earnings & Core Margin
PUTNAM – EARNINGS & CORE MARGIN (US$m) 250 254 Expenses 229 204 200 Fee & Net Investment Income 12.3% 11.4% Income Taxes 0.4% -4.5% Core Margin (Pre-tax)1 -7.2% (219) (225) (228) (213) (214) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Fee & Net Investment Income 250 254 229 204 200 Less: Expenses -219 -
Slide 31: Invested assets
INVESTED ASSETS 1 Loans to Investment Properties Policyholders Cash and CD's 3% Gov't, Gov't Related and Invested assets of $234.1 billion 3% 4% Agency Securitized Bonds 18% Stocks Diversified high quality portfolio: 6% Bonds represent 67%: Insured Residential • 99% are investment grade and Multi-fa
Slide 32: Lifeco consolidated bond portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO * % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 2.6% 28.1% 30.7% Canada 7.3% 8.5% 15.8% U.K. 4.2% 5.3% 9.5% Germany 0.7% 1.0% 1.7% Ireland 0.2% 0.3% 0.5% 15.0%
Slide 33: Corporate and non-agency securitized bonds – sector diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION * Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 6.8% CMBS 2.6% Consumer Products 6.6% RMBS 0.1% Industrial Products 5.2% Other ABS 5.3% Banks 4.2% Total Non-Agency Securitized 8.0% Fi
Slide 34: Lifeco mortgage exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 1,887 0.9% 1,887 - - - 430 1,457 Equity Release 2,626 1.1% 1,088 - 1,321 217 - 2,626 Multi Family 10,361 4.4% 4,566 4,927 828 40 2,
Slide 35: Currency (relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2022 1.31 1.54 1.31 1.38 1.54 1.35 Q2 2022 1.28 1.60 1.36 1.29 1.57 1.35 Q1 2022 1.27 1.70 1.42 1.25 1.64 1.38 Q4 2021 1.26 1.70 1.44 1.27 1.71 1.44 Q3 2021 1.26 1.74 1.48 1.27 1.71 1.47 35