Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2017 Earnings Presentation
29 slides from Great-West Lifeco's earnings presentation, 2017
Slide 1: Quarterly Information for Analysts and Investors Q3 2017
Quarterly Information for Analysts and Investors Q3 2017 Delivering on our Commitments Today and Tomorrow
Slide 2: Cautionary notes
Cautionary notes CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document may contain forward-looking statements. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipa
Slide 3: Summary of Results – Paul Mahon, President & CEO
Paul Mahon President & CEO Great-West Lifeco Summary of Results 3
Slide 4: Quarterly Highlights
Quarterly Highlights Solid operating performance across all businesses • Results impacted by property catastrophe reinsurance losses Benefits of Canadian business transformation emerging Empower Retirement showing momentum post-integration Capital strength supports investments in growth • Fi
Slide 5: Summary of Results
Summary of Results Adjusted Net Earnings(1) (C$m) 757 712 Adjusted earnings of $582m down 16% YoY, 689 698 619 and down 15% on a constant currency basis 582 • Include property catastrophe reinsurance losses of $175m after-tax • Excluding these losses, adjusted earnings were $757m, up 10% YoY Q3 20
Slide 6: Summary of Results – Sales
Summary of Results – Sales Sales (C$b) Canada 32.4 • Higher individual wealth and group 30.8 29.5 insurance sales more than offset 26.7 25.0 by lower group wealth and individual insurance sales YoY U.S. • Empower Retirement relatively flat YoY Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 • Putnam ins
Slide 7: Summary of Results – Fee and Other Income
Summary of Results – Fee and Other Income Y/Y Fee and Other Income (C$m) 7% Lifeco fee income up 7% YoY 1,345 1,305 1,381 1,365 6% 1,271 • Average equity markets: S&P/TSX 4% S&P 500 14% 7% Eurostoxx 50 17% Canada • Higher average AUM driven 9% by higher average equity markets Q3 2016 Q4 2016 Q1
Slide 8: Summary of Results – Expenses
Summary of Results – Expenses Adjusted Expenses(1) (C$m) Canada 1,205 1,189 • $95m pre-tax annualized 1,141 1,137 1,094 run-rate reductions achieved at end of Q3 2017 of which approximately $69m relates to the shareholder account U.S. Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 • Lower expenses post
Slide 9: Financial Highlights – Garry MacNicholas, EVP & CFO
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 9
Slide 10: Financial Highlights - Earnings
Financial Highlights - Earnings Adjusted EPS of $0.589, down 15% YoY, Adjusted Net Earnings per Share(1) 0.766 includes reinsurance losses of $0.177 0.697 0.709 0.719 • Excluding the losses, adjusted EPS was 0.627 0.589 $0.766, up 10% YoY Canada • Up due to higher fee income in Individual Custom
Slide 11: Financial Highlights – Source of Earnings
Financial Highlights – Source of Earnings For the three months ended Sept. 30, 2017 Q3/17 Q2/17 Q3/16 Source of Earnings (C$m) Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 297 123 266 (4) 682 681 661 Impact of new business 6 (30) 12 - (12) (61) (77) Experience gain
Slide 12: Book Value per Share and Return on Equity
Financial Highlights – Book Value per Share and Return on Equity Book Value per Share 19.76 19.99 19.95 19.92 19.18 Lifeco cash at quarter end was $0.9b Book value up 4% from last year Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Adjusted Return on Equity (Trailing 4 quarters) 20.0% Adjusted Return
Slide 13: Financial Highlights – Assets under Administration
Financial Highlights – Assets under Administration Assets Under Administration Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 YoY (C$b) General Fund 202 200 201 200 199 (2%) Segregated Fund 199 200 205 209 208 4% Mutual Fund & Institutional 257 259 270 272 269 5% Other AUA 571 589 620 628 619 8% Total 1,22
Slide 14: Questions
Questions GREAT-WEST ECOne 14
Slide 15: Appendix
Appendix GREAT-WEST ECOne 15
Slide 16: Canada
Canada (In C$m) Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 YoY Sales Individual Customer Individual Insurance 164 341 275 100 86 (48%) Individual Wealth 1,820 2,307 2,585 2,193 1,947 7% 1,984 2,648 2,860 2,293 2,033 2% Group Customer Group Insurance 90 180 134 186 136 51% Group Wealth 1,043 1,043 669 7
Slide 17: United States
United States (In US$m) Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 YoY GWF Sales Empower Retirement 8,344 5,111 7,520 4,792 8,222 (1%) Individual Markets 564 351 353 294 393 (30%) Total 8,908 5,462 7,873 5,086 8,615 (3%) Putnam Sales 8,657 8,360 10,576 7,552 8,323 (4%) Fee and Other Income Empower Reti
Slide 18: Europe
Europe (In C$m) Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 YoY Sales UK / Isle of Man 754 591 1,095 873 1,086 44% Ireland / Germany 3,891 3,819 3,321 3,962 4,276 10% Total 4,645 4,410 4,416 4,835 5,362 15% Fee and Other Income UK / Isle of Man 59 57 56 57 53 (10%) Ireland / Germany 265 276 263 285 291
Slide 19: Putnam - AUM and Flows
Putnam - AUM and Flows (US$b) Mutual Funds Institutional 3.9 (3.6) 3.0 167.8 162.9 159.9 153.8 152.1 4.4 (4.6) 1.8 91.0 85.7 87.7 81.5 80.2 72.3 71.9 74.2 75.2 76.8 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Sales Redemptions Market Q3 2017 In-Qtr Avg. AUM 151.7 151.9 157.4 161.8 165.2 19
Slide 20: Putnam – Core Net Earnings
Putnam – Core Net Earnings Putnam Net Earnings - Core Earnings Putnam Net Earnings - Core Earnings Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) (US$m) $250 Expenses Income Taxes Expenses Income Taxes Fee & Net Inv. Income Operating Margin (Pre-tax) 35% % of Budget $250 Fee
Slide 21: Consolidated MCCSR Ratio
240% 239%239% Consolidated MCCSR Ratio 238% 236% 234% 233% 233% 232% 240% 239%239% 230% 238% 229% 230% 236% 234% 233% 228%233% 224% 233% 223% 227% 232% 230% 222% 229% 230% 221% 228% 224% 218% 223% 227% 222% 210% 221% 210% 207% 218%Adjusted MCCSR 205%205% 204% 201% 210% 210% 200%200%200% 207% 205%205
Slide 22: Stable Trend Over the Years
Stable Trend Over the Years (C$m) Experience Gains (Losses), Management Actions, and Changes in Assumptions as a % of Net Income Before Tax 3,347 3,268 3,133 2,874 2,769 2,576 2,633 2,499 2,504 2,447 2,335 2,237 2,143 2005-2016 12 Year 24% 23% 23% 26% 25% 20% 19% 20% 20% 21% 23% Average 18% 11% 20.8
Slide 23: Credit Markets
Credit Markets In-Quarter Developments Credit experience related to impairments and rating changes negatively impacted shareholders’ net earnings by $7 million in the quarter Total Credit Impact on Shareholders’ Net Earnings 2016 Full Year 2017 YTD ($ millions) Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 2017 Credi
Slide 24: Invested Asset Composition
Invested Asset Composition(1) Invested assets at September 30, 2017 were $171.2bln Cash & CD's 2% Diversified high quality portfolio: − Bonds represent 73% of invested Loans to assets (99% are investment grade; Policyholders Investment Properties 2% 5% Gov't, Gov't Related and 82% rated A or hig
Slide 25: Lifeco Consolidated Bond Portfolio
Lifeco Consolidated Bond Portfolio(1) Corporate and Non-Agency Securitized Government, Government Related and Other Financial Other Corporate and % of Invested Total Domicile of Issuer Agency Securitized Banking Institutions and REITs Non-Agency Securitized Assets $ (millions) United States 4.0% 0.7
Slide 26: Corporate and Securitized Bonds – Sector Diversification
Corporate and Securitized Bonds – Sector Diversification(1) % of % of Invested Invested Assets Assets Corporates Non-Agency Securitized Utilities 9.6% ABS 2.1% Consumer Products 6.3% CMBS 1.9% Industrial Products 4.3% RMBS 0.8% Other Financial Institutions 3.6% Covered 0.8% Banking 3.2% Total Securi
Slide 27: United Kingdom Property Related Exposures – Mortgages
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London 280 955 483 42 60 1,820 1.1% Other United Kingdom 76 643 195 883 316 2,113 1.2% Total United Kingdom 356 1,598 678 925 37
Slide 28: United Kingdom Property Related Exposures – Investment Properties
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 28 247 - 39 314 0.2% Other United Kingdom - 1,089 381 647 370 2,487 1.4% Total United Kingdom - 1,117 628 6
Slide 29: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2017 1.25 1.64 1.47 1.25 1.67 1.47 Q2 2017 1.34 1.72 1.48 1.30 1.69 1.48 Q1 2017 1.32 1.64 1.41 1.33 1.67 1.42 Q4 2016 1.33 1.66 1.44 1.34 1.66 1.42 Q3 2016 1.31 1.71 1.46 1.31 1.71 1.47 29