Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2018 Earnings Presentation
27 slides from Great-West Lifeco's earnings presentation, Dec 24, 2018
Slide 1: Quarterly Information for Analysts and Investors Q3 2018
Quarterly Information for Analysts and Investors Q3 2018
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
Paul Mahon President & CEO Great-West Lifeco Summary of Results 3
Slide 4: Q3 2018 Highlights
Q3 2018 Highlights Adjusted net earnings(1) of $745m, up 28% year-over-year (YoY) Canada – earnings growth of 6% YoY; ongoing strategic investments • SimpleProtect in pilot; Group Life and Health e-enrolment lab underway U.S. – earnings up at Empower and Individual Markets • Strong sales and n
Slide 5: Summary of Results
Summary of Results Adjusted Net Earnings(1) (C$m) 831 Adjusted net earnings of $745m, up 28% YoY, 757 734 731 745 and up 25% YoY, in constant currency 582 (2) • Excluding the impact of the Q3 2017 reinsurance provision of $175m, adjusted net earnings down 2% YoY Net earnings of $689m, up 19% YoY
Slide 6: Summary of Results – Sales
Summary of Results – Sales Sales (C$b) Canada 34.6 34.4 • Higher Individual Insurance 30.3 33.1 29.5 sales offset by lower Group Customer sales U.S. • Higher mutual fund sales at Putnam partly offset by lower large plan sales at Empower Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Europe • Higher b
Slide 7: Summary of Results – Fee and Other Income
Summary of Results – Fee and Other Income Fee and Other Income (C$m) Canada 1,483 1,483 1,439 1,433 • Higher average assets and 1,400 the addition of Financial Horizons Group (FHG) U.S. • Higher fees from participant and asset growth at Empower • Fee growth at Putnam impacted by non-recurring Q3
Slide 8: Summary of Results – Expenses
Summary of Results – Expenses Lifeco Adjusted Expenses(1) (C$m) Adjusted expenses of $1.2b, 1,227 1,229 1,216 1,237 in line with recent quarters 1,098 Canada • $180m pre-tax annualized run-rate reductions achieved • Addition of FHG and ongoing strategic investments Q3 2017 Q4 2017 Q1 2018 Q2 2
Slide 9: Financial Highlights – Garry MacNicholas
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 9
Slide 10: Financial Highlights – Earnings
Financial Highlights – Earnings Adjusted Net Earnings per Share(1) 0.839 EPS of $0.75, up 28% YoY (adjusted) 0.766 0.742 0.740 0.754 Canada 0.589 • Favourable Group morbidity results and higher basis changes in Individual partly offset by lower investment gains U.S. • Higher Empower earnings o
Slide 11: Earnings – Europe – A Closer Look
Earnings – Europe – A Closer Look U.K. restructuring costs of $56m recorded in quarter • Related to Retirement Advantage integration and closed block sale • Expect annual run-rate cost savings of £20 million pre-tax by end of Q4 2020 • Investments in U.K. retirement platform and product line-up to
Slide 12: Financial Highlights – Source of Earnings
Financial Highlights – Source of Earnings Q3/18 Q2/18 Q3/17 For the three months ended Sept. 30/18 Canada U.S. Europe Corp. Total Total Total (Adjusted) Expected profit on in-force business 314 132 296 (4) 738 723 682 Impact of new business (1) (37) 8 - (30) (58) (12) Experience gains and losses 36
Slide 13: Financial Highlights – Book Value per Share and Return on Equity
Financial Highlights – Book Value per Share and Return on Equity Book Value per Share 21.01 21.22 21.25 19.92 20.11 Lifeco cash at quarter end was $0.9b Book value up 7% from last year Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Adjusted Return on Equity (Trailing 4 quarters) Adjusted Return on Eq
Slide 14: Financial Highlights – Assets under Administration
Financial Highlights – Assets under Administration Assets Under Administration Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 YoY (C$b) General Fund 198 203 212 210 209 6% Segregated Fund 208 217 221 221 220 6% Mutual Fund & Institutional 269 279 286 295 294 9% Other AUA 619 651 673 698 718 16% Total 1,294
Slide 15: Questions
Questions GREAT-WEST LIFECOn« 15
Slide 16: Appendix
Appendix GREAT-WEST LIFECOn« 16
Slide 17: Canada
Canada (In C$m) Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 YoY Sales Individual Customer Individual Insurance 86 106 76 88 109 27% Individual Wealth 1,947 2,431 2,449 2,165 1,921 (1%) 2,033 2,537 2,525 2,253 2,030 (0%) Group Customer Group Insurance 136 161 361 251 104 (24%) Group Wealth 771 1,074 936
Slide 18: United States
United States (In US$m) Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 YoY GWF Sales Empower Retirement 8,222 6,118 9,113 6,979 7,426 (10%) Individual Markets 393 296 285 390 327 (17%) Total 8,615 6,414 9,398 7,369 7,753 (10%) Putnam Sales 8,323 8,674 10,504 11,630 10,785 30% Fee and Other Income Empower R
Slide 19: Europe
Europe (In C$m) Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 YoY Sales UK / Isle of Man 1,086 809 949 1,151 3,274 201% Ireland / Germany 4,276 6,516 4,790 4,384 3,961 (7%) Total 5,362 7,325 5,739 5,535 7,235 35% Fee and Other Income UK / Isle of Man 53 55 56 58 54 2% Ireland / Germany 291 306 304 334 316
Slide 20: Putnam - AUM and Flows
Putnam - AUM and Flows (US$b) Mutual Funds Institutional In-Qtr Avg. AUM 20
Slide 21: Putnam – Core Net Earnings
Putnam – Core Net Earnings Expenses Income Taxes (US$m) Fee & Net Inv Income Operating Margin (Pre-tax) Q3 2017 Q4 2017 Q1 2017 Q2 2018 Q3 2018 Core Net Earnings $15 ($6) ($2) $5 $3 Notes: Q3/17 includes final performance fees and other proceeds from a closed portfolio of US$18m (US$11m after-tax).
Slide 22: Stable Trend Over the Years
Stable Trend Over the Years (C$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 2,739 2,576 2,633 2,732 2,499 2,504 2,447 2,335 2,237 2005-2017 13 Year 24% 23% 23% 27% 26% 25% 20% 21% 21% Average 19% 18% 20% 20
Slide 23: Invested Asset Composition
Invested Asset Composition(1) Invested assets of $180.1 billion Diversified high quality portfolio: − Bonds represent 72%: − 99% are investment grade − 80% rated A or higher − 85% of bond holdings are domiciled in Canada, the U.S. and the U.K. − Mortgage portfolio represents 13%: − Well diversif
Slide 24: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type Equity % of Multi Family Retail Office Industrial Other Total City/Region Release Lifeco IA Central London 283 966 427 31 11 113 1,831 1.0% Other United Kingdom 104 637 107 834 510 627 2,819 1.6% Total United King
Slide 25: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 29 296 - 40 365 0.2% Other United Kingdom - 1,008 370 746 337 2,461 1.4% Total United Kingdom - 1,037 666 7
Slide 26: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department % of Invested Asset Type and Other Stores Grocery Total Lifeco IA Mortgages 811 593 199 1,603 0.9% Investment Pr
Slide 27: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € 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 Q1 2018 1.26 1.76 1.55 1.29 1.81 1.59 Q4 2017 1.27 1.69 1.50 1.26 1.70 1.51 Q3 2017 1.25 1.64 1.47 1.25 1.67 1.47 27