Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q4 2018 Earnings Presentation
28 slides from Great-West Lifeco's earnings presentation, 2019
Slide 1: Quarterly Information for Analysts and Investors Q4 2018
Quarterly Information for Analysts and Investors Q4 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: Paul Mahon, President & CEO – Summary of Results
Paul Mahon President & CEO Great-West Lifeco Summary of Results 3
Slide 4: Highlights
Highlights 2018 adjusted earnings1 of $3 billion up 14% YoY with growth in all segments • Up 7% YoY excluding Q3 2017 hurricane losses Q4 2018 adjusted earnings1,2 of $710 million down 3% YoY • Includes $72 million after-tax negative impact from equity market declines Strong capital position e
Slide 5: Summary of Results
Summary of Results Adjusted Net Earnings1 (C$m) 831 734 731 745 Adjusted net earnings1 of $710m, down 710 3% YoY, include $72m after-tax negative impact from equity market declines • Canada – down 13% YoY, impacted by markets and higher expenses • U.S. – down 27% YoY, impacted by markets Q4 2017 Q
Slide 6: Summary of Results – Sales
Summary of Results – Sales Sales1 (C$b) 41.5 Canada 34.6 34.4 • Lower Individual and Group 30.3 33.1 Wealth sales partly offset by higher Individual Insurance sales U.S. • Higher large plan sales at Empower and higher sales at Putnam Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Europe Canada U.S. E
Slide 7: Summary of Results – Fee and Other Income
Summary of Results – Fee and Other Income Fee and Other Income (C$m) Lifeco fees down 1% YoY; down 1,483 1,483 3% in constant currency1 1,439 1,433 1,420 • Average equity markets: S&P/TSX (6%) S&P 500 3% Eurostoxx 50 (12%) Canada • Lower average assets Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 U
Slide 8: Summary of Results – Expenses
Summary of Results – Expenses Adjusted Expenses1 (C$m) Canada 1,311 1,227 1,229 1,216 1,237 • Significant strategic investments and closure of a legal matter • Transformation savings reinvested to drive growth U.S. Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 • Putnam and Empower down modestly Lifeco
Slide 9: Garry MacNicholas, EVP & CFO – Financial Highlights
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 9
Slide 10: Financial Highlights – Earnings
Financial Highlights – Earnings Adjusted Net Earnings per Share1 EPS of $0.72, down 3% YoY (adjusted) 0.84 0.74 0.74 0.75 0.72 • $0.07 per share negative impact from declines in equity markets Canada • Higher expenses related to strategic investments and the negative impact of equity market decl
Slide 11: Financial Highlights – Source of Earnings
Financial Highlights – Source of Earnings Q4/18 Q3/18 Q4/17 For the three months ended Dec.31/18 Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 299 127 323 (4) 745 738 704 Impact of new business 7 (29) 11 - (11) (30) (18) Experience gains and losses 54 (32) (36) (5)
Slide 12: Financial Highlights – Source of Earnings
Financial Highlights – Source of Earnings 2018 2017 For the twelve months ended Dec.31/18 Canada U.S. Europe Corp. Total Total Expected profit on in-force business 1,219 500 1,215 (17) 2,917 2,672 Impact of new business 8 (129) (74) - (195) (115) Experience gains and losses 212 (29) (73) (7) 103 341
Slide 13: Financial Highlights – Book Value per Share and ROE
Financial Highlights – Book Value per Share and Return on Equity (ROE) Book Value per Share 22.08 21.01 21.22 21.25 20.11 Lifeco cash of $1.0b Book value up 10% from last year LICAT at 140% Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Adjusted ROE1 (Trailing 4 quarters) Adjusted ROE1 of 14.3% N
Slide 14: Financial Highlights – Assets under Administration
Financial Highlights – Assets under Administration1 Assets Under Administration Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 YoY (C$b) General Fund 203 212 210 209 214 5% Segregated Fund 217 221 221 220 213 (2%) Mutual Fund & Institutional 279 286 295 294 282 1% Other AUA 651 673 698 718 690 6% Total 1,3
Slide 15: Looking ahead…
Looking ahead… Disciplined deployment of significant capital resources Canada – maintain strong market shares and harvest the benefits of strategic investments – extending our reach to new customers digitally and lowering costs through automation U.S. – focus on organic and inorganic growth op
Slide 16: Questions
Questions GREAT-WEST LIFECOn« 16
Slide 17: Appendix
Appendix GREAT-WEST LIFECOn« 17
Slide 18: Canada
Canada (In C$m) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 YoY Sales Individual Customer Individual Insurance 106 76 88 109 145 37% Individual Wealth 2,431 2,449 2,165 1,921 2,334 (4%) 2,537 2,525 2,253 2,030 2,479 (2%) Group Customer Group Insurance 161 361 251 104 151 (6%) Group Wealth 1,074 936 536
Slide 19: United States
United States (In US$m) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 YoY GWF Sales Empower Retirement 6,118 9,113 6,979 7,426 10,783 76% Individual Markets 296 285 390 327 275 (7%) Total 6,414 9,398 7,369 7,753 11,058 72% Putnam Sales 8,674 10,504 11,630 10,785 13,245 53% Fee and Other Income Empower Ret
Slide 20: Europe
Europe (In C$m) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 YoY Sales UK / Isle of Man 809 949 1,151 3,274 1,096 35% Ireland / Germany 6,516 4,790 4,384 3,961 4,876 (25%) Total 7,325 5,739 5,535 7,235 5,972 (18%) Fee and Other Income UK / Isle of Man 55 56 58 54 52 (5%) Ireland / Germany 306 304 334 316
Slide 21: Putnam - AUM and Flows
Putnam - AUM and Flows (US$b) Mutual Funds Institutional In-Qtr Avg. AUM 21
Slide 22: Putnam – Core Net Earnings
Putnam – Core Net Earnings Expenses Income Taxes (US$m) Fee & Net Inv Income Operating Margin (Pre-tax) Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Core Net Earnings ($6) ($2) $5 $3 ($14) Note: Core net earnings (loss) (a non-IFRS financial measure) is a measure of the Asset Management business unit's p
Slide 23: Stable Trend Over the Years
Stable Trend Over the Years (C$m) Experience Gains (Losses), Management Actions, and Changes in Assumptions as a % of Net Income Before Tax 3,556 3,347 3,268 3,133 2,874 2,769 2,576 2,633 2,732 2,499 2,504 2,447 2,335 2,237 2005-2018 14 Year 24% 23% 23% 23% 26% 25% 20% 21% 21% Average 19% 18% 20% 20
Slide 24: Invested Asset Composition
Invested Asset Composition1 Invested assets of $184.4 billion Diversified high quality portfolio: • Bonds represent 71%: − 99% are investment grade − 79% rated A or higher − 85% of bond holdings are domiciled in Canada, the U.S. and the U.K. • Mortgage portfolio represents 14%: − Well diversifie
Slide 25: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type Equity % of Multi Family Retail Office Industrial Other Total City/Region Release Lifeco IA Central London 323 995 456 32 11 122 1,939 1.1% Other United Kingdom 121 652 159 858 505 691 2,986 1.6% Total United King
Slide 26: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 30 305 - 41 376 0.2% Other United Kingdom - 996 364 783 331 2,474 1.3% Total United Kingdom - 1,026 669 783
Slide 27: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department % of Invested Asset Type and Other Stores Grocery Total Lifeco IA Mortgages 831 612 204 1,647 0.9% Investment Pr
Slide 28: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € 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 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 28