Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2020 Earnings Presentation
38 slides from Great-West Lifeco's earnings presentation, 2020
Slide 1: Quarterly Results Presentation Q3 2020
Quarterly Results Presentation Q3 2020
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 "will", "may", "e
Slide 3: Summary of Results
SUMMARY OF RESULTS Paul Mahon President & CEO Great-West Lifeco 3
Slide 4: A solid third quarter underpinned by a resilient business model
A solid third quarter underpinned by a resilient business model Business impacts from COVID-19 crisis modest but persisting Delivering on strategic priorities to drive growth 4
Slide 5: Earnings
EARNINGS Earnings per Share (EPS) Earnings (C$m) 831 863 826 0.93 730 0.90 0.89 677 706 679 0.79 0.76 0.73 0.73 543 513 0.55 0.59 342 0.37 Base1 Base1 Net Net Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Base Earnings and EPS Net Earnings and EPS • Base earnings an
Slide 6: COVID-19: Business Impacts
COVID-19: BUSINESS IMPACTS Q3 2020 IMPACTS NEAR-TERM OUTLOOK • Health and dental claims approaching normal levels in Q3, expense recoveries for • Disability experience being reflected into pricing at renewals where administrative service only (ASO) plans are improving appropriate • Lower level of di
Slide 7: COVID-19: Business Impacts
COVID-19: BUSINESS IMPACTS Q3 2020 IMPACTS NEAR-TERM OUTLOOK • Financial advisers have adapted to remote environment • Recovery of bulk annuity sales expected but wealth management sales will • Sales activity for wealth management continued to be slow; activity picked up in continue to be challenged
Slide 8: Invested Assets Portfolio
INVESTED ASSETS PORTFOLIO Q3 2020 IMPACTS NEAR-TERM OUTLOOK • Bond portfolio of $133.3b, 79% of bonds rated A or higher; 99% • Downgrade cycle expected to continue over the medium-term rated BBB or higher; BBB holdings of $26.8b are primarily higher • High grade issuers have taken advantage of robus
Slide 9: Sales
SALES Sales1,2 (C$b) Sales By Segment (C$b)1,2 Canada U.S. Europe Lifeco 66.5 Q3 2020 2.5 28.0 5.3 35.8 41.9 42.0 Q2 2020 2.4 28.2 7.1 37.8 37.8 35.8 Q3 2019 3.5 31.2 7.1 41.9 YoY (28%) (10%) (25%) (14%) Constant Currency3 (28%) (11%) (29%) (16%) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 • Lower large
Slide 10: Fee and Other Income
FEE AND OTHER INCOME Fee and Other Income (C$m) Fee and Other Income By Segment (C$m) Canada U.S. Europe CRS Lifeco 1,496 1,515 1,486 1,441 Q3 2020 445 696 342 3 1,486 1,406 Q2 2020 410 654 340 2 1,406 Q3 2019 447 665 382 2 1,496 YOY 0% 5% (10%) 10% (1%) Constant Currency 1 0% 4% (15%) 9% (2%) Q3 20
Slide 11: Expenses
EXPENSES Operating Expenses1,2,3 (C$m) Operating Expenses By Segment (C$m)1,2 Canada U.S.3 Europe CRS Lifeco1,3 1,333 1,324 1,291 1,285 1,253 Q3 2020 431 587 275 25 1,324 Q2 2020 411 560 283 24 1,285 Q3 2019 417 550 262 21 1,253 YOY 3% 7% 5% 19% 6% Constant Currency2 3% 6% (1%) 12% 4% Q3 2019 Q4 201
Slide 12: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco 12
Slide 13: Earnings
EARNINGS Earnings per Share (C$m) Base Earnings1 (C$m) (Base)1,2 (Net)2 0.90 0.93 0.89 Canada U.S. Europe CRS Lifeco Lifeco 0.79 0.76 0.73 0.73 Q3 2020 270 83 182 156 679 826 0.55 0.59 Q2 2020 315 83 179 137 706 863 0.37 Q3 2019 355 79 161 86 677 730 Base1 Net YOY (24%) 5% 13% 81% 0% 13% Constant Q3
Slide 14: Earnings Reconciliation
EARNINGS RECONCILIATION Q3 2020 Q2 2020 Q1 2020 For the three months ended (C$m) Post-Tax (m) Per Share Post-Tax (m) Per Share Post-Tax (m) Per Share Base earnings1 679 0.73 706 0.76 543 0.59 Items excluded from base earnings Actuarial assumption changes and 66 0.07 122 0.13 (52) (0.06) other manage
Slide 15: Source of Earnings
SOURCE OF EARNINGS Q3/20 Q2/20 Q3/19 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 319 114 213 161 (4) 803 732 752 Impact of new business (16) (40) (19) 9 - (66) (69) (13) Experience gains and losses 1 (6) 11 40 (7) (2) 36 98 (2) Management actions and cha
Slide 16: Source of Earnings – Additional Detail
SOURCE OF EARNINGS – ADDITIONAL DETAIL Experience gains and losses Management actions and changes in assumptions For the three months ended For the three months ended Pre-Tax Post-Tax Pre-Tax Post-Tax September 30/20 (C$m) September 30/20 (C$m) Yield enhancement 58 45 Net gain on Sale of IPSI 95 94
Slide 17: Book Value per Share and LICAT
BOOK VALUE PER SHARE AND LICAT Book Value per Share (C$) LICAT 22.34 22.57 21.98 139% 21.53 21.02 135% 133% 132% 131% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 • Retained earnings and currency translation drove • LICAT at 131%, down 1 point from Q2 2020 BVPS gro
Slide 18: Empower's Acquisition of Retirement Services Business of MassMutual
EMPOWER’S ACQUISITION OF RETIREMENT SERVICES BUSINESS OF MASSMUTUAL 1 Strengthens Empower’s #2 position in a growing U.S. retirement industry Presents meaningful expense and revenue synergy opportunities leveraging Empower’s proven track 2 record of platform integrations Solidifies Empower’s leaders
Slide 19: 2020 Year-to-Date M&A, Divestitures and Financing Activity
2020 YEAR-TO-DATE M&A, DIVESTITURES AND FINANCING ACTIVITY On August 4, 2020, Irish Life completed the previously announced sale of Irish Progressive Services 1 International Limited (IPSI) On August 4, 2020, the Company announced the proposed sale of GLC Asset Management Group Ltd. (GLC) to 2 Macke
Slide 20: Questions
QUESTIONS 20
Slide 21: Appendix
APPENDIX 21
Slide 22: Canada
CANADA (In C$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY Sales Individual Insurance 102 128 118 98 76 (25%) Individual Wealth 1,918 2,590 2,784 1,679 1,852 (3%) Individual Total 2,020 2,718 2,902 1,777 1,928 (5%) Group Insurance 237 102 118 75 109 (54%) Group Wealth 1,263 789 612 538 483 (62%) Gr
Slide 23: Canada
CANADA (In C$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY Individual Customer Base Earnings 165 143 138 159 123 (25%) Items excluded from Base Earnings (80) (56) (126) 36 (4) Net Earnings 85 87 12 195 119 40% Group Customer Base Earnings 181 144 143 195 134 (26%) Items excluded from Base Earnings
Slide 24: United States
UNITED STATES1 (In US$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY Sales Empower Retirement 12,792 11,968 25,060 5,196 6,692 (48%) Personal Capital - - - - 542 Total 12,792 11,968 25,060 5,196 7,234 (43%) Putnam Sales 10,879 12,108 14,664 15,111 13,809 27% Fee and Other Income Empower Retirement 2
Slide 25: United States
UNITED STATES (In US$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY Empower Retirement Base Earnings 46 54 40 48 58 26% Items excluded from Base Earnings (1) 23 (9) (4) 29 Net Earnings 45 77 31 44 87 93% Personal Capital Base Earnings - - - - (5) Items excluded from Base Earnings - - - - - Net Earni
Slide 26: Europe
EUROPE (In C$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY Sales U.K 1,238 1,027 1,102 1,059 672 (46%) Ireland 5,784 5,393 8,480 6,001 4,561 (21%) Germany 76 146 86 81 80 5% Total 7,098 6,566 9,668 7,141 5,313 (25%) Fee and Other Income U.K 54 63 39 44 42 (22%) Ireland 238 229 189 185 189 (21%) Ger
Slide 27: Europe
EUROPE (In C$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY U.K. Base Earnings 105 233 72 88 78 (26%) Items excluded from Base Earnings 62 (27) 19 21 (11) Net Earnings 167 206 91 109 67 (60%) Ireland Base Earnings 29 52 27 53 70 141% Items excluded from Base Earnings 54 36 (43) 48 126 Net Earnings 8
Slide 28: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 YoY Fee and Other Income Reinsurance 2 2 3 2 3 10% Operating Expenses Reinsurance 20 21 21 22 23 15% Corporate & Par 1 1 2 2 2 Total 21 22 23 24 25 19% Reinsurance Base Earnings 85 162 120 138 157 85% Items excluded from Bas
Slide 29: Putnam – AUM and Flows
PUTNAM – AUM AND FLOWS (US$b) 181.7 6.9 ( 5.5 ) 4.9 179.0 174.2 168.5 6.9 ( 6.2 ) 3.5 148.9 92.2 91.6 89.5 85.3 75.3 84.7 89.5 83.2 87.4 73.6 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Sales Redemptions Market Q3 2020 In-Qtr Avg. AUM: 174.3 178.0 172.4 160.2 176.7 Mutual Funds Institutional 29
Slide 30: Putnam – Core Net Earnings
PUTNAM – CORE NET EARNINGS (US$m) 226 235 238 190 226 11.9% 9.5% 7.2% 11.7% Expenses Fee & Net Investment Income Income Taxes Core Margin (Pre-tax) -16.1% (204) (218) (200) (210) (221) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Core Net Earnings: $17 $21 ($24) $19 $19 Note: Core net earnings (loss) (a
Slide 31: Invested Assets
INVESTED ASSETS1 Loans to Cash and CD's Policyholders 3% Investment Properties 5% 3% Gov't, Gov't Related and Stocks 5% Agency Securitized Bonds 28% Invested assets of $188.6 billion Insured Residential and Multi-family Diversified high quality portfolio: Mortgages 2% Bonds represent 71%: • 99% are
Slide 32: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO* % of Invested Assets Gov't, Gov't Related and Agency Corporate and Non-Agency Country of Domicile Securitized Bonds Securitized Bonds Total Bonds U.S. 4.4% 18.0% 22.4% Canada 11.8% 10.5% 22.3% U.K. 7.9% 8.0% 15.9% Germany 1.4% 1.0% 2.4% Ireland 0.3% 0.2% 0.5% 25.8
Slide 33: Lifeco Consolidated Bond Portfolio – By Rating
LIFECO CONSOLIDATED BOND PORTFOLIO – BY RATING* Rating Carrying Value (C$m) % of Total AAA 25,689 19.3% AA 36,611 27.5% A 43,331 32.5% BBB 26,830 20.1% BB or Lower 832 0.6% Total 133,293 100.0% • Bond portfolio quality remains high, with 99% rated investment grade and 79% rated A or higher. *Include
Slide 34: 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 1.4% Consumer Products 5.6% RMBS 0.1% Industrial Products 3.7% Other ABS 3.4% Banks 3.5% Total Non-Agency Securitized 4.9% Fin
Slide 35: United Kingdom Property Related Exposures
UNITED KINGDOM PROPERTY RELATED EXPOSURES Mortgages (C$m) Carrying Value Property Type City/Region Multi Family Retail Office Industrial Equity Release Other Total % of Lifeco IA Central London 414 1,022 964 31 235 80 2,746 1.4% Other United Kingdom 297 541 423 808 1,570 475 4,114 2.2% Total United
Slide 36: United Kingdom Property Related Exposures
UNITED KINGDOM PROPERTY RELATED EXPOSURES Investment Properties (C$m) Carrying Value Property Type City/Region Multi Family Retail Office Industrial Other Total % of Lifeco IA Central London - 28 303 - 43 374 0.2% Other United Kingdom - 769 329 775 290 2,163 1.1% Total United Kingdom - 797 632 775 3
Slide 37: United Kingdom Property Related Exposures
UNITED KINGDOM PROPERTY RELATED EXPOSURES Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Warehouse, Distribution, and Shopping Centres and Invested Asset Type Grocery Total % of Lifeco IA Retail LTV Other Department Stores Pre-2009 Mortgages 140 101 125 366
Slide 38: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2020 1.33 1.72 1.56 1.33 1.72 1.56 Q2 2020 1.39 1.72 1.53 1.36 1.68 1.52 Q1 2020 1.34 1.72 1.48 1.4 1.74 1.55 Q4 2019 1.32 1.70 1.46 1.3 1.72 1.46 Q3 2019 1.32 1.63 1.47 1.32 1.63 1.44 38