Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q4 2017 Earnings Presentation
31 slides from Great-West Lifeco's earnings presentation, February 2018
Slide 1: Quarterly Information for Analysts and Investors Q4 2017
Quarterly Information for Analysts and Investors Q4 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 Great-West Lifeco Summary of Results 3
Slide 4: Q4 2017 Highlights
Q4 2017 Highlights Solid operating performance with adjusted earnings(1) up 5% year-over-year Reported results include a charge related to U.S. tax reform and a net charge on disposal of an equity investment Strong results in Canada reflect business growth and transformation benefits Momentu
Slide 5: Summary of Results
Summary of Results Adjusted Net Earnings(1) (C$m) 757 734 698 712 Adjusted earnings of $734m, up 5% YoY 619 582 • Exclude $216m charge for U.S. tax reform impact and $122m net charge on the disposal of an equity investment • Q3/17 includes property catastrophe reinsurance losses of $175m after-tax
Slide 6: Summary of Results – Sales
Summary of Results – Sales Sales (C$b) Canada 32.4 • Strong wealth sales and return to 29.5 30.3 normalized Individual insurance 26.7 25.0 sales YoY U.S. • Empower sales up 20% YoY • Putnam sales up 4% YoY with Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 higher mutual fund sales and lower institutio
Slide 7: Summary of Results – Fee and Other Income
Summary of Results – Fee and Other Income Y/Y Fee and Other Income (C$m) 4% Lifeco fee income up 4% YoY 1,403 1,345 1,381 1,365 1,305 8% • Average equity markets: S&P/TSX 7% S&P 500 19% (0%) Eurostoxx 50 16% Canada • Higher average AUA driven 9% by higher average equity markets and positive net
Slide 8: Summary of Results – Expenses
Summary of Results – Expenses Adjusted Expenses(1) (C$m) Canada 1,205 1,189 1,212 • $123m pre-tax 1,137 1,094 annualized run-rate reductions achieved at end of Q4 2017 of which $93m relates to the shareholder account U.S. Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 • Lower expenses at Lifeco Lifeco
Slide 9: Financial Highlights
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 9
Slide 10: Financial Highlights - Earnings
Financial Highlights - Earnings Adjusted Net Earnings per Share(1) Adjusted EPS of $0.742, up 5% YoY 0.766 0.719 0.742 0.709 • Excludes $0.218 charge for U.S. tax 0.627 0.589 reform impact and $0.124 net charge on the disposal of an equity investment Canada • Up due to Individual Customer repric
Slide 11: Financial Highlights – Source of Earnings (adjusted)
Financial Highlights – Source of Earnings (adjusted) Q4/17 Q3/17 Q4/16 For the three months ended Dec.31/17 Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 300 126 279 (1) 704 682 695 Impact of new business 27 (31) (14) - (18) (12) (43) Experience gains and losses 114
Slide 12: Financial Highlights – Source of Earnings (adjusted)
Financial Highlights – Source of Earnings (adjusted) 2017 2016 For the twelve months ended Dec.31/17 Canada U.S. Europe Corp. Total Total Expected profit on in-force business 1,141 487 1,059 (15) 2,672 2,642 Impact of new business 56 (128) (43) - (115) (232) Experience gains and losses 336 50 (38) (
Slide 13: 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 20.11 Lifeco cash at quarter end was $0.5b Book value up 2% from last year Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Adjusted Return on Equity (Trailing 4 quarters) 19.9% Adjusted Return
Slide 14: Financial Highlights – Assets under Administration
Financial Highlights – Assets under Administration Assets Under Administration Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 YoY (C$b) General Fund 200 201 200 198 203 2% Segregated Fund 200 205 209 208 217 8% Mutual Fund & Institutional 259 270 272 269 279 8% Other AUA 589 620 628 619 651 10% Total 1,248
Slide 15: Outlook
Outlook Strategic actions taken underpin stronger earnings growth • Canadian transformation initiatives drive organic growth • Retirement Advantage acquisition extends our portfolio • Financial Horizons Group acquisition expands distribution Investments in technology and innovation to continue
Slide 16: Questions
Questions GREAT-WEST ECOne 16
Slide 17: Appendix
Appendix GREAT-WEST ECOne 17
Slide 18: Canada
Canada (In C$m) Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 YoY Sales Individual Customer Individual Insurance 341 275 100 86 106 (69%) Individual Wealth 2,307 2,585 2,193 1,947 2,431 5% 2,648 2,860 2,293 2,033 2,537 (4%) Group Customer Group Insurance 180 134 186 136 161 (11%) Group Wealth 1,043 669 75
Slide 19: United States
United States (In US$m) Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 YoY GWF Sales Empower Retirement 5,111 7,520 4,792 8,222 6,118 20% Individual Markets 351 353 294 393 296 (16%) Total 5,462 7,873 5,086 8,615 6,414 17% Putnam Sales 8,360 10,576 7,552 8,323 8,674 4% Fee and Other Income Empower Retireme
Slide 20: Europe
Europe (In C$m) Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 YoY Sales UK / Isle of Man 591 1,095 873 1,086 809 37% Ireland / Germany 3,819 3,321 3,962 4,276 6,516 71% Total 4,410 4,416 4,835 5,362 7,325 66% Fee and Other Income UK / Isle of Man 57 56 57 53 55 (4%) Ireland / Germany 276 263 285 291 306 1
Slide 21: Putnam - AUM and Flows
Putnam - AUM and Flows (US$b) Mutual Funds Institutional 3.3 (3.9) 2.5 171.5 167.8 159.9 162.9 5.4 (5.6) 2.0 152.1 91.0 92.9 85.7 87.7 80.2 71.9 74.2 75.2 76.8 78.6 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Sales Redemptions Market Q4 2017 In-Qtr Avg. 169.8 151.9 157.4 161.8 165.2 AUM 21
Slide 22: Putnam – Core Net Earnings
Putnam – Core Net Earnings Putnam Net Earnings - Core Earnings (US$m) Expenses Income Taxes Expenses Income Taxes Fee & Net Inv. Income Operating Margin (Pre-tax) $250 Fee & Net Inv Income Operating Margin (Pre-tax) 35% % of Budget 25% $150 186 190 211 193 85% 179 Core Earnings (US$mm) 12.0% 15% Ope
Slide 23: Consolidated MCCSR Ratio
241% 240% 239%239% 238% Consolidated MCCSR Ratio 234% 236% 241% 240% 233% 239%239% 238% 232% 230% 236% 233% 229% 230% 233% 234% 240% 241% 232% 239%239% 238% 224% 230% 228% 223% 229%236% 227% 233% 230% 233% 234% 222% 235% Adjusted MCCSR 233% 232% 221% 228% 224% 223% 230% 229% 227% 233% 222% 30% 218%
Slide 24: 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 2,732 2,499 2,504 2,447 2,335 2,237 2005-2017 13 Year 24% 23% 23% 26% 25% 20% 19% 20% 21% 21% Average 18% 20% 11% 20.8
Slide 25: Credit Markets
Credit Markets In-Quarter Developments Credit experience related to impairments and rating changes positively impacted shareholders’ net earnings by $6 million in the quarter Total Credit Impact on Shareholders’ Net Earnings 2016 Full Year 2017 Full Year ($ millions) Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2
Slide 26: Invested Asset Composition
Invested Asset Composition(1) Invested assets at December 31, 2017 were $175.8bln Diversified high quality portfolio: Cash & CD's 2% − Bonds represent 73% of invested assets (99% are investment grade; Investment Properties Loans to Policyholders 82% rated A or higher) 2% 5% Gov't, Gov't Related
Slide 27: Lifeco Consolidated Bond Portfolio
Lifeco Consolidated Bond Portfolio(1) Corporate and Non-Agency Securitized Government, Government Related Other Financial Other Corporate and % of Invested Total Domicile of Issuer and Agency Securitized Banking Institutions and REITs Non-Agency Securitized Assets $ (millions) United States 4.3% 0.7
Slide 28: Corporate and Securitized Bonds – Sector Diversification
Corporate and Securitized Bonds – Sector Diversification(1) % of % of Invested Invested Assets Assets Corporates Non-Agency Securitized Utilities 9.7% ABS 2.1% Consumer Products 6.1% CMBS 1.8% Industrials 4.2% RMBS 0.9% Other Financial Institutions 3.5% Covered 0.8% Banking 3.2% Total Securitized 5.
Slide 29: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London 285 972 499 39 11 1,806 1.0% Other United Kingdom 76 664 151 902 322 2,115 1.2% Total United Kingdom 361 1,636 650 941 33
Slide 30: United Kingdom Property Related Exposures
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 29 252 - 39 320 0.2% Other United Kingdom - 1,115 379 676 362 2,532 1.4% Total United Kingdom - 1,144 631 6
Slide 31: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € 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 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 31