Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2019 Earnings Presentation
28 slides from Great-West Lifeco's earnings presentation, 2019
Slide 1: Quarterly Results Presentation Q3 2019
Quarterly Results Presentation Q3 2019
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, President & CEO
Paul Mahon President & CEO Great-West Lifeco Summary of Results 3
Slide 4: Adjusted Net Earnings
Earnings Earnings per Share (EPS) 0.79 0.75 ▪ EPS of $0.79, up 4% YoY1 0.70 0.72 0.67 0.70 • Reflects sale of U.S. Individual 0.49 Adjusted Net 2 Markets business and Substantial Issuer Bid in Q2 2019 Net ▪ Earnings of $730m • Up 6% YoY1 excluding U.S. Individual Markets earnings of Q3 2018 Q4 2018
Slide 5: Strategy Update
Strategy Update Canada Europe & Reinsurance U.S. Protect and extend leadership Targeted growth through Invest for significant organic positions through organic acquisition and product growth and consolidation growth expansion opportunities ▪ Favourable policyholder vote ▪ U.K. transformation on trac
Slide 6: U.K. Business and Brexit
U.K. Business and Brexit ▪ We are a domestic player – our UK operations do not sell policies into the EU nor do we operate other EU businesses from the U.K. ▪ Underlying fundamentals remain strong for our U.K. payout annuity and employee benefits businesses ▪ Impact to date largely limited to curren
Slide 7: Sales
Sales Sales1 (C$b) 90.2 Canada ▪ Strong Group Customer sales driven by large case sales in wealth and 41.5 41.9 insurance 34.4 34.3 U.S. ▪ Growth at Empower driven by large plan sales Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 ▪ Higher institutional and lower mutual fund sales at Putnam Canada U.S. Eur
Slide 8: Fee and Other Income
Fee and Other Income Adjusted Y/Y 1% Canada Fee and Other Income1 (C$m) 3% ▪ Higher in Group; steady in 1,483 1,420 1,479 1,511 1,496 Individual U.S. (1%) ▪ Up 5% excluding U.S. Individual Markets in Q3 2018 2% ▪ Higher at Empower due to Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 participant and AUA2 g
Slide 9: Expenses
Expenses Canada Adjusted Expenses1 (C$m) 1,311 1,295 ▪ Expense growth moderating 1,237 1,247 1,253 U.S. ▪ Up 7% excluding U.S. Individual Markets in Q3 2018 ▪ Higher at Empower due to participant growth and Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 strong sales Lifeco Canada U.S. Europe (Adjusted)1,2
Slide 10: Financial Highlights - Garry MacNicholas, EVP & CFO
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 10
Slide 11: Earnings
Earnings Adjusted EPS of $0.79, up 4% YoY2 Net Earnings per Share1 0.79 0.75 ▪ Reflects sale of U.S. 0.72 0.67 0.70 Individual Markets and Substantial Issuer Bid in Q2 2019 Canada ▪ Lower basis changes partly offset by trading gains Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 U.S. Earnings (C$m) ▪ Up 31
Slide 12: Source of Earnings
Source of Earnings For the three months ended Sept. 30/19 Q3/19 Q2/19 Q3/18 Canada U.S. Europe Corp. (C$m) Total Total Total Expected profit on in-force business 324 109 323 (4) 752 734 738 Impact of new business 25 (33) (5) - (13) (17) (30) Experience gains and losses 77 5 (85) 1 (2) 37 (32) Manage
Slide 13: Source of Earnings – Additional Detail
Source of Earnings – Additional Detail Experience gains and losses Q3/19 For the three months ended Sept. 30/19 (C$m) Total Yield enhancement and investment-related 86 Expenses and fees (17) Policyholder behavior (27) Mortality / morbidity / other (44) Total experience gains / losses (2) Management
Slide 14: Book Value per Share and Return on Equity
Book Value per Share and Return on Equity Book Value per Share (C$) 22.08 22.07 21.25 20.84 21.02 ▪ Book value down 1% YoY primarily due to the SIB, along with the OCI impact of currency translation and lower interest rates ▪ LICAT at 139% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Adjusted ROE1 (Trail
Slide 15: Assets under Administration
Assets under Administration1 Assets Under Administration Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 YoY (C$b) General Fund 209 214 220 218 221 6% Segregated Fund 220 213 223 224 226 3% Mutual Fund & Institutional 294 282 304 305 308 5% Other AUA 718 690 804 821 842 17% Total 1,441 1,399 1,551 1,568 1,5
Slide 16: Questions
GREAT-WEST FECOne Questions 16
Slide 17: Appendix
Appendix GREAT-WEST FECOne 17
Slide 18: Canada
Canada (In C$m) Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 YoY Sales Individual Customer Individual Insurance 109 145 101 98 102 (6%) Individual Wealth 1,921 2,334 2,256 2,125 1,918 0% 2,030 2,479 2,357 2,223 2,020 0% Group Customer Group Insurance 104 151 186 109 237 128% Group Wealth 743 817 637 608
Slide 19: United States
United States1 (In US$m) Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 YoY GWF Sales Empower Retirement 7,426 10,783 45,847 8,746 12,792 72% Reinsured Insurance & Annuity Business 327 275 241 65 - NM Total 7,753 11,058 46,088 8,811 12,792 65% Putnam Sales 10,785 13,245 10,940 9,258 10,879 1% Fee and Other
Slide 20: Europe
Europe (In C$m) Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 YoY Sales UK / Isle of Man 3,274 1,096 1,216 1,748 1,238 (62%) Ireland / Germany 3,961 4,876 9,965 5,383 5,860 48% Total 7,235 5,972 11,181 7,131 7,098 (2%) Fee and Other Income UK / Isle of Man 54 52 56 52 54 0% Ireland / Germany 316 293 339 3
Slide 21: Putnam – AUM and Flows
Putnam – AUM and Flows (US$b) Mutual Funds Institutional 4.2 (6.8) 177.2 174.7 0.7 174.2 170.6 160.2 6.7 (5.6) 0.3 94.1 91.4 89.5 89.3 84.6 83.1 81.3 83.3 84.7 75.6 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Sales Redemptions Market Q3 2019 In-Qtr Avg. 174.3 175.2 168.7 168.0 172.0 AUM 21
Slide 22: Putnam – Core Net Earnings
Putnam – Core Net Earnings Putnam Net Earnings - Core Earnings Expenses Income Taxes (US$m) Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) Fee & Net Inv Income Operating Margin (Pre-tax) 35% % of Budget $220 25% 231 226 229 226 202 94% Core Earnings (US$mm) $120 15% 9.5% Oper
Slide 23: Experience Gains (Losses), Management Actions, and Changes in Assumptions
Experience Gains (Losses), Management Actions, and Changes in Assumptions (C$m) 3,556 3,347 3,268 3,133 2,732 2,576 2,633 2,504 2,447 2,237 2,246 2009-2018 Historical Average1 24% 23% 23% 21% 23% 20% 20% 21% 20% 18% 11% 12% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD'19 Note: Experience Ga
Slide 24: Invested Assets
Invested Assets 1 ▪ Invested assets of $174.7 billion ▪ Diversified high quality portfolio: Cash & CD's 2% − Bonds represent 70%: − 99% are investment grade Loans to − 81% rated A or higher Investment Properties Policyholders Gov't, Gov't Related and 3% 5% Agency Securitized Bonds 28% − 85% of bond
Slide 25: United Kingdom Property Related Exposures – Mortgages
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type Equity % of Multi Family Retail Office Industrial Other Total City/Region Release Lifeco IA Central London 359 858 809 33 49 163 2,271 1.3% Other United Kingdom 283 549 353 778 497 997 3,457 2.0% Total United King
Slide 26: United Kingdom Property Related Exposures – Investment Properties
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of Multi Family Retail Office Industrial Other Total Lifeco IA City/Region Central London - 27 292 - 39 358 0.2% Other United Kingdom - 863 337 731 302 2,233 1.3% Total United Kingdom - 890 629 731 3
Slide 27: United Kingdom Property Related Exposures – Retail
United Kingdom Property Related Exposures Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department % of Invested Asset Type and Other Stores Grocery Total Lifeco IA Mortgages 714 493 200 1,407 0.8% Investment Pr
Slide 28: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2019 1.32 1.63 1.47 1.32 1.63 1.44 Q2 2019 1.34 1.72 1.50 1.31 1.66 1.49 Q1 2019 1.33 1.73 1.51 1.34 1.74 1.50 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 28