Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2023 Earnings Presentation
27 slides from Great-West Lifeco's earnings presentation, November 2023
Slide 1: Quarterly Results Presentation Q3 2023
Quarterly Results Presentation Q3 2023
Slide 2: Cautionary Notes
CAUTIONARY NOTES CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains 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", "expe
Slide 3: Summary of Results
SUMMARY OF RESULTS Paul Mahon President & CEO Great-West Lifeco
Slide 4: Overview
OVERVIEW Financial Highlights Strategic Highlights Record base EPS1 of $1.02 Advancing Wealth-Focused Transactions • Up 17% YoY, with excellent performance across • Completed Value Partners acquisition segments • On track to close IPC3 acquisition by year end • Strong quarterly earnings growth traje
Slide 5: Canada
CANADA Group Life & Health Group Retirement • Workplace Solutions Book Premium4 (C$m) AUA1,2 and Flows3 (C$m) 1,912 199 14,700 • Group Life & Health book premium up 23% YoY, due 12,761 1,599 11,955 (172) 62,688 61,134 to the addition of the Public Service Health Care Plan; 55,886 (1,760) (1,393) up
Slide 6: Europe
EUROPE Group Life & Health Workplace Solutions Book Premium4 (C$m) AUA1,2 and Flows3 (C$m) • Workplace Solutions 13 2,348 2,306 14 ( 37 ) 28 • Group Life & Health book premium up 18% YoY driven 1,990 21 ( 15 ) 18 - 29,361 897 29,266 25,027 by new sales and impact of salary inflation and price 1,061
Slide 7: U.S. – Empower
U.S. – EMPOWER Empower Defined Contribution (DC) AUA1 and Flows2 (US$b) 1,388 40 1,340 • Workplace Solutions 1,178 (47) (41) • Empower DC AUA of $1.3T, up 14% YoY • Prudential integration program on track • Successfully migrated largest wave of Prudential Q3 2022 Q2 2023 Inflows Outflows Market/Othe
Slide 8: Capital & Risk Solutions (CRS)
CAPITAL & RISK SOLUTIONS (CRS) Run-Rate Reinsurance • Solid new business momentum in the first half of the year Earnings Drivers1 continuing; Q3 seasonally slower 209 205 185 ▪ Strong pipeline and business expansion 39 38 37 48 46 • Run-rate reinsurance earnings drivers: 50 ▪ Earnings on short-term
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco
Slide 10: EPS and Earnings by Reporting Segment
EPS AND EARNINGS BY REPORTING SEGMENT Earnings per Share5 (C$m) Earnings5(C$m) (Base)1,3,5 (Net)2,3 1.06 Canada U.S. Europe CRS Lifeco Lifeco 0.99 1.02 1.01 0.87 Q3 2023 296 262 206 198 950 936 0.61 Q2 2023 283 265 180 203 920 569 Net2 Base1 Q3 2022 340 214 203 56 809 986 YOY (13%) 22% 1% 254% 17% (
Slide 11: Earnings Reconciliation
EARNINGS RECONCILIATION Q3 2023 Q2 2023 Q3 2022 Post-Tax Per Share Post-Tax Per Share Post-Tax Per Share (C$m) (C$) (C$m) (C$) (C$m) (C$) Base earnings1,2 950 1.02 920 0.99 809 0.87 Items excluded from base earnings Market experience relative to expectations 153 0.16 (79) (0.08) 151 0.16 Realized OC
Slide 12: Drivers of Earnings (DOE) [Base Earnings]
DRIVERS OF EARNINGS (DOE) [BASE EARNINGS 1,2] Q3/23 Q2/23 Q3/22 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected insurance earnings 328 16 183 205 - 732 739 675 Risk adjustment release 34 1 31 46 - 112 114 112 CSM recognized for services provided 103 15 88 38 - 244 249 232 Short-term in
Slide 13: Key Capital Metrics
KEY CAPITAL METRICS Book Value per Share1 (C$) LICAT Ratio2 24.01 22.97 23.22 129% 128% 126% 5 Q3 2022 Q2 2023 Q3 2023 Q3 2022 Q2 2023 Q3 2023 Return on Equity1 Financial Leverage4 16.1% 15.9% 16.4% 33% 13.4% 11.7% 11.2% 31% 31% Base3 Net Q1 2023 Q2 2023 Q3 2023 Q3 2022 Q2 2023 Q3 2023 Footnotes 1,
Slide 14: Questions
GREAT-WEST LIFECO QUESTIONS INVESTMENTS
Slide 15: Appendix
GREAT-WEST LIFECO APPENDIX INVESTMENTS
Slide 16: Value Drivers
VALUE DRIVERS Operating Segments1 Capital and Risk Value Drivers Canada U.S. Europe Solutions Group Life & Health Empower Defined Group Life & Health Workplace Solutions Contribution Group Retirement Group Retirement Empower Personal Wealth & Asset Individual Wealth Wealth Individual Wealth & Manage
Slide 17: Base Earnings by Value Driver
BASE EARNINGS BY VALUE DRIVER YoY Canada U.S. Europe CRS LIFECO 1 1 1 1 2 Value Drivers Base YoY Base YoY Base YoY Base YoY Total Base YoY Workplace Solutions 191 14% 219 8% 53 (24%) - - 463 5% Wealth & Asset Management 49 (18%) 49 58% 59 (9%) - - 157 1% Insurance & Risk Solutions 58 (47%) - - 93 37
Slide 18: Contractual Service Margin (CSM)
CONTRACTUAL SERVICE MARGIN (CSM) Total CSM ($Cm) Non-Par CSM ($Cm), excluding segregated funds and par 143 192 29 125 138 35 (281) (93) (135) (68) 6,016 13,058 13,019 13,054 5,927 5,878 Beginning Total Impact of new Expected CSM recognized for Insurance CSM with Other impacts Ending Total CSM Beginn
Slide 19: Invested Assets
INVESTED ASSETS Investment Properties Cash and CD's 3% Gov't, Gov't Related and Invested assets of $217.2 billion 4% Agency Securitized Bonds Stocks 19% 7% Diversified high quality portfolio: Bonds represent 69%: Insured Residential and Multi-family • 99% are investment grade Mortgages 1% • 71% rate
Slide 20: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 3.4% 28.5% 31.9% Canada 7.6% 8.5% 16.1% U.K. 4.8% 5.5% 10.3% Germany 0.8% 1.1% 1.9% Ireland 0.2% 0.3% 0.5% 16.8% 4
Slide 21: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.1% CMBS 2.3% Consumer Products 6.7% RMBS 0.1% Industrial Products 5.2% Other ABS 5.4% Banks 3.7% Total Non-Agency Securitized 7.8% Fina
Slide 22: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada2 U.S. Europe CRS Insured Non-insured LTV1 DSCR1 WALT Single Family 1,570 0.7% 1,570 - - - 342 1,228 Equity Release 3,657 1.7% 1,478 - 1,787 392 - 3,657 Multi Family 9,297 4.3% 4,460
Slide 23: Lifeco Office Mortgage Exposures – By Maturity
LIFECO OFFICE MORTGAGE EXPOSURES – BY MATURITY $1,600 100% 90% $1,400 LTV - 61% 80% DSCR - 3.03x LTV - 55% $1,200 DSCR - 2.28x 70% $1,000 LTV - 72% 60% Loan Balance ($Ms) DSCR - 2.70x $800 50% LTV - 83% DSCR - 1.86x 40% $600 LTV - 65% LTV - 63% LTV - 65% DSCR - 2.74x DSCR - 2.83x DSCR - 2.13x 30% $4
Slide 24: United Kingdom Mortgage Exposures
UNITED KINGDOM MORTGAGE EXPOSURES (C$m) Carrying Value Property Type City/Region Total % of Lifeco IA Office Buildings Industrial Retail Multi Family Other Equity Release Central London 2,625 1.2% 873 133 501 535 338 245 Other United Kingdom 6,421 3.0% 460 1,184 794 337 459 3,187 Total United Kingdo
Slide 25: Lifeco Investment Property Exposures
LIFECO INVESTMENT PROPERTY EXPOSURES (C$m) Carrying Value Investment Property Holdings by Segment Property Type Total % of Lifeco IA Canada Par Canada Non-Par U.S. Europe CRS Industrial 3,186 1.4% 2,055 282 - 849 - Office 1,689 0.8% 991 166 25 507 - Multi Family 1,487 0.7% 1,221 244 - 22 - Retail 84
Slide 26: Non-GAAP Financial Measures and Ratios
NON-GAAP FINANCIAL MEASURES AND RATIOS This document contains some non-Generally Accepted Accounting Principles (GAAP) financial measures and non-GAAP ratios as defined in National Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”. Non-GAAP financial measures and ratios are used t
Slide 27: Footnotes
Footnotes All references to the Company’s Q3 2023 MD&A in the below footnotes are to the Company’s management’s discussion and analysis for the three and nine months ended September 30, 2023, which is available on SEDAR+ at www.sedarplus.com. Slide 4 2. The Life Insurance Capital Adequacy Test (LICA