Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q4 2016 Earnings Presentation
33 slides from Great-West Lifeco's earnings presentation, February 2017
Slide 1: Quarterly Information for Analysts and Investors Q4 2016
Quarterly Information for Analysts and Investors Q4 2016
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
Paul Mahon President & CEO Great-West Lifeco Summary of results 3
Slide 4: Q4 2016 Highlights
Q4 2016 Highlights Earnings of $676m - solid top and bottom line results in Canada and Europe, with Putnam restructuring charges impacting U.S. results Strong capital position with significant financial flexibility • MCCSR of 240%, RBC ratio estimated at 455% • Leverage of 28% at year end, refle
Slide 5: Summary of results
Summary of results Earnings (C$m) 683 Reported earnings of $676m, 620 671 674 676 adjusted earnings of $696m which exclude Putnam restructuring charge of $20m On a constant currency basis, YoY reported earnings up 4%, adjusted earnings up 7% Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Continuing c
Slide 6: Summary of results – Sales
Summary of results – Sales Canada Sales (C$b) • Strong sales in all lines led by 48.0 very strong Individual Life, 39.0 Group Insurance and Single 30.8 Premium Group Annuities 24.9 26.7 U.S. • Putnam sales increased in quarter, driven by higher mutual fund sales Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q
Slide 7: Summary of results – Expenses
Summary of results – Expenses Canada Expenses (C$m) (1) Y/Y B • Surge of Individual Life sales 1,175 1,240 1,145 1,124 1,160 8% drove increased new business 11% expenses in quarter U.S. 7% • Putnam expenses down 9% YoY, due to lower variable 8% costs and restructuring costs Q4 2015 Q1 2016 Q2 20
Slide 8: Summary of results – Fee and Other Income
Summary of results – Fee and Other Income Fee Income Lifeco fee income up 1% YoY Y/Y Fee and Other Income (C$m) 1% • Average equity markets: 1,333 1,345 1,271 4% 1,254 1,231 S&P/TSX 11% S&P 500 7% Eurostoxx 50 (7%) (3%) Canada • Positive impact from net inflows and improvement in 5% markets Q4 2
Slide 9: Financial highlights - Garry MacNicholas
Garry MacNicholas EVP & CFO Great-West Lifeco Financial highlights 9
Slide 10: Financial highlights
Financial highlights Earnings per Share Lifeco Q4 earnings of $676m 0.688 0.682 0.686 ($0.686 per share) include $20m of 0.625 0.675 Putnam restructuring charges Canada earnings increased with favorable mortality, morbidity experience and yield enhancement U.S. earnings decreased mostly due to
Slide 11: Financial highlights – Source of earnings, quarter
Financial highlights For the three months ended Dec. 31, 2016 Q4/16 Q3/16 Q4/15 Source of Earnings (C$m) Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 294 140 261 - 695 661 722 Impact of new business 4 (38) (9) - (43) (77) (60) Experience gains and losses 108 (38) 2
Slide 12: Financial highlights – Source of earnings, twelve months
Financial highlights For the twelve months ended Dec. 31, 2016 2016 2015 Source of Earnings (C$m) Canada U.S. Europe Corp. Total Total Expected profit on in-force business 1,155 458 1,041 (12) 2,642 2,763 Impact of new business (22) (131) (79) - (232) (219) Experience gains and losses 279 (86) 5 (12
Slide 13: Financial highlights – Book value and ROE
Financial highlights Book Value per Share Lifeco cash at quarter end was 20.06 19.28 19.02 19.18 19.76 $1.1b Lifeco book value per share down slightly from last year and up from last quarter During 2016, 8m shares purchased and cancelled at Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 average price
Slide 14: Financial highlights – Assets Under Administration
Financial highlights Assets Under Administration Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 YoY (C$b) General Fund 202 197 197 202 200 (1%) Segregated Fund 198 193 193 199 200 1% Mutual Fund & Institutional 253 238 244 257 259 2% Other AUA 560 559 550 571 589 5% Total 1,213 1,187 1,184 1,229 1,248 3%
Slide 15: 2017 Outlook
2017 Outlook Lifeco’s growth strategies are on track • Canada continues to invest in a technology-enabled customer experience, which will be funded by disciplined cost management • Empower will complete its integration in early 2017, ultimately driving down costs and harvesting synergies. Putnam w
Slide 16: Questions
GREAT-WEST FECOr« 16
Slide 17: Appendix
GREAT-WEST FECOr« 17
Slide 18: Canada
Canada (In C$m) Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 YoY Sales Individual Insurance 137 125 155 164 341 149% Group Insurance 135 283 119 90 180 33% 272 408 274 254 521 92% Individual Wealth Management 2,411 2,267 1,907 1,820 2,307 (4%) Group Wealth Management 809 593 496 1,043 1,043 29% 3,220 2,8
Slide 19: United States
United States (In US$m) Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 YoY GWF Sales Empower Retirement 15,153 20,029 4,438 8,344 5,111 (66%) Individual Markets 340 241 246 564 351 3% Total 15,493 20,270 4,684 8,908 5,462 (65%) Putnam Sales 8,111 9,042 8,236 8,657 8,360 3% Fee and Other Income Empower Reti
Slide 20: Europe
Europe Constant (In C$m) Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 YoY Currency Sales UK / Isle of Man 819 651 671 754 591 (28%) Ireland / Germany 3,098 3,923 4,879 3,891 3,819 23% Total 3,917 4,574 5,550 4,645 4,410 13% 17% Fee and Other Income UK / Isle of Man 69 70 74 59 57 (17%) Ireland / Germany
Slide 21: Putnam - AUM and flows
Putnam - AUM and flows (US$b) Putnam Mutual AUM Flows Funds Institutional 3.7 (4.2) 153.8 (0.8) 152.1 148.4 147.7 145.8 4.6 (5.6) 0.6 70.9 81.5 80.2 72.8 76.1 77.5 73.0 71.6 72.3 71.9 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Sales Redemptions Market Q4 2016 In-Qtr Avg. 151.2 141.4 146.7 151.7 151.9 AUM 21
Slide 22: Putnam – Core net earnings
Putnam – Core net earnings Putnam Net Earnings - Core Earnings Putnam Net Earnings - Core Earnings Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) (US$m) Expenses Income Taxes $250 Income Taxes Expenses Fee & Net Inv. Income Operating Margin (Pre-tax) 35% % of Budget Fee & Net
Slide 23: Consolidated MCCSR ratio
240% Consolidated MCCSR ratio 238% 236% 234% 233% 240% 232% 230% 238% 229% 236% 230% 234% 233% 233% 228% 224% 232% 223% 230% 227% 222%229% 230% 221% 228% 224% 223% 227% 218% 222% 210% 221% 210% 207% 218% Adjusted MCCSR 205% 205% 204% 210% 201% 210% 200%200%200% 207% 205% 205% 204% 201% 200%200%200%
Slide 24: Stable trend over the years
Stable trend over the years (C$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 2,633 2,499 2,504 2,447 2,576 2,335 2,237 2005-2016 12 Year 24% 23% 23% 26% 25% 20% Average 19% 18% 20% 20% 21% 11% 20.8% 2005 200
Slide 25: Credit markets
Credit markets In-Quarter Developments Credit experience related to impairments and rating changes positively impacted shareholders’ net earnings by $6 million in the quarter Total Credit Impact on Shareholders’ Net Earnings 2015 Full Year 2016 Full Year ($ millions) Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2
Slide 26: Invested asset composition
Invested asset composition* Invested assets at December 31, 2016 were $171.6bln Cash & CD's 2% Diversified high quality portfolio: • Bonds represent 73% of invested Loans to Investment Properties Policyholders assets (99% are investment grade; 2% 5% Gov't, Gov't Related and 82% rated A or higher
Slide 27: Lifeco consolidated bond portfolio
Lifeco consolidated bond portfolio* Corporate and Non-Agency Securitized Government, Government Related and Other Financial Other Corporate and % of Invested Domicile of Issuer Agency Securitized Banking Institutions and REITs Non-Agency Securitized Assets $ (millions) United States 6.0% 0.7% 1.9% 1
Slide 28: Corporate and securitized bonds – Sector diversification
Corporate and securitized bonds – Sector diversification* % of % of Invested Invested Assets Assets Corporates Non-Agency Securitized Utilities 9.4% ABS 2.0% Consumer Products 5.8% CMBS 2.1% Industrial Products 4.2% RMBS 0.9% Banking 3.3% Covered 0.7% Other Financial Institutions 3.2% Total Securiti
Slide 29: Direct Energy Exposure – Bonds
Direct Energy Exposure – Bonds (C$m) Carrying Value Credit Rating % of Amortized Sub-Sector AAA AA A BBB BB & Lower Total Lifeco IA Cost Midstream - - 1,043 1,218 64 2,325 1.4% 2,197 Integrated 4 539 610 118 15 1,286 0.7% 1,224 Independent - - 199 477 35 711 0.4% 689 Oil Field Services - 8 179 156 5
Slide 30: Indirect Energy Exposure – Commercial Mortgages and Investment Property
Indirect Energy Exposure – Commercial Mortgages and Investment Property (C$m) Carrying Value Property Type % of (1) (2) City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Calgary, Alberta 138 294 376 246 142 1,196 0.7% Edmonton, Alberta 473 140 182 184 58 1,037 0.6% Total Calgar
Slide 31: United Kingdom Property Related Exposures – Mortgages
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London 267 769 485 - 61 1,582 0.9% Other United Kingdom 76 665 215 923 311 2,190 1.3% Total United Kingdom 343 1,434 700 923 372
Slide 32: United Kingdom Property Related Exposures – Investment Properties
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 27 245 - 36 308 0.2% Other United Kingdom - 1,067 378 596 380 2,421 1.4% Total United Kingdom - 1,094 623 5
Slide 33: Currency (relative to C$)
Currency (relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q4 2016 1.33 1.66 1.44 1.34 1.66 1.42 Q3 2016 1.31 1.71 1.46 1.31 1.71 1.47 Q2 2016 1.29 1.85 1.46 1.30 1.72 1.44 Q1 2016 1.37 1.96 1.51 1.30 1.87 1.48 Q4 2015 1.34 2.03 1.46 1.38 2.04 1.50 33