Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q3 2013 Earnings Presentation
54 slides from Great-West Lifeco's earnings presentation, 2013
Slide 1: Quarterly Information Q3 2013
QUARTERLY INFORMATION Q3 2013 For Analysts and Investors
Slide 2: Cautionary Note Regarding Forward-Looking Information
Q3 2013 Quarterly Information Package CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION This document contains some forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include state
Slide 3: Overview
Overview Paul Mahon President & Chief Executive Officer Great-West Lifeco, Great-West Life, London Life, Canada Life
Slide 4: Earnings up 12.5% driven by Irish Life contribution and strong organic growth
Q3 2013 Quarterly Information Package Earnings up 12.5% driven by Irish Life contribution and strong organic growth Reported net earnings of $523 million in the third quarter, or $0.527 per common share Included in these earnings are $60 million of one-time restructuring costs and acquisition ex
Slide 5: Sales up 41% over Q3 2012
Q3 2013 Quarterly Information Package Sales up 41% over Q3 2012 reflecting Irish Life and excellent organic performance Sales up strongly across all geographies – 14% increase in Canada over last year with excellent performance across all business sectors. Wealth Management generated strong positi
Slide 6: Strong and stable financial and capital position
Q3 2013 Quarterly Information Package Strong and stable financial and capital position 221% MCCSR for The Great-West Life Assurance Company, post financing of the Irish Life acquisition Holding company cash at quarter end of approximately $0.9 billion, before giving effect to the announced redem
Slide 7: Lifeco Summary of Results
Lifeco Summary of Results William W. Lovatt Executive Vice President & Chief Financial Officer Great-West Lifeco
Slide 8: Irish Life Acquisition: Transaction Summary
Q3 2013 Quarterly Information Package Irish Life Acquisition: Transaction Summary On February 19, 2013 Lifeco announced the acquisition of Irish Life Group Limited for €1.3 billion – The acquisition is expected to be accretive to Lifeco’s earnings by adding approximately 10 cents or 4% to 2014 EPS
Slide 9: Irish Life: Expected Synergies are €40 million
Q3 2013 Quarterly Information Package Irish Life: Expected Synergies are €40 million (pre-tax) Integration activities are expected to be complete by Q2 2015. The annual reduction of Irish Life operating costs by €40 million will be fully reflected by Q4 2015 Other €11 million (28%) Staff Costs €23
Slide 10: Irish Life: Expected Restructuring Costs are €60 million
Q3 2013 Quarterly Information Package Irish Life: Expected Restructuring Costs are €60 million (pre-tax) The restructuring costs will be incurred over 2013-2014 Other Staff Costs €15 million (25%) €20 million (33%) Information Systems €25 million (42%) In Q3 2013 Lifeco incurred €15 million ($20
Slide 11: Impact of Irish Life Acquisition / Income Contribution to Lifeco
Q3 2013 Quarterly Information Package Impact of Irish Life Acquisition / Income Contribution to Lifeco (In millions, C$) C$ EPS Lifeco's Q3 2013 Reported Net Earnings 523 0.527 Add: Irish Life restructuring and acquisition expenses 60* 583 0.588 Less: Irish Life Net Earnings (July 19 - September 30,
Slide 12: Irish Life: Incremental Impact on Lifeco in Q3 2013
Q3 2013 Quarterly Information Package Irish Life: Incremental Impact on Lifeco in Q3 2013 Income Statement ILG Total Lifeco Impact of ILG (C$ millions) Q3 2013 Q3 2013 Q3 2013 Premiums and Deposits 2,571 19,719 13% Fee income 93 933 10% Earnings 41 * 523 8% * Excludes restructuring and other acquisi
Slide 13: Irish Life Acquisition: Purchase Price Accounting
Q3 2013 Quarterly Information Package Irish Life Acquisition: Purchase Price Accounting Purchase Price Accounting Process: – Under IFRS 3 “Business Combinations”, the purchase price of €1.3 billion is allocated to all identifiable assets and liabilities of Irish Life primarily based on their fair
Slide 14: Great-West Lifeco Operating Earnings
Q3 2013 Quarterly Information Package Great-West Lifeco Operating Earnings (C$MM) Except earnings per share (1) $0.588 $0.546 $0.544 $0.548 $0.517 $0.527 Canada (1) $583 U.S. $518 $517 $521 $60 Europe $491 $129 $165 $192 $178 Restructuring Costs & $151 Acquisition Expenses $76 $86 $73 (after-tax) $7
Slide 15: Return on Equity - Operating Earnings
Q3 2013 Quarterly Information Package Great-West Lifeco - Return on Equity - Operating Earnings (Trailing 4 Quarters) 25.3% 19.4% 15.0% 16.0% (3.3%) Canada Great-West Putnam Europe Lifeco (2) Financial (1) Average Allocated Equity $4.5 $1.8 $1.7 $4.3 $12.8 (C$bln) (1) Great-West Financial includes U
Slide 16: New Annualized Premiums (Sales) and Premiums & Deposits
Q3 2013 Quarterly Information Package Great-West Lifeco New Annualized Premiums (Sales) Premiums & Deposits (C$bln) (C$bln) Canada Great-West Financial Putnam Europe Y/Y Y/Y $19.7 27% $16.7 41% $4.3 79% $16.7 $16.6 $15.5 $3.3 267% $2.5 $2.2 $15.0 $13.6 $13.9 $2.4 $1.8 $1.0 $12.5 $11.9 $1.3 $0.9 $0.9
Slide 17: Great-West Lifeco – Fee Income
Q3 2013 Quarterly Information Package Great-West Lifeco – Fee Income (C$MM) Canada Great-West Financial Putnam Europe Y/Y $933 28% $811 $776 $778 90% $275 $728 $173 $170 $158 $145 $193 $202 11% $186 $191 $182 $140 $150 $156 20% $130 $137 $271 $283 $289 $295 $300 11% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q
Slide 18: Great-West Lifeco – Operating Expenses
Q3 2013 Quarterly Information Package Great-West Lifeco – Operating Expenses Restructuring Costs & (C$MM) Acquisition Expenses Canada Great-West Financial Putnam Europe Corporate (pre-tax) Y/Y $838 28% $61 $697 $698 $695 $656 $155 80% $94 $82 $84 $86 $192 $186 $189 $205 21% $170 $114 $118 $116 $126
Slide 19: Total Assets under Administration
Q3 2013 Quarterly Information Package Great-West Lifeco – Total Assets under Administration (C$bln) General Fund Mutual Fund & Institutional Y/Y Segregated Fund Other AUA $705 33% $582 $596 $223 47% $532 $546 $174 $182 $152 $157 $170 29% $146 $149 $132 $135 $150 47% $102 $105 $109 $111 $148 $149 $15
Slide 20: Book Value per Share
Q3 2013 Quarterly Information Package Great-West Lifeco – Book Value per Share $14.39 $13.48 $0.57 $12.64 $12.87 $12.41 $13.82 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Lifeco’s book value per share (BVPS) at January 1, 2013 was $12.64. After giving effect to increase in equity, currency and other c
Slide 21: Invested Assets Update
Invested Assets Update Mark Corbett Executive Vice President & Chief Investment Officer Great-West Lifeco
Slide 22: In-Quarter Developments
Q3 2013 Quarterly Information Package In-Quarter Developments Credit Markets Credit experience related to impairments and rating changes resulted in a net zero impact in the quarter Total Credit Impact on Shareholders’ Net Earnings Q3 Q4 Total Q1 Q2 Q3 YTD ($ millions) 2012 2012 2012 2013 2013 201
Slide 23: Invested Asset Composition
Q3 2013 Quarterly Information Package Invested Asset Composition* Invested assets at September 30, 2013 were $139.5 billion Cash & CD's 2% Diversified high quality portfolio: Investment Properties 3% Bonds represent 71% of invested Loans to Policyholders assets (98% are investment grade; Non-I
Slide 24: Lifeco Consolidated Bond Portfolio
Q3 2013 Quarterly Information Package Lifeco Consolidated Bond Portfolio* Corporate and Securitized Financial Other Corporate % of Invested $ Governments Banks Services and Securitized Assets (millions) United States 6.2% 1.0% 2.4% 13.2% 22.8% 31,841 Canada 10.7% 1.0% 0.2% 9.4% 21.3% 29,832 United K
Slide 25: Irish Life Bond Portfolio
Q3 2013 Quarterly Information Package Irish Life Bond Portfolio Corporate and Securitized Financial Other Corporate % of Invested $ Governments Banks Services and Securitized Assets (millions) United States 0.0% 0.1% 0.0% 0.0% 0.1% 106 Canada 0.0% 0.0% 0.0% 0.0% 0.0% 18 United Kingdom 0.0% 0.1% 0.0%
Slide 26: Capital & Other
Capital & Other Garry MacNicholas Executive Vice-President, Actuarial and Risk Great-West Lifeco
Slide 27: Regulatory Capital Ratios Remain Strong
Q3 2013 Quarterly Information Package Regulatory Capital Ratios Remain Strong 233% Great-West Life (Consolidated) MCCSR 221% 218% Adjusted MCCSR 210% 207% 205% 205% 204% 204% 202% 202% 202% 203% 200% 200% 200% 201% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2011 2012 2013 MCCSR of 2
Slide 28: Great-West Lifeco – Source of Earnings
Q3 2013 Quarterly Information Package Great-West Lifeco – Source of Earnings For the three months ended September 30, 2013 Q3 2012 (C$MM) Canada U.S. Europe Corp Total Total Expected profit on in-force business 299 94 211 (4) 600 458 Impact of new business 25 - (4) - 21 5 Experience gains and losses
Slide 29: Canada
Canada Dave Johnston President & Chief Operating Officer Canada
Slide 30: Canada – Individual Insurance
Q3 2013 Quarterly Information Package Canada – Individual Insurance New Annualized Premiums (Sales) Premiums & Deposits (C$MM) (C$MM) Life Living Benefits Y/Y Y/Y $133 $1,037 $1,029 $1,035 7% $14 $120 10% $1,001 $971 $80 $82 $80 1% $109 $108 $10 (2%) * $83 $107 $79 $11 $12 $10 $119 $957 $955 7% $110
Slide 31: Canada – Wealth Management
Q3 2013 Quarterly Information Package Canada – Wealth Management New Annualized Premiums (Sales) Premiums & Deposits (C$MM) (C$MM) Individual Wealth Management Group Retirement Services $2,630 $2,617 Y/Y $2,869 $2,323 $2,689 $581 $649 Y/Y $2,133 12% $2,371 $1,913 $611 $2,191 8% $526 30% $2,021 $406
Slide 32: Canada – Group Insurance
Q3 2013 Quarterly Information Package Canada – Group Insurance New Annualized Premiums (Sales) Premiums & Deposits (C$MM) (C$MM) Y/Y $1,880 $1,890 $1,875 $1,860 $1,852 0% $288 Y/Y $154 $136 65% $116 $82 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 32
Slide 33: Canada – Fee Income
Q3 2013 Quarterly Information Package Canada – Fee Income (C$MM) Segregated Funds ASO Other Y/Y $295 $300 11% $289 $283 $271 $49 $50 22% $45 $47 $41 $38 $36 0% $37 $37 $36 $201 $205 $208 $214 10% $194 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 33
Slide 34: Canada – Operating Expenses
Q3 2013 Quarterly Information Package Canada – Operating Expenses (C$MM) Group Insurance Wealth Management Individual Insurance Corporate Y/Y $294 $305 $293 4% $287 $277 $75 $83 $79 $77 4% $74 $107 $90 $82 $89 $86 5% $111 $108 $124 $114 $114 3% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Note: Operating
Slide 35: Canada – Operating Earnings
Q3 2013 Quarterly Information Package Canada – Operating Earnings (C$MM) Group Insurance Wealth Management Individual Insurance Corporate Y/Y $332 19% $280 $281 $263 $265 $114 39% $24 $82 $47 $90 $90 $69 $102 23% $83 $71 $11 $56 $119 $136 $118 (3%) $115 $95 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 35
Slide 36: Great-West Financial
Great-West Financial Mitchell T.G. Graye President & Chief Executive Officer Great-West Financial
Slide 37: Great-West Financial – Sales and Premiums & Deposits
Q3 2013 Quarterly Information Package Great-West Financial – Sales and Premiums & Deposits Sales Premiums & Deposits (US$MM) (US$MM) 401(k) P/NP Individual Markets Institutional Retirement Services Individual Markets Y/Y $1,730 $1,659 $1,643 (1%) $2,702 Y/Y $419 $1,420 $412 $1,385 $326 (21%) $2,492
Slide 38: Great-West Financial - Fee Income
Q3 2013 Quarterly Information Package Great-West Financial - Fee Income (US$MM) Variable Asset Charges Variable Asset Fees Administrative Fees (all non-variable) Individual Market Fees Corporate Y/Y $147 $148 14% $138 $140 $19 $17 6% $130 $18 $19 $16 $43 10% $44 $41 $41 $39 $72 $75 21% $65 $69 $62 $
Slide 39: Great-West Financial – Operating Expenses
Q3 2013 Quarterly Information Package Great-West Financial – Operating Expenses (US$MM) Retirement Services Individual Markets Corporate Y/Y $121 4% $116 $115 $117 $114 $4 $4 $18 0% $17 $18 $15 $16 $99 $101 7% $94 $96 $95 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 39
Slide 40: Great-West Financial - Operating Earnings
Q3 2013 Quarterly Information Package Great-West Financial - Operating Earnings (US$MM) Retirement Services Individual Markets Corporate $96 Y/Y $90 $84 $85 $83 (8%) $62 $56 $43 $43 $40 (35%) $43 $42 $41 $43 $42 (2%) ($15) Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 40
Slide 41: Putnam Investments
Putnam Investments Robert Reynolds President & Chief Executive Officer Putnam Investments
Slide 42: Putnam - AUM & Flows
Q3 2013 Quarterly Information Package Putnam - AUM & Flows (US$bln) Mutual Funds Institutional 2.7 ($3.1) $140.8 $3.2 $134.7 $133.7 $126.9 $128.3 5.6 ($4.2) $2.9 70.0 68.5 67.2 64.4 65.8 66.2 66.5 70.8 62.5 62.5 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Sales Redemptions Market Q3 2013 In-Qtr Avg. $123.0 $127
Slide 43: Putnam - Fee Income
Q3 2013 Quarterly Information Package Putnam - Fee Income (US$MM) Investment Management Fees Service Fees Underwriting & Distribution Fees Performance Fees Y/Y $189 $189 $195 7% $188 $182 $10 (23%) $11 $13 $11 $13 $37 3% $36 $36 $36 $36 $139 $141 $147 11% $132 $137 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3
Slide 44: Putnam - Core Earnings
Q3 2013 Quarterly Information Package Putnam - Core Earnings (US$MM) Expenses Income Taxes Fee & Net Inv Income Operating Margin (Pre-tax) $185 $191 $194 $193 $201 2.2% 0.5% (2.1%) (1.5%) (3.1%) ($197) ($199) ($200) ($181) ($195) Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Core Earnings $2 $1 ($2) ($4)
Slide 45: Putnam - Contribution to Lifeco Earnings
Q3 2013 Quarterly Information Package Putnam - Contribution to Lifeco Earnings (US$MM) Core Earnings (After-tax) Financing Expenses Other $2 $1 ($2) ($4) ($5) ($6) ($6) ($10) ($4) ($7) ($6) ($9) ($14) ($3) ($14) ($14) ($19) Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Note: Putnam’s contribution in Q3 20
Slide 46: Europe
Europe Arshil Jamal President & Chief Operating Officer Canada Life Capital Corporation
Slide 47: Europe – Sales and Premiums & Deposits
Q3 2013 Quarterly Information Package Europe – Sales and Premiums & Deposits Sales Premiums & Deposits (C$MM) (C$MM) UK/Isle of Man Ireland/Germany Reinsurance Y/Y Y/Y $3,299 281% $4,250 79% $475 (60%) $2,495 1880% $2,380 $2,491 $2,208 $2,862 922% $924 $1,793 $1,289 $1,200 $948 $190 $961 $536 $866 $
Slide 48: Europe – Fee Income
Q3 2013 Quarterly Information Package Europe – Fee Income UK/Isle of Man Ireland/Germany Reinsurance Y/Y (C$MM) $275 90% $18 50% $170 $173 $158 $17 $186 121% $145 $21 $17 $12 $89 $95 $84 $93 $60 $61 $71 45% $49 $48 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Europe’s fee income in Q3 2013 included a $
Slide 49: Europe – Operating Expenses
Q3 2013 Quarterly Information Package Europe – Operating Expenses UK/Isle of Man Ireland/Germany Restructuring Costs (C$MM) & Acquisition Corporate Reinsurance Expenses (pre-tax) Y/Y $216 151% $61 $10 (17%) $94 $91 $86 $86 $103 212% $11 $7 $12 $10 $11 $35 $33 $32 $33 $40 $46 $40 0% $39 $38 Q3 2012 Q
Slide 50: Europe - Consolidated Operating Earnings
Q3 2013 Quarterly Information Package Europe - Consolidated Operating Earnings (C$MM) UK/Isle of Man Ireland/Germany Reinsurance Corporate Y/Y $192 $178 $165 $129 (22%) $151 $55 $57 (7%) $70 $61 $64 $10 $11 $52 $9 $120 $108 $107 $95 $82 (14%) ($17) ($62) Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Const
Slide 51: Equity Markets
Q3 2013 Quarterly Information Package Macro Economic Environment Equity Markets S&P TSX S&P 500 FTSE 100 Close Average Close Average Close Average Q3 2013 12,787 12,627 1,682 1,673 6,462 6,530 Q2 2013 12,129 12,377 1,606 1,610 6,215 6,442 Q1 2013 12,750 12,721 1,569 1,513 6,412 6,295 Q4 2012 12,434
Slide 52: Interest Rates
Q3 2013 Quarterly Information Package Macro Economic Environment Interest Rates Canada United States United Kingdom A A A 10 Year Rated 10 Year Rated 10 Year Rated Gov’t Corporate Gov’t Corporate Gov’t Corporate Spread(1) Spread(1) Spread(1) Q3 2013 2.54% 1.40% 2.61% 1.27% 2.72% 1.13% Q2 2013 2.44%
Slide 53: Currency
Q3 2013 Quarterly Information Package Macro Economic Environment Currency Income & Expenses Balance Sheet US$ £ € US$ £ € Q3 2013 1.04 1.61 1.38 1.03 1.66 1.39 Q2 2013 1.02 1.57 1.34 1.05 1.60 1.37 Q1 2013 1.01 1.56 1.33 1.02 1.54 1.30 Q4 2012 0.99 1.59 1.29 0.99 1.62 1.31 Q3 2012 1.00 1.57 1.24 0.9
Slide 54: Questions
GREAT-WEST LIFECOn« Questions