Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q1 2022 Earnings Presentation
38 slides from Great-West Lifeco's earnings presentation, May 2022
Slide 1: Quarterly Results Presentation Q1 2022
Quarterly Results Presentation Q1 2022
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 "will", "may", "e
Slide 3: Summary of Results
SUMMARY OF RESULTS Paul Mahon President & CEO Great-West Lifeco 3
Slide 4: Overview
OVERVIEW Navigating macro challenges with diversified and resilient business Delivered solid results with base EPS up 9% YoY Integration of acquired businesses on track Building out retail wealth management strategies across Lifeco 4
Slide 5: Performance Against Medium-Term Objectives
PERFORMANCE AGAINST MEDIUM-TERM1 OBJECTIVES 1-Year 3-Year Q1 2022 (2020 - 2021) (2018 - 2021) 1 YR Q1 2022 Medium-Term Financial Objectives Base 2 Base 2 Base 2 Base EPS 8-10% base EPS growth p.a 2 14-15% base ROE 2 8.8% 14.7% 21.9% 14.6% 13.4% CAGR 13.6% average $0.87 Up 9% YoY 2 Target dividend pa
Slide 6: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Good sales momentum in Group Insurance; strong 385 348 4,348 4,572 3,956 growth in small and mid-segments 309 1,105 1,298 1,009 • Positive net cash flow in Group and Individual Wealth 276 189 255 • Subsequent to quarter end, Canada Life and 3,243 3
Slide 7: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) Sales1 (C$m) • Strong Insurance and Annuity sales 1,198 2,374 2,044 • Continued growth in ERM 909 465 1,498 350 831 • Over C$400m in bulk annuity sales in quarter 597 320 58 73 281 211 1,694 1,543 • Higher wealth sales YoY driven by U.K.’s international
Slide 8: Putnam
PUTNAM Sales1 (US$m) 13,835 • AUM consistent with prior year 12,674 10,331 • Net outflows of US$2.4b 5,805 8,629 4,747 • Continued outflows in lower-fee fixed income 6,869 5,206 5,584 products Q1 2021 Q4 2021 Q1 2022 • Strong investment performance continues Mutual Funds Institutional • 83% and 87%
Slide 9: Empower
EMPOWER Empower Sales1 (ex-Personal Capital) (US$m) • Continued strong momentum in Empower DC sales 63,833 1,669 • Q1 2022 included a mega sale of US$15b compared 37,290 2,559 to a mega sale of US$49b in Q1 2021 62,164 16,237 • Strong growth in Retail Wealth Management (See page 2,365 34,731 13,872
Slide 10: Fast-Growing Retail Wealth Management Franchise
FAST-GROWING RETAIL WEALTH MANAGEMENT FRANCHISE Markets to individuals in Empower-administered retirement plans to capture IRA rollovers & investment accounts • Accelerating investments in our retail wealth strategy 17+ million retirement plan participants • Hired over 250 sales and service associat
Slide 11: Capital and Risk Solutions
CAPITAL AND RISK SOLUTIONS • Base earnings up 17% YoY • Strong new business growth, including U.S. health transactions and an innovative reinsurance Q1 2022 transaction in Israel Base Earnings1 • Favourable longevity experience • Improved U.S. traditional life reinsurance results $170m Up 17% YoY wh
Slide 12: Financial Highlights
FINANCIAL HIGHLIGHTS Garry MacNicholas EVP & CFO Great-West Lifeco 12
Slide 13: Earnings
EARNINGS Earnings per Share (C$m) Earnings (C$m) (Base)1,2 (Net)2 0.89 0.87 Canada U.S. Europe CRS Lifeco Lifeco 0.80 0.82 0.83 0.76 Q1 2022 272 120 245 170 809 770 Q4 2021 317 156 213 145 825 765 Base1 Net Q1 2021 298 104 201 145 739 707 YOY (9%) 15% 22% 17% 9% 9% 3 Q1 2021 Q4 2021 Q1 2022 Constant
Slide 14: Earnings Reconciliation
EARNINGS RECONCILIATION Q1 2022 Q4 2021 Q1 2021 Post-Tax Post-Tax Post-Tax Per Share (C$) Per Share (C$) Per Share (C$) (C$m) (C$m) (C$m) 1 Base earnings 809 0.87 825 0.89 739 0.80 Items excluded from base earnings Actuarial assumption changes and other (9) (0.01) 23 0.02 5 0.00 management actions M
Slide 15: Source of Earnings (Base)
SOURCE OF EARNINGS [BASE 2] Q1/22 Q4/21 Q1/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 320 241 220 159 (5) 935 975 885 Impact of new business (12) (69) (15) 19 - (77) (60) (71) Experience gains and losses 42 (21) 78 15 3 117 57 83 Earnings on surplus
Slide 16: Source of Earnings (Net Earnings)
SOURCE OF EARNINGS [NET EARNINGS] Q1/22 Q4/21 Q1/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 320 241 220 159 (5) 935 975 885 Impact of new business (12) (69) (15) 19 - (77) (60) (71) Experience gains and losses 46 (24) 63 15 3 103 79 58 Management act
Slide 17: Source of Earnings – Additional Detail
SOURCE OF EARNINGS – ADDITIONAL DETAIL Experience gains and losses Management actions and changes in assumptions For three months ended Mar. 31/22 Pre-Tax Post-Tax For three months ended Mar. 31/22 (C$m) Pre-Tax Post-Tax (C$m) Yield enhancement 121 102 Transaction Costs related to Acquisitions (2) (
Slide 18: CRS – Expected Profit – Additional Detail
CAPITAL AND RISK SOLUTIONS (CRS) – EXPECTED PROFIT – ADDITIONAL DETAIL • CRS expected profit1 down 12% YoY • Actuarial PfAD releases on longer-term business have declined as favourable longer-term trends in CRS Expected Profit1 (C$m) longevity and interest rate matching experience 181 have led to re
Slide 19: Expenses
EXPENSES Operating and Administrative Expenses (C$m) Operating and Administrative Expenses (C$m) 1,688 (Adjusted) 1,2 (Reported) 1 1,635 1,598 1,600 1,527 1,533 Canada U.S. Europe CRS Lifeco Lifeco Q1 2022 480 789 299 29 1,598 1,600 Adjusted 1,2 Q4 2021 490 789 322 29 1,635 1,688 Reported1 Q1 2021 4
Slide 20: Book Value per Share and LICAT
BOOK VALUE PER SHARE 1 AND LICAT 2 Book Value per Share (C$) LICAT Ratio 123% 124% 24.71 24.57 23.36 119% Q1 2021 Q4 2021 Q1 2022 Q1 2021 Q4 2021 Q1 2022 •BVPS growth of 5% YoY was largely driven by strong • LICAT ratio at 119%, down 5 points QoQ, driven by retained earnings over the past 4 quarters
Slide 21: Looking ahead…
Looking ahead… Capitalize on strategic initiatives and investments Focus on the successful integration of acquired businesses Further establish ESG & community impact commitments and targets Continued vigilance around macro environment 21
Slide 22: Questions
QUESTIONS 22
Slide 23: Additional Financial and Segment Information
ADDITIONAL FINANCIAL AND SEGMENT INFORMATION 23
Slide 24: Canada
CANADA (In C$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Sales Individual Insurance 109 99 93 120 93 (15%) Individual Wealth 3,243 2,549 2,402 3,274 2,947 (9%) Individual Total 3,352 2,648 2,495 3,394 3,040 (9%) Group Insurance 276 101 101 189 255 (8%) Group Wealth 1,105 596 870 1,298 1,009 (9%)
Slide 25: Canada
CANADA (In C$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Individual Customer Base Earnings 138 162 140 140 124 (10%) Items excluded from Base Earnings (12) (5) (3) (20) (1) Net Earnings 126 157 137 120 123 (2%) Group Customer Base Earnings 154 189 168 194 138 (10%) Items excluded from Base Earnin
Slide 26: United States
UNITED STATES (In US$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Sales Empower Defined Contribution 62,164 16,182 10,766 13,872 34,731 (44%) Empower Retail 1,669 1,783 2,046 2,365 2,559 53% Personal Capital 1,399 1,483 1,551 1,757 1,833 31% Total 65,231 19,448 14,363 17,994 39,123 (40%) Putnam Sa
Slide 27: United States
UNITED STATES (In US$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Empower Base Earnings 95 147 145 117 117 23% Items excluded from Base Earnings (8) (8) (10) (11) (12) Net Earnings 87 139 135 106 105 21% Personal Capital Base Earnings (11) (7) (4) (6) (10) Items excluded from Base Earnings (2) (1)
Slide 28: Europe
EUROPE (In C$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 522 677 1,869 849 1,120 115% Ireland Insurance and Annuity 68 82 55 53 71 4% Germany Insurance and Annuity 7 7 6 7 7 0% Total 597 766 1,930 909 1,198 101% Wealth Management Sales U.K. W
Slide 29: Europe
EUROPE (In C$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Fee and Other Income U.K 46 39 48 42 42 (9%) Germany 116 115 115 122 119 3% Ireland 191 192 189 200 193 1% Total 353 346 352 364 354 0% Operating and Administrative Expenses U.K 86 92 76 82 88 2% Germany 41 38 37 48 40 (2%) Ireland 164 162
Slide 30: Europe
EUROPE (In C$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY U.K. Base Earnings 120 53 83 110 138 15% Items excluded from Base Earnings (12) (23) 102 44 (5) Net Earnings 108 30 185 154 133 23% Ireland Base Earnings 43 68 110 67 69 60% Items excluded from Base Earnings 3 4 22 (5) (12) Net Earnings 46
Slide 31: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 YoY Fee and Other Income Reinsurance 2 2 2 2 2 0% Operating and Administrative Expenses Reinsurance 23 23 25 26 26 13% Corporate & Par 2 2 2 3 3 Total 25 25 27 29 29 16% Reinsurance Base Earnings 146 151 108 147 171 17% Item
Slide 32: Putnam – Earnings & Core Margin
PUTNAM – EARNINGS & CORE MARGIN (US$m) 255 250 254 Expenses 231 229 13.1% 12.3% Fee & Net Investment Income 11.4% Income Taxes 2.8% 0.4% Core Margin (Pre-tax)1 (225) (222) (219) (225) (228) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Fee & Net Investment Income 231 255 250 254 229 Less: Expenses -225 -2
Slide 33: Recent acquisitions transforming Empower business
Recent acquisitions transforming Empower business Retirement Services Business Full-Service Retirement Business • AUM1 of US$23B2 • AUA1 of US$190B; participants of 2.5M at close of • Acquisition completed on April 1, 2022 acquisition on December 31, 2020 • Hybrid wealth management platform combinin
Slide 34: Invested Assets
INVESTED ASSETS 1 Loans to Cash and CD's 5% Invested assets of $197.3 billion Policyholders Gov't, Gov't Related and Investment Properties 4% Agency Securitized Bonds 4% 22% Diversified high quality portfolio: Bonds represent 65%: Stocks 7% • 99% are investment grade • 73% rated A or higher • 84% of
Slide 35: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO * % of Invested Assets Gov't, Gov't Related and Agency Corporate and Non-Agency Country of Domicile Securitized Bonds Securitized Bonds Total Bonds U.S. 2.1% 20.9% 23.0% Canada 9.3% 9.7% 19.0% U.K. 6.4% 6.3% 12.7% Germany 1.0% 0.8% 1.8% Ireland 0.3% 0.3% 0.6% 19.1%
Slide 36: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION * Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 7.3% CMBS 1.6% Consumer Products 5.2% RMBS 0.1% Industrial Products 4.1% Other ABS 3.7% Financial Services 3.2% Total Non-Agency Securi
Slide 37: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 1,938 0.9% 1,938 - - - 462 1,476 Equity Release 2,551 1.3% 1,063 - 1,488 - - 2,551 Multi Family 7,903 4.0% 4,619 2,488 758 38 2,835
Slide 38: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q1 2022 1.27 1.70 1.42 1.25 1.64 1.38 Q4 2021 1.26 1.70 1.44 1.27 1.71 1.44 Q3 2021 1.26 1.74 1.48 1.27 1.71 1.47 Q2 2021 1.23 1.72 1.48 1.24 1.71 1.47 Q1 2021 1.27 1.75 1.53 1.26 1.73 1.47 38