Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q1 2019 Earnings Presentation
27 slides from Great-West Lifeco's earnings presentation, 2019
Slide 1: Q1 2019 Quarterly Results Presentation
Q1 2019 Quarterly Results Presentation
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: Highlights
Highlights ▪ Strategic actions undertaken since the beginning of 2019 • Sale of U.S. life insurance and annuity business • $2 billion substantial issuer bid • Launch of single brand in Canada ▪ Net earnings down 10% YoY (pre-tax down 2%) • Unfavourable claims experience in Europe • Impact of lower a
Slide 5: Net Earnings
Net Earnings ▪ Net earnings of $657m, down 10% YoY Net Earnings (C$m) 831 • Pre-tax shareholders’ earnings of 731 710 $838m, down 2% YoY 689 657 ▪ Strong capital position maintained • LICAT ratio at 140%1 • Lifeco cash of $1 billion1 • M&A remains a priority Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 1
Slide 6: Sales
Sales Sales1 (C$b) 90.2 Canada ▪ Lower Group wealth and insurance sales and lower Individual wealth sales 34.6 41.5 33.1 34.4 U.S. ▪ Higher sales with a significant contribution from Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 one large Empower sale Canada U.S. Europe Lifeco Europe Q1 2019 3.2 75.8 11.2
Slide 7: Fee and Other Income
Fee and Other Income Y/Y Fee and Other Income (C$m) 3% Canada 9% 1,433 1,483 1,483 1,479 1,420 ▪ Lower average AUA1 in Individual Customer 4% U.S. ▪ Higher fees at Empower (4%) due to participant growth Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 ▪ Lower fees at Putnam due to lower average AUM1 Canada U
Slide 8: Expenses
Expenses Adjusted Expenses1 (C$m) Canada 1,311 1,295 1,229 1,216 1,237 ▪ Continuing investment in technology and strategic initiatives, including brand U.S. ▪ Empower expenses inline Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 with participant growth Lifeco Lifeco ▪ Lower operating Canada U.S. Europe (A
Slide 9: Financial Highlights – Garry MacNicholas, EVP & CFO
Garry MacNicholas EVP & CFO Great-West Lifeco Financial Highlights 9
Slide 10: Earnings
Earnings Adjusted Net Earnings per Share1 EPS of $0.67, down 10% YoY 0.84 0.74 0.75 0.72 Canada 0.67 ▪ Higher expenses, lower fee income and higher taxes U.S. ▪ Improved results at Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Putnam Canada U.S. Europe Lifeco Lifeco (Adjusted)1,2 (Reported) 2 Europe Q1 20
Slide 11: Source of Earnings
Source of Earnings Q1/19 Q4/18 Q1/18 For the three months ended Mar. 31/19 Canada U.S. Europe Corp. Total Total Total Expected profit on in-force business 282 110 316 (4) 704 745 711 Impact of new business 1 (36) (38) - (73) (11) (96) Experience gains and losses 41 19 (41) (1) 18 (19) 85 Management
Slide 12: Book Value per Share and Return on Equity
Book Value per Share and Return on Equity Book Value per Share 22.08 22.07 21.01 21.22 21.25 ▪ Lifeco cash of $1.0b ▪ Book value up 5% from last year ▪ LICAT at 140% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Adjusted ROE1 (Trailing 4 quarters) 17.2% 17.3% ▪ Adjusted ROE1 of 13.7% 13.7% ▪ Net ROE of 13
Slide 13: Substantial Issuer Bid
Substantial Issuer Bid ▪ Transaction allowed Lifeco to return capital to shareholders and mitigate the earnings impact of the sale of the U.S. life insurance and annuity business ▪ Purchased 59.7m shares at $33.50 per share for aggregate consideration of $2b • Represents ~6% of issued and outstandin
Slide 14: Assets under Administration
Assets under Administration1 Assets Under Administration Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 YoY (C$b) General Fund 212 210 209 214 220 4% Segregated Fund 221 221 220 213 223 1% Mutual Fund & Institutional 286 295 294 282 304 6% Other AUA 673 698 718 690 804 19% Total 1,392 1,423 1,441 1,399 1,5
Slide 15: Questions
GREAT-WEST FECOne Questions 15
Slide 16: Appendix
Appendix GREAT-WEST FECOne 16
Slide 17: Canada
Canada (In C$m) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 YoY Sales Individual Customer Individual Insurance 76 88 109 145 101 33% Individual Wealth 2,449 2,165 1,921 2,334 2,256 (8%) 2,525 2,253 2,030 2,479 2,357 (7%) Group Customer Group Insurance 361 251 104 151 186 (48%) Group Wealth 936 536 743 8
Slide 18: United States
United States (In US$m) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 YoY GWF Sales Empower Retirement 9,113 6,979 7,426 10,783 45,847 403% Individual Markets 285 390 327 275 241 (15%) Total 9,398 7,369 7,753 11,058 46,088 390% Putnam Sales 10,504 11,630 10,785 13,245 10,940 4% Fee and Other Income Empowe
Slide 19: Europe
Europe (In C$m) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 YoY Sales UK / Isle of Man 949 1,151 3,274 1,096 1,216 28% Ireland / Germany 4,790 4,384 3,961 4,876 9,965 108% Total 5,739 5,535 7,235 5,972 11,181 95% Fee and Other Income UK / Isle of Man 56 58 54 52 56 0% Ireland / Germany 304 334 316 293 3
Slide 20: Putnam – AUM and Flows
Putnam – AUM and Flows (US$b) Mutual Funds Institutional 177.2 169.5 172.4 4.1 (6.1) 6.7 170.6 160.2 6.9 (6.9) 5.7 94.1 92.0 93.1 89.3 84.6 77.5 79.3 83.1 75.6 81.3 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Sales Redemptions Market Q1 2019 In-Qtr Avg. 173.6 172.8 175.2 168.7 168.0 AUM 20
Slide 21: Putnam – Core Net Earnings
Putnam – Core Net Earnings Putnam Net Earnings - Core Earnings Expenses Income Taxes Expenses Income Taxes Fee & Net Inv. Income Operating Margin (Pre-tax) (US$m) Fee & Net Inv Income Operating Margin (Pre-tax) 35% % of Budget $220 25% 236 231 231 226 100% Core Earnings (US$mm) $120 202 15% Operatin
Slide 22: Stable Trend Over the Years
Stable Trend Over the Years (C$m) Experience Gains (Losses), Management Actions, and Changes in Assumptions as a % of Net Income Before Tax 3,556 3,347 3,268 3,133 2,874 2,769 2,576 2,633 2,732 2,499 2,504 2,447 2,335 2,237 2005-2018 14 Year 24% 23% 23% 23% 26% 25% 20% 21% 21% Average 19% 18% 20% 20
Slide 23: Invested Assets
Invested Assets 1 ▪ Invested assets of $187.6 billion ▪ Diversified high quality portfolio: Cash & CD's • Bonds represent 71%: 2% − 99% are investment grade Loans to − 79% rated A or higher Investment Properties Policyholders Gov't, Gov't Related and 3% 5% Agency Securitized Bonds 27% − 86% of bond
Slide 24: United Kingdom Property Related Exposures – Mortgages
United Kingdom Property Related Exposures Mortgages (C$m) Carrying Value Property Type Equity % of Multi Family Retail Office Industrial Other Total City/Region Release Lifeco IA Central London 292 956 587 37 26 181 2,079 1.1% Other United Kingdom 179 665 189 870 504 743 3,150 1.7% Total United King
Slide 25: United Kingdom Property Related Exposures – Investment Properties
United Kingdom Property Related Exposures Investment Properties (C$m) Carrying Value Property Type % of City/Region Multi Family Retail Office Industrial Other Total Lifeco IA Central London - 30 305 - 41 376 0.2% Other United Kingdom - 968 365 774 330 2,437 1.3% Total United Kingdom - 998 670 774 3
Slide 26: United Kingdom Property Related Exposures – Retail
United Kingdom Property Related Exposures Retail Mortgages and Investment Properties (C$m) Carrying Value Retail Property Category Shopping Warehouse, Centres and Distribution, Department % of Invested Asset Type and Other Stores Grocery Total Lifeco IA Mortgages 830 588 203 1,621 0.9% Investment Pr
Slide 27: Currency (Relative to C$)
Currency (Relative to C$) Income & Expenses Balance Sheet US$ £ € US$ £ € 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 Q2 2018 1.29 1.76 1.54 1.31 1.73 1.53 Q1 2018 1.26 1.76 1.55 1.29 1.81 1.59 27