Great-West Lifeco Inc. · TSX:GWO
Great-West Lifeco — Q4 2022 Earnings Presentation
39 slides from Great-West Lifeco's earnings presentation, February 2023
Slide 1: Quarterly Results Presentation Q4 2022
Quarterly Results Presentation Q4 2022
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 3
Slide 4: 2022 Overview
2022 OVERVIEW Discipline and diversification driving strong returns and resilient performance Acquired U.S. businesses performing well, in-line with expectations Good momentum across segments heading into 2023 Well-positioned for transition to IFRS 17 Advancing Corporate Purpose and Social Impact ag
Slide 5: Performance Against Medium-Term Objectives
PERFORMANCE AGAINST MEDIUM-TERM1 OBJECTIVES 2 1-Year 5-Year (2021 - 2022) (2017 - 2022) FY 2022 Base EPS Medium-Term Financial Objectives Base 3 Base 3 $3.46 8-10% base EPS growth p.a 3 (1.5%) 8.8% CAGR Down 1.5% YoY 14-15% base ROE 3 13.6% 13.1% average FY 2022 Net EPS Target dividend payout ratio
Slide 6: Q4 2022 Earnings
Q4 2022 EARNINGS Earnings per Share (EPS) (C$) Earnings (C$m) 1,026 1.10 892 0.96 825 0.89 765 0.82 688 688 0.74 0.74 Base2 Base1 Net Net Q4 2021 Q3 2022 Q4 2022 Q4 2021 Q3 2022 Q4 2022 Base Earnings and EPS Net Earnings and EPS • Base earnings and base EPS up 8% from Q4 2021 • Net earnings and net
Slide 7: Canada
CANADA Insurance Sales1 (C$m) Wealth Sales1 (C$m) • Strong momentum in Group insurance sales with good 4,572 persistency. Strong Individual insurance sales in quarter 3,761 309 1,298 driven by participating life sales 268 2,878 209 1,131 • Group retirement sales strong in quarter, including asset 18
Slide 8: Europe
EUROPE Insurance & Annuity Wealth Sales1 (C$m) Sales1 (C$m) • Economic outlook for Europe improved during the 966 2,044 quarter as UK political environment stabilised 909 887 1,677 350 1,558 • Individual annuity sales began to recover, reflecting the 320 483 350 375 344 58 56 higher interest rate en
Slide 9: Putnam
PUTNAM Sales1 (US$m) 13,835 •AUM up US$7B in quarter 10,555 8,500 •Net outflows of $1.5B 8,629 4,978 3,803 • Continued improvement over the previous 3 5,206 5,577 4,697 quarters Q4 2021 Q3 2022 Q4 2022 • Outflows are largely in lower-fee fixed income Mutual Funds Institutional products • Higher-earn
Slide 10: Empower
EMPOWER Empower Sales1 (ex-Personal Capital) (US$m) • Solid momentum in DC sales, up 8% YoY 17,526 17,537 16,237 2,242 2,613 • DC client retention remains high at ~97% 2,365 • MassMutual integration program complete 15,284 14,924 13,872 • US$160m of pre-tax cost synergies achieved • Participant, ass
Slide 11: Capital and Risk Solutions (CRS)
CAPITAL AND RISK SOLUTIONS (CRS) • CRS expected profit1 up 7% YoY • Other margins and fees up 20% reflecting growth in structured and longevity reinsurance and CRS Expected Profit1 (C$m) improved pricing in the P&C business 178 • Strong pipeline and business expansion 166 167 • Strong pipeline of ne
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 1.10 Canada U.S. Europe CRS Lifeco Lifeco 0.96 0.89 0.82 Q4 2022 295 185 239 187 892 1026 0.74 0.74 Q3 2022 283 204 200 1 688 688 Base1 Net Q4 2021 317 156 213 145 825 765 YOY (7%) 19% 12% 29% 8% 34% 3 Constant Currency (7%) 11% 19% 3
Slide 14: Earnings Reconciliation
EARNINGS RECONCILIATION Q4 2022 Q3 2022 Q4 2021 Post-Tax Post-Tax Post-Tax Per Share (C$) Per Share (C$) Per Share (C$) (C$m) (C$m) (C$m) Base earnings1 892 0.96 688 0.74 825 0.89 Items excluded from base earnings Actuarial assumption changes and other 49 0.05 68 0.07 23 0.02 management actions Mark
Slide 15: Source of Earnings [Base Earnings]
SOURCE OF EARNINGS [BASE EARNINGS 2] Q4/22 Q3/22 Q4/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 337 257 228 178 (5) 995 917 975 Impact of new business (1) (78) (28) 33 - (74) (92) (60) Experience gains and losses 4 82 74 (3) (9) 148 (47) 57 Earnings o
Slide 16: Source of Earnings [Net Earnings]
SOURCE OF EARNINGS [NET EARNINGS] Q4/22 Q3/22 Q4/21 (C$m) Canada U.S. Europe CRS Corp. Total Total Total Expected profit on in-force business 337 257 228 178 (5) 995 917 975 Impact of new business (1) (78) (28) 33 - (74) (92) (60) Experience gains and losses 2 94 95 12 (9) 194 (101) 79 Management ac
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 Dec. 31/22 Pre-Tax Post-Tax For three months ended Dec. 31/22 (C$m) Pre-Tax Post-Tax (C$m) Yield enhancement 161 135 Management Actions 31 29 Market related impact
Slide 18: Expenses
EXPENSES Operating and Administrative Expenses (C$m) Operating and Administrative Expenses (C$m) (Adjusted) 1,2 (Reported)1 1,943 1,943 1,768 1,711 Canada U.S. Europe CRS Lifeco Lifeco 1,635 1,688 Q4 2022 504 1,068 324 33 1,943 1,943 Adjusted 1,2 Q3 2022 471 982 282 28 1,768 1,711 Reported1 Q4 2021
Slide 19: Book Value per Share and LICAT
BOOK VALUE PER SHARE 1 AND LICAT 2 Book Value per Share (C$) LICAT Ratio 26.60 25.61 124% 24.71 120% 118% Q4 2021 Q3 2022 Q4 2022 Q4 2021 Q3 2022 Q4 2022 •BVPS growth of 8% YoY was largely driven by • LICAT ratio at 120%, up 2 point QoQ, driven by impact shareholder net earnings after common dividen
Slide 20: IFRS 17 expected impacts
IFRS 17 expected impacts IFRS 17 expected impacts June 2022 Current Decrease in shareholder's equity 10 -15% 12% Decrease in Book Value per Share (BVPS) 10 -15% 14% $6.3B non-par CSM Contractual Service Margin (CSM) N/A $2.3B par CSM Canada Life LICAT ratio Positive Impact Approx. +10 points 1,2 Por
Slide 21: Looking Ahead
LOOKING AHEAD Reconfirming medium-term financial objectives, including base EPS growth of 8% to 10% p.a. Modest reduction in base earnings growth expected in transition year to IFRS 17 Empower base earnings growth objective of 15% - 20%1 in 2023, including: Prudential pre-tax expense synergies of US
Slide 22: Questions
QUESTIONS 22
Slide 23: Additional Financial and Segment Information
ADDITIONAL FINANCIAL AND SEGMENT INFORMATION 23
Slide 24: Source of Earnings [Base] - Annual
SOURCE OF EARNINGS [BASE2] - ANNUAL 2022 2021 (C$m) Canada U.S. Europe CRS Corp. Total Total Expected profit on in-force business 1,321 1,029 855 673 (21) 3,857 3,771 Impact of new business (25) (296) (78) 69 - (330) (208) Experience gains and losses 96 74 242 (119) (4) 289 249 Earnings on surplus (
Slide 25: Source of Earnings [Net] - Annual
SOURCE OF EARNINGS [NET] - ANNUAL 2022 2021 (C$m) Canada U.S. Europe CRS Corp. Total Total Expected profit on in-force business 1,321 1,029 855 673 (21) 3,857 3,771 Impact of new business (25) (296) (78) 69 - (330) (208) Experience gains and losses 100 34 235 (117) (4) 248 284 Management actions and
Slide 26: Canada
CANADA (In C$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Sales Individual Insurance 120 93 97 93 130 8% Individual Wealth 3,274 2,947 2,364 1,988 2,630 (20%) Individual Total 3,394 3,040 2,461 2,081 2,760 (19%) Group Insurance 189 255 101 116 138 (27%) Group Wealth 1,298 1,009 657 890 1,131 (13%)
Slide 27: Canada
CANADA (In C$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Individual Customer Base Earnings 140 124 96 91 126 (10%) Items excluded from Base Earnings (20) (1) 5 (127) 27 Net Earnings 120 123 101 (36) 153 Group Customer Base Earnings 194 138 207 178 213 10% Items excluded from Base Earnings 10 4 -
Slide 28: United States
UNITED STATES (In US$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Sales Empower Defined Contribution 13,872 34,731 7,417 15,284 14,924 8% Empower Retail 2,365 2,559 2,438 2,242 2,613 10% Personal Capital 1,757 1,833 1,694 1,344 1,524 (13%) Total 17,994 39,123 11,549 18,870 19,061 6% Putnam Sales 1
Slide 29: United States
UNITED STATES (In US$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Empower Base Earnings 117 117 133 171 155 32% Items excluded from Base Earnings (11) (12) (39) (33) (13) Net Earnings 106 105 94 138 142 34% Personal Capital Base Earnings (6) (10) (10) (8) (7) 17% Items excluded from Base Earnings
Slide 30: Europe
EUROPE (In C$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Insurance and Annuity Sales U.K. Insurance and Annuity 849 1,120 853 748 632 (26%) Ireland Insurance and Annuity 53 71 66 213 249 Germany Insurance and Annuity 7 7 5 5 6 (14%) Total 909 1,198 924 966 887 (2%) Wealth Management Sales U.K. We
Slide 31: Europe
EUROPE (In C$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Fee and Other Income U.K 42 42 47 37 40 (5%) Ireland 200 193 186 174 180 (10%) Germany 122 119 107 101 108 (11%) Total 364 354 340 312 328 (10%) Operating and Administrative Expenses U.K 82 88 89 83 104 27% Ireland 185 165 154 153 164 (11%)
Slide 32: Europe
EUROPE (In C$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY U.K. Base Earnings 110 138 101 105 153 39% Items excluded from Base Earnings 44 (5) 16 57 (31) Net Earnings 154 133 117 162 122 (21%) Ireland Base Earnings 67 69 74 65 59 (12%) Items excluded from Base Earnings (5) (12) - - 70 Net Earnings
Slide 33: Capital and Risk Solutions
Capital and Risk Solutions (In C$m) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 YoY Fee and Other Income Reinsurance 2 2 - - 3 Operating and Administrative Expenses Reinsurance 26 26 25 25 29 12% Corporate & Par 3 3 3 3 4 Total 29 29 28 28 33 14% Reinsurance Base Earnings 147 171 176 3 190 29% Items exc
Slide 34: Putnam – Earnings & Core Margin
PUTNAM – EARNINGS & CORE MARGIN (US$m) 254 Expenses 229 220 204 200 Fee & Net Investment Income 11.4% Income Taxes 0.4% -4.5% Core Margin (Pre-tax)1 -7.2% 1.2% (225) (228) (213) (214) (218) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Fee & Net Investment Income 254 229 204 200 220 Less: Expenses -225 -2
Slide 35: Invested Assets
INVESTED ASSETS 1 Loans to Investment Properties Policyholders Cash and CD's 3% Gov't, Gov't Related and Invested assets of $237.8 billion 3% 4% Agency Securitized Bonds 18% Stocks Diversified high quality portfolio: 6% Bonds represent 67%: Insured Residential • 99% are investment grade and Multi-fa
Slide 36: Lifeco Consolidated Bond Portfolio
LIFECO CONSOLIDATED BOND PORTFOLIO * % of Invested Assets Gov't, Gov't Related and Corporate and Non-Agency Country of Domicile Agency Securitized Bonds Securitized Bonds Total Bonds U.S. 2.3% 27.7% 30.0% Canada 7.5% 8.2% 15.7% U.K. 4.7% 5.5% 10.2% Germany 1.1% 1.0% 2.1% Ireland 0.2% 0.3% 0.5% 15.8%
Slide 37: Corporate and Non-Agency Securitized Bonds – Sector Diversification
CORPORATE AND NON-AGENCY SECURITIZED BONDS – SECTOR DIVERSIFICATION * Corporates % of Invested Assets Non-Agency Securitized % of Invested Assets Electric Utilities 6.8% CMBS 2.4% Consumer Products 6.5% RMBS 0.1% Industrial Products 5.3% Other ABS 5.2% Banks 4.0% Total Non-Agency Securitized 7.7% Fi
Slide 38: Lifeco Mortgage Exposures
LIFECO MORTGAGE EXPOSURES* (C$m) Carrying Value Mortgage Holdings by Segment Property Type Total % of Lifeco IA Canada U.S. Europe CRS Insured Non-insured Single Family 1,856 0.7% 1,856 - - - 418 1,438 Equity Release 3,365 1.4% 1,392 - 1,705 268 - 3,365 Multi Family 10,346 4.4% 4,732 4,677 897 40 2,
Slide 39: Currency (Relative to C$)
CURRENCY (RELATIVE TO C$) Income & Expenses Balance Sheet US$ £ € US$ £ € Q4 2022 1.36 1.59 1.39 1.35 1.64 1.45 Q3 2022 1.31 1.54 1.31 1.38 1.54 1.35 Q2 2022 1.28 1.60 1.36 1.29 1.57 1.35 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 39