CEO.CA Chairman's Briefing

TSX:GWO

• Base earnings of $1,061 million, or $1.14 per share, up 12% from the third quarter of 2023
• Net earnings from continuing operations of $859 million or $0.92 per share, down 9% from a year ago
• Base ROE of 17.3% and ROE from continuing operations of 15.6%
• LICAT Ratio of 134%
• Book value per share of $25.78, up 7% year over year

WINNIPEG,MB, Nov. 6, 2024 /CNW/ - Great-West Lifeco Inc. (Lifeco or the Company) today announced its third quarter 2024 results.

"We continue to execute on our focused strategies to deliver sustainable and profitable growth for our shareholders. In our fifth consecutive quarter of record base earnings, we're delivering at the top end of our medium-term financial objectives," said Paul Mahon, President and CEO, Great-West Lifeco. "We have strong underlying momentum across all of our segments, and we have delivered on key actions to support and accelerate our growth strategies in both the U.S. and Canada. At the same time, the strength of our disciplined approach to managing our business is demonstrated through recent actuarial assumption reviews and their positive impact on our capital levels."

Record base earnings¹ of $1,061 million or $1.14 per common share, up 12% from $950 million a year ago reflects continued pre-tax growth and higher earnings on surplus from all segments, partially offset by the impact of the Global Minimum Tax (GMT) in the Capital and Risk Solutions and Europe segments. Base earnings growth was driven by net fee and spread income growth from higher equity markets and the addition of Investment Planning Counsel (IPC) and Value Partners, higher investment earnings, as well as favourable experience in the U.S. life reinsurance business. These items were partially offset by unfavourable group mortality experience in the Europe segment.

Net earnings from continuing operations of $859 million or $0.92 per common share, compared to $936 million a year ago reflects less favourable impacts of relative interest rate movements, including spread movements, and more unfavourable fair value impacts of assumption changes and management actions partially offset by higher base earnings. The third quarter of 2023 included reductions in commercial property values in the Europe segment.

In the third quarter of 2024, the Company completed certain actuarial assumption reviews and model refinements related to insurance contract liabilities which resulted in a positive economic impact. Within the Company's financial statements this is observed through an increase to contractual service margin on non-participating business of $305 million and a negative impact to net earnings of $203 million. These assumption changes improved the capital position of the Company, increasing the Canada Life LICAT ratio by two points. The assumption changes have a modest positive impact on base earnings from the beginning of third quarter of 2024 onwards.

Highlights

• Record base earnings for the fifth consecutive quarter:
  • Base EPS up 14% year-to-date and on track to exceed our medium-term objective in 2024.
  • Base ROE at the top end of the range of our medium-term objective.
  • Strong regulatory capital levels continue to provide substantial flexibility.
• Wealth and Retirement businesses continue to drive growth across the business with total Lifeco assets under administration (AUA)⁴ exceeding $3 trillion for the first time:
  • Strong asset growth across each operating segment, with year-over-year average AUA⁴ growth of 43% in Canada⁵ and 21% in Europe; while at Empower, robust year-over-year average AUA growth in Defined Contribution (DC) of 16% and 25% in Personal Wealth.
  • In Canada, individual segregated fund sales have grown 26% from prior year and total Individual Wealth Management net asset flows⁶ (excluding IPC and Value Partners) are up $113 million from prior year and up $189 million from the second quarter of 2024. IPC and Value Partners have contributed $407 million of net asset inflows in 2024.
  • Canada Life is extending its reach in the underserved Canadian mass market, with a distribution agreement signed in the third quarter of 2024 with managing general agent Primerica Life Insurance Company of Canada (Primerica) which provides Primerica's advisors with access to a curated segregated fund shelf. 
  • International product sales drove Wealth & Asset Management sales growth of 38% in the U.K. from the prior year and Wealth & Asset Management AUA is up 22% in Ireland from the prior year.
• Empower continues to execute on its strategy, strengthening confidence in delivering on the U.S. segment base earnings growth objective for 2024:
  • U.S. delivered strong base earnings growth of 35% for the quarter.
  • Base ROE has increased approximately 300 basis points in the past 12 months.
  • Results at Empower are driven by market performance and positive net flows in Personal Wealth.
  • Empower acquired Plan Management Corporation (PMC), the creator of OptionTrax, a digital equity plan administration and service provider, expanding Empower's retirement services to employers who offer equity compensation programs as well as enhancing financial planning services offered through the Empower Personal Wealth business.
• Disciplined approach to managing business remains a core attribute contributing to the strength and stability of the Company's long-term performance:
  • Current preliminary estimates of insured losses arising from recent catastrophe events do not reach the level where any significant claims would be anticipated. The Company also monitors potential impacts of recent geopolitical conflicts, which are not expected to have a material effect on results.

For reporting purposes, Lifeco's consolidated operating results are grouped into five reportable segments – Canada, United States, Europe, Capital and Risk Solutions and Lifeco Corporate – reflecting the management and corporate structure of the Company. For more information, refer to the Company's third quarter 2024 interim Management's Discussion and Analysis (MD&A).

• Q3 Canada segment base earnings of $317 million and net earnings of $460 million – Base earnings of $317 million increased by $21 million, or 7%, compared to the same quarter last year, reflecting higher net fee and spread income from the addition of IPC and Value Partners and higher equity markets, as well as improved credit experience and higher earnings on surplus. These items were partially offset by lower CSM recognized for services provided in Insurance and Annuities driven by actuarial assumption changes.

• Q3 United States segment base earnings of US$264 million ($359 million) and net earnings from continuing operations of US$225 million ($307 million) – Base earnings of US$264 million increased by US$69 million, or 35%, compared to the third quarter of 2023, primarily due to an increase in fee income driven by growth in the business and higher equity markets, as well as higher earnings on surplus assets, partially offset by higher crediting rates and higher growth-related operating expenses.

• Q3 Europe segment base earnings of $195 million and net earnings of $115 million – Base earnings of $195 million decreased by $11 million, or 5%, compared to the same quarter last year, primarily due to unfavourable group mortality experience in the U.K., tax impacts from the prior year in Germany that did not repeat and a higher effective tax rate due to the implementation of the GMT. These items were partially offset by higher fee income in the U.K. and Ireland as well as favourable impacts from trading activity in the U.K. On a pre-tax, constant currency basis, base earnings have increased 10% compared to the same quarter last year.

• Q3 Capital and Risk Solutions segment base earnings of $210 million and net earnings of $9 million – Base earnings of $210 million increased by $12 million, or 6%, compared to the same quarter last year, as favourable claims experience in the U.S. life business and higher earnings on surplus were partially offset by the impact of the GMT. Excluding the $26 million impact of the GMT, base earnings were up 19% compared to the third quarter of 2023.

QUARTERLY DIVIDENDS

The Board of Directors approved a quarterly dividend of $0.555 per share on the common shares of Lifeco payable December 31, 2024 to shareholders of record at the close of business December 3, 2024.

In addition, the Directors approved quarterly dividends on Lifeco's preferred shares, as follows:

For purposes of the Income Tax Act (Canada), and any similar provincial legislation, the dividends referred to above are eligible dividends.

Third Quarter Conference Call

Lifeco's third quarter conference call and audio webcast will be held on Thursday November 7, 2024 at 10 a.m. ET.

The live webcast of the call will be available at 3rd Quarter 2024 – Conference Call and Webcast (greatwestlifeco.com) or by calling 1-844-763-8274 (toll-free) or 1-647-484-8814 for International participants.

A replay of the call will be available following the event on our website or by calling 1-855-669-9658 (Canada toll-free) or 1-877-344-7529 (U.S. toll-free) and using the access code 6085380.

Selected financial information is attached.

GREAT-WEST LIFECO INC.

Great-West Lifeco is a Canadian headquartered, international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. We operate in Canada, the United States and Europe under the brands Canada Life, Empower, and Irish Life. At the start of 2024, our companies had over 32,250 employees, 106,000 advisor relationships, and thousands of distribution partners – serving approximately 40 million customer relationships.

Great-West Lifeco trades on the Toronto Stock Exchange (TSX) under the ticker symbol GWO and is a member of the Power Corporation group of companies. To learn more, visit greatwestlifeco.com.

Basis of presentation

The condensed consolidated interim unaudited financial statements for the periods ended September 30, 2024 of Lifeco, have been prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted and are the basis for the figures presented in this release, unless otherwise noted.

Cautionary note regarding Forward-Looking Information

This release 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", "expects", "anticipates", "intends", "plans", "believes", "estimates", "objective", "target", "potential" and other similar expressions or negative versions thereof.  Forward-looking information includes, without limitation, statements about the Company and its operations, business (including business mix), financial condition, expected financial performance (including revenues, earnings or growth rates, medium-term financial objectives and base earnings objectives for the Empower business), expected earnings contribution of the Company's U.S. segment, strategies and prospects, expected costs and benefits of acquisitions and divestitures (including timing of integration activities and timing and extent of revenue and expense synergies), expected expenditures or investments (including but not limited to investment in technology infrastructure and digital capabilities and solutions and investments in strategic partnerships), value creation and realization of growth opportunities, expected dividend levels, expected cost reductions and savings, expected capital management activities and use of capital, estimates of risk sensitivities affecting capital adequacy ratios, anticipated global economic conditions, potential impacts of catastrophe events, potential impacts of geopolitical conflicts, and the impact of regulatory developments on the Company's business strategy and growth objectives.

Forward-looking statements are based on expectations, forecasts, estimates, predictions, projections and conclusions about future events that were current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally, including the insurance, mutual fund and retirement solutions industries.  They are not guarantees of future performance, and the reader is cautioned that actual events and results could differ materially from those expressed or implied by forward-looking statements.  Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct.  In particular, in setting its objective to achieve base earnings growth in the Empower business of 15-20% in 2024, management has assumed pre-tax revenue synergies related to the Prudential acquisition of US$20 million by the end of 2024 and that the performance of equity, interest rate and credit markets during the relevant period is consistent with management's expectations, which take into account current market information and assume no credit impairments. In arriving at our assessment of the Company's potential exposure to Pillar Two income taxes and our expectation regarding the impact on our effective income tax rate and base earnings, management has relied on its interpretation of the relevant legislation.

It has also assumed a starting point of its current mix of business and base earnings growth consistent with management's base earnings objectives disclosed in the Company's 2023 Annual MD&A.  In all cases, whether or not actual results differ from forward-looking information may depend on numerous factors, developments and assumptions, including, without limitation, the ability to integrate and leverage acquisitions and achieve anticipated benefits and synergies, the achievement of expense synergies and client retention targets from the acquisition of the Prudential retirement business, the Company's ability to execute strategic plans and adapt or recalibrate these plans as needed, the Company's reputation, business competition, assumptions around sales, pricing, fee rates, customer behaviour (including contributions, redemptions, withdrawals and lapse rates), mortality and morbidity experience, expense levels, reinsurance arrangements, global equity and capital markets (including continued access to equity and debt markets and credit instruments on economically feasible terms), geopolitical tensions and related economic impacts, interest and foreign exchange rates, inflation levels, liquidity requirements, investment values and asset breakdowns, hedging activities, financial condition of industry sectors and individual issuers that comprise part of the Company's investment portfolio, credit ratings, taxes, impairments of goodwill and other intangible assets,  technological changes, breaches or failure of information systems and security (including cyber attacks), assumptions around third-party suppliers, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, changes in actuarial standards, unexpected judicial or regulatory proceedings, catastrophic events, continuity and availability of personnel and third party service providers, unplanned material changes to the Company's facilities, customer and employee relations, levels of administrative and operational efficiencies, and other general economic, political and market factors in North America and internationally.

The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company's 2023 Annual MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates" and in the Company's annual information form dated February 14, 2024 under "Risk Factors", which, along with other filings, is available for review at www.sedarplus.com.  The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to place undue reliance on forward-looking information.

Other than as specifically required by applicable law, the Company does not intend to update any forward-looking information whether as a result of new information, future events or otherwise.

Cautionary note regarding Non-GAAP Financial Measures and Ratios

This release contains some non-Generally Accepted Accounting Principles (GAAP) financial measures and non-GAAP ratios as defined in National Instrument   52-112 "Non-GAAP and Other Financial Measures Disclosure". Terms by which non-GAAP financial measures are     identified include, but are not limited to, "base earnings (loss)", "base earnings (loss) (US$)", "base earnings: insurance service result", "base earnings: net investment result", "assets under management" and "assets under administration". Terms by which non-GAAP ratios are identified include, but are not limited to, "base earnings per common share (EPS)", "base return on equity (ROE)", "base dividend payout ratio" and "effective income tax rate – base earnings – common shareholders".  Non-GAAP financial measures and ratios are used to provide management and investors with additional measures of performance to help assess results where no comparable GAAP (IFRS) measure exists.  However, non-GAAP financial measures and ratios do not have standard meanings prescribed by GAAP (IFRS) and are not directly comparable to similar measures used by other companies. Refer to the "Non-GAAP Financial Measures and Ratios" section in this release for the appropriate reconciliations of these non-GAAP financial measures to measures prescribed by GAAP as well as additional details on each measure and ratio.

FINANCIAL HIGHLIGHTS (unaudited)
(in Canadian $ millions, except per share amounts)

Selected consolidated financial information

BASE AND NET EARNINGS

Consolidated base earnings and net earnings of Lifeco include the base earnings and net earnings of Canada Life (and its operating subsidiaries), Empower and PanAgora Asset Management, together with Lifeco's Corporate operating results.  Net earnings also include the earnings from Putnam Investments reported as discontinued operations.

For a further description of base earnings, refer to the "Non-GAAP Financial Measures and Ratios" section of this document and the Company's third quarter of 2024 interim Management's Discussion and Analysis.

NON-GAAP FINANCIAL MEASURES AND RATIOS
Non-GAAP Financial Measures

The Company uses several non-GAAP financial measures to measure overall performance of the Company and to assess each of its business units.  A financial measure is considered a non-GAAP measure for Canadian securities law purposes if it is presented other than in accordance with generally accepted accounting principles (GAAP) used for the Company's consolidated financial statements.  The consolidated financial statements of the Company have been prepared in compliance with IFRS as issued by the IASB.  Non-GAAP financial measures do not have a standardized meaning under GAAP and may not be comparable to similar financial measures presented by other issuers.  Investors may find these financial measures useful in understanding how management views the underlying business performance of the Company.

Base earnings (loss)

Base earnings (loss) reflect management's view of the underlying business performance of the Company and provides an alternate measure to understand the underlying business performance compared to IFRS net earnings. 

Base earnings (loss) exclude the following items from IFRS reported net earnings:

• Market-related impacts, where actual market returns in the current period are different than longer-term expected returns;
• Assumption changes and management actions that impact the measurement of assets and liabilities;
• Business transformation impacts which include acquisition and divestiture costs and restructuring and integration costs;
• Material legal settlements, material impairment charges related to goodwill and intangible assets, impacts of income tax rate changes on the remeasurement of deferred tax assets and liabilities and other tax impairments, net gains, losses or costs related to the disposition or acquisition of a business; net earnings (loss) from discontinued operations;
• Realized gains (losses) on the sale of assets measured at fair value through other comprehensive income (FVOCI);
• The direct equity and interest rate impacts on the measurement of surplus assets and liabilities;
• Amortization of acquisition related finite life intangible assets; and
• Other items that, when removed, assist in explaining the Company's underlying business performance.

Assets under management (AUM) and assets under administration (AUA)

Assets under management and assets under administration are non-GAAP measures that provide an indicator of the size and volume of the Company's overall business.  Administrative services are an important aspect of the overall business of the Company and should be considered when comparing volumes, size and trends. 

Total assets under administration includes total assets per financial statements, proprietary mutual funds and institutional assets and other assets under administration.

NON-GAAP RATIOS

A non-GAAP ratio is a financial measure in the form of a ratio, fraction, percentage or similar representation that is not disclosed in the financial statements of the Company and has a non-GAAP financial measure as one or more of its components.  These financial measures do not have a standardized definition under IFRS and might not be comparable to similar financial measures disclosed by other issuers.

The non-GAAP ratios disclosed by the Company each use base earnings (loss) as the non-GAAP component.  Base earnings (loss) reflect management's view of the underlying business performance of the Company and provides an alternate measure to understand the underlying business performance compared to IFRS net earnings.

• Base dividend payout ratio - Dividends paid to common shareholders are divided by base earnings (loss).
• Base earnings per share - Base earnings (loss) for the period is divided by the number of average common shares outstanding for the period.
• Base return on equity - Base earnings (loss) for the trailing four quarters are divided by the average common shareholders' equity over the trailing four quarters. This measure provides an indicator of business unit profitability.

SOURCE Great-West Lifeco Inc.

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