|

February 14, 2024

Great-West Lifeco reports record base earnings in the fourth quarter of 2023; announces 7% dividend increase

This earnings news release for Great-West Lifeco Inc. should be read in conjunction with the Company’s Management Discussion & Analysis (MD&A) and Consolidated Financial Statements for the periods ended December 31, 2023, prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board unless otherwise noted. These reports are available on greatwestlifeco.com under Financial Reports. Additional information relating to Great-West Lifeco is available on sedarplus.com. Readers are referred to the cautionary notes regarding Forward-Looking Information and Non-GAAP Financial Measures and Ratios at the end of this release. All figures are expressed in millions of Canadian dollars, unless otherwise noted.

  • Base earnings of $971 million, or $1.04 per share, up 9% from Q4 2022.
  • Full year base earnings of $3.7 billion, up 11% over 2022; Empower surpasses $1 billion base earnings.
  • Net earnings from continuing operations of $743 million or $0.80 per share, up 55% over Q4 2022.
  • Full year net earnings from continuing operations of $2.9 billion.
  • Company strategically repositioned for future growth.


Winnipeg, February 14, 2024 – Great-West Lifeco Inc. (Lifeco or the Company) today announced its fourth quarter 2023 results.

“Our continued strong performance is supported by a solid foundation of diversified businesses and the disciplined actions we’ve taken to reposition our portfolio,” said Paul Mahon, President and CEO, Great-West Lifeco. “We’ve delivered back-to-back quarters with record base earnings per share, while at the same time positioning the Company for future growth.”

“This quarter also marks a transition of senior leadership as we welcome Jon Nielsen and Fabrice Morin as the company’s incoming Chief Financial Officer, Great-West Lifeco and President & Chief Operating Officer, Canada, respectively, on February 16, 2024,” continued Mahon. “I’d like to personally congratulate Garry MacNicholas, Jeff Macoun, and Arshil Jamal on their retirements and thank them for their dedicated contributions to our company’s success over their careers which each spanned many decades.”

Key Financial Highlights

1 This is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2 Base EPS and base return on equity are non-GAAP ratios. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
3 Base return on equity and return on equity are calculated using the trailing four quarters of applicable IFRS 17 earnings and common shareholders' equity.
4 Comparative base earnings results are restated to exclude discontinued operations related to Putnam Investments.

Record base earnings5 of $971 million or $1.04 per common share, up 9% from $894 million a year ago reflects the actions the Company has taken to reposition the portfolio. This includes investments made to add scale and capabilities at Empower to strengthen its DC recordkeeping business and accelerate growth in its personal wealth business. It also reflects the impact of favourable economic conditions as higher average equity markets have resulted in higher fee income and higher interest rates have increased earnings on surplus.

Net earnings from continuing operations of $743 million or $0.80 per common share, compared to $478 million a year ago. Compared to a year ago, net earnings are higher as a result of higher base earnings, more favourable market experience and assumptions and management actions.  In addition, strategic actions in Europe in the quarter resulted in a net gain of $78 million.

Highlights

  • The Company’s focused strategy, disciplined execution and trusted brands are driving strong performance and value creation for shareholders:
    • 2023 base earnings reached $3.7 billion, up 11% from 2022; Q4 2023 marked back-to-back quarters with record base EPS. Empower surpassed $1 billion base earnings, exceeding the pbjective announced at the beginning of 2023.
    • Delivering on our Medium-Term Financial Objectives
      • 11% base EPS6 CAGR over 5 years;
      • 16% base ROE6 average over 2 years; and
      • 56% base earnings average dividend payout ratio6 over 5 years.
    • Book value per share7 of $24.26, up 4% year over year.
    • Canada Life named top 3 most valuable brand in Canada by Brand Finance.
  • Actions to reposition and improve capital efficiency are supporting the Company’s near and long-term growth:
    • Sale of Putnam Investments to Franklin Templeton on January 1, 2024, unlocks value and furthers Lifeco’s strategy of building and extending strategic partnerships with best-in-class asset managers to support clients’ retirement, group benefits, and personal wealth management needs.
    • The integration of Prudential’s full-service retirement services business has to date achieved above target client retention and US$80 million of pre-tax run rate cost synergies. The integration remains on track to deliver the remaining expected synergies and be completed in 2024 as planned.
    • Completed the acquisition of Investment Planning Counsel (IPC), which along with the acquisition of Value Partners is supporting our goal of becoming a leading destination for entrepreneurial advisors and their clients. Together, at the end of 2023, we had over 16,000 advisor relationships and more than $100 billion in assets under administration5.
    • The Company undertook several strategic actions to help strengthen its market positions in Europe, improve capital efficiency, and enhance the outlook for 2024, including:
      • Completing the sale of a portfolio of existing policies to AIB Life;
      • Closed new business for sub-scale U.K. onshore wealth business; and
      • Reinsured an existing block of annuity business in the U.K. at attractive terms.
    • The Company’s leverage ratio decreased to 30% from 33% after the repayment of $500 million in short-term debt related to the Prudential acquisition and a maturing €500 million bond that was prefunded in late 2022.
  • There is strong momentum across all three of the Company’s value drivers:

Wealth & Asset Management

  • $30 billion in net inflows7 across Wealth and Workplace retirement businesses.
  • Empower Personal Wealth, launched in the first quarter of 2023, continued its strong growth with $18 billion total sales7 in 2023 (up 13% YoY), and ended Q4 2023 with an AUA8 of $72 billion, up 31% from Q4 2022.

Workplace Solutions

  • Workplace businesses continue to deliver strong earnings and growth:
    • Group Life & Health book premium7 up 22% year over year in Canada, and up 14% year over year in Europe.
    • Empower’s U.S. defined contribution retirement services business continues to grow faster than its peers and has now reached US$1.5 trillion in AUA8 (up 17% YoY). Net inflows7 in 2023 were US$11 billion.

Insurance & Risk Solutions

  • Consistent performance supports earnings growth and diversification of the Company:
    • Capital and Risk Solutions base earnings grew by 30% compared to Q4 2022 including favourable claims experience on prior years’ property and catastrophe losses. The quarter also showed solid momentum in new business sales and growth in structured reinsurance business.
    • Growth of contractual service margin (CSM) in Europe as a result of strong sales of U.K. individual annuities and bulk annuities and favourable assumption changes.

5 This is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
6 This is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
7 Additional information regarding this measure has been incorporated by reference and can be found in the Glossary section of our 2023 Annual MD&A.

SEGMENTED OPERATING 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 2023 Annual Management’s Discussion and Analysis (MD&A).

 8 This is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
 9 Comparative results are restated to exclude discontinued operations related to Putnam Investments.
10 Includes divestiture costs in 2023 related to the sale of Putnam Investments.

CANADA

  • Q4 Canada segment base earnings of $301 million and net earnings of $166 million – Base earnings of $301 million increased by $41 million compared to the same quarter last year. The increase reflects strong group disability results and higher earnings on surplus. These items were partially offset by unfavourable individual insurance mortality experience and favourable tax impacts in 2022 that did not repeat.

UNITED STATES

  • Q4 United States segment base earnings of US$193 million ($261 million) and net earnings from continuing operations of US$142 million ($194 million) – Base earnings of US$193 million increased by US$33 million or 21% from the fourth quarter of 2022. The increase was primarily due to increased fees and spread income resulting from organic business growth and higher average equity markets, partially offset by credit-related impairments of commercial mortgage loans.

EUROPE

  • Q4 Europe segment base earnings of $213 million and net earnings of $217 million – Base earnings of $213 million decreased by $43 million compared to the same quarter last year, primarily due to lower investment earnings as the fourth quarter of 2022 included a significant gain from trading activity that did not re-occur. This was partially offset by favourable group protection experience and the impact of currency movement.

CAPITAL AND RISK SOLUTIONS

  • Q4 Capital and Risk Solutions segment base earnings of $236 million and net earnings of $215 million – Base earnings of $236 million increased by $55 million compared to the same quarter last year, primarily due to growth in the structured business and net positive insurance experience from favourable claim developments on prior years’ property catastrophe losses. These items were partially offset by unfavourable experience in the U.S. life business and on certain structured transactions.

QUARTERLY DIVIDENDS

The Board of Directors approved a quarterly dividend of $0.555 per share on the common shares of Lifeco payable March 28, 2024 to shareholders of record at the close of business February 29, 2024.

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

First Preferred Shares

Amount, per share

Series G

$0.3250

Series H

$0.30313

Series I

$0.28125

Series L

$0.353125

Series M

$0.3625

Series N

$0.109313

Series P

$0.3375

Series Q

$0.321875

Series R

$0.3000

Series S

$0.328125

Series T

$0.321875

Series Y

$0.28125

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

Fourth Quarter Conference Call

Lifeco's fourth quarter conference call and audio webcast will be held on Thursday, February 15, at 2:00 p.m. ET.

The call and webcast can be accessed through greatwestlifeco.com/news-events/events or by phone at:

  • Participants in the Toronto area: 416-915-3239
  • Participants from North America: 1-800-319-4610

A replay of the call will be available until March 15, 2024 and can be accessed by calling 604-674-8052 or 1-855-669-9658 (passcode: 0644). The archived webcast will be available on greatwestlifeco.com.

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 end of 2023, our companies had over 33,500 employees, 232,000 advisor relationships, and thousands of distribution partners – serving approximately 42 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 annual audited financial statements for the periods ended December 31, 2023 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), strategies and prospects, climate-related  and diversity-related measures, objectives, goals, ambitions and commitments, 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, the timing and completion of the proposed sale of Canada Life U.K.’s individual onshore protection business, 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 arriving at our preliminary 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.

For more information:

Media Relations
Tim Oracheski
204-946-8961
media.relations@canadalife.com

Investor Relations
Deirdre Neary
647-328-2134
deirdre.neary@canadalife.com