Great-West Lifeco Inc.

Thank you for standing by. This is the conference operator. Welcome to the Great West LifeCo first quarter 2024 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Mr. Paul Mann, President and CEO of Great West Life Co. Please go ahead.

Thanks, Kayleen. Good afternoon and welcome to Great West Life Co.' 's first quarter 2024 conference call. Joining me on today's call and to deliver parts of the formal presentation are Ed Murphy, President and Chief Executive Officer at Empower, and John Nielsen, Executive Vice President and Chief Financial Officer. As I look around the table here today, there are three faces that are missing from the last quarter. Gary McNicholas, retiring after 43 years, Jeff McCowan, retiring after 40 years, and Arshil Jamal, retiring after 25 years. I know they are listening in as keenly interested investors and want to thank them for their important contributions over so many years. I also want to welcome a few officers who have not participated in past calls with analysts and investors. John Nielsen, of note, as our Lightco CFO, Fabrice Morin, as president of our Canadian operations, Jeff Coulin, who leads our capital and risk solutions business, and also Linda Kerrigan, our appointed actuary. They, along with other officers that you've heard from before, will be available to answer your questions. I'll now draw your attention to our cautionary notes regarding forward-looking information and non-GAAP financial measures and ratios, which is found on slide two. These cautionary notes apply to the information we'll discuss during the call. Please turn to slide five. I'm pleased to share that we've had a great start to the year, building on our momentum from 2023. Together, our teams delivered a third consecutive quarter of record-based earnings, and for the first time, we exceeded $1 billion in base earnings. Net earnings were also over a billion this quarter. These results reflect the intentional and disciplined work we've done to strengthen and reposition the portfolio for sustainable growth. We've seen excellent performance across all four of our operating segments, each of which have clear business strategies to unlock value and drive growth today and over the longer term. In the U.S., the execution of our strategy continues to deliver results. Empower reported record-based earnings this quarter, surpassing $1.6 trillion in assets under administration. Past acquisitions have expanded Empower's scale and capabilities and continue to provide a foundation for strong and sustainable growth. We've completed the integration of Prudential's full-service retirement business, solidifying Empower's position as a preeminent workplace retirement services provider in the U.S., Empower exceeded retention targets set for this integration and successfully is achieving its target run rate cost synergies. Ed will share more on Empower's results and provide an integration update following my comments. Across our businesses, we're delivering against our value creation goals, and we are operating at the top of the range of our base ROE medium-term objective. Our financial strength and flexibility leave us well-positioned for continued strong growth. and our stable of trusted brands continues to support excellent performance and market leadership. Earlier this year, Brand Finance, a leading brand valuation consultancy, rated Canada Light the third most valuable brand in Canada and the highest-ranked Canadian insurance company in a list of over 5,000 brands across industries. This recognition reflects our commitment and focus on our people, our customers, advisors, and communities. Please turn to slide six. Our results this quarter reflect a strong start to the year. Base earnings of $1 billion and base EPS of $1.09 increased 23% and 22% respectively over the prior year. Base ROE increased to 17.2%, up over a full percentage point over the prior year, and book value per share also increased 6%. Our capital position continues to strengthen, including increased cash, a higher LICAT ratio, and a stable leverage ratio. While this was a great quarter, we want to note that the high earnings growth is relative to a softer first quarter in 2023, which was also the first under IFRS 17. We also note that the first quarter of 24 does not reflect the full potential impacts of global minimum tax, which will affect future quarters if enacted. Please turn to slide 7. In Canada, we delivered solid results and continued to take actions to position the business for sustainable growth and performance. In individual wealth, the acquisition of Investment Planning Council, coupled with positive market performance, significantly accelerated growth in average AUA. While the acquisitions of IPC and Value Partners have improved net flows, the SEG Fund industry remains in outflows. We're continuing to take steps to strengthen our individual wealth business as we build a leading platform for our advisors and customers, including reinforcing the unique value segregated fund products have for customers. In group life and health, our results continue to reflect our leading position in the Canadian market, with premiums up 19% year over year, driven by solid organic growth and the addition of the public service health care plan. In insurance and annuities, CSM increased over the last quarter, largely due to a one-time reinsurance recapture gain. We continue to approach non-participating insurance with a focus on customer value balanced with pricing discipline. We do not consider CSM to be a key growth metric in Canada, given our capital-light growth focus on our workplace and wealth businesses. Please turn to slide 8. Our European business delivered a fifth consecutive quarter of growth across all value drivers. These results are supported by consistent performance across our product lines, which benefit from the stable nature of financial necessities like group benefits, annuities, and retirement savings. Last year, we took disciplined actions across our European businesses to strengthen our market position. The benefits of these actions will be reflected in future quarters results. In wealth and retirement, average AUA was up 14% year over year due to good market performance and positive net inflows. Growth in wealth remains underpinned by our wealth strategy in Ireland under the Unio brand and through our JV with Allied Irish Bank. In workplace, we experienced solid sales and organic growth in group life and health in both the UK and Ireland with book premiums up 10% year over year. In insurance and annuities, individual and bulk annuity growth in the UK helped drive CSM up 17% year-over-year. Overall, this was a very strong quarter of quality earnings across Europe, and we feel well-positioned to continue this performance over the medium term. Please turn to slide 9. Our capital and risk solutions business continue to create value with strong structured business growth and expansion into new markets. As a result of the global minimum tax not yet being in effect in Canada and the Barbados, these results exclude the anticipated tax impact we disclosed during our fourth quarter call last year or earlier this year. CRS had positive insurance experience with lower than expected mortality results in our U.S. traditional lifebook. Our sales continued to grow largely through our U.S. structured business. Please note that this structured business is accounted for on a PAA basis and does not impact CSM. Looking ahead, we see lots of opportunity for our CRS business to continue to grow and act as an important diversifier for LIFCO through disciplined pricing and risk selection in line with our value creation objectives. I'm now going to turn the call over to Ed Murphy to discuss the EMPOWER results. Over to you, Ed.

Great. Thank you, Paul, and good afternoon, everyone. We delivered a strong quarter at Empower with growth across both workplace solutions and personal wealth. In both business lines, we continue to earn new business and capitalize on our enviable market position with a differentiated offer in the retirement services space. Our wealth business continues to see gains in large part as a result of the scale brought by our workplace business. Our average AUA has risen to $1.6 trillion, supported by the benefits of higher markets, Over the past year, our average AUA is up more than 15% in the workplace business. We've seen especially strong growth in the public plan sector and also in the advisor sold segment where we continue to benefit from strong relationships with intermediaries. In fact, Empower recently introduced a new innovation to the workplace market to help address the needs of smaller employers. Leveraging our digital capabilities, this offering helps streamline the end-to-end 401 plan setup process and simplifies plan features and design decision points. The new solution helps to reduce both cost and administrative burdens often faced by small employers. Recent new policy improvements, the SECURE 2.0 Act, including tax incentives, have created new opportunities for employers to start retirement plans. This has the two-fold benefit of putting in power in a positive industry leadership position and helping to address a pressing public policy retirement need in the U.S. A third-party research firm, Cerulean Associates, recently published a forecast showing significant growth potential in the 401k market in the U.S. There are approximately 700,000 plans in existence today. Due to these new opportunities for small employers to start retirement plans, by the end of the decade, that number could total a million plans, increasing the market size from $31 trillion to a predicted $47 trillion, according to Cerulli. In addition, Empower announced new partnerships with industry peers to offer a suite of retirement income products in the market. The case for retirement income in our market is strong, and our demonstrated leadership role in the industry positions us advantageously for the future. One of the hallmarks of our successful workplace business is the diversified client base we serve. The business benefits from a segmentation strategy that has Empower servicing the needs of different clients through different channels and approaches. On the personal wealth side, average assets under administration is up 25% since the first quarter of last year, which was when the new Empower personal wealth brand was launched. Both strong market performance and continued net inflows have contributed to our success in this business. Please turn to slide 12. Empower is built on a foundation of three building blocks that make us successful. Industry leading retirement plan services, growing our direct-to-consumer wealth management business, and M&A excellence. In today's remarks, I will focus on the third item listed here, excellence in M&A. Turn to slide 13, please. Customers and intermediaries recognize that Empower has made acquisitions and investments. They know that we're committed to the retirement services market while other providers have exited. We believe this is a critically important factor in our growth and provides intrinsic value to our brand and reputation that is not always quantifiable. Customers want to put their plans with a provider that is committed to the retirement business. Empower's acquisitions of J.P. Morgan, MassMutual, and Prudential have helped to deliver that message. Following these acquisitions, Empower now administers $1.6 trillion in assets on behalf of 18.6 million individuals. Please turn to slide 14. Since 2014, Empower has generated significant value by utilizing its technology and integration prowess to drive synergies and reduce cost. During that period, Empower successfully completed 26 different planned migration waves, including 48,000 plans, 6.7 million participants from 10 different record-keeping platforms, 500 billion data values. In total, we have integrated 657 billion in assets. What we have accomplished here is not simple. Record-keeping integration requires significant skill set, and we have the best team in the industry that knows how to do this work.