Arshil Jamal
President and Chief Operating Officer
Canada Life Capital Corporation
Scotia Capital Financials Summit
September 8, 2011
2
Cautionary Note regarding Forward-looking Information
This report contains some forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” and similar expressions or negative versions thereof. In addition, any statement that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future action by the Company, including statements made by the Company with respect to the expected benefits of acquisitions or divestitures, are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events 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 and mutual fund industries. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Company due to, but not limited to, important factors such as sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, taxes, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, changes in accounting policies and the effect of applying future accounting changes including the adoption of IFRS, unexpected judicial or regulatory proceedings, catastrophic events, and the Company's ability to complete strategic transactions and integrate acquisitions. The reader is cautioned that the foregoing list of important factors is not exhaustive, and there may be other factors, including factors set out under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates", in the Company's 2010 Annual MD&A, and any listed in other filings with securities regulators, which are available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Company does not intend to update any forward-looking statements whether as a result of new information, future events or otherwise.
Cautionary Note regarding Non-IFRS Financial Measures
3
Outline
1.
Lifeco Overview
2.
Europe
3.
Reinsurance
4.
Invested Assets
212 246 233 237 232 238 245 262 68 36 68 54 88 133 88 128 167 165 140 142 158 138 86 147Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
445 443 441 433 479 508 415 526Note: Consolidated totals include corporate earnings
Solid/Stable Operating Earnings
2009 2010
2011
(1)Constant Currency
(2)Operating Earnings
1) 2011 based on IFRS
$445
$449
$459
$461
$501
$536
$439
$563
Canada
U.S.
Europe
Europe 6% Canada 35% Canada 17% U.S. 17% Europe 17% Reinsurance 8%
Great-West Lifeco Earnings
52%
17%
31%
41%
51%
8%
5
Canada
U.S.
Europe
Protection
Wealth
Management
Reinsurance
2010 Earnings by Geography
2010 Earnings by Product
1) Excludes U.S. Asset Management and Corporate
(1)
(1)
Individual Insurance 15% Wealth Management 17% Group Insurance 20% Financial Services 17% Insurance & Annuities 23% Reinsurance 8% 17.0% (5.0)% 15.9% 1.4% 25.7% 22.7% Lifeco Lifeco Corporate Europe Putnam U.S. Financial Services Canada6
Strong, Broad Based Operating Return on Equity
2010
2011
Trailing four quarter measure
16.6% 16.4% 17.0%
Q4 Q1 Q2
Lifeco Operating ROE
Operating ROE By Business Unit – Q2 2011
(1)
(1) U.S. Financial Services includes U.S. Corporate business unit
$4.4 $1.5 $1.6 $3.1 $0.4 $11.0
Average Allocated Equity
7
202%
202%
202%
203%
200%
200%
Q1
Q2
Q3
Q4
Q1
Q2
Great-West Life’s 200% MCCSR ratio does not include any benefit from
approximately $0.7 billion of cash at the Lifeco holding company level at
June 30, 2011
The GWL&A RBC ratio at December 31, 2010 was 408%
Solid, Stable Capital Ratios
2010
2011
The Great-West Life Assurance Company - MCCSR
Financial Strength / Claims Paying Ability
Senior Debt
Sub-Debt
Preferred Shares
A.M.
Best
Moody’s
Fitch
S&P
DBRS
DBRS
Fitch
S&P
DBRS
S&P
DBRS
S&P
AA
(low)
A
A+
Pfd-1
(low)
A-,
P-1
(low)
A+
Aa3
AA
AA
IC-1
Pfd-1
A+, P-1
A+
Aa3
AA
AA
IC-1
A+
Aa3
AA
AA
IC-1
AA
(low)
AA-Pfd-1
(low)
A-,
P-1
(low)
A+
Aa3
AA
AA
Great-West Lifeco and its subsidiaries continue to hold strong credit ratings
9
Europe - Vision & Strategy
Vision
Enhance value of Great West Lifeco with a high return, high growth set of
businesses that operate in chosen niches
We are a fact based, focused and risk averse operator
Strategy
Choose businesses and products where the accounting and actuarial
playing field is level compared to local companies
Develop a high relative market share in our business to provide scale and
knowledge advantage over competitors
Create shared centres of excellence for specialized services to maintain low
unit costs while retaining and maximizing specialized talents
FACT
BASED
FOCUSED
RISK AVERSE
10
U.K. / Isle of Man – Overview
Among the top 20 Life Insurance Companies operating in the U.K.
Ke
y
Products &
share
• Retirement
income
• Wealth
accumulation
Product Purpose
• Payout Annuities
- Among top 5 with 7%
market share; 14% in
“open market”
• Savings
- Among the top 12 in
the onshore unit-linked
single premium bond
market
Onshore
• Tax advantaged
wealth accumulation
• Savings
- A top provider of
offshore single
premium investment
products into the U.K.
with 17% market share
• Protection
• Living benefits
• Life Insurance
- The market leader with
30% market share
• Income Protection
(Disability) &
Critical Illness
- # 2 in the market with
20% market share
11
Germany Overview
11
Ke
y
Products
Product Purpose
• Retirement focused wealth
accumulation
• Protection
- Market leader in Serious Illness
Protection in Germany
• Living benefits
• Pensions
• Individual Life Insurance
• Income Protection
(Disability)
• Critical Illness
• Variable Annuities (GMWB)
4
th
largest insurance market in
the world
Market has not undergone
significant consolidation
- Top 10 companies make up
~55% of market
Canada Life in Germany
Started in 2000, strong brand
recognition
Contracts with 7,500 brokers
Among the top 5 in the German
Unit Linked Single Premium
market
AUM of €1.8 B (C$2.4B)
Ireland Overview
Ke
y
Products
• Retirement focused
wealth accumulation
• Wealth accumulation
• Protection
• Living benefits
Product Purpose
• Pensions
• Savings
• Individual Life Insurance
• Income Protection
(Disability)
• Critical Illness
Canada Life in Ireland
Operating since 1903
- Established brand
Among the top 6 insurers in the
Irish market by new business
market share
3,247
4,706
4,480
4,280
3,610
4,511
439
499
591
608
624
666
819
930
1,070
705
682
648
2005
2006
2007
2008
2009
2010
4,532
6,156
Europe 5.2% 05 - 10 CAGR6,163
5,615
4,937
U.K. / Isle of Man 6.8% Ireland (4.6%)5,846
Germany 8.7%Europe – Premiums (Constant 2010 Dollars
1
)
1At 2010 translation rates (£ 1.59, € 1.37)
(Constant 2010 C$ Millions)
13
U.K. / Isle of Man
Germany
Ireland
198
234
310
384
316
392
33
34
37
43
39
41
51
44
25
34
-8
8
2005
2006
2007
2008
2009
2010
U.K. / Isle of Man 14.6% Europe 9.4% 05 - 10 CAGR347
461
372
312
282
441
Germany 4.7% Ireland (31.3%)Europe – Net Earnings (Constant 2010 Dollars
1
)
1At 2010 translation rates (£ 1.59, € 1.37)
14
U.K. / Isle of Man
Germany
Ireland
Excluding currency impact, 2010 net earnings increased $94 million, or 27%,
from 2009
Context
Outlook
United
Kingdom
Represents majority of our European business
Continue to see
opportunities for growth
Payout
Annuities
Significant growth from 2005 to 2010 through
block acquisitions and organic sales growth
Expect growth to continue at
a more modest pace
Group Life &
Health
Market size driven by total UK payroll
Life share is stable
Health share is growing
Wealth
Management
Wealth management market (onshore &
offshore) is recovering following the credit crisis
– Canada Life has gained sales share during
market downturn
Well positioned to benefit
from market recovery
Germany
Focused on an attractive niche
– Unit linked products with returns driven by
equity markets
• Recent market volatility has shifted assets
to guaranteed products
Positioned for growth once
markets stabilize
Ireland
Irish business is relatively small
– Canada Life well regarded as a solid, well
capitalized player
– Multi channel approach has worked well with
solid direct sales performance
Growth dependent on
market turnaround
Market conditions remain
challenging with 2010 new
business at half of 2008
levels
15
Europe - Opportunities
Reinsurance – Business Overview
Structured
Life
Property
Catastrophe
Traditional
Life
58
121
122
186
153
154
2005
2006
2007
2008
2009
2010
Reinsurance – Net Earnings
17
Business mix actively managed to be responsive to business conditions
(C$ Millions)Reinsurance – Opportunities
Earnings of ~$150M per year with attractive return on capital
Source of diversification (geographic, product line, type of risk)
Market intelligence and industry insights
Expect business to grow in line with overall Lifeco earnings
Traditional life reinsurance is a stable, mature market delivering
attractive returns on in-force business
Structured life; Significant opportunity to grow business in the US;
Solvency II likely to create opportunities in Europe
P&C business offers attractive margins cross cycle; total exposure is
carefully managed and monitored
Annuity business growth managed in concert with primary payout
annuity business in the UK
18
Benefits to
Lifeco
Investments: Philosophy & Practices
19
Conservative
Investment Policies
Company-wide risk management culture
Diversified
Portfolio of High
Quality Assets
Long-term Track
Record in
Investment Grade
Markets
Controlled
Approval Process
Conservative
Asset/Liability
Management (ALM)
No purchases of below investment grade assets
Negligible investments in alternative assets
Internal resources to underwrite all bond, mortgage and real estate
investments with specialized teams in Europe investment operations
In each region, credit approval is limited to senior investment officers
Focus on cash flow and duration matching
Bonds 84% Mortgages 6% Real Estate 5% Cash & CD's 4%
Lifeco Invested Assets at June 30, 2011
Invested Assets - Europe
Invested Assets - Lifeco
Government 31% Corporate 69%
21
Europe - Bonds
Europe Ratings
1) Excludes short-term bonds of $747mm
Europe Total Bonds - $31,099
(1)Corporate Bonds ‐ Industry Classification Banks 20% Utilities 19% Financial Services 11% Government Related 11% Consumer Products 10% Real Estate 9% Sovereign/Supranationals 6% Transportation 4% Communications 4% Oil & Gas 3% Miscellaneous 2% Basic Materials 1% Industrial 1% 100%
AAA
41%
AA
16%
A
30%
BBB
11%
BB & Lower
2%
Government 6% Retail 32% Retail Grocery 15% Retail DIY 2% Financial 5% Hotel 11% Other 29% Office 22% Retail 49% Residential 5% Industrial 9% Other 15%22
Europe - Mortgages ($2,364 mm)
Tenant
Vintage
Classification
Average unexpired loan term of
14.6 yrs versus average unexpired
lease term of 20.3 yrs
Loan-to-value ratio of 89.4%
Debt service coverage ratio of 1.56x
Interest coverage ratio of 1.73x
Well diversified by geography
Government 7% Retail 17% Retail -Grocery 32% Retail - DIY 13% Leisure 8% Financial 3% Other 20%
23
Europe - Real Estate ($2,376 mm)
Property Type
Investment Properties by Tenant
Average remaining lease term 16.4 yrs.
Vacancy rate of 0.63%
Well diversified by geography
Office
23%
Industrial
11%
Retail
46%
Residential
4%
Other
16%
Bond Holdings of Government & Financial Institutions in
Portugal, Ireland, Italy, Greece and Spain
No direct exposure to Greece
Aggregate holdings of bonds issued by
governments of Portugal, Ireland, Italy and
Spain, and financial institutions domiciled in
those countries, totaled $926 million
(amortized cost)
–
Down $131 million in the quarter
Unrealized losses totaled $158 million
–
Ireland accounts for $113 million;
•
$65 million shareholders
•
$48 million participating account
Provisions of $50 million
–
$28 million of specific provisions against impaired
holdings
–
$22 million of asset default provisions
Amortized Unrealized
(C$mm) Portugal Ireland Italy Greece Spain Cost Loss
AAA - - - - - AA - - - - - A - - 51 - 52 103 115 (12) BBB 15 155 - - - 170 234 (64) BB& lower - - - - - -Q2 2011 Total Gov't 15 155 51 - 52 273 349 (76)
and Gov't Related AAA - - - - 46 46 46 AA - 63 30 - 20 113 134 (21) A - - 65 - 201 266 287 (21) BBB - - 61 - - 61 73 (12) BB& lower - 9 - - - 9 37 (28) Q2 2011 Total - 72 156 - 267 495 577 (82) Financial Institutions Q2 2011 Total 15 227 207 - 319 768 926 (158) Q1 2011 Total 15 281 210 - 332 838 1,057 (219)
