Great-West Lifeco Inc Fireside Chat with CIBC Capital Markets (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Paul Holden - CIBC World Markets Corp - Analyst : So I think I'm just going to jump straight into some questions. For those in the audience, please maybe give me an opportunity to ask three or four, but we do highly encourage audience participation. (Event Instructions) So David, maybe let's start with some sort of high-level questions which, again, I think are appropriate. Just given GWO had its Investor Day not that long ago, early April, you're new to the CEO chair, July 1. And I imagine you did play a major role in creating the plan at the Investor Day, and that nothing really changes with you as CEO, I imagine it was all laid out. But maybe you can kind of run through what are your top priorities, particularly in year one, as CEO?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. I mean, given that answer, it sounds like clearly you're coming into a position, or the company is in a position of strength. But I want to kind of break down the plan and to maybe two sort of buckets, right? Parts of the plan where you think it's -- there's high probability of success, as we call it in North America, the so-called slam dunks. And then maybe are there parts of the plan where a little bit more heavy lifting is required, like on digital, is there more -- a lot more work required in the next few years?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Yeah, okay. I want to ask you about the ROE objective. You already pulled that out in your first answer, 19% plus. That's above where GWO obviously currently is and has been historically. I think that's higher than most insurance companies would be targeting globally. So have you identified maybe the top three or four factors that enables Great-West to drive that ROE, what would those factors be?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Yeah. Okay. You already touched a little bit on what my next question is, which is the challenge with the higher ROE, it's a good challenge, but the challenge with the higher ROE is the deployment of all that excess capital. Particularly, as you pointed out, a lot of your growth is LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Yeah. I mean, I guess one of the obvious ones to me would be the Workplace Solutions, again, given recent history, given the priority of growing that business and the scale advantage that Empower currently has.

Question: Paul Holden - CIBC World Markets Corp - Analyst : I mean, past acquisitions have added a lot of earnings accretion and being -- opened up the opportunity for large cost synergies. Now, I guess my question is, given you've scaled the business even more, you have a lot of integration expertise. Could that sort of that financial opportunity in terms of driving synergies and EPS creation be even more powerful going forward?

Question: Paul Holden - CIBC World Markets Corp - Analyst : And sort of on that point, with the Q2, you announced some product initiatives, zero cost, S&P 500 Index, also expanded relationships with investment managers and private asset classes. So is that part of the play in terms of encouraging more savings? Is that how it benefits Empower?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Sure. I want to back up a bit and talk sort of again at the sort of the all Lifeco level, if you will, or the all company level. Really curious on the expensive initiatives sort of driving operating leverage could be a big part of that ROE story in coming years. So like what you've what you LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Got it. Understand. And is that like -- is that scalability? Is that really unlocked because of these investments in technology? Is that what enables the scalability and efficiency gains?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. So I mean, pretty clear, these technology investments are going to play a role in efficiency gains in the coming years. Curious to what extent are you also investing in technology or maybe using the same technology to enhance customer engagement, so more on the revenue side of the equation. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Good. One topic I feel like we don't talk enough about for Great-West, but for life insurers broadly is risk management that probably hopefully speaks to you given your actuarial background. But we focus a lot on ROE, a lot on EPS growth. But I think risk management and avoiding sort of the negative impacts to earnings and balance sheet over time has been just as important for shareholder performance in the Lifeco space over time as those other factors.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. Good. I don't see any hands raised. So I just want to remind those that are on the line, please do put up your hand, or again, send me an email, paul.holden@cibc.com. If you want to ask David a question, please fire away. We've already talked about Empower quite a bit, but it's obviously -- it's an important part of the story. So I want to drill down a little bit more here on the Empower. It's sort of a very high-level question. So the target, I think, is to make Empower 35% to 40% of total earnings for the company by 2029. Why -- from a shareholder's perspective, why is an increasing proportion of earnings from Empower a good thing? Why is this the right thing to do for shareholders?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. So I get a lot of questions on the net participant outflows from the Workplace Solutions business. You've heard those questions on the conference calls as well, and you've actually given guidance. I think your guidance is 50 basis points to 100 basis points roughly of annual net outflows over time. But there's some people that worry, given recent experience, it might be higher than that. But yet, you're forecasting, I think, annualized double-digit growth of the business. So maybe you can kind of help us bridge the gap between that sort of persistent net plan withdrawals from existing participants and the expectation for a low double-digit earnings growth.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Let's talk about that dynamic, the Empower Wealth business and that rollover capture, which looks like -- I mean, I think your official target is a 30% improvement in the capture, and correct me if I'm wrong on that, but I think it's 30%. And then you saw good results and good flows in the Q2 and that follows a good Q1, by the way, also. So it seems to be working. But the question I get, I guess, from investors is what is Empower Wealth doing that's different than maybe the traditional advisors? How are you improving that capture rate? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Let's talk about some of the other business segments because they're also important. When I look at the European business segment of business, quite well, obviously, the underlying growth drivers look strong, whether I look at CSM growth, the group benefits, in-force premiums, wealth and retirement assets, all growing double digits. So when I look at that, it looks to me like Europe should be on track to

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. So in the last, I don't know, maybe I'll call it five years, maybe even shorter term, seen a lot of moving pieces in Europe. Number of acquisitions, number of dispositions, none of them massive in terms of size, but there's been quite a number of them. So what's kind of been -- first off, what has been the high-level objective, the purpose of this sort of, I'll call it trading assets? And is the process mostly complete? Or is there more to come?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. I want to ask you a very specific question or on a very specific product line. Because again, a question I get from time to time on the UK, UK bulk annuities, why is this a good business? Why do you continue to participate in this business?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. So you're happy with the ROEs, the returns of that business?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay, good. I really like the Capital and Risk Solutions business, at least the financial results come out. But I think where people struggle a bit with that business, it's a little bit of an enigma. It's hard for people to wrap their head around exactly what's underwritten in Capital and Risk Solutions. I think you pulled back the veil a bit on the Investor Day and certainly some helpful new disclosure there. But really, what are the unique capabilities that enables Great-West to generate such high returns and good quality growth over time in Capital and Risk Solutions?

Question: Paul Holden - CIBC World Markets Corp - Analyst : Yeah. So going back to the point you made on sort of the primary insurers laying off risk, and again, I think with sort of the complexity of this business, that's where maybe investors get -- let's say it this way, it leads to a lot of investor questions. How do we know Great-West is not taking on bad risk versus good risk? So what -- maybe walk us through a little bit the risk management process at CRS and the risk tolerances put in place there.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Yeah, for sure. Okay. We're almost out of time, but we haven't talked about Canada at all. So maybe one question on Canada and sort of broader one. I mean, you've alluded to it already, I think a little bit. Canada, relatively mature, slower growth market, but maybe you can kind of just review your growth and ROE ambitions here in Canada and, I think importantly though, maybe how you're differentiating from the other life insurers here as well. What are the points of differentiation? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay, good. Well, David, we've we spent almost an hour doing Q&A. You've allowed me to pepper your thoughts with questions. So thanks for that. I don't know if you want to kind of provide any quick closing thoughts. Again, I think we've covered a lot of ground already, but maybe some concluding thoughts from you would be great.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. Great, David. Again, thank you for your time, and thanks, everyone for dialing in and listening. Have a great day.

Question: Paul Holden - CIBC World Markets Corp - Analyst : Thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.