Great West Lifeco : IFRS 17 Impacts and 2022 Comparative Results

IFRS 17 Impacts and 2022 Comparative Results

May 10th, 2023

Note: All figures reflect the adoption of IFRS 17 and IFRS 9, unless otherwise stated. Unaudited comparative results for 2022 are included on a restated basis in alignment with the new standards.

CAUTIONARY NOTES

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This document 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's operations, business (including business mix), financial condition, expected financial performance (including revenues, earnings or growth rates and medium-term financial objectives), ongoing business strategies or prospects, climate-related and diversity-related measures, objectives and targets, anticipated global economic conditions and possible future actions by the Company, including statements made with respect to the expected cost, benefits, timing of integration activities and timing and extent of revenue and expense synergies of acquisitions and divestitures, including but not limited to the proposed acquisition of Investment Planning Counsel (IPC) and the acquisitions of the full-service retirement business of Prudential, expected capital management activities and use of capital, estimates of risk sensitivities affecting capital adequacy ratios, expected dividend levels, expected cost reductions and savings, expected expenditures or investments (including but not limited to investment in technology infrastructure and digital capabilities and solutions), the timing and completion of the proposed acquisition of IPC, 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 all cases, whether or not actual results differ from forward-looking information may depend on numerous factors, developments and assumptions, including, without limitation, assumptions around sales, fee rates, asset breakdowns, lapses, plan contributions, redemptions and market returns, the ability to integrate the acquisitions of Personal Capital and the retirement services businesses of MassMutual and Prudential, the ability to leverage Empower's, Personal Capital's, MassMutual's and Prudential's retirement services businesses and achieve anticipated synergies, customer behaviour (including customer response to new products), the Company's reputation, market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy and plan lapse rates, participant net contribution, reinsurance arrangements, liquidity requirements, capital requirements, credit ratings, taxes, inflation, interest and foreign exchange rates, investment values, hedging activities, global equity and capital markets (including continued access to equity and debt markets), industry sector and individual debt issuers' financial conditions (particularly in certain industries that may comprise part of the Company's investment portfolio), business competition, impairments of goodwill and other intangible assets, the Company's ability to execute strategic plans and changes to strategic plans, technological changes, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, 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, the Company's ability to complete strategic transactions and integrate acquisitions, unplanned material changes to the Company's facilities, customer and employee relations or credit arrangements, levels of administrative and operational efficiencies, changes in trade organizations, 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 the Company's filings with securities regulators, including factors set out in the Company's 2022 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 8, 2023 under "Risk Factors", which, along with other filings, is available for review at www.sedar.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 document 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$)", "core base earnings (loss)", "core base earnings (loss) (US$)", "non-core base earnings (loss)", "non-core base earnings (loss) (US$)", "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", "core margin (pre-tax)" 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 the Company's MD&A for the three months ended March 31, 2023 (the "Q1 2023 MD&A") 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.

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Paul Mahon

President & CEO

Great-West Lifeco

SUCCESSFUL TRANSITION TO IFRS 17 WITH LIMITED FINANCIAL IMPACTS; CONTINUED PROGRESS ON CURRENT BUSINESS STRATEGIES

Successfully reported under IFRS 17 in Q1 2023, including the restatement of 2022 results and continued to advance our business strategies to drive long term value creation

Medium-term financial objectives for base EPS growth and dividend payout ratio unchanged, base ROE objective increased by 2% to 16-17% reflecting the change in shareholders' equity

Enhanced reporting with Drivers of Earnings (DOE) analysis, introduction of key Value Drivers for our business and an updated Supplementary Information Package (SIP)

Transitional impacts largely as expected, in line with previous disclosure

• Reduction to shareholders' equity and book value per share (BVPS) of 12% and 14%
• Positive impacts to LICAT and leverage ratios with inclusion of CSM
• Modest increase in 2022 comparative base earnings driven by:
• • 4% increase due to the updated definition of base earnings
  • 2% decrease as a result of the transition to IFRS 17

Excellent financial strength and earnings momentum maintained

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BUSINESS STRATEGY NOT IMPACTED BY IFRS 17 WITH LIMITED IMPACTS ON BASE EARNINGS FOR MOST VALUE DRIVERS

Value Drivers

Products		Mix of Base		Impact on Base
	Earnings1		Earnings

IFRS 17 Implication

Workplace Solutions

Wealth & Asset

Management

Insurance & Risk

Solutions

Group Retirement2 Group Life & Health

Asset Management Individual Wealth3

Structured and P&C

Reinsurance

Insurance,

Annuities and Life

Reinsurance

53%

11%

13%

23%

Limited or No

Impact

Limited or No

Impact

Limited

Modest

IFRS 17 is not applicable (e.g. defined contribution); Earnings on short-term business (e.g. life & health) produces similar earnings as IFRS 4

IFRS 17 is not applicable (e.g. mutual funds);

For wealth business classed as insurance contracts (e.g. segregated funds), CSM release produces similar earnings as IFRS 4

Earnings on short-term business produces similar

earnings as IFRS 4

Timing of earnings recognition is impacted by the CSM and the delinking of assets and liabilities

1. Based on % share of 2023 Q1 Base Earnings, excluding Corporate 2. Includes Empower Defined Contribution 3. Includes Empower Personal Wealth

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