Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Great-West Lifeco Inc (GWLIF, Financial) reported a sixth consecutive quarter of record base earnings, demonstrating strong momentum in growing shareholder value.
- Empower, the US segment, delivered a record quarter with base earnings growth of 36% and a significant increase in base ROE.
- The company announced a 10% increase in its quarterly dividend, reflecting strong financial performance and commitment to shareholder returns.
- Great-West Lifeco Inc (GWLIF) maintained a strong capital position with a LICAT ratio of 130% and a comfortable leverage ratio.
- The company reported broad-based growth across its value drivers, with significant contributions from favorable equity markets and stronger foreign currencies.
Negative Points
- The company faces tariff-related uncertainties in Canada, the US, and other markets, which could impact future economic conditions.
- Empower experienced net outflows due to planned member withdrawals, a trend consistent across the industry.
- Insurance and annuities in Canada saw a decline in CSM, primarily due to the impact of last quarter's assumption changes.
- The Capital and Risk Solutions segment anticipates modest impacts from recent tragic events in California, with potential claims related to ongoing wildfires.
- The UK insurance and annuity sales experienced volatility, with significant quarter-to-quarter fluctuations in the bulk annuity market.
Q & A Highlights
Q: Is it realistic to expect Great-West Lifeco to revisit its financial targets at the upcoming Investor Day in April?
A: Paul Mahon, President and COO, Canada, stated that while they are comfortable with their current base EPS growth objective of 8% to 10%, they are open to revisiting their base ROE target of 16% to 17% at the Investor Day. The company aims to align financial targets with strategy and compensation frameworks, emphasizing management's motivation to outperform.
Q: Given the recent reduction in catastrophe exposure, is there a desire to further decrease this exposure?
A: Paul Mahon explained that the company manages its business with a risk-first approach, staying away from core risks. Jeff Poulin, Executive VP & CEO of Canada Life Reinsurance, added that while the market has softened, they have not deployed all their capacity at renewal, maintaining a risk-conscious approach. The P&C earnings are a small part of the overall earnings, and they do not plan to grow this segment further.
Q: How does Great-West Lifeco view its stock buyback strategy, especially given the significant shareholding by IGM?
A: Paul Mahon emphasized that capital allocation priorities include organic growth, inorganic opportunities, and returning capital to shareholders. The $500 million buyback is a tool in their toolkit, reflecting strong cash generation and financial flexibility. Jon Nielsen, CFO, noted that they have room under the existing NCIB program and could consider an SIB if needed.
Q: What is driving the strong performance in the structured product sales within the Capital and Risk Solutions segment?
A: Jeff Poulin highlighted that the company has been adept at identifying opportunities in the market, with the fourth quarter typically being strong due to year-end adjustments by companies. They completed two asset-intensive transactions and two large structured transactions, with a focus on long-term structured transactions under the GMM approach.
Q: How is Empower positioned for growth in the small business 401(k) market, especially with the rise of state auto IRAs?
A: Edmund Murphy, CEO of Empower, stated that Empower has a low-cost option for small businesses and is well-positioned due to its distribution scale and capabilities. The growth in state auto IRAs is expected to boost new plan formations, contributing to increased flows in the defined contribution space.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
