Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Great-West Lifeco Inc (GWLIF, Financial) delivered record base earnings for the fifth consecutive quarter, with strong growth across all segments.
- The US segment, now the largest, achieved a 35% growth in base earnings, surpassing early 2024 objectives.
- Base EPS increased by 14% year-to-date, and base ROE is above the top end of the range, with Empower's base ROE increasing nearly 300 basis points.
- Strategic acquisitions, such as Empower's acquisition of Land Management Corporation, are enhancing offerings and market positions.
- The company maintains strong capital and cash generation across all segments, with robust regulatory capital levels providing stability and flexibility for future opportunities.
Negative Points
- The insurance service results were down year over year due to lower experience gains in Canada and unfavorable group mortality experience in the UK.
- Net participant outflows in Empower's retirement business are driven by demographic trends, with withdrawals outpacing new contributions.
- The European segment saw a 7% decrease in base earnings year over year in constant currency, primarily due to the release of a tax provision in Germany during the prior year.
- The capital and risk solutions business faced challenges in the mortality reinsurance market, with difficulties in competing due to automated underwriting and demand for guaranteed rates.
- Interest rate decreases in the third quarter could impact fixed income holdings, although the company remains optimized for rate changes.
Q & A Highlights
Q: Paul, you mentioned Great-West Lifeco is exceeding its financial objectives. What has changed since setting these expectations, and how sustainable is this growth?
A: Paul Mahon, President and CEO, explained that the growth is due to strong market performance and strategic execution, such as successful acquisitions and client retention. He emphasized the company's diversified business model and strategic outperformance as key drivers. Mahon expressed confidence in sustaining growth within their medium-term financial objectives, especially if market conditions remain favorable.
Q: Can you elaborate on the regulatory certainty in the US and its impact on Empower?
A: Paul Mahon noted that bipartisan support for retirement regulation is positive for Empower. Ed Murphy, CEO of Empower, added that the Trump administration is expected to continue policies that support retirement savings, such as tax incentives for small businesses. This regulatory environment is expected to drive new plan formations and increase plan membership, positively impacting Empower's results.
Q: What are Great-West's top priorities for capital deployment?
A: Paul Mahon stated that maintaining a strong balance sheet is a priority, followed by investing in organic and inorganic growth. He highlighted recent acquisitions like Option Trax and potential opportunities in the US retirement market. Mahon also mentioned the possibility of share repurchases if suitable opportunities arise.
Q: How does Great-West's risk appetite in P&C retrocession and mortality reinsurance look, given recent market conditions?
A: Paul Mahon and Jeff Poulin, EVP of Reinsurance, indicated that while the company has reduced its P&C catastrophe risk, it remains disciplined in seeking strong risk-adjusted returns. Poulin noted that the mortality reinsurance market is challenging, but the company is adjusting its approach and focusing on structured business opportunities.
Q: How sustainable is the improved margin at Empower, and what is the outlook for interest rate sensitivity?
A: Ed Murphy expressed confidence in sustaining Empower's improved margins through cost management and revenue diversification. Jon Nielsen, CFO, added that higher interest rates generally benefit the group, and the company is well-positioned to manage interest rate impacts, with a focus on growing assets under administration and fee income.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
