Q4 2024 Great-West Lifeco Inc Earnings Call
[music].
Thank you for standing by this is the conference operator, welcome to the Great West Life Co fourth quarter 2024 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity for analysts to ask questions join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
Speaker Change: I would now like to turn the conference over to Mr. Xu Par <unk> senior Vice President and head of Investor Relations at Great West Great West Life Oh. Please go ahead.
Xu Par: Thank you operator, Hello, everyone and thank you for joining the call to discuss our fourth quarter financial results.
Xu Par: We start please note that a link to a live webcast materials for this call have been posted on our website at great West Lifeco Dot com under the Investor Relations tab. Please.
Xu Par: Please turn to slide two.
I would like to draw your attention to the cautionary note regarding the use of forward looking statements, which form part of today's remarks and please refer to the appendix.
Xu Par: On the use of non-GAAP financial measures and important notes on adjustments terms and definitions used in this presentation.
Xu Par: Please turn to slide three.
Xu Par: Discuss our results today, joining us on the call are our president and CEO, Paul Matt Our CFO, John Nielsen, David Harney, President and CEO Europe.
Xu Par: Less pollution.
Speaker Change: But listen our president and CEO, Canada.
Ed Murphy: Ed Murphy, President and CEO empower Linda Kerrigan, senior Vice President and appointed Actuary.
Speaker Change: Yes.
Speaker Change: Second as Vice President Reinsurer.
Speaker Change: We'll begin with prepared remarks, followed by Q&A.
Paul Matt: With that I will turn the call over to Paul.
Paul Matt: Thanks, Sue, but please turn to slide five before I get into our results I wanted to acknowledge the tariff related uncertainties surrounding Canada, the U S and other markets.
Paul Matt: Governments work towards the long term resolution I wanted to assure you that our diversified portfolio of domestic businesses and strong balance sheet position us well to navigate any potential economic impacts related to this issue in the weeks ahead, we will stay focused on doing what we do best supporting our customers and communities.
Paul Matt: Turning to our fourth quarter results, we closed a year of record performance across like we.
Paul Matt: We delivered a sixth consecutive quarter of record base earnings.
Paul Matt: And this builds on our strong momentum and growing shareholder value.
Paul Matt: These results are supported by impressive performance in all of our segments and broad based growth across our value drivers, we're especially pleased to report a record quarter of base earnings in empower and the U S with the U S. Now our largest segment.
Paul Matt: We're seeing exceptional value, creating performance that empower with base earnings growth of 36% this quarter and base ROE increasing by more than 400 basis points over the past 12 months.
Paul Matt: These achievements are a testament to our clear strategies and the team's disciplined focus and execution.
Paul Matt: With our reposition portfolio are our four market, leading franchises took further steps to advance their strategies and 24.
Paul Matt: This is particularly evident in our wealth and retirement businesses, where advances in meeting more customers needs is unlocking growth.
Paul Matt: In the U S. We began the year by closing the sale of Putnam reaffirming <unk> commitment to growth and leadership in the retirement and personal wealth markets.
Paul Matt: The recent acquisition of planned management Corporation, a leading provider of stock plan Admin services is further enhanced empowers offering making it even more appealing to existing and future customers.
Paul Matt: In Canada, the integrations of IPC and value partners have positioned us as a top destination for independent advisers, and our new strategic agreement with primary life insurance strengthens our wealth business by giving even more Canadians access to segment based advice solutions.
In Europe, Canada life, UK announced the closure of its onshore bond and personal pension offering and reached an agreement to sell the business sharpening their focus on offshore bonds as the core of their wealth Division.
Paul Matt: Across our portfolio. These actions demonstrate our continued commitment to strategic capital deployment and deliberate choices that fuel sustainable long term growth.
Paul Matt: Our disciplined approach to managing the business continues to bolster our capital strength and provides us with significant financial flexibility to continue driving value creation, while managing risk.
Paul Matt: As part of our ongoing commitment to delivering shareholder value. We're pleased to announce that our board has approved a dividend increase of 10% or a quarterly dividend of <unk> 61.
Paul Matt: Our common share.
Paul Matt: We also announced today that we expect to repurchase an additional $500 million worth of life go shares under our existing NCI be John will provide further details on this during his remarks.
Paul Matt: Turn to slide six.
Paul Matt: Our results reflect our unwavering focus to deliver on our growth strategy, which has enabled us to meet or exceed our medium term financial objectives.
Paul Matt: We have successfully delivered against these objectives over one three and five years with this year's base EPS growth of 14% and base ROE at 18% exceeding our target range and our dividend payout ratio within our target range.
Paul Matt: Please turn to slide seven.
Paul Matt: Our record results position us well for continued growth base.
Paul Matt: Base earnings of $1 1 billion in base EPS of $1 20, both increased 15% over the prior year base.
Paul Matt: Based on our ROE increased to 17, 5% up nearly a full percentage point from the prior year and book value per share increased by 12% or.
Paul Matt: Our capital position remains strong with a <unk> ratio of 130% and we've maintained a comfortable leverage ratio.
Paul Matt: Overall its worth noting these results have benefited from tailwind and the macro environment as well as geographic diversification of our businesses.
Paul Matt: Favorable equity markets and the impact of stronger foreign currencies relative to the Canadian dollar positively contributed to our performance, particularly in the fourth quarter.
Paul Matt: We remain committed to operating with discipline, including making decisions that support sustainable growth and a changing macro environment.
Paul Matt: Please turn to slide eight.
Paul Matt: Canada delivered a good quarter and is maintaining its momentum for continued growth.
Paul Matt: Our individual wealth business further expanded its market presence aligned with our goal of driving growth through scale technology and the delivery of advice.
Paul Matt: Past acquisitions strong market performance and improved flows.
Paul Matt: Contributed significantly to <unk> growth with average <unk>, increasing by more than 30% over the prior year.
Paul Matt: This momentum is reinforced by the improved performance of segue fund sales in the quarter.
Paul Matt: In group life and health, we were pleased to expand our business relationship with the federal government.
Paul Matt: Taking on the administration of the public service dental care plan and the pensioners dental services plan.
Paul Matt: Booked premiums solid growth this quarter, largely driven by the expansion of our in force business.
Paul Matt: While this growth is encouraging maintaining our discipline in underwriting and pricing remains a key to success in this business.
Paul Matt: And insurance and annuities CSM declined primarily due to the impact of last quarter's assumption changes as we've previously stated our approach to non participating insurance card prioritizes customer value, while maintaining pricing discipline and we do not view CSM is a key growth metric in Canada.
Paul Matt: Turning to slide nine.
Paul Matt: We're pleased to report very strong performance at empower and workplace average AUR grew 22% over the past year supported by the strength in the U S equity markets. We saw continued withdrawals as part of member as planned members use their higher account balances boosted by strong market performance.
Paul Matt: Their retirement.
Paul Matt: As a result, we again experienced net outflows of trend that remains consistent across the industry at this time.
Paul Matt: While net flows can vary from quarter to quarter and power continues to deliver strong value creating performance.
Paul Matt: Scale remains a critical ingredient to success and empower is growing both plan contributions and the number of participants in.
Paul Matt: In 2024 D. C participant contributions were up 7% and then power added approximately 600000 net new plan participant and increase of 3%.
Paul Matt: This growth not only generates the fees, we earn today, but also build future balances.
Paul Matt: A thriving workplace business fueled the growth of our personal wealth offering unlocking even more opportunities.
Paul Matt: Tower personal wells delivered an outstanding quarter with average AUR up nearly 30% compared to last year positive net flows were driven by a significant boost in rollover sales contributing to the highest gross sales on record and over $3 billion in net new assets for the full year net flows alone accounted for 12%.
Paul Matt: Asset growth in the personal wealth business, demonstrating the growing strength of the platform.
Paul Matt: With a growing purchase in the base in the workplace and stronger momentum at empower personal wealth. The U S remains on a clear path driving growth in <unk>.
Paul Matt: <unk> continues to invest in the business and brand to strengthen its position and help even more American secure their financial future.
Paul Matt: Please turn to slide 10, our.
Paul Matt: Our European businesses also delivered record performance this quarter with double digit growth across all value drivers.
Paul Matt: Our offerings in wealth and retirement continued to scale and drive positive net flows international product sales in the UK were particularly strong up 60% compared to the prior year.
Across all our European wealth and retirement businesses average <unk> grew by 23% year over year.
Paul Matt: Like our other regions. These results were supported by strong equity market performance.
Paul Matt: <unk> seen steady sales and organic growth in group life and health with book premiums up 11% year over year supported by rising employment growth and higher salaries in Ireland and the UK.
Paul Matt: Insurance and annuities also delivered strong results in part fueled by high demand for bulk annuities in the U K throughout 2024.
Paul Matt: This reflects the success of our targeted strategy in this market and increasing demand for stable retirement income solutions.
Paul Matt: Please turn to slide 11.
Paul Matt: Our capital and risk solutions business ended the year on a strong note.
Paul Matt: Given our diversified book and disciplined approach to participate participation in property and casualty reinsurance markets, we anticipate modest impacts from the recent tragic events in California through.
Paul Matt: The year, we've stayed committed to supporting our customers affected by natural disasters across the U S and our thoughts remain with those who have been impacted.
Paul Matt: Growth in run rate reinsurance earnings was driven by an increase in structured business, which has a seasonal component that is typically weighted towards the fourth quarter. We.
Paul Matt: We've also begun recognizing higher CSM from structured transactions completed earlier in 2004.
Paul Matt: Reinsurance CSM increased 40%.
Paul Matt: Year over year, largely due to the impact of the assumption changes, we announced last quarter as.
Paul Matt: As we've emphasized before our disciplined approach to reinsurance underwriting and pricing remains a cornerstone of our long term success in this business.
Paul Matt: And with that I'm going to turn the call over to John now for his remarks on our financial performance John Thank.
John Nielsen: Thank you Paul Please turn to slide 13.
John Nielsen: We delivered record financial results this quarter and for the year, while we continued to execute against our strategy and all segments very strongly. These results were supported by constructive financial markets, including yield curve movements and strong equity market returns.
John Nielsen: A weaker Canadian dollar provided additional tailwind boosting year over year base earnings growth by three percentage points in the fourth quarter and by two points for the full year.
John Nielsen: Equity market performance contributed to growth in assets under administration within our wealth and retirement businesses with average assets up 7% from the third quarter and 26% versus last year.
John Nielsen: While short term rates decreased in the fourth quarter as the U S. Federal Reserve Bank of Canada lowered their policy rates by 50% and 100 basis points, respectively higher long term rates.
John Nielsen: Continued to provide meaningful earnings support.
Speaker Change: Turning to slide 14, we delivered another record base earnings quarter of $1 1 billion base earnings increased 15% year over year and 12% in constant currency driven by strong underlying growth in all of our segments.
Speaker Change: The effective tax rate on lifestyle base earnings of just under 16% included a two percentage point impact related to the global minimum tax we continue to expect an overall effective tax rate for life co to be in the high teens.
Speaker Change: Our base return on equity of 17, 5% continues to be above the upper end of our medium term objective of 16% to 17%.
Speaker Change: This reflects strong growth in base earnings and a continued focus on growing our wealth and retirement businesses.
Speaker Change: Turning to slide 15, all our segments delivered strong underlying growth in earnings this quarter and Canada base earnings grew 7% with organic growth in the group life and health in force block as well as higher fee and spread income driven by market as well.
Speaker Change: Acquisitions.
Speaker Change: This was partially tempered tempered by a moderation of insurance experience in the quarter as well as lower earnings on surplus, resulting from the lower short term rates I mentioned.
Speaker Change: In the U S. Empower maintained strong momentum with base earnings up 36% year over year in constant currency. These results reflected higher fee income driven by business growth as well as higher markets and the benefits of the acquisition related synergies and cost reduction.
Speaker Change: <unk> that we mentioned in our workplace business.
Speaker Change: While there weren't credit impairments on two U S commercial mortgages, they were significantly less than the prior year and we continue to see manageable losses on this portfolio going forward, However, we could see quarter to quarter volatility.
Speaker Change: Overall momentum in our U S business remained strong with the return on equity growing by over 400 basis points to nearly 16% over the last 12 months.
Speaker Change: And Europe based earnings increased 4% year over year in constant currency and were up 7%, excluding the impact of the global minimum tax results in the quarter reflected higher fee income in Ireland from strong net flows and market and higher UK trading gains.
Speaker Change: This was partially offset by moderated group insurance experienced gains from last year's elevated level.
Speaker Change: Within capital and risk solutions results were also impacted by the implementation of GMT earlier. This year. However, underlying growth was strong with pre tax base earnings increasing 5% year over year in constant currency driven by continued growth in structured business.
Speaker Change: And improved claims experience in our traditional life portfolio in the U S.
Speaker Change: Last year's results were helped by a release of the P&C provision, which muted year over year base earnings growth.
Speaker Change: As we mentioned on our last earnings call, we did not incur any losses in our P&C catastrophe business related to hurricane Elaine our Milton while we do expect to incur claims related to the ongoing wildfires in California, our maximum reinsurance loss exposure is $100 million after tax.
Speaker Change: Net of reinsurance premium and Canadian dollars. Our current loss estimate is between 10 and $50 million after tax.
Speaker Change: As discussed on our last call, we have deliberately reduced P&C catastrophe risk in our reinsurance business over the past two years, while the size of our exposure to the wildfire markets makes it a manageable event for us our Hearts go out to all those whose lives have been devastated by this catastrophe.
Speaker Change: Turning to slide 16.
Speaker Change: Insurance service results were down year over year, reflecting a moderation in favorable experience from last year's elevated levels. This was partly offset by higher expected insurance earnings from growth in Canada, as well as higher CSM amortization in Europe in Crs, reflecting.
Speaker Change: Solid new business volume and the recent assumption changes.
Speaker Change: Net investment result was up significantly year over year, driven by higher earnings on surplus, reflecting the addition of the Franklin Templeton gain higher trading gains in Europe, and lower credit losses at empower.
Speaker Change: Turning to slide 17, net fee and spread income was up meaningfully year over year, reflecting continued strength in equity markets and business growth with solid contributions from Canada and Europe non directly attributable expenses were down slightly over the prior year with the benefits of <unk>.
Speaker Change: Cost actions well balanced against investments in growth across our businesses.
Speaker Change: Turning to slide 18 base and net earnings were essentially in line for the quarter and for the full year.
Speaker Change: This follows the trends we've observed since the implementation of <unk> 17.
Speaker Change: As we've indicated over the medium term.
Speaker Change: We would anticipate our market experience to be neutral.
Speaker Change: Turning to slide 19.
Speaker Change: We continue to maintain a strong balance sheet to ensure we are resilient through market cycles and can deploy capital as opportunities emerge.
Speaker Change: In the quarter, our light cat ratio decreased to 130% down four points from the prior quarter. This follows our indication on the last call that we intended to increase the dividend to lifestyle, while maintaining strong capital levels, well above regulatory minimums within our operating companies.
Speaker Change: Our leverage ratio of 29% is down two points from a year ago and remains on a downward trajectory given our strong earnings growth.
Speaker Change: Our cash balance of $2 2 billion reflects continued upstream the capital the life co driven by strong earnings growth and capital generation within our businesses.
Speaker Change: In fact dividends to life Coe from our U S business doubled in 2024 and this is a direct result of the strategic repositioning of our focus in the U S market.
Speaker Change: <unk> capital generation has greatly enhanced our financial flexibility as a result, not only has our board approved the increase in our quarterly dividend by 10% to <unk> 61 per share. We've also announced the expected purchase of $500 million of shares under our <unk>.
Speaker Change: <unk> normal course issuer bid.
Speaker Change: This is over and above the amount that we intended to repurchase this year to offset the dilution from our share compensation plan.
Speaker Change: Although we intend to significantly increase our share buybacks, we continue to have significant financial flexibility.
Speaker Change: <unk> for deployment in both organic and inorganic opportunities as they emerge.
Speaker Change: Turning to slide 20.
Speaker Change: We look forward to hosting you at our Investor Day on April 2nd in Toronto.
Speaker Change: We intend to provide a look under the hood of each of our businesses to give you a greater understanding of the respective strategy competitive strengths return profile as well as the growth outlook, which we believe remains underappreciated.
Speaker Change: We also intend to highlight the strength of our capital generation across our portfolio as well as the strong reinvestment returns that each of our businesses generate.
Speaker Change: And finally, we will elaborate on our capital deployment priorities and how life co seeks to optimize capital allocation in order to maximize value for all of our shareholders.
Speaker Change: We invite you to join US for this event, whether in person or virtually with that Paul I'll hand, the call back over to you. Thanks very much John Please turn to slide 22, our.
Speaker Change: Our strong momentum that supported these record results positions us well for continued growth in 2025 and beyond.
Speaker Change: Looking ahead, our focus remains on driving continued momentum to deliver against our medium term objectives.
Speaker Change: We remain excited about our growth prospects in the U S and expect empower to continue delivering double digit base earnings growth in.
Speaker Change: And we are maintaining our focus on driving growth.
Speaker Change: And returns across all three of our value drivers with a particular emphasis on wealth and retirement.
Speaker Change: Our strong cash and capital position provides the resources to invest in opportunities that align with our strategic priorities, while managing risks positioning the company for stable long term growth.
Speaker Change: And as I mentioned before we're pleased to announce a dividend increase of 10% and an intention to purchase an additional $500 million.
Speaker Change: Of life co shares under our current NCI will be supported by the growing strength of our business and our disciplined approach to capital allocation.
Speaker Change: We look forward to carrying this confidence and momentum forward as we build on our success in 2025 and with that I'll turn it over to <unk> to start the Q&A portion of the call Szuba. Thank you Paul in order to give everyone a chance to participate in the Q&A. We would ask that you limit yourselves to two questions per person you can certainly people follow ups and we will do our best.
Speaker Change: To accommodate that based on the Dear operator, we are ready to take questions now.
Speaker Change: We will now begin the analyst question and answer session.
Speaker Change: Joining the question queue you May Press Star then one on your telephone keypad.
Speaker Change: You'll hear Retold acknowledging your request.
Speaker Change: You are using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
Mary Grauman: The first question comes from many Grauman with Scotiabank. Please go ahead.
Many Grauman: Hi, good morning.
Many Grauman: I'm looking at slide 20, thanks for this in terms of highlighting topics.
Speaker Change: April's Investor day.
Speaker Change: One bullet point, that's not there is just related to financial targets. So I'm. Just wondering is it realistic to expect you to revisit your financial targets.
Speaker Change: In April I don't think you will reveal anything new right now, but you're welcome to but just wanted to know if that's on the table.
Speaker Change: Okay.
Speaker Change: Good good good guests many.
Speaker Change: So I'll take that one it's Paul.
You can see on slide six we have achieved or exceeded our objectives, whether you look back over the past year three years five years and looking ahead I'm confident that we will continue to deliver strongly against our medium term objectives.
Speaker Change: There is strong momentum in the businesses, we're executing on our strategies and we've got confidence in them.
Speaker Change: I want to emphasize that when we set our medium term objectives. It's not just about communicating a number it's about having them aligned with our strategy and our compensation frameworks.
Speaker Change: And this is important to make sure that we've got good alignment and the reality is one of our objectives is we're looking for management to meet and exceed those.
Speaker Change: As to your specific question.
Speaker Change: There's a couple of points I'd note I guess first we're comfortable I would say at this point with our base EPS growth objective of eight to 10 10, we believe it's an ambition ambitious objectives and management are motivated to outperform that's that's our focus of course to the extent that strong equity markets and favorable currency movements as we saw.
Speaker Change: This year, which frankly was part of the fuel behind our strong performance this quarter to the extent that that continues that would result in an out performance, but we're not going to build a medium term objective based on expected market outperformance.
Speaker Change: Obviously.
Speaker Change: Another medium term objective as our base Roe of 16% to 17.
Speaker Change: We comfortably exceeded that objective in 2024.
Speaker Change: Not the least of which was our U S business is really hitting its stride.
Speaker Change: And as we noted up 400 basis points over the last 12 months, so given that we will be.
Speaker Change: As we get to the Investor day, we'll be looking at that for sure the ROE target, but that's a bit of context for your money.
Speaker Change: Thanks for that and then just a separate question just in terms of catastrophe exposure you've talked about.
Speaker Change: Taking that exposure down over the last.
Speaker Change: Two years.
Speaker Change: Is there any desire on your part to take that down even further or do you feel like you've hit it at.
Speaker Change: A level that you're comfortable with as you look out over the next few years.
Speaker Change: I'll start with that one and then I'll turn it over to Jeff <unk>, maybe a little color.
Speaker Change: One of the great things about our businesses they manage it with a risk lens first and foremost so as we look at markets evolution of markets. We're always thinking about writing that business in a way where we're staying on the.
Speaker Change: Far away from the <unk>.
Speaker Change: Core risk so it's really and as you know, it's a retrocession air business and so the discipline is about allocating capital in a way that really matches up with our risk appetite and.
Speaker Change: I would say over the last number of years, we've moved further and further away from the risk and that's kind of our mindset. We are providing we're providing good value, but we are making sure that we're looking after our risk profile, Jeff you want to speak to that a little bit yes.
Jeff: Thanks, Paul and I think what Paul said is right.
Jeff: As the market, it's hard to know over the last couple of years, we've gone away from the risk we've taken the same amount of premium, but then further and further away from the risk.
Jeff: Seeing the markets soften a little bit after two good years.
Jeff: And the retrocession market and as a result, we havent deployed to all our capacity at renewals. So we.
Jeff: We're being very risk conscious and we're trying to be as.
Jeff: As well.
We're trying to manage that portfolio the best way possible I think our earnings related to P&C are at 9% of the total.
Jeff: S earnings. So so it's not a big contribution and we're not planning on growing in the rest of the portfolio will continue to grow.
Jeff: To your point, it's a really good diversified in the context of Crs with Crs is a lot bigger and then Crs is obviously a part of <unk>, so 9% of Crs for context, it's not a significant part of local overall.
Speaker Change: Okay, and maybe just as a pump obviously, the wildcards of big events I'm wondering.
Jeff: That event in and of itself.
Speaker Change: That create opportunities for you.
Jeff: In terms of.
Jeff: How it impacts pricing going going forward in that particular business.
Jeff: Yes, Manny it's a good question I think that it's definitely a major event.
Speaker Change: In effect the market everywhere I think some people are buying covers with.
Jeff: Reinstatement.
Jeff: They are already in the reinstatement so they may be looking for more capacity.
Jeff: It's going to harden the market again.
Jeff: That might be some.
Jeff: Some good opportunity for the dry powder, we kept at year end.
Jeff: Thank you.
Jeff: Okay.
Jeff: Thanks Manny.
Speaker Change: The next question comes from Doug Young with nature and in capital markets. Please go ahead.
Speaker Change: Hi, Good morning, just wanted to think maybe Paul about.
Speaker Change: The stock buyback or John.
Speaker Change: Wants to address this stock buyback when 70% of your shares.
Speaker Change: Hal by mostly power by GM and just how that conversation goes at the board and what are the limitations in terms of.
Speaker Change: Ken a question on the buyback.
Speaker Change:
Speaker Change: Good question, and maybe I'll take it up a level and maybe just speak to capital allocation priorities and the reality is we've got a broad toolkit of ways, we think about capital allocation I guess.
Speaker Change: We've said in the past and we will continue to say that we're always looking to value, creating investments to grow the business and that's not always M&A actually the first and foremost investment we think about is driving organic growth in the business. So if you think about the empower personal wealth growth.
Speaker Change: Certainly the acquisition of personal capital was a foundational move on that but the investment we're making in sales force.
Speaker Change: Capabilities and branding that's the fuel that is really driving the growth that you can see right now.
Speaker Change: Same thing in Canada, we do these acquisitions, but now we're investing in capabilities to be the best.
Speaker Change: That form for independent advisers in Canada.
Speaker Change: Organic investment is important inorganic for sure I mean, you know that.
Speaker Change: We've executed very strongly on acquisitions over the last five years, especially through Covid and we will continue to look for and focus on value, creating transactions in the U S retirement and wealth space.
Speaker Change: Look to other markets like the Canadian wealth market, there will be further opportunities there.
Speaker Change: But the reality is that return of capital is another tool we have in the toolkit. So you know.
Speaker Change: We've got a lot of.
Speaker Change: Excess capital at this point, we remain very active looking for opportunities in the market, but we also want to make sure that in the meantime until the right thing comes along that we put some of that capital to work. So in the context of the available capital and our cash generation 500 is.
Speaker Change: We'll move but relative to our available capital and our cash generation and we'll share more information on that at our Investor day, its relatively modest we will continue to.
Speaker Change: Grow our capital base.
Overcoming that 500 so.
Speaker Change: Put it in the context of its a tool in the toolkit.
Speaker Change: We discuss it with the board do we think about auctions and we just think it's a well it's a prudent action now it's just more of an indication that we are prepared to use all the tools, we can to drive value creation for shareholders.
Speaker Change: And just to follow up on that in terms of the guard rails.
Speaker Change: Is there.
Speaker Change: Is there limitations like could you buy back 345% I mean, this is up 1% buyback and again, it's a good tool in the tool kit and that makes a ton of sense I'm just trying to think of the guard rails, but we don't have to think about that.
With the other publicly traded life counts, but I'm just trying to think about that for great west.
Speaker Change: I wouldn't think about it from the standpoint of the guardrail I think you have to look at it you have to step back and look at it from a bigger picture.
Speaker Change: And think about Youre trying to maintain dry powder for M&A.
Speaker Change: At the same time, you are trying to support and provide create value for shareholders and <unk>.
Speaker Change: John would you would you would you envision any particular guardrail, we sleep, we continue to have room under our existing NCI B program as you're aware this didn't take all the capacity.
Speaker Change: I mean, obviously beyond that.
Speaker Change: <unk>.
Speaker Change: Theres ESI route as well.
Speaker Change: That could provide an optionality to us I think right now we're clearly as Paul said focused on deploying as much capital into that and strong returning organic growth.
Speaker Change: Inorganic opportunities arise with really good returns.
We're open to that as well, but there are tools Doug.
<unk> been used in the past and we just think that it's a sign of the strong cash generation. This business generates the stronger reinvestment returns and we're excited to share more of the details about that at Investor day.
Speaker Change: And I'll just echo our priorities I mean, we do like value, creating investments in our businesses organic.
Speaker Change: Org.
Speaker Change: Inorganic.
Speaker Change: We have shown that we are prepared to use this tool we've used the <unk> in the past I wouldn't view that as our priority right now but.
Speaker Change: The toolkit and we'll consider all of them as we think about creating shareholder value.
Speaker Change: Okay, and then just second on Crs.
Speaker Change: That Geoff is they're just.
Speaker Change: Structured product sales it looks like they ticked up quite a deck and I get there's some seasonality, but you've talked about some opportunities in the past, but we saw a pretty decent jump and new business gains and the CSM within Crs skin and high level can you can you talk about.
Speaker Change: What's driving that.
Speaker Change: You are seeing in the market place any pressures from a margin or competition perspective that may kind.
Speaker Change: Kind of hit that in future periods or is this kind of sustainable in your view.
Speaker Change: Yes.
Speaker Change: Thanks, Doug.
Speaker Change: I guess, where.
Speaker Change: We've been pretty good at.
Speaker Change: At seeing the right opportunities and then moving around the market to find the right opportunities I think our track record shows that we have had a very good fourth quarter as you mentioned.
Speaker Change: It's typical for us the fourth quarter tends to be a better quarter as people look at their year end statements and they want to adjust for it so a lot of.
Speaker Change: A lot of companies come to us.
Speaker Change: Mid way through the year to do transaction and the fourth quarters. So it was a great fourth quarter and the CSM. As you mentioned went up we did opt to transact asset intensive transactions, which helps that but also two fairly large.
Speaker Change: Structured transactions and we've started to look at.
Speaker Change: Certain structured transaction that are more long term.
Speaker Change: Under GM approach as opposed to just a short term.
Speaker Change: So it's been it's been.
Speaker Change: Been a good quarter and we're hoping it's looking good for the next year. So I don't see it stopping Doug I think that the structured market has been good to us.
Speaker Change: We will continue to see opportunities I think over the long run more and more of this large seeding companies are seeing reinsurers.
Speaker Change: As partners.
Speaker Change: And not as a.
Speaker Change: Risk takers on an ongoing basis. So so we see them as.
Speaker Change: As partners in the long run they look for us for a capital solution. So.
Speaker Change: We've got a lot of very good established relationship with ceding companies and we.
Speaker Change: We will continue to see growth in that market, just and just a reminder, on acronyms Jim.
Speaker Change: What features under.
Speaker Change: Contracts, where we wrote them and they fueled CSM and then PAA contracts some of the ones that are more short term in nature.
Speaker Change: Yeah.
Speaker Change: The color. Thank you.
Speaker Change: The next question comes from Tom Mackinnon with BMO capital markets. Please go ahead.
Tom Mackinnon: Yes, thanks very much good morning.
Tom Mackinnon: A question with respect to the Holdco cash now I think historically you used to sort of telegraphed that you wanted to $500 million.
Minimum at the Holdco, how have you changed your thinking on that now.
Tom Mackinnon: And if so.
Speaker Change: What would that level be and if not Sam.
Speaker Change: This buyback is just $500 million why you're sitting at $2 2 billion at the Holdco.
Speaker Change: I'll turn that one to John yes.
John Nielsen: Yes. Thanks, Tom for the question you are right, we typically like to keep a minimum level of liquidity at at the Holdco of around 500 million and obviously keep the relevant liquidity buffers across all of our.
Speaker Change: Regulated entities I think its a sign it.
John Nielsen: The under appreciation.
John Nielsen: Capital generation nature of the businesses that we've created.
John Nielsen: As we mentioned.
John Nielsen: The U S has been really strategically repositioned as a significant provider of cash and capital to the group now.
John Nielsen: And it gives us you know.
John Nielsen: Capital to deploy as Paul said into organic inorganic opportunities or consider.
John Nielsen: Returning to shareholders, we pulled all of those levers this quarter.
John Nielsen: We grew our business substantially we deploy capital as you heard into our business segments, Jeff just covered substantive Lee.
John Nielsen: For example, Crs raised the dividend double digit by 10% and we announced.
John Nielsen: A further buyback under the NCI program so.
John Nielsen: It's just a sign of how strong our business is performing and the level of capital flexibility and financial flexibility of the company now has.
Tom Mackinnon: Tom I would say that.
Tom Mackinnon: We have developed I would say increasingly a discipline where.
Tom Mackinnon: We do want to make sure that we are we have ready firepower to reinvest in the right places, whether it's inorganic moving copper organic moving capital around inorganic.
Tom Mackinnon: For opportunity or or or.
Speaker Change: Or for things like buyback and so the reality is it just as John said, it's a sign of strong cash generation and we'll share more when we meet with you in April.
Tom Mackinnon: Okay.
Tom Mackinnon: Okay, and then a follow up questions with respect to.
Tom Mackinnon: Our net outflows at.
Tom Mackinnon: Empower D C related to stock plan services I believe this is a business that you just may have recently purchased.
Tom Mackinnon:
Tom Mackinnon: $2 5 billion in net outflows.
Tom Mackinnon: Should we be thinking about that going forward.
Tom Mackinnon: Just with respect to that unique.
Tom Mackinnon: Business line. Thanks.
Tom Mackinnon: Yes, it's early days for that business, Tom, but that's the timing issue that I outlined for you.
Tom Mackinnon: Yes, Tom typically people are exercising in Q4, and then the grants are coming in in Q1. So.
Tom Mackinnon: We will see some.
Tom Mackinnon: Timing issues flow through.
Okay. So going forward you kind of always expect this aesop business to have.
Tom Mackinnon: As these options get exercised in the fourth quarter Youre going to have plan outflows with respect to that yes. This is that okay.
Tom Mackinnon: Okay. Thanks, and if I can squeeze one more in U K annuity, our U K insurance and annuity sales were down significantly quarter over quarter or.
Tom Mackinnon: Our year over year I should say is there anything that youre seeing in the marketplace here.
Tom Mackinnon: It's especially maybe in the individual annuity marketplace has become more competitive with respect to our annuities there.
Tom Mackinnon:
David Harney: I'll turn that one over to David David No. There is nothing to call out a slight tangent.
David Harney: July has been strong all year, and that's pretty standard from quarter to quarter. So if the volatility you see in bulk.
David Harney: While community.
Marcus.
David Harney: Auctions are the Archer and just will come through the different quarters. So you said you went to <unk> and thus slightly from quarter to quarter. So probably to match our overall indication until up to slide 10, I think as long as I can see 13% growth year over year and CSA and that's just that's a reflection of our overall business strategy.
David Harney: Okay.
David Harney: So the USA.
David Harney: Volatility attached with quarter to quarter.
David Harney: But our position here it goes.
David Harney: Yeah, So I'll take market continues to stabilize.
Speaker Change: Okay, just lumpiness, there and theyre down like 61% year over year in the U K, but that's just the lumpiness is that what you're telling us.
That's just lumpiness in quarterly SaaS like the pipeline is good.
Speaker Change: Yes thats helpful.
Tom Mackinnon: I might add Tom.
Tom Mackinnon: We are becoming increasingly focused in targeting the right types of business that we like.
Tom Mackinnon: When you look to sort of the small to mid market, where the margins are very strong where we can be very competitive thus, where we've been focusing and if you think about it from a value creation perspective, we really like the value creation, we had in the bulk annuity business.
Tom Mackinnon: The past year.
Tom Mackinnon: That's really what it's all about so the odd time, you'll get a very large transaction.
Tom Mackinnon: Lower relative returns you know.
Tom Mackinnon: Margins, we like the margins were writing and we like where we're targeted because we think we actually have the muscle to win in that part of the market.
Tom Mackinnon: I might add the competitive moat.
Tom Mackinnon: Improved for us in that market I would say over the year.
Tom Mackinnon: Regulations around ability to offshore assets or bring in offshore.
Tom Mackinnon: Offshore capital to that market were strengthened so us being flexible both being able to write strong returns onshore within the UK business and complement that.
Speaker Change: With diversification of reinsurers in the offshore market through Jeff's business is really.
Tom Mackinnon: Stronger position than we would have started last year.
Speaker Change: Is that onshore and offshore staff more wealth and asset management or is it more insurance and annuities.
Speaker Change: It's the it's the need for capital to be deployed into the.
Speaker Change: T D.
Speaker Change: De risking at corporates and their pension plans.
Speaker Change: Substantial vol.
Speaker Change: Volume of these annuities that are going to come to the market and the regulations now have said.
Speaker Change: The use of offshore reinsurance and moving out assets is limited you need diversification of reinsurers and our special position of being both in onshore and offshore I think straight strengthens our as I say, the moat around that market and our ability to create value.
Speaker Change: Okay. Thanks for that John.
Speaker Change: Thanks again.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: Next question comes from Darko <unk> with RBC capital. Please go ahead.
Darko: Hi, Thank you good morning, I realize the CSN isn't really a big part of your story, but I did want to talk about it a little bit.
Speaker Change: Im looking at your <unk>.
Darko: Supplemental.
Darko: <unk> Pak and if I look at page.
Darko: 23.
Darko: And you have negative organic movement now for quite some time and if I look at the actual CSM, it's significantly lower.
Darko: And where it's been for a long time.
Darko: Trend is simply a drawdown.
Darko: And so the question is whats, causing the negative experience and should I be thinking about it more and when I model. This is the only thing I do is I do know the amortization of the CSM into the model I don't think about insurance experience, but once again negative.
Darko: Should I be thinking about.
Darko: Perhaps a more aggressive.
Darko: Grind down of your CSM over time.
Darko: Because I'm a bit surprised I think last quarter, you had a fairly big change because of assumptions.
Darko: Management actions and yet here, we are again with another negative quarter in organic CSN move, but how should I be thinking about this from a modeling perspective.
Speaker Change: Ill turn that one to John Doerr Linda.
Speaker Change: I think if you remember back to third quarter Darko the assumption changes that we took.
Speaker Change: We think.
Speaker Change: <unk> strengthened our overall position.
Speaker Change: In terms of of the CSM across the different segments and those resulted in a substantial write up the CSM in the European and Crs segments given the positive.
Speaker Change: Longevity experience that we've seen and as we said, we don't think we're through that cycle yet.
Speaker Change: And then in Canada, we did take the opportunity to revisit a number of our assumptions.
Speaker Change: And we're through that now.
Speaker Change: Follow on is obviously, the lower amount of amortization youre seeing in the Canadian segment.
Speaker Change: During the year.
Speaker Change: Across all the assumptions.
Speaker Change: And the experience we feel really good about the year.
Speaker Change: We see positive trends in most of our businesses now that we've reset assumptions.
Speaker Change: As we mentioned.
Speaker Change: Positive experience and longevity has been coupled with better trends in there and the traditional life portfolio and Crs.
Speaker Change: And I'd say in the fourth quarter, there's a little bit of noise in the individual in Canada.
Speaker Change: But nothing that really gives us pause and thinks that we're not at the right place with the overall assumptions that are embedded in the TSM.
Speaker Change: With a view that that will continue to look at the impact of longevity as we look forward into 2025.
Paul Holden: The next question comes from Paul Holden with CIBC.
Speaker Change: Please go ahead.
Speaker Change: Thank you good morning.
Speaker Change: There was a wall Street Journal article this morning talking about the gross and 401K participation rates.
I'm, particularly interested in it talked a little bit about <unk> and <unk>.
Speaker Change: Mall business plans.
Speaker Change: Lower cost options are there.
Speaker Change: Introduced in that segment of the market.
Speaker Change: Wondering how empower is positioned.
Speaker Change: For smaller plans.
Speaker Change: If you do have sort of a lower cost option targeted at that segment of the market.
Ed Murphy: Great question, I'll turn that one over to you Ed Yeah. Thanks. Thanks for the question Paul Yes, we do have a low cost option.
Speaker Change: <unk> had a low cost option in the market now for a couple of years.
Speaker Change: It's pretty much a straight through type solution for startup companies and small businesses.
Speaker Change: It wasn't specifically referenced in that article but.
Speaker Change: With the advent of the state Auto Iras 17 states now that require small businesses to a state auto Iras, we've seen that.
Speaker Change: Service kind of a boom to new plan formation, and a four one K space and.
Speaker Change: And so so really in particular third party researcher.
Speaker Change: Suggested that over the next several years by 2029, you could see another 350000 plans forming in the United States.
Speaker Change: So we're very encouraged there are some startup players that play in that space.
Speaker Change: Providers using newer technology, but we are very very well positioned there because of our distribution heft.
Speaker Change: And our scale. So yes, we think it's a really strong growth opportunity, we think it's going to contribute over time too.
Speaker Change: Increased flows obviously in the defined contribution space and.
Speaker Change: And we're competing there every day so.
Speaker Change: That's great helpful. Thank you.
Paul Holden: Paul you started off your prepared remarks, referring to tariffs for us and I think it's more on sort of below <unk>.
Speaker Change: Your risk for GW angle with trying to agree with what I want to ask you about is like.
Paul Holden: I think GW over time has been very good at being opportunistic.
Speaker Change: Have excess capital clearly.
Speaker Change: <unk> also been very good at managing the investment portfolio to be opportunistic in terms of crabbing extra yield.
Here and there weren't available just wondering if you could sort of have some thoughts you can share on how GW O could benefit if there is some kind of short term disruption.
Speaker Change: In markets or in businesses from from tariffs.
Speaker Change: Yeah. Good question I think you've characterized us well from the standpoint of having I'd say relatively lower risk highly diversified.
Speaker Change: Good discipline, we looked at our we look at our businesses there are domestic in nature, we look at our.
Speaker Change: The reality of.
Speaker Change: Over 70% of earnings are outside Canada. So we.
Speaker Change: I think we're set up in a good position relative just sort wirelessly to the general normal risk.
Think about opportunity one of the opportunities I think what is.
Speaker Change: Infrastructure investment if you thought about.
You know the need for example in Canada, where they are we've got to build out more capability I think the conditions are.
Speaker Change: A really strong for players like us to use.
Speaker Change: The abilities and to the extent we need to.
Speaker Change: Strengthening our capabilities with capital allocation to participate in that so we actually look at that as opportunity to participate in something that's really important for Canada, and so well positioned there.
Speaker Change: And then I'm not going to get into the specifics of particular sectors, where there could be some opportunity, but as Jeff outlined in his business.
He's got really smart people in this group and they're constantly scanning the market and thinking about where is the opportunity to help.
Speaker Change: Those are the same mindset, we bring to this and.
Speaker Change: There may be sectors, where we there will be opportunity and I think we're going to be.
Speaker Change: Opportunistic, but prudent and it's always those those two things it's that balance of opportunity improvements.
Speaker Change: <unk>.
Speaker Change: So we come at this obviously with concerns broadly for the economy and for impact on people, but knowing that we can be part of an important solution for Canadians and for the various markets where we operate.
Speaker Change: Okay, great. Thank you.
Speaker Change: The next question comes from Mario Mendonca with TD Securities. Please go ahead.
Mario Mendonca: Good morning, let's start with personal wealth and it's clear that that businesses.
Mario Mendonca: Sort of validating the decision to buy in the first place a few years back my question really is.
Mario Mendonca: What is personal while sort of bringing to the table that's driving this.
These strong inflows is there something specific to personal wealth or is it more of its proximity to empower that would account for the program.
Mario Mendonca: Yeah.
Mario Mendonca: Well I'll start off at a very high level I think you called it the acquisition of personal capital was a.
Mario Mendonca: A really important move for us a number of years ago.
Mario Mendonca: Set us up with the platform that now represents and power personal wealth.
Mario Mendonca: And I think it's a tale of two things I mean, you have to have a really capable wealth manager. If you want to grow and then you also.
Mario Mendonca: Your empower.
Mario Mendonca: With the level of rollover assets and opportunity that represents it's unique it's very unique to our wealth manager so alternative to provide some context around those two things.
Mario Mendonca: I would just build off that I would say it is highly synergistic and that if we serve those workplace customers as well.
Mario Mendonca: They will be predisposed in many instances to wanting to work with us on the personal wealth side, we certainly see that play out the other thing I would say is that.
Mario Mendonca: The capabilities that we have from a user experience standpoint, the fact that we offer.
Mario Mendonca: State of the art technology, very compelling user experience and then we marry that with a human advisor human capital. So we bring those two elements together in a way that I think is very powerful.
Mario Mendonca: And.
Mario Mendonca: What I would say to you is if you look at the progress that's been made over the last six months, we continue to capture a higher share of the opportunity, which I think speaks to the value proposition.
Mario Mendonca: And the fact that the organization is continuing to mature.
Mario Mendonca: In terms of the talent side of it but also our capabilities in our product set.
Mario Mendonca: Yes, I might add that if you look at empowers results in 2024 and the results that you will see in 'twenty five.
Mario Mendonca: There are good bottom line results, but they're in behind that we are investing in this wealth business on an ongoing basis.
Mario Mendonca: If you watched Portland, <unk> empower youll see the empower brand.
Mario Mendonca: Empower personal wealth.
Mario Mendonca: As a really important long term growth play for us and.
Mario Mendonca: It's not just about a single transaction that we did the number of years ago, it's about continuing to invest in that business in terms of capabilities.
Mario Mendonca: How many how many sales people do we have now serving that business. We have about 1000. So we now have 1000 advisors. So we will continue to grow and scale that advisor base.
Mario Mendonca: This is a law. This is the early stages of a long game that we're excited about yes, I would just note that in the fourth quarter in particular.
Mario Mendonca: On the workplace side, you saw approximately $11 billion in net outflows. However, we captured $4 7 billion on the wealth side of the business.
Mario Mendonca: That was our single best quarter so.
Mario Mendonca: Again very confident in the momentum we have there we're seeing that continued through January and we expect a very strong year for personal wealth business Brett maybe.
Mario Mendonca: Alright, just suggest that those assets are materially higher margin will then personal wealth than they are in power.
Mario Mendonca: I think thats a fair assumption.
Mario Mendonca: And then maybe moving over to the pension buyout market in the UK. It's my understanding that the underlying fundamentals there have been strong for some time.
Mario Mendonca: More recently.
Mario Mendonca: But I was surprised to see that growth really hasn't participated in that just yet is there something I'm missing there or is this recorded in a different.
Tom Mackinnon: Part of the segment because I'm, just looking I think as Tom did to insurance and annuities in the U K.
Speaker Change: Where would we see this robust if it is pension buyout market in the UK.
David Harney: David Yes, you'll see it in the two.
And so you've seen us into CSI relatively new business.
David Harney: The argument on those contracts get added into CSI CSI was up 13% year over year.
David Harney: I think in the supplemental information packet sales patch style, we mention charity or just the volatility from quarter to quarter.
Full year 2004 of our full year <unk> is up 17%.
David Harney: Yes.
David Harney: We referred to it as bulk annuities.
No I think literature from region to region changes, but you know its pension risk transfer we felt with assets transactions within the Crs business and so we're participating in two places with US it's transactions with Jeff's team drugs as a reinsurer supporting and then we are a direct writer of those.
David Harney: Pension risk transfer or bulk annuities as we call them in the U K and.
David Harney: I would say over the last.
David Harney: Two years, we've been building up our muscle to be able to participate.
David Harney: Both.
David Harney: More actively but also more effectively we wanted to be effective in the context of our capabilities our ability to route transactions and make offers on a very timely basis and also our <unk> investment strategies tobaccos. So we feel really good about where we're at.
David Harney: Our prospects as we move forward.
David Harney: Thank you.
Mr Khan: This concludes our question and answer session I would like to turn the conference back over to Mr Khan.
Mr Khan: Thanks, everyone for joining us today following the call a telephone replay will be available for one month and the webcast will be archived on our website for one year or 2025 first quarter results are scheduled to be released after market close on Thursday may eight with the earnings call starting at 930, a M. Eastern time, the following day and.
Mr Khan: And a reminder that all.
Mr Khan: We are hosting our next IND.
Mr Khan: Investor Day on April 2nd in Toronto.
Mr Khan: Much report to providing a comprehensive overview of all of our businesses at this event.
Mr Khan: Thanks again.
Speaker Change: Foods our call for today.
Speaker Change: Thank you this brings to a close the conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.