Q1 2025 Great-West Lifeco Inc Earnings Call
Okay.
Speaker Change: Thank you for standing by this is the conference operator, welcome to the Great West Life Co first quarter 2025 results conference call.
Speaker Change: As a reminder, all participants are in listen only mode and the conference is being recorded.
Speaker Change: After the presentation there'll be an opportunity for analysts to ask questions.
Speaker Change: And the question queue you May Press Star then one on your telephone keypad.
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Should've Mccahon: I would now like to turn the conference over to Mr. Should've Mccahon, Vice President, Sorry, Senior Vice President and head of Investor Relations that great West Lifeco. Please go ahead.
Speaker Change: Okay.
Speaker Change: Thank you operator, Hello, everyone and thank you for joining our call to discuss our first quarter financial results.
Speaker Change: Before we start please note that are linked to our life webcast and materials for this call have been posted on our website at great West Lifeco Dot com under the Investor Relations tab.
Speaker Change: Turning to slide two I'd like to draw your attention to the cautionary language regarding the use of forward looking statements, which form part of today's remarks and please refer to the appendix for a note on the use of non <unk> financial.
Speaker Change: <unk> financial measures and important notes on adjustments terms and definitions used in this presentation.
Speaker Change: And turning to slide three I'd like to introduce today's call participants joining us on the call today are Paul <unk>, our president and CEO.
Speaker Change: Sean Nielsen our group CFO.
Speaker Change: David Harney, President and CEO, Europe in capital and risk solutions because literally.
Speaker Change: <unk>, Canada, Ed Murphy, President and CEO and power Linda Kerrigan Senior Vice President of the appointed Actuary and Jeff <unk> Executive Vice President reinsurance.
Speaker Change: We will begin with prepared remarks, followed by Q&A and with that I'll turn the call over to Paul. Thank you, but please turn to slide four before turning to our results I wanted to take a moment to acknowledge last week's announcement regarding my retirement. This transition comes at a time of strength, both our business and our team we've sharpened our focus.
Speaker Change: With each of our operating segments executing clear strategies to drive growth.
Speaker Change: This is fueled record performance and continues to create lasting value for our shareholders.
Speaker Change: It also speaks to the strength of our talent and our deliberate succession planning and leadership development.
Speaker Change: Over time, we've built a deep and capable leadership.
Speaker Change: Growing and talented leaders from across the lifestyle and our operating companies share a deep commitment to our success.
Speaker Change: I am very pleased the board has appointed David Arnie as our next President and CEO. He is an outstanding leader with more than 35 years of experience across our organizations beginning at Irish life.
Speaker Change: You saw the wide range of roles most recently as President and Chief operating officer for Europe, and for capital and risk solutions.
Speaker Change: He has also been leading our global investment organization as interim global Chief investment officer over the past few months his business building mindset strategic vision and a strong track record of execution make him ideally suited to lead <unk> going forward.
Speaker Change: Congratulations on your appointment and I look forward to working closely with you to ensure a smooth transition.
Speaker Change: Please turn to slide five.
Speaker Change: And moving onto our results our strategy is playing out as expected.
Speaker Change: And this quarter demonstrates the progress we're making.
Speaker Change: Apart from the impacts of market volatility and seasonally impacted insurance experience our businesses delivered strong underlying performance this quarter.
Speaker Change: Our wealth businesses are driving both strong topline and Bottomline growth our group retirement and benefit businesses continued to see strong organic growth benefiting from scale and differentiation.
Speaker Change: Our insurance and risk businesses continue to provide solid diversification and growth opportunities.
Speaker Change: Jon will dive deeper into the key drivers behind these results in his section of the presentation.
Speaker Change: I am pleased to report that once again, we exceeded $1 billion in base earnings this quarter, marking a 5% increase year over year.
Speaker Change: This EPS rose, 6% to $1 11.
Speaker Change: And based on where we are are we reached 17, 2% up 20 basis points over the prior year.
Speaker Change: We continue to earn the trust of millions of customers and advisors today, our reach spans more than three trillion dollars of total client assets, an increase of 13% over the prior year.
Speaker Change: The one trillion represents assets and advice solutions or under management further underscoring the strength and scale of our retirement and wealth platforms.
Speaker Change: Our financial position remains strong backed by a solid balance sheet, a healthy like that ratio and a comfortable leverage ratio.
Speaker Change: As we shared at our recent Investor day, one of the key strengths of our business is cash and capital generation.
Speaker Change: <unk> cash position has grown to $2 5 billion.
Speaker Change: And is supported by a solid capital base.
Speaker Change: This gives us the flexibility to deploy capital confidently and in line with our strategic priorities.
Speaker Change: Please turn to slide six.
Speaker Change: We've introduced a new way of looking at performance that cuts across our four core businesses retirement wealth group benefits and insurance and risk solutions.
Speaker Change: This view brings together results from across geographies offering a clearer picture.
Speaker Change: How each of these four businesses contributes to our results.
Speaker Change: Youll see this reflected on the next two pages and John will provide additional insights at a country level.
Speaker Change: Retirement, and wealth remains a strong growth engines, both delivering double digit increases in base earnings this quarter.
Speaker Change: In retirement, our scale and leadership are driving profitable growth with base earnings up 24% year over year.
Speaker Change: This is supported by margin expansion, notably at empower where operating margins rose nearly 400 basis points to roughly 30%.
Speaker Change: Net flows at empower also improved indicating continued momentum in this business.
Speaker Change: Recognizing the connection between health related benefits and retirement solutions empower introduced the new customer directed healthcare savings offering to help individuals better manage their health care finances.
Speaker Change: This strategic move enhances empowers value proposition and supports long term growth by creating financial wellness solutions that meet the evolving needs of their customers.
In wealth, we continue to unlock value through strategic strategic extensions and are seeing strong flows across our platforms in Canada are independent wealth platform is gaining momentum.
Speaker Change: By a major milestone with the launch of advice, Canada, a leading joined wealth and insurance destination for entrepreneurial advisors I.
Speaker Change: I am pleased to report our wealth business in Canada delivered an improvement in net inflows of over $300 million year over year.
Speaker Change: At empower we are building on our leadership in retirement as we continue to advance empower personal wealth with a focus on the underserved mass affluent market segments.
Speaker Change: This is also driving strong net flows and asset growth and in Europe. We remain focused on scaling our Uni O wealth business in Ireland to capture organic growth strong market conditions contributed to higher fee income and earnings this quarter.
Speaker Change: Please turn to slide seven.
Speaker Change: Group benefits and insurance and risk solutions delivered solid performance and continue to be key contributors to life goes growth and diversification.
Speaker Change: Group benefits space earnings rose by 4% year over year in Europe, we saw strong premium growth driven by both in force business and new sales in Ireland, Canada.
Speaker Change: Canada had strong long term disability results this quarter and is continuing to improve service for workplace customers. This includes the rollout of the Canada life commitments, our service guarantee for group benefits and retirement plan sponsors.
Speaker Change: Insurance and risk solutions delivered solid results, considering the impact of mortality experience or.
Speaker Change: Our disciplined approach to underwriting and pricing continues to support our long term success in these businesses in.
Speaker Change: And capital and risk solutions, we established the claims revision related to the impacts of the tragic wildfires in the in California. This January.
Speaker Change: Our thoughts remain with those affected and we're continuing to support impacted clients. During this difficult time.
Speaker Change: Annuity sales moderated this quarter, reflecting the typical seasonality in these businesses, we remain confident in the long term outlook as demand for secure retirement income solutions continues to grow.
Speaker Change: Particularly in the UK pension risk transfer market, where companies are increasingly looking for ways to manage their pension risk.
Speaker Change: Please turn to slide eight despite.
Speaker Change: Ongoing macroeconomic uncertainty, we remain well positioned for the future supported by resilient businesses and a strong financial foundation.
Speaker Change: Our well diversified portfolio includes businesses operating in mature domestic markets delivering a central financial services like retirement savings and financial advice.
Speaker Change: Our retirement and wealth platforms continue to demonstrate both resilience and growth.
Speaker Change: In the U S. For example, a significant portion of empowers earnings are driven by factors other than equity markets underscoring the strength and diversification of our business model.
Speaker Change: Empower continues to expand its offerings and diversify revenue streams by launching new products designed to meet a wider range of.
Speaker Change: A customer needs supporting growth in any market environment.
Speaker Change: Our strong financial position is the result of years of disciplined risk management and a prudent investment approach.
Speaker Change: Today, 93% of our Nonparticipating portfolio is in fixed income and 99% is investment grade.
Speaker Change: This same disciplined guides, our capital allocation, enabling us to preserve financial flexibility manage risk and drive long term value for our stakeholders stakeholders and shareholders now.
Speaker Change: Before John takes us through the details of the quarter's financial performance I'd like to invite David Harney to share a few words as he joined us as our new CEO in July.
David Harney: Good morning, everyone and thank you Paul I'd like to start by recognizing the incredible leadership and care. He has shown and guiding light over the past 12 years.
Speaker Change: Our leaders have the challenges out there time on for Paul He responded to the global financial crisis by strengthening our discipline in cash benefit it provided steady reassuring either ship should it the uncertainty of the pandemic and the guided as trading you'd ikaes regime at the implementation of <unk> 17, but call it legacy.
Speaker Change: B the portfolio of businesses. He has been for grass last slides call under his leadership, we have built a leading global reinsurance business as a strong growing European business, we have.
Speaker Change: <unk>, our businesses in Canada under Canada life, creating one of the best brands in our home markets.
Speaker Change: And that is empowered through acquisition on investments, creating one of the best retirement and wealth businesses in the U S.
Speaker Change: These results speak for themselves, we have achieved an impressive track record of performance and to leverage lasting value to our shareholders. Paul on behalf of the team I want to thank you for your contributions we wish you and your family.
Speaker Change: <unk> success and happiness.
Speaker Change: Looking ahead the team and I are very excited about the opportunity jacquard or build on that success. We are very proud of the important role we play in the lives of our customers and Thats, what energizes us as an organization.
Speaker Change: We have clear strategies and the financial strength to grow these are grounded in the strategic playbook, we shared at Investor day and are supported by strong secular trends, which gives us confidence in our outlook and confidence in our ability to meet our enhanced financial objectives.
Speaker Change: I look forward to relocating to Toronto for a first of July to analysts and investors on the call I look forward to connecting with you and demands that.
Speaker Change: With that I'll hand, it over to John who will take you trade with this quarters results in more detail. Thanks, David I look forward to working with you in your new role now please turn to slide 11, we delivered strong underlying performance in the first quarter with base earnings increasing on the back of double digit growth in our wealth and retirement businesses.
Speaker Change: Empower had an excellent start to 2025.
Speaker Change: Base ROE exceeded 17% and is set to move higher over time as a result of our higher growth and the capital efficient businesses.
Speaker Change: I'm, particularly pleased that we were able to deliver solid earnings growth. Despite some discrete items in the quarter.
Speaker Change: This includes unfavorable mortality experience across our business totaling approximately 30 million before tax.
Speaker Change: This was impacted by seasonal impacts as well as heightened claims violet volatility.
Speaker Change: Our results were also impacted by our claims provision of 21 million after tax related to the California wildfires that we previously highlighted.
Speaker Change: There were also write downs of three U S commercial mortgage loans, and our investment portfolio totaling $45 million after tax most of which was related to a single property.
Speaker Change: I would add that these write downs are asset specific and do not reflect the change in the economic environment.
Speaker Change: While those items were unusual our first quarter results also reflect a degree of seasonality.
Speaker Change: As you are aware 2024 was a leap year. This impacted our reporting earnings growth both quarterly as well as annually. This quarter had one less day than compared to a year ago and two less days compared with the fourth quarter of 2024.
Speaker Change: Compared to the first quarter of 2024, this reduced year over year growth in base earnings by 1% to two <unk> per share.
Speaker Change: Further in the first quarter of each year, we typically launch marketing campaigns and our wealth businesses, resulting in higher spend.
Speaker Change: And we see the spend moderate over the remainder of the year.
Speaker Change: Going forward, we plan to address seasonality between quarters and ongoing earnings calls.
Speaker Change: Now as it what's the expected earnings on surplus moved lower in the first quarter, principally due to the falling short term interest rates in Canada.
Speaker Change: That said I am quite comfortable characterizing our first quarter results as strong since the majority of the items that I've mentioned are unlikely to persist.
Speaker Change: Turning to slide 12.
Speaker Change: As I mentioned on the previous slide insurance experience gains and base earnings moderated from the prior year due to unfavorable mortality experience in the quarter.
Speaker Change: However, there were experienced gains related to longevity in the quarter, reflecting the diversification of risks in our business.
Speaker Change: Under Ifr at 17. These gains are recorded as realized within CSM rather than base earnings.
Speaker Change: So while we had an economic hedge and saw unusual experience in both mortality and longevity the accounting treatment under <unk> 17 did not provide an immediate offset.
Speaker Change: Despite the volatility we experienced in the quarter insurance experience was favorable in aggregate.
Speaker Change: Now turning to slide 13 in the U S. Empower got off to a great start to 2025 and contributed double digit base earnings growth.
Speaker Change: This reflected strong business growth and higher markets as well as the synergies related to the integration of the Prudential business.
Speaker Change: Base earnings growth in the quarter was partially offset by the mortgage write downs I mentioned earlier.
Speaker Change: Empower had a great quarter from a flows perspective net inflows of $5 2 billion in our retirement business were driven by new plan wins and strong plan retention.
Speaker Change: Well net flows more than doubled year over year to $2 8 billion.
Speaker Change: Driven by continued strength in our rollover sales.
Speaker Change: Our outlook for 2025 based upon our committed sales and pipeline will result in net planned growth and market share gains. However, net planned growth will be volatile quarter to quarter.
Speaker Change: Turning to slide 14.
Speaker Change: In light of the recent market volatility I wanted to remind everyone about empowers revenue diversification and the resulting earnings stability.
Speaker Change: Approximately one quarter of empowers net fee and spread income is participant fee driven and not tied to markets.
Speaker Change: Further one quarter is derived from higher margin capital preservation products.
Speaker Change: Demand for which tends to increase during market peer.
Speaker Change: Periods of market volatility, resulting in only approximately 50% of our revenue tied to <unk> and <unk> are.
Speaker Change: <unk> AUM driven fees also provide diversification across asset types.
Speaker Change: Turning to slide 15, and Canada based earnings were down 7% year over year.
Speaker Change: Due to last year's assumption changes lower experienced gains from an X from exceptionally high levels, a year ago as well as lower earnings on surplus this offset the benefit of higher markets on retirement and wealth assets in the quarter.
Turning to slide 16, and Europe based earnings increased 6% year over year with strong results across all lines of business, excluding the impact of lower earnings on surplus which declined mainly due to higher remittances earnings would have grown at a double digit pace.
Speaker Change: Turning to slide 17.
Speaker Change: Within capital and risk solutions base earnings were down, 4% up 4% year over year, but down 2% in constant currency. The results. This quarter were impacted by the provision for California, wildfires as well as unfavorable mortality experience and the positive impact of the provision release.
Speaker Change: However, the underlying growth remains strong driven by new business <unk>.
Speaker Change: Williams and capital solutions.
Speaker Change: Turning to slide 18, as Paul noted in his remarks market volatility has been elevated since March amid concerns of a deterioration in the global economic outlook. This will inevitably raised concerns about our earnings outlook, especially across our retirement wealth businesses.
Speaker Change: Despite the negative headlines both fixed income and equity markets remain above levels seen a year ago, especially in Canadian dollar terms overall, the second quarter financial markets continue to be favorable against the same quarter of 2024.
Speaker Change: Turning to slide 19, we have significant resilience to market volatility. Thanks in part to our diversified business. In addition to be well positioned to absorb impacts on items excluded from base earnings.
Speaker Change: We have provided additional detail on the impact of sustained interest rate and equity market shocks to base earnings.
Speaker Change: We estimate that a sustained 10% decrease in equity markets.
Speaker Change: It would have a manageable impact on base earnings of $200 million over the course of an entire year.
Speaker Change: Turning to slide 20.
Speaker Change: Strong capital generation gives us additional confidence in our ability to absorb elevated economic uncertainty and market volatility.
Speaker Change: Our base capital generation exceeded 80% abate base earnings during the quarter.
Speaker Change: On a trailing 12 month basis remittances have averaged over $900 million are remittances are seasonal to an extent and we anticipate second quarter to be lower than what we delivered in the first quarter.
Speaker Change: As we plan for the upcoming maturity of the bond in the third quarter.
Speaker Change: Now turning to slide 21, we.
Speaker Change: We continue to maintain a strong balance sheet to ensure that we are resilient through market cycles and can deploy capital as emerge opportunities emerge. Despite the recent market volatility the capital priorities I shared at our recent Investor day have not changed.
Speaker Change: In the quarter, our light cat ratio was steady at 130% flat from the prior quarter.
Speaker Change: This follows our decision late last year to increase dividends to LIFO, while maintaining capital levels, well above regulatory minimums within our operating companies are.
Speaker Change: Our leverage ratio declined one point from the fourth quarter to 28% and remains on a downward trajectory given our strong earnings growth.
Speaker Change: Our cash balance of $2 5 billion reflects continued upstream you can get capital to life co <unk>.
Speaker Change: Further to our resiliency and Optionality.
Speaker Change: With that I'll turn it back over to Paul for his concluding remarks. Thanks John.
Speaker Change: Please turn to slide 22.
Speaker Change: Our core strategies are delivering strong momentum reinforce reinforcing our confidence in achieving our medium term objectives.
Speaker Change: Our wealth and retirement businesses remain key drivers of base earnings growth focused on markets, where advisor and customer demand remains high.
Speaker Change: At the same time, our disciplined approach to capital deployment and deliberate portfolio choices are generating strong returns for shareholders.
Speaker Change: Solid cash and capital generation continue to provide the financial flexibility to thrive across all market conditions invest in our businesses and pursue growth opportunities with confidence.
Speaker Change: Looking ahead, we remain focused on executing our strategy, creating value for our customers and sustaining the momentum we have built for our shareholders with.
Speaker Change: With continued momentum well diversified earnings across our operating segments and strong cash generation, we are well positioned to drive continued growth.
Speaker Change: On a personal note. This marks over 70 analyst calls I participated in with Great West Lifeco.
Speaker Change: As I reflect on my 12 years as CEO I'm incredibly proud of the progress we've made together.
Speaker Change: Most of all I'm proud of the exceptional team behind the success and I am deeply grateful for their dedication and support.
Speaker Change: Two analysts on the line. Thank you your thoughtful questions and engagement have challenged us and helped us to constantly improve our strategy.
Speaker Change: I have valued your insights curiosity and partnership over the past decade.
Speaker Change: I look forward to watching let go continue to grow under David's leadership as the company builds on the success delivers on its strategies going forward.
Speaker Change: Thank you all and with that I'll turn it over to <unk> to start the Q&A portion of the call Cuba.
Speaker Change: Thank you Paul.
Speaker Change: 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 can re queue for follow ups and we will do our best to accommodate these take time at the end.
Speaker Change: Operator, we are ready to take questions.
Speaker Change: Certainly.
Speaker Change: To join the question queue. You May Press Star then one on your telephone keypad Youll hear a tone acknowledging your request.
Speaker Change: Using a speakerphone please pick up your handset before pressing any keys to.
Speaker Change: Joe Your question Press Star then two.
Speaker Change: Our first question is from many Goldman with Deutsche Bank. Please go ahead.
Speaker Change: Thanks, Rich Thanks, I guess good morning, Bob.
Speaker Change: So clearly I was going to congratulate you.
Speaker Change: Got it.
Speaker Change: That's news to me, but.
Speaker Change: Just a question on <unk>.
Speaker Change: Something you were talking about you highlighted the temporary factors impacting the results this quarter.
Speaker Change: One factor that you highlighted was unfavorable mortality experience just wanted to better understand why you believe that is.
Speaker Change: A temporary factor and then I have a follow up.
Speaker Change: Thanks, Manny I'm going to turn that one over to John and then I suspect will call on a coupled with his colleagues.
Speaker Change: So so many what we saw across the portfolio and this was.
Speaker Change: Across all of our or our segments also across both our group and individual business and our annuity business with heightened mortality and impacts from that part of it is seasonal.
Speaker Change: Over the last couple of years, we've started to see a seasonal impact in the first quarter. The rest we would attribute just a heightened volatility now let me give you a little.
Speaker Change: Perspective across a longer period of time in terms of mortality.
Speaker Change: In terms of the last 10 years, if you take out Covid, we've had six quarters of.
Speaker Change: Impact larger than $30 million half of them positive half of them negative this happened to be a negative quarter. So we see this from time to time over that period.
Speaker Change: The aggregate impact on mortality.
Speaker Change: It has been a slight negative roughly roughly.
Speaker Change: Equivalent to what we saw this quarter, so we've seen volatility quarter to quarter and overtime.
Speaker Change: But it's over.
Speaker Change: Over the period of time, it's been positive or negative so.
Speaker Change: That's what we just attribute most of it to that volatility I would also say I would point out that we saw the same thing in our longevity portfolios and as we articulated before in a quarter of heightened mortality. We saw obviously increased longevity and unfortunately, the accounting there is an accounting mismatch.
Speaker Change: And how you deal with this experience overall, if you add CSM impacts in P&L. It was it was a positive for us, but just due to the accounting treatment, we got the volatility in earnings from mortality and obviously.
Speaker Change: We saw an increase in CSF that we'll recognize over a period of time.
Speaker Change: So we think and then evolve.
Speaker Change: See anything in the underlying trends that would give us a.
Speaker Change: Cause of concern that it's <unk>.
Speaker Change: Sumption related issue.
Speaker Change: We attribute it to.
Speaker Change: Specific to the quarter.
Speaker Change: Understood and similar question just on the mortgage impairments.
Speaker Change: What gives you confidence that this is the <unk>.
Speaker Change: Neo synchronic in not a sign of some.
Speaker Change: Thing that might be more persistent in your in your book.
Speaker Change: Thanks, David Harney is going to take that one David yes, so as far as maybe when we look at the investors' assets in our non power general accounts.
Speaker Change: So just maybe overall, that's a very large diversified portfolio, it's a very high quality.
Speaker Change: It goes a long way to the strength of our balance sheet and we have been very satisfied with the performance of those assets. So.
Speaker Change: The one area of weakness and this is the one area of weakness we've seen in the last while is just within the mortgage portfolio.
Speaker Change: Particularly within the mortgage portfolio at that and within commercial office and then further go into that it's just in the U S and just with some of the properties.
Speaker Change: That's where we have maybe a large anchor tenants.
Speaker Change: And in a small number of doors properties who've seen situations for one reason or another the sponsor is on willing to reinvest to get tenants back into the property. So we've given more information on the overall portfolio just in the slides 29 and entire <unk> four so if you look at <unk> portfolio.
Speaker Change: The office portfolio at $2 5 billion in total so less than 2% of the overall economy.
Speaker Change: Spread over 70 properties, we know all of these properties individually what we've seen in this quarter is that type of event with one of the larger properties.
Speaker Change: So it'd be a little strong to say, maybe we're completely at the end of this and.
Speaker Change: That trend within the U S. But we're pretty confident we're very close to the end and Thats unreasonable talk to remaining markets and that would be as large as one of the hits. We've taken this quarter. So we're pretty optimistic on the outlook for the sector.
Speaker Change: And finally, just all the best in your retirement, Paul and Congrats David.
Speaker Change: Thank you thanks Manny.
Speaker Change: The next question is from Gabrielle does Sheng with National Bank Financial. Please go ahead.
Gabrielle: Hi, Good morning, just wanted to talk about the sales in the retirement business and how those migrate over into the wealth business.
Speaker Change: First of all the trend in our.
Gabrielle: Plan and redemptions improved for the year.
Speaker Change: Okay.
Speaker Change: Consistently over the past few quarters and you're back into net inflows looks good but I saw a note about a 30% increase in rollover Brazil.
Speaker Change: Just for clarification, those or redemptions.
Speaker Change: Whatever the total number of redemptions you've captured some of the rollover in that number is 30% higher than last year right.
Speaker Change: I'll turn that one over to that's yes, that's correct.
Speaker Change: That's 30% higher.
Speaker Change: Yes.
Speaker Change: And then.
Speaker Change: Other people are changing jobs or retiring.
Speaker Change: Okay, and then I just think about money is.
Speaker Change: Showing up in the move or gross sales.
Speaker Change: Wealth business correct.
Speaker Change: Yes, that's correct right.
Speaker Change: And is there a dollar amount you can share because I mean, 30% sounds good but its still pretty.
Speaker Change: Pretty low relative to your ultimate objectives correct.
Speaker Change: The volume.
Speaker Change: The gross number was $6 6 billion.
Speaker Change: And gross sales with the majority of that being being rollover. That's the best quarter, we've had in the history of the business.
Speaker Change: Okay.
Speaker Change: And in terms of our our effectiveness in our efficacy.
Speaker Change: We're also at the highest level in terms of.
Speaker Change: Our ability to successfully capture capture the money that's in motion so.
Speaker Change: I think thats a work in progress we expect to see further improvement there I will say, it's a strong statement about our value proposition our ability to compete.
Speaker Change: In a very competitive market in the U S.
Speaker Change: Mass affluent market so.
Speaker Change: We're pretty we're pretty pleased about our results and the other thing I would just note.
Speaker Change: That was.
Speaker Change: A significant contributing factor to our net new assets.
Speaker Change: Is the improvement that we've made in asset retention.
Speaker Change: We moved from 86% to close to 90% year over year, which again reflects I think the value proposition and some of the steps that we took to kind of shore up and strengthen our service offerings.
Speaker Change: Okay.
Justin: Yes, Justin.
Speaker Change: Yes.
Speaker Change: So I was just going to underline that when you think back to the Investor day, where Ed talked about the drivers of growth into the future.
Speaker Change: Plan is playing out as we expected and as a matter of fact I think this is a really strong border, where we've made strong getting strong positive momentum so.
Stu: About 30% increase year over year in rollover captures Stu.
Speaker Change: Strong performance, we'd like to keep that growth.
Speaker Change: Sorry, the $6 6 billion number what is that again, that's like that's total rollover assets retained.
Speaker Change: That's our gross sales in the segment.
Speaker Change: Gross sale pigment sold for the quarter 666 6 billion.
Speaker Change: All of our sales.
Speaker Change: Most of its rollover, but but we have other we have a direct to consumer channels. So we have we have what I would call an unaffiliated customer that will open up an account with us that they see our advertising they see some of our performance marketing.
Speaker Change: So thats another channel of distribution for <unk>, and maybe Doug just to address that you called out the net plant sales were really happy.
Speaker Change: Gabe sorry.
Speaker Change: Alright.
Speaker Change: Deutsche Bank.
Speaker Change: Okay.
Speaker Change: We have the wrong bank in the wrong at analyst.
Speaker Change: Yeah.
Speaker Change: We did have net plant sales as you recall last year, we called out.
Speaker Change: A large.
Speaker Change: Loss of what single client loss, we're really happy to get back to net planned sale as I shared in my opening remarks.
Speaker Change: Based upon committed sales and pipeline.
Speaker Change: We will deliver net planned sales for the full year is expected and back that that trend of taking market share, but I would say quarter to quarter there'll be volatility because.
Speaker Change: Sometimes we lose a large client sometimes we gain a large client this quarter. Obviously you called out that it was a net positive but I'll just call out for the year, we expect not positive, but expect some quarter to quarter.
Speaker Change: Sales.
Speaker Change: Core losses of clients, Yes, I would just double click on that on two points one is.
Speaker Change: Our retention rate remains very high close to 98%.
Speaker Change: But also if you look at our year over year growth.
Speaker Change: Net participant growth is 4% that's two times the rate of the market. So this idea that this concept of growing the business organically faster than the market.
Speaker Change: Remains true we've talked about that in the past.
Speaker Change: We continue to see that growth so despite johns point about de conversions from time to time.
Speaker Change: The business continues to grow faster than the rate of the market, we're gaining share in our workplace business and as we've shared with you before that as a significant factor in driving the success of our wealth business.
Speaker Change: Okay, Great I'm gonna definitely up the re read the transcript.
Speaker Change: I couldn't.
Speaker Change: Couldn't write fast enough Paul.
Speaker Change: Great.
Speaker Change: You know what I'm talking to you over the years and good luck and enjoy your retirement.
Speaker Change: Thanks.
Gabe: Thank you Gabe.
Speaker Change: Okay.
Speaker Change: The next question is from Doug Young with Desjardin capital markets. Please go ahead.
Speaker Change: Hey, good morning, and you can call me gains in Tijuana incentives.
Speaker Change: Yes.
Speaker Change: Maybe John if we can look at the light cat ratio I just noticed the.
Speaker Change: The second one component to the base solvency buffer went up quite a bit sequentially.
Speaker Change: I guess theres, new capital rules in place, but I mean, this is a big move and I don't think.
Speaker Change: Weston.
Speaker Change: Big segment Riskin, I mean, if I do the math and I take out the sequential increase in the <unk> Fund ESP bump up I think I'm getting to a light cat without that about 144. So it was a big impact on like cat ratio.
Speaker Change: But maybe I'm missing something there is a lot going on so did I did I get that right.
Speaker Change: Why such a big impact.
Speaker Change: Maybe you can just flush that out.
Speaker Change: Yes.
Speaker Change: Well thanks, Doug.
Speaker Change: Okay.
Speaker Change: So the question.
Speaker Change: Yes, so there was an impact from the new.
Speaker Change: Off the guidance on state funds and it.
Speaker Change: Packed at US both in terms of the base stock solvency buffer, but also.
Speaker Change: The CSM impact as well, you'll see that go through.
Speaker Change: What we call adjusted retained earnings including CSM, the overall impact.
Speaker Change: The transition was about two points to the light cat ratio.
Speaker Change: In the quarter. So overall two points and Youll see that there were slight changes to our sensitivities as a result of that but nothing significant in terms of bid disclosed sensitivities.
Speaker Change: So you can.
Speaker Change: Two points higher than impacting two lines.
Speaker Change: Since you brought it up we did have continued very strong quarter in terms of capital generation across the business.
Speaker Change: We indicated for the quarter was in excess of 80% in line with our.
Speaker Change: Target the guide.
Speaker Change: Dave.
Speaker Change: The objective that we shared.
Speaker Change: So, but we did bring up continued to bring up excess capital from our operating divisions and that.
Speaker Change: Led to us ending with 130% overall like cat and as Youre aware about $2 5 billion of cash now.
Speaker Change: At Leica.
Speaker Change: Doug I also wanted to just underline something you said at the outset you said your perception was that we had a relatively less risky overall segment book and I think that is a good characterization. We've had really good discipline over over many decades with that book of business.
Speaker Change: We like the risk profile.
Speaker Change: I think its well managed both from an operational perspective and from an actuarial and financial perspective. So I think you've captured that Roland then John provide a little color there.
Speaker Change: And how much thanks Paul.
Speaker Change: How much was dividend Ed up from the <unk> to the Holdco this quarter.
Speaker Change: I think we disclosed that in the Sip and the majority of it.
Speaker Change: Came out of.
Speaker Change: Came out of Canada life assurance.
Speaker Change: Around a 1 billion won.
Speaker Change: Okay.
Speaker Change: Okay, and then second question.
Speaker Change: Yes.
Speaker Change: Just thinking about like you mentioned it a few times.
Speaker Change: Lower earnings on surplus because of lower interest rates, yes can you kind of it's kind of a strange thing to try to model, but can you kind of help us think about mapping Miss earnings on surplus.
Speaker Change: Going forward is this kind of a reasonable run rate to be thinking of bad debts.
Speaker Change: Is there going to be massive differences by each of the division. If you can kind of help me think through that.
Speaker Change: Yeah.
Speaker Change: So as we indicated in terms of sensitivity to lower rates.
Speaker Change: $80 million on an annualized basis.
Speaker Change: And half of it comes from surplus.
Speaker Change: From a movement in surplus.
Speaker Change: Principally impacted in Canada, and then in <unk>, where our duration is call. It one to two years type of timeframe. The rest of our surplus has a little longer duration across the other segments.
Speaker Change: So.
Speaker Change: So I think that probably gives you the modeling points that you need to model it out.
Speaker Change: I appreciate the color and Paul Thanks for everything and all the best in retirement.
Speaker Change: Thank you very much Doug.
Tom Mackinnon: Our next question is from Tom Mackinnon with BMO. Please go ahead.
Tom Mackinnon: Yes. Thanks.
Speaker Change: And good morning, just before I start I, just want to congratulate Paul and great.
Speaker Change: Long career at Great West and all the best as you move on to the next stages here.
Speaker Change: Thank you Tal.
Speaker Change: So.
Speaker Change: Two questions. The first is really with respect to the.
Speaker Change: Insurance experienced gains in the quarter 14 positive.
Speaker Change: It really if I kind of look into the Crs segment.
Speaker Change: Pretax negative 10.
Speaker Change: I mean, the wildfires that 'twenty one after tax all that 25.
Speaker Change: Pretax they're.
Speaker Change: There seem to be about another 16 health and Crs, maybe you can flesh that out and just talk about.
Speaker Change: Some of the other elements that.
Speaker Change: <unk> contributed to that.
Speaker Change: 43 million and helped if you will a positive experience that you note on that one slide thanks.
Speaker Change: Yes.
Speaker Change: Over to you John Yes, Thanks, Tom.
Speaker Change: Theres kind of three moving parts there you called out the wildfires as you recall.
Speaker Change: We said our maximum exposure there was about 100 million that came in just over 20.
Speaker Change: So we think we've got that right. Obviously there is there is there is some level of.
Speaker Change: Of lag and reporting and so forth, but we feel very good about the provision there.
Speaker Change: And how we've done that the second thing that we've called out is the mortality.
Speaker Change: That we experienced now I mentioned that mortality impacted all of our segments.
Speaker Change: Longevity was.
Also an impact in terms of.
Speaker Change: What we saw across the segments.
Speaker Change: But a big chunk of that mortality came through Crs and the Crs division, but it did impact Canada and the UK as well.
Speaker Change: The third element I mentioned in the script is we did have a provision release and this went to the resolution positive resolution.
Speaker Change: Yeah.
Speaker Change: They have a contractual discussion with the client that.
Speaker Change: That we recorded in 2024.
Speaker Change: We're really happy that that's been resolved amicably and they remain a client with us so that that was it.
Speaker Change: Good outcome. So those are the three moving parts within the Crs Division.
Speaker Change: In terms of.
Speaker Change: Yeah.
Speaker Change: That that impact. We also continued to see good group in terms of insurance experience.
Speaker Change: <unk> continued to see good experience in the LTV portfolio in Canada.
Speaker Change: Just more color on insurance experienced during the quarter. So we've continued to see.
Speaker Change: Good mortality morbidity in that portfolio, we did have some residual impacts in Canada from a postal strike.
Speaker Change: It's hard to estimate.
Speaker Change: How many how many so called letters where in the mail and we saw a little impact from that so just to give you a little more color on what we experienced during the quarter.
Speaker Change: And have you disclosed what that provision release was.
Speaker Change: I guess you can't.
Speaker Change: Can think of it as routes or something a little bit little bit bigger than the wildfires.
Speaker Change: Alright. Thanks.
Speaker Change: And it was recorded it was recorded last year.
Speaker Change: <unk>.
Speaker Change: In 2024.
Speaker Change: Yeah, you just reversing something from last year.
Speaker Change: Yes, we wanted to you know obviously follow accounting rules to be prudent last year ongoing discussions.
Speaker Change: As I say, we're really happy to resolve that if the client continues to be a strong client of the firm along long term clients.
Speaker Change: Okay.
Speaker Change: Then I mean, you talked about some seasonality in expenses and if we look into Canada wealth. The margin was weak the opex was up.
Speaker Change: Negative operating leverage at least in the quarter here, so and even in the retirement.
Speaker Change: I think we're looking at Canada retirement it please.
Speaker Change: Yeah.
Speaker Change: Euro operating leverage so maybe he can talk about is there anything that we should be thinking about in terms of.
Speaker Change: Operating expenses, particularly in that.
Speaker Change: And in both the wells and in the AR.
Speaker Change: Retirement, especially in the wealth I mean, the margin years 18, 9%.
Speaker Change: Running at 22, and a half or something like that in 2024.
Speaker Change: Yes for sure Tom what I'll do is I'll have John start off one with that one and I know this will add one other bit of color John Yes, So Tom I'm going to start with just.
Speaker Change: <unk> going to do a better job of calling out seasonality impacts in RF.
Speaker Change: And our results every quarter.
Speaker Change: Our seasonal things across the business.
Speaker Change: First start with <unk>.
Speaker Change: First quarter.
Speaker Change: Given our wealth and retirement businesses. There is some level of seasonality in the amount of fees that we get.
Speaker Change: Given the number of days.
Speaker Change: And then second typically.
Speaker Change: We have a fast tried to have a fast start to the year by.
Speaker Change: Having some.
Speaker Change: Marketing campaigns, and so forth that impacted the U S by just about $3 million and Thats pretty usual for first quarter that we would have elevated marketing expenses in the U S and then they.
Speaker Change: Kind of flatten off the rest of the year and become more.
Speaker Change: <unk> expense.
Speaker Change: Expenses become more aligned with with revenue growth.
Speaker Change: So just to call out that seasonality in terms of Canada specific I'm going to hand over to <unk> to give you color on expense management and what Youre seeing in the different lines. Thank you Tom. Thank you John and thank you Tom for the question.
Speaker Change: For our individual wealth business in Canada, we're pleased with the results on expenses I would say as John said, there's a bit of seasonality in an extensive tax season.
Speaker Change: As you might know wind, Canada. The tax season was partially already complex this year with the back and forth.
Speaker Change: Capital gains inclusion taxes, there was complexity in managing that and as John said that doesn't relate to expense, but that will get to the point on margin. We also see slightly lower revenue in Q1, just given the number of days, where we collect fees in Q1. So historically you would see that said that the other thing I would call out is there.
Speaker Change: It's been a change in allocation theres been a change in expense allocation, where our wealth business is getting more overhead as we've integrated some of our recently acquired businesses like IPCC businesses now attract corporate overhead our overall expense across Canada is growing at low single digit we're very comfortable with the.
Speaker Change: Growth of our extent, but the wealth business is attracting more extent since Q4 of 2024, and that's something that needs to be taken into account in the future, but overall I would say on our wealth business, where we're pleased with our momentum and market.
Speaker Change: We've talked about.
Speaker Change: Net flows improved earnings talked about early good results on the partnership with primary care that we've announced in the past quarter. So our business is doing well if I turn to retirement because you also talked about our retirement business.
Speaker Change: There is well we have a little bit of seasonality in expense given the cycles of the reporting and statements. So Q1 would be with the seasonally higher but we also we're also investing more in the business right now that we have in the past and that will recur in the future just geography.
Speaker Change: <unk> that we've made in our businesses. So that's something we're going to see in retirement, we believe in this business.
Speaker Change: Just like in the U S business, where <unk> has strong strategic momentum for us and we are investing in the business. So that that explains the expense level in part on retirement, yes. So.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: I was going to underline the fact that the reallocation. If you think about the overhead we now have a larger wealth business attracting more of the overhead so.
Speaker Change: Should sort of view that you know.
Speaker Change: Taking out some of the seasonality, that's a new normalized level because of that allocation youll see offsetting reduced expenses on a relative basis to the to the group.
Speaker Change: And the insurance portfolios and sort of thinking about is the level that we're operating from and its an allocation issue, it's not a discipline issue in any way.
Speaker Change: Yeah, and what does that mean the margin in Canada, well, so it's going to be a little bit lower because youre allocating more overhead to it.
Speaker Change: I think we're in.
Speaker Change: If you look at the pre tax operating margin we report in our in our supplementary package, we show around 19% I think 20% would be a good.
Speaker Change: A good run rate for the future were a bit lower this quarter again because of seasonality both in revenue and expense.
Speaker Change: Great. Thanks for the color.
Tom Mackinnon: Thanks, Tom.
Speaker Change: Once again, if you have a question. Please press Star then one.
Speaker Change: The next question is from Paul Holden with CIBC. Please go ahead.
Speaker Change: Yes.
Speaker Change: Morning. So first question is related to capital and risk solutions.
Speaker Change: Look at sort of run rate earnings growth trends, so ex wildfires or kind of a breakout you provide in the <unk>.
Speaker Change: In the slide deck, which is helpful by the way.
Speaker Change: It actually points to like double digit type earnings growth, which is better than the medium term expectation you set of mid single digits as it has.
Speaker Change: Is it possible you got higher growth for the year, and what's kind of driving that.
Speaker Change: I'm going to turn that went over to Jeff.
Jeff: Thanks, Paul.
Speaker Change: Thanks, both pumps.
Speaker Change: Hi.
Speaker Change: Yes.
Speaker Change: It's a good point I think.
Speaker Change: I think when we plan our business, it's always difficult to come up with.
Speaker Change: Things that you haven't done yet so we're looking at the market the way.
Speaker Change: The way it is and the plan is done thinking about the products that we have we've come up with new ideas, new product and we had a very good sales quarter in the first quarter. So I think the run rate is going very well, having said that.
Speaker Change: Some of the older products are renewing at.
Speaker Change: <unk> margin, so thats, a little bit of headwinds for us.
Speaker Change: I would expect that we might end up the year at or slightly better than the mid single digit that we said so it's been it's been a really good first quarter. So we're hoping to.
Speaker Change: To continue.
Speaker Change: Going at the same pace. So if we do it should look good.
Speaker Change: Yes, Paul one of the things that I think is a feature of that business is.
Speaker Change: Innovation constantly looking for new markets because it is a business that.
Speaker Change: These are solutions in their solutions for clients that are looking for those.
Speaker Change: But it's also disciplined so this was a quarter, where it was really attractive business that we wrote it.
Jeff: Won't be that's not a certainty every quarter, but jeff's team is out there constantly looking for opportunities.
Jeff: It is lumpy twos, one or two large transactions can can make a big difference.
Jeff: Got it Okay. That's helpful and then my son.
Jeff: Question.
Jeff: Excuse me sort of in a similar vein when I look at the.
Group premiums in Europe, I think it was 13% year over year.
Jeff: You highlighted some FX benefit to that.
Jeff: I think if I look over the last year, we're also seeing really good growth.
Jeff: And that business pretty consistently and I feel like maybe there's a little bit of a pause.
Jeff: The story of the topping told there.
Jeff: So I want to drill down on that like what is it what is driving the double digit growth consistent double digit growth in.
Jeff: And European group premiums.
David: David Yes. So yes, we are very happy with the performance of that book and maybe we should call it actually a bit more.
David: There's three segments to it so that's our group business in the UK, It's Eric.
David: In Ireland than it has.
David: This insurance business in Ireland.
David: We have very strong market positions in all of those three Bulks I'd say.
David: Over the last couple of years has been to Jefferies dynamics within that so if you go back to growth say, maybe 24 months ago that we were seeing was largely driven by salary inflation in Ireland and the U K and just continue to go deploy that platform.
David: Dropped relative to premium income.
David: And then more recently.
David: There has been has insurance increases and Arlen, just reflecting and claims growth and the bulk of that.
David: More of Tomorrow recent tanker rates.
David: So yes, we're very happy with the performance of both looked like they are at the factors driving the premium increase such need to do to lock that in.
David: Yes.
David: Have a good retention, we could say.
David: Its levels adult vault <unk> vault as well.
David: But talk about <unk>.
David: Canadian leadership group and we've talked about obviously empower leadership in retirement.
David: Underlying enough that we are a market leader in those businesses.
David: A meaningful market leader.
David: It's something that we're really proud of and David's team has done a great job of building those businesses, both from a sales and retention basis, because thats the Q2.
David: Managing successful group block.
David: The point on the health insurance rate increases does remind me.
David: It was two years ago and there is some negative experience there maybe just a quick follow up you can address.
David: Yeah, like I said, a negative experience hasn't repeated.
Speaker Change: Yeah, So sorry to post calls us like what we've seen is is.
Speaker Change: As an increase in the true plus in private hospitals like to really work hard other efficiency drove the increase in claim levels the contracts behind than behind.
Speaker Change: The policies are one year renewable itself, so the market energy prices experienced a net plus.
Speaker Change: <unk> strengthened the follow on price increases.
Speaker Change: Okay. That's helpful. Thank you and Paul Thanks for everything over the over the years and congrats on a very successful career and enjoy a well deserved retirement.
Speaker Change: Thank you very much Paul.
Speaker Change: Okay.
Speaker Change: This concludes the question and answer session I would like to turn the conference back over to Mr Khan.
Speaker Change: 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 two followed by the second quarter results are scheduled to be released after market closed on Tuesday August 5th with the earnings call starting at 830, a M eastern time to call date.
Speaker Change: Thank you again and this concludes our call for today.
Speaker Change: Okay.
Speaker Change: Yes, Thanks to close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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