Great-West Lifeco Signals Strong Momentum, Boosts Payouts

Great-West Lifeco ((TSE:GWO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Great-West Lifeco’s latest earnings call struck an upbeat tone, with management highlighting record base earnings, strong cash generation, and rising shareholder returns. While acknowledging some quarterly volatility in Europe, softer P&C retrocession pricing, and pressure from participant outflows, executives framed these as manageable headwinds against broad-based growth and expanding margins across core businesses.

Record Earnings, Rising EPS and ROE

Great-West Lifeco reported record base earnings for both the year and the third straight quarter, underscoring accelerating profitability. Base earnings rose 11% year over year, base EPS climbed 12%, and base ROE reached 18.2%, about 70 basis points higher, signaling improving capital efficiency.

Empower Hits Scale and Surpasses 20% ROE

Empower crossed the USD 2 trillion threshold in total client assets, confirming its position as a top player in U.S. retirement. Base earnings at Empower grew 17% year over year in constant currency, while Empower Wealth posted a striking 43% gain and pushed Empower’s base ROE above 20% for the first time.

Client Assets Tilt Toward Higher-Margin Pools

Total client assets finished the year at $3.3 trillion, reflecting the benefit of both market performance and organic growth. Importantly, more than $1.0 trillion of those assets sit in higher-margin mandates under management or advisement, giving Lifeco a richer earnings mix as these pools expand.

Healthy Net Flows and Wealth Franchise Momentum

Empower’s wealth platform delivered net new asset organic growth of 14%, with planned flows in the second half of 2025 now expected at USD 29 billion, about 16% above prior guidance. Irish Life also reported record retail net flows of $4.2 billion, underscoring strong traction across the group’s wealth channels.

Capital Solutions and CRS Pipeline Strength

Capital and Risk Solutions delivered 9% base earnings growth year over year in constant currency, driven by a step-up in insurance results. The Capital Solutions run-rate insurance result jumped 46% in the fourth quarter and 29% for the full year, and management pointed to a robust pipeline that supports continued growth.

Robust Capital Generation and Cash Conversion

Base capital generation exceeded 80% of base earnings for the full year, demonstrating strong internal funding of growth and dividends. Free cash flow represented roughly 90% of base earnings, giving Lifeco significant flexibility to pursue organic initiatives, selective deals, and meaningful capital returns.

Buybacks and a 10% Dividend Lift Reward Investors

The company repurchased about 28 million shares for more than $1.6 billion in 2025 and has already bought back $250 million of stock in 2026. Management renewed its normal course issuer bid for up to 20 million additional shares and raised the quarterly dividend by 10% to $0.60, signaling confidence in sustainable earnings power.

Strong Capital Ratios and Balance Sheet Flexibility

Holding-company deployable cash ended the year at around $2.1 billion, giving room for further deployment. The LICAT ratio was maintained at 128%, with guidance to stay above 125% in normal conditions, while leverage of about 28% leaves capacity for future strategic moves.

Canada and Europe Extend Organic Earnings Growth

Canadian base earnings rose 10% year over year, driven by favorable insurance experience and better fee income, though surplus earnings were dampened by lower yields. In Europe, full-year base earnings surpassed $1 billion for the first time and grew 7% in constant currency after adjustments, confirming underlying growth despite quarterly noise.

Digital, AI and Operating Efficiency Initiatives

Management highlighted expanding digital and AI projects, including Empower’s workplace private markets offerings, broader health options and tools like the CaLi AI assistant in Canada and CARA at Irish Life. Ongoing operational streamlining, including U.K. balance sheet optimization since 2024, has already unlocked over $2 billion in capital benefits.

European Q4 Volatility and Remittance Effects

Fourth-quarter Europe base earnings fell 2% year over year as unfavorable mortality experience and sharply lower trading gains weighed on results. Earnings on surplus in Europe also declined because nearly $2 billion of dividends remitted to the parent over two years exceeded local earnings, creating quarter-to-quarter volatility.

Lower Canadian Surplus Earnings from Yield Declines

In Canada, falling yields reduced earnings on surplus and partially masked underlying operating strength in the quarter. Management noted that adjusting for this surplus effect, Canadian base earnings would have risen about 6%, reflecting core insurance and fee-income momentum.

Restructuring and Markets Hit Net Income

Quarterly net earnings were dampened mainly by previously announced restructuring initiatives, which are expected to improve efficiency over time. Unfavorable market and interest rate experience also weighed on reported net figures, adding to the gap between base and net earnings.

P&C Retrocession Softness Trims Risk Appetite

Pricing in the P&C retrocession market was around 20% lower at recent renewals compared with a year earlier, eroding expected returns. In response, Lifeco scaled back its exposure to this line, and management signaled that earnings from this niche will decline as capital is redeployed elsewhere.

Participant Outflows and Fee-Mix Pressure in U.S.

Participant outflows across U.S. retirement totaled about $39.4 billion over the last four quarters, pressuring asset-based fee revenue. While average client assets have grown, net fee and spread income has expanded more slowly, creating temporary operating leverage headwinds as the fee mix shifts.

LICAT Variability and Capital Movement Dynamics

The LICAT ratio eased to 128% from 131% at the end of the third quarter, reflecting seasonal effects and elevated new business in Capital and Risk Solutions. European remittances to the holding company boosted group capital but reduced local surplus earnings, adding to reported capital and earnings variability.

Credit Quality Solid Despite Single-Name Impact

Total credit losses for the year were slightly better than the expected 4–6 basis point range, underscoring generally sound credit quality. However, this quarter’s credit experience was skewed by a single U.S. commercial property exposure, highlighting the portfolio’s sensitivity to individual large names.

Bulk Annuities Reflect Market Seasonality

Full-year bulk annuity sales in the U.K. declined in line with the broader market, even as Lifeco posted a record $1.5 billion quarter in this business. Activity in 2025 was uneven, with volume depressed earlier in the year by anticipated regulatory changes, reinforcing the inherently lumpy nature of this segment.

Guidance Points to Higher ROE and Capital-Light Growth

Management expects Empower to sustain double-digit base earnings growth in 2026 and aims for Lifeco’s base ROE to exceed 19% over the medium term, with more than 70% of base earnings coming from capital-light businesses. They plan to keep LICAT above 125%, maintain leverage near current levels, accept modest credit losses, and continue returning capital at rates similar to 2025 absent major acquisitions.

Great-West Lifeco’s call painted a picture of a company leaning into its scale, capital strength, and growing capital-light franchises while pruning lower-return exposures. For investors, the mix of record earnings, disciplined capital deployment, and a richer dividend points to a steadily compounding story, albeit with the usual pockets of volatility in markets, regulation, and specific lines of business.