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Great-West Lifeco’s Earnings Call Highlights Resilience and Growth

Great-West Lifeco’s Earnings Call Highlights Resilience and Growth

Great-West Lifeco ((TSE:GWO)) has held its Q1 earnings call. Read on for the main highlights of the call.

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Great-West Lifeco’s recent earnings call painted a picture of strong financial performance, despite facing some notable challenges. The company reported impressive growth in base earnings, client asset expansion, and positive trends in its Retirement and Wealth segments. However, the impact of the California wildfires, unfavorable mortality experience, and commercial mortgage loan write-downs posed significant hurdles. Nevertheless, Great-West Lifeco’s strategic initiatives and operational strengths provided a positive outlook for the future.

Record Base Earnings

Great-West Lifeco achieved a milestone by exceeding $1 billion in base earnings this quarter, marking a 5% increase from the previous year. This growth was reflected in the base earnings per share (EPS), which rose by 6% to $1.11, and the base return on equity (ROE), which improved by 20 basis points to reach 17.2%.

Strong Growth in Retirement and Wealth Businesses

The company’s Retirement segment experienced a remarkable 24% increase in base earnings year-over-year. This growth was bolstered by margin expansion at Empower, where operating margins rose nearly 400 basis points to approximately 30%. Additionally, net flows at Empower improved, signaling continued momentum in this sector.

Significant Increase in Client Assets

Total client assets saw a substantial increase of 13% over the prior year, surpassing $3 trillion. Of this, $1 trillion represents assets and advice solutions or under management, underscoring the strengths and scale of Great-West Lifeco’s retirement and wealth platforms.

Cash and Capital Generation

Lifeco’s cash position grew to $2.5 billion, supported by a solid capital base. This robust financial foundation provides the company with the flexibility to deploy capital confidently in line with its strategic priorities.

Empower’s Successful Quarter

Empower reported net inflows of $5.2 billion in the Retirement business, driven by new plan wins and strong plan retention. Wealth net flows more than doubled year-over-year to $2.8 billion, highlighting Empower’s successful quarter.

Group Benefits and Insurance & Risk Solutions Performance

Group Benefits base earnings increased by 4% year-over-year, with strong premium growth in Europe. Despite the impact of unfavorable mortality experience, Insurance & Risk Solutions delivered solid results.

Impact of California Wildfires

The California wildfires in January 2025 resulted in a claims provision of $21 million after tax, affecting the results of Insurance & Risk Solutions.

Unfavorable Mortality Experience

Unfavorable mortality experience across the business impacted results by approximately $30 million before tax, affecting Insurance & Risk Solutions and other segments.

Commercial Mortgage Loan Write-downs

The company faced write-downs of three U.S. commercial mortgage loans totaling $45 million after tax. These were mostly related to a single property, reflecting specific asset issues rather than a broader economic environment change.

Seasonal and Market Volatility Impacts

Market volatility and seasonality, including fewer days in the quarter due to the previous leap year, affected earnings growth by reducing it by $0.01 to $0.02 per share.

Forward-Looking Guidance

Looking ahead, Great-West Lifeco remains optimistic about its growth prospects. The company reported over $1 billion in base earnings for the quarter, reflecting a 5% increase year-over-year. Total client assets grew to over $3 trillion, a 13% increase from the previous year. Despite challenges such as market volatility and seasonally impacted insurance experience, the company’s diversified business model and strong capital generation continue to provide resilience and growth opportunities.

In conclusion, Great-West Lifeco’s earnings call highlighted a robust financial performance, with significant growth in key segments and a strong capital position. While challenges such as the California wildfires and unfavorable mortality experience posed obstacles, the company’s strategic initiatives and operational strengths offer a positive outlook for future growth.

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