Great-West Lifeco ((TSE:GWO)) has held its Q2 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 robust financial health and strategic execution, marked by record base earnings and substantial growth in key segments like Empower and Group Benefits. Despite some challenges, such as the exit from the U.S. traditional life reinsurance market and credit-related impacts, the overall sentiment was positive, underscoring the company’s solid financial standing.
Record Base Earnings Growth
Great-West Lifeco reported an impressive double-digit growth in base earnings, with base EPS rising by 12% year-over-year. This growth was attributed to strong execution across the business, showcasing the company’s ability to leverage its strategic initiatives effectively.
Strong Performance in Empower
Empower, a significant segment for Great-West Lifeco, delivered a 13% year-over-year growth in base earnings. The segment also saw a 10% increase in workplace client assets, reaching USD 1.7 trillion, and an addition of 500,000 participants, highlighting its expanding market influence.
Increased Share Buyback Target
Reflecting its confidence in future growth, Great-West Lifeco raised its full-year share buyback target to $1 billion. This move underscores the company’s commitment to enhancing long-term shareholder value and its optimistic growth outlook.
Significant Growth in Wealth Businesses
The Wealth businesses reported a 15% year-over-year increase in base earnings, driven by fee growth. Notably, Empower Wealth recorded an 83% surge in net flows, amounting to $2.9 billion, indicating strong investor confidence and market traction.
Strong Group Benefits Performance
Group Benefits saw a 17% rise in base earnings compared to the previous year. This performance highlights the strength of Great-West Lifeco’s diversified portfolio and its disciplined pricing strategy, contributing to its overall financial robustness.
U.S. Traditional Life Reinsurance Exit
In a strategic move, Great-West Lifeco decided to exit the U.S. traditional life mortality reinsurance market. This decision was driven by challenges in achieving desired returns, aligning with the company’s focus on optimizing its business portfolio.
Credit-Related Impacts
The quarter saw credit-related impacts stemming from bonds issued by UK water utilities, affecting the U.S. portfolio. This situation requires additional monitoring, indicating a cautious approach to managing credit risks.
Large Plan Withdrawal in U.S. Retirement
Despite strong net flows, a significant plan deconversion in the U.S. Retirement business impacted asset growth for the quarter. This highlights the challenges in maintaining asset growth amidst large-scale client movements.
Forward-Looking Guidance
Looking ahead, Great-West Lifeco reaffirmed its strategic priorities and medium-term financial objectives, aiming for 8% to 10% EPS growth and a return on equity of over 19%. The company also plans to maintain a dividend payout ratio of 45% to 55%, supported by strong organic growth and capital generation. Empower remains a key growth driver, with recent initiatives like the zero-fee S&P 500 Index Fund and private market investments poised to enhance its market position.
In summary, Great-West Lifeco’s earnings call highlighted a strong financial performance, with record base earnings and significant growth in key segments. While challenges exist, the company’s strategic decisions and forward-looking guidance reflect a confident outlook, reinforcing its position as a robust player in the financial market.