Great-West Lifeco Q2 2026 Earnings Report

Great-West Lifeco EPS Results

• Actual EPS: C$1.42
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Great-West Lifeco Revenue Results

• Actual Revenue: $8.35 billion
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Great-West Lifeco Announcement Details

• Quarter: Q2 2026
• Date: 7/28/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, July 29, 2026
• Conference Call Time: 9:30AM ET

Great-West Lifeco (TSE:GWO) is one of the three big Canadian life insurance firms. With just under half of the firm's profit and revenue in Canada, Great-West also operates in the U.S. and Europe. In Canada, Great-West provides both individual and group insurance. In the United States, Great-West operates Putnam Investments and defined-contribution recordkeeping firm Empower Retirement. In 2020, Great-West announced it would acquire Personal Capital and MassMutual's recordkeeping business. In Europe, Great-West offers life insurance, annuities, and reinsurance primarily in the U.K., Ireland, and Germany.

Great-West Lifeco Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Great-West reported 15% year-over-year base EPS growth in the second quarter, with base ROE of 19.3%. Retirement, wealth, and reinsurance businesses were the primary growth drivers.
• Positive Sentiment: Empower surpassed US$2 trillion in workplace client assets, while its wealth earnings rose 67% year-over-year in constant currency and reached a record 40% operating margin. The planned US$340 million Milliman acquisition is expected to be accretive in its first year and expand Empower’s defined benefit and bundled-services capabilities.
• Positive Sentiment: Europe delivered strong business momentum, including CAD 1.2 billion of second-quarter U.K. bulk annuity sales, 54% year-to-date retail annuity sales growth, and CAD 7.1 billion of wealth net inflows in the first half. Balance-sheet initiatives are on track to generate more than CAD 3 billion in capital benefits and have improved Europe’s base ROE by 350 basis points since 2024.
• Positive Sentiment: Capital and Risk Solutions base earnings increased 35% in constant currency during the quarter, supported by strong demand and a 54% rise in its run-rate insurance result. Management expects the current earnings level to be sustainable, with mid-single-digit-plus growth, although it cautioned that the business remains lumpy and competitive margins can erode over time.
• Negative Sentiment: Canadian base earnings fell 9% year-over-year as less favorable group long-term disability experience and other insurance factors offset strong retirement and wealth growth. Management said slower return-to-work trends could persist for several quarters, though pricing actions remain available because the business is annually renewable.

Presentation

[Operator]

Thank you for standing by. Welcome to the Great-West Second Quarter 2026 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. To join the question queue, you may press star then the number one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero.

[Operator]

I would now like to turn the conference over to Mr. Shubha Khan, Senior Vice President and Head of Investor Relations at Great-West. Please go ahead.

[Shubha Khan, SVP and Head of Investor Relations at Great-West]

Thank you, Morgan. Hello everyone, thank you for joining the call to discuss our second quarter financial results. Before we start, please note that a link to our live webcast and materials for this call have been posted on our website at greatwestlifeco.com under the Investor Relations tab. Turning to slide two, I'd like to draw your attention to the cautionary language regarding the use of forward-looking statements which formed part of today's remarks, please refer to the appendix for a note on the use of non-IFRS financial measures and important notes on adjustments, terms, and definitions used in this presentation.

[Shubha Khan, SVP and Head of Investor Relations at Great-West]

Turning to slide three, I'd like to introduce today's call participants. Joining us today are David Harney, our President and CEO, Jon Nielsen, our Group CFO, Ed Murphy, President and CEO, Empower, Fabrice Morin, President and CEO, Canada, Lindsey Rix-Broom, CEO, Europe, Jeff Poulin, CEO, Capital and Risk Solutions, Linda Kerrigan, our Appointed Actuary, and John Melvin, our Chief Investment Officer. We'll begin with prepared remarks followed by Q&A.

[Shubha Khan, SVP and Head of Investor Relations at Great-West]

With that, I'll turn the call over to David.

[David Harney, President and CEO at Great-West]

Thanks, Shubha, good morning, everyone. Please turn to slide five. This quarter, we built on our strong start to 2026, delivering 15% base EPS growth, driven by double-digit growth at both Empower and CRS. We continue to demonstrate strong execution across all of our growth platforms. Empower crossed a notable milestone, surpassing $2 trillion in client assets on its workplace platform. This business will be further strengthened by the acquisition of Milliman's Retirement and Benefits Administration business, which is expected to close later this year. Great-West continues to generate strong risk-adjusted returns with a base ROE of 19.3% this quarter, supported by our ongoing shift to a more capital-efficient business mix, as well as balance sheet optimization initiatives. Lindsey will discuss some of these initiatives in more detail shortly as part of an update on our European operations in this quarterly call.

[David Harney, President and CEO at Great-West]

Our strong cash generation and balance sheet continue to provide significant financial flexibility. We expect total capital deployment through buybacks and M&A in 2026 to be at least as much as was deployed in 2025. Please turn to slide six. As I mentioned, we delivered base EPS growth of 15% year-over-year, primarily driven by strong growth in our retirement, wealth, and reinsurance businesses across markets. Total retirement and wealth client assets grew 22% year-over-year to more than CAD 3.37 trillion, of which CAD 1.3 trillion represents higher margin assets under management or advisement. Robust capital generation continues to reinforce our financial position. We continued our share buybacks during the quarter and still ended with a solid capital base, including a high cash ratio of 128%, HoldCo cash of CAD 2.5 billion, and a leverage ratio of 27%, down 1 percentage point from Q1.

[David Harney, President and CEO at Great-West]

Please turn to slide seven. Our results this quarter highlight the benefits of diversification in our portfolio. Our segments are largely delivering on their growth ambitions through the first half of the year, despite the impact of more volatile earning drivers. Empower grew base earnings at a double-digit pace year-over-year, with strong operating margins and retirement plan wins, while delivering impressive growth of 66% in its wealth business through the first half of 2026. Canada saw double-digit growth in both retirement and wealth earnings on particularly strong margins, though this was offset by moderated insurance experience in the second quarter. In Europe, business performance has been strong across markets year to date, with robust sales including CAD 1.2 billion of bulk annuities in the second quarter continuing to support the growth outlook.

[David Harney, President and CEO at Great-West]

Finally, Capital and Risk Solutions continues to see strong demand for capital solutions across geographies and product lines, driving 38% year-over-year base earnings growth for the first half of the year. Overall, I am very pleased with our performance at the midpoint of the year. Please turn to slide eight. I want to take the opportunity to highlight Empower's recently announced acquisition of Milliman's Retirement and Benefits Administration business. The acquisition further scales our defined contribution platform, and more importantly, adds a leading defined benefit capability that strengthens our go-to market offering. By adding 1.5 million participants and $130 billion in client assets upon closing, Empower's workplace platform will be better positioned to compete for bundled opportunities

[David Harney, President and CEO at Great-West]

This transaction is expected to be financially attractive and accretive to base earnings in the first year. Ed is available today to address any additional questions on the transaction and the strong outlook for Empower's business overall. With that, I will pass over to Lindsey to discuss our European operations, where we have significantly enhanced the risk-return profile through sustained new business momentum and balance sheet optimization.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

Thank you, David, and good morning. Please turn to slide 10. In Europe, our base earnings increased 2% year-over-year in the second quarter, primarily driven by higher global equity markets, favorable insurance experience gains, and supportive currency movements. These were partially offset by a moderation in trading gains from the exceptionally strong levels recorded in the prior year. For the first half of 2026, base earnings grew 8% year-over-year, better reflecting the solid underlying business performance and successful execution of our strategic priorities. These results reinforce our confidence in the long-term earnings trajectory of the European business. We continue to benefit from a diversified earnings mix, recurring fee-based revenue streams, and strong growth across our lines of business.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

Turning to slide 11. Looking more closely at business activity, Europe continues to see robust demand across product lines, providing attractive opportunities for organic investment and a strong foundation for sustained earnings growth at a mid-single digit pace or higher. In insurance and annuities, U.K. bulk annuity sales were CAD 1.2 billion this quarter, with year-to-date sales amounting to a five-fold increase from 2025, reflecting robust demand for bulk annuities across the industry and healthy margins, particularly in the SME segment of the market. We continue to deploy capital in a disciplined manner, targeting returns in the mid-teens or higher. Retail annuity sales also remain strong, increasing 54% year-to-date, reflecting strong consumer demand for guaranteed retirement income solutions amid ongoing retirement planning needs. Within group benefits, in-force premiums increased 9% year-over-year, reflecting solid retention, pricing discipline, and ongoing growth.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

Particularly encouraging was the performance in wealth, as net flows improved significantly from the prior year period to CAD 7.1 billion of net inflows in the first half of 2026. This improvement was driven by continued momentum in retail sales and a rebound in institutional flows. It also underscores the attractiveness of our value proposition as clients continue to seek trusted advice and comprehensive wealth solutions across our European markets. Finally, retirement net flows remained positive at approximately CAD 600 million, consistent with the prior year, demonstrating the resilience and stability of our retirement franchise. Taken together, the U.K., Ireland, and Germany have a breadth of avenues to drive sustained growth. These drivers are supporting stronger earnings, higher ROE, and increased capital generation while reducing dependence on any single market or product line.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

Please turn to slide 12. Beyond top-line growth, we continue to make significant progress in optimizing our balance sheet. At the Investor Day last year, we outlined a series of initiatives designed to improve capital efficiency, enhance returns, and increase financial flexibility. We are pleased to report that we are on track to deliver over CAD 3 billion in capital benefits, exceeding our expectations from a year ago. These benefits were generated through enhanced asset liability management practices, strategic use of reinsurance, and modernization of our ALM tools and risk modeling capabilities. Improved capital efficiency has translated to more than CAD 2 billion in additional cash remittances and has reduced capital strain on new business by approximately 30%, enhancing capital deployment flexibility across the broader organization. The impact of these initiatives is most clearly reflected in our return metrics.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

Europe's base ROE this quarter reflects a 350 basis point improvement from 2024, demonstrating our ability to translate business growth and capital optimization into greater value creation. Importantly, this improvement has not come from taking additional risk. Rather, it reflects deliberate actions to optimize capital utilization, improve our business mix, and increase operating efficiency. Overall, Europe has delivered a good first half of 2026, marked by strong top-line growth and enhanced capital efficiency, enabling the business to drive strong risk-adjusted returns. As we look ahead, our focus remains on executing against attractive growth opportunities, maintaining disciplined capital deployment, and continuing to enhance returns while preserving the strength and resilience of our balance sheet.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

I'll now pass it over to Jon to talk through the broader financial results for the quarter.

[Jon Nielsen, Group CFO at Great-West]

Thank you, Lindsey, and good morning. Please turn to slide 14. Great-West again delivered a strong quarter with double-digit earnings growth driven by sustained momentum across our retirement and wealth businesses and strong new business volume in our CRS business. Base earnings per share growth of 15% year-over-year was also supported by CAD 925 million of share buybacks since the start of the year. These results drove base ROE of 19.3%, in line with our medium-term objective of 19.5% for a second straight quarter. While net earnings in the second quarter were impacted by unfavorable market experience. Primarily from interest rate movements, the year-to-date impact of interest rates was largely neutral.

[Jon Nielsen, Group CFO at Great-West]

Turning to slide 15. We are pleased that credit experience for the second quarter was down year-over-year and within our expected range of 4-6 basis points on an annualized basis. As a reminder, total credit experience is the aggregate of credit experience shown in our drivers of earnings disclosure, as well as our retirement and wealth P&L statements, all of which are included in the supplemental information package. We continue to expect that under normal conditions, credit experience would be at the lower end of the CAD 80 million-CAD 120 million pre-tax range that we indicated at the beginning of the year.

[Jon Nielsen, Group CFO at Great-West]

Turning to our results by segment, starting with slide 16. Empower delivered an excellent quarter with double-digit growth in base earnings, up 34% in constant currency, reflecting continued organic growth momentum across both the retirement and wealth businesses. In retirement, strong equity markets drove double-digit growth in average client assets, which now exceed $2 trillion for the first time. Net plan inflows remain strong, and we continue to expect positive net plan flows for the full year 2026. Operating margins also improved by over 600 basis points from a year ago, helped by improved credit experience and underscoring the significant operating leverage in the business.

[Jon Nielsen, Group CFO at Great-West]

Empower Wealth performed exceptionally well, with base earnings up 67% year-over-year in constant currency. Operating margins were a record 40% this quarter, up 10 percentage points year-over-year, demonstrating the scalability of the wealth platform. We intend to further invest in the business in the second half of the year and beyond, as a result, expect the full-year operating margin to be in the mid-to-high 30s. Overall, the significant momentum in our businesses drove Empower's base ROE to a record 22.2% and reinforces the double-digit growth outlook for 2026.

[Jon Nielsen, Group CFO at Great-West]

Turning to slide 17. Base earnings in our Canadian operations decreased 9% year-over-year as continued momentum in retirement and wealth was offset by moderated long-term disability experience gains, which can fluctuate from quarter-to-quarter. Underlying business growth was solid with group benefit sales up 20% from a year ago, insurance and annuity sales up 15% year-over-year, and rising equity markets and operating leverage supporting base earnings growth of 26% in the retirement business and 38% in wealth.

[Jon Nielsen, Group CFO at Great-West]

Turning to slide 18. Capital and Risk Solutions continued the strong start to the year with base earnings up 35% on a constant currency basis in the second quarter. This was driven by continued demand for our capital solutions globally, which drove a 54% year-over-year increase in the run rate insurance result in the second quarter. The pipeline in that business remains strong, we continue to expect new deals through the remainder of 2026.

[Jon Nielsen, Group CFO at Great-West]

Turning to slide 19. We've highlighted in the past, our organic capital generation is significant and is a key strength of our businesses. In the second quarter, base capital generation exceeded 80% of base earnings, while free cash flow was 86% of base earnings. We've said before, Great-West capital is highly fungible, providing significant support for continued capital deployment. While attractive organic growth opportunities in our more capital-supported businesses may impact base capital generation in any given quarter, we expect Great-West to remain highly cash generative.

[Jon Nielsen, Group CFO at Great-West]

Turning to slide 20. Great-West's exceptional free cash flow generation has supported significant capital deployment. Far this year, we've repurchased CAD 925 million of common shares and announced the acquisition of Milliman's Retirement and Benefits Administration business in the United States for a total consideration of $340 million. Similar to last year, we've amended our existing NCIB, allowing us to repurchase up to 40 million shares in 2026. We continue to expect that total capital deployed, either through share repurchases or M&A, will at least be as much as the CAD 1.6 billion deployed in 2025. Our LICAT ratio stood at 128%, down from 129% at the end of the first quarter, driven by a number of individual insignificant items.

[Jon Nielsen, Group CFO at Great-West]

For the remainder of the year, we expect to maintain a LICAT ratio at or above 125%, even if new business volume in our reinsurance business remains elevated. Our leverage ratio of 27% and HoldCo cash balance of CAD 2.5 billion positions us for continued financial flexibility and to pursue strategic capital deployment opportunities. Overall, we've had a great first half in 2026 and are excited about the continued momentum across all our business segments.

[Jon Nielsen, Group CFO at Great-West]

With that, I'll turn it back over to David for concluding remarks.

[David Harney, President and CEO at Great-West]

Thank you, Jon. Please turn to slide 22. I'm really pleased with how well we have continued to execute on our strategy since I took over as CEO a little over a year ago. With double-digit earnings growth through the first half of the year and a base ROE in excess of 19%, the results speak for themselves. This is a testament to the focus and efforts of our people across the organization. I'd also like to note that we are presenting our results for quarter two a week earlier than we did last year. I'd like to thank the finance and related teams for the amazing work they did in accelerating their timelines to facilitate the earlier reporting of these results. I am confident in the outlook for our business. We remain well-positioned to deliver on all our medium-term objectives.

[David Harney, President and CEO at Great-West]

Empower is on track once again to generate double-digit organic base earnings growth this year. CRS continues to outperform its growth ambitions with strong demand for its capital solutions expected to persist through 2026. We also demonstrated the strong and improving return profile of the business, supported by our balance sheet optimization efforts, especially in Europe. I'm confident that we will continue to deliver on our strategy and create long-term value for our shareholders in the years ahead. Thank you.

[David Harney, President and CEO at Great-West]

With that, I'll turn it over to Shubha to start the question and answer portion of the call.

[Shubha Khan, SVP and Head of Investor Relations at Great-West]

Thank you, David. In order to give everyone a chance to participate in the Q&A, we'd ask that you limit yourselves to two questions per person. You can certainly re-queue for follow-ups, and we will do our best to accommodate if there's time at the end. Morgan, we are ready to take questions now.

[Operator]

We will now begin the analyst question and answer session. To join the question queue, you may press star, then the number one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, press star, then the number one again. Your first question comes from John Aiken with Jefferies. Your line is open.

[John Aiken, Director of Research at Jefferies]

Good morning. With the Capital Risk Solutions, you mentioned the strong pipeline. As you're seeing demand increase in this segment, is this actually having any impact on margins? Are they actually widening out?

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

That's a good question, John. Thanks for that. There's always eroding margins on business that's been in the books for a long time. You can think of Capital Solutions as innovative, and in the early years, you tend to get really good margins. As other reinsurers enter the market, then the margin erodes over time. We always have a little bit of erosion on our margins on existing transactions over time. That's the way it works. However, I think what we are seeing right now and what we've seen the last 18 months or so, and continuing to see, is a lot of demand for some of the solutions that are working. It's actually a very diversified portfolio. We've got behavior risk in Europe and in North America. Policy behavior risk that people are reinsuring out.

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

We're seeing some health reinsurance demand in the United States, mass lapse transactions in Europe on savings products. A lot of demand on our Capital Solutions for non-life products. It's coming in a very diversified manner. We're very happy with it. However, our business is lumpy, and it comes in waves. I think I highlighted that at the investor day last year. It is a very lumpy business. Right now, we're riding the wave, and we're very opportunistic that way, but we remain disciplined. If the margins are no longer there and we're not getting our returns, we're going to move on to other types of products. It's important for us to continue to get new ideas and new products, and we're working on those, and we've got some pretty good ideas right now.

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

Whether the demand will be there or not for these products is hard to tell, but it's been a good run.

[David Harney, President and CEO at Great-West]

I think it's fair to say, Jeff, that margins on the new business have been good and in line with.

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

They're very good. Yes.

[David Harney, President and CEO at Great-West]

Like what's driving the growth here is increased demand from the market rather than any change in our competitive posture.

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

That's right.

[John Aiken, Director of Research at Jefferies]

Understood. Thank you. Jeff, just as a follow on, given your success, how is competition shaping up in your markets?

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

It's the same usual suspects, right? We're the same player. I think that what we've seen, John, is over the years, I think that There's been a shift from just a risk partner to a capital and planning partner. We've been at the forefront of that, we're constantly coming up with ideas. We've got extremely good relationships with large insurers in all the markets we're in, I think we benefit from the trust that they have in us. There's always some copycats in the market and people that are coming in and trying to get in the market. That'll continue to happen, we have been one of the leaders in the capital solutions and intend to continue to be that way. It's a hard market to get in.

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

You need to have experience and the right mindset, and the right balance sheet and backing of a strong company really helps as well. I think we've got all the right tools in our toolbox to get there.

[John Aiken, Director of Research at Jefferies]

Thanks for the color. I'll rep you.

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

Continue to be successful. Yeah.

[Operator]

Your next question comes from Mike Ward with UBS. Your line is open.

[Mike Ward, Senior Analyst at UBS]

Hi. Thanks, guys. I was just wondering if we could dig into the Milliman deal a little bit, and one of the things I was curious specifically about is some of the opportunities beyond sort of the cost synergies, but I guess revenue opportunities, right? The health and welfare benefits kind of administration, just because I don't think that you guys kind of quantified that potential opportunity, but it's an exciting part of that deal, I think.

[David Harney, President and CEO at Great-West]

Ed, do you want to take this?

[Ed Murphy, President and CEO of Empower at Great-West]

Sure. Yeah. Thanks for the question, Mike. Absolutely. I would say unlike some of the other major transactions that we did, MassMutual and Pru in particular, those were really driven in large part by cost synergies. This was very much about a strategic growth opportunity for us. This is a core capability that we were lacking to some degree because we were working through a third party, we were working through a partner, and we really felt like we needed to own the capability, similar to what we did with the acquisition of OptionTrax, where we have now a owned and proprietary capability in the equity plan administration category and space. We think there's tremendous opportunity, obviously, to cross-sell our DB admin capabilities with our existing customer base, tens of thousands of corporate clients.

[Ed Murphy, President and CEO of Empower at Great-West]

Also it puts us in a position to be far more effective in new pursuits when sponsors are typically looking for a multi-product type solution, defined contribution, defined benefit administration, and health and welfare administration. We're better positioned, we will be better positioned once that's successfully integrated to compete for those opportunities. I would say the market has moved to valuing the bundle, and that's very much core to our strategy is to build out these capabilities that allow us to establish deeper relationships with existing clients and with prospective clients. What I would say is in our workplace business, we continue to grow as measured by net new participants at 1.5x to 2x the rate of the market.

[Ed Murphy, President and CEO of Empower at Great-West]

In fact, this year, without an owned DB admin capability, we'll add close to 1 million participants net to the platform on a base of 20 million. 5% growth in a market that's growing at 2%, 2.5%. I think this is a tremendous growth opportunity. Obviously, coming out of the transaction, once it closes, we are establishing a partnership with Milliman. We think there's tremendous consulting opportunities that we can work on with Milliman. I would just summarize by saying this was all about addressing a product gap that we felt like we had, also very revenue synergistic from the standpoint of being able to have a much more appealing offering across things like DC, DB, and health and welfare.

[Mike Ward, Senior Analyst at UBS]

Thank you. That makes a lot of sense. Shifting away from the U.S. You guys spent a good amount of time talking sort of about the capital efficiency and business mix optimization efforts in Europe. I'm just kind of wondering how much more runway you see to further execute on that in Europe, and what that could look like, and do you see similar opportunities in other regions?

[Jon Nielsen, Group CFO at Great-West]

Thanks, Mike. We're really happy with the success that we've had in Europe. That's a multi-year project, and happy to report back on being ahead of where we expected to be at the Investor Day. That's really driven the ROE up significantly as we've done that and generated capital for us. I would say we're kind of 2/3 through that work. It does cover all the countries in Europe, although the most significant impact were in the higher capital intensive business, which is more a part of the U.K. business. When I say two-thirds of the way through, we are reflecting what we expect to be the outcome of that work when we've reported back to you and when we set out our initial expectations. As we continue to deliver that, it'll be against those expectations that we've laid out.

[Jon Nielsen, Group CFO at Great-West]

That's not just a focus in Europe. Albeit that was the biggest opportunity for us two years ago, but we're looking across the business and continue to optimize the business mix, the capital intensity, and the return, and look for opportunities to continue to drive better capital deployment and better IRRs out of our business.

[Mike Ward, Senior Analyst at UBS]

Thank you.

[Operator]

Your next question comes from Tom MacKinnon with BMO. Your line is open.

[Tom MacKinnon, Managing Director at BMO]

Yeah, thanks very much. Good morning. Two questions. First, on the Capital and Risk Solutions. If you mentioned the business comes in waves, it looks like the capital solutions business is largely in terms of short-term business and not CSM related. If demand did fall 10%, would we expect those short-term expected earnings to decline 10%? What is the outlook really for those short-term expected earnings in CRS, going forward through 2026, given the strong demand?

[Jeff Poulin, CEO of Capital and Risk Solutions at Great-West]

Thanks, Tom. I appreciate the question. I think you could look at some of the capital solution earnings as being a bit stickier than you've said there. It does erode over time, either through competition or people don't renew some of their covers. We tend to replace and expect to replace those earnings with more capital solutions. The demand is still fairly strong, although I think it's tapered off a little bit from the levels we've seen in the last 18 months. There's still plenty of demand. I would say that the current level of run rate that we have now is very sustainable, and we're probably going to continue to see mid-single digit plus growth from this standpoint. That's how I would qualify it. Does that make sense?

[Tom MacKinnon, Managing Director at BMO]

Great. Yep. The second question's with respect to Empower. Ed, we had $14 billion in participant net outflows. You understand higher markets can sometimes lead to higher net outflows, but that to me would suggest a lot of rollover possibilities, yet if I look into U.S. Wealth, there was $1.8 billion in net inflows. That's kind of the lowest we've seen in the last seven quarters. Understanding you're doing some transformation initiatives there, kind of trying to upgrade your capabilities with respect to rollover capture, but any color you can add on the commentary I just made there? Thanks.

[Ed Murphy, President and CEO of Empower at Great-West]

Yeah, sure. Tom, I think the one thing to take note of is the seasonality of the contributions on the workplace side. We had roughly CAD 45 billion in contributions in Q1, and that was to be expected because that's when a lot of the company matches and profit-sharing hits. That dropped to CAD 32 billion in Q2, and we would see that being relatively constant through the balance of the year from a contribution standpoint. The disbursement piece of it or the distribution piece of it on the workplace side was largely just driven by account balances. It wasn't volume per se. To answer the second part of your question, what I would say is, as we shared with you last quarter, we've instituted some changes. We've implemented several changes across the organization, made some structural changes, made some personnel changes.

[Ed Murphy, President and CEO of Empower at Great-West]

I will say that I have seen improvements starting to take hold. As I look at Q3 and beyond, we fully expect to see improvement above what we experienced in Q1 and Q2. A lot of the indicators I think are very strong. The flow opportunity for us has been fairly constant from quarter to quarter in terms of the opportunity set. As we look forward, we see greater success and higher net new assets in Q3 and Q4. More to come there, but I feel good about the path that we're on.

[Tom MacKinnon, Managing Director at BMO]

Great. Thanks.

[Ed Murphy, President and CEO of Empower at Great-West]

You bet.

[Operator]

Your next question comes from Alex Scott with Barclays. Your line is open.

[Alex Scott, Equity Research Analyst at Barclays]

Hey, good morning. First one I had is on excess capital. I was wondering if you could talk about the amount of capacity you have. I know you've got the Milliman going on. Just maybe talk about your appetite for further M&A and how you're measuring that against buybacks, especially considering your stock price has gotten to a, I'd say, a pretty attractive valuation at this point.

[Jon Nielsen, Group CFO at Great-West]

Yeah. Thanks, Alex. As you know, we're generating significant capital in excess of our target of 80%+, that's really translated into really strong free cash flow. If you look at this quarter above 85%, that trend, if you look backwards, was fairly consistent. 2/3 of our business and the growth parts, the parts of our business that are growing the fastest, do come from capital-light businesses. We expect those businesses to continue to outpace the growth of the overall company. We're in a good position to see that free cash flow continue at high levels. As we reported back on, we are in a process of capital optimization on some of those more capital-supported businesses, and happy with the progress there that's also driving that capital generation.

[Jon Nielsen, Group CFO at Great-West]

We did end the quarter at around CAD 2.5 billion of cash, we haven't changed our capital allocation priorities, continue to be what's in the best interest of the long-term return of our shareholders in deploying that. We have the tools available, both through our NCIB program, and through an active watch on the M&A market, which we took advantage of this quarter, as you said, with Milliman to deploy that capital. We would expect over time, that we wouldn't sit on excess capital in perpetuity. There may be timing as to when opportunities present themselves in the M&A market. We want to be prepared for those, and balance that with our ongoing buyback program. What we said consistently, and this is the third call of the year, is that we will do at least as much capital deployment as last year. That was CAD 1.6 billion.

[Jon Nielsen, Group CFO at Great-West]

We deployed CAD 925 million in buybacks and then obviously the CAD 350 or so into the Milliman acquisition. We'll continue to evaluate as we head into the second half. We have the tools in place, and thankful that Power Corporation has continued to support extending the NCIB program to the same level of shares as last year. Obviously, we probably wouldn't get to the full usage of that NCIB program, but I guess our thought is have some flexibility. We still think there's intrinsic value in buybacks and strong earnings growth and cash generation in our stock, and we'll balance that against opportunities. As I said, with the thought that we'll deploy that capital, that there may be timing in which we do it, and obviously a balance between the opportunities in the M&A market and buybacks.

[Alex Scott, Equity Research Analyst at Barclays]

Got it. Really helpful. Next one I had is on Empower Retirement. Wanted to see if you could talk a bit more about the margin there. I know I heard you opine on the margin for wealth, I think, in your comments. Could you talk about retirement? The margin's gotten a lot better there. How are you viewing the trade-offs for further margin improvement versus investment in the business in that segment?

[Ed Murphy, President and CEO of Empower at Great-West]

Yeah. I think a couple of factors there. Obviously, the market tailwind has been a contributing factor, and that's been positive for sure. As we've shared with you in the past, we've been on a multi-year journey in terms of transforming the operating environment and driving our unit cost lower, and we have a multi-year plan to do that. Obviously, AI is playing a prominent role there, but also just the work that we're doing around straight-through processing and automation. As we look further out, the scale that we have gives us tremendous operating leverage, and I'm confident that we can continue to drive unit cost lower. We can't always rely on the markets, but we focus on the things that we can control, which is delivering value for our customers and doing it in a way that's efficient.

[Ed Murphy, President and CEO of Empower at Great-West]

I think our guidance, in terms of margins in the workplace business, is really sort of in that low to mid-30%. As you acknowledge, we've seen really strong improvement in the margins over the last couple of years and in particular, a nice move just over the last couple of quarters. It's also a business that we are going to continue to invest in as we build out more capabilities. You think about the acquisition we did with Milliman, that's largely a workplace-type transaction. We're making investments there, but we've got a really strong expense discipline that I think is also a big contributing factor.

[Alex Scott, Equity Research Analyst at Barclays]

Thank you.

[Ed Murphy, President and CEO of Empower at Great-West]

You bet.

[Operator]

Your next question comes from Paul Holden with CIBC World Markets. Your line is open.

[Paul Holden, Director at CIBC World Markets]

Thank you. Good morning. First question I want to ask you about is on asset allocation and in consideration particularly of corporate spreads. We're about as tight as we ever have. The reason I'm asking the question, I always thought GWO and asset allocation always took advantage of spreads, not just in terms of trading income opportunities, but also just in terms of yield enhancement, right? Being an important part of the story over time. Just recent thoughts on asset allocation, how you're dealing with or trying to generate yield enhancement opportunities in a very challenging credit spread environment.

[David Harney, President and CEO at Great-West]

John, do you want to comment?

[John Melvin, Chief Investment Officer at Great-West]

Yes. Thank you. What I'd say is with respect to where we are in the current credit spread environment, we have a conservative, well-diversified portfolio. We are not aggressively chasing or pressing on that given that we are near historical tight spread levels across the board. I think the strategy remains consistent. We will certainly look for ways to be more capital efficient and have a better balance in all of our businesses with ALM, but we also need to make sure we're market competitive in our product areas. So far we're able to do that. As you've seen with some of the changes that we've deployed in some of our segments in terms of becoming more capital efficient and optimizing more effectively, that's likely to continue throughout the portfolio across our various segments.

[John Melvin, Chief Investment Officer at Great-West]

Again, I would say our strategy is to continue to hold the course on our desired risk-taking in the portfolio, and continue to try and build the portfolio yields through the types of strategies we have been deploying and more efficient use of capital.

[John Melvin, Chief Investment Officer at Great-West]

I'll turn it over to David. David, do you have any comments?

[David Harney, President and CEO at Great-West]

Yeah. I'd just add overall, our earnings are becoming less dependent on trading gains or a smaller portion. I think even in the current environment, there will continue to be trading gain opportunities. It's not a line we expect to grow. We'll have less reliance on this going forward. Even in the current environment, there will continue to be trading gain opportunities.

[Paul Holden, Director at CIBC World Markets]

Well, given all that and sort of putting the trading gains aside, if I just sort of think about the core net investment income, if there's such a thing as core net investment income. Do skinnier spreads put pressure on that over time, I guess, is really the nature of my question.

[David Harney, President and CEO at Great-West]

Yeah, I think it comes through in two parts of the business. Like sort of in the capital-intensive business. Pricing will reflect where spreads are at. Then I suppose the other area where it comes through is the general account in the U.S., and that's more straight through the crediting rates will affect where spreads are. Both of those become a little bit more difficult in a tightening spread market. They reflect through in the underlying business.

[Paul Holden, Director at CIBC World Markets]

Okay. That's good. Then second question is with respect to Europe and the wealth business. Obviously a lot of positives taking place in Europe. Just kind of curious on wealth shows good asset growth, good flows, but no growth in earnings over the last year, and that looks to be an expense story. Maybe just kind of walk us through what's happening on the expense line, if that's intended to result in future opportunities, or basically, how do we understand that lack of earnings growth and the higher expenses versus revenue?

[Jon Nielsen, Group CFO at Great-West]

Maybe I'll take a technical factor and then Lindsey can talk a little bit more about the business. There was a reclassification between wealth and retirement that impacted this year's numbers. We didn't go back and reclassify it because it wasn't that significant at the group. When you kind of look at the growth rate, you might aggregate those two together to get a more accurate picture of things. Apologies for that. It just better reflects the margins on each of the business as we see them.

[Jon Nielsen, Group CFO at Great-West]

Over to Lindsey.

[Lindsey Rix-Broom, CEO of Europe at Great-West]

No, thanks, Jon. Then just to build from a business point of view, I think as you say, we're seeing assets increase quarter-over-quarter. Due to just the mix of both client and revenue mix, you kind of see a potential change in terms of how the fee revenue then comes through quarter-over-quarter. I don't think there's anything else to seeing that other than mix over the course of the year. We're pleased with the growth that we're seeing across all parts of the business in wealth.

[Paul Holden, Director at CIBC World Markets]

Got it. Okay. That explains it. Thank you. I'll leave my questions there.

[Operator]

Your next question comes from Doug Young with Desjardins Capital Markets. Your line is open.

[Doug Young, Analyst at Desjardins Capital Markets]

Hi. Good morning. I guess this is for Jon. Just wanted to go back to capital for a second. Maybe you can quantify how much excess capital you have at the Canadian and U.S. OpCos. I see the cash up at the HoldCo. Just wondering how much is down at the OpCo. Can you define what you see as the debt capacity. The third part of it is you said the LICAT was down quarter-over-quarter. There were several smaller items. I didn't know if there was cash moved up from the OpCo that had an impact. What were those smaller items?

[Jon Nielsen, Group CFO at Great-West]

Yeah, sure. Let me take you through the excess capital position overall. We can talk about the current trend. As you indicated, the HoldCo cash. The way we context this, that's outside of the LICAT and RBC environment. That's excess capital. We typically keep around a little bit of liquidity there. You can generally think of it as fully deployable, and that was just around CAD 2.5 billion. I think as I've indicated in the prior couple of calls, that typically we would look at capital above 120% or just over CAD 2 billion as being deployable. As I indicated, for the right transaction, we could go down to that level. We'd always balance that decision, and the question is would we, and how would we fund a transaction? Not could we. Would we go down that road? That's about CAD 2 billion.

[Jon Nielsen, Group CFO at Great-West]

In terms of RBC in the U.S., I would think of the U.S. as being highly cash generative for us on the upper end of where we generate cash as a percent of base earnings. It's very high given the nature of the business. Whilst we have capital sufficient, capital excess there to a degree, there are ongoing developments in RBC and other factors. There may be some there, Doug. We really look at that as more cash into the future. In terms of leverage, that kind of gets you to CAD 4 billion-CAD 4.5 billion, similar to what I said last quarter. You have the leverage capacity. We would see an ongoing rate again, as I've shared, being 30% as being an ongoing leverage rate this business could run at. That's another CAD 2 billion.

[Jon Nielsen, Group CFO at Great-West]

Just around CAD 6 billion of excess capital. As I've indicated before, for the right transactions, we have gone up temporarily and leveraged up to a 35% level. What we typically have done in the past, and we have a great track record, and I think this helps build why we have this capacity in terms of paying it down quickly. We typically then will pay down that leverage quite quickly, both with the cash flows of any acquired businesses and our ongoing excess cash flows. That would add another CAD 3.5 billion or CAD 4 billion. We have a lot of capacity. Our intention is to continue to generate that, and there's no reason we don't excess of 80%. You should assume that we'll continue to have cash flow move up to the holding company at a strong pace.

[Jon Nielsen, Group CFO at Great-West]

During the quarter, it wasn't quite 1 point. We round to 1 point. I'll just point out there's a bit of a rounding there. Number of insignificant items, I would call it a little bit of markets, a little bit of timing on capital deployment. There's certain activities that you can align exactly in the time when you deploy capital organically and get everything lined up in terms of what the optimal capital structure for that new business is. A little bit of timing, and then just a number of other small things that honestly are very individually insignificant.

[Doug Young, Analyst at Desjardins Capital Markets]

Okay.

[Jon Nielsen, Group CFO at Great-West]

Nothing that would be something that would be an ongoing impact to have a concern about. Obviously then the outflow of capital.

[Doug Young, Analyst at Desjardins Capital Markets]

Sure. Yeah, okay. There was outflow of capital. You haven't quantified how much you put up, though, or just Canada?

[Jon Nielsen, Group CFO at Great-West]

It is available, this is one thing that we've done that I think gives you a great view on that. If you look at the SIP, you're able to back into all the numbers, very transparently on the SIP on page 17, Great-West Holdco cash at holding company. That gives you a sense of the cash flows of the holding company and its related operations, the money that flowed up and where it went. I'll just say that there's always timing impacts on dividends. Some of our entities, typically you pay it out after you earn it. Some are annual dividends, some are quarterly. Look at that over the full year when you always look at it over a full year or rolling four-quarter averages, that's kind of how we present it.

[Doug Young, Analyst at Desjardins Capital Markets]

Okay, just second question. Like Canadian, Canada, I know you had less favorable group LTD experience, you talked a bit about that. You had negative individual insurance experience, I think it was maybe kind of fleshed out as being like normal volatility. Just wanted to get a sense of like the individual insurance, there was a big swing in the individual insurance line in Canada, just maybe a little bit of color of what you're seeing there?

[Fabrice Morin, President and CEO of Canada at Great-West]

Doug, I think. It's Fabrice here. Thanks for the question. That's right. We've had overall insurance experience in Q2 that was materially lower than a strong prior year, due mainly to less favorable group long-term disability experience. There's also other experience factors that all played in the lower direction. In individual, as you pointed out, you would have individual disability, which is also unfavorable, although we see it as normal volatility there. We would have mortality on both the workplace and individual side that are in aggregate, unfavorable compared to prior year. The bulk of it is when we do the year-over-year, the bulk of it is group long-term disability. Can give just a few details there. It's been mainly around claims recovery, where we've seen less good experience than we'd had in the past.

[Fabrice Morin, President and CEO of Canada at Great-West]

We've seen this trend start to emerge in Q1. We've seen a continuation of it in Q2. We've seen at the industry level others as well, feeling the same pressure. I think it wouldn't be unreasonable to think that may continue into Q3. Long term, this is a strong business. We've also seen some incidents, higher incidents, lower experience on incidents this period, this has been quite recent, we would qualify this as normal volatility. Overall, we're very pleased with the performance of our business, our workplace benefits business. The sales momentum is high, as was mentioned in the formal presentation. Same thing in individual insurance. These businesses remain healthy. This doesn't change our strategy.

[Fabrice Morin, President and CEO of Canada at Great-West]

As I mentioned, group long-term disability, there's a part of it that has emerged in Q1, continues in Q2, may go on for a few quarters. The rest of it, I would say it's too early to call, and it doesn't change our strategy, and we've got strong businesses with good momentum.

[Doug Young, Analyst at Desjardins Capital Markets]

Appreciate the color. Thank you.

[Operator]

Your next question comes from Gabriel Dechaine with National Bank Financial. Your line is open.

[Gabriel Dechaine, Analyst at National Bank Financial]

Hey, good morning. Just to keep going with that line of questioning, more on the group side. Can you explain, you're seeing lower recoveries, what would have changed this year versus last? Does this preface, I guess, a need to reprice the portfolio? How long does that take to restore margins?

[Fabrice Morin, President and CEO of Canada at Great-West]

Thanks for the question, Gabriel. Yes, the lower recoveries is the return to work, so the return to healthy and productive state for our members on disability, that's a bit slower than historical. That's the trend that we see there. We have strong case managers. We're, of course, heavily focused on the factors that we can control, and we have good discipline in our case management and up discipline on our case management. As I've mentioned, we've seen this trend at the industry level, not just in Canada, but in Canada primarily. There can be a number of factors related to that, and this business can be cyclical.

[Gabriel Dechaine, Analyst at National Bank Financial]

Yeah.

[Fabrice Morin, President and CEO of Canada at Great-West]

One thing that I point to is employment growth in Canada has been slower in 2025 than 2024, and even slower in 2026, almost flat in 2026. When there's not a lot of employment growth, when there's not a lot of demand for labor, the return-to-work process can be at the margin, just a little bit more challenging, and we're working through that. That's an example of micro factor that we might see in addition to the types of health conditions that we're dealing with. We've been in this business for a long time. We've seen cycles, and there's no reason to believe this would change.

[Fabrice Morin, President and CEO of Canada at Great-West]

You talk about pricing there. The business is annually renewable. Depending on conditions that we see pricing is part of our toolkit. I'm not going to extend more on that at this one.

[Gabriel Dechaine, Analyst at National Bank Financial]

Got you. Thanks. That job background answered my second question, I'll change my second question just for the buybacks. Can you provide another explanation of your appetite for buybacks? The stock's 3x book. How does that factor into your decision? Milliman was not a big acquisition, is that even a reason to hold back on buybacks here?

[Jon Nielsen, Group CFO at Great-West]

Well, thanks, Gabe. Yeah. Well, first, we think there's still significant intrinsic value and upside in our share price. We continue to deliver at or above our medium-term objectives, that's our intention to meet or beat those objectives. Relatively still positive about the outlook on the growth for the organization continuing at this pace. I wouldn't characterize anything as an outlook change on buybacks. We did CAD 925 million in the first half.

[Gabriel Dechaine, Analyst at National Bank Financial]

Yeah.

[Jon Nielsen, Group CFO at Great-West]

We did significant buybacks in the second half of last year, we have the commitment from our major shareholder on a continuation of the same level of authorization and buybacks as we had last year. We are always looking for other opportunities that create long-term total shareholder return and obviously deploying capital into very accretive transactions. Mid IRRs on the Milliman transaction, we bought it at call it 10x earnings level. This is going to be accretive and CAD 350 million isn't necessarily pocket change. We'd like to do more transactions that meet our financial criteria. It's hard for us to time those, right? We can't know when those opportunities come, we always want to be apprised of having capital available.

[Jon Nielsen, Group CFO at Great-West]

What we can assure you is, as we said on this third call, we are going to do at least as much as we did last year in terms of capital deployment. We are going to be active in buybacks and hopefully M&A as we look forward because we generate significant cash flow in excess of our ongoing dividend and other fixed capital needs. We will deploy that cash. It will be deployed accretively. We want to do it very carefully. Whether it be through buyback or M&A, you should expect over time that excess capital to be deployed accretively.

[Gabriel Dechaine, Analyst at National Bank Financial]

All right. Thanks.

[Operator]

Your next question comes from Darko Mihelic with RBC Capital Markets. Your line is open.

[Darko Mihelic, Equity Analyst at RBC Capital Markets]

Hi. Thank you. Good morning. Thanks for taking my question. I know the conference call's a little late. I am looking at two pieces of information. First is from your shareholders report. It's on page eight proper. Beside that, I have slide 25 which shows how strong equity markets were. They were exceptionally strong in the quarter. My question is how did your equities underperform your expectations in the quarter?

[Jon Nielsen, Group CFO at Great-West]

Well, thanks, Darko, for the question. Obviously, there was some noise from our hedging program on our share price. The Great-West share moved up much in excess of the overall market and obviously in excess of the long-term return that we assumed for our base earnings. The overwhelming amount of our exposure there is hedged, but there are a number of things that go into hedging those programs, including performance standards, the length of service, the outstanding. As it relates to active management, all that ineffectiveness on the hedge is fully reflected in our base earnings. A little bit of noise as it relates to just the sharp increase in price. I'd probably bring it back up a level in terms of the non-base earnings impacts during the quarter. It was principally driven by interest rates.

[Jon Nielsen, Group CFO at Great-West]

As you look at the interest rates year to date, is a negligible level. What we always look at in terms of the market experience is not just a quarter, not even an annualized level, but more on a long-term trend where we'd expect these to, over time, be zero or close to zero. If you look at since we've applied IFRS, actually market experience for Great-West has been a slight positive over a 4.5-year period. What we've seen is higher interest rate levels has caused a bit of a positive in terms of the impacts over that period or let's say CAD 1 billion of positive. On the offset, really we've seen that interest rate impact our real estate portfolio and offset some of those benefits as you might expect from a cap rate.

[Jon Nielsen, Group CFO at Great-West]

In terms of the real estate portfolio, I thought it was important to give some update. What we've seen is almost 20% decline in that portfolio over the last couple of years. We have not made any active additions to our non-par real estate over the last two years, and we wouldn't intend to. Even since the quarter's ended, we've redeployed another CAD 200 million of the real estate into other active asset classes. While we've seen some of that noise continue and as the market's adjusted to higher rates what we've done to respond to that is obviously not actively allocate and continue to and we've seen a reduction in the real estate of 20%. Just wanted to give that context as well as an update to the analyst market.

[Darko Mihelic, Equity Analyst at RBC Capital Markets]

That's helpful, Jon. Maybe just two quick follow-ups, if I may. Is the hedging, is this something newer? Given that the hedging was a negative against some of the strongest equity markets we've ever seen, and given that you're not really looking at increasing sort of other assets like real estate, is it time to revisit the base investment earnings expectations? Number one.

[Darko Mihelic, Equity Analyst at RBC Capital Markets]

Number two, I don't know if you've ever looked at it this way, but I always look at this as a sort of a spread. There's investment earnings on assets that are backing your liabilities. Throughout this entire period, whereas your results on an actual basis versus expected may be slightly better or actually might be slightly positive, your overall rate of return or spread on these assets is much lower than your peers. I'm wondering if you're leaving money on the table, and if we should be lowering, or if you should be lowering the base investment earnings expectation.

[Jon Nielsen, Group CFO at Great-West]

Well, we're always looking at our long-term assumptions, Darko. We think they're consistent with market, and as I said, if anything, our net-to-base earnings, in terms of markets, while it's volatile quarter to quarter, year to year, having been through a cycle of 4.5 years of quite volatile markets, if you think about that cycle, far higher interest rates, impacts on real estate, inflation. To come out of that period as a positive, I think should give you a lot of confidence in our assumptions, should give you a lot of confidence in how we're managing the balance sheet. I would argue that if anything, we've managed it very well in terms of the transition to IFRS and how we do ALM.

[Jon Nielsen, Group CFO at Great-West]

I think the ultimate answer to that is look at the free cash flow and ROE that we've generated over that time and the improvements there. We always look at our assumed returns and so forth. There are different approaches that were taken at IFRS 17 in terms of the transition. I think John articulated well that in terms of our deployment into yield, we continue to deploy into the fixed income market positively, and run it in a very conservative way. We're very comfortable. We look at it all the time, and if anything, I think go back to we're net positive over 4.5 years in terms of the market experience. I think that's probably the best I can give you.

[Darko Mihelic, Equity Analyst at RBC Capital Markets]

Okay. Thank you.

[Operator]

Your next question comes from Mario Mendonca with TD Securities. Your line is open.

[Mario Mendonca, Managing Director and Senior Financial Services Analyst at TD Securities]

Good morning. Jon, can we go back to the public equity markets loss, the thing Darko's asking about. If you'd applied your sensitivities literally and precisely, you'd expect something like close to a CAD 40 million gain, and in fact, it's a CAD 34 million loss. We're looking at about a swing of CAD 70 million-CAD 75 million in one quarter. I understand that the hedging in effectiveness, as you described, goes through base earnings, this would be anything in excess of what you might expect. It's hard for me to wrap my mind around a CAD 70 million-CAD 75 million in effectiveness when in fact most of it gets recorded in base. Is there more going on there? Are there payments to executives, payments to other people within Great-West Life that's incorporated in that CAD 70 million-CAD 75 million I'm estimating?

[Jon Nielsen, Group CFO at Great-West]

I think I wouldn't context the volatility in the hedge to be the full gap between expected and actual. There were other performance-related factors in the investment portfolio. It wasn't the full impact, and as you might expect, there's noise in the base as well from the hedging program, as I articulated, that is in the base earnings.

[Mario Mendonca, Managing Director and Senior Financial Services Analyst at TD Securities]

It sounds to me from your response that there were payments here as well.

[Jon Nielsen, Group CFO at Great-West]

Yeah. Sorry to cut you off, Mario, there's a lot of factors that go into that hedging program. When people retire, how long they stay with us, performance factors. Most of those aren't felt in a quarter where you have a normalized return. We're really happy with the 35% return in the Great-West share price during the quarter, and that accentuated what is a very highly hedged program with very little sensitivity. Single-digit sensitivity to the overall balance of what we expect to pay on the share-based compensation program.

[Mario Mendonca, Managing Director and Senior Financial Services Analyst at TD Securities]

Okay. I can't help but assume that there are payments here that are part of this CAD 70 million, CAD 75 million swing. Maybe the question I'm really asking is this something we should see going forward? Significant charges as payments are made.

[Jon Nielsen, Group CFO at Great-West]

I wouldn't anticipate that. As I said, we're highly hedged across the portfolio, very close hedging. When you have a combination of movements in people and long-term balances in terms of certain non-management and a hedging program, it stuck out this quarter. We haven't changed our position. We've always applied the same accounting. Just happens to be this quarter with the sharp increase we saw this volatility. It's not something that would recur.

[Mario Mendonca, Managing Director and Senior Financial Services Analyst at TD Securities]

Okay, different type of question. Jon, you announced the increase from 20 million-40 million shares in the buyback. From your response, it doesn't sound like you'd get to 40 million. My question is this: Is there a set of facts or circumstances that could get you to 40 million, or is 40 million just highly improbable and it's just there for flexibility in case circumstances warrant it?

[Jon Nielsen, Group CFO at Great-West]

Yeah. Obviously, there are certain limitations on the use of the NCIB program in terms of volume and so forth. I would context it as improbable. Last year, we didn't even get to 40 million. I'd call it as improbable. Certainly, we have the free cash to deploy. We have CAD 2.5 billion of cash to deploy into buybacks if we choose to. Mario, we want to make sure that we do the most accretive balance sheet management as possible, and certainly one of the tools that we're going to actively continue to pull is the buyback tool. I think we've been consistent at least as much as last year. Over time, we will deploy all of that excess capital in one way or the other into accretive transactions.

[Mario Mendonca, Managing Director and Senior Financial Services Analyst at TD Securities]

All right. Thank you.

[Operator]

This concludes the question and answer session. I would like to turn the conference back over to Mr. Khan.

[Shubha Khan, SVP and Head of Investor Relations at Great-West]

Thanks, everyone, for joining us today. Following the call, a telephone replay will be available for one week, and the webcast will be archived on our website for one year. Our 2026 third quarter results are scheduled to be released after market close on Wednesday, November 4th, with the earnings call starting at 9:30 A.M. Eastern Time the following day. Thank you again, this concludes our call for today.

[Operator]

This brings today's conference call to a close. You may disconnect your lines at this time. Thank you for participating, and have a pleasant day.

Participants

Analysts

• Shubha Khan, SVP and Head of Investor Relations at Great-West
• David Harney, President and CEO at Great-West
• Lindsey Rix-Broom, CEO of Europe at Great-West
• Jon Nielsen, Group CFO at Great-West
• John Aiken, Director of Research at Jefferies
• Jeff Poulin, CEO of Capital and Risk Solutions at Great-West
• Mike Ward, Senior Analyst at UBS
• Ed Murphy, President and CEO of Empower at Great-West
• Tom MacKinnon, Managing Director at BMO
• Alex Scott, Equity Research Analyst at Barclays
• Paul Holden, Director at CIBC World Markets
• John Melvin, Chief Investment Officer at Great-West
• Doug Young, Analyst at Desjardins Capital Markets
• Fabrice Morin, President and CEO of Canada at Great-West
• Gabriel Dechaine, Analyst at National Bank Financial
• Darko Mihelic, Equity Analyst at RBC Capital Markets
• Mario Mendonca, Managing Director and Senior Financial Services Analyst at TD Securities