Great-West Lifeco Q2 Earnings Call Highlights

Key Points

• Great-West Lifeco’s Q2 base EPS rose 15% year over year, with base ROE at 19.3%, near its 19.5% medium-term target. Retirement and wealth client assets increased 22% to more than CAD 3.37 trillion.
• Empower was a major growth driver: base earnings climbed 34% in constant currency, workplace assets surpassed $2 trillion, and Empower Wealth earnings jumped 67%. The planned $340 million Milliman acquisition would add 1.5 million participants and $130 billion in assets.
• Results were mixed across regions: Europe delivered earnings growth and strong bulk-annuity sales, while Canada’s earnings fell 9% due to weaker disability and insurance experience. Capital and Risk Solutions earnings rose 35%, and management expects continued growth while maintaining a LICAT ratio of at least 125%.

Great-West Lifeco TSE: GWO reported 15% year-over-year growth in second-quarter base earnings per share, supported by double-digit growth at its Empower retirement business and Capital and Risk Solutions division, management said during the company’s second-quarter 2026 earnings call.

President and Chief Executive Officer David Harney said the company’s base return on equity was 19.3% for the quarter, near its medium-term objective of 19.5%. Retirement and wealth client assets rose 22% from a year earlier to more than CAD 3.37 trillion, including CAD 1.3 trillion in higher-margin assets under management or advisement.

Harney said Great-West expects total 2026 capital deployment through share buybacks and acquisitions to be at least equal to the CAD 1.6 billion deployed in 2025. The company repurchased CAD 925 million of common shares through the first half and announced its acquisition of Milliman’s Retirement and Benefits Administration business for approximately $340 million.

Empower Surpasses $2 Trillion in Workplace Assets

Empower’s workplace platform surpassed $2 trillion in client assets during the quarter. Group Chief Financial Officer Jon Nielsen said Empower’s base earnings increased 34% in constant currency, driven by continued growth in retirement and wealth operations.

In the retirement business, average client assets grew at a double-digit rate as equity markets rose, while operating margins increased more than 600 basis points from a year earlier. Empower expects positive net plan flows for the full year, Nielsen said.

Empower Wealth base earnings increased 67% year-over-year in constant currency, while operating margin reached a record 40%, up 10 percentage points from the prior year. Management said it plans to continue investing in the wealth operation in the second half, and expects its full-year operating margin to be in the mid-to-high 30% range.

The pending Milliman acquisition is expected to add 1.5 million participants and $130 billion in client assets to Empower’s workplace platform upon closing. Harney said the transaction, which is expected to close later this year, would add defined-benefit administration capabilities and be accretive to base earnings in its first year.

Ed Murphy, President and CEO of Empower, said the acquisition is primarily a strategic growth investment rather than a cost-synergy transaction. He said the deal would help Empower offer bundled defined-contribution, defined-benefit and health-and-welfare administration services, potentially expanding cross-selling opportunities with its existing corporate customers.

Europe Reports Sales Growth and Capital Benefits

Great-West’s European business posted 2% growth in second-quarter base earnings and 8% growth for the first half. Europe CEO Lindsey Rix-Broom said the quarterly result benefited from higher global equity markets, favorable insurance experience and currency movements, partly offset by lower trading gains compared with the prior-year period.

U.K. bulk annuity sales totaled CAD 1.2 billion in the quarter, and year-to-date sales were five times the 2025 level. Retail annuity sales increased 54% year-to-date, while in-force group benefits premiums rose 9% from a year earlier.

European wealth operations reported CAD 7.1 billion of net inflows in the first half, reflecting retail sales momentum and improved institutional flows. Retirement net flows were approximately CAD 600 million, in line with the prior year.

Rix-Broom said the company is on track to generate more than CAD 3 billion in capital benefits from balance-sheet initiatives, exceeding expectations established at its investor day last year. The efforts include enhanced asset-liability management, reinsurance use and updated risk-modeling tools. The initiatives have generated more than CAD 2 billion in additional cash remittances and reduced capital strain on new business by roughly 30%, she said.

Europe’s base return on equity improved by 350 basis points from 2024, according to management.

Canada and Capital Solutions Results Diverge

Base earnings in Canada declined 9% year-over-year, as growth in retirement and wealth was offset by weaker insurance experience. Retirement base earnings increased 26%, while wealth base earnings rose 38%, aided by higher equity markets and operating leverage.

Fabrice Morin, President and CEO of Canada, said group long-term disability experience was weaker because claims recoveries, or returns to work, were slower than historical levels. He said the trend emerged in the first quarter, continued in the second quarter and could persist into the third quarter. Individual disability and mortality experience were also unfavorable relative to the prior year, though Morin characterized some of the movement as normal volatility.

Group benefits sales in Canada increased 20% from a year earlier, while insurance and annuity sales rose 15%.

Capital and Risk Solutions continued to produce strong growth, with second-quarter base earnings up 35% in constant currency. The run-rate insurance result in the capital solutions business increased 54% from a year earlier, supported by demand across geographies and product lines.

Jeff Poulin, CEO of Capital and Risk Solutions, said margins on existing transactions can decline over time as competition develops, but new-business margins remain strong. He described the business as “lumpy” but said the current run rate was sustainable and that management expects mid-single-digit or better growth.

Capital Position and Outlook

Great-West generated base capital equal to more than 80% of base earnings during the quarter and free cash flow equal to 86% of base earnings. Its LICAT ratio was 128%, compared with 129% at the end of the first quarter, while its leverage ratio fell to 27% from 28%. Holdco cash totaled CAD 2.5 billion.

Nielsen said the company expects to maintain a LICAT ratio of at least 125% for the remainder of 2026, even if reinsurance new-business volumes remain elevated. Management also said it remains active in evaluating both share repurchases and acquisitions, though Nielsen characterized full use of its authorization to buy back up to 40 million shares in 2026 as improbable.

Harney said Empower remains on track for double-digit organic base earnings growth in 2026, while Capital and Risk Solutions is expected to continue benefiting from demand for capital solutions.

About Great-West Lifeco (TSE:GWO)

Great-West Lifeco 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.

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