Canadian insurer Great-West Lifeco Inc. GWO-T is looking to strengthen its results with the aim of doubling profits from its wealth management business over the next four years.
At the company’s recent annual investor day, chief executive Paul Mahon told analysts that the wealth division currently contributes about 15% of Great West Life’s base profit – or $500 million in 2022. But he expects to see that number jump to over $1. billion by 2027.
“We are uniquely positioned to meet the evolving and, in many cases, underserved wealth management needs of existing and potential clients across our business,” Mahon said.
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Some of that growth, he says, will come from an aging population seeking guidance for the future, as well as “pre-retirees who are now worried about preparing for retirement.”
Currently, wealth and asset management is the smallest contributor to earnings for Canada’s third-largest insurer. However, in recent years, Great-West Life has been steadily gaining momentum in the wealth management space, making a series of acquisitions during the pandemic, mostly in the United States.
The company now manages approximately $218 billion across its wealth and asset management divisions in Canada, the United States and Europe. This represents an increase from $122.2 billion in 2017. Over those five years, the largest increase was in the United States, where assets grew from $9.6 billion to 74, $1 billion due to Mr. Mahon’s aggressive US expansion plans.
In June 2020, the insurer’s US subsidiary, Empower Retirement, spent US$1 billion to buy online wealth manager Personal Capital. A month later, Empower further strengthened its presence in the United States with a US$4.45 billion deal to buy the retirement business of Prudential Financial Inc. PRU-N The same year, Empower also bought the pension fund from Massachusetts Mutual Life Insurance Co., adding US$167 billion in assets.
Since then, Mr. Mahon has recruited two Canadian wealth managers, Investment Planning Counsel and Value Partners.
In April, Canada Life Assurance Co. – a subsidiary of Great-West Life – bought Toronto stockbroker Investment Planning Counsel for $575 million in an all-cash deal with sister company IGM Financial. Inc. IGM-T The deal added more than 650 investment advisers who manage approximately $32 billion in assets to Canada Life’s roster (IGM and Great-West are both subsidiaries of Power Corp. ., based in Montreal)
And last month, Canada Life added another $5 billion in assets with the purchase of Winnipeg-based Value Partners Group Inc., a financial planning firm that serves clients with complex and sophisticated heritage.
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Together, the agreements expand the insurer’s access to the high net worth market – including IPC Private Wealth, which operates a discretionary portfolio manager, a firm. that Canada Life did not have before.
“We have seen growth in wealth and asset management achieved both organically and through mergers and acquisitions,” Great-West Life chief financial officer Garry MacNicholas said during the press conference. presentation to investors in June. “We expect this growth to continue, which will alter our portfolio over time as wealth and asset management becomes an increasingly important contributor to Great West Lifeco as a whole.”
The two Canadian deals are expected to close later this year and will propel Canada Life into the top three among independent non-bank wealth managers in the country, with more than $89 billion in assets.
Credit Suisse analyst Joo Ho Kim said in a note that the bank believes Great-West Life will pursue new acquisitions, as well as to increase client assets and profit margins.