Great-West Lifeco Inc. (GWLIF) Earnings Call Transcript & Summary

Good morning, everyone. I think most of you probably know who I am, but a quick introduction anyway. Paul Holden, I cover the large cap financials for CIBC. So that includes the life insurers and Great-West Life. So really excited to have this session this morning with David Harney. And David, thank you for spending the time with us. So David was appointed President and CEO of Great-West roughly a month ago. So really...

Yes, 1st of July, calendar day.

Yes, 1st of July. So just over a month ago. So new into the role, but certainly not new to Great-West, right? So David joined Great-West when it was acquired by Irish Life in 2013. He was appointed CEO of Irish Life in 2016 and then promoted to President and COO of the European segment in 2020. David has also held additional oversight for Capital and Risk Solutions business and holds a master's degree in financial mathematics and is an actuary. So I think it's always great to have an actuary at the top of the leadership chain in an insurance business. So I think that's good to know.

So I think I'm just going to jump straight into some questions. For those in the audience, please maybe give me opportunity to ask 3 or 4, but we do highly encourage audience participation. [Operator Instructions]. Okay. So David, maybe let's start with some sort of high-level questions, which again, I think are appropriate, just given GWO had its Investor Day not that long ago, early April. You're new to the CEO Chair, July 1. And I imagine you did play a major role in creating the plan at the Investor Day and that nothing really changes with you as CEO. I imagine it was all laid out. But maybe you can kind of run through what are your top priorities, particularly in year 1 as CEO?

Yes. Thanks very much, Paul, and thanks for the invite this morning. It's great just to get the opportunity to tell some of the Great-West story. And you're right, I became part of the Great-West Group in 2013. That was when Great-West bought Irish Life. And I suppose that was -- the thing I learned was just how good an acquirer they are of companies like Irish Life, really flourished under their ownership and has had -- grew very strongly. So it was a fantastic sort of parent for Irish Life to get at that time. I got to lead Irish Life from 2016 to 2020 and then have been on the Lifeco executive team when I got to run the European business and responsibilities were added for Capital and Risk Solutions and more recently, investments before stepping into the current role. So yes, as part of the executive team, I played maybe not a major part, but a part in shaping the development of the company over the last few years. Obviously, Paul did a fantastic job leading the business over the last 12 years and building the portfolio. And I feel really lucky coming in as CEO, we really see it as a portfolio that's in great shape. Somebody said to me recently, if you're in the right markets, the right geographies and you have the right teams in place, only good things can happen. And that's really where we are as a company. So certainly, with me coming in as CEO, there's going to be no major change in direction. We have a strategic playbook that plays very well for us, and we're going to continue that. So our core markets are wealth, retirement and insurance. Obviously, our geographies are Canada, the U.S., Europe and our global reinsurance business. And then we have great brands and positions in each of the market. And I think it's probably rare for a company to have, I think, a portfolio that it's so comfortable with. And I think Paul has done -- Paul before me did a great job shaping the portfolio. And there's no area that we're in at the moment that we don't want to be in. And I think it's rare for a company to be in that position. And I think that's what gives us a lot of confidence then about the financial objectives that we shared at Investor Day. Our earnings per share growth of 8% to 10%. We expect to grow ROE to over 19%. We're a mature company that the earnings flows more or less through to cash, so 80% plus cash generation. And -- so that's a very strong position to be in and then dividend payout ratio of 45% to 55%. So we have a lot of confidence around those financial objectives. So for me then, I think M&A has been part of our success to date and I think can be in the future as well. But the organic capability of the business will deliver those targets that we've set out. And the only thing I'm maybe adding now as I come into the job is we explained yesterday maybe what our execution priorities are to just help that organic growth. So again, we're very strong on customer, but it's continued sharpening our focus on customer and their needs. I think there's going to be a lot of AI and digital innovation in the industry over the next few years. We need to invest in platforms to make sure that we're well positioned for that and then just continuing to make sure that we have the brands and the talent in each of the markets to support our growth.

I mean, look, given that answer, sounds like clearly, you're coming into a position or the company is in a position of strength. But I want to kind of break down the plan into maybe 2 sort of buckets, right? Parts of the plan where you think it's -- there's a high probability of success, as we call it North America, the so-called slam dunks. And maybe are there parts of the plan where a little bit more heavy lifting is required like on digital? Is there more -- a lot more work required in the next few years?

Yes. We're in a strong position. So I'd say there's never slam dunks. Even when you have a fantastic position, markets are competitive. And that's the way it should be. That's what makes sure that we all do a good job for our customers. And I don't think there's heavy lifting either, the portfolio is in good shape. Maybe a sense of our ambition, we're in different growth positions maybe in each of our markets, our biggest ambition is in the U.S. So we expect double-digit growth in the U.S. and then mid-single-digit plus in Europe and Capital and Risk Solutions and single-digit growth in Canada. And that's just -- I suppose, just the growth position that we're in, in each of the markets. I don't think any of them is a slam dunk or I don't think any of them is tougher than the others. They are sensible targets, I'd say, with a similar degree of difficulty in -- on all of the segments. And what we need to do to support the growth is those execution priorities that I talked about.

Yes. Okay. I want to ask you about the ROE objective, right? You already pulled that out in your first answer, 19% plus. That's above where GWO obviously currently is and has been historically. I think that's higher than most insurance companies will be targeting globally. So [ do you ] have identified maybe the top 3 or 4 factors that enables Great-West to drive that ROE? What would those factors be?

Yes. I think -- yes, look, it is a very impressive number to grow ROE to over 19%, and we're confident about doing that, but that is an impressive achievement. And I mentioned maybe just to step back a bit, our 3 markets are retirement, wealth and insurance. Retirement and wealth, we describe as capital light. And by that, it means they don't -- once you establish your position, you don't require new capital to support the growth of those businesses. And then our short-term insurance business is maybe not as capital light as wealth and retirement, but it's largely capital light as well. So I think one of the great things we've done as a business over the last number of years is position the portfolio more to capital light. So for 2024, 62% of our earnings came from capital-light businesses. And for our planning period over the next 5 years, which we explained at Investor Day, we expect our capital-light businesses to grow to 72% of earnings. And again, if you go to 2024 or maybe for the last 12 months, sorry, our base ROE for the last 12 months is 17.4%. So we're already within touching distance of that 19% target. And 80% of that ROE expansion would just come from the growth of those capital-light businesses. There will be an additional amount when you have capital-light businesses, then you're generating a lot of cash, absent M&A activity that will allow us to do share buybacks, which we're doing at the moment. Again, as you grow those businesses, your leverage, your expense positions will improve, and that will add a little bit. But 80% of it is just from -- 80% of that ROE expansion is coming from the growth of the capital-light businesses. So I think maybe the real question here is why are we so confident about growing our capital-light businesses because it's easy for me to say we're going to grow them from 60% of earnings to over 70% of earnings. But why are we so confident about that is probably more the question. And I think it goes to the positions we have in each of the markets. We're the #2 player in 401(k) in the U.S. That's a great position to be in. Canada Life is one of the best nonfinancial brands in Canada. Irish Life is dominant brand in the U.K. Canada Life is very respected in the U.K. and Germany. And we have teams that like to win in each of the markets. And then when you go to retirement and wealth, there's just broader trends that are supporting the growth of those businesses. So we're not the only ones that are going to see growth in those businesses. Other people will see it as well.

Yes. Okay. You already touched a little bit on what my next question is, which is the challenge with the high ROE, it's a good challenge, but the challenge with the high ROE is the deployment of all that excess capital, right, particularly, as you pointed out, a lot of your growth is going to come in capital-light businesses. They don't require the organic capital to grow. So my numbers would suggest you're going to be generating over $1.2 billion of deployable capital per year. So that's above and beyond the dividend, right? So the way I view it, there's a bit of a balancing act between ROE expansion and the capital deployment because it's hard for acquisitions year 1 or 2 to be ROE accretive versus the 19% objective. So I'm just -- I'm really curious how you're thinking about those sort of different capital deployment options, right? Share buybacks, which you're currently doing, acquisitions, which you said Great-West has a very rich and successful history in acquisitions and part of the plan going forward. But bigger picture, how are you thinking about the balancing act on capital deployment?

Yes. I think you're right, Paul, like it is a balancing act. Clearly, if we can see an acquisition opportunity that's going to have an immediate ROE of 19%, we'll be all over it. But you tend not to get those. So I suppose maybe just -- maybe to stand back a little bit again, the point you made at the start, the delivery of our medium-term financial ambitions are not dependent on M&A. But you're right, we have been very successful on recent M&A, and I think it will continue to be a part of our story where we see the right opportunities. We're not realistically going to get an M&A opportunity that immediately has an ROE of 19%, and that's not the target we would set for M&A. We have a hurdle rate of 15%, and if we can get opportunities that deliver 15% or more and add to scale our capabilities in our segments, then we become interested. And that's okay. That will pull back ROE a little bit. So we would totally live with that pullback. And -- but I think our ambition post that pullback would still be on a journey back to that 19% plus. And then if we execute well on that, the great outcome of that will be that, that will be 19% again, but on a bigger equity base. And the obvious areas for us on acquisition are probably to look to our recent history. We've been very successful in the U.S. on our workplace acquisitions, but we've also been successful on some product extensions in the U.S., the recent acquisition of OptionTrax, going back a little bit the Personal Capital acquisition. And we've also done smaller wealth acquisitions in Canada, where we're rolling up a number of players. We've done similar in Europe. So again, I think they'd be areas for us. So I think opportunities will arise again where we can meet our hurdle rates, and we will be disciplined though if they don't, we won't play. We don't need to do it, but I think opportunities will arise. And the guide to where people can expect us to play is to look at our recent activity.

Yes. I guess one of the obvious ones to me would be the Workplace Solutions, right, again, given recent history, given the priority of growing that business and the scale advantage that Empower currently has.

Yes, it's a very competitive market. I think players do a really good job for participants to do it very efficiently, but you need scale to be able to play in it. We have 19 million participants now, that's smaller than the biggest player, but it's a relative market share of almost maybe 1.8, nearly 2x to the third player. So we're in a great position there. And that's from the successful acquisition and integration of going back to JPMorgan and then MassMutual and Prudential. And we have a very good playbook there. For all of those, we exceeded our synergy targets, we exceeded our retention targets and the growth of the U.S. business is coming from. I think just both the successful integration of those businesses but just also our passion for the market as well. So if you were to pick out one area where we were -- could add value is it have to be workplace again, I think. There are other areas, but yes, that's one we're certainly interested in.

Look, I mean, past acquisitions have added a lot of earnings accretion and being -- opened up the opportunity for large cost synergies. Now I guess my question is, given you scaled the business even more, you have a lot of integration expertise, could that sort of that financial opportunity in terms of driving synergies and EPS accretion be even more powerful going forward?

It depends a little bit on players. So you would say -- I'd say if we could get the same again, that would be good. So yes, and it's more -- there will be expense synergies. You obviously need to retain the clients. A lot of the time, the expense synergies are needed just for the IRR target. So you're going to buy it at a multiple and then to generate your 15% plus, you need those expense synergies. And it just gives you more scale going forward. I think what we find when we get business in then as well, we do a very good job for customers within those businesses. We tend to expand the product set. We're more active, I think, than other players on getting people to save more for retirement. And it just gives us a bigger bank of customers to serve. That's going to be a bigger bank of customers that are going to transition into retirement. So it's more than just an expense play. It's a belief that we're the best provider for those customers and can do the best job for those customers.

And sort of on that point, with the Q2, you announced some product initiatives, right, 0 cost S&P 500 Index, also expanded relationships with investment managers and private asset classes. So that's part of the play in terms of encouraging more savings? Is that how it benefits Empower?

It benefits in a lot of ways. So yes, we're very excited about the product expansion. We're very passionate about bringing private assets to the 401(k) market, and we're really proud to be leading that at the moment. The 0 sort of fee-based funds are just about improving our competitive position and giving our savers more choice. We're very excited about adding the health saving accounts as well, and that's going to be supported by some new regulations in the market as well. So we think that's a fantastic add for people. OptionTrax, I mentioned as well. So it's important that we do a really good job for our customers. And then in the long term, if we're doing a good job for our customers, we retain those customers for longer and particularly as they transition into retirement. So it's doing a good job for them now, but we will get rewarded for that over the long term.

Sure. I want to back up a bit and talk sort of again at the sort of the all Lifeco level, if you will, or the all company level. Really curious on the expense initiatives sort of driving operating leverage could be a big part of that ROE story in coming years. So I think what you said is Great-West is targeting an efficiency ratio of sub-50% by 2029. It was around 57% last year, and I think close to that 57% number in the latest quarter. So to me, I look at it, and it's like it's a fairly ambitious target. It's good to have that target. It's a fairly ambitious target though. I'm just wondering like why does the opportunity exist? And what are the key actions required to achieve the efficiency objective?

Yes. It's an important one so that we can continue to deliver value for our customers. But there's a lot of parallels, I think, just with the ROE target. So this is not -- obviously, you need to manage your costs to deliver on it, but people shouldn't think of it as a cost-cutting initiative. We're in a very strong position in capital-light businesses and even our capital supported businesses as well in each of our markets, and we expect those to grow. So a lot of this efficiency ratio will just come from revenue growing faster than costs. Now we are taking a number of actions to support us on our cost as well. So we've announced transformation charges of CAD 250 million to CAD 300 million this year, which will happen over the next 36 months, largely in Canada and Europe. And some of that investment is to modernize our technology infrastructure, rationalize our application suite and take out some people costs as well where we have surplus. So given the scale of the company, that's relatively modest investment to help us improve, but it will help us manage cost and limit cost growth. And that then combined with just the natural growth in the business improves the efficiency ratio. So as I said, there's a lot of parallels with the ROE target. This is coming just from strong scale positions that we have already.

Got it. Understand. And is that scalability? Is that really unlocked because of these investments in technology? Is that what enables the scalability and efficiency gains?

I think it is even going to the U.S. business, we took a lot of care on integration, sometimes people shortcut on this, but we took a lot of care on those integrations to get all those businesses on a single platform. And there's a lot of pain in doing that and even to transition those schemes onto a single platform and have the retention rates that we have, the U.S. team deserve a huge amount of credit for that. But when you have a single operating platform like that, it just gives you a lot of opportunity for process improvement and just continued improvement in any process, I suppose, once you can sort of get it in front of you. There's just a natural human innovation area that can improve any process by 10% per year. So if you get yourself set up for that, and that's a thing that can happen within businesses. And I think that's largely where we are at the moment. We need some of those transformation charges that I talked about just to get all of our businesses into that position. And I think we're probably -- AI is going to make this easier for companies to do as well, and that's a coming thing. So again, these investments just set us up to leverage off that opportunity as well.

Okay. So I mean, look, pretty clear these technology investments are going to play a role in efficiency gains in the coming years. Curious to what extent are you also investing in technology or maybe using the same technology to enhance customer engagement, so more on the revenue side of the equation?

Yes. And they go hand-in-hand really. I think the thing we really like about our markets is our customers do want to save more for retirement and they want more protection in their lives, but sometimes defined as a little bit daunting as an industry to deal with or these are big decisions for people to make so that they can naturally procrastinate on it. So obviously, we rely a lot on our own advisers and working with advisers to help people make those jumps that they need to make. But simple technology-enabled intuitive experiences just make it much easier for customers to act as well. And modernizing our platform and what's going to come with AI, I think it's just going to help us with all of that. And I think people would be surprised maybe just talking about AI, just how much is in the industry already. It's slightly in the background, but just to give people a sense of what's coming, if we look at call centers, AI isn't quite at conversational level yet. So it's still people having the calls with customers. But if you think about a call, there's prep for the call gathering information. Most of that now is AI prepped. Call centers are monitored for training and coaching purposes. They're being monitored by AI now, and there's full-time live coaching or effectively a permanent coach on all people. And then on wind up on calls and actions as well, it's AI that's doing that. So that -- and that capability is only going to grow, and you can see that capability growing in to help advisers. And then similarly, on the automation side, people will have heard of agentic AI, and it's effectively AI that can sit over a number of processes, bring together and give you full end-to-end automation. We have already agentic AI covering full automation and a number of processes, and that's going to be built out more. So I think all of that is just going to make it easier for customers to interact with us. And we have this nice thought that AI can make Great-West a more human financial services company, and we're pretty excited about that.

Good. One topic I feel like we don't talk enough about for Great-West, but for life insurers broadly is risk management that probably hopefully speaks to you given your actuarial background. But we focus a lot on ROE, a lot on EPS growth. But I think risk management and avoiding sort of the negative impacts to earnings and balance sheet over time has been just as important for shareholder performance in the Lifeco space over time as those other factors. So any...

Yes. It's very important. And yes, insurance companies are built to last and particularly life insurance companies have to last. Some of our contracts are decades and many decades. So we are built to last. So I think you always have to be optimistic about growth and lean to the positive, but you need to be cautious and conscious of things that can go wrong. When I think about Great-West as a brand, obviously, our consumer brands are Empower, Canada Life and Irish Life, but Great-West is a brand that sits behind that. And I think the brand Great-West has with investors and maybe some of our institutional insurance or large corporate clients is we are seen as a safe harbor and somebody that is good at risk management. We were 1 of, I think, only 2 North American financial services companies that wasn't downgraded in the global financial crisis, and that gave Great-West the opportunity to go and buy Irish life that time just which obviously had a personal impact on me. And then I think people see evidence of it as well, generally, our general account assets, we'd have more investment-grade assets maybe than other insurers and the rating of those assets would be higher than other insurers. People see us as very disciplined when it comes to underwriting and pricing of insurance as well. And if there's markets we don't like at a particular time, we're quite happy to stand back from them. And then I think generally, just at the moment, as I said, we like our geographies. We've favored stable markets that we understand. I think that's a good position for us to be in at the moment. I think we've a nice diversification by currency as well. That's a good position for us to be in at the moment. So -- yes, so I think we have a safe risk posture and good position in capital-light growth businesses. So that's a good combination, we think.

Okay. Good. I don't see any hands raised. So I just want to remind those that are on the line, please do put up your hand or again, send me an e-mail, [email protected]. If you want to ask David a question, please fire away. We've already talked about Empower quite a bit, but it's obviously -- it's an important part of the story. So I want to drill down a little bit more here on the Empower. And sort of a very high-level question, right? So the target, I think, is to make Empower 35% to 40% of total earnings for the company by 2029. Why -- from a shareholders' perspective, why is an increasing proportion of earnings from Empower a good thing? Why is this the right thing to do for shareholders?

Yes. So it is a good thing for shareholders. Empower is already at 30%. And I'm not sure it's a number going back a few years, but it's already journeyed, I'd say, from 20% at 30%. And largely, that continued journey to 35% plus is just a continuation of the investments we've made in the businesses for the last few years. So if you like, the journey from 20% to 30% has come from the successful acquisition and integration of those businesses we talked about earlier, and that positions the business for double-digit growth over the next number of years, which continues the growth of that 30%. So in a way that is obviously good news for shareholders, those shareholders through the company effectively made those acquisitions and the growth in Empower now is the successful reward for that. It's not -- that growth is not dependent on further acquisitions in the U.S. It's not coming at the cost of growth in other businesses or anything like that. So this growth is a successful reward for what we have done already, and that's clearly very good news for our shareholders.

So I get a lot of questions on the net participant outflows from the Workplace Solutions business. You've heard those questions on the conference calls as well. And you've actually given guidance, right? I think your guidance is 50 basis points to 100 basis points roughly of annual net outflows over time. But there are some people that worry given recent experience, it might be higher than that. but yet you're forecasting, I think, annualized double-digit growth of the business. So can you kind of help us bridge the gap between that sort of persistent net plan withdrawals from existing participants and the expectation for low double-digit earnings growth?

Yes. I think this is a fascinating area because if you take any market generally, it sort of grows, then it stabilizes, then it declines and then decline generally accelerates. So when anybody sees a market in decline, alarm bells start ringing so what's the future of this market. And now I think -- and the market we're talking about here is the 401(k) market in the U.S. It's not the post-retirement wealth market. It's the 401(k) market in the U.S. So -- but there's a couple of really interesting dynamics about this market. So the first is it's just the whole baby boomer generation and what happened there. And the interesting thing about baby boomers is more of them saved for retirement and they saved more than subsequent generations. So everyone will hear now the baby boomers are set fair for a good retirement. They've saved very well, more of them saved, I suppose, they've done well in real estate as well. And what's happening in the market at the moment is the baby boomers are effectively transitioning out of 401(k) into postretirement. And that's what's causing that 2% participant outflow rate. And that's been underway for maybe the last 5 years or so, and it's going to continue on for the next 5 to 7 years. The thing then that's different about this market is it's not a decline rate that's going to increase. It's actually a temporary decline rate that's going to go back to 0 and then it's going to go back to growth because the workplace is not going to reduce in the U.S. The population is going to continue to grow and the workplace is going to grow. And I think increasingly, what we're seeing is why was it that we're accepting that subsequent generations should save less for retirement than the baby boomers did and why should less of them save. So there's strong bipartisan support now in the U.S. to get more people to save for retirement and even the people that are already saving for retirement to save more. I think we have -- it's an amazing statistic. We have 700,000 401(k) plans in the U.S. at the moment, and there's bipartisan ambition to get that to add a further 350,000 to that. So we have this baby boomer dynamic at the moment, but it's temporary, and this is going to reverse back to be a growth market in time. And I think one of the reasons Empower has been so successful aside from the integrations is just its performance in the market. And it just has that passion that more people should be saving for retirement and people that are already saving for retirement should be saving more. And I think that's what -- that means we win more schemes in the market than other players. So we're in a great position. The sort of average player at the moment is in a 2% asset outflow because of that baby boomer dynamic that I talked about. Our net plan wins mean we reduce that to less than 1%, sometimes to 0.5%, sometimes to close to 0. So we don't have that 2% drag that others have because of our performance in the market. And then the other dynamic that's important is, again, as I said, this is 401(k) only. These people are not moving to Mars or anything like that. They're just transitioning into wealth postretirement products. And it's the workplace providers that are best positioned to continue to do a job for those people. And that's really where our double-digit aspiration comes from. Probably if you were to take a standard 401(k) provider with that 2% drag, they can expect maybe 3% growth if they're doing a good job. We get that to sort of -- we get that close to 6% because we're just doing better than others with product expansion and all of that. But the jump from 6% to 10% or 10% plus comes from the performance then of the wealth business and just how fast that should grow.

Let's talk about that dynamic, right, the Empower Wealth business and that rollover capture, which looks like -- I mean, I think your official target is a 30% improvement in the capture rate, correct me if I'm wrong on that, but I think it's 30%. And then you saw good results and good flows in the Q2, and that follows a good Q1, by the way, also. So it seems to be working. But the question I get, I guess, from investors is what is Empower Wealth doing that's different than maybe the traditional advisers? How are you improving that capture rate?

Yes. It's really a key area for us. And just to give some sense of how important this is or the size of the opportunity, if you go to the workplace, our assets under administration are $1.6 trillion, $1.7 trillion. Our current assets in wealth are $90 billion. Now I don't know how long it's going to take, maybe it's a decade, maybe it's longer, maybe it's shorter. But wealth will be a $1 trillion company for us as well. So that's how big the opportunity is here. And we're already -- and we're just at the start of this, but we're already the #1 sort of destination for our 401(k) saver. So it's quite fragmented and it's spread. We have seen a 30% improvement in that rollover rate over the last few years, and we're targeting that improvement in the rollover rate again in the next planning period. But there is a very successful playbook here. One large provider competitor who I don't need to call out, people can guess who they are, are very good at this. And the playbook is pretty simple. You do a really good job for your participants while they're saving for retirement. And if you can engage with them, if your brand can be well known, if you can sort of do more for them than just the 401(k) product, if you can get other products across them, they're the provider then that you trust when it goes to retirement. So we have a lot to do on that. I say, brand is very important on this because it gives people the confidence, Empower is a young challenger brand. Our unaided brand recognition at the moment is about 50%. We need to invest to get that up to 70% plus. That product extension that I talked about earlier on is a core part of this strategy as well. You can't be just a 401(k) provider. You need to put more solutions in front of people that's part of the strategy as well. And then I think we have a passion to engage with customers. We try and get our own advisers and work with advisers to talk to people as to save for the retirement. So obviously, you need a very good seamless experience at the point of retirement, but the battle is sort of lost or won before retirement. So the playbook here is doing a good job for participants while you have to ask them to save for retirement. And that's something we're improving at all of the time. And that's why our rollover rates are improving.

Let's talk about some of the other business segments because they're also important. When I look at the European business segment, a business you know quite well, obviously, the underlying growth drivers look strong, whether I look at CSM growth, the group benefits, in-force premiums, wealth and retirement assets, all growing double digits. So when I look at that, it looks to me like Europe should be on track to beat that mid-single-digit growth objective you put out at the Investor Day. So what's driving sort of the -- those strong growth rates over the last year? And why not something a little bit better than mid-single digits over time from Europe?

Yes. The performance this year has been stronger. So we set, I think, really tough targets for all of the segments or ambitious targets. And the performance this year in Europe has been better. Essentially, Europe breaks, like we're in Ireland, the U.K. and Germany. Our 2 big markets in Europe are Ireland and the U.K., and we have different positions in both, but very good positions in both. So Ireland is like our Canadian business. It's broad-based, but it's a bigger, more dominant brand. And the basic thing is it's a good market position in Ireland. It's a very dynamic, fast-growing economy. Obviously, there's a lot of trade uncertainty between Europe and the U.S. and Ireland is part of that, but that actually hasn't had any impact on economic growth this year. It might moderate a little bit next year, but growth in the last few years has been very strong. And the other dynamic we explained in Ireland is it's a sort of a young country from a savings, wealth, retirement point of view, it's an amazing success story, but it's a country that's transformed from second poorest in Europe 40 years ago to the second richest. So there's very young wealth in Ireland. So it's for a player like us, it's naturally a high-growth market. So maybe as I think about it, we should be setting a higher than mid-single-digit plus target there. And then -- but the U.K. business has performed very strong as well. It's more targeted in the U.K. So we have a fantastic insurance franchise. Our group risk workplace protection business does very well. We bounce around #1, #2 player. Annuities, we do very well in the individual market. We have aspirations on bulk annuities. That's been a little bit quieter this year than expected. But as you pointed out, other areas in Europe have more than compensated for that. And then another area where we've seen very strong wealth flows in Europe this year is what we call our offshore wealth business. So that's performed very strongly at the moment. So yes, then maybe it's probably just the demographics in Europe play well as well. Germany is older. That business does well for us too. Germans like saving. We're a good, well-respected brand there. And our products are just well positioned in the U.K.

Okay. So in the last, I don't know, maybe I'll call it, 5 years, maybe even shorter term, seen a lot of moving pieces in Europe, right, number of acquisitions, number of dispositions. None of them massive in terms of size, but there's been quite a number of them. So what's kind of been -- first off, what has been the high-level objective, the purpose of the sort of, I'll call it, trading assets, right? And is the process mostly complete? Or is there more to come?

No, I'd say it's largely complete, there may be opportunities that come up, but I'd say the process is complete. And it's just -- I think it's part of the overall thing of what we've been doing on sharpening our portfolio overall, it hasn't been -- it's just the execution of that within Europe. So if we don't have leadership positions or a right to win, we get out, and there were a couple of markets that we were subscale in the U.K. And I think that the team there has done a great job just repositioning to be in markets where we're either leading or people see we've an absolute right to play and expect us to do very well. And then wealth add-ons in Ireland, that was just an obvious go-to area for us, just given how Ireland is performing. And then we have a nice position in Germany as well, which we think will grow over time. So we like the shape of the portfolio in Europe, and it's probably not that easy to get into other geographies. So I see us continuing to be -- it's an Ireland, U.K. business with a German add-on that has growth potential going forward.

Okay. I want to ask you a very specific question or on a very specific product line because again, a question I get from time to time on the U.K. U.K. bulk annuities, why is this a good business? Why do you continue to participate in this business?

It's a long-term insurance business. It's one that we're good at underwriting. We understand the risks. There's very little illiquidity from the customer side to buy the product to receive the income. We understand the longevity, you put the assets behind it. So it's a natural type of product for us to write. I think the reasons we like the U.K. market, it's a tightly regulated market. So I think the PRA there take quite a conservative posture versus other markets on the players. And I think that's just a strategic decision for particular markets or economies to take. So they like that product to be quite safe. They're all safe, but I think just the PRA take a slightly even safer view on it. And that restricts the market a little bit just on players and what you can do with the assets. I think we just naturally fit into that profile. So that's a good space for us. And then it's probably just to say as well, I think the other reason we do well generally in insurance-related businesses is they're only part of our portfolio. So if it's a good fit for us and the returns are good, we play in it. And that's what we see in the U.K. Now it's been a little bit more competitive than that this year. There's been a couple of new players coming in. But longer term, we still expect that to be an attractive market for us.

Okay. So you're happy with the ROEs, the returns of that business?

No, absolutely. And if we're not, we don't write. We don't [ sell that. ]

Okay. Good. I really like the Capital and Risk Solutions business, at least the financial results come out. But I think where people struggle a bit with that business, it's a little bit of an enigma, right? It's hard for people to wrap their head around exactly what's underwritten in Capital and Risk Solutions. I think you pulled back the veil a bit on the Investor Day and certainly some helpful new disclosure there. But what -- really what are the unique capabilities that enables Great-West to generate such high returns and good quality growth over time in Capital and Risk Solutions?

Yes. It's a business we really like as well, and we're very proud of it. And it's -- and you're right, we did unlift the veil a little bit at Investor Day, and I think we'll continue to do that and explain more about the business and look to educate people on the business. And it's an important part of our overall portfolio and gives us really good diversification of earnings and risk. And the reinsurance market, it's a very large market. And the reason the reinsurance industry exists is to support the broader insurance industry. So that's the P&C, non-life insurance industry as well as the life insurance industry. And just generally, reinsurance plays -- and I'm talking about the industry broadly, just plays a very important role in that in spreading out risk for insurance companies. And then the second role it plays which is very important also is just providing capital support to insurance companies because all insurance companies will have their own economic view of risk and the capital that's required. And it's sort of -- it's impossible almost -- it's too much of an ask for regulatory regimes to almost get the regulatory rules right that are just going to align with economic capital. And the reinsurance industry plays a very important role in sort of smoothing that out. And ultimately, that allows better solutions and better price product to customers at the end of the day. So we provide support in 2 ways then just along those lines. We provide sort of risk support for insurance companies, they're too small on their own to carry the risk and they look to lay it off. So that's sort of at the money type risk and you see that on mortality side and on the longevity side, in particular, and even some of the non-life risks. And then there's our capital solutions part of the business where we're providing more of that regulatory capital relief. And again, that's a very sensible and important part of the overall industry. And I think the reason we're good at it then is there's something to do with the DNA we've got from the rest of the business. As a business, we're used to working with advisers and customers and corporates. So you have to be good at relationships to do that. And I think the people in our reinsurance business are very good at relationships to spend a lot of time with the insurance companies, even spend a lot of time with other reinsurance companies as well, we often spread risk around between each other. So they're good at building these relationships. They're good at taking time, understanding needs. And then we're just naturally good underwriters, and I think we have an advantage then as well in that this is a portion of our overall portfolio. So again, we're disciplined. If there are particular areas that are not attractive at a point in time, we don't need to play in them. So we can be a little bit selective, which is always a nice position to be in.

Yes. So going back to the point you made on sort of the primary insurers laying off risk. And again, I think with sort of the complexity of this business, that's where maybe investors get -- let's say it this way, it leads to a lot of investor questions, right? How do we know Great-West is not taking on bad risk versus good risk? So maybe walk us through a little bit like the risk management process at CRS and the risk tolerances put in place there?

Yes. We've pretty diversified portfolio, say, within the reinsurance business. So some of it is that maybe like half the portfolio is that at-risk money and that's insurance companies laying off mortality. Obviously, we've exited out new business on that in the U.S., but we have a block built up from the past. And then insurance companies in the past would have laid off longevity risk which is where we flow through. And I think that's pretty easy business for investors to understand there's very strong parallel similarity between just writing that business directly yourself. And if you're good in the primary insurance market at writing mortality, which we are and writing longevity, which we are, you can expect us to be good at that on the reinsurance side. So I think probably where we need to do more work and what we started to do on Investor Day is it's just explaining the capital support that we give to businesses. And this is more out of the money risk because what we're trying to do here is really smooth out regulatory regimes that just require the primary insurance company to carry too much risk, and we're helping get that back closer to economic risk. And in a way, it's probably in some ways, similar to lending capital to a company and you're getting protection for it. Now ultimately, there has to be some risk possibility to it, but it is remote. So I think what we have to show to investors then is the way we structure those contracts, we're properly understanding the risks and that they are remote. So I think that's just something we have to educate people on over time. But the experience of the business, I think, shows that we're good at this.

Yes, for sure. Okay. We're almost out of time, but we haven't talked about Canada at all. So maybe one question on Canada and sort of broader one. I mean, you've alluded to it already, I think, a little bit, right? Canada, relatively mature, slower growth market. But maybe you can kind of just review your growth and ROE ambitions here in Canada. And I think importantly, though, maybe how you're differentiating from the other life insurers here as well? What are the points of differentiation?

Yes. I think we have great position in Canada. So we're very proud to be a Canadian company. Great-West is headquartered in Winnipeg. The strength of the Canadian business has effectively transformed us into a global company. So we're very proud of those roots. And then we have 4 great positions in Canada, our Group Benefits business, the wealth business that we're building, our retirement business and then our insurance business. So where I see the strengths, we're a leading player on the group benefit side. We'll continue to invest in that product. It's a very important product for Canadians, and it's a product line we expect to do very well. I think on the wealth side, there's a huge opportunity for us. So we're the third biggest player ex the banks at the moment, and we see a pathway to be #1 there. And I think that's a natural #1 position for us. A brand like Canada Life should be the biggest wealth player after the banks, and that's a very achievable objective for us. The interesting thing for me in Canada then is I think the retirement conversation in Canada, and this will be as a country is maybe a little behind what I see in Europe and the U.S. And I think the country could do more to encourage defined contribution saving. And it's like that conversation I mentioned in the U.S. And then I'm surprised we're a #3 player in the retirement space, but this would be maybe a bigger ask than what I see on the wealth side. But again, I think it's a natural position for Canada Life to be #1 on the retirement side. That journey is a little bit longer to build. So I think we're happy for now with our sort of mid-single-digit aspirations in this planning period for Canada. But I think as we move out beyond 5 years, our growth ambitions for Canada can be higher than that.

Okay. Good. Well, David, we've spent almost an hour doing Q&A. You've allowed me to pepper your thoughts with questions. So thanks for that. I don't know if you want to kind of provide any quick closing thoughts. Again, I think we've covered a lot of ground already, but maybe some concluding thoughts from you would be great.

No, just thanks very much for the opportunity, Paul, to tell the story this morning. I think the core key message is that we have a new CFO that joined a while ago, a new CEO, but with both of us in, it's very much a continuation of the playbook that's been there before, and we're excited about the opportunity ahead over the next few years.

Okay. Great, David. Again, thank you for your time, and thanks, everyone, for dialing in and listening. Have a great day.

Thanks a lot, Paul.

Thank you.