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

Good morning, everyone, and welcome to the Barclays Global Financial Services Conference. Very pleased to kick my portion of the conference off with Garry MacNicholas, who's EVP and CFO of Great-West Life. But before I start grilling Garry with questions, just wanted to do a couple of administrative details. With the video chat, I -- it's going to be Garry and I having a conversation. [Operator Instructions] And Garry, with that, out of the way, welcome. Thank you very much for participating again.

No problem, John. Glad to be here. And we say it was -- I'd be glad to be in New York as well, going back to those -- 4 kind of bygone years, but hopefully next year.

Absolutely, fingers crossed, fingers crossed. And Garry, that's actually a good foray to my first question is, we've been dealing with the pandemic for 18-plus months now. There's been a lot of change, variants, everything else like that. How have you found COVID impacting your operations? And are there any lessons that you can take away from this that if and when we get to a more normal environment, there are takeaways that you can apply?

Sure. Yes. I mean I think I'll just start with the operationally. I think our company -- I mean, there are many that could do this. But in -- certainly, in our company's case, we were able to adapt quickly. We were able to get the vast majority of people, 90-odd percent up and running from home very quickly. And that really made -- enabled us to carry on the operational side of the business very effectively. Let's face it. Who knew 18 months from now, we'd still largely be working remotely? That was perhaps not quite as anticipated. I think you've seen over that period, the 18-month period, that our financial results have been only modestly impacted early on by COVID. And at recent quarters, you'll see -- from our published results, recent quarters, we're very strong right across the 4 segments or geographies: the U.S., Europe, Canada. Our reinsurance business is all performing well. So operationally, financially very strong. And if I think back to -- and I think it's quite important is we came into the COVID crisis or COVID period is -- in a very strong financial position. I think that made a big difference. We had a strong balance sheet, a high-quality investment portfolio, very diversified business model. And that enabled us not just to have, again, the operations, the sound financials. But also, it enabled us to really take some -- move forward with some key strategic moves during a period where perhaps not everyone else was able to, and that may have been a competitive advantage. So we were able to complete the Personal Capital acquisition, which had already been underway pre-COVID. We'd started some discussions there. MassMutual, our Retirement business transaction sort of came up right through COVID. And then more recently, Prudential transaction. So we're able to not just complete the transactions, but also get the integrations going and well on track all during the COVID environment. So I think our lessons, the investment community technology, very worthwhile. You need to be flexible. But also, having that underlying financial strength and a diversified business, that just positions you well no matter what the world throws at you, you're well positioned. So those would be a couple of key takeaways.

Well, Garry, that's great because you've touched on actually in that preamble quite a few topics that I'd love to drill down on. But I think first and foremost is, you mentioned the acquisition of Prudential's Retirement Services business and what you've been doing to grow Empower. Basically, you really have cemented a leadership position with Empower. But can you expand on the strategic vision for Empower? And what you as a management group hope that Empower is going to look like in, call it, 5 or 10 years down the road?

Sure. Yes. Maybe I'd start at the top of the house with Lifeco. And just -- we had our Investor Day back in June. And we outlined that -- as part of that, obviously, we outlined our growth EPS guidance, ROE and so on. But also, from a value creation priorities, the strategic value creation priorities at Lifeco. We called out a number of things, but a couple in particular that I think are worth bearing in mind as we talk about Empower. The first of these, the importance of advice, and extending those workplace relationships. And really effectively utilizing technology as an enabler for our businesses. So in those value creation priorities, we really -- that's how we see growing Lifeco overall. And you could see these playing out at Empower, I think, quite clearly. So Empower itself, all about wealth management and the preparing for retirement. In other words, helping -- everything we do at Empower is really about helping Americans prepare for retirement through its wealth and retirement businesses. And certainly, we plan to grow the DC, the defined contribution side of the business. The workplace savings is a very important part. And you could see how the acquisitions really support that in terms of the -- adding scale and capabilities through both MassMutual Retirement business and Prudential. But beyond that, the vision is to add a very strong retail wealth management business alongside complementing Empower's retirement -- workplace Retirement business. I think this is actually key is to really meet the broader needs of the plan participants as individual customers. So their broader wealth management needs as they prepare for retirement or other needs for wealth. So this -- and if you think of it as sort of extending and expanding that relationship from just a workplace relationship to a full individual customer relationship, that's a key to Empower's longer-term strategy is to really build both of those platforms. So the acquisitions, as I mentioned, MassMutual, Prudential are certainly really building the workplace side of it. And Personal Capital acquisition is really -- it's a hybrid digital advice. So it's really got the technology. But also, it's around individual's wealth management. So it's an aggregator of the people's full wealth. So it goes beyond just the in-plan assets. And so with Personal Capital's technology and its capabilities, paired with the Empower platform, so while the synergies -- synergy benefits, and there are obviously substantial earnings benefits from those acquisitions. If you think about, equally important for -- from our perspective is we now have 16 million -- post the Prudential transaction, 16 million working Americans on our platform. And so this gives us a potential customer base for the further expansion. So the ability to really extend those relationships. And ultimately, that's what we're looking to do, is extend the strong workplace relationships we have into lifetime customer relationships. So that's really what's going on at Empower. And all of these acquisitions very much aligned with that.

Garry, I know that we're early days in this, but how is the integration of Personal Capital and Empower going at the outset? Because I hear this -- I hear what you're talking about. The synergies is not just cost. It actually is potential revenue. Have you been able to see some engagement with Empower clients with Personal Capital?

Yes. Certainly, it is early days. The MassMutual transaction closed at year-end, Personal Capital, a little before that. The integrations are going well. So I'll start with that. And there's really 2 -- and you're right, there are 2 prongs to it. So -- and there are separate teams working on it. One is getting the Personal Capital capabilities to the broader Empower platform. And that's slated for later this year. And there will be some parts in the next year, but most of that comes at the back half of this year. There are some early wins. I was on the steering committee recently. So we've had some early pilots to work there, but the full rollout of those capabilities -- and certainly, the feedback has been fantastic, from client's advisers -- client companies and advisers. So the pilots are going well. A lot of the technology, this -- as you're rolling out new technologies to the platform, there's a fair bit of work, the integration. Just the cultures of the companies has fit together very well. So that's been very strong on the Personal Capital side. And separately from that, but certainly related, the MassMutual integration. Again, we brought over the MassMutual associates very early on in the process, right? These are the people who look after the clients. So we wanted that strong service to continue for the MassMutual clients as we then prepare for the Mass integration, so the Mass conversions from one platform, while in this case, from MassMutual's own 3 platforms. So from their 3 platforms over to the Empower platform. And that's a -- and again, that's where we'll drive out the cost synergies. That -- certainly, the planning is largely behind us right now. It's really executing those integrations in phases. And I believe the first ones are scheduled very shortly. The -- and again, this -- you start with the early pilot groups, but then the heavy-duty period to be. And it will take place over close to a year. So it's again a planning phase. And then -- given that there's 3 different systems. But we've had a dedicated team at Empower ever since the JPMorgan acquisition, what, 2015, JPMorgan Retirement Plan business. That acquisition in 2015, we basically kept that team in place. So they've got good knowledge. We really developed a good -- an automated process for data and the client record conversions over to the new system. So I think in both cases, and then obviously, once the MassMutual business is on the Empower platform, then they have also -- then they begin to have access to all Personal Capital tools to being rolled out. So it's very much -- the Personal Capital fuels onto the Empower platform, which is this year. Then as the MassMutual business converts over, it too will have that access. And that will drive the greater penetration into some of these retail offerings, but also just in-plan offerings that will improve the experience and round out the wealth management experience for plan participants, whether they extend beyond that or not.

And Garry, the -- I guess keeping yourself busy because the acquisitions haven't been just in Empower. I mean, recently, we saw Canada Life acquiring ClaimSecure. And in Europe, you made the acquisition of Ark Life. Can you talk about these acquisitions? What type of thinking goes into making strategic acquisitions? And how do these 2 in particular fit in with Great-West's strategy?

Sure. That's -- yes, they didn't get as much airtime perhaps as the big U.S. acquisitions. But they are important and they are both aligned with our strategy. So on ClaimSecure, that's a health and dental claims management, third-party -- administrative third-party payer extension. And this is something that we're seeing in cannabis just -- that's a growing area of the employee benefits landscape in Canada. So really, again, this is just extending our coverage in our core business. So obviously, the Canadian employee benefits business is a core business for Lifeco. And this really just extends that offering into the marketplace. But it also gives us -- we will now be serving an additional -- on account of Lifeco, an additional 1.2 million individuals. So this is plan members and their dependents, so an additional 1.2 million individuals. And again, that opens the door for further extending the workplace relationships and the broader customer relationships. So we already have must be some 8 million or so, and again, by adding -- extending the platform. So it's extending the business for tell, but it's also extending the potential opportunity to expand on those workplace relationships. If I go to Ark Life, just crossing the -- for a minute, go to Ark Life. Interesting bit of background to Ark Life. So again, it's $2 billion in assets, 150,000 policies. So it's not a large transaction, but it's financially attractive. And one of the things that makes it quite attractive and it may not be as well known is that we already provide the administration and the investment management services for this business. It's long been outsourced to us. So the ability to then integrate that is really quite straightforward. So it makes it financially attractive. But I think on the strategic side, we have an existing distribution agreement we had it existing for many years with Allied Irish Banks. Well, Ark Life was originally part of the Allied Irish Banks, AIB, a part of their system. So -- and they rest it years ago, and we've done the outsourcing for it. So there's a connection to that relationship with the -- with AIB. And you may recall, we announced in December that we had -- we'd announced a joint venture that we're developing with AIB in the Irish marketplace. So this linking of this back book of business, again, financially attractive. But again, it really strengthens that relationship with AIB, which I think will really serve our retail business in Ireland well for years to come.

Fantastic. And Garry, you and your team have been very busy. Can we expect to see a similar pace in M&A going forward? Or are we going to get a little bit of a lull as Great-West tries to integrate everything?

Yes. It's interesting. I don't think we will be taking a break, so to speak. We'll continue to assess the opportunities that may arise. It's all those things -- you can't really afford to sit on the sidelines. You don't know when the attractive opportunities might come along. And so you can't really afford to sit on the sidelines. Obviously, we'll be very disciplined in our work. We'll look for opportunities that are aligned with our strategy, so strategically attractive and financially attractive. I think it's fair to say we will be taking a bit of a pause at Empower. I don't think you'll see a major transaction at Empower in the next 12 to 18 months. But these things do take a while to develop and then to close. And so we think about the fact that Prudential followed on -- the Prudential Retirement business followed on not that long after MassMutual. But in some ways, that is on track to close in the first quarter of next year. By the time we've done all the planning to get the integration going, that's probably late summer, September timeframe, that's right when the MassMutual will be ramping up on the integration, Prudential can step in. So I think though to be fair, the next 12 to 18 months could be very busy to Empower. Elsewhere in the group though, I think we'll -- it will be eyes open, looking at opportunities that may arise. And again, if there is something that's attractive, if it hits our strategic and financial results, we'll find a way to get it done that works for our various stakeholders. So yes, it's not really a break.

Well, and then very, Garry, riffing off of that in terms of acquisitions potentially taking a long time. One of the things we've talked about quite a few times in the marketplace is Putnam and what's going on there because Great-West has talked about various incarnations of what a transaction may look like with Putnam. But what's -- Garry, what's the current thinking? And outside of an acquisition, what's the strategy to move Putnam forward? Now I say that with -- from the outside actually seeing some improvement in the operations of Putnam and moving in the right direction. But probably for some investors, it may not be happening as fast as what they've been hoping for.

Yes. Interesting. I think you've summed it up quite well. And it's been very intentional. Strategy on our part is to -- as a top priority, what we come into -- whether the Putnam team comes in to work every day thinking about is how to make Putnam even stronger. Just organically, like, it's delivering the investment performance for clients. It's keeping a cost and improving our margins, making sure we have the offerings that are going to be attractive to drive flows. So certainly, making Putnam as strong as it can be in and of itself, like organically, is absolutely fundamental. Because no matter what path that we take, whether it's continued to improve organically, whether it's an acquisition to add scale and accelerate the improvement in margins, whether it's -- we've talked about in the past year, you have a possibility whether you merge in with another larger player and take a stake of an even stronger overall asset manager. These are all possible -- strategic possibilities. But in every case, the stronger Putnam is, the better off we are. So the day-to-day priority absolutely is to make Putnam as strong as it can be. And we've had some good success there. As you noted, the -- Putnam is seeing some -- certainly seeing some improvement in margins, they've been making a contribution. I think not as stronger contributions we or other investors might like to see, but it's an improvement over where it has been in the past. And it has been a difficult environment obviously for the active asset management business. Now Putnam would want some active ETFs. And that's, again, they're broadening their range, their offerings and strengthening their own business. So -- and we have -- we looked at occasional opportunities. And -- but we're playing disciplined. We're not desperate to do a transaction. We're seeing the improvements at Putnam. Yes, I would like it to be a bit quicker. And I know investors would as well. But we're not desperate to do a transaction that doesn't make sense. So very disciplined in our approach. And -- but first and foremost, making sure that we've really strengthened Putnam best it can be. So yes, that's what's going on at Putnam.

Fantastic. And then, Garry, taking a step back and beating the M&A to death. The general earnings growth that Great-West is targeting, I'm going to say, is reasonably aggressive but not out of the realm of possibilities. But can you break down from your seat where you expect to see earnings growth to come from, either by segment or in terms of product? And what are the macro headwinds or tailwinds that may or may not occur to help or hurt your expectations?

Yes. Sure. So the first question, I think, again, I might start at the top of the house up at Lifeco. Remember we -- after many years, we've communicated some general expectations for our business, some high-level guidance on our expected expectation for EPS growth over the medium term, in that 8% to 10% range. And that -- a couple of things to clarify. Just -- again, I know we would have communicated at the time, but that was our organic growth. Now it included -- obviously, we've made the Personal Capital, MassMutual. We're expecting to bring those on board. So that was part of our business at the time. But additional transaction such as Prudential, we're on top of that. So we are looking for that 8% to 10%. And I think, obviously, a key part of that is the Empower growth story. That's not -- 8%, 10% would have included Empower post the MassMutual and Personal Capital on an organic basis. We think we're very well positioned at Empower to grow organically. We've been winning for some time now. We've been winning more than our "share" in the -- of new business in the market. Growing our business probably 2 to 2.5, even at some years, up 3x more quickly than the industry average. So we are seeing that organic growth. And with the Personal Capital technology and that pairing of those offerings, we really expect to drive additional relationships with these plan participants. And again, expect that to drive growth as that really comes on board post integration. So really starting next year, you'll see that ramping up. And then that will get further extended into the MassMutual book of business and then further extended into Prudential once that comes on board. So we've got a good growth trajectory at Empower. We would expect to see -- you can expect to see double-digit growth at Empower through this period. And then if I look around the rest of the geographies though, certainly, we feel we're well positioned in those areas. I look at Canada -- and our Europe and Canada businesses, I would say that probably the most similar to the Canadian, very -- we're a major player in that marketplace. So Canada, where, obviously, we have a very strong market leadership position. Irish has been even stronger in terms of -- Canada is you've got a number of large competitive players. Irish Life is the clear market leader in basically all lines of business in Ireland. And in those businesses, these are more mature insurance markets. But we do feel that we're well positioned to see if the market maybe is a mid-single-digit growth. With our approach to these workplace extensions, and we are seeing good traction there by, again, looking at -- in both of those markets, we have a lot of the plan participant relationships. And we're really just starting to develop those into broader customer relationships. So we see those extensions adding to that growth rate. So that will drive it up from whatever the market level, mid-single digit, it's up a little higher than that. So we feel well positioned in those businesses. And I then look at Germany. There's -- it's smaller, but it certainly has -- it come on to the radar now when we separated the Europe's segment, I think it shined a light on how the German operation has been able to grow. We're well positioned there. We are in a segment of the market, the pension savings, again, so pension savings. A lot of our -- to date, it's really been retail focused. And it's on the unit-linked side. So this is something we had anticipated that post Solvency II, you need a capital -- a more capital-light product offering. That's where our focus was for a number of years. And we did see post-Solvency II in actually 2016 that our German business has really picked up. And that segment of the market has really been growing, and again, access through broker distribution. We made a major system conversion in Germany. And our new admin system, not only is it really position us well on the retail side, but it does allow us to extend our business, which we've begun doing into the workplace savings market. So again, it's more focused at that small, medium enterprise market, the SMEs, as they call them in Germany. But that is an enormous segment to the German market. And so being able to offer pension solutions to those firms, we see that as a real growth there in Germany. So if I add the Canadian European to the Empower side, obviously, Putnam continues to improve its margin. So the relative growth rate, smaller base, to be fair, but the growth rate is strong there. So we see a lot of barriers where we can achieve this 8% to 10% and then augment that with acquisitions that come along. And of course, I should mention our Reinsurance business. It has had some really good growth. Continue to grow at that sort of pace as it has the last couple of years of big transaction might be difficult. But again, expanding into new geographies, new product solutions. We've written out a large asset-based deal in Japan earlier this year. Had some good success, very good success in the longevity market. Still seeing strong demand there. So I think across our businesses, we see some really, really solid growth, and that -- which gave us the confidence to put the 8% to 10% out there.

And actually, Garry, I just wanted to briefly touch on the Reinsurance business. But when you recently broke out the Capital and Risk Solution as another segment adding into the group, and it seem quite fortuitous because that was almost coincidental with the uptick in earnings that we've seen coming out of that group. You mentioned this that there's been a couple of deals in there. But is this a -- is more capital being allocated into that segment for diversification? Or is this just opportunistic where you saw a business that was profitable and you took it on, and whether or not as you alluded to, that growth continues is just going to be an evolution?

Yes. I think it's -- I mean there's always some -- a bit like acquisitions. For some of the larger transactions, there is a bit of a -- the opportunities arise, and you have to be prepared to act upon them. But the business itself is not strictly opportunistic. We are allocating capital to our Reinsurance business. And again, you hit it on the head well. It does diversify well with the rest of our book. I mean there are some areas that are complementary. So for example, we write bulk annuities in the U.K. We also write longevity solutions in reinsurance. The reinsurance ones have typically focused on those that are either in other jurisdictions like Continental Europe. The Netherlands has been very strong for us. Or they're on the U.K. The bulk of these, you typically need an onshore licensed operator. They often come with assets. Whereas in our Reinsurance side, we'll often look at longevity-only solutions rather than the with assets group. So you've got a -- we have complementary offerings there. But other areas, like the B&C side, like some of the other jurisdictions, like the Japan, Israel, we've had some deals, these are ones that are really just diversifying our group. We have very strong underwriting disciplines in our Reinsurance business We're very conscious not just how it diversifies at Lifeco. But just -- even within Reinsurance, we operate in a number of areas to gain -- to keep a balanced book. So large life insurance book, life reinsurance book in the U.S., where we don't have other life individual mortality exposures. Balances very well, and we certainly saw that in the COVID pandemic. Now obviously, that was the side of the business had more negative impact. But it's -- we've got this balance, so longevity and mortality in our book. So it's certainly more than opportunistic. Some of the large deals don't come up all the time. But underneath that, we are growing and each of our business is very steadily and looking -- continually looking for where -- are there attractive alternatives where we can really add value. So it's not a cookie-cutter approach. Our Reinsurance very much bespoke solutions for our clients. And we look, where does it make sense? Where can we make a difference? Very strong balance sheet that's -- so back to Reinsurance, kind of like AA rated balance sheet. So we're a very good counterparty for people that are looking for capital and risk solutions. And that's what -- we've got a team then to work with those clients. And really, how can we -- given their mix of business, what fits for us for a diversified business mix, financially attractive and what works for the clients. So a lot of bespoke solutions, but very conscious of the risk diversification and of the underwriting disciplines that go with that.

Now, Garry, moving to Canada Life. Again, it was quite fortuitous, the announcement, the move towards greater digitization within the segment happened pre-pandemic. Where does Canada Life sit in terms of the technology plans? And then I guess falling into your bucket, what is the outlook for expenses, for technology, inflation, regulatory inflation? Are -- has the bulk of the spending being done? Or is this something that's going to continue for the next little while?

Yes. I think that's fair to call in. Certainly going back a few years ago now, we had a year or 2 of some double-digit growth in expenses. A lot of that was driven by technology. We had a major transformation of our Canadian operations a number of years back. And again, a lot of that was to -- some to the bottom line. Obviously, we had some real tangible savings, but also a lot of investments required in technology. So I don't think -- certainly, the spend has not gone away. But I think underneath that question, the rate of increase has also slowed. I would -- I mean we're at a robust technology spend, but you have to be in today's world. Technology is a key enabler. And that can be both on the offensive side, so your new capabilities, new offerings for our clients. Extending these relationships, the workplace relationships to individual customers. A lot of that is enabled by technology to really be able to have offerings that are attractive to plan participants, whether it's at Empower or whether it's in the Canadian operations or at Irish side. Those technology investments to really, really strengthen that relationship with the plan participants, there's a lot of technology here. So that's on the what I call the offensive side where you're trying to -- you're really trying to grow and build your business. Then there's a defensive side. Cybersecurity is not going away. Having the robust infrastructure is absolutely critical as well. So certainly, the spend is not going away on technology. I think the rate of spend has certainly moderated. And I don't see that changing. I see it being a steady part of our business. But we are certainly continuing to invest heavily in technology, and I don't see that slowing down. I just don't see those double-digit growth rates that we saw as we went through a period of really accelerating that spend. But I think we're now at a -- continue to invest on a very steady basis, very focused basis in all of our operations really. It's a key -- virtually every jurisdiction. So it's not just what we're doing with Personal Capital and Empower, but it's really across our businesses. I mentioned the system replacement in Germany. Now good news is that's largely behind us. I'm sure we'll continue to make investments, but that's sort of bulk of that. A lot of work in the U.K. recently to upgrade the platform there, and we should see the synergy benefits in that arising in the next couple of years. But yes, I don't see technology spend going away anytime soon, whether it's on the offensive or the defensive side. I think both are going to be part of the landscape.

So, Garry, switching to capital now. We've lived with the LICAT regime for a handful of years now. How are you finding that as a management tool? And how does Great-West view its current capital levels in context with the fact that the regulator still has the restrictions in place?

Sure. Yes, you're right. LICAT has been around now to what 2018, I think it goes back to. So certainly, I think the Canadian insurance industry, very, very robust financially. I think the regulatory capital regime is LICAT framework, Life Insurance Capital Adequacy Test for those who want to know what LICAT is. I think that is a very sound framework for the industry. And certainly, yes, in terms of how useful it is, it's more risk-based, and it's a total balance sheet measure. So it is different than some of the other -- some of the audience may be familiar with the RBC ratio in the U.S., which really sits on top of the statutory balance sheet. Whereas LICAT is more of a total balance sheet view. So the percentages don't always translate. But we put some numbers on it. The LICAT regime, our target range, we published a 110% to 120% LICAT ratio. And we operate and we have since the outset operated a little above the top end of that range. And that would be our -- we'd expect to operate around or a little above the top end of that range. But anywhere in that range, a very strong, very robust capital in that range compared to the old MCCSR basis. The supervisory expectations is at 100%. I always like to put some numbers on -- each point is worth probably $250 million, give or take, in round numbers. And so if you think about our Q2 number, our Q2, like, 126%. So above our -- a little above our target range of 110% to 120%, well above the supervisory target of 100%. For that 126%, that's some $6 billion above the supervisory target level. So there's a lot of money in what looks like a fairly small percentage. But yes, LICAT being risk-based, you do get benefits for diversification in LICAT's. Obviously, like any regulatory regime, there some things you change, if you add your druthers. But I'm sure each of the major companies has different things they'd like to tinker with. But it's -- I think it's a good system for the Canadian industry. In terms of where it is now, obviously, OSFI still has restrictions on the financial services industry around certain -- increasing dividends, share buybacks. Obviously, we're hoping that these -- the strength of our industry is -- I think we've demonstrated both a -- I think it's fair to say, both the banks and juries have demonstrated some real resilience through the COVID crisis. And so hopefully, the regulator recognizes that and takes action. But again, it's -- I think the regulator is being very thoughtful on this, and they'll -- I'm sure -- well, I know that they're continuing to actively monitor it. And we shall see how that unfolds. But certainly, from our perspective, it's -- we just work within that regime. But yes, 126%, we feel very comfortable at this point where our LICAT's at.

Thanks, Garry, We're bumping up against time. So I'll close with one question and circle back to our initial M&A discussions. But in terms of your leverage ratio, how comfortable are you taking that up in context of an acquisition that obviously would have to be sizable? But are you comfortable with that? And do you have a range where there is an upper limit that you will not or the credit rating agencies will not let you surpass?

Yes. I think -- so we're -- certainly, we're comfortable where it's at now. And it is elevated or -- as a result of the Prudential acquisition. And then obviously, we undertook this in a very thoughtful manner. We had advanced discussions with rating agencies. And so there's no surprises there. And we had a good idea of their expectations. Our ratings are very important to us. That's a part of our business. So we would keep -- we look to keep our leverage ratios commensurate with rating agency expectations in that regard. And so certainly, we're not uncomfortable where we're at. The nature of the acquisition we made, both -- the MassMutual's already closed and then the Prudential that we're expecting to close. Those businesses that -- the retirement businesses from those companies that we're acquiring, they're very cash generative earnings. And in fact, Lifeco overall has a very strong cash generation within its businesses. So for example, on the MassMutual, and this was part of our rating agencies discussions, we have included in the financing plan USD 500 million of short-term debt that we said, yes, we'd look to bring that down early to improve our leverage. And by the time we were announcing Prudential, we'd already paid down $400 million of the $500 million. And so -- and the rest that, I think the -- if not imminently, I'm sure later this month or in the next few weeks. So we're able to get at that. And then for Prudential, again, we've included $1 billion short term. And then we also included some rating agency-friendly LRCN, so the limited recourse capital note, which is part of the financing plan. So very measured approach to our financing plan. Our leverage ratios, comfortable where we are. We don't have a specific target where we say, it's in the -- every situation is different. You have to look at where you're at. You have to have good discussion with the rating agencies. But our ratings are important to us and are -- in our overall diversification of our financing. We look at our maturity ladder. We look at our mix of financing. But we also look at the cash generation, okay, short-term bump up in leverage, with a clear path to bringing leverage back down. We'd prefer to operate -- in a sort of a quiet period, you'd expect us, and you would have seen this a couple of years ago that we have been operating in the upper 20s, mid to upper 20s, just below that 30% level. And that would certainly be very aligned with rating agencies expectations, that works for us. But given the cash generative nature, for short-term financing needs, I think bumping the leverage up to a short period makes the most sense for -- across the various stakeholders.

Garry, fantastic. As always, very open with your answers. We really appreciate it, and thanks again for attending again this year.

No problem, John. It's good to chat. Take care.

Okay. Bye now.

Bye.