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

Good morning, everyone. Thank you for joining us today. I'm happy to have David Harney, the brand new, I guess, maybe not that new, but CEO of Great-West Life. David, thank you for being here.

Yes. Thanks very much, Mario.

Let's get started by just remind me of how you came to be in that seat, the CEO of Great-West Life.

Yes. So I became Group CEO on 1st of July last year. So I've 7 and a bit months in the role now. So I've been with the Great-West organization since 2013. Great-West bought Irish Life in 2013, and I was in that business there. I ran Irish Life from 2016 to 2020. And then from 2020 up until the middle of last year, I ran the European segment and also oversaw our Capital and Risk Solutions segment. And when Paul retired then last year, I was asked to become Group CEO, and I obviously jumped at the opportunity and said, yes.

I can see one of the more important institutions in Canada. I'm going to get started with the sort of questions and concerns that have -- just the most frequently asked questions, if you will. As I prepare for something like this, I solicit questions from the large investors, I know, and there are a few very, very consistent ones that came through. The first has to do with Empower and M&A. And I want to focus direct -- we'll talk about all the other aspects of the business as well, but specifically on M&A, the sense, and it's a sentiment that I've expressed that the business really does need M&A to grow that we can't rely on equity markets to give us that kind of performance every year. How do you address that notion? Because you seem to have a different take on it, didn't really emphasize M&A the way I thought you might.

Yes. So like M&A has been very successful for us in the last number of years, and I can come back to that. But like we were very clear on Investor Day last April, just when we set out our medium-term growth ambitions, they are not dependent on M&A. And our guidance is double-digit growth from the U.S., high single-digit growth in Europe and Capital and Risk Solutions business and then mid-single-digit growth in Europe. And we remain very confident on all of those absent M&A. So I think what people are probably surprised about is how can we be so sure that we're going to get that double-digit growth in the U.S. segment, which is now our largest segment. And can you really do that absent M&A? And I think if you look at our results for last year, the full year 2025 versus 2024, I think you see the answer to that question. So the first thing I'd say is -- 2025 is a great year to judge the Empower business because, okay, market performance was good. But if we look at the aggregate external impacts on the business, they were actually neutral. So market effects were positive. That's an external impact. Credit experience was actually slightly elevated in a negative way. And then our crediting rate on the general account as well was a little bit higher in '25 than '24. So the aggregate of those 3 external events on the U.S. business last year was actually neutral. And what you saw then in the U.S. business was pretax operating earnings grew 11%, and that was made up of a 7% growth in the Workplace business and a 25% growth in the Wealth business. And that dynamic we expect to continue, like what we've done in the Workplace business is built an engine now that has substantial scale. People know we have 19 million participants there. That's by far and away the second biggest provider. That gives us a huge scale advantage. We can talk a little bit more about it. But post the acquisitions we've done there, the team have built a fantastic engine of incredible service delivery, great portfolio architecture that's there, open platform. So they're regularly winning new business. Even since 2022 to now, we've won [ $150 billion ] in net plan inflows. And we're very confident about net plan inflows again in 2026. So what that means in a 5-year period, we will win net plan inflows that are about the same size as the 10 biggest provider. So it's a combination of those net plan inflows compensating for that baby boomer outflow that everybody sees in Workplace and then leveraging the operating -- leveraging the scale that we have in the business. So the other thing you will see from Empower from 2024 to 2025 is just an improvement in the operating margin. So that went from 29.1% to 30.2%. And then that's the scale coming to play. It's the scale coming to play in our ability to grow revenue and put in new products, and it's the scale coming to play in reducing our cost per participant. So those dynamics will stay there for Workplace like we expect that type of growth again in 2026. And then there's obviously that huge engine from the workflow that is fueling the Wealth business. We're already the #1 destination for our Workplace customers when they come to retirement within our Wealth business. And that dynamic is going to continue. So absent acquisition activity in the U.S., we expect Workplace to grow at the same rate it did in 2025. So that's a 7% level. We expect the Wealth business to grow at that over 20% for the next number of years as well.

And so you made an important point there about the net plan flows and how meaningful that number is. Is it your sense that in a more normal market, because I can appreciate that the very strong market performance you've seen has somewhat supercharge the participant outflows. Is it your sense that the planned inflows can actually offset entirely and maybe more than offset the participant outflows in a more normal equity market?

No. In a more normal, they'll compensate, but they won't fully offset. So where everybody starts off in a year is you'll expect participant outflows of about 2% of funds. And that dynamic is going to be there for the next number of years. And that's because the baby boomers are retiring now. They've accumulated large pots. So as those pots transfer into retirement. Everybody can expect a 2% outflow. What we do then through our net plan wins, and that's effectively growing market share in the market, we reduced that to 1% or a little bit less than 1%. If we had an exceptional year, we bring it back to maybe 0.5%. But I think it's better off to think of the industry has this 2% drag because of that baby boomer outflow. Empower will reduce that to about 1% from just winning market share and net plan flows during the year. So that's a 1% drag. So if you think about a normal market, then like a normal market obviously grows to some extent, not as much as it did last year. So think maybe funds growing at, pick your number of 5%, 6% 1%. It's 1% drag off that. So if your model is 5%, that brings that back to 4%. There's obviously -- it's a competitive market. People have to sharpen prices every year. But we're adding new revenue all of the time on to the platform. We get more people into managed accounts every year. So we have this revenue expansion that sort of matches off sort of pricing pressure that's there in a competitive market. And then because of our scale platform and investments we're making, we were able to reduce cost per participant every year. So I think you'll have the similar dynamic continuing, net plan wins reducing a 2% drag to about a 1% drag. And then what you saw this year was the improvement in the operating margin like from 29.1% to 30.2%. You're going to see that dynamic again for the next number of years. And that's what translates maybe a 4% number to a 7% number.

And that's a really good sort of paradigm to think this through. So you got your 2%, 1% drag. Let's talk about that 1% of planned inflows. And let's talk -- because that's an important number. I mean that's important.

It's a big number, yes.

It offsets half of the regular outflow. Let's talk about -- a little bit about what Great-West Life does differently or better than your peers to extract that 1%.

Yes. There's a couple of things. So scale is very important. So -- because price is very important, you have to be efficient. So what you'll see in the market is the top 5 players are winning share and all of the other players are struggling to compete. So that dynamic is going to continue. I'd say we're in an even stronger position of that just because of the platform that we've built. So the platform we have in the U.S. came from our own seed platform, the purchase of the JPMorgan business, the purchase of the potential business and the purchase of the MassMutual business and the add-in then of the Personal Capital business as well. What's different about that platform is it's an open architecture platform. It's fully our own. We're one of the largest technology teams in the industry. So plan sponsors, employers love that open architecture because it gives them a very wide product choice that they can use to construct the offering that they want for their participants. Our service levels are among the best in the industry. And that's why we say 97% client retention. Our Net Promoter Scores are phenomenal. So that's why we win business. I think the other softer reason is probably just our passion for the business as well. Like the team really -- sense mission the way they go to the market. So our job is to help Americans save for retirement, guide them on the right amount that they need to be saving, guiding them well on the investments they need to make. So like all of these things feed into why we're winning in the market. And this isn't a 1-year performance, like this is consistent performance since 2022. So from 2022 to the end of last year, [ $150 billion ] in net plan inflows. We will add to that again this year. We already know we've signed up deals this year. So net plan flows are going to be very strong again this year. And that aggregate 5-year number from 2022, as I say, it's going to be of the order of the size of the 10 biggest player in the market. So that's just a great position to be in.

Let's talk a little bit then about the margin. You were clear in how that expanded in the retirement business. There's 2 sides, of course. There's the pressure on the fee side, and we have seen some pressure on the fee side. Can you put a little bit of thinking around what's driving that? Is it just the largest players in the business continuing to drive down expenses and lowering fees? What's -- or is it a mix story that maybe I'm missing?

It's a very big market. You'd expect it to be a very competitive market. The bigger players are going to continue to invest and they'll be driving down their cost per participant. And it's a very competitive market when schemes go out to tender. So if people -- if the bigger players are making those productivity gains, some of that is going to feed back into better pricing. I'd say it's probably the value for money that participants get and plan sponsors get is already very, very good. So I think we've continued to see a price competitive market and some downward pressure, but no more than we saw in the last number of years, I think. And what we've been able to do as a business is reduce our costs by more than that. And we've also been able to expand the products that we are selling to people as well. So we're actually seeing an aggregate revenue lift a little bit, and we're seeing a reducing cost. So it's both of those actually contributing to that improvement in the operating margin. So as I said in the Workplace, that went from 29.1% to 30.2%. We expect that to continue to improve over the next couple of years even with that pricing pressure that you would expect in the market.

And on the efficiency side, so I think I'm following you on the fees. On the efficiency side, is there anything you can point to some practical things Great-West Life is doing to take down expenses? And I appreciate that it's very scale driven, but is there anything else you could offer?

It's very scale driven. So like our attention over the last number of years went to successfully integrating those acquisitions that we made. And the team did a fantastic job on that. Like we took a lot of care to migrate all of those businesses onto a single platform. We have a very modern technology stack. And what you have now post -- we're in an environment now post those big acquisitions where we have a team that had to work on integrating all of those businesses now fully focused on making that engine as efficient as possible. And I think what businesses find is if you create a large engine like that and you're fully focused on making that efficient, it's pretty easy -- now the team worked very hard to do this. But typically, organizations will try and drive 10% productivity improvement a year on it. And it's just through understanding your processes, mapping your processes, seeing where the inefficiencies are, automating those, taking them out. And AI is starting to help on that now and contribute to it, and we think that's going to probably advance some of those productivity gains in the years ahead as well.

So I started off this question with M&A, but we quickly veered away from M&A and went down the path of organic earnings growth. I want to go back to M&A because a question came through, and it's actually a little different from the way I structured the question. The person asked it this way is, can you explain the economic rationale for buying up a smaller scale retirement platform like paying for that up now versus just waiting for these smaller players to exit the business over time where you can win those flows in the open market. So he's flipped it on its head and said, "Hey, maybe it's better just let these things wilt away.

Possibly. So that's the dynamic. And I said, we will grow absent M&A. So -- and we're obviously picking up schemes from smaller players that are struggling to compete against the bigger players. So that's a dynamic in our flows every year. We're also winning schemes of bigger players as well that have maybe not quite our scale, but yes, so we win across the market. So I suppose M&A at the right price, though, where we're very confident of executing is still a very good thing for us to do. So if we can get it at the right price, we're very confident that we can integrate it onto our platform. It just adds scale quicker than that, say, organic gains that we will have from year-to-year. So if we can get it at the right price, we're pretty confident that we can achieve our hurdle rates of return, if we have high level of confidence over execution, which you'd expect us to have on Workplace acquisitions in the U.S., we will do it.

And the Empower business.

But I suppose we'll be patient on to -- things have to be at the right price. We're not going to go and chase. Things will probably come to the market rather than us go and chasing. And if they're at the right price, we're very keen to acquire.

And the Empower business, I think you reported a 20.1% ROE, a pretty meaty number.

And the ROE on the Empower business now. Q4, yes.

Yes. Would you -- do you sort of have a stomach to let that drift a little lower if the right deal came along? Would you think you could sort of massage investors into thinking, hey, this is the right idea. We're going to accept a lower ROE in the near term? Or does that not the math you're doing in your mind?

No, I think we can tell that story very well. Like the guidance we've given on ROE for the aggregate business of the U.S. and the other 3 segments is our medium-term ambition is ROE in excess of 19%. That's grown from 17.4% in 2024 to 18.2%. And then similar growth in earnings this year with the bigger growth coming from the capital-light businesses in all of the segments means we hit that 19% target at the end of this year. Now that 19% will continue to grow because the capital-light businesses will continue to grow quicker than the other businesses. What will pull back that 19%, and I think this is perfectly right for us to pull it back, if we do an M&A, say that it's above our 15%, but let's say it's at a 16%, 17% return, that's obviously going to pull back that 19%. I still think that makes sense and it's the right thing to do because, okay, it will pull it back a bit, but that's still going to be a growing ROE number, and then it's on a bigger number. So yes.

Yes, it's been my experience that the way investors behave around M&A is always -- we look back at the very last big deal and say, did that one go well? And if that one went well, then we can all wrap our minds around the company drifting a little lower on ROE for an important deal. If the last one didn't go well, then we're not so keen to do it. That's just in my experience.

I think Yes. I think that's the right way to think about it. And our track record there is very good. So like I talked about JPMorgan, I talked about MassMutual, I talked about Prudential, I talked about the Personal Capital. All of those 4 have gone spectacularly well. So I think if we're executing in that space, we would have a very high level of confidence on the execution. So it's really just is the price right for us. We've also done some other acquisitions as well that have been very successful. So smaller ones like even in the U.S. and there was the add-on of option tracks and that stock compensation plan. That's been a great add-on. So where we see capability add-ons, we look at those. And then we've done a number of wealth acquisitions in Canada and in Europe. And okay, they're smaller than those acquisitions I've talked about in the U.S., but we've executed very well on all of those two. And again, we'll be open to opportunities in the other segments as well.

I think you're in that sweet spot where you can do something like that without spooking investors too much.

Yes.

Let's talk about something you said on the call around you'd be patient on deals, and you said it again here. And it was in the context of using capital to buy back stock. And the way you described it was the capital is there, if the opportunities don't present themselves, you offered something to the effect of 2026 could see as much buyback activity is 2025. I have to admit that surprised me because '25 was a big year for buybacks. Like for folks like myself and investors and analysts that have been around your company as long as we have, that's not normal for Great-West to buy $1.6 billion. So I think the first part of the question is, what does that mean? Do you have like a date, June 30, no deals for buying back stock? I mean that's a little too rigid. But is there like a time line that you decide, okay, well, we've looked long enough it's time to buy back stock?

Yes. No, like a time line like that would be very rigid, and it's not the way we think about it. We've become much better at our capital management, and we're much more transparent now with the market on how earnings turn into capital generation and how that capital generation turns into cash. And maybe I'll just talk about that a little bit because it informs then your question. So we made $4.65 billion in base earnings this year. You can think of that as practically all cash, right? 20% of that then gets invested back into supporting new businesses, those capital supported and new businesses that require capital. So that's in the insurance lines, Indian segments and our Capital and Risk Solutions business. So 20% of the earnings goes back into that. About 50% of the earnings then goes to pay the dividends, and we have 30% of earnings then that are left in cash. So they will either add to a cash pile or they will be used for share buybacks absent M&A. Now if you look at what we have permission to do this year, we have permission to buy 20 million shares, right? Now the cost of that will obviously depend on the share price during the year. I think the consensus target price at the moment is about $70. So that's going to be $1.4 billion. That's very close to the number that we did last year. And then if you think about the $4.65 billion that we made in 2025, if you take our sort of guidance on EPS growth or earnings growth, even go to the lower end of that 8% that turns that $4.65 billion into $5 billion, 30% of that just on the stack that I talked about is 1.5 billion in new cash. So that says, well, these guys could very easily do share buybacks of that level again in 2025. And we don't think that reduces our firepower when it comes to M&A because at the moment, we're already sitting on $2.1 billion in cash. We're sort of above our operating ratio on LICAT. We're above our RBC risk capital ratio in the U.S., and we're below our leverage target. So depending on what level of liquidity you want to keep in the business, we're probably sitting on firepower of $5 billion or $6 billion. And even if we do $1.4 billion, $1.5 billion of share buybacks this year, we're still sitting on that same firepower at the end of 2026.

Well, John put the excess capital, and I do my own math on it at over $6 billion.

So again, it's plenty of. There's a number of factors there. How low would you go on ICAT -- how much do you really want -- how much liquidity do you want to keep. But yes, it's of that order.

Yes. And we're going to go back to Wealth in a moment. But before we do, there's this -- at the beginning of your presentation, you talk about these 2025 highlights. And I always pay attention to those because if a CEO puts 5 things on a page, clearly, he's telling us those 5 things matter to them. So there's one line in there near the bottom of your 4 or 5 bullets and it says enhanced shareholder focus. And I'm a cynical person. So the first thing I think of when I see enhanced shareholder focus is, well, you're telling me that the previous management team did not have a shareholder focus. Clearly, it's not what you're telling us. But there's a word there, like what does that mean enhanced shareholder focus? What's changed?

Yes. First of all, it's really nice to hear that you read that stuff at the start and you pay close attention to it because sometimes I guess those CEOs wonder, are we talking to ourselves and is anybody really listening and just looking to hear John talk about the numbers. So that's very heartening to...

I must read it.

Yes. No, I suppose myself and John are new in our roles. But like we inherited a fantastic business. So the management team before us built what we have today. And we have an amazing portfolio across all of our segments. There's no business line that we're in at the moment that we don't want to be in. And that's a credit to the job that Paul and the team did beforehand. I think where we've gotten better as a business in the last while is just our interactions with the market, our transparency with the market. People always saw it as a prudent and well-run business that delivered good earnings. We've sharpened the focus and the transparency around capital generation and that stock management of capital. We're very responsive on our disclosures as well. So where people are looking for more information. We're continuing to update the supplemental information that goes out with our earnings results like even this quarter, even though we didn't get questions on it, we improved our disclosure around the private assets. And we're spending a lot more time with the investor community as well. As a team, we really enjoy that dynamic because it's energizing going out talking to investors in the same way that it's energizing going out talking to customers. So I think all of those things contributed to the very strong shareholder returns that we saw in 2025. And like we're very proud of that performance. So when we sort of put in that comment, we're signaling that continued engagement with the investor community, that transparency around how the business is performing, what's driving the business performance. And even the transparency around, it's not just an aggregate earnings per share growth target that we've set for the business, like we've broken that down in each of the segments in our Investor Day. We've gone into quite a bit of detail on what are the key deliverables for each of the segments to achieve those growth targets. And we're going to continue to be very transparent in that way on the performance of the business because we believe that, that transparency ultimately drives a better performance of the business.

Yes. It just -- it feels so different from what I remember 10, 15 years ago, it does feel quite different. Again...

It also -- I think we've always been very disciplined on sort of acquisitions and M&A opportunities. But that discipline then it continues on new business. We will pull away from markets where we don't like the returns on the new business side. People have seen this year, we've exited the mortality business in the U.S. through our reinsurance division. And that same discipline then happens on the M&A side as well. Like we have to be confident on execution. We have to hit our hurdle rate of returns. It has to be -- has to add scale or add capability in some ways. So all of those disciplines stay there.

You reminded me of something a moment ago when you talked about discipline and maybe you could talk about this business as well in that context. The P&C reinsurance and retrocession markets look very different this year from last. Can you talk a little bit about what's happened and maybe drive home the point, the discipline point in the context of P&C retrocession?

Yes. It's a very interesting market. So obviously, supply of capital into the insurance companies and the reinsurance companies on the property and casualty side is very important. And they have different sources of capital that supply that need. And just what tends to happen, if you go through a period of low claims and low catastrophe claims, there's effectively more capital there to serve that business because that capital really gets called on when you go through a period of high claims. So you sort of you'd imagine the market should be very disciplined and pricing is always the same. But you go through periods of a sort of a softer market or a harder market, and it follows the claims period. So if you have a period of elevated claims, some of the capital gets called and it's held against those claims, and that's when you have a harder market. We're going through a soft market at the moment because recent claims experience has been good. That means returns are lower. We will do less in that market segment this year because the pricing is softer, and we make up for that elsewhere.

Yes, it's clearly showing up. Let's focus on another question that came through. It's one I asked on the call, and it relates to AI, both as an opportunity for the company, but also as a threat. So I'm going to go to the question sort of directly. Will new AI options disintermediate power or any part of the business? The power seems the most at risk because it's the retirement administration and the low client touch business. So you tried to address it on the call, and I press you a little bit on this. And I press you because that seems to be the question of the day. It's remarkable watching investors shift from AI is real positive and what it could do on expenses to AI is now a giant disruptor. And these shifts are uncomfortable to watch as an equity analyst, but that's the shift of the day. So let's talk about why or why not Empower could get disintermediated here.

Yes. I think that's exactly the right way to think about it. And I think everybody can understand the efficiency gain that's there for us and other financial service providers. And we can really see that there as well. So just on the efficiency side, we talk about our sort of expense ratio going down from 57% to below 50% over the next number of years. I think probably the AI opportunity to drive productivity in the business, I think means we can do better than that. But let's move to the disruption question because that's a pretty interesting one. So if you think about structurally just what we have in the U.S. first is we have a fantastic Workplace platform that we've talked about, and that's obviously performing very well. It's hard to see that being disintermediated by AI because I don't think that's what people are talking about. They're really talking about the wealth advice side when people come to retirement. For the Workplace business, employers and plan sponsors have to pick an administrator who's going to run their pension plan. And AI isn't going to take over that. Like those platforms have to be built. They're expensive to build. We have one of those, and we have a scale advantage on that. So I think everyone would see that the administration and delivery of the Workplace business is going to continue to be done by the existing players. And if anything, the scale advantage that the biggest players have will even become more important in this world. Now what those players will use AI for is to drive more productivity improvements that I talked about. And they'll also use AI to improve the customer experience and improve the customer engagement. So we expect that to happen. So we already have very high NPS scores. We already have a great customer contact, but AI is just going to help us do better on that. So I think that's pretty clear on the Workplace side. So what people worry about then is when people come to retirement, what's going to happen? Are we going to get the same flows into the Wealth business? Or is that going to be disintermediated in some way? And I don't really see that happening either. Like as I said, we're already the #1 destination now for people when they come to retirement that choose to stay with Empower. And that's because they're used to the Empower experience. They like the Empower experience, and they're very comfortable staying in that environment and continuing on post retirement. And those people receive advice at the moment from a number of different sources. People talk to family and friends. People get a lot of confidence that their employer in the first place has faced that business with Empower. People will talk to advisers that work for us. People will talk to independent advisers. So what we potentially have in the new world then is a new advice channel, which is AI. Some of that AI will exist in those previous advice channels that I talked about. So our own advisers and our own platforms will have AI. Independent advisers will have AI options as well. And so the or the disintermediation risk then comes from potentially is there going to be a new independent AI that's going to give people different advice. And I think actually Empower and the big players will actually do really well in that independent AI space as well because ultimately, what somebody is going to do is if I'm an Empower client, I'm going to say, ask an independent AI agent, should I stay with Empower or should I go somewhere else? And if the independent AI agent is given the best advice, it should, which I expect that will, it will say you should stay with Empower because it's a scale platform. It's got the best product choice, you're going to get good options on drawing down your income, you're getting good service and where else would you go?

Interesting. This issue, I can assure you, will evolve so many times in the next I'd say just by the end of this year, we will have an entirely different take on how AI affects the Wealth business. And the reason I say this is the speed with which stories are changing in the market these days is shockingly high. This story could change within the next few months.

It's an amazing area. Like we're putting a huge amount of attention on it. Like I have to accept like that's the scenario I'm laying out. I think it makes sense. But we are in a world now where things are going to change a lot. Like the near things we have to do is we have to make sure we secure those productivity increases. So we have a lot of AI already built into our call centers. We have a lot of AI built into the operating engine behind. We're doing a lot of work on making sure that we have the infrastructure in place to really seize that agentic opportunity and make sure it drives all of those productivity sites. But as that happens then as well, it's easily moving from call centers into the advice people that we have. So what you'll start to see in 2026 and into 2027 is that hybrid AI advice that people will have access to. And then we have to be open that the world is going to change and that the Empower platform, the Empower wealth platform is as good as it can be because I think in an independent AI advice world, the requirement to be good and to be the best is going to become even more important.

Sure. Let's move forward to Wealth for a moment. Wealth is where all the really impressive growth is going to be. In your presentation or maybe even in this conversation, you made the point that net flows in wealth are running at about 14% of the opening balance. And I think maybe it was in your presentation and 14% is an enormous number. That is because the base is a little smaller, and the base has hit $100 billion. So you also made an important point that the largest destination of those assets out of -- you call it Workplace, I call it retirement, but we're talking about the same thing, aren't we?

Yes, we are, yes.

Yes. So the largest destination for those assets is the Wealth business. Have you got to the point yet where you talk about what that rollover rate is, where it's come from and what you hope to get it to? Are you offering outlooks like that yet?

Yes. So we talked about that in Investor Day. So we shared that our rollover rate at the moment was mid-teens, just slightly above 15%. We shared that, that was a 30% improvement over the last few years, maybe going back 5 years. And we said we expected to see a further 30% improvement in that rollover rate in the next planning period. So that takes it up to about a 20% level. And what you're seeing in the performance of the business this year and those net inflows are an improvement in the rollover rate along the guidance that we gave. So that generated net outflows for the Wealth business of $12.5 billion last year. And you're right, like our opening value was less than 100, it was 87. So that gives that 14% rate. And we expect that improvement in the rollover rate to continue over the next planning period. And the key to improving that rollover rate is, again, people come to the retirement point from the retirement business and they have to decide are they going to stay with Empower or are they going to go to another wealth provider. And the more we can engage with people while they're in the Workplace retirement business through broadening the product offering, engaging them with our advisers, even engaging them with new advice solutions, the more we invest in our brand and become familiar and comfortable with the Empower brand, they're all of the things that drive that improvement in the rollover rate. And so that's been on a steady improvement every year, and that's going to continue. So that's what gives us the confidence in the growth that we expect to see in the net inflows into the Wealth business and why we expect the Wealth business in aggregate then to grow at over 20% over the next 5 years.

Now this is super simple. But if you apply 20% to your $1.9 trillion in Workplace, that's a big number. That's like $400 billion. That's 4x what you currently have. Is that far too simple the math? Is there more going on there?

Yes. Look, we expect this to be a $1 trillion business in time. So if you take the U.S. business at the moment, there's about $2 trillion in that retirement Workplace business and there's $100 billion. And we expect that $100 billion to grow in time to be $1 trillion. Now the numbers you need to work off are there's a $2 trillion Workplace retirement business. I mentioned the 2% participant outflows that are there at the start. So that turns that into a $40 billion number. Some people take that in cash as well. So you need to think of about like maybe 75% of that then is in play. You'll win a percentage of that -- the other thing then as well, like that's $12.5 billion that I talked about for 2025, that's a net number. So it's the new business coming in. It's important to remember then as well that people are using that money to draw income out of it as well. So there's going to be maybe a 6% income drag out of that and then some people will move as well. So if that flow in that's going to be much bigger than $12.5 billion, people will be drawing income out. Some people will move to other providers in time. So that's what gives the net number. But you're right, like ultimately, all of this $2 trillion has to move, but it's about 2% of it that moves in any year.

For sure.

Sorry, the 2%, sorry, is the net number. So there's a bigger number there on the outflows.

The point though is this business just looks so primed for growth as you drive the rollover rate higher. When you think about the -- who are the -- who are the leaders, what's your best view into what the leaders in the business can generate in terms of a rollover rate? Is it materially higher than 20%?

It is, yes. So everybody knows the leader in the business here. I don't know to say who they are, and they've been doing this for decades and decades. And in fairness, they are very good at it. So they don't disclose numbers, but people think their sort of capture rate at retirement. And we don't like to use the word capture because people have choice, and we really want people to have choice and you want to win this business the right way, but close to 50% stay with that provider. So we're at early days here. But you won't go from sort of below 20% number to 50% quickly. Like you build this trust and confidence over time, and it's all about service delivery, you have to continue to invest in your brand, increase brand awareness. You have to continue to expand out the product set that you have because if it's just the retirement savings, that's a deduction of your wage. It just goes into account. People might look at it that often. But as you add in other accounts like the stock plan services that we talked about, the health care savings account, there's going to be some great new products coming out in the next couple of years where people will be able to save for younger kids and things like that, the managed accounts that we have, like they're all the products set that have much higher engagement rates. And so it's very important that you get people to take out and invest in those type of products as well. So that's why you can see it's a gradual journey. But if you're doing well in all of these things, you should expect at that rate to continue to improve over time.

That company we're both referring to -- I mean the name of that company is ubiquitous. Building that kind of brand takes a lot of money and a lot of time.

It does, yes. And we spend a lot of money on our brand, and we've upped that spend again now, the budget for that in 2026. I think the team are doing a fantastic job on building the brand, and they've been very clever as well in the number of ways that -- what they're doing that. But you're right, like this is a journey over many, many, many years.

Let's talk a little bit about what's happened to the margin in Wealth as well because that's a really good story, too. The margin -- you talked about the improving margin in Workplace, but the margin improvement in Wealth is also pretty heavy, especially in Q4. Q4 looked especially strong. So maybe talk a little bit about what's happening with the margin. I presume it's scale, of course, but the -- is there more to it than that?

There is a bit more to it. So the number is very high in Q4, and that's because some of our spend and particularly our advertising spend, and we talked about brand and that, that's heavier earlier in the year. So I think the number was 39% in Q4. I wouldn't jump to that number. The better number to look at is the full year number for last year. So that was 35%. Now in time, if you have a very good Wealth business, I think you can expect a 40% margin. So -- and I think over the next few years, we're on a journey from a 35% margin to a 40% margin. I think what people are surprised about is like how can a business that's so young and still scaling be already at a 35% margin. So that's surprising. But the reason for that is it goes back to the structural setup that we have in the U.S. And obviously, the source of our customers for the Wealth business are people retiring out of the retirement Workplace business and people that are also moving jobs and just moving money as they move jobs. And then we also win just pure new customers that have no prior relationship with Empower. But you won't be surprised to hear the biggest source or the biggest flow are the Workplace retirement people that are retiring and moving their money then. That means the cost of acquisition for those customers is much less than it is for a typical wealth manager. That's just an incredible flow or pipeline to have. So that's why even for a business that's really only 3 or 4 years old already has a 35% operating margin, right? That's just a fantastic position to be in.

Yes, you don't expect to see that. We see it at some very large mature companies. Yes. Let's flip over to a sort of odd thing I keep finding in your retirement business, and I don't understand why it keeps showing up there. It's the elevated credit charges showing up in retirement. But I think about all the credit charges we saw in the year, I think it might have been $125 million directly in retirement. It's just odd to see that there. So maybe just logistically, why is retirement eating most of the credit hits?

Yes. For no good reason, I'd say, Mario, I talked about improvements that we're making in our disclosures and how we're continuing to improve this. And this is one of the items actually on our agenda for this year. And that's even why just over the last few quarters of last year, we gave more information out on credit losses and what our expected credit losses are and try to give some guidance on that. So to be honest, we're a little bit of -- a little bit all over the place at the moment. So when you go outside of the U.S., there's a clear line on credit experience. And then for historical reasons, the nature of the U.S. business is, you're right, some of the credit losses are in the retirement result and some of the credit losses could be actually in the wealth result in the U.S. as well. So one of our hopes for next year is that we will lift out and show the credit experience in a clean line all on its own because you should be judging the retirement business and the Wealth business outside of those. And we'd like to even go a step further than that and get within base earnings maybe an expected credit loss period and have the volatility outside of that because you can -- it's a number that can just move around from quarter-to-quarter. And we think if we can separate that out, it better shows the underlying performance of the business. So this is something that we will return to in time, and it's a work in progress for us at the moment. But what we did in Q4 was even though it's in these different places just in the disclosure, like I think we did aggregate it on one of the slides just to show it more clearly.

I think that the way Great-West Life talks about credit experience on your calls, you can so easily be confused by it if you weren't really steeped in your disclosure because often we talk about a certain level of certain basis point losses, we immediately think you're talking about the expected credit loss that appears on the face of the drivers of earnings when what you're really talking about is the aggregate. So I think is that where you're going that that's something you could tidy up over time?

No, that's something we really want to tidy that up. So yes, we appreciate this isn't as good as it should be.

Yes. Like the reason I followed along with the explanation is because I sort of live and die by these things. But for people that don't, you can easily get confused by that disclosure.

Yes. And then different companies have different approaches as well. So we'd like if the industry could move together a little bit, and we'd all move to a similar approach as well because we're conscious we might have one way of doing it, but you're dealing with other companies as well. So we're not making investors' job easy if we all have different ways of talking about it.

Yes. I follow it, but clearly, it could be a little easier. So one of the things that comes up on discussions around Great-West Life is has the company put all its eggs in the Empower basket? Like think about this, our conversation has been wide-ranging, but a good portion of it has been about Empower. And it makes me forget sometimes that there are other really important businesses. But when I looked at the growth in those businesses this year, what I saw was Europe and Canada, low single digit, CRS looks a little better than that. Should I think of -- and I fear this is what investors are heading toward is that Great-West Life is all about great growth out of the U.S., pretty good growth out of Capital Risk Solutions, but we shouldn't expect more than 2% or 3% of the Canada and Europe. Do you have greater aspirations for Canada and Europe than 2% to 3%?

No, we absolutely do. And the performance of both of those businesses is better than that in 2024 and in 2025. So we -- again, we're very transparent, and we've had some currency sort of tailwinds for some of the businesses this year, particularly Capital and Risk Solutions and Europe. So what we showed in Q4 was just the full year performance of all of the businesses, taking out some of those currency benefits. And that's shown, I think, the 3% for Canada and 2% for Europe. But we were very clear then the underlying performance of the Canadian business was 6%. So there's a sort of surplus amount that's held for the Canadian business. We had 110 basis point drop just on short-term yields during 2025. That had a $55 million impact on Canadian earnings. That's sort of outside the performance of the business. So what we really saw in Canada last year was 6% underlying growth in the performance of the business. That's on the back of 7% growth in 2024. And our guidance out for the Canadian business is mid-single digit, and the performance has been in line with that over the last couple of years. And then the underlying performance in Europe is it's better than that 2% number. So we've talked again in our Investor Day about the capital optimization program that's underway in Europe and particularly in the U.K. Europe has sent cash of $2 billion back to Lifeco, which is higher than the earnings. And again, you can see that then that fall on the earnings of surplus, but a lot of that has been driven by just cash repatriation back to the parent. So that cash isn't sitting in Europe anymore. And again, when you adjust for that, then the underlying performance of the business in Europe was 7%. And then again, looking at Europe, like the phenomenal top line growth in Europe, I think, which really surprises people. Everyone knows the bulk annuity market was a little quieter in 2025. But outside of bulk, the sales growth on the underlying was just over 20%. So again, our guidance for Europe is mid-single digit plus, and that will come largely -- that growth will come largely from Ireland, where we have a fantastic position and the team continue to do a great job there to leverage that position. And then we have a very good insurance franchise in the U.K. The outlook for the bulk annuity market there is very good, and that will drive growth in the U.K. And then our Capital and Risk Solutions business, like we were -- the unadjusted currency number there was 13%. We corrected that back to 9% just to take out that favorable currency movements. The momentum in that business is really good. So we've talked over the last number of quarters about the growth in the capital solutions part of that business. That's close to 55% of earnings there. The momentum into that is very strong in 2026 as well. So our guidance for our reinsurance business remains mid-single digit plus -- it's outperformed that last year. Chances are it will outperform that again this year. So the U.S. is clearly our biggest segment. It is our fastest-growing segment, but all of the other segments are doing well. And I think because the U.S. is the biggest and the fastest growing, that's just where the volume of questions go. But we're very happy to spend as much time talking about the other segments. And even with the U.S. being the biggest, it's 34% of earnings. So 66% of earnings still come from the other segments and the growth outlook for the other segments is good. And I think maybe this answer is too long, stop me. But like the reason we're seeing growth is we talked about this at Investor Day as well is there's just dynamics that are driving this in each of the markets. So the demographics in the geographies that we're in is very good. These are very important products for people. So people still need advice and advice is a very important part of the component. Debt levels in our geographies are high. So that means governments need people to look after this part of their life more and more. And we're seeing corporates then much more conscious about their capital levels, and that feeds into what we're seeing in the reinsurance business. So those dynamics are going to continue to exist in our business. And if you think about aside just from the good product positions we have, but just the overall macro environment, ultimately, that's what's driving the growth in all of the segments.

So we've got a couple of minutes left. I want to take a really big picture now, take a real big step back. Listening to you talk about your business, empowering the rest of the business, you sound pretty content with the way Great-West Life looks the components. I feel like you've really wrapped your mind around every business and how they fit in. Even though sometimes Capital and Risk Solutions doesn't really fit in, I think you've made a pretty good argument in the past in how it does, like diversification benefits. So you've been in the seat for less than a year, do you see anything that needs to be addressed? And I mean structural like stuff that needs to be exited, things you need to add? Or does this look -- now that I've kind of wrapped my mind around what Great-West Life looks like, got the some power business with growth, Canada stable, Europe stable to grow. Capital Risk Solutions got some good sort of momentum behind it, is there anything that changes in the next, say, 5 years? Or does that feel really good to you right now?

No, that feels really good to us because of the dynamics that are there in each of those markets and because of the positions that we have in each of those markets. Like what we have is like winning positions in our different product lines, great teams working on all of those are positions where we might be quite a market leader, but people see that we clearly have a right to win or a right to play in those markets. So that's an incredible position for our portfolio to be in. Like as I said earlier in the call, there is a single product line we're in at the moment that we don't want to be in. So exiting anything isn't on our agenda. So our full attention is just on making all of those businesses as good as they can be. And we're not going to look at other geographies. There are other geographies that are obviously attractive and growing well. But ultimately, our belief is no matter where you are, you have to have a scale position like -- and we are looking -- we have scale positions in the markets that we have, and that's where we're going to continue to focus.

Yes. I think sometimes investors get spooked when a CEO sort of openly muses about other geographies. And that's why I asked the question. I wanted to sort of narrow it down a little bit because I don't think investors really are open to big transformational things at this time, especially when, as you described, you seem awfully content with the way things are shaping up. And I think investors generally like it right now.

Yes. Yes, I'd probably take awfully content and turn it into excited. Like we have a great portfolio. And the world is very exciting geopolitically, but I think it's more exciting from a technology point. Like we love the AI agenda and what it could do for our business. As good as we are and as good as our market positions, we still measure a lot of our customer experiences and our turnaround times, sometimes in hours, but sometimes in days. We'd love to be a seconds and minutes business. And we talk a lot internally just about the opportunity with AI and increasing technology in the business. But if that can turn us into minutes and seconds business, it actually makes us a more human intuitive business to deal with for our customers. So like that's what we're really excited about. We're not dreaming of other geographies. We love what we have, and we think we can do a great job in it in the next few years.

Well, David, I appreciate you doing this. I feel like measuring my own confidence level, it's probably ticked up a little bit from this conversation.

That's good. That's good.

And that's all you can really help for conversations tick up confidence levels. Everything is very small and incremental, but I appreciate you doing this. And thank you to everybody else who joined us.

Yes. Thanks for the question on the probing Mario. So we love the opportunity to talk about our business. So thanks for giving me the time this morning.

Enjoy it. Thank you. Have a good afternoon, everyone.

Okay. Thanks a lot. Bye.