Great-West Lifeco (TSE:GWO) reported what management described as a “great year” in 2025, pointing to record base earnings, a higher dividend, continued share repurchases, and momentum in its retirement and wealth businesses. Executives also emphasized the company’s capital flexibility, including deployable cash at the holding company and additional capital capacity across operating units, while reiterating that its medium-term targets do not depend on completing acquisitions.
Record base earnings, higher ROE, and increased dividend
President and CEO David Harney said 2025 produced record base earnings up 11% year-over-year and base earnings per share up 12%, which he said was “well above” the company’s medium-term objective. Management highlighted that double-digit base earnings growth in retirement, wealth, and group benefits continued to shift the portfolio toward a more capital-efficient business mix.
In capital returns, the company announced a 10% increase to its quarterly dividend to CAD 0.60 per share. Management also said it had already repurchased CAD 250 million of common shares early in 2026 and may repurchase up to 20 million shares in 2026 under a renewed normal course issuer bid.
Quarterly performance and key drivers
Group CFO Jon Nielsen said Great-West Lifeco delivered record base earnings for a third consecutive quarter, with fourth-quarter results supported by strong new business volumes, constructive global equity markets, and approximately CAD 0.04 per share of tax benefits. Nielsen said base earnings grew 12% year-over-year, with double-digit growth across the U.S., Canada, and Capital and Risk Solutions.
Nielsen noted that fourth-quarter net earnings were “principally impacted” by previously announced restructuring plans and unfavorable market experience from interest rates. On credit, he said total credit losses were marginally lower than the company’s expected annual range of 4–6 basis points, with the quarter’s credit experience primarily attributable to a single U.S. commercial property. The company maintained its expectation that annualized credit experience will be 4–6 basis points, “at the low end” under normal conditions. Nielsen also quantified what that range could mean in 2026, saying it would translate to CAD 70–100 million post-tax based on the current portfolio.
Management added that 2025 included about CAD 0.10 per share of tax benefits, producing an effective tax rate of less than 16%, and said it expects the effective tax rate to be about 18% in 2028, citing a growing share of earnings from Empower and tax changes in Canada that are recent or proposed.
Segment highlights: Empower, Canada, Europe, and Capital and Risk Solutions
- Empower (U.S.): Nielsen said base earnings rose 17% year-over-year in constant currency, reflecting organic growth in retirement and wealth. He said plan flows for the second half of 2025 were $29 billion, exceeding the $25 billion expectation shared earlier in the year. Management expects continued positive net plan flows in 2026, which it said should dampen the effect of participant outflows. Empower Wealth base earnings rose 43% year-over-year in constant currency, driven by record net inflows of $3.4 billion tied to rollover sales. The pre-tax operating margin for the wealth business was a record 39% in the quarter, though management cautioned that marketing expense seasonality could pressure first-quarter 2026 margins and said a 35% full-year margin “better reflects” near-term expectations.
- Canada: Base earnings increased 10% year-over-year, with management citing strong insurance experience gains that more than offset the effect of lower yields on earnings on surplus. Group benefits results were supported by organic growth and favorable health, life, and long-term disability experience, which management attributed in part to pricing discipline. Retirement and wealth were supported by higher fee income from stronger equity markets and IPC’s acquisition of the wealth business of De Thomas.
- Europe: Nielsen said full-year base earnings surpassed CAD 1 billion for the first time, benefiting from favorable currency movements. In constant currency, base earnings rose 7% when adjusting principally for reduced earnings on surplus tied to increased dividends paid to the parent company as part of capital optimization initiatives. Fourth-quarter base earnings declined 2% year-over-year due to unfavorable mortality experience and lower trading gains, which management described as variable quarter to quarter. Executives pointed to sales momentum excluding bulk annuities, with sales growth of over 25% across products if bulk annuities are excluded. They also noted the U.K. delivered a record CAD 1.5 billion of bulk annuity sales in the fourth quarter as deal flow rebounded after anticipated regulatory changes temporarily dampened activity earlier in 2025; management expects bulk annuity volumes to return to growth in 2026.
- Capital and Risk Solutions (CRS): Base earnings rose 9% year-over-year in constant currency, driven by capital solutions, where run-rate insurance results increased 46% in the fourth quarter and 29% for the full year. Management said the pipeline remains robust and it expects to remain active. The company also said it continues to reduce exposure to P&C catastrophe risk, which accounted for less than 8% of run-rate insurance results in the fourth quarter.
Capital generation, LICAT, buybacks, and M&A posture
Nielsen said base capital generation exceeded 80% of base earnings in 2025, while free cash flow represented approximately 90% of base earnings, which he linked to capital optimization efforts. The company’s LICAT ratio was 128% at year-end, down from 131% at the end of the third quarter. Nielsen said the company expects to maintain the LICAT ratio above 125% in normal operating conditions in 2026, even if new business volume in reinsurance remains elevated.
On buybacks, management said it repurchased 28 million shares in 2025 for over CAD 1.6 billion and renewed the NCIB for 2026. Nielsen said the company does not have a fixed quarterly repurchase target, but reiterated that if compelling M&A opportunities do not emerge, investors should expect capital returns “at least as much” as in 2025, with timing dependent on cash flow, share price, and market opportunities.
In response to analyst questions on acquisitions, Harney said the company’s medium-term objectives do not depend on M&A, which allows it to maintain a “very high bar” for deals. He said targets must fit within the four segments by adding scale or capability, meet internal return requirements, add to EPS growth and capital generation, and come with high confidence in execution. Harney said the most natural area of focus is the U.S. workplace market given the company’s integration track record, though it also evaluates opportunities in other segments.
Nielsen provided a framework for “dry powder,” citing about CAD 2 billion of excess cash at the holding company and noting the company typically prefers to keep about CAD 500 million of holding-company cash. He also cited CAD 2 billion of excess capital in Canada Life operations and about CAD 1 billion in the U.S. business, describing roughly CAD 5 billion of excess capital before considering additional balance sheet capacity from leverage. Nielsen added that a 30% leverage ratio “wouldn’t be unusual,” which he said would bring capacity to about CAD 6.5 billion, with potential for more in “exceptional cases” for the right acquisition.
AI and efficiency: focus on scale and hybrid advice
Management also addressed AI as both an efficiency opportunity and a potential disruptor. Harney said the company guided previously to improving its overall efficiency ratio from 57% to 50% or below, and he said it is now “very comfortable” exceeding that goal, adding the company will share more during the year about expected efficiency gains.
Empower CEO Ed Murphy said the company is using AI across its wealth business for supervision and coaching of advisors, as well as prospect targeting and identifying “next best step” opportunities among existing customers. Murphy said his expectation is AI should free capacity, enable deeper advisor-client conversations, and ultimately improve trust and share of wallet, while reiterating the company’s belief in a hybrid advice model.
About Great-West Lifeco (TSE:GWO)
Great-West Lifeco is one of the three big Canadian life insurance firms. With just under half of the firm’s profit and revenue in Canada, Great-West also operates in the U.S. and Europe. In Canada, Great-West provides both individual and group insurance. In the United States, Great-West operates Putnam Investments and defined-contribution recordkeeping firm Empower Retirement. In 2020, Great-West announced it would acquire Personal Capital and MassMutual’s recordkeeping business. In Europe, Great-West offers life insurance, annuities, and reinsurance primarily in the U.K., Ireland, and Germany.
