GREAT-WEST LIFECO INC.’S (GWL) recent focus on Ireland and the U.K. is a combination of good planning and fortuitous timing.
The Winnipeg-based financial services giant made its biggest splash across the pond in February 2013, when it acquired Irish Life Group Ltd. for $1.75 billion from Ireland’s government. But GWL has continued to make several strategic acquisitions. And although none are as transformational as the Irish Life deal, they’re important just the same, says Paul Mahon, GWL’s president and CEO.
This past February, GWL bought Legal & General International (Ireland) Ltd. (LGII), which provides investment and tax planning in the U.K.’s high net-worth market. LGII has issued more than 4,000 U.K. offshore bond policies with assets under administration of about $4.7 billion and has more than seven million customers for life insurance, pensions, investments and general insurance plans. LGII also provides wealth-management products to the U.K. market on a tax-deferred basis, similar to RRSPs, out of the nearby Isle of Man.
“[The LGII acquisition] won’t be hugely noticeable at the Lifeco level, but you always want to be growing businesses,” Mahon says.
Then, in March, GWL bought the annuity business of U.K.-based Equitable Life Assurance Society in a deal that includes 31,000 policies, with assets and liabilities worth $1.7 billion.
GWL’s European expansion isn’t without precedent. The company has long been a player in Ireland through its Canada Life Financial Corp. subsidiary.
“Our approach tends to be to look at moving into geographies where we have established management capabilities and an understanding of the regulatory market,” Mahon says. “We’ve been in Ireland for more than 100 years with Canada Life. We understand the market and we know the players. We’re always looking to establish scale-leading positions.”
The Irish Life purchase has “framed” GWL’s follow-on acquisitions, he adds: “Irish Life was an opportunistic play. It had been taken over by Ireland’s government and the government wanted capital for having held [Irish Life] for a while. The more recent acquisitions were opportunistic, too.”
Robert Sedran, financial services sector analyst with CIBC World Markets Inc. in Toronto, is a fan of GWL’s strategy in the U.K. and Ireland. He says GWL is exceeding expectations with Irish Life and has been able to achieve some significant expense synergies since taking over that firm.
Although “terms not disclosed” deals, such as those for LGII and Equitable Life, won’t change Sedran’s view of GWL’s corporate strategy, they demonstrate a commitment to a geographical region in which GWL has a growing presence: “A bolt-on acquisition carries less operational risk. It’s often a business [GWL] knows well and it can get synergies out of it.”
Sedran is quick to note, though, that his positive view of the acquisition strategy contrasts with his view of GWL as a whole, which he views as “underperforming.”
By no means does Sedran think GWL is done on the acquisition trail, although he expects potential targets on its radar screen will be of the smaller variety.
“There’s not another Irish Life out there,” he says. “We think there will be more capital deployments. Acquisitions have always been a part of GWL’s [business plan].”
There is a lot to like about the U.K. market, with its population of about 60 million and the established and sound – albeit increasingly complex – regulatory regime. The U.K. market also is far less consolidated than Canada’s.
“There will be [further] acquisition opportunities there,” Mahon says, adding that the recent deals are “not a sign that we’re going to do all of our growth in Europe. The U.K. is an attractive market, but I wouldn’t say it’s our singular focus. We look to the U.S. with the same open eyes.”
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