Already the most dominant insurance player in Canada, Great-West Lifeco Inc. has taken the first step in becoming an international powerhouse with a new acquisition in Britain.
The Winnipeg-based behemoth’s Canada Life Ltd. subsidiary in Britain has purchased the payout annuity business of Phoenix and London Assurance Ltd., a division of the Resolution Life Group.
Ray McFeetors, president and CEO of Great-West Lifeco, says that, although the deal is a significant one for its European division, it is a small piece of the puzzle from the parent company’s perspective.
“With our net income as high as it is, it would take a huge [acquisition] to be significant [to Great-West Lifeco],” he says.
“But it is certainly not trivial. This will be real earnings to the reporting Canadian company and it represents a very significant earnings increase for the British company.”
The 58,000 annuity policies that come over
in the deal essentially doubles Canada Life’s existing annuity business in Britain, he says. In terms of volume, it adds about $5.1 billion of liabilities to its current book of about $5.6 billion.
McFeetors says Phoenix was an attractive target because its annuity block will be easy to assimilate, as the ages and gender mix of holders are similar to that of Canada Life’s current operations in Britain.
“We knew we would be able to underwrite confidently and administer it in our system and that synergies would be achievable. We also knew the assets we were getting to support the liabilities would be a very high-grade portfolio. It is a complex structure, but we expect to do additional business from this group. It’s not a dead block in this sense, and that is important to us because we want to grow,” he says.
Canada Life is either first or second in Britain’s annuity business, and in the top five in annuity sales, he says.
“Some companies would be larger for historical reasons. But because we’ve been there, we’ve been at the forefront of the payout annuity business,” he says.
Canada Life will begin to assume the risk
effective July 1, but the deal is subject to regulatory and legal approval and isn’t expected to become final until the fourth quarter. At that time, McFeetors says, Great-West Lifeco will know the exact value of the transaction because it is based on the asset values at the date of closing.
McFeetors leaves no doubt this won’t be the last acquisition for Great-West Lifeco.
“You never stop doing acquisitions. I think that is a fundamental continuing circumstance. We continue to look at opportunities in Canada, the U.S. and Britain. You have to be opportunistic when things present themselves,” he says.
Great-West Lifeco is best known for its two major domestic acquisitions: the $2.94-billion deal for London Life Group in 1997, and the $7.3 billion it paid for Canada Life Assurance Co. in early 2003.
Great-West Lifeco and its subsidiaries currently have more than $167 billion in assets under administration.
McFeetors notes there is no specific goal to which Great-West Lifeco is striving, from a size point of view: “You grow the business as big as you can; there is no ceiling. At some point — in theory, at least — you may get diseconomies of scale. But I don’t know where that would be.
“We are a long way from being a MET [Metropolitan Life Insurance Co.] or AIG [American International Group Inc.] We have lots of room to grow in those three geographies, as well as in continental Europe. Germany continues to have very good growth for us,” he says.
He also hinted other changes will be
coming for some of the non-Canadian Great-West Lifeco companies. “I think we recognize strategic needs for businesses that are sub-optimum. We have some sub-optimum products that we continue to work on. Everything isn’t always operating at peak efficiency. The market giveth and the market taketh away,” he says. “We’re very fortunate. In Canada we are the market leader in all our products; there are no real businesses in which we are sub-optimum here.”
McFeetors has confirmed his appointment as president and CEO, dropping the “co-” that preceded his titles for the past five years. Bill McCallum, who shared the duties with McFeetors, no longer has a role at Great-West Lifeco but remains president and CEO of Great-West Life & Annuity, its Denver-based U.S. operating unit.
@page_break@McFeetors, who also heads up the Canadian division, Great-West Life Assurance Co., says that as the parent organization grows, it needs more of a single co-ordinating group.
“It’s an evolution,” he says. “Bill and I will continue to run the operating companies the way we always have, but I’ll be increasingly involved in broader strategic
decision-making and co-ordinating at the Lifeco level.
“Companies have to renew themselves.
We’re big, we’re complicated and we
continually have to renew the structure and the people. Truthfully, we’ve operated along these lines for some time. All the work at Lifeco is done in Winnipeg; it just made sense to have a single president and CEO.”
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