Great-West Lifeco Inc. has taken another step toward establishing itself as an international insurance powerhouse with the acquisition of the payout annuity business of a British firm.
The Winnipeg-based company has bought the assets and liabilities associated with the not-for-profit pension annuity business of Equitable Life Assurance Society in London. The deal involves the acquisition of about 130,000 policies — which have liabilities and supporting assets of about $9.3 billion — for its Canada Life Ltd. subsidiary. The move, which GWL CEO Ray McFeetors says is the biggest of its kind in England, nearly doubles the size of GWL’s payout annuity business in the country.
“That’s pretty attractive considering using organic growth, you’d be writing for multiple years to get this kind of volume. It gives us a giant step up in size,” he says. “This is the type of thing we’re looking for. This will add to what we think is a very good business. We have a lot of experience and knowledge in the payout annuity business and in administering and underwriting it.”
McFeetors hasn’t seen the final numbers, but it’s possible that GWL could now assume the top-ranked spot in the payout annuity business in Britain. Prior to the Equitable deal, it was No. 3, with a 17% market share. He says Europe represents about one-third of GWL’s annual earnings, with the Britain representing 75% of that.
GWL has also been active on the home front — but on the mutual fund side. Deals have been signed with a trio of firms, transferring about $600 million of client assets to the company’s five-year-old Quadrus Investment Services Ltd. arm. The troika that have left their previous dealers and switched to Quadrus are Brian Mallard and Associates and Sanderson Securities Ltd., both of Saskatoon, as well as Surrey, B.C.-based Chartwell Financial Inc.
“We created Quadrus, our mutual fund dealer, to expand in mutual fund distribution,” McFeetors says. “We are the largest segregated fund manufacturer and distributor of the life companies, and we want to grow in mutual funds, as well. A lot of money flows into mutual funds.”
Quadrus now has more than 3,700 registered investment representatives managing about $3.8 billion in assets under administration, including $1.5 billion in proprietary products. McFeetors says part of the company’s strategy is to market more products, such as seg funds and various types of insurance, in its mutual fund distribution channel.
“Everybody needs multiple financial products. Nobody needs just mutual funds; they need critical illness insurance or disability insurance. When an advisor is licensed for those risk products, we hope he or she be able to sell one of those products to clients as well,” he says.
Mallard, whose firm represents two-thirds of the new assets coming over, says he switched from Assante Corp. because of Quadrus’s superior service and information technology platforms: “The fact it is also providing us with dedicated service people was a big deal for us. Quadrus is also very supportive of individual advisor branding.”
Dan Richards, president of Strategic Imperatives Ltd., a Toronto-based consulting firm to the financial services industry, says the acquisitions were both strategically and financially driven. He doubts GWL will stray too far from its traditional areas of strength in insurance but adds there’s no doubt Quadrus is now firmly entrenched as a mid-tier player in Canada’s mutual fund industry.
“Clearly, Great-West has decided it needs to bulk up its assets on the mutual fund side to raise its profile and scale, but also to get profitability in its dealership up as quickly as possible. In today’s world, you have to be profitable or there’s no future,” he says.
Richards doesn’t think GWL’s goal is to dominate the mutual fund business the way it does insurance because it’s “kissing cousins” with Investment Planning Counsel, a subsidiary of its sister company, IGM Financial Inc.
The problem for many insurance-based firms is that mutual funds typically make up a small portion of producers’ books, he says.
“The average asset level and sales are relatively low. That makes it problematic to get the economics up quickly and efficiently enough. Generally, the insurance firms are struggling with the issue of being profitable,” he says.
As an example, he notes Standard Life Financial Inc. exited the mutual fund business in March when it sold its mutual fund dealership, Performa Financial Group Ltd., which has $1.3 billion of assets under administration, to Montreal-based Desjardins Financial Security.
@page_break@The Equitable transaction marks GWL’s second acquisition in Britain in the past year. Last summer, it purchased the payout annuity business of Phoenix and London Assurance, a division of the Resolution Life Group. The 58,000 policies in the deal added about $5.1 billion in liabilities to its book. IE
GWL purchases greater presence in Britain
Growth through acquisition in insurance industry abroad, and through mutual fund deals at home
- By: Geoff Kirbyson
- June 2, 2006 January 21, 2018
- 10:48