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Great-West Lifeco net earnings rise to $863 million amid sale of subsidiary


Great-West Lifeco Inc. nearly doubled its second-quarter earnings from last year as it benefited from investments in digital technology and a market rebound from COVID-19.

The insurance and wealth management company reported its net earnings attributable to common shareholders reached $863 million or 93 cents per share in the three months ended June 30.

That compared with $459 million or 49 cents per share for the same quarter last year.

Its base earnings, which exclude certain items, amounted to $706 million or 76 cents per share, up from $627 million or 67 cents per share a year ago.

Great-West beat analyst estimates of 72 cents per share of net earnings and 60 cents per share of base earnings. 

Chief executive and president Paul Mahon said the Winnipeg-based company was quite fortunate in the quarter, despite grappling with COVID-19 like every other business.

"To a large extent, we saw a good recovery in equity markets," he said.

"What we found is that our business model is very resilient...There is obviously going to be downsides related to economic impacts but we always believe they will be moderated because of our risk sense."

Great-West — which operates the Canada Life brand, among other things — saw lower health and dental claims and reductions to premiums while medical offices were closed during the early stages of the pandemic in Canada.

The closures were coupled with an increase in disability claims, lower levels of disability claim terminations and strong sales of life insurance sales.

The public's gravitation towards virtual offerings, which insurance companies have been ramping up in recent years, also helped, Mahon said.

His remarks came a day after Great-West announced it is selling its Canadian subsidiary GLC Asset Management Group Ltd. for $175 million in cash to Mackenzie Financial Corp., an affiliated company.

Mackenzie parent IGM Financial Inc. and Great-West are both majority owned by Montreal-based Power Corp. of Canada.

As part of the deal with Mackenzie, The Canada Life Assurance Company will acquire fund management contracts relating to the private label Quadrus Group of Funds and other Canada Life branded investment funds from Mackenzie for $30 million in cash.

That will result in Lifeco receiving net cash of $145 million if the deal receives regulatory approval and closes as expected in the fourth quarter.

"We believe successful wealth managers need to control their product shelf and customer solutions, but they also need access to asset managers with consistent, high-performance skill mandates and product innovation and breadth," said Mahon.

"By combining GLC with Mackenzie, Canada Life will have access to a product manager with these strengths."

News of the deal and Great-West's earnings pushed the company's stock to close at $24.96, up $1.06 or 4.4 per cent. Earlier, Lifeco shares hit an intraday high of $25.44

Looking ahead, Great-West is seeing encouraging signs.

Claims levels in Canada were already approaching pre-COVID levels in June.

"We are starting to see reasonable recoveries in sales activities in markets where some of the limitations of physical distancing have been lifted...but we can't really estimate what will happen in the external market," Mahon said.

"You don't know what will happen to the economy going forward."

This report by The Canadian Press was first published Aug. 5, 2020.

Companies in this story: (TSX:GWO, TSX:POW)

Tara Deschamps, The Canadian Press

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