GREAT-WEST LIFECO INC. 2024 ANNUAL REPORT
Table of
Contents
Business Review
Financial Review
Management’s
Discussion and Analysis
Directors’
Report
Financial Reporting
Responsibility
Financial
Performance
Consolidated Financial
Statements
Workplace
Solutions
Independent
Auditor’s Report
Wealth & Asset
Management
Insurance & Risk
Solutions
Community &
Social Impact
Directors and
Senior Officers
Shareholder
Information
Notes
15
2
112
5
113
6
218
7
8
11
222
223
225
The financial information in this report is presented in millions of Canadian dollars for the period ended December 31, 2024, unless otherwise indicated.
Refer to the Cautionary Notes regarding forward-looking information, sustainability disclosure and non-GAAP financial measures on page 16.
Great-West Lifeco Inc. is a financial services holding
company focused on building stronger, more inclusive
and financially secure futures. We operate in Canada,
the United States and Europe under the brands Canada
Life, Empower and Irish Life. Together we provide wealth,
retirement, workplace benefits and insurance and risk
solutions to over 40 million customer relationships. As
of December 31, 2024, Great-West Lifeco’s assets under
administration exceeded $3.2 trillion.
Our Ambitions
We’re invested for the long-term, to achieve growth
and create lasting value for our people, our customers
and our communities.
Our Purpose
To build stronger, more inclusive and financially secure
futures. We’re here for life.
Our Value Drivers
Reflecting our strengths and business strategy,
our value drivers enable growth and value creation
for shareholders and customers.
Workplace Solutions
Wealth & Asset Management
Insurance & Risk Solutions
Building Stronger Financial Futures
Advancing Inclusive Growth
Delivering Sustainable Financial Strength
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Great-West Lifeco Inc. 2024 Annual Report
A year of strategic growth
and community impact
As we reflect on 2024, we are proud of our
accomplishments and how we have delivered for our
customers and advisors, our communities and for you,
our shareholders and policyholders. This year has been
marked by significant progress against our strategies
that position Great-West Lifeco for continued success.
We seek to support our customers throughout all of life’s
moments – and we’re guided by our purpose, to build
stronger, more inclusive and financially secure futures.
We’re here for life.
Over the past year, we’ve gained momentum across our
portfolio of businesses by executing on plans that support
sustainable and profitable growth. We’ve accomplished
this through disciplined execution against opportunities
that help scale our businesses, extend the range of
services we provide to our customers, enhance our
digital capabilities and strengthen our operations.
We’ve also continued to build on commitments to the
communities we serve. We’ve been a consistent partner
to charitable organizations that are making a meaningful
difference in the communities where we operate and
championed a more inclusive and welcoming society.
Taken together, we’re creating sustainable value, while
at the same time becoming stronger and more resilient.
Directors’
Report
Extending market leadership through
strategic investments and growth
In 2024, we continued to prioritize strategic investments
that support long-term organic growth to create lasting
value for our stakeholders.
Across our portfolio, we’re executing strategies in focused
areas in each of our segments to further strengthen our
leadership positions. These are underpinned by market
leading brands, customer reach and scale.
Growth in Wealth & Asset Management remains a priority
across multiple segments of our business. In the U.S.,
Empower acquired Plan Management Corporation, the
creator of OptionTrax, a digital equity plan administration
and service provider. This offering enhances Empower’s
retirement services value proposition for employers and
helps expand the financial planning services offered through
Empower Personal Wealth. In Canada, we’ve advanced
the integration of Investment Planning Counsel and Value
Partners, which are helping to grow and expand our
Canadian wealth management offerings for customers
and advisors. In Ireland, Irish Life Investment Managers,
together with Aon, launched a €500 million climate
transition fund, expanding the range of offerings available
to customers. Through the continued trust our customers
and advisors place in us, in 2024 Great-West Lifeco has
exceeded $3 trillion in assets under administration for the
first time.
We provide millions of individuals and their families with
health, wellness and retirement benefits through our
Workplace Solutions businesses. In Canada, we expanded
our business in 2024 with the addition of the plan that
administers dental benefits for federal public service
employees, retired public servants and their dependents.
In the U.S., we completed the integration of Prudential
Financial’s retirement services business, further
strengthening the breadth and reach of Empower, which
now helps more than 18.5 million Americans prepare for
their retirement. In Ireland, where Irish Life is one of the
country’s leading providers of workplace benefits, we’ve
created a connected employee experience through the
MyIrishLife portal for employees. This service also helps
employers manage and maximize the benefits of their
plan with a connected employee benefits dashboard.
Thank you
Over the past year, we celebrated the retirement
of key individuals within our management group.
Notably, these include Garry MacNicholas, Jeff
Macoun, Arshil Jamal and Grace Palombo. We’d
like to thank each of them for their dedication over
long careers that have contributed to the ongoing
success of our company. Additionally, we welcomed
key individuals into new roles, demonstrating the
depth of expertise amongst our teams and the
strength of our succession planning.
On behalf of Great-West Lifeco, its Board of
Directors and our dedicated employees and
advisors, we extend our sincere thanks to you
for your trust and support. We look forward
to continuing our impactful work together,
delivering reliable, responsive advice and
solutions that individuals, families and
businesses can depend on today,
tomorrow and for life.
Great-West Lifeco Inc. 2024 Annual Report 3
Our Insurance & Risk Solutions businesses remain a point
of strength, stability and diversification. Our Reinsurance
business supports this through disciplined underwriting
and risk selection across a wide range of markets by
leveraging specialized skills to help clients manage capital
and risks. In the UK, we remain a leader in helping clients
manage longevity risk, including growth in pension risk
transfer solutions for clients in 2024. And in Canada, we’ve
continued to strengthen our distribution and product suite
by launching a new universal life product with competitive
features and rates, and through improved pricing for
disability and critical illness insurance products.
Through these actions, we continue to advance
our focused strategies to deliver for our customers
and advisors, while also driving sustainable growth
and lasting value.
Community, citizenship and impact
We believe our products and services, backed by quality
advice, can make a lasting positive difference in the lives
of our customers. We also believe that we can make
a lasting positive impact in the communities where
we operate. That belief in action has resulted in over
$165 million in donations to local charitable initiatives
over the last 10 years. This is furthered through the
actions of our employees and associates who volunteer
their time and talent to help make a positive difference
in the world around them. This year, we contributed to
greater financial security for underserved populations,
made investments in arts and education and were
there to help those impacted by natural disasters.
Across our company, we’ve built a culture where our
colleagues can bring the best version of themselves
every day. We continue to believe that recruitment and
talent development that supports a sense of belonging
helps us attract and retain the best performing people.
When we invest in helping individuals harness their
fullest potential, they in turn empower our customers
to realize theirs.
We bring a focus on long-term value creation and we’re
making disciplined choices that include considering
climate and other factors and the impact that they may
have on the value of investments.
Paul Mahon
President and Chief Executive Officer
Jeffrey Orr
Chair of the Board
Great-West Lifeco Inc. 2024 Annual Report 5
1-Year
5-Year
8-10% base EPS growth per annum
14.2%
9.4% CAGR 2
16-17% base ROE (IFRS 17)
17.5%
16.6% average 3
Target dividend payout ratio 45-55% of base earnings
49.3%
53.7% average
Medium Term Financial Objectives (Base Earnings) 1
Comparative 2022 to 2024 Base and Net Financial Performance
Refer to page 225 for endnotes.
Financial
Performance
NET
BASE
4.2
3.9
2022
2023
2024
Base1
Net
3.7
2.7
3.3
3.6
2022
2023
2024
Base1
Net4
17.5
16.6
16.4
12.4
15.8
17.2
2022
2023
2024
Base1
Net
4.20
3.94
2.94
3.56
3.86
2022
2023
2024
2.08
2.22
1.96
4.50
Billions ($)
Dollars ($)
Dollars ($)
(%)
Earnings
Return on Equity
Earnings Per Share
Dividends Paid Per Share
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Great-West Lifeco Inc. 2024 Annual Report
Empowering organizations to
support their employees’ financial,
physical and mental well-being
through innovative retirement plans,
benefits and wellness programs
tailored to meet the evolving
needs of modern workplaces.
Workplace
Solutions
Empower expands its platform in the U.S.
by delivering equity compensation offering
Empower’s acquisition of Plan Management Corporation,
the creator of OptionTrax®, expands our capabilities in
equity compensation plan administration. Integrating
OptionTrax’s growing, digitally-oriented equity compensation
platform and administration services enhances Empower’s
holistic offering to their existing and future client base.
Simplifying 401(k) setup for small employers
and start-ups
Empower launched Ready Select™, a digital 401(k) solution
designed to help small employers and start-ups establish
workplace retirement plans with ease. Launched in mid-2024,
Ready Select simplifies the process for advisors and
third-party administrators by reducing costs, minimizing
complexity and streamlining administrative tasks. Tailored
for plans with up to $1 million in assets, this innovative
offering aims to expand retirement savings access for
employees across smaller organizations.
Exploring longevity to build
financially secure futures
Canada Life UK published its inaugural
Life100+ report, the first in a series of
in-depth research papers exploring the
different aspects of our lives that will
be affected by increasing longevity,
and both the opportunities and
challenges that this presents.
Providing quality benefits administration
for Canada’s public service
Canada Life began administering the Public Service
Dental Care Plan and the Pensioners’ Dental Services
Plan for federal employees and retirees. The transition
was smooth and efficient, improving service delivery
for existing plan members, while onboarding
the Pensioners’ plan.
Great-West Lifeco Inc. 2024 Annual Report 7
Delivering comprehensive
wealth management solutions
and investment strategies that help
clients achieve their financial goals
while driving sustainable growth and
maximizing value for stakeholders.
Wealth
& Asset
Management
Expanding access to advice to more Canadians
The addition of Investment Planning Counsel and Value
Partners to Canada Life is expanding access to advice and
solutions for more Canadians. Together, they are supporting
the delivery of a more comprehensive range of solutions
and reinforcing our strategy of becoming the destination
of choice for entrepreneurial advisors in Canada.
Joining forces to deliver exceptional support
and solutions for advisors and their clients
Canada Life Investment Management Services Ltd. and
Counsel Portfolio Services Inc. (Counsel) amalgamated
on October 1, 2024 to form a unified company under
the Canada Life Investment Management Ltd. name.
By consolidating their expertise, the new entity now
serves as the manager, trustee, portfolio manager and
promoter for all Canada Life and Counsel/IPC branded
funds, creating a centre of excellence.
Driving sustainable investing and
creating long-term value for clients
and communities in Ireland
Aon and Irish Life Investment Managers partnered up to
launch the €500 million Climate Transition Equity Fund,
expanding the range of offerings available to customers.
The fund focuses on companies advancing UN Sustainable
Development Goals, including climate action, resource
efficiency, ecosystem health and addressing essential
social needs.
Investment focus on offshore bonds
Canada Life UK announced the closure of onshore bond
and personal pension offerings to focus investments
on offshore bonds as the core of the Wealth division.
Resources will be leveraged to deliver a better experience
for advisers and their clients through the market-leading
International Bond proposition.
Divesting Putnam Investments to
Franklin Templeton
Effective January 1, 2024, Great-West Lifeco completed
the sale of Putnam Investments to Franklin Templeton,
a global leader among independent and diversified asset
managers. This transaction unlocked the value of Putnam
and reinforced Lifeco’s strategic commitment to growth
and leadership in the retirement and personal wealth
markets in the U.S. Through this transaction, Lifeco retained
PanAgora, a premier quantitative asset manager.
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Great-West Lifeco Inc. 2024 Annual Report
Insurance &
Risk Solutions
Award-winning Claims AI Reasoning
Assistant strengthens customer
experience at Irish Life
Irish Life won two prestigious awards for its Claims
AI Reasoning Assistant (CARA): Gold at the Global
Qorus Innovation Awards and the Consumer Service
Award at Ireland’s 2024 AI Awards. CARA uses
document-recognition technology to analyze
member data including treatment history and risk
factors to ensure claims are processed accurately
and promptly. The intelligent medical claims system
has significantly improved the company’s processing
times, productivity, operating efficiency and
customer experience.
Providing personalized insurance
products and risk management
strategies that protect what
matters most to individuals,
families and businesses,
ensuring security and
peace of mind in an
ever-changing world.
Capital and Risk Solutions continues to evolve
its global presence and its product offering
Through Canada Life Reinsurance, our Capital and Risk
Solutions (CRS) business continues to innovate into new
markets. With tailored client solutions, CRS has expanded
to key markets in the U.S. and Europe, while continuing
to pursue opportunities globally through two innovative
transactions in Australia.
Delivering relief to customers impacted
by natural disasters
We support customers affected by natural hazard events all
around the world. In addition, our Reinsurance operations
play a vital role in financing recovery and rebuilding efforts,
demonstrating the company’s dedication to being a
reliable partner during crises.
Great-West Lifeco Inc. 2024 Annual Report 11
Community &
Social Impact
Creating positive change by
investing in initiatives that strengthen
communities, promote social equity
and enhance well-being. Driving
meaningful impact and building a
better future for individuals and
families around the globe through
philanthropy, volunteerism
and sustainable practices.
Cultivating a brighter future through
collaboration and partnership
We strive to make positive and lasting change in
our communities and the world around us. We have
contributed to community organizations that are
focused in areas like environmental preservation
and water conservation.
2,700+
$165+
Million
80,000+
hours volunteered by employees during and
outside of work hours in 2024
community organizations supported by our
companies in 2024
in charitable contributions since 2014
Sustainable private equity and infrastructure
Great-West Lifeco announced a long-term
strategic partnership with climate-focused
investment manager Power Sustainable Manager
Inc. (Power Sustainable). This ongoing relationship
will enable Power Sustainable to accelerate its
growth and market penetration in sustainable private
equity and infrastructure, while supporting Lifeco’s
value creation strategy.
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Great-West Lifeco Inc. 2024 Annual Report
Promoting healthy
and resilient communities
We’re proud to partner with organizations that are on
the frontline of well-being and aspire to build healthier
families, stronger communities and brighter futures:
Partnering with Kids Help Phone to
expand mental health support in Canada
Canada Life is investing in Kids Help Phone’s texting
service with a transformational gift of $1 million to the
Feel Out Loud movement. Announced in early 2024,
this donation will build on Canada Life’s impact as a
long-time supporter and one of the texting service’s
founding donors. The gift is poised to expand Kids Help
Phone’s network of crisis responders and reach more
young people than ever before.
Investing in healthcare initiatives
We support local and national organizations in improving the
quality and access to healthcare. Whether it’s local hospitals
like Children’s Hospital in Colorado or the American Lung
Association in the U.S., Canadian Blood Services in Canada
or Irish Motor Neurone Disease Association in Europe,
we’re proud to contribute to organizations that give people
the care and support they need today and into the future.
Irish Life Dublin Marathon raises an estimated
€9 million for charities
Known as the ‘friendly marathon,’ over 22,000 participants
took to the streets of Dublin to raise money for charity.
The race received tremendous support from thousands
of volunteers who make the event possible and countless
spectators who line the streets. This year’s Participants
Inclusion Programme included Sanctuary Runners,
a solidarity-through-sport initiative which uses running,
jogging and walking to bring together asylum seekers,
refugees, migrants and Irish residents. Among the highlights
was actor Colin Farrell raising almost €1 million for charity
by completing the marathon, with Irish Life also winning
Best of Europe Gold at the European Sponsorship Awards.
Fostering healthy communities in Ireland
For more than a decade, Irish Life has proudly sponsored
the Gaelic Athletic Association Healthy Club Programme
designed to promote sport, physical activity, mental health
and preventative health. The program now includes 600
clubs and has provided nearly €50 million in health and
well-being benefits to Ireland, according to a recent
independent Social Return on Investment evaluation.
Great-West Lifeco Inc. 2024 Annual Report 13
Advancing inclusive growth
Supporting Canada’s Indigenous Peoples
and advancing Truth and Reconciliation
Canada Life remains supportive of our country’s
Indigenous Peoples and understands the importance of
responding to the Truth and Reconciliation Commission
of Canada’s Calls to Action. That’s why we’re a founding
signatory of the Winnipeg Indigenous Accord and provide
colleagues in Canada with a paid day away from work for
reflection on National Day for Truth and Reconciliation.
Honouring Juneteenth in the U.S.
Empower recognizes Juneteenth as a company holiday to
commemorate the end of slavery in the U.S. Throughout
the year, employees of the Black Organization for Leadership
Development host meaningful sessions with inspiring
speakers and share valuable resources that educate and
honour the history, culture and contributions of Black and
African American people.
Embracing the opportunity of Neurodiversity @ Work
Empower has partnered with the Horace Mann
Educational Associates to build an immersive talent
program: Neurodiversity @ Work. The program gives
those on the autism spectrum meaningful work
opportunities within a supportive and collaborative
environment. Since its launch in 2022, the program
has seen more than half of its apprentices be offered
full-time positions at Empower.
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Great-West Lifeco Inc. 2024 Annual Report
Refer to page 225 for endnotes.
Empowering diverse voices
Our Employee and Business Resource Groups
(ERGs/BRGs) help our colleagues feel seen,
heard and empowered to be their authentic selves.
Our ERGs/BRGs reflect the diversity of our
company and include:
• Persons with Disabilities
• Women and Gender
• Black and People of Colour
• Young Professionals
• Indigenous Peoples (Canada only)
• 2SLGBTQ+ / Pride
• Military Veterans (U.S. only)
We’re also proud to partner with BlackNorth Initiative and
Winnipeg Indigenous Accord in Canada and the 30% Club
and Women in Finance Charter in Europe to support even
greater inclusion in our workplace.
Inclusion ambitions
23%
6
42%
5
Increase the number of individuals
from underrepresented groups in
management roles to 25% by 2030 .
Grow representation of women
in management roles to 50%
across our business segments
by 2030 .
Progress
Progress
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
This Management’s Discussion and Analysis (MD&A) presents management’s view of the financial condition, financial
performance and cash flows of Great-West Lifeco Inc. (Lifeco or the Company) for the three and twelve months ended
December 31, 2024 and includes a comparison to the corresponding periods in 2023, to the three months ended September 30,
2024, and to the Company’s financial condition as at December 31, 2023, as applicable. This MD&A provides an overall
discussion, followed by analysis of the performance of Lifeco's four major reportable segments: Canada, United States (U.S.),
Europe, and Capital and Risk Solutions.
Businesses of Lifeco
Lifeco has operations in Canada, the U.S. and Europe through The Canada Life Assurance Company (Canada Life), Empower
Annuity Insurance Company of America (Empower, formerly known as Great-West Life & Annuity Insurance Company), and
Irish Life Group Limited (Irish Life). On January 1, 2024, Lifeco completed the previously announced sale of Putnam
Investments (Putnam) to Franklin Resources, Inc., operating as "Franklin Templeton". As a result of the transaction, Putnam is
presented as discontinued operations throughout this document.
In Canada, Canada Life offers a broad portfolio of financial and benefit plan solutions for individuals, families, businesses and
organizations through three primary business units: Workplace Solutions, Individual Wealth Management and Insurance &
Annuities. Through Workplace Solutions, the Company provides life, accidental death and dismemberment, critical illness,
disability, health and dental protection, creditor insurance as well as retirement savings and income and annuity products and
other specialty products to group clients in Canada. These products are distributed through an extensive network of group
sales offices located across the country through brokers, consultants and financial security advisors. Through Individual
Wealth Management, the Company provides wealth savings and income products and services to individual customers.
Through Insurance & Annuities, the Company provides individual life, disability and critical illness insurance products and
services, as well as individual life annuities to individual customers. These individual insurance and wealth products are
distributed through multiple channels: Advisor Solutions; a distribution channel for advisors with a direct contract with
Canada Life, managing general agencies (MGAs), national accounts, Investment Planning Counsel (IPC), and Value Partners
Group (Value Partners).
In the U.S., Empower Annuity Insurance Company of America (Empower) is a leading provider of employer-sponsored
retirement savings plans in the public/non-profit and corporate sectors. Empower consists of: Empower Defined Contribution,
which aligns with the Workplace Solutions business value driver, offering saving, investment and advisory services through
employer-sponsored plans; and Empower Personal Wealth, which operates under the Wealth & Asset Management value
driver, offering individual product solutions and providing retail wealth management products and services to individuals,
including individual retirement accounts and after-tax investment accounts. Empower's products and services are marketed
nationwide through its sales force, brokers, consultants, advisors, third-party administrators and financial institutions.
The Europe segment is comprised of three distinct business units: Workplace Solutions, Individual Wealth & Asset
Management and Insurance & Annuities, and serves customers in the United Kingdom (U.K.), Ireland and Germany, offering
individual and group protection and wealth management products, including payout annuity products, equity release
mortgages, pensions and investments products. The Company operates under the Canada Life brand in the U.K. and Germany
and under the Irish Life brand in Ireland along with other acquired brands within the broker market in Ireland.
The Capital and Risk Solutions segment includes the Reinsurance business unit under the Insurance & Risk Solutions value
driver, which operates primarily in the U.S., Barbados, Bermuda and Ireland. Reinsurance products are provided through
Canada Life and its subsidiaries and include both reinsurance and retrocession business transacted directly with clients or
through reinsurance brokers. As a retrocessionaire, the Company provides reinsurance to other reinsurers to enable those
companies to manage their insurance risk.
Lifeco currently has no other material holdings and carries on no business or activities unrelated to its holdings in Canada Life,
Empower, Irish Life and their subsidiaries. However, Lifeco is not restricted to investing in those companies and may make
other investments in the future.
Basis of Presentation and Summary of Material Accounting Policies
The consolidated financial statements of Lifeco, which are the basis for data presented in this report, have been prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) unless otherwise noted and are presented in millions of Canadian dollars unless otherwise indicated. This MD&A
should be read in conjunction with the Company's annual consolidated financial statements for the year ended December 31,
2024.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Cautionary Note Regarding Forward-Looking Information
This MD&A contains forward-looking information. Forward-looking information includes statements that are predictive in nature, depend upon or
refer to future events or conditions, or include words such as "will", "may", "expects", "anticipates", "intends", "plans", "believes", "estimates",
"objective", "target", "potential" and other similar expressions or negative versions thereof. Forward-looking information includes, without limitation,
statements about the Company and its operations, business (including business mix), financial condition, expected financial performance (including
revenues, earnings or growth rates, medium-term financial objectives and base earnings objectives for the Empower business), strategies and
prospects, expected costs and benefits of acquisitions and divestitures (including timing of integration activities and timing and extent of revenue and
expense synergies), expected expenditures or investments (including but not limited to investment in technology infrastructure and digital
capabilities and solutions and investments in strategic partnerships), value creation and realization and growth opportunities, product and service
innovation, expected dividend levels, expected cost reductions and savings, expected capital management activities and use of capital, the timing and
extent of possible share repurchases, market position, estimates of risk sensitivities affecting capital adequacy ratios, anticipated global economic
conditions, potential impacts of catastrophe events, potential impacts of geopolitical events and conflicts and the impact of regulatory developments
on the Company’s business strategy, growth objectives and capital.
Forward-looking statements are based on expectations, forecasts, estimates, predictions, projections and conclusions about future events that were
current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company,
economic factors and the financial services industry generally, including the insurance, mutual fund and retirement solutions industries. They are
not guarantees of future performance, and the reader is cautioned that actual events and results could differ materially from those expressed or
implied by forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of the Company
and there is no assurance that they will prove to be correct. In particular, in setting its objective to achieve double-digit base earnings growth in the
Empower business in 2025, management has assumed that the performance of equity, interest rate and credit markets during the relevant period is
consistent with management’s expectations, which take into account current market information and assume no credit impairments, and further that
actual sales, client retention and conversion rates, customer behaviour (including contributions, redemptions, withdrawals and lapse rates), expense
levels, and mix of business at Empower are consistent with management’s estimates. In arriving at our assessment of the Company’s potential
exposure to Global Minimum Tax and our expectation regarding the impact on our effective income tax rate and base earnings, management has
relied on its interpretation of the relevant legislation. It has also assumed a starting point of its current mix of business and base earnings growth
consistent with management’s base earnings objectives disclosed in this MD&A. With respect to possible share repurchases, the amount and timing
of actual repurchases will depend on the earnings, cash requirements and financial condition of the Company, market conditions, our ability to effect
the repurchases on a prudent basis, capital requirements, applicable law and regulations (including applicable securities laws), and other factors
deemed relevant by the Company, and may be subject to regulatory approval or conditions. In all cases, whether or not actual results differ from
forward-looking information may depend on numerous factors, developments and assumptions, including, without limitation, the ability to integrate
and leverage acquisitions and achieve anticipated benefits and synergies, the achievement of expense synergies and client retention targets from the
acquisition of the Prudential retirement business, the Company’s ability to execute strategic plans and adapt or recalibrate these plans as needed, the
Company’s reputation, business competition, assumptions around sales, pricing, fee rates, customer behaviour (including contributions,
redemptions, withdrawals and lapse rates), mortality and morbidity experience, expense levels, reinsurance arrangements, global equity and capital
markets (including continued access to equity and debt markets and credit instruments on economically feasible terms), geopolitical tensions and
related economic impacts, interest and foreign exchange rates, inflation levels, liquidity requirements, investment values and asset breakdowns,
hedging activities, financial condition of industry sectors and individual issuers that comprise part of the Company’s investment portfolio, credit
ratings, taxes, impairments of goodwill and other intangible assets, technological changes, breaches or failure of information systems and security
(including cyber attacks), assumptions around third-party suppliers, changes in local and international laws and regulations, changes in accounting
policies and the effect of applying future accounting policy changes, changes in actuarial standards, unexpected judicial or regulatory proceedings,
catastrophic events, continuity and availability of personnel and third-party service providers, unplanned changes to the Company’s facilities,
customer and employee relations, levels of administrative and operational efficiencies, and other general economic, political and market factors in
North America and internationally.
The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with
securities regulators, including factors set out in the "Risk Management" and "Summary of Critical Accounting Estimates" sections of this document
and in the Company's annual information form dated February 5, 2025 under "Risk Factors", which, along with other filings, is available for review at
www.sedarplus.com. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to place
undue reliance on forward-looking information.
Other than as specifically required by applicable law, the Company does not intend to update any forward-looking information whether as a result of
new information, future events or otherwise.
Important Note Regarding Sustainability Disclosure
Certain forward-looking statements in the Company's filings relate to the Company’s climate-related and diversity-related measures, ambitions,
goals, objectives, priorities, strategies and commitments or actions that will be taken to achieve them. The climate-related statements include
statements with respect to the Company's ambition to achieve net-zero GHG emissions for its operating and financing activities by 2050, the
Company’s initial interim net zero goals for operations and investments, the Company’s plan to review and revise initial interim net zero goals as
appropriate, the causes and potential impacts of climate change globally, and the Company’s approach to identifying and managing climate-related
risks and opportunities. The diversity-related statements include statements with respect to growing representation of women and underrepresented
groups in management. The forward-looking information in the Company's filings is presented for the purpose of assisting our stakeholders in
understanding how we currently intend to address climate-related and diversity-related governance, strategy, risks, opportunities, and objectives,
and is not appropriate for other purposes.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Any goals, objectives, ambitions, commitments or targets discussed in the Company's filings, including but not limited to the Company’s net-zero
related goals (including interim net zero goals) and diversity-related measures, are aspirational. They may need to change or be recalibrated as data
improve and as climate science, regulatory requirements and market practices regarding standards, methodologies, metrics and measurements
evolve. Our climate risk analysis and net-zero strategy remain under development, and the data underlying our analysis and strategy remain subject
to evolution over time and the scope of assets to be included in our 2050 net zero related goals, remains under review. The Company does not
currently have a comprehensive transition plan in place to achieve its net zero-related goals and ambitions and the timing for developing such a plan
and its scope and achievability remain uncertain. Moreover, the data needed to define the Company’s plan to achieve those goals and ambitions is
limited in quality and availability and is inconsistent across the sectors the Company chooses to focus on. We are also continuing to develop our
diversity-related data. There is a strong possibility that our expectations, forecasts, estimates, predictions and conclusions may not prove to be
accurate and our assumptions may prove to be incorrect, and there is a material risk we will not achieve our climate-related and diversity-related
goals, objectives, ambitions, strategies and commitments. In addition, many of the assumptions, standards, metrics and measurements used in
preparing these forward-looking statements are not audited or independently verified, have limited comparability and continue to evolve.
Any goals, objectives, priorities, ambitions, commitments or targets discussed in the Company's filings, may also need to change or be recalibrated to
meet our other strategic objectives and the reasonable expectations of our stakeholders, including expectations around financial performance. As a
financial services company, our primary purpose is to provide our clients and customers with solutions to meet their financial security needs and to
deliver on the promises we make to them. Our ability to fulfil this corporate purpose depends in large part on effective and responsible capital
allocation and the ability to create value within the boundaries of our stakeholders’ expectations, including expectations around financial
performance. The path to achieving net zero and our climate-related goals will require significant investment, resources, systems and technologies by
third parties we do not control. Faced with a wide range of stakeholder interests, we will need to effectively manage trade-offs and make choices
about how to deploy financial and human capital. These choices could include prioritizing other strategic objectives over our climate-related
ambitions and goals in pursuit of fulfilling our primary purpose, delivering value to our stakeholders and meeting expectations around financial
performance. As our business, our industry and climate science evolve over time, we may need to adjust our climate-related goals and our approach
to meeting them. We will also need to remain thoughtful about the regulatory and business environment of the jurisdictions in which we operate, as
our ability to achieve our climate goals is contingent on the success of our partners and communities.
We caution readers that numerous factors (many of which are beyond the control of the Company) may cause actual results to differ materially and
impact the Company’s ability to achieve its climate-related and diversity-related goals, objectives, priorities, ambitions, strategies and targets. These
factors include, without limitation, the transition to a low-carbon economy, the need for more and better climate data and standardization of climate-
related measurement methodologies, our ability to gather and verify data, our ability to develop indicators to effectively monitor our advancements
and assess and manage climate-related risks, the need for active and continued action by stakeholders (including governmental and non-
governmental organizations, our counterparties and other businesses and individuals), trade-offs and choices we make that prioritize other strategic
objectives and financial performance over our climate-related goals the ability of clients, regulators and suppliers to meet and report on their publicly
stated emissions and commitments, the viability of third-party decarbonization scenarios, the availability of carbon offset and renewable energy
instruments on economically feasible terms, compliance with our policies and procedures, our ability to recruit and retain key personnel in a
competitive environment for talent, technological advancements, the evolution of consumer behaviour, varying decarbonization efforts across
economies, the challenges of balancing emission reduction goals with an orderly, just and inclusive transition and geopolitical factors that impact
global energy needs, the legal and regulatory environment, and regulatory compliance considerations. In relation to our climate-related ambitions,
goals, objectives, priorities, strategies and targets, there are limitations and uncertainties inherent in climate science, climate risk analysis and
reporting. The Company has made good faith approximations and assumptions in establishing its interim Scope 1 and 2 reduction goals and initial
reduction goals for Scope 3 financed emissions. However, there are many factors that are the subject of ongoing climate science and that we cannot
foresee or accurately predict which will impact our ability to achieve those goals.
Cautionary Note Regarding Non-GAAP Financial Measures and Ratios
This MD&A contains some non-Generally Accepted Accounting Principles (GAAP) financial measures and non-GAAP ratios as defined in National
Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”. Terms by which non-GAAP financial measures are identified include, but
are not limited to, "base earnings (loss)", "base earnings (loss) (US$)", "base earnings: insurance service result", "base earnings: net investment
result", "assets under management" and "assets under administration". Terms by which non-GAAP ratios are identified include, but are not limited
to, “base earnings per common share (EPS)”, “base return on equity (ROE)”, "base dividend payout ratio" and “effective income tax rate – base
earnings – common shareholders”. Non-GAAP financial measures and ratios are used to provide management and investors with additional
measures of performance to help assess results where no comparable GAAP (IFRS) measure exists. However, non-GAAP financial measures and
ratios do not have standard meanings prescribed by GAAP (IFRS) and are not directly comparable to similar measures used by other companies.
Refer to the "Non-GAAP Financial Measures and Ratios" section in this MD&A for the appropriate reconciliations of these non-GAAP financial
measures to measures prescribed by GAAP as well as additional details on each measure and ratio.
18
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Consolidated Operating Results
Selected consolidated financial information
As at or for the three months ended
For the twelve months ended
(in Canadian $ millions, except per share amounts)
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings1
$
1,115
$
1,061
$
971
$
4,192
$
3,667
Net earnings from continuing operations2
1,116
859
743
4,011
2,862
Net earnings - common shareholders
1,116
859
740
3,940
2,738
Per common share
Basic:
Base earnings3
1.20
1.14
1.04
4.50
3.94
Net earnings from continuing operations
1.20
0.92
0.80
4.30
3.07
Net earnings
1.20
0.92
0.79
4.23
2.94
Dividends paid
0.555
0.555
0.520
2.220
2.080
Base dividend payout ratio3
46.3 %
48.7 %
50.0 %
49.3 %
52.8 %
Dividend payout ratio2
46.3 %
60.3 %
65.6 %
52.5 %
70.7 %
Book value per common share2
27.17
25.78
24.26
Base return on equity3
17.5 %
17.3 %
16.6 %
Return on equity - continuing operations2,4
16.7 %
15.6 %
12.9 %
Financial leverage ratio5
29 %
29 %
30 %
Total assets per financial statements
$
802,163
$
779,741
$
713,230
Total assets under management1
1,039,405
1,004,183
1,095,374
Total assets under administration1
3,266,298
3,110,284
2,852,540
Total contractual service margin (net of reinsurance
contracts held)
$
13,368
$
13,517
$
12,635
Total equity
$
32,654
$
31,311
$
29,851
Canada Life Assurance Company consolidated LICAT
Ratio6
130 %
134 %
128 %
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
4
Comparative result for the period ended December 31, 2023 has been restated to exclude amounts related to discontinued operations which were included in error in the Q4 2023
MD&A.
5
The calculation for financial leverage ratio includes the after-tax non-participating contractual service margin (CSM) balance in the denominator, excluding CSM associated with
segregated fund guarantees. This reflects that the CSM represents future profit and is considered available capital under LICAT. These ratios are estimates based on available data.
6
The Life Insurance Capital Adequacy Test (LICAT) Ratio is based on the consolidated results of The Canada Life Assurance Company, Lifeco's major Canadian operating subsidiary.
The LICAT Ratio is calculated in accordance with the Office of Superintendent of Financial Institutions' guideline - Life Insurance Capital Adequacy Test. Refer to the "Capital
Management and Adequacy" section of this document for additional details.
19
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Lifeco 2024 Highlights
Financial Performance
•
For the twelve months ended December 31, 2024, base earnings of $4,192 million ($4.50 per common share) compared to
$3,667 million ($3.94 per common share) a year ago, an increase of 14%, reflecting strong business growth in all segments
and positive impacts of favourable markets in 2024.
•
For the twelve months ended December 31, 2024, net earnings from continuing operations of $4,011 million ($4.30 per
common share) compared to $2,862 million ($3.07 per common share) a year ago, an increase of 40%, primarily due to the
increase in base earnings as well as improved market experience relative to expectations.
•
For the twelve months ended December 31, 2024, Lifeco’s combined quarterly dividends paid to common shareholders
increased by 7% to $2.22 per share.
•
The Company maintained its strong capital position as evidenced by a Life Insurance Capital Adequacy Test (LICAT) Ratio
at December 31, 2024 of 130% for Canada Life, Lifeco’s major operating subsidiary, which exceeded the OSFI Supervisory
Target Total Ratio of 100%, and Supervisory Minimum Total Ratio of 90%.
•
The Company’s financial leverage ratio at December 31, 2024 was 29% compared to 30% at the end of 2023. This reduction
is primarily due to growth in equity and non-participating CSM, excluding segregated funds, as well as repayment of short-
term debt. These items were partially offset by the impact of currency movement.
Medium-Term Financial Objectives
The Company measures performance against its medium-term financial objectives, with medium-term defined as 3 to 5 years.
The Company aims to create value through disciplined capital deployment to achieve, over the medium-term, 8-10% base EPS
growth per annum, 16-17% base return on equity (ROE) and to deliver strong cash generation.
The Company has also stated its objective to achieve double-digit base earnings growth in Empower in 2025.
1-Year
3-Year
5-Year
Medium-Term Financial Objectives
Base1
Base1,2
Base1,2
8-10% base EPS growth per annum1
14%
8% CAGR
9% CAGR
16-17% base ROE (IFRS 17)1,3
18%
17% average
17% average3
Target dividend payout ratio 45-55% of base earnings1
49%
52% average
54% average
1
This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
2019, 2020 and 2021 base earnings were calculated by excluding items from net earnings as discussed in the “Non-GAAP Financial Measures and Ratios” section of the Company’s Q4
2024 MD&A. 2019 base earnings as reported were $2,704 million and base earnings per share was $2.86 compared to net earnings of $2,359 million and net earnings per share of $2.49.
2020 base earnings as reported were $2,669 million and base earnings per share was $2.88 compared to net earnings of $2,943 million and net earnings per share of $3.17. 2021 base
earnings as reported were $3,260 million and base earnings per share was $3.51 compared to net earnings of $3,128 million and net earnings per share of $3.37. For purposes of
calculating the 5-year growth rate for base EPS under the current definition of base earnings to provide a more accurate comparison for the 3 and 5-year growth rates, amortization of
acquisition related finite life intangible assets of $41 million, $41 million and $137 million after-tax was added back to 2019, 2020, 2021 base earnings. In addition, the Company
excluded earnings related to Putnam Investments, which was sold to Franklin Templeton on January 1, 2024, of $101 million, $23 million and $26 million from 2019, 2020 and 2021
base earnings. With these adjustments, 2019 base earnings were $2,719 million and base EPS of $2.87; 2020 base earnings were $2,687 million and base EPS of $2.90; and 2021 base
earnings were $3,296 million and base EPS of $3.55.
3
This is the 3-year average base ROE under IFRS 17. The 2-year average base ROE under IFRS 4 is 14%. The prior base ROE medium-term objective was 14% - 15% under IFRS 4.
2024 Developments
Financial Highlights
•
Total assets under administration exceeded $3.2 trillion with growth across each of Lifeco's operating segments of 29% in
Capital and Risk Solutions, 17% in Europe, 12% in Canada and 14% (6% in U.S. dollars) in the U.S. from December 31, 2023.
•
The Organization for Economic Co-Operation and Development (OECD) introduced a 15% Global Minimum Tax (GMT)
regime that has been adopted for 2024 by all countries in which the Company has significant operations, other than the
U.S. and Isle of Man. Legislation has been enacted by Canada, Barbados, Germany, Ireland, the U.K. and Switzerland with
an effective date of January 1, 2024. In 2024, the Company recognized a Global Minimum Tax (GMT) current tax expense of
$113 million on net earnings and $141 million on base earnings, primarily related to its operations in Barbados and
Ireland, impacting the Europe and Capital and Risk Solutions segments.
Canada
•
On October 1, 2024, Canada Life Investment Management Ltd. (CLIML) and Counsel Portfolio Services Inc. (Counsel), a
subsidiary of IPC, amalgamated. Bringing these two investment fund management companies together into one centre of
excellence is expected to allow Canada Life to unlock new growth opportunities, achieve economies of scale and improve
operational effectiveness.
20
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
United States
•
In the United States, on January 1, 2024, Lifeco completed the previously announced sale of Putnam Investments to
Franklin Resources, Inc., operating as "Franklin Templeton", in exchange for Franklin Templeton common shares, cash,
and contingent consideration of up to US$375 million over a five to seven-year period. In the first quarter of 2024, the
Company recorded a net loss of $115 million reflecting closing costs as well as a $44 million final gain on sale within
discontinued operations. Lifeco retains its controlling interest in PanAgora Asset Management, a leading quantitative asset
manager. The Company currently holds approximately 31,600,000 Franklin Templeton shares and has agreed to hold a
majority of these shares until at least January 1, 2029. The shares are held at fair value with changes in fair market value
flowing through other comprehensive income (OCI).
In addition to the sale, Lifeco, along with Power Corporation of Canada and Franklin Templeton, entered into a strategic
relationship to distribute Franklin Templeton products for the benefit of clients, distribution partners, and shareholders.
•
As of June 30, 2024, with the successful completion of system migrations of the full-service retirement services business of
Prudential, Empower achieved US$180 million pre-tax run rate synergies following the acquisition on April 1, 2022,
consistent with expectations. Revenue synergies of US$20 million were achieved on a run-rate basis by the end of 2024 and
are expected to grow to US$50 million by the end of 2026.
Overall, acquired Prudential retention targets have been exceeded with asset retention of 94% and revenue retention of
86%.
Europe
•
On January 23, 2024, Canada Life U.K. announced the immediate closure of the Select Account, The Retirement Account,
and the Canada Life Trustee Investment Plan to new business, representing less than 1% of its customer base. On
December 23, 2024, Canada Life U.K. announced the signing of an agreement to transfer part of this business to
Countrywide Assured plc (Countrywide), a subsidiary of Chesnara plc. Concurrently, the two parties entered into a
reinsurance agreement such that the risks and rewards of the underlying business are transferred to Countrywide. The
transfer is subject to customary closing conditions including regulatory approvals and is expected to complete by the end
of 2025. This decision enables Canada Life U.K. to focus on core lines, including offshore wealth products.
Capital and Risk Solutions
•
The Capital and Risk Solutions segment continued to grow by providing tailored solutions to customers while increasing
diversification within the portfolio. In 2024, the Capital and Risk Solutions segment continued to expand its international
presence in targeted new markets, while continuing to focus on core markets and product expansion in Europe and the
U.S. During 2024, the Company had a strong new business year, completing a number of transactions with continued
growth in the structured business. Of note, the Company's geographic expansion included two structured transactions in
Australia and the asset intensive business grew with two transactions signed in the fourth quarter of 2024.
Outlook for 2025
Refer to Cautionary Note regarding Forward-looking Information and Cautionary Note regarding Non-GAAP Financial
Measures and Ratios at the beginning of this document.
•
Lifeco is continuing to focus on its core strategies: delivering financial security and wellness through the workplace,
providing advice-centered wealth management, delivering strong investment and asset management and leveraging risk
and capital management expertise. The Company intends to invest strategically, both organically and through
acquisitions, to drive growth, productivity and operational resilience while maintaining strong risk and expense discipline,
to deliver sustainable long-term value to its customers and shareholders.
•
In Canada, the Company will continue to leverage the strength of the Canada Life brand to develop innovative products
and services and broaden and deepen its distribution channels to better serve its customers. Specifically, the Workplace
Solutions business plans to continue its focus and investment in the disability offering operations to support growth in the
health market as well as to make significant operational and digital investments in the group retirement business to
improve customer experiences. As the Company successfully onboarded the dental plan for retired Canadian public
servants in November 2024, it expects its strong market share and distribution capacity will lead to continued growth in
2025. Growing the Freedom Experience has also been a key area of focus as the Company seeks to provide customized
solutions to increasingly unique customer needs. In its Individual Wealth Management business, the Company will
continue to leverage recently acquired capabilities to advance its growth strategies with an enhanced offering to advisors
in all channels. This commitment to advice is expected to benefit strong customer retention and acquiring new business.
The Insurance & Annuities business will continue to advance on business strategies of balancing growth through the
offering of a comprehensive range of individual insurance products with disciplined pricing and risk selection. Operational
expense management will continue to be critically important for the Canada segment to deliver strong financial results.
21
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
•
In the U.S., the Company is positioned to capitalize on substantial growth opportunities across various plan types,
company sizes and market segments. Through its defined contribution business, Empower has enhanced its expertise,
expanded its capabilities and broadened its product portfolio. Empower continues to accelerate growth and is well-
prepared to leverage the developments of expected transformative shifts in the financial services industry, including
increased capital investment and the adoption of advanced technologies to capture market growth opportunities.
Empower Personal Wealth will continue to serve its existing customers and drive growth through a hybrid approach that
integrates the expertise of financial advisors with sophisticated digital platforms. Empower Personal Wealth will continue
to develop and expand a broad range of product solutions that leverage the Empower Personal Dashboard and Empower
Advisors to offer customized wealth solutions to an expanding customer base. In 2025, Empower anticipates realizing
revenue synergies through the financial planning and equity compensation solution services offered through OptionTrax
by Empower.
•
In Europe, the Company is focusing on maintaining or growing its market positions while investing in customer service
systems and automation. In Workplace Solutions, the U.K. group protection business is expected to enhance Canada Life’s
competitive position as one of the largest insurers in the market through technology-driven efficiencies and the expanded
access of the WeCare support service to all insured employees. Through the Irish Life brand, the Company will focus on
developing a fully integrated corporate engagement strategy to maximize the effectiveness of strong corporate
relationships, ensure the Company maintains its strong pension, risk and health propositions and continue the journey of
integrating its wealth and employee benefits consulting businesses. In the Individual Wealth & Asset Management
business, Irish Life will focus on the growth of its wealth brand, Unio Wealth Management, while maintaining its focus in
the areas of sustainability and product innovation. Furthermore, Canada Life U.K. expects to maintain its position as the
market leader in the single premium international investment bond marketplace. Canada Life in Germany will focus on
growth and product diversification, efficiency through automation and enhancing the experience of the independent
financial advisor and customer. In its Insurance & Annuities business, Canada Life U.K. and Irish Life will focus on
maintaining its share of the retail payout annuities market while investing in customer service systems. Moreover, the
Company will continue to further develop its offerings and capability in the bulk annuity market in 2025, extending the
offering across a wider range of the market.
•
In Capital and Risk Solutions, the Reinsurance business unit will continue to help its clients and other affiliated companies
meet capital challenges through innovative reinsurance solutions. Demand for structured reinsurance remains strong and
will remain a focus for 2025. Internationally, Canada Life continues to explore opportunities for measured expansion into
new markets where the Company's innovative reinsurance solutions can be deployed to support clients' evolving needs.
•
The global economy is expected to experience a period of transition in 2025. Inflation has been brought broadly in line
with domestic targets in Canada and broader Europe as central banks continue to ease monetary restraints. In the U.S.,
disinflation efforts have stalled, with the Federal Reserve indicating a pause on previously expected interest rate
reductions. Economic growth in the U.S., and to a lesser extent, Canada and the euro zone, is expected to remain strong in
2025 with excess demand and enhanced productivity. Uncertainty remains with the impacts of potential policy changes,
such as tariffs, made by the new U.S. administration that could dampen growth for impacted countries. Global equity
markets were strong throughout 2024, with outperformance in the U.S., and the outlook for 2025 is generally positive with
healthy fundamentals and strong forecasted earnings growth. The U.S. dollar is expected to remain strong relative to a
broad range of currencies, including the Canadian dollar, primarily due to a higher U.S. policy rate and potential trade
policy changes. While there is a high degree of uncertainty in the broader macroeconomic outlook, the Company’s well
diversified business portfolio and prudent approach to risk management positions it well to execute on its core strategies
in 2025. See the "Risk Management" section of this document for additional details.
22
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Base and Net Earnings
Consolidated base earnings and net earnings of Lifeco include the base earnings and net earnings of Canada Life (and its
operating subsidiaries), Empower and PanAgora Asset Management, together with Lifeco’s Corporate operating results. Net
earnings also include the earnings from Putnam Investments reported as discontinued operations.
For a further description of base earnings, refer to the "Non-GAAP Financial Measures and Ratios" section of this document.
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
Canada
$
321 $
317 $
301 $
1,262 $
1,158
United States
367
359
261
1,336
1,006
Europe
231
195
213
829
777
Capital and Risk Solutions
223
210
236
818
794
Lifeco Corporate
(27)
(20)
(40)
(53)
(68)
Lifeco base earnings1
$
1,115 $
1,061 $
971 $
4,192 $
3,667
Items excluded from base earnings
Market experience relative to expectations2
$
38 $
41 $
(213) $
214 $
(307)
Realized OCI gains / (losses) from asset rebalancing
—
—
—
—
(121)
Assumption changes and management actions2
16
(203)
83
(149)
(20)
Other non-market related impacts3
(53)
(40)
(98)
(246)
(357)
Items excluded from Lifeco base earnings
$
1 $
(202) $
(228) $
(181) $
(805)
Net earnings (loss) from continuing operations2
Canada
$
336 $
460 $
166 $
1,484 $
961
United States
304
307
194
1,118
769
Europe
310
115
217
813
384
Capital and Risk Solutions
194
9
215
618
833
Lifeco Corporate
(28)
(32)
(49)
(22)
(85)
Lifeco net earnings from continuing operations2
$
1,116 $
859 $
743 $
4,011 $
2,862
Net earnings (loss) from discontinued operations
—
—
(3)
(115)
(124)
Net gain from disposal of discontinued operations
—
—
—
44
—
Lifeco net earnings - common shareholders
$
1,116 $
859 $
740 $
3,940 $
2,738
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
Included in other non-market related impacts are business transformation impacts (including restructuring and integration costs as well as acquisition and divestiture costs),
amortization of acquisition-related intangible assets and tax legislative changes and other tax impacts.
Base Earnings
Base earnings for the fourth quarter of 2024 of $1,115 million ($1.20 per common share) increased by $144 million or 15% from
$971 million ($1.04 per common share) a year ago reflecting higher net fee and spread income from all segments, partially
offset by the impact of the GMT in the Capital and Risk Solutions and Europe segments. Additionally, base earnings growth was
driven by higher equity markets and organic growth in Workplace Solutions in the Canada segment and higher CSM
recognized for services provided in the Europe segment. These items were partially offset by lower spread income and higher
operating expenses in the U.S. segment, weaker individual insurance morbidity experience and lower earnings on surplus in
the Canada segment, less favourable group and health insurance experience in the Europe segment, as well as favourable
property catastrophe claims experience from the prior year that did not repeat in the Capital and Risk Solutions segment.
For the twelve months ended December 31, 2024, Lifeco's base earnings were $4,192 million ($4.50 per common share)
compared to $3,667 million ($3.94 per common share) a year ago. The increase was primarily due to favourable insurance
experience and higher fee income in the Canada segment, growth in surplus income in the U.S. and Europe segments as well as
the same reasons discussed for the in-quarter results. These items were partially offset by lower surplus earnings in the Canada
segment and a change to certain tax estimates from the prior year in Germany that did not repeat in the Europe segment, as
well as the same reasons discussed for the in-quarter results.
23
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Net Earnings
Lifeco's net earnings from continuing operations for the three month period ended December 31, 2024 of $1,116 million ($1.20
per common share) increased by $373 million or 50% compared to $743 million ($0.80 per common share) a year ago. The
increase was primarily due to higher base earnings, more favourable market experience relative to expectations, and the non-
recurrence of prior year Prudential integration expenses. These were offset by adjustments to transaction-related expenses and
higher guaranty fund assessments in the current quarter. The results from discontinued operations for the fourth quarter of
2024 were nil compared to a net loss of $3 million a year ago.
For the twelve months ended December 31, 2024, Lifeco's net earnings from continuing operations were $4,011 million ($4.30
per common share) compared to $2,862 million ($3.07 per common share) a year ago. The increase was primarily due to the
same reasons discussed for the in-quarter results. The prior year period included the following items that did not repeat in
2024: a provision related to Empower's sale of substantially all of its individual life and annuity business in 2019; and realized
other comprehensive income (OCI) losses related to asset rebalancing in the surplus account in the Europe segment. The
results from discontinued operations for the twelve months ended December 31 included a net loss of $115 million as well as a
$44 million net gain on sale compared to a net loss of $124 million a year ago.
Lifeco's net earnings from continuing operations for the three month period ended December 31, 2024 of $1,116 million ($1.20
per common share) increased by $257 million or 30% compared to $859 million ($0.92 per common share) in the previous
quarter. The increase was primarily due to unfavourable fair value impacts of actuarial assumption changes and management
actions from the prior quarter that did not repeat as well as the same reasons discussed for the in-quarter results. The results
from discontinued operations as discussed for the year-over-year base earnings results were nil and were comparable to the
previous quarter.
Foreign Currency
The average currency translation rate for the fourth quarter of 2024 increased for the U.S. dollar, British pound and the euro
compared to the fourth quarter of 2023. For the three months ended December 31, 2024, the overall impact of currency
movement on the Company's base earnings was an increase of $24 million (increase of $61 million year-to-date) compared to
translation rates a year ago. The overall impact of currency movement on the Company’s net earnings was an increase of $26
million (increase of $53 million year-to-date) compared to translation rates a year ago.
From September 30, 2024 to December 31, 2024, the market rates at the end of the reporting period used to translate the U.S.
dollar assets and liabilities to the Canadian dollar increased, while the British pound and euro decreased. The movements in
end-of-period exchange rates impact the translation of foreign operations, including related hedging activities, resulting in
post-tax unrealized foreign exchange gains of $739 million in-quarter ($1,281 million net unrealized gains year-to-date),
recorded in other comprehensive income.
Translation rates for the reporting period and comparative periods are detailed in the "Translation of Foreign Currency"
section.
Credit Markets
Credit experience impacts on net earnings can arise from:
•
Upgrades, downgrades and impairments on fixed income assets measured at fair value through profit and loss (FVTPL),
which support insurance contract liabilities;
•
Impairments on assets measured at FVTPL, which support general account investment products; and
•
The change in expected credit losses on fixed income assets measured at fair value through other comprehensive income
(FVOCI) and amortized cost.
Credit markets impact on common shareholders' net earnings (pre-tax)
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Canada
$
3 $
1 $
— $
2 $
(2)
United States
(17)
—
(48)
(57)
(65)
Europe
(2)
(11)
2
(12)
(16)
Capital and Risk Solutions
1
(4)
(1)
(3)
(1)
Total
$
(15) $
(14) $
(47) $
(70) $
(84)
In the fourth quarter of 2024, the Company experienced net negative $15 million of credit-related experience in net investment
result compared to a net negative impact of $47 million in the same quarter last year, primarily due to less unfavourable credit
charges on mortgage loans in the U.S. segment.
24
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
For the twelve months ended December 31, 2024, the Company experienced net negative $70 million of credit-related
experience in net investment result compared to a net negative impact of $84 million in the same period last year, primarily due
to the same reason discussed for the in-quarter results.
Taxes
The Company's effective income tax rate on earnings attributable to common shareholders and total Lifeco earnings are
presented below.
Effective Income Tax Rates
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings - common shareholders1
15.6 %
16.3 %
15.9 %
17.2 %
13.9 %
Net earnings - common shareholders
15.3 %
16.1 %
(22.2) %
16.5 %
4.1 %
Net earnings - total Lifeco
15.0 %
12.8 %
(28.0) %
14.8 %
1.7 %
1
This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
The Company's effective income tax rate is generally lower than the statutory income tax rate of 28.0% due to benefits related to
non-taxable investment income and lower income tax rates in certain foreign jurisdictions.
The Organization for Economic Co-Operation and Development (OECD) introduced a 15% Global Minimum Tax (GMT)
regime that has been adopted for 2024 by all countries in which the Company has significant operations, other than the U.S.
and Isle of Man. Legislation has been enacted by Canada, Barbados, Germany, Ireland, the U.K. and Switzerland with an
effective date of January 1, 2024.
The GMT is complex in nature and applies to Lifeco as part of a larger group of related companies. The Company is liable for
GMT in respect of Barbados, Ireland, the Isle of Man and Switzerland, jurisdictions where the statutory income tax rates are
below 15%. A GMT current tax expense of $24 million has been recognized in the fourth quarter of 2024 ($113 million for the
twelve months ended December 31, 2024).
The impact of the GMT on the Company's effective income tax rates are presented below.
Impact of GMT on Effective Income Tax Rates
For the three
months ended
Dec. 31, 2024
For the twelve
months ended
Dec. 31, 2024
Base earnings - common shareholders1
2.2 %
2.7 %
Net earnings - common shareholders
1.8 %
2.3 %
Net earnings - total Lifeco
1.7 %
2.3 %
1
This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
In the fourth quarter of 2024, the effective income tax rate on base earnings for the common shareholders of 15.6% was
comparable to the 15.9% in the fourth quarter of 2023 as the GMT increase in 2024 was offset by changes in the jurisdictional
mix of earnings. In the fourth quarter of 2024, the effective income tax rate on net earnings for the common shareholders of
15.3% was up from negative 22.2% in the fourth quarter of 2023, mainly due to changes in the jurisdictional mix of earnings and
a one-time tax benefit on a reinsurance recapture transaction in 2023.
In the fourth quarter of 2024, the Company's overall effective income tax rate of 15.0% was up from negative 28.0% in the fourth
quarter of 2023, primarily due to the same reasons discussed for the in-quarter common shareholders net earnings results.
For the twelve months ended December 31, 2024, the effective income tax rate on base earnings for the common shareholders
of 17.2% was up from 13.9% in the same period last year, primarily due to the GMT. For the twelve months ended December 31,
2024, the effective income tax rate on net earnings for the common shareholders of 16.5% was up from 4.1% in the same period
last year due to the the same reasons discussed for the in-quarter results and the GMT.
For the twelve months ended December 31, 2024, the Company's overall effective income tax rate of 14.8% was up from 1.7% in
the same period last year, primarily due to the same reasons discussed for the year-to-date common shareholders net earnings
results.
Refer to note 29 of the Company's annual consolidated financial statements for the year ended December 31, 2024 for further
details.
25
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The Company pays corporate income taxes and indirect taxes in jurisdictions where we carry on business. The combination of
these taxes totaled approximately $1.7 billion in 2024 and approximately $1.3 billion in 2023 as outlined in the table below.
For the twelve months ended
Dec. 31
2024
Dec. 31
2023
Indirect taxes
Premium taxes (net of business ceded)
$
424
$
416
Payroll taxes
309
276
Property taxes
84
86
Sales tax (GST/HST/PST/VAT/other)
129
105
Business and other taxes
15
8
Total indirect taxes
$
961
$
891
Income taxes paid, net of refunds received
707
423
Total
$
1,668
$
1,314
Items Excluded from Base Earnings
Market Experience Relative to Expectations
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Public equity market impacts
$
(1) $
22 $
27 $
48 $
14
Real estate and other non-fixed income asset impacts
(45)
(10)
(62)
(140)
(371)
Interest rate and other impacts
84
29
(178)
306
50
Total market experience relative to expectations
$
38 $
41 $
(213) $
214 $
(307)
Market experience relative to expectations, which are reflected in the net investment result of the Company's consolidated
statement of earnings, positively impacted net earnings by $38 million in the fourth quarter of 2024, compared to a negative
impact of $213 million in the fourth quarter of 2023.
In-quarter impacts reflect interest rate movements including spread movements, and lower returns than expected on real
estate assets which are partially offset by higher returns than expected on other non-fixed income assets. The positive interest
rate and other impacts result primarily arose from liabilities decreasing by more than their supporting assets; this was driven by
risk-free rate increases partially offset by credit spreads narrowing in the Canada segment and in the U.K. in the Europe
segment. The lower returns than expected on real estate and other non-fixed income assets arose on underperforming real
estate assets in the Canada segment and in the U.K. in the Europe segment, partially offset by over-performance of other non-
fixed income assets in the Canada segment.
For the twelve months ended December 31, 2024, market experience relative to expectations positively impacted net earnings
by $214 million which compares favourably to a negative impact of $307 million for the same period in 2023. The 2024 year-to-
date positive impact was primarily due to interest rate movements in the Canada and Europe segments, and strong
performance of public equities in the Canada segment, partially offset by lower returns than expected on real estate assets and
other non-fixed income assets.
In order to mitigate the Company's exposure to interest rate fluctuations, the Company follows disciplined processes for
matching asset and liability cash flows. As a result, the impact of changing interest rates is mostly mitigated in the current
period, with the impact of changes in fair values of bonds backing insurance contract liabilities mostly offset by a
corresponding change in the insurance contract liabilities. However, differences in the interest rate sensitivity in the value of
assets and the value of insurance and investment contract liabilities leads to a sensitivity to interest rate movements in net
earnings due to the Company’s asset liability management strategies and accounting policy choices. These choices include
consideration of the impact on regulatory capital, which can result in increased net earnings sensitivity, but decreased capital
sensitivity. For example, the Company’s asset liability management strategy uses public equities and other non-fixed income
assets as a component of general fund assets supporting liabilities, which leads to interest rate exposure in net earnings. The
classification of financial assets, which are valued at amortized cost and held in the general fund assets supporting liabilities
(for example, mortgage assets in the U.K.), also contributes to interest rate exposure in net earnings. Furthermore, sensitivities
to interest rate movements vary depending upon the geography where the changes occur and the level of change in interest
rates by term.
For a further description of the Company's sensitivity to equity market and interest rate fluctuations, including sensitivity
disclosures as a result of current market conditions, refer to "Risk Management", note 7 of the Company's annual consolidated
financial statements for the period ended December 31, 2024.
26
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Assumption Changes and Management Actions
Assumption changes on insurance risks and certain management actions directly impact CSM, for contracts which have CSM.
The impact of assumption changes and certain management actions on CSM are measured at locked-in rates, for contracts
measured under the General Measurement Model.
Net earnings impacts arise from the fair value impact of measuring assumption changes impacting CSM at fair value (relative to
the impacts on CSM measured at locked-in rates), as well as assumption changes on financial risks on certain products and
assumption changes on insurance risks on contracts which do not have CSM (including short-term insurance contracts).
The table below summarizes how assumption changes and management actions impact CSM and earnings.
Products with CSM
Products without CSM
Type of business
Non-participating insurance and
longevity business
Pass through and fee-based
insurance business
Short-term business
Products
• Term life / universal life
• Disability / critical illness
• Payout annuities
• Life reinsurance
• Longevity swaps
• Segregated funds
• Participating insurance
• Group life and health
• Structured and P&C reinsurance
• Liabilities for incurred claims
Financial
statement
impact of
assumption
changes
CSM1
• Insurance assumptions – locked-
in rates impact2
• Insurance assumptions
• Financial assumptions
Earnings
• Insurance assumptions – fair
value impact2
• Financial assumptions
• Insurance assumptions
• Financial assumptions
1
If there is no CSM balance, then the impact of both insurance and financial assumption changes flows through earnings.
2
As current discount rates are generally higher than locked-in rates (as locked-in rates were mostly set as at January 1, 2022), a favourable change in insurance assumptions would
increase the CSM and result in a negative earnings impact in the period.
The following table shows the net earnings and CSM impacts of assumption changes and management actions for the three
months ended December 31, 2024 and the same quarter last year.
Assumptions
CSM1
impacts
Net earnings impact (post-tax)
Description
Fair value
impact of CSM
assumption
changes
Other
Total
For the three months ended
December 31, 2024
Non-participating, excluding
segregated funds
$
(23) $
— $
16 $
16 Minor assumption changes and model refinements
Segregated funds
(290)
—
—
—
Updates to reflect trends in withdrawal experience and
model refinements, mainly in the Canada segment
Total
$
(313) $
— $
16 $
16
For the three months ended
December 31, 2023
Total
$
(200) $
(20) $
103 $
83
1
Excludes participating policies.
27
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The following table shows the net earnings and CSM impacts of assumption changes and management actions for the twelve
months ended December 31, 2024 and the same period last year.
Assumptions
CSM1
impacts
Net earnings impact (post-tax)
Description
Fair value
impact of CSM
assumption
changes
Other
Total
For the twelve months ended
December 31, 2024
Longevity
$
731 $
(246) $
4 $
(242)
Updates to reflect trends in longevity experience,
primarily on portfolios in the Capital and Risk Solutions
segment and in the U.K. in the Europe segment
Mortality
48
(67)
(13)
(80)
Updates to reflect trends in mortality, primarily on the
U.S. life reinsurance portfolio in the Capital and Risk
Solutions segment
Policyholder behaviour
(412)
79
(16)
63
Updates to reflect renewal experience on term insurance
in the Canada segment
Other
(115)
11
99
110
Other updates, including financial and expense
assumptions
Total non-participating, excluding
segregated funds
$
252 $
(223) $
74 $
(149)
Segregated funds
(278)
—
—
—
Updates to reflect trends in withdrawal experience and
model refinements, mainly in the Canada segment
Total
$
(26) $
(223) $
74 $
(149)
For the twelve months ended
December 31, 2023
Total
$
(34) $
(78) $
58 $
(20)
1
Excludes participating policies.
For the three months ended December 31, 2024, assumption changes and management actions resulted in a decrease in CSM
of $290 million on segregated fund business, as well as a decrease in CSM of $23 million and a positive net earnings impact of
$16 million on non-participating business, excluding segregated funds.
In the Canada segment, CSM was negatively impacted by $272 million and there was no impact to net earnings, primarily due
to assumption changes on segregated fund business. In the Capital and Risk Solutions segment, CSM was negatively impacted
by $2 million and net earnings were negatively impacted by $4 million. In the Europe segment, CSM was negatively impacted
by $17 million due to assumption changes on segregated fund business. Also in the Europe segment, CSM was negatively
impacted by $22 million and net earnings were positively impacted by $20 million, due to minor assumption changes and
modelling refinements on other non-participating business. In the U.S. segment, there were no impacts due to assumption
changes and management actions.
This compares to an increase in CSM of $305 million and a negative net earnings impact of $203 million on non-participating
business in the previous quarter, and a decrease in CSM of $200 million and a positive net earnings impact of $83 million on
non-participating business for the same period in 2023.
For the twelve months ended December 31, 2024, assumption changes and management actions resulted in an increase of
$252 million in CSM and a negative net earnings impact of $149 million on non-participating business excluding segregated
funds. Additionally, assumption changes and management actions resulted in a decrease of $278 million in CSM on segregated
fund business.
In the Canada segment, CSM on non-participating business excluding segregated funds was negatively impacted by $371
million and net earnings were positively impacted by $113 million. Also in the Canada segment, CSM on segregated funds was
negatively impacted by $273 million. In the Capital and Risk Solutions segment, CSM was positively impacted by $470 million
and net earnings were negatively impacted by $246 million. In the Europe segment, CSM on non-participating business
excluding segregated funds was positively impacted by $118 million and net earnings were negatively impacted by $33 million.
Also in the Europe segment, CSM on segregated fund business was negatively impacted by $9 million. In the U.S. segment, the
CSM on non-participating business excluding segregated funds was positively impacted by $35 million and net earnings were
negatively impacted by $23 million. Also in the U.S. segment, CSM on segregated fund business was positively impacted by $4
million. In the Lifeco Corporate segment, there was no impact to CSM, and net earnings were positively impacted by $40
million.
This compares to a decrease in CSM of $34 million and a negative net earnings impact of $20 million for the same period in
2023.
28
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Other Items Excluded from Base Earnings
For the fourth quarter of 2024, other items excluded from base earnings were negative $53 million compared to negative $98
million a year ago as business transformation costs decreased $37 million compared to the same period in the prior year,
primarily due to restructuring and integration costs in the Europe and U.S. segments from the prior year that did not repeat.
For the twelve months ended December 31, 2024, other items excluded from base earnings were negative $246 million
compared to negative $357 million a year ago as business transformation costs decreased $110 million compared to the same
period in the prior year. This is primarily due to the same reason discussed for the in-quarter results. Additionally, there were
realized OCI losses related to asset rebalancing to shorter duration assets in the Europe segment from the prior year that did
not repeat which contributed to the less negative impact on other items excluded from base earnings for the twelve months
ended December 31, 2024.
Lifeco Value Drivers
The Company has a diversified mix of business across its reportable operating segments and accordingly supplements its
analysis of results with reporting and disclosures by business type or “value driver”. The Company focuses on three key value
drivers for its business that extend across its reportable operating segments:
•
Workplace Solutions
•
Wealth & Asset Management
•
Insurance & Risk Solutions
Lifeco Base Earnings by Value Driver
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
Workplace Solutions
$
558 $
520 $
489 $
2,043 $
1,851
Wealth & Asset Management
185
167
144
652
539
Insurance & Risk Solutions
371
358
383
1,416
1,398
Corporate
1
16
(45)
81
(121)
Lifeco base earnings1
$
1,115 $
1,061 $
971 $
4,192 $
3,667
Lifeco net earnings from continuing operations2
$
1,116 $
859 $
743 $
4,011 $
2,862
1 This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2 Refer to the "Glossary" section of this document for additional details on the composition of this measure.
The information in the table above is a summary of base earnings by the Company's value drivers. Additional commentary
regarding base earnings by value drivers is included, as applicable, in the sections below.
29
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Workplace Solutions
The Company has built millions of trusted relationships with customers through Workplace Solutions. These relationships are
based on the consistent delivery of health and wellness benefits, as well as retirement solutions that are delivered at scale
through employer sponsored plans as a core part of the business. The Company is also building lifetime customer relationships
through a focus on deepening the advice and solutions to better meet customers' retirement, investment and wellness needs.
Selected Financial Results
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
$
558 $
520 $
489 $
2,043 $
1,851
Retirement net cash flows2,3,4
(11,474)
(18,393)
12,132
(43,617)
17,430
Fee and other income
1,297
1,221
1,089
4,869
4,208
Group life and health book premiums2
18,337
17,802
17,258
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
Results for the three months ended September 30, 2024 and twelve months ended December 31, 2024 do not include $54.4 billion (US$40.0 billion) in transfers related to the Plan
Management Corporation (PMC) acquisition in the U.S. segment.
4
Results for the periods ended December 31, 2024 do not include $3.5 billion (US$2.5 billion) in net outflows related to PMC stock plan services in the U.S. segment. These outflows
primarily represent timing of outflows and inflows that fall in separate quarters based on the nature of the product and are not representative to the Company’s ability to attract and
retain business. The Company expects outflows in the fourth quarter will be mostly offset by inflows in the first quarter of 2025.
Base earnings
Workplace Solutions base earnings for the fourth quarter of 2024 of $558 million increased by $69 million or 14% compared to
the same quarter last year. The increase was primarily due to an increase in fee income driven by growth in the business and
higher equity markets in Empower Defined Contribution as well as organic growth in the Canada segment, partially offset by
less favourable group protection experience in the U.K. as well as less favourable health experience in Ireland in the Europe
segment.
For the twelve months ended December 31, 2024, Workplace Solutions base earnings of $2,043 million increased by $192
million or 10% compared to the same period last year. The increase was primarily due to strong long-term disability and health
experience as well as organic growth of in-force block earnings in the Canada segment and an increase in fee income driven by
growth in the business and higher equity markets in Empower Defined Contribution. These items were partially offset by less
favourable group experience in the U.K. in the Europe segment.
Net cash flows
Net cash outflows for the fourth quarter of 2024 were $11.5 billion, compared to net cash inflows of $12.1 billion for the same
quarter last year, primarily due to higher participant net redemptions in the current year in Empower Defined Contribution.
Average account balances of participants have increased due to market growth over the past year, resulting in increased
distributions, which have outpaced contributions.
For the twelve months ended December 31, 2024, net cash outflows were $43.6 billion compared to net cash inflows of $17.4
billion for the same period last year, primarily due to the same reason discussed for the in-quarter results as well as a large plan
termination in the first quarter of 2024 in Empower Defined Contribution. Large plan sales and terminations can be highly
variable from period to period and tend to result in lower margins but nonetheless contribute to covering fixed overhead costs.
The current year excludes $54.4 billion (US$40 billion) in net transfers related to Empower's recent acquisition of Plan
Management Corporation (PMC).
Fee and other income
Fee and other income for the fourth quarter of 2024 of $1,297 million increased by $208 million compared to the same quarter
last year, primarily due to higher equity market levels and overall growth in the business in the U.S. segment.
For the twelve months ended December 31, 2024, fee and other income of $4,869 million increased by $661 million compared
to the same period last year, primarily due to the same reasons discussed for the in-quarter results as well as adjustments
related to the Prudential acquisition in the U.S. segment in the second quarter of 2024.
Group life and health book premiums
Group life and health book premiums at December 31, 2024 were $18,337 million, an increase of $535 million compared to
September 30, 2024, primarily due to organic growth of in-force business in the Canada and Europe segments as well as the
addition of the dental plan for retired Canadian public servants in the Canada segment.
30
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Wealth & Asset Management
In partnership with over 108,000 advisor relationships globally at the end of 2024, the Company is delivering targeted and
sophisticated solutions supported by personalized advice to meet customers’ most complex personal wealth needs. The
approach is enabled through investments in technology platforms and in market leading managed solutions to help advisors
continue to meet the evolving needs of customers.
Selected Financial Results
As at or for the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
$
185 $
167 $
144 $
652 $
539
Wealth net cash flows2
4,689
4,783
3,711
13,475
12,316
Fee and other income
637
569
456
2,284
1,619
CSM, segregated fund products3
3,291
3,567
3,309
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
The U.S. segment does not have a material CSM balance and has been excluded.
Base earnings
Wealth & Asset Management base earnings for the fourth quarter of 2024 of $185 million increased by $41 million or 28%
compared to the same quarter last year. The increase was primarily due to an increase in fee income driven by growth in the
business and higher equity markets in Empower Personal Wealth, higher net fee and spread income driven by the addition of
IPC and Value Partners and favourable market impacts in the Canada segment and higher fee income from Ireland and the
U.K. in the Europe segment.
For the twelve months ended December 31, 2024, Wealth & Asset Management base earnings of $652 million increased by $113
million or 21% compared to the same period last year. The increase was primarily due to the same reasons discussed for the in-
quarter results.
Net cash flows
Net cash inflows for the fourth quarter of 2024 were $4,689 million compared to net inflows of $3,711 million for the same
quarter last year, primarily due to higher inflows in Empower Personal Wealth as well as higher segregated fund and third party
mutual fund flows in the Canada segment. These items were partially offset by fund redemptions at Irish Life Investment
Managers (ILIM) by a subadvisor to tactically rebalance their holdings in Ireland in the Europe segment.
For the twelve months ended December 31, 2024, net cash inflows were $13,475 million compared to net cash inflows of
$12,316 million for the same period last year, primarily due to higher institutional asset management flows in Ireland in the
Europe segment driven by a large client rebalancing and strategic allocation decision, as well as the addition of IPC and Value
Partners and higher segregated fund and third party mutual fund flows in the Canada segment. These items were partially
offset by lower inflows in Empower Personal Wealth.
Fee and other income
Fee and other income for the fourth quarter of 2024 of $637 million increased by $181 million compared to the same quarter
last year, primarily due to assets under management growth from strong markets and the additions of IPC and Value Partners
in the Canada segment, higher equity market levels and overall growth in the business in Empower Personal Wealth and higher
management fees from higher average assets under administration as well as a gain recorded in the fourth quarter of 2024 on
the sale of the U.K. onshore bond business, which is excluded from base earnings, in the Europe segment.
For the twelve months ended December 31, 2024, fee and other income of $2,284 million increased by $665 million compared
to the same period last year, primarily due to the same reasons discussed for the in-quarter results.
CSM, segregated fund products
CSM for segregated fund products at December 31, 2024 of $3,291 million decreased by $18 million compared to December 31,
2023, primarily due to CSM recognized for services provided and the impact of actuarial assumption changes, partially offset by
the impact of markets and new business. Refer to the "Assumption Changes and Management Actions" section of this
document for additional details.
31
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Insurance & Risk Solutions
The Company has a strong and stable insurance base which helps produce capital that is invested in areas of opportunity for
growth. Additionally, with its sophisticated risk and capital management expertise, the Company is helping organizations
manage their risks and deliver sustainable customer solutions. By leveraging this expertise, Lifeco is diversifying its portfolio,
offsetting or counterbalancing risks and creating value for stakeholders including strong financial performance.
Selected Financial Results
As at or for the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
$
371 $
358 $
383 $
1,416 $
1,398
New business non-participating CSM, excluding segregated
fund products2
269
180
105
658
374
Non-participating CSM, excluding segregated fund
products2
6,790
6,703
6,159
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
The U.S. segment does not have a material CSM balance and has been excluded.
Base earnings
Insurance & Risk Solutions base earnings for the fourth quarter of 2024 of $371 million decreased by $12 million or 3%
compared to the same quarter last year. The decrease was primarily due to the impact of GMT in the Capital and Risk Solutions
and Europe segments, lower individual insurance experience in the Canada segment, and favourable property catastrophe
claims experience in 2023 which did not recur in the Capital and Risk Solutions segment. These items were partially offset by
business growth and favourable claims experience in the U.S. life business in the Capital and Risk Solutions segment and
higher trading gains in the Europe segment.
For the twelve months ended December 31, 2024, Insurance & Risk Solutions base earnings of $1,416 million increased by $18
million or 1% compared to the same period last year. The increase was primarily due to business growth and favourable claims
experience in the U.S. life business in the Capital and Risk Solutions segment. These items were partially offset by the impact of
GMT in the Capital and Risk Solutions and Europe segments as well as the impact of assumption changes in the Canada
segment.
New business non-participating CSM, excluding segregated fund products
Insurance & Risk Solutions new business non-participating CSM, excluding segregated fund products, for the fourth quarter of
2024 of $269 million increased by $164 million compared to the same quarter last year, primarily due to strong contributions
from the Capital and Risk Solutions segment, partially offset by lower new business CSM from the U.K. in the Europe segment.
For the twelve months ended December 31, 2024, Insurance & Risk Solutions new business non-participating CSM, excluding
segregated fund products, of $658 million increased by $284 million compared to the same period last year, primarily due to
strong contributions from the Capital and Risk Solutions segment and from the U.K. in the Europe segment.
Non-participating CSM, excluding segregated fund products
Non-participating CSM, excluding segregated fund products, at December 31, 2024 of $6,790 million increased by $631 million
compared to December 31, 2023, primarily due to strong contributions of CSM from new business, the impact of currency
movement and the positive actuarial assumption changes in the Europe and Capital and Risk Solutions segments, partially
offset by CSM recognized for services provided across all segments and negative actuarial assumption changes in the Canada
segment. Refer to the "Assumption Changes and Management Actions" section of this document for additional details.
32
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Segmented Operating Results
The segmented operating results of Lifeco, including the comparative figures, are presented on an IFRS basis after capital
allocation. Consolidated operating results for Lifeco comprise the net earnings of Canada Life (and its operating subsidiaries),
Empower and the discontinued operations of Putnam, together with Lifeco's corporate results. The following sections analyze
the performance of Lifeco's four major reportable segments: Canada, United States (U.S.), Europe and Capital and Risk
Solutions.
Translation of Foreign Currency
For the United States, Europe and Capital and Risk Solutions segments, foreign currency assets and liabilities are translated
into Canadian dollars at the market rate at the end of the financial period. All income and expense items are translated at an
average rate for the period.
Canada
The Canada segment of Lifeco includes the operating results of the Canadian businesses operated by Canada Life, together
with an allocation of a portion of Lifeco's corporate results.
Business Profile
The Canada segment offers a broad suite of products and services through multiple distribution channels aimed at providing
advice and product solutions to meet the needs of Canadians at all phases of their lives.
Workplace Solutions
Workplace Solutions includes group life and health benefits, group creditor, and group retirement and investment product
lines.
Through its group life and health benefits product lines, the Company offers effective benefit solutions for small, medium and
large plan sponsors. The Company offers a wide range of traditional group products and services including life, accidental
death and dismemberment, critical illness, disability, health and dental as well as specialty products. The Company's Freedom
Experience suite of products allows members to apply for life, health and critical illness products and maintain this coverage
even when leaving their employers, as well as offering members the option to roll over their retirement assets to a Canada Life
sponsored plan after they change jobs or retire. Traditional group products are generally offered on an insured or an
administrative services only (ASO) basis, where clients self-insure the products and the Company administers it on their behalf.
The Company’s creditor business offers creditor insurance products through financial institutions. Canada Life is a leader in
the creditor insurance business in Canada.
Group retirement and investment product lines include group Registered Retirement Savings Plans (RRSP), defined
contribution (DC) pension plans, Tax-Free Savings Accounts (TFSA), Registered Education Savings Plans (RESP), other group
retirement income products and institutional investment services. The Company is focused on innovation within its savings
and investment product lines.
Through the Company's extensive network of group sales offices located across the country, it distributes its products through
brokers, consultants and financial security advisors.
Individual Wealth Management
Individual Wealth Management includes individual wealth savings and income products and services.
The Company is a leader in Canada for wealth management products and services delivered through independent advisors.
Segregated fund products are distributed through diverse, complementary channels: Advisor Solutions; a distribution channel
for advisors with a direct contract with Canada Life, MGAs and national accounts. The Company participates in the MGA
channel through Financial Horizons Group, distributing segregated fund products from across the insurance industry. The
Company also offers mutual funds and securities accounts through its dealer Quadrus Investment Services, as well as through
Value Partners and IPC.
Through its various platforms and distribution channels, the Company is able to provide wealth management advice and
product solutions that meet the needs of Canadians across a broad range of affluence levels.
33
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Insurance & Annuities
Insurance & Annuities includes individual life, disability and critical illness insurance products and services, as well as
individual life annuities and single premium group annuities (SPGA).1
The Company is a leader in Canada for insurance products and services and utilizes diverse, complementary distribution
channels: Advisor Solutions, MGAs and national accounts, including IG Wealth Management, a member of the Power
Corporation of Canada group of companies. The Company participates in the MGA channel through Financial Horizons
Group, distributing products from across the insurance industry.
By offering this broad suite of products and services through multiple distribution channels, the Company is able to provide
protection and estate planning product solutions supported by expert advice to meet the needs of Canadians at all phases of
their lives.
Market Overview
Workplace Solutions
The Company provides an array of life, health and creditor insurance as well as retirement and investment products that are
distributed primarily through group sales offices across the country.
Market Position
Products and Services
Distribution
• Employee benefits to over 28,000 plan
sponsors1
• 22% market share for employee benefit
plans1
• Leading market share for creditor products
with coverage provided to 6 million plan
members2
• 19% market share of group capital
accumulation plans1
Group Life and Health Benefits
• Life
• Disability
• Critical illness
• Accidental death & dismemberment
• Dental
• Expatriate coverage
• Extended health care
Group Creditor
• Life
• Disability
• Job loss
• Critical illness
Group Retirement and Investment Services
• Group capital accumulation plans including:
• Defined contribution pension plans
• Group RRSPs, RESPs & TFSAs
• Deferred profit sharing plans
• Non-registered savings programs invested
in:
• Segregated funds
• Guaranteed investment options
• Single company stock
• Retirement income plans
• Retirement income funds
• Life income funds
• Investment management services only plans;
invested in:
• Segregated funds
• Guaranteed investment options
• Securities
Specialty Products and Services
• Individual health, life and critical illness
offered through the Freedom Experience
• Consult+™
• Teledoc Medical Experts™
• ContactTM
• Group life and health benefits and group
retirement and investment services products
and services are distributed through brokers,
consultants, third party administrators/payers
and financial security advisors. Sales and
service support are provided by an integrated
team of over 600 employees, located in 21
offices across the country, including more
than 100 account executives.2
• Group creditor products and services are
distributed primarily though large financial
institutions and serviced through a dedicated
sales and service organization.
1
As at December 31, 2023.
2
As at December 31, 2024.
1 Effective August 2023, the Company is no longer actively pursuing and bidding on the SPGA market.
34
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Individual Wealth Management
The Company provides an array of individual wealth management products that are distributed through multiple sales
channels.
Market Position
Products and Services
Distribution1
• An industry leader with 24% market share of
individual segregated fund assets1
• Savings and retirement income plans
• RRSPs
• Non-registered savings programs
• TFSAs
• RESPs
• RRIFs
• LIFs
Invested in:
• Segregated funds
• Mutual funds
• Guaranteed investment options
• Securities (various forms of managed
programs)
Advisor Solutions
• Our Affiliated channel includes about 4,000
advisors who have directly contracted with
Canada Life; those selling mutual funds are
registered with Quadrus Investment Services.
Managing General Agency
• Independent advisors who contract with an
MGA to access all carriers for insurance and
segregated funds, including Canada Life. In
2024, about 12,000 advisors placed business
through Canada Life in this channel or are
contracted with Financial Horizons, a Canada
Life owned MGA.
National Accounts
• National accounts are banks and financial
planning firms who contract with Canada
Life, with about 2,500 advisors placing
business in 2024.
Investment Planning Counsel
• Over 600 financial advisors work with IPC.
Value Partners
• Value Partners has approximately 80 financial
advisors.
1
As at November 30, 2024.
Insurance & Annuities
The Company provides an array of individual insurance products that are distributed through multiple sales channels.
Market Position
Products and Services
Distribution2
• A leader in individual life insurance sales
measured by new total premiums with 16%
market share1
• A significant provider of individual disability
and critical illness insurance with 10% market
share of new sales1
Individual Life Insurance
• Term life
• Universal life
• Participating life
Living Benefits
• Disability
• Critical illness
Retirement Income Plans
• Payout annuities
• Deferred annuities
Advisor Solutions
• Our Affiliated channel includes about 4,000
advisors who have directly contracted with
Canada Life.
Independent Distribution
• Independent advisors who contract with an
MGA to access all insurance carriers including
Canada Life. In 2024, about 12,000 advisors
placed business through Canada Life in this
channel or are contracted with Financial
Horizons, a Canada Life owned MGA.
National Accounts
• National accounts are banks and financial
planning firms who contract with Canada
Life, with about 2,500 advisors placing
business in 2024.
1
For the nine months ended September 30, 2024.
2
As at November 30, 2024.
35
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Competitive Conditions
Workplace Solutions
The group life and health benefits market in Canada is mainly comprised of three large group insurance carriers with
significant market positions, a number of smaller companies operating nationally and several regional and niche competitors.
The Company has a significant market share of 22%, which is supported by an extensive distribution network that has access to
a wide range of products and services. This strong market share position is a distinct advantage for competing successfully in
the Canadian group insurance market.
The group capital accumulation plan market is also very competitive. Three major insurance companies hold a significant
market share while several smaller insurance companies have an important market presence.
Individual Wealth Management
The individual wealth management marketplace is very competitive. The Company's main competitors include mutual fund
companies, insurance companies, banks, financial technology (Fintech) and investment advisors as well as other service and
professional organizations. Competition focuses on ease of doing business through technology, service, variety of investment
options, investment performance, product features, price (fees), compensation and financial strength. Individual Wealth
Management's strong partnership with financial advisors, which was further enhanced in 2023 with the acquisition of IPC and
Value Partners, provide important strategic advantages within the Canadian market.
Insurance & Annuities
Competition in the Canadian individual insurance market focuses on service, technology, product features, price,
compensation and financial strength, as indicated by ratings issued by nationally recognized agencies. The Company's broad
spectrum of strong distribution relationships provide important strategic advantages within the Canadian market.
2024 Developments
•
More than 11,000 advisors and delegates to date have been onboarded to a new central digital platform, enabling access to
view Canada Life business, find forms and access other resources and tools including a new digital segregated fund
application which enables a seamless onboarding experience.
•
On July 1, 2024, Canada Life successfully moved IPC to Canada Life's financial systems, programs and processes,
technology and human resources. IPC continues to operate as a separate brand in the Canadian wealth marketplace.
•
On October 1, 2024, Canada Life Investment Management Ltd. (CLIML) and Counsel Portfolio Services Inc. (Counsel), a
subsidiary of IPC, amalgamated. Bringing these two investment fund management companies together into one centre of
excellence is expected to allow Canada Life to unlock new growth opportunities, achieve economies of scale and improve
operational effectiveness.
•
On October 4, 2024, Canada Life announced that it had signed a new, independent distribution agreement with Primerica
Life Insurance Company of Canada (Primerica Canada). This distribution agreement will give Primerica Canada's advisors
access to a curated selection of Canada Life's segregated fund shelf, extending the market reach of Canada Life's existing
distribution and help the underserved mass market. The training and onboarding of Primerica Canada's advisors will be
phased, beginning in 2025.
•
On November 1, 2024, Canada Life began administering the dental benefits for approximately 1.4 million Canadians
through the public service dental plans. Canada Life has administered the dental plan for active employees of the federal
public service since 1987. Under a modernized contract, Canada Life is now also administering dental benefits to retirees.
Claims are being processed quickly and call centre service is exceeding service standards. This builds on the Company's
implementation of the Public Service Health Care Plan (PSHCP), implemented on July 1, 2023.
•
During the fourth quarter of 2024, Canada Life went live with a new contact centre platform, enabling the Company to
continue providing a high level of service to all of its customers.
36
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Selected Financial Information - Canada
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
Workplace Solutions
$
200 $
181 $
192 $
761 $
706
Individual Wealth Management
66
61
46
238
202
Insurance & Annuities
54
65
60
235
224
Corporate
1
10
3
28
26
Base earnings (loss)1
$
321 $
317 $
301 $
1,262 $
1,158
Items excluded from base earnings
15
143
(135)
222
(197)
Net earnings - common shareholders
$
336 $
460 $
166 $
1,484 $
961
Sales2
Group Life & Health
$
397 $
283 $
135 $
963 $
2,336
Group Retirement
1,168
694
1,143
3,410
3,151
Individual Wealth Management
4,998
3,964
2,869
18,004
9,801
Insurance & Annuities
180
169
175
650
637
Net cash flows2
Group Retirement
$
77 $
20 $
435 $
414 $
849
Individual Wealth Management
(132)
(157)
(572)
(967)
(1,960)
Net cash flows2
$
(55) $
(137) $
(137) $
(553) $
(1,111)
Fee and other income
Workplace Solutions
$
284 $
268 $
244 $
1,079 $
945
Individual Wealth Management
218
203
131
813
401
Individual Insurance
—
—
—
1
—
Corporate
11
9
8
34
31
Fee and other income
$
513 $
480 $
383 $
1,927 $
1,377
Group life and health book premiums2
$
15,666 $
15,189 $
14,843
Total assets
$
226,873 $
222,018 $
203,784
Other assets under management2,3
14,600
14,092
13,056
Total assets under management1
241,473
236,110
216,840
Other assets under administration2
64,499
62,832
55,635
Total assets under administration1
$
305,972 $
298,942 $
272,475
Contractual service margin
Insurance & Annuities - Non-Participating
$
690 $
706 $
1,159
Individual Wealth Management - Segregated Funds
1,760
2,003
1,846
Insurance & Annuities - Participating
3,024
2,969
2,867
Contractual service margin
$
5,474 $
5,678 $
5,872
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
At December 31, 2024, Canada Life had $7.3 billion of proprietary mutual fund assets held by retail clients ($7.1 billion at December 31, 2023). $3.4 billion ($3.3 billion as at December
31, 2023) of these assets are consolidated as investments on account of segregated fund policyholders on the Company's balance sheet.
Base and net earnings
In the fourth quarter of 2024, the Canada segment's base earnings of $321 million increased by $20 million or 7% compared to
the same quarter last year, primarily due to strong Workplace Solutions health experience driven by pricing actions, organic
growth of in-force block earnings in Workplace Solutions and higher net fee and spread income driven by the addition of IPC
and Value Partners and favourable market impacts. These items were partially offset by lower individual insurance morbidity
experience and lower earnings on surplus.
In the fourth quarter of 2024, net earnings of $336 million increased by $170 million compared to the same quarter last year.
Items excluded from base earnings were positive $15 million compared to negative $135 million for the same quarter last year.
Market experience relative to expectations was positive $9 million in the fourth quarter of 2024 compared to negative $114
million for the same quarter last year, primarily due to favourable impacts of risk-free interest rate movements in the current
quarter compared to unfavourable impacts in the prior year.
37
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
For the twelve months ended December 31, 2024, base earnings of $1,262 million increased by $104 million or 9% compared to
the same period last year, primarily due to strong Workplace Solutions long-term disability and health experience, organic
growth of in-force block earnings in Workplace Solutions and higher net fee and spread income driven by the addition of IPC
and Value Partners and favourable market impacts. These items were partially offset by the impact of assumption changes and
lower earnings on surplus.
For the twelve months ended December 31, 2024, net earnings of $1,484 million increased by $523 million compared to the
same period last year. Items excluded from base earnings were positive $222 million compared to negative $197 million for the
same period last year. Market experience relative to expectations was positive $144 million compared to negative $139 million
for the same period last year, primarily due to favourable impacts of risk-free interest rate movements in the current year
compared to unfavourable impacts in the prior year and better non-fixed income performance relative to expectations in the
current year compared to the prior year. Assumption changes and management actions were positive $113 million compared
to negative $38 million for the same period last year. Refer to the "Assumption Changes and Management Actions" section of
this document for additional details.
For the fourth quarter of 2024, net earnings attributable to the participating account was $29 million compared to a net loss of
$5 million for the same quarter last year, primarily due to higher earnings on surplus and more favourable tax impacts.
For the twelve months ended December 31, 2024, the net earnings attributable to the participating account was $104 million
compared to net earnings of $16 million for the same period last year, primarily due to the same reasons discussed for the in-
quarter results.
Sales
Group life and health sales for the fourth quarter of 2024 of $397 million increased by $262 million compared to the same
quarter last year, primarily due to the addition of the dental plan for retired Canadian public servants. Group retirement sales
for the fourth quarter of 2024 of $1,168 million increased by $25 million compared to the same quarter last year, primarily due
to higher asset retention sales. Individual wealth management sales for the fourth quarter of 2024 of $4,998 million increased
by $2,129 million compared to the same quarter last year, primarily due to the addition of IPC and Value Partners, along with
strong segregated fund and third-party mutual fund sales. Insurance and annuities sales for the fourth quarter of 2024 of $180
million increased by $5 million compared to the same quarter last year, primarily due to higher par sales.
For the twelve months ended December 31, 2024, compared to the same period last year, group life and health sales of $963
million decreased by $1,373 million, primarily due to the addition of the Canada federal government PSHCP last year. Group
retirement sales of $3,410 million increased by $259 million, individual wealth management sales of $18,004 million increased
by $8,203 million, and insurance and annuities sales of $650 million increased by $13 million. These movements were primarily
due to the same reasons discussed for the in-quarter results.
Group life and health book premiums
Group life and health book premiums at December 31, 2024 were $15,666 million, an increase of $477 million compared to
September 30, 2024, primarily due to organic growth of in-force business and the addition of the dental plan for retired
Canadian public servants.
Net cash flows
In the fourth quarter of 2024, net cash outflows were $55 million compared to net cash outflows of $137 million for the same
quarter last year, primarily due to higher segregated fund and third party mutual fund flows, partially offset by higher group
retirement withdrawals.
For the twelve months ended December 31, 2024, net cash outflows were $553 million compared to net cash outflows of $1,111
million for the same period last year, primarily due to the same reasons discussed for the in-quarter results as well as the
addition of IPC and Value Partners.
Fee and other income
Fee and other income for the fourth quarter of 2024 of $513 million increased by $130 million compared to the same quarter
last year, primarily due to assets under management growth from strong markets and the additions of IPC and Value Partners.
For the twelve months ended December 31, 2024, fee and other income of $1,927 million increased by $550 million compared
to the same period last year, primarily due to the same reasons discussed for the in-quarter results.
Contractual service margin
At December 31, 2024, total contractual service margin was $5,474 million, a decrease of $398 million from December 31, 2023.
The decrease was primarily due to the impact of actuarial assumption changes and CSM recognized for services provided,
partially offset by the impact of markets. Refer to the "Assumption Changes and Management Actions" section of this document
for additional details.
38
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Outlook
Refer to Cautionary Note regarding Forward-looking Information and Cautionary Note regarding Non-GAAP Financial
Measures and Ratios at the beginning of this document.
Workplace Solutions
The group life and health and group retirement markets in Canada are mainly comprised of three large carriers, including
Canada Life and a number of smaller companies also having an important market presence. Major factors affecting the growth
of this market, as well as the Company, include employment growth, macroeconomic conditions such as interest rates and the
changes in the regulatory and legislative landscape. Major factors affecting the growth of the group retirement market include
employment growth, the financial ability for workers to save for retirement and macroeconomic conditions such as interest
rates and public equity market performance.
During 2024, Workplace Solutions successfully onboarded the dental plan for retired Canadian public servants. The Company
believes that its strong market share in all case sizes, regional and benefit market segments, together with its distribution
capacity, will facilitate continued growth in 2025.
In 2025, Workplace Solutions plans to continue its focus and investment in the disability offering and operations to support
growth and profitability in the group health market as well as to make significant investments in the group retirement business
to improve customer experiences through enhanced digital capabilities, operational effectiveness, and improved sales support
levels. The Company also plans to enhance its competitive position by improving operational resilience; and to enhance
productivity as well as customer and employee experience by making further investments in workflow, automation, digital
innovation and artificial intelligence.
Growing the Freedom Experience has been a key area of focus as the Company seeks to provide customized solutions to
increasingly unique customer needs. These products also serve to close any group health and wealth gaps that members might
experience with their current coverage.
Individual Wealth Management
The individual wealth management market in Canada is shared among banks, wealth advisory companies, life insurers and
others, including growth in a number of digital wealth platforms. Major factors affecting the growth of this market include
growth in private wealth, the pattern of wealth accumulation and decumulation, changes in the regulatory and legislative
landscape and macroeconomic conditions such as the public equity market performance.
The strong Canada Life brand, prudent business practices, the depth and breadth of its distribution channels, as well as the
Company's reputation for strength and stability, positions the Company well for 2025 and beyond.
In 2024, the Company progressed on integrating the business of IPC, onboarding IPC to Canada Life's financial systems,
business processes, technology and human resources systems. IPC's fund company, Counsel, was amalgamated with CLIML
on October 1, 2024.
In 2025, Individual Wealth Management will continue to leverage the recently acquired capabilities to advance its growth
strategies. The business will enhance the value propositions for advisors in all channels, providing them with strategies and
tools, helping their customers focus on achieving long-term financial security. This commitment to advice is expected to
benefit strong customer retention as well as helping advisors attract new customers.
The business will continue to competitively develop, price and market a comprehensive range of individual wealth
management products while maintaining its focus on providing a leading platform to customers and independent advisors in
all channels.
Insurance & Annuities
The insurance and annuities market in Canada is led by a few major players, with many other players participating in the
market. Major factors affecting the growth of this market, as well as the Company, include perceived need for life and health
protection, tax and estate planning, growth in private wealth, changes in the regulatory and legislative landscape and
macroeconomic conditions including interest rates and public equity market performance.
In 2024, the Company continued to strengthen its distribution network and product suite by launching a new universal life
product with competitive features and rates, and improved pricing for disability illness products. The Company also continued
to enhance features for its web-based illustrations.
In 2025, Insurance & Annuities will continue to advance on business strategies of balancing growth with disciplined pricing and
risk selection. The business will continue to competitively develop, price and market a comprehensive range of individual
insurance products, while maintaining a strong focus on pricing and risk management discipline. The Company will also
continue to monitor and respond to the impacts of fluctuation in long-term interest rates and price compression.
39
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The Company remains committed to supporting its advisors. Distribution channels will maximize the use of common tools,
processes and support, while tailoring support to specific needs of advisors, where appropriate. The business will continue to
enhance its competitive position by focusing on improving advisor, customer and employee experience with investments in
new business and underwriting workflow and simplification of processes. It will continue to focus on delivering a seamless,
digitally led experience for advisors, customers, and employees from point of initial engagement through to claims settlement,
with quick and transparent servicing.
Operational expense management continues to be critically important for the Canada segment to deliver strong financial
results. The business will seek to achieve this through disciplined expense controls and effective implementation of efficiency
initiatives. Management has identified key areas of focus for these initiatives to facilitate efficiency gains balancing with
supporting organic growth, including continuing to invest in digital solutions to support advisors and customers, while
addressing its legacy of administration systems and processes to gain efficiency.
United States
The United States segment operating results for Lifeco include the results of Empower Annuity Insurance Company of America
(Empower), PanAgora Asset Management and the results of the legacy insurance businesses in the U.S. branch of Canada Life,
together with an allocation of a portion of Lifeco's corporate results. Items not associated directly with or allocated to Empower
and PanAgora Asset Management are included in the Corporate business unit. Those include a retained block of life insurance,
predominately participating policies, which are now administered by Protective Life, as well as a closed life retrocession block.
The U.S. segment also includes the results of Putnam Investments classified as discontinued operations.
Business Profile
Empower Defined Contribution
Empower Defined Contribution specializes in saving, investing and advisory services to help participants and plan sponsors
achieve their retirement goals by offering a comprehensive suite of services through employer sponsored defined contribution,
defined benefit and non-qualified plans. These services include optimized enrollment processes, engaging communication
materials, diverse investment options and educational resources. Empower Defined Contribution further supports participants
through individualized financial advice and innovative product solutions designed to maximize retirement outcomes. In
addition to participant focused offerings, it also offers private label recordkeeping and administrative services, empowering
plan providers to deliver seamless employer-sponsored plan experiences. Empower has expanded its capabilities with
Empower Stock Plan Services, providing equity compensation administration through flexible and adaptable technology for
plan sponsors. Through these capabilities, Empower Defined Contribution continues to strengthen its alignment with the
Workplace Solutions value driver, with a commitment to improving financial security across diverse industries.
Empower Personal Wealth
Empower Personal Wealth provides extensive retail wealth management products and services tailored to individuals. These
offerings include individual retirement accounts, after-tax investment accounts, high-net-worth wealth management and an
array of financial planning solutions. Empower Advisors serves as a cornerstone of these offerings, delivering customized
financial strategies that include online investment advice and managed account services to support clients in achieving their
unique financial goals. To further enhance these services, Empower Personal Wealth integrates digitally advanced tools and
platforms that enable clients to monitor their financial health comprehensively. These digital tools provide capabilities such as
real-time tracking of net worth and portfolios, budgeting, cash flow analysis, retirement planning and debt management.
Empower Personal Wealth aligns with the Wealth & Asset Management value driver, offering a seamless and holistic approach
to financial well-being for its clients.
Asset Management
Asset Management, through the PanAgora Asset Management brand, provides investment management services and related
administrative functions and distribution services and offers a broad range of investment products. PanAgora Asset
Management aligns with the Wealth & Asset Management value driver. PanAgora Asset Management's results are immaterial
to Lifeco's overall results.
40
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Market Overview
Empower Defined Contribution
Market Position
Products and Services
Distribution
• Second largest defined contribution service
provider in the country1 by participants,
providing services for 18.5 million participant
accounts and approximately 88,000 plans2,
with clients in all fifty states, Puerto Rico and
Guam
• Multiple awards from the NAPA Advisors’
Choice Awards as an industry leader across
various market segments for excellence in
service and innovation3
• Best in class in satisfaction among
recordkeeping providers in 20244
• Market leader in service to small and mid-
sized organizations (plans under $50 million)1
• Provides services to government plans in all
fifty states, including administration or
investment services for 29 state plans
• Largest provider of union plan services5
• Employer-sponsored defined contribution,
defined benefit and non-qualified plans as
well as a complete array of financial wellness
programs
• Administrative and recordkeeping services,
including enrollment, communication
strategies and education programs
• Fund management, investment options and
advisory services
• Workplace advice solutions leveraging
advanced data analytics and technology
through personalized dashboards, investment
strategies and progress tracking
• Real-time stock plan technology offered
through Empower Stock Plan Services,
providing administration services for equity
plan management
• Retirement services products distributed to
plan sponsors through brokers, consultants,
advisors, third-party administrators and
banks, ensuring broad accessibility
• Retirement plan sponsors are supported by
Empower's dedicated sales, account
management and client service professionals
• Empower offers private label recordkeeping
and administrative services distributed
through institutional clients
1
2024 PLANSPONSOR DC Recordkeeping Survey as of December 31, 2024.
2
As of December 31, 2024.
3
2024 Advisors' Choice Top Recordkeepers. NAPA Advisors' Choice Awards 2024.
4
2024 PLANSPONSOR DC Survey Standout.
5
2023 Pensions & Investments DC Recordkeeping Survey.
Empower Personal Wealth
Market Position
Products and Services
Distribution
• Individual wealth management provider with
over 740,000 accounts and approximately
US$87 billion in assets under administration
• Advisory team continues growing momentum
as net flows increase
• Top ranking apps1 and digital technology
with expert human advisory services for a
hybrid financial planning approach
• Multiple awards recognized by NAPA Advisors
for excellence in digital tools and advisory
support2
• Broad suite of financial solutions including:
• Personalized advisory services,
• Investment management,
• Individual retirement accounts (IRAs),
• Taxable accounts,
• High-net-worth wealth management
• Empower Personal DashboardTM provides
actionable financial insights, portfolio
monitoring and planning and market trend
information
• Multi-channel distribution approach through:
• Direct-to-consumer engagement through
digital platform
• Customized advisory services provided by
Empower Advisors
• Integrated equity compensation solutions
enabled through the OptionTrax by Empower
platform providing solutions for individual
and corporate clients
1
NerdWallet, "The Best Budget Apps for 2024," August 2024. ©2024 and TM, NerdWallet, Inc. All Rights Reserved, App Store rating is as of September 2024 and is based upon all ratings
and reviews received by Apple App Store®, Investopedia.com, "Best Budgeting Apps of 2024," August 23, 2024.
2
2024 Advisors' Choice Top Recordkeepers. NAPA Advisors' Choice Awards 2024.
Competitive Conditions
Empower Defined Contribution
The employer-sponsored defined contribution market remains intensely competitive, encompassing a broad range of well-
established insurance companies, financial service providers, banks, investment advisors, recordkeepers and professional
organizations. No single company or small group of competitors dominates the market. Industry consolidation has
significantly reduced the number of recordkeepers, creating a more concentrated landscape where scale and operational
efficiency drive competitive advantage. Firms are increasingly leveraging advanced technology and data analytics to offer
personalized investment solutions and enhance participant engagement as well as integrating financial wellness programs.
The Company competes primarily based on its strong brand recognition, industry-leading technology, scalable service
offerings and customer-focused solutions. The Company's competitive advantages include its robust recordkeeping
capabilities, innovative participant engagement tools and innovative technology, such as personalized dashboards and
proprietary retirement readiness scores.
41
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Empower Personal Wealth
The wealth management market continues to be intensely competitive, driven by evolving client preferences and significant
technological advancements. The Company’s competitors span a broad spectrum including traditional brick and mortar
institutions, hybrid and fully digital registered investment advisors, independent advisory firms, broker-dealers, mutual fund
companies, insurance companies and banks. While no single competitor dominates the market, several established legacy
organizations leverage their size, extensive resources and strong brand recognition. At the same time, innovative new entrants
and existing competitors continue to present challenges, often emphasizing technology-driven solutions and tailored customer
experiences. Consolidation trends within the industry are reshaping the competitive landscape, as larger players acquire
smaller firms to expand capabilities and market share, as well as fintech companies offering low-cost digital solutions.
Competition increasingly focuses on key areas such as cutting-edge technology, customer service excellence, sustainable
investing options, cost efficiency, brand awareness, investment strategy sophistication and reputation management, including
reviews and social media presence.
2024 Developments
•
In the United States, on January 1, 2024, Lifeco completed the previously announced sale of Putnam Investments to
Franklin Resources, Inc., operating as "Franklin Templeton", in exchange for Franklin Templeton common shares, cash,
and contingent consideration of up to US$375 million over a five to seven-year period. In the first quarter of 2024, the
Company recorded a net loss of $115 million reflecting closing costs as well as a $44 million final gain on sale within
discontinued operations. Lifeco retains its controlling interest in PanAgora Asset Management, a leading quantitative asset
manager. The Company currently holds approximately 31,600,000 Franklin Templeton shares and has agreed to hold a
majority of these shares until at least January 1, 2029. The shares are held at fair value with changes in fair market value
flowing through other comprehensive income (OCI).
In addition to the sale, Lifeco, along with Power Corporation of Canada and Franklin Templeton, entered into a strategic
relationship to distribute Franklin Templeton products for the benefit of clients, distribution partners, and shareholders.
•
As of June 30, 2024, with the successful completion of system migrations of the full-service retirement services business of
Prudential, Empower achieved US$180 million pre-tax run rate synergies following the acquisition on April 1, 2022,
consistent with expectations. Revenue synergies of US$20 million were achieved on a run-rate basis by the end of 2024 and
are expected to grow to US$50 million by the end of 2026.
Overall, acquired Prudential retention targets have been exceeded with asset retention of 94% and revenue retention of
86%.
•
On September 23, 2024, Empower acquired Plan Management Corporation (PMC), the creator of OptionTrax, a digital
equity plan administration and service provider. With the completion of the acquisition, Empower’s retirement services
expanded to employers who offer equity compensation programs as well as enhanced financial planning services offered
through the Empower Personal Wealth business. The acquisition increased Empower’s client base by an additional 300
employers with approximately US$62 billion in plan value. The purchase consideration was funded with existing resources
and deferred consideration subject to achievement of target growth objectives. Empower expects to incur integration
expenses of US$20 million pre-tax and transaction costs of approximately US$1 million pre-tax. The integration is expected
to be completed by June of 2026. Empower anticipates realizing revenue synergies through the financial planning services
offered through Empower Personal Wealth business. This acquisition is not expected to have a material impact on the
Company's financial position.
•
During the fourth quarter of 2024, Empower announced an expansion of the suite of retirement income products offered
based on partnering with several asset managers and insurance providers to help bolster the choices retirement plan
participants have available to them on the Empower platform.
42
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Selected Financial Information - United States
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss) (US$)1
Empower Defined Contribution
$
207 $
215 $
155 $
769 $
659
Empower Personal Wealth
47
44
40
168
135
Asset Management
1
(2)
—
(3)
(7)
Corporate
7
7
(2)
39
(38)
Base earnings (loss) (US$)1
$
262 $
264 $
193 $
973 $
749
Items excluded from base earnings (US$)
(46)
(39)
(51)
(160)
(177)
Net earnings from continuing operations (US$)2
$
216 $
225 $
142 $
813 $
572
Base earnings (loss) (C$)1
$
367 $
359 $
261 $
1,336 $
1,006
Net earnings from continuing operations (C$)2
$
304 $
307 $
194 $
1,118 $
769
Net flows (US$)2
Empower Defined Contribution3,4
$
(8,344) $
(13,746) $
8,301 $
(32,866) $
11,001
Empower Personal Wealth
3,050
2,363
1,653
8,313
8,519
Asset Management
(466)
(1,495)
(995)
(4,404)
(3,777)
Net flows (US$)2
$
(5,760) $
(12,878) $
8,959 $
(28,957) $
15,743
Net flows (C$)2
$
(8,064) $
(17,514) $
12,184 $
(39,565) $
21,370
Fee and other income (US$)
Empower Defined Contribution
$
677 $
655 $
586 $
2,591 $
2,273
Empower Personal Wealth
139
130
109
507
398
Asset Management
22
19
19
85
81
Corporate
—
—
—
3
—
Fee and other income (US$)
$
838 $
804 $
714 $
3,186 $
2,752
Fee and other income (C$)
$
1,174 $
1,094 $
970
$
4,368 $
3,706
Total assets (US$)
$
237,676 $
242,010 $
229,947
Continuing operations - other assets under
management2
98,184
99,756
108,268
Discontinued operations - other assets under
management2
—
—
121,478
Total assets under management1
335,860
341,766
459,693
Other assets under administration2
1,491,834
1,503,158
1,270,267
Total assets under administration (US$)1
$
1,827,694 $
1,844,924 $
1,729,960
Total assets under administration (C$)1
$
2,631,879 $
2,490,648 $
2,300,847
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
Results for the three months ended September 30, 2024 and twelve months ended December 31, 2024 do not include US$40.0 billion in transfers related to the Plan Management
Corporation (PMC) acquisition.
4
Results for the periods ended December 31, 2024 do not include US$2.5 billion in net outflows related to PMC stock plan services. These outflows primarily represent timing of
outflows and inflows that fall in separate quarters based on the nature of the product and are not representative to the Company’s ability to attract and retain business. The Company
expects outflows in the fourth quarter will be mostly offset by inflows in the first quarter of 2025.
Note: The United States segment does not have a material CSM balance.
Base earnings and net earnings from continuing operations
In the fourth quarter of 2024, net earnings from continuing operations increased by US$74 million to US$216 million compared
to the same quarter last year. Base earnings of US$262 million increased by US$69 million in the fourth quarter of 2024
compared to the same quarter last year, primarily due to a significant increase in fee income driven by growth in the business
and higher equity markets and lower credit-related impacts on commercial loans when compared to the prior period. These
increases were partially offset by higher paid crediting rates resulting in lower spread as well as higher operating expenses
attributed to growth in the business in the current year.
Items excluded from base earnings were negative US$46 million in the fourth quarter of 2024 compared to negative US$51
million for the same quarter last year, primarily due to more favourable market experience relative to expectations and the
43
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
non-recurrence of prior year Prudential integration expenses. These were offset by adjustments to transaction-related expenses
and higher guaranty fund assessments in the current quarter.
For the twelve months ended December 31, 2024, net earnings from continuing operations increased by US$241 million to
US$813 million compared to the same period last year. Base earnings of US$973 million increased by US$224 million compared
to the same period last year, primarily due to the same reasons discussed for the in-quarter results as well as higher earnings on
surplus assets.
For the twelve months ended December 31, 2024, items excluded from base earnings were negative US$160 million compared
to negative US$177 million for the same period last year. This improvement was primarily due to the same reasons discussed
for the in-quarter results as well as the non-recurrence of a 2023 provision related to Empower's sale of substantially all of its
individual life and annuity business in 2019. These were partially offset by unfavourable actuarial assumption changes during
the current year.
Net flows
In the fourth quarter of 2024, net outflows were US$5.8 billion, compared to net inflows of US$9.0 billion for the same quarter
last year, primarily due to higher participant net redemptions in the current year compared to the same quarter last year.
Average account balances of participants have increased due to market growth over the past year, resulting in increased
distributions, which have outpaced contributions. The number of participants at the end of the fourth quarter of 2024 has
increased from the end of the fourth quarter of 2023 and from the end of the third quarter of 2024.
For the twelve months ended December 31, 2024, net outflows were US$29.0 billion compared to net inflows of US$15.7 billion
for the same period last year, primarily due to the same reason discussed for the in-quarter results, in addition to a large plan
termination in the first quarter of 2024. Large plan sales and terminations can be highly variable from period to period and tend
to result in lower margins but nonetheless contribute to covering fixed overhead costs. The current year period excludes US$40
billion in net transfers related to the PMC acquisition.
Fee and other income
Fee income is derived primarily from assets under management, assets under administration, shareholder servicing fees,
administration and recordkeeping services, investment advisory services, investment management fees, performance fees,
transfer agency and other service fees as well as underwriting and distribution fees.
Fee and other income for the fourth quarter of 2024 of US$838 million increased by US$124 million compared to the same
quarter last year. The increase was primarily due to higher equity market levels and overall growth in the business.
For the twelve months ended December 31, 2024, fee and other income of US$3,186 million increased by US$434 million
compared to the same period last year, due to the same reasons discussed for the in-quarter results as well as adjustments
related to Prudential fee income.
Empower - Assets under administration (US$)
Dec. 31
2024
Dec. 31
2023
General account - fixed options
$
63,130 $
66,531
Segregated funds - variable options
135,191
131,954
Other assets under management1
64,769
75,794
Other assets under administration
1,491,834
1,270,267
Total
$
1,754,924 $
1,544,546
1
At December 31, 2024, other assets under management included US$48 million in PanAgora managed funds (US$21.4 billion in Putnam managed funds, including PanAgora managed
funds at December 31, 2023).
Empower customer account values at December 31, 2024 of US$1.8 trillion increased by US$210.4 billion compared with
December 31, 2023, primarily due to increased market activity as well as increased asset flow within Empower Personal Wealth.
These were partially offset by higher participant net redemptions in the current year compared to last year.
Outlook
Refer to Cautionary Note regarding Forward-looking Information and Cautionary Note regarding Non-GAAP Financial
Measures and Ratios at the beginning of this document.
Empower Defined Contribution
Empower Defined Contribution is strategically positioned to capitalize on substantial growth opportunities across various plan
types, company sizes and market segments. Since accelerating its growth through acquisitions, beginning in 2020, Empower
has enhanced its expertise, expanded its capabilities and broadened its product portfolio. Notably, the integration of the
Prudential business, acquired in 2022, was completed in the first half of 2024, yielding additional revenue and cost saving
synergies.
44
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Looking ahead to 2025, the financial services industry is expected to experience transformative shifts, including increased
capital investment and the adoption of advanced technologies, which are expected to drive market growth. Empower is well-
prepared to leverage these developments to further enhance its service offerings and operational efficiency. As the second-
largest provider in the U.S. defined contribution retirement market, the Company anticipates increased organic growth within
Empower Defined Contribution and remains vigilant regarding ongoing consolidation trends in the workplace retirement
market. The Company’s dedication to innovation, customer-centric services and operational excellence continues to solidify its
leading position in the defined contribution marketplace, appealing to a diverse range of plan sponsors and participants, and
fostering better retirement outcomes.
Empower Personal Wealth
Empower Personal Wealth launched in the first quarter of 2023 by combining Empower’s legacy rollover and brokerage
offerings with the acquired capabilities and customers from Personal Capital. It is dedicated to providing retail wealth
management to individual investors through its suite of financial solutions including customized advisory services, IRAs,
taxable account offerings and high-net-worth wealth management.
In 2025, Empower Personal Wealth will continue to serve its existing customer base while driving growth through a hybrid
approach that integrates the expertise of financial advisors with sophisticated digital platforms. Active marketing efforts to
promote the Empower brand will complement these initiatives. It will continue to focus on developing and expanding a broad
range of product solutions, leveraging the Empower Personal Dashboard and Empower Advisors. Management has identified
strategic priorities to achieve organic growth and enhance operational efficiency. These priorities include sustained investment
in digital tools to support advisors and clients, modernization of legacy administrative systems and the creation of scalable
processes to unlock future business growth. Empower Personal Wealth anticipates realizing revenue synergies through the
financial planning and equity compensation solution services offered through OptionTrax by Empower.
By maintaining its commitment to innovation, personalized service and strategic investments in technology and talent,
Empower Personal Wealth remains well positioned to deliver meaningful outcomes for its clients and thereby strengthen its
competitive position in the market through sustainable growth in 2025 and beyond.
Europe
The Europe segment is comprised of three distinct business units: Workplace Solutions, Individual Wealth & Asset
Management and Insurance & Annuities. The segment serves customers in the United Kingdom (U.K.), Ireland and Germany.
The Company operates under the Canada Life brand in the U.K. and Germany and under the Irish Life brand in Ireland along
with other acquired brands within the broker market in Ireland.
Business Profile
Workplace Solutions
Workplace Solutions consists of group life and health insurance business in the U.K. and Ireland as well as group retirement
and employee benefit consulting services in Ireland. These products and services are distributed through employee benefit
consultants in the U.K. and independent brokers and a direct sales force in Ireland. Irish Life Health offers individual and
corporate health plans, distributed through independent brokers and direct channels. The Company's subsidiary Unio
Financial Services (Unio) offers employee benefits consulting services in Ireland through Unio Employment Benefits and
represents the amalgamation of three of Ireland's leading employee benefits consulting companies. The Company's subsidiary
Cornmarket Group Financial Services Limited is Ireland’s largest public sector provider of financial services with
approximately 388,000 active policies at the end of 2024.
Individual Wealth & Asset Management
Individual Wealth & Asset Management consists of investments products offered in the U.K., pension, savings, and investment
products offered in Ireland and pension products offered in Germany. The core products offered are investments, including life
bonds, retirement drawdown and pension. These products are distributed through independent financial advisors, including
owned independent financial advisors, a direct sales force, tied agent bank branches and by companies in the Isle of Man
selling into the U.K. Canada Life Asset Management (CLAM) is a fund management company managing a broad range of assets
on behalf of the U.K. businesses and companies in the Lifeco group. Irish Life Investment Managers (ILIM) is one of the
Company's fund management operations in Ireland. In addition to managing assets on behalf of companies in the Lifeco
group, ILIM also manages assets for a wide range of institutional clients including pension schemes, insurance companies,
wealth managers, fiduciary managers and sovereign wealth funds across Europe and North America. Setanta Asset
Management, a subsidiary of the Company also based in Ireland, manages assets for third-party institutional clients and a
number of companies in the Lifeco group. The Company's subsidiary, Unio, operates a wealth consultancy business in Ireland,
Unio Wealth Management, which results from the amalgamation of four of Ireland's leading wealth management companies.
45
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Insurance & Annuities
Insurance & Annuities consists of bulk and individual payout annuities offered in the U.K. and Ireland, equity release
mortgages offered in the U.K., and individual protection insurance offered in Ireland and Germany. These products are
distributed through independent brokers and multi-tied agents.
Market Overview
Workplace Solutions
Market Position
Products and Services
Distribution
U.K.
• Group life market share 22%1
• Group income protection market share 13%1
Ireland
• Life assurance market share 30%2
• Group DC schemes market share 40%3
• Group third largest health insurance business
through Irish Health with a market share of
20%4
U.K.
• Group life insurance
• Group income protection (disability)
• Group critical illness
Ireland
• Group and individual health insurance
• Group critical illness
• Group risk & pension
• Group wealth management services
U.K.
• Financial advisors
• Employee benefit consultants
Ireland
• Independent brokers (including owned
brokers)
• Pension consultants (including owned
pension consultants)
• Direct sales force made up of primarily self-
employed tied agents and a smaller employed
sales team
• Direct digital and contact centre
1
As at December 31, 2023.
2
As at September 30, 2024. This is the total Irish Life Assurance share of the Life, Pensions & Investments market.
3
As at December 31, 2024.
4
As at September 30, 2024 based on figures reported by the Health Insurance Authority.
Individual Wealth & Asset Management
Market Position
Products and Services
Distribution
U.K.
• A market leading international life company
selling into the U.K. market with over 31%
market share1
Ireland
• ILIM is one of the largest institutional fund
managers in Ireland with $195 billion assets
under management2
• Setanta Asset Management has
approximately $22 billion of assets under
management2
• Unio is one of Ireland's leading wealth
management companies
Germany
• 2.6% share of the broker market3
U.K.
• International bonds
• Collective investment funds
• Retirement drawdown & pension, onshore
bonds (closed to new business)
Ireland
• Individual risk & pensions
• Individual wealth management services
• Individual savings and investment
• Institutional investment management
Germany
• Pensions
• Variable annuities (GMWB)
U.K.
• Financial advisors
• Private banks
Ireland
• Independent brokers (including owned
brokers)
• Pension and investment consultants
• Direct sales force made up of primarily self-
employed tied agents and a smaller employed
sales team
• Direct digital and contact centre
• Tied bank branch distribution
Germany
• Independent brokers
• Multi-tied agents
1
Market share position is based on Acuity U.K. Index Q3 2024.
2
As at December 31, 2024.
3
As at November 30, 2024.
46
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Insurance & Annuities
Market Position
Products and Services
Distribution
U.K.
• Payout annuities market share 10% (advisor
only)1
• A leading company in the equity release
market with 10% market share2
Ireland
• Market leader with total market share of
30%3
• Number one in individual life insurance with
22% market share4
• Number one in bulk annuities with over 43%
market share5
Germany
• 6.8% share of the broker market6
U.K.
• Bulk payout annuities
• Individual payout annuities
• Fixed term annuities
• Equity release mortgages
Ireland
• Individual and bulk payout annuities
• Individual protection products
Germany
• Individual life insurance
• Income protection (disability)
• Critical illness
U.K.
• Financial advisors
• Employee benefit consultants
Ireland
• Independent brokers (including owned
brokers)
• Direct sales force made up of primarily self-
employed tied agents and a smaller employed
sales team
• Direct digital and contact centre
• Tied bank branch distribution
Germany
• Independent brokers
• Multi-tied agents
1
Market share based on data for the nine months ended September 30, 2024 through financial advisors, restricted whole market advisors and non-advised distributor.
2
Market share based on Equity Release Council market statistics for the nine months ended September 30, 2024.
3
As at September 30, 2024. This is the total Irish Life Assurance share of the Life, Pensions & Investments market.
4
As at September 30, 2024.
5
As at December 31, 2024.
6
As at November 30, 2024.
Competitive Conditions
Workplace Solutions
In the U.K., Canada Life is one of the largest insurers in the group protection market. The top four participants in this market
comprise the majority market share measured by in-force premium. Pricing competition remains high in this market.
Irish Life is the largest life assurance company in Ireland with a market share of 30% as at September 30, 2024. While there are a
broad number of domestic and multinational participants, the top three participants have a combined share of the market
exceeding 75%.
Irish Life Health is one of the main insurers in the Irish market and provides access to healthcare through its health insurance
plans that offers preventative health benefits through a combination of innovative digital and in-person services. During the
fourth quarter of 2024, a fourth health insurer launched in the already competitive Irish market with the potential to further
increase competition in 2025.
The intermediary division of Irish Life provides employee benefits consultancy to companies in Ireland through Unio
Employee Benefits and Cornmarket Group Financial Services. Cornmarket Group is the largest Irish public sector provider of
financial services, whereas Unio Employee Benefits operates predominately in the private sector.
Individual Wealth & Asset Management
Canada Life Asset Management (CLAM) is based in the U.K. with approximately $68.6 billion of assets under management, as
at December 31, 2024. CLAM’s core fund management solutions include a broad asset sourcing capability that supports its
institutional client mandates, bulk annuity and reinsurance customers and retail collective funds. CLAM distributes its
products through a network of platforms, discretionary fund managers and financial advisors.
ILIM is one of Ireland’s largest institutional fund managers with approximately $195 billion of assets under management, as at
December 31, 2024. ILIM continues to expand its investment offerings in multi asset, real estate and custom indexed solutions
to broaden its environmental, social and governance capabilities, and evolve its asset and liability management capabilities to
support bulk annuity services for large defined benefit pension schemes. Setanta Asset Management had approximately $22
billion of assets under management as at December 31, 2024.
The Company has a competitive position among providers of low guarantee unitized products to the German independent
intermediary market. The move of insurance companies from traditional German insurance products with guarantees to the
unitized lighter guarantee product categories that Canada Life offers continues to increase the level of competition. The
Company has enhanced its ongoing product, technology and service offerings to help strengthen its position in the German
market.
Within Individual Wealth & Asset Management, the intermediary division of Irish Life provides wealth services to individuals.
This is through Unio, which along with an affiliated company, oversees approximately $14 billion of assets on behalf of
Workplace and Individual Wealth & Asset Management clients.
47
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Insurance & Annuities
Canada Life in the U.K. has benefited in recent years from an increase in the proportion of customers who are seeking the best
price in the open market and buying annuities through financial advisors, which is the Company’s primary distribution
channel. The Company continues to offer both standard and enhanced annuities for customers wanting to take advantage of
pension flexibility. Following the rise of interest rates from historic lows, the market has grown and is highly competitive with
new entrants launching their annuity propositions. Despite rates falling in 2024, the appeal of annuity products remains high.
The Company offers bulk annuities aimed at trustees of defined benefits plans who want to insure pension scheme liabilities in
payment. This is a large and growing market and the demand from trustees continues to increase as corporate sponsors wish to
remove scheme liabilities from the corporate balance sheet. With considerable expertise and experience in longevity and
investment products, the Company is well placed in the bulk annuity market. In 2024, the U.K. bulk annuity market saw one
insurer exit the market and two new entrants, with another entrant pending regulatory approval. While this will add to market
supply, the impact on competition will be limited by the continued strong growth in demand.
Irish Life continues to compete successfully in the Irish protection market through product innovation, broad distribution
reach and service offerings. Market share grew to 22% in the fourth quarter of 2024.
Annuity sales in the Irish market, in particular, bulk cases, were slower than expected in 2024. Irish Life competed well in cases
that came to market, with an overall market share of 43%. A deferred annuity product is planned to launch in the first half of
2025 which should facilitate increased bulk annuity activity.
The U.K. equity release market continues to experience pressure as consumers remain cautious, and when combined with high
interest rates has resulted in the market contracting. The Company is well positioned for further growth in the equity release
market and aims to continue to innovate its value proposition despite current market conditions.
2024 Developments
•
On January 23, 2024, Canada Life U.K. announced the immediate closure of the Select Account, The Retirement Account,
and the Canada Life Trustee Investment Plan to new business, representing less than 1% of its customer base. On
December 23, 2024, Canada Life U.K. announced the signing of an agreement to transfer part of this business to
Countrywide Assured plc (Countrywide), a subsidiary of Chesnara plc. Concurrently, the two parties entered into a
reinsurance agreement such that the risks and rewards of the underlying business are transferred to Countrywide. The
transfer is subject to customary closing conditions including regulatory approvals and is expected to complete by the end
of 2025. This decision enables Canada Life U.K. to focus on core lines, including offshore wealth products.
•
In Germany, the business completed the migration of all its policies in the first quarter of 2024 onto a new administration
platform and is now focused on realizing the benefits from this multi-year technology investment.
•
Canada Life U.K. launched several new products in 2024 including Canada Life Home Finance. Canada Life Home Finance
launched six new Capital Select products at the start of the second quarter of 2024. This strategic initiative underscores
Canada Life U.K.'s dedication to continuous product development and market responsiveness. By introducing lower loan-
to-value (LTV) tiers, Canada Life U.K. has successfully unlocked access to new customer segments, supporting clients in
achieving their financial goals and further positioning Canada Life at the forefront of the equity release market.
•
On October 21, 2024, three Irish Life Health branded ExpressCare Clinics were launched, strengthening Irish Life's market
presence. These clinics, already accessible to health customers, are now branded as Irish Life Health Centres, augmenting
Irish Life's customer offering in digital healthcare and reinforcing its commitment to integrated healthcare services.
•
Canada Life U.K. has significantly developed its bulk annuity proposition and capability in 2024. The U.K. bulk annuities
market continues to remain very buoyant as companies seek to de-risk their balance sheets from changes in the value of
pension liabilities. The company wrote fourteen bulk annuity transactions in 2024, with all transactions including deferred
liabilities, aggregating to $2.3 billion (£1.3 billion). This represented a significant increase on 2023 sales, and a record
number of transactions for the Company.
•
Canada Life U.K. offshore bonds sales reached $3.6 billion (£2 billion), marking the highest annual sales since inception.
This outcome followed the decision to close the onshore bond product to new business in January 2024, allowing for a
focus on offshore bonds.
•
In 2024, Irish Life won two of the largest public sector risk plans in the market, representing coverage of over 20,000 lives.
In addition, new risk business with several large multi-national companies in the finance, medical devices and technology
sectors were also secured, all while maintaining a large business retention rate over 96%. Irish Life achieved this success by
bringing first-to-market income protection claim innovations, while improving Irish Life's proposition by expanding its
early intervention and rehabilitation offerings.
48
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Selected Financial Information - Europe
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
Workplace Solutions
$
68 $
47 $
87 $
226 $
258
Individual Wealth & Asset Management
52
49
43
188
161
Insurance & Annuities
106
93
91
391
396
Corporate
5
6
(8)
24
(38)
Base earnings (loss)1
$
231 $
195 $
213 $
829 $
777
Items excluded from base earnings
79
(80)
4
(16)
(393)
Net earnings - common shareholders
$
310 $
115 $
217 $
813 $
384
Sales2
Workplace Solutions
$
356 $
381 $
596 $
1,537 $
2,343
Individual Wealth & Asset Management
11,505
9,499
6,260
34,709
24,947
Insurance & Annuities
479
1,539
1,216
4,294
3,851
Net cash flows2
Workplace Solutions
$
131 $
282 $
408 $
969 $
1,605
Individual Wealth & Asset Management
1,203
3,759
3,388
9,007
7,882
Insurance & Annuities
19
20
30
60
93
Net cash flows2
$
1,353 $
4,061 $
3,826 $
10,036 $
9,580
Fee and other income
Workplace Solutions
$
65 $
62 $
49 $
237 $
202
Individual Wealth & Asset Management
193
163
151
660
573
Insurance & Annuities and Corporate
3
4
1
18
2
Fee and other income
$
261 $
229 $
201
$
915 $
777
Group life and health book premiums2
$
2,671 $
2,613 $
2,415
Total assets
$
221,329 $
221,707 $
194,529
Other assets under management2
81,257
75,679
63,525
Total assets under management1
302,586
297,386
258,054
Other assets under administration2,3
14,153
14,006
12,076
Total assets under administration1
$
316,739 $
311,392 $
270,130
Contractual service margin
Insurance & Annuities - Non-Participating
$
3,664 $
3,713 $
3,255
Individual Wealth & Asset Management - Segregated
Funds
1,531
1,564
1,463
Contractual service margin
$
5,195 $
5,277 $
4,718
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
At December 31, 2024, other assets under administration excludes $19.1 billion of assets managed for other business units within the Lifeco group of companies ($17.8 billion at
September 30, 2024 and $12.7 billion at December 31, 2023).
Base and net earnings
In the fourth quarter of 2024, the Europe segment's net earnings of $310 million increased by $93 million compared to the same
quarter last year. Base earnings of $231 million increased by $18 million compared to the same quarter last year, primarily due
to fee income growth in Ireland driven by strong flows and markets, higher CSM recognized for services provided and higher
trading gains in the U.K. compared to the same quarter last year. These items were partially offset by less favourable group
protection experience in the U.K. and less favourable health experience in Ireland.
Items excluded from base earnings for the fourth quarter of 2024 were positive $79 million compared to positive $4 million for
the same quarter last year. Market experience relative to expectations was positive $46 million compared to negative $60
million for the same quarter last year, primarily due to favourable market experience relative to expectations in the current year
compared to the prior year due to increases in risk-free interest rates. Assumption changes and management actions were
positive $20 million compared to positive $100 million for the same period last year. Refer to the "Assumption Changes and
Management Actions" section of this document for additional details. In addition, business transformation impacts increased
by $49 million compared to the same quarter last year. Business transformation impacts of positive $17 million in the fourth
49
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
quarter of 2024 were primarily related to a gain recorded on the sale of the U.K. onshore bond business. Business
transformation impacts in the fourth quarter of 2023 were primarily related to provisions for restructuring costs.
For the twelve months ended December 31, 2024, net earnings of $813 million increased by $429 million compared to the same
period last year. Base earnings of $829 million increased by $52 million compared to the same period last year, primarily due to
higher CSM recognized for services provided, growth in surplus income and higher fee income. These items were partially
offset by less favourable group experience in the U.K., a change to certain tax estimates from the prior year in Germany that did
not repeat and a higher effective tax rate due to the implementation of the GMT.
For the twelve months ended December 31, 2024, items excluded from base earnings were negative $16 million compared to
negative $393 million for the same period last year. Market experience relative to expectations was positive $19 million
compared to negative $243 million for the same period last year, primarily due to the same reason discussed for the in-quarter
results. Assumption changes and management actions were negative $33 million compared to positive $67 million for the same
period last year. Refer to the "Assumption Changes and Management Actions" section of this document for additional details.
In the fourth quarter of 2024, the impact of GMT was negative $5 million on net earnings and negative $6 million on base
earnings.
For the twelve months ended December 31, 2024, the impact of the GMT was negative $33 million on net earnings and negative
$38 million on base earnings.
Sales
Individual wealth and asset management sales for the fourth quarter of 2024 of $11,505 million increased by $5,245 million
compared to the same quarter last year, primarily due to higher institutional management sales in Ireland driven by client
migration and restructuring mandates, strong international bond sales in the U.K. driven by increased market activity and the
impact of currency movement. Insurance and annuities sales for the fourth quarter of 2024 of $479 million decreased by $737
million compared to the same quarter last year, primarily due to lower bulk purchase annuity sales and lower individual
annuity sales due to pricing competition in the market, partially offset by the impact of currency movement. Workplace
Solutions sales for the fourth quarter of 2024 of $356 million decreased by $240 million compared to the same quarter last year,
primarily due to lower pension sales in Ireland.
For the twelve months ended December 31, 2024, individual wealth and asset management sales of $34,709 million increased
by $9,762 million compared to the same period last year, primarily due to higher institutional management sales in Ireland
driven by a large client rebalancing and strategic asset allocation decision as well as the same reasons discussed for the in-
quarter results. Insurance and annuities sales for the twelve months ended December 31, 2024 of $4,294 million increased by
$443 million compared to the same period last year, primarily due to strong bulk annuity sales and the impact of currency
movement, partially offset by lower individual annuity sales. Workplace Solutions sales for the twelve months ended December
31, 2024 of $1,537 million decreased by $806 million compared to the same period last year, primarily due to the same reason
discussed as the in-quarter results, partially offset by the impact of currency movement.
Group life and health book premiums
Group life and health book premiums at December 31, 2024 were $2.7 billion, an increase of $58 million compared to
September 30, 2024, primarily due to growth of in-force business and new voluntary risk sales in Ireland.
Net cash flows
In the fourth quarter of 2024, net cash inflows were $1.4 billion compared to net cash inflows of $3.8 billion for the same quarter
last year. The lower net inflows were primarily due to fund redemptions at ILIM by a subadvisor to tactically rebalance their
holdings and lower net inflows in Workplace Solutions driven by reduced pension sales in Ireland in a slower market. These
items were partially offset by strong international bond sales from increased market activity in the U.K.
For the twelve months ended December 31, 2024, net cash inflows were $10.0 billion compared to net cash inflows of $9.6
billion for the same period last year. The increase was primarily due to a large client rebalancing and strategic asset allocation
decision and the impact of currency movement, partially offset by lower net inflows in Workplace Solutions driven by reduced
pension sales in Ireland in a slower market.
Fee and other income
Fee and other income for the fourth quarter of 2024 of $261 million increased by $60 million compared to the same quarter last
year. The increase was primarily due to higher management fees from higher average assets under administration as well as a
gain recorded in the fourth quarter of 2024 on the sale of the U.K. onshore bond business, which is excluded from base
earnings.
For the twelve months ended December 31, 2024, fee and other income of $915 million increased by $138 million compared to
the same period last year, primarily due to the same reason discussed for the in-quarter results.
50
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Contractual service margin
At December 31, 2024, total contractual service margin was $5,195 million, an increase of $477 million from December 31, 2023.
The increase was primarily due to new business sales, the impact of currency movement and the impact of actuarial
assumption changes, partially offset by CSM recognized for services provided. Refer to the "Assumption Changes and
Management Actions" section of this document for additional details on the impact of actuarial assumption changes.
Outlook
Refer to Cautionary Note regarding Forward-looking Information and Cautionary Note regarding Non-GAAP Financial
Measures and Ratios at the beginning of this document.
Workplace Solutions
•
In 2025, Canada Life U.K.’s group protection business will focus on enhancing propositions and gaining efficiencies
through technology to facilitate continued growth in premium income. Development of the WeCare support service and
expanding WeCare access to all insured employees is expected to improve positioning against market competition.
Continued development and automation of some administrative processes will support efficient growth in our target small
and medium-sized enterprises sector.
•
In 2025, Irish Life will focus on developing a fully integrated corporate engagement strategy to maximize the effectiveness
of our strong corporate relationships, ensure we maintain our pension, risk and health propositions and continue the
journey of integrating its wealth and employee benefits consulting businesses. Through the development of the fully
integrated corporate engagement strategy, this will support maximizing the impact of the Irish Life brand and continue to
grow both the number of relationships and the depth of these relationships. Irish Life offers a broad level of solutions to
corporate clients in the pension, protection, wealth and health spaces ahead of what is customary in these markets.
Individual Wealth & Asset Management
•
In 2025, Canada Life U.K. will focus on maintaining its position as the market leader in the single premium international
investment bond marketplace. Our distribution strategy for wealth will remain focused on financial advisors and
maintaining its relationships with institutional partners. We aim to hold our current market leading position. Our success
has been driven by breadth and depth of the product range, features and investment options, jurisdictional choice, service,
technical support, and relationship excellence, as well as competitive pricing. Consolidation has reduced the number of
major providers in the market which presents the Company with an opportunity to grow its market share further.
•
In 2025, Irish Life will continue to grow the Unio Wealth Management brand while seeking to maintain its market leading
positions in asset management in the areas of sustainability and product innovation. Irish Life plans to launch an
intermediary platform in 2025 offering innovative product solutions, data insights and administration efficiencies to the
Irish broker market.
•
In 2025, Canada Life in Germany will focus on growth and diversification in products and services, efficiency through
automation using technology and artificial intelligence partnerships and enhancing the experience of the independent
financial advisor and customer using digital applications. Occupational pensions are a major growth theme in Germany
and the Company intends to use its franchise and technologies to add value to small and medium-size business segments
where there is significant pension under coverage in Germany. The Company has been successful in building a presence
in the pensions market by leveraging its unitized with profits (UWP) competency and in 2025, will continue to explore
alternative solutions that are less capital intensive while still meeting customer and advisor needs.
Insurance & Annuities
•
In 2025, both Canada Life U.K. and Irish Life will focus on maintaining share of the retail payout annuities market while
investing in customer service systems. In 2024, rapid growth in the retail payout annuities market was driven by improved
payout rates and consumers seeking a guaranteed income. Canada Life U.K. expects that interest in retail annuities will
remain high as interest rates persist at a higher level than in the recent past, while overall retirement market demand will
continue to grow as retiree finances increasingly reflect historic employer provision shifts from defined benefit to defined
contribution plans.
•
The Company will continue to further develop its offerings and capability in the bulk annuity market in 2025, extending the
offering across a wider range of the market. Medium-term demand is expected to remain strong in this market as scheme
funding ratios mean de-risking is accessible for a higher proportion of schemes than in previous years.
At Irish Life, product development on deferred annuity product continues in line with expectations. This is an important
offering to expand footprint in the bulk annuity market and aligns with the Company's strategic plans and is key to
stabilizing CSM.
•
The outlook for both U.K. gilt prices and property prices remains uncertain over the short-term, however, demand for
equity release mortgage products is expected to increase given growing customer needs to meet living costs, consolidate
debt and manage mortgage debt carried into later life.
51
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
•
In 2025, Irish Life will continue to digitalize and expand its advice services to 1.6 million customers and its advice partners.
•
In the Irish life and health insurance markets, competition is expected to grow in 2025, as a new health insurer launched
into the Irish health market in the fourth quarter of 2024, bringing the number of key players to four. To date, policyholder
behaviour experience has remained resilient to the competitive threat. Defensive strategies are being deployed to
strengthen the competitive position, including a new partnership with Affidea on Irish Life Health branded clinics which
went live in the fourth quarter of 2024.
•
In 2025, Canada Life in Germany will continue to develop its data and customer facing digital capabilities and will grow its
customer portal further to make it easier for customers to access their plan information. The Company will also continue
its deployment of automation across the customer journey with the use of AI supported technologies. Through its
associated investment in a broker consolidator in Germany, the Company will continue to explore opportunities across the
country to acquire brokerages that would generate accretive value to the existing business.
Capital and Risk Solutions
The Capital and Risk Solutions segment includes Lifeco's reinsurance business and an allocation of a portion of Lifeco's
corporate results. Capital and Risk Solutions also includes the results for the Company's legacy international businesses.
At Lifeco, the Capital and Risk Solutions offerings are generally included in the Insurance & Risk Solutions value driver. The
segment's surplus earnings and an allocation of corporate capital are included in Corporate.
Business Profile
Reinsurance
Reinsurance provides capital and risk solutions and operates primarily in the U.S., Barbados, Bermuda and Ireland. In the U.S.,
the reinsurance business operates through a branch of Canada Life. In Barbados, the reinsurance business operates primarily
through a branch of Canada Life and subsidiaries of Canada Life. In Bermuda and Ireland, the reinsurance business operates
through a subsidiary of Canada Life.
The Company’s business includes both reinsurance and retrocession business transacted directly with clients or through
reinsurance brokers. As a retrocessionaire, the Company provides reinsurance to other reinsurers to enable those companies to
manage their insurance risk. The product portfolio offered by the Company includes life, health, annuity/longevity, mortgage
surety and property catastrophe reinsurance, provided on both a proportional and non-proportional basis.
In addition to providing reinsurance products to third parties, the Company also utilizes the same structures on internal
reinsurance transactions between companies in the Lifeco group. These transactions are undertaken to better manage
insurance risks relating to retention, volatility and concentration; and to facilitate capital management for the Company, its
subsidiaries and branch operations. These internal reinsurance transactions produce benefits that are reflected in one or more
of the Company’s other business units.
Market Overview
Reinsurance
Market Position
Products and Services
Distribution
• Largest group life reinsurer and 6th largest
individual life reinsurer in the U.S. by in force
volumes1
• Leading provider of structured reinsurance
solutions in the U.S. and Europe markets
• Leading provider of U.K. and European
longevity reinsurance
• Long-standing provider of a range of property
and casualty catastrophe retrocession
coverages
Life, Health and Annuity
• Yearly renewable term
• Co-insurance
• Modified co-insurance
• Risk & capital management solutions
Longevity
• Longevity swaps
• Capital management solutions
Mortgage and Surety Reinsurance
• Stop loss and quota share
Property and Casualty
• Catastrophe retrocession
• Capital management solutions
Funded Reinsurance
• Coinsurance of life and annuity blocks with
assets
• Independent reinsurance brokers
• Direct placements
1
As at December 31, 2023.
52
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Competitive Conditions
In the U.S. life reinsurance market, insurers continue to view reinsurance as an important tool for risk and capital management.
Several competitors are now focusing on growing their market share, which has resulted in increased competition.
Nevertheless, a biennial independent industry survey released in November 2023 confirmed that the Company remains one of
the top two providers of risk and capital management solutions in the U.S. market. The Company’s financial strength and
ability to offer risk and capital solutions and traditional mortality reinsurance continues to be a competitive advantage.
In Europe, Solvency II dominates the regulatory landscape and interest in reinsurance solutions that produce capital benefits
continues to grow. Demand for longevity reinsurance remains strong in the U.K., the Netherlands and other continental
European countries. As a result, there are now more reinsurers participating in the European market.
The Company's main competitors include other large reinsurance companies primarily in North America and Europe.
2024 Developments
•
The Capital and Risk Solutions segment continued to grow by providing tailored solutions to customers while increasing
diversification within the portfolio. In 2024, the Capital and Risk Solutions segment continued to expand its international
presence in targeted new markets, while continuing to focus on core markets and product expansion in Europe and the
U.S. During 2024, the Company had a strong new business year, completing a number of transactions with continued
growth in the structured business. Of note, the Company's geographic expansion included two structured transactions in
Australia and the asset intensive business grew with two transactions signed in the fourth quarter of 2024.
•
The Company offers property catastrophe coverage to reinsurance companies and as a result, the Company is exposed to
potential claims arising from major weather events and other catastrophic events, primarily hurricanes, windstorms and
earthquakes. Current preliminary estimates of industry losses arising from catastrophe events during 2024 do not reach the
level where any significant claims would be anticipated. In addition, the Company continues to monitor potential impacts
of recent geopolitical conflicts, which are not expected to have a material effect on results.
•
The impacts of wildfires in California which occurred in January 2025, subsequent to 2024 year-end, are under review and
the Company estimates the maximum possible loss on property catastrophe retrocession contracts at $100 million,
however does not expect claims to reach this maximum loss level. This estimated maximum loss is based on our contract
terms and current public reports regarding the fires. The actual impact will be dependent on a number of factors, many of
which are still to be determined, including total insured losses and whether the wildfires are considered more than a single
loss event. The Company will continue to assess the impact as more information is available and any provision will be
determined as part of the Company's 2025 financial results.
Selected Financial Information - Capital and Risk Solutions
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
Reinsurance
$
211 $
200 $
232
$
790 $
778
Corporate
12
10
4
28
16
Base earnings (loss)1
$
223 $
210 $
236
$
818 $
794
Items excluded from base earnings
(29)
(201)
(21)
(200)
39
Net earnings - common shareholders
$
194 $
9 $
215
$
618 $
833
Total assets2
$
11,708 $
9,302 $
9,088
Contractual service margin
Reinsurance - Non-Participating
$
2,436 $
2,284 $
1,745
Reinsurance - Participating
1
1
24
Contractual service margin
$
2,437 $
2,285 $
1,769
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
The Capital and Risk Solutions segment does not have assets under management or other assets under administration.
Base and net earnings
In the fourth quarter of 2024, the Capital and Risk Solutions segment's net earnings of $194 million decreased by $21 million
compared to the same quarter last year. Base earnings of $223 million decreased by $13 million compared to the same quarter
last year as business growth, favourable claims experience in the U.S. life business and higher earnings on surplus were offset
by the impact of the GMT and favourable property catastrophe claims experience in 2023 which did not recur.
53
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Items excluded from base earnings for the fourth quarter of 2024 were negative $29 million compared to negative $21 million
for the same quarter last year, primarily due to interest rate movements relative to expectations.
For the twelve months ended December 31, 2024, net earnings of $618 million decreased by $215 million compared to the same
period last year. Base earnings of $818 million increased by $24 million compared to the same period last year, primarily due to
the same reasons discussed for the in-quarter results.
For the twelve months ended December 31, 2024, items excluded from base earnings were negative $200 million compared to
positive $39 million for the same period last year, primarily due to the impact of assumption changes in the third quarter of
2024 as well as the impact of markets. Refer to the "Assumption Changes and Management Actions" section of this document
for additional details.
In the fourth quarter of 2024, the impact of GMT was negative $18 million on net earnings and negative $24 million on base
earnings, primarily related to operations in Barbados.
For the twelve months ended December 31, 2024, the impact of the GMT was negative $78 million on net earnings and negative
$101 million on base earnings, primarily related to operations in Barbados.
Contractual service margin
At December 31, 2024, total contractual service margin was $2,437 million, an increase of $668 million from December 31, 2023.
The increase was primarily due to the impact of actuarial assumption changes, new business and currency movement, partially
offset by CSM recognized for services provided. Refer to the "Assumption Changes and Management Actions" section of this
document for additional details on the impact of actuarial assumption changes.
Outlook
Refer to Cautionary Note regarding Forward-looking Information and Cautionary Note regarding Non-GAAP Financial
Measures and Ratios at the beginning of this document.
Reinsurance
The U.S. health individual market continues to create expanded opportunities for reinsurance.
The Company's reinsurance business unit continues to help its clients and other affiliated companies meet capital challenges
through innovative reinsurance solutions. Demand for structured reinsurance remains strong and will remain a focus for 2025.
Internationally, Canada Life continues to explore opportunities where the Company's reinsurance solutions can support
clients in new geographies and execute a number of value generating transactions. Measured international expansion will
remain a focus in 2025.
2024 was another very active year for hurricanes with two significant events in Florida, neither of which caused any loss activity
for the portfolio. The Company expects property retrocessional pricing to reduce somewhat in 2025 due to the lack of major
loss activity in the past two years. The Company’s primary focus in the property catastrophe market for 2025 will be to continue
to support the core client base with prudent attachment levels, restricted territorial scope and risk adjusted premiums.
Lifeco Corporate
The Lifeco Corporate segment includes operating results for activities of Lifeco that are not associated with the major business
units of the Company.
Selected Financial Information - Lifeco Corporate
For the three months ended
For the twelve months ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)1
$
(27) $
(20) $
(40)
$
(53) $
(68)
Items excluded from base earnings
(1)
(12)
(9)
31
(17)
Net earnings (loss) - common shareholders
$
(28) $
(32) $
(49)
$
(22) $
(85)
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
In the fourth quarter of 2024, Lifeco Corporate had a net loss of $28 million compared to a net loss of $49 million for the same
period last year. Base loss of $27 million decreased by $13 million compared to the same quarter last year, primarily due to
higher net investment income.
Items excluded from base earnings for the fourth quarter of 2024 were negative $1 million compared to negative $9 million for
the same quarter last year, primarily due to less unfavourable market experience relative to expectations.
54
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
For the twelve months ended December 31, 2024, Lifeco Corporate had a net loss of $22 million compared to a net loss of $85
million for the same period last year. Base loss of $53 million decreased by $15 million compared to the same period last year,
primarily due to the same reason discussed for the in-quarter results, partially offset by higher operating expenses.
For the twelve months ended December 31, 2024, items excluded from base earnings were positive $31 million compared to
negative $17 million for the same period last year. The increase was primarily due to the finalization of a prior year reinsurance
recapture transaction in the second quarter of 2024 and less unfavourable market experience relative to expectations.
Consolidated Financial Position
Assets
Assets under administration1
Canada
United
States
Europe
Capital and
Risk Solutions
Total
As at December 31, 2024
Assets
Invested assets
$
98,262
$
89,768
$
44,321
$
11,434
$
243,785
Insurance contract assets
434
335
353
71
1,193
Reinsurance contract held assets
1,216
12,756
3,746
124
17,842
Goodwill and intangible assets
6,645
6,667
3,074
—
16,386
Other assets
5,769
16,741
3,982
79
26,571
Investments on account of segregated fund
policyholders
114,547
215,986
165,853
—
496,386
Total assets
226,873
342,253
221,329
11,708
802,163
Other assets under management2
14,600
141,385
81,257
—
237,242
Total assets under management1
241,473
483,638
302,586
11,708
1,039,405
Other assets under administration2
64,499
2,148,241
14,153
—
2,226,893
Total assets under administration1
$
305,972
$
2,631,879
$
316,739
$
11,708
$
3,266,298
As at December 31, 2023
Assets
Invested assets
$
89,382
$
86,715
$
41,981
$
8,732
$
226,810
Insurance contract assets
400
291
331
171
1,193
Reinsurance contract held assets
1,243
12,243
3,713
133
17,332
Goodwill and intangible assets
6,545
6,151
3,037
—
15,733
Other assets
4,964
16,192
3,531
52
24,739
Assets held for sale3
—
4,467
—
—
4,467
Investments on account of segregated fund
policyholders
101,250
179,770
141,936
—
422,956
Total assets
203,784
305,829
194,529
9,088
713,230
Continuing operations - other assets under
management2
13,056
143,997
63,525
—
220,578
Discontinued operations - other assets under
management2,4
—
161,566
—
—
161,566
Total assets under management1
216,840
611,392
258,054
9,088
1,095,374
Other assets under administration2
55,635
1,689,455
12,076
—
1,757,166
Total assets under administration1
$
272,475
$
2,300,847
$
270,130
$
9,088
$
2,852,540
1
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
On May 31, 2023, Lifeco announced an agreement to sell Putnam Investments to Franklin Templeton. Beginning Q2 2023, the related assets were classified as assets held for sale. The
transaction closed on January 1, 2024.
4
At Q4 2023, other assets under management related to Putnam Investments were classified as discontinued operations - other assets under management.
Total assets under administration at December 31, 2024 exceeded $3.2 trillion, increasing by $413.8 billion compared to
December 31, 2023, primarily due to the impact of currency and market movements in the U.S. segment, partially offset by the
divestiture of Putnam Investments.
55
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Invested Assets
The Company manages its general fund assets to support the cash flow, liquidity and profitability requirements of the
Company's insurance and investment products. The Company's investment policies are designed to be prudent and
conservative, so that assets are not unduly exposed to concentration, credit or market risks. Within the framework of the
Company’s policies, the Company implements strategies and reviews and adjusts them on an ongoing basis considering
liability cash flows and capital market conditions. The majority of investments of the general fund are in medium-term and
long-term fixed-income investments, primarily bonds and mortgages, reflecting the characteristics of the Company’s liabilities.
Invested asset distribution
Canada
United States
Europe
Capital and
Risk Solutions
Total
As at December 31, 2024
Bonds
Government & related
$
20,776
$
5,021
$
14,718
$
4,927
$
45,442
19 %
Corporate & other
38,460
61,211
16,993
5,008
121,672
50
Sub-total bonds
59,236
66,232
31,711
9,935
167,114
69
Mortgages
16,925
13,819
7,358
777
38,879
16
Stocks
14,489
3,712
625
—
18,826
8
Investment properties
6,128
22
2,107
—
8,257
3
Sub-total portfolio investments
96,778
83,785
41,801
10,712
233,076
96
Cash and cash equivalents
1,484
5,983
2,520
722
10,709
4
Total invested assets
$
98,262
$
89,768
$
44,321
$
11,434
$
243,785
100 %
As at December 31, 2023
Bonds
Government & related
$
17,951
$
6,188
$
15,282
$
3,307
$
42,728
19 %
Corporate & other
34,793
60,430
14,809
4,291
114,323
50
Sub-total bonds
52,744
66,618
30,091
7,598
157,051
69
Mortgages
16,744
14,321
6,707
642
38,414
17
Stocks
13,140
1,889
704
—
15,733
7
Investment properties
5,543
21
2,306
—
7,870
4
Sub-total portfolio investments
88,171
82,849
39,808
8,240
219,068
97
Cash and cash equivalents
1,211
3,866
2,173
492
7,742
3
Total invested assets
$
89,382
$
86,715
$
41,981
$
8,732
$
226,810
100 %
At December 31, 2024, total invested assets were $243.8 billion, an increase of $17.0 billion from December 31, 2023. The
increase in invested assets was primarily due to an increase in fair values of bonds resulting from a decrease in bond yields in
Canada, an increase in private equity investments due to purchases and market value increases, and the impact of currency
movement. The distribution of assets has not changed significantly and remains heavily weighted to bonds and mortgages.
Bond portfolio
It is the Company's policy to acquire primarily investment grade bonds subject to prudent and well-defined investment
policies. Modest investments in below investment grade rated securities may occur while not changing the overall discipline
and conservative approach to the investment strategy. The total bond portfolio, including short-term investments, was $167.1
billion or 69% of invested assets at December 31, 2024 compared to $157.1 billion or 69% at December 31, 2023. The increase in
the bond portfolio was primarily due to an increase in fair values resulting from a decrease in bond yields in Canada. The
overall quality of the bond portfolio remained high, with 99% of the portfolio rated investment grade and 70% rated A or higher.
Bond credit ratings reflect bond rating agency activity up to December 31, 2024. Management continues to closely monitor
bond rating agency activity and general market conditions.
Bond portfolio quality
As at December 31, 2024
As at December 31, 2023
AAA
$
24,462
15 %
$
24,298
15 %
AA
32,310
19
31,435
20
A
60,041
36
54,807
35
BBB
47,936
29
44,811
29
BB or lower
2,365
1
1,700
1
Total
$
167,114
100 %
$
157,051
100 %
56
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The following table provides details of the carrying value of the bonds by industry sector:
As at December 31, 2024
As at December 31, 2023
Bonds issued or guaranteed by:
Treasuries
$
16,159
10 %
$
14,853
10 %
Government related
28,029
17
26,626
17
Agency securitized
1,254
1
1,249
1
Non-agency securitized
16,811
10
17,178
11
Financials
24,057
15
23,178
15
Communications
4,002
2
3,669
2
Consumer products
18,403
11
17,296
11
Energy
7,044
4
6,520
4
Industrials
12,452
7
11,781
8
Technology
5,628
3
5,127
3
Transportation
7,498
5
6,806
4
Utilities
25,777
15
22,768
14
Total
$
167,114
100 %
$
157,051
100 %
At December 31, 2024, total bonds were $167.1 billion compared to $157.1 billion at December 31, 2023. The increase was
primarily due to an increase in the utilities, government related and consumer products industry sectors driven by an increase
in fair values resulting from a decrease in bond yields in Canada.
Mortgage portfolio
It is the Company’s practice to acquire high quality commercial mortgages meeting strict underwriting standards and
diversification criteria. The Company has a well-defined risk-rating system, which it uses in its underwriting and credit
monitoring processes for commercial loans. The majority of the commercial mortgages held in the Europe segment are
classified as amortized cost and therefore there are no fair value movements recorded on these holdings. Equity release
mortgages are originated in the Europe segment following well-defined lending criteria and held in the Canada, Europe and
Capital and Risk Solutions segments. Equity release mortgages are loans provided to people who want to continue living in
their homes while accessing some of the underlying equity value in their homes. Loans are typically repaid when the borrower
dies or moves into long-term care.
As at December 31, 2024
As at December 31, 2023
Mortgage loans by type
Insured1
Non-insured
Total
Total
Single family residential
$
251
$
974
$
1,225
3 %
$
1,511
4 %
Multi-family residential
2,539
7,029
9,568
25
9,372
24
Equity release
—
4,818
4,818
12
4,203
11
Commercial
—
23,268
23,268
60
23,328
61
Total
$
2,790
$
36,089
$
38,879
100 %
$
38,414
100 %
1
Insured mortgages include mortgages where insurance is provided by a third party and protects the Company in the event that the borrower is unable to fulfill their mortgage
obligations.
The total mortgage portfolio was $38.9 billion or 16% of invested assets at December 31, 2024, compared to $38.4 billion or 17%
of invested assets at December 31, 2023. At December 31, 2024, total insured loans were $2.8 billion or 7% of the mortgage
portfolio, compared to $2.9 billion or 8% at December 31, 2023.
57
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Commercial mortgages
Canada
U.S.
Europe
Capital and
Risk
Solutions
Total
Par
Non-Par
As at December 31, 2024
Retail & shopping centres
$
2,969 $
846 $
792 $
1,142 $
31 $
5,780
Industrial
3,037
950
5,377
982
88
10,434
Office buildings
990
384
2,505
1,148
19
5,046
Other
32
20
1,080
861
15
2,008
Total
$
7,028 $
2,200 $
9,754 $
4,133 $
153 $
23,268
As at December 31, 2023
Retail & shopping centres
$
2,715 $
774 $
964 $
1,097 $
27 $
5,577
Industrial
2,970
1,047
5,794
835
69
10,715
Office buildings
1,027
366
2,467
1,161
29
5,050
Other
32
24
1,151
757
22
1,986
Total
$
6,744 $
2,211 $
10,376 $
3,850 $
147 $
23,328
Throughout 2024, commercial real estate markets in Europe and North America showed signs of slowdown. In particular, the
office markets are experiencing dampened demand from a continued delay faced by employers on return-to-office plans,
leading to higher vacancy rates and deteriorating operating performance, driven as well by challenging economic and capital
market conditions. This has resulted in certain valuation reductions for the underlying office properties in 2024 reflecting the
current outlook. The Company is monitoring and will work proactively with borrowers to manage exposures. It is the
Company's practice to acquire high-quality commercial mortgages meeting strict underwriting standards and diversification
criteria. The Company has a well-defined risk-rating system, which it uses in its underwriting and credit monitoring processes
for commercial loans.
Expected credit losses
Expected credit loss (ECL) allowances are recognized on all financial assets, except for financial assets classified or designated
as FVTPL and equity securities designated as FVOCI. The Company measures ECL allowances at either 12-month for stage 1
performing financial assets or lifetime ECL for stage 2 performing financial assets and stage 3 impaired financial assets. Refer to
the "Summary of Critical Accounting Estimates" section of this document and in note 2 of the Company's December 31, 2024
annual consolidated financial statements for additional details on ECL measurement and presentation. Carrying values of
assets subject to ECL allowance and corresponding allowances for ECL are shown below.
At December 31, 2024, the total allowance for credit losses recognized was $33 million compared to $37 million at
December 31, 2023. The decrease in total allowance for credit losses was primarily due to remeasurement of stage 2
commercial mortgages in the UK division.
58
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Equity portfolio
The total equity portfolio was $27.1 billion or 11% of invested assets at December 31, 2024 compared to $23.6 billion or 10% of
invested assets at December 31, 2023. The equity portfolio consists of publicly traded stocks, privately held stocks and
investment properties. The increase in publicly traded stocks of $1.1 billion and the increase in privately held stocks of $2.0
billion were primarily due to purchases, market value increases as well as the Franklin Templeton common shares received on
the sale of Putnam. The increase in investment properties of $0.4 billion was mainly the result of market value increases.
Canada
Par
Non-Par
U.S.
Europe
Total
As at December 31, 2024
Equity portfolio by type1
Publicly traded stocks
$
8,536 $
2,498 $
1,309 $
357 $
12,700
47 %
Privately held stocks
1,977
1,478
2,403
268
6,126
23
Sub-total
10,513
3,976
3,712
625
18,826
70
Investment properties
5,164
964
22
2,107
8,257
30
Total
$
15,677 $
4,940 $
3,734 $
2,732 $
27,083
100 %
As at December 31, 2023
Equity portfolio by type
Publicly traded stocks
$
7,951 $
2,808 $
375 $
465 $
11,599
49 %
Privately held stocks
1,306
1,075
1,514
239
4,134
18
Sub-total
9,257
3,883
1,889
704
15,733
67
Investment properties
4,615
928
21
2,306
7,870
33
Total
$
13,872 $
4,811 $
1,910 $
3,010 $
23,603
100 %
Investment properties1
Canada
U.S.
Europe
Total
Par
Non-Par
As at December 31, 2024
Industrial
$
2,016 $
287 $
— $
673 $
2,976
36 %
Office buildings
933
164
22
510
1,629
20
Retail
184
24
—
632
840
10
Other
2,031
489
—
292
2,812
34
Total
$
5,164 $
964 $
22 $
2,107 $
8,257
100 %
As at December 31, 2023
Industrial
$
1,906 $
271 $
— $
847 $
3,024
38 %
Office buildings
973
159
21
508
1,661
21
Retail
181
24
—
625
830
11
Other
1,555
474
—
326
2,355
30
Total
$
4,615 $
928 $
21 $
2,306 $
7,870
100 %
1
The Capital and Risk Solutions segment does not hold any publicly traded stocks, privately held stocks or investment properties.
Throughout 2024, commercial real estate markets in Europe and North America showed signs of slowdown. In particular, the
office markets are experiencing dampened demand from a continued delay faced by employers on return-to-office plans,
leading to higher vacancy rates and deteriorating operating performance, driven as well by challenging economic and capital
market conditions. This has resulted in certain valuation reductions in 2024 reflecting the current outlook for office properties.
As market conditions evolve, the Company may be required to apply further valuation reductions.
Derivative Financial Instruments
During the fourth quarter of 2024, there were no major changes to the Company's policies and procedures with respect to the
use of derivative financial instruments. The Company’s derivative transactions are generally governed by the International
Swaps and Derivatives Association, Inc. (ISDA) Master Agreement, which provide for legally enforceable set-off and close-out
netting of exposure to specific counterparties in the event of an early termination of a transaction, which includes, but is not
limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off
receivables from a counterparty against payables to the same counterparty, in the same legal entity, arising out of all included
transactions. The Company’s ISDA Master Agreement may include Credit Support Annex provisions, which require both the
pledging and accepting of collateral in connection with its derivative transactions.
59
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
At December 31, 2024, total financial collateral, including initial margin and overcollateralization, received on derivative assets
was $1.7 billion ($1.7 billion at December 31, 2023) and pledged on derivative liabilities was $2.1 billion ($0.8 billion at
December 31, 2023). Collateral pledged on derivatives liabilities increased in 2024, primarily driven by the impact of the U.S.
dollar strengthening against the Canadian dollar on cross-currency swaps that pay U.S. and receive Canadian dollars.
Collateral received on derivative assets increased due to Initial Margin requirements.
During the twelve month period ended December 31, 2024, the outstanding notional amount of derivative contracts increased
by $11.2 billion to $63.1 billion, primarily due to increases in volume of regular hedging activities.
The Company’s exposure to derivative counterparty credit risk, which reflects the current fair value of those instruments in a
gain position, increased to $2.4 billion at December 31, 2024 from $2.2 billion at December 31, 2023. The increase was primarily
driven by the impact of the U.S. dollar strengthening against the Euro and Pound on cross-currency swaps that receive U.S.
dollars and pay Euro or Pounds. There were no changes to derivative counterparty ratings during the fourth quarter of 2024 and
all had investment grade ratings as of December 31, 2024.
Goodwill and Intangible Assets
As at December 31
2024
2023
Goodwill
$
11,428
$
11,249
Indefinite life intangible assets
1,414
1,269
Finite life intangible assets
3,544
3,215
Total
$
16,386
$
15,733
The Company's goodwill and intangible assets relate primarily to business acquisitions made by the Company. Goodwill and
intangible assets of $16.4 billion at December 31, 2024 increased by $0.7 billion compared to December 31, 2023. Goodwill
increased by $0.2 billion, primarily due to the impact of currency movement, partially offset by the re-allocation of goodwill to
intangible assets arising from the comprehensive valuation performed in the third quarter of 2024 of the fair value of the net
assets acquired and purchase price allocation of IPC and Value Partners. Indefinite life intangible assets increased by $0.1
billion and finite life intangible assets increased by $0.3 billion, primarily due to the same reasons discussed for goodwill.
IFRS principles require the Company to assess at the end of each reporting period whether there is any indication that an asset
may be impaired and to perform an impairment test on goodwill and indefinite life intangible assets at least annually or more
frequently if events indicate that impairment may have occurred. Intangible assets that were previously impaired are reviewed
at each reporting date for evidence of reversal. Finite life intangible assets are reviewed annually to determine if there are
indications of impairment and assess whether the amortization periods and methods are appropriate. In the fourth quarter of
2024, the Company conducted its annual impairment testing of goodwill and intangible assets based on September 30, 2024
asset balances. It was determined that the recoverable amounts of cash generating unit (CGU) groupings for goodwill and
CGUs for intangible assets were in excess of their carrying values and there was no evidence of impairment. Recoverable
amount is based on fair value less cost of disposal.
Refer to note 9 in the Company's December 31, 2024 annual consolidated financial statements for further details of the
Company's goodwill and intangible assets. Also, refer to the "Summary of Critical Accounting Estimates" section of this
document for details on impairment testing of these assets.
60
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Other General Fund Assets
As at December 31
2024
2023
Other assets
$
15,265
$
14,483
Accounts and interest receivable
5,402
4,863
Deferred tax assets
2,066
1,848
Derivative financial instruments
2,431
2,219
Owner occupied properties
789
731
Fixed assets
346
335
Current income taxes
272
260
Total
$
26,571
$
24,739
Total other general fund assets at December 31, 2024 were $26.6 billion, an increase of $1.8 billion from December 31, 2023.
The increase was primarily due to an increase of $0.8 billion in other assets driven by trading account assets and finance leases
receivable, an increase of $0.5 billion in accounts and interest receivable and an increase of $0.2 billion in deferred tax assets.
Other assets comprise several items including prepaid expenses and accounts receivable. Refer to note 11 in the Company's
December 31, 2024 annual consolidated financial statements for a breakdown of other assets.
Investments on Account of Segregated Fund Policyholders
As at December 31
2024
2023
Stock and units in unit trusts
$
154,439
$
130,415
Mutual funds
232,073
188,549
Bonds
74,444
72,111
Investment properties
11,317
12,071
Cash and other
15,948
11,718
Mortgage loans
2,083
2,022
Sub-total
$
490,304
$
416,886
Non-controlling mutual funds interest
6,082
6,070
Total
$
496,386
$
422,956
Investments on account of segregated fund policyholders, which are measured at fair value, increased by $73.4 billion to $496.4
billion at December 31, 2024 compared to December 31, 2023. The increase was primarily due to the combined impact of
market value gains and investment income of $53.5 billion related to net unrealized capital gains on investments as well as the
impact of currency movement of $21.2 billion, partially offset by net withdrawals of $1.3 billion.
Liabilities
Total Liabilities
As at December 31
2024
2023
Insurance contract liabilities
$
155,683
$
144,388
Reinsurance contract held liabilities
795
648
Investment contract liabilities
90,157
88,919
Other general fund liabilities
26,488
24,061
Liabilities held for sale1
—
2,407
Insurance contracts on account of segregated fund policyholders
66,343
60,302
Investment contracts on account of segregated fund policyholders
430,043
362,654
Total
$
769,509
$
683,379
1
On May 31, 2023, Lifeco announced an agreement to sell Putnam Investments to Franklin Templeton. Beginning Q2 2023, the related liabilities were classified as liabilities held for
sale. The transaction closed on January 1, 2024.
Total liabilities increased by $86.1 billion to $769.5 billion at December 31, 2024 from December 31, 2023.
Insurance contract liabilities increased by $11.3 billion. The increase was primarily due to market movements and the impact
of currency movements.
Investment contract liabilities increased by $1.2 billion. The increase was primarily due to the impact of currency movements
and market movements, partially offset by normal business movements.
61
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Other general fund liabilities increased by $2.4 billion. The increase was primarily due to increases in derivative financial
instruments and other liabilities.
Investment and insurance contracts on account of segregated fund policyholders increased by $73.4 billion, primarily due to
the combined impact of market value gains and investment income of $53.5 billion and the positive impact of currency
movement of $21.2 billion.
Insurance and investment contract liabilities represent the amounts that, together with estimated future premiums and
investment income, will be sufficient to pay estimated future benefits, dividends and expenses on policies in-force. Insurance
and investment contract liabilities are determined using generally accepted actuarial practices, according to standards
established by the Canadian Institute of Actuaries. Also, refer to the "Summary of Critical Accounting Estimates" section of this
document for details on impairment testing of these assets.
Assets supporting insurance and investment contract liabilities
Non-Participating
Participating
Account
Canada
United States
Europe
Capital and
Risk Solutions
Total
As at December 31, 2024
Bonds
$
32,098
$
22,522
$
53,869
$
27,228 $
6,716
$
142,433
Mortgage loans
12,551
4,085
11,483
7,359
751
36,229
Stocks
10,914
2,698
2,011
396
—
16,019
Investment properties
4,645
728
—
1,909
—
7,282
Other assets1
1,870
4,974
31,651
5,382
—
43,877
Total
$
62,078
$
35,007
$
99,014
$
42,274 $
7,467
$
245,840
Total insurance and
investment contract
liabilities
$
62,078
$
35,007
$
99,014
$
42,274 $
7,467
$
245,840
As at December 31, 2023
Bonds
$
27,651
$
21,408
$
53,381
$
25,738 $
4,938
$
133,116
Mortgage loans
13,008
4,244
11,760
6,707
488
36,207
Stocks
10,081
2,782
1,301
467
—
14,631
Investment properties
4,665
644
—
2,113
—
7,422
Other assets1
921
5,809
30,571
4,582
48
41,931
Total
$
56,326
$
34,887
$
97,013
$
39,607 $
5,474
$
233,307
Total insurance and
investment contract
liabilities
$
56,326
$
34,887
$
97,013
$
39,607 $
5,474
$
233,307
1
Other assets include reinsurance assets, premiums in the course of collection, interest due and accrued, other investment receivables, deferred acquisition costs, accounts receivable,
current income taxes and prepaid expenses. Reinsurance assets include assets recognized as a result of the indemnity reinsurance agreement with Protective Life Insurance Company
(Protective Life).
Asset and liability cash flows are matched within established limits to minimize the financial effects of a shift in interest rates
and mitigate the changes in the Company's financial position due to interest rate volatility.
62
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Insurance Contract Liabilities and Assets
Insurance contract liabilities and assets1
Insurance contracts not under PAA method
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contractual
service margin
Total
Contracts
under PAA
method
Total net
insurance
contract
liabilities
As at December 31, 2024
Canada
$
104,920 $
1,826 $
5,474 $
112,220 $
9,556 $
121,776
United States
19,955
139
262
20,356
2
20,358
Europe
44,401
1,016
5,195
50,612
3,709
54,321
Capital and Risk Solutions
2,657
2,006
2,437
7,100
231
7,331
Total
$
171,933 $
4,987 $
13,368 $
190,288 $
13,498 $
203,786
As at December 31, 2023
Canada
$
95,943 $
1,935 $
5,872 $
103,750 $
9,267 $
113,017
United States
18,187
136
276
18,599
1
18,600
Europe
40,615
1,064
4,718
46,397
3,614
50,011
Capital and Risk Solutions
1,029
2,162
1,769
4,960
225
5,185
Total
$
155,774 $
5,297 $
12,635 $
173,706 $
13,107 $
186,813
1
Insurance contract liabilities and assets presented in the above tables also include insurance contracts on account of segregated fund policyholders and reinsurance contract held
assets and liabilities.
At December 31, 2024, total net insurance contract liabilities were $203.8 billion, an increase of $17.0 billion from December 31,
2023. The increase in net insurance contract liabilities was primarily due to market movements and the impact of currency
movements.
Contractual Service Margin
The CSM of a group of insurance contracts represents the unearned profit that the Company expects to recognize in the future
as it provides services under those contracts. On initial recognition of a group of insurance contracts, if the total of the
fulfilment cash flows, any derecognized assets for insurance acquisition cash flows and any cash flows arising at that date is a
net inflow, then the group is classified as non-onerous. For non-onerous contracts, the CSM is measured as the equal and
opposite amount of the net inflow, which results in no income or expenses arising on initial recognition.
If the total is a net outflow, then the group of insurance contracts is onerous. In this case, the net outflow is recognized as a loss
in the current period. A loss component is created to depict any losses recognized in the current period, which determines the
amounts that are subsequently recognized in future periods as reversals on onerous groups.
Contractual service margin continuity1
Non-Participating (excluding Segregated Funds)
Seg Funds
Par
Total
Canada
United
States
Europe
Capital
and Risk
Solutions
Total
CSM beginning of period,
December 31, 2023
$
1,159 $
24 $
3,255 $
1,745 $
6,183 $
3,298 $
3,154 $
12,635
Impact of new insurance business
36
—
371
251
658
170
119
947
Expected movements from asset
returns & locked-in rates
29
1
79
47
156
223
188
567
CSM recognized for services
provided
(103)
(5)
(286)
(178)
(572)
(408)
(151)
(1,131)
Insurance experience gains/losses
(60)
(4)
(39)
7
(96)
(117)
—
(213)
Organic CSM movement
$
(98) $
(8) $
125 $
127 $
146 $
(132) $
156 $
170
Impact of markets
—
—
—
—
—
352
118
470
Impact of changes in assumptions
and management actions
(371)
35
118
470
252
(278)
(193)
(219)
Currency impact
—
4
166
94
264
28
20
312
Total CSM movement
$
(469) $
31 $
409 $
691 $
662 $
(30) $
101 $
733
CSM end of period, December 31,
2024
$
690 $
55 $
3,664 $
2,436 $
6,845 $
3,268 $
3,255 $
13,368
1
The CSM shown in the above table is presented net of reinsurance contracts held and includes CSM attributed to insurance contract assets and insurance contract liabilities.
63
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
At December 31, 2024, total contractual service margin on non-participating business excluding segregated funds was $6.8
billion, an increase of $662 million from December 31, 2023. The increase was mainly driven by currency impacts of $264
million, the impact of assumption changes and management actions of $252 million and organic contractual service margin
growth of $146 million.
At December 31, 2024, total contractual service margin was $13.4 billion, an increase of $733 million from December 31, 2023.
The increase was mainly driven by market impacts of $470 million, currency impacts of $312 million.
Further detail on the assumption changes and management actions on non-participating business is provided in the
"Assumption Changes and Management Actions" section of this document.
Other General Fund Liabilities
As at December 31
2024
2023
Debentures and other debt instruments
$
9,469
$
9,046
Other liabilities
10,230
9,587
Accounts payable
3,524
3,216
Deferred tax liabilities
834
787
Derivative financial instruments
2,137
1,288
Current income taxes
294
137
Total
$
26,488
$
24,061
Total other general fund liabilities at December 31, 2024 were $26.5 billion, an increase of $2.4 billion from December 31, 2023.
The increase was primarily due to an increase of $0.8 billion in derivative financial instruments driven by the impact of the U.S.
dollar strengthening against the Canadian dollar on cross-currency swaps that pay U.S. and receive Canadian dollars, an
increase of $0.6 billion in other liabilities, an increase of $0.4 billion in debentures and other debt instruments and an increase
of $0.3 billion in accounts payable.
Other liabilities of $10.2 billion include pension and other post-employment benefits, lease liabilities, deferred income reserve,
bank overdraft, collateralized loan obligation liabilities and other liability balances. Refer to note 20 in the Company’s
December 31, 2024 annual consolidated financial statements for a breakdown of the other liabilities balance and note 18 in the
Company’s December 31, 2024 annual consolidated financial statements for details of the debentures and other debt
instruments.
Segregated Fund and Variable Annuity Guarantees
The Company offers retail segregated fund products, unitized with profits (UWP) products and variable annuity products that
provide for certain guarantees tied to the market values of the investment funds.
In Canada, the Company offers individual segregated fund products through Canada Life. These products provide guaranteed
minimum death benefits (GMDB) and guaranteed minimum accumulation on maturity benefits (GMAB).
In the U.S., the Company has a mix of open and closed blocks of group variable annuities with guaranteed minimum
withdrawal benefits (GMWB) and a closed block of group standalone GMDB products which mainly provide return of
premium on death. A large portion of the GMWB portfolio has been reinsured by a third party.
In Europe, the Company offers UWP products, which are similar to segregated fund products but include minimum credited
interest rates and pooling of policyholders' funds, as well as a GMWB product in Germany.
The GMWB products offered by the Company in the U.S. and Germany, and previously offered in Canada and Ireland, provide
the policyholder with a guaranteed minimum level of annual income for life. The minimum level of income may increase
depending upon the level of growth in the market value of the policyholder's funds. Where the market value of the
policyholder's funds is ultimately insufficient to meet the level of guarantee purchased by the policyholder, the Company is
obligated to make up the shortfall.
Capital and Risk Solutions has guaranteed minimum income benefits (GMIB) that it has reinsured from other U.S. life
insurance and reinsurance companies.
These products involve cash flows of which the magnitude and timing are uncertain and are dependent on the level of equity
and fixed-income market returns, interest rates, currency markets, market volatility, policyholder behaviour and policyholder
longevity.
The Company has a hedging program in place to manage a portion of the market and interest rate risk associated with options
embedded in its GMWB products. The program methodology quantifies both the embedded option value and its sensitivity to
64
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
movements in equity markets, currency markets and interest rates. Equity derivative instruments, currency derivative
instruments and interest rate derivative instruments are used to mitigate changes in the embedded option value attributable to
movements in equity markets, currency markets and interest rates respectively. The hedging program, by its nature, requires
continuous monitoring and rebalancing to avoid over or under hedged positions. Periods of heightened market volatility will
increase the frequency of hedge rebalancing.
By their nature, certain risks associated with the GMWB product either cannot be hedged or cannot be hedged on a cost-
effective basis. These risks include policyholder behaviour, policyholder longevity, basis risk and market volatility.
Consequently, the hedging program will not mitigate all risks to the Company associated with the GMWB products and may
expose the Company to additional risks including the operational risk associated with the reliance upon sophisticated models,
and counterparty credit risk associated with the use of derivative instruments.
Other risk management processes are in place aimed at appropriately limiting the Company’s exposure to the risks it is not
hedging or are otherwise inherent in its hedging program. In particular, the GMWB product has been designed with specific
regard to limiting policyholder anti-selection, and the array of investment funds available to policyholders has been
determined with a view to minimizing underlying basis risk.
Certain GMWB products offered by the Company offer levels of death and maturity guarantees. At December 31, 2024, the
amount of GMWB product in-force in Canada, the U.S., Ireland and Germany was $7,538 million ($7,343 million at
December 31, 2023).
Segregated fund and variable annuity guarantee exposure
Investment deficiency by benefit type
December 31, 2024
Market Value
Income
Maturity
Death
Total1
Canada
$
36,099 $
1 $
4 $
12 $
12
United States
22,890
32
—
5
37
Europe
13,013
3
—
1,143
1,143
Capital and Risk Solutions2
718
94
—
—
94
Total
$
72,720 $
130 $
4 $
1,160 $
1,286
1
A policy can only receive a payout from one of the three trigger events (income election, maturity or death). Total deficiency measures the point-in-time exposure assuming the most
costly trigger event for each policy occurred on December 31, 2024.
2
Capital and Risk Solutions exposure is to markets in the U.S.
Investment deficiency at December 31, 2024 decreased by $225 million to $1,286 million compared to December 31, 2023,
primarily as a result of an increase in market values. The investment deficiency measures the point-in-time exposure to a
trigger event (i.e., income election, maturity or death) assuming it occurred on December 31, 2024 and does not include the
impact of the Company's hedging program. The actual cost to the Company will depend on the trigger event having occurred
and the market values at that time. The actual claims before tax associated with these guarantees were $3 million in-quarter ($4
million for the fourth quarter of 2023), with the majority arising in the Capital and Risk Solutions segment related to a legacy
block of business.
Lifeco Capital Structure
In establishing the appropriate mix of capital required to support the operations of the Company and its subsidiaries,
management utilizes a variety of debt, equity and other hybrid instruments considering both the short and long-term capital
needs of the Company.
Debentures and Other Debt Instruments
At December 31, 2024, debentures and other debt instruments increased by $423 million to $9,469 million compared to
December 31, 2023, primarily due to the impact of currency movement and the addition of a mortgage on investment
properties.
Refer to note 18 in the Company's December 31, 2024 annual consolidated financial statements for further details of the
Company's debentures and other debt instruments.
Capital Trust Securities
At December 31, 2024, the Company had $150 million principal outstanding of Canada Life Capital Trust Securities – Series B
(CLiCS – Series B). Included in the Company's invested assets at December 31, 2024 were CLiCS – Series B with a fair value of
$44 million and principal value of $37 million (fair value of $44 million at December 31, 2023).
Each holder of the CLiCS – Series B is entitled to receive a semi-annual non-cumulative fixed cash distribution of $37.645 per
CLiCS – Series B, representing an annual yield of 7.529% payable out of Canada Life Capital Trust's (CLCT) distributable funds.
Subject to regulatory approval, CLCT may redeem the CLiCS – Series B, in whole or in part, at any time and the CLiCS – Series B
are callable at par on June 30, 2032.
65
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Equity
Share capital outstanding at December 31, 2024 was $10.3 billion, which comprises $6.1 billion of common shares and $2.7
billion of preferred shares and $1.5 billion Limited Recourse Capital Notes (LRCN Series 1). Preferred shares included $2,470
million of non-cumulative First Preferred Shares and $250 million of non-cumulative 5-year rate reset First Preferred Shares.
Common shares
At December 31, 2024, the Company had 932,107,643 common shares outstanding with a stated value of $6.07 billion
compared to 932,427,987 common shares with a stated value of $6.00 billion at December 31, 2023.
The Company renewed its normal course issuer bid (NCIB) effective January 29, 2024 for one year to purchase and cancel up to
20,000,000 of its common shares at market prices in order to mitigate the dilutive effect of stock options granted under the
Company's Stock Option Plan and for other capital management purposes. Effective March 5, 2024, the Company entered into
an automatic share purchase plan (ASPP). The ASPP is intended to facilitate repurchases of common shares under the NCIB,
including at times when the Company would ordinarily not be permitted to make purchases due to regulatory restrictions or
self-imposed blackout periods. All purchases of common shares made under the ASPP are included in determining the number
of common shares purchased under the NCIB. Any common shares purchased by the Corporation pursuant to the NCIB will be
cancelled.
During the twelve months ended December 31, 2024, the Company repurchased and subsequently cancelled 2,700,000
common shares under the NCIB at an average cost per share of $42.32.
Subsequent to December 31, 2024, the Company announced that it had renewed its NCIB commencing January 6, 2025 for one
year to purchase and cancel up to 20,000,000 of its common shares at market prices. On the same day, the Company entered
into an ASPP under the renewed NCIB.
The Company intends to purchase $500 million under our current NCIB, in addition to the purchases made to offset dilution
under its share compensation plans. This is subject to market conditions, the Company's ability to effect the purchases on a
prudent basis, and other strategic opportunities emerging.
Preferred shares
At December 31, 2024, the Company had 11 series of fixed rate First Preferred Shares and 1 series of 5-year rate reset First
Preferred Shares outstanding with aggregate stated values of $2,470 million and $250 million, respectively.
The terms and conditions of the outstanding First Preferred Shares are set out in the table below:
Great-West Lifeco Inc.
Series G
Series H
Series I
Series L
Series M
Series N
General Type
Fixed Rate
Fixed Rate
Fixed Rate
Fixed Rate
Fixed Rate
5-Year Rate Reset
Cumulative/Non-
Cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Date Issued
Sep 14, 2004
Aug 12, 2005
Apr 12, 2006
Oct 2, 2009
Mar 4, 2010
Nov 23, 2010
Shares Outstanding
12,000,000
12,000,000
12,000,000
6,800,000
6,000,000
10,000,000
Amount Outstanding
(Par)
$300,000,000
$300,000,000
$300,000,000
$170,000,000
$150,000,000
$250,000,000
Yield
5.20%
4.85%
4.50%
5.65%
5.80%
1.749%
Earliest Issuer
Redemption Date
Dec 31, 2009
Sep 30, 2010
Jun 30, 2011
Dec 31, 2014
Mar 31, 2015
Dec 31, 2020
Series P
Series Q
Series R
Series S
Series T
Series Y
General Type
Fixed Rate
Fixed Rate
Fixed Rate
Fixed Rate
Fixed Rate
Fixed Rate
Cumulative/Non-
Cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Non-cumulative
Date Issued
Feb 22, 2012
Jul 6, 2012
Oct 11, 2012
May 22, 2014
May 18, 2017
Oct 8, 2021
Shares Outstanding
10,000,000
8,000,000
8,000,000
8,000,000
8,000,000
8,000,000
Amount Outstanding
(Par)
$250,000,000
$200,000,000
$200,000,000
$200,000,000
$200,000,000
$200,000,000
Yield
5.40%
5.15%
4.80%
5.25%
5.15%
4.50%
Earliest Issuer
Redemption Date
March 31, 2017
Sep 30, 2017
Dec 31, 2017
Jun 30, 2019
Jun 30, 2022
Dec 31, 2026
The terms and conditions of the First Preferred Shares do not allow the holder to convert to common shares of the Company or
to otherwise cause the Company to redeem the shares. Preferred shares issued by the Company are commonly referred to as
perpetual and represent a form of financing that does not have a fixed term.
66
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Non-Controlling Interests
The Company's non-controlling interests include participating account surplus in subsidiaries and non-controlling interests in
subsidiaries. Refer to note 21 in the Company's December 31, 2024 annual consolidated financial statements for further details.
As at December 31
2024
2023
Participating account surplus in subsidiaries:
Canada Life
$
3,043
$
2,844
Empower
(2)
3
$
3,041
$
2,847
Non-controlling interests in subsidiaries
$
72
$
168
At December 31, 2024, the carrying value of non-controlling interests increased by $98 million to $3,113 million compared to
December 31, 2023. For the twelve months ended December 31, 2024, net earnings attributable to participating account before
policyholder dividends were $2,007 million and policyholder dividends were $1,901 million.
Liquidity and Capital Management
Liquidity
Total Liquid Assets
On-balance sheet
assets
Non-liquid/
Pledged3
Net liquid assets3
As at December 31, 2024
Cash, cash equivalents and short-term bonds
Cash and cash equivalents1
$
10,709
$
339
$
10,370
Short-term bonds2
5,429
348
5,081
Sub-total
$
16,138
$
687
$
15,451
Other assets and marketable securities
Government bonds2
$
40,928
$
11,293
$
29,635
Corporate bonds2
120,757
59,688
61,069
Stocks1
18,826
6,126
12,700
Mortgage loans1
38,879
36,089
2,790
Sub-total
$
219,390
$
113,196
$
106,194
Total
$
235,528
$
113,883
$
121,645
As at December 31, 2023 (Restated)
Cash, cash equivalents and short-term bonds
Cash and cash equivalents1
$
7,742
$
282
$
7,460
Short-term bonds2
5,876
374
5,502
Sub-total
$
13,618
$
656
$
12,962
Other assets and marketable securities
Government bonds2
$
38,369
$
8,833
$
29,536
Corporate bonds2
112,806
54,134
58,672
Stocks1
15,733
4,134
11,599
Mortgage loans1
38,414
35,500
2,914
Sub-total
$
205,322
$
102,601
$
102,721
Total
$
218,940
$
103,257
$
115,683
1
Refer to the consolidated balance sheet in the Company's December 31, 2024 annual consolidated financial statements for on-balance sheet amounts.
2
Total short-term bonds, government bonds and corporate bonds as at December 31, 2024 was $167.1 billion ($157.1 billion at December 31, 2023). Refer to the consolidated balance
sheet in the Company's December 31, 2024 annual consolidated financial statements for on-balance sheet bonds amounts.
3
Comparative results have been restated to reflect expanded definition of non-liquid and pledged assets.
67
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The Company’s liquidity requirements are largely self-funded, with short-term obligations being met by internal funds and
maintaining levels of liquid investments adequate to meet anticipated liquidity needs. The Company holds cash, cash
equivalents and short-term bonds at the Lifeco holding company level and with the Lifeco consolidated subsidiary companies.
At December 31, 2024, the Company and its operating subsidiaries held liquid cash, cash equivalents and short-term bonds of
$15.5 billion ($13.0 billion at December 31, 2023) and other liquid assets and marketable securities of $106.2 billion ($102.7
billion at December 31, 2023). Included in the cash, cash equivalents and short-term bonds at December 31, 2024 was $2.2
billion ($0.5 billion at December 31, 2023) held at the Lifeco holding company level which includes cash at Great-West Lifeco
U.S. LLC, the Company's U.S. holding company. In addition, the Company maintains committed lines of credit with Canadian
chartered banks and other revolving credit agreements in the U.S. for potential unanticipated liquidity needs, if required. Refer
to note 7(b) in the Company’s December 31, 2024 annual consolidated financial statements for additional detail.
The Company does not have a formal common shareholder dividend policy. The Company maintains a target dividend payout
ratio range of 45% to 55% of base earnings that is considered in dividend decisions. Dividends on outstanding common shares
of the Company are declared and paid at the sole discretion of the Board of Directors of the Company. The decision to declare a
dividend on the common shares of the Company takes into account a variety of factors including the level of earnings,
adequacy of capital and availability of cash resources.
As a holding company, the Company’s ability to pay dividends and, in part, its ability to deploy capital is dependent upon the
Company receiving dividends from its operating subsidiaries. The Company’s operating subsidiaries are subject to regulation
in a number of jurisdictions, each of which maintains its own regime for determining the amount of capital that must be held in
connection with the different businesses carried on by the operating subsidiaries. The requirements imposed by the regulators
in any jurisdiction may change from time to time, and thereby impact the ability of the operating subsidiaries to pay dividends
to the Company. During 2024, the Company's main operating subsidiaries made cash payments to the holding company in the
form of dividends amounting to $4.0 billion ($3.5 billion in 2023).
Liquidity risk is assessed and mitigated through prudent product design and contract terms; and by maintaining a high quality,
diversified investment portfolio with sufficient liquidity to meet policyholder and financing obligations under normal and
stress conditions. Refer to the "Liquidity Risk" section of this document for additional details.
Cash Flows
Cash flows
For the three months ended
December 31
For the twelve months ended
December 31
2024
2023
2024
2023
Cash flows relating to the following activities:
Operations
$
2,000
$
2,118
$
4,751
$
5,203
Financing
(515)
(598)
(2,285)
(3,550)
Investment
(5)
(655)
(408)
(786)
1,480
865
2,058
867
Effects of changes in exchange rates on cash and cash
equivalents
342
(74)
534
(40)
Increase (decrease) in cash and cash equivalents in the period
1,822
791
2,592
827
Cash and cash equivalents, beginning of period
8,887
7,326
8,117
7,290
Cash and cash equivalents from continuing and
discontinued operations, end of period
$
10,709
$
8,117
$
10,709
$
8,117
Cash and cash equivalents from discontinued operations, end
of period1
—
375
—
375
Cash and cash equivalents from continuing operations,
end of period
$
10,709
$
7,742
$
10,709
$
7,742
1
On January 1, 2024, Lifeco completed the sale of Putnam Investments to Franklin Templeton. Beginning in Q2 2023, the cash flows related to the discontinued operations have been
presented separately.
The principal source of funds for the Company on a consolidated basis is cash provided by operating activities, including
insurance revenue, net investment income and fee income. These funds are used primarily to pay policy benefits, policyholder
dividends and claims, as well as operating expenses and commissions. The operations category on the statement of cash flows
also includes transfers and withdrawals by clients that are funded in part by the sale of assets for cash. Cash flows generated by
operations are mainly invested to support future liability cash requirements. Cash flows related to financing activities include
the issuance and repayment of capital instruments and associated dividends and interest payments.
In the fourth quarter of 2024, cash and cash equivalents increased by $1,822 million from September 30, 2024. Cash flows
provided by operations during the fourth quarter of 2024 were $2,000 million, a decrease of $118 million compared to the
fourth quarter of 2023. The decrease was primarily due to net purchases of portfolio investments in the current quarter
68
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
compared to net sales of portfolio investments for the same quarter last year and less favourable fair value adjustments,
partially offset by higher net earnings after taxes. Cash flows used by financing activities of $515 million were primarily used for
payment of dividends to common and preferred shareholders. Cash flows used by investment activities were $5 million.
For the twelve months ended December 31, 2024, cash and cash equivalents increased by $2,592 million from December 31,
2023. Cash flows provided by operations were $4,751 million, a decrease of $452 million compared to the same period last year,
primarily due to lower net sales of portfolio investments, partially offset by higher net earnings after taxes. Cash flows used by
financing activities of $2,285 million were primarily used for the same reasons discussed for the in-quarter results. Cash flows
used by investment activities were $408 million primarily related to the sale of Putnam Investments classified as discontinued
operations.
Commitments/Contractual Obligations
In the normal course of business the Company enters into contracts that give rise to commitments of future minimum
payments that impact short-term and long-term liquidity. The following summarizes the principal repayment schedule for
certain of the Company’s financial liabilities. The table below does not include commitments of insurance and investment
contract liabilities. Refer to the "Market and Liquidity Risk" section of this document for additional information regarding
insurance and investment contract liabilities.
Payments due by period
As at December 31, 2024
Total
1 year
2 years
3 years
4 years
5 years
Over
5 years
1)
Debentures and other debt instruments
$
9,229 $
720 $
745 $
576 $
1,032 $
800 $
5,356
2)
Lease obligations
457
63
61
56
49
42
186
3)
Purchase obligations
517
203
146
75
42
22
29
4)
Credit-related arrangements
(a) Contractual commitments
7,533
7,372
116
30
8
—
7
(b) Letters of credit
see note 4(b) below
5)
Pension contributions
221
221
—
—
—
—
—
Total contractual obligations
$
17,957 $
8,579 $
1,068 $
737 $
1,131 $
864 $
5,578
1) Refer to note 18 in the Company's December 31, 2024 annual consolidated financial statements. Excluded from debentures and other debt instruments are unamortized transaction
costs.
2) For a further description of the Company's lease obligations (presented on a net value basis), refer to note 20 in the Company's December 31, 2024 annual consolidated financial
statements.
3) Purchase obligations are commitments to acquire goods and services, essentially related to information services.
4) (a) Contractual commitments are essentially commitments of investment transactions made in the normal course of operations in accordance with policies and guidelines that are to
be disbursed upon fulfillment of certain contract conditions.
(b) Letters of credit (LC) are written commitments provided by a bank. The total amount of LC facilities is US$1,717 million of which US$941 million were issued as of December 31,
2024.
The Reinsurance business unit periodically uses LC as collateral under certain reinsurance contracts for on-balance sheet policy liabilities.
The Company may be required to seek collateral alternatives if it is unable to renew existing LCs on maturity.
A total of US$723 million has been issued to subsidiaries or branches of Canada Life and the additional US$70 million has been issued to Great-West Life & Annuity Insurance
Company of South Carolina.
The remaining US$148 million has been issued to external parties. Clients residing in the United States are required pursuant to their insurance regulations to obtain LCs issued
on the Company’s behalf from approved banks in order to further secure the Company’s obligations under certain reinsurance contracts.
5) Pension contributions include funding estimates for defined benefit pension plans, defined contribution pension plans and other post-employment plans. These contributions are
subject to change, as contribution decisions are affected by many factors including market performance, regulatory requirements and management’s ability to change funding policy.
Funding estimates beyond 2025 are excluded due to the significant variability in the assumptions required to project the timing of future contributions.
69
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Capital Management and Adequacy
The Board of Directors reviews and approves an annual capital plan as well as capital transactions undertaken by management
pursuant to the plan. The capital plan is designed to ensure that the Company maintains adequate capital, taking into account
the Company's strategy, risk profile and business plans. The Company has established policies and procedures designed to
identify, measure and report all material risks. Management is responsible for establishing capital management procedures for
implementing and monitoring the capital plan. In addition to undertaking capital transactions, the Company uses and
provides traditional and structured reinsurance to support capital and risk management.
At the holding company level, the Company monitors the amount of consolidated capital available and the amounts deployed
in its various operating subsidiaries. The amount of capital deployed in any particular company or country is dependent upon
local regulatory requirements as well as the Company’s internal assessment of capital requirements in the context of its
operational risks and requirements and strategic plans. The Company’s practice is to maintain the capitalization of its
regulated operating subsidiaries at a level that will exceed the relevant minimum regulatory capital requirements in the
jurisdictions in which they operate. The capitalization decisions of the Company and its operating subsidiaries also give
consideration to the impact such actions may have on the opinions expressed by various credit rating agencies that provide
financial strength and other ratings to the Company.
In Canada, OSFI has established a regulatory capital adequacy measurement for life insurance companies incorporated under
the Insurance Companies Act (Canada) and their subsidiaries, known as the Life Insurance Capital Adequacy Test (LICAT).
The LICAT Ratio is calculated in accordance with the 2024 OSFI Guideline - Life Insurance Capital Adequacy Test.
The LICAT Ratio compares the regulatory capital resources of a company to its required capital. The required capital is
calibrated so that a life insurer can both withstand severe stress events and support the continuity of existing business. The
LICAT guideline uses a risk-based approach for measuring specific life insurer risks and for aggregating the results to calculate
the amount of a life insurer's capital requirements.
OSFI has established a Supervisory Target Total Ratio of 100% and a Supervisory Minimum Total Ratio of 90%. Lifeco's major
Canadian operating subsidiary, Canada Life, is operating well above these supervisory ratios.
Canada Life's consolidated LICAT Ratio at December 31, 2024 was 130%. The LICAT Ratio does not take into account any
impact from $2.2 billion of liquidity at the Lifeco holding company level at December 31, 2024 ($1.1 billion at September 30,
2024).
The following provides a summary of the LICAT information and ratios for Canada Life:
LICAT Ratio
Dec. 31
2024
Dec. 31
2023
Tier 1 Capital
$
20,142
$
18,285
Tier 2 Capital
5,253
5,223
Total Available Capital
25,395
23,508
Surplus Allowance & Eligible Deposits
5,130
5,406
Total Capital Resources
$
30,525
$
28,914
Required Capital
$
23,516
$
22,525
Total Ratio (OSFI Supervisory Target = 100%)1
130 %
128 %
1
Total Ratio (%) = (Total Capital Resources / Required Capital)
The LICAT Ratio increased by two points from 128% at December 31, 2023 to 130% at December 31, 2024. The year-over-year
increase of two points was primarily due to higher earnings, partially offset by increased capital requirements as a result of new
business.
In the U.S, the National Association of Insurance Commissioners has established Risk-Based Capital (RBC) as a regulatory
capital adequacy measurement. Empower, Lifeco’s U.S. operating company, reports its RBC ratio annually to U.S. Insurance
Regulators. The RBC ratio is for information only and is not intended as a means to rank insurers generally or for any other
purpose. The reported December 31, 2023 ratio was 522%. At December 31, 2024, the ratio is estimated to continue to be above
500%.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
OSFI Regulatory Capital Initiatives
OSFI introduced revised capital requirements for Segregated Fund Guarantee Risk with its 2025 LICAT Guideline, effective
January 1, 2025.
Canada Life will report under the new rules starting in the first quarter of 2025. They are expected to have a modest positive
impact on the LICAT Total Ratio based on current market conditions and a modest expansion in Canada Life's hedging
program.
Return on Equity (ROE)
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Base Return on Equity1 by Segment
Canada
15.7 %
16.5 %
16.9 %
United States
15.7 %
14.5 %
11.6 %
Europe
15.4 %
16.4 %
16.7 %
Capital and Risk Solutions
59.5 %
48.4 %
49.5 %
Total Lifeco Base Return on Equity
17.5 %
17.3 %
16.6 %
Return on Equity - Continuing Operations2 by Segment
Canada
18.4 %
17.4 %
14.0 %
United States3
13.2 %
11.8 %
8.8 %
Europe
15.1 %
14.6 %
8.2 %
Capital and Risk Solutions
45.0 %
37.2 %
52.0 %
Total Lifeco Return on Equity - Continuing Operations3
16.7 %
15.6 %
12.9 %
1
This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
2
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
3
Comparative results for 2023 have been restated to exclude amounts related to discontinued operations which were included in error in the corresponding figures presented in the Q4
2023 MD&A.
The Company has a capital allocation methodology, which allocates financing costs in proportion to allocated capital. For the
Canada, Europe and Capital and Risk Solutions segments (essentially Canada Life), this allocation method generally tracks the
regulatory capital requirements, while for the United States, it tracks the financial statement carrying value of the business
units. Total leverage capital is consistently allocated across all business units in proportion to total capital resulting in a debt-
to-equity ratio in each business unit consistent with the consolidated Company.
Lifeco's base ROE as at December 31, 2024 increased by 0.9 percentage points compared to the same quarter last year. The
increase was driven by the Capital and Risk Solutions and U.S. segments, for which base ROEs increased by 10.0 and 4.1
percentage points, respectively.
Lifeco's ROE as at December 31, 2024 increased by 3.8 percentage points compared to the same quarter last year, primarily
driven by the Europe, U.S. and Canada segments.
Ratings
Lifeco and its operating companies maintain ratings from five independent ratings companies. Credit ratings1 are intended to
provide investors with an independent measure of the credit quality of a corporation and securities of a corporation and are
indicators of the likelihood of payment and the capacity of a corporation to meet its obligations in accordance with the terms of
each obligation.
Lifeco and its major operating subsidiaries, are assigned a group rating from each rating agency. This group rating is
predominantly supported by leading positions in the Canadian insurance market and competitive positions in the U.S. and
Europe. Each of Lifeco's operating companies benefit from the strong implicit financial support and collective ownership by
Lifeco.
During 2024, the existing credit ratings for Lifeco and its major operating subsidiaries were unchanged. As of December 31,
2024, all agency outlooks for Lifeco’s rated entities were unchanged at stable.
The following table summarizes Lifeco’s issuer credit rating and the financial strength ratings for Lifeco’s major operating
subsidiaries:
1 These ratings are not a recommendation to buy, sell or hold the securities of the Company or its subsidiaries and do not address market price or other factors that might determine
suitability of a specific security for a particular investor. The ratings also may not reflect the potential impact of all risks on the value of securities and are subject to revision or
withdrawal at any time by the rating agency.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Company
Ratings Type
AM Best
Company
Fitch Ratings
Moody's
Ratings
Morningstar
DBRS
S&P Global
Ratings
Great-West Lifeco Inc.
Issuer Credit
Rating
a
A+
Not Rated
A (high)
A+
The Canada Life Assurance
Company
Financial
Strength Rating
A+
AA
Aa3
AA
AA
Empower Annuity Insurance
Company of America
Financial
Strength Rating
A+
AA
Aa3
Not Rated
AA
For a complete listing of credit ratings for Great-West Lifeco and its major operating subsidiaries, please refer to the "Investor
Relations" section of the Company's website at www.greatwestlifeco.com.
Risk Management
Risk Management Overview
As a diverse financial services company, effective risk management is critical to our success. The Company is committed to a
comprehensive system of risk management, that is embedded throughout all business activities, structured around a three
lines of defense model and overseen by the Board of Directors. The three lines of defense include business unit and support
functions, oversight functions including actuarial, finance, risk and compliance, and the Company's internal audit function.
The Company has a prudent and measured approach to risk management, reinforced by a strong risk culture and guided by an
integrated Enterprise Risk Management (ERM) Framework. This framework aligns our business strategy with our risk appetite,
informs capital allocation and supports the identification, mitigation and management of potential risks and opportunities.
The Company’s Risk Function develops and maintains the Risk Appetite Framework (RAF), supporting policies and risk limits,
while providing independent oversight across the Company. Although the Company takes steps to anticipate and minimize
risks, no framework can guarantee that all risks are fully managed and mitigated effectively. Unforeseen events may affect the
Company's business, financial condition and results of operations.
This Risk Management disclosure has three main sections: ERM Framework, Principal Risk Categories and Exposures and
Sensitivities.
Enterprise Risk Management Framework
The Company’s Board and Management Committees provide oversight of the ERM Framework, which consists of five
components: Risk Culture, Risk Governance, RAF, Risk Processes and Risk Infrastructure & Policies.
Risk Culture
Risk culture is the system of norms, values, attitudes and behaviours that influences and informs risk decision-making. Our risk
culture embodies a collective responsibility to meet our commitments to stakeholders, guided by our corporate purpose and
core values with a customer-first approach. We protect our financial strength and reputation while responsibly growing
shareholder value in a manner that balances the interests of all stakeholders.
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This culture is instilled through a mindset of risk awareness as demonstrated by:
•
A consistent tone from the Board, senior management and throughout the organization, reinforcing behavioural and
ethical expectations, and alignment of business decisions with our strategy, corporate purpose, core values and risk
appetite.
•
An understanding that risk is inherent to our business success and represents opportunity when managed effectively.
•
An individual and shared commitment to continuous risk management, with clear accountability and ownership of
specific risks.
•
Rewarding positive risk-taking and management behaviours while challenging and correcting those that are inconsistent
with our corporate purpose, core values or risk appetite.
•
Encouraging the reporting of risk events and having robust whistleblowing processes, actively seeking to learn from
mistakes and near misses.
•
Being accountable to all stakeholders.
•
Recognizing that risk management is the responsibility of all employees, officers and directors, both individually and
collectively. Risk management skills and knowledge are developed and are essential to our ongoing success. Effective
challenge is expected and respected across all business operations and all three lines of defense. Oversight and assurance
functions are valued and appropriately resourced throughout the organization.
Risk Governance
Risk governance sets out the roles and responsibilities for management, the Board of Directors (Board) and Board Committees.
Board of Directors
The mandate of the Board, which it discharges directly or through one of its Committees, is to oversee the management of the
Company’s business and operations. The Board holds ultimate accountability for the governance and oversight of risk across
the Company. Each year, the Board approves the Company’s strategic goals, objectives, plans and initiatives, reviewing the
risks associated with the Company’s diverse businesses, strategic goals and high priority initiatives. Key risk responsibilities
include:
•
Approving the ERM Policy and RAF, in addition to periodically approving policies designed to support the independence
of the Risk, Finance, Actuarial and Compliance oversight functions, as well as the Internal Audit assurance function.
•
Monitoring the implementation and maintenance of appropriate systems, policies, procedures and controls to manage the
risks associated with the Company’s businesses and operations.
•
Approving the Company’s business, financial and capital plans each year and monitoring their implementation by
management.
•
Adopting a Code of Conduct for Directors, officers and employees of the Company, upon the recommendation of the Risk
Committee.
•
Overseeing the Company’s environmental, social and governance (ESG) strategy, monitoring management’s execution of
this strategy and reviewing the related impacts, risks, initiatives and reporting.
Risk Committee
The Risk Committee of the Board of Directors is responsible for assisting the Board with risk management oversight and
governance throughout the Company. The Risk Committee's responsibilities include:
•
Reviewing and overseeing the ERM Policy and RAF.
•
Approving the risk limit framework, associated risk limits and monitoring adherence to those limits.
•
Reviewing, approving and overseeing credit, market and liquidity, insurance, operational, conduct, strategic and other risk
policies.
•
Discussing risks in aggregate and by type of risk, including actions taken or planned to mitigate those risks where
appropriate.
•
Reviewing and assessing the effectiveness of risk management across the Company including processes to ensure effective
identification, measurement, management, monitoring and reporting on significant current and emerging risks.
•
Reviewing relevant reports, including stress testing and Financial Condition Testing.
•
Reviewing and approving the Own Risk and Solvency Assessment (ORSA) Report.
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Great-West Lifeco Inc. 2024 Annual Report
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•
Periodically approving of the Recovery Plan Playbook.
•
Reviewing and monitoring of compliance with the Company's Code of Conduct and evaluating the Company’s risk culture.
•
Periodically considering and providing input on the relationships between risk and compensation.
•
Approving the organizational and reporting structures, budget and resources of the Risk and Compliance functions.
•
Annually assessing the performance of the CRO, CCO and the effectiveness of the Risk and Compliance Functions.
The Risk Committee is required to meet, at least annually, with the Audit Committee and with the Company's Chief Internal
Auditor. The Risk Committee meets with the Investment Committee as appropriate.
Audit Committee
The primary mandate of the Audit Committee is to review the financial statements of the Company and public disclosure
containing financial information and, at its discretion, ESG information and to report on such reviews to the Board, to be
satisfied that adequate procedures are in place for the review of the Company’s public disclosures containing financial
information and to oversee the work and review the independence of the external auditor. The mandate also includes the
responsibility to recommend to the Board the appointment and/or removal of the Appointed Actuary, the Chief Financial
Officer and the Chief Internal Auditor, to review and approve their mandates, to assess their performance, to review the
independence and assess the effectiveness of each of the Finance, Actuarial and Internal Audit functions and to review and
approve their organizational structures and resources. The Audit Committee is also responsible for reviewing, evaluating and
approving the internal control procedures that are implemented and maintained by management. The Audit Committee is
required to meet, at least annually with the Risk Committee.
Conduct Review Committee
The primary mandate of the Conduct Review Committee is to require management to establish satisfactory procedures for the
consideration and approval of transactions with related parties, to review and, if deemed appropriate, to approve related party
transactions.
Governance and Nominating Committee
The primary mandate of the Governance and Nominating Committee is to oversee the Company’s approach to governance
matters, to recommend to the Board effective corporate governance policies and processes, to assess the effectiveness of the
Board, Board Committees and of the Directors, and to recommend to the Board candidates for election as Directors and
candidates for appointment to Board Committees.
Human Resources Committee
The primary mandate of the Human Resources Committee is to support the Board in its oversight of compensation, talent
management and succession planning. This includes the responsibility to approve compensation policies, to review the
designs of major compensation programs, to approve compensation arrangements and any benefit or perquisite plan for
senior executives of the Company and to recommend to the Board compensation arrangements for the Directors and for the
President and Chief Executive Officer. The mandate also includes the responsibility to review succession plans for the
President and Chief Executive Officer and other senior executives, to review talent management programs and initiatives and
to review the leadership capabilities required to support the advancement of the Company’s strategic objectives. The Human
Resources Committee is also responsible for considering the implications of the risks associated with the Company’s
compensation policies, plans and practices, and in doing so meets annually with the Chief Risk Officer.
Investment Committee
The primary mandate of the Investment Committee is to oversee the Company’s global investment strategy and activities,
including approving the Company’s Investment Policy and monitoring the Company’s compliance with the investment policy.
The mandate also includes reviewing the Company’s annual investment plan and monitoring the company’s investment
performance and results against the annual investment plan and monitoring emerging risks, market trends and performance,
and, at its discretion, ESG information, investment regulatory issues, and any other matters relevant to the oversight of the
Company’s global investment function.
Reinsurance Committee
The primary mandate of the Reinsurance Committee is to advise on the Company’s reinsurance transactions. The mandate
also includes reviewing and approving management’s recommendations with respect to policies applicable to reinsurance.
Senior Management Risk Committees
The Executive Risk Management Committee (ERMC) is the senior management committee responsible for overseeing all types
of risk and the implementation of the ERM Framework. Its members include the President and Chief Executive Officer, heads of
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
major business segments, key oversight functions and support functions as appropriate. The Committee reviews compliance
with the RAF, risk policies and standards, assesses the risk impact of business strategies, capital and financial plans and
material initiatives. Authority for approving and managing lower level risk limits is delegated from the Board Risk Committee to
the ERMC. The ERMC is advised by three enterprise-wide sub-committees, chaired by the Risk Function:
•
Market and Credit Risk Committee
•
Insurance Risk Committee
•
Operational Risk Committee
These sub-committees are responsible for the identification, measurement, management, monitoring and reporting of their
respective risks. Additionally, each business segment has its own executive risk management committee to oversee and
monitor risks and the implementation of the ERM Framework within the respective segment.
Management Accountabilities
The Company employs a Three Lines of Defense model to clearly segregate risk management and risk oversight responsibilities
and rigorously applies the ERM Framework across the enterprise.
•
First Line: Business units and support functions, including Investment Management, Human Resources, Information
Services and Legal, are the ultimate owners of risk and have primary responsibility and accountability for risk management
through day-to-day operations.
•
Second Line: The Risk Function has primary responsibility for independent oversight and challenge of risk management
practices of the first line of defense. It is supported by oversight functions such as Actuarial, Compliance and Finance.
•
Third Line: Internal Audit provides independent assurance on the adequacy and effectiveness of the ERM Framework.
The Chief Risk Officer (CRO) reports directly to both the President and Chief Executive Officer and the Board Risk Committee.
The CRO is responsible for ensuring that the Risk Function is properly resourced and effective. The CRO’s responsibilities
include reporting on compliance with the ERM Policy and RAF and escalating matters that require attention.
Risk resources and capabilities are aligned with business segments and operating units. Additional support is provided by
centrally based risk expertise.
Risk Appetite Framework
The Company has established a RAF that includes the following elements:
•
Risk Strategy: Outlines the Company’s risk philosophy and its alignment with the business strategy.
•
Risk Appetite Statement: Outlines the overall level and types of risk that the Company is willing to accept to achieve its
business objectives.
•
Risk Preference: Provides a qualitative description of risk tolerances.
•
Risk Limit Framework: Includes quantitative components, such as limits and escalation processes, to manage and
monitor risk levels.
Risk Strategy
Our purpose is to help our customers achieve financial security and well-being, while keeping our commitments and growing
shareholder value. Effective and efficient risk management is key to achieving these aims. This is achieved by:
•
Establishing a risk awareness culture that is integrated into all business activities with a risk governance model based on
three lines of defense. Business units are accountable for risk-taking decisions, the Risk Function provides independent
oversight and challenge, Internal Audit provides independent assurance of the ERM Framework;
•
Employing a prudent and measured approach to risk-taking;
•
Conducting business to protect the Company’s reputation and deliver fair customer outcomes through maintaining high
standards of integrity as outlined in the employee Code of Conduct and through sound sales and marketing practices; and
•
Driving profitable growth and while maintaining a strong balance sheet to generate returns and enhance shareholder
value.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Risk Appetite Statement
The Company’s Risk Appetite Statement has four key components:
•
Strong Capital Position: The Company intends to maintain a strong balance sheet and not take risks that would
jeopardize its financial strength;
•
Mitigated Earnings Volatility: The Company seeks to avoid substantial earnings volatility through appropriate
diversification and limiting exposure to more volatile lines of business;
•
Strong Liquidity: The Company intends to maintain a high quality, diversified investment portfolio with sufficient
liquidity to meet the demands of policyholder and financing obligations under normal and stressed conditions; and
•
Treating Customers Fairly and Maintaining the Company's Reputation: The Company seeks to maintain a high
standing and positive reputation with all stakeholders including its customers, counterparties, creditors and other
stakeholders. This includes building and maintaining trust, fair treatment of customers, consideration of corporate social
responsibility and effective management of sustainability and reputational risks.
Risk Preference
The Company has defined qualitative risk preferences for each risk type, assigning a risk preference level to guide
understanding and management of these risks. Risk exposure is regularly measured, with risk tolerances quantitatively
expressed through specific constraints on the Company's risk profile within established limits. Maximum guidelines are in
place to monitor risk concentration and inform the risk limit setting process.
Risk Limit Framework
The Company has implemented a comprehensive structure of risk limits and controls, which are segmented by business unit
and risk type. The limit structure is supported by comprehensive limit approval and excess management processes to ensure
effective governance and oversight of the RAF.
The Company and its subsidiaries operate under various regulatory regimes. The capital requirements under these regulatory
capital regimes are factored into the development of risk limits. Business units are responsible for operating within the
established risk appetite and the risk limit framework, while also meeting local regulatory requirements.
Risk Processes
The Company’s risk processes follow a cycle of identification, measurement, management, monitoring and reporting and are
designed to ensure that both current and emerging risks are assessed against the RAF.
Risk Identification, Measurement and Management
Risk identification involves the structured analysis of the current and emerging risks to ensure they are understood and
appropriately managed. Processes are in place to identify, assess, prioritize and address risks across all business initiatives,
including investment strategies, product design, annual planning, budgeting and significant transactions including but not
limited to potential acquisitions and disposals.
Risk measurement enables the quantification and assessment of the Company’s risk profile, which is monitored against risk
limits. Material business developments or strategy changes require an independent assessment of risk, including potential
impacts on reputation, capital, earnings and liquidity. Stress and scenario testing is used to evaluate risk exposures relative to
the Company’s risk appetite. Sensitivity testing assesses the impact of specific risks independent of other risks. Scenario testing
examines the combined impact of multiple risk exposures.
Where necessary, the Company develops mitigation strategies to manage them proactively. Risk management involves
selecting approaches to accept, reject, transfer, avoid or control risk, including mitigation plans. This is supported by a control
framework for both financial and non-financial risks that includes risk limits, Risk Function Indicators (RFIs) and stress and
scenario testing to ensure timely escalation and resolution of potential issues.
The Risk Function is responsible for ensuring consistent application of the risk appetite across the Company and for
establishing limits to ensure compliance with the risk appetite and Company-wide risk policies. The Risk Function provides
ongoing, independent challenge to the first line of defense. In cases of significant internal or external changes that may
introduce new risks or amplify existing risks, the Risk Function provides formal Risk Opinions or thematic reviews.
Risk Monitoring, Reporting and Escalation
Risk monitoring involves the continuous oversight and tracking of the Company’s risk exposures to ensure that current risk
management strategies remain effective. Monitoring may also identify potential opportunities for risk-taking.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Risk reporting presents a clear, accurate and timely view of existing and emerging risk issues and exposures as well as their
potential impact on business activities. It highlights the Company’s risk profile in relation to the established risk appetite and
limits.
A well-defined escalation protocol is in place to address any excesses against thresholds or limits set by the RAF, risk policies or
operating standards and guidelines. Remediation plans are reviewed and monitored by the Risk Function and escalated to
designated management and Board committees, as necessary.
Risk Infrastructure and Policies
The Company’s organizational structure and infrastructure is established to provide the necessary resources and risk systems
to support comprehensive risk policies, operating standards, guidelines and processes. The Company endeavours to take a
consistent approach to risk management across key risk types.
Risk management and oversight requirements are codified in a set of guiding documents composed of risk policies, operating
standards and associated guidelines. This framework provides detailed and effective guidance across all risk management
processes, promoting a consistent approach to risk management and oversight across the Company’s business segments.
These documents are regularly reviewed and approved by the Board of Directors, the Board Risk Committee or a senior
management committee, following an established authority hierarchy. Each business segment maintains and develops similar
policy structures to align with the Company’s overall risk framework.
Principal Risk Categories
The Company’s risk profile is impacted by a variety of risks and its risk management and independent oversight processes are
tailored to the type, volatility and magnitude of each risk. The Company has defined specific risk management and oversight
processes for risks, broadly grouped in the following categories:
1. Market and Liquidity Risk
2. Credit Risk
3. Insurance Risk
4. Operational Risk
5. Conduct Risk
6. Strategic Risk
Protecting the Company's reputation is a fundamental component of our RAF. Reputation risk is the risk of loss as a result of
damage to the Company's image, brand and standing in the market due to negative public perception. Reputation risk is an
overarching consideration across all identified risks within the Company’s risk taxonomy. This approach ensures that potential
impacts to reputation are evaluated and managed in conjunction with other risk categories, reinforcing the Company’s
commitment to maintain a positive reputation with customers, counterparties, creditors and other stakeholders.
Market and Liquidity Risk
Risk Description
Market risk is the potential loss due to changes in market rates and prices in various markets such as those for interest rates,
real estate, currency and common shares. This risk arises from business activities including investment transactions which
create on-balance sheet and off-balance sheet positions.
Liquidity risk is the risk of the Company's inability to generate the necessary funds to meet its obligations, including off-balance
sheet commitments and obligations, as they come due.
Market and Liquidity Risk Management
The Company’s Market & Liquidity Risk Policy outlines the framework and principles for managing market and liquidity risks.
This policy is supported by other policies and guidelines that provide detailed guidance.
A governance structure is in place for the management of market and liquidity risk. Business units, including the Investment
Division, are the ultimate owners of market and liquidity risk and as such have primary responsibility for the identification,
measurement, management, monitoring and reporting of these risks. The Company has established risk limits and other
measures to ensure compliance with the Company's RAF. The Risk Function works with business units and other oversight
functions to identify current and emerging market and liquidity risks and take appropriate action, if required. A senior
management committee provides oversight of market and liquidity risk, which includes reviewing and making
recommendations regarding risk limits, risk policy and associated compliance, excess management and mitigation strategies.
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Great-West Lifeco Inc. 2024 Annual Report
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Each business segment also has its own oversight and operating committees to manage market and liquidity risk within the
segment.
The Company is exposed to market and liquidity risk as a consequence of its business model and seeks to mitigate the risks
wherever practical. A wide range of risk mitigation techniques, including derivatives-based hedging, are used to manage
market risks. Hedging programs include product-level hedging, tactical portfolio hedging and macro hedging. A general macro
equity hedging program has been established. The macro hedge program is contingent and would be executed only in
circumstances and at levels determined by the Company. To reduce liquidity risk, the Company maintains a high quality,
diversified investment portfolio with sufficient liquidity to meet policyholder and financial obligations under normal and stress
conditions.
Risks and risk management activities associated with the broad market and liquidity risk categories are detailed below.
Interest Rate Risk
Interest rate risk refers to the potential loss due to changes in future interest rates (risk-free rates and/or credit spreads) that
affect cash flows of assets relative to liabilities as well as assets backing surplus. This risk also includes changes in the amount
and timing of cash flows related to asset and liability optionality, including interest rate guarantees and book value surrender
benefits in the liabilities.
The Company’s main exposure to interest rate risk arises from certain general fund and segregated fund products. The
Company’s Asset Liability Management (ALM) strategy is designed to mitigate interest rate risks associated with general fund
products, with the general approach being to match asset cash flows with insurance and investment contract obligations.
Products with similar risk characteristics are managed together with asset portfolios supporting insurance and investment
contract liabilities segmented to align with characteristics of the associated liabilities (e.g., cash flow patterns, crediting rate
strategies and other product features).
For products with fixed and highly predictable benefit payments, investments are generally made in fixed income assets or
investment properties whose cash flows closely match the liability product cash flows. Where assets are not available to match
certain period cash flows, such as long-tail cash flows, a portion of these are invested in equities and other non-fixed income
assets.
Hedging instruments are also employed when there is a lack of suitable permanent investments or to manage the level of loss
exposure to interest rate changes.
For products with less predictable timing of benefit payments, investments are made in fixed income assets with cash flows of a
shorter duration than the anticipated timing of benefit payments, or equities and other non-fixed income assets. The risk
associated with the mismatch in portfolio duration and cash flow, asset prepayment exposure and the pace of asset acquisition
are quantified and reviewed regularly.
For certain general fund products, the account values of the underlying policies increase through the application of crediting
rates, or through policyholder dividends. Crediting rates and policyholder dividends are set taking into account interest rate
risk, and many of these products share risks and returns with policyholders. However, a rapid rise in interest rates may
adversely affect the Company if it needs to dispose of fixed income securities to meet contractual surrender benefits.
Additionally, the value of most liquid assets and marketable securities, which are mainly fixed-income securities, would
decrease when interest rates rise. The Company mitigates this risk through investment strategies and product design. The
Company also maintains a high quality, diversified investment portfolio with a spread of asset maturities by year. Surrender
terms are outlined in contracts and in the case of group contracts depend on whether an exit is driven by a plan or a plan
participant, and the nature of a participant's exit. For example, plan terminations may be subject to delay conditions and
discretionary withdrawals may have market value adjustments for exits payable immediately.
Company has several product-level hedging programs to manage interest rate risk, particularly for segregated fund and
variable annuity products with guaranteed minimum withdrawal benefits. These dynamic hedging programs use derivative
instruments, such as interest rate swaps, to offset changes in the economic value of liabilities. The hedge portfolios are regularly
rebalanced within approved thresholds and rebalancing criteria.
A prolonged low interest rate environment may adversely impact the Company's earnings and capital and could impact the
Company's business strategy. During periods of prolonged low interest rates, investment earnings may be lower because the
interest earned on new fixed income investments will likely have declined with market interest rates and hedging costs may
increase. Also, early repayment on investments such as mortgage-backed securities, asset-backed securities and callable
bonds, could force reinvestment at lower yields, which will reduce investment margins. Lower interest rates also increase
capital requirements for guaranteed products (e.g., Canada participating products), with non-linear sensitivity to market
movements (sensitivity increases as interest rates decrease). The Company uses hedging strategies to partially offset this risk.
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Great-West Lifeco Inc. 2024 Annual Report
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Where the Company’s insurance and investment products have benefit or expense payments that are dependent on inflation
(e.g. inflation-indexed annuities, pensions and disability claims), the Company manages the risk through product design (e.g.,
inflation caps and floors), and investment in index-linked and real return instruments.
Non-Fixed Income Risk
Non-Fixed Income (NFI) risk refers to the potential loss from changes in the level or the volatility of asset prices such as public
and private equity, and real estate.
The Company’s main exposure to equity risk comes from direct equity investments, equity guarantee risk and equity fee
income risk associated with assets under management.
For very long-dated liabilities, it is not practical to match cash flows closely with fixed-income investments. Therefore, certain
asset portfolios target an investment return sufficient to meet liability cash flows over the longer term with liabilities backed by
a diversified portfolio of investments, including equity, real estate and long dated fixed-income instruments. To manage the
related equity risk, the Company follows approved investment and risk policies, allowing for general fund investments in equity
markets within defined limits.
Our product design process involves thoughtful consideration to prudent pricing, terms and guarantees. Most of the equity
guarantees offered on the Company’s segregated fund products are well out of the money, reflecting low risk profile (e.g., low
level of guarantees, diversified age mix). To mitigate equity risk relating to segregated fund and variable annuity with
guaranteed minimum withdrawal guarantees, the Company has established dynamic hedging programs. These programs use
derivative instruments, such as the short selling of equity index futures, to protect against changes in the economic value of
these liabilities. The hedge asset portfolios are regularly adjusted within set guidelines.
The Company's product-level hedging programs are supplemented by a general macro hedging strategy. The macro hedge
program is contingent and would be executed only in circumstances and at levels determined by the Company. The objective
of the program is to reduce the Company's exposure to equity tail-risk and to maintain overall capital sensitivity to equity
market movements within Board approved risk appetite limits. The program is designed to hedge a portion of the Company's
capital sensitivity due to movements in equity markets arising from sources outside of dynamically hedged segregated fund
and variable annuity guaranteed withdrawal benefit exposures. There have been no macro hedge transactions executed and
there are currently no assets supporting the macro hedge program.
Real estate losses can arise from fluctuations in the value of, or future cash flows from, the Company's investment in real estate.
This risk affects both the Company’s general fund assets and investments made on behalf of segregated fund policyholders.
The Company’s investment in real estate arises from direct holdings in real estate and through fixed income holdings backed
by real estate (e.g., mortgages, mortgage-backed securities). Our real estate investments are well diversified by asset type,
property type and location, and are generally focused on higher-quality properties.
Foreign Exchange Risk
Foreign exchange risk refers to the potential loss from changes in currency exchange rates against the Company’s reporting
currency. The Company’s foreign exchange investment and risk management policies and practices are to match the currency
of general fund investments with the currency of the underlying insurance and investment contract liabilities. The Company
may use foreign exchange derivatives such as forward contracts and swaps to reduce currency risk where practical.
The Company also has net investments in foreign operations, meaning its revenues, expenses and income in currencies other
than the Canadian dollar are affected by fluctuations in exchange rates. These fluctuations impact the Company’s financial
results. The Company is particularly exposed to the U.S. dollar due to operations in the United States, such as Empower and the
Reinsurance business unit within the Capital and Risk Solutions segment; and to the British pound and euro from operations of
business units within the Europe and Capital and Risk solutions segments.
Under IFRS, foreign currency gains and losses from net investments in foreign operations, after hedging and taxes, are recorded
in accumulated other comprehensive income (loss). Changes in the Canadian dollar compared to the U.S. dollar, British pound
and euro at end-of-period impacts the Company’s total share capital and surplus. Correspondingly, the Company’s book value
per share and capital ratios monitored by rating agencies are also impacted.
•
A 5% appreciation (depreciation) of the average exchange rate of the Canadian dollar to each of the U.S. dollar, euro and
British pound would decrease (increase) net earnings in 2024 by $72 million, $26 million and $25 million, respectively.
•
A 5% appreciation (depreciation) of the Canadian dollar end-of-period market rate compared to each of the U.S. dollar,
British pound and euro end-of-period market rates would decrease (increase) the unrealized foreign currency translation
gains2, in accumulated other comprehensive income (loss) of shareholders’ equity by approximately $557 million, $158
million and $75 million, respectively, as at December 31, 2024.
2 Unrealized foreign currency translation gains (losses) include the impact of instruments designated as hedges of net investments on foreign operations.
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Management’s Discussion and Analysis
To manage this volatility, the Company may use forward foreign currency contracts and foreign currency denominated debt to
reduce the impact of currency fluctuations on its net investments in foreign operations. The Company also uses non-GAAP
financial measures such as constant currency calculations to assist in communicating the effect of currency translation
fluctuation on financial results.
Liquidity Risk
Liquidity risk is the risk of the Company's inability to generate the necessary funds to meet its obligations as they come due.
The Company’s liquidity risk management framework and limits are designed to ensure it can meet cash and collateral
commitments as they fall due, both under normal conditions and in times of severe liquidity stress.
During such a stress, additional cash and collateral needs could arise from factors like increased policyholder withdrawals
(refer to the “Interest Rate Risk” section of this document for additional details), derivative collateral demands, reinsurance
obligations and loan renewals.
The Company has a low appetite for liquidity risk and seeks to mitigate the risk wherever possible.
The Corporation manages liquidity risk through product design, by maintaining adequate high-quality liquid assets (HQLA)
including adequate eligible collateral (for derivative transactions) and by retaining access to committed banking facilities to
ensure unexpected payments can be covered. Effective matching of asset and liability cashflows helps to reduce the need to
utilize HQLA and banking facilities to make unexpected payments (including higher than expected claims or policy lapses).
Approximately 67% of the Company’s insurance and investment contract liabilities (measured based on carrying value and
excluding liabilities held on account of segregated fund holders) are subject to discretionary withdrawal. These liabilities
primarily come from U.S. general account and Canadian participating account businesses. The Company includes contract
provisions that limit withdrawal rights on U.S. general account pension products sold to employee benefit plan sponsors. While
plan participants can redeem at their account value, we have the right to make market value adjustments and/or delay
payments for terminations of most plans at the plan sponsor level. Participating account policies provide insurance coverage
over the lifetime of the policyholders which would be lost on surrender. The Company also maintains a high quality, diversified
investment portfolio with a spread of asset maturities by year.
For segregated funds, contract terms are generally in place to reduce liquidity risk from discretionary withdrawals.
For further details on the Company's financial instrument risk management policies, refer to note 7 in the Company's
December 31, 2024 annual consolidated financial statements.
Credit Risk
Risk Description
Credit risk refers to the potential loss from an obligor’s inability or unwillingness to fully meet its contractual obligations. This
risk arises whenever funds are extended, committed or invested through actual or implied agreements. Credit risk includes
several components: loan loss/principal risk, pre-settlement/replacement risk and settlement risk. Obligors include issuers,
debtors, borrowers, brokers, policyholders, reinsurers, derivative counterparties and guarantors.
The Company faces credit exposure primarily from the purchase of fixed income securities, which are mainly used to support
policyholder liabilities. It also manages financial contracts with counterparties, such as reinsurance agreements and derivative
contracts, which are used to mitigate insurance and market risks or arise from direct business operations. The risk arising from
these types of arrangements is included in the Company's measurement of its risk profile.
Credit Risk Management
The Company’s credit risk management framework is designed to minimize risk by avoiding excessive concentration of assets
and conducting in-house credit analysis to assess and measure risks. This is supported by continuous monitoring and
proactive management. Diversification is maintained through concentration limits based on factors such as asset class, issuer,
credit rating, industry and geography, along with protocols for transaction approval. The Company regularly reviews its risk
profile relative to its RAF and assesses how potential stress scenarios might affect it.
A governance structure oversees credit risk management. Business units, including Investment Management, are responsible
for identifying, measuring, managing, monitoring and reporting credit risk. A senior management committee provides
oversight by reviewing risks, setting risk limits and ensuring compliance. Each business segment has its own oversight and
operating committees to help manage credit risk. The Company has established risk limits and other measures to ensure
compliance with the Company's RAF.
The Company has also established specific policies, including Investment and Lending Policies with investment limits for each
asset class, and a Credit Risk Policy that outlines the credit risk management framework. This policy is supported by other
policies and guidelines that provide detailed guidance.
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Management’s Discussion and Analysis
Credit risk is identified through an internal risk rating system, which assesses an obligor’s creditworthiness based on business
risks, financial profile, structural considerations and security characteristics including seniority and covenants. Ratings are
assigned using a scale that is consistent with those used by external rating agencies. The Company’s policies ensure internal
ratings do not exceed the highest ratings provided by certain independent rating companies. The Risk Function reviews and
approves the credit risk ratings for new investments and assesses the appropriateness of ratings for existing exposures.
The Risk Function assigns credit risk parameters (probabilities of default, rating transition rates, loss given default, exposures at
default) to all credit exposures to measure the Company’s aggregate credit risk profile. It also sets limits, conducts stress and
scenario testing (both stochastic and deterministic) and ensures compliance with the RAF. Reports on the Company's credit
risk profile are provided to executive management, the Risk Committee of the Board of Directors and other committees at
different levels of the Company.
Investment Management and the Risk Function are responsible for monitoring exposures against limits and managing any
excesses. Investment Management continuously monitors portfolios for changes in credit outlook and performs regular
reviews of obligors and counterparties. These reviews combine bottom-up credit analysis with top-down views on the economy
and assessment of industry and sub-sector outlooks. Watch lists monitor obligors experiencing heightened credit stress,
allowing for appropriate risk mitigation strategies.
Counterparty Risk
Counterparties include both reinsurers and derivative counterparties.
The Company uses reinsurance to mitigate insurance risks, which increases credit risk due to the potential failure of
reinsurance counterparties to fulfill their contractual obligations.
The financial soundness of reinsurers is reviewed regularly as part of an ongoing monitoring process. The minimum financial
strength of reinsurers is outlined in the Reinsurance Risk Management Policy. To manage reinsurance credit risk, the Company
aims for diversification and seeks protection through collateral or funds withheld arrangements where possible.
The Company enters into derivative contracts primarily to mitigate market risks. Derivative counterparty risk is the risk of loss if
a derivative counterparty fails to meet its financial obligations under the contract. The Company trades derivative products
through exchanges or with counterparties approved by the Board of Directors or the Investment Committee. To mitigate
derivative credit risk, the Company diversifies its counterparties and uses collateral arrangements where possible. Additionally,
potential future exposure from derivatives is included in the Company’s measurement of total exposure against single name
limits.
Insurance Risk
Risk Description
Insurance products involve commitments by the insurer to provide services and financial obligations with coverage for
extended periods of time. To provide insurance protection effectively, the Company must design and price products so that the
premiums received, along with investment income earned on those premiums, are sufficient to pay future claims and
expenses. This involves making assumptions about expected income, claims, expenses, policyholder behaviour and market
risks, which influence pricing and liabilities. As a result, the Company faces product design and pricing risks such as potential
financial losses if actual costs and liabilities exceed the pricing expectations.
Insurance risk is the risk of loss due to unfavourable changes in experience associated with contractual promises and
obligations arising from insurance contracts. This includes uncertainties related to the ultimate amount of net cash flows (such
as premiums, commissions, claims, payouts and settlement costs), the timing of those cash flows and the impact of
policyholder behaviour (such as policy lapses).
The Company recognizes six main types of insurance risk that may lead to financial losses: mortality risk, morbidity risk,
longevity risk, policyholder behaviour risk, expense risk and property & casualty risk. Mortality, morbidity, longevity and
expense risks are key business risks and managing these risks to create value is a core business activity. Policyholder behaviour
risk is mainly associated with offering core products and is accepted as a consequence of the business model, with mitigation
applied where appropriate. Property & casualty risk is selectively accepted, managed within defined risk limits and actively
controlled.
Insurance Risk Management
A governance structure has been established for the management of insurance risk. Business units are responsible for
identifying, measuring, managing, monitoring and reporting insurance risk. The Risk Function, supported by Corporate
Actuarial, oversees the insurance risk management framework. The Company has an Insurance Risk Committee, which is a
management committee that makes recommendations on insurance risk limits and policies, and reviews associated
compliance and mitigation. Each business segment has its own committees that oversee and manage insurance risk (among
other risks) within the segment.
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Management’s Discussion and Analysis
The Company’s Insurance Risk Policy sets out the insurance risk management framework and provides the principles for
insurance risk management. This policy is supported by several other policies and guidelines that provide detailed guidance.
The Risk Function, in conjunction with the Actuarial Function, implements various processes to carry out its responsibility for
oversight of insurance risk. The Risk Function assesses the insurance risk management processes of business units, such as
product design and pricing, underwriting, claims adjudication, and reinsurance ceding and provides challenge as appropriate.
The Risk Function works with business units and other oversight functions to identify current and emerging insurance risks
and take appropriate action, if required. Insurance risk limits, risk budgets and RFIs are established to ensure that the
insurance risk profile aligns with the Company’s risk appetite. The Risk Function regularly monitors the insurance risk profile
and escalates any excesses for appropriate remediation. It performs stress testing and analysis of insurance risks, including
review of experience studies and provides regular reporting on these activities to business units, senior management, and
management-level risk oversight committees. The Risk Function also performs thematic reviews and enhances the monitoring
and reporting of related risk exposures.
Risks and risk management activities associated with the broad insurance risk categories are detailed below.
Mortality and Morbidity Risk
Mortality risk refers to the potential for loss due to unfavourable changes in mortality rates, where an increase in mortality rates
leads to a decrease in current and/or expected future earnings.
Morbidity risk refers to the potential for loss due to unfavourable changes in disability, health, dental, critical illness and other
sickness rates where an increase in the incidence rate or a decrease in the disability recovery rate leads to a decrease in current
and/or expected future earnings.
There is a possibility that the Company may misestimate mortality or morbidity levels or write business which generates worse
mortality and morbidity experience than expected.
The Company employs the following practices to manage its mortality and morbidity risk:
•
Regular research and analysis are conducted to establish pricing and valuation assumptions that reflect the insurance and
reinsurance risks in markets where the Company operates.
•
Underwriting limits, practices and policies are in place to manage risk exposure and ensure that the selection of insured
risks aligns with claims expectations.
•
The Company sets retention limits for mortality and morbidity risks, managing aggregate risk through a combination of
reinsurance and capital market solutions to transfer the risk where appropriate.
•
For group life products, exposure to a concentrated mortality event, due to concentration of risk in specific locations for
example, could have an impact on financial results. To mitigate this risk, concentrations are monitored for new business
and renewals. The Company may set single-event limits on certain group plans and may refrain from quoting in areas
where aggregate risk is considered excessive.
•
Effective plan design and claims adjudication practices are crucial for managing both morbidity and mortality risks. For
example, for group healthcare products, inflation and utilization can affect claims costs, which can be challenging to
predict. The Company addresses these factors through plan designs that specify the level of coverage and limit long-term
price guarantees, allowing for regular re-pricing based on emerging experience.
•
The Company manages large blocks of business, which, in aggregate, are expected to result in relatively low statistical
fluctuations within any given period. For some policies, risks are shared with policyholders through adjustments to future
premiums or, in the case of participating policies, through changes in future policyholder dividends.
Longevity Risk
Longevity risk refers to the potential for loss due to unfavourable changes in mortality rates, where a decrease in these rates
leads to a decrease in current and/or future earnings. Annuities, certain segregated fund products with Guaranteed Minimum
Withdrawal Benefits and longevity reinsurance are priced and valued based on the life expectancy of the annuitant. There is a
risk that annuitants may live longer than was estimated by the Company, which would increase the value of the associated
insurance contract liabilities.
Pricing for these products uses mortality assumptions based on recent Company and industry experience, as well as the latest
research on developments that may impact expected future mortality.
Aggregate risk is managed through reinsurance to transfer risk when appropriate and by considering capital market solutions
when necessary.
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Management’s Discussion and Analysis
The Company has established processes to verify annuitants’ eligibility for ongoing income benefits. These processes ensure
that annuity payments accrue to those contractually entitled to receive them and help ensure mortality data used to develop
pricing and valuation assumptions is as complete as possible.
Policyholder Behaviour Risk
Policyholder behaviour risk refers to the potential for loss due to unfavourable changes in the rates of policy lapses,
terminations, renewals, surrenders or the exercise of embedded policy options.
Products are priced and valued based on the expected duration of contracts and the exercise of contractual options. There is a
risk that contracts may be terminated earlier or later than anticipated in the pricing and design of the product. For contracts
where higher costs are incurred in the early years, there is a risk of termination before those expenses can be recovered.
Conversely, with certain long-term level premium products, where claims costs increase with age, there is risk that contracts
may be terminated later than expected.
Business is priced using policy termination assumptions which consider product designs and policyholder options, recent
Company and industry experience and the latest research on expected future trends. Assumptions are reviewed regularly and
are updated as necessary for both pricing of new policies and valuation of in-force policies.
The Company also incorporates early surrender charges into certain contracts and incorporates commission chargebacks in its
distribution agreements to reduce unrecovered expenses.
Policyholder taxation rules in many jurisdictions help encourage the retention of insurance coverage.
In addition to the risk associated with core product offerings, the Company also writes structured mass lapse reinsurance deals.
These covers are designed to provide capital relief for our clients. Risks are managed by limiting the aggregate net cash payout
as well as country and counterparty concentration. The Company also incorporates product features to mitigate risk (such as
ability to cancel on relatively short notice and specified exclusions).
Expense Risk
Expense risk refers to the potential for loss due to unexpected changes in expenses related to fee-for-service business or the
servicing and maintenance of insurance, savings or reinsurance contracts. This includes both direct expenses and allocations
of overhead costs.
Expense management programs are regularly reviewed to ensure that expenses are controlled while providing effective service
delivery.
Property & Casualty Risk
Property & casualty risk refers to the risk of loss due to unfavourable experience related to property catastrophes and other
non-life coverages.
This risk is primarily associated with the Company’s reinsurance assumed business and can be divided into two main
categories:
•
Property catastrophe risk: The Company primarily assumes this risk as a retrocessionaire. Participation is generally at
significantly higher event or experience loss exposures than primary carriers and reinsurers. Generally, an event or
experience of significant severity must occur prior to the Company incurring a claim. If a claim does occur, it may affect
multiple reinsurance contracts.
Risks are managed by limiting the total maximum claim amount across all contracts and regularly monitoring the claims
experience of cedant companies. This information is incorporated into pricing processes to ensure that the Company is
adequately compensated for the risk undertaken.
•
Additional non-life risks: including motor, pet, third party liability, unemployment and title insurance. Treaties can take
the form of coverage for particular lines of business or multiple lines of business. Risks are managed through risk limits
established using a probable maximum loss approach. Treaties are on a structured basis which helps to mitigate risk
exposures through mechanisms which may include maximum loss, loss carry forward and pricing margins. Given the
range of risk exposures, these transactions are expected to provide significant diversification benefits, both among
themselves and with the Company’s other risk exposures.
Operational Risk
Risk Description
Operational risk refers to the potential loss due to issues with internal processes, people, and systems or from external events.
This risk can arise from normal day-to-day operations or unexpected incidents and can lead to material financial losses and
damage to reputation.
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Management’s Discussion and Analysis
Operational Risk Management
The Company has processes in place to identify, assess, mitigate and manage operational risks. However, the Company’s
operations require multiple processes, systems and stakeholders to interact across the enterprise on an ongoing basis and
operational risk is a natural feature of the Company’s business model that cannot be fully eliminated.
The Company actively manages these risks to support operational resilience in key processes and services while maintaining a
strong reputation and financial stability.
A governance structure is in place for managing operational risk, with business units being the ultimate owners responsible for
identifying, measuring, managing, monitoring and reporting these risks. To oversee operational risk, the Company has
established an Operational Risk Committee that reviews, reports, monitors risks and makes recommendations on risk limits,
policies, and mitigation strategies. Each business segment has its own oversight committees and operating committees to assist
in managing operational risk across their business.
The Company's Operational Risk Policy is supported by standards and guidelines for specialized functions. The Company
applies controls for managing operational risk through integrated policies, procedures and processes, weighing the cost/
benefit of each control. Business areas monitor and refine processes and controls, and the Company’s Internal Audit
department reviews them periodically. Financial reporting processes and controls are further examined by external auditors.
The Company uses a combination of operational risk management methods, including risk and control assessments, system of
internal controls and risk event analyses. Risk and control assessments systematically identify potential operational risks and
associated controls, while internal and external risk events are analyzed to identify root causes and recognize new potential
risks. Scenario analysis is also used to identify and quantify severe operational risk exposures, and RFIs, risk appetite
preferences, and other processes are leveraged to measure, manage, and monitor operational risks.
The Risk Function oversees the progress of risk mitigation to ensure that risk exposures are mitigated in a timely manner.
Processes are in place to escalate significant matters to senior management to enable management to take appropriate action.
The Risk Function regularly reports on the Company’s operational risk profile to executive management, the Board of Directors
and various committees at enterprise, business segment and legal entity levels.
The Company also manages operational risks through a corporate insurance program, which mitigates a portion of the
operational risk exposure by purchasing insurance coverage that provides protection against unexpected material losses from
events such as property loss, cyber-attacks or damage and liability exposures. Insurance protection is determined based on the
Company’s risk profile, risk appetite, risk tolerance, legal requirements and contractual obligations.
Key operational risks and the Company’s approach to managing them are outlined below.
Technology Risk
Technology risk is the risk of loss from improper system or control design, improper operation, delivery of or unauthorized
access to information and technology resources. This risk can significantly impact the Company’s ability to operate efficiently,
comply with regulations and maintain its financial integrity and reputation. Technology risk includes cyber and information
security risk, technology operations risk and technology delivery risk.
Technology is critical to the Company’s business operations and customer-focused digital strategy. The Company faces
ongoing technology and cyber risks from legacy systems, technology constraints and the advancement of techniques used in
cyber-attacks.
The Company continues to enhance risk management processes to improve the identification, measurement, management
and reporting of technology risk, including emerging technologies such as artificial intelligence. As technology and business
needs evolve, the Company’s strategy to manage technology and cyber risks includes policies that govern the technology
environment and establish standards for information security, including:
•
multiple layers of technology designed to prevent unauthorized access, ransomware, distributed denial of service and
other cyber-attacks;
•
coordinated global and regional information security offices that collect threat intelligence, detect, monitor and respond to
security events and conduct regular threat and vulnerability assessments;
•
independent oversight by Technology Risk Management team, an independent group, providing a second line of defense
by assessing mitigation efforts for technology and cyber-risks; and
•
regular cyber security awareness sessions and mandatory training for all employees.
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Management’s Discussion and Analysis
Business Continuity Risk
Business continuity risk is the risk of loss as a result of the failure to provide for business processes and operations during
adverse events. These events can be natural, technological or human caused events involving the loss of workplace, workforce,
technology or supply chain disruptions. Business continuity risk also includes the risk of loss resulting from the reduction or
non-availability of corporate facilities or physical assets.
A business continuity risk management framework has been implemented to manage business continuity risks. This
framework focuses on four key areas: emergency response, incident and crisis management, business continuity and
technology resilience which includes disaster recovery. It is supported by ongoing development, testing, training and
maintenance to ensure its effectiveness.
Process & Reporting Risk
Process and reporting risk is the risk of loss or material error due to inadequate or failed business processes or financial
reporting. These processes include transaction processing, product development and introduction, new business (including
distribution and sales), renewals (including underwriting), investment activities, client administration, claims and benefit
payments, data aggregation, financial reporting, modelling and financial management. Such inadequacies may result from
issues in governance, oversight, communication or general process management.
Process and reporting risks are an inherent part of doing business. The Company manages these risks through a control
environment for core processes which uses automation, standardization and process improvements to prevent or minimize
operational losses.
Fraud Risk
Fraud risk is defined as the risk of loss due to acts by customers, suppliers, advisors, directors, officers, employees, on-site
contractors or other third parties that are intended to defraud, misappropriate assets, or circumvent laws or regulations. This
risk is increasing for financial institutions due to financial pressures that may drive fraudulent behaviour and the growing
sophistication of organized and cyber fraud methods. Fraud can result in financial losses or harm the Company’s reputation
and negatively affect customers and other stakeholders.
The Company has implemented a formal program with governance, principles and process requirements outlined in a Fraud
Risk Management Policy and Operating Standard, to prevent, detect, investigate and address fraud in a timely manner.
Additionally, the Code of Conduct and Fraud Risk Management Policy emphasize management’s commitment to integrity and
fostering strong fraud risk awareness.
Supplier Risk
Supplier (third party) risk is the risk of loss due to inadequate supplier arrangements, transactions or interactions that fail to
meet expected or contracted service levels. This risk applies to external and internal suppliers.
The Company strategically engages suppliers to maintain cost efficiency, optimize internal resources and capital and access
skills, expertise and resources not otherwise available. Supplier engagements follow the principles outlined in our Supplier Risk
Management Policy. The Company uses a risk management framework and mitigation activities, such as risk assessments and
due diligence, to manage and monitor supplier risk throughout the supplier lifecycle, including how they meet service
standards and protect stakeholders and the interests of the Company.
Legal and Regulatory Compliance Risk
Legal and regulatory risk is the risk of loss from non-compliance with local or international laws, regulations, or industry
standards, as well as civil or criminal litigation involving the Company. As a multi-national enterprise, the Company and its
subsidiaries are subject to extensive legal and regulatory requirements in the jurisdictions in which we operate, including
Canada, the U.S., the U.K., Ireland and Germany. These requirements cover areas such as capital adequacy, privacy, financial
crime, liquidity and solvency, investments, the sale and marketing of insurance and wealth products, obligations to consumers,
business conduct of insurers, asset managers and investment advisors as well as reinsurance processes. Material changes in
legal or regulatory frameworks, or non-compliance, could negatively impact the Company. An increase in the pace of
regulatory change may also increase operational costs to maintain compliance.
The Company manages legal and regulatory risk through coordinated efforts between first and second line of defense
functions. The Company records, manages and monitors the regulatory compliance environment closely, using the subject
matter expertise of both local and enterprise-wide Compliance and Legal stakeholders and reporting on emerging changes that
could have a significant impact on the Company’s operations or business.
The Company also faces risks of litigation and regulatory actions relating to its business, operations, products, securities and
contractual relationships and it establishes contingency reserves for litigation that it determines are appropriate.
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Management’s Discussion and Analysis
People Risk
People risk is the risk of loss due to inadequate management of human capital or misalignment between human resource
policies, programs and practices and employment-related legislation, regulatory expectations or the Company’s strategic
objectives, risk appetite and values. To manage these risks the Company has established compensation programs, succession
planning, talent management and employee engagement processes. These are designed to support a high-performance culture
and maintain a skilled, diverse workforce that reflects the cultures and practices of the countries in which the Company
operates. The Company's ability to recognize and adapt to evolving industry trends in human resource strategies is essential to
successfully execute its business strategies.
Model Risk/End-user-computing (EUC) Risk
Model / EUC risk is the risk of negative outcomes from decisions based on inaccurate models or EUCs, or from misuse of their
outputs and reports. This risk can result in financial loss, poor business and strategic decisions, and harm to the Company’s
reputation or standing, potentially affecting customer, counterparty, shareholder or regulatory perceptions of the Company.
The Company prioritizes mitigation and control efforts to limit adverse outcomes from models or EUCs not functioning as
intended, following a risk-based approach. This includes establishing controls throughout the model / EUC lifecycle
(development, maintenance and ongoing use), regularly updating model and EUC inventories according to risk classifications,
and conducting independent reviews of models and EUCs within risk-based review cycles.
Conduct Risk
Risk Description
Conduct risk is the risk that customers may experience unfair outcomes due to inadequate or failed processes, or inappropriate
actions or offerings by the Company or its representatives. If conduct risk is not identified and managed, it can harm customers
and lead to financial, reputational and regulatory risk for the Company, including potential for remediation costs and
regulatory fines.
Conduct Risk Management
The Company manages conduct risk through several key processes, including:
•
formal policies, frameworks, employee training and report to senior management;
•
clear and appropriate disclosures and communications for customers;
•
designing, selling and providing advice on products and handling complaints and claims, with a focus on customer
outcomes and any vulnerabilities; and
•
conducting risk-based assessments of advisors, suitability reviews and maintaining controls according to Board-approved
policies, such as the Conduct Risk Policy and Code of Conduct.
Conduct risk is incorporated in risk management and compliance activities, including risk and control self-assessments,
internal event reporting, emerging risk assessments and other measurement, monitoring and reporting activities.
Strategic Risk
Risk Description
Strategic risk is the risk of failing to set or achieve appropriate strategic objectives, considering internal and external
environments, which could materially impact business performance (e.g. earnings, capital, reputation or standing).
The Company may take on strategic risk intentionally, to grow the business, or it may emerge as an unintended consequence of
business strategy, its execution, or from inadequate resilience to external forces. It includes both the risks of the strategy and
the risks to the strategy – that is, the risks associated with the entire strategy management lifecycle, from development to
execution.
Strategic Risk Management
The Company’s Strategic Risk Management Framework is designed to identify, measure, manage, monitor and report on
strategic risk, supported by Policies, Standards and Guidelines across both first and second lines of defense.
Strategic risk management includes strategy development and refinement, translating strategy into tangible activities, aligning
resources to meet strategic needs, executing the strategy and continuously monitoring and adjusting strategies as needed.
Strategic risks are monitored throughout the strategy management lifecycle.
The Company aligns business strategies with its risk appetite and mitigates strategic risk exposure through strategic planning,
performance indicators, reporting on strategy execution and ongoing monitoring, along with robust oversight and challenge.
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Management’s Discussion and Analysis
Strategic risks are managed for both new and existing strategies, initiatives, and new business developments that may impact
the business or overall portfolio significantly. Major initiatives undergo a comprehensive risk assessment to review alignment
with risk appetite and are subject to ongoing, robust monitoring and oversight.
Sustainability Risk
Sustainability risk is the risk of loss or other negative impacts resulting from environmental, social or governance factors. This
includes the risk of loss or negative impacts from the inability or failure to adequately prepare for the transition to a lower-
carbon economy or for the physical impacts of a changing environment and from failing to set and maintain strategies to
manage the business in response to changes in social factors. The Company recognizes that attitudes towards environmental
and societal issues are dynamic and continue to evolve. The Company takes a balanced approach to conducting business by
considering sustainability risk and incorporating resilience into our strategies and operations.
Sustainability risk underlies all risk types, both financial (market, credit and insurance) and non-financial (operational,
conduct and strategic). As a result, the processes for managing sustainability risk are embedded in the processes for managing
each risk type.
The Company has established a climate risk management policy that articulates the principles guiding the Company’s
approach to climate risk and sets out the necessary requirements for its effective management. In addition, the Company has
established environmental policies and guidelines pertaining to the acquisition and ongoing management of investment
properties, loans secured by real property and investments in equity and fixed-income securities.
Holding Company Structure Risk
As a holding company, the Company’s ability to pay interest, dividends and other operating expenses and to meet its
obligations depends upon receipt of sufficient funds from its subsidiaries and its ability to raise additional capital.
In the event of bankruptcy, liquidation or reorganization of any of its subsidiaries, the insurance and investment contract
liabilities of these subsidiaries will be completely provided for before any assets are made available for distribution from the
subsidiary to the Company. Additionally, other creditors of these subsidiaries generally have priority over the Company in
receiving payments unless the Company is recognized as a creditor of the relevant subsidiaries.
Payments from subsidiaries, including interest and dividends, are subject to restrictions under insurance, securities, corporate
and other laws and regulations, which require Canada Life, Empower and their subsidiaries to maintain solvency and capital
standards. There are considerable risks and benefits related to this structure.
Management monitors the solvency and capital positions of subsidiaries relative to liquidity requirements of the holding
company. Management also maintains lines of credit for additional liquidity and can access capital markets if needed.
Additionally, management monitors compliance with the regulatory requirements at both the holding company and operating
company levels.
Mergers and Acquisitions Risk
The Company and its subsidiaries periodically evaluate existing companies, businesses, assets, products and services. These
reviews may result in the Company or its subsidiaries acquiring or divesting of businesses or assets. In the ordinary course of
business, the Company considers the purchase or sale of companies, business segments or assets.
If transactions occur, they 1) could be material to the Company in size or scope, 2) could result in risks and contingencies
relating to companies, businesses or assets that the Company acquires or expose it to the risk of claims relating to those it has
divested, 3) could result in changes in the value of the securities of the Company, including the common shares of the
Company, and 4) could result in the Company holding additional capital for contingencies that arise after the transaction is
completed. Strategic and integration risks related to mergers and acquisitions can also emerge due to external risks that are
difficult to anticipate and may result in reduced synergies and negative impact on value capture.
To mitigate these risks, the Company conducts due diligence on potential transactions and risks are assessed in the context of
our Risk Appetite. For acquisitions, an integration strategy is established that considers the values, norms and culture of the
target company, including monitoring of new and emerging risks that may impede efficiency and delay the consolidation
process. Before acquiring or divesting companies, businesses, business segments, or assets, management evaluates and
ensures that systems and processes are in place to manage risks after transaction completion. Additionally, regular monitoring
and oversight of transaction activities is conducted.
Tax Regime Risk
The Company operates in a number of countries encompassing various levels of government and a range of tax mechanisms,
such as income taxes, capital taxes, payroll taxes, value added taxes, sales taxes, etc. Furthermore, each country may provide
tax incentives for certain types of products (e.g. pensions, retirement savings and life & health insurance). These jurisdictions
periodically review and amend various aspects of their tax regimes which can have an impact on the business of the Company.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
There is a risk that changes to tax rates may increase the tax expense to the Company, adversely impacting earnings. There is
also a risk that a reduction or elimination in the level of tax incentives on products offered by the Company may adversely
impact demand for those products.
The Organization for Economic Co-Operation and Development (OECD) introduced a 15% Global Minimum Tax (GMT)
regime that has been adopted for 2024 by all countries in which the Company has significant operations, other than the U.S.
Legislation has been enacted in Canada, Barbados, Germany, Ireland, the U.K. and Switzerland with an effective date of
January 1, 2024 and by the Isle of Man with an effective date of January 1, 2025.
The GMT is complex in nature and applies to Lifeco as part of a larger group of related companies. The Company is liable for
GMT in respect of Barbados, Ireland, the Isle of Man and Switzerland, jurisdictions where the statutory tax rates are below 15%.
Although the determination of the actual GMT liability depends on a number of factors, the Company expects the GMT impact
in future years to be an increase to the effective income tax rate on base earnings in the 2-4% range, compared to pre-GMT
levels.
Management actively monitors tax changes in countries where it has operations and proactively responds to those tax changes
that may potentially impact its business.
Refer to the "Taxes" section of this document for additional details.
Product Distribution Risk
Product distribution risk is the risk of loss if the Company cannot effectively market its products through its network of
distribution channels and intermediaries. These intermediaries often offer competing products and are not obligated to
continue working with the Company. Losing access to a distribution channel, failing to maintain effective relationships with
intermediaries, or not adapting to changes in distribution channels could significantly impact the Company’s sales.
Product distribution risk is managed by maintaining a broad network of distribution relationships, with products distributed
through numerous broker-dealers, managing general agencies, financial planners, banks and other financial institutions.
Geopolitical Risk
Geopolitical risk is the risk of loss and uncertainty arising from political, economic and social factors on the Company's
operations, investments and financial performance across geographic regions. These risks may include changes in government
policies, regulatory environments, trade relation, civil unrest, terrorism and other geopolitical events that can affect the stability
and predictability of markets in which the Company operates. The Company continues to monitor potential impacts of recent
geopolitical conflicts.
Exposures and Sensitivities
Insurance and Investment Contract Liabilities
In determining the Company’s insurance contract liabilities, valuation assumptions are made regarding rates of mortality/
morbidity, investment returns, levels of operating expenses, rates of policy termination and rates of utilization of elective policy
options or provisions. When the assumptions are revised to reflect emerging experience or change in outlook, the result is a
change in the value of liabilities which in turn affects the Company’s earnings.
Non-Financial Exposures and Sensitivities
The earnings and CSM sensitivities illustrated in the table below represent impacts as at December 31, 2024 under the
Company's current accounting policies, including accounting for insurance contracts and financial instruments. A description
of the methodologies used to calculate the Company's insurance risk sensitivities is included in the "Summary of Critical
Accounting Estimates" section of this document.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Non-Financial Exposures and Sensitivities
Net earnings & equity
CSM1
Before reinsurance
Net of reinsurance held
Before reinsurance
Net of reinsurance held
December 31, 2024
2% Life mortality increase
$
(100) $
(100)
$
(350) $
(175)
2% Annuity mortality decrease
200
175
(725)
(650)
5% Morbidity adverse change
(150)
(125)
(200)
(100)
5% Expense increase
—
—
(125)
(150)
10% Adverse change in policy
termination and renewal
(50)
—
(850)
(850)
December 31, 2023
2% Life mortality increase
$
(100) $
(100)
$
(375) $
(200)
2% Annuity mortality decrease
175
150
(700)
(625)
5% Morbidity adverse change
(150)
(125)
(225)
(100)
5% Expense increase
—
—
(150)
(150)
10% Adverse change in policy
termination and renewal
50
50
(1,025)
(950)
1 The impacts to the contractual service margin (CSM) are pre-tax.
These sensitivities reflect the impact on earnings and CSM of an immediate change in assumptions on the value of insurance
and reinsurance held contracts and investment contracts. The impact on shareholders’ equity is equal to the net earnings
impact.
Assumption changes on insurance risks directly impact CSM, for contracts which have CSM. The impact of assumption
changes on CSM are measured at locked-in discount rates, for contracts measured under the General Measurement Model.
Net earnings impacts arise from the fair value impact of assumption changes impacting CSM, as well as assumption changes on
contracts which do not have CSM (including short term insurance contracts). The fair value impact of CSM assumption
changes included in earnings is a second-order impact which captures the present value difference between the impact of
assumption changes measured at prevailing discount rates and locked-in discount rates. In general, prevailing discount rates
are currently higher than locked-in rates for the Company’s insurance contracts. Therefore, an unfavourable change in
assumptions on insurance risks, which decreases CSM, also results in a positive impact in the period due to the fair value
impact.
Concentration risk may arise from geographic regions, accumulation of risks and market risk. The concentration of insurance
risk before and after reinsurance by geographic region is described in the segmented information note 33.
Financial Exposures and Sensitivities
The following table illustrates the approximate impact to the Company’s shareholders' net earnings that would arise as a result
of changes to management’s best estimate of certain assumptions. A description of the methodologies used to calculate the
Company's financial risk sensitivities is included in the "Summary of Critical Accounting Estimates" section of this document.
For changes in financial assumptions, the sensitivity is shown net of the corresponding impact on earnings of the change in the
value of liabilities and the value of assets supporting liabilities.
The impact to shareholders' net earnings from an immediate 50 basis point increase or decrease in credit spreads is illustrated
in the table below, with no change to the ultimate illiquidity premium. Actual impacts of credit spread changes will vary
depending on the geographies where the changes occur, and the changes in credit spreads by term. A change in credit spreads
may also lead to a change in the allowance for credit risk within the discount rate, depending on prevailing market and credit
conditions at the time; any potential earnings impacts that may arise from such a change are not reflected in the sensitivities
below.
On January 1, 2024, the Company completed the sale of Putnam Investments and currently holds approximately 31,600,000
Franklin Templeton shares as part of the consideration, which are classified as fair value through other comprehensive income
(FVOCI). The Company has agreed to hold a majority of these shares until at least January 1, 2029.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Financial Exposures and Sensitivities
Net earnings
Equity1
CSM2
LICAT3
Dec. 31
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Investment returns:
Change in risk free interest rates
50 basis points increase
$
125 $
175 $
75 $
150 $
50 $
175
(1 point)
0 point
50 basis points decrease
(150)
(225)
(125)
(225)
(100)
(250)
< 1 point
0 point
Change in credit spreads
50 basis points increase
$
250 $
300 $
325 $
350 $
50 $
175
0 point
1 point
50 basis points decrease
(300)
(375)
(400)
(450)
(75)
(250) < (1 point)
(1 point)
Change in publicly traded common stock values1
20% increase
$
100 $
225 $
525 $
525 $
450 $
525
(1 point)
0 point
10% increase
50
100
250
250
225
275 < (1 point)
0 point
10% decrease
(50)
(100)
(250)
(250)
(225)
(300)
< 1 point
0 point
20% decrease
(100)
(225)
(525)
(525)
(425)
(550) < (1 point)
(1 point)
Change in other non-fixed income asset values
10% increase
$
425 $
400 $
475 $
450 $
— $
—
1 point
1 point
5% increase
225
200
250
225
—
—
< 1 point
< 1 point
5% decrease
(225)
(200)
(250)
(225)
—
— < (1 point) < (1 point)
10% decrease
(450)
(425)
(500)
(450)
—
—
(1 point)
(1 point)
1
The net impact of the sale of Putnam Investments and the receipt of Franklin Templeton common shares is reflected in the December 31, 2024 values in the table above. The Franklin
Templeton common shares are measured at FVOCI and therefore unrealized gains and losses do not impact shareholders' net earnings. The after-tax impact on shareholders' equity
of the Franklin Templeton common shares is approximately $75 million for every 10% change in the common stock equity value.
2
The impacts to the total contractual service margin are pre-tax.
3
LICAT sensitivities should be viewed as directional estimates only of the underlying sensitivities for the respective factors. Given the nature of these calculations, the Company cannot
provide assurance that the actual impact on the Canada Life consolidated LICAT Ratio will be as indicated. LICAT sensitivities are rounded to the nearest point, are prepared on a
LICAT 2024 Guideline basis and may change under the LICAT 2025 OSFI Guideline which comes into effect during the first quarter of 2025.
The sensitivities above reflect the immediate impacts of shareholders' net earnings, shareholders' equity and the LICAT ratio
from market movements.
Actual impacts of interest rate changes will vary depending upon the geography where the changes occur. Net earnings are
positively impacted by a parallel increase in interest rates and credit spreads in Canada, U.K. and the U.S., and are positively
impacted by a parallel decrease in interest rates in the eurozone. Actual impacts of interest rate changes also vary by the level of
change in interest rates by term. Therefore, actual impacts from interest rate changes may differ from the estimated impact of
parallel movements in all geographies, which is presented above.
The potential impact on shareholders' net earnings of the Company does not take into account any future potential changes to
the Company's ultimate investment rate (UIR) assumptions. As at both December 31, 2024 and December 31, 2023, the
sensitivity of shareholders' net earnings of the Company to a 10 basis point increase or decrease in the UIR in all geographies
would be an increase of $25 million or a decrease of $25 million post-tax, respectively. In addition, as at December 31, 2024, the
sensitivity of the CSM of the Company to a 10 basis point increase or decrease in the UIR in all geographies would be an
increase of $50 million or a decrease of $50 million pre-tax, respectively. At December 31, 2023 the sensitivity of the CSM of the
Company to a 10 basis point increase or decrease in the UIR in all geographies would have been an increase of $75 million or a
decrease of $75 million pre-tax, respectively.
Refer to the "Accounting Policies - Summary of Critical Accounting Estimates" and "Capital Management and Adequacy"
sections of this document for additional information on earnings and LICAT sensitivities.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Accounting Policies
Summary of Critical Accounting Estimates
The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the
reporting date, and the reported amounts of revenue and expenses during the reporting period. The results of the Company
reflect management's judgments regarding the impact of prevailing market conditions related to global credit, equities,
investment properties and foreign exchange and prevailing health and mortality experience. The fair value of portfolio
investments, the valuation of goodwill and other intangible assets, the valuation of insurance contract liabilities and the
recoverability of deferred tax asset carrying values reflect management’s judgement based on current expectations but could be
impacted in the future depending on current market developments.
Fair Value Measurement
Refer to note 8 in the Company’s annual consolidated financial statements for the year ended December 31, 2024 for disclosure
of the Company's financial instruments fair value measurement by hierarchy level as at December 31, 2024.
The following is a description of the methodologies used to value instruments carried at fair value:
Bonds - FVTPL and FVOCI
Fair values for bonds measured as FVTPL or FVOCI are determined with reference to quoted market bid prices primarily
provided by third-party independent pricing sources. Where prices are not quoted in an active market, fair values are
determined by valuation models. The Company maximizes the use of observable inputs when measuring fair value. The
Company obtains quoted prices in active markets, when available, for identical assets at the balance sheet date to measure
bonds at fair value in its FVTPL and FVOCI portfolios.
The Company estimates the fair value of bonds not traded in active markets by referring to actively traded securities with
similar attributes, dealer quotations, matrix pricing methodology, discounted cash flow analyses and/or internal valuation
models. This methodology considers such factors as the issuer's industry, the security's rating, term, coupon rate and position
in the capital structure of the issuer, as well as yield curves, credit curves, prepayment rates and other relevant factors. For
bonds that are not traded in active markets, valuations are adjusted to reflect illiquidity, and such adjustments generally are
based on available market evidence. In the absence of such evidence, management's best estimate is used.
Mortgages - FVTPL and FVOCI
There are no market observable prices for mortgages; therefore fair values for mortgages are determined by discounting
expected future cash flows using current market rates for similar instruments. Valuation inputs typically include benchmark
yields and risk-adjusted spreads based on current lending activities and market activity.
Equity Release Mortgages - FVTPL
There are no market observable prices for equity release mortgages; therefore an internal valuation model is used for
discounting expected future cash flows and includes consideration of the embedded no negative equity guarantee. Inputs to
the model include market observable inputs such as benchmark yields and risk-adjusted spreads. Non-market observable
inputs include property growth and volatility rates, expected rates of voluntary redemptions, death, moving to long term care
and interest cessation assumptions and the value of the no negative equity guarantee.
Stocks - FVTPL and FVOCI
Fair values for stocks traded on an active market are generally determined by the last bid price for the security from the
exchange where it is principally traded. Fair values for stocks for which there is no active market are typically based upon
alternative valuation techniques such as discounted cash flow analysis, review of price movement relative to the market and
utilization of information provided by the underlying investment manager. The Company maximizes the use of observable
inputs when measuring fair value. The Company obtains quoted prices in active markets, when available, for identical assets at
the balance sheet date to measure stocks at fair value in its FVTPL and FVOCI portfolio.
Investment Properties
Fair values for investment properties are determined using independent qualified appraisal services and include management
adjustments for material changes in property cash flows, capital expenditures or general market conditions in the interim
period between appraisals. The determination of the fair value of investment property requires the use of estimates including
future cash flows (such as future leasing assumptions, rental rates, capital and operating expenditures) and discount,
reversionary and overall capitalization rates applicable to the asset based on current market conditions. Investment property
under construction is valued at fair value if such values can be reliably determined; otherwise they are recorded at cost.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Goodwill and Intangibles Impairment Testing
Goodwill and indefinite life intangible assets, including those resulting from an acquisition during the year, are tested for
impairment annually or more frequently if events indicate that impairment may have occurred. Intangible assets that were
previously impaired are reviewed at each reporting date for evidence of reversal. In the event that certain conditions have been
met, the Company would be required to reverse the impairment loss or a portion thereof.
Goodwill has been allocated to cash generating unit (CGU) groupings, representing the lowest level that the assets are
monitored for internal reporting purposes. Goodwill is tested for impairment by comparing the carrying value of each CGU
grouping to its recoverable amount. An impairment loss is recognized for the amount by which the asset's carrying amount
exceeds its recoverable amount.
Intangible assets have been allocated to CGUs, representing the lowest level that the assets are monitored for internal reporting
purposes.
Intangible assets with an indefinite useful life are reviewed annually to determine if there are indicators of impairment. If
indicators of impairment have been identified, a test for impairment is performed and recognized as necessary. Impairment is
assessed by comparing the carrying values of the assets to their recoverable amounts. An impairment loss is recognized for the
amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of the asset’s fair value less costs of disposal and value-in-use.
Finite life intangible assets are reviewed annually to determine if there are indicators of impairment and assess whether the
amortization periods and methods are appropriate. If indicators of impairment have been identified, a test for impairment is
performed and then the amortization of these assets is adjusted or impairment is recognized as necessary.
Expected Credit Losses (ECL)
Expected credit loss (ECL) allowances are recognized on all financial assets, except for financial assets classified or designated
as FVTPL and equity securities designated as FVOCI.
The ECL allowance is based on a probability-weighted estimate of credit losses expected as a result of defaults over the relevant
time period as prescribed under the ECL model, which is a three-stage impairment approach.
Performing financial assets that have not experienced a significant increase in credit risk since initial recognition or have low
credit risk are categorized into stage 1. A 12-month ECL allowance is calculated for stage 1 financial assets.
Performing financial assets that have experienced a significant increase in credit risk since initial recognition are categorized
into stage 2. A lifetime ECL allowance is calculated for stage 2 financial assets.
Impaired financial assets are categorized into stage 3 and require a lifetime ECL allowance.
The Company monitors all financial assets that are subject to impairment for significant increases in credit risk. In making this
assessment, the Company considers both quantitative and qualitative information that is reasonable and supportable,
including historical experience and forward-looking information that is available without undue cost or effort.
Insurance, Reinsurance Held and Investment Contract Liabilities
In the computation of insurance contract liabilities, valuation assumptions have been made regarding rates of mortality/
morbidity, investment returns, levels of operating expenses, rates of policy termination and rates of utilization of elective policy
options or provisions. The valuation assumptions use best estimates of future experience together with a risk adjustment for
non-financial risk. The risk adjustment for non-financial risk represents the compensation that the Company requires for
bearing uncertainty in the amount and timing of insurance contract cash flows due to non-financial risk. Risk adjustments for
non-financial risk are reviewed periodically for continued appropriateness.
The Company measures the estimates of the present value of future cash flows for reinsurance held using assumptions that are
consistent with those used to measure the estimates of the present value of future cash flows for the underlying insurance
contracts, with an adjustment for any risk of non-performance by the reinsurer.
Investment contract liabilities are measured at fair value determined using discount rates derived from a reference portfolio or
stochastic modeling at end of the reporting period. The Company’s main valuation techniques incorporate all factors that
market participants would consider and make maximum use of observable market data.
The methods for arriving at these valuation assumptions are outlined below:
Mortality – A life insurance mortality study is carried out regularly for each major block of insurance business. The results of
each study are used to update the Company’s experience valuation mortality tables for that business. Annuitant mortality is
also studied regularly, and the results are used to modify established annuitant mortality tables. When there is insufficient data,
use is made of the latest industry experience to derive an appropriate valuation mortality assumption. Improvement scales for
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
life insurance and annuitant mortality are updated periodically based on population and industry studies, product specific
considerations, as well as professional guidance. In addition, appropriate provisions are made for future mortality
deterioration on term insurance.
Morbidity – The Company uses industry developed experience tables modified to reflect emerging Company experience. Both
claim incidence and termination are monitored regularly, and emerging experience is factored into the current valuation.
Expenses – Expenses for certain items, such as sales commissions and policy taxes and fees are either contractual or specified
by law, and so they are only reflected on a best estimate basis in the liability. Operating expenses, such as policy and claims
administration as well as overhead, are more variable. The Company produces expense studies for operating expenses
regularly to determine an appropriate estimate of future operating expenses for the liability type being valued. An inflation
assumption is incorporated in the estimate of future operating expenses held within the liability.
Policy termination – Studies to determine rates of policy termination are updated regularly to form the basis of this estimate.
Industry data is also available and is useful where the Company has no experience with specific types of policies or its exposure
is limited. The Company's most significant exposures are in respect of the T-100 and Level Cost of Insurance Universal Life
products in Canada and policy renewal rates at the end of the term for renewable term policies in Canada and Capital and Risk
Solutions. Industry experience has guided the Company's assumptions for these products as its own experience is limited.
Property and casualty reinsurance – Insurance contract liabilities for property and casualty reinsurance written by Capital
and Risk Solutions are determined using accepted actuarial practices for property and casualty insurers in Canada. The
insurance contract liabilities are based on cession statements provided by ceding companies. In addition, insurance contract
liabilities also include an amount for incurred but not reported losses, which may differ significantly from the ultimate loss
development. The estimates and underlying methodology are continually reviewed and updated and adjustments to estimates
are reflected in net earnings. Capital and Risk Solutions analyzes the emergence of claims experience against expected
assumptions for each reinsurance contract separately and at the portfolio level. If necessary, a more in-depth analysis is
undertaken of the cedant experience.
Utilization of elective policy options – There are a wide range of elective options embedded in the policies issued by the
Company. Examples include term renewals, conversion to whole life insurance (term insurance), settlement annuity purchase
at guaranteed rates (deposit annuities) and guarantee re-sets (segregated fund maturity guarantees). The assumed rates of
utilization are based on Company or industry experience when it exists and otherwise based on judgement considering
incentives to utilize the option. Generally, whenever it is clearly in the best interests of an informed policyholder to utilize an
option, then it is assumed to be elected.
Policyholder dividends and adjustable policy features – Future policyholder dividends and other adjustable policy features
are included in the determination of insurance contract liabilities with the assumption that policyholder dividends or
adjustable benefits will change in the future in response to the relevant experience. The dividend and policy adjustments are
determined consistent with policyholders’ reasonable expectations, such expectations being influenced by the participating
policyholder dividend policies and/or policyholder communications, marketing material and past practice. It is the Company's
expectation that changes will occur in policyholder dividend scales or adjustable benefits for participating or adjustable
business respectively, corresponding to changes in the best estimate assumptions, resulting in an immaterial net change in
insurance contract liabilities. Where underlying guarantees may limit the ability to pass all of this experience back to the
policyholder, the impact of this non-adjustability impacting shareholders' net earnings is reflected in the impacts of changes in
best estimate assumptions.
Investment returns – Interest rate risk is managed by investing in assets that are suitable for the products sold. The Company
utilizes a formal process for managing the matching of assets and liabilities. This involves grouping general fund assets and
liabilities into segments. Assets in each segment are managed in relation to the liabilities in the segment.
The impact to shareholders' net earnings from changes in the interest rates would be largely offset by changes in the value of
financial assets supporting the liabilities. However, differences in the interest rate sensitivity in the value of assets and the value
of insurance and investment contract liabilities leads to a sensitivity to interest rate movements in net earnings. The Company’s
asset liability management strategy uses equities and other non-fixed income assets as a component of general fund assets
supporting liabilities, which leads to interest rate exposure in the net earnings. Further, the classification of financial assets, for
example, mortgage assets which are valued at amortized cost and held in the general fund assets supporting liabilities, also
contributes to interest rate exposure in net earnings.
A way of measuring the interest rate risk is to determine the net effect on the value of assets relative to insurance and
investment contract liabilities that impact the shareholders' net earnings of the Company from immediate change in interest
rates.
In addition to interest rates, the Company is also exposed to movements in equity markets.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Some insurance and investment contract liabilities with long-tail cash flows are supported by publicly traded common stocks
and investments in other non-fixed income assets, primarily comprised of investment properties, real estate funds, private
stocks, and equity release mortgages. Net earnings will reflect changes in the values on non-fixed income assets. However, in
most cases the value of the liabilities will not fluctuate with changes in the value of the non-fixed income assets.
The liabilities for other products such as segregated fund products with guarantees also fluctuate with equity values. Under
current market conditions, there are no earnings impacts to the Company on segregated fund business that it does not hedge,
as changes in the cost of guarantees are fully offset within the CSM. For segregated fund business that the Company hedges,
there is a limited earnings impact with respect to the change in liability compared to the change in hedge assets.
For a further description of the Company's sensitivity to equity market, interest rate and other fluctuations, refer to "Financial
Instruments Risk Management" note 7 in the Company's annual consolidated financial statements for the period ended
December 31, 2024.
Risk Adjustment
The risk adjustment for non-financial risk represents the compensation that the Company requires for bearing uncertainty in
the amount and timing of insurance contract cash flows due to non-financial risk. Non-financial risks are insurance risks such
as life mortality, annuity mortality and morbidity, and other risks such as expense and lapse. The risk adjustment is calculated
by applying a margin to non-financial assumptions and discounting the resulting margin cash flows at the same discount rates
as the best estimate cash flows. The margins applied reflect diversification benefits across all non-financial risks. The
Company’s target range for the confidence level of the risk adjustment is between the 85th and 90th percentile, and the risk
adjustment is currently within the target range. The confidence level is determined on a net-of-reinsurance basis.
Discount Rates
The Company measures time value of money using discount rates that are consistent with observable market prices and reflect
the liquidity characteristics of the insurance contracts. They exclude the effect of factors that influence such observable market
prices but do not affect the future cash flows of the insurance contracts (e.g., credit risk).
The Company applies the top-down approach for insurance contract liabilities with backing assets. Under this approach,
discount rates are estimated by starting from the yield curve implied in a reference portfolio of assets that closely reflects the
duration, currency, and liquidity characteristics of the insurance cash flows, and then excluding the effects of risks (e.g., credit
risk) present in the cash flows from the financial instruments that are part of the reference portfolio, but not in the insurance
contracts cash flows. The allowance for credit risk in the discount rate varies depending on the credit rating, sector and term of
the assets reflected in the discount rate. The allowance is estimated based on historic credit experience and prevailing market
conditions. For example, if there is a significant widening of market credit spreads, an additional allowance for credit risk to
reduce the discount rate may be required to reflect prevailing market conditions. The Company uses the fixed-income assets
supporting the insurance contract liabilities as the reference portfolio to determine the discount rates, in the observable period,
while the discount rates in the unobservable period are based on an ultimate investment rate. In situations where the fixed-
income assets supporting the insurance contract liabilities do not appropriately reflect the illiquidity characteristics of the
liability, an additional adjustment is made to the discount rate.
In cases where there are no backing assets, the Company applies the bottom-up approach to set the discount rate. This
approach uses a risk-free rate, plus a spread to reflect the liquidity characteristics of the liability. Risk-free rates are determined
by reference to highly liquid government securities in the currency of the insurance contract liability, and the spread is derived
from an external benchmark.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The following table provides the lower and upper end of the range of the spot rates used by the Company to discount liability
cash flows by major currency:
As at December 31, 2024
Year 1
Year 5
Year 10
Year 20
Year 30
Year 50
CAD
Lower
4.2 %
4.2 %
4.5 %
4.6 %
4.6 %
4.9 %
Upper
4.6 %
4.6 %
4.9 %
5.0 %
5.0 %
5.0 %
USD
Lower
4.9 %
5.2 %
5.4 %
5.8 %
5.6 %
5.1 %
Upper
5.4 %
5.7 %
5.8 %
6.2 %
5.9 %
5.3 %
EUR
Lower
2.5 %
2.5 %
2.8 %
3.0 %
3.2 %
4.3 %
Upper
3.6 %
3.6 %
3.8 %
4.0 %
4.1 %
4.5 %
GBP
Lower
4.9 %
4.8 %
5.1 %
5.7 %
5.7 %
4.3 %
Upper
5.7 %
5.5 %
5.9 %
6.5 %
6.5 %
5.1 %
As at December 31, 2023
Year 1
Year 5
Year 10
Year 20
Year 30
Year 50
CAD
Lower
6.0 %
4.5 %
4.4 %
4.3 %
4.2 %
4.5 %
Upper
6.4 %
4.9 %
4.9 %
4.9 %
4.8 %
4.9 %
USD
Lower
5.7 %
4.8 %
4.8 %
5.3 %
4.9 %
4.7 %
Upper
6.1 %
5.2 %
5.3 %
5.8 %
5.4 %
5.0 %
EUR
Lower
3.2 %
2.1 %
2.2 %
2.5 %
2.9 %
4.3 %
Upper
4.8 %
3.6 %
3.8 %
4.1 %
4.2 %
4.5 %
GBP
Lower
4.9 %
3.8 %
4.0 %
4.7 %
4.6 %
3.7 %
Upper
5.9 %
4.8 %
5.1 %
5.7 %
5.6 %
4.7 %
The spot rates in the table above are calculated based on prevailing interest rates observed in their respective markets. When
interest rates are not observable, the yield curve to discount cash flows transitions to an ultimate rate composed of a risk-free
rate and illiquidity premium. These amounts are set based on historical data.
Income Taxes
The Company is subject to income tax laws in various jurisdictions. The Company’s operations are complex and related
income tax interpretations, regulations and legislation that pertain to its activities are subject to continual change. As life
insurance companies, the Company's primary Canadian operating subsidiaries are subject to a regime of specialized rules
prescribed under the Income Tax Act (Canada) for purposes of determining the amount of the companies' income that will be
subject to tax in Canada.
Tax planning strategies to obtain tax efficiencies are used. The Company continually assesses the uncertainty associated with
these strategies and holds an appropriate level of provisions for uncertain income tax positions. Accordingly, the provision for
income taxes represents management’s interpretation of the relevant income tax laws and its estimate of current and deferred
income tax balances for the period. Deferred income tax assets and liabilities are recorded based on expected future income tax
rates and management’s assumptions regarding the expected timing of the reversal of temporary differences. The Company
has substantial deferred income tax assets. The recognition of deferred income tax assets depends on management's
determination that future earnings will be sufficient to realize the deferred benefit. The amount of the asset recorded is based
on management's best estimate of the realization of the asset.
The audit and review activities of tax authorities may affect the ultimate determination of the amounts of income taxes payable
or receivable, deferred income tax assets or liabilities and income tax expense. Therefore, there can be no assurance that
income taxes will be payable as anticipated and/or the amount and timing of receipt or use of the income tax related assets will
be as currently expected. Management’s experience indicates that taxation authorities are more aggressively pursuing
perceived income tax issues and have increased the resources they put to these efforts.
Employee Future Benefits
The Company’s subsidiaries maintain contributory and non-contributory defined benefit and defined contribution pension
plans for eligible employees and advisors. The defined benefit pension plans provide pensions based on length of service and
final average pay; however, these plans are closed to new entrants. Many of the subsidiaries' defined benefit pension plans also
no longer provide future defined benefit accruals. The Company's defined benefit plan exposure is expected to reduce in future
years. Where defined benefit pension accruals continue, active plan participants share in the cost of benefits through employee
95
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
contributions in respect of current service. Certain pension payments are indexed on either an ad hoc basis or a guaranteed
basis. The determination of the defined benefit obligation reflects pension benefits in accordance with the terms of the plans.
Assets supporting the funded pension plans are held in separate trusteed pension funds. Obligations for the wholly unfunded
plans are included in other liabilities and are supported by general assets. New hires and active plan participants in defined
benefit plans closed to future defined benefit accruals are eligible for defined contribution benefits. The defined contribution
pension plans provide pension benefits based on accumulated employee and employer contributions. The Company’s
subsidiaries also provide post-employment health, dental and life insurance benefits to eligible employees, advisors and their
dependents. These plans are also closed to new entrants. For further information on the pension plans and other post-
employment benefits refer to note 26 in the Company's December 31, 2024 annual consolidated financial statements.
For the defined benefit plans, service costs and net interest costs are recognized in the Consolidated Statements of Earnings.
Service costs include current service cost, administration expenses, past service costs and the impact of curtailments and
settlements. Re-measurements of the defined benefit liability (asset) due to asset returns less (greater) than interest income,
actuarial losses (gains) and changes in the asset ceiling are recognized immediately in the Consolidated Statements of
Comprehensive Income.
Actuarial assumptions – Accounting for defined benefit pension and other post-employment benefits requires estimates of
expected increases in compensation levels, indexation of certain pension payments, trends in health-care costs, the period of
time over which benefits will be paid, as well as the appropriate discount rates for past and future service liabilities. These
assumptions are determined by management using actuarial methods, and are reviewed and approved annually. Emerging
experience that differs from the assumptions will be revealed in future valuations and will affect the future financial position of
the plans and net periodic benefit costs.
Actuarial assumptions - employee future benefits
At December 31
Defined benefit
pension plans
Other post-employment
benefits
2024
2023
2024
2023
Actuarial assumptions used to determine benefit cost
Discount rate - past service liabilities
4.4 %
5.0 %
4.7 %
5.3 %
Discount rate - future service liabilities
4.6 %
5.3 %
5.0 %
5.4 %
Rate of compensation increase
3.4 %
3.8 %
—
—
Future pension increases1
2.1 %
2.3 %
—
—
Actuarial assumptions used to determine defined benefit obligation
Discount rate - past service liabilities
4.5 %
4.4 %
4.7 %
4.7 %
Rate of compensation increase
3.4 %
3.4 %
—
—
Future pension increases1
2.0 %
2.1 %
—
—
Medical cost trend rates
Initial medical cost trend rate
4.7 %
4.7 %
Ultimate medical cost trend rate
4.1 %
4.1 %
Year ultimate trend rate is reached
2039
2039
1
Represents the weighted average of plans subject to future pension increases.
The period of time over which benefits are assumed to be paid is based on best estimates of future mortality, including
allowances for mortality improvements. This estimate is subject to considerable uncertainty, and judgment is required in
establishing this assumption. As mortality assumptions are significant in measuring the defined benefit obligation, the
mortality assumptions applied by the Company take into consideration such factors as age, gender and geographic location, in
addition to an estimation of future improvements in longevity.
The mortality tables are reviewed at least annually, and assumptions are in accordance with accepted actuarial practices.
Emerging plan experience is reviewed and considered in establishing the best estimate for future mortality.
As these assumptions relate to factors that are long-term in nature, they are subject to a degree of uncertainty. Differences
between actual experience and the assumptions, as well as changes in the assumptions resulting from changes in future
expectations, result in increases or decreases in the pension and post-employment benefits expense and defined benefit
obligation in future years. There is no assurance that the plans will be able to earn assumed rates of return, and market driven
changes to assumptions could impact future contributions and expenses.
96
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The following table indicates the impact of changes to certain key assumptions related to pension and post-employment
benefits.
Impact of a change of 1.0% in actuarial assumptions on defined benefit obligation1
1% increase
1% decrease
2024
2023
2024
2023
Defined benefit pension plans:
Impact of a change to the discount rate
$
(787) $
(771) $
997 $
972
Impact of a change to the rate of compensation increase
170
173
(154)
(157)
Impact of a change to the rate of inflation
344
346
(304)
(313)
Other post-employment benefits:
Impact of a change to assumed medical cost trend rates
$
15 $
14
$
(13) $
(12)
Impact of a change to the discount rate
(22)
(22)
26
26
1 To measure the impact of a change in an assumption, all other assumptions were held constant. It is expected that there would be interaction between at least some of the
assumptions.
The calculation of the defined benefit obligation is also sensitive to the mortality assumptions. The effect of a one-year increase
in life expectancy would be an increase in the defined benefit obligation of $174 million ($174 million in 2023) for the defined
benefit pension plans and $6 million ($6 million in 2023) for other post-employment benefits.
Funding – The Company’s subsidiaries have both funded and unfunded pension plans as well as other post-employment
benefit plans that are unfunded. The Company’s subsidiaries' funded pension plans are funded to or above the amounts
required by relevant legislation. During the year, the Company's subsidiaries contributed $224 million ($283 million in 2023) to
the pension plans and made benefit payments of $21 million ($18 million in 2023) for post-employment benefits. The
Company's subsidiaries expect to contribute $201 million to the pension plans and make benefit payments of $20 million for
post-employment benefits in 2025.
International Financial Reporting Standards
Due to the evolving nature of IFRS, there are a number of IFRS changes impacting the Company in 2024, as well as standards
that could impact the Company in future reporting periods. The Company actively monitors future IFRS changes proposed by
the International Accounting Standards Board (IASB) to assess if the changes to the standards may have an impact on the
Company's results or operations.
Changes in Accounting Policies
The Company adopted the amendments to IFRS for IAS 7, Statement of Cash Flows, IFRS 7, Financial Instruments: Disclosures,
and IFRS 16, Leases effective January 1, 2024. The adoption of these amendments did not have a material impact on the
Company's financial statements.
New Standard
Summary of Future Changes
IFRS 18 – Presentation and Disclosure in
Financial Statements
In April 2024, the IASB published IFRS 18, Presentation and Disclosure in Financial Statements
(IFRS 18). The standard aims to improve how companies communicate information in their
financial statements, with a focus on information about financial performance in the statement of
earnings.
IFRS 18 will require companies to:
•
Provide defined subtotals in the statement of earnings;
•
Disclose information for any management-defined performance measures related to the
statement of earnings; and
•
Implement principles for the grouping of information in the financial statements, and
whether to provide it in the primary financial statements or notes.
The standard is effective for annual reporting periods beginning on or after January 1, 2027, with
earlier application permitted. The Company is evaluating the impact of the adoption of this
standard.
IFRS 9 – Financial Instruments and IFRS 7 –
Financial Instruments: Disclosures
In May 2024, the IASB published amendments to IFRS 9, Financial Instruments and IFRS 7,
Financial Instruments: Disclosures. The amendments clarify the classification of financial assets
with environmental, social and corporate governance and similar features, the settlement of
liabilities through electronic payment systems, and introduce additional disclosure requirements to
enhance transparency for investors.
These amendments are effective for annual reporting periods beginning on or after January 1,
2026, with earlier application permitted. The Company is evaluating the impact of the adoption of
these amendments.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
For additional detail, refer to note 2 of the Company’s annual consolidated financial statements for the period ended
December 31, 2024.
Other Information
Non-GAAP Financial Measures and Ratios
Non-GAAP Financial Measures
The Company uses several non-GAAP financial measures to measure overall performance of the Company and to assess each
of its business units. A financial measure is considered a non-GAAP measure for Canadian securities law purposes if it is
presented other than in accordance with generally accepted accounting principles (GAAP) used for the Company's
consolidated financial statements. The consolidated financial statements of the Company have been prepared in compliance
with IFRS as issued by the IASB. Non-GAAP financial measures do not have a standardized meaning under GAAP and may not
be comparable to similar financial measures presented by other issuers. Investors may find these financial measures useful in
understanding how management views the underlying business performance of the Company.
Base earnings (loss)
Base earnings (loss) reflect management’s view of the underlying business performance of the Company and provides an
alternate measure to understand the underlying business performance compared to IFRS net earnings.
Base earnings (loss) exclude the following items from IFRS reported net earnings:
•
Market-related impacts, where actual market returns in the current period are different than longer-term expected returns;
•
Assumption changes and management actions that impact the measurement of assets and liabilities;
•
Business transformation impacts which include acquisition and divestiture costs and restructuring and integration costs;
•
Material legal settlements, material impairment charges related to goodwill and intangible assets, impacts of income tax
rate changes on the remeasurement of deferred tax assets and liabilities and other tax impairments, net gains, losses or
costs related to the disposition or acquisition of a business; net earnings (loss) from discontinued operations;
•
Realized gains (losses) on the sale of assets measured at fair value through other comprehensive income (FVOCI);
•
The direct equity and interest rate impacts on the measurement of surplus assets and liabilities;
•
Amortization of acquisition related finite life intangible assets; and
•
Other items that, when removed, assist in explaining the Company's underlying business performance.
98
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Lifeco
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings
$
1,115 $
1,061 $
971
$
4,192 $
3,667
Items excluded from Lifeco base earnings
Market experience relative to expectations (pre-tax)
$
59 $
46 $
(351)
$
286 $
(461)
Income tax (expense) benefit
(21)
(5)
138
(72)
154
Realized OCI gains / (losses) from asset rebalancing (pre-
tax)
—
—
—
—
(158)
Income tax (expense) benefit
—
—
—
—
37
Assumption changes and management actions (pre-tax)
21
(235)
(28)
(209)
(149)
Income tax (expense) benefit
(5)
32
111
60
129
Business transformation impacts (pre-tax)1
(34)
(7)
(137)
(144)
(340)
Income tax (expense) benefit1
4
3
70
32
118
Amortization of acquisition-related finite life intangibles
(pre-tax)1
(51)
(47)
(42)
(200)
(182)
Income tax (expense) benefit1
14
11
11
52
47
Tax legislative changes and other tax impacts (pre-tax)1
—
—
—
—
—
Income tax (expense) benefit1
14
—
—
14
—
s
Total pre-tax items excluded from base earnings
$
(5) $
(243) $
(558)
$
(267) $
(1,290)
Impact of items excluded from base earnings on income
taxes
6
41
330
86
485
Net earnings from continuing operations
$
1,116 $
859 $
743
$
4,011 $
2,862
Net earnings (loss) from discontinued operations (post-tax)
—
—
(3)
(115)
(124)
Net gain from disposal of discontinued operations (post-
tax)
—
—
—
44
—
Net earnings - common shareholders
$
1,116 $
859 $
740
$
3,940 $
2,738
1
Included in other non-market related impacts.
Canada
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings
$
321 $
317 $
301
$
1,262 $
1,158
Items excluded from base earnings
Market experience relative to expectations (pre-tax)
$
16 $
58 $
(162) $
202 $
(197)
Income tax (expense) benefit
(7)
(15)
48
(58)
58
Assumption changes and management actions (pre-tax)
—
147
(22)
157
(52)
Income tax (expense) benefit
—
(41)
5
(44)
14
Business transformation impacts (pre-tax)1
(5)
(4)
(5)
(41)
(9)
Income tax (expense) benefit1
1
1
2
10
3
Amortization of acquisition-related finite life intangibles
(pre-tax)1
(6)
(4)
(2)
(25)
(20)
Income tax (expense) benefit1
2
1
1
7
6
Tax legislative changes and other tax impacts (pre-tax)1
—
—
—
—
—
Income tax (expense) benefit1
14
—
—
14
—
Net earnings - common shareholders
$
336 $
460 $
166
$
1,484 $
961
1
Included in other non-market related impacts.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
United States
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings
$
367 $
359 $
261
$
1,336 $
1,006
Items excluded from base earnings
Market experience relative to expectations (pre-tax)
$
13 $
(1) $
(13) $
19 $
5
Income tax (expense) benefit
(4)
—
4
(5)
(1)
Assumption changes and management actions (pre-tax)
—
(29)
—
(29)
—
Income tax (expense) benefit
—
6
—
6
—
Business transformation impacts (pre-tax)1
(52)
(2)
(52)
(125)
(191)
Income tax (expense) benefit1
9
1
20
27
54
Amortization of acquisition-related finite life intangibles
(pre-tax)1
(39)
(36)
(35)
(151)
(140)
Income tax (expense) benefit1
10
9
9
40
36
Net earnings from continuing operations
$
304 $
307 $
194
$
1,118 $
769
Net earnings (loss) from discontinued operations (post-tax)
—
—
(3)
(115)
(124)
Net gain from disposal of discontinued operations (post-
tax)
—
—
—
44
—
Net earnings - common shareholders
$
304 $
307 $
191
$
1,047 $
645
1
Included in other non-market related impacts.
Europe
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings
$
231 $
195 $
213
$
829 $
777
Items excluded from base earnings
Market experience relative to expectations (pre-tax)
$
55 $
(30) $
(114) $
23 $
(321)
Income tax (expense) benefit
(9)
7
54
(4)
78
Realized OCI gains / (losses) from asset rebalancing (pre-
tax)
—
—
—
—
(158)
Income tax (expense) benefit
—
—
—
—
37
Assumption changes and management actions (pre-tax)
26
(69)
(6)
(45)
(46)
Income tax (expense) benefit
(6)
18
106
12
113
Business transformation impacts (pre-tax)1
23
(1)
(80)
22
(140)
Income tax (expense) benefit1
(6)
1
48
(5)
61
Amortization of acquisition-related finite life intangibles
(pre-tax)1
(6)
(7)
(5)
(24)
(22)
Income tax (expense) benefit1
2
1
1
5
5
Net earnings - common shareholders
$
310 $
115 $
217
$
813 $
384
1
Included in other non-market related impacts.
100
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Capital and Risk Solutions
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings
$
223 $
210 $
236
$
818 $
794
Items excluded from base earnings
Market experience relative to expectations (pre-tax)
$
(23) $
34 $
(50) $
54 $
75
Income tax (expense) benefit
(2)
—
29
(8)
13
Assumption changes and management actions (pre-tax)
(5)
(284)
—
(296)
(51)
Income tax (expense) benefit
1
49
—
50
2
Net earnings - common shareholders
$
194 $
9 $
215
$
618 $
833
Lifeco Corporate
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (loss)
$
(27) $
(20) $
(40) $
(53) $
(68)
Items excluded from base earnings (loss)
Market experience relative to expectations (pre-tax)
$
(2) $
(15) $
(12) $
(12) $
(23)
Income tax (expense) benefit
1
3
3
3
6
Assumption changes and management actions (pre-tax)
—
—
—
4
—
Income tax (expense) benefit
—
—
—
36
—
Net earnings (loss) - common shareholders
$
(28) $
(32) $
(49) $
(22) $
(85)
Base earnings - insurance service result
Represents the profit earned from providing insurance coverage and comprises the expected insurance earnings, impacts of
new insurance business written and insurance experience gains and losses for the Company's insurance businesses. This
metric is presented on a common shareholders' basis by removing the participating account results.
Lifeco (pre-tax)
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings - insurance service result
$
806 $
777 $
854 $
3,140 $
3,010
Items excluded from base earnings
(4)
(31)
1
(38)
(80)
Participating account
37
34
35
145
151
Net earnings - insurance service result
$
839 $
780 $
890 $
3,247 $
3,081
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Base earnings - net investment result
Represents the difference between management’s expected return on assets backing insurance contract liabilities and the
unwinding of discount rates used to measure corresponding insurance contract liabilities. Includes the release of credit
provisions into profit and the impact of credit experience for the period as well as the impact of certain trading activity on fixed
income assets and non-directly attributable investment expenses. Additionally, includes expected investment income on
surplus assets net of associated investment expenses. This metric is presented on a common shareholders' basis by removing
the participating account results. This measure removes spread income earned on certain investment products which
represents the difference between earned rates and rates credited to clients.
Lifeco (pre-tax)
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings - net investment result
$
285 $
301 $
212 $
1,138 $
914
Items excluded from base earnings
60
(156)
(256)
97
(616)
Spread income
323
294
332
1,266
1,317
Participating account
24
(41)
(23)
(2)
(82)
Net earnings - net investment result
$
692 $
398 $
265 $
2,499 $
1,533
Base earnings - pre-tax
Represents base earnings (loss) before income taxes, earnings (losses) attributable to non-controlling interests and preferred
share dividends.
Lifeco
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Base earnings (pre-tax)
$
1,362 $
1,305 $
1,192 $
5,222 $
4,410
Items excluded from Lifeco base earnings (pre-tax)
Market experience relative to expectations (pre-tax)
$
59 $
46 $
(351) $
286 $
(461)
Realized OCI gains / (losses) from asset rebalancing (pre-
tax)
—
—
—
—
(158)
Assumption changes and management actions (pre-tax)
21
(235)
(28)
(209)
(149)
Business transformation impacts (pre-tax)1
(34)
(7)
(137)
(144)
(340)
Amortization of acquisition-related finite life intangibles
(pre-tax)1
(51)
(47)
(42)
(200)
(182)
Total pre-tax items excluded from base earnings
$
(5) $
(243) $
(558) $
(267) $
(1,290)
Participating account
31
(41)
(27)
26
(52)
Earnings before income taxes
$
1,388 $
1,021 $
607 $
4,981 $
3,068
1
Included in other non-market related impacts.
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Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Empower Defined Contribution and Personal Wealth net revenue
For the Empower Defined Contribution (Empower DC) and Empower Personal Wealth (Empower PW) business lines in the
U.S. segment, the Company discloses net revenue, which is a measure of financial performance and growth for these
businesses. Net revenue includes net asset-based fee income and other fee income related to businesses such as mutual funds
products and recordkeeping. Net asset-based expenses include certain direct expenses incurred such as commissions,
managed account expenses and sub-advisor expenses. Net revenue also includes spread income earned on general account
investment products, net of credit experience on assets held to back general account liabilities.
United States
For the three months ended
For the twelve months
ended
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Dec. 31
2024
Dec. 31
2023
Empower Defined Contribution (US$)
Gross AUM fees
$
467 $
460 $
408 $
1,789 $
1,633
Asset-based expenses
(117)
(111)
(104)
(447)
(422)
Asset-based fee income (net)
$
350 $
349 $
304 $
1,342 $
1,211
Spread income
160
153
191
661
770
Credit experience
(12)
—
(35)
(41)
(48)
Spread income (net)
$
148 $
153 $
156 $
620 $
722
Other fees
210
195
178
802
640
Total net revenue (US$)
$
708 $
697 $
638 $
2,764 $
2,573
Empower Personal Wealth (US$)
Gross AUM fees
$
117 $
110 $
91 $
428 $
337
Asset-based expenses
(16)
(15)
(13)
(59)
(48)
Asset-based fee income (net)
$
101 $
95 $
78 $
369 $
289
Spread income (net)
48
47
44
185
164
Other fees
21
21
18
79
62
Total net revenue (US$)
$
170 $
163 $
140 $
633 $
515
Reconciliation to Income Statement
Fee and other income
Gross AUM and other fees (US$)
$
815 $
786 $
695 $
3,098 $
2,672
Gross AUM and other fees (C$)
1,141
1,069
945
4,247
3,600
Add: Other fee and other income
33
25
25
121
106
Fee and other income
$
1,174 $
1,094 $
970 $
4,368 $
3,706
Net investment result
Empower DC and PW spread income (net) (US$)
$
196 $
200 $
200 $
805 $
886
Empower DC and PW spread income (net) (C$)
274
271
272
1,101
1,192
Add: Other U.S. segment net investment results
66
72
49
288
159
Add: Items excluded from base earnings
13
7
(13)
27
5
Add: Participating account
—
(1)
8
1
8
Net investment result
$
353 $
349 $
316 $
1,417 $
1,364
Operating and administrative expenses
Asset-based expenses (US$)
$
(133) $
(126) $
(117) $
(506) $
(470)
Empower DC other operating expenses (US$)
(451)
(446)
(451)
(1,796)
(1,773)
Empower PW other operating expenses (US$)
(106)
(102)
(84)
(399)
(326)
Total Empower DC and PW fee and spread income-related
operating expenses (US$)
$
(690) $
(674) $
(652) $
(2,701) $
(2,569)
Total Empower DC and PW operating expenses (C$)
(966)
(917)
(887)
(3,701)
(3,456)
Add: Items excluded from base earnings
(52)
(1)
—
(53)
(67)
Add: Other U.S. segment operating expenses
(47)
(47)
(66)
(189)
(221)
Add: Participating account
(2)
(1)
(5)
(8)
(14)
Operating and administrative expenses
$
(1,067) $
(966) $
(958) $
(3,951) $
(3,758)
103
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Assets under management (AUM) and assets under administration (AUA)
Assets under management and assets under administration are non-GAAP measures that provide an indicator of the size and
volume of the Company's overall business. Administrative services are an important aspect of the overall business of the
Company and should be considered when comparing volumes, size and trends.
Total assets under administration includes total assets per financial statements, proprietary mutual funds and institutional
assets and other assets under administration.
Lifeco
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Total assets per financial statements1
$
802,163 $
779,741 $
713,230
Continuing operations - other AUM
237,242
224,442
220,578
Discontinued operations - other AUM
—
—
161,566
Total AUM1
$
1,039,405 $
1,004,183 $
1,095,374
Other AUA
2,226,893
2,106,101
1,757,166
Total AUA1
$
3,266,298 $
3,110,284 $
2,852,540
1
Comparative figures include assets held for sale and other AUM related to the discontinued operations of Putnam Investments.
Canada
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Canada wealth fee business AUA
Segregated fund assets
$
114,547 $
112,493 $
101,250
Other AUM
14,600
14,092
13,056
Wealth fee business other AUA
62,050
60,368
53,490
Total Canada wealth fee business AUA
$
191,197 $
186,953 $
167,796
Add: Other balance sheet assets
$
112,326 $
109,525 $
102,534
Add: Other AUA
2,449
2,464
2,145
Consolidated Canada balance sheet assets
$
226,873 $
222,018 $
203,784
Consolidated Canada other AUM
14,600
14,092
13,056
Consolidated Canada other AUA
64,499
62,832
55,635
Total Canada AUA
$
305,972 $
298,942 $
272,475
United States
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Empower AUA
General account
$
90,907 $
84,899 $
88,487
Segregated funds
194,675
183,081
175,499
Other AUM
93,267
88,630
100,806
Other AUA
2,148,241
2,029,263
1,689,455
Empower AUA
$
2,527,090 $
2,385,873 $
2,054,247
PanAgora - other AUM
$
48,187 $
46,107 $
43,190
Discontinued operations - other AUM
—
—
194,145
Subtotal
$
2,575,277 $
2,431,980 $
2,291,582
Add: Other AUM consolidated adjustment
$
(69) $
(66) $
(32,579)
Add: Other balance sheet assets
56,671
58,734
41,844
Consolidated United States balance sheet assets
$
342,253 $
326,714 $
305,829
Consolidated United States other AUM
141,385
134,671
305,563
Consolidated United States other AUA
2,148,241
2,029,263
1,689,455
Total United States AUA
$
2,631,879 $
2,490,648 $
2,300,847
104
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Europe
Dec. 31
2024
Sept. 30
2024
Dec. 31
2023
Europe wealth and investment only AUA
Segregated fund assets
$
165,853 $
164,954 $
141,936
Other AUM
81,257
75,679
63,525
Other AUA
14,153
14,006
12,076
Total Europe wealth and investment only AUA
$
261,263 $
254,639 $
217,537
Add: Other balance sheet assets
$
55,476 $
56,753 $
52,593
Consolidated Europe balance sheet assets
$
221,329 $
221,707 $
194,529
Consolidated Europe other AUM
81,257
75,679
63,525
Consolidated Europe other AUA
14,153
14,006
12,076
Total Europe AUA
$
316,739 $
311,392 $
270,130
Non-GAAP Ratios
A non-GAAP ratio is a financial measure in the form of a ratio, fraction, percentage or similar representation that is not
disclosed in the financial statements of the Company and has a non-GAAP financial measure as one or more of its components.
These financial measures do not have a standardized definition under IFRS and might not be comparable to similar financial
measures disclosed by other issuers.
The non-GAAP ratios disclosed by the Company each use base earnings (loss) as the non-GAAP component. Base earnings
(loss) reflect management’s view of the underlying business performance of the Company and provides an alternate measure
to understand the underlying business performance compared to IFRS net earnings.
•
Base dividend payout ratio - Dividends paid to common shareholders are divided by base earnings (loss).
•
Base earnings per share - Base earnings (loss) for the period is divided by the number of average common shares
outstanding for the period.
•
Base earnings per share (diluted) - Base earnings (loss) for the period is divided by the number of average common
shares outstanding on a diluted basis for the period.
•
Base return on equity - Base earnings (loss) for the trailing four quarters are divided by the average common
shareholders' equity over the trailing four quarters. This measure provides an indicator of business unit profitability.
•
Cost of management ratio - Compares the amount paid by the Company to compensate its Named Executive Officers
(NEOs) relative to the Company’s base earnings for the same period. Calculated by dividing total annual compensation
paid to NEOs (as disclosed in the Executive Compensation section of the Company’s management proxy circular) by base
earnings for the year.
•
Effective income tax rate - base earnings - common shareholders - Calculated by adjusting the Company's reported
income taxes and net earnings before income taxes attributable to common shareholders to remove the impact of items
excluded from base earnings, to calculate the effective tax rates for common shareholders.
•
Price/base earnings ratio - The Company's closing share price divided by its base earnings per share on a trailing four
quarter basis.
Glossary
•
Assumption changes and management actions - The net earnings impact of: (i) revisions to the methodologies and
assumptions used in the measurement of the Company’s assets, insurance contract liabilities and investment contract
liabilities, and (ii) actions taken by management in the current reporting period which include, but are not limited to,
changes in in-force product features (including prices), and new or revised reinsurance deals on in-force business.
Assumption changes and management actions are excluded from base earnings.
•
Average assets under management and administration - Calculated as the average of the opening and ending balances
of assets under management and administration during the reporting period using daily balances where available and
monthly or quarterly balances when daily balances are unavailable.
•
Business transformation impacts - Business transformation impacts include acquisition and divestiture costs as well as
restructuring and integration costs.
105
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
•
Book value per common share - Measure is calculated by dividing Lifeco's common shareholders' equity by the number
of common shares outstanding at the end of the period.
•
Contractual service margin (CSM) - The CSM of a group of insurance contracts represents the unearned profit that the
Company expects to recognize in the future as it provides services under those contracts. On initial recognition of a group
of insurance contracts, if the total of the fulfillment cash flows, any derecognized assets for insurance acquisition cash
flows, and any cash flows arising at that date is a net inflow, the group of contracts is non-onerous. In this case, the CSM is
measured as the equal and opposite amount of the net inflow, which results in no net income or expenses arising on initial
recognition.
•
Common shareholders' equity - A financial measure comprised of the following items from Lifeco's balance sheet: share
capital - common shares, accumulated surplus, accumulated other comprehensive income and contributed surplus.
•
Dividend payout ratio - Dividends paid to common shareholders are divided by net earnings - common shareholders.
•
Drivers of earnings (DOE) - Drivers of earnings analysis provides additional detail on the primary sources of Lifeco's
earnings and is a consistent presentation across Canadian insurance industry peers. The DOE view presents net earnings
attributable to common shareholders, comprising base earnings on a DOE basis and items excluded from base earnings.
For base insurance service result, the DOE view provides detail on expected insurance earnings, the impact of new
business and experience gains and losses. For base net investment result, the DOE view provides detail on expected
investment earnings, credit experience, trading activity and earnings on surplus. Base other income and expenses are
presented separately in the DOE view with additional detail on net fee and spread income, non-directly attributable and
other expenses, income taxes on base earnings, non-controlling interests, preferred dividends and other items.
•
Financial leverage ratio - Defined as debt, hybrid securities, and preferred shares divided by total consolidated
capitalization. The denominator also includes the after-tax non-participating CSM balance in the denominator, other than
CSM associated with segregated fund guarantees. This reflects that the CSM represents future profit and is considered
available capital under LICAT.
•
General Measurement Model (GMM) - The Company applies this measurement model to all insurance contracts not
measured under the PAA or VFA measurement models.
•
Group life and health book premiums - For group life and health insurance, this measure represents the value of in-force
premiums at the end of the reporting period. The Company may express the period-over-period net change in group life
and health book premiums excluding the impact of foreign currency translation, which represents the net impact of new
sales, terminations and organic growth of in-force business for the period.
•
Impact of currency movement (constant currency basis) - Items impacting the Company's Consolidated Statements of
Earnings, such as income and benefits and expenses and net earnings, are translated into Canadian dollars at an average
rate for the period. These measures highlight the impact of changes in currency translation rates on Canadian dollar
equivalent IFRS results and have been calculated using the average rates, as shown below, in effect at the date of the
comparative period. These measures provide useful information as it facilitates the comparability of results between
periods.
Period ended
December 31, 2024
December 31, 2023
United States dollar
1.40
1.36
British pound
1.79
1.69
Euro
1.49
1.47
•
Market experience relative to expectations - The net earnings impact related to the direct equity and interest rate market
impacts on insurance and investment contract liabilities, net of hedging, and related deferred tax liabilities, which
includes:
•
the impact of hedge ineffectiveness related to segregated fund guarantee liabilities that are hedged and the
performance of the related hedge assets;
•
the impact on segregated fund guarantee liabilities not hedged;
•
the market-related impacts that are different than expectations on surplus assets, general account assets and the
insurance and investment contract liabilities they support; and
•
other market impacts on general account assets and the insurance and investment contract liabilities they support
that cannot be attributed to expectations within the period.
106
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
•
Net cash flows and net flows - Indicator of the Company's ability to attract and retain business. Net cash flows and net
asset flows are measured by the following:
•
Canada net cash flows include cash inflows and outflows related to segregated fund assets and proprietary and non-
proprietary mutual funds.
•
Europe net cash flows include cash inflows and outflows related to segregated fund assets, proprietary mutual funds
and institutional assets as well as other assets under administration.
•
Empower net cash flows include cash inflows and outflows related to segregated fund assets, general fund assets,
proprietary and non-proprietary mutual funds as well as other assets under management.
•
PanAgora net flows include institutional sales and redemptions.
•
Net earnings from continuing operations - Defined as net earnings - common shareholders less net earnings (loss) from
discontinued operations and the net gain from disposal of discontinued operations. The discontinued operations
represent the results of Putnam Investments. On January 1, 2024, Lifeco completed the previously announced sale of
Putnam Investments to Franklin Resources, Inc., operating as "Franklin Templeton".
•
Office of the Superintendent of Financial Institutions Canada (OSFI) - Is an independent Canadian federal government
agency that regulates and supervises federally regulated financial institutions and pension plans to determine whether
they are in sound financial condition and meeting their requirements.
•
Other assets under administration - Includes assets where the Company only provides administration services for which
the Company earns fees and other income. These assets are beneficially owned by the clients and the Company does not
direct the investing activities. Services provided relating to assets under administration include recordkeeping,
safekeeping, collecting investment income, settling of transactions or other administrative services. Administrative
services are an important aspect of the overall business of the Company and should be considered when comparing
volumes, size and trends.
•
Other assets under management - Includes external client funds where the Company has oversight of the investment
policies. Services provided in respect of proprietary mutual funds and institutional assets include the selection of
investments, the provision of investment advice and discretionary portfolio management on behalf of clients.
•
Premium Allocation Approach (PAA) - The Company applies this measurement model to contracts with coverage
periods of one year or less and those that are relatively stable and have low variability in fulfillment cash flows. Low
variability in fulfillment cash flows indicates that no significant difference in measurement exists when compared to the
general measurement model (GMM).
•
Price/book value ratio - The Company's closing share price divided by its book value per share.
•
Price/earnings ratio - The Company's closing share price divided by its net earnings per share on a trailing four quarter
basis.
•
Return on equity (ROE) - continuing operations - Net earnings from continuing operations for the trailing four quarters
are divided by the average common shareholders' equity over the trailing four quarters. This measure provides an
indicator of business unit profitability.
•
Sales - Sales are measured according to product type:
•
For risk-based insurance and annuity products, sales include 100% of single premium and annualized premiums
expected in the first twelve months of the plan.
•
Group insurance and ASO sales reflect annualized premiums and premium equivalents for new policies and new
benefits covered or expansion of coverage on existing policies.
•
For individual wealth management products, sales include deposits on segregated fund products, proprietary mutual
funds and institutional accounts as well as deposits on non-proprietary mutual funds.
•
For group wealth management products, sales include assets transferred from previous plan providers and the
expected annual contributions from the new plan.
•
Segmented common shareholders' equity - The Company has a capital allocation methodology, which allocates
financing costs in proportion to allocated capital. For the Canada, Europe and Capital and Risk Solutions segments
(essentially Canada Life), this allocation method generally tracks the regulatory capital requirements, while for Empower,
it tracks the financial statement carrying value of the business units. Total leverage capital is consistently allocated across
all business units in proportion to total capital resulting in a debt-to-equity ratio in each business unit mirroring the
consolidated Company.
107
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
The capital allocation methodology allows the Company to calculate comparable ROE for each business unit. These ROEs
are therefore based on the capital the business unit has been allocated and the financing charges associated with that
capital. IFRS does not prescribe the calculation of ROE and therefore a comparable measure under IFRS is not available.
•
Variable Fee Approach (VFA) - The Company applies this measurement model to contracts with direct participating
features such as participating insurance and segregated fund business with insurance guarantees, where an investment
return is provided to the policyholder based on a defined pool of items (e.g., a portfolio of assets).
Selected Annual Information
Selected annual information
(in $ millions, except per share amounts)
Years ended December 31
2024
2023
2022 (Restated)1
Total revenue2
$
39,797 $
41,629 $
1,384
Earnings
Base earnings3
4,192
3,667
3,318
Net earnings from continuing operations
4,011
2,862
3,628
Net earnings - Common Shareholders
3,940
2,738
3,596
Earnings per common share
Basic - base earnings4
4.50
3.94
3.56
Basic - net earnings from continuing operations
4.30
3.07
3.89
Basic - net earnings
4.23
2.94
3.86
Diluted - base earnings4
4.48
3.93
3.56
Diluted - net earnings from continuing operations
4.29
3.07
3.89
Diluted - net earnings
4.21
2.93
3.86
Total assets under administration
Total assets
$
802,163 $
713,230 $
672,206
Continuing operations - other assets under management5
237,242
220,578
182,288
Discontinued operations - other assets under management5
—
161,566
149,446
Total assets under management3
1,039,405
1,095,374
1,003,940
Other assets under administration5
2,226,893
1,757,166
1,464,523
Total assets under administration3
$
3,266,298 $
2,852,540 $
2,468,463
Total liabilities
$
769,509 $
683,379 $
643,411
Dividends paid per share
Series G First Preferred
1.3000
1.3000
1.3000
Series H First Preferred
1.21252
1.21252
1.21252
Series I First Preferred
1.1250
1.1250
1.1250
Series L First Preferred
1.41250
1.41250
1.41250
Series M First Preferred
1.450
1.450
1.450
Series N First Preferred6
0.437252
0.437252
0.437252
Series P First Preferred
1.350
1.350
1.350
Series Q First Preferred
1.2875
1.2875
1.2875
Series R First Preferred
1.200
1.200
1.200
Series S First Preferred
1.312500
1.312500
1.312500
Series T First Preferred
1.2875
1.2875
1.2875
Series Y First Preferred
1.1250
1.1250
1.1250
Common
2.220
2.080
1.960
1
Comparative 2022 results restated to reflect the adoption of IFRS 17, Insurance Contracts and IFRS 9, Financial Instruments.
2
Total revenue excludes revenue from discontinued operations related to Putnam Investments. Total revenue comprises of insurance revenue, net investment income, changes in fair
value through profit or loss on investment assets and fee and other income.
3
This metric is a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
4
This metric is a non-GAAP ratio. Refer to the "Non-GAAP Financial Measures and Ratios" section of this document for additional details.
5
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
6
The Series N First Preferred Share dividend was reset at the end of 2020 to a five year fixed dividend rate of 1.749% per annum which applies until December 30, 2025.
108
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Disclosure Controls and Procedures
The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information relating to
the Company which is required to be disclosed in reports filed under provincial and territorial securities legislation is: (a)
recorded, processed, summarized and reported within the time periods specified in the provincial and territorial securities
legislation, and (b) accumulated and communicated to the Company's senior management, including the President and Chief
Executive Officer and the Executive Vice-President and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. Management evaluated the effectiveness of the Company’s disclosure controls and procedures
as at December 31, 2024 and, based on such evaluation, the President and Chief Executive Officer and the Executive Vice-
President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.
Internal Control Over Financial Reporting
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Company’s
management is responsible for establishing and maintaining effective internal control over financial reporting. All internal
control systems have inherent limitations and may become ineffective because of changes in conditions. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.
The Company's management, under the supervision of the President and Chief Executive Officer and the Executive Vice-
President and Chief Financial Officer, has evaluated the effectiveness of the Company's internal control over financial reporting
based on the 2013 Internal Control - Integrated Framework (COSO Framework) published by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s management adopted the revised 2013 COSO Framework in 2015
as the basis to evaluate the effectiveness of Lifeco’s internal control over financial reporting.
During the twelve months ended December 31, 2024, there have been no changes in the Company's internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control
over financial reporting. Management evaluated the effectiveness of the Company’s internal control over financial reporting as
at December 31, 2024 and, based on such evaluation, the President and Chief Executive Officer and the Executive Vice-
President and Chief Financial Officer have concluded that the Company’s internal control over financial reporting is effective
and that there are no material weaknesses in the Company’s internal control over financial reporting.
Transactions with Related Parties
Relationship with Power Corporation Group of Companies
Lifeco's controlling shareholder is Power Financial Corporation (Power Financial), which is controlled by Power Corporation of
Canada (Power Corporation) and, ultimately, by the Desmarais Family Residuary Trust. Power Corporation also controls IGM
Financial Inc. and its subsidiaries (IGM), Sagard Holdings Inc. (Sagard), a multi-strategy alternative asset manager, Portage
Ventures (Portage), a global fintech venture capital investment strategy as well as Power Sustainable Manager Inc. (Power
Sustainable), a global multi-platform alternative asset manager. Lifeco and Mackenzie Financial Corporation, a wholly-owned
subsidiary of IGM, are investors in Northleaf Capital Partners Ltd. (Northleaf), a global private equity, private credit and
infrastructure fund manager. The Company and its subsidiaries invest in funds managed by Sagard, Power Sustainable,
Portage and Northleaf. Sagard also provides certain sub-advisory and property management services to the Company and its
subsidiaries. Some of these related entities operate in similar or related sectors to those in which Lifeco's subsidiaries operate.
A number of the Company's directors are also directors or officers of Power Corporation or one of its affiliates.
Lifeco's relationship with Power Financial, Power Corporation, IGM, Sagard, Portage, Power Sustainable and other members of
the Power Corporation group of companies enables Lifeco to access expertise and industry knowledge, achieve economies of
scale and access investment opportunities. As a result of these relationships, Lifeco and other members of the Power
Corporation group of companies may become aware of opportunities that are also of potential interest to other members of the
group and Lifeco may share information for that purpose. Power Corporation and Power Financial from time to time also assist
Lifeco to identify and analyze strategic corporate opportunities that may be of potential interest to it. However, Power
Corporation and Power Financial have no commitment to Lifeco that would require them or their respective subsidiaries,
directors or officers to offer any particular opportunity to Lifeco.
The Company has related party procedures that require, among other things, transactions between the Company and its
subsidiaries and any member of the Power Corporation group of companies to be on terms no less favourable than market
terms or where there is no open market, on terms that would reasonably be expected to provide at least fair value to the
Company. Under the related party procedures, any material related party transactions must be reviewed and approved by a
conduct review committee composed entirely of directors who are independent of management and Power Corporation and its
affiliates.
109
Great-West Lifeco Inc. 2024 Annual Report
Management’s Discussion and Analysis
Other Transactions with Related Parties
In the normal course of business, subsidiaries of Lifeco enter into various transactions with related companies which include
providing insurance benefits and sub-advisory services to other companies within the Power Corporation group of companies.
In all cases, transactions were at market terms and conditions.
During the year, Canada Life provided to and received from IGM and its subsidiaries, a member of the Power Corporation
group of companies, certain administrative services. Canada Life also provided life insurance, annuity and disability insurance
products under a distribution agreement with IGM. All transactions were provided at market terms and conditions.
The Company owns 9,200,407 shares, held through Canada Life, representing a 3.89% ownership interest in IGM. The
Company uses the equity method to account for its investment in IGM as it exercises significant influence. In 2024, the
Company recognized $41 million for the equity method share of IGM net earnings and received dividends of $21 million from
its investment in IGM.
Segregated funds of the Company were invested in funds managed by IG Wealth Management and Mackenzie Investments.
Mackenzie Investments also manages certain of the Company's portfolio investments. The Company also has interests in
mutual funds, open-ended investment companies and unit trusts. Some of these funds are sub-advised by related parties of the
Company, who are paid sub-advisory fees related to these services. During 2024, the Company and its subsidiaries made
additional investments in funds managed by related parties. All transactions were provided at market terms and conditions.
The Company held debentures issued by IGM with a carrying value of $90 million at December 31, 2024 ($88 million at
December 31, 2023).
On May 6, 2024, the Company announced it had entered into a new long-term strategic partnership with Power Sustainable
Manager Inc. (Power Sustainable), a sustainability-focused investment manager and subsidiary of the Company's parent,
Power Corporation of Canada. Under the transaction, the Company has become a minority shareholder in Power Sustainable
with an ownership share of slightly below 20% on a fully diluted basis. The Company has agreed to invest in certain funds
across Power Sustainable's investment strategies in the future.
The Company provides asset management, employee benefits and administrative services for employee benefit plans relating
to pension and other post-employment benefits for employees of the Company and its subsidiaries. These transactions were
provided at market terms and conditions.
110
Great-West Lifeco Inc. 2024 Annual Report
Quarterly Financial Information
Quarterly financial information
(in $ millions, except per share amounts)
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Insurance revenue
$
5,399 $
5,292 $
5,273 $
5,250 $
5,174 $
5,110 $
5,081 $
5,037
Net investment income
2,685
2,249
2,409
2,340
2,431
2,271
2,061
2,101
Changes in fair value on FVTPL assets
(2,981)
6,906
(864)
(1,385)
11,042
(5,457)
(2,668)
3,572
Fee and other income
1,952
1,806
1,794
1,672
1,558
1,450
1,466
1,400
Total revenue1
$
7,055 $ 16,253 $
8,612 $
7,877 $ 20,205 $
3,374 $
5,940 $ 12,110
Insurance service operating and administrative
expenses2
$
428 $
423 $
424 $
423 $
408 $
395 $
405 $
448
Other operating and administrative expenses
1,881
1,737
1,729
1,703
1,780
1,522
1,571
1,529
Total operating and administrative expenses
$
2,309 $
2,160 $
2,153 $
2,126 $
2,188 $
1,917 $
1,976 $
1,977
Amortization of acquisition-related intangible assets
51
47
52
50
42
48
49
43
Amortization of other finite life intangible assets
56
58
51
50
37
52
48
47
Financing charges
103
98
101
100
104
103
104
115
Restructuring and integration expenses
4
23
27
68
143
38
19
26
Total expenses
$
2,523 $
2,386 $
2,384 $
2,394 $
2,514 $
2,158 $
2,196 $
2,208
Net earnings from continuing operations3
Total
$
1,116 $
859 $
1,005 $
1,031 $
743 $
936 $
569 $
614
Basic - per share
1.20
0.92
1.08
1.10
0.80
1.01
0.61
0.66
Diluted - per share
1.19
0.92
1.08
1.10
0.79
1.00
0.61
0.66
Net earnings - Common Shareholders
Total
$
1,116 $
859 $
1,005 $
960 $
740 $
905 $
498 $
595
Basic - per share
1.20
0.92
1.08
1.03
0.79
0.97
0.53
0.64
Diluted - per share
1.19
0.92
1.08
1.03
0.79
0.97
0.53
0.64
1
Total revenue and its components exclude revenue from discontinued operations related to Putnam Investments.
2
Excludes claims and benefits incurred, adjustments to the liability for incurred claims, losses and reversal of losses on onerous contracts, impairment losses and reversal of
impairment losses on the asset for insurance acquisition cash flows, commissions, amounts attributed to insurance acquisition cash flows and amortization of insurance acquisition
cash flows.
3
Refer to the "Glossary" section of this document for additional details on the composition of this measure.
Total revenue
Total revenue for the fourth quarter of 2024 was $7,055 million and comprises insurance revenue of $5,399 million ($5,174
million for the same quarter last year), net investment income of $2,685 million ($2,431 million for the same quarter last year),
changes in fair value through profit or loss on investment assets of negative $2,981 million (positive $11,042 million for the
same quarter last year) and fee and other income of $1,952 million ($1,558 million for the same quarter last year).
Insurance revenue
Insurance revenue for the fourth quarter of 2024 was $5,399 million, an increase of $225 million compared to the same quarter
last year, primarily due to higher earnings on short-term insurance contracts in the Canada segment and higher CSM
recognized for services provided in the Europe and Capital and Risk Solutions segments.
Total net investment income
Total net investment income, which includes net investment income and changes in fair value on FVTPL assets, for the fourth
quarter of 2024 decreased by $13,769 million compared to the same quarter last year. The changes in fair value in the fourth
quarter of 2024 were a decrease of $2,981 million compared to an increase of $11,042 million in the fourth quarter of 2023,
primarily due to an increase in bond yields across all geographies. Net investment income in the fourth quarter of 2024 of
$2,685 million, which excludes changes in fair value through profit or loss, increased by $254 million compared to the same
quarter last year, primarily due to the strengthening of the U.S. dollar, British pound and euro against the Canadian dollar.
Management’s Discussion and Analysis
111
Great-West Lifeco Inc. 2024 Annual Report
Fee and other income
Fee and other income for the fourth quarter of 2024 was $1,952 million, an increase of $394 million compared to the same
quarter last year, primarily due to higher equity market levels and overall growth in the business in the U.S. segment, the
addition of IPC and Value Partners in the Canada segment and higher management fees from higher average assets under
administration as well as a gain recorded in the fourth quarter of 2024 on the sale of the U.K. onshore bond business, which is
excluded from base earnings in the Europe segment.
Expenses
Expenses for the fourth quarter of 2024 were $2,523 million, an increase of $9 million compared to the same quarter last year.
Operating and administrative expenses of $2,309 million increased by $121 million compared to the same quarter last year,
primarily due to higher salaries and other employment benefits reflecting business growth. Restructuring and integration
expenses of $4 million decreased by $139 million compared to the same quarter last year, primarily due to restructuring
provisions from the prior year in the Europe segment that did not repeat.
Net earnings
Lifeco's consolidated net earnings attributable to common shareholders were $1,116 million for the fourth quarter of 2024
compared to $740 million for the same quarter last year. On a per share basis, this represents $1.20 per common share ($1.19
diluted) for the fourth quarter of 2024 compared to $0.79 per common share ($0.79 diluted) a year ago.
Translation of Foreign Currency
Through its operating subsidiaries, Lifeco conducts business in multiple currencies. The four primary currencies are the
Canadian dollar, the U.S. dollar, the British pound and the euro. Throughout this document, foreign currency assets and
liabilities are translated into Canadian dollars at the market rate at the end of the reporting period. All income and expense
items are translated at an average rate for the period. The rates employed are:
Period ended
Dec. 31
2024
Sept. 30
2024
June 30
2024
Mar. 31
2024
Dec. 31
2023
Sept. 30
2023
June 30
2023
Mar. 31
2023
United States dollar
Balance sheet
$
1.44 $
1.35 $
1.37 $
1.35 $
1.33 $
1.36 $
1.32 $
1.35
Income and expenses
$
1.40 $
1.36 $
1.37 $
1.35 $
1.36 $
1.34 $
1.34 $
1.35
British pound
Balance sheet
$
1.80 $
1.81 $
1.73 $
1.71 $
1.69 $
1.66 $
1.68 $
1.67
Income and expenses
$
1.79 $
1.77 $
1.73 $
1.71 $
1.69 $
1.70 $
1.68 $
1.64
Euro
Balance sheet
$
1.49 $
1.51 $
1.47 $
1.46 $
1.46 $
1.44 $
1.45 $
1.47
Income and expenses
$
1.49 $
1.50 $
1.47 $
1.46 $
1.47 $
1.46 $
1.46 $
1.45
Additional Information
Additional information relating to Lifeco, including Lifeco's most recent consolidated financial statements, CEO/CFO
certification and Annual Information Form are available at www.sedarplus.com.
Management’s Discussion and Analysis
112
Great-West Lifeco Inc. 2024 Annual Report
Financial Reporting Responsibility
The consolidated financial statements of Great-West Lifeco Inc. are the responsibility of management and are prepared in accordance with
International Financial Reporting Standards (IFRS). The financial information contained elsewhere in the annual report is consistent with that
in the consolidated financial statements. The consolidated financial statements necessarily include amounts that are based on management’s
best estimates. These estimates are based on careful judgments and have been properly reflected in the consolidated financial statements. In
the opinion of management, the accounting practices utilized are appropriate in the circumstances and the consolidated financial statements
present fairly, in all material respects, the financial position of Great-West Lifeco and the results of its operations and its cash flows in accordance
with IFRS.
In carrying out its responsibilities, management maintains appropriate internal control over financial reporting designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.
The consolidated financial statements were approved by the Board of Directors, which has oversight responsibilities with respect to financial
reporting. The Board of Directors carries out this responsibility principally through the Audit Committee, which comprises independent
directors. The Audit Committee is charged with, among other things, the responsibility to:
• Review the interim and annual consolidated financial statements and report thereon to the Board of Directors.
• Review internal control procedures.
• Review the independence of the external auditors and the terms of their engagement and recommend the appointment and compensation of
the external auditors to the Board of Directors.
• Review other audit, accounting and financial reporting matters as required.
In carrying out the above responsibilities, this Audit Committee meets regularly with management, and with both the Company’s external and
internal auditors to review their respective audit plans and to review their audit findings. The Committee is readily accessible to the external
and internal auditors.
The Board of Directors of each of The Canada Life Assurance Company and Empower Annuity Insurance Company of America appoints an
Actuary who is either a Fellow of the Canadian Institute of Actuaries or a Fellow of the Society of Actuaries. The Actuary:
• Ensures that the assumptions and methods used in the valuation of policy liabilities are in accordance with International Financial Reporting
Standards, accepted actuarial practice, applicable legislation and associated regulations and directives, and the consolidated financial
statements fairly present the result of the valuation.
• Examination of supporting data for accuracy and completeness is an important element of the work required to form this opinion.
Deloitte LLP Chartered Professional Accountants, as Great-West Lifeco’s external auditors, have audited the consolidated financial statements.
The Independent Auditor’s Report to the Shareholders is presented following the consolidated financial statements. Their opinion is based upon
an examination conducted in accordance with Canadian generally accepted auditing standards, performing such tests and other procedures as
they consider necessary in order to obtain reasonable assurance that the consolidated financial statements present fairly, in all material respects,
the financial position of the Company and the results of its operations and its cash flows in accordance with IFRS.
Paul Mahon
Jon Nielsen
President and
Executive Vice-President and
Chief Executive Officer
Chief Financial Officer
Toronto, Ontario
February 5, 2025
113
Great-West Lifeco Inc. 2024 Annual Report
Consolidated Statements of Earnings
(in Canadian $ millions except per share amounts)
For the years
ended December 31
2024
2023
Insurance service result
Insurance revenue (note 12)
$
21,214 $
20,402
Insurance service expenses (note 13)
(16,368)
(15,777)
Net expense from reinsurance contracts
(1,599)
(1,544)
3,247
3,081
Net investment result (note 6)
Net investment income
9,683
8,864
Changes in fair value on fair value through profit or loss assets
1,676
6,489
11,359
15,353
Net finance income (expenses) from insurance contracts
(5,918)
(9,238)
Net finance income (expenses) from reinsurance contracts
(10)
224
Changes in investment contract liabilities
(2,932)
(4,806)
2,499
1,533
Net investment result - insurance contracts on account of segregated fund policyholders
Net investment income (loss)
6,828
4,808
Net finance income (expenses) from insurance contracts
(6,828)
(4,808)
—
—
Other income and expenses
Fee and other income
7,224
5,874
Operating and administrative expenses (note 13)
(7,050)
(6,402)
Amortization of finite life intangible assets (note 9)
(415)
(366)
Financing costs (note 19)
(402)
(426)
Restructuring and integration expenses (note 4)
(122)
(226)
Earnings before income taxes
4,981
3,068
Income taxes (note 29)
737
53
Net earnings from continuing operations before non-controlling interests
4,244
3,015
Attributable to non-controlling interests (note 21)
103
23
Net earnings from continuing operations before preferred share dividends
4,141
2,992
Preferred share dividends (note 23)
130
130
Net earnings from continuing operations
4,011
2,862
Net loss from discontinued operations
(115)
(124)
Net gain from disposal of discontinued operations (note 3)
44
—
Net earnings - common shareholders
$
3,940 $
2,738
Earnings per common share (note 23)
Basic
$
4.23 $
2.94
Diluted
$
4.21 $
2.93
Earnings per common share from continuing operations (note 23)
Basic
$
4.30 $
3.07
Diluted
$
4.29 $
3.07
114
Great-West Lifeco Inc. 2024 Annual Report
Consolidated Statements of Comprehensive Income
(in Canadian $ millions)
For the years
ended December 31
2024
2023
Net earnings - common shareholders, before preferred dividends
$
4,070 $
2,868
Other comprehensive income (loss)
Items that may be reclassified subsequently to Consolidated Statements of Earnings
Unrealized foreign exchange gains (losses) on translation of foreign operations
1,413
(19)
Foreign exchange translation gains reclassified to earnings on disposal of foreign operations (note 3)
(211)
—
Unrealized gains (losses) on hedges of the net investment in foreign operations
(172)
(64)
Income tax (expense) benefit
40
(6)
Unrealized gains (losses) on bonds and mortgages at fair value through other comprehensive income
113
281
Income tax (expense) benefit
(25)
(97)
Realized (gains) losses on bonds and mortgages at fair value through other comprehensive income
(note 6)
47
248
Income tax expense (benefit)
(10)
(19)
Unrealized gains (losses) on cash flow hedges
64
133
Income tax (expense) benefit
(17)
(36)
Realized (gains) losses on cash flow hedges
(61)
(94)
Income tax expense (benefit)
16
25
Non-controlling interests
(109)
(135)
Income tax (expense) benefit
30
40
Total items that may be reclassified
1,118
257
Items that will not be reclassified to Consolidated Statements of Earnings
Unrealized gains (losses) on stocks at fair value through other comprehensive income
(409)
—
Re-measurements on defined benefit pension and other post-employment benefit plans (note 26)
264
(127)
Income tax (expense) benefit
(72)
36
Non-controlling interests
(21)
11
Income tax (expense) benefit
6
(3)
Total items that will not be reclassified
(232)
(83)
Total other comprehensive income
886
174
Comprehensive income
$
4,956 $
3,042
115
Great-West Lifeco Inc. 2024 Annual Report
Consolidated Balance Sheets
(in Canadian $ millions)
December 31
December 31
2024
2023
Assets
Cash and cash equivalents (note 5)
$
10,709 $
7,742
Bonds (note 6)
167,114
157,051
Mortgage loans (note 6)
38,879
38,414
Stocks (note 6)
18,826
15,733
Investment properties (note 6)
8,257
7,870
243,785
226,810
Insurance contract assets (note 14)
1,193
1,193
Reinsurance contract held assets (note 15)
17,842
17,332
Assets held for sale
—
4,467
Goodwill (note 9)
11,428
11,249
Intangible assets (note 9)
4,958
4,484
Derivative financial instruments (note 30)
2,431
2,219
Owner occupied properties (note 10)
789
731
Fixed assets (note 10)
346
335
Accounts and interest receivable
5,402
4,863
Other assets (note 11)
15,265
14,483
Current income taxes
272
260
Deferred tax assets (note 29)
2,066
1,848
Investments on account of segregated fund policyholders (note 17)
496,386
422,956
Total assets
$
802,163 $
713,230
Liabilities
Insurance contract liabilities (note 14)
$
155,683 $
144,388
Investment contract liabilities (note 16)
90,157
88,919
Reinsurance contract held liabilities (note 15)
795
648
Liabilities held for sale
—
2,407
Debentures and other debt instruments (note 18)
9,469
9,046
Derivative financial instruments (note 30)
2,137
1,288
Accounts payable
3,524
3,216
Other liabilities (note 20)
10,230
9,587
Current income taxes
294
137
Deferred tax liabilities (note 29)
834
787
Insurance contracts on account of segregated fund policyholders (note 17)
66,343
60,302
Investment contracts on account of segregated fund policyholders (note 17)
430,043
362,654
Total liabilities
769,509
683,379
Equity
Non-controlling interests (note 21)
Participating account surplus in subsidiaries
3,041
2,847
Non-controlling interests in subsidiaries
72
168
Shareholders' equity
Share capital (note 22)
Limited recourse capital notes
1,500
1,500
Preferred shares
2,720
2,720
Common shares
6,071
6,000
Accumulated surplus
17,266
15,492
Accumulated other comprehensive income (note 27)
1,776
890
Contributed surplus
208
234
Total equity
32,654
29,851
Total liabilities and equity
$
802,163 $
713,230
Approved by the Board of Directors:
Jeffrey Orr
Paul Mahon
Chair of the Board
President and Chief Executive Officer
116
Great-West Lifeco Inc. 2024 Annual Report
Consolidated Statements of Changes in Equity
(in Canadian $ millions)
December 31, 2024
Share
capital
Contributed
surplus
Accumulated
surplus
Accumulated
other
comprehensive
income
Non-
controlling
interests
Total
equity
Balance, beginning of year
$
10,220 $
234 $
15,492 $
890 $
3,015 $
29,851
Net earnings - common shareholders, before
preferred dividends
—
—
4,070
—
103
4,173
Other comprehensive income
—
—
—
886
94
980
10,220
234
19,562
1,776
3,212
35,004
Dividends to shareholders
Preferred shareholders (note 23)
—
—
(130)
—
—
(130)
Common shareholders
—
—
(2,069)
—
—
(2,069)
Shares exercised and issued under share-based
payment plans (note 22)
88
(20)
—
—
12
80
Shares purchased and cancelled under normal
course issuer bid (note 22)
(17)
—
(97)
—
—
(114)
Equity settlement of subsidiary's share-based plans
—
—
—
—
(9)
(9)
Impact of sale of discontinued operations
—
(32)
—
—
(99)
(131)
Share-based payment plans expense
—
26
—
—
—
26
Derecognition of non-controlling interest in
subsidiary
—
—
—
—
(3)
(3)
Balance, end of year
$
10,291 $
208 $
17,266 $
1,776 $
3,113 $
32,654
December 31, 2023
Share
capital
Contributed
surplus
Accumulated
surplus
Accumulated
other
comprehensive
income
Non-
controlling
interests
Total
equity
Balance, beginning of year
$
10,011 $
209 $
14,976 $
713 $
2,886 $
28,795
Impact of initial application of IFRS 9
—
—
(33)
3
—
(30)
Revised balance, beginning of year
10,011
209
14,943
716
2,886
28,765
Net earnings - common shareholders, before
preferred dividends
—
—
2,868
—
23
2,891
Other comprehensive income
—
—
—
174
87
261
10,011
209
17,811
890
2,996
31,917
Dividends to shareholders
Preferred shareholders (note 23)
—
—
(130)
—
—
(130)
Common shareholders
—
—
(1,937)
—
—
(1,937)
Issued in business acquisition
89
—
—
—
—
89
Shares exercised and issued under share-based
payment plans (note 22)
158
(51)
—
—
36
143
Shares purchased and cancelled under normal
course issuer bid (note 22)
(38)
—
(195)
—
—
(233)
Equity settlement of Putnam share-based plans
—
—
—
—
(13)
(13)
Shares cancelled under Putnam share-based plans
—
3
—
—
2
5
Share-based payment plans expense
—
73
—
—
—
73
Acquisition of non-controlling interest in subsidiary
—
—
(27)
—
(36)
(63)
Dilution loss on non-controlling interests
—
—
(30)
—
30
—
Balance, end of year
$
10,220 $
234 $
15,492 $
890 $
3,015 $
29,851
117
Great-West Lifeco Inc. 2024 Annual Report
Consolidated Statements of Cash Flows
(in Canadian $ millions)
For the years
ended December 31
2024
2023
Operations
Earnings before income taxes
$
4,821 $
2,914
Income taxes paid, net of refunds received
(707)
(423)
Adjustments:
Change in insurance contract liabilities
5,636
9,316
Change in investment contract liabilities
(5,538)
(4,561)
Change in reinsurance contract held liabilities
115
170
Change in reinsurance contract held assets
586
5
Change in insurance contract assets
38
(480)
Changes in fair value through profit or loss
(1,676)
(6,489)
Sales, maturities and repayments of portfolio investments
43,805
38,507
Purchases of portfolio investments
(42,566)
(35,253)
Other
237
1,497
4,751
5,203
Financing Activities
Issue of common shares
88
158
Purchased and cancelled common shares
(114)
(233)
Repayment of euro denominated debt
—
(735)
Increase in line of credit of subsidiaries
—
61
Decrease in line of credit of subsidiaries
(60)
(734)
Dividends paid on common shares
(2,069)
(1,937)
Dividends paid on preferred shares
(130)
(130)
(2,285)
(3,550)
Investment Activities
Impact from sale of discontinued operations
(211)
—
Investment in associates and joint ventures
(121)
(223)
Business acquisitions, net of cash and cash equivalents acquired
(76)
(563)
(408)
(786)
Effect of changes in exchange rates on cash and cash equivalents
534
(40)
Increase in cash and cash equivalents
2,592
827
Cash and cash equivalents from continuing and discontinued operations, beginning of year
8,117
7,290
Cash and cash equivalents from continuing and discontinued operations, end of year
$
10,709 $
8,117
Less: Cash and cash equivalents from discontinued operations, end of year
—
375
Cash and cash equivalents from continuing operations, end of year
$
10,709 $
7,742
Supplementary cash flow information
Interest income received
$
7,657 $
7,332
Interest paid
410
453
Dividend income received
494
422
118
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(in Canadian $ millions except per share amounts and where otherwise indicated)
1.
Corporate Information
Great-West Lifeco Inc. (Lifeco or the Company) is a publicly listed company (Toronto Stock Exchange: GWO), incorporated
and domiciled in Canada. The registered address of the Company is 100 Osborne Street North, Winnipeg, Manitoba, Canada,
R3C 1V3. Lifeco is a member of the Power Corporation of Canada (Power Corporation) group of companies and is a subsidiary
of Power Corporation.
Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, wealth
and asset management, and reinsurance businesses, primarily in Canada, the United States and Europe through its operating
subsidiaries including The Canada Life Assurance Company (Canada Life) and Empower Annuity Insurance Company of
America (Empower).
The consolidated financial statements (financial statements) of the Company as at and for the year ended December 31, 2024
were approved by the Board of Directors on February 5, 2025.
2.
Basis of Presentation and Summary of Material Accounting Policies
The consolidated financial statements of the Company have been prepared in compliance with International Financial
Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Consistent accounting policies
were applied in the preparation of the consolidated financial statements of the subsidiaries of the Company.
Changes in Accounting Policies
The Company adopted the amendments to IFRS for IAS 7, Statement of Cash Flows, IFRS 7, Financial Instruments: Disclosures,
and IFRS 16, Leases effective January 1, 2024. The adoption of these amendments did not have a material impact on the
Company's financial statements.
Basis of Consolidation
The consolidated financial statements of the Company were prepared as at and for the year ended December 31, 2024 with
comparative information as at and for the year ended December 31, 2023. Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such
control ceases. The Company has control when it has the power to direct the relevant activities, has significant exposure to
variable returns from these activities and has the ability to use its power to affect the variable returns. All intercompany
balances and transactions, including income and expenses, profits or losses and dividends, are eliminated on consolidation.
Use of Significant Judgments, Estimates and Assumptions
In preparation of these consolidated financial statements, management is required to make significant judgments, estimates
and assumptions that affect the reported amounts of assets, liabilities, net earnings and related disclosures. Key sources of
estimation uncertainty and areas where significant judgments have been made are listed below and discussed throughout the
notes to these consolidated financial statements including:
•
Management applies judgment in determining the fair value of assets acquired and liabilities assumed in a business
combination.
•
Management applies judgment in determining the assets and liabilities to be included in a disposal group, and uses
estimates in the determination of the fair value for disposal groups, including contingent consideration and costs to sell
(note 3).
•
Management uses independent qualified appraisal services to determine the fair value of investment properties, which
utilize judgments and estimates. These appraisals are adjusted by applying management judgments and estimates for
material changes in property cash flows, capital expenditures or general market conditions (note 6).
•
Management uses internal valuation models which utilize judgments and estimates to determine the fair value of equity
release mortgages. These valuations are adjusted by applying management judgments and estimates for material changes
in projected asset cash flows, and discount rates (note 6).
•
In the determination of the fair value of financial instruments, management exercises judgment in the determination of
fair value inputs, particularly those items categorized within level 3 of the fair value hierarchy (note 8).
•
Cash generating units for intangible assets and cash generating unit groupings for goodwill have been determined by
management as the lowest level that the assets are monitored for internal reporting purposes, which requires management
judgment in the determination of the lowest level of monitoring (note 9).
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•
Management evaluates the future benefit for initial recognition and measurement of goodwill and intangible assets as well
as testing the recoverable amounts. The determination of the carrying value and recoverable amounts of the cash
generating unit groupings for goodwill and cash generating units for intangible assets relies upon the determination of fair
value or value-in-use using valuation methodologies (note 9).
•
Management applies judgment in determining whether deferred acquisition costs and deferred income reserves can be
recognized on the Consolidated Balance Sheets. Deferred acquisition costs are recognized if management determines the
costs meet the definition of an asset, are incremental and related to the issuance of the investment contract (notes 11 and
20).
•
Management applies judgment when evaluating the classification of insurance and reinsurance contracts to determine
whether these arrangements should be accounted for as insurance, investment or service contracts.
•
The actuarial assumptions, such as mortality, longevity, morbidity, expense and policyholder behaviour, used in the
valuation of insurance and certain investment contract liabilities require judgment and estimation (notes 14 and 16).
•
Management applies judgment in determining the coverage units which are based on an estimate of the quantity of
coverage provided by the contracts in a group, considering the quantity of benefits provided and the expected coverage
duration.
•
The Company considers all terms of contracts it issues to determine whether there are amounts payable to the
policyholder in all circumstances, regardless of contract cancellation, maturity, and the occurrence or non-occurrence of
an insured event. Some amounts, once paid by the policyholder, are repayable to the policyholder in all circumstances.
The Company considers such payments to meet the definition of an investment component, irrespective of whether the
amount repayable varies over the term of the contract as the amount is repayable only after it has first been paid by the
policyholder.
•
In determining discount rates to apply to most insurance contract liability cash flows, the Company generally uses the top-
down approach for cash flows of non-participating contracts that do not depend on underlying items. Applying this
approach, the Company uses the yield curve implied in a reference portfolio of assets and adjusts it to exclude the effects of
risks (e.g., credit risk) present in the cash flows from the financial instruments that are part of the reference portfolio, but
not in the insurance cash flows. One of the key sources of estimation uncertainty is estimating the market risk premiums
for credit risk of the underlying items that are only relevant to assets included in the reference portfolio, but not to the non-
participating contracts. For some products, discount rates are set using a bottom-up approach, based on risk-free rates,
plus an illiquidity premium, which also requires judgment (note 14).
•
When determining the risk adjustment for non-financial risk, the Company applies judgment in reflecting diversification
and calculating the confidence level.
•
The determination of whether a contract or a group of contracts is onerous is based on the expectations as at the date of
initial recognition and subsequently, with fulfillment cash flow expectations determined on a probability-weighted basis.
The Company determines the appropriate level at which reasonable and supportable information is available to make this
assessment. The Company applies judgment in determining at what level of granularity the Company has sufficient
information to conclude that all contracts within a set will be in the same group.
•
The Company used judgment in determining which insurance contracts to apply the fair value approach to upon
transition to IFRS 17, Insurance Contracts (IFRS 17) and applied significant judgment in determining the critical
assumptions and estimates in determining the fair value for these contracts.
•
The measurement of impairment losses under IFRS 9, Financial Instruments (IFRS 9) across relevant financial assets
requires judgment, in particular for the estimation of the amount and timing of future cash flows when determining
impairment losses and the assessment of a significant increase in credit risk.
•
The actuarial assumptions used in determining the expense and benefit obligations for the Company’s defined benefit
pension plans and other post-employment benefits requires judgment and estimation. Management reviews previous
experience of its plan members and market conditions including interest rates and inflation rates in evaluating the
assumptions used in determining the expense for the current year (note 26).
•
The Company operates within various tax jurisdictions where management judgments and estimates are required when
interpreting the relevant tax laws, regulations and legislation in the determination of the Company’s tax provisions and the
carrying amounts of its tax assets and liabilities (note 29).
•
Management applies judgment in assessing the recoverability of the deferred income tax asset carrying values based on
future years’ taxable income projections (note 29).
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•
Legal and other provisions are recognized resulting from a past event which, in the judgment of management, has resulted
in a probable outflow of economic resources which would be passed to a third-party to settle the obligation. Management
applies judgment in evaluating the possible outcomes and risks in determining the best estimate of the provision at the
balance sheet date (note 31).
•
The operating segments of the Company are the segments reviewed by the Company’s Chief Executive Officer to assess
performance and allocate resources within the Company. Management applies judgment in the aggregation of the
business units into the Company's operating segments (note 33).
•
The Company consolidates all subsidiaries and entities which management determines that the Company controls.
Control is evaluated on the ability of the Company to direct the activities of the subsidiary or entity to derive variable
returns and management applies judgment in determining whether control exists. Judgment is exercised in the evaluation
of the variable returns and in determining the extent to which the Company has the ability to exercise its power to generate
variable returns.
•
Management applies judgment when determining whether the Company retains the primary obligation with a client in
sub-advisor arrangements. Where the Company retains the primary obligation to the client, revenue and expenses are
recorded on a gross basis.
•
The results of the Company reflect management’s judgments regarding the impact of prevailing global credit, equity and
foreign exchange market conditions. The Company’s practice is to use third-party independent credit ratings where
available. Judgment is required when setting credit ratings for instruments that do not have a third-party rating.
The material accounting policies are as follows:
(a)
Portfolio Investments
Portfolio investments that meet the definition of a financial asset include bonds, mortgage loans and stocks.
A financial asset is measured at fair value on initial recognition and is classified and subsequently measured as fair value
through profit or loss (FVTPL), fair value through other comprehensive income (FVOCI), or amortized cost based upon the
Company’s business model for managing its assets and the contractual cash flow characteristics of the asset.
The Company’s business models are determined at the level that reflects how its groups of financial assets are managed
together to achieve business objectives.
A financial asset is classified as FVOCI if it meets the following criteria and is not designated as FVTPL:
•
It is held in a business model whose objective is to hold to collect contractual cash flows and sell financial assets, and
•
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on
the principal amount outstanding; or
•
It is an investment in an equity instrument that is neither held for trading nor contingent consideration recognized by an
acquirer in a business combination, and at initial recognition, the Company has made an irrevocable election to present
subsequent changes in FVOCI.
A financial asset is classified as amortized cost if it meets the following criteria and is not designated as FVTPL:
•
It is held in a business model whose objective is to hold to collect contractual cash flows, and
•
Its contractual terms give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
FVOCI investments are recognized at fair value on the Consolidated Balance Sheets with unrealized gains and losses recorded
in the Consolidated Statements of Other Comprehensive Income.
Any financial asset that does not qualify for measurement at amortized cost or FVOCI is classified as FVTPL. For financial
instruments that meet the amortized cost or FVOCI criteria, the Company may exercise the option to designate, at initial
recognition, such financial instruments as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that
would otherwise arise. Investments measured as FVTPL are recognized at fair value on the Consolidated Balance Sheets with
realized and unrealized gains and losses recorded in the Consolidated Statements of Earnings.
Investments in stocks, except for those where the Company exerts significant influence, are classified on initial recognition as
FVTPL unless an irrevocable designation is made to classify an individual instrument as FVOCI.
Interest income earned on bonds and mortgages is calculated using the effective interest method and is recorded within net
investment result in the Consolidated Statements of Earnings.
Investment properties are real estate held to earn rental income or for capital appreciation. Investment properties are initially
measured at cost and subsequently carried at fair value on the Consolidated Balance Sheets. All changes in fair value are
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recorded within the net investment result in the Consolidated Statements of Earnings. Properties held to earn rental income or
for capital appreciation that have an insignificant portion that is owner occupied or where there is no intent to occupy on a
long-term basis are classified as investment properties. Properties that do not meet these criteria are classified as owner
occupied properties. Property that is leased that would otherwise be classified as investment property if owned by the
Company is also included within investment properties.
Investments in Joint Arrangements and Associates
The Company recognizes an investee as a joint venture when the Company or one of its subsidiaries requires unanimous
consent with other investor(s) over decisions about the relevant activities of the investee. An associate is an entity which the
Company exercises significant influence over the entity’s financial and operating policies without having control or joint
control.
The Company applies equity method accounting to its investments in joint ventures and associates. Under the equity method,
an investment in a joint venture or an associate is recognized initially on the Consolidated Balance Sheets at cost and adjusted
thereafter to recognize the Company’s share of the profit or loss and other comprehensive income. The Company’s
investments in associates and joint ventures are presented as stocks on the Consolidated Balance Sheets. The Company’s
proportionate share of the associate’s or joint venture’s earnings is recorded in net investment income in the Consolidated
Statements of Earnings.
Fair Value Measurement
The following is a description of the methodologies used to value instruments carried at fair value:
Bonds - FVTPL and FVOCI
Fair values for bonds measured as FVTPL or FVOCI are determined with reference to quoted market bid prices primarily
provided by third-party independent pricing sources. Where prices are not quoted in an active market, fair values are
determined by valuation models. The Company maximizes the use of observable inputs when measuring fair value. The
Company obtains quoted prices in active markets, when available, for identical assets at the balance sheet date to measure
bonds at fair value in its FVTPL and FVOCI portfolios.
The Company estimates the fair value of bonds not traded in active markets by referring to actively traded securities with
similar attributes, dealer quotations, matrix pricing methodology, discounted cash flow analyses and/or internal valuation
models. This methodology considers such factors as the issuer's industry, the security's rating, term, coupon rate and position
in the capital structure of the issuer, as well as yield curves, credit curves, prepayment rates and other relevant factors. For
bonds that are not traded in active markets, valuations are adjusted to reflect illiquidity, and such adjustments generally are
based on available market evidence. In the absence of such evidence, management's best estimate is used.
Mortgages - FVTPL and FVOCI
There are no market observable prices for mortgages; therefore fair values for mortgages are determined by discounting
expected future cash flows using current market rates for similar instruments. Valuation inputs typically include benchmark
yields and risk-adjusted spreads based on current lending activities and market activity.
Equity Release Mortgages - FVTPL
There are no market observable prices for equity release mortgages; therefore an internal valuation model is used for
discounting expected future cash flows and includes consideration of the embedded no negative equity guarantee. Inputs to
the model include market observable inputs such as benchmark yields and risk-adjusted spreads. Non-market observable
inputs include property growth and volatility rates, expected rates of voluntary redemptions, death, moving to long term care
and interest cessation assumptions and the value of the no negative equity guarantee.
Stocks - FVTPL and FVOCI
Fair values for stocks traded on an active market are generally determined by the last bid price for the security from the
exchange where it is principally traded. Fair values for stocks for which there is no active market are typically based upon
alternative valuation techniques such as discounted cash flow analysis, review of price movement relative to the market and
utilization of information provided by the underlying investment manager. The Company maximizes the use of observable
inputs when measuring fair value. The Company obtains quoted prices in active markets, when available, for identical assets at
the balance sheet date to measure stocks at fair value in its FVTPL and FVOCI portfolio.
Investment Properties
Fair values for investment properties are determined using independent qualified appraisal services and include management
adjustments for material changes in property cash flows, capital expenditures or general market conditions in the interim
period between appraisals. The determination of the fair value of investment property requires the use of estimates including
future cash flows (such as future leasing assumptions, rental rates, capital and operating expenditures) and discount,
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reversionary and overall capitalization rates applicable to the asset based on current market conditions. Investment property
under construction is valued at fair value if such values can be reliably determined; otherwise they are recorded at cost.
Net Investment Income Recognition
Interest income on bonds and mortgages is recognized and accrued using the effective interest method.
Dividend income is recognized when the right to receive payment is established. This is the ex-dividend date for listed stocks,
and usually the notification date or date when the shareholders have approved the dividend for private equity instruments.
Investment property income includes rents earned from tenants under lease agreements and property tax and operating cost
recoveries. Rental income leases with contractual rent increases and rent-free periods are recognized on a straight-line basis
over the term of the lease.
Derecognition
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On
derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum
of the consideration received and receivable is recognized in the Consolidated Statements of Earnings. In addition, on
derecognition of an investment in a debt instrument classified as FVOCI, the cumulative gain or loss previously accumulated is
reclassified to the Consolidated Statements of Earnings. On derecognition of stocks designated as FVOCI, the cumulative gain
or loss previously accumulated remains in equity.
Expected Credit Losses
Expected credit loss (ECL) allowances are recognized on all financial assets, except for financial assets classified or designated
as FVTPL and equity securities designated as FVOCI.
The ECL allowance is based on a probability-weighted estimate of credit losses expected as a result of defaults over the relevant
time period as prescribed under the ECL model, which is a three-stage impairment approach.
Stage 1
Performing financial assets that have not experienced a significant increase in credit risk since initial recognition or have low
credit risk are categorized into stage 1. A 12-month ECL allowance is calculated for stage 1 financial assets. To assess if credit
risk has increased significantly, the Company compares the risk of default at initial recognition to the risk as at the current
reporting date.
Stage 2
Performing financial assets that have experienced a significant increase in credit risk since initial recognition are categorized
into stage 2. A lifetime ECL allowance is calculated for stage 2 financial assets. Financial assets are assessed for a significant
increase in credit risk on an individual basis, utilizing the Company’s internal credit risk rating system and the monitoring of
timely payments on the assets. Financial assets that have contractual payments more than 30 days past due are generally
presumed to have experienced a significant increase in credit risk and are included in stage 2. A financial asset in stage 2 can
revert to stage 1 if the credit risk subsequently improves.
Stage 3
Impaired financial assets are categorized into stage 3 and require a lifetime ECL allowance. Financial assets are reviewed
regularly on an individual basis to determine impairment status. The Company considers various factors in the impairment
evaluation process, including, but not limited to, the financial condition of the issuer, specific adverse conditions affecting an
industry or region, decline in fair value not related to interest rates, bankruptcy or defaults, and delinquency in payments of
interest or principal. Financial assets are deemed to be impaired when there is objective evidence that timely collection of
future cash flows can no longer be reliably estimated. The fair value of a financial asset is not a definitive indicator of
impairment, as it may be significantly influenced by other factors including the remaining term to maturity and liquidity of the
asset; however, market price is taken into consideration when evaluating impairment.
The Company monitors all financial assets that are subject to impairment for significant increases in credit risk. In making this
assessment, the Company considers both quantitative and qualitative information that is reasonable and supportable,
including historical experience and forward-looking information that is available without undue cost or effort.
Modified Financial Assets
An existing financial asset whose terms have been modified may be derecognized and the renegotiated asset recognized as a
new financial asset at fair value in accordance with the Company’s accounting policies.
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If modification does not result in derecognition, the financial asset continues to be subject to the assessment for significant
increase in credit risk relative to initial recognition. Expected cash flows arising from the modified contractual terms are
considered when calculating the ECL for the modified asset. For loans that were modified while having lifetime ECLs, such
loans can revert to having 12-month ECLs if the borrower's financial condition improves.
Definition of Default
The definition of default used in the measurement of ECL is consistent with the definition used for the Company’s internal
credit risk management purposes. A financial asset is considered to be in default when the issuer is unlikely to meet its credit
obligations in full or when it is 90 days past due.
Securities Lending
The Company engages in securities lending through its securities custodians as lending agents. Loaned securities are not
derecognized, and continue to be reported within invested assets, as the Company retains substantial risks and rewards and
economic benefits related to the loaned securities.
(b)
Transaction Costs
Transaction costs are expensed as incurred for financial instruments classified as FVTPL. Transaction costs are capitalized for
all other classifications of financial instruments at acquisition, and taken into net earnings using the effective interest method
for fixed income instruments or when sold for equity instruments.
(c)
Cash and Cash Equivalents
Cash and cash equivalents comprise cash, current operating accounts, overnight bank and term deposits with maturities of
three months or less held for the purpose of meeting short-term cash requirements. Net payments in transit and overdraft bank
balances are included in other liabilities.
(d)
Trading Account Assets
Trading account assets include the portfolio investments of the Company's consolidated Collaterized Loan Obligations (CLOs),
sponsored funds, open ended investment companies and sponsored unit-trusts, which are carried at fair value based on the
net asset value of these funds. Investments in these assets are included in other assets on the Consolidated Balance Sheets with
realized and unrealized gains and losses reported in the Consolidated Statements of Earnings.
Each CLO is a special purpose vehicle that owns a portfolio of investments, consisting primarily of senior secured loans, and
issues various tranches of senior and subordinated notes to third parties for the purpose of financing the purchase of those
investments. Assets of the special purpose vehicle, the senior secured loans, are included in other assets and the associated
liabilities, the senior and subordinated notes issued to third parties, are included in other liabilities on the Consolidated
Balance Sheets.
(e)
Debentures and Other Debt Instruments and Capital Trust Securities
Debentures and other debt instruments and capital trust securities are initially recorded on the Consolidated Balance Sheets at
fair value and subsequently carried at amortized cost using the effective interest method with amortization expense recorded in
financing costs in the Consolidated Statements of Earnings. These liabilities are derecognized when the obligation is cancelled
or redeemed.
(f)
Other Assets and Other Liabilities
Other assets includes prepaid expenses, deferred acquisition costs, finance leases receivable, right-of-use assets and other
miscellaneous assets, which are measured at cost or amortized cost. Other assets also includes funds held under investment
contracts, which comprises of cash and cash equivalents, bonds, mortgages and other miscellaneous assets, which are
measured in accordance with the Company's corresponding accounting policies.
Other liabilities includes deferred income reserves, bank overdraft, lease liabilities and other miscellaneous liabilities, which
are measured at cost or amortized cost.
Other liabilities also include notes of consolidated CLOs, which are classified as FVTPL. Gains or losses are recognized in net
investment income in the Consolidated Statements of Earnings.
Provisions are recognized within other liabilities when the Company has a present obligation, either legal or constructive,
resulting from a past event, and in management's judgment, it is probable that an outflow of economic resources will be
required to settle the obligation and a reliable estimate can be made of the amount. The amount recognized for provisions are
management's best estimate at the balance sheet date. The Company recognizes a provision for restructuring when a detailed
formal plan for the restructuring has been established and that the plan has raised a valid expectation in those affected that the
restructuring will occur.
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Pension and other post-employment benefits also included within other assets and other liabilities are measured in
accordance with note 2(r).
(g)
Disposal Group Classified As Held For Sale and Discontinued Operations
Disposal groups are classified as held for sale when the carrying amount will be recovered through a sale transaction rather
than continuing use. The fair value of a disposal group is measured at the lower of its carrying amount and fair value less costs
to sell. Individual assets and liabilities in a disposal group not subject to these measurement requirements include financial
assets, investment properties and insurance contract liabilities. These assets and liabilities are measured in accordance with
the relevant accounting policies described for those assets and liabilities included in this note before the disposal group as a
whole is measured to the lower of its carrying amount and fair value less cost to sell. Any impairment loss for the disposal group
is recognized as a reduction to the carrying amount for the portion of the disposal group under the measurement requirements
for IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations.
Disposal group assets and liabilities classified as held for sale are presented separately on the Company’s Consolidated Balance
Sheets. Gains and losses from disposal groups held for sale are presented separately in the Company’s Consolidated
Statements of Earnings.
A disposal group qualifies as a discontinued operation if it is a component of an entity for which operations and cash flows can
be clearly distinguished from the rest of the Company, that either has been disposed of, or is classified as held for sale, and:
•
Represents a separate major line of business or geographical area of operations;
•
Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or
•
Is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs at the earlier of disposal and when the operation meets the criteria to be
classified as held for sale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount in net
earnings (loss) from discontinued operations in the Consolidated Statements of Earnings.
When an operation is classified as a discontinued operation, the comparative Consolidated Statements of Earnings is re-
presented as if the operation had been discontinued from the beginning of the comparative year.
(h)
Derivative Financial Instruments and Hedging
The Company uses derivative products as risk management instruments to hedge or manage asset, liability and capital
positions, including fee and investment income. The Company’s policy guidelines prohibit the use of derivative instruments for
speculative trading purposes.
The Company includes disclosure of the maximum credit risk, future credit exposure, credit risk equivalent and risk weighted
equivalent in note 30 as prescribed by the Office of the Superintendent of Financial Institutions (OSFI) in Canada.
All derivatives including those that are embedded in financial and non-financial contracts that are not closely related to the
host contracts are recorded at fair value on the Consolidated Balance Sheets. The method of recognizing unrealized and
realized fair value gains and losses depends on whether the derivatives are designated as hedging instruments. For derivatives
that are not designated as hedging instruments, unrealized and realized gains and losses are recorded within the net
investment result in the Consolidated Statements of Earnings. For derivatives designated as hedging instruments, unrealized
and realized gains and losses are recognized according to the nature of the hedged item.
Derivatives are valued using market transactions and other market evidence whenever possible, including market based inputs
to models, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When
models are used, the selection of a particular model to value a derivative depends on the contractual terms of, and specific risks
inherent in, the instrument, as well as the availability of pricing information in the market. The Company generally uses similar
models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices
and rates, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs.
As permitted under IFRS 9, the Company has elected to continue to apply the hedge accounting principles under IAS 39,
Financial Instruments, instead of those under IFRS 9. To qualify for hedge accounting, the relationship between the hedged
item and the hedging instrument must meet several strict conditions on documentation, probability of occurrence, hedge
effectiveness and reliability of measurement. If these conditions are not met, the relationship does not qualify for hedge
accounting treatment and both the hedged item and the hedging instrument are reported independently as if there was no
hedging relationship.
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Notes to the Consolidated Financial Statements
Where a hedging relationship exists, the Company documents all relationships between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedge transactions. This process includes
linking derivatives that are used in hedging transactions to specific assets and liabilities on the Consolidated Balance Sheets or
to specific firm commitments or forecasted transactions. The Company also assesses, both at the hedge’s inception and on an
ongoing basis, whether derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash
flows of hedged items. Hedge effectiveness is reviewed quarterly through correlation testing. Hedge accounting is discontinued
when the hedging no longer qualifies for hedge accounting.
Derivatives Not Designated as Hedges for Accounting Purposes
For derivative investments not designated as accounting hedges, changes in fair value are recorded in the net investment
result.
Fair Value Hedges
For fair value hedges, changes in fair value of both the hedging instrument and the hedged risk are recorded in the net
investment result and consequently any ineffective portion of the hedge is recorded immediately in the net investment result.
The Company currently uses foreign exchange forward contracts designated as fair value hedges.
Cash Flow Hedges
For cash flow hedges, the effective portion of the changes in fair value of the hedging instrument is recorded in the same
manner as the hedged item while the ineffective portion is recognized immediately in the net investment result. Gains and
losses that accumulate in other comprehensive income are recorded in the net investment result in the same period the
hedged item affects net earnings. Gains and losses on cash flow hedges are immediately reclassified from other comprehensive
income to the net investment result if and when it is probable that a forecasted transaction is no longer expected to occur.
The Company currently uses interest rate swaps, cross-currency swaps and equity total return swaps designated as cash flow
hedges.
Net Investment Hedges
For net investment hedges, the effective portion of changes in the fair value of the hedging instrument are recorded in other
comprehensive income while the ineffective portion is recognized immediately in the net investment result. The unrealized
foreign exchange gains (losses) on the instruments are recorded within accumulated other comprehensive income and will be
reclassified into net earnings when the Company disposes of the foreign operation.
The Company currently uses cross-currency swaps, foreign exchange forward contracts, and debt instruments designated as
net investment hedges.
(i)
Foreign Currency Translation
The Company operates with multiple functional currencies. The Company’s consolidated financial statements are presented in
Canadian dollars as this presentation is most meaningful to financial statement users. For those subsidiaries with different
functional currencies, exchange rate differences arising from the translation of monetary items that form part of the net
investment in the foreign operation are recorded in unrealized foreign exchange gains (losses) on translation of foreign
operations in other comprehensive income.
For the purpose of presenting consolidated financial statements, assets and liabilities are translated into Canadian dollars at
the rate of exchange prevailing at the balance sheet dates and all income and expense items are translated at an average of daily
rates. Unrealized foreign currency translation gains and losses on translation of the Company’s net investment in its foreign
operations are presented separately as a component of other comprehensive income. Unrealized gains and losses will be
recognized proportionately within the Consolidated Statements of Earnings when there has been a disposal of the investment
in the foreign operations.
Foreign currency translation gains and losses on foreign currency transactions of the Company are included in the net
investment result.
(j)
Business Combinations, Goodwill and Intangible Assets
Business combinations are accounted for using the acquisition method. The Company identifies and classifies, in accordance
with the Company’s accounting policies, all assets acquired and liabilities assumed as at the acquisition date. Goodwill
represents the excess of purchase consideration over the fair value of net assets of the acquired subsidiaries of the Company.
Following initial recognition, goodwill is measured at cost less accumulated impairment losses.
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Notes to the Consolidated Financial Statements
Intangible assets represent finite life and indefinite life intangible assets of acquired subsidiaries of the Company and software
acquired or internally developed by the Company. Finite life intangible assets include the value of technology/software, certain
brands and trademarks, certain customer contracts and distribution channels. These finite life intangible assets are amortized
over their estimated useful lives, typically ranging between 3 and 30 years.
Indefinite life intangible assets include brands and trademarks, certain customer contracts and the shareholders' portion of
acquired future participating account profits. Amounts are classified as indefinite life intangible assets when, based on an
analysis of all the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net
cash inflows for the Company. The identification of indefinite life intangible assets is made by reference to relevant factors such
as product life cycles, potential obsolescence, industry stability and competitive position. Following initial recognition,
indefinite life intangible assets are measured at cost less accumulated impairment losses.
Impairment Testing
Goodwill and indefinite life intangible assets, including those resulting from an acquisition during the year, are tested for
impairment annually or more frequently if events indicate that impairment may have occurred. Intangible assets that were
previously impaired are reviewed at each reporting date for evidence of reversal. In the event that certain conditions have been
met, the Company would be required to reverse the impairment loss or a portion thereof.
Goodwill has been allocated to cash generating unit groupings, representing the lowest level that the assets are monitored for
internal reporting purposes. Goodwill is tested for impairment by comparing the carrying value of each cash generating unit
grouping to its recoverable amount. An impairment loss is recognized for the amount by which the asset's carrying amount
exceeds its recoverable amount.
Intangible assets have been allocated to cash generating units, representing the lowest level that the assets are monitored for
internal reporting purposes.
Intangible assets with an indefinite useful life are reviewed annually to determine if there are indicators of impairment. If
indicators of impairment have been identified, a test for impairment is performed and recognized as necessary. Impairment is
assessed by comparing the carrying values of the assets to their recoverable amounts. An impairment loss is recognized for the
amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of the asset’s fair value less costs of disposal and value-in-use.
Finite life intangible assets are reviewed annually to determine if there are indicators of impairment and assess whether the
amortization periods and methods are appropriate. If indicators of impairment have been identified, a test for impairment is
performed and then the amortization of these assets is adjusted or impairment is recognized as necessary.
(k)
Fee and Other Income Recognition
Fee income includes fees earned from management of investment contracts on account of segregated fund policyholders,
proprietary mutual fund assets, record-keeping, fees earned on administrative services only Group health contracts,
commissions and fees earned from management services. Fee and other income is recognized on the transfer of services to
customers for the amount that reflects the consideration expected to be received in exchange for those services promised.
The Company has sub-advisor arrangements where the Company retains the primary obligation with the client; as a result, fee
income earned is reported on a gross basis with the corresponding sub-advisor expense recorded in operating and
administrative expenses.
(l)
Owner Occupied Properties and Fixed Assets
Property held for own use and fixed assets are carried at cost less accumulated depreciation, disposals and impairments.
Depreciation is expensed over the estimated useful lives of the assets, using the straight-line method, on the following bases:
Owner occupied properties
15 - 20 years
Furniture and fixtures
5 - 10 years
Other fixed assets
3 - 10 years
Depreciation methods, useful lives and residual values are reviewed at least annually and adjusted if necessary.
(m) Deferred Acquisition Costs
Included in other assets are deferred acquisition costs related to investment contracts and service contracts. These are
recognized as assets if the costs are incremental and incurred due to the contract being issued and are primarily amortized on a
straight-line basis over the term of the contract, not to exceed 20 years.
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Notes to the Consolidated Financial Statements
(n)
Segregated Funds
Segregated fund assets and liabilities arise from contracts where all financial risks associated with the related assets are borne
by policyholders and are presented separately on the Consolidated Balance Sheets. The assets and liabilities are set equal to the
fair value of the underlying asset portfolio. Segregated fund contacts are classified as insurance contracts or investment
contracts following the classification criteria described in the accounting policy for Insurance Contracts, Investment Contracts
and Reinsurance Contracts Held. Investment income and changes in fair value of the segregated fund assets are offset by a
corresponding change in the segregated fund liabilities. The Company accounts for guarantees on its segregated fund products
within insurance contract liabilities on the Consolidated Balance Sheets.
(o)
Insurance Contracts, Investment Contracts and Reinsurance Contracts Held
Contract Classification
Insurance Contracts
The Company identifies insurance contracts as arrangements where the Company accepts significant insurance risk from
another party (the policyholder) by agreeing to compensate the policyholder or beneficiary of the contract for specified
uncertain future events that adversely affect the policyholder and whose amount and timing is unknown.
The Company determines whether a contract contains significant insurance risk by assessing if an insured event could cause
the Company to pay to the policyholder additional amounts that are significant in any single scenario with commercial
substance even if the insured event is extremely unlikely or the expected present value of the contingent cash flows is a small
proportion of the expected present value of the remaining cash flows from the insurance contract. In making this assessment,
the Company considers all its substantive rights and obligations, whether they arise from contract, law or regulation.
When the Company issues insurance contracts to compensate another entity for claims arising from one or more insurance
contracts issued by that other entity, the associated contracts are reinsurance contracts issued which is part of insurance
contracts issued.
Investment Contracts
In the absence of significant insurance risk, the Company classifies contracts as investment contracts or service contracts.
Investment contracts with discretionary participating features are accounted for in accordance with IFRS 17 and investment
contracts without discretionary participating features are accounted for in accordance with IFRS 9. The Company has not
classified any contracts as investment contracts with discretionary participating features.
Investment contracts may be reclassified as insurance contracts after inception if insurance risk becomes significant. A contract
that is classified as an insurance contract at contract inception remains as such until all rights and obligations under the
contract are extinguished or expire. Investment contracts are contracts that carry financial risk, which is the risk of a possible
future change in one or more of the following: interest rate, commodity price, foreign exchange rate, or credit rating. Refer to
note 7 for discussion of risk management.
Investment contracts are measured at FVTPL in order to eliminate or significantly reduce an accounting mismatch that would
otherwise arise from measuring the assets that back the contract on different bases.
Reinsurance Contracts Held
The Company enters into arrangements to transfer insurance risk, along with the respective premiums, to one or more
reinsurers who will share the risks. To the extent that assuming reinsurers are unable to meet their obligations, the Company
remains liable to its policyholders for the portion reinsured. Contracts of this nature are defined as reinsurance contracts held.
Separating Components from Insurance and Reinsurance Contracts
At inception, the Company separates the following components from an insurance or reinsurance contract held and accounts
for them as if they were stand-alone financial instruments:
•
Derivatives embedded in the contract which have economic characteristics and risks that are not closely related to those of
the host contract, and which have terms that would not meet the definition of an insurance or reinsurance contract held as
a stand-alone instrument; and
•
Distinct investment components: investment components that are not highly inter-related with the insurance components
and for which contracts with equivalent terms are sold, or could be sold, separately in the same market or the same
jurisdiction.
After separating any financial instrument components, the Company separates any promises to transfer distinct goods or non-
insurance services to policyholders and accounts for them as separate contracts with customers. A good or service is distinct if
the policyholder can benefit from it either on its own or with other resources that are readily available to the policyholder. A
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Notes to the Consolidated Financial Statements
good or service is not distinct and is accounted for together with the insurance component if the cash flows and risks associated
with the good or service are highly inter-related with the cash flows and risks associated with the insurance component, and
the Company provides a significant service of integrating the good or service with the insurance component.
Level of Aggregation
The Company determines its level of aggregation for the insurance contracts issued by dividing the business written into
portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. The Company has defined
portfolios of insurance contracts issued based on its product lines. Portfolios are further disaggregated into groups of contracts
that are issued within an annual period (typically a financial year) and are further divided into onerous contracts, contracts that
have no significant possibility of becoming onerous subsequently, and all other profitable contracts. An insurance contract is
onerous if, at the date of initial recognition, the estimated fulfillment cash flow expectations determined on a probability-
weighted basis is a net outflow. The Company’s evaluation of whether contracts are onerous is based on reasonable and
supportable information. The Company has not identified any groups of insurance contracts that have no significant possibility
of becoming onerous subsequently.
In determining groups of contracts, the Company has elected to include in the same group contracts where its ability to set
prices or levels of benefits for policyholders with different characteristics is constrained by regulation. Contracts are aggregated
into groups once they have been initially recognized.
The Company has defined portfolios of reinsurance contracts held based on the portfolios of the underlying insurance
contracts issued. Groups of reinsurance contracts held that are entered into within an annual period (typically a financial year)
are divided based on whether they are in a net gain or net loss position at initial recognition.
Some reinsurance contracts held provide cover for underlying contracts that are included in different groups. However, these
contracts’ legal form of a single contract reflects the substance of the Company’s contractual rights and obligations, considering
that the different remaining coverages lapse together and are not sold separately. As a result, the reinsurance contract held is
not separated into multiple insurance components that relate to different underlying groups.
Initial Recognition
The Company recognizes a group of insurance contracts that it issues from the earliest of:
•
The beginning of the coverage period of the group of contracts;
•
The date when the first payment from a policyholder in the group becomes due or when the first payment is received if
there is no due date; and
•
For a group of onerous contracts, when the group becomes onerous if facts and circumstances indicate there is such a
group.
A group of reinsurance contracts held is recognized on the following date:
•
Reinsurance contracts held initiated by the Company that provide proportionate coverage: the date on which any
underlying insurance contract is initially recognized;
•
Other reinsurance contracts held initiated by the Company: the beginning of the coverage period of the group of
reinsurance contracts. However, if the Company recognizes an onerous group of underlying insurance contracts on an
earlier date and the related reinsurance contract held was entered into before that earlier date, then the group of
reinsurance contracts held is recognized on that earlier date; and
•
Reinsurance contracts held that are acquired by the Company: the date of acquisition.
Contract Boundaries
The Company includes in the measurement of a group of insurance and reinsurance contracts held all the future cash flows
within the boundary of each contract in the group. Cash flows are within the boundary of a contract if they arise from
substantive rights and obligations that exist during the reporting period in which the Company can compel the policyholder to
pay the premiums (or is compelled to pay amounts to a reinsurer), or in which the Company has a substantive obligation to
provide the policyholder with services (or receive services from a reinsurer). A substantive obligation to provide services ends
when:
•
The Company has the practical ability to reassess the risks of the particular policyholder and, as a result, can set a price or
level of benefits that fully reflects those risks, or
•
Both the following criteria are satisfied:
•
The Company has the practical ability to reassess the risks of the portfolio of insurance contracts that contain the
contract and, as a result, can set a price or level of benefits that fully reflects the risk of that portfolio; and
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Notes to the Consolidated Financial Statements
•
The pricing of the premiums for coverage up to the date when the risks are reassessed does not take into account the
risks that relate to periods after the reassessment date.
For reinsurance contracts held, a substantive obligation to receive services ends when the reinsurer has the practical ability to
reassess the risk transferred to it and, as a result, can set a price or level of benefits that fully reflects those risks, or the reinsurer
has the substantive right to terminate the coverage.
For insurance contracts with renewal periods, the Company assesses whether premiums and related cash flows that arise from
the renewed contract are within the contract boundary. The pricing of renewals is established by the Company after
considering the risks and terms of coverage for the policyholder, with reference to the pricing of contracts with equivalent risks
and terms on the renewal dates. The Company reassesses the contract boundary of each group at the end of each reporting
period.
Liabilities or assets relating to expected premiums or claims outside the boundary of the insurance contract are not recognized
as these amounts relate to future insurance contracts.
Measurement of Insurance Contracts
There are three measurement models provided by IFRS 17 to measure insurance contracts:
•
The General Measurement Model (GMM);
•
The Variable Fee Approach (VFA); and
•
The Premium Allocation Approach (PAA).
The General Measurement Model
The Company applies this model to its medium to long-term insurance products, such as individual protection, payout
annuities, and longevity swaps.
Initial Measurement
On initial recognition, the Company measures a group of insurance contracts as the total of the fulfillment cash flows, and the
contractual service margin (CSM).
Fulfillment Cash Flows
Fulfillment cash flows comprise probability-weighted estimates of future cash flows, discounted to reflect the time value of
money and the associated financial risks, plus a risk adjustment for non-financial risk.
The Company estimates future contractual cash flows within the contracts’ boundary by considering evidence from current
and past conditions, as well as possible future conditions to reflect market and non-market variables impacting the valuation of
cash flows. The estimates of these cash flows are based on probability-weighted expected values that reflect the average of a full
range of possible outcomes and includes an explicit risk adjustment for non-financial risk. The risk adjustment is the
compensation the Company receives in fulfilling an insurance contract that arises from uncertainties surrounding the amount
and timing of cash flows for non-financial risks. The non-financial risk assumptions are mortality, longevity, morbidity, lapse,
and expense. Estimates and assumptions are reviewed periodically for appropriateness in reflecting current, past, and future
conditions.
When estimating fulfillment cash flows, the Company includes all cash flows that are within the contract boundary including:
•
Premiums and related cashflows;
•
Claims and benefits, including reported claims not yet paid, incurred claims not yet reported and expected future claims;
•
Premium and other transaction-based taxes and cash flows from loans to policyholders;
•
Insurance acquisition cash flows which are allocated to groups of contracts on a systematic and rational basis;
•
Other fixed and variable expenses directly attributable to the fulfillment of insurance contracts;
•
Investment expenses incurred in investment activities related to underlying items such as universal life funds and
segregated fund account balances; and
•
The impact of funds withheld for reinsurance contracts issued to manage credit risk.
Contractual Service Margin
The CSM of a group of insurance contracts represents the unearned profit that the Company expects to recognize in the future
as it provides services under those contracts.
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Notes to the Consolidated Financial Statements
On initial recognition of a group of insurance contracts, if the total of the fulfillment cash flows, any derecognized assets for
insurance acquisition cash flows, and any cash flows arising at that date is a net inflow, the group of contracts is non-onerous.
In this case, the CSM is measured as the equal and opposite amount of the net inflow, which results in no net income or
expenses arising on initial recognition.
Discount Rates
The Company measures time value of money using discount rates that are consistent with observable market prices and reflect
the liquidity characteristics of the insurance contracts. They exclude the effect of factors that influence such observable market
prices but do not affect the future cash flows of the insurance contracts (e.g., credit risk).
The Company applies the top-down approach for insurance contract liabilities with backing assets. Under this approach,
discount rates are estimated by starting from the yield curve implied in a reference portfolio of assets that closely reflects the
duration, currency, and liquidity characteristics of the insurance cash flows, and then excluding the effects of risks (e.g., credit
risk) present in the cash flows from the financial instruments that are part of the reference portfolio, but not in the insurance
contracts cash flows. The allowance for credit risk in the discount rate varies depending on the credit rating, sector and term of
the assets reflected in the discount rate. The allowance is estimated based on historic credit experience and prevailing market
conditions. For example, if there is a significant widening of market credit spreads, an additional allowance for credit risk to
reduce the discount rate may be required to reflect prevailing market conditions. The Company uses the fixed-income assets
supporting the insurance contract liabilities as the reference portfolio to determine the discount rates, in the observable period,
while the discount rates in the unobservable period are based on an ultimate investment rate. In situations where the fixed-
income assets supporting the insurance contract liabilities do not appropriately reflect the illiquidity characteristics of the
liability, an additional adjustment is made to the discount rate.
In cases where there are no backing assets, the Company applies the bottom-up approach to set the discount rate. This
approach uses a risk-free rate, plus a spread to reflect the liquidity characteristics of the liability. Risk-free rates are determined
by reference to highly liquid government securities in the currency of the insurance contract liability, and the spread is derived
from an external benchmark.
Risk Adjustment
The risk adjustment for non-financial risk represents the compensation that the Company requires for bearing uncertainty in
the amount and timing of insurance contract cash flows due to non-financial risk. Non-financial risks are insurance risks such
as life mortality, annuity mortality and morbidity, and other risks such as expense and lapse. The risk adjustment is calculated
by applying a margin to non-financial assumptions and discounting the resulting margin cash flows at the same discount rates
as the best estimate cash flows. The margins applied reflect diversification benefits across all non-financial risks. The
Company’s target range for the confidence level of the risk adjustment is between the 85th and 90th percentile, and the risk
adjustment is currently within the target range. The confidence level is determined on a net-of-reinsurance basis.
Insurance Acquisition Cash Flows
Insurance acquisition cash flows arise from selling and underwriting activities required to initiate a group of contracts.
Any assets or liabilities for insurance acquisition cash flows recognized before the corresponding insurance contracts are
recognized and included in the carrying amount of the related groups of insurance contracts issued. Judgments are applied by
management to determine which costs are directly attributable to the issuance of a group of contracts and the portion of those
costs that are allocated to groups of contracts arising from expected renewals.
The asset for insurance acquisition cash flows is tested for impairment annually or more frequently if facts and circumstances
indicate that impairment may have occurred. In testing for impairment, the carrying value of the asset is compared to the
expected net cash inflow for the related group of insurance contracts.
Additionally, if a portion of the asset for insurance acquisition cash flows has been allocated to future renewals of the related
group of contracts, the carrying value of the asset is compared to the expected net cash inflow for those expected renewals. If
the carrying value exceeds the expected net cash inflows described above, a loss is recognized in the insurance service result. In
the event that facts and circumstances indicate the asset for insurance acquisition cash flows is no longer impaired, the
impairment loss, or a portion thereof, is reversed.
Subsequent Measurement
The carrying amount of a group of insurance contracts at each reporting date is the sum of the liability for remaining coverage
and the liability for incurred claims.
•
The liability for remaining coverage comprises the fulfillment cash flows that relate to services that will be provided under
the contracts in future periods and any remaining CSM at that date.
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Notes to the Consolidated Financial Statements
•
The liability for incurred claims comprises the fulfillment cash flows for incurred claims and expenses that have not yet
been paid, including claims that have been incurred but not yet reported.
The fulfillment cash flows for groups of insurance contracts are measured at the reporting date using current estimates of
future cash flows, current discount rates, and current estimates of risk adjustment for non-financial risk.
For a group of insurance contracts, the carrying amount of the CSM of the group at the end of the reporting period equals the
carrying amount at the start of the reporting period, adjusted for:
•
The CSM of any new contracts that are added to the group in the period;
•
Interest accreted on the carrying amount of the CSM during the period, measured at the discount rates on nominal cash
flows that do not vary based on the returns on any underlying items determined on initial recognition;
•
The changes in fulfillment cash flows that relate to future services (measured using initial recognition discount rates),
except to the extent that:
•
Any increases in the fulfillment cash flows that exceed the carrying amount of the CSM, in which case the excess is
recognized as a loss in the Consolidated Statements of Earnings and creates a loss component; or
•
Any decreases in the fulfillment cash flows are allocated to the loss component, reversing losses previously recognized
in the Consolidated Statements of Earnings.
•
The effect of any currency exchange differences on the CSM; and
•
The amount recognized as insurance revenue because of the services provided in the period.
The changes in fulfillment cash flows that relate to future services that adjust the CSM comprise of:
•
Experience adjustments arising from premium and premium related cash flows received in the period that relate to future
services;
•
Changes in both estimates of the present value of future cash flows and risk adjustment in the liability for remaining
coverage, measured at the discount rates determined on initial recognition, except for those that relate to the effects of the
time value of money and financial risk changes; and
•
Differences between any investment components not separated from the contract expected to become payable in the
period (after allowing for financial experience variance) and the actual investment component that becomes payable in
the period, measured at the discount rates determined on initial recognition.
Changes in expected future discretionary cash flows are regarded as an assumption relating to future services and accordingly
adjust the CSM.
Changes in fulfillment cash flows that relate to current or past service are recognized in the Consolidated Statements of
Earnings as part of the insurance service result. Changes that relate to the effects of the time value of money and financial risk
are recognized in insurance finance income or expenses.
The Variable Fee Approach
The Company applies this model to contracts with direct participating features such as participating insurance and segregated
fund business with insurance guarantees, where an investment return is provided to the policyholder based on a defined pool
of items (e.g., a portfolio of assets).
Recognition
The Company will recognize an insurance contract under the VFA if it meets all of the following conditions at initial
recognition:
•
The policyholder participates in a share of a clearly identified pool of underlying items;
•
The Company expects to pay the policyholder an amount equal to a substantial share of the returns from the underlying
items; and
•
The substantial proportion of the cash flows the Company expects to pay to the policyholder is expected to vary with cash
flows from the underlying items.
The Company performs the test for VFA qualification at initial recognition.
Initial Measurement
Similar to the GMM, the VFA initially measures the insurance contract liabilities as the fulfillment cash flows plus CSM.
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Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Subsequent Measurement
For a group of insurance contracts applying the VFA, the carrying amount of the CSM of the group at the end of the reporting
period equals the carrying amount at the beginning of the reporting period adjusted for the following:
•
The effect of any new contracts added to the group;
•
The Company’s share of the change in the fair value of the underlying items, except to the extent that:
•
The Company has a previously documented risk-management objective and strategy for using derivatives to mitigate
financial risk arising from the insurance contracts, as it does for the insured assets contracts;
•
The Company’s share of a decrease in the fair value of the underlying items exceeds the carrying amount of the
contractual service margin, giving rise to a loss; or
•
The Company’s share of an increase in the fair value of the underlying items reverses the amount previously
recognized as a loss.
•
The changes in fulfillment cash flows, relating to future service, except to the extent that:
•
The Company has a previously documented risk-management objective and strategy for using derivatives to mitigate
financial risk arising from the insurance contracts, as it does for insured assets contracts;
•
Such increases in the fulfillment cash flows exceed the carrying amount of the contractual service margin, giving rise
to a loss; or
•
Such decreases in the fulfillment cash flows are allocated to the loss component of the liability for remaining coverage.
•
The effect of any currency exchange differences on the CSM; and
•
The amount recognized as insurance revenue because of the services provided in the period.
Risk Mitigation
The Company mitigates the financial risks created by guarantees embedded in some of their insurance contracts with direct
participation features through the use of derivatives and reinsurance contracts held. The derivatives are in the scope of IFRS 9
with changes in their fair value reflected in the Consolidated Statements of Earnings. In applying risk mitigation, the financial
impact on the guarantees embedded in these direct participating contracts do not adjust the CSM and are also reflected in the
Consolidated Statements of Earnings.
Premium Allocation Approach
The Company applies this model to its short-term insurance products, such as group life and health.
Recognition
Contracts with Coverage Periods of One Year or Less
The Company applies the PAA to measure the liability for remaining coverage of insurance contracts with coverage periods of
one year or less.
Contracts with Coverage Periods of More than One Year
The Company applies the PAA to contracts with coverage periods longer than one year that are relatively stable and have low
variability in fulfillment cash flows. The low variability in fulfillment cash flows indicates there is no material difference in the
liability for remaining coverage measured under the PAA as compared to the GMM. Generally, this applies to products with
rate guarantees between 2 and 5 years.
New groups of insurance contracts are assessed to determine whether they can be measured using the PAA at initial
recognition.
The eligibility test for the PAA model will not be subsequently performed after initial recognition unless there are substantial
changes to the terms of the groups of insurance contracts.
Measurement
Initial Measurement of the Liability for Remaining Coverage
On initial recognition, the liability for remaining coverage is initially measured as the premiums received in the period minus
any insurance acquisition cash flows not expensed, plus or minus any amount caused by the derecognition of an acquisition
cash flow asset or liability which represents any acquisition costs that were paid before the contracts were recognized.
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Notes to the Consolidated Financial Statements
Insurance acquisition costs are included as fulfillment cash flows of the liability and are allocated over the contract boundary
on a straight-line basis. For contracts with expected future renewals, a portion of the acquisition costs are capitalized as an
asset and deferred until the future contract renewals are recognized.
The fulfillment cash flows of contracts with coverage periods of more than one year are discounted to reflect the impact of
financial risk on the contract. The discount rates used reflect the characteristics of the contract cash flows. For contracts where
premiums are received within one year of the coverage period, the Company has elected not to adjust the liability for the time
value of money.
Subsequent Measurement
At the end of each reporting period, the Company measures the liability for remaining coverage for contracts under the PAA as
the carrying amount of the liability for remaining coverage at the beginning of the period, adjusted for the following:
•
Add the premiums received in the period;
•
Less any insurance acquisition cash flows during the period not directly expensed;
•
Add the amortization of acquisition cash flows, plus any adjustments to a financing component;
•
Less the amount recognized as insurance revenue for the coverage provided in the period; and
•
Less any investment components paid or transferred to the liability for incurred claims.
If circumstances indicate that a contract under the PAA model has become onerous, a loss is immediately recognized in the
Consolidated Statements of Earnings, and a separate component of the liability for remaining coverage is created to record this
loss component. The loss is measured as the difference between the fulfillment cash flows that relate to the remaining coverage
of the group and the current carrying amount of the liability for remaining coverage using the measurement described above.
The liability for incurred claims is measured under the same approach as the GMM, which is the fulfillment cash flows related
to incurred claims. When claims are expected to be settled less than one year after being incurred, the Company has elected not
to discount the liability for incurred claims.
Measurement of Reinsurance Contracts Held
The General Measurement Model
The accounting policies used to measure a group of insurance contracts under the GMM apply to the measurement of a group
of reinsurance contracts held, with the following modifications:
•
The carrying amount of a group of reinsurance contracts held at each reporting date is the sum of the remaining coverage
component and the incurred claims component. The remaining coverage component comprises:
•
The fulfillment cash flows that relate to services that will be received under the contracts in future periods; and
•
Any remaining CSM at that date.
The Company measures the estimates of the present value of future cash flows using assumptions that are consistent with
those used to measure the estimates of the present value of future cash flows for the underlying insurance contracts, with an
adjustment for any risk of non-performance by the reinsurer. The effect of the non-performance risk of the reinsurer is assessed
at each reporting date and the effect of changes in the non-performance risk is recognized in the Consolidated Statements of
Earnings.
The risk adjustment for non-financial risk is the amount of the risk transferred by the Company to the reinsurer.
On initial recognition, the CSM of a group of reinsurance contracts held represents a net cost or net gain on purchasing
reinsurance. It is measured as the equal and opposite amount of the total of the fulfillment cash flows, any derecognized assets
for cash flows occurring before the recognition of the group, any cash flows arising at that date and any income recognized in
the Consolidated Statements of Earnings because of onerous underlying contracts recognized at that date. However, if any net
cost on purchasing reinsurance coverage relates to insured events that occurred before the purchase of the group, then the
Company recognizes the cost immediately in the Consolidated Statements of Earnings as an expense.
The Company adjusts the carrying amount of the CSM of a group of reinsurance contracts held at the end of a reporting period
to reflect changes in the fulfillment cash flows applying the same approach as for insurance contracts issued, except when the
underlying contract is onerous and the change in the fulfillment cash flows for underlying insurance contracts is recognized in
profit or loss by adjusting the loss component. The respective changes in reinsurance contracts held is also recognized in profit
and loss (adjusting the loss recovery component).
Funds withheld under reinsurance contracts held to manage credit risk are included in the carrying amount of the reinsurance
contracts held asset.
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Notes to the Consolidated Financial Statements
The Premium Allocation Approach
The Company holds reinsurance contracts with the direct insurance contracts it issues. The reinsurance contracts held that are
eligible for the PAA and have underlying direct contracts measured under the PAA are also classified and measured under the
PAA.
Onerous Underlying Insurance Contracts
The Company adjusts the CSM of the group to which a reinsurance contract held belongs and as a result recognizes income
when it recognizes a loss on initial recognition of onerous underlying contracts, if the reinsurance contract held is entered into
before or at the same time as the onerous underlying contracts are recognized. The adjustment to the CSM is determined by
multiplying:
•
The amount of the loss that relates to the underlying contracts; and
•
The percentage of claims on the underlying contracts that the Company expects to recover from the reinsurance contracts
held.
For reinsurance contracts held that are acquired by the Company in a transfer of contracts or a business combination covering
onerous underlying contracts, the adjustment to the CSM is determined by multiplying:
•
The amount of the loss component that relates to the underlying contracts at the date of acquisition; and
•
The percentage of claims on the underlying contracts that the Company expects at the date of acquisition to recover from
the reinsurance contracts held.
A loss recovery component is created or adjusted for the group of reinsurance contracts held to depict the adjustment to the
CSM, which determines the amounts that are subsequently presented in the Consolidated Statements of Earnings as reversals
of recoveries of losses from the reinsurance contracts held and are excluded from the allocation of reinsurance premiums paid
in the net expense from reinsurance contracts held.
Measurement of Investment Contracts
Investment contracts are recognized when the Company becomes a party to the contractual provisions of the contract. At
recognition, the Company measures an investment contract at its fair value. Transaction costs that are incremental and directly
attributable to the acquisition or issue of the investment contract are expensed as incurred.
When the fair value of the investment contract differs from the transaction price on initial recognition, the Company recognizes
the difference as follows:
•
When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e., a Level 1 input)
or based on a valuation technique that uses only data from observable markets, the difference is recognized as a gain or
loss.
•
In all other cases, the difference is deferred, and the timing of recognition of deferred day one profit or loss is determined
individually. It is either amortized over the life of the instrument, deferred until the instrument’s fair value can be
determined using market observable inputs or realized through settlement.
Investment contracts are subsequently measured at FVTPL where the fair value is set to the higher of the market value of the
assets supporting the liability balance and the result of discounting risk-adjusted cash flows using rates derived from a
reference portfolio or stochastic modeling. The Company’s main valuation techniques incorporate all factors that market
participants would consider and make maximum use of observable market data.
Coverage Units
Amortization of the Contractual Service Margin
The CSM is a component of the group of insurance contracts that represents the unearned profit the Company will recognize as
it provides services in the future. An amount of the CSM for a group of insurance contracts is recognized in the Consolidated
Statements of Earnings as insurance revenue in each period to reflect the services provided under the group of insurance
contracts in that period. The amount that is recognized in the Consolidated Statements of Earnings for the current period is
determined by identifying the coverage units in the group, allocating the CSM at the end of the period to each coverage unit
provided in the current period and expected to be provided in the future periods.
The number of coverage units in a group is the quantity of coverage provided by the contracts in the group, which is
determined by considering the quantity of the benefits provided and the expected coverage duration.
For reinsurance contracts issued, the number of coverage units in a group reflects the expected pattern of underwriting of the
underlying contracts because the level of service provided depends on the number of underlying contracts in-force.
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Notes to the Consolidated Financial Statements
For reinsurance contracts held, the CSM amortization is similar to the reinsurance contracts issued and reflects the expected
pattern of underwriting of the underlying contracts because the level of service provided depends on the number of underlying
contracts in-force.
Insurance Revenue
The Company’s insurance revenue depicts the provision of services arising from a group of insurance contracts at an amount
that reflects the consideration to which the Company expects to be entitled in exchange for those services. Insurance revenue
from a group of insurance contracts is therefore the relevant portion for the period of the total consideration for the contracts,
(i.e., the amount of premiums paid to the Company adjusted for financing effect (the time value of money) and excluding any
investment components).
Insurance Finance Income or Expenses
Insurance finance income or expenses comprise the change in the carrying amount of the group of insurance contracts arising
from:
•
The effect of the time value of money and changes in the time value of money; and
•
The effect of financial risk and changes in financial risk.
The Company has elected to recognize insurance finance income or expenses in the Consolidated Statements of Earnings.
Net Income or Expense from Reinsurance Contracts Held
The Company presents separately in the Consolidated Statements of Earnings the amounts expected to be recovered from
reinsurers, and an allocation of the reinsurance premiums paid. The Company treats reinsurance cash flows that are
contingent on claims on the underlying contracts as part of the claims that are expected to be reimbursed under the
reinsurance contract held, and excludes investment components and commissions from an allocation of reinsurance
premiums presented in the Consolidated Statements of Earnings. Amounts relating to the recovery of losses relating to
reinsurance of onerous direct contracts are included as amounts recoverable from the reinsurer.
Contract Modifications and Derecognition
Contract Modifications
When the terms of insurance contracts are modified, the Company assesses whether the modification is substantial enough to
lead to the derecognition of the original contract and recognition of a new modified contract as if it was entered for the first
time. If the contract modification does not lead to a re-recognition of the contract, then the effect of the modification is treated
as a change in the estimates of fulfillment cash flows which is recorded as an experience adjustment to the existing contract.
Derecognition of Contracts
The Company derecognizes a contract when it is extinguished, which is when the specified obligations in the contract expire or
are discharged or cancelled.
When an insurance contract not accounted for under the PAA is derecognized from within a group of insurance contracts:
•
The fulfillment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations
derecognized;
•
The CSM of the group is adjusted for the change in the fulfillment cash flows, except where such changes are allocated to a
loss component; and
•
The number of coverage units for the expected remaining coverage is adjusted to reflect the coverage units derecognized
from the group.
If a contract is derecognized because it is transferred to a third party, then the CSM is also adjusted for the premium charged by
the third party, unless the group is onerous.
When an insurance contract accounted for under the PAA is derecognized, adjustments to the fulfillment cash flows to remove
related rights and obligations and account for the effect of the derecognition result in the following amounts being charged
immediately to the Consolidated Statements of Earnings:
•
If the contract is extinguished, any net difference between the derecognized part of the liability for remaining coverage of
the original contract and any other cash flows arising from extinguishment; and
•
If the contract is transferred to the third party, any difference between the derecognized part of the liability for remaining
coverage of the original contract and the premium charged by the third party.
136
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(p)
Deferred Income Reserves
Included in other liabilities are deferred income reserves relating to investment contracts. These are amortized on a straight-
line basis to recognize the initial policy fees over the policy term, not to exceed 20 years.
(q)
Income Taxes
The income tax expense for the period represents the sum of current income tax and deferred income tax. Income tax is
recognized as an expense or income in profit or loss except to the extent that it relates to items that are recognized outside
profit or loss (whether in other comprehensive income or directly in equity), in which case the income tax is also recognized
outside profit or loss.
Current Income Tax
Current income tax is based on taxable income for the year. Current income tax liabilities (assets) for the current and prior
periods are measured at the amount expected to be paid to (recovered from) the taxation authorities using the tax rates that
have been enacted or substantively enacted at the balance sheet date in each respective jurisdiction. Current income tax assets
and current income tax liabilities are offset if a legally enforceable right exists to offset the recognized amounts and the entity
intends either to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
A provision for tax treatment uncertainties which meet the probable threshold for recognition is measured using either the
most likely amount or the expected value, depending upon which method provides the better prediction of the resolution of the
uncertainty. The provision for tax uncertainties will be classified as current or deferred based on how a disallowance of the
underlying uncertain tax treatment would impact the tax provision accrual as of the balance sheet date.
Deferred Income Tax
Deferred income tax is the tax expected to be payable or recoverable on differences arising between the carrying amounts of
assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of
taxable income and is accounted for using the balance sheet liability method. Deferred income tax liabilities are generally
recognized for all taxable temporary differences and deferred income tax assets are recognized to the extent that it is probable
that taxable profits will be available against which deductible temporary differences, unused tax losses and carryforwards can
be utilized.
Recognition is based on the fact that it is probable that the entity will have taxable profits and/or tax planning opportunities
available to allow the deferred income tax asset to be utilized. Changes in circumstances in future periods may adversely
impact the assessment of the recoverability. The uncertainty of the recoverability is taken into account in establishing the
deferred income tax assets. The Company's annual financial planning process provides a significant basis for the measurement
of deferred income tax assets.
Deferred income tax assets and liabilities are measured at the tax rates expected to apply in the year when the asset is realized
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet
date. Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to net current
income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the
same taxation authority.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has
become probable that future taxable profit will allow the deferred income tax asset to be recovered.
Deferred income tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and
associates, except where the group controls the timing of the reversal of the temporary difference and it is probable that the
temporary differences will not reverse in the foreseeable future.
(r)
Pension Plans and Other Post-Employment Benefits
The Company’s subsidiaries maintain contributory and non-contributory defined benefit pension plans for eligible employees
and advisors. The Company’s subsidiaries also provide post-employment health, dental and life insurance benefits to eligible
employees, advisors and their dependents.
The present value of the defined benefit obligations and the related current service cost is determined using the projected unit
credit method (note 26). Pension plan assets are recorded at fair value.
137
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
For the defined benefit plans of the Company’s subsidiaries, service costs and net interest costs are recognized in the
Consolidated Statements of Earnings. Service costs include current service cost, administration expenses, past service costs
and the impact of curtailments and settlements. To determine the net interest costs (income) recognized in the Consolidated
Statements of Earnings, the Company's subsidiaries apply a discount rate to the net benefit liability (asset), where the discount
rate is determined by reference to market yields at the beginning of the year on high quality corporate bonds.
For the defined benefit plans of the Company’s subsidiaries, re-measurements of the net defined benefit liability (asset) due to
asset returns less (greater) than interest income, actuarial losses (gains) and changes in the asset ceiling are recognized in the
Consolidated Statements of Comprehensive Income.
The Company’s subsidiaries also maintain defined contribution pension plans for eligible employees and advisors. For the
defined contribution plans of the Company’s subsidiaries, the current service costs are recognized in the Consolidated
Statements of Earnings.
(s)
Equity
Financial instruments issued by the Company are classified as share capital if they represent a residual interest in the assets of
the Company. Preferred share capital is classified as equity if it is non-redeemable, or retractable only at the Company’s option
and any dividends are discretionary.
Limited recourse capital notes are classified as share capital as the Company has the sole discretion to settle the obligation to
noteholders through the issuance of a fixed number of the Company’s own equity instruments. Interest incurred on these
instruments is expensed within financing costs in the Consolidated Statements of Earnings.
Incremental costs that are directly attributable to the issue of share capital are recognized as a deduction from equity, net of
income tax.
Contributed surplus represents the vesting expense on unexercised equity instruments under share-based payment plans.
Accumulated other comprehensive income (loss) represents the total of the unrealized foreign exchange gains (losses) on
translation of foreign operations, the unrealized gains (losses) on hedges of the net investment in foreign operations, the
unrealized gains (losses) on FVOCI assets, the unrealized gains (losses) on cash flow hedges, the re-measurements on defined
benefit pension and other post-employment benefit plans net of tax and the revaluation surplus on transfer to investment
properties, where applicable.
Non-controlling interests in subsidiaries represents the proportion of equity that is attributable to minority shareholders.
Participating account surplus in subsidiaries represents the proportion of equity attributable to the participating account of the
Company's subsidiaries.
(t)
Share-Based Payments
The Company provides share-based compensation to certain employees and Directors of the Company and its subsidiaries.
The Company follows the fair value based method of accounting for the valuation of compensation expense for shares and
share options granted to employees under its stock option plans (note 25). This share-based payment expense is recognized in
operating and administrative expenses in the Consolidated Statements of Earnings and as an increase to contributed surplus
over the vesting period of the granted options. When options are exercised, the proceeds received, along with the amount in
contributed surplus, are transferred to share capital.
Information on the Company's Deferred Share Unit (DSU), Preferred Share Unit (PSU), and Employee Share Ownership Plans
(ESOP) is included in note 25.
(u)
Earnings Per Common Share
Earnings per common share is calculated using net earnings after preferred share dividends and the weighted average number
of common shares outstanding. Diluted earnings per share is calculated by adjusting common shareholders' net earnings and
the weighted average number of common shares outstanding for the effects of all potential dilutive common shares assuming
that all convertible instruments are converted and outstanding options whose exercise price is less than the average market
price of common shares during the period are exercised.
(v)
Leases
Where the Company is the lessee, a right-of-use asset and a lease liability are recognized on the Consolidated Balance Sheets as
at the lease commencement date.
Right-of-use assets are initially measured based on the initial amount of lease liability adjusted for any lease payments made at
or before the commencement date, initial direct costs incurred and any lease incentive received. Right-of-use assets are
138
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
included within other assets with the exception of right-of-use assets which meet the definition of investment property which
are presented within investment properties and subject to the Company's associated accounting policy. Right-of-use assets
presented within other assets are depreciated to the earlier of the useful life of the right-of-use asset or the lease term using the
straight-line method. Depreciation expense on right-of-use assets is included within operating and administrative expenses.
The lease liability is measured at amortized cost using the effective interest method and is included within other liabilities.
Interest expense on lease liabilities is included within operating and administrative expenses.
The Company has elected to apply a practical expedient not to recognize right-of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or less and leases of low-value assets.
Where the Company is the lessor under an operating lease for its investment property, the assets subject to the lease
arrangement are presented within the Consolidated Balance Sheets. Income from these leases is recognized in the
Consolidated Statements of Earnings on a straight-line basis over the lease term.
Investments in a lease that transfers substantially all the risks and rewards of ownership to the lessee are classified as a finance
lease. The Company is the lessor under a finance lease and the investment is recognized as a receivable at an amount equal to
the net investment in the lease, which is represented as the present value of the minimum lease payments due from the lessee
and is presented within the Consolidated Balance Sheets. Payments received from the lessee are apportioned between the
recognition of finance lease income and the reduction of the finance lease receivable. Income from the finance leases is
recognized in the Consolidated Statements of Earnings at a constant periodic rate of return on the Company’s net investment
in the finance lease.
(w) Operating Segments
Operating segments have been identified based on internal reports that are regularly reviewed by the Company’s Chief
Executive Officer to allocate resources and assess performance of segments and for which discrete financial information is
available. The Company’s operating segments include Canada, United States, Europe, Capital and Risk Solutions, and Lifeco
Corporate. The Canada segment comprises the Individual Customer and Group Customer units. Empower is included in the
United States segment. The Europe segment comprises United Kingdom, Ireland, and Germany. Reinsurance is reported in the
Capital and Risk Solutions segment. The Lifeco Corporate segment represents activities and transactions that are not directly
attributable to the measurement of the operating segments of the Company.
(x)
Future Accounting Policies
The Company actively monitors changes in IFRS, both proposed and released, by the IASB for potential impact on the
Company. The following sets out standards released and updates to the Company’s analysis since the year ended December 31,
2023:
New Standard
Summary of Future Changes
IFRS 18 – Presentation and Disclosure in
Financial Statements
In April 2024, the IASB published IFRS 18, Presentation and Disclosure in Financial Statements
(IFRS 18). The standard aims to improve how companies communicate information in their
financial statements, with a focus on information about financial performance in the statement of
earnings.
IFRS 18 will require companies to:
•
Provide defined subtotals in the statement of earnings;
•
Disclose information for any management-defined performance measures related to the
statement of earnings; and
•
Implement principles for the grouping of information in the financial statements, and
whether to provide it in the primary financial statements or notes.
The standard is effective for annual reporting periods beginning on or after January 1, 2027, with
earlier application permitted. The Company is evaluating the impact of the adoption of this
standard.
IFRS 9 – Financial Instruments and IFRS 7 –
Financial Instruments: Disclosures
In May 2024, the IASB published amendments to IFRS 9, Financial Instruments and IFRS 7,
Financial Instruments: Disclosures. The amendments clarify the classification of financial assets
with environmental, social and corporate governance and similar features, the settlement of
liabilities through electronic payment systems, and introduce additional disclosure requirements to
enhance transparency for investors.
These amendments are effective for annual reporting periods beginning on or after January 1,
2026, with earlier application permitted. The Company is evaluating the impact of the adoption of
these amendments.
139
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
3.
Business Acquisitions and Other Transactions
(a)
Sale of Putnam US Holdings I, LLC (Putnam Investments)
On January 1, 2024, the Company completed the sale of Putnam Investments to Franklin Resources, Inc., operating as Franklin
Templeton, in exchange for Franklin Templeton common shares, cash, and contingent consideration of up to U.S. $375 over a
five to seven-year period. The Company has retained its controlling interest in PanAgora Holdings Inc. and its subsidiary
PanAgora Asset Management Inc. (collectively PanAgora), a quantitative asset manager, and certain assets, including deferred
tax assets, related to Putnam Investments. The Company currently holds approximately 31,600,000 Franklin Templeton
common shares and has agreed to hold a majority of these shares until at least January 1, 2029.
Financial information relating to the sale of the discontinued operation is set out below, reflecting total estimated fair value of
consideration of $1,909. Included in the results for the year ended December 31, 2024 are $115 of closing costs and final
adjustments to the carrying value, resulting in a net gain on sale of $44 after-tax.
Details of the Sale of Putnam Investments
January 1, 2024
Consideration received or receivable
Fair value of Franklin Templeton Common Shares (U.S. $29.79 per share)
$
1,321
Net cash and other deferred and contingent consideration
588
Non-controlling interest in sale of Putnam Investments
(123)
Total net proceeds on disposal of Putnam Investments
$
1,786
Net carrying value of net assets sold
Carrying value
$
2,010
Foreign exchange translation gains reclassified to earnings on disposal of foreign operations
(211)
Net carrying value of discontinued operations
$
1,799
$
(13)
Income tax recovery
57
Net gain on sale after income tax
$
44
In the 2023 financial statements, the net earnings (loss) and cash flows of Putnam Investments were classified as discontinued
operations within the United States operating segment, and the related assets and liabilities were classified as held for sale.
Net Earnings (Loss) From Discontinued Operations
For the year ended
December 31, 2023
Net investment result
$
44
Other income and expenses
Fee and other income
1,008
Operating and administrative expenses
(1,050)
Acquisition and divestiture costs
(130)
Amortization of finite life intangible assets
(26)
Earnings (loss) before income taxes
(154)
Income tax expense (benefit)
(30)
Net earnings (loss) from discontinued operations
$
(124)
Exchange differences on translation of discontinued operations
(42)
Other comprehensive income (loss) from discontinued operations
$
(42)
Cash Flows From Discontinued Operations
For the year ended
December 31, 2023
Net cash provided by (used in) operating activities
$
137
Net cash provided by (used in) financing activities
(6)
Effect of changes in exchange rates on cash and cash equivalents
(5)
Net increase (decrease) in cash and cash equivalents
$
126
140
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Assets and Liabilities Held for Sale
December 31, 2023
Assets
Cash
$
375
Stocks
46
Intangible assets
1,594
Fixed assets
56
Other assets
2,396
Total assets classified as held for sale
$
4,467
Liabilities
Other liabilities
$
2,407
Total liabilities classified as held for sale
$
2,407
(b)
Acquisition of Investment Planning Counsel
On November 30, 2023, Canada Life completed the acquisition of 100% of the equity of Investment Planning Counsel Inc., an
independent wealth management firm, from IGM Financial Inc. (IGM) for total purchase consideration of $585. The
acquisition extends Canada Life’s wealth management reach and capabilities. IGM is an affiliated company and a member of
the Power Corporation group of companies. Therefore, the transaction was reviewed and approved by the Conduct Review
Committee of each of the Company and Canada Life.
During the third quarter of 2024, the Company completed its comprehensive valuation of the fair value of the net assets
acquired, and the purchase price allocation.
Initial goodwill presented in the Company’s December 31, 2023 consolidated annual audited financial statements of $583 was
adjusted upon completion of the purchase price allocation. Adjustments were made to the provisional amounts disclosed in
the Company’s December 31, 2023 consolidated annual audited financial statements, mainly due to the recognition and
measurement of intangible assets. Intangible assets recognized include customer contracts of $230, which have accumulated
amortization of $8 as at December 31, 2024.
Comparative information in the Company’s consolidated financial statements has not been restated.
The Company determined the fair value of the intangible assets using the valuation techniques that incorporate projections of
discounted cash flows by applying judgments and estimates for customer retention, forecasted revenues, earnings and
discount rates.
The amounts assigned to the assets acquired, goodwill, and liabilities assumed on November 30, 2023, reported as at December
31, 2024 are as follows:
Assets acquired and goodwill
Cash
$
31
Goodwill
371
Intangible assets
230
Fixed assets
3
Accounts receivable
33
Other assets
279
Current income taxes
1
Total assets acquired and goodwill
$
948
Liabilities assumed
Accounts payable
$
38
Other liabilities
294
Current income taxes
1
Deferred tax liabilities
30
Total liabilities assumed
$
363
141
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following provides the change in the carrying value from December 31, 2023 to December 31, 2024 of the goodwill on
acquisition:
Goodwill previously reported at December 31, 2023
$
583
Recognition and measurement of intangible assets
(230)
Recognition of deferred tax liabilities on intangible assets and other measurement period adjustments
18
Goodwill reported at December 31, 2024
$
371
(c)
Acquisition of Value Partners
On September 8, 2023, Canada Life completed the acquisition of 100% of the equity of Value Partners Group Inc., a Winnipeg
based investment firm that serves clients with complex and sophisticated wealth needs.
During the third quarter of 2024, the comprehensive valuation of the fair value of the net assets acquired including intangible
assets and the final purchase price allocation was completed. As a result, initial goodwill presented in the December 31, 2023
consolidated annual audited financial statements of $119 recognized upon the acquisition was adjusted to $68, mainly due to
the recognition and measurement of intangible assets. Comparative information in the Company’s consolidated financial
statements has not been restated.
(d)
Strategic Relationship with Power Sustainable
On May 6, 2024, the Company announced that it had agreed to enter into a long-term strategic partnership with Power
Sustainable Manager Inc. (Power Sustainable), a sustainability-focused investment manager and a subsidiary of Power
Corporation. Under the transaction, the Company became a minority shareholder in Power Sustainable, with an ownership
share of slightly below 20% on a fully diluted basis, and has agreed to invest in certain funds across Power Sustainable’s
investment strategies in the future. Power Corporation remains the controlling shareholder of Power Sustainable. Power
Sustainable is a related party, therefore the transaction was reviewed and approved by the Company’s Conduct Review
Committee. The investment in Power Sustainable is not material to the Company.
(e)
Sale of U.K. Onshore Bond Business
On December 23, 2024, Canada Life U.K. announced the signing of an agreement to transfer its onshore bond business to
Countrywide Assured plc (Countrywide), a subsidiary of Chesnara plc. Concurrently, the two parties entered into a reinsurance
agreement such that the risks and rewards of the underlying business are transferred to Countrywide. The transaction resulted
in a net gain of $21 pre-tax, mainly driven by recognition of assets associated with the reinsurance agreement. The underlying
assets and the related liabilities on account of segregated fund policyholders, with a carrying value of $2,750 as at December 31,
2024, are to be transferred to Countrywide pending court approval, which is expected to occur within 12 months.
4.
Restructuring and Integration Expenses
(a)
Canada Restructuring
The Company recorded a restructuring provision of $23 in Canada for the year ended December 31, 2024 ($20 in the
shareholder account and $3 in the participating account). The restructuring is related to the transitioning of some of the
information technology operations functions to a managed service arrangement with an external provider. As at December 31,
2024, the Company has a provision of $7 remaining in other liabilities related to this restructuring. The Company expects to
utilize a significant portion of these amounts during 2025.
(b)
Empower Restructuring and Integration
The Company recorded a restructuring provision of $29 in the United States for the year ended December 31, 2024 ($5 for the
year ended December 31, 2023). As at December 31, 2024, the Company has a provision of $10 remaining in other liabilities
related to this restructuring ($7 at December 31, 2023). The restructuring is primarily attributable to staff reductions and other
exit costs related to the Company's acquisition of the retirement services businesses of Massachusetts Mutual Life Insurance
Company and Prudential Financial, Inc. (Prudential). The Company expects to pay out a significant portion of these amounts
during 2025.
The Company recorded integration expenses in the Consolidated Statements of Earnings of $44 for the year ended December
31, 2024 ($95 for the year ended December 31, 2023).
(c)
Europe Restructuring
The Company recorded a restructuring provision of $26 in Europe for the year ended December 31, 2024 ($126 for the year
ended December 31, 2023). As at December 31, 2024, the Company has a restructuring provision of $104 remaining in other
142
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
liabilities ($106 at December 31, 2023). The restructuring is related to provisions for staff reductions as well as other business
transformation initiatives as disclosed in the Company's December 31, 2023 consolidated annual audited financial statements.
5.
Cash and Cash Equivalents
2024
2023
Cash
$
4,772 $
3,029
Short-term deposits
5,937
4,713
Total
$
10,709 $
7,742
At December 31, 2024 cash and short-term deposits of $1,145 were restricted for use by the Company ($689 at December 31,
2023) in respect of cash held in trust for reinsurance agreements or with regulatory authorities, cash held under certain
indemnity arrangements, client monies held by brokers and cash held in escrow.
6.
Portfolio Investments
(a)
Carrying Values and Estimated Fair Values of Portfolio Investments are as Follows:
2024
2023
Carrying value
Fair value
Carrying value
Fair value
Bonds
FVTPL - designated
$
151,369 $
151,369 $
143,506 $
143,506
FVTPL - mandatory
1,987
1,987
1,795
1,795
FVOCI
13,758
13,758
11,750
11,750
167,114
167,114
157,051
157,051
Mortgage loans
FVTPL - designated
28,790
28,790
29,211
29,211
FVTPL - mandatory
4,818
4,818
4,203
4,203
FVOCI
461
461
578
578
Amortized cost
4,810
4,193
4,422
3,923
38,879
38,262
38,414
37,915
Stocks
FVTPL - mandatory
16,896
16,896
14,890
14,890
FVOCI - designated 1
923
923
—
—
Equity method
1,007
1,021
843
777
18,826
18,840
15,733
15,667
Investment properties
8,257
8,257
7,870
7,870
Total
$
233,076 $
232,473 $
219,068 $
218,503
1
Represents Franklin Templeton common shares received on the sale of Putnam Investments.
(b)
Carrying Value of Bonds and Mortgages by Term to Maturity are as Follows:
2024
2023
Term to maturity
Term to maturity
1 year or
less
Over 1 year
to 5 years
Over 5
years
Total
1 year or
less
Over 1 year
to 5 years
Over 5
years
Total
Bonds
$
24,890 $
49,463 $
92,761 $
167,114 $
14,282 $
47,685 $
95,084 $
157,051
Mortgage loans 1
4,507
19,686
14,686
38,879
3,753
19,554
15,107
38,414
Total
$
29,397 $
69,149 $
107,447 $
205,993 $
18,035 $
67,239 $
110,191 $
195,465
1
Mortgage loans include equity release mortgages which do not have a fixed redemption date. The maturity profile of the portfolio has been estimated based on previous
redemption experience.
143
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(c)
Equity Method Investments
A significant amount of the Company's equity method investments relate to the Company’s investment, held through Canada
Life, in an affiliated company, IGM, a member of the Power Corporation group of companies, over which it exerts significant
influence but does not control. The Company's proportionate share of IGM's earnings is recorded in net investment income in
the Consolidated Statements of Earnings. The Company owns 9,200,407 shares of IGM at December 31, 2024 (9,200,448 at
December 31, 2023) representing a 3.89% ownership interest (3.86% at December 31, 2023). The Company uses the equity
method to account for its investment in IGM as it exercises significant influence. Significant influence arises from several
factors, including, but not limited to, the following: common control of the Company and IGM by Power Corporation, shared
representation on the Boards of Directors of the Company and IGM, interchange of managerial personnel, certain shared
strategic alliances, significant intercompany transactions and service agreements that influence the financial and operating
policies of both companies.
The Company and IGM both have a year-end date of December 31. The Company's year-end results are approved and reported
before IGM publicly reports its financial results; therefore, the Company reports IGM's financial information by estimating the
amount of earnings attributable to the Company, based on prior quarter information as well as other market expectations, to
complete equity method accounting. The difference between actual and estimated results is reflected in the subsequent
quarter and is not material to the Company's consolidated financial statements.
At December 31, 2024, IGM owned 22,136,471 (22,136,471 at December 31, 2023) common shares of the Company. IGM's
financial information as at December 31, 2024 can be obtained in its publicly available information.
The Company and its subsidiaries also hold equity investments in certain related parties which the Company accounts for
using equity method accounting.
2024
IGM
Other Related
Parties
Total
Carrying value, beginning of year
$
387 $
456 $
843
Additions
—
121
121
Equity method share of net earnings
41
26
67
Dividends received
(21)
(12)
(33)
Other
—
9
9
Carrying value, end of year
$
407 $
600 $
1,007
Fair value, end of year
$
421 $
600 $
1,021
2023
IGM
Other Related
Parties
Total
Carrying value, beginning of year
$
375 $
263 $
638
Additions
—
223
223
Equity method share of net earnings
33
(28)
5
Dividends received
(21)
(5)
(26)
Other
—
3
3
Carrying value, end of year
$
387 $
456 $
843
Fair value, end of year
$
321 $
456 $
777
144
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(d)
Net Investment Income Comprises the Following:
2024
Bonds
Mortgage
loans
Stocks
Investment
properties
Other
Total
Net investment income:
Investment income earned
$
6,960 $
1,509 $
626 $
507 $
531 $
10,133
Net realized losses on derecognition of FVOCI assets
(47)
—
—
—
—
(47)
Gains on derecognition of amortized cost assets
—
2
—
—
—
2
Net ECL recovery
—
7
—
—
—
7
Other income and expenses
—
—
—
(208)
(204)
(412)
6,913
1,518
626
299
327
9,683
Changes in fair value on FVTPL assets:
FVTPL - designated
(1,237)
641
—
—
802
206
FVTPL - mandatory
(24)
(39)
1,686
—
—
1,623
Recorded at fair value
—
—
—
(153)
—
(153)
(1,261)
602
1,686
(153)
802
1,676
Total
$
5,652 $
2,120 $
2,312 $
146 $
1,129 $
11,359
2023
Bonds
Mortgage
loans
Stocks
Investment
properties
Other
Total
Net investment income:
Investment income earned
$
6,626 $
1,434 $
463 $
506 $
440 $
9,469
Net realized losses on derecognition of FVOCI assets
(248)
—
—
—
—
(248)
Gains on derecognition of amortized cost assets
—
9
—
—
—
9
Net ECL (charge) recovery
(1)
—
—
—
—
(1)
Other income and expenses
—
—
—
(196)
(169)
(365)
6,377
1,443
463
310
271
8,864
Changes in fair value on FVTPL assets:
FVTPL - designated
5,050
478
—
—
347
5,875
FVTPL - mandatory
53
272
796
—
—
1,121
Recorded at fair value
—
—
—
(507)
—
(507)
5,103
750
796
(507)
347
6,489
Total
$
11,480 $
2,193 $
1,259 $
(197) $
618 $
15,353
Investment income from bonds and mortgages includes interest income, and premium and discount amortization. Investment
income from stocks includes dividends and distributions from private equity funds. Investment properties income includes
rental income earned on investment properties, ground rent income earned on leased and sub-leased land, fee recoveries,
lease cancellation income, and interest and other investment income earned on investment properties. Other investment
income includes foreign exchange gains and losses, income earned from derivative financial instruments, and equity income
from the investments in IGM and other related parties.
145
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(e)
Net Investment Result
2024
2023
Investment return
Net investment income
$
9,683 $
8,864
Changes in fair value on FVTPL assets
1,676
6,489
Total investment return
11,359
15,353
Net finance income (expenses) from insurance contracts
Changes in fair value of underlying items of direct participating contracts
(4,793)
(3,941)
Effects of risk mitigation option
84
68
Interest accreted
(3,810)
(3,433)
Effect of changes in discount rate and other financial assumptions
2,807
(1,919)
Effect of measuring changes in estimates at current rates and adjusting the CSM at rates on initial
recognition
(206)
(13)
Total net finance income (expenses) from insurance contracts
(5,918)
(9,238)
Net finance income (expenses) from reinsurance contracts
Interest accreted
342
78
Other
(352)
146
Total net finance income (expenses) from reinsurance contracts
(10)
224
Changes in investment contract liabilities
(2,932)
(4,806)
$
2,499 $
1,533
(f)
Securities Lending
The Company engages in securities lending to generate additional income. The Company’s securities custodians are used as
lending agents. Collateral, which exceeds the fair value of the loaned securities, is deposited by the borrower with the
Company's lending agent and maintained by the lending agent until the underlying security has been returned. The fair value
of the loaned securities is monitored on a daily basis by the lending agent who obtains or refunds additional collateral as the
fair value of the loaned securities fluctuates. Collateral primarily consists of government bonds, investment grade corporate
bonds and cash. Included in the collateral deposited with the Company's lending agent is cash collateral of $219 at December
31, 2024 ($443 at December 31, 2023). In addition, the securities lending agent indemnifies the Company against borrower risk,
meaning that the lending agent agrees contractually to replace securities not returned due to a borrower default. As at
December 31, 2024, the Company had loaned securities (which are included in invested assets) with a fair value of $4,212
($8,154 at December 31, 2023).
7.
Risk Management
The Company has policies relating to the identification, measurement, management, monitoring and reporting of risks
associated with financial instruments and insurance contracts. The key risks related to financial instruments are credit risk,
liquidity risk and market risk (currency, interest rate and equity). The Risk Committee of the Board of Directors is responsible
for the oversight of the Company's key risks.
The following sections describe how the Company manages each of these risks.
(a)
Credit Risk
Credit risk is the risk of loss resulting from an obligor's potential inability or unwillingness to fully meet its contractual
obligations.
The following policies and procedures are in place to manage this risk:
•
Investment and risk policies aim to minimize undue concentration within issuers, connected companies, industries or
individual geographies.
•
Investment and risk limits specify minimum and maximum limits for each asset class.
•
Identification of credit risk through an internal credit risk rating system which includes a detailed assessment of an
obligor's creditworthiness. Internal credit risk ratings cannot be higher than the highest rating provided by certain
independent ratings companies.
•
Portfolios are monitored continuously, and reviewed regularly with the Risk Committee and the Investment Committee of
the Board of Directors.
146
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
•
Credit risk associated with derivative instruments is evaluated quarterly based on conditions that existed at the balance
sheet date, using practices that are at least as conservative as those recommended by regulators. The Company manages
derivative credit risk by including derivative exposure to aggregate credit exposures measured against rating based obligor
limits and through collateral arrangements where possible.
•
Counterparties providing reinsurance to the Company are reviewed for financial soundness as part of an ongoing
monitoring process. The minimum financial strength of reinsurers is outlined in the Reinsurance Risk Management Policy.
The Company seeks to minimize reinsurance credit risk by setting rating based limits on net ceded exposure by
counterparty as well as seeking protection in the form of collateral or funds withheld arrangements where possible.
•
Investment guidelines also specify collateral requirements.
(i)
Maximum Exposure to Credit Risk
The following summarizes the Company’s maximum exposure to credit risk related to financial instruments as well as
insurance and reinsurance contracts. The maximum credit exposure is the carrying value of the asset net of any allowances for
losses.
2024
2023
Financial instruments
Cash and cash equivalents
$
10,709 $
7,742
Bonds
167,114
157,051
Mortgage loans
38,879
38,414
Interest due and accrued
1,778
1,645
Accounts receivable
3,624
3,218
Funds held under investment contracts
6,895
7,268
Trading account assets
3,701
3,038
Finance leases receivable
926
668
Other assets 1
1,979
2,055
Derivative assets
2,431
2,219
238,036
223,318
Insurance and reinsurance contracts
Reinsurance contract held assets 2
17,842
17,332
Insurance contract assets
1,193
1,193
Funds held by ceding insurers 3
3,640
3,926
Loans to policyholders 3
9,204
8,945
31,879
31,396
Total
$
269,915 $
254,714
1
Includes items such as current income taxes receivable and miscellaneous other assets of the Company (note 11).
2
Includes funds withheld on reinsurance contracts issued.
3
Included in insurance contract liabilities (note 14).
Credit risk is also mitigated by entering into collateral agreements. The amount and type of collateral required depends on an
assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral
and the valuation parameters. Collateral primarily consists of government bonds, investment grade corporate bonds and cash.
Management monitors the value of the collateral, requests additional collateral when needed and performs an impairment
valuation when applicable. The Company has $1,732 of collateral received from counterparties as at December 31, 2024 ($1,715
at December 31, 2023) relating to derivative assets.
(ii)
Concentration of Credit Risk
Concentrations of credit risk arise from exposures to a single obligor, a group of related obligors or groups of obligors that have
similar credit risk characteristics and operate in the same geographic region or in similar industries. The characteristics are
similar in that changes in economic or political environments may impact their ability to meet obligations as they come due.
147
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following provides details of the carrying value of bonds by issuer, industry sector and operating segment:
2024
Canada
United States
Europe
Capital and Risk
Solutions
Total
Bonds issued or guaranteed by:
Treasuries
$
3,304 $
1,361 $
7,274 $
4,220 $
16,159
Government related
17,286
2,605
7,444
694
28,029
Agency securitized
186
1,055
—
13
1,254
Non-agency securitized
3,453
12,395
800
163
16,811
Financials
4,726
12,556
5,651
1,124
24,057
Communications
1,194
1,741
856
211
4,002
Consumer products
5,086
10,172
2,084
1,061
18,403
Energy
2,809
3,363
502
370
7,044
Industrials
2,878
7,927
1,178
469
12,452
Technology
1,329
3,568
409
322
5,628
Transportation
4,426
2,021
853
198
7,498
Utilities
12,559
7,468
4,660
1,090
25,777
Total
$
59,236 $
66,232 $
31,711 $
9,935 $
167,114
2023
Canada
United States
Europe
Capital and Risk
Solutions
Total
Bonds issued or guaranteed by:
Treasuries
$
1,155 $
2,289 $
8,522 $
2,887 $
14,853
Government related
16,618
2,842
6,760
406
26,626
Agency securitized
178
1,057
—
14
1,249
Non-agency securitized
2,924
13,314
803
137
17,178
Financials
5,225
12,095
4,861
997
23,178
Communications
1,089
1,680
748
152
3,669
Consumer products
4,704
9,795
1,774
1,023
17,296
Energy
2,619
3,118
447
336
6,520
Industrials
2,560
7,623
1,156
442
11,781
Technology
1,044
3,307
479
297
5,127
Transportation
3,996
1,899
755
156
6,806
Utilities
10,632
7,599
3,786
751
22,768
Total
$
52,744 $
66,618 $
30,091 $
7,598 $
157,051
The following provides details of the carrying value of mortgage loans by operating segment:
2024
Canada
United States
Europe
Capital and Risk
Solutions
Total
Single family residential
$
1,225 $
— $
— $
— $
1,225
Multi-family residential
4,523
4,065
946
34
9,568
Equity release
1,949
—
2,279
590
4,818
Commercial
9,228
9,754
4,133
153
23,268
Total
$
16,925 $
13,819 $
7,358 $
777 $
38,879
148
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Canada
United States
Europe
Capital and Risk
Solutions
Total
Single family residential
$
1,511 $
— $
— $
— $
1,511
Multi-family residential
4,581
3,945
814
32
9,372
Equity release
1,697
—
2,043
463
4,203
Commercial
8,955
10,376
3,850
147
23,328
Total
$
16,744 $
14,321 $
6,707 $
642 $
38,414
(iii) Expected Credit Losses
The following table reconciles the allowance for credit losses under the ECL model by asset classification and stage:
2024
Performing
Impaired
Stage 1
Stage 2
Stage 3
Total
Bonds at FVOCI
Balance, beginning of year
$
3 $
— $
— $
3
Provision for credit losses
Originations
1
—
—
1
Maturities
(1)
—
—
(1)
Net re-measurement of loss allowance
1
—
—
1
Balance, end of year
$
4 $
— $
— $
4
Mortgages at amortized cost
Balance, beginning of year
$
1 $
29 $
4 $
34
Provision for credit losses
Transfers to stage 1
3
(3)
—
—
Net re-measurement of loss allowance
(3)
(7)
3
(7)
Exchange rate and other
—
1
—
1
Balance, end of year
$
1 $
20 $
7 $
28
Mortgages at FVOCI
Balance, beginning of year
$
— $
— $
— $
—
Provision for credit losses
Net re-measurement of loss allowance
—
1
—
1
Balance, end of year
$
— $
1 $
— $
1
Total allowance for credit losses, end of year
$
5 $
21 $
7 $
33
149
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Performing
Impaired
Stage 1
Stage 2
Stage 3
Total
Bonds at FVOCI
Balance, beginning of year
$
3 $
— $
— $
3
Provision for credit losses
Originations
1
—
—
1
Maturities
(1)
—
—
(1)
Net re-measurement of loss allowance
1
—
—
1
Exchange rate and other
(1)
—
—
(1)
Balance, end of year
$
3 $
— $
— $
3
Mortgages at amortized cost
Balance, beginning of year
$
1 $
32 $
— $
33
Provision for credit losses
Transfers to stage 1
1
(1)
—
—
Originations
1
—
—
1
Net re-measurement of loss allowance
(2)
(3)
4
(1)
Exchange rate and other
—
1
—
1
Balance, end of year
$
1 $
29 $
4 $
34
Total allowance for credit losses, end of year
$
4 $
29 $
4 $
37
(iv) Credit Risk Exposure by Internal Risk Rating
The following table presents the fair value of bonds and mortgages at FVOCI and carrying amounts of mortgages at amortized
cost. Risk ratings are based on internal ratings used in the measurement of ECLs as at the reporting date.
2024
Performing
Impaired
Stage 1
Stage 2
Stage 3
Total
Bonds at FVOCI
Investment grade
$
13,669 $
— $
— $
13,669
Non-investment grade
75
14
—
89
Impaired
—
—
—
—
Total
$
13,744 $
14 $
— $
13,758
Mortgage loans at FVOCI
Investment grade
$
446 $
— $
— $
446
Non-investment grade
—
15
—
15
Impaired
—
—
—
—
Total
$
446 $
15 $
— $
461
Mortgages at amortized cost
Investment grade
$
4,562 $
— $
— $
4,562
Non-investment grade
—
266
—
266
Impaired
—
—
10
10
4,562
266
10
4,838
Allowance for credit losses
(1)
(20)
(7)
(28)
Total
$
4,561 $
246 $
3 $
4,810
150
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Performing
Impaired
Stage 1
Stage 2
Stage 3
Total
Bonds at FVOCI
Investment grade
$
11,668 $
— $
— $
11,668
Non-investment grade
77
5
—
82
Impaired
—
—
—
—
Total
$
11,745 $
5 $
— $
11,750
Mortgage loans at FVOCI
Investment grade
$
560 $
— $
— $
560
Non-investment grade
—
18
—
18
Impaired
—
—
—
—
Total
$
560 $
18 $
— $
578
Mortgages at amortized cost
Investment grade
$
4,088 $
— $
— $
4,088
Non-investment grade
—
357
—
357
Impaired
—
—
11
11
4,088
357
11
4,456
Allowance for credit losses
(1)
(29)
(4)
(34)
Total
$
4,087 $
328 $
7 $
4,422
(v)
Credit Impact on Financial Assets Designated as FVTPL
The carrying value of the Company’s portfolio investments designated as FVTPL represents the maximum exposure to credit
risk for those assets. The change in fair value attributable to the change in credit risk of these assets is generally insignificant in
the absence of significant credit events occurring on specific assets. In 2024, a fair value loss of $67 ($80 in 2023) is reflected in
changes in fair value on fair value through profit or loss assets in the Consolidated Statements of Earnings related to significant
credit events occurring on assets designated as FVTPL.
(vi) Asset Quality
Bond Portfolio by Credit Rating
2024
2023
Based on internal ratings:
AAA
$
24,462 $
24,298
AA
32,310
31,435
A
60,041
54,807
BBB
47,936
44,811
BB and lower
2,365
1,700
Total
$
167,114 $
157,051
Derivative Portfolio by Credit Rating
2024
2023
Over-the-counter contracts (counterparty ratings):
AA
$
1,687 $
1,448
A
743
770
Exchange-traded
1
1
Total
$
2,431 $
2,219
151
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Reinsurance Contract Held Assets by Credit Rating
2024
2023
Based on Rating Agency ratings:
AA- to AA+
$
16,409 $
15,955
A- to A+
1,424
1,365
BBB+ and lower
8
9
Not rated
1
3
Total reinsurance contract held assets
$
17,842 $
17,332
Total reinsurance contract held assets less collateral
$
4,177 $
4,296
Total reinsurance contract held assets are net of funds held under reinsurance contracts.
As at December 31, 2024, $12,633 of the $17,842 of reinsurance contract held assets are ceded to Protective Life Insurance
Company ($12,122 of $17,332 at December 31, 2023). This concentration risk is mitigated by funds held in trust and other
arrangements of $13,774 as at December 31, 2024 ($13,710 at December 31, 2023).
(vii) Funds Held Under Investment Contracts and Funds Held by Ceding Insurers
At December 31, 2024, the Company had amounts on deposit of $6,895 ($7,268 at December 31, 2023) for funds held under
investment contracts. This amount has been included in other assets on the Consolidated Balance Sheets. At December 31,
2024 the Company had amounts on deposit of $3,640 ($3,926 at December 31, 2023) for funds held by ceding insurers. This
amount has been included in insurance contract liabilities on the Consolidated Balance Sheets. Included in these amounts are
assets of $98 at December 31, 2024 ($37 at December 31, 2023) where the Company does not retain the credit risk. Income and
expenses arising from the underlying assets are included in net investment result in the Consolidated Statements of Earnings.
The details of the funds on deposit for certain agreements where the Company has credit risk are as follows:
(i)
Carrying Values and Estimated Fair Values
2024
2023
Carrying
value
Fair
value
Carrying
value
Fair
value
Cash and cash equivalents
$
206 $
206 $
189 $
189
Bonds
9,689
9,689
10,415
10,415
Mortgages
384
384
418
418
Other assets
158
158
135
135
Total
$
10,437 $
10,437 $
11,157 $
11,157
Supporting:
Insurance contract liabilities
$
3,542 $
3,542 $
3,834 $
3,834
Investment contract liabilities
6,895
6,895
7,268
7,268
Surplus
—
—
55
55
Total
$
10,437 $
10,437 $
11,157 $
11,157
152
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(ii)
The Following Provides Details of the Carrying Value of Bonds Included in the Funds on Deposit by Issuer and
Industry Sector:
2024
2023
Bonds issued or guaranteed by:
Treasuries
$
265 $
487
Government related
1,080
1,139
Agency securitized
94
103
Non-agency securitized
1,063
1,135
Financials
1,670
1,731
Communications
291
332
Consumer products
1,525
1,609
Energy
504
534
Industrials
927
1,011
Technology
349
385
Transportation
306
301
Utilities
1,615
1,648
Total
$
9,689 $
10,415
(iii) The Following Provides Details of the Carrying Value of Mortgages Included in the Funds on Deposit by Property
Type:
2024
2023
Multi-family residential
$
81 $
107
Commercial
303
311
Total
$
384 $
418
(iv) Asset Quality
Bond Portfolio by Credit Rating
2024
2023
AAA
$
794 $
951
AA
2,332
2,536
A
4,002
3,973
BBB
2,501
2,856
BB and lower
60
99
Total
$
9,689 $
10,415
(b)
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet all cash outflow obligations as they come due. The
Company’s liquidity risk management framework and associated limits are designed to allow the Company to meet cash and
collateral commitments as they fall due, both on an expected basis and under a severe liquidity stress.
•
The Company attempts to mitigate liquidity risk through product design and maintaining a high quality, diversified
investment portfolio with a spread of asset maturities by year. Approximately 67% of our insurance and investment
contract liabilities (measured based on carrying value and excluding liabilities held on account of segregated fund holders)
are subject to discretionary withdrawal.
•
Management closely monitors the solvency and capital positions of its principal subsidiaries opposite liquidity
requirements at the holding company. Additional liquidity is available through established lines of credit or via capital
market transactions. At December 31, 2024, the Company maintains $950 of liquidity at the Lifeco level through committed
lines of credit with Canadian chartered banks. As well, the Company maintains a U.S. $1,000 revolving credit agreement
with a syndicate of banks, a U.S. $500 revolving credit agreement, and a U.S. $50 line of credit at Empower. Empower also
has borrowing capacity of approximately U.S. $587 under the Federal Home Loan Bank program.
153
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(i)
Payments Due by Period
In the normal course of business the Company enters into contracts that give rise to commitments of future minimum
payments that impact short-term and long-term liquidity. The following summarizes the principal repayment schedule for
certain of the Company’s financial liabilities.
2024
1 year or
less
1-2 years
2-3 years
3-4 years
4-5 years
Over
5 years
Total
Debentures and other debt instruments
$
720 $
745 $
576 $
1,032 $
800 $
5,356 $
9,229
Capital trust securities 1
—
—
—
—
—
150
150
Purchase obligations
203
146
75
42
22
29
517
Pension contributions
221
—
—
—
—
—
221
Total
$
1,144 $
891 $
651 $
1,074 $
822 $
5,535 $
10,117
1
Payments due have not been reduced to reflect that the Company held capital trust securities of $37 principal amount ($44 carrying value).
(c)
Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument and the value of insurance and
investment contract liabilities will fluctuate as a result of changes in market factors which include three types: currency risk,
interest rate (including related inflation) risk and equity risk.
Caution Related to Risk Sensitivities
These financial statements include estimates of sensitivities and risk exposure measures for certain risks, such as the sensitivity
due to specific changes in interest rate levels projected and market prices as at the valuation date. Actual results can differ
significantly from these estimates for a variety of reasons including, but not limited to, changes in the Company’s asset or
liability profile, changes in business mix, effective income tax rates, other market factors, differences in the actual exposure
relative to broad market indices, variation in exposures by geography, and general limitations of the Company’s internal
models.
For these reasons, the sensitivities should only be viewed as directional estimates of the underlying sensitivities for the
respective factors. Given the nature of these calculations, the Company cannot provide assurance that the actual impact on
shareholders' net earnings will be as indicated.
(i)
Currency Risk
Currency risk relates to the Company operating and holding financial instruments in different currencies. For the assets
backing insurance and investment contract liabilities that are not matched by currency, changes in foreign exchange rates can
expose the Company to the risk of foreign exchange losses not offset by liability decreases.
•
A 10% weakening of the Canadian dollar against foreign currencies would be expected to increase non-participating
insurance and investment contract liabilities and their supporting assets by approximately the same amount resulting in
an immaterial immediate change to net earnings. A 10% strengthening of the Canadian dollar against foreign currencies
would be expected to decrease non-participating insurance and investment contract liabilities and their supporting assets
by approximately the same amount resulting in an immaterial immediate change in shareholders' net earnings.
The Company has net investments in foreign operations. The Company’s debt obligations are denominated in Canadian
dollars, euros, and U.S. dollars. In accordance with IFRS, foreign currency translation gains and losses from net investments in
foreign operations, net of related hedging activities and tax effects, are recorded in accumulated other comprehensive income.
Strengthening or weakening of the Canadian dollar spot rate compared to the U.S. dollar, British pound and euro spot rates
impacts the Company’s total equity. Correspondingly, the Company’s book value per share and capital ratios monitored by
rating agencies are also impacted.
(ii)
Interest Rate Risk
Interest rate risk exists if asset and liability cash flows are not closely matched and interest rates change, causing a difference in
the value of assets and the value of liabilities. The following policies and procedures are in place to mitigate the Company's
exposure to interest rate risk:
•
Interest rate risk is managed by investing in assets that are suitable for the products sold.
•
The Company utilizes a formal process for managing the matching of assets and liabilities. This involves grouping general
fund assets and liabilities into segments. Assets in each segment are managed in relation to the liabilities in the segment.
•
For products with fixed and highly predictable benefit payments, investments are generally made in fixed income assets or
investment properties whose cash flows closely match the liability product cash flows. Where assets are not available to
154
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
match certain period cash flows, such as long-tail cash flows, a portion of these are invested in equities and other non-fixed
income assets, while the rest are duration matched.
•
Hedging instruments are employed when there is a lack of suitable permanent investments or to manage the level of loss
exposure to interest rate changes.
•
To the extent asset and liability cash flows are matched, protection against interest rate change is achieved and any change
in the fair value of the assets will be offset by a similar change in the fair value of the liabilities.
•
For products with less predictable timing of benefit payments, investments are made in fixed income assets with cash flows
of a shorter duration than the anticipated timing of benefit payments, or equities and other non-fixed income assets.
•
The risk associated with the mismatch in portfolio duration and cash flow, asset prepayment exposure and the pace of
asset acquisition are quantified and reviewed regularly.
The impact to shareholders' net earnings from changes in the interest rates would be largely offset by changes in the value of
financial assets supporting the liabilities. However, differences in the interest rate sensitivity in the value of assets and the value
of insurance and investment contract liabilities leads to a sensitivity to interest rate movements in shareholders' net earnings.
The Company's asset liability management strategy uses public equities and other non-fixed income assets as a component of
general fund assets supporting liabilities, which leads to interest rate exposure in the net earnings. Further, the classification of
financial assets, such as mortgage assets in the United Kingdom which are carried at amortized cost and held in the general
fund assets supporting liabilities, also contributes to interest rate exposure in shareholders' net earnings.
The impact to shareholders' net earnings and equity from an immediate parallel 50 basis point increase or decrease in interest
rates is illustrated in the table below, rounded to the nearest $25:
Change in Market Yield Curves
2024
2023
Increase 50 basis
points interest
rates
Decrease 50 basis
points interest
rates
Increase 50 basis
points interest
rates
Decrease 50 basis
points interest
rates
Shareholders' net earnings
$
125 $
(150) $
175 $
(225)
Shareholders' equity
75
(125)
150
(225)
The sensitivities above reflect the immediate impacts on shareholders' net earnings and shareholders’ equity from market
movements.
Actual impacts of interest rate changes will vary depending upon the geography where the changes occur. Net earnings are
positively impacted by a parallel increase in interest rates in Canada, United States and the United Kingdom, and are positively
impacted by a parallel decrease in interest rates in the eurozone. Actual impacts of interest rate changes also vary by the level of
change in interest rates by term. Therefore, actual impacts from interest rate changes may differ from the estimated impact of
parallel movements in all geographies, which is presented above.
The potential impact on shareholders' net earnings of the Company does not take into account any future potential changes to
the Company's ultimate investment rate (UIR) assumptions. As at both December 31, 2024 and December 31, 2023, the
sensitivity of shareholders' net earnings of the Company to a 10 basis point increase or decrease in the UIR in all geographies
would be an increase of $25 or a decrease of $25 post-tax, respectively.
The impact to shareholders' net earnings and equity from an immediate parallel 50 basis point increase or decrease in credit
spreads is illustrated in the table below, rounded to the nearest $25, with no change to the ultimate illiquidity premium:
Change in Credit Spreads
2024
2023
Increase 50 basis
points credit
spreads
Decrease 50 basis
points credit
spreads
Increase 50 basis
points credit
spreads
Decrease 50 basis
points credit
spreads
Shareholders' net earnings
$
250 $
(300) $
300 $
(375)
Shareholders' equity
325
(400)
350
(450)
The sensitivities above reflect the immediate impacts on shareholders' net earnings and shareholders’ equity from market
movements.
155
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Actual impacts of credit spread changes will vary depending on the geographies where the changes occur, and the changes in
credit spreads by term. A change in credit spreads may also lead to a change in the allowance for credit risk within the discount
rate, depending on prevailing market and credit conditions at the time; any potential earnings impacts that may arise from
such a change are not reflected in the sensitivities above.
(iii) Equity Risk
Equity risk is the uncertainty associated with the valuation of assets and liabilities arising from changes in equity markets and
other pricing risk. To mitigate this risk, the Company has investment policy guidelines in place that provide for prudent
investment in equity markets within clearly defined limits. The risks associated with segregated fund guarantees on lifetime
Guaranteed Minimum Withdrawal Benefits have been mitigated through a hedging program using equity futures, currency
forwards, and interest rate derivatives.
Some insurance and investment contract liabilities with long-tail cash flows are supported by publicly traded common stocks
and investments in other non-fixed income assets, primarily comprised of investment properties, real estate funds, private
stocks, and equity release mortgages. Shareholders' net earnings will reflect changes in the values of non-fixed income assets.
However, in most cases the value of the liabilities will not fluctuate with changes in the value of the non-fixed income assets.
The liabilities for segregated fund products with guarantees will fluctuate with changes in the value of the non-fixed income
assets. Under current market conditions, there are no earnings impacts to the Company on segregated fund business that it
does not hedge, as changes in the cost of guarantees are fully offset within the CSM. For segregated fund business that the
Company hedges, there is a limited earnings impact with respect to the change in liability versus the change in hedge assets.
On January 1, 2024, the Company completed the sale of Putnam Investments and currently holds approximately 31,600,000
Franklin Templeton common shares as part of the consideration, which are classified as FVOCI. The Company has agreed to
hold a majority of these shares until at least January 1, 2029.
The following table provides information on the expected impacts of an immediate 10% or 20% increase or decrease in the
value of publicly traded common stocks on the shareholders' net earnings and equity, rounded to the nearest $25:
Change in Publicly Traded Common Stock Values
2024 1
2023
20%
increase
10%
increase
10%
decrease
20%
decrease
20%
increase
10%
increase
10%
decrease
20%
decrease
Shareholders' net
earnings
$
100 $
50 $
(50) $
(100) $
225 $
100 $
(100) $
(225)
Shareholders'
equity
525
250
(250)
(525)
525
250
(250)
(525)
1
The net impact of the sale of Putnam Investments and the receipt of Franklin Templeton common shares is reflected in the December 31, 2024 values in the table above.
The Franklin Templeton common shares are measured at FVOCI and therefore unrealized gains and losses do not impact shareholders' net earnings. The after-tax
impact on shareholders' equity of the Franklin Templeton common shares is approximately $75 for every 10% change in the common stock equity value.
The sensitivities above reflect the immediate impacts on shareholders' net earnings and shareholders’ equity from market
movements.
The following table provides information on the expected impacts of an immediate 5% or 10% increase or decrease in the value
of other non-fixed income assets on the shareholders' net earnings and equity, rounded to the nearest $25:
Change in Other Non-Fixed Income Asset Values
2024
2023
10%
increase
5%
increase
5%
decrease
10%
decrease
10%
increase
5%
increase
5%
decrease
10%
decrease
Shareholders' net
earnings
$
425 $
225 $
(225) $
(450) $
400 $
200 $
(200) $
(425)
Shareholders'
equity
475
250
(250)
(500)
450
225
(225)
(450)
The sensitivities above reflect the immediate impacts on shareholders' net earnings and shareholders’ equity from market
movements.
156
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(d)
Enforceable Master Netting Arrangements or Similar Agreements
The Company enters into International Swaps and Derivative Association's (ISDA's) master agreements for transacting over-
the-counter derivatives. The Company receives and pledges collateral according to the related ISDA's Credit Support Annexes.
The ISDA's master agreements do not meet the criteria for offsetting on the Consolidated Balance Sheets because they create a
right of set-off that is enforceable only in the event of default, insolvency, or bankruptcy.
For exchange-traded derivatives subject to derivative clearing agreements with the exchanges and clearinghouses, there is no
provision for set-off at default. Initial margin is excluded from the table within this disclosure as it would become part of a
pooled settlement process.
The table sets out the potential effect on the Company’s Consolidated Balance Sheets on financial instruments that have been
shown in a gross position where right of set-off exists under certain circumstances that do not qualify for netting on the
Consolidated Balance Sheets.
2024
Related amounts not set-off in the
Consolidated Balance Sheets
Gross amount of
financial
instruments
presented in the
Consolidated
Balance Sheets
Offsetting
counterparty
position 1
Financial collateral
received / pledged 2
Net
exposure
Financial instruments - assets
Derivative financial instruments
$
2,431 $
(1,117) $
(1,130) $
184
Total financial instruments - assets
$
2,431 $
(1,117) $
(1,130) $
184
Financial instruments - liabilities
Derivative financial instruments
$
2,137 $
(1,117) $
(628) $
392
Total financial instruments - liabilities
$
2,137 $
(1,117) $
(628) $
392
1
Includes counterparty amounts recognized on the Consolidated Balance Sheets where the Company has a potential offsetting position (as described above) but does not
meet the criteria for offsetting on the balance sheet, excluding collateral.
2
Financial collateral presented above excludes overcollateralization and, for exchange-traded derivatives, initial margin. At December 31, 2024, total financial collateral,
including initial margin and overcollateralization, received on derivative assets was $1,732, and pledged on derivative liabilities was $2,068.
2023
Related amounts not set-off in the
Consolidated Balance Sheets
Gross amount of
financial
instruments
presented in the
Consolidated
Balance Sheets
Offsetting
counterparty
position 1
Financial collateral
received / pledged 2
Net
exposure
Financial instruments - assets
Derivative financial instruments
$
2,219 $
(925) $
(1,097) $
197
Total financial instruments - assets
$
2,219 $
(925) $
(1,097) $
197
Financial instruments - liabilities
Derivative financial instruments
$
1,288 $
(925) $
(194) $
169
Total financial instruments - liabilities
$
1,288 $
(925) $
(194) $
169
1
Includes counterparty amounts recognized on the Consolidated Balance Sheets where the Company has a potential offsetting position (as described above) but does not
meet the criteria for offsetting on the balance sheet, excluding collateral.
2
Financial collateral presented above excludes overcollateralization and, for exchange-traded derivatives, initial margin. At December 31, 2023, total financial collateral,
including initial margin and overcollateralization, received on derivative assets was $1,715, and pledged on derivative liabilities was $773.
157
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
8.
Fair Value Measurement
The Company’s assets and liabilities recorded at fair value have been categorized based upon the following fair value hierarchy:
Level 1: Fair value measurements utilize observable, quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access. Assets and liabilities utilizing Level 1 inputs include actively exchange-
traded equity securities, exchange-traded futures, and mutual and segregated funds which have available prices in an active
market with no redemption restrictions.
Level 2: Fair value measurements utilize inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and
inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are
observable at commonly quoted intervals. Level 2 assets and liabilities include those priced using a matrix which is based on
credit quality and average life, government and agency securities, restricted stock, some private bonds and investment funds,
most investment-grade and high-yield corporate bonds, most asset-backed securities, most over-the-counter derivatives, and
mortgage loans. Investment contracts that are measured at FVTPL are mostly included in the Level 2 category. Notes issued by
consolidated CLOs are measured at FVTPL and included in Level 2.
Level 3: Fair value measurements utilize one or more significant inputs that are not based on observable market inputs and
include situations where there is little, if any, market activity for the asset or liability. The values of the majority of Level 3
securities were obtained from single broker quotes, internal pricing models, or external appraisers. Assets and liabilities
utilizing Level 3 inputs generally include certain bonds, certain asset-backed securities, some private equities, investments in
mutual and segregated funds where there are redemption restrictions, certain over-the-counter derivatives, investment
properties and equity release mortgages.
158
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following presents the Company’s assets and liabilities measured at fair value on a recurring basis by hierarchy level:
2024
2023
Assets measured at fair value
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
10,709 $
— $
— $
10,709 $
7,742 $
— $
— $
7,742
Financial assets at FVTPL
Bonds
—
153,178
178
153,356
—
145,049
252
145,301
Mortgage loans
—
28,790
4,818
33,608
—
29,211
4,203
33,414
Stocks
11,055
260
5,581
16,896
10,863
218
3,809
14,890
Total financial assets at FVTPL
11,055
182,228
10,577
203,860
10,863
174,478
8,264
193,605
Financial assets at FVOCI
Bonds
—
13,758
—
13,758
—
11,750
—
11,750
Mortgage loans
—
461
—
461
—
578
—
578
Stocks
923
—
—
923
—
—
—
—
Total financial assets at FVOCI
923
14,219
—
15,142
—
12,328
—
12,328
Investment properties
—
—
8,257
8,257
—
—
7,870
7,870
Derivatives 1
1
2,430
—
2,431
1
2,218
—
2,219
Assets held for sale 2
—
—
—
—
614
1,006
907
2,527
Other assets:
Trading account assets
252
3,449
—
3,701
242
2,796
—
3,038
Other 3
—
219
—
219
—
443
—
443
Total assets measured at fair value
$
22,940 $ 202,545 $
18,834 $ 244,319 $
19,462 $ 193,269 $
17,041 $ 229,772
Liabilities measured at fair value
Mortgage on investment property
$
— $
54 $
— $
54 $
— $
— $
— $
—
Derivatives 4
—
2,137
—
2,137
5
1,283
—
1,288
Investment contract liabilities
—
90,157
—
90,157
—
88,919
—
88,919
Collateralized loan obligation liabilities
—
3,791
—
3,791
—
3,110
—
3,110
Other liabilities
—
219
—
219
—
443
—
443
Total liabilities measured at fair value
$
— $
96,358 $
— $
96,358 $
5 $
93,755 $
— $
93,760
1
Excludes collateral received from counterparties of $1,199 at December 31, 2024 ($1,346 at December 31, 2023).
2
Assets held for sale measured at fair value includes cash of $375, stocks of $46 and trading account assets of $2,106 as at December 31, 2023.
3
Includes collateral received under securities lending arrangements.
4
Excludes collateral pledged to counterparties of $1,337 at December 31, 2024 ($247 at December 31, 2023).
There were no transfers of the Company's assets and liabilities between Level 1 and Level 2 during the years ended December
31, 2024 and December 31, 2023.
159
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following presents additional information about assets and liabilities measured at fair value on a recurring basis and for
which the Company has utilized Level 3 inputs to determine fair value:
2024
FVTPL
bonds
FVTPL
mortgage
loans
FVTPL
stocks 4
Investment
properties
Trading
account
assets
Assets
held for
sale
Total
Level 3
assets
Balance, beginning of year
$
252 $
4,203 $
3,809 $
7,870 $
— $
907 $
17,041
Total gains (losses)
Included in net earnings
7
200
556
(153)
—
—
610
Included in other comprehensive income 1
—
153
107
265
—
—
525
Purchases
29
—
1,407
618
—
—
2,054
Sale of discontinued operations
—
—
—
—
—
(907)
(907)
Issues
—
481
—
—
—
—
481
Sales
(27)
—
(299)
(334)
—
—
(660)
Settlements
—
(219)
—
—
—
—
(219)
Transferred to owner occupied properties
—
—
—
(9)
—
—
(9)
Other
—
—
—
—
—
—
—
Transfers into Level 3 3
—
—
1
—
—
—
1
Transfers out of Level 3 3
(83)
—
—
—
—
—
(83)
Balance, end of year
$
178 $
4,818 $
5,581 $
8,257 $
— $
— $
18,834
Total gains (losses) for the year included in net
investment result
$
7 $
200 $
556 $
(153) $
— $
— $
610
Change in unrealized gains (losses) for the year
included in net earnings for assets held at
December 31, 2024
$
7 $
191 $
556 $
(165) $
— $
— $
589
2023
FVTPL
bonds
FVTPL
mortgage
loans
FVTPL
stocks 4
Investment
properties
Trading
account
assets
Assets
held for
sale
Total
Level 3
assets
Balance, beginning of year
$
195 $
3,371 $
3,029 $
8,344 $
940 $
— $
15,879
Total gains (losses)
Included in net earnings
6
345
148
(507)
(12)
25
5
Included in other comprehensive income 1
—
52
(12)
53
—
(14)
79
Purchases
68
—
948
191
23
12
1,242
Issues
—
569
—
—
—
—
569
Sales
(17)
—
(304)
(211)
—
(67)
(599)
Settlements
—
(134)
—
—
—
—
(134)
Other 2
—
—
—
—
(951)
951
—
Transfers into Level 3 3
—
—
—
—
—
—
—
Transfers out of Level 3 3
—
—
—
—
—
—
—
Balance, end of year
$
252 $
4,203 $
3,809 $
7,870 $
— $
907 $
17,041
Total gains (losses) for the year included in net
investment result
$
6 $
345 $
148 $
(507) $
(12) $
25 $
5
Change in unrealized gains (losses) for the year
included in earnings for assets held at December 31,
2023
$
6 $
334 $
148 $
(499) $
— $
25 $
14
1
Amount of other comprehensive income for FVTPL bonds, mortgage loans and investment properties represents the unrealized gains (losses) on foreign exchange.
2
Represents amounts reclassified to assets held for sale as a result of the agreement to sell Putnam Investments (note 3).
3
Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies or the placement of redemption restrictions on investments in
mutual and segregated funds. Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of
market prices with multiple pricing vendors or the lifting of redemption restrictions on investments in mutual and segregated funds.
4
Includes investments in mutual and segregated funds where there are redemption restrictions. The fair value is based on observable, quoted prices.
160
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following sets out information about significant unobservable inputs used at year-end in measuring assets and liabilities
categorized as Level 3 in the fair value hierarchy:
Type of asset
Valuation approach
Significant
unobservable input
Input value
Inter-relationship between
key unobservable inputs
and fair value measurement
Investment
properties
Investment property valuations are
generally determined using
property valuation models based on
expected capitalization rates and
models that discount expected
future net cash flows. The
determination of the fair value of
investment property requires the
use of estimates such as future cash
flows (such as future leasing
assumptions, rental rates, capital
and operating expenditures) and
discount, reversionary and overall
capitalization rates applicable to the
asset based on current market
rates.
Discount rate
Range of 4.2% - 12.6%
A decrease in the discount rate
would result in an increase in
fair value. An increase in the
discount rate would result in a
decrease in fair value.
Reversionary rate
Range of 4.3% - 8.0%
A decrease in the reversionary
rate would result in an
increase in fair value. An
increase in the reversionary
rate would result in a decrease
in fair value.
Vacancy rate
Weighted average of 5.7%
A decrease in the expected
vacancy rate would generally
result in an increase in fair
value. An increase in the
expected vacancy rate would
generally result in a decrease
in fair value.
Mortgage loans -
equity release
mortgages (FVTPL)
The valuation approach for equity
release mortgages is to use an
internal valuation model to
determine the projected asset cash
flows, including the cost of the no
negative equity guarantee for each
individual loan, to aggregate these
across all loans and to discount
those cash flows back to the
valuation date. The projection is
done monthly until expected
redemption of the loan either
voluntarily or on the death/entering
into long term care of the
loanholders.
Discount rate
Range of 4.7% - 6.5%
A decrease in the discount rate
would result in an increase in
fair value. An increase in the
discount rate would result in a
decrease in fair value.
Stocks
The determination of the fair value
of stocks requires the use of
estimates such as future cash flows,
discount rates, projected earnings
multiples, or recent transactions.
Discount rate
Various
A decrease in the discount rate
would result in an increase in
fair value.
An increase in the discount
rate would result in a decrease
in fair value.
The following presents the Company’s assets, liabilities and equity disclosed at fair value on a recurring basis by hierarchy
level:
2024
Level 1
Level 2
Level 3
Other assets/
liabilities not
held at fair
value
Total
Assets disclosed at fair value
Financial assets at amortized cost
Mortgage loans
$
— $
4,193 $
— $
— $
4,193
Total financial assets at amortized cost
—
4,193
—
—
4,193
Other stocks 1
421
—
—
600
1,021
Total assets disclosed at fair value
$
421 $
4,193 $
— $
600 $
5,214
Liabilities and equity disclosed at fair value
Debentures and other debt instruments
$
144 $
8,506 $
— $
— $
8,650
Limited recourse capital notes
—
1,346
—
—
1,346
Total liabilities and equity disclosed at fair value
$
144 $
9,852 $
— $
— $
9,996
1
Other stocks include the Company's investment in IGM and other related parties.
161
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Level 1
Level 2
Level 3
Other assets/
liabilities not
held at fair
value
Total
Assets disclosed at fair value
Financial assets at amortized cost
Mortgage loans
$
— $
3,923 $
— $
— $
3,923
Total financial assets at amortized cost
—
3,923
—
—
3,923
Other stocks 1
321
—
—
456
777
Total assets disclosed at fair value
$
321 $
3,923 $
— $
456 $
4,700
Liabilities and equity disclosed at fair value
Debentures and other debt instruments
$
192 $
8,212 $
— $
— $
8,404
Limited recourse capital notes
—
1,155
—
—
1,155
Total liabilities and equity disclosed at fair value
$
192 $
9,367 $
— $
— $
9,559
1
Other stocks include the Company's investment in IGM and other related parties.
9.
Goodwill and Intangible Assets
(a)
Goodwill
(i)
The Carrying Value and Changes in the Carrying Value of Goodwill are as Follows:
2024
2023
Cost
Balance, beginning of year
$
11,284 $
11,860
Transfer to assets held for sale
—
(1,214)
Business acquisitions
75
702
Purchase price allocation adjustments
36
(1)
Disposals
(4)
—
Allocated to intangible assets
(299)
(11)
Changes in foreign exchange rates
376
(52)
Balance, end of year
$
11,468 $
11,284
Accumulated impairment
Balance, beginning of year
$
(35) $
(1,249)
Transfer to assets held for sale
—
1,214
Disposals
2
—
Impairment
(7)
—
Balance, end of year
$
(40) $
(35)
Net carrying amount
$
11,428 $
11,249
(ii)
Goodwill has Been Assigned to Cash Generating Unit Groupings as Follows:
2024
2023
Canada
Group Customer
$
1,482 $
1,482
Individual Customer
2,978
3,250
Europe
2,393
2,366
United States
4,575
4,151
Total
$
11,428 $
11,249
162
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
Intangible Assets
Intangible assets of $4,958 ($4,484 as at December 31, 2023) include indefinite life and finite life intangible assets. The carrying
value and changes in the carrying value of these intangible assets are as follows:
(i)
Indefinite Life Intangible Assets:
2024
2023
Brands and
trademarks
Customer
contract
related
Shareholders'
portion of
acquired
future
participating
account
profit
Total
Brands and
trademarks
Customer
contract
related
Shareholders'
portion of
acquired
future
participating
account
profit
Total
Cost
Balance, beginning of year
$
562 $
410 $
354 $
1,326 $
1,079 $
2,678 $
354 $
4,111
Additions
—
135
—
135
—
26
—
26
Transfer to assets held for
sale
—
—
—
—
(425)
(2,294)
—
(2,719)
Transfer to finite life
intangible assets
—
—
—
—
(95)
—
—
(95)
Changes in foreign exchange
rates
13
—
—
13
3
—
—
3
Balance, end of year
$
575 $
545 $
354 $
1,474 $
562 $
410 $
354 $
1,326
Accumulated impairment
Balance, beginning of year
$
(57) $
— $
— $
(57) $
(137) $
(1,092) $
— $
(1,229)
Transfer to assets held for
sale
—
—
—
—
103
1,092
—
1,195
Impairment
—
—
—
—
(23)
—
—
(23)
Changes in foreign exchange
rates
(3)
—
—
(3)
—
—
—
—
Balance, end of year
$
(60) $
— $
— $
(60) $
(57) $
— $
— $
(57)
Net carrying amount
$
515 $
545 $
354 $
1,414 $
505 $
410 $
354 $
1,269
During 2023, the Company recognized an impairment of $23 on the PanAgora brand which is presented within operating and
administrative expenses in the Consolidated Statements of Earnings.
(ii)
Indefinite Life Intangible Assets Have Been Assigned to Cash Generating Unit Groupings as Follows:
2024
2023
Canada
Group Customer
$
529 $
354
Individual Customer
609
649
Europe
256
247
United States
20
19
Total
$
1,414 $
1,269
163
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(iii) Finite Life Intangible Assets:
2024
Customer contract
related
Distribution
channels
Brands and
trademarks
Technology and
software
Total
Amortization period range
7 - 30 years
30 years
10 years
3 - 10 years
Amortization method
Straight-line
Straight-line
Straight-line
Straight-line
Cost
Balance, beginning of year
$
3,132 $
107 $
93 $
2,557 $
5,889
Additions
214
—
—
360
574
Changes in foreign exchange rates
191
4
8
84
287
Disposals
(5)
—
—
(22)
(27)
Balance, end of year
$
3,532 $
111 $
101 $
2,979 $
6,723
Accumulated amortization and
impairment
Balance, beginning of year
$
(1,135) $
(73) $
(7) $
(1,459) $
(2,674)
Changes in foreign exchange rates
(64)
(2)
(1)
(48)
(115)
Impairment
(2)
—
—
—
(2)
Disposals
5
—
—
22
27
Amortization
(175)
(4)
(10)
(226)
(415)
Balance, end of year
$
(1,371) $
(79) $
(18) $
(1,711) $
(3,179)
Net carrying amount
$
2,161 $
32 $
83 $
1,268 $
3,544
2023
Customer contract
related
Distribution
channels
Brands and
trademarks
Technology and
software
Total
Amortization period range
7 - 30 years
30 years
10 years
3 - 10 years
Amortization method
Straight-line
Straight-line
Straight-line
Straight-line
Cost
Balance, beginning of year
$
3,182 $
105 $
— $
2,886 $
6,173
Additions
29
—
—
313
342
Transfer to assets held for sale
(50)
—
—
(325)
(375)
Transfer from indefinite life intangible
assets
—
—
95
—
95
Changes in foreign exchange rates
(29)
2
(2)
(5)
(34)
Disposals
—
—
—
(312)
(312)
Balance, end of year
$
3,132 $
107 $
93 $
2,557 $
5,889
Accumulated amortization and
impairment
Balance, beginning of year
$
(1,013) $
(68) $
— $
(1,744) $
(2,825)
Transfer to assets held for sale
39
—
—
244
283
Changes in foreign exchange rates
5
(1)
—
7
11
Disposals
—
—
—
223
223
Amortization
(166)
(4)
(7)
(189)
(366)
Balance, end of year
$
(1,135) $
(73) $
(7) $
(1,459) $
(2,674)
Net carrying amount
$
1,997 $
34 $
86 $
1,098 $
3,215
During 2023, the Company recognized an impairment of $88 on software assets in the United Kingdom which is presented
within operating and administrative expenses in the Consolidated Statements of Earnings.
The weighted average remaining amortization period of the customer contract related, distribution channels and brands and
trademarks are 14, 9 and 8 years respectively (14, 10 and 9 years respectively at December 31, 2023).
164
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(c)
Recoverable Amount
For the purposes of annual impairment testing, the Company allocates intangible assets to cash generating units and goodwill
to cash generating unit groupings. Any potential impairment of indefinite life intangible assets is identified by comparing the
recoverable amount of a cash generating unit to its carrying value. Any potential impairment of goodwill is identified by
comparing the recoverable amount of a cash generating unit grouping to its carrying value.
Fair value is initially assessed with reference to valuation multiples of comparable publicly-traded financial institutions and
precedent business acquisition transactions. The calculations utilize earnings and cash flow projections based on financial
budgets approved by management. These valuation multiples may include price-to-earnings or price-to-book measures for life
insurers and asset managers. This assessment may give regard to a variety of relevant considerations, including expected
growth, risk and capital market conditions, among other factors. The valuation multiples used in assessing fair value represent
Level 2 inputs.
In the fourth quarter of 2024, the Company conducted its annual impairment testing of intangible assets and goodwill based on
September 30, 2024 asset balances. It was determined that the recoverable amounts of cash generating units for intangible
assets and cash generating unit groupings for goodwill were in excess of their carrying values and there was no evidence of
impairment.
Any reasonable changes in assumptions and estimates used in determining recoverable amounts of cash generating units or
cash generating unit groupings is unlikely to cause carrying values to exceed recoverable amounts.
10. Owner Occupied Properties and Fixed Assets
The carrying value of owner occupied properties and the changes in the carrying value of owner occupied properties are as
follows:
2024
2023
Carrying value, beginning of year
$
932 $
907
Less: accumulated depreciation/impairments
(201)
(183)
Net carrying value, beginning of year
731
724
Additions
52
26
Impairment
(3)
—
Transferred from investment properties
9
—
Depreciation
(18)
(18)
Foreign exchange
18
(1)
Net carrying value, end of year
$
789 $
731
The net carrying value of fixed assets is $346 at December 31, 2024 ($335 at December 31, 2023).
The following provides details of the net carrying value of owner occupied properties and fixed assets by operating segment:
2024
2023
Canada
$
572 $
583
United States
269
270
Europe
293
212
Capital and Risk Solutions
1
1
Total
$
1,135 $
1,066
There are no restrictions on the title of the owner occupied properties and fixed assets, nor are they pledged as security for debt.
165
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
11. Other Assets
2024
2023
Deferred acquisition costs
$
1,065 $
913
Right-of-use assets
311
308
Trading account assets 1
3,701
3,038
Finance leases receivable
926
668
Defined benefit pension plan assets (note 26)
493
365
Prepaid expenses
167
128
Funds held under investment contracts
6,895
7,268
Miscellaneous other assets
1,707
1,795
Total
$
15,265 $
14,483
1
Includes bonds of $3,449 and stocks of $252 at December 31, 2024 (bonds of $2,797 and stocks of $241 at December 31, 2023).
Total other assets of $5,624 ($5,000 at December 31, 2023) are expected to be derecognized within 12 months from the
reporting date. This amount excludes deferred acquisition costs, the changes in which are noted below.
Deferred Acquisition Costs
2024
2023
Balance, beginning of year
$
913 $
923
Additions
247
201
Amortization
(123)
(114)
Changes in foreign exchange rates
54
(2)
Disposals
(26)
(95)
Balance, end of year
$
1,065 $
913
12. Insurance Revenue
2024
2023
Contracts not measured under the premium allocation approach (PAA)
Amounts relating to changes in liabilities for remaining coverage
Experience adjustments
$
(61) $
(87)
CSM recognized for services provided
1,262
1,224
Change in risk adjustment for non-financial risk for risk expired
624
609
Expected incurred claims and other insurance service expenses
9,527
9,161
Recovery of insurance acquisition cash flows
588
556
11,940
11,463
Contracts measured under the PAA
9,274
8,939
Total insurance revenue
$
21,214 $
20,402
166
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
13. Insurance Service and Other Operating Expenses
2024
2023
Claims and benefits incurred
$
14,598 $
13,982
Allocation of premium directly to recovery of insurance acquisition cash flows
748
702
Adjustments to the liability for incurred claims
(773)
(625)
Losses and reversal of losses on onerous insurance contracts
97
62
Salaries and other employee benefits
4,954
4,544
General and administrative
1,778
1,785
Interest expense on leases
14
11
Depreciation of fixed assets
87
87
Depreciation of right-of-use assets
54
52
Commissions
1,861
1,579
Total expenses
$
23,418 $
22,179
Represented by:
Insurance service expenses
$
16,368 $
15,777
Other operating and administrative expenses
7,050
6,402
Total expenses
$
23,418 $
22,179
167
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
14. Insurance Contracts
(a)
Analysis by Remaining Coverage and Incurred Claims
Insurance contracts
2024
Liability for remaining
coverage
Liability for incurred claims
Contracts under PAA
Excluding
loss
component
Loss
component
Contracts
not under
PAA
Estimates
of present
value of
future
cash flows
Risk
adjustment
for non-
financial
risk
Asset for
acquisition
cash flows
Total
Opening assets
$
(2,021) $
— $
831 $
(3) $
— $
— $ (1,193)
Opening liabilities
127,300
253
2,876
13,578
555
(174) 144,388
Opening liabilities on account of segregated fund
policyholders
60,302
—
—
—
—
—
60,302
Net opening balance
185,581
253
3,707
13,575
555
(174) 203,497
Changes in the Consolidated Statements of
Earnings and Comprehensive Income
Insurance revenue
(21,214)
—
—
—
—
— (21,214)
Insurance service expenses
Incurred claims and other insurance service expenses
—
(21)
9,647
6,615
55
—
16,296
Amortization of insurance acquisition cash flows
748
—
—
—
—
—
748
Losses and reversal of losses on onerous contracts
—
97
—
—
—
—
97
Adjustments to liabilities for incurred claims
—
—
(17)
(689)
(67)
—
(773)
748
76
9,630
5,926
(12)
—
16,368
Investment components
(10,578)
—
7,523
3,055
—
—
—
Total changes in insurance service result
(31,044)
76
17,153
8,981
(12)
—
(4,846)
Net finance (income) expenses from insurance
contracts
7,856
2
5,576
505
17
—
13,956
Effect of movement in exchange rates
4,892
9
87
188
9
—
5,185
Total changes in the Consolidated Statements of
Earnings and Comprehensive Income
(18,296)
87
22,816
9,674
14
—
14,295
Cash flows
Premiums received
35,406
—
—
—
—
—
35,406
Incurred claims paid and other insurance service
expenses paid
(58)
—
(22,760)
(9,355)
—
— (32,173)
Insurance acquisition cash flows
(878)
—
—
—
—
—
(878)
Insurance acquisition cash flows transferred from
the asset for insurance acquisition cash flows at
initial recognition
(34)
—
—
—
—
—
(34)
Other cash flows 1
1,211
—
—
—
—
—
1,211
Total cash flows
35,647
—
(22,760)
(9,355)
—
—
3,532
Asset for acquisition cash flows
Insurance acquisition cash flows paid in the period
—
—
—
—
—
(41)
(41)
Insurance acquisition cash flows allocated to groups
of insurance contracts recognized in the period
—
—
—
—
—
34
34
Total changes in asset for acquisition cash flows
—
—
—
—
—
(7)
(7)
Other movements 2
(484)
—
—
—
—
—
(484)
Net closing balance 3
$
202,448 $
340 $
3,763 $
13,894 $
569 $
(181) $ 220,833
Recorded in:
Closing assets
$
(1,414) $
3 $
190 $
28 $
— $
— $ (1,193)
Closing liabilities
137,519
337
3,573
13,866
569
(181) 155,683
Closing liabilities on account of segregated fund
policyholders
66,343
—
—
—
—
—
66,343
Net closing balance 3
$
202,448 $
340 $
3,763 $
13,894 $
569 $
(181) $ 220,833
1
Other cash flows includes transfer to/from segregated funds, premiums to be settled via funding component balance (FCB), claims to be settled via FCB, net settlements,
and other cash flows from policy loans.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
3
Included in the insurance contract balances are loans to policyholders of $9,204 and funds withheld of $3,640.
168
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Insurance contracts
2023
Liability for remaining
coverage
Liability for incurred claims
Contracts under PAA
Excluding
loss
component
Loss
component
Contracts
not under
PAA
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Asset for
acquisition
cash flows
Total
Opening assets
$
(1,275) $
2 $
197 $
(64) $
— $
— $ (1,140)
Opening liabilities
118,505
199
3,366
12,994
545
(171) 135,438
Opening liabilities on account of segregated fund
policyholders
57,841
—
—
—
—
—
57,841
Net opening balance
175,071
201
3,563
12,930
545
(171) 192,139
Changes in the Consolidated Statements of Earnings
and Comprehensive Income
Insurance revenue
(20,402)
—
—
—
—
— (20,402)
Insurance service expenses
Incurred claims and other insurance service expenses
—
(22)
9,311
6,250
99
—
15,638
Amortization of insurance acquisition cash flows
702
—
—
—
—
—
702
Losses and reversal of losses on onerous contracts
—
62
—
—
—
—
62
Adjustments to liabilities for incurred claims
—
—
(47)
(455)
(123)
—
(625)
702
40
9,264
5,795
(24)
—
15,777
Investment components
(10,085)
—
7,193
2,892
—
—
—
Total changes in insurance service result
(29,785)
40
16,457
8,687
(24)
—
(4,625)
Net finance (income) expenses from insurance
contracts
9,515
12
5,274
709
31
—
15,541
Effect of movement in exchange rates
88
—
7
72
3
—
170
Total changes in the Consolidated Statements of
Earnings and Comprehensive Income
(20,182)
52
21,738
9,468
10
—
11,086
Cash flows
Premiums received
30,906
—
—
—
—
—
30,906
Incurred claims paid and other insurance service
expenses paid
(63)
—
(21,594)
(8,823)
—
— (30,480)
Insurance acquisition cash flows
(865)
—
—
—
—
—
(865)
Insurance acquisition cash flows transferred from
the asset for insurance acquisition cash flows at
initial recognition
(32)
—
—
—
—
—
(32)
Other cash flows 1
903
—
—
—
—
—
903
Total cash flows
30,849
—
(21,594)
(8,823)
—
—
432
Asset for acquisition cash flows
Insurance acquisition cash flows paid in the period
—
—
—
—
—
(35)
(35)
Insurance acquisition cash flows allocated to groups
of insurance contracts recognized in the period
—
—
—
—
—
32
32
Total changes in asset for acquisition cash flows
—
—
—
—
—
(3)
(3)
Other movements 2
(157)
—
—
—
—
—
(157)
Net closing balance 3
$
185,581 $
253 $
3,707 $
13,575 $
555 $
(174) $ 203,497
Recorded in:
Closing assets
$
(2,021) $
— $
831 $
(3) $
— $
— $ (1,193)
Closing liabilities
127,300
253
2,876
13,578
555
(174) 144,388
Closing liabilities on account of segregated fund
policyholders
60,302
—
—
—
—
—
60,302
Net closing balance 3
$
185,581 $
253 $
3,707 $
13,575 $
555 $
(174) $ 203,497
1
Other cash flows includes transfer to/from segregated funds, premiums to be settled via FCB, claims to be settled via FCB, net settlements, and other cash flows from
policy loans.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
3
Included in the insurance contract balances are loans to policyholders of $8,945 and funds withheld of $3,926.
169
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
Analysis by Measurement Component for Insurance Contracts not Measured Under PAA
Insurance contracts
2024
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
CSM
Total
Opening assets
$
(6,560) $
1,654 $
3,796 $
(1,110)
Opening liabilities
115,794
5,372
9,952
131,118
Opening liabilities on account of segregated fund policyholders
60,302
—
—
60,302
Net opening balance
169,536
7,026
13,748
190,310
Changes in the Consolidated Statements of Earnings and
Comprehensive Income
Changes that relate to current service
CSM recognized for services provided
—
—
(1,262)
(1,262)
Change in risk adjustment for non-financial risk for risk expired
—
(627)
—
(627)
Experience adjustments
161
1
—
162
Changes that relate to future service
Contracts initially recognized in the year
(1,229)
330
913
14
Changes in estimates that adjust the CSM
(243)
(284)
527
—
Changes in estimates that result in losses and reversal of losses on onerous
contacts
69
14
—
83
Changes that relate to past service
Adjustment to liabilities for incurred claims
(16)
—
—
(16)
Total changes in insurance service result
(1,258)
(566)
178
(1,646)
Net finance (income) expenses from insurance contracts
13,186
74
174
13,434
Effect of movement in exchange rates
4,441
205
340
4,986
Total changes in the Consolidated Statements of Earnings and
Comprehensive Income
16,369
(287)
692
16,774
Cash flows
Premiums received
22,964
—
—
22,964
Incurred claims paid and other insurance service expenses paid
(22,817)
—
—
(22,817)
Insurance acquisition cash flows
(750)
—
—
(750)
Other cash flows 1
1,271
—
—
1,271
Total cash flows
668
—
—
668
Other movements 2
(484)
—
—
(484)
Net closing balance
$
186,089 $
6,739 $
14,440 $
207,268
Recorded in:
Closing assets
$
(4,397) $
584 $
2,672 $
(1,141)
Closing liabilities
124,143
6,155
11,768
142,066
Closing liabilities on account of segregated fund policyholders
66,343
—
—
66,343
Net closing balance
$
186,089 $
6,739 $
14,440 $
207,268
1
Other cash flows includes transfer to/from segregated funds, premiums to be settled via FCB, claims to be settled via FCB, net settlements, and other cash flows from
policy loans.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
170
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Insurance contracts
2023
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
CSM
Total
Opening assets
$
(4,271) $
515 $
2,773 $
(983)
Opening liabilities
105,278
6,036
11,361
122,675
Opening liabilities on account of segregated fund policyholders
57,841
—
—
57,841
Net opening balance
158,848
6,551
14,134
179,533
Changes in the Consolidated Statements of Earnings and Comprehensive
Income
Changes that relate to current service
CSM recognized for services provided
—
—
(1,224)
(1,224)
Change in risk adjustment for non-financial risk for risk expired
—
(611)
—
(611)
Experience adjustments
214
1
—
215
Changes that relate to future service
Contracts initially recognized in the year
(1,037)
358
688
9
Changes in estimates that adjust the CSM
(11)
91
(80)
—
Changes in estimates that result in losses and reversal of losses on onerous
contacts
56
15
—
71
Changes that relate to past service
Adjustment to liabilities for incurred claims
(45)
(2)
—
(47)
Total changes in insurance service result
(823)
(148)
(616)
(1,587)
Net finance (income) expenses from insurance contracts
14,058
591
152
14,801
Effect of movement in exchange rates
(22)
32
78
88
Total changes in the Consolidated Statements of Earnings and Comprehensive
Income
13,213
475
(386)
13,302
Cash flows
Premiums received
19,144
—
—
19,144
Incurred claims paid and other insurance service expenses paid
(21,654)
—
—
(21,654)
Insurance acquisition cash flows
(755)
—
—
(755)
Other cash flows 1
897
—
—
897
Total cash flows
(2,368)
—
—
(2,368)
Other movements 2
(157)
—
—
(157)
Net closing balance
$
169,536 $
7,026 $
13,748 $
190,310
Recorded in:
Closing assets
$
(6,560) $
1,654 $
3,796 $
(1,110)
Closing liabilities
115,794
5,372
9,952
131,118
Closing liabilities on account of segregated fund policyholders
60,302
—
—
60,302
Net closing balance
$
169,536 $
7,026 $
13,748 $
190,310
1
Other cash flows includes transfer to/from segregated funds, premiums to be settled via FCB, claims to be settled via FCB, net settlements, and other cash flows from
policy loans.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
171
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(c)
CSM and Insurance Revenue by Transition Approach
2024
2023
CSM movement by transition approach
Insurance contracts under fair value approach
CSM balance, beginning of year
$
9,641 $
10,579
Change related to current service provided
CSM recognized for services provided
(885)
(929)
Changes that relate to future service
Changes in estimates that adjust the CSM
58
(116)
Total changes in insurance service result
(827)
(1,045)
Net finance expenses from insurance contracts
62
71
Effect of movement in exchange rates
176
36
Total change
(589)
(938)
CSM balance, end of year
$
9,052 $
9,641
Other insurance contracts
CSM balance, beginning of year
$
4,107 $
3,555
Change related to current service provided
CSM recognized for services provided
(377)
(295)
Changes that relate to future service
Contracts initially recognized in the year
913
688
Changes in estimates that adjust the CSM
469
36
Total changes in insurance service result
1,005
429
Net finance expenses from insurance contracts
112
81
Effect of movement in exchange rates
164
42
Total change
1,281
552
CSM balance, end of year
$
5,388 $
4,107
Net CSM balance, end of year
$
14,440 $
13,748
2024
2023
Insurance revenue
Insurance revenue for contracts under fair value approach
$
8,569 $
8,529
Insurance revenue for contracts under other approaches
12,645
11,873
Total insurance revenue
$
21,214 $
20,402
Upon transition, IFRS 17 required an entity to apply the standard retrospectively unless impracticable. The Company
performed a cut-off date assessment (by region and product) to determine the contracts to which the full retrospective
approach can be applied. The Company applied the full retrospective approach to all identified insurance contracts unless it
was impracticable, where reasonable and supportable information necessary to complete the full retrospective approach was
not available.
The Company applied the fair value approach to contracts where it was impracticable to apply the full retrospective approach.
The fair value approach calculates the CSM or loss component of the liability for remaining coverage as the difference between
the fair value of a group of insurance contracts at the date of transition and the fulfillment cash flows measured at that date.
The Company used an embedded value approach to determine the fair value within the fair value approach. Under the
embedded value approach, the fair value is measured as the third party’s present value of fulfillment cash flows, plus future
costs of capital, less any future profits. The cost of capital was measured as the total required capital multiplied by a hurdle rate,
and the future profits are driven by the release of risk adjustment and investment income on required capital. The development
of the assumptions were based on a combination of publicly available industry data, historic economic data and the
Company’s own view of assumptions when the external data sources were not available.
172
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(d)
Composition of Insurance Contract Liabilities and Related Supporting Assets
(i)
The Composition of the Insurance and Reinsurance Contract Assets and Liabilities, as well as Investment
Contract Liabilities is as Follows:
2024
Insurance contract
assets
Reinsurance
contract held
assets
Insurance contract
liabilities
Investment
contract liabilities
Reinsurance
contract held
liabilities
Participating
Canada
$
— $
— $
55,941 $
— $
—
United States
—
—
5,337
—
—
Europe
—
—
122
—
—
Capital and Risk Solutions
—
—
678
—
—
Non-Participating
Canada
434
1,216
31,309
3,698
283
United States
335
12,756
13,544
85,470
159
Europe
353
3,746
41,944
330
313
Capital and Risk Solutions
71
124
6,808
659
40
Total
$
1,193 $
17,842 $
155,683 $
90,157 $
795
2023
Insurance contract
assets
Reinsurance
contract held
assets
Insurance contract
liabilities
Investment contract
liabilities
Reinsurance
contract held
liabilities
Participating
Canada
$
— $
— $
50,499 $
— $
—
United States
—
—
5,032
—
—
Europe
—
—
124
—
—
Capital and Risk Solutions
—
—
671
—
—
Non-Participating
Canada
400
1,243
30,956
3,931
208
United States
291
12,243
13,047
83,966
163
Europe
331
3,713
39,266
341
250
Capital and Risk Solutions
171
133
4,793
681
27
Total
$
1,193 $
17,332 $
144,388 $
88,919 $
648
173
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(ii)
The Composition of the Assets Supporting Insurance and Investment Contract Liabilities and Equity is as
Follows:
2024
Bonds
Mortgage
loans
Stocks
Investment
properties
Other
Total
Carrying value
Participating liabilities
Canada
$
27,160 $
11,939 $
10,629 $
4,642 $
1,571 $
55,941
United States
4,281
612
251
—
193
5,337
Europe
53
—
34
3
32
122
Capital and Risk Solutions
604
—
—
—
74
678
Non-participating liabilities
Canada
22,522
4,085
2,698
728
4,974
35,007
United States
53,869
11,483
2,011
—
31,651
99,014
Europe
27,228
7,359
396
1,909
5,382
42,274
Capital and Risk Solutions
6,716
751
—
—
—
7,467
Other
9,229
2,178
1,229
153
510,880
523,669
Total equity
15,452
472
1,578
822
14,330
32,654
Total carrying value
$
167,114 $
38,879 $
18,826 $
8,257 $
569,087 $
802,163
Fair value
$
167,114 $
38,262 $
18,840 $
8,257 $
569,087 $
801,560
2023
Bonds
Mortgage
loans
Stocks
Investment
properties
Other
Total
Carrying value
Participating liabilities
Canada
$
22,726 $
12,503 $
9,853 $
4,662 $
755 $
50,499
United States
4,299
500
187
—
46
5,032
Europe
56
—
41
3
24
124
Capital and Risk Solutions
570
5
—
—
96
671
Non-participating liabilities
Canada
21,408
4,244
2,782
644
5,809
34,887
United States
53,381
11,760
1,301
—
30,571
97,013
Europe
25,738
6,707
467
2,113
4,582
39,607
Capital and Risk Solutions
4,938
488
—
—
48
5,474
Other
11,448
1,483
164
—
436,977
450,072
Total equity
12,487
724
938
448
15,254
29,851
Total carrying value
$
157,051 $
38,414 $
15,733 $
7,870 $
494,162 $
713,230
Fair value
$
157,051 $
37,915 $
15,667 $
7,870 $
494,162 $
712,665
Cash flows of assets supporting insurance and investment contract liabilities are matched within reasonable limits. Changes in
the fair values of these assets are largely offset by changes in the fair value of insurance and investment contract liabilities.
Changes in the fair values of assets backing capital and surplus, less related income taxes, would result in a corresponding
change in surplus over time in accordance with investment accounting policies.
174
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(e)
Effect on Measurement Components of Contracts Initially Recognized in the Year
Insurance contracts
2024
Profitable
contracts issued
Onerous
contracts issued
Total
Insurance acquisition cash flows
$
582 $
42 $
624
Claims and other insurance service expenses payable
9,241
79
9,320
Estimates of present value of cash outflows
9,823
121
9,944
Estimates of present value of cash inflows
(11,050)
(123)
(11,173)
Risk adjustment for non-financial risk
312
18
330
CSM
913
—
913
Total losses (gains) recognized on initial recognition
$
(2) $
16 $
14
Insurance contracts
2023
Profitable
contracts issued
Onerous
contracts issued
Total
Insurance acquisition cash flows
$
465 $
46 $
511
Claims and other insurance service expenses payable
11,710
88
11,798
Estimates of present value of cash outflows
12,175
134
12,309
Estimates of present value of cash inflows
(13,208)
(138)
(13,346)
Risk adjustment for non-financial risk
338
20
358
CSM
690
(2)
688
Total losses (gains) recognized on initial recognition
$
(5) $
14 $
9
The Company did not acquire any insurance contracts through transfer or business combination.
(f)
Maturity Analysis of Insurance and Reinsurance Contracts Held
The following table shows the undiscounted expected future cash outflows (inflows) for insurance and reinsurance contracts
held by expected timing based on best estimate actuarial assumptions and excludes amounts from insurance contract
liabilities on account of segregated fund holders. Whole life individual insurance products have expected cash flows for several
decades in the future. Examples of cash outflows are payment of claims and expenses, and examples of cash inflows are
premiums.
2024
1 year or
less
1-2 years
2-3 years
3-4 years
4-5 years
Over
5 years
Total
Insurance contracts
Insurance contract liabilities
$
8,168 $
4,295 $
4,429 $
4,776 $
4,947 $
456,281 $
482,896
Insurance contract assets
(604)
(573)
(541)
(479)
(424)
(3,260)
(5,881)
$
7,564 $
3,722 $
3,888 $
4,297 $
4,523 $
453,021 $
477,015
Reinsurance contracts held
Reinsurance contract held liabilities
$
182 $
111 $
112 $
99 $
82 $
490 $
1,076
Reinsurance contract held assets
(634)
(189)
(168)
(164)
(167)
(4,306)
(5,628)
$
(452) $
(78) $
(56) $
(65) $
(85) $
(3,816) $
(4,552)
175
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
1 year or
less
1-2 years
2-3 years
3-4 years
4-5 years
Over
5 years
Total
Insurance contracts
Insurance contract liabilities
$
7,815 $
4,180 $
4,150 $
4,331 $
4,602 $
434,966 $
460,044
Insurance contract assets
(674)
(675)
(633)
(577)
(534)
(7,892)
(10,985)
$
7,141 $
3,505 $
3,517 $
3,754 $
4,068 $
427,074 $
449,059
Reinsurance contracts held
Reinsurance contract held liabilities
$
15 $
110 $
96 $
85 $
69 $
(41) $
334
Reinsurance contract held assets
(407)
(94)
(70)
(83)
(76)
(3,258)
(3,988)
$
(392) $
16 $
26 $
2 $
(7) $
(3,299) $
(3,654)
(g)
Amount of Insurance Contract Liabilities Payable on Demand
The amounts from insurance contract liabilities that are payable on demand are set out below. The amounts payable on
demand include the cash surrender value and/or the account value less applicable surrender charges payable. Insurance
contract liabilities held on account of segregated fund holders are excluded from the amounts payable on demand and carrying
amounts.
2024
2023
Amounts payable on demand
$
64,424 $
61,367
Carrying amounts
101,715
93,324
(h)
Expected Remaining CSM Recognition
Insurance contracts
1 year or
less
1-2 years
2-3 years
3-4 years
4-5 years
5-10 years
Over
10 years
Total
2024
$
1,207 $
1,121 $
1,027 $
950 $
873 $
3,384 $
5,878 $
14,440
2023
1,138
1,051
972
898
827
3,241
5,621
13,748
(i)
Expected Derecognition of the Asset for Insurance Acquisition Cash Flows
Insurance contracts
1 year or
less
1-2 years
2-3 years
3-4 years
4-5 years
5-10 years
Over
10 years
Total
2024
$
32 $
30 $
27 $
24 $
21 $
47 $
— $
181
2023
30
28
26
24
20
46
—
174
(j)
Insurance Risk
Actuarial Assumptions
In the computation of insurance contract liabilities, valuation assumptions have been made regarding rates of mortality/
morbidity, investment returns, levels of operating expenses, rates of policy termination and rates of utilization of elective policy
options or provisions. The valuation assumptions use best estimates of future experience together with a risk adjustment for
non-financial risk. The risk adjustment for non-financial risk represents the compensation that the Company requires for
bearing uncertainty in the amount and timing of insurance contract cash flows. Risk adjustments for non-financial risk are
reviewed periodically for continued appropriateness.
The Company measures the estimates of the present value of future cash flows for reinsurance held using assumptions that are
consistent with those used to measure the estimates of the present value of future cash flows for the underlying insurance
contracts, with an adjustment for any non-performance by the reinsurer.
Investment contract liabilities are measured at fair value determined using discount rates derived from a reference portfolio or
stochastic modeling at end of the reporting period. The Company’s main valuation techniques incorporate all factors that
market participants would consider and make maximum use of observable market data.
176
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The methods for arriving at these valuation assumptions are outlined below:
Mortality
A life insurance mortality study is carried out regularly for each major block of insurance business. The results of each study are
used to update the Company’s experience valuation mortality tables for that business. Annuitant mortality is also studied
regularly, and the results are used to modify established annuitant mortality tables. When there is insufficient data, the
Company uses the latest industry experience to derive an appropriate valuation mortality assumption. Improvement scales for
life insurance and annuitant mortality are updated periodically based on population and industry studies, product specific
considerations, as well as professional guidance. In addition, appropriate provisions are made for future mortality
deterioration on term insurance.
Morbidity
The Company uses industry developed experience tables modified to reflect emerging Company experience. Both claim
incidence and termination are monitored regularly, and emerging experience is factored into the current valuation.
Expenses
Expenses for certain items, such as sales commissions and policy taxes and fees, are either contractual or specified by law, and
so they are only reflected on a best estimate basis in the liability. Operating expenses, such as policy and claims administration
as well as overhead, are more variable. The Company produces expense studies for operating expenses regularly to determine
an appropriate estimate of future operating expenses for the liability type being valued. An inflation assumption is incorporated
in the estimate of future operating expenses held within the liability.
Policy Termination
Studies to determine rates of policy termination are updated regularly to form the basis of this estimate. Industry data is also
available and is useful where the Company has no experience with specific types of policies or its exposure is limited. The
Company's most significant exposures are in respect of the T-100 and Level Cost of Insurance Universal Life products in
Canada and policy renewal rates at the end of the term for renewable term policies in Canada and Capital and Risk Solutions.
Industry experience has guided the Company's assumptions for these products as its own experience is very limited.
Property and Casualty Reinsurance
Insurance contract liabilities for property and casualty reinsurance written by Capital and Risk Solutions are determined using
accepted actuarial practices for property and casualty insurers in Canada. The insurance contract liabilities are based on
cession statements provided by ceding companies. In addition, insurance contract liabilities also include an amount for
incurred but not reported losses, which may differ significantly from the ultimate loss development. The estimates and
underlying methodology are continually reviewed and updated and adjustments to estimates are reflected in net earnings.
Capital and Risk Solutions analyzes the emergence of claims experience against expected assumptions for each reinsurance
contract separately and at the portfolio level. If necessary, a more in depth analysis is undertaken of the cedant experience.
Utilization of Elective Policy Options
There are a wide range of elective options embedded in the policies issued by the Company. Examples include term renewals,
conversion to whole life insurance (term insurance), settlement annuity purchase at guaranteed rates (deposit annuities) and
guarantee re-sets (segregated fund maturity guarantees). The assumed rates of utilization are based on Company or industry
experience when it exists and otherwise based on judgment considering incentives to utilize the option. Generally, whenever it
is clearly in the best interests of an informed policyholder to utilize an option, then it is assumed to be elected.
Policyholder Dividends and Adjustable Policy Features
Future policyholder dividends and other adjustable policy features are included in the determination of insurance contract
liabilities with the assumption that policyholder dividends or adjustable benefits will change in the future in response to the
relevant experience. The dividend and policy adjustments are determined consistent with policyholders’ reasonable
expectations, such expectations being influenced by the participating policyholder dividend policies and/or policyholder
communications, marketing material and past practice. It is the Company's expectation that changes will occur in policyholder
dividend scales or adjustable benefits for participating or adjustable business respectively, corresponding to changes in the
best estimate assumptions, resulting in an immaterial net change in insurance contract liabilities. Where underlying
guarantees may limit the ability to pass all of this experience back to the policyholder, the impact of this non-adjustability
impacting shareholders' net earnings is reflected in the impacts of changes in best estimate assumptions below.
Investment Returns
Interest rate risk is managed by investing in assets that are suitable for the products sold. The Company utilizes a formal
process for managing the matching of assets and liabilities. This involves grouping general fund assets and liabilities into
177
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
segments. Assets in each segment are managed in relation to the liabilities in the segment. The impact to net earnings from
changes in the interest rates would be largely offset by changes in the value of financial assets supporting the liabilities.
However, differences in the interest rate sensitivity in the value of assets and the value of insurance and investment contract
liabilities leads to a sensitivity to interest rate movements in net earnings.
Insurance and Investment Contract Liabilities
In determining the Company’s insurance contract liabilities, valuation assumptions are made regarding rates of mortality/
morbidity, investment returns, levels of operating expenses, rates of policy termination and rates of utilization of elective policy
options or provisions. When the assumptions are revised to reflect emerging experience or change in outlook, the result is a
change in the value of liabilities which in turn affects the Company’s earnings.
Non-Financial Exposures and Sensitivities
Insurance Risk
2024
Net earnings
CSM 1
Before
Reinsurance
Net of
Reinsurance Held
Before
Reinsurance
Net of
Reinsurance Held
2% Life mortality increase
$
(100) $
(100) $
(350) $
(175)
2% Annuity mortality decrease
200
175
(725)
(650)
5% Morbidity adverse change
(150)
(125)
(200)
(100)
5% Expense increase
—
—
(125)
(150)
10% Adverse change in policy termination and renewal
(50)
—
(850)
(850)
2023
Net earnings
CSM 1
Before
Reinsurance
Net of
Reinsurance Held
Before
Reinsurance
Net of
Reinsurance Held
2% Life mortality increase
$
(100) $
(100) $
(375) $
(200)
2% Annuity mortality decrease
175
150
(700)
(625)
5% Morbidity adverse change
(150)
(125)
(225)
(100)
5% Expense increase
—
—
(150)
(150)
10% Adverse change in policy termination and renewal
50
50
(1,025)
(950)
1
The impacts to the CSM are pre-tax.
These sensitivities reflect the impact on net earnings and CSM of an immediate change in assumptions on the value of
insurance and reinsurance contracts held and investment contracts. The impact on equity is equal to the net earnings impact.
Assumption changes on insurance risks directly impact CSM, for contracts which have CSM. The impact of assumption
changes on CSM are measured at locked-in discount rates, for contracts measured under the General Measurement Model.
Net earnings impacts arise from any differences relative to the fair value impact of assumption changes impacting CSM, as well
as assumption changes on contracts which do not have CSM (including short term insurance contracts). For assumption
changes impacting CSM, there is a second-order impact to earnings which captures the present value difference between the
impact of assumption changes measured at prevailing discount rates and locked-in discount rates. In general, prevailing
discount rates are currently higher than locked-in rates for the Company’s insurance contracts, as most locked-in rates for the
calculation of CSM impacts were struck at January 1, 2022 for the in-force portfolio. Therefore, an unfavourable change in
assumptions on insurance risks, leading to a liability strengthening offset by CSM reduction, also results in a positive earnings
impact in the period due to the fair value impact.
Concentration risk may arise from geographic regions, accumulation of risks and market risk. The concentration of insurance
risk before and after reinsurance by geographic region is described in the segmented information (note 33).
Reinsurance Risk
Maximum limits per insured life benefit amount (which vary by line of business) are established for life and health insurance,
and reinsurance is purchased for amounts in excess of those limits.
Reinsurance costs and recoveries as defined by the reinsurance agreement are reflected in the valuation with these costs and
recoveries being appropriately calibrated to the direct assumptions.
178
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honour their
obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
Certain of the reinsurance contracts are on a funds withheld basis where the Company retains the assets supporting the
reinsured insurance contract liabilities, thus minimizing the exposure to significant losses from reinsurer insolvency on those
contracts.
Discount Rates
The following table provides the lower and upper end of the range of the spot rates used by the Company to discount liability
cash flows by major currency:
2024
Year 1
Year 5
Year 10
Year 20
Year 30
Year 50
CAD
Lower
4.2 %
4.2 %
4.5 %
4.6 %
4.6 %
4.9 %
Upper
4.6 %
4.6 %
4.9 %
5.0 %
5.0 %
5.0 %
USD
Lower
4.9 %
5.2 %
5.4 %
5.8 %
5.6 %
5.1 %
Upper
5.4 %
5.7 %
5.8 %
6.2 %
5.9 %
5.3 %
EUR
Lower
2.5 %
2.5 %
2.8 %
3.0 %
3.2 %
4.3 %
Upper
3.6 %
3.6 %
3.8 %
4.0 %
4.1 %
4.5 %
GBP
Lower
4.9 %
4.8 %
5.1 %
5.7 %
5.7 %
4.3 %
Upper
5.7 %
5.5 %
5.9 %
6.5 %
6.5 %
5.1 %
2023
Year 1
Year 5
Year 10
Year 20
Year 30
Year 50
CAD
Lower
6.0 %
4.5 %
4.4 %
4.3 %
4.2 %
4.5 %
Upper
6.4 %
4.9 %
4.9 %
4.9 %
4.8 %
4.9 %
USD
Lower
5.7 %
4.8 %
4.8 %
5.3 %
4.9 %
4.7 %
Upper
6.1 %
5.2 %
5.3 %
5.8 %
5.4 %
5.0 %
EUR
Lower
3.2 %
2.1 %
2.2 %
2.5 %
2.9 %
4.3 %
Upper
4.8 %
3.6 %
3.8 %
4.1 %
4.2 %
4.5 %
GBP
Lower
4.9 %
3.8 %
4.0 %
4.7 %
4.6 %
3.7 %
Upper
5.9 %
4.8 %
5.1 %
5.7 %
5.6 %
4.7 %
The spot rates in the table above are calculated based on prevailing interest rates observed in their respective markets. When
interest rates are not observable, the yield curve to discount cash flows transitions to an ultimate rate composed of a risk-free
rate and illiquidity premium. These amounts are set based on historical data.
179
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
15. Reinsurance Contracts Held
(a)
Analysis by Remaining Coverage and Incurred Claims
Reinsurance contracts held
2024
Asset for remaining
coverage
Asset for incurred claims
Contracts under PAA
Excluding
loss
recovery
component
Loss
recovery
component
Contracts
not under
the PAA
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Total
Opening assets
$
15,981 $
90 $
1,002 $
247 $
12 $
17,332
Opening liabilities
(885)
20
218
(1)
—
(648)
Net opening balance
15,096
110
1,220
246
12
16,684
Changes in the Consolidated Statements of Earnings
and Comprehensive Income
Net expenses from reinsurance contracts
(4,457)
(10)
1,906
961
1
(1,599)
Investment components
(123)
—
123
—
—
—
Net finance income from reinsurance contracts, excluding
the effect of changes in non-performance risk of
reinsurers
(52)
(1)
36
6
1
(10)
Effect of movement in exchange rates
1,036
1
19
5
—
1,061
Total changes in the Consolidated Statements of
Earnings and Comprehensive Income
(3,596)
(10)
2,084
972
2
(548)
Cash flows
Premiums paid
3,799
—
—
—
—
3,799
Incurred claims received and other insurance service
amounts received
—
—
(1,919)
(995)
—
(2,914)
Other cash flows 1
510
—
—
—
—
510
Total cash flows
4,309
—
(1,919)
(995)
—
1,395
Other movements 2
(484)
—
—
—
—
(484)
Net closing balance 3
$
15,325 $
100 $
1,385 $
223 $
14 $
17,047
Recorded in:
Closing assets
$
16,594 $
72 $
1,046 $
124 $
6 $
17,842
Closing liabilities
(1,269)
28
339
99
8
(795)
Net closing balance 3
$
15,325 $
100 $
1,385 $
223 $
14 $
17,047
1
Other cash flows includes premiums to be settled via FCB, claims to be settled via FCB, and net settlements.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
3
Included in the reinsurance contracts held amounts are funds withheld by the Company under reinsurance contracts of $4,276.
180
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Reinsurance contracts held
2023
Asset for remaining
coverage
Asset for incurred claims
Contracts under PAA
Excluding
loss
recovery
component
Loss
recovery
component
Contracts
not under
the PAA
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Total
Opening assets
$
16,212 $
76 $
952 $
320 $
11 $
17,571
Opening liabilities
(760)
—
223
—
—
(537)
Net opening balance
15,452
76
1,175
320
11
17,034
Changes in the Consolidated Statements of Earnings and
Comprehensive Income
Net expenses from reinsurance contracts
(3,676)
28
1,319
784
1
(1,544)
Investment components
(107)
—
107
—
—
—
Net finance income from reinsurance contracts, excluding
the effect of changes in non-performance risk of
reinsurers
184
6
34
—
—
224
Effect of movement in exchange rates
(189)
—
11
3
—
(175)
Total changes in the Consolidated Statements of Earnings
and Comprehensive Income
(3,788)
34
1,471
787
1
(1,495)
Cash flows
Premiums paid
6,930
—
—
—
—
6,930
Incurred claims received and other insurance service
amounts received
—
—
(1,426)
(861)
—
(2,287)
Other cash flows 1
(3,341)
—
—
—
—
(3,341)
Total cash flows
3,589
—
(1,426)
(861)
—
1,302
Other movements 2
(157)
—
—
—
—
(157)
Net closing balance 3
$
15,096 $
110 $
1,220 $
246 $
12 $
16,684
Recorded in:
Closing assets
$
15,981 $
90 $
1,002 $
247 $
12 $
17,332
Closing liabilities
(885)
20
218
(1)
—
(648)
Net closing balance 3
$
15,096 $
110 $
1,220 $
246 $
12 $
16,684
1
Other cash flows includes premiums to be settled via FCB, claims to be settled via FCB, and net settlements.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
3
Included in the reinsurance contracts held amounts are funds withheld by the Company under reinsurance contracts of $4,491.
181
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
Analysis by Measurement Component for Reinsurance Contracts Held not Measured Under PAA
Reinsurance contracts held
2024
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
CSM
Total
Opening assets
$
16,181 $
866 $
163 $
17,210
Opening liabilities
(2,419)
863
950
(606)
Net opening balance
13,762
1,729
1,113
16,604
Changes in the Consolidated Statements of Earnings and
Comprehensive Income
Changes that relate to current service
CSM recognized for services received
—
—
(131)
(131)
Change in risk adjustment for non-financial risk for risk expired
—
(176)
—
(176)
Experience adjustments
43
(1)
—
42
Changes that relate to future service
Contracts initially recognized in the year
(115)
159
(34)
10
Changes in estimates that adjust the CSM
(27)
(34)
61
—
Changes in estimates that result in losses and reversal of losses on onerous
contacts
(17)
11
—
(6)
Changes that relate to past service
Changes in amounts recoverable arising from changes in liability for
incurred claims
25
—
—
25
Net expenses from reinsurance contracts
(91)
(41)
(104)
(236)
Net finance income from reinsurance contracts, excluding the effect of
changes in non-performance risk of reinsurers
(83)
31
35
(17)
Effect of movement in exchange rates
998
33
28
1,059
Total changes in the Consolidated Statements of Earnings and
Comprehensive Income
824
23
(41)
806
Cash flows
Premiums paid
1,462
—
—
1,462
Incurred claims received and other insurance service amounts received
(1,918)
—
—
(1,918)
Other cash flows 1
510
—
—
510
Total cash flows
54
—
—
54
Other movements 2
(484)
—
—
(484)
Net closing balance
$
14,156 $
1,752 $
1,072 $
16,980
Recorded in:
Closing assets
$
16,644 $
731 $
344 $
17,719
Closing liabilities
(2,488)
1,021
728
(739)
Net closing balance
$
14,156 $
1,752 $
1,072 $
16,980
1
Other cash flows includes premiums to be settled via FCB, claims to be settled via FCB, and net settlements.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
182
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Reinsurance contracts held
2023
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
CSM
Total
Opening assets
$
15,791 $
1,062 $
514 $
17,367
Opening liabilities
(1,458)
429
497
(532)
Net opening balance
14,333
1,491
1,011
16,835
Changes in the Consolidated Statements of Earnings and Comprehensive
Income
Changes that relate to current service
CSM recognized for services received
—
—
(102)
(102)
Change in risk adjustment for non-financial risk for risk expired
—
(156)
—
(156)
Experience adjustments
40
(1)
—
39
Changes that relate to future service
Contracts initially recognized in the year
(85)
69
22
6
Changes in estimates that adjust the CSM
(332)
158
174
—
Changes in estimates that result in losses and reversal of losses on onerous
contacts
20
10
—
30
Changes that relate to past service
Changes in amounts recoverable arising from changes in liability for
incurred claims
(4)
(1)
—
(5)
Net expenses from reinsurance contracts
(361)
79
94
(188)
Net finance income from reinsurance contracts, excluding the effect of
changes in non-performance risk of reinsurers
62
152
13
227
Effect of movement in exchange rates
(181)
7
(5)
(179)
Total changes in the Consolidated Statements of Earnings and Comprehensive
Income
(480)
238
102
(140)
Cash flows
Premiums paid
4,834
—
—
4,834
Incurred claims received and other insurance service amounts received
(1,427)
—
—
(1,427)
Other cash flows 1
(3,341)
—
—
(3,341)
Total cash flows
66
—
—
66
Other movements 2
(157)
—
—
(157)
Net closing balance
$
13,762 $
1,729 $
1,113 $
16,604
Recorded in:
Closing assets
$
16,181 $
866 $
163 $
17,210
Closing liabilities
(2,419)
863
950
(606)
Net closing balance
$
13,762 $
1,729 $
1,113 $
16,604
1
Other cash flows includes premiums to be settled via FCB, claims to be settled via FCB, and net settlements.
2
Other movements represent changes in the expected fulfillment cash flows on certain reinsurance contracts held where the Company has no continuing involvement
other than exposure to the remote insolvency risk of the reinsurer. This movement is offset by movement in associated reinsurance assets.
183
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(c)
CSM by Transition Approach
2024
2023
Reinsurance contracts held
Reinsurance contracts held under fair value approach
CSM balance, beginning of year
$
1,106 $
891
Change related to current service provided
CSM recognized for services provided
(124)
(87)
Changes that relate to future service
Changes in estimates that adjust the CSM
(24)
299
Total changes in insurance service result
(148)
212
Net finance expenses from reinsurance contracts
63
3
Total change
(85)
215
CSM balance, end of year
$
1,021 $
1,106
Other reinsurance contracts held
CSM balance, beginning of year
$
7 $
120
Change related to current service provided
CSM recognized for services provided
(7)
(15)
Changes that relate to future service
Contracts initially recognized in the year
(34)
22
Changes in estimates that adjust the CSM
85
(125)
Total changes in insurance service result
44
(118)
Net finance expenses from insurance contracts
—
5
Total change
44
(113)
CSM balance, end of year
$
51 $
7
Net CSM balance, end of year
$
1,072 $
1,113
(d)
Effect on Measurement Components of Contracts Initially Recognized in the Year
Reinsurance contracts held
2024
2023
Estimates of present value of cash outflows
$
3,522 $
882
Estimates of present value of cash inflows
(3,407)
(797)
Risk adjustment for non-financial risk
(159)
(69)
Income recognized on initial recognition
10
6
CSM
$
34 $
(22)
The Company did not acquire any reinsurance contracts held through transfer or business combination.
(e)
Expected Remaining CSM Recognition
Reinsurance contracts held
1 year or
less
1-2 years
2-3 years
3-4 years
4-5 years
5-10 years
Over
10 years
Total
2024
$
(122) $
(109) $
(97) $
(86) $
(76) $
(262) $
(320) $
(1,072)
2023
(122)
(108)
(97)
(86)
(77)
(266)
(357)
(1,113)
184
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
16. Investment Contract Liabilities
Change in Investment Contract Liabilities Measured at Fair Value
2024
2023
Balance, beginning of year
$
88,919 $
94,810
Normal change in force business
(8,469)
(9,356)
Investment experience
2,932
4,806
Management action and changes in assumptions
—
(9)
Impact of foreign exchange rate changes
6,775
(1,332)
Balance, end of year
$
90,157 $
88,919
All investment contract liabilities are measured at FVTPL.
17. Segregated Funds and Other Structured Entities
The Company offers segregated fund products in Canada, the U.S. and Europe that are referred to as segregated funds, separate
accounts and unit-linked funds in the respective region. These funds are contracts issued by insurers to segregated fund
policyholders where the benefit is directly linked to the performance of the investments, the risks or rewards of the fair value
movements and net investment income is realized by the segregated fund policyholders. The segregated fund policyholders are
required to select segregated funds that hold a range of underlying investments. While the Company has legal title to the
investments, there is a contractual obligation to pass along the investment results to the segregated fund policyholder and the
Company segregates these investments from those of the Company.
In Canada and the U.S., the segregated fund and separate account assets are legally separated from the general assets of the
Company under the terms of the policyholder agreement and cannot be used to settle obligations of the Company. In Europe,
the assets of the funds are functionally and constructively segregated from those of the Company. As a result of the legal and
constructive arrangements of these funds, the assets of these funds are presented on the Consolidated Balance Sheets as
investments on account of segregated fund policyholders and the associated liabilities as investment contracts on account of
segregated fund policyholders and insurance contracts on account of segregated fund policyholders.
In circumstances where the segregated funds are invested in structured entities and are deemed to control the entity, the
Company has presented the non-controlling ownership interest within the segregated funds for the risk of policyholders as
equal and offsetting amounts in the assets and liabilities. The amounts presented within are $6,082 at December 31, 2024
($6,070 at December 31, 2023).
Within the Consolidated Statements of Earnings, all segregated fund policyholders’ income, including fair value changes and
net investment income, is credited to the segregated fund policyholders and reflected in the assets and liabilities on account of
segregated fund policyholders within the Consolidated Balance Sheets. These revenues and expenses are presented in the
Consolidated Statements of Earnings where the contracts with the segregated fund policyholders are classified as insurance
contracts.
Segregated Funds Guarantee Exposure
The Company offers retail segregated fund products, unitized with profits (UWP) products and variable annuity products that
provide for certain guarantees that are tied to the market values of the investment funds. While these products are similar to
mutual funds, there is a key difference from mutual funds as the segregated funds have certain guarantee features that protect
the segregated fund policyholder from market declines in the underlying investments. These guarantees are the Company’s
primary exposure on these funds. The Company accounts for these guarantees within insurance and investment contract
liabilities within the consolidated financial statements. In addition to the Company’s exposure on the guarantees, the fees
earned by the Company on these products are impacted by the market value of these funds.
In Canada, the Company offers retail segregated fund products through Canada Life. These products provide guaranteed
minimum death benefits (GMDB) and guaranteed minimum accumulation on maturity benefits.
In the U.S., the Company has a mix of open and closed blocks of group variable annuities with guaranteed minimum
withdrawal benefits (GMWB) and a closed block of group standalone GMDB products which mainly provide return of
premium on death.
In Europe, the Company offers UWP products in Germany and unit-linked products with investment guarantees in Ireland.
These products are similar to segregated fund products but include minimum credited interest rates and pooling of
policyholders' funds.
185
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The Company also offers a GMWB product in the U.S., and Germany, and previously offered a GMWB product in Canada and
Ireland. Certain GMWB products offered by the Company offer levels of death and maturity guarantees. At December 31, 2024,
the amount of GMWB product in-force in Canada, the U.S., Ireland and Germany was $7,538 ($7,343 at December 31, 2023).
The following presents further details of the investments, determined in accordance with the relevant statutory reporting
requirements of each region of the Company's operations, on account of segregated fund policyholders:
(a)
Investments on Account of Segregated Fund Policyholders
2024
2023
Cash and cash equivalents
$
18,895 $
15,024
Bonds
74,444
72,111
Mortgage loans
2,083
2,022
Stocks and units in unit trusts
154,439
130,415
Mutual funds
232,073
188,549
Investment properties
11,317
12,071
493,251
420,192
Accrued income
882
832
Other liabilities
(3,829)
(4,138)
Non-controlling mutual funds interest
6,082
6,070
Total 1, 2
$
496,386 $
422,956
1
At December 31, 2024, $65,315 of investments on account of segregated fund policyholders are reinsured by the Company on a modified coinsurance basis ($64,097 at
December 31, 2023). Included in this amount are $517 of cash and cash equivalents, $10,623 of bonds, $21 of stocks and units in unit trusts, $54,114 of mutual funds, $89
of accrued income and $(49) of other liabilities.
2
At December 31, 2024, $2,750 of investments on account of segregated fund policyholders on the Company’s Consolidated Balance Sheets are expected to be transferred
to Countrywide within 12 months (note 3). Included in this amount are $104 of cash and cash equivalents, $2,672 of stocks and units in unit trusts and $(26) of other
liabilities.
(b)
Insurance and Investment Contracts on Account of Segregated Fund Policyholders
2024
2023
Insurance contracts on account of segregated fund policyholders
$
66,343 $
60,302
Investment contracts on account of segregated fund policyholders
430,043
362,654
$
496,386 $
422,956
(c)
Insurance Contracts on Account of Segregated Fund Policyholders - Effect on Measurement
Components of Contracts Initially Recognized in the Year
Segregated funds
2024
Profitable
contracts issued
Onerous
contracts issued
Total
Insurance acquisition cash flows
$
— $
— $
—
Claims and other insurance service expenses payable
3,938
—
3,938
Estimates of present value of cash outflows
3,938
—
3,938
Estimates of present value of cash inflows
(3,938)
—
(3,938)
Risk adjustment for non-financial risk
—
—
—
Total losses (gains) recognized on initial recognition
$
— $
— $
—
Segregated funds
2023
Profitable
contracts issued
Onerous
contracts issued
Total
Insurance acquisition cash flows
$
— $
— $
—
Claims and other insurance service expenses payable
3,367
—
3,367
Estimates of present value of cash outflows
3,367
—
3,367
Estimates of present value of cash inflows
(3,367)
—
(3,367)
Risk adjustment for non-financial risk
—
—
—
Total losses (gains) recognized on initial recognition
$
— $
— $
—
186
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(d)
Changes in Insurance and Investment Contracts on Account of Segregated Fund Policyholders
2024
2023
Balance, beginning of year
$
422,956 $
387,882
Additions (deductions):
Policyholder deposits
64,353
51,236
Net investment income
9,653
7,333
Net realized capital gains (losses) on investments
13,113
6,430
Net unrealized capital gains (losses) on investments
30,777
33,660
Unrealized gains (losses) due to changes in foreign exchange rates
21,161
(1,033)
Policyholder withdrawals
(65,662)
(59,686)
Portfolio transfer
—
(2,662)
Change in segregated fund investment in general fund
5
54
Change in general fund investment in segregated fund
1
14
Net transfer from (to) general fund
17
46
Non-controlling mutual funds interest
12
(318)
Total
73,430
35,074
Balance, end of year
$
496,386 $
422,956
(e)
Investments on Account of Segregated Fund Policyholders by Fair Value Hierarchy Level
2024
Level 1
Level 2
Level 3
Total
Investments on account of segregated fund
policyholders 1
$
348,889 $
136,947 $
13,354 $
499,190
1
Excludes other liabilities, net of other assets, of $2,804.
2023
Level 1
Level 2
Level 3
Total
Investments on account of segregated fund
policyholders 1
$
299,451 $
113,199 $
13,792 $
426,442
1
Excludes other liabilities, net of other assets, of $3,486.
During 2024, certain foreign stock holdings valued at $1,624 have been transferred from Level 1 to Level 2 ($56 were transferred
from Level 1 to Level 2 at December 31, 2023) primarily based on the Company's change in use of inputs in addition to quoted
prices in active markets for certain foreign stock holdings. Level 2 assets include those assets where fair value is not available
from normal market pricing sources, where inputs are utilized in addition to quoted prices in active markets and where the
Company does not have access to the underlying asset details within an investment fund.
As at December 31, 2024, $4,061 ($3,912 at December 31, 2023) of the segregated funds were invested in funds managed by
related parties IG Wealth Management and Mackenzie Investments, members of the Power Corporation group of companies
(note 28).
The following presents additional information about the Company's investments on account of segregated fund policyholders
for which the Company has utilized Level 3 inputs to determine fair value:
2024
2023
Balance, beginning of year
$
13,792 $
14,455
Total gains (losses) included in segregated fund investment income
(758)
(1,073)
Purchases
1,130
795
Sales
(872)
(445)
Transfers into Level 3
97
350
Transfers out of Level 3
(35)
(290)
Balance, end of year
$
13,354 $
13,792
Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies. Transfers out of Level
3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market
prices with multiple pricing vendors.
187
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(f)
Other Structured Entities
In addition to the segregated funds, the Company has interests in a number of structured unconsolidated entities including
mutual funds, open-ended investment companies, and unit trusts. These entities are created as investment strategies for its
unit-holders based on the directive of each individual fund.
Some of these funds are sub-advised by related parties of the Company, who are paid sub-advisory fees at normal market rates
for their services.
The Company earns management fees related to managing the segregated fund products. Management fees can be variable
due to performance of factors, such as markets or industries, in which the fund invests. Fee income derived in connection with
the management of investment funds generally increases or decreases in direct relationship with changes of assets under
management which is affected by prevailing market conditions, and the inflow and outflow of client assets.
Factors that could cause assets under management and fees to decrease include declines in equity markets, changes in fixed
income markets, changes in interest rates and defaults, redemptions and other withdrawals, political and other economic risks,
changing investment trends and relative investment performance. The risk is that fees may vary but expenses and recovery of
initial expenses are relatively fixed, and market conditions may cause a shift in asset mix potentially resulting in a change in
revenue.
During 2024, fee and other income earned by the Company resulting from the Company’s interests in segregated funds and
other structured entities was $4,820 ($4,020 during 2023).
Included within other assets (note 11) at December 31, 2024 is $3,540 ($2,878 at December 31, 2023) of investments by the
Company in bonds and stocks of consolidated Empower CLOs and other sponsored funds and $161 ($160 at December 31,
2023) of investments in stocks of sponsored unit trusts in Europe.
188
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
18. Debentures and Other Debt Instruments
2024
2023
Carrying
value
Fair
value
Carrying
value
Fair
value
Short-term
Commercial paper and other short-term debt instruments with interest rates
4.930% (5.729% at December 31, 2023), unsecured
$
144 $
144 $
132 $
132
Revolving credit facility with interest based on Adjusted Term SOFR (U.S. $45 at
December 31, 2023), unsecured
—
—
60
60
Total short-term
144
144
192
192
Long-term
Operating:
Mortgage on investment property, due January 1, 2029 (U.S. $39) with interest
of 4.51%
54
54
—
—
Capital:
Lifeco
6.74% Debentures due November 24, 2031, unsecured
197
231
196
229
6.67% Debentures due March 21, 2033, unsecured
396
467
395
461
5.998% Debentures due November 16, 2039, unsecured
343
396
343
396
4.70% Senior bonds due November 16, 2029, unsecured, (€500) 1
742
806
726
784
3.337% Debentures due February 28, 2028, unsecured
499
498
499
483
2.981% Debentures due July 8, 2050, unsecured
494
378
494
388
2.379% Debentures due May 14, 2030, unsecured
598
563
598
540
1.75% Senior bonds due December 7, 2026, unsecured, (€500) 1
743
731
728
703
4,012
4,070
3,979
3,984
Canada Life
6.40% Subordinated debentures due December 11, 2028, unsecured
100
110
100
109
Canada Life Capital Trust (CLCT)
7.529% due June 30, 2052, unsecured, face value $150
155
179
156
179
Great-West Lifeco Finance 2018, LP
4.581% Senior notes due May 17, 2048, unsecured, (U.S. $500)
714
603
659
597
4.047% Senior notes due May 17, 2028, unsecured, (U.S. $300)
431
417
398
388
1,145
1,020
1,057
985
Great-West Lifeco Finance (Delaware) LP
4.15% Senior notes due June 3, 2047, unsecured, (U.S. $700)
993
797
917
787
Great-West Lifeco U.S. Finance 2020, LP
0.904% Senior notes due August 12, 2025, unsecured, (U.S. $500)
719
703
663
621
Empower Finance 2020, LP
3.075% Senior notes due September 17, 2051, unsecured, (U.S. $700)
998
633
922
643
1.776% Senior notes due March 17, 2031, unsecured, (U.S. $400)
574
471
530
429
1.357% Senior notes due September 17, 2027, unsecured, (U.S. $400)
575
523
530
475
2,147
1,627
1,982
1,547
Total long-term
9,325
8,560
8,854
8,212
Total
$
9,469 $
8,704 $
9,046 $
8,404
1 Designated as hedges of the net investment in foreign operations.
Capital Trust Securities
CLCT, a trust established by Canada Life, had issued $150 of Canada Life Capital Securities - Series B (CLiCS - Series B), the
proceeds of which were used by CLCT to purchase Canada Life senior debentures in the amount of $150.
Distributions and interest on the capital trust securities are classified as financing costs in the Consolidated Statements of
Earnings (note 19). The fair value for capital trust securities is determined by the bid-ask price. Refer to note 7 for risk
management.
Subject to regulatory approval, CLCT may redeem the CLiCS - Series B, in whole or in part, at any time.
189
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
19. Financing Costs
Financing costs consist of the following:
2024
2023
Operating charges:
Interest on operating lines and short-term debt instruments
$
9 $
30
Financial charges:
Interest on long-term debentures and other debt instruments
302
304
Interest on limited recourse capital notes
54
54
Interest on capital trust securities
11
11
Other
26
27
393
396
Total
$
402 $
426
20. Other Liabilities
2024
2023
Pension and other post-employment benefits (note 26)
$
497 $
581
Lease liabilities
380
361
Bank overdraft
379
243
Deferred income reserves
264
256
Collateralized loan obligation liabilities
3,791
3,110
Other
4,919
5,036
Total
$
10,230 $
9,587
Total other liabilities of $5,298 ($5,279 at December 31, 2023) are expected to be derecognized within 12 months from the
reporting date. This amount excludes deferred income reserves, the changes in which are noted below.
Deferred Income Reserves
2024
2023
Balance, beginning of year
$
256 $
293
Additions
63
54
Amortization
(53)
(62)
Changes in foreign exchange
12
6
Disposals
(14)
(35)
Balance, end of year
$
264 $
256
21. Non-Controlling Interests
The Company has a controlling equity interest in Canada Life and Empower at December 31, 2024 and December 31, 2023. The
Company held a controlling equity interest in Putnam Investments at December 31, 2023. On January 1, 2024, the Company
completed the sale of Putnam Investments to Franklin Templeton.
Non-controlling interests attributable to participating account surplus is the proportion of the equity attributable to the
participating account of the Company's subsidiaries.
Non-controlling interests in subsidiaries also include non-controlling interests for the issued and outstanding shares of
PanAgora held by employees, as well as through a Canada Life subsidiary's controlling interest in certain Canadian advisor
businesses.
190
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(a)
The Non-Controlling Interests Recorded in the Consolidated Statements of Earnings and the Other
Comprehensive Income are as Follows:
2024
2023
Net earnings attributable to participating account
Canada Life
$
107 $
24
Empower
(1)
(1)
Net earnings (loss) - participating account
106
23
Non-controlling interests in subsidiaries
(3)
—
Total
$
103 $
23
The Company paid $1,901 of participating policyholder dividends for the year ended December 31, 2024 ($1,818 for the year
ended December 31, 2023).
The non-controlling interests recorded in other comprehensive income (loss) for the year ended December 31, 2024 was $94
($87 for the year ended December 31, 2023).
(b)
The Carrying Value of Non-Controlling Interests Consists of the Following:
2024
2023
Participating account surplus in subsidiaries:
Canada Life
$
3,043 $
2,844
Empower
(2)
3
Total
$
3,041 $
2,847
Non-controlling interests in subsidiaries
$
72 $
168
22. Share Capital
(a)
Limited Recourse Capital Notes
2024
2023
Limited recourse capital notes
Earliest redemption date
Interest rate
Carrying value
Fair value
Carrying value
Fair value
Series 1
November 30, 2026
3.60 % $
1,500 $
1,346 $
1,500 $
1,155
On August 16, 2021, the Company issued $1,500 aggregate principal amount 3.60% Limited Recourse Capital Notes Series 1
(Subordinated Indebtedness) at par, maturing on December 31, 2081 (LRCN Series 1). The LRCN Series 1 bear interest at a
fixed rate of 3.60% per annum payable semi-annually, up to but excluding December 31, 2026. On December 31, 2026 and every
five years thereafter until and including December 31, 2076, the interest rate on the LRCN Series 1 will be reset at an interest
rate equal to the five-year Government of Canada Yield, plus 2.641%. Commencing November 30, 2026, the Company will have
the option to redeem the LRCN Series 1 every five years during the period from November 30 to December 31, in whole or in
part at par, together in each case with accrued and unpaid interest.
Non-payment of interest or principal when due on the LRCN Series 1 will result in a recourse event, with the noteholders’ sole
remedy being receipt of their proportionate share of Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series U (Series
U Preferred Shares) held in a newly formed consolidated trust (Limited Recourse Trust). All claims of the holders of LRCN
Series 1 against the Company will be extinguished upon receipt of the corresponding trust assets. The Series U Preferred Shares
are eliminated on the Company’s Consolidated Balance Sheets while being held within the Limited Recourse Trust.
191
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
Preferred Shares
Authorized
Unlimited First Preferred Shares, Class A Preferred Shares and Second Preferred Shares
Unlimited Common Shares
Issued and outstanding and fully paid
2024
2023
Number
Carrying
value
Number
Carrying
value
First Preferred Shares
Series G, 5.20% Non-Cumulative
12,000,000 $
300
12,000,000 $
300
Series H, 4.85% Non-Cumulative
12,000,000
300
12,000,000
300
Series I, 4.50% Non-Cumulative
12,000,000
300
12,000,000
300
Series L, 5.65% Non-Cumulative
6,800,000
170
6,800,000
170
Series M, 5.80% Non-Cumulative
6,000,000
150
6,000,000
150
Series N, 1.749% Non-Cumulative Rate Reset
10,000,000
250
10,000,000
250
Series P, 5.40% Non-Cumulative
10,000,000
250
10,000,000
250
Series Q, 5.15% Non-Cumulative
8,000,000
200
8,000,000
200
Series R, 4.80% Non-Cumulative
8,000,000
200
8,000,000
200
Series S, 5.25% Non-Cumulative
8,000,000
200
8,000,000
200
Series T, 5.15% Non-Cumulative
8,000,000
200
8,000,000
200
Series Y, 4.50% Non-Cumulative
8,000,000
200
8,000,000
200
Total
108,800,000 $
2,720
108,800,000 $
2,720
Common shares
Balance, beginning of year
932,427,987 $
6,000
931,853,110 $
5,791
Issued in business acquisition
—
—
2,278,830
89
Shares exercised and issued under share-based
payment plans
2,379,656
88
4,296,047
158
Shares purchased and cancelled under normal course
issuer bid
(2,700,000)
(114)
(6,000,000)
(233)
Excess of redemption proceeds over stated capital per
normal course issuer bid
—
97
—
195
Balance, end of year
932,107,643 $
6,071
932,427,987 $
6,000
The Series G, 5.20% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series H, 4.85% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series I, 4.50% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series L, 5.65% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series M, 5.80% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series N, Non-Cumulative 5-Year Rate Reset First Preferred Shares carry an annual fixed non-cumulative dividend rate of
1.749% up to but excluding December 31, 2025 and are redeemable at the option of the Company on December 31, 2025 and on
December 31 every five years thereafter for $25.00 per share plus all declared and unpaid dividends up to but excluding the
date of redemption. Subject to the Company's right of redemption and certain other restrictions on conversion described in the
Series N share conditions, each Series N share is convertible into one Series O, Non-Cumulative Floating Rate First Preferred
Share at the option of the holders on December 31, 2025 and on December 31 every five years thereafter.
The Series P, 5.40% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series Q, 5.15% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
192
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The Series R, 4.80% Non-Cumulative First Preferred Shares are currently redeemable at the option of the Company for $25.00
per share, together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series S, 5.25% Non-Cumulative First Preferred Shares are redeemable at the option of the Company for $25.00 per share,
together with all declared and unpaid dividends up to but excluding the date of redemption.
The Series T, 5.15% Non-Cumulative First Preferred Shares are redeemable at the option of the Company for $25.00 per share
plus a premium if redeemed prior to June 30, 2026, together with all declared and unpaid dividends up to but excluding the
date of redemption.
The Series Y, 4.50% Non-Cumulative First Preferred Shares are redeemable at the option of the Company on or after December
31, 2026 for $25.00 per share plus a premium if redeemed prior to December 31, 2030, together with all declared and unpaid
dividends up to but excluding the date of redemption.
(c)
Common Shares
Normal Course Issuer Bid
The Company renewed its normal course issuer bid (NCIB) effective January 29, 2024 for one year to purchase and cancel up to
20,000,000 of its common shares at market prices in order to mitigate the dilutive effect of stock options granted under the
Company's Stock Option Plan and for other capital management purposes. During the year ended December 31, 2024, the
Company repurchased and subsequently cancelled 2,700,000 common shares under the 2024 NCIB at a cost of $114 (6,000,000
for the year ended December 31, 2023 at a cost of $233, under the previous NCIB). The Company’s share capital was reduced by
the average carrying value of the shares repurchased for cancellation. The excess paid over the average carrying value was $97
and was recognized as a reduction to accumulated surplus for the year ended December 31, 2024 ($195 for the year ended
December 31, 2023, under the previous NCIB).
On January 2, 2025, the Company announced a new NCIB commencing January 6, 2025 and terminating January 5, 2026 to
purchase for cancellation up to but not more than 20,000,000 of its common shares at market prices.
23. Earnings Per Common Share
The following provides the reconciliation between basic and diluted earnings per common share:
2024
2023
Earnings
Net earnings from continuing operations before preferred share dividends
$
4,141 $
2,992
Preferred share dividends
(130)
(130)
Net earnings from continuing operations
4,011
2,862
Net loss from discontinued operations (note 3)
(115)
(124)
Net gain from disposal of discontinued operations (note 3)
44
—
Net earnings - common shareholders
$
3,940 $
2,738
Number of common shares
Average number of common shares outstanding
932,083,891
931,645,747
Add: Potential exercise of outstanding stock options
3,036,627
1,889,104
Average number of common shares outstanding - diluted basis
935,120,518
933,534,851
Basic earnings per common share
$
4.23 $
2.94
Diluted earnings per common share
$
4.21 $
2.93
Basic earnings per common share from continuing operations
$
4.30 $
3.07
Diluted earnings per common share from continuing operations
$
4.29 $
3.07
Dividends per common share
$
2.220 $
2.080
193
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
24. Capital Management
(a)
Policies and Objectives
Managing capital is the continual process of establishing and maintaining the quantity and quality of capital appropriate for
the Company and ensuring capital is deployed in a manner consistent with the expectations of the Company’s stakeholders.
For these purposes, the Board considers the key stakeholders to be the Company’s shareholders, policyholders and holders of
subordinated liabilities in addition to the relevant regulators in the various jurisdictions where the Company and its
subsidiaries operate.
The Company manages its capital on both a consolidated basis as well as at the individual operating subsidiary level. The
primary objectives of the Company’s capital management strategy are:
•
To maintain the capitalization of its regulated operating subsidiaries at a level that will exceed the relevant minimum
regulatory capital requirements in the jurisdictions in which they operate;
•
To maintain strong credit and financial strength ratings of the Company ensuring stable access to capital markets; and
•
To provide an efficient capital structure to maximize shareholders' value in the context of the Company’s operational risks
and strategic plans.
The target level of capitalization for the Company and its subsidiaries is assessed by considering various factors such as the
probability of falling below the minimum regulatory capital requirements in the relevant operating jurisdiction, the views
expressed by various credit rating agencies that provide financial strength and other ratings to the Company, and the desire to
hold sufficient capital to be able to honour all policyholder and other obligations of the Company with a high degree of
confidence.
The Company has established policies and procedures designed to identify, measure and report all material risks. Management
is responsible for establishing capital management procedures for implementing and monitoring the capital plan.
The capital planning process is the responsibility of the Company’s Chief Financial Officer. The capital plan is approved by the
Company’s Board of Directors on an annual basis. The Board of Directors reviews and approves all material capital
transactions undertaken by management.
(b)
Regulatory Capital
In Canada, OSFI has established a regulatory capital adequacy measurement for life insurance companies incorporated under
the Insurance Companies Act (Canada) and their subsidiaries.
The Life Insurance Capital Adequacy Test (LICAT) Ratio compares the regulatory capital resources of a company to its required
capital, defined by OSFI, as the aggregate of all defined capital requirements. The total capital resources are provided by the
sum of Available Capital, Surplus Allowance and Eligible Deposits.
The following provides a summary of the LICAT information and ratio for Canada Life:
2024
2023
Tier 1 Capital
$
20,142
$
18,285
Tier 2 Capital
5,253
5,223
Total Available Capital
25,395
23,508
Surplus Allowance and Eligible Deposits
5,130
5,406
Total Capital Resources
$
30,525
$
28,914
Required Capital
$
23,516
$
22,525
Total LICAT Ratio (OSFI Supervisory Target = 100%) 1
130 %
128 %
1
Total Ratio (%) = (Total Capital Resources / Required Capital)
For entities based in Europe, the local solvency capital regime is the Solvency II basis. At December 31, 2024 and December 31,
2023, all European regulated entities met the capital and solvency requirements as prescribed under Solvency II.
Empower is subject to the risk-based capital regulatory regime in the U.S. Other foreign operations and foreign subsidiaries of
the Company are required to comply with local capital or solvency requirements in their respective jurisdictions. At December
31, 2024 and December 31, 2023, the Company maintained capital levels above the minimum local regulatory requirements in
each of its foreign operations.
194
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
25. Share-Based Payments
(a)
Stock Option Plan
The Company has a stock option plan (the Plan) pursuant to which options to subscribe for common shares of Lifeco may be
granted to certain officers and employees of Lifeco and its affiliates. The Company’s Human Resources Committee (the
Committee) administers the Plan and, subject to the specific provisions of the Plan, fixes the terms and conditions upon which
options are granted. The exercise price of each option granted under the Plan is fixed by the Committee, but cannot under any
circumstances be less than the weighted average trading price per Lifeco common share on the Toronto Stock Exchange for the
five trading days preceding the date of the grant. Options granted prior to January 1, 2019 vest over a period of five years.
Options granted on or after January 1, 2019 vest 50% three years after the grant date and 50% four years after the grant date.
Options have a maximum exercise period of ten years from the grant date. Termination of employment may, in certain
circumstances, result in forfeiture of the options, unless otherwise determined by the Committee. In 2024, the maximum
number of Lifeco common shares issuable under the Plan was 72,500,000.
During 2024, 2,673,400 common share options were granted (2,957,200 during 2023). The weighted average fair value of
common share options granted during 2024 was $5.43 per option ($4.41 in 2023). The fair value of each common share option
was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions used for those
options granted in 2024: dividend yield 5.26% (5.65% in 2023), expected volatility 19.08% (18.98% in 2023), risk-free interest rate
3.43% (3.45% in 2023), and expected life of eight years (eight in 2023).
The following summarizes the changes in options outstanding and the weighted average exercise price:
2024
2023
Options
Weighted average
exercise price
Options
Weighted average
exercise price
Outstanding, beginning of year
15,564,488 $
34.63
17,093,615 $
33.82
Granted
2,673,400
42.24
2,957,200
36.81
Exercised
(2,379,656)
33.83
(4,296,047)
32.88
Forfeited/expired
(267,150)
36.27
(190,280)
35.62
Outstanding, end of year
15,591,082 $
36.03
15,564,488 $
34.63
Options exercisable at end of year
6,987,132 $
32.99
7,267,288 $
33.50
The weighted average share price at the date of exercise of stock options for the year ended December 31, 2024 was $45.37
($39.69 in 2023).
Compensation expense due to the Plan transactions accounted for as equity-settled share-based payments of $12 after-tax in
2024 ($8 after-tax in 2023) has been recognized in the Consolidated Statements of Earnings.
The following summarizes information on the ranges of exercise prices including weighted average remaining contractual life
at December 31, 2024:
Outstanding
Exercisable
Exercise price
ranges
Options
Weighted
average
remaining
contractual life
Weighted
average
exercise price
Options
Weighted
average
exercise price
Expiry
$30.28 - $36.87
752,100
0.69 $
33.44
683,150 $
33.58
2025
$30.28 - $36.87
888,932
1.17 $
34.67
888,932 $
34.67
2026
$30.28 - $36.87
794,900
2.22 $
36.15
794,900 $
36.15
2027
$30.28 - $34.21
975,550
3.22 $
33.75
975,550 $
33.75
2028
$30.28 - $32.50
1,765,550
4.21 $
30.86
1,765,550 $
30.86
2029
$32.10 - $32.22
1,091,350
5.16 $
32.22
1,085,950 $
32.22
2030
$32.10 - $38.75
1,637,500
6.16 $
32.33
788,350 $
32.33
2031
$31.59 - $38.71
2,205,500
7.16 $
38.68
4,750 $
31.59
2032
$36.69 - $38.87
2,815,000
8.16 $
36.82
— $
—
2033
$42.22 - $42.87
2,664,700
9.16 $
42.24
— $
—
2034
195
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
Deferred Share Unit Plans
To promote greater alignment of interests between the Directors and Lifeco's shareholders, the Company and certain of its
subsidiaries have mandatory DSU Plans and/or voluntary DSU Plans (the “Mandatory DSU Plans” and the “Voluntary DSU
Plans” respectively) in which the Directors of the Company participate. Under the Mandatory DSU Plans, each Director who is
a resident of Canada or the United States must receive 50% of their annual Board retainer in the form of Deferred Share Units
(DSUs). Under the Voluntary DSU Plans, each Director may elect to receive the balance of their annual Board retainer and
Board Committee fees entirely in the form of DSUs, entirely in cash, or equally in cash and DSUs. In both cases, the number of
DSUs granted is determined by dividing the amount of remuneration payable to the Director by the weighted average trading
price per Lifeco common share on the Toronto Stock Exchange (TSX) for the last five trading days of the preceding fiscal
quarter. Directors receive additional DSUs for dividends payable on the Company's common shares based on the value of a
DSU at the dividend payment date. DSUs are redeemable when an individual ceases to be a Director, or as applicable, an
officer or employee of the Company or any of its affiliates by a lump sum cash payment, based on the weighted average trading
price per Lifeco common share on the TSX for the last five trading days preceding the date of redemption. In 2024, $8 in
Directors' fees were used to acquire DSUs ($7 in 2023). At December 31, 2024, the carrying value of the DSU liability is $117
($101 in 2023) recorded within other liabilities.
Certain employees of the Company are entitled to receive DSUs. Under these DSU Plans, certain employees may elect to
receive DSUs as settlement of their annual incentive plan or as settlement of PSUs issued under the Company’s PSU Plan. In
both cases these employees are granted DSUs equivalent to the Company’s common shares. Employees receive additional
DSUs in respect of dividends payable on the common shares based on the value of the DSUs at the time. DSUs are redeemable
when an individual ceases to be an officer or employee of the Company or any of its affiliates, by a lump sum cash payment
representing the value of the DSUs at that date. The Company uses the fair-value based method to account for the DSUs
granted to employees under the plans. For the year ended December 31, 2024, the Company recognized compensation expense
of $12 ($24 in 2023) for the DSU Plans recorded in operating and administrative expenses in the Consolidated Statements of
Earnings. At December 31, 2024, the carrying value of the DSU liability is $73 ($63 in 2023) recorded within other liabilities in
the Consolidated Balance Sheets.
(c)
Performance Share Unit Plan
Certain employees of the Company are entitled to receive PSUs. Under the PSU Plan, these employees are granted PSUs
equivalent to the Company’s common shares vesting over a three-year period. Employees receive additional PSUs in respect of
dividends payable on the common shares based on the value of a PSU at that time. At the maturity date, employees receive
cash representing the value of the PSU at this date. The Company uses the fair-value based method to account for the PSUs
granted to employees under the plan. For the year ended December 31, 2024, the Company recognized compensation expense,
excluding the impact of hedging, of $179 ($179 in 2023) for the PSU Plan recorded in operating and administrative expenses in
the Consolidated Statements of Earnings. At December 31, 2024, the carrying value of the PSU liability is $324 ($255 in 2023)
recorded within other liabilities.
(d)
Employee Share Ownership Plan
The Company's Employee Share Ownership Plan (ESOP) is a voluntary plan where eligible employees can contribute up to 5%
of their previous year’s eligible earnings to purchase common shares of Lifeco. The Company matches 50% of the total
employee contributions. The contributions from the Company vest immediately and are expensed. For the year ended
December 31, 2024, the Company recognized compensation expense of $14 ($13 in 2023) for the ESOP recorded in operating
and administrative expenses in the Consolidated Statements of Earnings.
(e)
Putnam Investments, LLC Equity Incentive Plan
On January 1, 2024, the Company completed the sale of Putnam Investments to Franklin Templeton. Prior to the sale, Putnam
Investments sponsored the Putnam Investments, LLC Equity Incentive Plan. Under the terms of the Equity Incentive Plan,
Putnam Investments was authorized to grant or sell Class B Shares of Putnam (the Putnam Class B Shares), subject to certain
restrictions, and to grant options to purchase Putnam Class B Shares (collectively, the Awards) to certain senior management
and key employees of Putnam at fair value at the time of the award.
During 2023, Putnam granted 46,000 restricted Class B common shares to certain members of senior management and key
employees.
Compensation expense recorded for the year ended December 31, 2023 related to restricted Class B common shares and Class
B stock options earned was $50 and is recorded in net earnings (loss) from discontinued operations in the Consolidated
Statements of Earnings.
196
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(f)
PanAgora Management Equity Plan
Certain employees of PanAgora, a subsidiary of Empower, are eligible to participate in the PanAgora Management Equity Plan
under which Class C Shares of PanAgora and options and stock appreciation rights on Class C Shares of PanAgora may be
issued. Holders of PanAgora Class C Shares are not entitled to vote and have no rights to convert their shares into any other
securities. The number of PanAgora Class C Shares may not exceed 20% of the equity of PanAgora on a fully exercised and
converted basis.
Compensation expense recorded for the year ended December 31, 2024 related to restricted Class C Shares and stock
appreciation rights was $14 ($14 in 2023) and is included as a component of operating and administrative expenses in the
Consolidated Statements of Earnings.
26. Pension Plans and Other Post-Employment Benefits
Characteristics, Funding and Risk
The Company’s subsidiaries maintain contributory and non-contributory defined benefit pension plans for eligible employees
and advisors. The Company’s subsidiaries also maintain defined contribution pension plans for eligible employees and
advisors.
The defined benefit pension plans provide pensions based on length of service and final average pay; however, these plans are
closed to new entrants. Many of the defined benefit pension plans also no longer provide future defined benefit accruals. The
Company's defined benefit plan exposure is expected to reduce in future years. Where defined benefit pension accruals
continue, active plan participants share in the cost by making contributions in respect of current service. Certain pension
payments are indexed either on an ad hoc basis or a guaranteed basis. The determination of the defined benefit obligation
reflects pension benefits in accordance with the terms of the plans. Assets supporting the funded pension plans are held in
separate trusteed pension funds. Obligations for the wholly unfunded plans are included in other liabilities and are supported
by general assets.
New hires and active plan participants in defined benefit plans closed to future defined benefit accruals are eligible for defined
contribution pension benefits. The defined contribution pension plans provide pension benefits based on accumulated
employee and employer contributions. Employer contributions to these plans are a set percentage of employees’ annual
income and may be subject to certain vesting requirements.
The Company’s subsidiaries also provide post-employment health, dental and life insurance benefits to eligible employees,
advisors and their dependents. Retirees share in the cost of benefits through deductibles, co-insurance and caps on benefits.
These plans are closed to new hires and were previously amended to limit which employees could become eligible to receive
benefits. The amount of some of the post-employment benefits other than pensions depends on future cost escalation. These
post-employment benefits are not pre-funded and the amount of the obligation for these benefits is included in other liabilities
and is supported by general assets.
The Company's subsidiaries have pension and benefit committees or a trusteed arrangement that provides oversight for the
benefit plans. The benefit plans are monitored on an ongoing basis to assess the benefit, funding and investment policies,
financial status, and funding requirements. Significant changes to a subsidiary company's benefit plans require approval from
that company's Board of Directors.
The funding policies of the Company’s subsidiaries for the funded pension plans require annual contributions equal to or
greater than those required by the applicable regulations and plan provisions that govern the funding of the plans. Where
funded plans have a net defined benefit pension plan asset, the Company determines if an economic benefit exists in the form
of potential reductions in future contributions by the Company, from the payment of expenses from the plan and in the form of
surplus refunds, where permitted by applicable regulation and plan provisions.
By their design, the defined benefit plans expose the Company to the typical risks faced by defined benefit plans such as
investment performance, changes to the discount rates used to value the obligations, longevity of plan members, and future
inflation. Pension and benefit risk is managed by regular monitoring of the plans, applicable regulations and other factors that
could impact the expenses and cash flows of the Company.
197
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following reflects the financial position of the contributory and non-contributory defined benefit plans of the Company’s
subsidiaries:
(a)
Plan Assets, Benefit Obligation and Funded Status
Defined benefit
pension plans
Other post-
employment benefits
2024
2023
2024
2023
Change in fair value of plan assets
Fair value of plan assets, beginning of year
$
6,517 $
6,291 $
— $
—
Interest income
280
306
—
—
Actual return over (less than) interest income
88
177
—
—
Employer contributions
(8)
35
21
18
Employee contributions
22
22
—
—
Benefits paid
(304)
(295)
(21)
(18)
Settlements
(56)
(27)
—
—
Administrative expenses
(8)
(9)
—
—
Net transfer in
1
1
—
—
Foreign exchange rate changes
113
16
—
—
Fair value of plan assets, end of year
$
6,645 $
6,517 $
— $
—
Change in defined benefit obligation
Defined benefit obligation, beginning of year
$
6,275 $
5,825 $
256 $
256
Current service cost
44
41
2
2
Interest cost
272
282
12
13
Employee contributions
22
22
—
—
Benefits paid
(304)
(295)
(21)
(18)
Plan amendments
—
—
—
(7)
Settlements
(58)
(30)
—
—
Actuarial loss (gain) on financial assumption changes
(159)
400
—
15
Actuarial loss (gain) on demographic assumption changes
1
(15)
—
(2)
Actuarial loss (gain) arising from member experience
42
31
3
(2)
Net transfer in
—
1
—
—
Foreign exchange rate changes
110
13
1
(1)
Defined benefit obligation, end of year
$
6,245 $
6,275 $
253 $
256
Asset (liability) recognized on the Consolidated
Balance Sheets
Funded status of plans - surplus (deficit)
$
400 $
242 $
(253) $
(256)
Unrecognized amount due to asset ceiling
(151)
(202)
—
—
Asset (liability) recognized on the Consolidated
Balance Sheets
$
249 $
40 $
(253) $
(256)
Recorded in:
Other assets (note 11)
$
493 $
365 $
— $
—
Other liabilities (note 20)
(244)
(325)
(253)
(256)
Asset (liability) recognized on the Consolidated
Balance Sheets
$
249 $
40 $
(253) $
(256)
Analysis of defined benefit obligation
Wholly or partly funded plans
$
6,008 $
6,031 $
— $
—
Wholly unfunded plans
$
237 $
244 $
253 $
256
198
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Under IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, the Company
must assess whether each pension plan's asset has economic benefit to the Company through future contribution reductions,
from the payment of expenses from the plan, or surplus refunds; in the event the Company is not entitled to a benefit, a limit or
‘asset ceiling’ is required on the balance. The following provides a breakdown of the changes in the asset ceiling:
Defined benefit pension plans
2024
2023
Change in asset ceiling
Asset ceiling, beginning of year
$
202 $
310
Interest on asset ceiling
8
14
Change in asset ceiling
(63)
(123)
Foreign exchange rate changes
4
1
Asset ceiling, end of year
$
151 $
202
(b)
Pension and Other Post-Employment Benefits Expense
The total pension and other post-employment benefit expense included in operating expenses and other comprehensive
income are as follows:
All pension plans
Other post-
employment benefits
2024
2023
2024
2023
Defined benefit current service cost
$
66 $
63 $
2 $
2
Defined contribution current service cost
232
248
—
—
Employee contributions
(22)
(22)
—
—
Employer current service cost
276
289
2
2
Administrative expense
8
9
—
—
Plan amendments
—
—
—
(7)
Settlements
(2)
(3)
—
—
Net interest cost
—
(10)
12
13
Expense - profit or loss
282
285
14
8
Actuarial (gain) loss recognized
(116)
416
3
11
Return on assets (greater) less than assumed
(88)
(177)
—
—
Change in the asset ceiling
(63)
(123)
—
—
Re-measurements - other comprehensive (income) loss
(267)
116
3
11
Total (income) expense including re-measurements
$
15 $
401 $
17 $
19
(c)
Asset Allocation by Major Category Weighted by Plan Assets
Defined benefit pension plans
2024
2023
Equity securities
37 %
35 %
Debt securities
54 %
55 %
Real estate
6 %
7 %
Cash and cash equivalents
3 %
3 %
Total
100 %
100 %
No plan assets are directly invested in the Company’s or related parties’ securities. Plan assets include investments in
segregated funds and other funds managed by subsidiaries of the Company of $5,971 at December 31, 2024 and $5,841 at
December 31, 2023, of which $5,970 ($5,827 at December 31, 2023) are included on the Consolidated Balance Sheets. Plan
assets do not include any property occupied or other assets used by the Company.
199
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(d)
Details of Defined Benefit Obligation
(i)
Portion of Defined Benefit Obligation Subject to Future Salary Increases
Defined benefit
pension plans
Other post-
employment benefits
2024
2023
2024
2023
Benefit obligation without future salary increases
$
5,799 $
5,815 $
253 $
256
Effect of assumed future salary increases
446
460
—
—
Defined benefit obligation
$
6,245 $
6,275 $
253 $
256
The other post-employment benefits are not subject to future salary increases.
(ii)
Portion of Defined Benefit Obligation Without Future Pension Increases
Defined benefit
pension plans
Other post-
employment benefits
2024
2023
2024
2023
Benefit obligation without future pension increases
$
5,585 $
5,546 $
253 $
256
Effect of assumed future pension increases
660
729
—
—
Defined benefit obligation
$
6,245 $
6,275 $
253 $
256
The other post-employment benefits are not subject to future pension increases.
(iii) Maturity Profile of Plan Membership
Defined benefit
pension plans
Other post-
employment benefits
2024
2023
2024
2023
Actives
35 %
36 %
14 %
13 %
Deferred vesteds
16 %
16 %
n/a
n/a
Retirees
49 %
48 %
86 %
87 %
Total
100 %
100 %
100 %
100 %
Weighted average duration of defined benefit obligation
14.8 years
14.4 years
9.9 years
9.6 years
(e)
Cash Flow Information
Pension
plans
Other post-
employment
benefits
Total
Expected employer contributions for 2025:
Funded (wholly or partly) defined benefit plans
$
(34) $
— $
(34)
Unfunded plans
18
20
38
Defined contribution plans
217
—
217
Total
$
201 $
20 $
221
200
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(f)
Actuarial Assumptions and Sensitivities
(i)
Actuarial Assumptions
Defined benefit
pension plans
Other post-
employment benefits
2024
2023
2024
2023
To determine benefit cost:
Discount rate - past service liabilities
4.4 %
5.0 %
4.7 %
5.3 %
Discount rate - future service liabilities
4.6 %
5.3 %
5.0 %
5.4 %
Rate of compensation increase
3.4 %
3.8 %
—
—
Future pension increases 1
2.1 %
2.3 %
—
—
To determine defined benefit obligation:
Discount rate - past service liabilities
4.5 %
4.4 %
4.7 %
4.7 %
Rate of compensation increase
3.4 %
3.4 %
—
—
Future pension increases 1
2.0 %
2.1 %
—
—
Medical cost trend rates:
Initial medical cost trend rate
4.7 %
4.7 %
Ultimate medical cost trend rate
4.1 %
4.1 %
Year ultimate trend rate is reached
2039
2039
1
Represents the weighted average of plans subject to future pension increases.
(ii)
Sample Life Expectancies Based on Mortality Assumptions
Defined benefit
pension plans
Other post-
employment benefits
2024
2023
2024
2023
Sample life expectancies based on mortality
assumption:
Male
Age 65 in fiscal year
22.9
22.8
22.8
22.7
Age 65 for those age 35 in the fiscal year
24.8
24.7
24.2
24.2
Female
Age 65 in fiscal year
25.0
25.0
25.0
25.1
Age 65 for those age 35 in the fiscal year
26.9
26.8
26.5
26.4
The period of time over which benefits are assumed to be paid is based on best estimates of future mortality, including
allowances for mortality improvements. This estimate is subject to considerable uncertainty, and judgment is required in
establishing this assumption. As mortality assumptions are significant in measuring the defined benefit obligation, the
mortality assumptions applied by the Company take into consideration such factors as age, gender and geographic location, in
addition to an estimation of future improvements in longevity.
The mortality tables are reviewed at least annually, and assumptions are in accordance with accepted actuarial practice.
Emerging plan experience is reviewed and considered in establishing the best estimate for future mortality.
The calculation of the defined benefit obligation is sensitive to the mortality assumptions. The effect of a one-year increase in
life expectancy would be an increase in the defined benefit obligation of $174 for the defined benefit pension plans and $6 for
other post-employment benefits.
201
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(iii) Impact of Changes to Assumptions on Defined Benefit Obligation
1% increase
1% decrease
2024
2023
2024
2023
Defined benefit pension plans:
Impact of a change to the discount rate
$
(787) $
(771) $
997 $
972
Impact of a change to the rate of compensation increase
170
173
(154)
(157)
Impact of a change to the rate of inflation
344
346
(304)
(313)
Other post-employment benefits:
Impact of a change to assumed medical cost trend rates
15
14
(13)
(12)
Impact of a change to the discount rate
(22)
(22)
26
26
To measure the impact of a change in an assumption, all other assumptions were held constant. It is expected that there would
be interaction between at least some of the assumptions.
27. Accumulated Other Comprehensive Income
2024
Unrealized
foreign
exchange
gains on
translation
of foreign
operations1
Unrealized
gains
(losses) on
hedges of
the net
investment
in foreign
operations
Unrealized
gains
(losses) on
stocks,
bonds and
mortgages
at FVOCI
Unrealized
gains
(losses) on
cash flow
hedges
Re-
measurements
on defined
benefit
pension and
other post-
employment
benefit plans
Revaluation
surplus on
transfer to
investment
properties
Total
Non-
controlling
interest
Shareholders
Balance, beginning
of year
$
1,343 $
16 $
(383) $
28 $
(179) $
10 $ 835 $
55 $
890
Other comprehensive
income (loss)
1,202
(172)
(249)
3
264
— 1,048
(130)
918
Income tax
—
40
(35)
(1)
(72)
—
(68)
36
(32)
1,202
(132)
(284)
2
192
—
980
(94)
886
Balance, end of
year
$
2,545 $
(116) $
(667) $
30 $
13 $
10 $ 1,815 $
(39) $
1,776
1
Includes foreign exchange translation gains reclassified to earnings on disposal of foreign operations.
2023
Unrealized
foreign
exchange
gains
(losses) on
translation
of foreign
operations
Unrealized
gains
(losses) on
hedges of
the net
investment
in foreign
operations
Unrealized
gains (losses)
on bonds and
mortgages at
FVOCI
Unrealized
gains
(losses) on
cash flow
hedges
Re-
measurements
on defined
benefit pension
and other post-
employment
benefit plans
Revaluation
surplus on
transfer to
investment
properties
Total
Non-
controlling
interest
Shareholders
Balance, beginning
of year
$
1,362 $
86 $
(799) $
— $
(88) $
10 $
571 $
142 $
713
Impact of initial
application of
IFRS 9 overlay
(note 3)
—
—
3
—
—
—
3
—
3
Revised balance,
beginning of year
1,362
86
(796)
—
(88)
10
574
142
716
Other
comprehensive
income (loss)
(19)
(64)
529
39
(127)
—
358
(124)
234
Income tax
—
(6)
(116)
(11)
36
—
(97)
37
(60)
(19)
(70)
413
28
(91)
—
261
(87)
174
Balance, end of year
$
1,343 $
16 $
(383) $
28 $
(179) $
10 $
835 $
55 $
890
202
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
28. Related Party Transactions
Power Corporation, which is incorporated and domiciled in Canada, is the Company's parent and has voting control of the
Company. The Company is related to other members of the Power Corporation group of companies including IGM, a company
in the financial services sector along with its subsidiaries IG Wealth Management and Mackenzie Financial; and Groupe
Bruxelles Lambert, a holding company based in Europe with substantial holdings in global industrial and services companies.
(a)
Principal Subsidiaries
The consolidated financial statements of the Company include the operations of the following subsidiaries and their
subsidiaries:
Company
Incorporated in
Primary business operation
% Held
The Canada Life Assurance Company
Canada
Insurance and wealth management
100.00 %
Empower Annuity Insurance Company of America
United States
Financial services
100.00 %
(b)
Transactions With Related Parties Included in the Consolidated Financial Statements
In the normal course of business, subsidiaries of Lifeco enter into various transactions with related companies which include
providing insurance benefits and sub-advisory services to other companies within the Power Corporation group of companies.
In all cases, transactions were at market terms and conditions.
During the year, Canada Life provided to and received from IGM and its subsidiaries, a member of the Power Corporation
group of companies, certain administrative services. Canada Life also provided life insurance, annuity and disability insurance
products under a distribution agreement with IGM. All transactions were provided at market terms and conditions.
The Company owns 9,200,407 shares, held through Canada Life, representing a 3.89% ownership interest in IGM. The
Company uses the equity method to account for its investment in IGM as it exercises significant influence. In 2024, the
Company recognized $41 for the equity method share of IGM net earnings and received dividends of $21 from its investment in
IGM (note 6).
Segregated funds of the Company were invested in funds managed by IG Wealth Management and Mackenzie Investments.
Mackenzie Investments also manages certain of the Company's portfolio investments. The Company also has interests in
mutual funds, open-ended investment companies and unit trusts. Some of these funds are sub-advised by related parties of the
Company, who are paid sub-advisory fees related to these services. During 2024, the Company and its subsidiaries made
additional investments in funds managed by related parties. All transactions were provided at market terms and conditions
(note 17).
On November 30, 2023, Canada Life acquired IPC from IGM for purchase consideration of $585. The transaction was reviewed
and approved by the Conduct Review Committee of each of the Company and Canada Life (note 3).
The Company held debentures issued by IGM with a carrying value of $90 at December 31, 2024 ($88 at December 31, 2023).
Power Corporation also controls Sagard Holdings Inc. (Sagard), a multi-strategy alternative asset manager, Power Sustainable,
a global multi-platform alternative asset manager, and Portage Ventures (Portage), a global fintech venture capital investment
strategy. Lifeco has a minority investment in Sagard and in 2024 entered into a long-term strategic partnership with Power
Sustainable (note 3). Lifeco and Mackenzie Financial Corporation, a wholly-owned subsidiary of IGM, are investors in
Northleaf Capital Partners Ltd. (Northleaf), a global private equity, private credit and infrastructure fund manager. The
Company and its subsidiaries invest in funds managed by Sagard, Power Sustainable, Portage and Northleaf. Sagard also
provides certain sub-advisory and property management services to the Company and its subsidiaries.
The Company provides asset management, employee benefits and administrative services for employee benefit plans relating
to pension and other post-employment benefits for employees of the Company and its subsidiaries. These transactions were
provided at market terms and conditions.
(c)
Key Management Compensation
Key management personnel constitute those individuals that have the authority and responsibility for planning, directing and
controlling the activities of Lifeco, directly or indirectly, including any Director. The individuals that comprise the key
management personnel are the Board of Directors as well as certain key management and officers.
203
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The following describes all compensation paid to, awarded to, or earned by each of the key management personnel for services
rendered in all capacities to the Company and its subsidiaries:
2024
2023
Salary
$
24 $
21
Share-based awards
23
21
Option-based awards
9
8
Annual non-equity incentive plan compensation
14
29
Other
1
2
Total
$
71 $
81
29. Income Taxes
(a)
Components of the Income Tax Expense
(i)
Income Tax Recognized in Consolidated Statements of Earnings
2024
2023
Current income tax
Current income tax
$
771 $
467
Current Global Minimum Tax (GMT)
113
—
Total current income tax
$
884 $
467
Deferred income tax
Origination and reversal of temporary differences
$
(138) $
(422)
Tax expense (recovery) arising from unrecognized tax losses, tax credits or temporary differences
(9)
8
Total deferred income tax
$
(147) $
(414)
Total income tax expense
$
737 $
53
(ii)
Income Tax Recognized in Other Comprehensive Income (note 27)
2024
2023
Current income tax expense (recovery)
$
(12) $
43
Deferred income tax expense (recovery)
80
54
Total
$
68 $
97
(iii) Income Tax Recognized in Consolidated Statements of Changes in Equity
2024
2023
Current income tax (recovery)
$
— $
—
Deferred income tax (recovery)
—
1
Total
$
— $
1
204
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
The Effective Income Tax Rate Reported in the Consolidated Statements of Earnings Varies From
the Combined Canadian Federal and Provincial Income Tax Rate of 28.00% for the Following Items:
2024
2023
Earnings before income taxes
$
4,981
$
3,068
Combined basic Canadian federal and provincial tax rate
1,395
28.00 %
859
28.00 %
Increase (decrease) in the income tax rate resulting from:
Non-taxable investment income
(342)
(6.86)
(234)
(7.63)
Operations outside of Canada subject to a lower average
foreign tax rate
(436)
(8.75)
(532)
(17.34)
Other
7
0.14
(40)
(1.30)
Total income tax expense and effective income tax rate
excluding GMT
$
624
12.53 % $
53
1.73 %
Global Minimum Tax
113
2.27
—
—
Total income tax expense and effective income tax rate $
737
14.80 % $
53
1.73 %
Total income tax expense and effective income tax rate
- common shareholders
$
815
16.46 % $
128
4.12 %
(c)
Composition and Changes in Net Deferred Income Tax Assets are as Follows:
2024
Insurance
and
investment
contract
liabilities
Portfolio
investments
Losses
carried
forward
Intangible
assets
Tax credits
Other
Total
Balance, beginning of year
$
(2,727) $
2,437 $
1,545 $
(783) $
237 $
352 $
1,061
Recognized in Consolidated
Statements of Earnings
358
(184)
(262)
355
(28)
(92)
147
Recognized in Consolidated
Statements of Comprehensive
Income
—
(8)
—
—
—
(72)
(80)
Recognized in Consolidated
Statements of Changes in Equity
—
—
—
—
—
—
—
Acquired in business combinations
—
(59)
—
(25)
(1)
(10)
(95)
Other and foreign exchange rate
changes
(251)
236
101
(19)
13
119
199
Balance, end of year
$
(2,620) $
2,422 $
1,384 $
(472) $
221 $
297 $
1,232
2023
Insurance
and
investment
contract
liabilities
Portfolio
investments
Losses
carried
forward
Intangible
assets
Tax credits
Other
Total
Balance, beginning of year
$
(3,064) $
2,249 $
1,619 $
(786) $
290 $
389 $
697
Recognized in Consolidated
Statements of Earnings
1,098
(712)
(58)
(33)
(53)
172
414
Recognized in Consolidated
Statements of Comprehensive
Income
—
(71)
—
—
—
17
(54)
Recognized in Consolidated
Statements of Changes in Equity
—
—
—
—
—
(1)
(1)
Acquired in business combinations
—
—
4
(12)
1
(3)
(10)
Other and foreign exchange rate
changes
(761)
971
(20)
48
(1)
(222)
15
Balance, end of year
$
(2,727) $
2,437 $
1,545 $
(783) $
237 $
352 $
1,061
205
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Recorded on Consolidated Balance Sheets:
2024
2023
Deferred tax assets
$
2,066 $
1,848
Deferred tax liabilities
(834)
(787)
Total
$
1,232 $
1,061
A deferred income tax asset is recognized for deductible temporary differences and unused tax losses and carryforwards only to
the extent that realization of the related income tax benefit through future taxable profits is probable.
Recognition is based on the fact that it is probable that the entity will have taxable profits and/or tax planning opportunities
available to allow the deferred income tax asset to be utilized. Changes in circumstances in future periods may adversely
impact the assessment of the recoverability. The uncertainty of the recoverability is taken into account in establishing the
deferred income tax assets. The Company's annual financial planning process provides a significant basis for the measurement
of deferred income tax assets.
Management assesses the recoverability of the deferred income tax assets carrying values based on future years’ taxable
income projections and believes the carrying values of the deferred income tax assets as of December 31, 2024 are recoverable.
At December 31, 2024, the Company has recognized a deferred tax asset of $1,384 ($1,545 at December 31, 2023) on tax loss
carryforwards totaling $6,131, of which $594 expire between 2026 and 2044 while $5,537 have no expiry date. The Company will
realize this benefit in future years through a reduction in current income taxes payable.
The Company has not recognized a deferred tax asset of $183 ($154 in 2023) on tax loss carryforwards totaling $799 ($592 in
2023). Of this amount, $457 expire between 2025 and 2044 while $342 have no expiry date. In addition, the Company has not
recognized a deferred tax asset of $116 ($11 in 2023) on other temporary differences of $473 ($54 in 2023).
A deferred income tax liability has not been recognized in respect of the temporary differences associated with investments in
subsidiaries, branches and associates as the Company is able to control the timing of the reversal of the temporary differences,
and it is probable that the temporary differences will not reverse in the foreseeable future.
The Organization for Economic Co-Operation and Development (OECD) introduced a 15% GMT regime that has been adopted
for 2024 by all countries in which the Company has significant operations, other than the U.S. and Isle of Man. Legislation has
been enacted by Canada, Barbados, Germany, Ireland, the U.K. and Switzerland with an effective date of January 1, 2024.
The GMT is complex in nature and applies to Lifeco as part of a larger group of related companies. The Company is liable for
GMT in respect of Barbados, Ireland, the Isle of Man and Switzerland, jurisdictions where the statutory tax rates are below 15%.
The Company has applied the mandatory temporary exception in IAS 12, Income Taxes from recognizing and disclosing
deferred tax assets and liabilities related to the GMT.
206
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
30. Derivative Financial Instruments and Hedging
In the normal course of managing exposure to fluctuations in interest and foreign exchange rates, and to market risks, the
Company is an end-user of various derivative financial instruments. It is the Company's policy to transact in derivatives only
with the most creditworthy financial intermediaries. Note 7 discloses the credit quality of the Company's exposure to
counterparties. Credit risk equivalent amounts are presented net of eligible collateral received of $440 as at December 31, 2024
($842 at December 31, 2023).
(a)
The Following Summarizes the Company's Derivative Portfolio and Related Credit Exposure Using
the Following Definitions of Risk as Prescribed by OSFI:
Maximum credit risk
The total replacement cost of all derivative contracts with positive values.
Future credit exposure
The potential future credit exposure is calculated based on a formula prescribed by OSFI. The factors
prescribed by OSFI for this calculation are based on derivative type and duration.
Credit risk equivalent
The sum of maximum credit risk and the potential future credit exposure less any eligible collateral held.
Risk weighted equivalent
Represents the credit risk equivalent, weighted according to the creditworthiness of the counterparty, as
prescribed by OSFI.
2024
2023
Notional
amount
Maximum
credit
risk
Future
credit
exposure
Credit
risk
equivalent
Risk
weighted
equivalent
Notional
amount
Maximum
credit
risk
Future
credit
exposure
Credit
risk
equivalent
Risk
weighted
equivalent
Interest rate
contracts
Swaps
$
9,355 $
186 $
104 $
247 $
4 $
6,732 $
153 $
73 $
156 $
3
Futures - short
159
—
—
—
—
153
—
—
—
—
Options
purchased
3,239
90
37
43
1
1,995
15
19
26
—
12,753
276
141
290
5
8,880
168
92
182
3
Foreign
exchange
contracts
Cross-currency
swaps
36,047
1,971
2,219
3,886
67
33,150
1,771
2,080
3,213
56
Forward
contracts
8,821
48
110
150
1
6,484
73
82
126
1
44,868
2,019
2,329
4,036
68
39,634
1,844
2,162
3,339
57
Other
derivative
contracts
Equity
contracts
2,564
107
170
275
1
2,089
206
155
294
1
Futures - long
14
—
—
—
—
14
—
—
—
—
Futures - short
599
—
—
—
—
627
1
—
—
—
Equity options-
written
1,509
28
121
149
1
—
—
—
—
—
Credit default
swaps
759
1
—
—
—
665
—
—
—
—
5,445
136
291
424
2
3,395
207
155
294
1
Total
$ 63,066 $
2,431 $
2,761 $
4,750 $
75 $ 51,909 $
2,219 $
2,409 $
3,815 $
61
207
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(b)
The Following Provides the Notional Amount, Term to Maturity and Carrying Value of the
Company’s Derivative Portfolio by Category:
2024
Notional amount
Carrying value
1 year
or less
1-5 years
Over
5 years
Total
Assets
Liabilities
Derivatives not designated as
accounting hedges
Interest rate contracts
Swaps
$
886 $
2,329 $
6,121 $
9,336 $
185 $
(340)
Futures - short
159
—
—
159
—
—
Options purchased
216
864
2,159
3,239
90
—
1,261
3,193
8,280
12,734
275
(340)
Foreign exchange
contracts
Cross-currency swaps
3,776
9,416
20,514
33,706
1,862
(1,402)
Forward contracts
5,835
7
—
5,842
11
(225)
9,611
9,423
20,514
39,548
1,873
(1,627)
Other derivative contracts
Equity contracts
1,631
557
—
2,188
4
(18)
Futures - long
14
—
—
14
—
—
Futures - short
599
—
—
599
—
—
Equity options - written
—
1,509
—
1,509
28
—
Credit default swaps
—
746
13
759
1
—
2,244
2,812
13
5,069
33
(18)
Derivatives designated as
accounting hedges
Fair value hedges
Foreign currency risk
Foreign exchange
contracts
Forward contracts
79
—
—
79
—
(3)
79
—
—
79
—
(3)
Cash flow hedges
Interest rate risk
Interest rate contracts
Swaps
—
19
—
19
1
—
Foreign currency risk
Foreign exchange
contracts
Cross-currency swaps
46
25
—
71
6
—
Equity risk
Other derivative
contracts
Equity contracts
117
259
—
376
103
—
163
303
—
466
110
—
Net investment hedges
Foreign currency risk
Foreign exchange
contracts
Cross-currency swaps
—
—
2,270
2,270
103
(61)
Forward contracts
2,353
547
—
2,900
37
(88)
2,353
547
2,270
5,170
140
(149)
Total
$
15,711 $
16,278 $
31,077 $
63,066 $
2,431 $
(2,137)
208
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Notional amount
Carrying value
1 year
or less
1-5 years
Over
5 years
Total
Assets
Liabilities
Derivatives not designated as
accounting hedges
Interest rate contracts
Swaps
$
597 $
1,869 $
4,248 $
6,714 $
152 $
(338)
Futures - short
153
—
—
153
—
—
Options purchased
200
798
997
1,995
15
—
950
2,667
5,245
8,862
167
(338)
Foreign exchange contracts
Cross-currency swaps
2,531
9,552
18,704
30,787
1,651
(856)
Forward contracts
3,930
—
—
3,930
45
(14)
6,461
9,552
18,704
34,717
1,696
(870)
Other derivative contracts
Equity contracts
504
1,256
—
1,760
100
(1)
Futures - long
14
—
—
14
—
—
Futures - short
627
—
—
627
1
(4)
Credit default swaps
326
166
173
665
—
—
1,471
1,422
173
3,066
101
(5)
Derivatives designated as
accounting hedges
Fair value hedges
Foreign currency risk
Foreign exchange
contracts
Forward contracts
80
—
—
80
1
—
80
—
—
80
1
—
Cash flow hedges
Interest rate risk
Interest rate contracts
Swaps
—
18
—
18
1
—
Foreign currency risk
Foreign exchange
contracts
Cross-currency swaps
18
75
—
93
2
—
Equity risk
Other derivative
contracts
Equity contracts
93
236
—
329
106
—
111
329
—
440
109
—
Net investment hedges
Foreign currency risk
Foreign exchange
contracts
Cross-currency swaps
—
—
2,270
2,270
118
(61)
Forward contracts
1,967
507
—
2,474
27
(14)
1,967
507
2,270
4,744
145
(75)
Total
$
11,040 $
14,477 $
26,392 $
51,909 $
2,219 $
(1,288)
Futures contracts included in the above are exchange traded contracts; all other contracts are over-the-counter.
209
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(c)
The Following Provides Further Details on the Derivatives Designated as Accounting Hedges:
Exchange rates and share prices expressed in dollar terms
2024
Notional amount
1 year
or less
1-5 years
Over
5 years
Total
Fair value hedges
Foreign currency risk
Foreign exchange contracts
Forward contracts
$
79
$
—
$
—
$
79
Weighted average USD-CAD exchange rate
1.37
—
—
1.37
Cash flow hedges
Interest rate risk
Interest rate contracts
Swaps
$
—
$
19
$
—
$
19
Weighted average fixed interest rate
— %
5.23 %
— %
5.23 %
Foreign currency risk
Foreign exchange contracts
Cross-currency swaps
$
46
$
25
$
—
$
71
Weighted average USD-AUD exchange rate
1.33
—
—
1.33
Weighted average USD-CAD exchange rate
1.26
—
—
1.26
Weighted average USD-EUR exchange rate
0.91
0.92
—
0.91
Weighted average USD-GBP exchange rate
0.76
0.76
—
0.76
Equity risk
Other derivative contracts
Equity contracts
$
117
$
259
$
—
$
376
Weighted average share price
38.71
39.40
—
39.17
Net investment hedges
Foreign currency risk
Foreign exchange contracts
Cross-currency swaps
$
—
$
—
$
2,270
$
2,270
Weighted average EUR-CAD exchange rate
—
—
1.41
1.41
Weighted average GBP-CAD exchange rate
—
—
1.73
1.73
Forward contracts
$
2,353
$
547
$
—
$
2,900
Weighted average USD-CAD exchange rate
1.37
—
—
1.37
Weighted average EUR-GBP exchange rate
0.83
0.83
—
0.83
210
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Exchange rates and share prices expressed in dollar terms
2023
Notional amount
1 year
or less
1-5 years
Over
5 years
Total
Fair value hedges
Foreign currency risk
Foreign exchange contracts
Foreign exchange forward contracts
$
80
$
—
$
—
$
80
Weighted average USD-CAD exchange rate
1.34
—
—
1.34
Cash flow hedges
Interest rate risk
Interest rate contracts
Swaps
$
—
$
18
$
—
$
18
Weighted average fixed interest rate
— %
5.23 %
— %
5.23 %
Foreign currency risk
Foreign exchange contracts
Cross-currency swaps
$
18
$
75
$
—
$
93
Weighted average USD-AUD exchange rate
—
1.33
—
1.33
Weighted average USD-CAD exchange rate
—
1.26
—
1.26
Weighted average USD-EUR exchange rate
0.92
0.91
—
0.91
Weighted average USD-GBP exchange rate
0.76
0.76
—
0.76
Equity risk
Other derivative contracts
Equity contracts
$
93
$
236
$
—
$
329
Weighted average share price
32.10
37.69
—
35.82
Net investment hedges
Foreign currency risk
Foreign exchange contracts
Cross-currency swaps
$
—
$
—
$
2,270
$
2,270
Weighted average EUR-CAD exchange rate
—
—
1.41
1.41
Weighted average GBP-CAD exchange rate
—
—
1.73
1.73
Forward contracts
$
1,967
$
507
$
—
$
2,474
Weighted average USD-CAD exchange rate
1.34
—
—
1.34
Weighted average EUR-GBP exchange rate
0.86
0.86
—
0.86
(d)
The Following Provides Details of the Company's Derivative Portfolio by Type of Instrument:
Interest Rate Contracts
Interest rate swaps, futures and options are used as part of a portfolio of assets to manage interest rate risk associated with
investment activities and insurance and investment contract liabilities. Interest-rate swap agreements require the periodic
exchange of payments without the exchange of the notional principal amount on which payments are based. Call options grant
the Company the right to enter into a swap with predetermined fixed-rate payments over a predetermined time period on the
exercise date. Call options are used to manage the variability in future interest payments due to a change in credited interest
rates and the related potential change in cash flows due to surrenders. Call options are also used to hedge minimum rate
guarantees.
Foreign Exchange Contracts
Cross-currency swaps are used in combination with other investments to manage foreign currency risk associated with
investment activities, and insurance and investment contract liabilities. Cross-currency swaps are also used to hedge the
Company's net investment in foreign operations. Under these swaps principal amounts and fixed or floating interest payments
may be exchanged in different currencies. The Company also enters into certain foreign exchange forward contracts to hedge
certain product liabilities.
211
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
Other Derivative Contracts
Equity index swaps, futures and options are used to hedge certain product liabilities. Equity index swaps are also used as
substitutes for cash instruments and are used to periodically hedge the market risk associated with certain fee income. Equity
put options are used to manage potential credit risk impact of significant declines in certain equity markets.
Equity total return swaps are used to manage exposure to fluctuations in the total return of common shares related to deferred
compensation arrangements. Total return swaps require the exchange of net contractual payments periodically or at maturity
without the exchange of the notional principal amounts on which the payments are based. These instruments are designated as
cash flow hedges.
(e)
Hedge Accounting
Fair Value Hedges
The ineffective portion of fair value hedges recognized in the net investment result, which includes foreign exchange contracts,
was nil during 2024 and 2023.
Cash Flow Hedges
The ineffective portion of the cash flow hedges, which includes interest rate contracts, foreign exchange contracts, and equity
total return swap contracts, was nil during 2024 and 2023, and the anticipated net gains (losses) expected to be reclassified out
of accumulated other comprehensive income within the next twelve months is nil. The maximum time frame for which
variable cash flows are hedged is 5 years.
Net Investment Hedges
The effects of the Company’s net investment hedges on the Consolidated Statements of Earnings and Consolidated Statements
of Comprehensive Income are shown in the following table.
2024
Change in fair
value of hedged
items for
ineffectiveness
measurement
Change in fair
value of hedging
instruments for
ineffectiveness
measurement
Gains (losses)
deferred in AOCI
Gains (losses)
reclassified from
AOCI into total
investment result
Ineffectiveness
recognized in
total investment
result
Euro denominated debt
$
30 $
(30) $
(30) $
— $
—
Cross-currency swaps
85
(85)
(85)
—
—
Foreign exchange forward contracts
88
(88)
(88)
—
—
Total
$
203 $
(203) $
(203) $
— $
—
2023
Change in fair
value of hedged
items for
ineffectiveness
measurement
Change in fair
value of hedging
instruments for
ineffectiveness
measurement
Gains (losses)
deferred in AOCI
Gains (losses)
reclassified from
AOCI into total
investment result
Ineffectiveness
recognized in
total investment
result
Euro denominated debt
$
10 $
(10) $
(10) $
— $
—
Cross-currency swaps
35
(35)
(35)
—
—
Foreign exchange forward contracts
(17)
17
17
—
—
Total
$
28 $
(28) $
(28) $
— $
—
212
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
31. Legal Provisions and Contingent Liabilities
The Company and its subsidiaries are from time-to-time subject to legal actions, including arbitrations, class actions, and
regulatory matters. Provisions are established if, in management's judgment, it is probable a payment will be required and the
amount of the payment can be reliably estimated. It is inherently difficult to predict the outcome of any of these proceedings
with certainty, and it is possible that an adverse resolution could have a material adverse effect on the consolidated financial
position of the Company. However, based on information presently known, it is not expected that any of the existing legal
actions, either individually or in the aggregate, will have a material adverse effect on the consolidated financial position of the
Company. Actual results could differ from management’s best estimates.
Subsidiaries of the Company in the United States are defendants in a class action, relating to the costs and features of their
retirement and fund products and the conduct of their businesses. Management believes the claim is without merit and will be
vigorously defending these actions. Based on the information presently known these actions will not have a material adverse
effect on the consolidated financial position of the Company.
A proposed class action was filed against a subsidiary of the Company in Canada and other third party defendants relating to
the defendants' alleged use of a software application for setting rents in multi-family residential complexes. Management
believes the claim to be without merit and will be vigorously defending the action.
32. Commitments
(a)
Letters of Credit
Letters of credit are written commitments provided by a bank. The total amount of letter of credit facilities is U.S. $1,717 of
which U.S.$941 were issued as of December 31, 2024.
The Capital and Risk Solutions segment periodically uses letters of credit as collateral under certain reinsurance contracts for
on balance sheet policy liabilities.
(b)
Investment Commitments
Commitments of investment transactions made in the normal course of operations in accordance with policies and guidelines
that are to be disbursed upon fulfillment of certain contract conditions were $7,533 as at December 31, 2024, with $7,372
maturing within one year, $116 maturing within two years, $30 maturing within three years, $8 maturing within four years and
$7 maturing within over 5 years.
(c)
Pledged Assets
In addition to the assets pledged by the Company disclosed elsewhere in the consolidated financial statements:
•
The amount of assets included in the Company's balance sheet which have a security interest by way of pledging is $3,710
($1,462 at December 31, 2023) in respect of reinsurance agreements.
•
In addition, under certain reinsurance contracts, bonds presented in portfolio investments are held in trust and escrow
accounts. Assets are placed in these accounts pursuant to the requirements of certain legal and contractual obligations to
support contract liabilities assumed.
•
The Company has pledged, in the normal course of business, $74 ($72 at December 31, 2023) of assets of the Company for
the purpose of providing collateral for the counterparty.
33. Segmented Information
The operating segments of the Company are Canada, United States, Europe, Capital and Risk Solutions and Lifeco Corporate.
These segments reflect the Company’s management structure and internal financial reporting. Each of these segments
operates in the financial services industry and the revenues from these segments are derived principally from interests in life
insurance, health insurance, retirement and investment services, asset management and reinsurance businesses.
Transactions between operating segments occur at market terms and conditions and have been eliminated upon
consolidation.
The Company has a capital allocation model to measure the performance of the operating segments. The impact of the capital
allocation model is included in the segmented information presented below.
213
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
(a)
Consolidated Net Earnings
2024
Canada
United
States
Europe
Capital and
Risk
Solutions
Lifeco
Corporate
Total
Segment revenue
Insurance revenue 1
$
9,460 $
231 $
6,588 $
4,935 $
— $
21,214
Net investment income 2
3,785
4,029
1,509
366
(6)
9,683
Changes in fair value on FVTPL assets 2
2,881
343
(1,172)
(416)
40
1,676
16,126
4,603
6,925
4,885
34
32,573
Fee and other income 3
1,927
4,368
915
14
—
7,224
18,053
8,971
7,840
4,899
34
39,797
Other insurance results
Insurance service expenses
(6,450)
(225)
(5,613)
(4,080)
—
(16,368)
Net income (expenses) from reinsurance contracts
(1,399)
(33)
(138)
(29)
—
(1,599)
(7,849)
(258)
(5,751)
(4,109)
—
(17,967)
Other investment results
Net finance income (expenses) from insurance contracts
(5,800)
(145)
15
12
—
(5,918)
Net finance income (expenses) from reinsurance contracts
(2)
(37)
28
1
—
(10)
Changes in investment contract liabilities
(153)
(2,773)
(2)
(4)
—
(2,932)
(5,955)
(2,955)
41
9
—
(8,860)
Net investment result - insurance contracts on account
of segregated fund policyholders
Net investment income (loss)
5,280
—
1,548
—
—
6,828
Net finance income (expenses) from insurance contracts
(5,280)
—
(1,548)
—
—
(6,828)
—
—
—
—
—
—
Other income and expenses
Operating and administrative expenses
(2,020)
(3,951)
(961)
(48)
(70)
(7,050)
Amortization of finite life intangible assets
(123)
(228)
(61)
(2)
(1)
(415)
Financing costs
(134)
(221)
(40)
(5)
(2)
(402)
Restructuring and integration expenses
(23)
(73)
(26)
—
—
(122)
Earnings (loss) before income taxes
1,949
1,285
1,042
744
(39)
4,981
Income taxes
345
173
166
100
(47)
737
Net earnings from continuing operations before non-
controlling interests
1,604
1,112
876
644
8
4,244
Attributable to non-controlling interests
101
2
—
—
—
103
Net earnings from continuing operations before
preferred share dividends
1,503
1,110
876
644
8
4,141
Preferred share dividends
112
—
18
—
—
130
Net earnings from continuing operations before
capital allocation
1,391
1,110
858
644
8
4,011
Impact of capital allocation
93
8
(45)
(26)
(30)
—
Net earnings (loss) from continuing operations
1,484
1,118
813
618
(22)
4,011
Net loss from discontinued operations
—
(115)
—
—
—
(115)
Net gain from disposal of discontinued operations
—
44
—
—
—
44
Net earnings (loss) - common shareholders
$
1,484 $
1,047 $
813 $
618 $
(22) $
3,940
1
Included within insurance service result in the Consolidated Statements of Earnings.
2
Included within net investment result in the Consolidated Statements of Earnings.
3
Included within other income and expenses in the Consolidated Statements of Earnings.
214
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Canada
United
States
Europe
Capital and
Risk
Solutions
Lifeco
Corporate
Total
Segment revenue
Insurance revenue 1
$
9,378 $
240 $
6,068 $
4,716 $
— $
20,402
Net investment income 2
3,163
4,053
1,423
198
27
8,864
Changes in fair value on FVTPL assets 2
3,245
2,296
891
74
(17)
6,489
15,786
6,589
8,382
4,988
10
35,755
Fee and other income 3
1,377
3,706
777
14
—
5,874
17,163
10,295
9,159
5,002
10
41,629
Other insurance results
Insurance service expenses
(6,496)
(178)
(5,162)
(3,941)
—
(15,777)
Net income (expenses) from reinsurance contracts
(1,399)
8
(143)
(10)
—
(1,544)
(7,895)
(170)
(5,305)
(3,951)
—
(17,321)
Other investment results
Net finance income (expenses) from insurance contracts
(6,271)
(334)
(2,542)
(91)
—
(9,238)
Net finance income (expenses) from reinsurance contracts
19
(24)
222
7
—
224
Changes in investment contract liabilities
(130)
(4,627)
(3)
(46)
—
(4,806)
(6,382)
(4,985)
(2,323)
(130)
—
(13,820)
Net investment result - insurance contracts on account of
segregated fund policyholders
Net investment income (loss)
3,366
—
1,442
—
—
4,808
Net finance income (expenses) from insurance contracts
(3,366)
—
(1,442)
—
—
(4,808)
—
—
—
—
—
—
Other income and expenses
Operating and administrative expenses
(1,465)
(3,758)
(1,063)
(50)
(66)
(6,402)
Amortization of finite life intangible assets
(102)
(204)
(57)
(1)
(2)
(366)
Financing costs
(134)
(239)
(45)
(5)
(3)
(426)
Restructuring and integration expenses
—
(100)
(126)
—
—
(226)
Earnings (loss) before income taxes
1,185
839
240
865
(61)
3,068
Income taxes
188
72
(207)
6
(6)
53
Net earnings (loss) from continuing operations before non-
controlling interests
997
767
447
859
(55)
3,015
Attributable to non-controlling interests
17
6
—
—
—
23
Net earnings (loss) from continuing operations before
preferred share dividends
980
761
447
859
(55)
2,992
Preferred share dividends
112
—
18
—
—
130
Net earnings (loss) from continuing operations before
capital allocation
868
761
429
859
(55)
2,862
Impact of capital allocation
93
8
(45)
(26)
(30)
—
Net earnings (loss) from continuing operations
961
769
384
833
(85)
2,862
Net loss from discontinued operations
—
(124)
—
—
—
(124)
Net earnings (loss) - common shareholders
$
961 $
645 $
384 $
833 $
(85) $
2,738
1
Included within insurance service result in the Consolidated Statements of Earnings.
2
Included within net investment result in the Consolidated Statements of Earnings.
3
Included within other income and expenses in the Consolidated Statements of Earnings.
215
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
The Revenue by Source Currency for Capital and Risk Solutions
2024
2023
Revenue
United States
$
1,422 $
1,462
United Kingdom
2,110
2,052
Japan
(68)
87
Other
1,435
1,401
Total revenue
$
4,899 $
5,002
Negative income in the table above is primarily due to unrealized fair value losses through profit or loss on bonds.
(b)
Consolidated Total Assets and Liabilities
2024
Canada
United
States
Europe
Capital and Risk
Solutions
Total
Assets
Invested assets
$
98,262 $
89,768 $
44,321 $
11,434 $
243,785
Insurance contract assets
434
335
353
71
1,193
Reinsurance contract held assets
1,216
12,756
3,746
124
17,842
Goodwill and intangible assets
6,645
6,667
3,074
—
16,386
Other assets
5,769
16,741
3,982
79
26,571
Investments on account of segregated fund
policyholders
114,547
215,986
165,853
—
496,386
Total
$
226,873 $
342,253 $
221,329 $
11,708 $
802,163
Liabilities
Insurance contract liabilities
$
87,250 $
18,881 $
42,066 $
7,486 $
155,683
Investment contract liabilities
3,698
85,470
330
659
90,157
Reinsurance contract held liabilities
283
159
313
40
795
Other liabilities
9,572
12,523
3,456
937
26,488
Insurance contracts on account of segregated fund
policyholders
35,893
14,409
16,041
—
66,343
Investment contracts on account of segregated fund
policyholders
78,654
201,577
149,812
—
430,043
Total
$
215,350 $
333,019 $
212,018 $
9,122 $
769,509
216
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Canada
United
States
Europe
Capital and Risk
Solutions
Total
Assets
Invested assets
$
89,382 $
86,715 $
41,981 $
8,732 $
226,810
Insurance contract assets
400
291
331
171
1,193
Reinsurance contract held assets
1,243
12,243
3,713
133
17,332
Assets held for sale
—
4,467
—
—
4,467
Goodwill and intangible assets
6,545
6,151
3,037
—
15,733
Other assets
4,964
16,192
3,531
52
24,739
Investments on account of segregated fund
policyholders
101,250
179,770
141,936
—
422,956
Total
$
203,784 $
305,829 $
194,529 $
9,088 $
713,230
Liabilities
Insurance contract liabilities
$
81,455 $
18,079 $
39,390 $
5,464 $
144,388
Investment contract liabilities
3,931
83,966
341
681
88,919
Reinsurance contract held liabilities
208
163
250
27
648
Liabilities held for sale
—
2,407
—
—
2,407
Other liabilities
7,153
12,804
3,408
696
24,061
Insurance contracts on account of segregated fund
policyholders
32,997
12,892
14,413
—
60,302
Investment contracts on account of segregated fund
policyholders
68,253
166,878
127,523
—
362,654
Total
$
193,997 $
297,189 $
185,325 $
6,868 $
683,379
The Assets by Source Currency for Capital and Risk Solutions
2024
2023
Assets
United States
$
4,792 $
4,334
United Kingdom
3,694
1,350
Japan
2,926
3,047
Other
296
357
Total assets
$
11,708 $
9,088
(c)
CSM
2024
Non-Participating (excluding Segregated Funds)
Segregated
Funds
Par
Total 1
Canada
United
States
Europe
Capital
and Risk
Solutions
Total
CSM, beginning of year
$
1,159 $
24 $
3,255 $
1,745 $ 6,183 $
3,298 $ 3,154 $ 12,635
CSM recognized for services provided
(103)
(5)
(286)
(178)
(572)
(408)
(151)
(1,131)
Contracts initially recognized in the year
36
—
371
251
658
170
119
947
Changes in estimates that adjust the CSM
(431)
31
79
477
156
197
113
466
Net finance (income) expenses from insurance
contracts
29
1
79
47
156
(17)
—
139
Effect of movement in exchange rates
—
4
166
94
264
28
20
312
CSM, end of year
$
690 $
55 $
3,664 $
2,436 $ 6,845 $
3,268 $ 3,255 $ 13,368
1
The amounts in the table above are presented net of reinsurance.
217
Great-West Lifeco Inc. 2024 Annual Report
Notes to the Consolidated Financial Statements
2023
Non-Participating (excluding Segregated Funds)
Segregated
Funds
Par
Total 1
Canada
United
States
Europe
Capital
and Risk
Solutions
Total
CSM, beginning of year
$
1,264 $
41 $
2,771 $
1,796 $ 5,872 $
3,557 $ 3,694 $ 13,123
CSM recognized for services provided
(143)
(4)
(234)
(154)
(535)
(430)
(157)
(1,122)
Contracts initially recognized in the year
41
—
284
49
374
181
111
666
Changes in estimates that adjust the CSM
(40)
(12)
325
—
273
(37)
(490)
(254)
Net finance (income) expenses from insurance
contracts
37
—
49
37
123
16
—
139
Effect of movement in exchange rates
—
(1)
60
17
76
11
(4)
83
CSM, end of year
$
1,159 $
24 $
3,255 $
1,745 $ 6,183 $
3,298 $ 3,154 $ 12,635
1
The amounts in the table above are presented net of reinsurance.
218
Great-West Lifeco Inc. 2024 Annual Report
Independent Auditor’s Report
Deloitte LLP
360 Main Street
Suite 2300
Winnipeg MB R3C 3Z3
Canada
Tel: 204-942-0051
Fax: 204-947-9390
www.deloitte.ca
Independent Auditor’s Report
To the Shareholders of Great-West Lifeco Inc.
We have audited the consolidated financial statements of Great-West Lifeco Inc. (the “Company”), which
comprise the consolidated balance sheets as at December 31, 2024 and 2023, and the consolidated
statements of earnings, comprehensive income, changes in equity and cash flows for the years then
ended, and notes to the consolidated financial statements, including material accounting policy
information (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Company as at December 31, 2024 and 2023 and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards as issued
by the International Accounting Standards Board (“IASB”).
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian
GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of our report. We are independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of
the consolidated financial statements for the year ended December 31, 2024. This matter was addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this matter.
Insurance Contract Liabilities - Refer to Notes 2 and 14 to the Financial Statements
Key Audit Matter Description
The Company’s insurance contract liabilities represent a significant portion of its total liabilities. Insurance
contract liabilities are determined in accordance with IFRS 17, Insurance Contracts (“IFRS 17”). This
requires the use of complex valuation models and assumptions to measure groups of contracts as the
total of estimates of future cash flows, plus a risk adjustment for non-financial risk and a contractual
service margin (“CSM”). The CSM component is only relevant for groups of insurance contracts measured
using the general measurement model and the variable fee approach.
Opinion
Basis for Opinion
Key Audit Matter
.
219
Great-West Lifeco Inc. 2024 Annual Report
Independent Auditor’s Report
While there is considerable judgment applied by management and inherent uncertainty in selecting
assumptions, the assumptions with the greatest estimation uncertainty are related to mortality,
policyholder behaviour and discount rates. These assumptions required significant auditor attention in
specific circumstances where (i) there is limited Company and industry experience data, (ii) the historical
experience may not be a good indicator of the future and (iii) the determination of discount rates
requires complex calculation and measurement of unobservable market inputs. Auditing certain valuation
models and significant assumptions (mortality, policyholder behaviour and discount rates) required a high
degree of auditor judgment and an increased extent of audit effort, including the need to involve
actuarial and fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to certain valuation models and significant assumptions included the
following, among others:
•
With the assistance of actuarial specialists, tested the appropriateness of certain valuation models
used in the valuation process by:
−
Calculating an independent estimate of the insurance contract liability for a sample of insurance
policies and comparing the results to the Company’s estimate; and
−
Testing the accuracy of certain valuation models for changes in key assumptions.
•
With the assistance of actuarial specialists, tested the reasonableness of mortality and policyholder
behaviour assumptions by:
−
Evaluating whether management’s assumptions were determined in accordance with the
requirements of IFRS 17;
−
Testing experience studies and other inputs used in the determination of the assumptions; and
−
Analyzing management’s interpretation and judgment of its experience study results and
emerging claims experience, evaluating new and revised key assumptions, assessing reasonable
possible alternative assumptions, and considering industry and other external sources of
benchmarking, where applicable.
•
With the assistance of actuarial and fair value specialists, evaluated the reasonableness of the
discount rates used by:
−
Evaluating whether management’s assumptions and methodologies were determined in
accordance with the requirements of IFRS 17; and
−
Testing the inputs and source information underlying the determination of the discount rates and
developing a range of independent estimates and comparing those to the discount rates selected
by management.
Management is responsible for the other information. The other information comprises:
•
Management’s Discussion and Analysis.
•
The information, other than the financial statements and our auditor’s report thereon, in the Annual
Report.
Other Information
220
Great-West Lifeco Inc. 2024 Annual Report
Independent Auditor’s Report
Our opinion on the financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon. In connection with our audit of the financial
statements, our responsibility is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on
the work we have performed on this other information, we conclude that there is a material
misstatement of this other information, we are required to report that fact in this auditor’s report. We
have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based
on the work we will perform on this other information, we conclude that there is a material misstatement
of this other information, we are required to report that fact to those charged with governance.
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards as issued by the IASB, and for such internal
control as management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Company or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Auditor’s Responsibilities for the Audit of the Financial Statements
221
Great-West Lifeco Inc. 2024 Annual Report
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business units within the Company as a basis for forming an
opinion on the financial statements. We are responsible for the direction, supervision and review of
the audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this independent auditor’s report is David Jordan
Oakley.
Chartered Professional Accountants
Winnipeg, Manitoba
February 5, 2025
Independent Auditor’s Report
222
Great-West Lifeco Inc. 2024 Annual Report
Directors and Senior Officers
As of February 5, 2025
Board of Directors
R. Jeffrey Orr 3, 4, 5, 6
Chair of the Board, Lifeco
President and Chief Executive Officer,
Power Corporation of Canada
Michael R. Amend 2, 7
Chief Enterprise Technology Officer,
Ford Motor Company
Deborah J. Barrett, FCPA, FCA, ICD.D 1, 2, 5
Corporate Director
Robin A. Bienfait 1, 7
Chief Executive Officer,
Emnovate
Heather E. Conway 1, 2, 4, 7
Chair of the Board,
Amex Bank of Canada
Marcel R. Coutu 3, 4, 5
Corporate Director
André Desmarais, O.C., O.Q. 3, 4, 7
Deputy Chairman,
Power Corporation of Canada
Paul Desmarais, Jr., O.C., O.Q. 3, 5
Chairman,
Power Corporation of Canada
Gary A. Doer, O.M. 4, 7
Senior Business Advisor,
Dentons Canada LLP
Claude Généreux 4, 5
Executive Vice-President,
Power Corporation of Canada
Jake P. Lawrence 6, 7
Executive Vice-President and
Chief Financial Officer,
Power Corporation of Canada
Paula B. Madoff
5, 6
Corporate Director
Paul A. Mahon 6
President and Chief Executive Officer,
Lifeco
Susan J. McArthur 3, 4, 5
Corporate Director
James P. O’Sullivan 4, 5
President and Chief Executive Officer,
IGM Financial Inc.
T. Timothy Ryan 3, 4, 7
Corporate Director
Dhvani D. Shah, CFA 2, 5, 6
Group Vice President and
Chief Investment Officer,
JM Family Enterprises, Inc.
Siim A. Vanaselja, FCPA, FCA
1, 7
Corporate Director
Brian E. Walsh 3, 4, 5, 6
Corporate Director
Committees
1. Audit Committee
Chair: Siim A. Vanaselja
2. Conduct Review Committee
Chair: Deborah J. Barrett
3. Governance and Nominating Committee
Chair: R. Jeffrey Orr
4. Human Resources Committee
Chair: Claude Généreux
5. Investment Committee
Chair: Paula B. Madoff
6. Reinsurance Committee
Chair: Brian E. Walsh
7. Risk Committee
Chair: T. Timothy Ryan
Senior Officers
Paul A. Mahon
President and Chief Executive Officer
David M. Harney
President and Chief Operating Officer,
Europe and Capital and Risk Solutions
Interim Global Chief Investment Officer
Fabrice Morin
President and Chief Operating Officer,
Canada
Edmund F. Murphy III
President and Chief Executive Officer,
Empower
Colleen N. Bailey Moffitt
Executive Vice-President and
Chief Human Resources Officer
Michael W. Dibden
Executive Vice-President and
Chief Information Officer
Nancy C. Hudson
Senior Vice-President and
Chief Internal Auditor
Sharon C. Geraghty
Executive Vice-President and
General Counsel
Linda Kerrigan
Senior Vice-President and
Appointed Actuary
Amy E. Metzger
Senior Vice-President and
Chief Compliance Officer
Jon P. Nielsen
Executive Vice-President and
Chief Financial Officer
Robert L. Reynolds
Chair,
Great-West Lifeco U.S. LLC
David B. Simmonds
Senior Vice-President,
Chief Marketing and
Communications Officer
Dervla M. Tomlin
Executive Vice-President and
Chief Risk Officer
223
Great-West Lifeco Inc. 2024 Annual Report
Shareholder Information
Great-West Lifeco Inc.
100 Osborne Street North
Winnipeg, Manitoba, Canada R3C 1V3
Phone: 204 946-1190
Website: greatwestlifeco.com
Stock Exchange Listings
Great-West Lifeco’s shares are listed on the Toronto Stock Exchange.
Common Shares: GWO
First Preferred Shares:
Series G:
GWO.PR.G
Series P:
GWO.PR.P
Series H:
GWO.PR.H
Series Q:
GWO.PR.Q
Series I:
GWO.PR.I
Series R:
GWO.PR.R
Series L:
GWO.PR.L
Series S:
GWO.PR.S
Series M:
GWO.PR.M
Series T:
GWO.PR.T
Series N:
GWO.PR.N
Series Y:
GWO.PR.Y
Shareholder Services
For information or assistance regarding your registered share account, including dividends, change of address or ownership, share certificates,
direct registration, to eliminate duplicate mailings or to receive shareholder material electronically, please contact our Transfer Agents in
Canada, the United States, United Kingdom or in Ireland directly. If you hold your shares through a broker, please contact your broker directly.
Information about Great-West Lifeco, including electronic versions of documents and share and dividend information is available online
at greatwestlifeco.com.
Transfer Agent and Registrar
Great-West Lifeco’s transfer agent and registrar is Computershare Investor Services Inc.
In Canada, the Common Shares are transferable at the following locations:
Canadian Offices
Computershare Investor Services Inc.
100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1
800, 324 8th Avenue S.W., Calgary, Alberta T2P 2Z2
650 de Maisonneuve Boulevard W, 7th Floor, Montréal, Québec H3A 3T2
510 Burrard Street, 3rd Floor, Vancouver, British Columbia V6C 3B9
Toll Free: 1-888-344-2798
Direct: 514-982-9557
The Preferred Shares are only transferable at the Toronto office of Computershare Investor Services Inc.
224
Great-West Lifeco Inc. 2024 Annual Report
Shareholder Information
Internationally, the Common Shares are also transferable at the following locations:
United States Office
Computershare Trust Company, N.A.
150 Royall Street, Canton, Massachusetts 02021
Toll Free: 1-888-344-2798
United Kingdom Office
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS13 8AE
Phone: +44(0) 370 702 0003
Ireland Office
Computershare Investor Services (Ireland) Limited
3100 Lake Drive, Citywest, Business Campus, Dublin 24, D24 AK82
Phone: +353 1 447 5566
Shareholders wishing to contact the transfer agent by email can do so at GWO@computershare.com.
Investor Information
Financial analysts, portfolio managers and other investors requiring information may contact Investor Relations by emailing
investorrelations@canadalife.com.
Trademarks contained in this report are owned by Great-West Lifeco Inc. or a member of the Power Corporation group of companies. Trademarks not owned by Great-West Lifeco Inc. are used with permission.
224
Great-West Lifeco Inc. 2024 Annual Report
225
Great-West Lifeco Inc. 2024 Annual Report
Notes
Endnotes from page 5
1 Base earnings per common share (EPS), base return on common shareholders’ equity (ROE) and target dividend payout ratio (base) are non-GAAP ratios calculated using base
earnings, a non-GAAP financial measure. These ratios/measures do not have standardized meanings under GAAP and might not be comparable to similar financial measures
disclosed by other issuers. Additional information on these ratios/measures is incorporated by reference and can be found under “Non-GAAP Financial Measures and Ratios” on
page 97 of this report.
2 2019, 2020 and 2021 base earnings were calculated by excluding items from net earnings as discussed in the “Non-GAAP Financial Measures and Ratios” on page 97 of this report.
2019 base earnings as reported were $2,704 million and base earnings per share was $2.86 compared to net earnings of $2,359 million and net earnings per share of $2.49. 2020
base earnings as reported were $2,669 million and base earnings per share was $2.88 compared to net earnings of $2,943 million and net earnings per share of $3.17. 2021 base
earnings as reported were $3,260 million and base earnings per share was $3.51 compared to net earnings of $3,128 million and net earnings per share of $3.37. For purposes of
calculating the 5-year growth rate for base EPS under the current definition of base earnings to provide a more accurate comparison for the 3 and 5-year growth rates, amortization
of acquisition related finite life intangible assets of $41 million, $41 million and $137 million after-tax was added back to 2019, 2020, 2021 base earnings. In addition, the Company
excluded earnings related to Putnam Investments, which was sold to Franklin Templeton on January 1, 2024, of $101 million, $23 million and $26 million from 2019, 2020 and 2021
base earnings. With these adjustments, 2019 base earnings were $2,719 million and base EPS of $2.87; 2020 base earnings were $2,687 million and base EPS of $2.90; and 2021
base earnings were $3,296 million and base EPS of $3.55.
3 3-year average under IFRS 17 between 2022 - 2024. The prior 2-year average base ROE under IFRS 4 is 14%. The prior base ROE medium-term objective was 14% - 15% under IFRS 4.
4 The description of net ROE is incorporated by reference and can be found under “Glossary” on page 106 of this report.
Endnotes from page 14
5 This includes representation of women across overall management roles (Manager+) as of December 31, 2024; updated annually and excludes Putnam Investments, which was
sold on January 1, 2024.
6 Underrepresented groups are defined as collective ethnic and visible minority, including Indigenous (Canada) and Native (U.S.A) identity. This includes North American-based
employees only as of December 31, 2024; data for employees based in Europe and the U.K. is not currently available.
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About
Great-West
Lifeco Inc.
Great-West Lifeco is a financial services holding
company focused on building stronger, more inclusive
and financially secure futures. We operate in Canada,
the United States and Europe under the brands Canada
Life, Empower and Irish Life. Together we provide wealth,
retirement, workplace benefits and insurance and risk
solutions to our over 40 million customer relationships.
As of December 31, 2024, Great-West Lifeco’s assets
under administration exceeded $3.2 trillion.
Great-West Lifeco trades on the Toronto Stock Exchange
(TSX) under the ticker symbol GWO and is a member
of the Power Corporation group of companies.
To learn more, visit greatwestlifeco.com.
100 Osborne Street North
Winnipeg Manitoba Canada R3C 1V3
greatwestlifeco.com
A member of the Power Corporation
Group of Companies®
E987(24LIFECO)-3/25