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Proud to be a tortoise: Great-West takes it slow and steady

By: Martin Cash

Posted: 05/25/2012 1:00 AM | Comments: 0

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Paul Mahon: little exposure to risks (BORIS MINKEVICH / WINNIPEG FREE PRESS ) Photo Store

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(JOE BRYKSA / WINNIPEG FREE PRESS ARCHIVES)

Drawing on the fable of the tortoise and the hare, management at Great-West Lifeco say they are proud their company would play the role of the tortoise.

In a rare public presentation by a senior GWL official, Paul Mahon, president and chief operating officer of the company's Canadian operations -- including Great-West Life Assurance Co., London Life and Canada Life -- told a Winnipeg Chamber of Commerce audience Thursday the company's highly conservative approach to risk management served it well during and after the financial-services industry's meltdown of 2008.

And now, amid uncertainty in global bond markets, the Winnipeg-based global insurance giant says it still has surprisingly little exposure in the riskiest of the European countries.

"Of the company's $125 billion in investment assets, only 2.8 per cent of it is in government bonds or financial institutions in euros," Mahon said. "We have nothing directly in Greece and only a very small amount in Portugal, Ireland, Italy and Spain."

While it took some writedowns during that time, GWL has been able compile a remarkably clean record since then, including cumulative operating earnings of $7.4 billion (from 2008 to 2011) and cumulative shareholder dividends of $4.6 billion.

Its return on equity based on operating earnings for the first quarter of this year was 16.5 per cent, an industry-leading pace, according to Mahon. A focus on improving efficiencies and customer service is the company's focus, now that the days of headline-making acquisitions (in Canada, at least) seem to be over.

Great-West Life acquired London Life in 1997 and Canada Life in 2003, but Mahon said those kinds of massive acquisitions will be few and far between.

"In Canada, the market is highly consolidated, so growth in acquisition will be quite limited going forward," Mahon said. "But there are opportunities for acquisitions in the U.S. and Europe, where the markets are quite a bit less consolidated. We are always assessing opportunities for expansion in those regions."

The publicly traded holding company, Great-West Lifeco, has $800 million in cash Mahon said could be deployed for such opportunities.

The company has interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses with operations in Canada, the United States, Europe and Asia.

It has $523 billion in assets under administration.

In the meantime, GWL had all of its operating divisions conduct reviews to come up with strategies for accelerated organic growth in the absence of acquisitions.

What it found was there is a continuing need for financial-security advice among most Canadians; among aging baby boomers there is a transition from accumulating funds to creating a retirement nest egg and a real concern about outliving their savings; and there are changing customer-service expectations with online business models and "anytime-anywhere access to information" more in demand.

"We believe we are well-positioned with our financial strength, our diversified distribution channels and our unique ability to offer products that address that risk of outliving retirement savings," Mahon said.

In light of those reviews, Mahon said the company's business units are focused on advancing performance in three areas: advice, security and service.

Among other things GWL is doing to beef up customer service and product innovation, it is combining its far-flung Canadian data centres into a new, 50,000- square-foot state-of-the-art green data centre in St. Boniface Industrial Park.

Opening in the third quarter of this year, the building will consolidate smaller centres at its Osborne Street headquarters in Winnipeg, another one in Regina, the Canada Life centre in Toronto and London Life's in London.

Mahon said it will include the best security features, designed to protect the integrity and security of data from both unauthorized access and natural disasters.

"It's being built using the highest green standards," he said.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 25, 2012 B3

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