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This article was published 9/9/2020 (452 days ago), so information in it may no longer be current.
IN one of the largest acquisitions in its history, Great-West Lifeco’s U.S subsidiary Empower Retirement has agreed to pay about $4.4 billion for the retirement services business of Massachusetts Mutual Life Insurance Company.
Coming only a couple of months after paying $1 billion for another U.S. financial planning and retirement services business, it underlines the Winnipeg-based financial services company’s interest in the large and growing U.S. retirement services business.
MassMutual’s retirement services business has about 2.5 million participants in 26,000 plans and about US$167 billion in assets.
The transaction expands Empower’s reach to more than 12.2 million retirement-plan participants with assets under administration to US$834 billion on behalf of 67,000 plans.
Empower Retirement, which was formed in 2014, is the second-largest retirement service company in the U.S. by a large margin over the third-largest. Fidelity Investments is the largest.
Paul Mahon, CEO of Great-West Lifeco, said the company wanted to commit to this business in the U.S. and saw the MassMutual deal as a big opportunity.
"What you always want to do is play to your strengths," he said in an interview Tuesday.
In Canada, Great-West Lifeco is the largest provider of life insurance through its newly rebranded national operation, Canada Life. In the U.S., Mahon said GWL’s strength is in the retirement services business, which has been growing at a pace almost three times the market rate.
(In early 2019, GWL’s Denver-based subsidiary Great-West Life & Annuity Insurance Company sold most of its U.S. life insurance business for about $1.6 billion.)
"The opportunity comes from the fact that we know the retirement services market there," Mahon said. "We have had great success in building the Empower business through acquisitions and organically."
He said, "As we look at what is going on… there is a shift to more digital ways of doing business with digital advice and hybrid digital advice. The Empower platform is really well-positioned for that. We really like the fact that we are building a big franchise."
The deal was partially set up by the $1-billion acquisition in June of a California company, Personal Capital, which is a hybrid wealth manager that combines a leading-edge digital technology with personalized advice delivered by human advisers.
Mahon said it will leverage Personal Capital’s automated technologies to help expand the business in the U.S.
MassMutual’s retirement plan business includes defined-contribution and defined-benefit retirement plans as well as other financial planning offerings.
Mahon said that in addition to having "strengths" in the retirement services business in the U.S., the fact there is so much growth potential also tipped the scales to make such a large investment.
Demographics is driving growth in people’s retirement savings but Mahon said there are other opportunities as well.
"It’s also growing because of the relationships we have with participants through digital and hybrid digital channels, which means we can offer them other products and services and advice and guidance," he said. "We see a significant opportunity to do that."
In the past decade, Mass Mutual doubled the number of participants served and assets under management more than quadrupled to more than US$160 billion from US$34 billion.
In a prepared statement, Roger Crandall, MassMutual’s chairman and CEO, said, "In Empower, we are pleased to have found a strong, long-term home for MassMutual’s retirement plan business, and believe this transaction will greatly benefit our policy owners and customers as we invest in our future growth and accelerate progress on our strategy."
Empower has acquired a few other large retirement services portfolios from Met Life and JP Morgan, but this is by far the largest. In fact, it is one of the three largest deals in Great-West Lifeco’s history.
This deal also means Great-West Lifeco’s U.S. operations, which includes the investment management firm Putnam Investments, is expected to account for more than 20 per cent of Great-West Lifeco’s earnings after the integration processes are completed by 2022.
Great-West Lifeco is a publicly traded subsidiary of a group headed by Montreal-based Power Corp. of Canada, one of Canada’s largest non-bank financial companies.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.