Great-West Lifeco Inc
TSX:GWO
Great-West Lifeco Inc
Great-West Lifeco Inc. stands as a formidable force in the financial services sector, weaving its influence largely across North America, Europe, and Asia. As part of the mighty Power Corporation of Canada, it operates through a network of subsidiaries that include well-known names like London Life, Canada Life, and Irish Life. The company's diverse offerings are not just confined to life insurance; they span an extensive spectrum covering health insurance, reinsurance, investment services, and retirement savings plans. This mosaic of services is meticulously crafted to suit the evolving needs of individuals, families, and institutions, illustrating Great-West Lifeco’s adaptability and grasp of market dynamics.
The heart of Great-West Lifeco’s profitability lies in its tried-and-true business model, where it leverages premium income from its insurance products and astutely invests these funds to generate higher returns. This model allows the company to not only cover claims but also to grow its reserves for future obligations. Furthermore, the company's wealth and asset management arms broaden its revenue streams by charging management fees on the assets under its stewardship. By deftly balancing its underwriting operations with astute financial management, Great-West Lifeco solidifies its position as a guardian of people’s financial futures, all while steering its own growth and profitability.
Earnings Calls
Great-West Lifeco reported record base earnings of $1.1 billion, marking a 15% increase year-over-year, driven by robust performance across all segments. The U.S. operations saw base earnings surge by 36%, fueled by strong market returns and strategic acquisitions. The company raised its quarterly dividend by 10% to $0.61 per share and anticipates significant share buybacks totaling $500 million. Lifeco maintains a base EPS growth target of 8% to 10% and aims for a return on equity between 16% and 17% moving forward, demonstrating its commitment to sustainable long-term growth amidst a favorable financial landscape.
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Thank you for standing by. This is the conference operator. Welcome to the Great-West Lifeco Fourth Quarter 2024 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Shubha Khan, Senior Vice President and Head of Investor Relations at Great-West Lifeco. Please go ahead.
Thank you, operator. Hello, everyone, and thank you for joining the call to discuss our fourth quarter financial results. Before we start, please note that a link to our live webcast and materials for this call have been posted on our website at greatwestlifeco.com under the Investor Relations tab. Please turn to Slide 2. I would like to draw your attention to the cautionary notes regarding the use of forward-looking statements, which form part of today's remarks. And please refer to the appendix for a note on the use of non-GAAP financial measures and important notes on adjustments, terms and definitions used in this presentation.
Please turn to Slide 3. To discuss our results today, joining us on the call are our President and CEO, Paul Mahon; our CFO, Jon Nielsen; David Harney, President and COO, Europe and Capital and Risk Solutions; Fabrice Morin May, President and COO, Canada; Ed Murphy, President and CEO, Empower; Linda Kerrigan, Senior Vice President and Appointed Actuary; and Jeff Poulin, Executive Vice President of Reinsurance. We will begin with prepared remarks followed by Q&A. With that, I'll turn the call over to Paul.
Thanks, Shubha. Please turn to Slide 5. Before I get into our results, I want to acknowledge the tariff-related uncertainties surrounding Canada, the U.S. and other markets. While governments work towards the long-term resolution, I want to assure you that our diversified portfolio of domestic businesses and strong balance sheet position us well to navigate any potential economic impacts related to this issue. In the weeks ahead, we will stay focused on doing what we do best, supporting our customers and communities.
Turning to our fourth quarter results. We closed the year of record performance across Lifeco. We delivered a sixth consecutive quarter of record base earnings, and this builds on our strong momentum in growing shareholder value. These results are supported by impressive performance in all of our segments and broad-based growth across our value drivers. We're especially pleased to report a record quarter of base earnings in Empower in the U.S., with the U.S. now our largest segment. We're seeing exceptional value-creating performance at Empower with base earnings growth of 36% this quarter and base ROE increasing by more than 400 basis points over the past 12 months. These achievements are a testament to our clear strategies and the team's disciplined focus and execution.
With our repositioned portfolio, our 4 market-leading franchises took further steps to advance their strategies in '24. This is particularly evident in our wealth and retirement businesses, where our advances in meeting more customers' needs is unlocking growth. In the U.S., we began the year by closing the sale of Putnam, reaffirming Lifeco's commitment to growth and leadership in the retirement and personal wealth markets. The recent acquisition of Plan Management Corporation, a leading provider of stock plan admin and services has further enhanced Empower's offering, making it even more appealing to existing and future customers.
In Canada, the integrations of IPC and Value Partners have positioned us as a top destination for independent advisers. And our new strategic agreement with Primerica Life Insurance strengthens our wealth business by giving even more Canadians access to seg fund-based advice solutions. In Europe, Canada Life U.K. announced the closure of its onshore bond and personal pension offering and reached an agreement to sell the business, sharpening their focus on offshore bonds as the core of their wealth division. Across our portfolio, these actions demonstrate a continued commitment to strategic capital deployment and deliberate choices that fuel sustainable long-term growth.
Our disciplined approach to managing the business continues to bolster our capital strength and provides us with the significant financial flexibility to continue driving value creation while managing risk. As part of our ongoing commitment to delivering shareholder value, we're pleased to announce that our Board has approved a dividend increase of 10% or a quarterly dividend of $0.61 per common share. We also announced today that we expect to repurchase an additional $500 million worth of Lifeco shares under our existing NCIB. Jon will provide further details on this during his remarks.
Please turn to Slide 6. Our results reflect our unwavering focus to deliver on our growth strategy, which has enabled us to meet or exceed our medium-term financial objectives. We've successfully delivered against these objectives over 1, 3 and 5 years with this year's base EPS growth of 14% and base ROE at 18%, exceeding our target range and our dividend payout ratio within our target range.
Please turn to Slide 7. Our record results position us well for continued growth. Base earnings of $1.1 billion and base EPS of $1.20, both increased 15% over the prior year. Base ROE increased to 17.5%, up nearly a full percentage point from the prior year and book value per share increased by 12%. Our capital position remains strong with a LICAT ratio of 130% and we've maintained a comfortable leverage ratio.
Overall, it's worth noting these results have benefited from tailwinds in the macro environment as well as geographic diversification of our businesses. Favorable equity markets and the impact of stronger foreign currencies relative to the Canadian dollar positively contributed to our performance, particularly in the fourth quarter. We remain committed to operating with discipline, including making decisions that support sustainable growth in a changing macro environment.
Please turn to Slide 8. Canada delivered a good quarter and is maintaining its momentum for continued growth. Our individual wealth business further expanded its market presence, aligned with our goal of driving growth through scale, technology and the delivery of advice. Past acquisitions, strong market performance and improved flows have contributed significantly to AUA growth, with average AUA increasing by more than 30% over the prior year. This momentum is reinforced by the improved performance of seg fund sales in the quarter.
In Group Life and Health, we were pleased to expand our business relationship with the federal government, taking on the administration of the Public Service dental care plan and the pensioners dental services plan. Book premium saw solid growth this quarter, largely driven by the expansion of our in-force business. While this growth is encouraging maintaining our discipline in underwriting and pricing remains a key to success in this business. In insurance and annuities, CSM declined primarily due to the impact of last quarter's assumption changes. As we previously stated, our approach to nonparticipating insurance prioritizes customer value while maintaining pricing discipline, and we do not view CSM as a key growth metric in Canada.
Turning to Slide 9. We're pleased to report very strong performance at Empower. In Workplace, average AUA grew 22% over the past year, supported by the strength in the U.S. equity markets. We saw continued withdrawals as part of member -- as planned members used their higher account balances boosted by strong market performance to fund their retirements. As a result, we again experienced net outflows, a trend that remains consistent across the industry at this time. While net flows can vary from quarter-to-quarter, Empower continues to deliver strong value-creating performance. Scale remains a critical ingredient to success and Empower is growing both plan contributions and the number of participants.
In 2024, DC participant contributions were up 7% and Empower added approximately 600,000 net new plan participants, an increase of 3%. This growth not only generates the fees we earn today but also builds future balances. A thriving workplace business fuels the growth of our personal wealth offering, unlocking even more opportunities. Empower Personal Wealth delivered an outstanding quarter with average AUA up nearly 30% compared to last year. Positive net flows were driven by significant boosts in rollover sales, contributing to the highest gross sales on record and over $3 billion in net new assets.
For the full year, net flows alone accounted for 12% asset growth in the personal wealth business, demonstrating the growing strength of the platform. With a growing purchase base in the workplace, and stronger momentum at Empower Personal Wealth, the U.S. remains on a clear path driving growth. Empower continues to invest in the business and brand to strengthen its position and help even more Americans secure their financial future.
Please turn to Slide 10. Our European businesses also delivered record performance this quarter, with double-digit growth across all value drivers. Our offerings in wealth and retirement continue to scale and drive positive net flows. International product sales in the U.K. were particularly strong, up 60% compared to the prior year. Across all our European wealth and retirement businesses, average AUA grew by 23% year-over-year. Like our other regions, these results were supported by strong equity market performance. We've seen steady sales and organic growth in Group Life and Health with book premiums up 11% year-over-year, supported by rising employment growth and higher salaries in Ireland and the U.K.
Insurance and Annuities also delivered strong results, in part fueled by high demand for bulk annuities in the U.K. throughout 2024. This reflects the success of our targeted strategy in this market and increasing demand for stable retirement income solutions.
Please turn to Slide 11. Our Capital and Risk Solutions business ended the year on a strong note. Given our diversified book and disciplined approach to participation in property and casualty reinsurance markets, we anticipate modest impacts from the recent tragic events in California. Throughout the year, we have stayed committed to supporting our customers affected by natural disasters across the U.S., and our thoughts remain with those who have been impacted. Growth in run rate reinsurance earnings was driven by an increase in structured business, which has a seasonal component that is typically weighted towards the fourth quarter.
We've also begun recognizing higher CSM from structured transactions completed earlier in '24. Reinsurance CSM increased 40% and year-over-year, largely due to the impact of the assumption changes we announced last quarter. As we've emphasized before, our disciplined approach to reinsurance underwriting and pricing remains a cornerstone of our long-term success in this business.
And with that, I'm going to turn the call over to Jon now for his remarks on our financial performance. Jon?
Thank you, Paul. Please turn to Slide 13. We delivered record financial results this quarter and for the year. While we continue to execute against our strategy and all segments very strongly, these results were supported by constructive financial markets, including yield curve movements and strong equity market returns. A weaker Canadian dollar provided additional tailwinds boosting year-over-year base earnings growth by 3 percentage points in the fourth quarter and by 2 points for the full year.
Equity market performance contributed to growth in assets under administration within our wealth and retirement businesses with average assets up 7% from the third quarter and 26% versus the last year. While short-term rates decreased in the fourth quarter as the U.S. Federal Reserve and Bank of Canada lowered their policy rates by 50 and 100 basis points, respectively, higher long-term rates continue to provide meaningful earnings support.
Turning to Slide 14. We delivered another record base earnings quarter of $1.1 billion. Base earnings increased 15% year-over-year and 12% in constant currency, driven by strong underlying growth in all of our segments. The effective tax rate on Lifeco based earnings of just under 16% included a 2 percentage point impact related to the global minimum tax. We continue to expect an overall effective tax rate for Lifeco to be in the high teens.
Our base return on equity of 17.5% continues to be above the upper end of our medium-term objective of 16% to 17%. This reflects strong growth in base earnings and a continued focus on growing our wealth and retirement businesses.
Turning to Slide 15. All our segments delivered strong underlying growth in earnings this quarter. In Canada, base earnings grew 7%, with organic growth in the group life and health in-force block as well as higher fee and spread income driven by markets as well as acquisitions. This was partially tempered by a moderation of insurance experience in the quarter as well as lower earnings on surplus resulting from the lower short-term rates I mentioned.
In the U.S., Empower maintained strong momentum with base earnings up 36% year-over-year in constant currency. These results reflected higher fee income driven by business growth as well as higher markets and the benefit of the acquisition-related synergies and cost reduction initiatives that we mentioned in our workplace business. While there were credit impairments on 2 U.S. commercial mortgages, they were significantly less than the prior year, and we continue to see manageable losses on this portfolio going forward.
However, we could see quarter-to-quarter volatility. Overall, momentum in our U.S. business remains strong with the return on equity growing by over 400 basis points to nearly 16% over the last 12 months. In Europe, base earnings increased 4% year-over-year in constant currency and were up 7%, excluding the impact of the global minimum tax. Results in the quarter reflected higher fee income in Ireland from strong net flows in markets and higher U.K. trading gains. This was partially offset by moderated group insurance experience gains from last year's elevated level.
Within Capital and Risk Solutions, results were also impacted by the implementation of GMT earlier this year. However, underlying growth was strong, with pretax base earnings increasing 5% year-over-year in constant currency, driven by continued growth in structured business and improved claims experience in our traditional life portfolio in the U.S. Last year's results were helped by a release of a P&C provision, which muted year-over-year base earnings growth.
As we mentioned on our last earnings call, we did not incur any losses in our P&C catastrophe business related to hurricane Helene or Milton. While we do expect to incur claims related to the ongoing wildfires in California, our maximum reinsurance loss exposure is CAD 100 million after-tax net of reinsurance premiums in Canadian dollars. Our current loss estimate is between $10 million and $50 million after tax.
As discussed on our last call, we've deliberately reduced P&C catastrophe risk in our reinsurance business over the past 2 years. While the size of our exposure to the wildfire markets makes it a manageable event for us, our hearts go out to all those whose lives have been devastated by the catastrophes.
Turning to Slide 16. Insurance service results were down year-over-year, reflecting a moderation and favorable experience from last year's elevated levels. This was partly offset by higher expected insurance earnings from growth in Canada as well as higher CSM amortization in Europe and CRS, reflecting solid new business volume and the recent assumption changes. The net investment result was up significantly year-over-year, driven by higher earnings on surplus, reflecting the addition of the Franklin Templeton gain, higher trading gains in Europe and lower credit losses at Empower.
Turning to Slide 17. Net fee and spread income was up meaningfully year-over-year, reflecting continued strength in equity markets and business growth with solid contributions from Canada and Europe. Non-directly attributable expenses were down slightly over the prior year with the benefits of cost actions well balanced against investment and growth across our businesses.
Turning to Slide 18. Base and net earnings were essentially in line for the quarter and for the full year. This follows the trend we've observed since the implementation of IFRS 17. As we've indicated over the medium term, we would anticipate our market experience to be neutral.
Turning to Slide 19. We continue to maintain a strong balance sheet to ensure we are resilient through market cycles and can deploy capital as opportunities emerge. In the quarter, our LICAT ratio decreased to 130%, down 4 points from the prior quarter. This follows our indication on the last call that we intended to increase the dividend to Lifeco while maintaining strong capital levels well above regulatory minimums within our operating companies. Our leverage ratio of 29% is down 2 points from a year ago and remains on a downward trajectory, given our strong earnings growth.
Our cash balance of $2.2 billion reflects continued upstreaming capital to Lifeco, driven by strong earnings growth and capital generation within our businesses. In fact, dividends to Lifeco from our U.S. business doubled in 2024. And this is a direct result of the strategic repositioning of our focus in the U.S. market. Strong capital generation has greatly enhanced our financial flexibility. As a result, not only has our Board approved the increase in our quarterly dividend by 10% to $0.61 per share, we've also announced the expected purchase of $500 million of shares under our existing normal course issuer bid. This is over and above the amount that we intended to repurchase this year to offset the dilution from our share compensation plan. Although we intend to significantly increase our share buyback, we continue to have significant financial flexibility for deployment in both organic and inorganic opportunities as they emerge.
Turning to Slide 20. We look forward to hosting you at our Investor Day on April 2 in Toronto. We intend to provide a look under the hood of each of our businesses to give you a greater understanding of the respective strategy, competitive strengths, return profile as well as the growth outlook, which we believe remains underappreciated. We also intend to highlight the strength of our capital generation across our portfolio as well as the strong reinvestment returns that each of our businesses generate. And finally, we will elaborate on our capital deployment priorities and how Lifeco seeks to optimize capital allocation in order to maximize value for all of our shareholders.
We invite you to join us for this event, whether in person or virtually.
With that, Paul, I'll hand the call back over to you.
Thank you very much, Jon. Please turn to Slide 22. Our strong momentum that supported these record results positions us well for continued growth in 2025 and beyond. Looking ahead, our focus remains on driving continued momentum to deliver against our medium-term objectives. We remain excited about our growth prospects in the U.S. and expect Empower to continue delivering double-digit base earnings growth, and we're maintaining our focus on driving growth and returns across all 3 of our value drivers with a particular emphasis on wealth and retirement.
Our strong cash and capital position provides the resources to invest in opportunities that align with our strategic priorities while managing risks, positioning the company for stable, long-term growth. And as I mentioned before, we're pleased to announce a dividend increase of 10% and an intention to purchase an additional $500 million of Lifeco shares under our current NCIB, supported by the growing strength of our business and our disciplined approach to capital allocation.
We look forward to carrying this confidence and momentum forward as we build on our success in 2025. And with that, I'll turn it over to Shubha to start the Q&A portion of the call. Shubha?
Thank you, Paul. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourselves to 2 questions per person. You can certainly re-queue for follow-ups, and we will do our best to accommodate [indiscernible] at the end. Operator, we are ready to take questions now.
[Operator Instructions] The first question comes from Meny Grauman with Scotiabank.
I'm looking at Slide 20. Thanks for this in terms of highlighting topics for April's Investor Day. One bullet point that's not there is just related to financial targets. So I'm just wondering, is it realistic to expect you to revisit your financial targets in April? I don't think you'll reveal anything new right now, but you're welcome to. But I just want to know if that's on the table.
Good guess, Meny. So I'll take that one. It's Paul. As you can see on Slide 6, we've achieved or exceeded our objectives whether you look back over the past year, 3 years and 5 years. And looking ahead, I'm confident that we'll continue to deliver strongly against our medium-term objectives. There's strong momentum in the businesses. We're executing on our strategies, and we've got confidence in them. I want to emphasize that when we set our medium-term objectives, it's not just about communicating a number, it's about having them aligned with our strategy and our compensation frameworks.
And this is important to make sure that we've got good alignment, and the reality is one of our objectives is we're looking for management to meet and exceed those. As to your specific question, there's a couple of points I'd note. I guess, first, we're comfortable, I would say, at this point with our base EPS growth objective of 8% to 10%. We believe it's an ambitious objective and management are motivated to outperform. That's our focus. Of course, to the extent that strong equity markets and favorable currency movements, as we saw this year, which frankly, was part of the fuel behind our strong performance this quarter. To the extent that, that continues, that would result in an outperformance, but we're not going to build a medium-term objective based on expected market outperformance.
Obviously, another medium-term objective is our base ROE of 16% to 17%. We comfortably exceeded that objective in 2024, not the least of which was our U.S. businesses really hitting its stride. And as we noted, up 400 basis points over the last 12 months. So given that, we will be -- as we get to the Investor Day, we'll be looking at that for sure, the ROE target. But that's a bit of context for you, Meny.
And then just a separate question, just in terms of catastrophe exposure. You've talked about taking that exposure down over the last 2 years. Is there any desire on your part to take that down even further? Or do you feel like you've hit a level that you're comfortable with as you look out over the next few years?
I'll start with that, and then I'll turn it over to Jeff Poulin maybe to add a little color. One of the great things about our business is they manage it with a risk lens first and foremost. So as we look at markets -- evolution of markets, we're always thinking about writing that business in a way where we're staying on the -- far away from the core risk. So it's really -- and as you know, it's a retrocessionaire business. And so the discipline is about allocating capital in a way that really matches up with our risk appetite. And I would say, over the last number of years, we've moved further and further away from the risk, and that's kind of our mindset. We're providing good value, but we are making sure that we're looking after our risk profile. Jeff, do you want to speak to that a little bit?
Yes. Thanks, Paul. And I think what Paul said is right. We -- as the market has hardened over the last couple of years, we've gone away from the risk. We've taken the same amount of premium, but been further and further away from the risk. We've seen the market soften a little bit after 2 good years in the retrocession market. And as a result, we haven't deployed all our capacity at renewal. So we're being very risk conscious and we're trying to be as -- like we're trying to manage the portfolio the best way possible. I think our earnings related to P&C are at 9% of the total CRS earnings. So it's not a big contribution, and we're not planning on growing it. The rest of the portfolio will continue to grow.
Yes. I mean, Jeff, to your point, it's a really good diversifier in the context of CRS, but CRS is a lot bigger, and then CRS is obviously a part of Lifeco. So 9% of CRS for context, it's not a significant part of Lifeco overall.
Okay. And maybe just as a follow-up. Obviously, the wildcard is a big event. So I'm wondering that event in and of itself, does that create opportunities for you in terms of how it impacts pricing going forward in that particular business?
Yes, Meny, it's a good question. I think that it's definitely a major event, and it's going to affect the market everywhere. I think some people are buying covers with reinstatement. They're already in the reinstatement, so they may be looking for more capacity. I think it's going to harden the market again. And there might be some good opportunity for the dry powder we kept at year end.
The next question comes from Doug Young with Desjardins Capital Markets.
Just wanted to think maybe, Paul, about the stock buyback or Jon, I'm not sure who wants to address this, but the stock buyback when 70% of your shares were held by mostly [indiscernible] but IGM. And just you had a conversation goes with the Board. And what are the limitations in terms of kind of pushing the buyback?
Good question. And maybe I'll take it up a level and maybe just speak to capital allocation priorities. And the reality is we've got a broad tool kit of ways we think about capital allocation. I guess, we've said in the past and we will continue to say that we're always looking to value creating investments to grow the business. And that's not always M&A actually. The first and foremost investment we think about is driving organic growth in the business. So if you think about the Empower personal wealth growth, certainly, the acquisition of Personal Capital was a foundational move on that, but the investment we're making in sales force, in capabilities, in branding, that's the fuel that's really driving the growth that you can see right now.
Same thing in Canada. We do these acquisitions, but now we're investing in capabilities to be the best platform for independent advisers in Canada. So that organic investment is important. Inorganic, for sure -- I mean you know that we've executed very strongly on acquisitions over the last 5 years, especially through COVID. And we will continue to look for and focus on value-creating transactions in the U.S. retirement and wealth space. We look to other markets like the Canadian wealth market, there'll be further opportunities there. But the reality is that return of capital is another tool we have in the toolkit.
So we've got a lot of excess capital at this point. We remain very active looking for opportunities in the market. But we also want to make sure that in the meantime, until the right thing comes along that we put some of that capital to work. So in the context of the available capital and our cash generation, $500 million is -- it's a meaningful move. But relative to our available capital and our cash generation, and we'll share more information on that at our Investor Day. It's relatively modest. We will continue to grow our capital base overcoming that $500 million.
So I put it in the context of it's a tool in the toolkit. We discuss it with the Board. We think about actions, and we just think it's -- while it's a prudent action now, it's just more of an indication that we're prepared to use all the tools we can to drive value creation for shareholders.
And just a follow-up on that. In terms of the guardrails, is there limitations, like could you buy back 3%, 4%, 5%? I mean this is a 1% buyback. And I get it, it's a good tool in the tool kit, and that makes a ton of sense. I'm just trying to think of the guardrails. We don't have to think about that with the other publicly traded Lifecos. But I'm just trying to think about that for Great-West.
I wouldn't think about it from the standpoint of asset guardrail. I think you have to look at it. You have to step back and look at it from a bigger picture and think about you're trying to maintain dry powder for M&A. At the same time, you're trying to support and provide -- create value for shareholders. And Jon, would you envision any particular guardrail?
We continue to have room under our existing NCIB program, as you're aware, this didn't take all the capacity. I mean, obviously, beyond that, there's the SIB route as well that could provide an optionality to us. I think right now, where clearly, as Paul said, focused on deploying as much capital into that and strong returning organic growth. And if inorganic opportunities arise with really good returns, we're open to that as well. But there are tools, Doug. They've been used in the past. And we just think that it's a sign of the strong cash generation this business generates the strong reinvestment returns and we're excited to share more of the details about that at the Investor Day.
And I'd just add to our priorities. I mean we do like value-creating investment in our businesses, organic and inorganic. We have shown that we're prepared to use this tool. We've used the SIB tool in the past. I wouldn't view that as our priority right now. But that's a toolkit, and we'll consider all of them as we think about creating shareholder value.
Okay. And then just second on CRS and Jeff is there, just like structured product sales looked like they picked up quite a bit. And I guess there's some seasonality, but you've talked about some opportunities in the past, but we saw a pretty decent jump in new business gains in the CSM within CRS? And high level, can you talk about what's driving that? What you're seeing in the marketplace, any pressures from a margin or competition perspective that may kind of hit that in future periods? Or is this kind of sustainable in your view?
Thanks, Doug. We -- I guess we're we've been pretty good at seeing the right opportunities and moving around the market to find the right opportunities. I think our track record shows that we have had a very good fourth quarter, as you mentioned. It's typical for us. The fourth quarter tends to be a better quarter as people look at their year-end statements and they want to adjust for it. So a lot of companies come to us midway through the year to do transaction in the fourth quarter. So it was a great fourth quarter. And the CSM, as you mentioned, went up. We did 2 asset-intensive transactions, which helped that, but also 2 fairly large structured transactions.
And we've started to look at certain structured transactions that are more long term under GMM approach as opposed to just a short-term approach. So it's been a good quarter, and we're hoping it's looking good for the next year. So I don't see it stopping, Doug. I think that the structured market has been good to us, and we will continue to see opportunities. I think over the long run, more and more of these large seating companies are seeing reinsurers as partners and not as risk takers on an ongoing basis. So we see them as partners in the long run, they look for us for capital solutions. So I think that we've got a lot of very good established relationship with seating companies, and we will continue to see growth in that market.
Just -- and Doug, just a reminder on acronyms. GMM is the what features under contracts where we write them and they fuel CSM and then PAA contracts are the ones that are more short term in nature.
The next question comes from Tom MacKinnon with BMO Capital Markets.
Question with respect to the holdco cash now. I think historically, you used to sort of telegraph that you wanted a $500 million minimum at the holdco. Have you changed your thinking on that now? And if so, what would that level be? And if not, hey, this buyback is just $500 million. Why are you sitting at $2.2 billion at the holdco?
I'll turn that one to Jon.
Yes. Thanks, Tom, for the question. You're right. We typically like to keep a minimum level of liquidity at the holdco of around $500 million and obviously keep the relevant liquidity buffers across all of our regulated entities. I think it's a sign of the underappreciation of the capital generation nature of the businesses that we created. As we mentioned, the U.S. has been really strategically repositioned. It's a significant provider of cash and capital to the group now. And it gives us capital to deploy, as Paul said, into organic, inorganic opportunities or consider returning to shareholders. We pulled all those levers this quarter. We grew our business substantially. We deployed capital, as you heard into our business segments.
Jeff just covered substantively. And for example, CRS, raised the dividend double digit by 10%, and we announced a further buyback under the NCIB program. So it's just a sign of how strong our business is performing and the level of capital flexibility and financial flexibility the company now has.
Yes. And Tom, I'd say that we have developed, I'd say, increasingly a discipline where we do want to make sure that we are -- we have ready firepower to reinvest in the right places, whether it's inorganic moving -- organic moving capital around inorganic for opportunity or for things like buyback. And so the reality is that just, as Jon said, it's a sign of strong cash generation, and we'll share more when we meet with you in April.
Okay. And then a follow-up question with respect to net outflows at Empower DC related to stock plan services. I believe this is a ESOP business that you just may have recently purchased $2.5 billion in net outflows. How should we be thinking about that going forward and just with respect to that unique business line?
Yes. It's early days for that business, Tom, but that's a timing issue that Ed can outline for you.
Yes, Tom, typically, people are exercising in Q4, and then the grants are coming in, in Q1. So you'll -- we'll see some timing issues flow through.
Okay. So going forward, you kind of always expect this ESOP business to have as these options get exercised in the fourth quarter, you're going to have planned outflows with respect to that. Is it that?
Yes.
Okay. And if I could squeeze one more in U.K. annuity. Our U.K. insurance and annuity sales were down significantly quarter-over-quarter -- or year-over-year, I should say. Is there anything that you're seeing in the marketplace here, especially maybe in the individual annuity marketplace? Does it become more competitive with respect to annuities there?
I'll turn that one over to David. David?
No, there's nothing to call out. Like the individual annuity line has been strong all year, and that's pretty stable from quarter-to-quarter. So the volatility you see in sales really arises in the bulk annuity market. Those transactions are larger and just will come through in different quarters. So you will see volatility in that sales line from quarter-to-quarter. So probably the better overall indication, if you look to Slide 10, I think it was like you see 13% growth year-over-year in CFM, and that's just -- that's a reflection of our overall business strength on the annuity part. You will see volatility in sales from quarter to quarter, but our position here is good and the outlook for the market continues to be good.
Okay. Just lumpiness there, and they're down like 61% year-over-year in the U.K., but that's just lumpiness. Is that what you're telling us?
That's just the lumpiness in quarterly it's like the pipeline is good. So [indiscernible].
I might add, Tom, we're becoming increasingly focused in targeting the right types of business that we like. And when you look to sort of the small to mid-market, where the margins are very strong, where we're -- we can be very competitive, that's where we've been focusing. And if you think about it from a value creation perspective, we really like the value creation we had in the bulk annuity business this past year, and that's really what it's all about. So the odd time, you'll get a very large transaction that will lower relative returns, margins. We like the margins we're writing, and we like where we're targeted because we think we actually have the muscle to win in that part of the market.
And I might add. The competitive moat improved for us in that market, I would say, over the years, the regulations around ability to offshore assets or bring in offshore capital to that market were strengthened. So us being flexible, both being able to write strong returns on onshore within the U.K. business and complement that with diversification of reinsurers in the offshore market through Jeff's business is really a stronger position than we would have started last year.
Is that onshore and offshore stuff more wealth and asset management? Or is it more insurance and annuities?
It's the need for capital to be deployed into the de-risking of corporates in their pension plans, and it's a substantial volume of these annuities that are going to come to the market and the regulations now have said the use of offshore reinsurance and moving out assets is limited. You need diversification of reinsurers and our special position to be able to being both in onshore and offshore, I think strengthens our, as I say, the moat around that market and our ability to create value.
[Operator Instructions] The next question comes from Darko Mihelic with RBC Capital.
I realize the CSM isn't really a big part of your story, but I did want to talk about it a little bit. If I'm looking at your supplemental your SIP pack, and if I look at Page 23, you have negative organic movement now for quite some time. And if I look at the actual CSM, it's significantly lower than where it's been for a long -- like the trend is simply a drawdown. So the question is what's causing the negative experience? And should I be thinking about a more -- I mean when I model this, the only thing I do is I do amortization of the CSM into the model. I don't think about insurance experience, but once again negative, should I be thinking about perhaps a more aggressive drying down of your CSM over time? Because I'm a bit surprised, I think last quarter, you had a fairly big change because of assumptions and management actions. And yet here we are again with another negative quarter in organic CSM movement. How should I be thinking about this from a modeling perspective?
I'll turn that one to Jon and/or Linda, Jon?
Yes. I think if you remember back to third quarter, Darko, the assumption changes that we took, we think, strengthened our overall position in terms of the CSM across the different segments. And those resulted in a substantial write-up of CSM and the European and CRS segments, given the positive longevity experience that we've seen. And as we said, we don't think we're through that cycle yet. And then in Canada, we did take the opportunity to revisit a number of our assumptions, and we're through that now. The follow-on is obviously the lower amount of amortization you're seeing in the Canadian segment during the year.
Across all the assumptions and the experience, we feel really good about the year. We see positive trends in most of our businesses now that we've reset assumptions. As we mentioned, positive experience in longevity has been coupled with better trends in the traditional life portfolio and CRS. And I'd say in the fourth quarter, there's a little bit of noise in individual in Canada, but nothing that really gives us pause and things that we're not at the right place with the overall assumptions that are embedded in the CSM with a view that we'll continue to look at the impact of longevity as we look forward into 2025.
The next question comes from Paul Holden with CIBC.
There was a Wall Street Journal article this morning talking about the growth in 401(k) participation rates. I guess what I'm particularly interested in talked a little bit about growth in small business plans and lower cost options that are introduced in that segment of the market. Just wondering how Empower is positioned for smaller plans and if you do have sort of a lower cost option targeted at that segment of the market?
Great question. I'll turn that one over to you, Ed.
Yes. Thanks for the question, Paul. Yes, we do have a low-cost option. We've had a low-cost option in the market now for a couple of years. It's pretty much a straight-through type solution for start-up companies and small businesses. It wasn't specifically referenced in that article, but with the admin of the state auto IRAs, there's 17 states now that require small businesses to state auto IRAs. We've seen that serve as kind of a boom to new plan formation in the 401(k) space. And so really, in particular, third-party researcher suggested that over the next several years, by 2029, you could see another 350,000 plans forming in the United States.
So we're very encouraged. There are some start-up players that play in that space, providers using newer technology, but we are very, very well positioned there because of our distribution heft and our scale. So yes, we think it's a really strong growth opportunity. We think it's going to contribute over time to increase flows, obviously, in the defined contribution space, and we're competing there every day. So...
That's great, helpful. Paul, you started off your prepared remarks referring to tariff risk, and I think it's more on sort of the low -- lower risk for GWO angle, which I'd agree with. What I want to ask you about is like, I think GWO over time has been very good at being opportunistic. You have excess capital, clearly, you've also been very good at managing, I think, the investment portfolio to be opportunistic in terms of grabbing extra yield here and there when available. Just wondering if you could sort of have some thoughts you can share on how GWO could benefit if there is some kind of short-term disruption in markets or in businesses from tariffs?
Yes, good question. I think you've characterized as well from the standpoint of having, I'd say, a relatively lower risk, highly diversified, good discipline. We look at our businesses, they're domestic in nature. We look at our -- the reality of over 70% of earnings are outside Canada. So we're -- I think we're set up in a good position relative to just sort of what I will say, to the general normal risk. When you think about opportunity, one of the opportunities, I think, what is infrastructure investment, if you thought about the need, for example, in Canada, where we've got to build out more capability, I think the conditions are really strong for players like us to use our capabilities and to the extent we need to strengthening our capabilities with capital allocation to participate in that.
So we actually look at that as opportunity to participate in something that's really important for Canada. And so well positioned there. And then I'm not going to get into the specifics of particular sectors where there could be some opportunity. But as Jeff outlined in his business, he's got really smart people in this group and they're constantly scanning the market and thinking about where is the opportunity to help. Those are the same mindset we bring to this. And there may be sectors where we -- there will be opportunity. And I think we're going to be opportunistic but prudent. And it's always those 2 things, it's that balance of opportunity and prudence. And so we come at this obviously with concerns broadly for the economy and for impact on people, but knowing that we can be part of an important solution for Canadians and for the various markets where we operate.
The next question comes from Mario Mendonca with TD Securities.
I want to start with personal wealth. And it's clear that, that business is sort of validating the decision to buy it in the first place a few years back. My question really is this, what is personal wealth sort of bringing to the table that's driving this -- these strong inflows. Is there something specific to personal wealth? Or is it more its proximity to Empower that would account for the improvement?
Well, I'll start off at a very high level. I think you've called it that the acquisition of Personal Capital was a really important move for us a number of years ago that set us up with the platform that now represents Empower Personal Wealth. And I think it's a tale of 2 things. I mean, you have to have a really capable wealth manager if you want to grow. And then you also -- if you're empower with the level of rollover assets and opportunity that represents its unique -- it's very unique to a wealth manager. So I'll turn it to Ed to provide some context around those 2 things.
Yes. I would just build off that. I would say it's highly synergistic in that if we serve those workplace customers well, they will be predisposed in many instances to wanting to work with us on the Personal Wealth side. We certainly see that play out. The other thing I would say is that the capabilities that we have from a user experience standpoint, the fact that we offer state-of-the-art technology, a very compelling user experience. And then we marry that with a human adviser -- human capital. So we bring those 2 elements together in a way that I think is very powerful.
And what I would say to you is if you look at the progress that's been made over the last 6 months, we continue to capture a higher share of the opportunity, which I think speaks to the value proposition and the fact that the organization is continuing to mature both in terms of the talent side of it, but also our capabilities and our product set.
Yes. I might add, Ed, that if you look at Empower's results in 2024 and the results that you'll see in '25, they're good bottom line results, but they're in behind it, we are investing in this wealth business on an ongoing basis. If you watch sports on TV, you'll see the Empower -- you'll see the Empower brand. Empower Personal Wealth is a really important long-term growth play for us. And it's not just about a single transaction that we did a number of years ago. It's about continuing to invest in that business in terms of capabilities.
Ed, how many sales people do we have now serving that business?
There are about 1,000 advisers.
Yes. So we now have 1,000 advisers. So we will continue to grow and scale that adviser base. So this is a -- this is the early stages of a long game that we're excited about.
Yes. And I would just note that in the fourth quarter, in particular, on the workplace side, you saw approximately $11 billion in net outflows However, we captured $4.7 billion on the wealth side of the business. And that was our single best quarter. So again, very confident in the momentum we have there. We're seeing that continue through January, and we expect a very strong year for the personal wealth business.
Right. Would I be right to suggest that those assets are materially higher margin within Personal Wealth than they are in Empower?
I think that's a fair assumption.
And maybe moving over to the pension buyout market in the U.K. Is my understanding that the underlying fundamentals there have been strong for some time or at least more recently? But I was surprised to see that Great-West Life really hasn't participated in that just yet. Is there something I'm missing there? Is this recorded in a different part of the segment? Because I'm just looking, I think, as Tom did to insurance and annuities in the U.K., where would we see this, robust if it is, pension buyout market in the U.K.?
David?
You'll see it in the few lines. So you've see it in the CSM growth as we write new business, and the earnings on to contracts get added into CSM. So the CSM is up 13% year-over-year. And then I think in the supplemental information pack, you'll see it on the sales page. So we mentioned earlier just the volatility from quarter-to-quarter. But if you look at full year '24 versus full year '23, you'll see the U.K. line is up 17%. So you see it coming through there.
Yes. And we refer to it as bulk annuities, nomenclature from region to region changes, but it's pension risk transfer, we call it with assets, transactions within the CRS business. And so we're participating in 2 places with assets, transactions that Jeff's team drives as a reinsurer supporting. And then we are a direct writer of those pension risk transfer or bulk annuities, as we call them in the U.K. And I would say over the last 2 years, we've been building up our muscle to be able to participate both more actively, but also more effectively. We want to be effective in the context of our capabilities, our ability to write transactions and make offers on a very timely basis and also our ALM and investment strategies to back those. So we feel really good about where we're at and our prospects as we move forward.
This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Khan.
Thanks, everyone, for joining us today. Following the call, a telephone replay will be available for 1 month, and the webcast will be archived on our website for 1 year. Our 2025 first quarter results are scheduled to be released after market close on Thursday, May 8, with the earnings call starting at 9:30 a.m. Eastern Time the following day. And a reminder that we are hosting our next Investor Day on April 2 in Toronto, we very much look forward to providing a comprehensive overview of all of our businesses at this event. And thanks again. This concludes our call for today.
Thank you. This brings to a close the conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.