Canada Life announced on December 4, 2023, that it has formed a partnership with digital mortgage lender nesto to transfer the service and administration of its residential mortgage loan portfolio.
The insurer states that the agreement follows its decision to exit the residential mortgage loan market. In its latest annual report, Great-West Lifeco (parent company of The Canada Life Assurance Company) mentioned that it ceased residential mortgage loans origination in November 2022, for its Canadian operations.
Asked by Insurance Portal about the reasons for this withdrawal, Steve Fiorelli, senior vice-president, wealth management solutions at Canada Life, pointed to the significant changes the mortgage industry has undergone in recent years. " In light of these changes, and as part of our evaluation of current and future business strategy, we decided to withdraw from the Canadian mortgage marketplace," added Fiorelli.
He explains that Canada Life only recently informed its clients communicated to its clients about this withdrawal. Regarding nesto's digital offering, Fiorelli emphasized that clients will continue to receive offline service through Nesto's call center.
Transition in 2024
Under the agreement between the two partners, nesto will begin servicing and administering Canada Life's residential mortgage loan portfolio on January 1, 2024.
Canada Life's mortgage clients will gradually gain access to nesto's customer service platform as part of a phased implementation plan in mid-2024.
A springboard for nesto
The transfer of Canada Life's portfolio will increase the mortgages managed by nesto to over $10 billion. Founded in 2018, the Montreal-based fintech has evolved from a mortgage broker to a mortgage lender, now employing over 300 staff.
According to an annex note in Great-West Lifeco's annual report, residential mortgages from its Canadian operation totaled $6.6 billion as of December 31, 2022, split between $4.7 billion in multi-family residential and $1.9 billion in single-family residential.
The total mortgages were $17.1 billion within its Canadian operation as of December 31, 2021. Besides the residential mortgages of $6.6 billion, Great-West Lifeco's Canadian operation's mortgage portfolio in 2022 consisted of commercial ($9.1 billion) and equity release mortgages ($1.4 billion). Equity release mortgages allow individuals to access a portion of the actual net equity of a property they continue to reside in.
Direct approach
Malik Yacoubi, CEO at nesto, praised the partnership that aligns with their mission to offer a transparent and simplified home financing experience from start to finish for all Canadians. "Our teams are 100 % committed to providing the highest level of mortgage services possible," asserts Yacoubi.
Nesto claims on its website to fulfill its mission by offering Canadians an online mortgage experience without intermediaries. It states that its salaried advisors are rewarded based on customer satisfaction. Steve Fiorelli asserts that Canada Life borrowers can expect to benefit from nesto's competitive mortgage products.
Fiorelli specifies that Canada Life distributed mortgage products through credit planning consultants. He adds that its clients will continue to receive wealth and insurance advice from their current advisor.
In the family
Nesto is backed by Diagram Ventures, an incubator for startups in fintech, insurance, and health sectors. Diagram invests in these companies through, among others, the Fintech Portag3 fund, financed by Power Financial Corporation, IGM Financial, and Great-West Lifeco. In May 2023, nesto revealed it had secured investments of $165 million after three funding rounds, with participants including Diagram Ventures, NAVentures (corporate venture capital arm of National Bank of Canada), BMO Partners, and IGM Financial.
