Great-West Lifeco has experienced a setback for the second consecutive quarter.
The insurer reported net income of $688 million in the third quarter of 2022, compared with $872 million in Q3 2021.
This downturn of 21.1 per cent or $184 million “was primarily due to a decrease in base earnings and higher restructuring and transaction costs related to the Prudential and MassMutual acquisitions,” explains Great-West Lifeco.
“In addition, the Company had less favourable market-related impacts on liabilities driven by updated property cash flow projections in the Europe segment as well as market volatility resulting in hedge ineffectiveness related to Prudential guaranteed products in the U.S. segment,” the insurer continues.
“The decrease was partially offset by the release of a contingent consideration provision related to Personal Capital and a provision for acquisition-related costs in the third quarter of 2021 in the Lifeco Corporate segment that did not recur. The release of the Personal Capital contingent consideration provision was a result of growth in assets under management being below the level where further contingent consideration would be payable,” the quarterly report reads.
Decline in Canada
Three out of five segments declined in Q3 2022, including Canada. Net income slipped 2.4 per cent or $4 million in the U.S. and 30.2 per cent or $108 million in Europe.
In Canada, including Canada Life, net earnings were $160 million in the third quarter of 2022, versus $305 million in Q3 2021. This decrease of 47.5 per cent or $145 million is “primarily due to the impact of actuarial liability basis changes reflecting updated policyholder behaviour assumptions, partially offset by updated mortality assumptions and model refinements,” says Great-West Lifeco.
The other two segments grew: Lifeco Corporate gained $60 million and capital and risk management and control practices rose 12.7 per cent or $13 million.
Great-West Lifeco reminds readers that it “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.”
In the third quarter of 2022, the insurer's net income was impacted by Hurricane Ian. Thus, “the Company’s net earnings for the third quarter of 2022 includes a $128 million after-tax provision primarily relating to estimated claims net of reinstatement premiums on these coverages.”
“The Company’s loss estimate is based on currently available information and the exercise of judgment and may change as additional information becomes available,” Great-West Lifeco says.
Premiums and deposits
Great-West Lifeco's premiums and deposits were $44.3 billion in the third quarter of 2022, compared with $39.3 billion in Q3 2021. This represents an increase of 12.7 per cent or $5 billion.
In Canada alone, premiums and deposits increased by 2.7 per cent or $191 million to $7.1 billion.
Looking at the results in closer detail, premiums and deposits in one Canada sub-segment increased: group insurance climbed 8.5 per cent or $356 million, to $4.6 billion. The second Canada sub-segment’s premiums and deposits decreased: individual insurance was down 6 per cent or $165 million, to $2.6 billion.
Great-West Lifeco’s total sales were $45.5 billion in the third quarter of 2022, compared with $39.6 billion in the third quarter of 2021. This represents an increase of 14.9 per cent or $5.9 billion.
Sales in Canada were $3.1 billion in Q3 2022 versus $3.5 billion in Q3 2021. The decrease of 10.9 per cent or $379 million is “primarily due to lower individual mutual fund and segregated fund sales.”
As a result, individual insurance sales fell by 16.6 per cent or $414 million to $2.1 billion.
In contrast, group insurance premiums rose by 3.6 per cent or $35 million to $1 billion. “Group insurance sales were up 15 per cent over the third quarter of 2021 in part due to the addition of ClaimSecure. Group wealth and Individual insurance sales held strong in quarter” Great-West Lifeco says.