JACQUELINE NELSON | The Globe and Mail
Great-West Lifeco Inc. is looking south of the border and in Europe for new customers.
The Winnipeg-based insurer and wealth manager says there are plenty of opportunities to build its business in developed markets such as the U.S. and Britain, where competition is fierce but large players are buying smaller ones to gain scale. This will mean competing with major financial firms, but the company has already begun to acquire businesses in these regions and plans to boost its focus on technology to attract more consumers.
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“We could really participate in good growth in the U.S., and we’ll look to acquisitions to bolster that,” Paul Mahon, chief executive of Great-West, said on a recent trip to Toronto. “And in the U.K.? That’s a market that is not fully consolidated either.”
Great-West is Canada’s stealthy insurance giant, sometimes overlooked due to its head office location outside Toronto’s financial core, its holding company structure and because its shares are less widely held than those of competitors.
More than 67 per cent of the company’s outstanding shares are owned by Power Financial Corp., which is backed by Canada’s wealthy Desmarais family.
But 12 million Canadians – one in three – are connected to Great-West through a product or service. The company also operates multiple international insurance and wealth-management brands throughout the U.K. and the United States, such as London Life Insurance Co., Irish Life Financial Services Ltd. and Putnam Investments, and consolidation will be the ticket to building a presence in these markets. That, and keeping an eye on how tech companies such as Google Inc. and Amazon.com Inc. are changing consumers’ expectations for service.
Because Great-West has built its strength in similar Western economies, it often gets the benefit of employee collaboration on new products from Europe, the United States and Canada.
“We can use that commonality of that Western world phenomenon to leverage commonalities across our organization,” Mr. Mahon said. “In the Far East, you’d be be thinking about products we were maybe selling at Great-West Life or London Life 20 or 30 years ago.”
Mr. Mahon said it would be outside Great-West’s wheelhouse to expand into emerging economies and Asia, where large Canadian competitors Manulife Financial Corp. and Sun Life Financial Inc. have had huge growth in insurance and wealth management in recent years.
Instead, Mr. Mahon is looking to the fragmented U.S. market, where the rising cost of regulation stemming from changes after the financial crisis – such as the Dodd-Frank Act – are also making it more efficient to be a larger player.
Last year, U.S. business arm Great-West Financial bought J.P. Morgan Securities Canada Inc.’s retirement plan services unit, which does administration of defined-benefits pension plans, marketing and client services. The business is being integrated with part of Boston-based asset manager Putnam Investments, and will fall under the company’s recently created brand Empower Retirement.
Building in the United States will take time. “Particularly in the massive U.S. market, these investments carry great long-term potential if execution is strong,” Robert Sedran, an analyst at CIBC World Markets, said in a note. “[In the medium term] the costs will likely outweigh the benefits, especially since it is natural for the size of the opportunity to sometimes compromise near-term expense discipline.”
Great-West is more cautious in Europe because of instability in the Euro zone, but has a positive outlook. “As we look to the U.K. and Ireland and Germany, those would be markets we’d see as sound and stable and strong,” Mr. Mahon said. In early 2013, Great-West bought Ireland’s biggest life insurer for $1.75-billion, a move Mr. Mahon said is not only a good strategic fit, but has also benefited from the country’s economic recovery.
Amid the hunt for growth, the pool of opponents is getting broader. “It’s not just traditional life insurers that we view as competition any more. You look to financial services evolving out of Wal-Mart,” he said, adding that even some drug stores are selling pet and travel insurance at the end of the aisle. “And then there’s digital players like Google – what will Google Finance become?” he said.
Customers’ digital experiences should be compared not to what Manulife might offer them, but to what they are getting from Amazon.com Inc. and other digital players, Mr Mahon said. In the future, insurers will not get a pass on a lousy digital experience just because life insurance has long been dominated by paper forms, he added.
At the same time, Mr. Mahon must ensure all changes fit well with the independent cultures of Great-West’s unique businesses. “As you try and create commonality or sharing, you also have to balance that out with making sure you maintain those strong capabilities in markets,” he said. “We’re in growth mode, but it’s thoughtful growth.”