Great-West Lifeco Financial Performance Report: Growth and Challenges

Great-West Lifeco's recent financial performance demonstrates significant growth yet highlights some challenges. The company reported fourth-quarter base earnings of CA$1.25 billion, marking a 12% increase over the previous year. Full-year 2025 earnings were CA$4.65 billion, an 11% rise from 2024. However, net earnings from continuing operations showed a decline, with Q4 net earnings of CA$1.05 billion, a 6% decrease from the prior year. This decrease is attributed to business transformation impacts, unfavorable market conditions, and changes in management actions and assumptions.

In 2025, the firm achieved a base return on equity (ROE) of 18.2%, while the reported ROE was lower at 15.5%. David Harney, President and CEO, emphasized the company's trajectory toward its medium-term ROE target of 19% or higher, fueled by growth in capital-efficient lines. Harney asserts, "We delivered on our medium-term base earnings growth objective and drove strong return on equity and capital generation, maintaining financial flexibility for further capital deployment."

Capital Management and Shareholder Returns

The company's board approved a 10% increase in quarterly common share dividends to $0.67, set for distribution on March 31, 2026. In addition, 2025 saw CA$1.6 billion in common shares repurchased, with CA$250 million more in 2026. Great-West Lifeco has the capacity to repurchase up to 20 million common shares under a renewed normal course issuer bid, enhancing their approach to strategic capital deployment and regulatory compliance.

Financially, Great-West Lifeco ended 2025 with a LICAT ratio of 128% and holding company cash reserves of CA$2.1 billion. Despite this robust capital adequacy, the LICAT ratio dropped two percentage points from 2024 due to reinvestment in new Capital Solutions and increased insurance capital requirements. The leverage ratio increased slightly, driven by share buybacks while the book value per share rose 3% year-over-year to CA$28.07.

Regional Earnings Performance

The U.S. division significantly contributed to Great-West Lifeco's base earnings, with Q4 earnings reaching US$317 million (CA$440 million), a 17% increase on a constant currency basis from 2024. Full-year U.S. base earnings rose to CA$1.58 billion, driven by higher fee and spread income. The Empower Retirement business reported US$23 billion in net plan flows in 2025, with Empower Wealth showing a 14% increase in net new assets.

In Canada, Q4 base earnings grew by 10% year-over-year to CA$400 million due to positive insurance experiences. Meanwhile, in Europe, Q4 base earnings were CA$256 million, a slight decrease influenced by adverse experiences in UK group benefits and Ireland, offset by increased wealth and retirement fee income. The Capital and Risk Solutions division posted a Q4 base earnings increase of 11% through ongoing strength in new business.

Comparative Industry Position

Compared to Canadian peers like Manulife, Sun Life, and iA Financial Group, Great-West Lifeco shows a unique focus on U.S. retirement and wealth sectors combined with capital-efficient reinsurance. While other rivals prioritize growth in Asia and asset management, Great-West's U.S. Empower franchise and Capital and Risk Solutions segment are crucial to its earnings and ROE strategy. The 18.2% base ROE, highlighted by profitable U.S. operations, places the company near the top in underlying profitability among domestic competitors.

Great-West Lifeco's strategic capital management, highlighted by a 128% LICAT ratio, a 10% dividend hike, and significant share buybacks, underscores its balanced approach between growth and shareholder returns. The company continues to navigate evolving market and regulatory landscapes, ensuring robust risk management and capital deployment strategies.