WINNIPEG — A Great-West Lifeco Inc. subsidiary aims to strengthen its position in the U.S. market with a $4.4-billion acquisition of the retirement services business of Massachusetts Mutual Life Insurance Co.
The transaction is an “excellent strategic fit” for Empower Retirement, said Great-West chief executive Paul Mahon, with Empower adding small and mid-sized employers to its existing U.S. base, which is primarily focused on very large companies.
“We really like the way this fills out those client segments on the overall Empower platform,” Mahon said in an interview.
Empower provides its clients and their employees with a platform for managing the U.S. equivalent of group registered retirement savings plans or defined contribution pension plans. The group — usually a corporate client managing a fund for its employees — pays fees for administering accounts and providing advice in managed accounts.
“They’re able to get a tax-deductible contribution (and) their employer would typically match those contributions, or have some level of matching,” Mahon said.
Great-West Life offers similar services in Canada through Canada Life, although on a smaller scale.
The company uses a similar group plan model in Ireland and is in the process of building a similar business in Germany, Mahon said.
Employer plans provide a good way to reach a large number of affluent investors, he added, and Mahon said Great-West has been seeing increased participation in employer-sponsored plans like this as well as through robo-advisers.
“This business is really well-positioned to actually thrive in a COVID-style environment. We fundamentally believe we’re strengthening in an area where the market is going,” Mahon said. ”So we decided it was the right time for us to take advantage of it … and create value for shareholders.”
Great-West Lifeco is a publicly traded subsidiary of a group headed by Montreal-based Power Corporation of Canada, one of Canada’s largest non-bank financial companies.
Empower, which is 100 per cent owned by Great-West, was created in 2014 to acquire the retirement plan services business of JPMorgan Chase.
Based near Denver, Empower administers US$667 billion in assets for more than 9.7 million retirement plan participants as of June 30.
The MassMutual retirement services business will add 26,000 plans with approximately 2.5 million participants and US$167 billion in assets.
The deal is expected to close in the fourth quarter of 2020.
MassMutual said in a separate announcement that the retirement plan portion of its business employs approximately 2,000 people.
“In Empower, we are pleased to have found a strong, long-term home for MassMutual’s retirement plan business, and believe this transaction will greatly benefit our policy owners and customers as we invest in our future growth and accelerate progress on our strategy,” said Roger Crandall, MassMutual’s chairman, president and CEO.
In addition, Empower and MassMutual plan a partnership through which digital insurance products offered by Haven Life Insurance Agency and MassMutual’s voluntary insurance and lifetime income products will be offered to Empower and Personal Capital customers.
Empower’s newly acquired Personal Capital is a hybrid wealth manager that manages $13 billion in assets, delivered virtually from offices across the United States.
In August, Empower closed its acquisition of Personal Capital in a deal worth up to US$1 billion, including US$825 million up front and up to US$175 million over two years.
— by David Paddon in Toronto.
This report by The Canadian Press was first published Sept. 8, 2020.
Companies in this story: (TSX:GWO, TSX:POW)
The Canadian Press