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Great-West Life progressing with plans to consolidate brands and amalgamate its operating life insurance company subsidiaries
July 31, 2019
10:45 pm
Doug
British Columbia, Canada
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Following its announcement of April 3, 2019, an announcement which admittedly got lost in the flurry of the Motus Bank public launch, that it would be consolidating the operating brand names and legal companies of both its intermediary, non-regulated insurance holding companies and its regulated life insurance companies under the Canada Life banner, Great-West Lifeco, Inc., has followed up with a further announcement of July 19, 2019, the specific details of how it will effect that change and the timeline for such changes.

For starters, the operating life insurance companies, each headquartered in Manitoba and Ontario, of The Great-West Life Assurance Company, London Life Insurance Company, and The Canada Life Assurance Company will be amalgamated together with their intermediary, non-regulated holding companies, Canada Life Financial Corporation and London Insurance Group, Inc., and operated under The Canada Life Assurance Company name. The combined company will remain headquartered in The Great-West Life Assurance Company's and the publicly-traded parent company Great-West Lifeco, Inc.'s headquarters location of Winnipeg, Manitoba. Some analysts had speculated whether it might move to Toronto or London given that Canada Life was to be the surviving brand name, but to me, this was never in any question given that, ultimately, Great-West Life Assurance Company has been the larger operating company and its parent company has been headquartered in Manitoba (it has a very large skyscraper there that a company affiliate owns and manages on behalf of its real estate funds). The release does note that the existing corporate offices will remain in each of London and Toronto, but let's be clear, they'll be regional sales and administrative offices; the corporate headquarters of the combined company will be in Winnipeg, Manitoba.

Although Great-West Lifeco has owned Canada Life and London Life since it beat out Manulife Financial Corporation's hostile takeover attempt in 2003 and thus has owned all the common shares in the company, Canada Life has both (a) outstanding subordinated series B debt securities amounting to $100 million that mature in 2028 that yield 6.40% per annum and, together with London Life and Great-West Life Assurance, (b) certain life insurance policies of eligible policyholders that carry voting privileges. As such, both Canada Life Financial Corp. and The Canada Life Assurance Company are reporting issuers and have continued to file quarterly and annual financial reports with Canadian provincial securities administrators since then. Similarly, it's announced, in the July 19, 2019, release, that it has finalized the amalgamation agreement and submitted it to its regulator, the Office of Superintendent of Financial Institutions, for approval and expects to have that approval by late August 2019, at which time it will mail to eligible policyholders of the three life insurance companies for voting. Assuming policyholders approve the transaction at the meeting scheduled for October 3, 2019, which is likely, it will then submit to the Minister of Finance for approval of the letters patent of amalgamation of the three operating life insurance companies and two, non-publicly-traded intermediary holding companies, with an effective date of January 1, 2020, which coincidentally, is the effective date for the planned merger of 11 of 12 operating Desjardins local caisse populaires and their provincial federation in Ontario to form Desjardins Ontario Credit Union.

From the Frequently Asked Questions page on the Canada Life amalgamation informational website that's been set up, the following are some notable highlights:

* Eligible policyholders can determine if they're eligible to vote if they (a) have a policy with one of the three operating life insurance companies headquartered in Canada that (b) receives policyholder dividends.

* No change to policyholders' insurance advisors will take place.

* Following amalgamation, the combined operating life insurance company will "combine the Canadian open participating accounts of each of the three companies into a single Canadian open participating account (including the London Life Bermuda policies). This combined account would be larger than each of the existing open participating accounts, providing an opportunity for greater risk diversification while reducing regulatory and participating account management expenses. This is expected to result in the distribution of the same or possibly slightly greater policyholder dividends for pre-amalgamation policies than would be the case if the Canadian open accounts were kept separate."

* Further, Canada Life and London Life had previously, prior to the 2003 acquisition by Great-West Life, acquired life insurance policies in Canada and elsewhere from New York Life and Crown Life, which are unaffected by the changes as they are already part of Canada Life, other than being combined into single policyholder accounts.

Finally, it's somewhat unclear whether there will be any impacts to Assuris deposit guarantees, which have a $100,000 limit like CDIC, such as for so-called Guaranteed Interest Option ("GIO") or Guaranteed Interest Contract ("GIC") deposit products/"payout annuities"/"accumulation annuities," as I haven't looked into whether the deposit insurance limits with Assuris are per depositor, like CDIC, or per account number, since Canada Life will be concurrently amalgamating policyholder contracts under a single account number.

As well, it should be noted that, while Great-West Life Assurance Company and Canada Life Financial Corp. will cease to exist and thus cease to be reporting issuers on SEDAR as at January 1, 2020, or the fiscal quarter inclusive of that date, Canada Life Assurance Company should thus continue to report its financials on a separate, non-consolidated basis.

Cheers,
Doug

July 31, 2019
11:03 pm
Canadianbull
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Welcome to the new Canada Life
3 companies – Great-West Life, London Life and Canada Life – are coming together under one brand now.

August 1, 2019
12:11 am
Loonie
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Is this something that could evolve into a bank?

Good for the Winnipeg economy, I guess, and thus good for our Hubert accounts.
Not good for London ON. When I lived there years ago, London Life was one of the major employers although everyone I ever knew who worked there hated it.

August 1, 2019
7:06 am
Doug
British Columbia, Canada
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Loonie said
Is this something that could evolve into a bank?

Good for the Winnipeg economy, I guess, and thus good for our Hubert accounts.
Not good for London ON. When I lived there years ago, London Life was one of the major employers although everyone I ever knew who worked there hated it.  

Thanks for your reply, as always, Loonie! sf-cool

Well, Great-West Lifeco could always decide to incorporate a banking subsidiary (or buy one), but I'd say probably not. That said, their publicly-traded parent company, Power Financial Corp., which owns more than 60% of Great-West Lifeco's issued and outstanding shares, has a venture capital arm in Portag3 Ventures for which it holds a majority stake that ultimately has invested in several Canadian and U.S. fintech or robo-advisor firms, including Wealthsimple (with its pooled Save product that invests one's savings in the broker-held HISAs of several of Canada's Big 5 banks and EQ Bank that pays an effective average annual rate of between 2.00-2.30% and which permits up to $1 million in combined CDIC deposit insurance, no-fee prepaid credit card company Koho (which has partnered with Peoples Trust Company), and U.S.-based robo-advisor Personal Capital. As well, also through their controlling parent company Power Financial, there is the Investors Group Trust federally-regulated trust company that is a deposit gathering institution.

It'll be good and bad for London, Ontario. On the one hand, they're keeping the existing office, which will be an important sales field office and administrative office for the combined company, but they're losing their namesake company on the other (for which Great-West Lifeco will no doubt hold on to the trademarks of "London Life" thereby preventing another company from using it). It should also be noted that there were no changes to Great-West Lifeco's other Canadian subsidiaries and divisions, including Freedom 55 Financial, which will now be a division of Canada Life instead of London Life, its mutual fund dealer subsidiary Quadrus Investment Services, Ltd., and its asset management subsidiaries.

I can see why many people in London Life's hometown didn't like London Life. I have a same absolute loathing for PBC Health Benefits Society doing business as Pacific Blue Cross. Maybe Blue Cross is better in other provinces, but customer service wise, they are atrocious - worse than any bank, credit union, or even telecommunications company! If they even have 1 star on Yelp, it'd be a miracle. Nice online member platform and good technological innovation overall, but their unionized staff is so institutionalized and reticent to modernizing the company's policies, the company actually prohibits its staff from communicating with its customers when a third-party administrator manages the accounts which PBC services and underwrites, and they don't make available dental claim PDFs processed by the dentist's office (in contrast to Sun Life and Manulife, which do). What's with these non-profit associations and their complete lack of accountability and poor customer service?

Cheers,
Doug

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