Empower Achieves Record $1 Billion (CAD) Base Earnings in 2023

Rhea-AI Summary

Empower celebrates its tenth year with record earnings, doubling customer base and assets under administration. The firm's full-year after-tax base earnings in 2023 were $749 million (US) or $1 billion (CAD), administering over $1.5 trillion in assets for 18.5 million individuals. Empower's growth is fueled by acquisitions, organic net flows, and a focus on retirement and wealth management services.

Positive

• Empower achieved record earnings in 2023, with after-tax base earnings of $749 million (US) or $1 billion (CAD).
• The firm administers over $1.5 trillion in assets for 18.5 million individuals.
• Empower's base earnings have grown by 400% in three years, with a doubled base return on equity in the U.S. over the same period.
• Acquisitions and organic growth have led to a doubling of assets and participants since 2020, resulting in higher market share and gains in scale.
• Empower's Empower Personal Wealth offering has driven annual net inflows of 21% over the last three years.
• The Prudential integration program achieved pretax run-rate cost synergies of $80 million at the end of 2023.

Negative

• None.

Market Research Analyst

The reported earnings and growth trajectory of Empower reflect a robust expansion strategy in the retirement and wealth management sector. The 17% year-over-year increase in defined contribution plan assets and the 31% growth in Personal Wealth assets are indicative of a strong market presence and an effective business model. The strategic acquisitions, notably of the Prudential retirement business and the organic growth underscore a significant consolidation within the industry.

Empower's growth metrics, such as the 400% increase in base earnings over three years and the doubling of base return on equity in the U.S., suggest a competitive advantage that may appeal to investors. The company's commitment to digital innovation, combined with human advisory, aligns with current consumer demand for tech-enabled financial services. The 21% annual net inflows in the Personal Wealth segment highlight the efficacy of this approach.

Furthermore, the announcement of a 7% dividend increase by Great-West Lifeco could be seen as a positive signal to shareholders, reflecting confidence in the firm's financial health and future prospects. However, investors should consider the broader economic conditions, such as interest rate trends and market volatility, which could impact the retirement and wealth management industry.

Financial Analyst

Empower's financial performance, particularly the $749 million in after-tax base earnings, is a critical indicator of its profitability and operational efficiency. The increase in earnings and assets under administration (AUA) suggests that the firm has effectively leveraged its scale and market position to enhance shareholder value. The reported pretax run-rate cost synergies of $80 million from the Prudential acquisition demonstrate a strategic focus on cost management and integration success.

Investors should note the potential for further cost synergies as the integration completes in the first half of 2024. This could lead to improved margins and potentially higher profitability. Additionally, the firm's Compound Annual Growth Rate (CAGR) of 54% in wealth clients over a three-year period is remarkable and could be a harbinger of sustained revenue growth.

Given the firm's performance and strategic positioning, stakeholders may anticipate a favorable impact on the stock price of Great-West Lifeco. However, it is essential to monitor the execution of ongoing integration efforts and the company's ability to maintain client retention and asset growth in a competitive landscape.

Economist

The expansion of Empower's business, particularly in the context of the broader economic environment, reflects a strategic response to demographic trends and the increasing demand for retirement planning and wealth management services. The firm's ability to double its customer base and assets since 2020, during a period marked by economic uncertainty and market fluctuations, suggests resilience and adaptability.

The integration of the Prudential retirement business and the anticipation of full completion later in the year could further solidify Empower's market position. High retention levels post-acquisition indicate customer confidence and successful transition strategies. However, it is critical to remain vigilant about potential economic headwinds, such as inflationary pressures and shifts in monetary policy, which could affect consumer financial behavior and investment patterns.

An in-depth analysis of the firm's performance should also consider the broader industry's response to regulatory changes and technological advancements, as these factors will continue to shape the competitive landscape and influence Empower's long-term growth trajectory.

Firm has doubled customer base and assets under administration since 2020

GREENWOOD VILLAGE, Colo--(BUSINESS WIRE)-- Empower today announced that it has entered its tenth year of operations with record earnings achieved through sustained business growth and sales momentum. The firm’s full-year after-tax base earnings^1,2 in 2023 were $749 million (US) or $1 billion (CAD). The company now administers more than $1.5 trillion in assets for 18.5 million individuals.

Empower, a leading provider of retirement and wealth management services, released results as part of a broader quarterly announcement by its parent company, Winnipeg-based Great-West Lifeco (TSX: GWO-CA). For more information on Great-West Lifeco’s fourth-quarter 2023 results, please see the release on the firm’s website:

• Great-West Lifeco reports record base earnings in the fourth quarter of 2023; announces 7% dividend increase (greatwestlifeco.com)

Highlights from Empower’s reported results at the close of 2023 include:

Empower Workplace Solutions (EWS):

• Defined contribution plan assets under administration (AUA)¹ increased 17% year over year to $1.5 trillion.
• Participants served: a record 17.9 million.
• Funded sales¹ of $54 billion; pipeline¹ across all segments at almost $2 trillion.

Empower Personal Wealth™ (EPW):

• AUA¹ was $72 billion, up 31% over the prior year as a result of both strong net inflows and positive markets.
• Wealth clients are up 268%, or a Compound Annual Growth Rate (CAGR)¹ of 54%, over the three-year period.

With this combination of increased scale and growth, Empower’s base earnings¹ have grown by 400% in three years, and its base return on equity¹ in the U.S. has doubled in that same period.

“We delivered a strong quarter at Empower, with positive cash flows and strong organic growth across both Workplace Solutions and Personal Wealth,” said Empower President and CEO Edmund F. Murphy III. “This continues an extended period of expansion that has been our hallmark since Empower was created in 2014.”

Acquisitions + organic growth

Since its inception in 2014, Empower has grown through a combination of strategic acquisitions and organic growth. Today, Empower Workplace Solutions is the second-largest retirement services provider in the U.S.³ In 2023, the firm expanded its business to create a focused wealth management unit called Empower Personal Wealth, which is composed of its legacy retail unit and the Personal Capital business it acquired in 2020.

This combination has led to a doubling of assets and participants since 2020, resulting in higher market share and material gains in scale. Organic net flows¹ in Empower’s defined contribution business have averaged 4% annually as a percentage of beginning AUA.¹

“Through our investment, Empower has made a significant commitment to the retirement services market, and our intent is to build on that through continual service to employers, plan participants and the advisors who serve them,” said Murphy.

Empower Personal Wealth’s offering, which combines a powerful and unique digital experience with human advice, has driven annual net inflows¹ of 21% over the last three years (2021-2023). Today, EPW employs over 1,000 advisors serving individual investors from across the wealth spectrum, from the mass affluent to high-net-worth individuals.

“Empower is extending its legacy of being a valued provider of financial services to more people who want financial advice, education and investment expertise,” said Murphy. “The last year proved that we are positioned to grow this business and help our clients seize opportunities to build the financial security they want.”

Prudential integration

In 2022, Empower closed on its acquisition of the full-service retirement business it acquired from Prudential. The integration of that business is currently underway and slated for completion later this year. “Retention levels of the clients, participants and assets from the Prudential business remain high and exceed original expectations,” said Murphy.

The Prudential integration program achieved pretax run-rate cost synergies of $80 million at the end of 2023, with the remainder to be assumed during the first half of 2024.

ABOUT EMPOWER

Recognized as the second-largest retirement services provider in the U.S.³ by total participants, Empower administers approximately $1.5 trillion in assets for more than 18.5 million individuals⁴ through the provision of retirement plans, advice, wealth management and investments. Connect with us on empower.com, Facebook, X, LinkedIn, TikTok and Instagram.

1 This is an unaudited non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures and Ratios” section in the Great-West Lifeco 2023 Annual Management Discussion and Analysis (MD&A) for additional details. Please visit Financial reports - Great-West Lifeco Inc. (greatwestlifeco.com).

2 On January 1, 2024, Great-West Lifeco completed the sale of substantially all of Putnam Investments to Franklin Resources, Inc., operating as “Franklin Templeton.” Great-West Lifeco retained a controlling interest in PanAgora Asset Management, a leading quantitative asset manager, as well as certain other aspects of the Putnam business. The 2023 results presented herein include these results as Empower will assume these retained operations in 2024.

3 Pensions & Investments 2022 Defined Contribution Survey. Ranking measured by total number of participants as of September 2022.

4 As of December 31, 2023. Information refers to all retirement business of Empower Annuity Insurance Company of America (EAICA) and its subsidiaries, including Empower Retirement, LLC; Empower Life & Annuity Insurance Company of New York (ELAINY); and Empower Annuity Insurance Company (EAIC), marketed under the Empower brand. EAICA’s consolidated total assets under administration (AUA) were $1,544.5B. AUA is a non-GAAP measure and does not reflect the financial stability or strength of a company. EAICA’s statutory assets total $72.1B and liabilities total $68.3B. ELAINY’s statutory assets total $7.2B and liabilities total $6.9B. EAIC’s statutory assets total $92.0B and liabilities total $91.0B.

On August 1, 2022, Empower announced that it is changing the names of various companies within its corporate group to align the names with the Empower brand. For more information regarding the name changes, please visit empower.com/name-change.

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Empower refers to the products and services offered by Empower Annuity Insurance Company of America and its subsidiaries. “EMPOWER” and all associated logos and product names are trademarks of Empower Annuity Insurance Company of America.

Advisory services are provided for a fee by Empower Advisory Group, LLC (EAG). EAG is a registered investment adviser with the Securities and Exchange Commission (SEC) and subsidiary of Empower Annuity Insurance Company of America. Registration does not imply a certain level of skill or training. Investing involves risk. Past performance is not indicative of future returns. You may lose money. All visuals are illustrative only. Actors are not EAG clients.

On April 1, 2022, Empower Annuity Insurance Company of America, an affiliate of Empower Retirement, LLC (Empower) acquired the retirement services business of Prudential Financial, Inc. (Prudential). EAICA acquired Prudential’s retirement services businesses with both a share purchase and a reinsurance transaction. EAICA acquired the shares of Empower Annuity Insurance Company (formerly Prudential Retirement Insurance and Annuity Company), and business written by The Prudential Insurance Company of America was reinsured by EAICA and Empower Life & Annuity Insurance Company of America of New York (for New York business). Following an initial transition period, EAICA will become the sole administrator of this business. Empower refers to the products and services offered by EAICA and its subsidiaries, including Empower Retirement, LLC. Empower is not affiliated with Prudential or its affiliates.

©2024 Empower Annuity Insurance Company of America. All rights reserved. RO-3394746-0224

View source version on businesswire.com: https://www.businesswire.com/news/home/20240216445702/en/

Stephen Gawlik - Stephen.Gawlik@empower.com

Alex Goss - agoss@stantonprm.com

Source: Empower

FAQ

What were Empower's full-year after-tax base earnings in 2023?

Empower's full-year after-tax base earnings in 2023 were $749 million (US) or $1 billion (CAD).

How many assets does Empower administer?

Empower administers over $1.5 trillion in assets for 18.5 million individuals.

What is the growth percentage of Empower's base earnings in three years?

Empower's base earnings have grown by 400% in three years.

What has led to a doubling of assets and participants for Empower since 2020?

Acquisitions and organic growth have led to a doubling of assets and participants for Empower since 2020.

What is the annual net inflows percentage driven by Empower Personal Wealth over the last three years?

Empower Personal Wealth has driven annual net inflows of 21% over the last three years.

What were the pretax run-rate cost synergies achieved by the Prudential integration program at the end of 2023?

The Prudential integration program achieved pretax run-rate cost synergies of $80 million at the end of 2023.