Great-west unit to buy Prudential's retirement business
Canadian insurer Great-west Lifeco Inc said on Wednesday its U.S. unit would buy Prudential Financial Inc's full-service retirement business for about $4.45 billion in one of its biggest deals yet as it accelerates its expansion.
The acquisition by Empower Retirement, the second-largest retirement plan provider in the U.S., will expand the subsidiary's contribution to earnings to 30 per cent by the end of 2023, from 10 per cent in 2020, according to Great-west, adding about $325 million in after-tax earnings by the end of 2023.
Great-west shares climbed about 1.5 per cent to $37.10 at the close in Toronto, while Prudential shares jumped about two per cent to US$101.21 in New York trading.
Winnipeg-based Great-west has spent billions of dollars on a raft of U.S. acquisitions in recent years, including the retirement plan business of Massmutual, which closed in January, and financial technology company Personal Capital, which it completed in mid-2020.
The deal with Newark, N.j.-based Prudential underscores continued interest among Canadian insurers in expanding overseas amid rising premiums and high levels of capital. Overseas acquisitions by Canadian insurers reached a 20-year high last year, according to Refinitiv data.
While rivals Manulife Financial Corp and Sun Life Financial have been expanding more in Asia, Great-west is focused on growing in the U.S., as the population of Americans aged 65 and over is expected to more than double in the next 40 years.
The deal will expand Empower's customer base to more than 16.6 million, from over 12 million in 2020, Great-west said in a statement, boosting assets under administration to US$1.4 trillion, from US$1 trillion in January.
The deal value includes about US$2.1 billion of capital to support the business, and the purchase will be financed with a combination of debt and existing resources, it said.
The deal, which is expected to close in the first quarter of 2022, will include a share repurchase and a reinsurance transaction.
Prudential's full-service retirement business covers about four million participants, 4,300 workplace savings plans and US$314 billion in assets under administration.
“Empower's acquisition of Prudential's full-service retirement business will add significant scale and capabilities, further solidifying its leadership position in the world's largest retirement market,” Paul Mahon, Great-west president and CEO, said in a statement. “The Empower team has a strong track record of successful M&A integration and is well-positioned to deliver for stakeholders on this transaction.”