Great-West Earnings: Strong All-Around Results; Empower’s Acquisition Synergies Starting to Show

No-moat-rated Great-West Life reported a solid set of numbers in the first quarter as the company benefited from higher interest rates and underwriting profitability remained stable. The highlight of the quarter for us was the strong performance of the Empower business. We are seeing increasing signs of cost synergies from the recent acquisitions made under the Empower business. We believe that the various steps taken by management to reposition the company’s portfolio over the past three years will bode well for the shareholders. Great-West announced that the integration of Prudential’s retirement business has been completed with 94% of assets under administration and 86% of revenue being retained. Management has exceeded its retention target of 83% for the Prudential acquisition. Importantly, the company has also been able to achieve significant cost synergies as the expense base associated with the acquisition has been reduced by about 32%. The inherent synergies baked in to defined-contribution deals make it a win-win for both transacting parties and explain the consolidating nature of the industry.