Great-West Lifeco Inc.

Thank you for standing by. Welcome to the Great West Second Quarter 2026 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then the number one on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star, then zero. I would now like to turn the conference over to Mr. Shubha Khan, Senior Vice President and Head of Investor Relations at Great West. Please go ahead.

Thank you, Morgan. Hello, everyone, and thank you for joining the call to discuss our second quarter financial results. Before we start, please note that a link to our live webcast and materials for this call have been posted on our website at greatwestlifeco.com. under the Investor Relations tab. Turning to slide two, I'd like to draw your attention to the cautionary language regarding the use of forward-looking statements, which formed part of today's remarks. And please refer to the appendix for a note on the use of non-IFRS financial measures and important notes on adjustments, terms, and definitions used in this presentation. And turning to slide three, I'd like to introduce today's call participants. Joining us today are David Harney, our president and CEO, John Nielsen, our group CFO, Ed Murphy, President and CEO Empower, Fabrice Morin, President and CEO Canada, Lindsay Wicks-Broom, CEO Europe, Jeff Poulin, CEO Capital and Risk Solutions, Linda Kerrigan, our appointed actuary, and John Melvin, our Chief Investment Officer. We'll begin with prepared remarks followed by Q&A. With that, I'll turn the call over to David.

Thanks, Shubha, and good morning, everyone. Please turn to slide five. This quarter we built on our strong start to 2026, delivering 15% base EPS growth, driven by double-digit growth at both Empower and CRS. We continue to demonstrate strong execution across all of our growth platforms. Empower crossed a notable milestone, surpassing US$2 trillion in client assets on its workplace platform. This business will be further strengthened by the acquisition of Milliman's Retirement and Benefits Administration business, which is expected to close later this year. Great West continues to generate strong risk-adjusted returns, with a base ROE of 19.3% this quarter, supported by our ongoing shift to a more capital-efficient business mix, as well as balance sheet optimisation initiatives. Lindsay will discuss some of these initiatives in more detail shortly, as part of an update on our European operations in this quarterly call. Our strong cash generation and balance sheet continue to provide significant financial flexibility and we expect total capital deployment through buybacks and M&A in 2026 to be at least as much as was deployed in 2025. Please turn to slide six. As I mentioned, we delivered base EPS growth of 15% year-on-year, primarily driven by strong growth in our retirement, wealth and reinsurance businesses across markets. Total retirement and wealth client assets grew 22% year-over-year to more than $3.37 trillion, of which $1.3 trillion represents higher margin assets under management or advisement. Robust capital generation continues to reinforce our financial position. We continued our share buybacks during the quarter and still ended with a solid capital base, including a like cash ratio of 128%, hold to call cash of $2.5 billion and a leverage ratio of 27% down one percentage point from Q1. Please turn to slide seven. Our results this quarter highlight the benefits of diversification in our portfolio. Our segments are largely delivering on their growth ambitions through the first half of the year, despite the impact of more volatile earning drivers. Empower grew base earnings at a double-digit pace year over year, with strong operating margins and retirement plan wins, while delivering impressive growth of 66% in its wealth business through the first half of 2026. Canada saw double-digit growth in both retirement and wealth earnings on particularly strong margins, though this was offset by moderated insurance experience in the second quarter. In Europe, business performance has been strong across markets year-to-date, with robust sales, including $1.2 billion of bulk annuities in the second quarter, continuing to support the growth outlook. And finally, Capital and Risk Solutions continues to see strong demand for capital solutions across geographies and product lines, driving 38% year-over-year base earnings growth for the first half of the year. Overall, I am very pleased with our performance at the midpoint of the year. Please turn to slide 8. I want to take the opportunity to highlight Empower's recently announced acquisition of Milliman's retirement and benefits administration business. The acquisition further scales our defined contribution platform and, more importantly, adds a leading defined benefit capability that strengthens our go-to-market offering. By adding 1.5 million participants and US$130 billion in client assets upon closing, Empower's workplace platform will be better positioned to compete for bundled opportunities. This transaction is expected to be financially attractive and accretive to base earnings in the first year. Ed is available today to address any additional questions on the transaction and a strong outlook for Empower's business overall. With that, I will pass over to Lindsay to discuss our European operations, where we have significantly enhanced Thank you, David, and good morning.

Please turn to slide 10. In Europe, our base earnings increased 2% year over year in the second quarter, primarily driven by higher global equity markets, favourable insurance experience gains, and supportive currency movements. These were partially offset by a moderation in trading gains from the exceptionally strong levels For the first half of 2026, base earnings grew 8% year over year, better reflecting the solid underlying business performance and successful execution of our strategic priorities. These results reinforce our confidence in the long-term earnings trajectory of the European business. We continue to benefit from a diversified earnings mix, recurring fee-based revenue streams, and strong growth across our lines of business. Turning to slide 11. Looking more closely at business activity, Europe continues to see robust demand across product lines, providing attractive opportunities for organic investment and a strong foundation for sustained earnings growth at a mid-single digit pace or higher. In insurance and annuities, UK bulk annuity sales were $1.2 billion this quarter, with year-to-date sales amounting to a five-fold increase from 2025. Reflecting robust demand for bulk annuities across the industry and healthy margins, particularly in the SME segment of the market. We continue to deploy capital in a disciplined manner, targeting returns in the mid-teens or higher. Retail annuity sales also remain strong, increasing 54% year-to-date, reflecting strong consumer demand for guaranteed retirement income solutions amid ongoing retirement planning needs. Within group benefits, In-force premiums increased 9% year over year, reflecting solid retention, pricing discipline, and ongoing growth. Particularly encouraging was the performance in wealth, as net flows improved significantly from the prior year period to $7.1 billion of net inflows in the first half of 2026. This improvement was driven by continued momentum in retail sales and a rebound in institutional flows. It also underscores the attractiveness of our value proposition, as clients continue to seek trusted advice and comprehensive wealth solutions across our European markets. Finally, retirement net flows remain positive at approximately $600 million, consistent with the prior year, demonstrating the resilience and stability of our retirement franchise. Taken together, the UK, Ireland and Germany have a breadth of avenues to drive sustained growth. These drivers are supporting stronger earnings, higher ROEs, and increased capital generation, while reducing dependence on any single market or product line. Please turn to slide 12. Beyond top line growth, we continue to make significant progress in optimizing our balance sheet. At the Investor Day last year, we outlined a series of initiatives designed to improve capital efficiency, enhance returns and increase financial flexibility. We are pleased to report that we are on track to deliver over $3 billion in capital benefits, exceeding our expectations from a year ago. These benefits were generated through enhanced asset liability management practices, strategic use of reinsurance, and modernization of our ALM tools and risk modeling capabilities. Improved capital efficiency has translated to more than $2 billion in additional cash remittances, and has reduced capital strain on new business by approximately 30%, enhancing capital deployment flexibility across the broader organization. The impact of these initiatives is most clearly reflected in our return metrics. Europe's base ROE this quarter reflects a 350 basis point improvement from 2024, demonstrating our ability to translate business growth and capital optimization into greater value creation. Importantly, This improvement has not come from taking additional risks. Rather, it reflects deliberate actions to optimize capital utilization, improve our business mix, and increase operating efficiency. Overall, Europe has delivered a good first half of 2026, marked by strong top line growth and enhanced capital efficiency, enabling the business to drive strong risk adjusted returns. As we look ahead, Our focus remains on executing against attractive growth opportunities, maintaining disciplined capital deployment, and continuing to enhance returns while preserving the strength and resilience of our balance sheet. I'll now pass it over to Jon to talk through the broader financial results for the quarter.

Thank you, Lindsay, and good morning. Please turn to slide 14. Great West, again, delivered a strong quarter with double digit earnings growth driven by sustained momentum across our retirement and wealth businesses and strong new business volume in our CRS business. Base earnings per share growth of 15% year over year was also supported by $925 million of share buybacks since the start of the year. These results drove base ROE of 19.3% in line with our medium term objective of 19.5% for a second straight quarter. While net earnings in the second quarter were impacted by unfavorable market experience, primarily from interest rate movements, the year-to-date impact of interest rates was largely neutral. Turning to slide 15, we are pleased that credit experience for the second quarter was down year over year and within our expected range of four to six basis points on an annualized basis. As a reminder, Thank you for joining us. Thank you for joining us. Strong equity markets drove double-digit growth in average client assets, which now exceed $2 trillion for the first time. Net plan inflows remain strong, and we continue to expect positive net plan flows for the full year 2026. Operating margins also improved by over 600 basis points from a year ago, helped by improved credit experience and underscoring the significant operating leverage in the business. Empower Wealth performed exceptionally well with base earnings up 67% year-over-year in constant currency. Operating margins were a record 40% this quarter, up 10 percentage points year-over-year, demonstrating the scalability of the wealth platform. We intend to further invest in the business in the second half of the year and beyond, and as a result, expect the full year operating margin to be in the mid to high 30s. Overall, the significant momentum in our businesses drove Empower's base ROE to a record 22.2% and reinforces the double digit growth outlook for 2026. Turning to slide 17, base earnings in our Canadian operations decreased 9% year-over-year as continued momentum in retirement and wealth was offset by moderated long-term disability experience gains, which can fluctuate from quarter to quarter. Underlying business growth was solid with group benefit sales up 20% from a year ago, insurance and annuity sales up 15% year-over-year, and rising equity markets and operating leverage supporting base earnings growth of 26% in the retirement business and 38% in wealth. Turning to slide 18, capital and risk solutions continued the strong start to the year with base earnings up 35% on a constant currency basis in the second quarter. This was driven by continued demand for our capital solutions globally which drove a 54% year-over-year increase in the run rate insurance result in the second quarter. The pipeline in that business remains strong and we continue to expect new deals through the remainder of 2026. Turning to slide 19, as we've highlighted in the past, our organic capital generation is significant and is a key strength of our businesses. In the second quarter, base capital generation exceeded 80% of base earnings, while free cash flow was 86% of base earnings. As we've said before, Great West Capital is highly fungible, providing significant support for continued capital deployment. While attractive organic growth opportunities in our more capital supported businesses may impact base capital generation in any given quarter, We expect Great West to remain highly cash generative. Turning to slide 20, Great West's exceptional free cash flow generation has supported significant capital deployment. So far this year, we've repurchased $925 million of common shares and announced the acquisition of Milliman's Retirement and Benefits Administration business in the United States for a total consideration of 340 million US dollars. Similar to last year, we've amended our existing NCIB allowing us to repurchase up to 40 million shares in 2026. We continue to expect that total capital deployed either through share repurchases or M&A will at least be as much as the 1.6 billion Our LICAT ratio stood at 128%, down from 129% at the end of the first quarter, driven by a number of individual insignificant items. For the remainder of the year, we expect to maintain a LICAT ratio at or above 125%, even if new business volume and our reinsurance business remains elevated. Our leverage ratio of 27% and hold code cash balance of $2.5 billion positions us for continued financial flexibility and to pursue strategic capital deployment opportunities. Overall, we've had a great first half in 2026 and are excited about the continued momentum across all our business segments. With that, I'll turn it back over to David for concluding remarks.

Thank you, Jon. Please turn to slide 22. I am really pleased with how well we have continued to execute on our strategy since I took over as CEO a little over a year ago. With double-digit earnings growth through the first half of the year and a base ROE in excess of 19%, the results speak for themselves. This is a testament to the focus and efforts of our people across the organisation. I'd also like to note that we are presenting our results for a quarter to a week earlier than we did last year. And I'd like to thank the finance and related teams for the amazing work they did in accelerating their timelines to facilitate the earlier reporting of these results. I am confident in the outlook for our business. We remain well positioned to deliver on all our medium term objectives. and Power is on track once again to generate double-digit organic base earnings growth this year. CRS continues to outperform its growth ambitions with strong demand for its capital solutions expected to persist through 2026. We also demonstrated the strong and improving return profile of the business supported by our balance sheet optimisation efforts, especially in Europe. I am confident that we will continue to deliver on our strategy and create long-term value for our shareholders in the years ahead. Thank you. And with that, I'll turn it over to Shubha to start the question and answer portion of the call.

Thank you, David. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourselves to two questions per person. You can certainly re-queue for follow-ups and we will do our best to accommodate if there's time at the end. Morgan, we are ready to take questions now.

We will now begin the analyst question and answer sessions. To join the question queue, you may press star then the number one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, press star then the number one again. Your first question comes from John Aiken with Jefferies. Your line is open.

Good morning. With the capital risk solutions that you mentioned, the strong pipeline, as you're seeing demand increase in this segment, is this actually having any impact on margins? Are they actually widening out?

That's a good question, Jon. Thanks for that. There's always eroding margins on Thank you for having me. However, I think what we are seeing right now and what we've seen the last 18 months or so and continuing to see is a lot of demand for some of the solutions that are working. And it's actually a very diversified portfolio. We've got behavior risk in Europe and in North America, policy behavior risk that people are reinsuring and then we're seeing some health reinsurance demand in the United States, mass lapse transactions in Europe on savings products and then a lot of demand on our essential capital solutions for non-life products. So it's coming in a very diversified manner. We're very happy with it. However, our business is lumpy and it comes in waves. I think I highlighted that at the Investor Day last year. So it is a very lumpy business. Right now, we're riding the wave and we're very opportunistic that way. But we remain disciplined. If the margins are no longer there and we're not getting our returns right, We're going to move on to other types of products. So it's important for us to continue to get new ideas and new products, and we're working on those, and we've got some pretty good ideas right now. So whether the demand will be there or not for these products is hard to tell, but it's been a good run.

I think it's fair to say, Jeff, that margins on the new business have been good and in line with what's driving the growth here is increased demand from the market rather than any change in our competitive posture.

That's right. Understood. Thank you. And Jeff, just as a follow on, given your success, how is competition shaping up in your markets?

It's been, I mean, it's the same usual suspects, right? Like there's, we're the same player. I think that what we've seen, Jon, is over the years, I think that reinsurers have shift, there's been a shift from just a risk partner to a capital and planning partner. We've been at the forefront of that and we're constantly coming up with ideas. So We've got extremely good relationships with large insurers and all the markets we're in. And I think we benefit from the trust that they have in us. There's always some copycats in the market and people that are coming in and trying to get in the market. That'll continue to happen. But we have been one of the leaders in the capital solutions and intend to continue to be that way. It's a hard market to get in. You need to have experience and the right mindset and the right balance sheet and backing of a strong company really helps as well. So I think we've got all the right tools in our toolbox to get there.

Thanks for the call. I'll read you. Continue to be successful.

Yeah. Your next question comes from Mike Ward with UBS. Your line is open.

Hi, thanks guys. I was just wondering if we could dig into the Milliman deal a little bit. And one of the things I was curious specifically about is, you know, some of the opportunities beyond sort of the cost synergies, but like, I guess revenue opportunities, right? The health and welfare benefits kind of administration just because I don't think, you know, I don't think that you guys kind of quantified that potential opportunity, but it's an exciting part of that deal, I think.

Ed, do you want to take this? Sure.

Yeah. Thanks for the question, Mike. Absolutely. You know, I would say unlike Some of the other major transactions that we did, Mass Mutual and Prue in particular, you know, those were really driven in large part by cost synergies. This was very much about a strategic growth opportunity for us. This is a core capability that we were lacking to some degree because we were working through a third party, we're working through a partner. and we really felt like we needed to own the capability similar to what we did with the acquisition of option tracks where we have now a owned and proprietary capability in the equity plan administration category in space. And so we think there's a tremendous opportunity obviously to cross sell our DB admin capabilities with our existing customer base, tens of thousands of corporate clients. but also it puts us in a position to be far more effective in new pursuits when sponsors are typically looking for a multi-product type solution, defined contribution, defined benefit administration and health and welfare administration. And so we're better positioned, we will be better positioned once that's successfully integrated to compete for those opportunities. I would say the market has moved to valuing the bundle and that's very much core to our strategy is to build out these capabilities that allow us to establish deeper relationships with existing clients and with prospective clients. And what I would say is in our workplace business, we continue to grow as measured by net new participants at one and a half to two times the rate of the market. In fact, this year, Without an owned DB admin capability, we'll add close to a million participants net to the platform on a base of 20 million. So 5% growth in a market that's growing at two, two and a half. So I think this is a tremendous growth opportunity. Obviously coming out of the transaction, once it closes, we are establishing a partnership with Milliman. We think there's tremendous consulting opportunities that we can work on with Milliman. So I would just summarize by saying this was all about addressing a product gap that we felt like we had, but also very revenue synergistic from the standpoint of being able to have a much more appealing offering across things like DCDB and health and welfare.

Thank you. That makes a lot of sense. And then shifting, you know, away from the US. So the, you know, you guys spent a good amount of time talking sort of about the capital efficiency and business mix optimization efforts in Europe. I'm just kind of wondering, like, how much more runway you see to further execute on that in Europe? and what that could look like. And do you see similar opportunities in other regions?

Yeah. Thanks, Mike. We're really happy with the success that we've had in Europe. That's a multi-year project and happy to report back on being ahead of where we expected to be at the investor day. And that's really driven the ROE up significantly. as we've done that and generated capital for us. I would say we're, you know, kind of two thirds through that work. It does cover, you know, all the countries in Europe, although, you know, the most significant impact we're in the higher capital intensive business, which is, you know, more a part of the UK business. And when I say two thirds of the way through, you know, We are reflecting what we expect to be the outcome of that work when we've reported back to you and when we set out our initial expectations. So as we continue to deliver that, it'll be against those expectations that we've laid out. That's not just a focus in Europe, albeit that was the biggest opportunity for us. Your next question comes from Tom McKinnon with BMO. Your line is open.

Yeah, thanks very much. Good morning. Two questions. First on the capital risk solutions. If you mentioned the business comes in waves, it looks like the capital solutions business is largely in terms of short-term business and not CSM related. So if demand did fall 10%, would we expect those short-term expected earnings to decline 10%? and what is the outlook really for those short-term expected earnings in CRS going forward through 2026 given the strong demand?

Thanks, Tom. I appreciate the question.

I think you could look at some of the capital solution earnings as being a bit stickier than It does erode over time, either through competition or people don't renew some of their covers, but we tend to replace and expect to replace those earnings with more capital solutions. The demand is still fairly strong, although I think it's tapered off a little bit from the levels we've seen in the last 18 months. but there's still plenty of demand. So I would say that the current level of run rate that we have now is very sustainable. And we're probably gonna continue to see mid single digit plus growth from this standpoint. So that's how I would qualify it. Does that make sense?

Great, yeah. And the... The second question is with respect to MPower. Ed, we had $14 billion in participant net outflows. You understand higher markets can sometimes lead to higher net outflows, but that to me would suggest a lot of rollover possibilities. Yet, if I look into U.S. wealth, there was... 1.8 billion in net inflows. That's kind of the lowest we've seen in the last seven quarters. Understanding you're doing some transformation initiatives there, kind of trying to upgrade your capabilities with respect to rollover capture, but any color you can add on the commentary I just made there, thanks.

Yeah, sure. Tom, I think the one thing to take note of is the seasonality of the contributions on the workplace side. So we had roughly $45 billion in contributions in Q1, and that was to be expected because that's when a lot of the company matches and profit sharing hits. And then that dropped to $32 billion in Q2. and we would see that being relatively constant through the balance of the year from a contribution standpoint. So the disbursement piece of it or the distribution piece of it on the workplace side was largely just driven by account balances. It wasn't volume per se. Now to answer the second part of your question, what I would say is as we shared with you last quarter, we've instituted some changes. We've implemented several changes across The organization made some structural changes, made some personnel changes. And I will say that I have seen improvement starting to take hold. And as I look at Q3 and beyond, we fully expect to see improvement above what we experienced in Q1 and Q2. So a lot of the indicators, I think, are very, very strong. The flow opportunity for us has been fairly constant from quarter to quarter in terms of the opportunity set. But as we look forward, we see greater success and higher net new assets in Q3 and Q4. So more to come there, but I feel good about the path that we're on.

Great. Thanks.

You bet.

Your next question comes from Alex Scott with Barclays. Your line is open.

Hey, good morning. First one I had is on excess capital. I was wondering if you could talk about the amount of capacity you have. I know you've got the Milliman going on, so just maybe talk about your appetite for further M&A and how you're measuring that against buybacks, especially considering your stock price has gotten to a I'd say a pretty tracked evaluation at this point.

Yeah, thanks, Alex. As you know, we're generating significant capital and in excess of our target of 80% plus. And that's really translated into really strong free cash flow. If you look at this quarter above 85% and that trend, if you look backwards, was fairly consistent. Two-thirds of our business and the growth parts, the parts of our business that are growing the fastest do come from capital life businesses. And we expect that, you know, those businesses to continue to outpace the growth of the overall company. So we're in a good position to see that free cash flow continue at high levels. We did, as we reported back on, we are in a process of capital optimization on some of those more capital efficient companies. Thank you for joining us. both through our NCIB program and through an active watch on the M&A market which we took advantage of this quarter as you said with Milliman to deploy that capital. We would expect over time that we wouldn't sit on excess capital in perpetuity but there may be timing as to when opportunities present themselves in the M&A market. We want to be prepared for those. and balance that with our ongoing buyback program. What we said consistently in the third call of the year is that we will do at least as much capital deployment as last year. That was $1.6 billion. We deployed $925 million in buybacks and then obviously the $350 or so into the Milliman Thank you for joining us. have some flexibility. We still think there's intrinsic value in buybacks and strong earnings growth and cash generation in our stock. And we'll balance that against opportunities, as I said, with the thought that we'll deploy that capital, but there may be timing in which we do it and obviously a balance between the opportunities in the M&A market and buybacks.

Got it. Really helpful. Next one I had is on Empower Retirement. I wanted to see if you could talk a bit more about the margin there. I know I heard you, you know, point on the margin for wealth, I think, in your comments. But could you talk about retirement? The margin's gotten a lot better there. You know, how are you viewing the tradeoffs between further margin improvement versus investment in the business in that segment?

Yeah, so I think a couple of factors there. Obviously, the market tailwind has been a contributing factor, and that's been positive for sure. But as we've shared with you in the past, we've been on a multi-year journey in terms of transforming the operating environment and driving our unit costs lower. And we have a multi-year plan to do that. Obviously, AI is playing a prominent role there, but also just the work that we're doing around straight-through processing and automation. So, as we look further out, the scale that we have gives us tremendous operating leverage, and I'm confident that we can continue to drive unit cost lower. We can't always rely on the markets. But we focus on the things that we can control, which is delivering value for our customers and doing it in a way that's efficient. So I think our guidance in terms of margins in the workplace business is really sort of in the low to mid 30s. As you acknowledge, we've seen really strong improvement in the margins. over the last couple of years, and in particular, a nice move just over the last couple of quarters. But it's also a business that we are going to continue to invest in as we build out more capabilities. You think about the acquisition we did with Billiman, that's largely a workplace-type transaction. So we're making investments there, but we've got a really strong expense discipline that I think is also a big contributing factor.

Thank you.

Your next question comes from Paul Holden with CIBC World Markets. Your line is open. Thank you. Good morning.

First question I want to ask you about is on asset allocation and in consideration particularly of corporate spreads. We're about as tight as we ever have and The reason I'm asking the question, I always thought GWO and asset allocation always took advantage of spreads, not just in terms of trading income opportunities, but also just in terms of yield enhancement, being an important part of the story over time. So just recent thoughts on asset allocation, how you're dealing with or trying to generate yield enhancement opportunities in a very challenging credit spread environment.

Jon, do you want to comment? Yes, thank you.

So what I'd say is with respect to where we are in the current credit spread environment, we have a conservative, well-diversified portfolio. We are not aggressively chasing or pressing on that, given that we are near historical tight spread levels across the board. The strategy remains consistent. We will certainly look for ways to be more capital efficient and have a better balance in all of our businesses with ALM, but we also need to make sure we're market competitive in our product areas. So far, we're able to do that, but as you've seen with some of the changes that we've deployed, in some of our segments in terms of becoming more capital efficient and optimizing more effectively. That's likely to continue throughout the portfolio across our various segments. So again, I would say our strategy is to continue to hold the course on our desired risk taking in the portfolio. and continue to try and build the portfolio yields through the types of strategies we have been deploying and more efficient use of capital. I'll turn it over to David. David, do you have any comments?

Yeah, I'd just add overall, our earnings are becoming less dependent on trading gains for a smaller portion. I think even in the current environment, there will continue to be trading gain opportunities. but it's not a line we expect to grow. We'll have lesser lines in this going forward but even in the current environment there will continue to be trading gain opportunities.

Given all that and putting the trading gains aside if I just think about the core net investment income if there's such a thing as core net investment income do skinnier spreads put pressure on that over time I guess is really the nature of my question.

Yeah, I think it comes through in two parts of the business, like sort of in the capital-intensive business. Pricing will reflect where spreads are at. And then I suppose the other area where it comes through is the general account in the US, and that's more a straight through. The crediting rates will affect where spreads are. So, you know, both of those become a little bit more difficult in a tightening spread market, but they reflect through in the underlying business.

Okay, okay. That's good. And then second question is with respect to Europe and the wealth business. So obviously a lot of positives taking place in Europe. But just kind of curious on, you know, wealth shows good asset growth, good flows, but no growth in earnings over the last year. And that looks to be an expense story. So maybe just kind of walk us through what's happening on the expense line. That's intended to result in future opportunities or basically how do we understand that lack of earnings growth and the higher expenses versus revenue?

Maybe I'll take a technical factor and then Lindsay can talk a little bit more about the business. There was a reclassification between wealth and retirement. that impacted this year's numbers. We didn't go back and reclassify because it wasn't that significant at the group. So when you kind of look at the growth rate, you might aggregate those two together to get a more accurate picture of things. And apologies for that. It just better reflects the margins on each of the business as we see them.

Thanks, Jon. And then just to build from a business point of view, I think, as you say, we're seeing Got it. Okay, that explains it. Thank you. I'll leave my questions there.

Your next question comes from Doug Young with Desjardins Capital Markets. Your line is open.

Hi, good morning. I guess this is for Jon. Just wanted to kind of go back to capital for a second, but just wanted to, maybe you can quantify how much excess capital you have at the Canadian and U.S. opcos. I see the cash at the holdco, just wondering how much is down at the opco. And then can you kind of define You said the LICAT was down quarter over quarter. There were several smaller items. I didn't know if there was cash moved up from the UPCO that had an impact, but what were those smaller items?

Let me take you through the excess capital position overall, and then we can talk about the current trend. So as you indicated, the Holdco Cash, the way we context this, that's outside of the LICAT and RBC environment. That's excess capital. We typically keep around a little bit of liquidity there, but you can generally think of it as fully deployable, and that was just around $2.5 billion. I think, as I've indicated in the prior couple of calls, that typically, you know, we would look at capital above 120% or just over $2 billion as being deployable. And as I indicated, you know, for the right transaction, we could go down to that level, but we'd always balance that decision. And the question is, would we, you know, and how would we fund a transaction? You know, not could we, but would we go down that low? So that's about $2 billion. In terms of RBC in the U.S., I would think of, you know, the U.S. as being highly cash generative for us. On the upper end of where we generate cash as a percent of base earnings, it's very high given the nature of the business. And whilst we... have capital sufficient, you know, capital excess there to a degree. There are, you know, ongoing developments in RBC and other factors. So there may be some there, Doug, but we don't, we really look at that as more cash into the future. In terms of leverage, so that kind of gets you to four, four and a half billion, similar to what I said last quarter. And then you have the leverage capacity. We would see an ongoing rate again, as I've shared. Thank you very much. at a 35% level. And then what we typically have done in the past, and we have a great track record, and I think this helps build why we have this capacity in terms of paying it down quickly. We typically then will pay down that leverage quite quickly, both with the cash flows of any acquired business and our ongoing excess cash flows. That would add another three and a half or four billion. So we have a lot of capacity. Our intention is to continue to generate that, and there's no reason we don't. Excess of 80%, you should assume that we'll continue to have cash flow move up to the holding company at a strong pace. During the quarter, it wasn't quite one point. We round to one point, so I'll just point out there's a bit of a rounding there. Number of insignificant items, I would call it a little bit of markets A little bit of timing on capital deployment. There's certain activities that you can align exactly in the time when you deploy capital organically and get everything lined up in terms of what the optimal capital structure for that new business is. So a little bit of timing and then just a number of other small things that honestly are very individually insignificant. Nothing that would be something that would be, you know, like an ongoing, you know, impact to have a concern about. And obviously, then the upflow of capital.

Sure. And yeah, okay. Then there was a flow of capital. You haven't quantified how much you put up, though, for just Canada. Yeah.

It is available, and this is one thing that we've done that I think gives you a great view on that. If you look at the SIP, you're able to back into all the numbers, but very transparently on the SIP on page 17, Great West Holdco Cash Holding Company. That gives you a sense of the cash flows of the holding company and its related operations, the money that floats. Thank you for having me.

Okay, and then just second question, like Canadian, Canada, I know you had less favorable group LTV experience, and you talked a bit about that, but you had negative individual insurance experience, and I think it was maybe kind of fleshed out as being like normal volatility, but just wanted to get a sense of like the individual, there was a big swing in the individual insurance line in Canada, just maybe a little bit of color of what you're seeing there.

Yeah. Doug, I think it's a brace here. Thanks for the question. That's right. We've had overall insurance experience in Q2 that was materially lower than a strong prior year. You may need to less favorable group long-term disability experience, but there's also other experience factors that all played in the lower direction. In individual, as you pointed out, you would have individual disability, which is also unfavorable. Although we see it as normal volatility there and we would have mortality on both the workplace and individual side that are in aggregate unfavorable compared to prior year. The bulk of it is when we do the year-over-year, the bulk of it is group long-term disability. Can give just a few details there. It's been mainly around claims recovery, where we've seen less good experience than we've had in the past. We've seen the strange trends start to emerge in Q1. We've seen a continuation of it in Q2. And we've seen at the industry level, others as well, feeling the same pressure. So I think it would be... wouldn't be unreasonable to think that may continue into Q3. Long term, this is a strong business. We've also seen some incidents, lower, higher incidents, so lower experience and incidents this period, but this has been quite recent. So we would qualify this as normal volatility. But overall, we're very pleased with the performance of our business, our workplace, benefits business, The sales momentum is high, as was mentioned in the formal presentation. Same thing in individual insurance. These businesses remain healthy. This doesn't change our strategy. As I mentioned, group long-term disability, there's a part of it that has emerged in Q1, consumes in Q2, and may go on for a few quarters. The rest of it, I would say it's too early to call, and it doesn't change our strategy, and we've got strong businesses with good momentum.

Appreciate the callers. Thank you.

Your next question comes from Gabriel DeShane with National Bank Financial. Your line is open.

Hey, good morning. Just to keep going with that line of questioning, more on the group side, can you explain, like, you're saying lower recoveries, like, what would have changed this year versus last? And then, I mean, does this preface, I guess, a need to reprice the portfolio? How long does that take to restore margins?

Thanks for the question, Gabriel. Yes, lower recoveries, the return to work, so the return to healthy and productive stay for members and disability, that's a bit slower than historical. So that's the trend that we see there. We have strong case managers. We're, of course, heavily focused on the factors that we can control, and we have good discipline in our case management and up-discipline in our case management. But as I've mentioned, We've seen this trend at the industry level, not just in Canada, but in Canada primarily. And there can be a number of factors related to that, and this business can be cyclical. One thing that I point to is employment growth in Canada has been slower in 25 than 24, and then even slower in 26, almost flat in 26. And when there's not a lot of employment growth, when there's not a lot of demand for The return to work process can be at the margin, just a little bit more challenging, and we're working through that. But that's an example of a micro factor that we might see in addition to the types of health conditions that we're dealing with. So again, we've been in this business for a long time. We've seen cycles, and there's no reason to believe this would change. You talked about pricing there. The business is annually renewable, of course, depending on conditions. We see pricing is part of our toolkit, but I'm not going to expand more on that at this point.

Got you. Thanks. And that job background answered my second question, so I'll change my second question just for the buybacks. Can you provide another explanation of your appetite for buybacks? You know, those stocks three times book. How does that factor into your decision? And then also... like Milliman was not a big acquisition. So is that even a reason to hold back on buybacks here?

Well, thanks, Gabe. Yeah, well, first, we think there's still significant intrinsic value and upside. In our share price, we continue to deliver at or above our medium term objectives, and that's our intention to meet or beat those objectives and relatively still positive about the outlook on the growth for the organization continuing at this pace. I wouldn't characterize anything as an outlook change on buybacks. We did $925 million in the first half. We did significant buybacks in the second half of last year, and we have the commitment from our major shareholder on a continuation of the same level of authorization and buybacks as we had last year. You know, we are always looking for other opportunities that create long-term total shareholder return and obviously deploying capital into very creative transactions, you know, Thank you for joining us. We can't know when those opportunities come, so we always want to be apprised of having capital available. What we can assure you is, as we said on this third call, we're going to do at least as much as we did last year in terms of capital deployment. And we are going to be active in buybacks and hopefully M&A as we look forward because we generate significant cash flow in excess of our ongoing dividend and other fixed capital needs. So we will deploy that cash. It will be deployed accretively. We want to do it very carefully. And whether it be through buyback or M&A, you should expect over time that excess capital to be deployed accretively.

All right. Thanks.

Your next question comes from Darko Mahalik with RBC Capital Markets. Your line is open.

Hi, thank you. Good morning. Thanks for taking my question. The conference call is a little late. I'm looking at two pieces of information. First is from your shareholders report. It's on page eight proper. And beside that, I have slide 25. which shows how strong equity markets were. They were exceptionally strong in the quarter.

So my question is, how did your equities underperform your expectations in the quarter?

Well, thanks, Darko, for the question. There was, you know, obviously there was some noise from from our Thank you very much. A number of things that go into hedging those programs, including performance standards, the length of service, the outstanding. As it relates to active management, all that ineffectiveness on the hedge is fully reflected in our base earnings. but a little bit of noise as it relates to just the sharp increase in price.

I'd probably bring it back up a level in terms of the non-base earnings impacts during the quarter. It was principally driven by interest rates.

And as you look at the interest rates year to date, you know, it was a negligible level. And what we always look at, you know, in terms of the market experience is not just a quarter, Not even an annualized level, but more on a long-term trend where we'd expect these to, over time, be close, zero or close to zero. And so if you look at, since we've applied IFRS, actually market experience for Great West has been a slight positive over a four and a half year period. What we've seen is higher interest rate levels has caused A bit of a positive in terms of the impacts over that period, or let's say a billion dollars of positive. On the offset, really, we've seen that interest rate impact our real estate portfolio and offset some of those benefits, as you might expect, from a cap rate. And in terms of the real estate portfolio, I thought it was important to give some update. What we've seen is... and many more. We're seeing, while we've seen some of that noise continue as the market's adjusted to higher rates, what we've done to respond to that is obviously not actively allocate and continue to, and we've seen a reduction in the real estate of 20%. So just wanted to give that context as well as an update to the analyst market.

That's helpful, Jon. Maybe just two quick follow-ups, if I may. Is the hedging, is this something newer? And given that the hedging was a negative against some of the strongest equity markets we've ever seen, and given that you're not really looking at increasing sort of other assets like real estate, is it time to revisit You know, the base investment earnings expectations, number one. And then number two, I don't know if you've ever looked at it this way, but I always look at this as a sort of a spread. You know, there's investment earnings on assets that are backing your liabilities. And throughout this entire period, whereas your... Results on an actual basis versus expected may be slightly better or actually might be slightly positive. Your overall rate of return or spread on these assets is much lower than your peers. And so I'm wondering if you're leaving money on the table and if we should be lowering or if you should be lowering the base investment earnings expectation.

Well, we're always looking at our long term assumptions. We think they're consistent with market. And as I said, if anything, our net to base earnings, you know, in terms of markets, well, it's volatile quarter to quarter, year to year. You know, having been through a cycle of four and a half years of quite volatile markets, if you think about that cycle, far higher interest rates, you know, impacts on real estate, inflation. to come out of that period as a positive, I think should give you a lot of confidence in our assumptions, should give you a lot of confidence in how we're managing the balance sheet. So I would argue that if anything, we've managed it very well in terms of the transition to IFRS and how we do ALM. I mean, I think the ultimate answer to that is look at the free cash flow and ROE that we've generated over that time and the improvements there. So we always look at our assumed returns and so forth. There are different approaches that were taken at IFRS 17 in terms of the transition. I think Jon articulated well that in terms of our deployment into yield, we continue to deploy into the fixed income market You know, positively and run it in a very conservative way. So we're very comfortable. We look at it all the time. And if anything, I think, you know, go back to we're net positive over, you know, four and a half years in terms of the market experience. So I think that's probably the best I can give you.

Okay.

Thank you.

Your next question comes from Mario Mendongo with TD Securities. Your line is open.

Good morning. Jon, can we go back to that, the public equity markets loss, the thing Darko's asking about? If you'd applied your sensitivities literally and precisely, you'd expect something like close to a $40 million gain. And in fact, it's a $34 million loss. So we're looking at about a swing of 70, 75 million dollars in one quarter. Now, I understand that the hedging and effectiveness, as you described, goes through base earnings. So this would be anything in excess of what you might expect. So it's hard for me to wrap my mind around a $70, $75 million in effectiveness when, in fact, most of it gets recorded in base. So is there more going on there? Are there payments to executive payments to other companies? people within Great West Life that's incorporated in that $70 to $75 million, I'm estimating.

I think I wouldn't context the volatility in the hedge to be the full gap between expected and actual. You know, other performance related factors in the investment portfolio wasn't the full impact. And there was, you know, as you might expect, there's noise in the base as well from the hedging program, as I articulated, that is in the base earnings.

So it sounds to me from your response that there were payments here as well.

And yeah, that's I mean, there's a lot of factors that sorry to cut you off, Mario, but there's a lot of factors. that go into that hedging program. You know, when people retire, how long they stay with us, performance factors. And when you have, you know, most of those aren't felt in a quarter where you have a normalized return. But we're really happy with the 35% return in the Great West share price during the quarter. And that accentuated, you know, what is a very highly hedged program with very little sensitivity. single-digit sensitivity to the overall balance of what we expect to pay on the share-based compensation program.

Okay. I can't help but assume that there are payments here that are part of this $70 million, $75 million swing. So maybe the question I'm really asking is, is this something we should see going forward? Significant charges as payments are made.

I wouldn't anticipate that. As I said, we're highly hedged, you know, across the portfolio, very close hedging. But when you have a combination of movements and people and, you know, long-term balances, you know, in terms of certain non-management and a hedging program, you know, it stuck out this quarter. But, you know, this hasn't been any... We haven't changed our position. We've always applied the same accounting. It just happens to be this quarter with the sharp increase, we saw this volatility. So it's not something that would recur.

A different type of question. Jon, you announced the increase from 20 to 40 million shares in the buyback. But from your response, it doesn't sound like you'd get to 40 million. So my question is this. Is there a set of facts or circumstances that That could get you to $40 million, or is $40 million just highly improbable, and it's just there for flexibility in case circumstances warrant it?

Yeah. Obviously, there are certain limitations on the use of the NCIB program in terms of volume and so forth. I would context it as improbable. Last year, we didn't even get to $40 million. I'd call it as improbable. Certainly, we have the free cash to deploy. We have $2.5 billion of cash to deploy into buybacks if we choose to. Mario, we want to make sure that we do the most accretive balance sheet management as possible. and certainly one of the tools that we're going to actively continue to pull is the buyback tool. When we say we're, you know, I think we've been consistent at least as much as last year and over time we will deploy all of that excess capital in one way or the other into accretive transactions. Thank you.

This concludes the question and answer session. I would like to turn the conference back over to Mr. Khan.

Thanks, everyone, for joining us today. Following the call, a telephone replay will be available for one week, and the webcast will be archived on our website for one year. Our 2026 third quarter results are scheduled to be released after market close on Wednesday, November 4th, with earnings calls starting at 9.30 a.m. Eastern time the following day. Thank you again, and this concludes our call for today.

This brings today's conference call to a close. You may disconnect your lines at this time. Thank you for participating and have a pleasant day.