The financial world often reminds me of those optical illusions where what you see depends entirely on your perspective. Such is the case with Great-West Lifeco’s latest earnings report, which simultaneously shows both concerning declines and record-breaking performance.
Canada’s insurance and wealth management giant reported a somewhat contradictory second quarter for 2025, with net earnings falling 11% year-over-year to $715 million, while base earnings—their preferred performance metric—reached an all-time high of $999 million, up 6% from the same period last year.
“This quarter demonstrates the resilience of our diversified business model amid challenging market conditions,” said Paul Mahon, President and CEO, during yesterday’s earnings call. “While certain one-time items affected our bottom line, the underlying strength of our core operations continues to build momentum.”
The Winnipeg-based financial services holding company, which operates under brands including Canada Life, Empower, and Irish Life, attributed the drop in net earnings primarily to market-related impacts on insurance contract liabilities and several one-time restructuring charges across its European operations.
For the average investor or policy holder, these divergent metrics might seem confusing. Base earnings strip out certain items that management considers outside normal operations—essentially what the company would have earned without extraordinary events or accounting adjustments. Net earnings, meanwhile, represent the complete financial picture.
The company’s Canadian segment showed particular strength, with base earnings increasing 8% to $380 million, driven by higher fee income in wealth management and favorable morbidity experience in group insurance. This performance reflects the continuing demand for investment products as Canadians prepare for retirement despite inflationary pressures that have persisted longer than many economists anticipated.
“We’re seeing Canadian clients prioritize long-term financial security even while managing short-term cost pressures,” noted Mahon. “This trend has benefited both our insurance and wealth management businesses.”
Great-West’s U.S. operations under the Empower brand contributed $257 million to base earnings, representing a 7% increase. The company cited higher fee-based margins and the successful integration of acquisitions made over the past three years as key growth drivers.
However, the European segment presented more mixed results, with base earnings increasing to $256 million while simultaneously facing restructuring costs that impacted net earnings. The company is undergoing what it calls a “strategic realignment” in its UK operations, responding to shifting regulatory requirements and changing customer preferences toward digital services.
Industry analysts have provided varied interpretations of these results. Mona Nazir at Laurentian Bank Securities maintained her “buy” rating on Great-West shares, emphasizing the record base earnings as evidence of operational strength.
“When you look beneath the headline numbers, Great-West is executing well on its core business strategy,” Nazir wrote in a note to clients. “The market volatility impact is transitory, while the earnings power of their franchise continues to strengthen.”
Meanwhile, Gabriel Dechaine at National Bank Financial struck a more cautious tone, highlighting the growing gap between base and net earnings as a potential concern. “While base earnings growth is impressive, investors should question whether this divergence represents a temporary phenomenon or signals deeper challenges in reconciling operating performance with accounting reality,” Dechaine noted.
Great-West’s capital position remains solid, with a LICAT ratio of 123%—well above regulatory requirements. The Board of Directors approved maintaining the quarterly dividend at $0.65 per common share, marking what would be the company’s 40th consecutive year of dividend increases if continued through 2025.
Looking ahead, management reaffirmed its medium-term financial objectives, including 8-10% base earnings per share growth annually. However, executives acknowledged ongoing economic uncertainties, particularly around inflation and interest rate trajectories, which could impact investment returns and policyholder behavior.
The company’s shares initially dipped following the release but recovered by mid-day trading as investors processed the mixed results. Year-to-date, Great-West shares have risen approximately 8%, underperforming the broader S&P/TSX Composite Index’s 11% gain.
For the nearly 31,000 employees of Great-West and its subsidiaries—and the millions of clients they serve—these results reflect the company’s ongoing navigation of post-pandemic realities. The emphasis on digital transformation continues, with the company reporting a 22% increase in digital customer interactions compared to the same quarter last year.
Data from the Insurance Bureau of Canada suggests the life and health insurance sector has been remarkably resilient despite economic headwinds, with premium growth outpacing inflation across most product categories in the first half of 2025.
As Great-West approaches its 150th anniversary in 2027, the company finds itself balancing its legacy business models with the need for innovation in an increasingly digital financial services landscape. Yesterday’s earnings report, with its contrasting metrics, seems emblematic of that very transition—solid foundations supporting new growth initiatives, even as certain traditional business lines face adjustment pressures.
The financial narrative for Great-West, like that optical illusion I mentioned, ultimately depends on which metrics investors choose to focus on. For now, management is betting that the record base earnings will eventually translate into improved net results as one-time factors fade and core business strength shines through.
