Press Release

DBRS Comments on Great-West Life’s Planned Acquisition of J.P. Morgan Retirement Plan Services

Non-Bank Financial Institutions
April 03, 2014

DBRS notes that today Great-West Lifeco Inc. (GWL) announced the signing of an agreement by Great-West Financial, the registered trade name for its U.S. subsidiary, Great-West Life & Annuity Insurance Company (GWF or the Company), to acquire J.P. Morgan’s Retirement Plan Services. DBRS views the transaction as a positive development and consistent with the Company’s strategy to grow its U.S. retirement services businesses. There are no changes to the ratings.

Great-West Financial’s acquisition of J.P. Morgan Retirement Plan Services’ large-market record-keeping business will strengthen Great-West Financial’s position in the defined contribution (DC) record-keeping business and increase GWF’s market share to the second-largest record keeper for DC plans (as measured by number of participants), allowing them to have a more significant presence in the large plan market. This combination will enable Great-West Financial to provide additional client experience capabilities with customized record-keeping services to large company DC plans; this will complement the small and mid-sized employer DC plan market that Great-West Financial has been most active in.

The acquired business has about 200 clients with 1.9 million participants and $167 billion in assets. The transaction is expected to close during Q3 2014 pending regulatory approval.

There is some integration risk given the very large size of these DC plans. It will be important for GWF to manage client retention well. However, switching plan record keepers is costly and time consuming for plan sponsors, so there would need to be a very significant inducement, be it positive or negative, for a plan departure to occur.

DBRS views favourably the potential for incremental profits and future product placement synergies with the rest of the Company and views the financial impact of this acquisition as diminutive compared to the overall size of GWL’s balance sheet.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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