Great-West Lifeco Inc.
Great-West Lifeco Inc.
Incorporated: 1891 as The Great-West Life Assurance Company
Assets: C$18.89 billion (US$16.31 billion)
Stock Exchanges: Winnipeg Toronto Montreal
Great-West Lifeco is the holding company for The Great-West Life Assurance Company, a company begun during a major recession in a small Canadian western prairie town almost a century ago. Great-West Lifeco is, in turn, 86.2% owned by Power Financial Corporation. The Great-West Life Assurance Company meets the insurance, retirement, and investment needs of more than six million people across North America. A combination of conservative investment strategies, adaptation to the changing business environment, and innovation in both products and policy have brought Great-West into its second century of business.
In the early 1890s, Winnipeg was a frontier town of lumbermen and plains traders. As a stop on the slowly growing Canadian Pacific Railway, it was a promising growth point in the western province of Manitoba. The difficulty of transportation combined with drought created hard economic times for the region during the decade, however. An optimistic local businessman, Jeffry Hall Brock, recognized that capital was needed to invest in local farm and retail development. His vision was to collect western Canadians’ savings via insurance sales, thereby offering them security and protection while financing development. At this time, only 9 of the 40 insurance companies in Canada were Canadian. Not one of these companies was based in western Canada.
The Great-West Life Assurance Company was incorporated in 1891 with a name that reflected the company’s regional pride; the hyphen was a typesetter’s error. In the first year, 834 policies were sold, representing more than $2 million worth of protection, by a sales force of three that included Brock. The bold enterprise attracted the involvement of the area’s outstanding businessmen, and early shareholders included bakers, farmers, a harnessmaker, and the sheriff. Support came from bustling Toronto as from well as many local rural communities. The mayor of Winnipeg, Alexander Mac-donald, became Great-West’s first president in 1892. Brock was made managing director.
The company issued its premier manual in 1892, offering six insurance plans. The first claim was received that same year. By the end of 1893, Great-West—competing with 5- to 50-year-old companies across Canada—had the eighth highest returns. At this point, the self-confident young company made the remarkable decision to enter the eastern Canadian markets. Its well-established competitors were situated in the East, as were the country’s banking, financial, and manufacturing institutions. The West had essentially one industry: agriculture. In Great-West’s first three years, it had achieved the financial backing and business volume that had taken other companies up to 15 years to reach.
Great-West’s prosperity continued during the next two decades. By the turn of the century, the company was represented in every province and was the country’s fastest growing life insurer. As the economy improved when the region’s depression lifted, the service industry benefited. In 1896 Great-West gained the largest percentage of new business written, out of 21 Canadian life insurance companies, to make it only $80,000 behind the industry leader in aggregate gain of business in force. The first shareholder dividends were paid in 1901, and dividends have been paid every year since.
In 1906 the company crossed the border and established U.S. operations in North Dakota. The next year, Great-West topped all Canadian companies in paid-for business. From 50 applications a month in 1893, the company received an average of 375 applications a month by 1909. However the growth proved a strain on the founder’s health. Brock essentially left the company in 1912 for health reasons, and he died in 1915. C.C. Ferguson succeeded Brock as CEO in 1915, one year after the onset of World War I.
With the war came a boost to the area’s economy, which had declined as the wheat boom receded and freight rates climbed, but the war presented the life insurance industry with the problem of wartime policies. Most firms charged extra premiums for those in the service, but Great-West kept its extra charges at a minimum as part of its war effort. Throughout the war, the company managed to keep up its record, maintained since 1906, for writing more ordinary business in Canada annually than any other company. Nevertheless, the war’s impact was felt: claims for wartime deaths totaled $1.5 million. Almost as catastrophic was the flu epidemic that flared up at the war’s end from 1918 to 1919, which cost Great-West more than $1 million in death claims.
Canada, like other countries, then contended with conditions following the war: high rates of inflation and unemployment, labor unrest, slowed agricultural output. Though economic conditions worsened through the 1920s, Great-West showed a steady increase in business. In 1920, U.S. operations were extended into Michigan and Minnesota. That same year, Great-West became one of the first companies to offer group insurance. The concept took many years to catch on. In 1940 group insurance was still only 9% of the company’s total business. In later years it comprised more than half. In 1926 Macdonald retired as president, succeeded by G.W. Allan, who had been company director for 22 years.
Great-West, which had initially concentrated its investments in farm mortgages, had diversified since the war into government bonds and city mortgages. Because of its diversified investments and the fact that stock holdings were a very small part of the company’s portfolio, Great-West was well insulated when the market crash of 1929 occurred. In fact, that year was the best to date in the company’s history.
The Great Depression years of the next decade provided a new challenge. Business declined between 1932 and 1937, but Great-West managed a gradual increase in assets during the period. By the company’s 45th anniversary in 1936, it provided coverage for nearly one million people in North America, issuing an average of 60 policies per business day. New insurance plans were introduced during the Depression, including a policy for the professional woman and a family protection policy. By summer of 1939, Great-West was again enjoying record-breaking figures in applied business.
The decade of depression was ended by the outbreak of World War II, which stimulated employment and industrial activity. The life insurance industry was dramatically revived, and between 1939 and 1945 Great-West enjoyed a tremendous growth in the business, as well as expansion into Indiana, Missouri, Ohio, Kansas, California, and Pennsylvania. Group insurance and group pension plans steadily increased. Also during the war years, Great-West entered into the individual accident and health insurance fields. The company changed presidents in 1940, when M.F. Christie took the job, and again in 1943, when W.P. Riley assumed the position.
During the postwar boom, the company’s business boomed too. In 1946 Great-West’s business-in-force reached the $1 billion mark. It would reach its second billion only six years later and its third three years after that. The company continued its expansion in the United States entering seven more states between 1946 and 1952. In 1958 it started doing business in five more states and the District of Columbia. Also in 1958 Great-West began technological expansion; it purchased the first computer in western Canada.
Growth continued throughout the prosperous 1960s. In 1968 Great-West became the first Canadian company authorized to sell a variable annuity in the United States. More than $1 billion of new business was placed in that year.
Business in the United States grew rapidly. By 1973 Great-West was licensed in 28 states and the District of Columbia, and opened a marketing office in Denver, Colorado, in 1973. The company separated its Canadian and U.S. operations, except for investment and corporate operations, in 1979. It also opened the company’s U.S. headquarters in Denver that year. By then Great-West Life was operating in 45 states. From 1979 to 1983 U.S. business nearly doubled.
During the next decade, Great-West concentrated on product development, asset management, and developing the two regional operations. The Canadian and U.S. markets developed different needs during the 1980s. One of the company’s new products was a universal life policy, first introduced in 1982—the first of its kind designed for the Canadian market. A similar policy was introduced in the United States the following year.
Another Great-West innovation was a system it introduced in Canada that paid agents levelized commissions and offered loan arrangements for agents needing additional income. It was the first insurance company in North America to adopt such a system. This arrangement allowed the sales force to experiment with the sale of new products with less fear of financial repercussion. As a result, universal life business increased from 30% in 1983 to almost 60% in 1985. Over those three years, career agents enjoyed a 65% compound growth in average earnings.
In the mid-1980s, the company’s structure changed. Great-West had been a joint shareholder-policyholder-owned company from its inception 1891 to 1969 when the Investors Group acquired controlling interest in the company’s common shares. Investors Group was acquired by Power Corporation, a Montreal-based holding company with interests in publishing, pulp and paper, and financial services, in 1969. In 1984 Power Corporation formed a subsidiary to hold Great-West and its other financial-service companies. This corporation, called Power Financial, in turn created a holding company in 1986: Great-West Lifeco now holds 99.4% of Great-West Life Assurance Company’s stock.
Another first came in 1988 when Great-West entered into a joint venture with New England Life Insurance Company of Boston. The arrangement allowed Great-West to provide New England Life with a range of services including group life and health products, with both companies sharing in the risks and profits. This innovation allowed New England to benefit from Great-West’s product line while Great-West gained from New England’s sales force and established markets. In 1989 Great-West Life acquired Crown Life’s group life and health business in the United States.
Over the course of the 1980s, the company’s U.S. operations went from generating 40% of the total business to 60%. In the United States, the primary sales are in business insurance and executive planning markets, while in Canada, Great-West is a major insurance carrier of life and health insurance and retirement products in all markets.
As Great-West approached its centennial, it was determined to continue its focus of providing benefits and services through employer-sponsored programs. The company’s ability to adapt to the changing business environment, its care in fund management, and its willingness to innovate are the strengths that Great-West brings to its second century.
Great-West Life & Annuity Insurance Co.; G.W.L. Properties Ltd.; Gold Circle Insurance Co.; GWL Properties Inc.; Great-West Realty Investments, Inc.; Great-West Life Financial Corp.
“United States Operations Span 75 Years,” Key News, January 1981; Fleming, James, Merchants of Fear, New York, Viking Press, 1986; Across the Company, November-December 1989; “Historical Review of the Great-West Life Assurance Company,” Great-West Life corporate typescript, [n.d.]; “The History of Great-West Life,” Great-West Life corporate typescript, [n.d.].
—Carol I. Keeley