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Great-West Lifeco‘s headquarters in Winnipeg.JOHN WOODS/The Canadian Press

Great-West Lifeco Inc. is making sweeping changes to its Canadian business, cutting staff as it moves to reduce costs in an increasingly competitive industry.

The Winnipeg-based insurer plans to broadly reduce its Canadian head count by as much as 13 per cent, or 1,500 positions, in the next two years. It will also slim down its real-estate footprint and invest in some new technology systems. As a result of the restructuring, Great-West will take a charge of $215-million before tax in its second quarter of 2017.

The move comes as Great-West repositions its business to compete more aggressively in the Canadian insurance and wealth management marketplace, where older consumers are shifting towards retirement products from investments aimed at increasing their assets, while younger potential customers demand faster and more convenient digital service.

For subscribers: The insurance shift: How a staid industry is attempting to reform itself

At a time when Canadians have more choice than ever in how, where and when to seek advice and buy financial products, insurance companies including Great-West are revamping their offerings and distribution methods to court these choosy buyers.

"While there's always excitement in investing and developing new capabilities, there's also the difficult step of reducing costs to ensure we remain competitive," said Paul Mahon, CEO of Great-West Lifeco, adding that management has a duty to "make sure that our businesses are relevant and strong in a market that's changing dramatically and dynamically with technology."

Mr. Mahon said that the staffing cuts will come from across the organization over the next two years, and that the company has tried to give advanced warning to affected departments, which include the company's temporary work force. Efforts will be made to move some staff into jobs in other parts of the company, while others will receive early-retirement packages.

As a result of making these changes, Great-West expects to generate continuing pretax savings of about $200-million by the end of its first quarter in 2019.

Mr. Mahon said that although consumers have heightened expectations for digital services from financial companies, they are not willing to pay for upgraded systems, he says. In most cases, they expect to pay less.

Great-West has historically relied heavily on a wide network of advisers to sell its products and interact with customers, but the company sees the potential to speed some of those interactions through digital tools. So far, areas of investment in technology include in data analytics, forming an innovation centre to create new kinds of products and creating an app that can submit claims and locate nearby service providers such therapists and doctors.

Other major Canadian insurers have also been changing their product lineup, rejigging compensation schemes and moving to shorten the amount of time it takes clients to apply for insurance in recent months. Like Great-West, Manulife Financial Corp. and Sun Life Financial Inc. have been vocal about plans to increase their focus and investments on improving customer service.

The Canadian business is highly competitive, both in selling insurance and other wealth and savings products. And Great-West already holds a large share of the Canadian market. The company says that about 13 million people, or about one in three Canadians, are "touched" by its products or services, such as company-sponsored health benefits plans, pension and investment products or individual life insurance.

The changes announced Tuesday have roots in a review done by the company a few years ago to imagine what its future customers' needs would be, which also resulted in the recent reorganization of different business lines. The company said that the changes would not only improve the customer experience, but also deliver cost savings that would buoy profit growth.

Profits in the Canadian division of Great-West have been relatively flat over the last few years, increasing by about 2 per cent last year to $1.22-billion. Great-West is set to release its first-quarter 2017 financial results on May 4.

Mr. Mahon said that these cost-reductions in Canada wouldn't preclude Great-West from investing in other facets of its international business, such as the group retirement market in the U.S., or through its European operations.

"In markets where our market position wouldn't be as strong as it is in Canada, we continue to look for opportunities to grow through acquisition," he said. "We've got eyes wide open in terms of expansion opportunities where we could deploy capital through acquisitions."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:00pm EDT.

SymbolName% changeLast
GWO-T
Great-West Lifeco Inc
-0.1%40.26
MFC-T
Manulife Fin
+0.41%31.72
MFC-N
Manulife Financial Corp
+0.61%23.07

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