Great-West Lifeco Inc. announced April 25 that it is restructuring its Canadian business. This transformation will lead to the elimination of 1500 jobs.
The Company says the first step in its “business transformation” was taken in November 2016 when it decided to align its Canadian business around Group and Individual customers.
"Late last year we began the journey to evolve our Canadian business into a more agile and innovative organization, better equipped to respond to and anticipate the changing needs of our customers," said Paul Mahon, President and Chief Executive Officer of Great-West Lifeco. "To ensure we remain competitive and drive future growth, we are reducing costs and becoming more efficient, while at the same time investing more in customer-focused innovations and service offerings. We are confident these strategic initiatives will have a long-term positive impact for customers, advisors, employees and our shareholders."
Reducing Canadian workforce by 13 per cent
The company has informed employees that it plans to reduce its Canadian workforce by approximately 1,500 positions over the next two years – about 13 per cent of its 12,000 employees in Canada. These cuts will be implemented by reducing the temporary workforce, a voluntary retirement program and eliminating positions through a severance program. These reductions are expected to be partly offset by business growth, as well as natural attrition combined with controlled hiring practices, says Great-West Lifeco.
"These are difficult but necessary decisions that we are not taking lightly," said Mahon. "We are committed to treating all those affected fairly and respectfully, consistent with our values."
Other cost reductions will come from a number of sources including real estate consolidation, process improvements, and updates to information systems.
In the second quarter of 2017, the company will record a restructuring charge of $215 million pre-tax allocated between participating and non-participating accounts. The impact of the charge on common shareholder net earnings will be $172 million pre-tax or $127 million after-tax (13 cents per share), says the company.
$200 million in pre-tax savings forecast
The restructuring charge includes employee severance payments, real estate optimization costs and information systems exit costs. “As a result of its Canadian transformation initiatives, the Company expects to realize total annual run-rate savings of $200 million pre-tax by the end of Q1 2019 allocated between participating and non-participating accounts,” says Great-West.