Thank you for standing by. This is the conference operator. Welcome to the Great West Lifeco Conference Call. I would now like to introduce Mr. Paul Mann, President and CEO of Great West Lifeco.
Please go ahead.
Thanks, Ariel. Good afternoon, and welcome to Great West Lifeco's third quarter twenty twenty conference call. I hope you and your families are safe and healthy as we head into winter. As we face the second COVID wave in many jurisdictions, we continue to offer our heartfelt thanks to all health care workers who have displayed such selfless courage throughout this pandemic. And to all essential workers, thank you for your tireless commitment as you show up to work each day to help keep our communities running smoothly.
To advisers and employees, thank you for your ongoing efforts to serve our clients and deliver on our commitments as you balance and adapt to the many new challenges of daily life. Joining me on today's call is Gary McNicholas, Executive Vice President and Chief Financial Officer. Gary and I will deliver today's formal presentation. Also joining us on the call and available to answer your questions are David Harney, President and Chief Operating Officer, Europe Arshal Jamal, President and Group Head, Strategy, Investment, Reinsurance and Corporate Development Jeff McKown, President and Chief Operating Officer, Canada Ed Murphy, President and Chief Executive Officer of Empower Retirement and Bob Reynolds, President and Chief Executive Officer, Putnam Investments. Before we start, I'll draw your attention to our cautionary notes regarding forward looking information and non IFRS financial measures on Slide two.
These cautionary notes apply to today's discussion and presentation materials. Moving to Slide four, you'll see a high level summary of the key themes we'll cover today. I would characterize our overall third quarter performance as excellent, given our progress on multiple fronts. First, we made significant advances on our strategic priorities, including six transactions either announced or closed to strengthen and accelerate growth in our portfolio. I'll speak more to these later in the presentation.
Second, over the last few months, we've completed several successful debt issuances, raising almost CAD4 billion at historically low rates that enabled us to execute on these transactions and maintain our financial strength. And third, we delivered solid base earnings of $679,000,000 in line with last year and strong net earnings of $826,000,000 up 13% year over year. And we delivered on all these fronts despite the ongoing impact of the pandemic over the past nine months. These results are underpinned by the strong collaboration and focus across our management teams and our disciplined and diversified business model, which is exhibiting great resilience as the global pandemic continues to play out. Now let's turn to Slide five for an overview of the third quarter results.
Base EPS of $0.73 was steady year over year. This result reflects strong momentum in Capital and Risk Solutions in particular and overall expected profit growth of 7%, offset by higher new business strain from lower sales and lower yield enhancement compared to Q3 twenty nineteen. Net earnings of $0.89 per share were up 13% year over year, mainly due to a $94,000,000 after tax gain on the sale of Irish Progressive Services International in Ireland. I'd note that net earnings also include favorable market related impacts offset by personal capital and MassMutual acquisition related transaction costs. Turning to Slides six and seven, I'll provide an overview of COVID-nineteen business impacts in the quarter and some color on our near term outlook.
Our diversified businesses have a long history of stability, adaptability and competitiveness in the face of crisis and change like the current COVID-nineteen pandemic. Turning to more recent pandemic impacts. While there was a slowdown in COVID cases and fatalities over the summer months, the virus has since resurged and lockdowns have been restored in many jurisdictions. As such, we maintain a close watch on the situation and the majority of our 24,000 global staff continue to work remotely. Across Lifeco, fee income improved sequentially as the market recovery progressed from sharp declines early in the year and average asset levels increased.
Expectations for fee income going forward will depend on future market movements and levels of business activity. While we continue to see COVID related mortality increases across our business, the balanced nature of our insurance and longevity book greatly reduces the financial impact. Looking at Canada, we saw a lower level of group disability claims terminations, partly due to more limited return to work opportunities. We're focused on ensuring our disability claims management practices remain effective and disciplined in this environment, and we're taking pricing action as needed. Health and dental claims in Canada increased in the quarter, leading to an improvement in expense recoveries for administrative services only plans.
In The U. S. At Empower, we've seen solid asset retention with most plan participants remaining invested. We've also seen an increased interest in advisory and financial wellness offerings. I'd also like to highlight that the pandemic has not hampered our integration plans for Personal Capital.
The transaction closed in August and integration is underway and on track. You can see a partial quarter of Personal Capital's results and performance metrics in our disclosures. Finally, Putnam, seed capital gains in the second and third quarters more than offset first quarter losses. Looking to Europe, there is potential for a rise in mortality with the second pandemic wave, but we expect some offsetting impacts between our life and annuity businesses. And while the return of lockdown measures could slow down equity release mortgage valuations, residential property values remain resilient.
Please turn to Slide eight for an update on our invested assets portfolio. While performance continues to be strong, COVID related pressures exist, and as such, we're closely monitoring the portfolio. Specifically, we're paying attention to investments more vulnerable to the pandemic stresses like real estate and office in particular. First, we'll look at the bond portfolio. At $133,000,000,000 it represents 71% of our invested assets.
It's diversified and high quality with 99% rated investment grade and 79% rated A or higher. We've seen limited corporate bond downgrades within the portfolio to date. The negative earnings impact from these downgrades was $9,000,000 in the quarter, and our holdings in the sectors most directly impacted by COVID-nineteen remain highly rated and closely monitored. That said, we expect the downgrade cycle to continue over the medium term, but believe we're well positioned given our book's high quality. Next, we'll turn to our investment property portfolio.
Economic stresses continue to put pressure on businesses of all sizes. The negative earnings impact from mortgage downgrades is based on our own internal reviews, was $13,000,000 in the quarter. We received a modest number of requests for mortgage and rent payment deferrals. Cumulative commercial mortgage loan deferrals was $1,100,000 at the end of Q3, and we approved $4,400,000 quarter rent payment deferrals, down from $5,200,000 last quarter. We continue to closely monitor our asset book as fiscal stimulus measures subside.
Our UK property related portfolio saw minimal impacts in quarter. While some pressure is expected to persist in the real estate book, particularly in the office and retail subsectors, we believe the portfolio's high quality, diversified nature will help mitigate those pressures. A good example is our retail portfolio where grocers and distribution warehouses have been quite stable in this environment. While we expect this economic dislocation to continue and associated risks will persist, we are optimistic they will be manageable in the context of our total invested assets. Please turn to Slide nine, where we'll deal with sales.
As outlined on Slide six and seven, COVID-nineteen lockdowns have affected market activity and slowed sales across many of our channels. While impacts have varied by business unit, we're pleased to have seen some improvements in September that have continued post quarter end. In Canada, following slower volumes in JulyAugust, we're starting to see our individual insurance application activity returning to pre COVID levels as we drive more sales through digital channels. We're also benefiting from new product launches, including our newly rebranded and expanded mutual fund shelf, which are helping to boost individual wealth management sales. Our Canadian group sales were lower in quarter with the offsetting impact of higher plan sponsor retention and lower in plan redemptions.
As we look ahead, we see solid growth in quotation activity and a strong pipeline heading into 2021. In The U. S, sales were down 10% year over year, primarily due to lower large cap plan sales at Empower. This impact has been moderated by fewer plan terminations and sustained virtual sales activity. Moreover, momentum is strong and the sales pipeline is robust with request for proposal activity higher than ever before.
Over the last twelve months, Empower has taken in approximately billion dollars in new client commitments, including new DC plans of all sizes covering corporate, government and not for profit employers. Moving to Putnam. We saw sustained positive sales and net flows, particularly on the institutional side. We expect positive momentum in Putnam sales and net flows to continue on the back of strong investment performance for our clients. U.
S. Sales include a partial quarter for Personal Capital. You'll find details in the appendix of the analyst slides and in the supplemental information package. In Europe, sales performance is varied by product line, with the decline in sales year over year reflecting lower retail wealth sales in The UK and Ireland and lower bulk annuity sales, offset by stronger corporate wealth sales in Ireland. Looking ahead, pressure on UK and Ireland retail well sales is expected to continue in Q4, while bulk annuity sales are expected to recover on the back of recent wins.
Finally, our Capital and Risk Solutions business continues to have a strong pipeline with continuing strong demand for longevity and life capital solutions in Europe and The U. S. Respectively. Please turn to slide 10. Overall Lifeco fees were relatively steady year over year, but improved sequentially with higher average asset levels.
Turning to The U. S, fees were up 5%, primarily due to participant growth at Empower, higher equity markets and the inclusion of personal capital, which added 3% to year over year growth. Platinum fees were relatively steady year over year. In Europe, fees were lower due to the sale of The UK legacy business and a revised reinsurance structure for the Irish Health business, partly offset by higher management fees in Germany. Next on Slide 11, we'll look at expenses.
Lifeco operating expenses in constant currency and excluding personal capital were up 2% year over year. This reflects our focus on expense discipline in combination with business growth and transaction costs in reinsurance. I'd also note that strategic and technology investments continued in Canada, while travel and training expenses remained low across all segments due to the pandemic. Now I'll turn the call over to Gary to review the financial highlights. Gary?
Thank you, Paul. Starting with Slide 13. Base EPS of zero seven three dollars was comparable to the prior year with strong business results in Capital and Risk Solutions and Empower and favorable experience in Europe offset by lower impacts from investment yield enhancements and new business primarily in Canada. Net EPS of $0.89 was up 13% as positive net contributions from M and A activities and from actuarial reviews added to the base earnings. On a segment basis, starting with Canada, base earnings were $270,000,000 compared to a very strong $355,000,000 last year.
In Q3 twenty nineteen, yield enhancement added over $100,000,000 to experience gains, which are unusually strong, whereas this quarter it was just over $30,000,000 This will fluctuate from quarter to quarter depending on investment opportunities. The impact of new business swung from a gain last year, which included a large group annuity sale, to a small negative this quarter as a result of lower interest rates and sales volumes in individual customer. Underlying business performance remained very solid. In The U. S, base earnings were up 5% year over year.
Empower's base earnings increased 27% with strong investment experience and solid business growth. Putnam's results were comparable to last year with gains on seed capital offset by higher expenses. Note that U. S. Based earnings this quarter included Personal Capital, which recorded a net loss of $7,000,000 The supplemental information package introduces key metrics for Personal Capital and notes a positive contribution prior to customer acquisition costs and financing.
This result was in line with our expectations as Personal Capital continues to invest in customer acquisition to fuel future growth. In Europe, base earnings were up 13% year over year. Favorable mortality and morbidity experience were partly offset by the lower impact of new business as the prior period included higher gains on bulk annuity sales. Currency movements also had a positive impact on Europe's results. Capital and Risk Solutions again saw very strong year over year growth, particularly in Longevity Solutions.
Base earnings were up 80 reflecting significant longevity new business written over the past year, plus gains on new business in this period. Favorable longevity claims experience was partly offset by higher claims in the life reinsurance business. Turning to Slide 14. This table the table on this slide is a reconciliation of base to net earnings, highlighting the key items so far in 2020 that are not included in base earnings. Net earnings included a gain of $94,000,000 on the sale of Iris Progressive Services International Limited and transaction costs of $31,000,000 related to the recent U.
S. Acquisitions as well as a positive contribution from actuarial reviews, which I'll come back to. The market related impacts on liabilities were positive on continuing market recovery, albeit lower than we saw in the second quarter, which had seen North American markets in particular recoup much of their late Q1 losses. Please turn to slide 15. This table shows segment and total Lifeco net earnings results from a source of earnings perspective.
Adjustments to get to base earnings are footnoted and the SOE categories as a reminder, the SOE categories above the line are shown pretax. Expected profit was up 7% year over year with strong business growth, particularly in Capital and Risk Solutions and depreciation in European currencies. New business strain was in line with prior quarter, but higher than prior year, which included the benefit of upfront gains on bulk annuity sales in both UK and Canada. Strain in Canada was impacted by the sharp drop in interest rates, which takes time to factor into repricing actions and lower sales. New business strain was also higher in The U.
S. As it now includes customer acquisition costs at Personal Capital for the first time. Experience gains, management actions and assumption changes contributed positively in the quarter, and I'll cover these on the next slide. Earnings on surplus contributed $8,000,000 which is down from the prior year given the impact of lower yields and lower trading gains in period. The effective tax rate on shareholder earnings was 5%, which is primarily a reflection of the jurisdictional mix of income and the non taxable gain on the disposition of Iris Progressive Services.
Canada benefited by approximately $30,000,000 following the resolution of certain historic tax matters, which is more of a one time item. The overall tax rate will continue to depend on the jurisdictional mix of earnings. Following U. S. Tax reform and reflecting the growth in our European and reinsurance businesses, today's mix probably leads on average to a rate in the low double digits.
But this will likely rise in future as The U. S. Segment continues to grow in the future on the back of recent acquisitions. Please turn to slide 16. These tables expand on the experience results as well as the management actions and changes assumptions to highlight various items in the quarter.
Starting on the left, yield enhancement continued to contribute positively, although down from strong comparative periods, particularly in Canada. I'd also call out there was a positive combined net impact of mortality, longevity and morbidity. In many cases, it is difficult to determine what exactly is COVID related versus the other factors, but again, we benefit from a diversified book of business. Expense variances reflect strategic project spend as well as lower processing fees and expense recoveries on our admin services contracts given those lower transaction volumes. Credit related impacts continued to be modest this quarter.
Looking at the right hand side, you'll see the net gain on sale and The U. S. Acquisition related transaction costs noted earlier. You can also see the net positive results of assumption changes in the period with largely offsetting impacts between longevity and life mortality and a pickup in The U. S.
On a review of economic assumptions. Turning to Slide 17. The Q3 book value per share of $22.57 was up 7% year over year and up 3% sequentially, driven by retained earnings and currency translation. The LICAT ratio at Canada Life remained steady, down 1% from Q2. The one point reduction arises from the increased capital requirements following a shift to a new most adverse LICAT interest rate scenario.
And assuming we stay in this same most adverse scenario, the full impact will continue to be smoothed in over the next five quarters and largely offset normal growth levels that have typically been about 1% a quarter. And just to note, the Lifeco cash of $1,500,000,000 is not included in the LICAT ratio. That concludes my formal remarks. Back to you, Paul.
Thanks, Gary. Moving to Slide 18, we'll briefly review Empower's acquisition of MassMutual's retirement services business. As noted on our September analyst call, where we unveiled the deal, this CAD4.4 billion acquisition aligns with Empower's strategic growth objectives, strengthening the company's number two position in The U. S. Retirement market.
Empower will also leverage newly acquired Personal Capital and its hybrid digital wealth platform to accelerate growth in retail wealth management across a larger combined business. In summary, the transaction presents significant expense and revenue synergies through Empower's proven track record of platform integration. It enhances retail's prospects and Personal Capital synergy opportunities across a larger business. It adds a business with a highly attractive margins and strong earnings and cash flow profile. And it positions Empower as a growth engine for Lifeco.
Upon close, the combination will increase Empower's participant base to $12,200,000 and assets under administration to $834,000,000,000 On a fully synergized basis, following integration, The U. S. Segment is expected to be 20% or more of Lifeco's earnings. Finally, on Slide 19, we provide a reminder of the strategic actions taken across the portfolio over the last quarter. I want to close our formal remarks by highlighting the strategic backdrop to a number of these transactions.
For Empower, beyond the scale and synergies of the MassMutual deal, plus the tuck in of the Fifth Third business, it's about leveraging personal capital to increase a digitally enabled wealth management platform to meet the needs of over 12,000,000 Americans. For our Canadian operations, the Mackenzie GLC and Northleaf transactions are about access to stronger and more diversified assets and investment management solutions for both our wealth management channels and our general account backed products. To conclude, these actions are focused on broadening and strengthening our businesses to accelerate growth in revenue, EPS and shareholder value. With that, Ariel, please open the line to questions.
Thank you. We will now begin the question and answer session. Our first question comes from Tom MacKinnon of BMO Capital. Please go ahead.
Yes, thanks very much. Good afternoon. Two questions here. One with respect to the Capital Solutions segment seem to be stronger than what we would have anticipated. Is there anything happening in terms of the reinsurance business here that may have been driving that?
Was there like we don't have an indication sales or anything like that. But what was driving the improvement in the capital and risk solutions here? And how sustainable is it?
Tom, I'll start off and I will quickly hand off to Arshul Jamal, who's responsible for that business. I think Capital and Risk Solutions, we've seen steady growth over the last number of years as we've strengthened the business, expanded our footprint in terms of the expert team we have there. And actually, they're both experts, but they're also very innovative out in the market looking to develop new solutions. And then when you add that up with the current environment, where on the back of Solvency II implementation in Europe and another and environmental factors where people are looking to secure their capital positions. I think it's a business that's kind of primed for growth right now, given the things we've done both internally, but also the things that are going on in the market.
So I'll let Arshil speak a little bit to more of the where we're seeing the growth and its relative sustainability. Arshil?
Thanks, Paul. Echoing on Paul's comments, would highlight that just over $30,000,000 growth in expected profit from the third quarter last year to this year's third quarter results. So that's really demonstrating the vitality of the business and the growth that we've seen across all of our product lines, but particularly longevity that Paul called out. In addition to that, the year ago quarter had a negative impact of new business, reflecting the transactions that we wrote in that quarter. And this year's quarter showed a favorable contribution from new business.
And then we also saw a meaningful reduction in experience losses from the third quarter last year to this quarter. So I think it's the expected profit growth that we would expect to continue depending on our risk appetite and the demands that we're seeing in the marketplace. And then the impact of new business is really particular to the transactions that we closed in a particular quarter, whether we end up with a small gain or a small loss. But sometimes that contributes to year over year noise. So that's the extra color that I put on this quarter's financial results, but again emphasizing the strong underlying growth in expected profit year over year.
Harshal, what do you think a normal run rate for that segment would be in terms of expected profit growth? It's very hard to put a run rate given that we have four different businesses and we are relying sort of on market demand and very disciplined underwriting and risk preference and risk appetite control. All I sit there and say is, there's no reason for us not to be able to grow our longevity business provided that the market is there by sort of double digit growth that we've experienced in the last little while. And I think there's opportunities to grow other parts of the reinsurance business also very, very strongly. So we expect to see strong growth going forward, but it's really hard to put a single number on the overall growth rate.
Okay. And my follow-up question is with respect to Empower. I noticed the participants fell quarter over quarter about 3%. I wonder what was driving that. And you used to flow you used to show kind of net cash flow associated with Empower.
We don't seem to have that anymore. Maybe you can tell us what's been happening in terms of the flows at Empower as well. Thanks.
Thanks, Tom. I'm going to turn that one over to Ed Murphy. Clearly, any there's movement from quarter to quarter, especially when we're winning very large cases or potentially from time to time where we might lose a particular case. But I'll let Ed give you a bit of insight into what's happened in period and sort of the way we're looking at flows. Ed?
Yes, sure. Thank you, Paul. Good afternoon, everyone. In terms of participant growth, a couple of factors there. One, we did see a slowdown in sales cycle.
I think we talked about that previously due to COVID. So that certainly impacted sales. I would say sales have been deferred. It's more of a timing issue than anything else. And then the other the other factor in terms of sentiment growth would be we saw less new participants from existing clients than what we typically would have experienced, which, again, I would attribute to the environment, COVID, furloughs, layoffs, those types of things.
We expect that to come back as the economy starts to resume back to or gets back to some point of normalcy. In terms of flows, what I would say was flows, we did see higher distributions than what we typically would see. And again, I think that was primarily participants looking to access dollars. So we had more distributions during the last quarter. But general flows, if you look across the whole business, were favorable in large part due to the market.
Does that mean if you don't get any Empower sales that you're actually going have a decline in your participants quarter over quarter?
No. No. What it means is
Did you mention that No,
there may some quarter where you see a decline. But as Paul mentioned, if you look at what's happening is sales are being pushed out into the future quarter. We have our commitments are as high as they've ever been in terms of contracts and commitments, and the pipeline is as high as it's ever been in history. So that's the dynamic there. And then the other factor, as I mentioned, is we just didn't see participant growth coming from the existing customer base.
Okay. So that means if you don't have any that means naturally you'll have a drop in the number of participants unless you have sales. Is that correct?
Correct.
Okay.
Yes.
And what would be just driving that? Just people leaving plan, people retiring, etcetera? Is that just the normal migration of people?
Well well, there there's that activity, but but, Tom, we generally see pretty good growth from our from our client base where they're continuing to hire and or new participants, existing employees are enrolling in the plan. And that's where we saw that sort of level off a bit. It's completely tied to the economy.
Okay. Thanks for that.
Thanks, Bob.
Our next question comes from Meny Grauman of Scotiabank. Please go ahead.
Hi, good afternoon. So Europe was very resilient during the first lockdown. Now we have a second lockdown. And I'm wondering, is it safe to assume that we're likely to see the same kind of performance? Or is there any reason to believe that this time will be a little bit different?
Are there any different dynamics that you see taking place in the European business right now because of the lockdown?
I'll start off on that, Meeni, and then I'm going to pass it on to David Harney. What I would say, and I'm going to say this as more as a general rule, I think businesses and economies and governments in general have generally figured out how to manage through COVID a little bit better as we get into the second lockdown. So we're figuring out ways to for example, new digital ways of connecting with customers. A great example, and I think David will probably go there, but if you think about property valuations for equity release mortgages, figured out ways to do those where you don't actually have to be doing it physically on-site. So there's a number of different mechanisms where I think as organizations and sort of the market has figured out ways to drive things forward.
So that I think stands us in reasonably good stead. But I think I'll let David speak to perspectives on how we think this current lockdown will impact the business relative to the first lockdown. David?
Yes. Thanks, Paul. Yes, I'd agree with those comments. So like our results have been resilient in quarter two and quarter three. Like I know from talking to colleagues in North America, like the experience in Europe is much the same.
So I don't think that's the lockdowns we're seeing now are going to change the business environment versus what we've been operating in from quarter two to quarter three. So like obviously, our results can be volatile from quarter to quarter, but I think the business has adjusted now to COVID and that's going to continue on for another six months or so. So we really see the next few quarters being as a continuation of what we've seen for the last Q and then we'll have to normal volatility that's difficult to predict, our best estimate is probably a continuation of the last two quarters.
Thanks for that.
Thanks, Maggie.
Our next question comes from Doug Young of Desjardins Capital Markets.
Hi, good Just starting on credit and maybe just a clarification. When I look at your MD and A on Page thirteen, fourteen, you quote downgrades and impairments and if you added up net impact on common shareholders is $28,000,000 But on Slide 16, post tax, you're showing credit related of 14,000,000 So just wondering to get a little clarity of what's the difference? Is part of that related to the release of asset default provisions? Or why the difference?
Yes, that's a good question for the actuary and the person responsible for the source of earnings. So over to you, Gary.
Yes, actually Doug, I think you've pretty much answered your own question. There is when we do the source of earnings display, that's an experience gain or loss relative to the expected profit. So there's some amount of poor credit experience already baked into expected profit, as you said, the best estimate release. And so the source of earnings just shows the net impact. So it's really a geography question, whereas the MD and A just shows the total amount.
Okay. So when I'm thinking about the impact on earnings, it's the SOE that I should be thinking about?
If you think about the impact on earnings from a baseline of zero, then it's the total amount that's in the MD and A. You're thinking of what's the variance from our expected profit, then that's what's in the SOE.
Okay. That makes sense to me. And then just on credit, I mean, you're clearly starting to see an impact from downgrades of $22,000,000 as the absolute number. Can you talk a bit about the sectors and in which regions you're starting to feel that? Is that more in Europe?
Are you starting to feel it across North America? And if you can talk or maybe there was an impairment in the quarter. Just hoping to get a little more detail on that.
Hey, Doug, I'm going to hand that one off to Raman Srivastava who can take that. Raman?
Thanks, Paul. And thanks for the question, Doug. So, yes, with respect to downgrade, I'd say what we've seen in Q3 is a bit muted versus what we saw in Q2 and even in Q1. So the pace of downgrades have decelerated. And I think that's true across all regions.
Hasn't really been, you know, so whether it's been probably more pronounced in The US and Europe versus Canada. But generally speaking, it's been across all regions that same trend. And then in terms of sectors, it's the ones which you might imagine that would be hit the most, most impacted by the pandemic. So, you know, leisure and hotels, travel, real estate, those have been the major sectors amongst others most impacted by the pandemic. But the trend has been a decrease particularly over Q3 versus Q1 and Q2.
Okay. Okay. And then just, you know, when I dig into Europe, it looks like The UK based earnings were down quite a bit, 25% or so. You talked about Canada where the yield enhancement on base earnings was so significant last year and came down quite significantly this year as being the driver there. But in The UK, was it a similar function?
I'll let Gary start off on that one and he may want to defer to David Harney as well. But Gary?
Yes. I think the first thing I noticed, I did mention, I think in the comments is we did point to bulk annuities in The U. K. There were gains new business gains on bulk annuities in The U. K.
Last year, and they didn't rise this year. And of course, those are in base earnings. And then the investment performance, my recollection is it was down a bit in The UK as well. But I think a lot of it was the I think that's where we saw when we did our internal review, Ron mentioned some of the downgrades, but we did an internal review on our mortgages and we lowered the ratings on a couple of that ourselves. And those were in The UK as well.
And that again, those investment results would have flown through their experience gains. So you had a bit of those two things in the year over year that I think would have affected the Europe sorry, The UK based earnings in particular.
I'm not sure
if you Yes. Want to add That's the case, Gary. And I think what you'll see in the disclosure documents, there is an element of just Q3 was quite strong last year. So we've shown good information on each quarter's results in the disclosure documents. So I think if you compare The UK versus a running average of all the quarters, it's slightly below what you see for the average of all the quarters, is to do with just the lower annuity sales and sort of very modestly for investment experience.
Okay, great. Thank you.
Thanks,
This concludes the question and answer session. I would like to turn the conference back over to Mr. Mann for any closing remarks.
Thank you, operator. Just to close then, what I would like to do is thank everyone for participating today for your questions. We look forward to connecting with you at the end of our Q4 reporting time. And I really just wish you all a safe and healthy end of the year and look forward to talking to you in 2021. Take care.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.