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Great-West Lifeco Inc. $29 – Toronto symbol GWO

GREAT-WEST LIFECO $29 (Toronto symbol GWO; SI Rating: Above-average) is a leading Canadian insurance company, with $177.3 billion in assets under administration. The company also provides wealth management and other financial services. It also operates in the U.S. and Europe. Power Corp. of Canada controls about 75% of the company’s common stock.

Great-West’s earnings in the three months ended December 31, 2005 rose 10.3%, to $469 million or $0.53 a share from $423 million or $0.48. Revenues rose 13.6%, to $6.52 billion from $5.74 billion.

Earnings growth came from the company’s Canadian and European operations. Canada accounts for 38% of total revenues. Canadian earnings in the latest quarter rose 16.7%. European revenues comprise 45% of the total. Earnings in that region rose 9.9%.

Although profits at its U.S. division (17% of revenue) are also showing signs of improvement, the rising Canadian dollar means that these earnings now translate into fewer Canadian dollars, particularly since most of Great-West’s currency hedges have expired.

Great-West now trades at 14.4 times the $2.02 a share it made in 2005. The $0.88 a share dividend yields 3.0%.

Great-West Lifeco is a buy.

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