Insurer Great-West Lifeco and mutual funds provider IGM Financial continue to benefit from their recent moves to focus on their core businesses. We still like both, but prefer IGM for your new buying.
GREAT-WEST LIFECO INC. $48 is a hold. The insurer (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; shares outstanding: 931.2 million; Market cap: $44.7 billion; Price-to-sales ratio: 1.4; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.greatwestlifeco.com)is Canada’s second-largest life insurer, after Manulife Financial. It also offers pension and wealth management services. Power Corp. (Toronto symbol POW) owns 68.1% of the firm.
In April 2022, the company’s Empower business paid $4.35 billion for the full-service retirement business of U.S.-based Prudential Financial Inc. (New York symbol PRU). As well, in November 2023, the company paid IGM $575 million for Investment Planning Counsel, which provides wealth management and planning services. The company also sold its U.S.-based Putnam Investments mutual fund business to Franklin Resources, Inc. (New York symbol BEN), which operates as Franklin Templeton. It received $1.89 billion in cash and Franklin shares.
In the third quarter of 2024, Great-West’s revenue jumped 381.7%, to $16.25 billion from $3.37 billion a year earlier. That’s mainly due to a $6.91 billion gain on its investment portfolio. The higher revenue and cost savings related to its recent acquisitions helped boost earnings by 11.8%, to $1.14 a share (or a total of $1.06 billion) from $1.02 a share (or $950 million).
The company’s earnings will probably improve 12% in 2024 to $4.43 a share, and the stock trades at 10.8 times that estimate. That low p/e reflects the risk of integrating new businesses. The $2.22 dividend yields a high 4.6%.
Great-West Lifeco is a hold.
IGM FINANCIAL INC. $45 is a buy.The company (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 236.8 million; Market cap: $10.7 billion; Price-to-sales ratio: 3.2; Dividend yield: 5.0%; TSINetwork Rating: Above Average; www.igmfinancial.com)is Canada’s largest independent asset management provider with $264.8 billion in assets under management and administration as of October 31, 2024. Power Corp. owns 62.5% of the firm.
IGM realized a gain of $220.7 million on the $575 million sale of Investment Planning Counsel to Great-West Lifeco (see left). It used the proceeds to buy an additional 13.9% stake in China Asset Management for $1.15 billion. That increased its stake to 28.7%. China Asset is one of that country’s largest mutual fund sellers. In April 2023, IGM acquired a 20.5% stake in U.S. investment firm Rockefeller Capital Management for $835 million.
Those new businesses and rising stock market values lifted IGM’s revenue in the third quarter of 2024 by 10.8%, to $853.2 million from $770.9 million a year earlier. Earnings also gained 14.8%, to $1.01 a share (or a total of $239.2 million) from $0.88 a share (or $209.8 million).
For all of 2024, IGM’s earnings will probably rise 12% to $3.85 a share, and the stock trades at a moderate 11.7 times that estimate. The $2.25 dividend looks safe, and yields a high 5.0%.
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