great-west lifeco

GREAT-WEST LIFECO $22.43 (Toronto symbol GWO; Shares outstanding: 944.2 million; Market cap: $21.2 billion; SI Rating: Above Average) is a leading Canadian insurance company, with $332.9 billion in assets under administration. It also sells wealth management and other financial services, and also operates in the U.S. and Europe. Power Financial controls 72.7% of Great-West. Excluding one-time items, Great-West’s earnings fell 34.5% in the three months ended March 31, 2009, to $326 million, or $0.35 a share, from $493 million, or $0.55. Falling stock markets cut sharply into the fees it earns from assets it manages, including Putnam’s mutual funds. Great-West shored up its already strong capital base by issuing $1 billion in common shares and $230 million in preferred shares last December. This will help it deal with any challenges ahead from the recession, and gives it plenty of flexibility to buy companies at bargain prices. Great-West is also actively cross-promoting its products to Putnam’s large client base....

Great-West bought troubled U.S.-based mutual-fund manager Putnam Investments in August 2007. Putnam had $182 billion in assets, and Great-West paid a bargain price of $4.2 billion. Putnam was coming off a mutual fund trading scandal that prompted investor redemptions. Falling stock markets and lingering problems dropped Putnam’s assets by 32%, to $124.2 billion today. That helped push down Great-West’s shares from $37 at the end of 2007 to as low as $11.21 in March 2009. However, the stock has since doubled. GREAT-WEST LIFECO $22.43 (Toronto symbol GWO; Shares. outstanding: 944.2 million; Market cap: $21.2 billion; SI Rating: Above Average) is a leading Canadian insurance company, with $332.9 billion in assets under administration. It also sells wealth management and other financial services, and also operates in the U.S. and Europe. Power Financial controls 72.7% of Great-West. Excluding one-time items, Great-West’s earnings fell 34.5% in the three months ended March 31, 2009, to $326 million, or $0.35 a share, from $493 million, or $0.55. Falling stock markets cut sharply into the fees it earns from assets it manages, including Putnam’s mutual funds....

ISHARES CANADIAN BOND INDEX FUND $29.23 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. This index consists of a wide range of investment-grade Canadian government and corporate bonds with terms to maturity of more than one year. The 221 bonds in the fund’s portfolio have an average term to maturity of 8.7 years. The bonds in the index are 71.2% government and 28.8% corporate. The fund sticks with high-quality government bonds from issuers such as Canada Housing Trust, Government of Canada and Province of Ontario, plus high-quality corporate bonds from issuers such as Bank of Montreal, TransCanada Pipelines, Bank of Nova Scotia, Great-West Lifeco and Bell Canada....

With interest rates so low, bonds have become much less attractive to income-seeking investors. However, if you need stable income and want to hold bonds, here are two bond funds that have low fees and top-quality holdings. As well, both cut risk by avoiding speculative trading and emphasizing government bonds. ISHARES CANADIAN SHORT BOND INDEX FUND $29.34 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The iShares Canadian Short Bond Index Fund currently holds 152 bonds with an average term to maturity of 2.9 years....

GREAT-WEST LIFECO INC. $16 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 943.9 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.6; SI Rating: Above Average) is Canada’s largest insurance company. Great-West administers $339 billion worth of assets. The company also offers wealth-management services. It operates in Canada (55% of its earnings), Europe (35%) and the U.S. (10%). Power Corp. (Toronto symbol POW) owns 72.7% of Great-West’s shares. In August 2007, Great-West paid $4.2 billion for U.S.-based mutual-fund manager Putnam Investments. Buying Putnam gave Great-West an opportunity to cross-promote its products to Putnam’s large base of individual and institutional clients. The stock market downturn has lowered the value of Putnam’s assets. This hurts Putnam’s earnings, since its fees rise and fall with the value of the securities in its funds. Moreover, the market’s volatility has caused many of Putnam’s clients to redeem their funds. Consequently, Putnam’s assets under management fell 27% in 2008, to $129 billion U.S. from $176.7 billion U.S. in 2007....

IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.4 million; Market cap: $8.7 billion; Price-to-sales ratio: 3.2; SI Rating: Above Average) is Canada’s largest mutual fund company. It manages $98.8 billion of assets. Power Corp. owns 56.4% of IGM. IGM has three divisions. Investors Group sells funds through its own network of advisors. Mackenzie Financial sells its funds through independent brokers. IGM also owns 74.5% of Investment Planning Counsel, whose 700 advisors provide wealth-management services to individuals. IGM has few operations outside of Canada. The sharp stock market drop in the latter half of 2008 hurt demand for IGM’s mutual funds. As a result, the company’s earnings dropped 11.3%, to $766.1 million from $863.8 million in 2007. Per-share earnings fell 10.5%, to $2.89 from $3.23, on fewer shares outstanding. IGM owns around 4% of Great-West Lifeco, and these figures exclude its share of Great-West’s writedown of its purchase of Putnam Investments. IGM’s 2008 revenue fell 6.6%, to $2.7 billion from $2.9 billion....

We continue to recommend that all investors own at least two of Canada’s big-five banks. But these should not be the extent of your financial holdings. Other types of financial investments, such as high-quality insurance companies, should play a role in your portfolio, as well. Here are four non-bank financial companies we like. All offer an attractive combination of growth and value. However, only three are buys right now. GREAT-WEST LIFECO INC. $16 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 943.9 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.6; SI Rating: Above Average) is Canada’s largest insurance company. Great-West administers $339 billion worth of assets. The company also offers wealth-management services. It operates in Canada (55% of its earnings), Europe (35%) and the U.S. (10%). Power Corp. (Toronto symbol POW) owns 72.7% of Great-West’s shares....

POWER CORPORATION $17.23 (Toronto symbol POW; Shares outstanding: 407.5 million; Market cap: $7.0 billion; SI Rating: Above Average) is a diversified holding company. It controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great-West Lifeco, one of the country’s largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, which include 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of holding company Parjointco, which, in turn, owns a 54.3% interest in Swiss-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials). In the three months ended September 30, 2008, Power Corp.'s earnings, excluding one-time items, fell 6.2%, to $332 million, or $0.70 a share, from $354 million, or $0.76. Great-West contributed $203 million to Power’s earnings and IGM contributed $74 million....

The bulk of Power Corp.’s investments are in financial services companies, and turmoil in credit markets has hurt those holdings. But both of the major businesses it controls are leaders in their fields. They remain well capitalized and are cheap in relation to earnings. POWER CORPORATION $17.23 (Toronto symbol POW; Shares outstanding: 407.5 million; Market cap: $7.0 billion; SI Rating: Above Average) is a diversified holding company. It controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great-West Lifeco, one of the country’s largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, which include 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of holding company Parjointco, which, in turn, owns a 54.3% interest in Swiss-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials)....

ING Canada, $28.20, symbol IIC on Toronto (Shares outstanding: 119.9 million; Market cap: $3.4 billion), is Canada’s largest property and casualty insurer. ING’s 3.5 million customers give it an 11% market share across Canada. Ontario accounts for 43% of ING’s revenues, Quebec, 25%, Alberta, 20%, B.C., 6%, the Maritimes, 5% and elsewhere in Canada, 1%. Auto insurance accounts for 57% of revenues and property insurance, 43%. ING sells insurance through 1,875 independent brokers under the ING Insurance brand. This division accounted for $3.3 billion, or 79.1%, of revenues in 2008. Brokers can also sell ING’s Grey Power insurance, which sells auto insurance to customers who are 50 years of age or older and accounts for 2.7% of ING’s revenues. Through Belairdirect, ING sells home and auto insurance directly to consumers by telephone or through the Internet; Belairdirect generates 18.2% of ING’s revenues. ING also owns Canada Borderlink, one of Canada’s largest insurance brokerages....