great-west lifeco

Insurance has a stable image, but it has always been highly competitive and volatile. That’s why we’ve said for some time that insurers are riskier than they look. For safety-conscious investors, right now we recommend just three Canadian insurance companies as buys: Manulife Financial, Great-West Lifeco and Sun Life Financial. MANULIFE FINANCIAL $39.51 (Toronto symbol MFC; SI Rating: Above-average) sells life and other forms of insurance, as well as mutual funds and investment management services. It operates in 19 countries and territories worldwide. Manulife has assets under administration of $399 billion. In the three months ended September 30, 2007, Manulife’s earnings rose 9.9%, to $1.1 billion or $0.70 a share, from $967 million or $0.62 a share a year earlier. Revenue rose 11.3%, to $9.4 billion from $8.4 billion. Manulife has raised its dividend 9.1%, to $0.24 from $0.22. The shares now yield 2.2%....

GREAT-WEST LIFECO $35.63 (Toronto symbol GWO; SI Rating: Above-average) has agreed to sell its U.S. health care business, which provides medical, dental, vision, life and disability coverage to 5,200 groups and 2.2 million individuals. The business faces strong competition from larger insurers, whose size lets them negotiate better deals with medical service suppliers, so selling it makes sense. Great-West will use the net proceeds of $1.6 billion U.S. to finance the $3.9 billion U.S. acquisition of mutual fund manager Putnam Investments in August, 2007....

POWER CORPORATION $40.52 (Toronto symbol POW; SI Rating: Above average) is a diversified holding company. Power Corp., founded in the 1920s to develop hydroelectric power, now controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great- West Lifeco, one of the largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, including 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of 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 processing), Total SA (world’s fourth-largest oil firm), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials.) Power Corp. also owns 100% of Gesca Ltée, which publishes Montreal’s La Presse and six other daily newspapers....

As a holding company, Power Corp. trades at an estimated 15% discount to the break-up value of its assets. But even without a reorganization or restructuring, Power Corp. has considerable investment appeal. POWER CORPORATION $40.52 (Toronto symbol POW; SI Rating: Above average) is a diversified holding company. Power Corp., founded in the 1920s to develop hydroelectric power, now controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great- West Lifeco, one of the largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, including 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of 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 processing), Total SA (world’s fourth-largest oil firm), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials.)...

GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 892.2 million; Market cap: $31.2 billion; SI Rating: Above average) earned $0.61 a share (total $544 million) in the second quarter of 2007, up 17.3% from $0.52 a share ($461 million) a year earlier. Most of the gain came from its European operations. Revenue grew 3.1%, to $10.1 billion from $9.8 billion. Great-West also raised its dividend 7.8%. The new annual rate of $1.10 yields 3.1%. The company has $1.2 billion U.S. invested in the troubled subprime mortgage market. But less than 1% of that is rated non-investment grade, so any writedown will probably be minor. The recent $3.9 billion U.S. purchase of mutual fund investment manager Putnam Investments Trust will also cut Great-West’s exposure to the housing market....

GREAT-WEST LIFECO $34.17 (Toronto symbol GWO; SI Rating: Above-average) is a leading Canadian insurance company, with $212 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 Financial controls about 75% of Great-West. Great-West’s earnings in the three months ended June 30, 2007 rose 18%, to $544 million or $0.61 a share from $461 million or $0.52. Revenues fell 30%, to $4.6 billion from $6.6 billion on new accounting rules for investments. The shares yield 3.0%. The $3.9 billion U.S. acquisition of U.S.-based investment management firm and mutual fund company Putnam Investments Trust will close shortly. The purchase will more than double Great-West’s assets under administration. Great-West is also making a series of small acquisitions aimed at expanding its share of the employer-sponsored health insurance market in the United States....

Insurance has a stable image, but it has always been highly competitive and volatile. That’s why we’ve said for some time that insurers are riskier than they look. For safety-conscious investors, right now we recommend just three Canadian insurance companies as buys: Manulife Financial, Great-West Lifeco and Sun Life Financial. SUN LIFE FINANCIAL $50.16 (Toronto symbol SLF; SI Rating: Above-average) offers savings, retirement, pension and life and health insurance products and services to individuals and corporations. The company operates mainly in Canada, the U.S. and the UK, and also in Asia, China and India. It has assets under administration of $435 billion. In the three months ended June 30, 2007, Sun Life’s earnings rose 15.2%, to $590 million or $1.03 a share, from $512 million or $0.88 a year earlier. Revenue fell 27.8%, to $4.5 billion from $6.2 billion, due to new accounting rules for investments....

GREAT-WEST LIFECO INC. $35 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 892.1 million; Market cap: $31.2 billion; SI Rating: Above average) is Canada’s largest insurance company with $216.2 billion in assets under administration. Power Financial Corp. owns 75% of Great-West’s stock. The company sells its products directly and through brokers to groups and individuals, mainly under the Great-West Life, London Life and Canada Life brands. Great-West also provides retirement planning and other financial services. Canada accounts for about 45% of its revenue, followed by Europe (35%) and the United States (20%). Great-West recently agreed to buy U.S.-based mutual fund manager Putnam Investments Trust for $3.9 billion U.S. Putnam ran into trouble over a mutual fund trading scandal a few years ago, which hurt its reputation. It also helps explain the low selling price in relation to Putnam’s assets under management of $192 billion U.S....

LOBLAW COMPANIES $46.27 (Toronto symbol L; SI Rating: Above average) is Canada’s largest food seller, with about 1,700 stores under the Loblaws, Fortinos, No Frills, Provigo and Zehrs banners. It also distributes groceries to other stores. George Weston Ltd. owns 63% of Loblaw’s shares. Loblaw’s sales rose 3.5% in the three months ended December 30, 2006, to $6.78 billion from $6.55 billion. Earnings per share fell sharply, to $0.16 from $0.73. However, if you disregard one-time items, per-share profits fell 38.3%, to $0.58 from $0.94. For the full year 2006, sales rose 3.7%, to $28.6 billion from $27.6 billion in 2005. The company lost $0.80 a share, compared to a profit of $2.75. Excluding one-time reorganization and restructuring charges, per share earnings fell 18.8%, to $2.72 from $3.35. Loblaw will likely earn $2.74 a share this year. The stock now trades at 16.9 times those earnings....

GREAT-WEST LIFECO $36.20 (Toronto symbol GWO; SI Rating: Above-average) is a leading Canadian insurance company, with $210.6 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 Financial controls about 75% of Great-West. Great-West’s earnings in the three months ended December 31, 2006 rose 4.9%, to $491 million or $0.55 a share from $456 million or $0.51. Revenues rose 29.7%, to $8.5 billion from $6.5 billion. Great-West recently raised its quarterly payout by 6.3%, to $0.255 from $0.24. It now yields 2.8%. Great-West has agreed to buy U.S.-based investment management firm and mutual fund company Putnam Investments Trust for $3.9 billion U.S. The deal also gives Great-West a 25% stake in Thomas H. Lee Partners, a private equity firm. It will more than double Great-West’s assets under administration....