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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Great-West Lifeco Inc.    GWO   CA39138C1068


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Wealth management drives Canadian insurance profits

02/13/2014 | 05:24pm EST

TORONTO (Reuters) - The profits of Canadian life insurers grew in the fourth quarter, as higher returns from growing wealth management units offset uneven insurance sales, highlighting a shift in business as the companies cut risk in the wake of the financial crisis.

Manulife Financial Corp (>> Manulife Financial Corp.), the country's largest insurer, posted a 20 percent rise in net profit for the fourth quarter on Thursday, while No. 3 player Sun Life Financial Inc (>> Sun Life Financial Inc.) said its profit from continuing operations more than doubled to C$571 million ($519.78 million).

Smaller Industrial Alliance Insurance and Financial Services Inc (>> Industrial Alliance Insur. & Fin. Ser.), the No.4 player in the market, posted a 26 percent rise in profit and boosted its dividend by 6 percent. Great-West Lifeco Inc (>> Great-West Lifeco Inc.), the second-largest insurer, said its profit doubled largely because of a litigation recovery.

For Manulife, core profit was driven by wealth sales that rose 15 percent to C$12.2 billion, while insurance sales in the quarter fell 32 percent to C$617 million.

"Insurance sales were down, largely because they're charging more for their policies, but wealth sales were way up," said Peter Routledge, an analyst at National Bank Financial.

"That just highlights that Manulife is slowly shifting itself towards wealth and away from protection businesses."

Manulife is not alone.

Sun Life's results were powered by its U.S. MFS Investment management arm, while Industrial Alliance's profit were helped by stronger wealth sales and an 18 percent rise in assets under management, while individual insurance sales fell.

The business shift is part of a larger overhaul by the insurers in the wake of the financial crisis, which cost them billions in market-related losses, largely connected their insurance businesses.

Wealth management has lower capital requirements, predictable fee-based income and the promise of increased business as baby boomers approach retirement and increasingly need money management.

Manulife, which owns U.S.-based insurer John Hancock, continued the shift during the quarter as it sold its Taiwan insurance business, booking a C$350 million gain that helped boost earnings. It also purchased small Malaysian wealth manager MAAKL Mutual Bhd during the quarter.

Sun Life sold its U.S. annuities business last year as part of its own move to lessen risk.

Sun Life Chief Executive Dean Connor said the company's business is now about 55 percent wealth management, up from 50 percent two years ago.

"I expect going out a number of years, it's going to be a larger percentage of our business," he said. "There's a lot of demand for wealth solutions and you see us investing to meet that demand."


Manulife's core profit, which excluded one-time items and market-related gains and losses, was C$685 million, or 35 Canadian cents a share, up from C$554 million, or 28 Canadian cents per share.

The result fell just short of analysts' estimates of a profit of 38 Canadian cents a share, and by mid-afternoon, the company's shares closed down 1 Canadian cent at C$20.90.

Sun Life closed up 2.2 percent at C$38.35 after it reported operating income was C$642 million, or C$1.05 a share, up from C$333 million, or 56 Canadian cents a share a year earlier. That was well ahead of analysts' expectations of a profit of 68 Canadian cents a share.

The results follow a year during which the insurers clawed back some of the ground they lost in 2008-2012, when investors were scared off by results that would veer from profit to steep loss based on equity market and interest rate fluctuations.

Manulife surged 55 percent in 2013, while Sun Life gained 42 percent. Industrial Alliance was up 50 percent, while Great-West, which historically has had less market exposure than its rivals, rose 32 percent.

Tim Johal, an portfolio manager at Investors Group, which owns more than C$1 billion in Manulife shares, is bullish on the sector, although he expects share growth to moderate.

"I think that you'll see smaller increments in terms of core earnings growth and the shares should reflect that. I don't see any reason why you can't see double digit earnings growth though," he said.

The sharp gains in Manulife shares, combined with steadier profits and a stronger capital position, has prompted some to wonder when the company might restore the dividend it cut in half in 2009.

But Manulife Chief Financial Officer Steve Roder said on a conference call the company would be unlikely to do so until it further reduces its leverage ratio, sees more evidence of stable earnings, and receives more clarity on the direction of changes to capital and accounting regulations.

"Until we have some further clarity on some of the other factors, we do not expect to recommend any changes to the dividend to our board," he added.

($1 = 1.0986 Canadian dollars)

(Editing by Andre Grenon)

By Cameron French

© Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
FIRST FINANCIAL CORPORATION 0.05% 41.8 Delayed Quote.7.59%
GREAT-WEST LIFECO INC. 0.93% 31.64 Delayed Quote.4.25%
MANULIFE FINANCIAL CORPORATION 1.20% 24.47 Delayed Quote.6.76%
RISE, INC. -4.17% 23 End-of-day quote.-4.17%
SHIFT, INC. -1.62% 12110 End-of-day quote.-15.37%
SUN LIFE FINANCIAL INC. 2.17% 60.8 Delayed Quote.7.42%
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01/08GREAT WEST LIFECO : Mackenzie Investments and Great-West Lifeco Close GLC Asset ..
01/04GREAT WEST LIFECO : subsidiary, Empower Retirement, closes acquisition of retire..
2020GREAT WEST LIFECO : reports results of conversion elections for Non-Cumulative 5..
2020Joint Statement By Canadian Banks And Life Insurance Companies Regarding Annu..
2020Great-West Lifeco Earns 'A' Ranking by CDP
2020GREAT WEST LIFECO : earns prestigious ‘A' ranking by CDP
2020GREAT WEST LIFECO : earns prestigious 'A' ranking by CDP
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Sales 2020 48 082 M 37 781 M 37 781 M
Net income 2020 2 805 M 2 204 M 2 204 M
Net Debt 2020 - - -
P/E ratio 2020 10,6x
Yield 2020 5,54%
Capitalization 29 353 M 23 002 M 23 065 M
Capi. / Sales 2020 0,61x
Capi. / Sales 2021 0,54x
Nbr of Employees 24 000
Free-Float 26,0%
Duration : Period :
Great-West Lifeco Inc. Technical Analysis Chart | MarketScreener
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Technical analysis trends GREAT-WEST LIFECO INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 10
Average target price 32,70 CAD
Last Close Price 31,64 CAD
Spread / Highest target 16,9%
Spread / Average Target 3,35%
Spread / Lowest Target -8,34%
EPS Revisions
Managers and Directors
Paul Anthony Mahon Co-President, Chief Executive Officer & Director
Jeffrey F. Macoun Co-President & Chief Operating Officer
Robert Jeffrey Orr Chairman
Garry MacNicholas Chief Financial Officer & Executive Vice President
Philip Armstrong Global Chief Information Officer & Executive VP
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