Great-West Lifeco Reported Solid Second Quarter Results

On Thursday, before market opened, Great-West Lifeco reported solid second quarter with core EPS of $0.63, an boost of 15% year-over-year – which remained in line with our and consensus estimates of $0.63. Earnings growth was led by a 24% raise in anticipated profit, strong underwriting results and a 36% boost in total AUA to $806 billion. Sales remained mainly solid, but softened partially in certain regions from current quarters. The core ROE of 15.10% boosted 30 basis points year-over-year. BVPS boosted 20% year-over-year, to $16.05. Net earnings of $616 million ($0.617 per share) include $9 million in Irish Life restructuring spending, but are excluded from core earnings of $624 million ($0.625 per share). The core return on equity of 15.10% boosted 30 basis points year-over-year. BVPS boosted 20% year-over-year, to $16.05.

In general, company’s earnings were essentially in-line with our estimates, with strong results in Canada and Europe offsetting poorer earnings in U.S. Financial Services. In Canada, Individual Insurance sales increased by 17% and Wealth Management sales increased by 16%, but Group Insurance sales decreased 10%. In the U.S., Individual Market sales boosted 69%, but Retirement Services sales dropped by 25% on lower 402,000 sales. Net flows at Putnam came in positive and upgraded year-over-year, but remained down compared to the two most current quarters. Sales in Europe remained mostly higher year-over-year on the Irish Life acquisition, but UK (and Isle of Man) sales decreased compared to the year ago quarter.

The MCCSR ratio came in solid, at 229%, down just little compared to first quarter of 2014. Company had $701 million in cash at the holding firm at the end of second quarter, a boost of roughly $201 million from first quarter of 2014 from preferred share issuance. We are raising our 2014 estimate EPS $2.55 from $2.50 to indicate the anticipated positive influence from the execution of the new Canadian actuarial standards in fourth quarter of 2014. Our 2015 estimate EPS raises little to $2.77 from $2.75 on higher asset balances. We maintain “Sector Outperform” rating and the stock trades at a considerable premium to competitors.

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Ryan Madden, CPA, is a senior analyst for The Downtown Leader. If you have a great story idea for Ryan Madden, you can write at [Ryan.Madden@downtownleader.com ].