Friday, November 06, 2009

Great-West Lifeco Q3 2009 Earnings

  
Scotia Capital, 6 November 2009

• EPS of $0.47, vs. our $0.43 estimate. In line with consensus of $0.48.

Implications

• Unlike the other big lifecos, GWO's limited equity market sensitivity and minimal interest rate sensitivity once again resulted in a fairly steady quarter - $0.04 above our estimate and $0.01 below consensus - underlying EPS at $0.49 in line with our estimate.

• Sales momentum continues in U.S. Financial Services, as several new cases propel the top line 50% YOY and 57% QOQ. As well, sales momentum continues in Canada, with individual insurance sales up 13% YOY and individual wealth management sales down just 3% YOY (better than prior quarters). Sales in the U.K. were down sharply (40%), but not as bad as the market (down 50%).

• While Putnam net sales, at negative US$1.8B, were much better than previous quarters, they were slightly worse than our negative US$1B - US$ 1.5B estimate. Putnam margins, at negative 11%, remain weak.

Recommendation

• With a much lower risk profile, significantly less EPS volatility, an excellent track record, attractive 10.6x multiple and 5.2% yield, we reiterate our 1-Sector Outperform rating.
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