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Heavyweight Great West weathers lacklustre year

The great banking collapse of 2008, which still echoes resoundingly up and down the corridors of Irish business, had one small incidental spin-off. It helped Ireland introduce itself to the prudent conservatism of Canadian banking and financial services.

The great banking collapse of 2008, which still echoes resoundingly up and down the corridors of Irish business, had one small incidental spin-off. It helped Ireland introduce itself to the prudent conservatism of Canadian banking and financial services.

A legacy of that acquaintance is Great West Life Co (GWL), the present owners of Ireland’s biggest insurer, Irish Life. GWL stepped in during 2013 to buy the shares of the profitable Irish Life from the Irish government after the period of unprecedented horrors during which the listed company, Irish Life and Permanent, was taken through the wringer.

There is comfort being part of a major international player and GWL certainly has scale. Its interests extend to all aspects of insurance, annuity products, investment management, retirement savings and reinsurance. Its offshoots include Canada Life, London Life, and Putman Investments. The company is indirectly controlled by the ubiquitous Power Corp of Canada which owns over 70pc of the shares.

The company is a heavyweight in Canadian financial services, where it manages a broad portfolio and provides services to more than 12 million people (one-in-three Canadians) through a vast network of financial advisers and brokers. Its Canadian business alone accounts for 45pc of the group’s earnings.

However, even hotshot financial service companies can run up against the ropes. The company’s experiences in the United States in the past year have been disappointing. Earnings fell from CAD$410m (€286m) to CAD$250m (€174m). Indeed none of its three complementary businesses – Putman, GWL Finance and Empower Retirement – performed well.

Its Putman investment subsidiary, which offers mutual funds to individuals and institutional investors, had ‘challenging’ results.

GWL Financial, a provider of employer-sponsored retirement savings plans for the public, not-for-profit and corporate sector, had mixed results. Finally, GWL subsidiary Empower Retirement, which is focused on the US retirement market, did not sparkle.

GWL European business consists of insurance, annuities and reinsurance, and accounts for 45pc of group earnings. The company operates in the UK, Isle of Man, Germany and Ireland. In 2015 it acquired the annuities business of Equitable Life Assurance. European net earnings last year were marginally ahead of the previous year.

The Irish Life business contributed CAD$250m to the group, down on 2015. Last year it acquired Aviva Health Insurance and got control of GloHealth Financial Services. The operation is the leading life insurance company in Ireland, with 36pc market share. GWL opened its first German operation 17 years ago following the EU opening of the cross-border insurance market. Its focus in Germany is on pensions and insurance.

Its reinsurance business is broadly diversified by geography with operations in Canada, the US, Barbados and Ireland. It provides life reinsurance in the US and Europe and property and casualty reinsurance on a global basis. The firm anticipates growth opportunities through acquisitions and product expansion.

Results for 2016 show net earnings at CAD$2.64bn (€1.84bn), in contrast to CAD$2.76bn (€1.93bn) for the previous year. Of some concern to investors is the return on equity is now the lowest in the last five years. The company’s five-year share trend show its present price at CAD$37 (€26), a record; five years ago it was CAD$20 (€14). It has a modest multiple of 14 and a valuation of CAD$36bn (€25bn).

The group has a strong capital position, is highly rated by credit rating agencies, and is strong enough financially to invest in growth and acquisitions. Like all good financial services it has a stable investment performance, disciplined management with a risk sensitive culture. That is the sort of positive-sounding public relations talk you would expect from an insurance company, don’t you think?

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.
Article Source: http://tinyurl.com/kbwqb42


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