Great-West’s Q2 Base Earnings Beat Estimates

Great-West Lifeco (GWO) base earnings increased 17% in its second quarter from a year earlier, thanks to a contribution from Massachusetts Mutual Life Insurance Company. However, net profit decreased 9.2% in the quarter. Great-West Lifeco is an international financial services holding company focused on insurance.

Net income attributable to shareholders was C$784 million (C$0.84 per diluted share) in Q2 2021, down from C$863 million (C$0.93 per share) in Q2 2020.

Excluding one-time items, base earnings came in at C$826 million (C$0.89 per share) in the quarter ended June 30, up 17% from C$706 million or (C$0.76 per share) in the prior-year quarter. According to financial data firm Refinitiv, Great-West was expected to post C$0.79 per share in base earnings.

The increase was attributable to the C$63-million contribution from MassMutual purchased in December, rising stock markets, and a favorable morbidity experience in Europe and Canada. (See Great-West Lifeco stock charts on TipRanks)

Great-West president and CEO Paul Mahon said, “We’ve transformed our portfolio over the last few years by capitalizing on several strategic initiatives and investments – including, most recently, our agreement to acquire Prudential Financial, Inc.’s full-service retirement business in the U.S. Our second quarter results were driven by strong performance across segments with solid sales activity. Just as importantly, our business integration activities in the U.S. remain on track to deliver targeted financial results and strong customer retention.”

Last month, Lifeco’s U.S. unit (Empower Retirement) agreed to buy Prudential Financial Inc’s full-service retirement business for a total value of about $3.55 billion. This acquisition strengthens Empower Retirement’s position as the second-largest provider of pension services in the United States.

On July 25, National Bank Financial analyst Gabriel Dechaine maintained a Hold rating on GWO while raising its price target to C$37.00 (from C$36.00). This implies 2.6% downside potential.

Consensus on the Street is that GWO is a Hold based on one Buy and six Holds. The average Great-West Lifeco price target of C$39.00 implies 2.7% upside potential.