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Great-West Lifeco (TSE:GWO)
TSX:GWO
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Great-West Lifeco
(TSX:GWO)
73Outperform
Positive Factors
Financial Performance
The company has increased its medium-term base ROE target to over 19%, reflecting a strong focus on generating higher returns.
Future Earnings Potential
Empower's 'double-digit' targeted growth is identified as a key driver for the company's future earnings potential.
Negative Factors
Earnings Challenges
Weaker expected insurance earnings and Empower earnings impact the company's performance.
Earnings Visibility
The generally full valuation at 11.8x NTM base EPS and earnings visibility challenges in the Europe/Capital & Risk Solutions segments create concerns.
Great-West Lifeco (GWO) vs. S&P 500 (SPY)
Market Cap
C$48.77B
Dividend Yield4.34%
Average Volume (3M)3.85M
Price to Earnings (P/E)12.5
Beta (1Y)0.62
Revenue Growth-2.40%
EPS Growth42.24%
CountryCA
Employees33,250
SectorFinancial
Sector Strength79
IndustryInsurance - Life
Share Statistics
EPS (TTM)4.18
Shares Outstanding930,708,100
10 Day Avg. Volume2,384,365
30 Day Avg. Volume3,853,162
Financial Highlights & Ratios
PEG Ratio0.30
Price to Book (P/B)N/A
Price to Sales (P/S)1.10
Price to Cash Flow (P/CF)6.20
P/FCF Ratio0.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$56.22Price Target Upside9.10% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
Great-West Lifeco Business Overview & Revenue Model
Company DescriptionGreat-West Lifeco Inc., a financial services holding company, engages in the life and health insurance, retirement and investment services, asset management, and reinsurance businesses in Canada, the United States, and Europe. The company offers a portfolio of financial and benefit plan solutions for individuals, families, businesses, and organizations; life, disability, critical illness, accidental death, dismemberment, health and dental protection, and creditor insurance products; and retirement savings and income, annuity, and other specialty products. It also provides employer-sponsored retirement savings plans, individual retirement and taxable brokerage accounts, enrollment services, communication materials, investment options, and education services; and fund management, investment, and advisory services. In addition, the company offers private-label recordkeeping and administrative services; and investment products, including equity, fixed income, absolute return, and alternative strategies. Further, it provides protection and wealth management products, including payout annuity products; pension products; and life, annuity/longevity, mortgage surety, and property catastrophe reinsurance products. The company offers its products under the Canada Life, Irish Life, Empower, Putnam Investments, and PanAgora brand names. It distributes its products through a network of advisors, dealers, brokers, managing general agencies, financial institutions, consultants, third-party administrators, sales force, financial planners, employee benefit consultants, banks, and multi-tied agents. The company was founded in 1891 and is based in Winnipeg, Canada. Great-West Lifeco Inc. operates as a subsidiary of Power Financial Corporation.
How the Company Makes MoneyGreat-West Lifeco generates revenue through multiple streams primarily derived from insurance premiums, investment income, and management fees. The company collects premiums from policyholders in exchange for life, health, and disability insurance coverage, which provides a steady income stream. Additionally, GWO invests these premiums in various financial instruments, earning returns that contribute significantly to its income. The company's subsidiaries, such as Empower Retirement, manage retirement and investment accounts, earning management and advisory fees. This diversification across insurance and financial services enables Great-West Lifeco to maintain stability and growth in its earnings. Key partnerships with financial advisors and institutional clients further bolster its market presence and revenue generation capabilities.
Great-West Lifeco Financial Statement Overview
Summary
Great-West Lifeco's financials show strengths in profitability margins and balance sheet stability, with a solid equity ratio and reasonable leverage. However, revenue decline poses a challenge, and the company's ability to generate operating cash flow slightly weakened. Overall, the company maintains a stable financial position but should address revenue growth to enhance future performance.Income Statement
Great-West Lifeco has experienced a decline in revenue from previous years, with a substantial drop from 2021 to 2022 and further decline in 2023. The gross profit margin remains high since revenue equals gross profit, typical for insurance companies. The net profit margin has shown improvement in 2023 compared to 2022 and 2021, indicating better cost management. However, the absence of EBIT data in 2024 raises concerns about operating efficiency.55
Neutral
Balance Sheet
The company's debt-to-equity ratio is reasonable, indicating a balanced leverage. The equity ratio suggests a strong equity base compared to total assets, which is positive for long-term stability. Return on equity has been stable but could improve. The overall balance sheet reflects a solid financial position, with a slight concern over increasing liabilities.72
Positive
Cash Flow
Operating cash flow has been generally strong, but it decreased slightly in 2024. The free cash flow has shown resilience despite revenue declines, and the free cash flow to net income ratio indicates efficient cash generation relative to profits. The cash flow stability is promising, yet the drop in operating cash flow warrants attention.65
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 17.22B | 25.27B | 44.70B | 64.45B | 60.60B | Gross Profit |
| 17.22B | 25.27B | 44.70B | 64.45B | 60.60B | EBIT |
| 0.00 | 16.00M | 3.97B | 3.57B | 2.99B | EBITDA |
| 5.93B | 4.00B | 3.72B | 4.74B | 3.82B | Net Income Common Stockholders |
| 4.07B | 2.87B | 3.73B | 3.26B | 3.08B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 24.71B | 19.38B | 18.84B | 17.23B | 7.95B | Total Assets |
| 802.16B | 713.23B | 701.46B | 630.49B | 600.49B | Total Debt |
| 10.23B | 9.65B | 11.29B | 9.73B | 10.71B | Net Debt |
| 664.00M | 2.60B | 4.88B | 4.96B | 2.76B | Total Liabilities |
| 769.51B | 683.38B | 669.14B | 600.00B | 573.48B | Stockholders Equity |
| 29.54B | 26.84B | 29.01B | 27.22B | 24.03B |
| Cash Flow | Free Cash Flow | |||
| 4.75B | 5.20B | 7.05B | 10.37B | 9.61B | Operating Cash Flow |
| 4.75B | 5.20B | 7.05B | 10.37B | 9.61B | Investing Cash Flow |
| -408.00M | -786.00M | -5.49B | -11.21B | -8.20B | Financing Cash Flow |
| -2.29B | -3.55B | -620.00M | -992.00M | 2.01B |
Great-West Lifeco Technical Analysis
Negative
51.53
Price Trends
52.24
Negative
49.61
Positive
46.27
Positive
Market Momentum
1.26
Negative
79.34
Negative
94.51
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:GWO, the sentiment is Negative. The current price of 51.53 is below the 20-day moving average (MA) of 54.01, below the 50-day MA of 52.24, and above the 200-day MA of 46.27, indicating a neutral trend. The MACD of 1.26 indicates Negative momentum. The RSI at 79.34 is Negative, neither overbought nor oversold. The STOCH value of 94.51 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:GWO.
Great-West Lifeco Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | C$31.09B | 11.66 | 12.45% | 4.74% | -7.62% | 25.47% | |
73 Outperform | C$48.77B | 12.54 | 15.52% | 4.34% | -2.40% | 42.24% | |
70 Outperform | C$11.78B | 12.87 | 13.26% | 2.72% | -17.69% | 29.19% | |
64 Neutral | $13.46B | 9.44 | 9.34% | 4.72% | 16.14% | -8.80% |
* Financial Sector Average
Performance Comparison
TSE:GWO
Great-West Lifeco
51.53
13.08
34.02%
MFC
Manulife Financial
27.30
5.06
22.75%
SLF
Sun Life Financial
54.26
5.47
11.21%
ELEEF
Element Fleet Management
20.01
4.67
30.44%
TSE:IAG
iA Financial Corporation Inc
120.28
40.74
51.22%
TSE:POW
Power Corp of Canada
47.48
12.88
37.23%
Great-West Lifeco Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: 9.80% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong performance across most segments, particularly with record earnings and growth in Empower and European markets. However, challenges remain with net outflows in Empower Workplace and impacts from California wildfires. The company's strong capital position and strategic initiatives such as the dividend increase and share repurchase highlight its resilience and potential for continued growth.Highlights
Record Performance Across Segments
Great-West Lifeco delivered record base earnings for the sixth consecutive quarter, with a year-over-year increase of 15% to $1.1 billion. Base EPS also increased by 15% to $1.20.
Empower Segment Growth
Empower in the U.S. reported a record quarter with base earnings growth of 36% and base ROE increasing by over 400 basis points in the past 12 months.
Dividend Increase and Share Repurchase
The Board approved a 10% dividend increase to $0.61 per common share and announced the intention to repurchase an additional $500 million worth of shares under the existing NCIB.
Strong Capital Position
LICAT ratio remained strong at 130%, and the leverage ratio decreased by 2 points year-over-year to 29%.
Growth in Personal Wealth
Empower Personal Wealth reported a 30% increase in average AUA compared to last year, with net flows accounting for 12% asset growth, demonstrating strong platform strength.
European Market Success
European businesses delivered record performance with average AUA growth of 23% year-over-year and strong net flows in the wealth and retirement segments.
Lowlights
Net Outflows in Empower Workplace
Continued net outflows in Empower Workplace as planned members withdrew higher account balances, a trend consistent across the industry.
Wildfires in California
The Capital and Risk Solutions business anticipates modest impacts from recent wildfires in California, with current loss estimates between $10 million and $50 million after tax.
Moderation in Insurance Experience
Insurance service results were down year-over-year, reflecting a moderation in favorable experience from last year’s elevated levels.
Company Guidance
During the Great-West Lifeco Fourth Quarter 2024 Results Conference Call, the company reported record base earnings of $1.1 billion and base EPS of $1.20, both reflecting a 15% increase over the prior year. Base ROE rose to 17.5%, nearly a full percentage point higher than the previous year, while the book value per share saw a 12% increase. The U.S. segment, Empower, was highlighted for its exceptional performance, with base earnings growing by 36% and base ROE improving by over 400 basis points. The company's capital position remains strong with a LICAT ratio of 130%, despite a 4-point decrease from the previous quarter. Additionally, they announced a 10% increase in the quarterly dividend to $0.61 per share and a planned $500 million share repurchase under the existing NCIB. The company also noted favorable contributions from equity markets, foreign currency impacts, and strategic acquisitions, which have bolstered its financial results.Great-West Lifeco Corporate Events
Business Operations and StrategyFinancial Disclosures
Great-West Lifeco Updates Financial Objectives at 2025 Investor Day
Positive
Apr 2, 2025
Great-West Lifeco Inc. hosted its 2025 Investor Day in Toronto, focusing on the theme ‘Driving Growth, Delivering Lasting Value.’ The company updated its medium-term financial objectives, including an increase in its Base Return on Equity objective to 19% or more, up from 16-17%. Additionally, it introduced a new objective for Base Capital Generation of 80% or more and reaffirmed its confidence in achieving Base EPS growth of 8-10% and a Base Dividend Payout Ratio of 45-55%. These updates reflect the company’s strategic focus on building market-leading franchises and delivering value for shareholders through strong cash and capital generation.
Business Operations and StrategyFinancial Disclosures
Great-West Lifeco Enhances Transparency with Updated 2025 Information Package
Positive
Mar 18, 2025
Great-West Lifeco has updated its Supplemental Information Package for 2025, offering more detailed segment reporting and enhanced disclosure of assets under management and advisement. These changes aim to provide greater clarity and transparency for analysts and investors, particularly in the Retirement and Wealth lines of business. The update also includes a new efficiency ratio metric and reclassification of certain expenses to improve understanding of expense management and capital allocation.
Business Operations and Strategy
Great-West Lifeco CEO to Present at RBC Conference
Neutral
Feb 25, 2025
Great-West Lifeco announced that its President and CEO, Paul Mahon, will present at the RBC Capital Markets Global Financial Institutions Conference on March 5, 2025. This engagement underscores the company’s active participation in industry discussions and could enhance its visibility and influence within the financial sector.
Stock BuybackDividendsFinancial Disclosures
Great-West Lifeco Reports Record Earnings and Increases Dividend
Positive
Feb 5, 2025
Great-West Lifeco Inc. reported record fourth quarter and full-year 2024 earnings, with base earnings reaching $1.1 billion for the quarter and $4.2 billion for the year, reflecting increases of 15% and 14% respectively compared to the previous year. The company also announced a 10% dividend increase and plans for additional share repurchases, highlighting its strategic focus on shareholder value and robust financial performance amid economic uncertainties.
Financial Disclosures
Great-West Lifeco to Announce Q4 2024 Financial Results and 2025 Schedule
Neutral
Jan 31, 2025
Great-West Lifeco announced it will release its fourth quarter 2024 financial results on February 5, 2025, with a subsequent conference call scheduled for February 6. The company has also outlined its earnings release and conference call schedule for 2025, signaling transparency and structured communication with stakeholders.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.