Great-West Lifeco Inc logo

GWO - Great-West Lifeco Inc News Story

C$25.81 -0.3  -1.2%

Last Trade - 21/09/20

Sector
Financials
Size
Large Cap
Market Cap £14.21bn
Enterprise Value £14.73bn
Revenue £32.21bn
Position in Universe 31st / 2687

UPDATE 1-Canadian insurers set for double-digit quarterly profit drop amid COVID-19

Thu 30th July, 2020 2:23pm
(Adds IA Financial results in fifth paragraph and shares in
sixth)
    By Nichola Saminather
    TORONTO, July 30 (Reuters) - Canadian life insurers are set
to see double-digit earnings decreases in the second quarter as
the pandemic-induced economic slowdown has ushered in decade-low
interest rates and weighed on sales.
    Analysts predict declines in underlying earnings per share
of between 10% and 14% from a year earlier for the four major
life insurers -- Manulife Financial  MFC.TO , Sun Life Financial
 SLF.TO , Great-West Lifeco  GWO.TO  and IA Financial  IAG.TO .
    "Insurance companies keep a very large reserve of cash, and
when interest rates are as low as they are... it obviously hurts
them," said Allan Small, senior investment adviser at Allan
Small Financial Group with HollisWealth. 
    The year-on-year declines are set to be the most since the
first quarter of 2012, according to analysts.
    On Thursday, IA Financial reported a 6% drop in core
earnings from a year earlier to C$1.57 a share, handily beating
analysts' estimates of C$1.38. 
    Great-West, Manulife and Sun Life are set to report earnings
on Aug. 4, 5 and 6 respectively.
    IA Financial shares are down 37% this year. Manulife and
Great-West have lost nearly 30%, and Sun Life 10.6%, versus the
benchmark Toronto stock index's 4.6% decline.
    Canaccord Genuity analyst Scott Chan wrote in a note that
the industry is buffeted by lower interest rates, higher credit
losses from corporate downgrades and the energy sector,
resulting in a 14% year-on-year profit drop, despite strong
wealth management performance.
    Despite the headwinds, second-quarter profits are likely to
be an improvement on the prior three months, of about 1%,
Barclays analyst John Aiken said, helped by improved equity
markets. Canaccord also expects a 1% profit increase from the
prior quarter, and CIBC Capital Markets a 4.6% gain.
    Canadian insurers could follow some of their U.S.
counterparts, including Aflac Inc  AFL.N  and Principal
Financial  PGF.O  in beating estimates, said Brian Madden,
portfolio manager at Goodreid Investment Counsel, which holds
Manulife shares.
    But wealth management strength is "not likely to be enough
to offset weak sales in the group insurance and group retirement
segments," said Madden, who expects earnings declines in the
high-single-digits from a year ago. "When you're having
bankruptcies and layoffs, and you're not adding a lot of
employees, you're not buying a lot of new... plans." 

 (Reporting By Nichola Saminather
Editing by Alistair Bell and Bernadette Baum)
 ((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604;))
© Stockopedia 2020, Refinitiv, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.