Great-West Lifeco world headquarters is pictured in Winnipeg on Feb. 19, 2013. Great-West Lifeco Inc. will acquire Irish Life Group for $1.75 billion through an agreement with the Government of Ireland, which acquired the company last summer.JOHN WOODS/The Canadian Press
Great-West Lifeco Inc. won't let efforts to mesh its recent $1.75-billion acquisition of Irish Life Group with its existing Irish business stand in the way of future mergers.
The insurer, which reported a 7-per-cent rise in second quarter profits after market close Wednesday, said that having a strong management team in Europe would allow it to look for new ways to expand and improve profitability, while integrating the new business.
"Clearly corporate teams will be working with Irish Life Group, but that is in no way going to constrain us from continuing to look for opportunities to grow, whether its additional growth in Europe or the U.S.," said Paul Mahon, chief executive of Great-West, on a conference call. While other major Canadian life insurers have looked to Asia for growth, Great-West has intensified its focus on Europe. Mr. Mahon noted that further growth within Ireland itself would be unlikely, though.
The company's net income hit $521-million in the quarter – another solid, steady period, thanks to overall strength in Europe and Canada.
But its investment in Putnam Investments continues to be a soft spot for Great-West, which could make it a good business to buttress through acquisition. The asset management company, bought by Great-West in 2007, posted a net loss of $14-million in the quarter despite stronger equity markets and good investment performance.
"The combination of stagnant expenses and declining fees relative to assets under management is a worrying trend that does not bode well for Putnam's return to profitability," said Peter Routledge, analyst at National Bank Financial in a note to clients. He noted that if the company can turn the business around, it might be the best shot for growth. Still, he extended his break-even target date to 2016.
But while an acquisition could spur some much-needed gains at Putnam, Great-West also said it would be also interested in beefing up its group retirement services business through its U.S. insurance subsidiary Great-West Financial. The business has posted muted earnings growth in recent quarters.
Still, other analysts have said that when it comes to Putnam, at least, investors just need to wait it out.
"Bears will likely continue to point to the disappointing performance at Putnam; however, we continue to view it as a zero cost option on an eventual turnaround," wrote John Aiken, analyst at Barclays Capital.
Great-West sounded similarly confident while addressing analysts on the call, with Mr. Mahon saying he is starting to see positive fund performance translating into better fund flows on the retail side. The company's patience, he said, will pay off.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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