Power Financial is a diversified management company having interests in the financial services sector in Canada, the US and Europe. It also has holdings in global industrial and services companies based in Europe.
By geography, Canada accounts for nearly 50% of revenues, followed by Europe (~40%) and the US (10%). The company has controlling interests in Lifeco and IGM, and investment in Pargesa, and owns some of the strongest financial services brands in North America and Europe. Lifeco contributed ~80% of the group’s total adjusted earnings in 2018, followed by IGM (18%) and Pargesa (2%).
Power Financial manages assets worth $840 billion and customer relationships worth more than 30 million. Diversified business model and leading franchises have enabled Power Financial to attain a leadership position in financial services across geographies and businesses. In partnership with its subsidiaries, Power Financial has been participating in the emerging fintech industry, which is capable of reaching a large base of consumers, making insurance and financial services more accessible to the public.Investment Data
- Opportunity Score: 67
- Ticker: TSE:PWF
- Sector: Financial Services
- Industry: Insurance - Life
- Market Cap: 21.57B
- P/E: 10.97
- Dividend Yield: 5.61
- Dividend Payout Ratio: 61.55
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
Power Financial has a diversified business model. It operates through its subsidiaries such as Great-West Lifeco, IGM Financial, and Pargesa. Most of its businesses enjoy large market shares in the regions they operate. Great-West Lifeco is a leading international financial services holding company engaging in life and health insurance, asset management, retirement services, etc. and has a history dating back to 125 years. It is the No.1 individual insurer in Canada, catering to 1 out of every 3 Canadians. The company sold off its U.S. individual life and annuity business in January to focus on U.S. retirement and asset management markets, which poses to be its next big growth driver.
IGM Financial is one of Canada’s premier personal financial services companies. Power Financial companies are continually investing in enhancing their current business models to better serve existing clients and appeal to newer ones. The companies are focusing on strategies such as transforming their advisor-based distribution businesses, harnessing the potential of group customers and reshaping global asset management. Power Financial is growing organically as well as through active acquisitions to further strengthen its market position and add profitability to its existing businesses. Its recent significant acquisition was that of Retirement Advantage in the U.K.
Some of the group’s recent organic investments include investment in Wealthsimple, Canada’s leading robo-advisor; a U.S.-based digital wealth platform; Portag3, a fintech venture capital fund; and IGM Financial’s purchase of a significant position in China Asset Management Corporation (a leading AMC in China). Power Financial also has an investment in Pargesa, which through its holdings has an influence in the global industrial and services companies in Europe. Pargesa’s ownership of GBL also provides an additional value creation vehicle for Power Financial.
Power Financial’s revenues have registered a growth of 8.8% CAGR over the last three years. These leading franchises have attractive growth profiles and positions Power Financial well for the future. The group is actively participating in the emerging fintech industry too. Its Wealthsimple is one of Canada’s fastest growing online investment managers offering globally diversified portfolios of low-cost index funds.
Power Financial has a sound track record of paying increasing dividends to its shareholders and a history of producing attractive shareholder returns. The company has paid over $10 billion in dividends over the last decade. Its latest dividend hike was 5.2% in the quarter. Power Financial sports an attractive dividend yield of 6.6% and has a payout ratio of 64%. The group has grown its dividends at more than 5% CAGR in the last three years.
Power Financial focuses on high growth and high return on equity products and market segments. The company’s prudent approach to risk management helps it strike a proper balance in its capital deployments. Power Financial invests in companies that have a long-term perspective and investment horizon. Its Lifeco and IGM have become leaders across the insurance, asset management, and wealth and retirement business lines in core markets such as Canada, the U.S. and Europe. The group is favorably placed to grow its earnings organically by capitalizing on the scale of its leading franchises in a rapidly changing environment.
The companies of the Power Financial group provide vital services to millions of people in North America, Europe and Asia. They help clients achieve financial security and peace of mind by offering comprehensive planning and nurturing long-term relationships. It is difficult for newbies to build that kind of trust in the mind of investors and this results in sticky client relationships.
The individual insurance, group life and health benefits, savings and investment marketplaces are highly competitive. Power Financial competitors include mutual fund companies, insurance companies, banks, and investment advisors as well as other service and professional organizations. Great-West LifeCo competes with leading Canadian insurance companies like Manulife Financial Corporation, Sun-Life Financials, iA Financial Corporation, and Intact Financial. The company faces intense competition from insurance companies, banks, asset managers, mutual fund companies, financial planners and other service providers. Power Financial also faces constant headwinds from rapidly evolving technology, which has led to the emergence of several new entrants.
Power Financial, in partnership with Lifeco and IGM, continues to build on the future of the financial services market. It is well placed to gain from future trends in the financial services industry driven by its diversified global footprint and extensive financial expertise. Power Financial should continue its dividend payment streak in the future, given its large market share positions, focus on emerging trends, prudent capital management and sound track record of dividend payments.
The life insurance segment should continue to fill the coffers but the mutual fund segment is being challenge and may offset growth over time. While it pays a good dividend yield and it’s not at risk, the growth expectations doesn’t appear to be clear. I prefer a US S&P500 index at this point than invest in PWF.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.