November 10, 2011 / 6:09 PM / 6 years ago

UPDATE 3-Great-West Lifeco profit rises, meets expectations

* Q3 EPS C$0.48 vs yr-earlier C$0.28

* Analysts expected EPS C$0.48 (Adds analyst’s comment, details)

TORONTO, Nov 10 (Reuters) - Great-West Lifeco GWO.TO, Canada’s second-largest life insurer, said on Thursday its quarterly profit rose 71 percent from a year earlier when litigation provisions hurt earnings.

The profit was in line with market expectations and confirmed Winnipeg-based Great-West as the best performer this quarter among Canada’s big four life insurers, all of whom have been hurt by stock and bond market losses in volatile markets.

Great-West, a division of the Montreal-based Desmarais family’s Power Corp POW.TO empire, earned C$457 million ($448 million), or 48 Canadian cents a share, in the quarter ended Sept. 30. That compared with a profit of C$267 million, or 28 Canadian cents a share, in the same quarter a year earlier.

Analysts had expected a profit of 48 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Third-quarter 2010 results included a C$204 million cost related to an incremental litigation provision.

Great-West, the last of Canada’s big life insurers to report earnings, said consolidated assets under administration were C$493.3 billion at the end of September. That was up C$6.3 billion from Dec. 31, 2010.

Analysts said the results showed Great-West remains the best-positioned Canadian life insurer given market volatility and the global low-interest rate environment, which makes it hard for insurers to make money on their huge portfolios of long-term investments.

“GWO only incurred modest charges to its income, despite the significant market volatility in the quarter, further entrenching it as the most stable of the Canadian life insurance companies,” John Aiken, an analyst at Barclays Capital, said in a note to clients.

“We continue to believe that Great-West represents the best risk-reward profile in the group, in that it has exhibited very little relative risk, while still retaining strong upside once the market focuses on fundamentals again and rewards GWO for its profitability and underlying earnings momentum.”

Rival insurers Manulife Financial MFC.TO and Sun Life Financial SLF.TO both reported steep third-quarter losses due to the impact of falling stock markets and low bond yields, but Great-West has far less exposure to market volatility. Quebec City-based Industrial Alliance IAG.TO, the No. 4 insurer, reported a much smaller profit than expected.

Winnipeg-based Great-West is 68-percent owned by Power Financial PWF.TO, which is a unit of Power Corp. Great-West sells insurance under the Great-West, Canada Life, London Life and Putnam Investments banners.

A drop in U.S. net earnings to C$75 million from C$87 million a year earlier was a notable negative in the quarter for Great-West. Putnam revenue fell to C$5.7 billion in the quarter from C$6.2 billion a year earlier, mostly due to volatility in the markets.

Noting the debt crisis in Europe, Great-West said only 3 percent of its invested assets were in bonds of government and financial institutions of euro zone countries as of Sept. 30, 2011.

“The company’s credit market experience remains stable with credit related charges and provisions totaling C$16 million after-tax in third quarter 2011,” it said.

$1=$1.02 Canadian Reporting by Andrea Hopkins; editing by Peter Galloway

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