Hold Rating on Great-West Lifeco Reflects Full Valuation, U.K. Underperformance, and Execution Risks at Empower

BMO Capital analyst Tom Mackinnon has maintained their neutral stance on GWO stock, giving a Hold rating on January 8.

Tom Mackinnon has given his Hold rating due to a combination of factors related to both valuation and business fundamentals. He highlights that Great-West Lifeco’s U.K. operations, which form a meaningful portion of its European business, are underperforming a key peer, Legal & General, in terms of earnings and sales growth. The U.K. segment’s base earnings have been weak and volatile, and its bulk annuity and pension risk transfer volumes have fallen sharply at a time when the overall market remains robust and highly competitive. This underperformance raises concerns about GWO’s ability to capture the growth it has targeted in the U.K. and Europe more broadly.
At the consolidated level, Mackinnon notes that Great-West Lifeco trades at a valuation multiple that he considers generally full relative to its growth profile and earnings visibility. He points to the lumpy and opaque nature of results in the Europe and Capital & Risk Solutions segments as a source of uncertainty. In addition, the company’s growth narrative is increasingly dependent on Empower, which he views as a “show-me” story until it delivers more consistent proof of execution. Although the dividend yield offers some downside support, these mixed fundamentals and elevated competitive pressures support a neutral, Hold stance rather than a more positive recommendation.

In another report released on January 8, Barclays also maintained a Hold rating on the stock with a C$70.00 price target.