Scotiabank has kept its Sector Perform rating and $38 target on Great West Lifeco after the insurer reported base EPS of $0.87 (+9% Y/Y) which was 2% above both Scotia estimate and the Street.
Analyst Meny Grauman's 2022 base EPS estimate goes up by 2% to $3.70 to reflect the small beat, while his estimate for 2023 remains relatively unchanged at $4.06 (from $4.07).
During the call GWO emphasized the resiliency of its platform and rejected the notion that Europe is more at risk of recession than North America. Scotia is not convinced of that second point, but acknowledges the lifeco's business mix is quite defensive, especially in Europe. The company continues to integrate its MassMutual acquisition in the US where expense synergies are on track, and is embarking on the integration of the Prudential acquisition, which closed right after quarter end. Management indicated that it is accelerating its investments in US retail wealth, which is a linchpin of its US strategy, but Scotia believes this effort is very long-tailed and not a near-term catalyst for the shares.
"Broadly speaking Great West Life delivered a relatively clean quarter that continued to highlight the defensive nature of this stock. The bottom line is that there was nothing in these numbers that changes our thesis on this name, even as the macro environment becomes more complicated."