Skip to Content
Morningstar

IGM Financial Earnings: Sale of Great-West Lifeco Stake Overcomes Weaker Asset-Management Results

""
Securities In This Article
IGM Financial Inc
(IGM)

While there was little in narrow-moat IGM Financial’s IGM first-quarter results that would alter our long-term view of the firm, we do expect to raise our CAD 42 fair value estimate slightly to account for higher levels of assets under management than we were forecasting for the firm at this point in the cycle. Even so, the share will still only be slightly undervalued relative to our revised fair value estimate.

IGM Financial closed out the March quarter with CAD 225.9 billion in managed assets, up 4.1% sequentially but down 4.7% year over year. Consolidated net outflows of CAD 50 million during the quarter were reflective of a 0.0% annualized rate of organic AUM growth. While this was better than our forecast calling for negative 3% to negative 1% average annual organic AUM growth during 2023-27, we’re not going to put too much behind one quarter’s results—especially the first quarter, which tends to see more sales than other periods.

With average total AUM down 6.1% year over year during the first quarter, asset-management fee income overall declined 5.0% when compared with the prior year’s period. That said, total revenue increased 21.0% year over year, as IGM Financial booked a CAD 179 million gain from the sale of a portion of the company’s investment in Great-West Lifeco, the Canadian life insurance firm that is also part of the Power Financial group of companies that owns IGM Financial.

As for profitability, the company used ongoing cost controls to deliver adjusted pretax operating margins of 28.2% during the first quarter, which were 790 basis points lower year over year. While this was lower than our projected range of 30% to 32% for the full year, the company does face easier comparables as the year progresses.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Greggory Warren, CFA

Strategist
More from Author

Greggory Warren, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the traditional U.S.-and Canadian-based asset managers, as well as Berkshire Hathaway.

Before assuming his current role in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies. Before joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than seven years, covering consumer staples and consumer cyclicals.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago. During 2014-19, Warren was selected to participate on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

Sponsor Center