Valued at a market cap of $47 billion, Great-West Lifeco (TSX:GWO) is among the largest financial services companies globally. Founded in 1891, it provides life and health insurance, retirement solutions, wealth management, and reinsurance services across Canada, the U.S., and Europe. Operating under brands including Canada Life, Irish Life, and Empower, Great-West offers individuals and businesses insurance protection, retirement savings plans, annuities, and investment products through various distribution channels.
In the last 10 years, the TSX stock has returned 133% to shareholders after adjusting for dividend reinvestments, similar to the broader index returns of 138%. Despite its steady gains, Great-West also offers you a tasty dividend yield of 4.4%. Let’s see if the TSX dividend stock can continue to deliver inflation-beating returns over the next four years.
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Is Great-West Lifeco stock still a good buy?
In the first quarter (Q1) of 2025, Great-West Lifeco delivered solid results, with base earnings exceeding $1 billion, representing 5% growth year over year. It achieved a healthy base RoE (return on equity) of 17.2%, an improvement of 20 basis points from the prior year, supporting the company’s medium-term financial objectives.
The quarter featured strong performance in the Retirement and Wealth segments, which grew 24% and double digits, respectively. Empower, the U.S. retirement business, delivered impressive results, with operating margins expanding 400 basis points to 30%. Retirement net flows improved, and wealth platforms across regions showed momentum, with enhanced net inflows in Canada exceeding $300 million year over year.
Several temporary factors impacted results, including unfavourable mortality experience across segments (approximately $30 million pre-tax), a $21 million after-tax provision for California wildfires, and commercial mortgage loan write-downs totalling $45 million after-tax. Management characterized these as isolated events rather than systemic issues.
Great-West maintains a strong capital position with a LICAT (life insurance capital adequacy test) ratio of 130% and a reduced leverage ratio of 28%, down one percentage point from Q4. Cash at the holding company level stands at $2.5 billion, providing flexibility for strategic capital deployment. Moreover, base capital generation exceeded 80% of base earnings during the quarter, with trailing 12-month remittances averaging over $900 million.
Great-West stated that a leadership transition is underway. CEO Paul Mahon announced his retirement after 12 years. David Harney, President and COO for Europe and Capital and Risk Solutions, will assume the CEO role in July.
Looking forward, Great-West Lifeco emphasizes its resilience to market volatility through business diversification. Management estimates a sustained 10% decrease in equity markets would impact base earnings by approximately $200 million over a full year, a manageable exposure given their earnings profile.
What is the target price for the TSX dividend stock?
Analysts tracking GWO stock expect adjusted earnings per share to expand from $4.50 in 2024 to $5.63 in 2029. Today, the TSX stock trades at a forward price-to-earnings multiple of 10.5 times, similar to its 10-year average. If Great-West maintains a similar multiple, it should trade around $60 per share in May 2029, indicating an upside potential of 20% from current levels. If we adjust for dividends, cumulative returns will be closer to 40%.
Great-West’s strategic focus remains on scaling its wealth and retirement platforms while maintaining disciplined capital management. With strong cash generation, diversified earnings streams, and continued momentum in key growth segments, Great-West appears well-positioned to navigate changing market conditions while executing its long-term strategy under new leadership.
