IGM Financial Earnings: Capital Reallocation Moves Overcome Mixed Asset-Management Results

There was little in narrow-moat IGM Financial’s second-quarter results that would alter our long-term view of the firm. We expect to leave our CAD 40 per share fair value estimate in place. We view the shares as being fairly valued right now.

IGM closed out the June quarter with CAD 226.3 billion in assets under management, up 0.2% sequentially and 6.2% year over year. Consolidated net outflows of CAD 837 million during the quarter were reflective of a negative 1.5% annualized rate of organic AUM growth, within our forecasted range of negative 3% to negative 1% for average annual organic AUM growth during 2023-27.

With average total AUM up 0.3% year over year, asset-management fee income declined 0.4% during the second quarter when compared with the prior year’s period. Total revenue increased 2.4% year over year on improved investment income. IGM’s first-half top-line increase of 0.1% was on par with our forecast for the full year. We should note, however, that the asset manager faces slightly easier comparables in the back half of the year.

As for profitability, IGM used ongoing cost controls to deliver adjusted pretax operating margins (exclusive of discontinued operations) of 34.9% during the first half of 2023, just 90 basis points lower year over year despite the operating leverage inherent in its business model.

On a separate note, IGM announced the sale of Investment Planning Counsel, the asset manager’s smallest segment (which provides products and support to independent financial planners), for CAD 575 million. The transaction, which is expected to close by the end of 2023, follows on IGM’s first-quarter sale of a portion of its stake in Great-West LifeCo for CAD 553 million.

Much of this capital was used to help fund a 20.5% equity stake in U.S.-based advisory firm Rockefeller Capital Management (for USD 622 million), as well as the company’s acquisition of an additional 13.9% interest in ChinaAMC (for CAD 1.15 billion).