Shareholder dividends strong; life insurance policy owner’s dividends down

Last week Canadian financial conglomerate, Power Financial Corporation (PFC), reported that their quarterly profit climbed due to better results by its secondary financial services groups, Great-West Life, IGM Financial, London Life and Canada Life all of which PFC owns majority stakes in. Shares rose following the news, “net earnings attributable to shareholders were $312 million, or 44 cents a share, in the quarter ended Sept. 30. That compared with a year-earlier profit of $294 million, or 42 cents a share,” a Reuters report published by BNN said. Shareholder dividends are strong; however life insurance policy owner’s dividends are down. Higher profits don’t translate to better returns for participating life insurance policy owners; the two have no relation to each other. Participating whole life insurance policies or PAR plans are gaining popularity due to low interest rates and turbulent markets, but don’t be fooled. In May of 1995 Great-West Life purchased 90 per cent of London Life’s shares in a $2.95 billion takeover bid –part of that $2.95 billion was funded through the policy owner’s dividend pool or PAR fund. In 1995 the policy owner’s dividend pool was used to help pay for an acquisition; for the last three years it has been used to make up for the shortfall on bond yields. This lack of accountability to policy owners in regard to the use of the Participating Whole Life insurance dividend pool often results in shareholders coming before policy owners. | Raymond Matt, CFP, CLU, TEP, CHS

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