Source: The Canadian Press

Insurance and mutual funds giant Power Financial Corp. has shunned its traditional dividend hike over concerns that new global regulations on financial institutions could increase its future capital requirements.

“There’s a great amount of uncertainty right now,” CEO Jeffrey Orr told shareholders Wednesday at the company’s annual meeting.

“While that debate rages we’re sitting back a little bit… it’s difficult to tell how much capital Great-West Life will need going forward and it does have an impact on our thoughts around dividends.”

Power Financial (TSX:PWF), a Montreal-based holding company that owns Great West Lifeco (TSX:GWL), Investors Group and other major companies, conducted a special meeting to increase its number of directors to 20. But Orr joked that the occasion could be considered special because of the lack of a dividend increase.

The company had gone 17 consecutive years with dividend increases at its annual meeting. Last year, it was hiked 12% to 35 cents.

Power said it is moving cautiously this year despite reporting improved financial results in the first quarter. The company earned $389 million or 52 cents a share for the three months ended March 31, compared with earnings of $195 million or 24 cents in the first quarter of 2009.

Revenues rose 63% to $8.8 billion from $5.4 billion. Operating income increased by 51% to $381 million from $252 million.

Orr said the Canadian financial system worked very well during the recent recession, and Canadian leaders must remain vigilant and resist global pressure to impose “untested” regulations on financial institutions.

He praised Ottawa’s opposition to a bank tax proposed by a number of other leading industrial countries.

“Giving a heavy dose of medicine to a person who isn’t sick wouldn’t qualify as very sound medicinal treatment in most people’s books,” he said.

“Let’s resist the pressure to, in effect, do the very same thing in our approach to financial regulation.”

He later told reporters that the federal government must remain active in opposing extreme measures to increase capital ratios and change accounting standards that could result in greater earnings volatility.

“Let’s take our own positions in Canada and argue them with strength because we’re in a position of strength in this debate,” he said.

Power Financial, which is controlled by the Desmarais family, said it is taking a more active role in public debate on a number of issues that face Canadians.

Among them are calls for an overhaul of pensions in Canada and demands that the government play a larger role in providing retirement income.

But those ideas are based largely on questionable research that ignores the substantial assets that Canadians hold outside of their employer-based pension plans, Orr said.

“The current system of private-sector retirement solutions built upon a government-provided base level of income is serving Canadians well,” he said.

Power Financial has an important stake in the debate since its companies are deeply involved in the private pension business.

The company stick-handled the question of a central national securities regulator by saying it supports the new entity only if the objections of provinces are adequately resolved.

Orr said the current system works well, but noted the company wasn’t asked to join a Quebec coalition that is fighting Ottawa’s push to create the new entity.

Despite the economic challenges it has faced, the company said it has outperformed its various rivals and is positioned to take advantage of opportunities to gain market share.

Putnam Investments, which Power acquired in 2007, has turned around from several years of bad results to increase sales and double its market share. While it only broke even in the first quarter, Orr said the U.S.-based company is poised for growth.

On the Toronto Stock Exchange, Power Financial shares closed up 16 cents to $29.54.