BUSINESS WATCH

Laurentian’s Asian campaign

Peter C. Newman July 13 1987
BUSINESS WATCH

Laurentian’s Asian campaign

Peter C. Newman July 13 1987

Laurentian’s Asian campaign

BUSINESS WATCH

Peter C. Newman

Next week Michael Hale, a senior vice-president of Imperial Life, leaves Toronto for a long-term posting in Hong Kong. Next month Claude Castonguay, head of the Laurentian Group, which owns Imperial, will also touch down in the island colony before moving on to Kuala Lumpur. The two emissaries are the vanguard of a major move into the Pacific Rim by the Montreal-based Laurentian financial conglomerate.

Without too many investors being aware of it, the once-parochial insurance company, incorporated into its current format only in 1984, has become a major player in the world money game. “We are looking very much toward Southeast Asia,” Castonguay told me recently. “As the standard of living increases in the area, there will be new insurance needs, new needs to invest, and while most of these countries are quite efficient in catching up in the manufacturing sector, the provision of financial services requires a lot more sophistication and expertise. We hope to move into South Korea, Taiwan, Malaysia and possibly Indonesia, but not, for the moment, into Japan.” Castonguay’s record at Laurentian, which he has moved from assets worth $3 billion just two years ago to an expected $12 billion or more by the end of 1987, is such that many observers agree his company will quickly become a significant Pacific Rim presence. Operating out of Hong Kong on a joint venture basis and using international contacts that he has established through other partnerships with France’s Banque Indosuez and Groupe Victoire, Castonguay is betting on his Pacific venture as the next major breakthrough in his company’s breathtaking growth pattern. In early 1984 he projected a doubling of Laurentian’s revenues in five years—and made it in three. For the first quarter of 1987, net income jumped to $7.3 million, from $1.4 million in 1986, and Castonguay fully intends to top last year’s leap of more than 100 per cent in profits.

The Laurentian Group chairman, who looks like a cross between a smalltown optometrist and a cardinal in mufti, cuts an unlikely figure among today’s go-go French-Canadian financial gunslingers. They talk fast, deal hard, wear striped shirts and vented double-breasteds, displaying the hyper savoir-faire of quizmasters on after-

noon television shows. A dignified if austere gentleman of the old school, Castonguay actually spent part of his working life as a professor of actuarial science at Laval University and later served as minister of social affairs in Robert Bourassa’s Quebec cabinet. Like the successful politician he was, he still operates his exploding financial empire on the basis of an evolving consensus among the heads of his various divisions. “We believe in decentralization,”

he says. “The executives of each member company can take whatever measures are needed to achieve the objectives they have set—and their salaries are tied to how well they reach them.” What differentiates the Laurentian Group from such other financial conglomerates as the Bronfmans’ Trilon juggernaut and Paul Desmarais’ Power Financial Corp. is that it has become a true financial supermarket, active in all five pillars—banking (Montreal City and District Savings), the trust busi-

ness (Yorkshire and Eaton), investment dealing (Geoffrion Leclerc, Canagex), insurance (Imperial, Laurentian, Eaton) and real estate (Imbrook, F-I-C). Despite the company’s rapid growth, Laurentian has no long-term debt and has a 100-per-cent interest in several of its subsidiaries, affording it plenty of manoeuvring room.

Apart from his current thrust into the Pacific, Castonguay has already established international beachheads with assets worth more than $1 billion each in the United States and Britain. Laurentian owns five medium-size American life insurance companies, folded into a separate holding company listed on the American Stock Exchange. A similar setup in the United Kingdom, Imperial Trident Life, already ranks third among British insurance companies and is poised for growth. Other quietly expanding operations are based in the Bahamas and Luxembourg. “The world’s financial centres,” says Castonguay, “are gradually becoming suburbs of other centres and will finally form one single, unified unit.” He likes to quote a recent pronouncement by a prominent American financier: “We are evolving toward markets that look, act feel and smell the same worldwide.”

That cannot come soon enough for Castonguay. “Some people,” he complains, “still persist in ignoring current

trends and keep raising the spectre of concentration of power. There is no evidence, not a single fact, that points to any real problem.” He is particularly upset by Ottawa’s current plans to prevent financial institutions from becoming tied to commercial business through majority shareholdings. He points out that on a world scale Canada’s financial clout is not that significant, with the Royal Bank, our largest money institution, ranking below 25th by any international measure.

“We have to be big to compete, ” he insists, “though we are, of course, still very much smaller than Power Financial, say, or Trilon. But I would suggest that we have a broader perspective and are integrating the distribution of our services better, and may thus be gaining an advantage for the future. An organization our size still has a strong entrepreneurial drive, an individual motivation quite unique in the industry.”

That may be the secret of Castonguay’s success—allowing the entrepreneurial spirit to flourish inside the corporate colossus that will be his monument.