Manulife Financial (MFC.TO)

He covered his short on this one in the summer. It is going to be "torquey to interest rates". He does not think it is quite a buy yet. However, it is not a short any more.

The difficulty with the lifecos is that the longer it takes for them to normalize interest rates, the tougher it is going to be on them. They have obligations that go 20 years in the future, and have to do an offset. When we go to a more normalized yield curve, that is a bonus to the lifecos. He is starting to lose patience, and might put this one on the boat if rates don’t improve.

A well-run company and well diversified in Canada and the US, as well as Asia. The issue for all insurance companies right now is the very low interest rate. Thinks interest rates will gradually move up over the next few years and their operation will get better. Long-term it is still a good buy, but shorter term you are probably not going to see a lot of upside.

Share price has been disappointing for the last 1-1.5 years. They’ve had headwinds with the energy sector and their bond and loan portfolios. Resolved their problems from the financial crisis and are on mode now to invest and to grow. Hopefully the macro headwinds are now largely behind them. Stock was punished because they missed expectations, so valuations are now quite attractive at about 1X BV. Likes their exposure to the Asian market. She would start buying here on a pullback.

This has frustrated many, many people for the better part of 10 years. They disappointed in the latest quarter with some of their numbers, and they keep writing down assets. They had quite a bit of exposure to oil/gas which hurt them. It is probably going to sit in the $17-$19 range. He is not interested in it.

(Market Call Minute.) He likes the life insurance areas as a value play, but this one is his least favourite company. They seem to have problem after problem after problem.

(A Top Pick Feb 25/16. Up 4.17%.) Still cheap and still hated. In the upcoming quarter they are probably earmarking some costs associated with their revisions with their actuarial assumptions. There are some challenges ahead, but feels that a lot of them are priced in. The dividend is sustainable.

(Market Call Minute.)

The whole life insurance sector has been a troubled battleground, and hinges on interest rates being extraordinarily low. Thinks it is still going to be pretty tough to own this name.

In his ranking system, it is in the 2^nd quartile of all the companies he looks at. Technically, it would rank a lot lower. There are 2 aspects that are going to drive the business. One is interest rates and the other is their Asian business, whose economy continues to improve.

Doesn’t own this, except for some of their preferred shares. The dividend hasn’t been growing in a huge way, which is the same situation for many insurance companies because of the low interest rates. He is not a big fan of the insurance companies in general.

It has been difficult for them to get a lot of respect lately. They recently got hit with some problems in the long-term care business in the US. There may be some actuarial revaluations going on in the 3^rd quarter, so there could be a possible hit in terms of a write down. However, we have a company that is one of the best capitalized in the industry. Any more they don’t just depend on interest margins to earn their money. Expanding very rapidly and making progress in Asia. Dividend yield of 4.24%.

Expects interest rates to go lower, which would be a major headwind for financial companies. This has large operations, not only in Canada, but also in Asia and the US.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? As a group, the insurance companies have not done very well. Of these 3, Sun Life has relatively performed the best. A lot of the difficulties they have experienced has been a function of what has happened with energy, as they all have some energy exposure. Also low interest rates are generally negative for lifecos. This one just had its last quarter, and the results were not as strong, and had to take some charges on reviews that they are doing. The valuation on this is very attractive now and is trading below BV.

Generally Canadian insurance companies need higher rates to do well, so he is not looking at these at the moment.