Manulife Financial (MFC.TO)

Prefers P&C insurance companies. Lifecos have a challenge with low interest rates. He likes to see the share price reflecting that things are improving within the company.

Trading at about 8X forward earnings and has the biggest discount to BV that he has seen since the financial crisis. Core earnings are still growing. Asian/international exposure is great. Their US business is growing. Valuation is the cheapest he has seen in a number of years. A screaming buy.

He has constantly wrestled with it. He has looked at it a half a dozen times. Over the last two years it has done nothing. This is an entry point because we have had false starts. He would aim toward Canadian banks. He prefers SLF-T. The presence of MFC-T in Asia has not monetized itself.

Whether looking at this, a US insurance company, US bank or Canadian bank, the financial sector has declined almost in lockstep with the decline of US 10 year bonds. That tells you that people are going to these things when they are more optimistic about rising rates. This company funds their liabilities through their assets, and their liabilities tend to go down when rates go up. Have hedged a lot of the interest rate exposure. The other concern is their Asian exposure. He would almost rather own a Canadian bank because their businesses are little more diverse insulating you from just one product line. Dividend yield of 3.9%.

GWO-T is worth considering also. Life Companies. They are big beneficiaries if and when interest rates go up. Future liabilities are discounted more in an increasing interest rate environment. He prefers Great West Life.

Sun Life (SLF-T) or Manulife (MFC-T)? Prefers Sun Life. This company has done very well in the last little while, tidying up their financials and getting themselves out from under the equity problem they had. A problem he has is their emphasis on China and the far East.

Sun Life (SLF-T) or Manulife (MFC-T)? Both are great institutions. This one has a slightly bigger presence in Asia, which he likes, as it is a very immature market and will continue to grow. They each have good wealth management franchises. This one has had some redemptions on the institutional side, so there is a slight preference for this. Both are good companies and over time you will see dividend growth from both. Dividend yield of about 3.6%.

Good insurance operations in Canada and the US that throw off cash flow. They are fairly mature in the business, so it is what they do with that cash flow. It is going to expand their wealth management arm, a higher margin business, as well as investing in Asia. Asia is the biggest growth market for insurance companies. Insurance companies would benefit the most if interest rates went up.

(Market Call Minute.) Would prefer Great West (GWO-T) or to look at property and casualty in the US such as Travellers Group (?) or Fairfax Financial (FFH-T).

A double from 2012. It came off about 20-25% recently. There is a concern on the asset side about investment of premiums and how much is invested in energy. The second biggest part of their growth was in Asia. Those are the headwinds. The stock eventually will price in the energy piece. He thinks this is starting to look a little more interesting.

Manulife (MFC-T) or Power Financial (PWF-T)? Power financial is more into Investors Group and Great West Life. Great West is basically health benefits and the demand is there, so it is inelastic. This company is in life insurance and other things that are little bit riskier. He prefers Chubb Ltd (CB-N).

Prefers Sun Life (SLF-T) because of the better dividend profile and being slightly more diversified. Interest rates have continued to move down, and insurers tend to move with interest rates as well as with equity markets. The dividend of 3.6% is safe. He is underweight most Canadian financials, including the insurers.

He looked at this in 2 areas. One is investments and the other is in their core business of selling insurance. They are having a tough time on the investment side, with corporate bond spreads widening out. This will have a short-term negative affect on insurance companies. However, their actual insurance business is quite strong. Their recent acquisition and exposure in China is quite positive. With the volatility here, there could be a better time to enter the insurance business.

From a valuation standpoint, this looks pretty attractive. Trading at almost BV, so you don’t get much cheaper than that. Has a good dividend. It does bounce around a little. This might be a good place to pick it up. Ranks reasonably well in his ranking system.

It has a better footing in China where they are becoming wealthier and older. Their wealth management side in North America has really grown. His pick would be Prosurance in the US.