Manulife Financial (MFC.TO)

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.

This is not a bad time to consider insurance stocks. There is expanding life expectancy, which is good for the lifecos. He would favour Power Financial (PWF-T), but this company and Sun Life (SLF-T) are both good strong companies. They won’t benefit in a significant way until investment returns improve.

(A Top Pick Jan 7/15. Down 8.6%.) Has admired their restructuring since the financial crisis. They de-risked it and changed their product lines to be less market sensitive. They are expanding fairly aggressively. Current price is a compelling place to start to Buy. Basically trading at BV currently.

(A Top Pick Jan 9/15. Down 3.89%.) He is still buying this. If the yield curve can become more normalized, this will be a beneficiary in Asia.

The story remains the same. They are in the business of getting premiums, investing all that money and then eventually paying claims. It is harder when bonds pay 1.5%. They are now buying long term assets like real estate, but they find it hard with so many other investors buying in that space.

He owns MFC-T and PWF-T. MFC has better exposure to higher interest rates. He marginally prefers MFC-T, but you could go with either one.

You play insurance for an interest rate increase. We have been waiting 10 years and have finally got a .25% interest rate lift. Thinks interest rates, beyond a 6 month period, are probably going to go higher. Insurance companies will benefit from this and this is a good one to own. An interesting global play that you can buy domestically in Canada.

A great stock going into the financial crisis, and found itself over leveraged and got crushed. It has come out of that, but deleveraged itself just as interest rates were about to go down, and it might benefit from that. His favourite is Sun Life (SLF-T).