Insurance companies are financial institutions that are in the business of risk management. Generally, these companies are either life insurance or property and casualty insurance. The two types have different considerations.
Life Insurance companies are mandated by the government to maintain a certain level of reserve. These companies are thus less leveraged. It is important to note that insurers evaluate assets at market value but liabilities at book value. These life insurance policies have a long term outlook, as benefits are not paid out for many years.
Property and casualty insurance companies have shorter policy duration. Due to the nature of this type of insurance, timing and amount of liabilities are less certain than for life insurance companies. These insurance companies also go through an underwriting cycle.
🚑 Insurance Company
Manulife Financial (MFC-T) Life & Health Insurance
A Canadian multinational insurance company. They announced good earnings and profits, as well as pays a good dividend. They have been growing internationally, with growth particularly in Asia. They pay a dividend of 4.1%
During low interest rates Low rates are deadly for lifecos which are invested in fixed income and real estate. Don't invest in rate-sensitive stocks.
Industrial-Alliance Life Ins (IAG-T)
A Quebec City based insurance company with a wealth management business. Their operations are more focused on personal insurance. A more regional insurer. The dividend at 3% is considered safe.
They are doing a good job. It has broken above its 50 day moving average. The trend is in a non-aggressive down trend. It is near the top of its channel.
Sun Life Financial Inc (SLF-T)
One of the largest and oldest life insurance companies in the world. They are diversifying into wealth management and buying real estate. A long-term hold that pays a good dividend at 4%.
Pays a 4% dividend and trades at 1.46 book. They have been diversifyign into welath management and buying a real estate business. Asia has done very well for them, growing at double digits. Well-run.
Great West Lifeco (GWO-T)
A value pick with low volatility. They operate in North America, Europe and Asia through subsidiaries that are regionally focused. A good long-term hold when interest rates rise. However the short term rate outlook has changed and it has affected the stock. The yield is 5%.
GWO-T vs. MFC-T. MFC-T has the advantage of being a very diversified company, globally. They have done well from that diversification. He tends to prefer it to GWO-T, although he might use its weakness to buy.
Fairfax Financial (FFH-T) Property & Casualty Insurance
A financial holding company has activities in property, casualty and life insurance. They also operate in the investment management and insurance claims management sphere. It is well-run and a good long term hold.
He owns a lot of their debt. But he'd rather invest in Warren Buffet than Prem Watsa. WB is a better buyer/investor overall.
Intact Financial (IFC-T)
The largest provider of property and casualty insurance in Canada. They have a strong balance sheet and has grown well. Intact is now well-positioned to make acquisitions.
He does not own it, but he is watching closely with the recent pullback. It is extremely well run, but operates on thin margins. He would wait until after the Ontario election, because insurance rates can be a political football. It has a good long term future. (Analysts’ price target is $108 )
St. Paul Travelers Companies Inc. (TRV-N) Property & Casualty Insurance
One of the largest U.S. insurance companies for commercial property casualty insurance and personal insurance. They pay a dividend of 2.12%
Will far outpace the average market in its earnings are the cyclicals that are exposed to the economy.
First American Corp. (FAF-N)
They are in the home insurance business. This is a play on the US housing market where prices have softened. This has affected the stock performance this year. They have done a good job of consistently raising their dividend which is at 3%.
An efficient insurance company that is generating free cash flow. They reduced their share count by half and raised dividends. Low interest rates have been detrimental as premiums are not generating as much income. The yield is at 2.1%
Cheap at 9 X earnings with a 2 1/2% dividend. Florida insurance is under a seperate entity, so hurricane is not a problem.
Kingsway Financial Services (KFS-T)
A property and casualty insurer in the United States. They operate through several segments, each covering insurance underwriting, extended warranty, and leased real estate.
This is a company that has had difficulties in the past and has managed to recover. He is kicking the tires on them. This could be a 3-4 bagger. Would want to see some quarters before putting any money down on it. There were a lot of disgruntled shareholders at AGM.
Markel Corporation. (MKL-N)
A holding company for insurance that invest its cash in stocks instead of bonds They are getting into wealth management through insurance but there were some hiccups last year. Still, it is a well run company with a good track record.
Progressive Corp Ohio (PGR-N)
The largest provider of car insurance in the U.S. They have low cost operations so their profitability and growth are higher than their peers. It’s enjoyed a long-term uptrend.
Although it always looks expensive it is a great niche little auto company. Very well-managed and very focused. Still a lot of earnings momentum to come.
Aflac Inc (AFL-N) Life & Health Insurance
The largest provider of supplemental insurance in the United States. They pay a dividend of 1.94%. They have consistently beat earnings and are growing. A low volatile name.
Expects to do earnings growth of 15 to 18%. Good record of increasing dividends. 75% of its business is in Japan.
A holding corporation for Metropolitan Life Insurance Company. They are buying back stocks. The US retirement portfolio has been doing well, and they are growing in Asia and Europe.
(A Top Pick May 8/17. Up 15%.) Changes to the US are positive in one sense, but there are problems in the insurance industry in another. Interest rates are going up, which should help. He would probably hang in, with the admonition that if something better came along, he might jump.
Prudential Financial Inc (PRU-N)
A financial company that has operations in insurance, wealth management and other financial products through their subsidiaries. It has been through a tough couple of years, but it may be changing. It pays a dividend of 4%.
When you buy a life insurance product, they have a long tail risk i.e. most of the people are going to live a long time. The company has to invest your premiums so that eventually they have assets to pay off the policy. They used to buy long bonds, which yielded 4%-8%, but now yield…