Trump’s election victory has boosted interest rates, resulting in a sector-wide rise in Canadian insurers’ share prices
Donald Trump’s unexpected victory and the resulting yield surge has lifted all boats in the Canadian insurance sector, according to an article from the Globe and Mail.
Having struggled under the weight of low interest rates for the better part of a decade, insurers are showing new signs of life, with many firms’ shares hitting their highest points so far this year. Manulife’s third-quarter profit of $1.1 billion helped bring its stock up 9%. A 35% rise in profit contributed to a near-10% jump in Sun Life’s share price, while Great-West Lifeco shares bounced back from a hard hit last week with a 3.3% lift. Other life insurers such as MetLife and Prudential Financial saw gains as well.
Investor expectations of a stronger US economy, higher inflation, and higher interest rates have pushed up US 10-year treasuries – a beneficial turn for insurance companies that invest much of the premiums they collect in long-paying fixed-income assets.
“The spike in US 30-year bond yields following the US presidential election … gives us more cause for cautious optimism [on insurance stocks],” said National Bank Financial analyst Peter Routledge.
The post-election spike, however, could be just one factor. “In fairness, interest rates in the United States have been going up since early September, when predictions were in an entirely different direction,” said Manulife CEO Donald Guloien, who cited the fact that “unemployment rates [in the US] are essentially at full employment levels.”
While there are significant potential changes to Obamacare under Trump’s presidency, their impact on insurers who have US businesses is not definite. “I’d say it’s too early to speculate on what president-elect Trump and a Republican-led Congress may actually do,” said Sun Life CEO Dean Connor, who added that changes to US healthcare probably won’t affect their firm significantly.
“We’re not in the business of paying personal health-care claims,” Connor said.
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Having struggled under the weight of low interest rates for the better part of a decade, insurers are showing new signs of life, with many firms’ shares hitting their highest points so far this year. Manulife’s third-quarter profit of $1.1 billion helped bring its stock up 9%. A 35% rise in profit contributed to a near-10% jump in Sun Life’s share price, while Great-West Lifeco shares bounced back from a hard hit last week with a 3.3% lift. Other life insurers such as MetLife and Prudential Financial saw gains as well.
Investor expectations of a stronger US economy, higher inflation, and higher interest rates have pushed up US 10-year treasuries – a beneficial turn for insurance companies that invest much of the premiums they collect in long-paying fixed-income assets.
“The spike in US 30-year bond yields following the US presidential election … gives us more cause for cautious optimism [on insurance stocks],” said National Bank Financial analyst Peter Routledge.
The post-election spike, however, could be just one factor. “In fairness, interest rates in the United States have been going up since early September, when predictions were in an entirely different direction,” said Manulife CEO Donald Guloien, who cited the fact that “unemployment rates [in the US] are essentially at full employment levels.”
While there are significant potential changes to Obamacare under Trump’s presidency, their impact on insurers who have US businesses is not definite. “I’d say it’s too early to speculate on what president-elect Trump and a Republican-led Congress may actually do,” said Sun Life CEO Dean Connor, who added that changes to US healthcare probably won’t affect their firm significantly.
“We’re not in the business of paying personal health-care claims,” Connor said.
Related stories:
Great-West announce operational shakeup following disappointing Q3 earnings
Is Manulife class-action settlement a sign of the low-interest times?
