With Canada’s Big Three in the life insurance space set to report Q1 earnings for 2018, which stock looks the best value?
As any broker will tell you, life insurance can be a tough sell sometimes. But what about a life insurance company, or at least part of it? Canada is home to some of the world’s largest life and health insurers, with operations that stretch across the globe. In particular, the Big Three of Manulife, Sun Life and Great West Life are increasingly looking outside of their home country to grow their business.
But are they good investments? According to Jason Phillips in a new article for investment site Motley Fool, the answer is largely yes.
Focusing on the Big Three, he looked at which institution was providing the best dividend payouts currently. On that criteria, Great West Lifeco led the way, with a dividend yield of 4.55%, which compares favorably to both Manulife (3.63%) and Sun Life (3.43%).
Great West has been going through a restructuring over the past two years as it adapts to the challenges of the digital age. The firm made headlines last April after announcing it would shed 1,500 jobs over a two-year period, but this ultimately meant positive 4Q 2017 earnings where it recorded top-line growth of 13%. This was driven in large part by a 10% improvement in adjusted net earnings from its Canadian business unit.
In contrast, it’s outside of Canada that Manulife and Sun Life are performing best, with both companies recording strong growth in their respective Asian businesses.
In Phillips’ analysis, he identifies that Sun Life generated 12% of its net income in 2017 from is Asian life insurance segment, making it the firm’s second-largest market behind the United States.
The US is also the dominant market for Manulife, which remains Canada’s largest life insurer, but is increasingly focused on opportunities outside of its home country. In 2017, less than 30% of its core earnings came from Canadian operations, and CEO Roy Gori has made no secret of his intentions for further expansion in the Asian market.
Manulife and Great-West will report first quarter earnings this week, with Sun Life next week, so it will be interesting to see if the firms have built on their momentum in 2017, and if that is reflected in dividend payouts.
