Wealth management the key to this stock’s future success

National Bank analyst Peter Routledge sees big things ahead for one Canadian insurer that’s riding wealth management to the proverbial promised-land.

For those of you who follow the insurance industry closely you’ll no doubt guess we’re talking about Manulife, who’ve made two big acquisitions in the past year – New York Life’s retirement planning division as well as Standard Life’s Canadian business.

The company’s move away from the protection side of the business and into wealth management is expected to be good for Manulife stock. At least that’s the opinion of Routledge, who noted in a recent letter to clients, “Given MFC’s success in wealth management over the past several years, we consider management’s intensifying focus on wealth management, and aversion towards protection, as a positive for valuation.”

Manulife’s stock is up more than ten percent year-to-date through December 29. It’s the third consecutive year with positive returns and more importantly, the fourth consecutive year beating its life insurance peers.

It wasn’t too long ago that Manulife’s stock was pummeled by investors after reporting billions of dollars in losses related to its variable annuity business and the lack of hedging in place when the stock markets collapsed in late 2008, early 2009.

Manulife’s not the only insurer focusing on wealth management.

Sun Life CEO Dean Connor’s moved the company farther into wealth management and away from the insurance business since taking over the top job in December 2011. It’s this decision that got him Canadian Business’s 2014 award for new CEO of the Year.

While Manulife’s stock’s done well in the past three years – annualized total return of thirty-one percent – it can’t hold a candle to Sun Life’s total return of more than thirty-seven percent. All under Connor’s watch.

So, before you run out and buy Manulife for your clients, you might remind yourself that two can play this game – and Sun Life might play it better.