# Life Insurance Stocks



## newfoundlander61 (Feb 6, 2011)

I am in the process of looking to add an insurance company stock to my holdings with 3 I have been looking at: GWO/MFC/SLF. Would any of these be a solid hold for the next several years, all seem to pay a good dividend and have been around a long time.


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## OptsyEagle (Nov 29, 2009)

If you can find a 3 headed coin, it would be very helpful.

Most responses will probably surround the company that the responder owns. That does not make the suggestion bad but it does make it very biased.

I would probably suggest splitting all of your investment between the 3 and just cover your bases by buying them all or I would pick the one with the highest yield. 

The reason for this simplistic approach is because analysing insurance companies fundamental prospects is probably harder then just about any company that is currently trading publicly. Most of their historical results come from some estimated interest rate discount factor, projected loss ratios and re-insurance risk reduction rates, mortality adjusted and assuming a projected counter-party loss ratio, corrected for performance, etc. etc. etc. Good luck with all that. 

It would be easier to find a 3 headed coin.


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## newfoundlander61 (Feb 6, 2011)

"analysing insurance companies fundamental prospects is probably harder then just about any company that is currently trading publicly. Most of their historical results come from some estimated interest rate discount factor, projected loss ratios and re-insurance risk reduction rates, mortality adjusted and assuming a projected counter-party loss ratio, corrected for performance, etc. etc. etc. "

Good info in your post, appreciate it


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## agent99 (Sep 11, 2013)

You should do a search and read more about those insurers. Especially Manulife, but also some of the others. There are a number of issues that would make me stay away. 

In our accounts, we do hold Power Corp and subsidiary Power Financial. No individual insurers, but Power do control Great West Life and some smaller insurers:

Power Corporation owns 65.5% Power Financial Corporation, who own a good part of Great West Life who own London Life, Canada Life , Irish Life and probably others.

The Power group companies are sort of like buying a managed fund. They are into a number of different sectors. Performance over the years has been lackluster, but has been steady.

By the way, we do also own Life and Banc split, but only the preferred shares. The capital shares currently yield over 12%. That can't last - unit prices will keep going down as they are paying over 200% of earnings as dividends. Pfds look OK for now and we continue to hold a relatively small amount (yields about 5%)

https://www.preferredstockchannel.com/symbol/lbs.pra.ca/


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## gardner (Feb 13, 2014)

I own equal parts of GWO, SLF and MFC in my dividend portfolio. During the time I've owned them, SLF and MFC have performed about the same, but GWO has fallen behind. Dividends are solid on all three.


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## OptsyEagle (Nov 29, 2009)

gardner said:


> I own equal parts of GWO, SLF and MFC in my dividend portfolio. During the time I've owned them, SLF and MFC have performed about the same, but GWO has fallen behind. Dividends are solid on all three.


What does that really tell us? If three are in a race, one will win, one will lose and the other will fall somewhere in between. I assume you picked all 3 because you knew what I said before you bought them and like I said, it is virtually impossible to determine which of the 3 will win the next race.


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## agent99 (Sep 11, 2013)

gardner said:


> I own equal parts of GWO, SLF and MFC in my dividend portfolio. During the time I've owned them, SLF and MFC have performed about the same, but GWO has fallen behind. Dividends are solid on all three.


We once owned MFC, but it really tanked when interest rates dropped. Out of interest (?), I just had a look at the total return of those three insurers over the past 10 years (Divvies reinvested)

MFC 7.25%
SLF 14.02%
GWO 11.25%
POW 8.47%
PWF 9.11%
XIU 9.47%
XIC 9.69%

History, of course, doesn't prove anything. MFC has lagged the TSX, but maybe it will turn around? But would like to see some evidence of that.

Buying 1/3 of each, would have provided 10.84% yield. Not bad, but dragged down by MFC. And not that good compared with buying equal amounts of the 6 biggest banks where investor could have earned about 19% pa.


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## dubmac (Jan 9, 2011)

I own SLF and it has done well - not great, but OK. I have owned for around 10 yrs and drip it.
MFC was a dog. I expected some growth from China to materialize - but it continued to under-perform. (I noted that MFC was among the most shorted stocks on the TSX for quite some time) ..so I sold it at a small profit in late January after the rebound.


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## OptsyEagle (Nov 29, 2009)

I recommend not attempting to move forward by looking backwards. A poor performance in the past signals either good performance in the future or bad performance in the future or possibly some average performance between those two performances. 

Do you really want to take the time out of your life to look at past performance, when the only signal it gives is that.


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## doctrine (Sep 30, 2011)

I am holding MFC; while the stock price has underperformed, the underlying business has been performing very well. They are just coming off a year where adjusted earnings increased 23%, despite the late year drop in interest rates, which they have done a good job of mitigating against. Adjusted earnings of $2.74 in 2018 puts them at trailing P/E of 7.8, which is better than SLF and GWO. SLF is probably good as well, but less of a value story for me. GWO is always pretty steady but has a lot of Brexit risk. So for life insurance, MFC makes sense to me. The 4.7% yield is great and up 14% year over year, far higher dividend growth than the banks, with more room to grow with a low 37-38% payout. I own shares as well, but this is just my opinion. I might sell MFC if it gets overvalued; at $30 I would probably rotate out into maybe bank stocks, depending on the relative valuation.


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## agent99 (Sep 11, 2013)

OptsyEagle said:


> I recommend not attempting to move forward by looking backwards. A poor performance in the past signals either good performance in the future or bad performance in the future or possibly some average performance between those two performances.
> 
> Do you really want to take the time out of your life to look at past performance, when the only signal it gives is that.


If you read my post, I said: "History, of course, doesn't prove anything.". But at least it is a start to analyzing stocks. A lot better than suggesting buying all three stocks because you haven't a clue which one will do better. 

There are ways to analyze the future prospects of a company. Financials of course and MFC is covered well by the pundits! But also, as I suggested, read about the issues some, like MFC have or had. 
Court cases, 
shorting 
etc.


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## OptsyEagle (Nov 29, 2009)

agent99 said:


> If you read my post, I said: "History, of course, doesn't prove anything.". But at least it is a start to analyzing stocks. A lot better than suggesting buying all three stocks because you haven't a clue which one will do better.


and you now do?

All I was saying is that you were wasting your time...and you were.


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## agent99 (Sep 11, 2013)

OptsyEagle said:


> and you now do?
> 
> All I was saying is that you were wasting your time...and you were.


No, I am not even trying to compare those stocks. 

Your reply was out of line and your advice next to useless.

Anyway couple of clicks and problem solved


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## Eder (Feb 16, 2011)

There are much better insurance companies in Canada (in my opinion) than the 3 mentioned. Manulife has been a train wreck...almost as bad as buying TransAlta. How are they even an option?


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## OptsyEagle (Nov 29, 2009)

agent99 said:


> No, I am not even trying to compare those stocks.
> 
> Your reply was out of line and your advice next to useless.
> 
> Anyway couple of clicks and problem solved


I was explaining to the OP that fundamental analysis on Life Insurance companies is almost impossible to do, which is true. You then went on to list a bunch of past performances, which I believe are nothing but a distraction, so I pointed out why that was. 

Except for demanding that it is useful information you have not done anything to prove your case. Maybe you are right but I have no idea from what you have said. I think I explained my position quite well, although not to your liking I see.


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## newfoundlander61 (Feb 6, 2011)

Thankyou all for the great and informative conversation on my original question about Life Insurance stocks, looks like its a little more research would be needed to pick this sector for investing.


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## AltaRed (Jun 8, 2009)

I agree insurers are near impossible to analyze from a fundamentals perspective. I find it is better to check some recent 1-3 year financial metrics, and make assumptions of where growth will come from, and go from there. I agree history isn't that helpful, especially for MFC that gambled on risk management about 10 years ago and got slaughtered with the equity crisis. They changed CEO and I think have gotten most of that behind them....and will eventually solve the Hancock boondoggle. They are doing well in Asia... as is Sun Life I think? 

I am an owner of MFC, IAG and PWF...the latter being mostly GWO. I keep waiting for MFC to shine (at least 5 years now) and I think it will. I've run out of patience* with many years of ownership of PWF and it is my current candidate to sell to replenish my fixed income reserve something this year.

*GWO might shine some day but my sentiment is it is boxed in. PWF itself is also hampered by its IG business and I don't think its ownership in robo-advisor WealthSimple is going to jump start revenue and earnings any time soon. I'd stay way from the entire Power Corp business but that may be just my bias.


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## agent99 (Sep 11, 2013)

AltaRed said:


> I've run out of patience* with many years of ownership of PWF and it is my current candidate to sell to replenish my fixed income reserve something this year.


At the moment, my allocation to fixed income is lower than I would like. I have only been buying bonds, gics and pfds for some time. Still not there. However, if and when the equity markets tank, the FI/Equity ratio will no doubt self correct! So don't see need to sell any stocks for rebalancing purposes! In time, will sell one or two based on uneasy feeling I have about what they are doing. IPL, for example seem to be over-extending themselves with their PP project.

By the way, I own PWF and POW in relatively small quantities. No doubt lackluster, but as you can see from the 10yr numbers I posted, they just chug along. Better than some of the energy stocks I still own and no worse than index ETFs.


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## AltaRed (Jun 8, 2009)

agent99 said:


> At the moment, my allocation to fixed income is lower than I would like. I have only been buying bonds, gics and pfds for some time. Still not there. However, if and when the equity markets tank, the FI/Equity ratio will no doubt self correct! So don't see need to sell any stocks for rebalancing purposes! In time, will sell one or two based on uneasy feeling I have about what they are doing.


Think I have written about this before, so at the risk of repeating myself (which I do frequently), I do not have a 'conventional' approach to asset allocation, and by that, I mean percentages to equity/FI are a distant consideration. In withdrawal of which I have 13 years experience now, I look at my annuity income such as CPP, and my investment income, on an annual basis, and decide how much FI I need to have in reserve to supplement those cash flows to maintain X years of typical annual expenses (hint - 3+ years). That is the premise on which I to up that FI reserve. Allocation percentages go up/down as a result of supplementing my FI and the oscillations of a volatile equity market. PWF is simply in the bulls eye in 2019 for the reasons noted.


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## OptsyEagle (Nov 29, 2009)

The problem with LIFCO fundamental analysis is that it really does nothing to shed light on where they are going to be in a few years. When MFC wrote off a load of cash against its losses on seg. funds in 2008, that pretty much hit everyone by surprise. They did this because in the past they were using estimates of losses on seg funds that were too low. Now you could have analysed their financial statements, in the years before this, until the cows came home, and you would not have known what loss estimates they were using, and even if you did, I doubt you would know what the correct estimate should be.

Their struggle since then has revolved around a few things but lowering interest rates was certainly one of them. Well, since we or anyone else cannot predict where interest rates will be next year or in 5 years, again we would have no idea, that the earnings they were posting on their insurance business in the past, was overstated. I mean, they didn't even know it. Why should we.

Now, if you had of bought GWO and SLF in addition to MFC, you would have faired better then with MFC alone. My simplified suggestion was simply a response to the difficulty in LIFCO analysis. Even it will not guarantee success, but until a better idea comes along, that is what I would suggest for the original poster.


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## agent99 (Sep 11, 2013)

AltaRed said:


> Think I have written about this before, so at the risk of repeating myself (which I do frequently), I do not have a 'conventional' approach to asset allocation, and by that, I mean percentages to equity/FI are a distant consideration. In withdrawal of which I have 13 years experience now, I look at my annuity income such as CPP, and my investment income, on an annual basis, and decide how much FI I need to have in reserve to supplement those cash flows to maintain X years of typical annual expenses (hint - 3+ years). That is the premise on which I to up that FI reserve. Allocation percentages go up/down as a result of supplementing my FI and the oscillations of a volatile equity market. PWF is simply in the bulls eye in 2019 for the reasons noted.


I have also likely posted along the same lines, especially about percentages. Letting the markets correct our FI/Equity ratio was a bit tongue in cheek, but is in fact what happens. 

BMOIL provides allocation ratios and charts for each account, so I do look at those from time to time. If I see about 50% FI in each of our RRIFs, then based on the total RRIF value, I know if we have enough drop-dead FI in the case, heaven forbid, of a massive market collapse.


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## doctrine (Sep 30, 2011)

Eder said:


> There are much better insurance companies in Canada (in my opinion) than the 3 mentioned. Manulife has been a train wreck...almost as bad as buying TransAlta. How are they even an option?


MFC just reported the largest earnings in their corporate history, up 23% year over year. While the stock is relatively flat over the last 5 years (3-4% annual return), Transalta has torpedoed, is still losing money, and is down 70% over the same period of time.

It has been 10 years since the big seg fund loss at Manulife; that is usually considered sufficient time to see if a change has occurred. It looks good to me, which is why I have shares, as revenues/earnings are going up very steadily and even accelerating in recent years.


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