Today’s report looks at the prospects of two of Canada’s largest insurance companies. Working from a foundation of strong assets and rising dividends, these two firms can pursue ambitious expansion plans and continue to rank among our best low risk investments.
SUN LIFE FINANCIAL (Toronto symbol SLF; www.sunlife.ca) sells life insurance, savings, retirement and pension products to individuals and corporations. It has $812.6 billion of assets under management and mainly operates in Canada, the U.S. and the U.K. It’s also expanding in Asia.
In the three months ended March 31, 2015, Sun Life’s revenue rose 2.2%, to $3.72 billion from $3.64 billion a year earlier. Earnings per share gained 16.7%, to $0.84 from $0.72.
The company continues to expand its asset management business, which generates high profit margins and requires little capital investment. It recently paid $560 million for Bentall Kennedy Group, which manages more than $27 billion in real estate for over 550 institutional clients across the U.S. and Canada.
As well, Sun Life has just agreed to buy U.S. asset manager Prime Advisors for an undisclosed amount. Prime has about $13 billion under management, mainly bond portfolios for U.S. insurance firms. The stock trades at just 12.4 times Sun Life’s forecast 2015 earnings of $3.33 a share. The company raised its quarterly dividend by 5.6% with the June 2015 payment, to $0.38 from $0.36. It yields a high 3.7%.
Recommendation in Canadian Wealth Advisor: BUY
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Low risk investments: Assets under management up almost $200 billion for ManuLife over last year
MANULIFE FINANCIAL (Toronto symbol MFC; www.manulife.ca) sells life and other forms of insurance, as well as mutual funds and investment management services.
In the three months ended March 31, 2015, Manulife’s earnings per share gained 5.4%, to $0.39 from $0.37 a year earlier. Revenue rose 25.1%, to $7.83 billion from $6.26 billion.
The company continues to expand in growing Asian markets. Right now, about 40% of its insurance premiums come from that region, which is adding to its revenue and profits.
Manulife ended the latest quarter with $821.3 billion of assets under management, up 29.4% from $635.0 billion a year earlier. A large part of the increase came from U.K.-based Standard Life’s Canadian insurance operations, which Manulife bought for $4.0 billion in late 2014.
To expand its Manulife Bank subsidiary, the company plans to install 830 ATMs in Mac’s, Circle K and Couche-Tard convenience stores across Canada. (The owner of these chains, Alimentation Couche-Tard, is a recommendation of our Stock Pickers Digest newsletter.) Manulife Bank has over $22 billion in assets.
The stock trades at just 12.5 times its forecast 2015 earnings of $1.82 a share. Manulife raised its quarterly dividend by 5.6% with the June 2015 payment, to $0.17 from $0.155. It yields 3.0%.
Recommendation in Canadian Wealth Advisor: BUY
