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In investing, they tell you to buy what you know. And in case Canadian insurance stocksEveryone knows insurance.
No, not everyone knows the intricacies of your 80-page insurance policy that they provide to you on an annual basis. But we know you need insurance for driving, you need homeowners insurance, and at some point it’s wise to get a life insurance policy. Health insurance products in the United States are also available to protect people from costly situations when it comes to their personal health conditions.
But what you may not know is that there are many different types of Canadian insurance stocks and insurance providers, and there aren’t many “all-in-one” solutions here in Canada. From P&C (property and casualty) insurers to life insurers, there is a wide variety here. Canadian stocks And buying one doesn’t reveal all the variety, so to speak.
Why are insurance stocks moving forward in Canada?
Given the current economic climate, insurance stocks are certainly in a good position moving forward.
The question of the government looking at controlling inflation is almost nil. One of the first things a government usually does is raise interest rates to slow down debt and spending. We are now seeing this in rapid fashion.
In the end, Canadian fintech stocks Cost easing due to high interest rates may be problematic, but this is a boon for insurance companies and financial institutions as a whole.
Often, insurance companies invest their collected premiums in low-risk assets, many of which are highly dependent on interest rates. In the case of life insurance companies, they also offer products that are highly dependent on rates. As rates rise, these companies can earn more and charge more.
Are there insurance ETFs?
Finding a pure-play insurance ETF here in Canada can be difficult. This is because when it comes to insurance stocks, we don’t have enough companies and popularity to generate enough cash flows.
However, the iShares Equal Weight Banc & Lifeco ETF (TSE: CEW), or the CI US & Canada Lifeco Income ETF (TSE: FLI) can give you fair exposure to the sector.
CEW is an ETF that provides exposure to both Canadian insurance companies and Canadian banks, while FLI is Canadian and United States insurance companies.
Overall, the outlook for insurance stocks is bullish
As a result, in this article we are going to look at 3 of the best Buy insurance stocks in Canada, So you don’t miss out.
We will try to give you the widest coverage available so that you can choose which sector you want to be exposed to. So let’s begin.
The Best Canadian Insurance Stocks to Buy Today
- Sunlife Financial (TSE:SLF)
- Intac Financial (TSE:IFC)
- Power Corporation (TSE:POW)
Sunlife Financial (TSX:SLF)
There are three major life insurance companies in Canada, one of which is Sunlife Fund (TSE: SLF) with a market capitalization of more than $36B, Sunlife is one of the largest companies in the country.
The company provides insurance, pension, asset management solutions and wealth management services not only to individuals but also to corporations in both North America and Asia. The company also owns a Boston-based asset management firm in MFS Investment Management, and about 1/3 of its revenue comes from the asset management segment.
With a mid-year yield of 4%, the company has 6 years of dividend growth and has been able to raise dividends at an annualized pace of 7.82% during this time. Among the major insurance companies in Canada, the company is the best performing insurance company by landfall.
With total returns over 300% over the last decade, the next closest competitor Manulife Financial is over 200%. Assuming you have reinvested all dividends.
The company is expected to grow revenues and earnings moderately over the next 2-3 years with mid single digit revenue growth and double digit revenue growth.
As for the dividend, now that the freeze on financial institutions has been lifted, expect Sunlife to make some decent hikes to reward investors.
In November 2021, the company raised its dividend by 20%, much higher than its usual average, highlighting the company’s strong cash position.
Intact Fund (TSX:IFC)
Finance as such (TSE: IFC) is a bit different than the other Canadian insurance stocks on this list. Because that’s what they call “P&C”. or a property and casualty insurance company. Instead of investment products like life insurance or annuities, the company offers Canadians products like car, motorcycle and property damage insurance.
In fact, most of the company’s premiums are written in the personal vehicle space. The company operates under BrokerLink and goes direct-to-consumer through Belairdirect.
This insurance industry is highly prone to catastrophic events such as fire, flood or other major events, but it is often the fastest growing business model.
Intact has a huge market share here in Canada, just shy of 20% of the P&C market. Although it’s one of the “smaller” insurance companies in Canada, it’s not small considering it has a market cap of over $34 billion.
The company posted annual revenue of $17.48B and has a dividend yield of over 2%. These low yields may deter many income-seeking investors. However, this is a big mistake because Intact Financial has one of the best dividends of all financial institutions in Canada in terms of dividend growth in recent years.
The company has 17 years of dividend growth. In fact, it hasn’t missed raising its dividend in a single year since its 2004 initial public offering. 2022 has consistently raised its dividend by double digits, including its most recent hike in March, from $0.83 to $1.
In terms of growth, the company is expected to grow top and bottom lines in the high single digits over the next 2-3 years. However, rising interest rates in 2022 and 2023 could boost this Canadian insurer’s trajectory, certainly something to watch out for.
Power Corporation (TSE:POW)
Although Power Corporation (TSE: POW) is technically an insurance company, much more than that in the past. The company is a diversified holding company with interests in financial services, communications and other sectors.
Another major insurer, Great-West Lifeco, is part of Power Financial Group, and Power Corp has controlling interests in IGM Financial and holding company Parkesa in Europe.
By mid-2022, the company’s net worth is $42~. This is significantly lower than the late 2021 NAV of $52~. However, with the big correction in the stock markets, we are not really surprised. The company has rewarded shareholders with some of the best-in-class capital appreciation post-pandemic, and Power Corporation is one of our Top Bull List stocks elevated to StockTrades Premium membership in 2021. Most analysts have a price target in the $42 range. Time to write.
The company is a Canadian dividend aristocrat, resulting in a top 5% margin with a payout ratio of just 54%. Given that the company recently raised its dividend by 10.5% through mid-November 2021, this low payout ratio could be a signal of future dividend growth.
The company has driven both NAV and dividend growth through top investments, including stocks you can trade on WealthsimpleTrade. Even just learning How to buy sharesYou may have heard of Wealthsimple.
Power Corp does not limit itself to investments in financial institutions. The company has also backed companies in the EV sector such as Lion Electric.
In terms of forward-looking growth, analysts predict the company will grow revenue at a mid-single-digit pace and EPS growth is expected to be relatively flat over the next year or two. However, keep in mind that they’ve been improving Power Corporation’s earnings estimate every quarter, and it continues to surprise. So, who knows where we will be in the next year or two.
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