Today I decided to do an analysis of the top Canadian and US insurance stocks. Why insurance? The first part of the reason is the fact that a fellow blogger, Jeff from GoodFinancialCents created an insurance movement which means that over a hundred blogs are writing about the subject today. Personally I’ve been a big fan of insurance companies for years now and it wasn’t a big surprise that I added Aflac (NYSE:AFL) to the Ultimate Sustainable Portfolio a few months ago.
Why Insurance?Investing in insurance companies brings many important benefits along with a couple of drawbacks. I personally think the main drawback is that their balance sheets and activities are more complex than the average large cap company. That being said, it remains much easier than trying to figure out many financials/banks.
There are several interesting benefits though both for dividend and other fundamental investors.
-Stable Business (companies generally have reinsurance for larger events so these companies typically perform well no matter how the economy fares)
-Patterns: the big danger for insurance companies is to sell policies too agressively and when that happens, profitability can decline. It’s important for these companies to accept losing business or market share if the competition is too agressive. Therefore I try to look at historical performance as a very good indicator of the management’s
-Dividends: Because insurance company profits and cash flows are typically so reliable, they are able to pay out decent portions out to their shareholders as dividends.
Top Insurance PlaysObviously, I consider Alfac to be a very solid dividend play but there are many others. Here are the biggest insurance names in Canada and the US. As you can imagine, a few of the names are traded in both countries:
|Ticker||Name||Industry||Price||Dividend Yield||P/E||Payout Ratio||Market Cap||Annual Total Return Last 5 Years||Country|
|BRK/B||Berkshire Hathaway Inc||Reinsurance||85.22||N/A||N/A||0||$211,345,906,250.00||1.36||US||1.36|
|LFC||China Life Insurance Co Ltd||Life/Health Insurance||41.73||1.13||N/A||35.46||$77,028,085,937.50||-5.33||US||-5.33|
|AIG||American International Group Inc||Multi-line Insurance||34.13||N/A||25.28||0||$55,635,964,843.75||-49.79||US||-49.79|
|MET||MetLife Inc||Multi-line Insurance||35.33||2.09||6.9||11.46||$37,529,312,500.00||-9.45||US||-9.45|
|PUK||Prudential PLC||Life/Health Insurance||25.55||2.06||N/A||43.09||$32,659,804,687.50||2.95||US||2.95|
|ING||ING Groep NV||Life/Health Insurance||7.32||N/A||N/A||0||$28,047,023,437.50||-23.18||US||-23.18|
|PRU||Prudential Financial Inc||Life/Health Insurance||54.93||2.64||9.25||18.98||$25,597,380,859.38||-7.06||US||-7.06|
|ACE||ACE Ltd||Multi-line Insurance||74.13||2.64||8.85||22.33||$25,136,914,062.50||7.16||US||7.16|
|TRV||Travelers Cos Inc/The||Property/Casualty Ins||65.23||2.82||11.77||46.95||$25,136,910,156.25||7.59||US||7.59|
|AFL||Aflac Inc||Life/Health Insurance||46.51||2.84||7.18||28.11||$21,779,312,500.00||0.23||US||0.23|
|MFC||Manulife Financial Corp||Life/Health Insurance||11.23||4.68||N/A||703.76||$20,379,023,437.50||-18.54||US||-18.54|
|CB||Chubb Corp/The||Property/Casualty Ins||73.62||2.23||13.19||26.52||$19,571,798,828.13||10.51||US||10.51|
|ALL||Allstate Corp/The||Multi-line Insurance||38.25||2.3||9.73||55.51||$18,548,441,406.25||-3.99||US||-3.99|
|MMC||Marsh & McLennan Cos Inc||Insurance Brokers||33.83||2.72||16.67||48.54||$18,410,136,718.75||8.48||US||8.48|
|AON||Aon PLC||Insurance Brokers||52.63||1.2||16.45||20.51||$16,968,255,859.38||5.41||US||5.41|
|L||Loews Corp||Multi-line Insurance||40.49||0.62||16.2||9.5||$16,017,706,054.69||-1.7||US||-1.7|
|AV||Aviva PLC||Life/Health Insurance||10.49||5.97||N/A||102.73||$15,306,634,765.63||N/A||US||#VALUE!|
|SLF||Sun Life Financial Inc||Life/Health Insurance||23.26||6.27||N/A||N/A||$13,817,549,804.69||-8.89||US||-8.89|
|PGR||Progressive Corp/The||Property/Casualty Ins||19.78||2.06||16.21||24.43||$12,049,155,273.44||1.48||US||1.48|
|HIG||Hartford Financial Services Group Inc||Multi-line Insurance||18.55||2.16||8.21||33.33||$8,084,361,816.41||-24.79||US||-24.79|
|PFG||Principal Financial Group Inc||Life/Health Insurance||26.78||3.14||9.77||31.33||$7,903,300,292.97||-11.39||US||-11.39|
|Ticker||Name||Industry||Price||Dividend Yield||P/E||Payout Ratio||Market Cap||Annual Total Return Last 5 Years|
|GWO||Great-West Lifeco Inc||Life/Health Insurance||22.23||5.53||10.52||57.81||21114507813||-4.27|
|MFC||Manulife Financial Corp||Life/Health Insurance||11.09||4.69||N/A||703.76||20124968750||-19.74|
|PWF||Power Financial Corp||Life/Health Insurance||25.3||5.53||10.77||59.73||17916792969||-4.37|
|SLF||Sun Life Financial Inc||Life/Health Insurance||23.04||6.25||N/A||N/A||13686858398||-10.17|
|POW||Power Corp of Canada||Life/Health Insurance||23.76||4.88||11||52.67||10928293945||-5.66|
|FFH||Fairfax Financial Holdings Ltd||Property/Casualty Ins||378.75||2.68||33.53||N/A||8110434570||15.59|
|IFC||Intact Financial Corp||Property/Casualty Ins||61.81||2.59||13.15||37.86||8007711914||10.19|
|IAG||Industrial Alliance Insurance & Financial Services Inc||Life/Health Insurance||25.45||3.85||25.2||71.94||2305845459||-4.64|
|ELF||E-L Financial Corp Ltd||Multi-line Insurance||412||0.12||24.08||N/A||1655996460||N/A|
|EFH||EGI Financial Holdings Inc||Property/Casualty Ins||8.98||N/A||19.96||0||108046585.1||-4.02|
-Prudential (NYSE:PRU): Earnings per share growth, dividends and sales have all increased signifciantly over the past 5 years, the stock is trading at a decent P/E ratio and while the return has not been spectacular by any means, it remains reasonable given the context
-Aflac (NYSE:AFL): No doubt about, this has been my top name with all important metrics increasing by 10% or so or more per year in the past 5, an attractive P/E, international exposure and the stock has done fairly well. From a dividend perspective, this has been a winner.
-Power Financial (PWF.TO): Very strong dividend yield with a reasonable payout ratio, this is one of the better looking Canadian stocks without any doubt.
Other Stocks Worth Looking Into-Power Corp (POW.TO)
-Industrielle Alliance (IAG.TO)
Insurance As The Basis Of Your Portfolio?Having a heavy weighting in insurance stocks would provide you with important cash flows that can be used to increase assets in your other holdings.
Don’t laugh! That is pretty much what Warren Buffett’s Berkshire (BRK/B) has been doing for years now. The incredible success story has been able to build its investments book thanks mainly to the cash flows generated by its insurance businesses such as Geico.