Great West Lifeco (GWO.TO)

Having a multiyear low in long-term interest rates last June, this is likely to creep higher for many years. Looking at insurance companies, rising rates are good for them. Being in a pretty good equity market, equity returns help the insurance industry. It’s a group he is quite interested in, and they could do well for many years. If he had to pick a Canadian insurer, he would probably pick Manulife (MFC-T) as the leader in the group. Technically it is acting the best and has a great global footprint with great growth in Asia. We are in a bull market, so you don’t want to buy a company that is not going up yet.

The most conservative of the 3 lifecos in Canada. A lot of their business is more utilitarian, and they don’t take some of the risks the others do. As a result, they perform better across negative markets, but the leveraged companies have been doing better. They bought Putnam Funds in Boston, and have had difficulty getting that turned around. With Power Financial (PWF-T) you get this company at a discount of about 17%. He would use Power Financial instead.

GWO-T vs. MFC-T. MFC-T has the advantage of being a very diversified company, globally. They have done well from that diversification. He tends to prefer it to GWO-T, although he might use its weakness to buy.

This has always been one of the most profitable of the large life insurers. If you think we are going into a rising interest rate environment, the insurers are the ones who can benefit greatly. He would prefer owning Power Financial (PWF-T) over this because of its diversification, but also increases in dividends.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? He has quite a bit of exposure to life insurance right now through Manulife and Sun Life, and they both look very attractive. Interest rates are likely going to work their way slowly higher over the next several years.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? This depends on quality and size, but if you are thinking of just keeping it very safe, Manulife and Sun Life would be the 2 he would zoom in on.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? As a group, the insurance companies have not done very well. Of these 3, Sun Life has relatively performed the best. A lot of the difficulties they have experienced has been a function of what has happened with energy, as they all have some energy exposure. Also low interest rates are generally negative for lifecos.

(Top Pick Aug 20/15, Down 4.27%) The stock has balanced the stock’s valuation losses with its income. This is a sector that needs interest rates to go up and after that there is nothing more to be said. They will soften otherwise.

A world-class insurance company with great assets, suffering from high interest rates. This is financially bulletproof and your dividend is secure.

Not an expensive stock from a valuation perspective. It survived the 2008 downturn, and has done a better job than some other insurers. However, this is going to have a difficult time going much higher. 4.1% dividend yield.

Negative interest rates leaking into North America will hurt insurance companies more than anyone else. Best case scenario you are in a range. You could add at the low end of the range, but negative interest rates leaking in from Europe are a big risk.

A well-managed insurance company, and has always had a relatively high ROE, but generally speaking it has been one of the lifecos where you have had to pay up for that return on equity. This is selling at 1.8X Book, compared to Manulife (MFC-T) at 1X Book and Sun Life (SLF-T) at 1.5X. He feels you are paying too much for this additional ROE.

A Fixed Perpetual Preferred. In this environment, you are probably all right with something like this. It’s an awfully good coupon. The Rate Reset has problems with being reset potentially lower. As an equity, it is kind of middle of the pack of the insurance companies in Canada. Not bad, but it struggles because of some of its assets mainly.

It is a strong brand. He prefers SLF-T and MFC-T, although owns neither. They take in premiums and invest them in fixed income. It is difficult for them to see a reasonable return on their cash. There are easier ways to make money in the market. He prefers Canadian Banks.

Great West Life (GWO-T), Manulife (MFC-T) or Sun Life (SLF-T) for the best upside? That’s a tough question, because he likes all 3. Insurance companies will do well in the economy he sees going forward. Lifecos have a little bit more torque on the upside with rising interest rates. Right now Manulife would be his favourite.