Canada’s top three insurers by market capitalization are solid investment prospects like the country’s Big Six banks. Manulife Financial (TSX:MFC), Sun Life Financial (TSX:SLF), or Great-West Lifeco (TSX:GWO) are federally regulated like their banking counterparts to ensure consumer protection.
Income investors should have confidence in investing in these insurance companies because of financial stability and solid capital positions. Moreover, all three are dividend growers paying high yields. Be like current investors who are enjoying market-beating returns year to date.
Franchise strength and diversity
Manulife (John Hancock in the U.S.) is a Dividend Aristocrat owing to eight consecutive years of dividend increases. The $47.31 billion company increased its dividend in 2023 by 11%. If you invest today, the share price is $25.72 (+9.5% year to date), while the dividend yield is 5.63%.
Its president and chief executive officer (CEO) Roy Gori said, “Our financial strength, robust risk management and diversified business portfolio continue to drive the performance for our global franchise.” In the first quarter (Q1) of 2023, net income attributed to shareholders reached $1.4 billion compared to the net loss of $1.22 billion in Q1 2022.
Gori added that the year-over-year core earnings growth in North America reflect the franchise’s strength and diversity. Management is likewise encouraged by the sales momentum in Asia. Market analysts forecast revenue growth of 20.76% per year, although earnings could decline by 11% in the next three years.
Strong growth
Sun Life’s dividend-growth streak is also eight years, and at $67.40 per share (+9.63% year to date), you can partake of the 4.44% dividend yield. The most recent increase in the common share dividend was 3%. This $39.7 billion financial services company provides savings, retirement, and pension products globally and is the pioneer in the High Net Worth (HNW) life insurance business.
Management continues to focus on overseas expansion while adding more digital tools and new products at home. In Q1 2023, net income rose 21.2% year over year to $806 million. Sun Life president and CEO Kevin Strain said, “We generated strong growth in both health and protection sales, which reinforces the importance clients continue to place on health and financial security.”
Market analysts forecast earnings growth of 6.6% annually in the next three years. Their 12-month average and high price targets are $73.43 (+8.9%) and $79 (+17.2%).
Top performer
Great-West Lifeco is flying high and outperforms both Manulife and Sun Life. At $38.07 per share, the year-to-date gain is an impressive 24.98%. GWO’s total return in three years is a respectable 74.75%, with a compound annual growth rate of 20.43%. The current dividend yield is 5.42%, while the dividend-growth streak is nine years.
The $35.75 billion holding company provides life & health insurance, retirement & investment services, asset management, and reinsurance businesses to clients in Canada, the U.S., and Europe. Despite lower margins in 2023 (4.1%) compared to 2022 (7.5%), market analysts see earnings growth of 9.33% annually.
In Q1 2023, base earnings grew 13.5% to $808 million versus Q1 2022, although net earnings nosedived 59.9% year over year to $595 million. Management attributes the decline to losses in non-fixed income assets and changing interest rates. Nonetheless, Great-West is positioning its portfolio to deliver greater value for clients and shareholders.
Resilient Dividend Aristocrats
A recession could have knock-on effects on the insurance industry, but Canada’s top insurance stocks are resilient to overcome them.
