Manulife (TSX: MFC) and Sun Life Financial (TSX: SLF) are two of Canada’s best-known insurance companies. Manulife is a life insurance company that also has banking operations. Sun Life is a diversified financial company that offers insurance as well as investments. The two companies are quite similar, which makes them worth comparing.
Generally speaking, Manulife trades at lower multiples than Sun Life does, while Sun Life has a better historical growth track record. The profitability comparison between the two companies is mixed, with each company scoring wins on some metrics but missing on others. In this article I will explore Manulife and Sun Life Financial side by side, so you can decide which is a better fit for your portfolio.
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The case for Manulife
The main advantage that Manulife Financial has over Sun Life is a cheaper valuation (at least going by multiples). It also has grown more than Sun Life in the last 12 months, though less over the last five years.
Some key valuation multiples for Manulife Financial Corporation include:
- 11.5 times earnings.
- 2.5 times sales.
- 1.6 times book value.
- 2.9 times cash flow.
The same multiples for Sun Life are:
- 12.5 times earnings.
- 1.5 times sales.
- 2 times book value.
- 8.9 times cash flow.
As you can see, Manulife’s multiples are lower than Sun Life’s on average. This is particularly striking when we consider that Manulife grew more than Sun Life in the trailing 12-month period. In that period, MFC grew its revenue by 15.8% and its earnings by 28%. In the same period, Sun Life grew its revenue by 5.5% and its earnings by 2.6%. So Manulife has got Sun Life beaten on valuation and recent growth. However, the latter has some advantages of its own.
The case for Sun Life Financial
The main advantage that Sun Life Financial has over Manulife is a better long-term growth track record. Over the last five years, Sun Life grew its revenue, earnings, and assets at the following rates (compounded annually):
- Revenue: -3.7%.
- Earnings: 8%.
- Assets: 4.3%.
The same growth rates for Manulife were:
- Revenue: -16.5%.
- Earnings: 3%.
- Assets: 3.3%.
Overall, we have Sun Life here with a slightly better long-term growth track record than Manulife.
Will this continue? It’s hard to say. Sun Life has a somewhat better-known brand than Manulife, and its integration of insurance and wealth management creates an ecosystem effect. Manulife doesn’t have this advantage to the same extent. On the other hand, Manulife has a wider variety of insurance products to choose from. So, it’s hard to say which of these companies will perform better going forward.
Foolish takeaway
Looking at Sun Life Financial and Manulife Financial Corporation side by side, I’m left without a very clear preference for one or the other. If I had to choose, I’d probably go with Sun Life, simply because its performance has been a bit more consistent over the years. This may indicate that SLF has a somewhat more sober-minded and sensible management team than MFC. But the difference here isn’t massive.
