The insurers have really been big gainers for investors over the last two years. Indeed, higher interest rates, robust earnings trajectories, better operating results, and the ability to dodge and weave past inflation’s blow have all helped the Canadian lifecos. And while the easy money, as they say, has already been made, I think the best insurance plays still represent terrific value.
Arguably, they’re still cheap and even more timely now that they’ve got a multi-year bullish run behind them. While the Bank of Canada (BoC) has been slashing rates of late, I still think the “higher for longer” case could bode very well for the Canadian financials.
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It’s time to give the insurers another look
Indeed, perhaps the BoC will be more inclined to hold off on future hikes as it looks to stomp out what remains of inflation. Sure, the CPI numbers have been better, but higher food prices still need to be conquered. Add economic resilience in spite of Trump’s tariffs into the equation, and I think that “keeping an ear on the data,” so to speak, makes the most sense for the Bank of Canada moving forward.
Either way, I think the insurers could continue to thrive in this environment as the economy holds its own despite macro uncertainties, while premiums on various insurance products look to march higher. At the end of the day, insurance takes some risk off the table. And clearly, customers are willing to pay just a bit more if it means having greater peace of mind with regard to life insurance, extended health, or anything else. Perhaps we should give the insurers credit for their ability to thrive in today’s hot, but still uncertain, time.
Manulife Financial: A robust insurance stock worth buying on the dip
At this juncture, Manulife Financial (TSX: MFC) stock looks like a great pick-up now that it’s gone sideways for close to a year, seemingly digesting the blistering run that preceded the consolidation. Now down around 9% from recent highs, I think it’s prime time to give the insurance juggernaut a second look, especially as the firm looks to follow up on a decent second quarter of earnings with more strength.
Add the share repurchase plan into the equation, and I’m inclined to view MFC stock as a top pick in the Canadian financial scene as shares look for direction going into the final few months of the year. So far this year, the firm bought back just north of $1 billion worth of shares.
Add the potential for dividend hikes into the equation, the generous upfront yield (4.2%), and the modest 13.6 times trailing price-to-earnings (P/E) multiple, and MFC seems like a timely value play for investors looking to punch their ticket ahead of the next big act for the big Canadian insurers.
It’ll be interesting to see how the firm can jolt growth as it levels up its Asian business, which may very well set Manulife apart from the pack in the insurance scene. Personally, I think MFC stock is a fantastic value, even though its year-to-date performance has been lacking. In short, MFC stock is a great buy in August.
