BMO Nesbitt Burns analyst Tom MacKinnon expects few surprises from fourth-quarter earnings season in Canada’s insurance sector.
“The fourth of the new IFRS17 prints, so still a learning experience, especially for lifecos,” he said. “Still we expect no surprises, with Q4/23E core/base/underlying EPS estimates generally in line with consensus. MTM impacts that account for a large part of the differences between core/underlying/base EPS and reported EPS are expected to be small for Q4/23 (unlike the case in Q3/23), as the MTM impact of Q4/23 favourable equity markets help offset a portion of the once again likely lower than expected ALDA/private NFI asset returns. We continue to believe organic capital generation is a comprehensive KPI for lifecos, especially under IFRS 17 (IFRS 17 earnings are not representative of organic capital generation), and our top picks, SLF & IAG, look more attractive on this measure. For P&C insurers we are generally in line with consensus, looking for 2024 CAT loss guidance from IFC/DFY. Top P&C picks are FFH & IFC.”
For life insurance companies, he made these target adjustments:
* Great-West Lifeco Inc. (“market perform”) to $44 from $42. Average: $43.
* IA Financial Corp. Inc. ( “outperform”) to $101 from $99. The average is $100.75.
* Manulife Financial Corp. ( “market perform”) to $31 from $29. Average: $30.50.
* Sun Life Financial Inc. ( “outperform”) to $80 from $70. Average: $74.
For property and casualty insurance firms, his changes are:
* Fairfax Financial Holdings Ltd.( “outperform”) to $1,550 from $1,400. Average: $1,607.20
* Intact Financial Corp. to $230 from $225. Average: $224.73.