Canaccord
Manulife Financial* (MFC : TSX : $14.13), Net Change: 0.25, % Change: 1.80%, Volume: 2,466,299
Great-West Lifeco* (GWO : TSX : $26.25), Net Change: 0.38, % Change: 1.47%, Volume: 323,549
Industrial Alliance* (IAG : TSX : $35.95), Net Change: 0.40, % Change: 1.13%, Volume: 93,356
Sun Life Financial* (SLF : TSX : $27.58), Net Change: 0.82, % Change: 3.06%, Volume: 1,418,914
Lifecos: Beating out banks so far in 2013. Canadian insurers outperformed the banks by 14% in 2012 and have outperformed the banks by a further 8% so far in 2013. The insurers delivered a strong 2012, climbing 26% YoY and outperformed the banks by 14%. The last time the insurers outperformed the banks was in 2007. The insurers are off to another strong start, outperforming the banks by 8%. Canaccord Genuity Financials Analyst Mario Mendonca attributes the insurers' strong relative performance in 2012 to the shift to cyclicals from defensives – essentially the risk on trade, and also to an improving sentiment about earnings power and capital stability. Concerns over a slowing mortgage and housing market have limited bank performance materially in 2013. Mendonca believes all four insurers should report positive results this quarter. With the improvement in markets during Q1/13, the absence of large assumption and goodwill charges, Mendonca expects the group to report positive EPS this quarter: Manulife and Great-West Lifeco both report on May 2, Sun Life on May 8, and Industrial Alliance on May 9. All of Canada's banks are raising dividends. Mendonca expects two dividend increases from each bank in 2013, ranging from annual growth of 4% at the low end to 11% at the high end. The average bank and insurance dividend yield is essentially the same at 4.3-4.4%. With SLF and GWO supporting payout ratios approaching 60%, and MFC's and IAG's ongoing macro sensitivity, Mendonca believes it is unlikely we will see dividend increases from the insurers for some time. Mendonca favours IAG over its larger peers and prefers MFC to SLF.