Desjardins Securities analyst Doug Young expects Canadian insurance companies to see a 6-per-cent year-over-year increase in core earnings per share for the third quarter with several sector-wide catalysts on the horizon.
“There are several themes we’ll be watching for with 3Q24 results,” he said in a research note. “First, core EPS should benefit from higher average equity markets, a depreciating Canadian dollar and share buybacks on a year-over-year basis. Second, reported EPS will likely be below core EPS for the group due to several factors, including commercial real estate (CRE) returns falling short of expectations. Third, on a company basis, the main focus will be on (1) the actuarial review impact for SLF, MFC and GWO; (2) US group results for SLF; (3) Asia trends for MFC and SLF; (4) US extended vehicle warranty trends for IAG; and (5) Empower for GWO.”
“We expect MFC’s and SLF’s Asia businesses to show improvements in sales and earnings,” he said. “The wealth businesses should benefit from higher equity markets and lower interest rates. The US dollar, British pound and euro appreciated vs the Canadian dollar on an average basis, which should benefit results (the US dollar is relevant for all lifecos, while the British pound and euro are relevant for GWO). The yen depreciated vs the Canadian dollar (relevant for MFC).”
Increasing his target prices for the four stocks in his coverage universe, the analyst emphasized several earnings growth drivers over the next 2–3 years, pointing to “(1) Higher equity markets should benefit core earnings; (2) SLF—growth in the U.S. group (in 2025), Asia and SLC Management, in addition to stock buybacks and capital deployment; (3) MFC—a turnaround in Asia and buybacks; (4) IAG—a non-recurrence of various items that had a negative impact in 2023 (higher mortality, corporate expenses, higher-than-normal strain in group insurance and yield curve inversion), potential turnaround in U.S. auto sales/U.S. extended vehicle warranty business, organic growth, digital initiatives, buybacks and leveraging distribution domestically; and (5) GWO—Empower.”
Maintaining his “pecking order” of companies, his targets are now:
- Sun Life Financial Inc. (
, “buy”) with a $84 target, up from $77. The average on the Street is $77.23. - Manulife Financial Corp. (
, “buy”) with a $44 target, up from $41. Average: $39.30. - IA Financial Corp. Inc. (
, “hold”) with a $115 target, up from $98. Average: $109.38. - Great-West Lifeco Inc. (
, “hold”) with a $46 target, up from $43. Average: $44.60.
Manulife Fin
41.23+11.95 (40.81%)
IA Financial Corp Inc
115.67+25.34 (28.05%)
Sun Life Financial Inc
78.48+9.76 (14.20%)
Great-West Lifeco Inc
46.04+2.18 (4.97%)
Year to date
Dec. 29, 2023
Oct. 10, 2024