Ahead of the start of earnings season for Canadian life insurance companies next week, National Bank Financial analyst Gabriel Dechaine expects strong equity markets to “boost” both reported and core earnings per share results.
“Lifecos are underperforming the market by approximately 6 per cent since the end of Q4/23 reporting season, reflecting a general pullback in markets. In general, we are forecasting a fairly ‘quiet’ quarter,” he said.
“Excluding a one-time charge to be recorded by MFC (i.e., related to LTC portfolio disposition), we are forecasting a narrow spread (3 per cent) between reported and core EPS, with all but GWO expected to deliver reported EPS ahead of core EPS. Core EPS should benefit from strong equity markets during the quarter, considering 30-per-cent-plus of average lifeco earnings are linked to Wealth businesses, and we have revised our EPS upwards slightly for MFC and SLF as a reflection of this backdrop. On the other hand, we have cut our IAG Q1/24 forecast by 5 per cent to reflect: 1) a more conservative outlook for new business strain in the Group business; 2) impact from macro movements (rates); and 3) offset by higher wealth AUM due to stronger equity markets. We believe investors are particularly concerned about IAG’s results, given the string of poor quarters over the past year. We note that consensus Q1/24 has been cut by 2 per cent so far over the past month, which should limit downside risk heading into earnings.”
In a research report released Friday, Mr. Dechaine made modest changes to his earnings projections, leading to a pair of target price adjustments as he outlined company-specific trends, themes and issues for investors to watch for.
* Manulife Financial Corp. ( “sector perform”) to $34 from $33. The average is $35.05.
“MFC: 1) Legacy block transactions are still THE focus; 2) Asia sales rebound facing tougher comparable; 3) Investment experience has caused reported earnings volatility,” he said.
* Sun Life Financial Corp. ( “sector perform”) to $73 from $72. Average: $76.38.
“SLF: 1) U.S. Group redetermination impact waning; 2) Canadian Group business has been exceeding expectations; 3) Another CRE loss anticipated,” he said.