Tuesday, November 29, 2005

Big Cdn Insurers Seen Getting Smaller Break from Tax Cut Pledge

The Globe and Mail, John Partridge, Tuesday, November 29, 2005

Canada's three largest life insurers will likely enjoy only about half the share-price lift their bank counterparts can count on from Ottawa's pledge to lower dividend taxes, a financial services analyst is betting.

One reason is that the insurers have a much larger base of foreign investors, who do not stand to benefit from the pledge, TD Newcrest analyst Steve Cawley said yesterday.

The companies -- Manulife Financial Corp. and Sun Life Financial Inc. of Toronto and Great-West Life Assurance Co. of Winnipeg -- also have a smaller percentage of retail shareholders and lower dividend payout ratios.

As a result, Mr. Cawley said in the report that he is boosting his target prices for the companies by just 3 per cent to 4 per cent, "roughly half the positive impact we assigned to the Canadian banks." He said he has raised his 12-month price target for Great-West to $30 a share from $29, for Manulife to $75 from $73 and for Sun Life to $51 from $49.

About 25 per cent of Sun Life's shareholders and 45 per cent of Manulife's are foreign, while non-Canadian investors are a very small percentage of the banks', the report says. Mr. Cawley says if Sun Life's and Manulife's share prices increase, foreign investors may sell as the firms' shares become pricier relative to U.S life companies.