Monday, June 05, 2006

Life Insurance Co Growth Rates

Scotia Capital, 5 June 2006

• Acquisitions have historically fuelled growth in Canada but those days are largely behind us - organic growth in Canada has been slowing and should continue to slow going forward. In our view, gone are the days of 30% earnings growth for the Canadian divisions of these companies, largely driven by acquisitions. We estimate that the 28% average earnings CAGR for all the Canadian divisions of the Canadian lifecos from '00 to '05, driven largely by the acquisitions of Clarica, Canada Life, and Maritime Life (as part of the John Hancock acquisition), was around 16% on an organic basis. We estimate the organic growth rate actually declined to 12% over the last two years. We look for a 12% CAGR for '06 & '07, and 11% on an organic basis.

• We estimate Manulife will have the best earnings growth prospects in the Canadian market. In '06 & '07, we expect Manulife's Canadian division to be the fastest growing of all the Canadian divisions of our lifecos, with 16% earnings CAGR, (14% on an organic basis), followed by Great-West Lifeco at 12%, Industrial-Alliance at 12% (10% organic), and Sun Life at 8%.