Wednesday, April 11, 2007

UBS Expects 'Decent, but Not Great' Life Insurance Cos Results

Financial Post, Duncan Mavin, 11 April 2007

UBS Investment Research is forecasting "decent, but not great" results from the big life insurance companies, due to report first quarter 2007 earnings starting in the first week of May.

Profits across the industry could be hurt by weak equity markets, a challenging rate environment, and strong competition, said UBS analyst Jason Bilodeau in a note.

"North American equity markets were fairly choppy through the first quarter," Mr. Bilodeau said, noting that the S&P/TSX index was up just 2% in the first quarter, while the S&P500 was down nearly 3% over the same period.

At the same time, the life companies have been faced with inverted yield curves in Canada and the U.S., which "likely kept a lid on investment spreads and continued to dampen fixed annuity sales trends," said the UBS analyst.

From a competitive bunch, Mr. Bilodeau rates Manulife Financial Corp. as his top pick, with continued healthy sales and a possible 10% dividend hike on the cards.

Sun Life Financial Inc., Industrial Alliance Inc. and Great-West LifeCo Inc. are all rated "neutral" by Mr. Bilodeau. Only Manulife gets a "buy" rating from UBS.