Tuesday, January 15, 2008

Credit Suisse on Life Insurance Cos

The Globe and Mail, 15 January 2008

Canada’s biggest life insurers, Manulife Financial, Sun Life Financial and Great-West Lifeco, are in a great position to make more major U.S. acquisitions, according to Credit Suisse Canadian financial services analyst James Bantis.

For one thing, he said in a report to clients, they have a “stunning but well deserved” valuation premium over their U.S. peers, with their stocks currently trading at 12.7 times his estimate for 2008 share profit, compared with 10.5 south of the border.

For another, the stellar rise in the value of the Canadian dollar “has made the cost of entry into the U.S. banking market considerably less expensive for Canadian lifecos.

As well, they have suffered “relatively little damage” from the global credit and liquidity crisis triggered by the subprime mortgage debacle in the United Sates.

Although Sun Life and Great-West have, in fact, recently sold some U.S. businesses, Manulife “has been candid in its desire” to do another transaction similar to its $15-billion acquisition of John Hancock in 2003, Mr. Bantis said in the report, which is part of a broader Credit Suisse look at M&A possibilities in insurance around the world.

As for potential U.S. targets – for Canadian and other foreign acquirers – the report cites: Lincoln National, Principal Financial, Ameriprise, Phoenix Cos., Mercury General, Progressive, Infinity and RLI.