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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Hurricane Sandy may have helped the insurance industry by pushing up the prices of policies (ADREES LATIF/Reuters)
Hurricane Sandy may have helped the insurance industry by pushing up the prices of policies (ADREES LATIF/Reuters)


Insurers that deliver dividends Add to ...

Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high net worth clients. michael@wickhaminvestments.com

What are we looking for?

Some investors rushed to sell North American insurance stocks as Hurricane Sandy barrelled towards the Atlantic seaboard last October. Insurance companies are on the hook for about $30-billion (U.S.) in claims, but the storm may have helped the industry by pushing up the prices of policies. Today my colleague Rob Belanger and I take a closer look at the insurance industry.

The screen

We sorted North American insurers by market capitalization and looked at only those worth more than $1-billion, and with a dividend yield of 1.5 per cent or greater.

Return on equity (ROE) measures a firm’s profitability by calculating how much profit it can generate in relation to the cash that shareholders have invested. Businesses showing a high ROE are more profitable; we have listed only companies with an ROE greater than 8 per cent.

Return on assets (ROA) indicates how profitable a company is relative to its total assets. It gives investors an idea as to how efficiently management uses its assets to generate returns. We have listed only companies with an ROA greater than a 0.4 per cent.

Price to book (P/B) compares a company’s market value to its book value – the net asset value of the business. The lower the P/B ratio, the cheaper the stock. Our list shows those with a P/B of less than three.

Price to earnings (P/E) is the share price divided by the forecast earnings per share for the next 12 months. Again, a lower number indicates a cheaper stock.

What did we find?

AFLAC sports the highest ROE, and counts 50 million customers.

Sun Life makes the grade in most areas, while Manulife is absent from our screen because of its very low 3 per cent ROE.

Predominantly a business property and casualty company, RLI Corp. displays the highest yield, but also one of the highest P/E ratios. Unum Group and Assurant Inc. represent the best value with their low P/E and P/B ratios.

With interest rates moving higher, it may be time to take a hard look at the industry, but as always, do your own research or talk to an investment professional before buying.

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Insurance industry screen

Company Ticker Recent
Price $
Travelers Cos. TRV-N 80.40 30.26 10.13 2.46
Great-West Lifeco GWO-T 28.01 26.51 15.49 0.79
Aflac Inc. AFL-N 56.60 26.39 20.38 2.52
Allstate Corp. ALL-N 48.47 22.72 11.30 1.78
Chubb Corp. CB-N 85.13 22.06 10.76 3.30
Sun Life Financial SLF-T 29.86 17.92 9.55 0.65
Progressive Corp. PGR-N 25.45 15.35 15.08 4.16
Principal Financial PFG-N 36.97 10.85 8.34 0.44
Unum Group UNM-N 29.67 7.92 10.67 1.47
Cincinnati Financial CINF-Q 46.32 7.57 8.90 2.96
Intact Financial IFC-T 56.90 7.52 13.26 3.10
WR Berkley Corp. WRB-N 41.54 5.65 11.57 2.51
Amer. Financial Group AFG-N 49.18 4.42 10.63 1.31
Indus. Alliance Ins. IAG-T 40.12 3.90 12.75 0.89
Assurant Inc. AIZ-N 50.43 3.88 8.62 1.54
ProAssurance Corp. PRA-N 52.14 3.22 14.53 6.49
First American Fin. FAF-N 21.79 2.36 13.67 5.17
RLI Corp. RLI-N 77.53 1.65 12.05 3.78
Average 10.88 2.27

All currencies in US$. Source: Bloomberg, Wickham Investment Counsel Inc.


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