Skip to main content
number cruncher

What are we looking for?

Federal Reserve chair Janet Yellen said last week that the Fed is giving "serious consideration" to beginning to reduce its accommodative monetary policy and a rate hike may be warranted later this year.

Since insurance companies derive more profits in a rising interest rate environment, my colleague Rob Belanger and I thought we would take a look at the sector.

The screen

We started with North American insurance companies with market capitalizations greater than $1-billion (U.S.) and sorted them from the largest to the smallest.

Only companies with a positive earnings per share in the trailing 12 months are included.

The price-to-earnings ratio is the EPS divided by the market price of the stock. Generally a low number is preferred.

The price-to-tangible-book value is a method of valuing a company on a per-share basis by measuring its equity after removing any intangible assets. A low ratio could mean the stock is undervalued.

The benefit ratio measures an insurance company's net premiums received compared with claims and charges. We are looking for a high number.

Reserves are a measurement of an insurance company's financial strength. The reserve growth is the percentage change in reserves from last year to the current year. A high number is preferable.

We are also showing the current dividend yield of all the companies on our screen.

What did we find?

The company with the highest EPS is Columbus, Ga.-based Aflac Inc., which, in addition to its strong U.S. presence, also insures one in four Japanese households.

Voya Financial leads the pack in the P/E ratio, and in the price/tangible book ratio. The company is headquartered in New York and was formerly a subsidiary of ING Group NV. ING U.S. was spun off in 2013 and rebranded as Voya Financial in 2014.

The company with the highest one-year growth in reserves is Toronto-based Manulife Financial Corp.

Contact an investment professional or conduct further research before investing in any of the companies listed here.

Michael Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients.

North American insurance companies