A pedestrian walks past the Manulife building in downtown Vancouver, B.C., in this file photo.JONATHAN HAYWARD/The Canadian Press
Investors shouldn't overlook the value of Canadian life insurers' businesses at home, even if the prospects of new markets of Asia and recovery in the U.S. appear to be more dynamic.
Insurance companies can focus on their business fundamentals, now that the pressures of the recession are easing and interest rates and equity markets have risen.
"A lot of people think that Canada is a saturated market, but we really do think there are lots of opportunities," said Marianne Harrison, president of Manulife Canada, in an interview on the front lawn at Toronto headquarters on Tuesday morning. She'd just finished putting against pro golfer Brittany Lang, the defending champion of the Manulife Financial LPGA Classic.
While investors have started to wade back into the insurance sector, stronger earnings results in the next year and a half could drive even more demand for shares, Doug Young, a TD Securities analyst, wrote in a recent report.
"The Canadian divisions often get overlooked, in our view, due to bigger issues in other regions, or due to the outsized impact that macro conditions have on lifeco results," Mr. Young said. "As macro conditions stabilize and investors begin to focus on the fundamentals again, we believe Canada could stand out as a key driver of the life insurance story over the near term."
Mr. Young thinks insurers' mutual fund sales will take a bigger bite out of the industry's market share in the next five to 10 years. Life insurers manage just 5 per cent of total invested assets, according to Investor Economics. Manulife had just 3 per cent of the market's assets under management as of the end of 2012.
Ms. Harrison highlighted mutual funds as a business she wants to build, and said that sales have nearly doubled from a year ago. "Fund performance and how many fund offerings we have" are the keys to attracting more customers, she said. "We're going to continue to expand distribution, but we're pleased with the partners we have, and it's gone very well."
The small business group is also being targeted for expansion – "especially in group benefits, because we're really been in the large group market, historically," she said. "But we want to do it a little bit differently. More of an integrated approach to how we deal with small business owners, not only benefits but banking needs and loans."
But there are always pitfalls. Mr. Young said an increased demand for defined-contribution pensions could attract "various international competitors which were previously reluctant to enter Canada because of inability to gain the needed scale."
But Ms. Harrison, doesn't appear too concerned. The bigger question for her is whether the pension market, which has been a little slower than expected this year, will pick up. She's hoping that the advancement of the pooled retirement pension plans system will drive some new business.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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