FILE PHOTO: The Solar Life Monetary emblem is seen at their company headquarters of One York Street in Toronto, Ontario, Canada, February 11, 2019. REUTERS/Chris Helgren
TORONTO (Reuters) – Canadian life insurers are set to see double-digit earnings decreases within the second quarter because the pandemic-induced financial slowdown ushered in decade-low rates of interest and weighed on gross sales.
Analysts predict declines in underlying earnings per share of between 10% and 14% from a 12 months earlier for the 4 main life insurers — Manulife Monetary (MFC.TO), Solar Life Monetary (SLF.TO), Nice-West Lifeco (GWO.TO) and IA Monetary (IAG.TO).
“Insurance companies keep a very large reserve of cash, and when interest rates are as low as they are… it obviously hurts them,” stated Allan Small, senior funding adviser at Allan Small Monetary Group with HollisWealth.
The year-on-year declines are set to be essentially the most because the first quarter of 2012, in response to analysts.
IA Monetary will report outcomes on Thursday, adopted by Nice-West, Manulife and Solar Life on Aug. 4, 5 and 6 respectively.
Canaccord Genuity analyst Scott Chan wrote in a word that the trade is buffeted by decrease rates of interest, larger credit score losses from company downgrades and the vitality sector, leading to a 14% year-on-year revenue drop, regardless of sturdy wealth administration efficiency.
Regardless of the headwinds, second-quarter earnings are more likely to be an enchancment on the prior three months, of about 1%, Barclays analyst John Aiken stated, helped by improved fairness markets. Canaccord additionally expects a 1% revenue enhance from the prior quarter, and CIBC Capital Markets a 4.6% acquire.
Canadian insurers might observe a few of their U.S. counterparts, together with Aflac Inc (AFL.N) and Principal Monetary PGF.O in beating estimates, stated Brian Madden, portfolio supervisor at Goodreid Funding Counsel, which holds Manulife shares.
However wealth administration power is “not likely to be enough to offset weak sales in the group insurance and group retirement segments,” Madden, who expects earnings declines within the high-single-digits from a 12 months in the past, stated. “When you’re having bankruptcies and layoffs, and you’re not adding a lot of employees, you’re not buying a lot of new… plans.”
Reporting By Nichola Saminather; Modifying by Alistair Bell