Life Insurance Stocks: Bargains Amid Industry Turmoil
A tumultuous period for the life insurance industry, marked by the failure of Confederation Life Insurance Co. and increasing competition from banks, has sent share prices plummeting. However, a few analysts believe that the downturn has created opportunities to buy quality stocks at a discount.
Mutual fund manager Irwin Michael considers London Insurance Group Inc. a good value, citing its well-run operations and low price-to-earnings ratio of 7.7. Wood Gundy analyst Rossa O'Reilly also recommends London, pointing to its dominance of the individual life market and potential for growth through acquisitions. Great-West Lifeco Inc., a subsidiary of Power Corp. of Canada, is another stock that analysts believe has been oversold. O'Reilly predicts that Great-West will rise to its 1995 book value of $27.60 in the next year.
Key Takeaways:
- London Insurance Group Inc. and Great-West Lifeco Inc. are considered quality stocks with low price-to-earnings ratios.
- London dominates the individual life market, with a leading share of 14 percent.
- Great-West is a major player in group life and benefits from the "flight to quality" among customers.
- Both companies have been oversold and could be attractive buys in the current market.
- London and Great-West have stable, growing earnings and high-quality assets.
- Rossa O'Reilly estimates that London could fetch up to $31.55 a share in a takeover.
Statistics:
- London Insurance Group Inc.'s price-to-earnings ratio is 7.7.
- Great-West Lifeco Inc.'s price-to-earnings ratio is 8.4.
- London Insurance Group Inc.'s share price closed at $23.50 on the Toronto Stock Exchange on the day of the report.
- Great-West Lifeco Inc.'s share price ended yesterday at $23.87 on the TSE, closer to its year-long high.
- O'Reilly estimates that London could rise to its 1995 book value of $27.60 in the next year.
- O'Reilly predicts that Great-West could climb as high as $29.
Sources:
- Wood Gundy analyst Rossa O'Reilly
- Mutual fund manager Irwin Michael
- Tom Starkey of Loewen Ondaatje McCutcheon
- A fund manager, who didn't want to be named ( figure not specified in the text)