Top Canadian Insurance Stocks to Buy in 2022

Posted on November 30, 2021 by Dylan Callaghan

In investing, they often say to buy what you know. And in the case of Canadian insurance stocks, everybody knows insurance.

No, not everybody knows the complexities of your 80 page insurance policy they deliver you on an annual basis. But we know that you need insurance to drive, you need insurance on your home, and you'd be wise to get some sort of life insurance policy at some point.

But, you're likely unaware that there are many different types of Canadian insurance stocks, and there aren't too many "all in one" solutions here in Canada. From P&C (property and casualty) insurers to life insurers, there is a ton of variety here among Canadian stocks and buying one might not get you exposure to all types, so to speak.

Why insurance stocks in Canada moving forward?

There's certainly a bullish case for insurance stocks moving forward considering the current economic environment.

There is almost zero question the government will look to put a damper on inflation. One of the first things a government will typically do is raise interest rates to slow borrowing and spending. In the end, Canadian fintech stocks might struggle as spending relaxes, but this is a benefit to insurance companies, and financial companies as a whole.

For the most part, insurance companies invest their collected premiums into low risk assets, many of which are highly dependent on interest rates. In the situation of life insurance companies, they also offer products that are highly dependent on rates. When rates go up, these companies earn more and can charge more.

Do insurance ETFs exist?

It will be difficult to find a pure-play insurance ETF here in Canada. That is simply because we do not have enough companies nor the popularity to generate enough fund flows when it comes to insurance stocks.

However, something like the iShares Equal Weight Banc & Lifeco ETF (TSE:CEW), or the CI U.S. & Canada Lifeco Income ETF (TSE:FLI) can give you reasonable exposure to the sector.

CEW is an ETF that offers exposure to both Canadian insurers and Canadian banks, while FLI is both Canadian and United States insurance companies.

Overall, the environment for insurance stocks is bullish

As a result, in this article we're going to go over 3 of the top insurance stocks to buy in Canada, so you don't miss out.

We'll attempt to give you the widest coverage available so that you can pick what industry you want exposure to. So let's get started.

The top Canadian insurance stocks to buy today

Sunlife Financial (TSX:SLF)

Sun Life Financial

There are three major life insurance companies here in Canada, and one of them is Sunlife Financial (TSE:SLF). With a market cap just over $40B, Sunlife is also one of the largest companies in the country.

The company offers insurance, retirement, asset management solutions, and wealth management services to not only individuals but corporations in both North America and Asia. The company also owns a Boston-based asset management firm in MFS Investment Management, and about 1/3 of its revenue comes from the asset management department.

Yielding in the high 3% range, the company has a 6 year dividend growth streak and has managed to raise the dividend at an annual pace of 7.82% during this time. Out of the major insurance companies here in Canada the company has been the best performing insurer by a landslide.

With total returns in excess of 450% over the last decade, the next closest competitor would be Manulife Financial at just over 200%. That is assuming you reinvested all the dividends.

The company is expected to grow revenue and earnings at a moderate clip over the next 2-3 years, with mid single digit revenue growth and double digit earnings growth.

In terms of the dividend, now that the freeze is lifted on financial companies we can expect Sunlife to make some decently sized raises to reward investors.

In November of 2021, the company raised the dividend by 20%, far more than its typical average, highlighting the strong cash position the company is in.

Intact Financial (TSX:IFC)

Intact Financial

Intact Financial (TSE:IFC) is slightly different than the other Canadian insurance stocks on this list. This is because Intact is what they call a "P&C", or property and casualty insurance company. This means the company provides products like auto and property insurance to Canadians, instead of investment products like life insurance or an annuity.

In fact, the majority of the company's premiums are written in the personal automotive space. The company operates under BrokerLink and directly to consumers through Belairdirect.

Intact has a large chunk of market share here in Canada, making up just shy of 20% of the P&C market. Although it is one of the "smaller" insurance companies here in Canada, considering it has a market cap in excess of $28 billion, it is far from small.

The company posted annual revenues of $12.46B and has a dividend yield of just over 2%. This low yield could deter many investors who are looking for income. However, this would be a pretty big mistake, as Intact Financial has one of the best dividends out of all financial institutions in Canada in terms of dividend growth in recent years.

The company has a 16 year dividend growth streak. In fact, it hasn't missed raising the dividend in a single year since its 2004 initial public offering. It has also consistently raised the dividend by double digits, including its most recent raise in November of 2021 of 10%.

In terms of growth, the company is expected to grow the top and bottom lines by high single digits over the next 2-3 years. However, an inevitable increase to interest rates in 2022 or 2023 could increase the trajectory of this Canadian insurer, certainly something to keep an eye on.

Power Financial (TSX:POW)

Power Financial Corp

Although Power Financial (TSE:POW) is technically an insurance company, it has shown to be much more than that over the last while. The company is a diversified holding company with interests in financial services, communications, and many other sectors.

Another major insurer, Great-West Lifeco, is a part of the Power Financial group of companies and Power Corp also has controlling interests in IGM Financial, and Pargesa, which is a holding company in Europe.

As of late 2021, the company had a net asset value of $52~, which represents 25% year over year growth, a significant accomplishment. The company has rewarded shareholders with some best in class capital appreciation post-pandemic, and Power Corporation was one of our best Bull List stocks highlighted to Stocktrades Premium members in 2021.

The company is a Canadian Dividend Aristocrat, yielding in the high 4% range with a payout ratio of only 42%. This low payout ratio is likely a signal for future dividend growth, as the company recently raised the dividend by 10.5% in mid November 2021.

The company has driven both NAV and dividend growth through excellent investments, including a stake in a brokerage you could be trading with, Wealthsimple Trade. Even just learning how to buy stocks, you have probably heard of Wealthsimple.

Power Corp doesn't just limit itself to investments in financial companies. The company has also backed companies in the EV industry like Lion Electric.

In terms of forward looking growth, analysts predict the company will grow revenue at a mid single digit pace and earnings are expected to stay relatively flat over the next year or two. Keep in mind however, they've been upgrading earnings estimates on Power Corporation nearly every single quarter it reports earnings, as it continues to surprise. So, who knows where we will be in the next year or two.

Disclaimer: The writer of this article or employees of Stocktrades Ltd may have positions in securities listed in this article. Stocktrades Ltd may also be compensated via affiliate links in this post.

Dylan Callaghan

About the author

Dylan is the co-founder of Stocktrades.ca and an avid self-directed investor. He holds a portfolio of Canadian growth and dividend growth stocks, and believes that anyone, regardless of financial status, stands to benefit from investing in the stock market. His ultimate goal with his writing and the continual development of Stocktrades.ca is to create a resource that helps Canadians, and investors from around the world, make more money and retire earlier.