Best Canadian Insurance Stocks to Buy in June 2024

WRITTEN BY Dylan Callaghan | UPDATED ON: May 8, 2024

Canadian stocks

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In the world of investments, a common saying is to put your money in sectors you are familiar with. This especially holds true for Canadian insurance stocks, as insurance is a universally understood concept. Furthermore, the current market conditions favor insurance stocks. We delve deeper into this topic towards the end of this write-up.

First, we're going to go over 3 of the best insurance stocks to buy in Canada so you don't miss out.

We'll give you the broadest coverage available so that you can pick what industry you want exposure to.

Of note, these stocks are in no particular order. If you'd like to read any additional research on the companies, just click the links in the table.

The top Canadian insurance stocks to buy today

Sunlife Financial (TSX:SLF)

Sun Life Financial

There are three primary life insurance companies here in Canada, and one of them is Sunlife Financial (TSE:SLF). With a market cap just over $39B, Sunlife is also one of the largest companies in the country.

The company offers insurance, retirement, asset management solutions, and wealth management services to individuals and corporations in 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 mid 4% range, the company has an 8-year dividend growth streak and has managed to raise the dividend at an annual pace of 9.60% during this time. Out of the major life insurance companies in Canada, the company has been the best-performing by a landslide.

With total returns of over 192% over the last decade, the next closest competitor would be Manulife Financial, at just over 103%. That is assuming you reinvested all the dividends.

The company is expected to grow earnings at a moderate clip over the next 2-3 years, with mid-single-digit and double-digit earnings growth. Revenue on the other hand is supposed to be relatively flat, likely due to economic conditions.

In terms of the dividend, significant raises after the pandemic dividend freeze was lifted make this company's short-term dividend growth look slightly better than expected.

But we can still expect mid-single-digit growth moving forward, which is relatively strong for a large-cap, high-yielding company.

Life insurers have struggled relatively to the type of insurer we're going to talk about next. However, Sunlife has been a bit of an exception, and it does have a high yield, which is an attractive proposition for many investors.

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 auto, motorcycle, and property damage insurance to Canadians instead of investment products like life insurance or annuities.

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.

This insurance sector is more prone to catastrophic events like fires, floods, or other significant events but is often a faster-growing business model.

Intact has a significant market share here in Canada, making up around 20% of the P&C market. Although it is one of the "smaller" insurance companies in Canada, considering it has a market cap of over $34 billion, it is far from small.

The company posted annual revenues of $21B 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 regarding dividend growth in recent years.

The company has an 18-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 March of 2023, going from $1 to $1.10.

The company is expected to grow the top and bottom lines by high single digits over the next 2-3 years. However, the bump in interest rates that still continues today could increase the trajectory of this Canadian insurer, certainly something to keep an eye on.

Power Corporation (TSE:POW)

Power Financial Corp

Although Power Corporation (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.

Power Corp also has controlling interests in IGM Financial, and Pargesa, a holding company in Europe.

As of the company's most recent filing, it had a net asset value of $46~. This is lower than the $52~ NAV it had in late 2021 during the market euphoria. However, with the significant correction in the equity markets, we're not surprised.

The company is a Canadian Dividend Aristocrat, yielding in the high 5% range with a payout ratio of only 73%. This low payout ratio is likely a signal for future dividend growth, as the company recently raised the dividend by 7% in March of 2023.

We expect the company to come through with additional dividend growth in the coming years.

The company has driven 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 fact, it just increased its stake in the company in mid-2023.

In terms of forward-looking growth, analysts predict the company will grow revenue at a mid-single-digit pace, and EPS growth is expected to stay relatively flat over the next year or two. If a recession is avoided and a soft landing is achieved, I have no doubt these estimates will be upgraded.

Why insurance stocks in Canada moving forward?

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

Not everybody knows the complexities of the 80-page insurance policy they deliver you annually. But we know you need insurance to drive and homeowners insurance, and you'd be wise to get a life insurance policy at some point. 

Even health insurance products in the United States are available to protect people from costly situations regarding their private healthcare situation.

But, you're likely unaware that there are many different types of Canadian insurance stocks and insurance providers, 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. Buying one might not get you exposure to all types.

There is almost zero doubt that the government will continue to stomp out inflation. Although they've slowed down, if inflation persists, there will no doubt be continued increases in interest rates.

Ultimately, Canadian fintech stocks might struggle as spending relaxes due to higher interest rates. However, increasing rates benefits 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?

Finding a pure-play insurance ETF here in Canada won't be easy. This is simply because we do not have enough companies nor the popularity to generate enough fund flows regarding 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 good exposure to the sector.

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