It is a very touchy subject when talking about getting insurance. The thing is that everyone has it. Or at least, you should. Do you own a house? You should have house insurance. Do you own a car? You should have car insurance. Are you alive? You should have life insurance. Do you live in an apartment? You should have renters insurance. These are really only the main basic types of insurance that you really should have. Insurance goes even way beyond these 4 things. You can pretty much insure anything you can possibly think of.
Now, think of it for an investment standpoint. The whole business and point behind insurance companies from the consumer point of view is to be monetarily covered if ANYTHING ever happens. Its knowing that paying one or two hundred dollars a month will keep a roof over your head, your car on the road and your family covered financially in the event something catastrophic happens to you. It sounds like its a pretty good deal and like you have everything taken care of. Right?
Well, from the standpoint of insurance companies and the investors its the exact opposite. As terrible as it sounds, insurance companies will do a great deal to not pay people out the money that they got the insurance for in the first place. If you get insurance you need to read it word for word. Every little detail, because the fine print is what will get you nothing and the insurance company everything. People pay billions of dollars a year to insurance companies and all for a service they may never even use. But make sure this does not deter you from getting insurance because trust me, its worth it.
I personally have had to rely on my insurance company on a few occasions. I hit a deer and wrote my car off and we had a hail storm doing thousands of dollars in damage to our house. We decided to go through our insurance company to have it all fixed. They took great care of us and did a wonderful job to help us out. The other side of it though, we are now paying slightly higher premiums for this service because we made a claim and it was taken care of. From a consumer standpoint it was very much so worth it because the insurance we had worked how we needed it to.
In times like this global pandemic of the Covid-19 things have been changed and compromises have had to be made. Lots of peoples driving habits have changed there for people are putting their vehicles on storage insurance and lowering their payments which means less money for insurance companies. I know that its a little touchy, but you should also makes sure you are covered in the scenario you get Covid-19 and if you are than that is even more money that insurance companies have to pay out if its worst case scenario for you.
I really like insurance companies from an investing side. They are much like investing in financial institutions. They are fairly safe, they make lots and lots of money and they are all very diverse in their respected fields. Also much like the big 5 banks in Canada we have the big 5 insurance companies as well(although all the banks offer their own insurance to haha). The biggest are Manulife Financial(MFC), Sun Life(SLF), Intact Financial(IFC), Fairfax Financial(FFH) and Great west Life(GWO). There are more than just these 5 but they are the biggest in Canada I feel that they would be a great way to diversify any portfolio.
- Manulife Financial(MFC)-$33.16 Billion Market Cap, 2.77 EPS, 7.4 P/E, 6.55% Dividend Yield and 34% Dividend Payout Ratio.
- Sun Life(SLF)-$27.61 Billion Market Cap, 4.41 EPS, 11.72 P/E, 4.66% Dividend Yield and 41% Dividend Payout Ratio.
- Intact Financial(IFC)-$18.8 Billion Market Cap, 5.08 EPS, 28.1 P/E, 2.53% Dividend Yield and 36% Dividend Payout Ratio.
- Fairfax Financial(FFH)-$11.1 Billion Market Cap, -6.1 EPS, 28.1 P/E, 3.4% Dividend Yield and 21% Dividend Payout Ratio.
- Great West Life(GWO)-$20.8 Billion Market Cap, 2.49 EPS, 10.2 P/E, 7.81% Dividend Yield and 54% Dividend Payout Ratio.
I feel that all of these factors are very good reasons to have exposure from insurance companies in your portfolio. But the big question for Insurance companies is how will Covid-19 and this global pandemic change the way insurance is done? Will it affect premiums? With less people driving vehicles and spending more time at home or just in doors will prices go up or down? Companies do not like to lose money so what will they do to adapt? These are all questions that I feel will be answered in the near future. Keep a close eye on all of these companies and this sector because I expect strong volatility is coming its way.
That is all for today and remember everyone, invest in yourself first.
Outsider Trading 