Analysts cut Canadian insurer share-price targets

* Weaker stock markets, lower yields to hit earnings

* Manulife, Great-West downgraded, Sun Life target reduced

* Insurers to report results in late July, early August

TORONTO, July 19 (BestGrowthStock) – Analysts at two brokerages cut
share-price targets for Canadian insurance companies on Monday,
and predicted a gloomy second-quarter earnings period for them
due to weak stock markets and lower interest rates.

TD Newcrest, a division of Toronto-Dominion Bank (TD.TO: ),
cut targets for Canada’s top three insurers. It also downgraded
its rating on the shares of Manulife Financial (MFC.TO: ) and
Great-West Lifeco (GWO.TO: ), the two biggest players in the
sector.

Canaccord Genuity also lowered targets for the big three.
Sun Life Financial (SLF.TO: ) is the third member if the trio.

“(The second quarter) is going to be messy for Canadian
life insurers,” TD analyst Doug Young said in a note.

“Falling equity markets and declining interest rates
created the ‘perfect storm’ for lifeco business models,” he
added.

Canadian insurers hold billions in equity assets that lose
value when markets fall. As well, declining interest rates keep
them from reinvesting long-term debt holdings at higher
returns.

The Toronto Stock Exchange composite index (.GSPTSE: ) fell
more than 6 percent in the April-June quarter, while bond
yields declined sharply. Both have rebounded a bit since the
end of June, which Young said was reason for optimism about the
third quarter.

Young cut its rating on Manulife to “hold” from “buy” and
chopped his price target on the company stock to C$18 from
C$25, predicting a second-quarter loss of 95 Canadian cents a
share for the company, considerably weaker than current
consensus expectations for a loss of 30 Canadian cents,
according to Thomson Reuters I/B/E/S.

He also lowered Great-West to “hold” from “buy”, and
reduced his target on the company to C$27 from C$31. He cut his
target on Sun Life to C$35 from C$37 a share.

Shares of Manulife and Sun Life were down 3.1 percent and
2.3 percent, respectively, the two weakest performers in the
TSX financials subgroup at mid-afternoon on Monday.

Canaccord Genuity analyst Mario Mendonca lowered his target
on Manulife to C$18 from C$21, predicting it will take a C$1
billion charge due to weaker stock markets and a C$300 million
hit from weaker long-term corporate bond yields.

He trimmed his Sun Life target to C$34 from C$35, reduced
Great-West to C$28 from C$29, and lowered his target on No. 4
insurer Industrial Alliance (IAG.TO: ) to C$38 a share from
C$39.

The target reductions follow a similar move by CIBC World
Markets — a division of Canadian Imperial Bank of Commerce
(CM.TO: ) — two weeks ago.

Manulife shares were down 48 Canadian cents at C$14.81 on
in Toronto on Monday afternoon. Sun Life was down 63 Canadian
cents at C$26.84, and Great-West was down 20 Canadian cents, or
0.8 percent, at C$24.30. Industrial Alliance was down 42
Canadian cents at C$32.01.

The insurers will report second quarter results in late
July and early August.

Stock Market Research

($1=$1.06 Canadian)
(Reporting by Cameron French; editing by Peter Galloway)

Analysts cut Canadian insurer share-price targets