Investing

What did you buy? What might you buy??

  • Last Updated:
  • Dec 10th, 2018 1:03 pm
Tags:
None
Deal Addict
Aug 17, 2008
1614 posts
813 upvotes
treva84 wrote:
Jul 3rd, 2018 7:50 am
Buying IFC and RY this morning.
What's your reasoning for investing in IFC now?

The Canada curve 2Y10Y curve is now only at 25bps, while it was at 70bps 1 year ago. IFC is a P&C. The liability book duration of a P&C is ~10yrs and they typically only invest out to 10 yrs to match those liabilities. With a flat curve, both P&C and Life insurance companies are going to have a hard time making money.
Images
  • Canada Curve 3July18.JPG
Deal Addict
Nov 9, 2013
2535 posts
1194 upvotes
Edmonton, AB
MrMom wrote:
Jul 3rd, 2018 9:39 am
What's your reasoning for investing in IFC now?

The Canada curve 2Y10Y curve is now only at 25bps, while it was at 70bps 1 year ago. IFC is a P&C. The liability book duration of a P&C is ~10yrs and they typically only invest out to 10 yrs to match those liabilities. With a flat curve, both P&C and Life insurance companies are going to have a hard time making money.
An excellent point - any chance this is priced in?
Deal Addict
Aug 17, 2008
1614 posts
813 upvotes
treva84 wrote:
Jul 3rd, 2018 9:56 am
An excellent point - any chance this is priced in?
Yes, I think it's baked in. What you have to think about is where the you and the mkt is pricing/expecting yields to be in the future.

Both Life Co's MFC and SLF have been hit as well, although it's the 10s30 curve that is more important to them. Yield pick up of only 5bps for 20years.

If you have a different reason for investing, i.e. new business line development or won a major new client, then maybe it makes sense is all I'm asking
Sr. Member
Feb 26, 2017
801 posts
383 upvotes
Bought JNJ, NYSE:T yesterday and CP this morning.

I'm probably done for a while.
Deal Addict
Sep 2, 2004
1955 posts
216 upvotes
MrMom wrote:
Jul 3rd, 2018 10:25 am
Yes, I think it's baked in. What you have to think about is where the you and the mkt is pricing/expecting yields to be in the future.

Both Life Co's MFC and SLF have been hit as well, although it's the 10s30 curve that is more important to them. Yield pick up of only 5bps for 20years.

If you have a different reason for investing, i.e. new business line development or won a major new client, then maybe it makes sense is all I'm asking
A rate hike in July is now expected with an 84% probability. How does this factor into your yield curve comments? I thought it would be a positive indicator but the insurers are down as you mentioned. Although SLF and MFC are more international so they may be less affected by the Canadian rates than IFC. I suppose it depends where they invest their capital.
Sr. Member
Oct 21, 2014
982 posts
830 upvotes
Burlington, ON
Initiated Minto REIT (MI.UN). This could be interesting.
Deal Fanatic
Jan 27, 2006
9279 posts
3350 upvotes
Vancouver, BC
White Comet wrote:
Jul 3rd, 2018 1:00 pm
Poor MU, down to $50 now...
Possible trade war issues as a Chinese company seems to have won a case against MU in a Chinese court.
Deal Expert
User avatar
Sep 19, 2004
21914 posts
3990 upvotes
Waterloo
Expecting a wild week this week

7/2 TSX closed, US reversed higher
Today 7/3 US faded into close at early close 1 pm
Tomorrow US closed, TSX open
Good example is WEED.CA vs. CGC (US) .. they move oddly
Stocks tumble in the final hour of holiday shortened session

Stocks slumped in the final hour of trading to finish near session lows in a shortened session ahead of tomorrow's Fourth of July holiday.
Tech stocks tumbled following news that a Chinese court blocked the sale of Micron (-5.5%) chips, a move related to a probe by Chinese regulators into high prices for memory products.
Technology (-1.2%) and financials (-0.9%) were the leading losers among the S&P's 11 sectors, while energy (+0.7%) outperformed.
Crude oil prices reversed early gains after hitting $75/bbl as Saudi Arabia said it is prepared to pump more oil to ease supply constraints in the market.
Which Credit Cards to sign up? >> Jerry's List of Credit Cards with $200+ Welcome bonus/Aeroplan & AMEX Churning FAQ
AMEX Personal 60K || Business Platinum 75K || Biz Gold 40K
Deal Addict
Nov 9, 2013
2535 posts
1194 upvotes
Edmonton, AB
MrMom wrote:
Jul 3rd, 2018 10:25 am
Yes, I think it's baked in. What you have to think about is where the you and the mkt is pricing/expecting yields to be in the future.

Both Life Co's MFC and SLF have been hit as well, although it's the 10s30 curve that is more important to them. Yield pick up of only 5bps for 20years.

If you have a different reason for investing, i.e. new business line development or won a major new client, then maybe it makes sense is all I'm asking
I don't have any special insight to add. As a long term dividend growth investor I'm looking for companies that will stick around for a while while growing dividends.

With respect to IFC specifically, basically I think insurance is sticky (when it's time to renew your home / auto / business insurance, do you shop around or do you just pay your renewal?) and, at least historically, IFC does a good job underwriting their premiums. I'm bullish on their expansion into the US as well. There's obviously the risks - interest rate as mentioned, climate risk, US expansion may not work out, may lose market share in Canada, underwriting may deteriorate - but I think the price is attractive at present which is what compelled me to invest.
Deal Addict
Aug 17, 2008
1614 posts
813 upvotes
Capt. wrote:
Jul 3rd, 2018 12:55 pm
A rate hike in July is now expected with an 84% probability. How does this factor into your yield curve comments? I thought it would be a positive indicator but the insurers are down as you mentioned. Although SLF and MFC are more international so they may be less affected by the Canadian rates than IFC. I suppose it depends where they invest their capital.
(1) The FOMC, BOE, BOC, etc are still in the removing accommodative monetary policy mode. Hawkish talk or actions are reflected in higher yields in the "front end" of the curves. You can see that in the previous chart.

(2) However the bond markets also do not believe there is inflation on the horizon as the data has been mixed. That would explain why the front end is relatively flat to the "belly" and the belly is relatively flat to the "back end." See the UST Chart. The long end of the Canada curve trades more on technicals rather than absolute macro moves, so be careful in assuming large shifts are macro policy related.

=> (1) + (2) = Yield curves don't move or shift like they do in high school textbooks. The BOC, FOMC etc may hike, but that may not help the insurers.

Lastly, I don't want to search for all the info, but empirically SLF has more diverse earnings geographically, while MFC is more north-south with Hancock and that's why it was speculated recently that MFC wanted to unload Hancock.

My comments on IFC were only from a Rates perspective as I have never drilled down into their business
treva84 wrote:
Jul 3rd, 2018 2:25 pm
US expansion may not work out
This would be my #1 concern. TD is the exception rather than the rule, CTC (Whites Stores), BMO (Harris Bank), MFC (Hancock)...
Images
  • SLF Net Inc.JPG
Newbie
Jun 28, 2018
83 posts
39 upvotes
Toronto
IFC: I keep a lazy eye on it to see where it's at - surprising it went as low as 92's recently (52wk low?), which made it look somewhat attractiv.

I didn't look at the yield curves, though I should.

Property & Casualty insurance does not seem to be that good of a business or at least tougher compared to the more focused lifecos like SLF/MFC. Weather related incidents are occurring more frequently and payouts may increase. Though this means premiums will increase, it may stretch out consumers. Sort of the slow burn. Best time for P&C may be after big one off natural disasters. Fort McMurray was an example of great time to jump in for the dip.

Also, maybe not the most telling, but their recent commercials were not appealing at all, which could mean management is off? Example, they had an "empathy training" where this trainee guy's car gets crushed.

He gets asked by the trainer, "How do you feel?" to which he responds "I feel sad".

Would you feel sad if someone intentionally crushed your car? If they think we'll feel that way...
The Distracted Investor

Dividends through quality companies 😃 Though I usually lose money with trades :facepalm:
Deal Addict
Nov 9, 2013
2535 posts
1194 upvotes
Edmonton, AB
johnnychi wrote:
Jul 3rd, 2018 7:15 pm
IFC: I keep a lazy eye on it to see where it's at - surprising it went as low as 92's recently (52wk low?), which made it look somewhat attractiv.

I didn't look at the yield curves, though I should.

Property & Casualty insurance does not seem to be that good of a business or at least tougher compared to the more focused lifecos like SLF/MFC. Weather related incidents are occurring more frequently and payouts may increase. Though this means premiums will increase, it may stretch out consumers. Sort of the slow burn. Best time for P&C may be after big one off natural disasters. Fort McMurray was an example of great time to jump in for the dip.

Also, maybe not the most telling, but their recent commercials were not appealing at all, which could mean management is off? Example, they had an "empathy training" where this trainee guy's car gets crushed.

He gets asked by the trainer, "How do you feel?" to which he responds "I feel sad".

Would you feel sad if someone intentionally crushed your car? If they think we'll feel that way...
I can't comment on the ads as I don't have cable TV.

Speaking about the insurance business, you are absolutely correct in that there are many variables you cannot control and those uncontrollable variables can cost you money (i.e. weather). The only things you can really control are costs of doing business, satisfaction of consumers and discipline with underwriting.

Although house insurance is not legal, car insurance is a legal requirement. Most business owners have a form of business insurance as well (i.e. general liability) so the market is ubiquitous and consumers will need insurance for the foreseeable future. Delivery mechanisms may change, but the need and function of insurance is unlikely (in my opinion, anyway) to be disrupted.

If an event occurs that causes an increase in payouts (i.e. a terrible winter with increased MVCs) all insurance companies (not just IFC) are impacted as the event. Those who have the best combined ratio moving forward will be best suited to handle these events. To date, IFC has an industry leading combined ratio, so in my opinion they are best positioned to handle these unpredictable events. This, coupled with attractive dividend growth and what I think is an attractive price, is why I decided to buy.

Of course, moving forward we'll see how it all pans out!
Sr. Member
Feb 26, 2017
801 posts
383 upvotes
Anyone know what is going on with TSX:ITP? Its down 3% today and 21% for the year.
Deal Guru
Jun 26, 2011
11427 posts
1738 upvotes
Markham
Sold overweight position in GUD (Knight Therapeutics) due to recent gain in the past week and sold at the open on negative CRA news. Will consider for re-entry at a later date.

Bought ITP on weakness @ 17.01

Top

Thread Information

There are currently 10 users viewing this thread. (5 members and 5 guests)

amazonbay, fuzzy2k3, holychristian, HappyDaze, SofaProfessor