Best Canadian Insurance Stocks
Insurance companies are quieter cousins of Canada's big banks: large, profitable financial firms that pay solid dividends. The life insurers in particular are a core part of the TSX financial sector. This guide explains how to evaluate a Canadian insurance stock and names the widely known TSX operators, without inventing any live figures.
How insurers make money
Insurers earn money in two ways. First, underwriting: they collect premiums and pay out claims, aiming to take in more than they pay. Second, investment income: they invest the premiums, called the 'float', until claims come due.
Life insurers, or 'lifecos', also run large wealth-management and asset-management businesses, adding fee income that is less capital-intensive than pure insurance.
On the TSX the widely known insurance names include Manulife, Sun Life, Great-West Lifeco, iA Financial, and property-and-casualty specialist Intact Financial. These are large-cap financials that appear across Canadian dividend and index portfolios.
Keep reading: Banks Sector · Dividend Investing in Canada.
Life insurers versus property and casualty
The two main types of insurer behave differently and it helps to know which you are buying.
- Life and health insurers (lifecos): sell life insurance, annuities, and wealth products, and hold big investment portfolios. Their profits are sensitive to interest rates and equity markets.
- Property and casualty (P&C): insure homes, cars, and businesses. Results hinge on underwriting discipline and are affected by catastrophes and weather-related claims.
Lifecos also carry meaningful exposure to Asian and US markets in some cases, adding growth potential and currency and regional risk.
How to evaluate an insurance stock
Insurance accounting is complex, so lean on a few reliable measures.
- Return on equity (ROE): how efficiently the insurer turns shareholder capital into profit; consistently strong ROE signals quality.
- Book value per share: insurers are often valued on price-to-book, and growing book value over time is a good sign.
- Dividend track record and payout ratio: many Canadian lifecos are dependable dividend payers, so check coverage and growth.
- Capital strength: regulatory capital ratios (such as the LICAT ratio for lifecos) show the buffer against shocks.
- Underwriting quality: for P&C insurers, the combined ratio measures whether the core insurance business is profitable, below 100% is good.
Why interest rates and markets matter
Insurers, especially lifecos, are among the more interest-rate sensitive financials, but in the opposite way to utilities. They invest premiums heavily in bonds, so higher rates generally let them earn more on that float, which can be a tailwind.
Equity markets also matter, because lifecos hold large investment portfolios and run wealth-management arms whose fees rise and fall with markets. A market downturn can pressure both investment income and fee revenue.
For P&C insurers, the bigger swing factor is claims: a year of major storms, floods, or wildfires can raise payouts and dent results, which is why underwriting discipline is so important.
Owning insurers in a Canadian portfolio
Eligible dividends from Canadian insurers qualify for the dividend tax credit in a taxable account, and the income is fully sheltered inside a TFSA, RRSP, or FHSA.
Insurers overlap with the banks in the financials sector, so owning several plus a bank-heavy ETF can leave a portfolio concentrated in Canadian financials. Keep an eye on the total weighting.
For diversified exposure, a broad Canadian financials or dividend ETF holds the major insurers alongside the banks for a low fee, spreading single-company risk. Whichever route you choose, insurers can add steady income and a different risk profile from banks to a Canadian portfolio.
Frequently asked
What are the big Canadian insurance stocks?
The widely known TSX names include life insurers Manulife, Sun Life, Great-West Lifeco, and iA Financial, plus property-and-casualty specialist Intact Financial. They are large financial firms and common dividend holdings.
Do rising interest rates help or hurt insurers?
Generally they help, especially lifecos. Insurers invest premiums heavily in bonds, so higher rates let them earn more on that float. This is the opposite of rate-sensitive utilities, whose share prices tend to fall when rates rise.
How are insurance stocks different from bank stocks?
Both are financials with solid dividends, but insurers earn from underwriting and investing premiums rather than lending. Adding an insurer diversifies a bank-heavy portfolio, though both still sit in the same broad sector.
Sources
General information for Canadian readers, not individualized financial, tax or investment advice. Figures reflect the date reviewed; confirm current limits and rules with the CRA or a qualified professional before acting.