In todays environment there is much talk of rising interest rates and what the best ways to benefit are. Often, one of the go to solutions to help a portfolio benefit from interest rate changes is through that of insurers. While helpful, this still leaves the question as to what is the best way to own insurance companies. While owning an ETF is usually the simplest way to gain broad exposure, many investors (especially those in Canada) are likely to already hold a significant exposure to financial stocks and owning another diversified financial fund may not be the ideal choice. So if we were to own a single insurer, which one should it be. Lets take a look at Manulife Financial (MFC) and Sun Life Financial (SLF).
It is interesting that the interest rate debate often occurs in isolation. In reality, with interest rates being a large driver of markets, one should really consider the effect a change in rates will have alongside a change in equity markets. Below we can see the effect that a 100 basis point (1%) change in rates has on net income and EPS as well as a 10% change in equity markets, in isolation.