If you want your investments to be insured, invest in, well, insurance companies.
OK, this is an overstatement since insurance companies cannot insure your financial returns. But such companies do tend to perform well over the long term and are generally conservatively managed.
I have been looking at insurance companies with a life-insurance focus, and several are well priced. True, persistently low interest rates present a difficult economic environment for such companies. But low interest rates have been around for nearly a decade, and these companies have generally figured out how to survive and prosper despite low returns on their invested money.
Canadian-based Sun Life Financial (SLF) has been in existence for about 150 years and operates around the world. It sells life insurance and annuity products. I created two strategies based on the writings of James P. O'Shaughnessy -- growth and value. The growth strategy has analyzed Sun Life and found it worthy of a recommendation. It likes the company's large market cap ($20.1 billion), earnings per share that have increased in each of the past five years and a price-to-sales ratio (a measure of growth stocks still cheap to buy) of 1.26, which is below the 1.5 maximum allowed. Among the companies that meet these criteria, the strategy then picks the top 50 based on relative strength, which measures how well a stock has performed in the last 12 months compared with the market. Sun Life's relative strength of 61 places it in this very desirable top-50 group.
AXA (AXAHY) , 199 years old, is a French-based insurer that operates worldwide. In addition to life insurance and annuities, its business includes property and casualty insurance and asset management. My Peter Lynch-based strategy is recommending this company. The P/E/G ratio is this strategy's most important favorable. This is price-to-earnings relative to growth, and is a measure of how much the investor is paying for growth. A P/E/G of up to 1.0 is acceptable and below 0.5 is considered truly noteworthy. AXA is in noteworthy territory with a P/E/G of 0.38. In addition, it has a strong equity-to-assets ratio (used to measure an insurance company's financial health) of 8%, nicely above the 5% minimum required.
My O'Shaughnessy-based value strategy is a fan of MetLife (MET) , the giant New York-based life insurance company. This strategy values MetLife's market cap ($48 billion), strong cash flow per share, large number of shares outstanding and huge sales ($70 billion). Among all the companies passing these tests, the top 50 are picked based on their dividend yield. With a yield of 3.66%, MetLife is among the top 50 companies identified by this strategy.
Life insurance is not the grist of lively conversation, but it can provide a steadying mechanism for portfolios when the financial seas are a bit turbulent, like now. Solid, basic companies such as the ones I just discussed need to be in virtually everyone's portfolio.