Is investing in insurance companies like SLF a good idea in a declining interest rate enviroment , or are they like banks and make up the difference in lost revenue in other areas of their businesses ?
Also would now be a good time to buy into REITS , DIR specifically as it has not done very well over the past year and therefor more likely to rise more also with declining rates ?
Thanks
Bill C
Generally, insurance companies do better in a time of rising rates, because they earn more on their reserves set aside for claims, but claims themselves are not correlated to rates. However, declining rates are not necessarily bad for the companies, just that rising rates tends to be better. But lower rates do make their dividends more attractive (this is true of any dividend stock) and for those companies that have a lot of debt there is a direct benefit as well to lower rates. Bottom line, we would be very comfortable buying SLF today. REITs do generally benefit from lower rates, but there are many factors involved. Office REITs may still struggle. Residential rates are closely tied to population growth and job numbers. Retail REITs of course are tied to shopping trends. DIR.UN's industrial exposure should help it, but the stock has been flat. Still, with its yield and low valuation we continue to like it.