On the eve of second quarter earnings season for Canadian life insurers, a new report from Desjardins Securities finds that banks have started to outperform insurers.

Industrial Alliance leads of Canadian life insurers’ reporting season tomorrow, followed by Great-West Life Co. and Sun Life Financial Inc. on Wednesday and Thursday, respectively.

Manulife Financial Corp. reports on August 6, and Desjardins notes that this will also be the first quarter in which it will report combined results with John Hancock.

Desjardins says that it expects Manulife to take a restructuring charge this quarter although the details of such a charge would probably not be specified, it predicts.

Generally, in the second quarter, insurers outperformed banks, but Desjardins says that it has recently seen this trend reversed. It suggests that this is happening because: insurers are no longer significantly undervalued relative to banks; bank stocks have been discounting overly pessimistic expectations for higher interest rates; and, insurers could be suffering from recent weakness in equity markets.

“As equity markets have remained stagnant (not really moving in any direction), we don’t expect any significant changes to amortization of realized and unrealized gains on equities, or any releases of seg fund guarantee reserves,” it says. However, there may be a slight increase in fee income based off [assets under management]. Sales of equity linked and wealth management products could also continue to rise.”

Desjardins also predicts that most life insurers will raise their dividends.