Manulife (MFC) Down 0.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Manulife Financial (MFC). Shares have lost about 0.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Manulife due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Manulife Financial Q1 Earnings Top, Premiums Fall Y/Y
Manulife Financial Corporation delivered first-quarter 2023 core earnings of 58 cents per share, which beat the Zacks Consensus Estimate of 57 cents. The bottom line declined 4.9% year over year.
Core earnings of $1.1 billion (C$1.5 billion) increased 6% year over year. The improvement was driven by the non-recurrence of excess mortality claims related to COVID-19 in the year-ago quarter in the U.S. life insurance business, an increase in expected investment earnings related to business growth and higher reinvestment yields, higher returns on surplus assets net of higher cost of debt financing and lower new insurance business losses related to onerous contracts driven by pricing actions.
New business value (NBV) in the reported quarter was $376 million (C$509 million), down 5% year over year, attributable to lower sales volumes in Canada and the U.S. Annualized premium equivalent (APE) sales decreased 3% year over year to $1.2 billion (C$1.6 billion), attributable to lower sales in Asia, Canada and U.S. segments.
The expense efficiency ratio increased 70 basis points (bps) to 47%.
Wealth and asset management assets under management and administration were $601 billion (C$814.5 billion), up 0.5% year over year. The Wealth and Asset Management business generated net outflows of $3.3 billion (C$4.4 billion), down 35.2%. This was due to net outflows at Retirement and Retail.
Core return on equity, measuring the company’s profitability, expanded 80 bps year over year to 14.8%. Financial leverage ratio deteriorated 110 basis points to 26% at quarter end.
Life Insurance Capital Adequacy Test ratio was 138% as of Mar 31, 2023, up from 131% as of Dec 31, 2022.
Segmental Performance
Global Wealth and Asset Management division’s core earnings came in at $212 million (C$287 million), down 16.6% year over year.
Asia division’s core earnings totaled $362 million (C$489 million), up 2.1% year over year. In Asia, NBV decreased 4%, attributable to less favorable product mix, partially offset by higher sales volumes. APE sales increased 5% driven by growth in Hong Kong.
Manulife Financial’s Canada division’s core earnings of $261 million (C$350 million) were up 5.7% year over year. In Canada, NBV decreased 12% due to lower volumes in Annuities and Group Insurance, partially offset by higher margins in Individual Insurance and Annuities.
APE sales decreased 19%, primarily due to the impact of market volatility on demand for segregated fund products and variability in the large-case group insurance market, partially offset by higher participating life insurance sales.
The U.S. division reported core earnings of $285 million (C$385 million), up 31.4% year over year. NBV increased 6% due to pricing actions and a favorable mix, partially offset by lower sales volumes.
APE sales decreased 22% due to the adverse impact of higher short-term interest rates and equity market volatility on consumer sentiment.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Manulife has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Manulife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Manulife belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Brighthouse Financial (BHF), has gained 8.8% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Brighthouse Financial reported revenues of $1.99 billion in the last reported quarter, representing a year-over-year change of -11.1%. EPS of $2.86 for the same period compares with $4.07 a year ago.
Brighthouse Financial is expected to post earnings of $3.58 per share for the current quarter, representing a year-over-year change of +8.8%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Brighthouse Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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Manulife Financial Corp (MFC) : Free Stock Analysis Report
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