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Manulife (MFC) Q1 Earnings Improve Y/Y, Asia Business Strong

Zacks Equity Research

Manulife Financial Corporation MFC delivered first-quarter 2019 core earnings of $1.1 billion (C$1.5 billion), up 15% year over year. This upside can be attributed to new business growth in Asia, higher investment income and improved expense efficiency.

New business value in the reported quarter was $390 million (C$519 million), up 31% year over year on the back of double-digit growth across all insurance segments.

Annualized premium equivalent (APE) sales increased 23% year over year to $1.3 billion (C$1.7 billion) driven by higher sales.

Expense efficiency ratio improved 210 basis points (bps) to 49.9%.

Manulife Financial Corp Price, Consensus and EPS Surprise

Manulife Financial Corp Price, Consensus and EPS Surprise | Manulife Financial Corp Quote

As of Mar 31, 2019, Manulife Financial’s financial leverage ratio improved 270 bps year over year to 27%.

Wealth and asset management assets under management and administration net outflows were $1 billion (C$1.3 billion).

Core return on equity, measuring the company’s profitability, expanded 80 bps year over year to 14.2%.

The Office of the Superintendent of Financial Institutions' new Life Insurance Capital Adequacy Test (LICAT) regulatory capital regime came into effect in Canada on Jan 1, 2018, replacing the Minimum Continuing Capital and Surplus framework. LICAT ratio was 144% as of Mar 31, 2019, up from 143% as of Dec 31, 2018.

Segmental Performance

Global Wealth and Asset Management division’s core earnings came in at $175 million (C$233 million), up 2.6% year over year.

Asia division’s core earnings totaled $345.2 million (C$459 million), up 12.3% year over year.  NBV increased 23% driven by higher sales. Annualized premium equivalents sales improved 32% year over year on solid growth in Japan, Hong Kong and Asia Other.

Manulife Financial’s Canada division core earnings of $212.8 million (C$283 million) were flat year over year. NBV increased 27% driven by new Manulife Par product. Annualized premium equivalent sales dropped 10% year over year due to lower large-case group insurance sales.

The U.S. division reported core earnings of $357 million (C$475 million), up 4.6% year over year. NBV more than quadrupled on strategic actions taken to improve margins and a more favorable product mix. Annualized premium equivalents sales increased 20% year over year on higher universal life and international sales.

Dividend Update

The board of directors declared a dividend of 25 cents per share payable on Jun 19 to shareholders of record at the close of business on May 14.

Zacks Rank

Manulife Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

Among the other players from the life insurance industry, which have already reported first-quarter results, Lincoln National Corporation LNC beat the Zacks Consensus Estimate for earnings while Reinsurance Group of America, Incorporated. RGA and Genworth Financial Inc. GNW missed the same.

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