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Manulife (MFC) Q2 Earnings Rise Y/Y on Solid Asia Business

Zacks Equity Research

Manulife Financial Corporation MFC delivered second-quarter 2019 core earnings of $1.1 billion (C$1.5 billion), up 1.5% year over year. This upside can be attributed to double-digit core earnings growth in Asia and higher investment income in surplus portfolio. However, non-recurrence of both a tax-related benefit and notably positive group insurance policyholder experience in Canada as well as the impact of actions to improve the capital efficiency of legacy businesses was a partial offset.

New business value (NBV) in the reported quarter was $358 million (C$479 million), up 16.5% year over year on the back of growth in Asia and Canada insurance segments.

Annualized premium equivalent (APE) sales increased 9.2% year over year to $1 billion (C$1.4 billion) driven by higher sales in Canada and U.S. segments.

Expense efficiency ratio improved 130 basis points (bps) to 52.5%.

As of Jun 30, 2019, Manulife Financial’s financial leverage ratio improved 300 bps year over year to 26.4%.

Wealth and asset management assets under management and administration were $498.7 billion (C$653.1 billion), up 2.1% year over year.

Core return on equity, measuring the company’s profitability, contracted 130 bps year over year to 12.7%.

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 Jun 30, 2019, up from 143% as of Dec 31, 2018.

Manulife Financial Corp Price, Consensus and EPS Surprise

Manulife Financial Corp Price, Consensus and EPS Surprise

Manulife Financial Corp price-consensus-eps-surprise-chart | Manulife Financial Corp Quote

Segmental Performance

Global Wealth and Asset Management division’s core earnings came in at $180.9 million (C$242 million), up 1.3% year over year.

Asia division’s core earnings totaled $352 million (C$471 million), up 14.4% year over year.  NBV increased 7% driven by favorable business mix, partially offset by lower sales in Japan. Annualized premium equivalents sales decreased 2% year over year as growth in Hong Kong and Asia Other was more than offset by lower sales in Japan.

Manulife Financial’s Canada division core earnings of $233.2 million (C$312 million) were down 21% year over year. NBV remained flat year over year as higher insurance sales were offset by business mix changes in group insurance and the withdrawal of certain capital-intensive annuity products. APE sales increased 46% due to a large-case group insurance sale and growth across individual insurance business including living benefits, term and permanent life insurance product lines.

The U.S. division reported core earnings of $329.6 million (C$441 million), up 0.2% year over year. NBV nearly quadrupled primarily as a result of recent actions to improve margins as well as a more favorable product mix. APE sales increased 16% on higher universal life and international sales.

Dividend Update

The board of directors declared a dividend of 25 cents per share to be paid out on Sep 19 to shareholders of record at the close of business on Aug 20.

Zacks Rank

Manulife Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

Second-quarter earnings of Lincoln National LNC and Torchmark TMK surpassed the Zacks Consensus Estimate while that of Sun Life Financial SLF missed the same.

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