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

Zacks Equity Research

Manulife Financial Corporation MFC delivered second-quarter 2020 core earnings of $1.2 billion (C$1.6 billion), up 5% year over year. This upside was driven by encouraging policyholder experience, favorable impact of markets on seed money investments in segregated funds and mutual funds, and in-force business growth in Asia.

New business value (NBV) in the reported quarter was $277 million (C$384 million), down 22% year over year, attributable to COVID-19 related impacts.

Annualized premium equivalent (APE) sales decreased 15% year over year to $0.9 billion (C$1.2 billion), attributable to lower sales in Asia, Canada and U.S. segments.

Expense efficiency ratio improved 360 basis points (bps) to 48.9%.

As of Jun 30, 2020, Manulife Financial’s financial leverage ratio improved 40 bps year over year to 26%.

Wealth and asset management assets under management and administration were $509.8 billion (C$696.9 billion), up 6.7% year over year. Wealth and Asset Management business generated net inflows of $3.7 billion (C$5.1 billion), driven by positive contributions from institutional business.

Core return on equity, measuring the company’s profitability, contracted 50 bps year over year to 12.2%.

Life Insurance Capital Adequacy Test (LICAT) ratio was 155% as of Jun 30, 2019, up from 144% as of Jun 30, 2019.

Manulife Financial Corp Price, Consensus and EPS Surprise

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 $172 million (C$238 million), down 1.7% year over year.

Asia division’s core earnings totaled $353 million (C$489 million), up 3.8% year over year.  NBV decreased 21%, primarily due to a decrease in APE sales in Hong Kong, Japan and Asia Other, and a decline in interest rates in Hong Kong, partially offset by a more favorable business mix in Asia Other. APE sales decreased 17% mainly due to the adverse impact of COVID-19.

Manulife Financial’s Canada division core earnings of $247 million (C$342 million) were up 9.6% year over year. NBV declined 29% year over year largely due to lower sales volumes. APE sales decreased 18%, primarily due to variability in the large-case group insurance market.

The U.S. division reported core earnings of $434.2 million (C$602 million), up 36.5% year over year. NBV dropped 22%, primarily due to the impact of lower interest rates and lower sales due to COVID-19. APE sales decreased 3% mainly due to the adverse impact of COVID-19.

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

Of the life insurance industry players that have reported second-quarter results so far, Reinsurance Group of America RGA and Voya Financial VOYA beat the respective Zacks Consensus Estimate for earnings while Lincoln National Corporation LNC missed expectations.

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