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Manulife (MFC) Q4 Earnings Flat Y/Y, Asia Business Strong

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Zacks Equity Research
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Manulife Financial Corporation MFC delivered fourth-quarter 2020 core earnings of $1.2 billion (C$1.5 billion), flat with the prior-year quarter.

Favorable impact of in-force business growth in Asia and the U.S., higher average AUMA in Global Wealth and Asset Management, favorable experience in P&C Reinsurance business and lower general expenses were offset by lower investment income in Corporate and Other.

New business value (NBV) in the reported quarter was $375 million (C$489 million), down 7% year over year due to lower business in Asia and the United States, partially offset by higher sales in Canada.

Annualized premium equivalent (APE) sales decreased 5% year over year to $1.1 billion (C$1.4 billion), attributable to lower sales in Canada and U.S. segments, partially offset by higher sales in Aisa.

Expense efficiency ratio improved 150 basis points (bps) to 52.7%.

As of Dec 31, 2020, Manulife Financial’s financial leverage ratio deteriorated 150 bps year over year to 26.6%.

Wealth and asset management assets under management and administration were $753.6 billion, up 10.6% year over year. Wealth and Asset Management business generated net outflow of $2.8 billion, down 42.9%, attributable to net outflows in the United States.

Core return on equity, measuring the company’s profitability, contracted 220 bps year over year to 10.9% in 2020.

Life Insurance Capital Adequacy Test (LICAT) ratio was 149% as of Dec 31, 2020, up from 140% as of Dec 31, 2019.

Book value per share excluding AOCI increased 9% to $21.74 as on Dec 31, 2020.

Manulife achieved medium-term target of delivering cumulative reduction in pre-tax annual general expenses of $1 billion and is on track to achieve target expense efficiency ratio of less than 50% by 2022.

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 $233 million (C$304 million), up 14.7% year over year.

Asia division’s core earnings totaled $438 million (C$571 million), up 15.6% year over year. NBV declined 5% due to lower sales volumes in Hong Kong and less favorable product mix in Japan, partially offset by higher sales and more favorable product mix in Asia Other. APE sales increased 2% as growth in sales in Japan from COLI and higher Asia Other sales from Vietnam and Singapore were partially offset by lower sales in Hong Kon, due to the tightening of COVID-19 containment measures.

Manulife Financial’s Canada division core earnings of $242 million (C$316 million) were up 9.7% year over year. NBV increased 10% driven by higher margins across all business lines, partially offset by lower volumes in small and mid-size group insurance and individual insurance. APE sales decreased 10% primarily due to lower small and mid-size group insurance and individual insurance sales due to the adverse impact of COVID-19, partially offset by higher sales in lower risk segregated funds.

The U.S. division reported core earnings of $368 million (C$479 million), down 2% year over year. NBV dropped 26%, primarily due to lower international universal life sales volumes.. APE sales decreased 28%, as international universal life sales were unfavorably impacted by COVID-19 and domestic universal life sales decreased compared with a strong prior year quarter, which benefited from higher sales in advance of anticipated regulatory changes.

Loss at Corporate and Other were $150 million (C$196 million), reflecting a deterioration of 23.3% year over year.

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

Fourth-quarter earnings of Reinsurance Group of America RGA beat the Zacks Consensus Estimate while that of Lincoln Financial LNC and Primerica PRI missed the same.

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