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Manulife Realigns Asian Business

Zacks Equity Research

As part of its business restructuring initiatives in Asia, life insurer Manulife Financial Corp. (MFC) has divested its 11-year-old life insurance business in Taiwan.

The insurer sold the business to CTBC Life Insurance Co., Ltd. (CTBC Life), the insurance arm of a large financial services holding company in Taiwan that provides an array of banking services. The acquiring company will also take on all of Manulife’s employees and agents in Taiwan. During its 11-year long tenure, the Taiwan life business had grown its agent base to approximately 1000.

The deal, announced in Jul 2013, was completed on scheduled time. The transaction will not have a significant financial impact on the company’s operating results.

Nevertheless, funds worth $25 million generated from the sell-out will help solidify Manulife’s capital position by about 3%, as measured by the Minimum Continuing Capital and Surplus Requirements (:MCCSR) ratio of Manulife's key operating subsidiary, The Manufacturers Life Insurance Company (MLI). MLI's MCCSR was 229% as of Sep 30, 2013.

Alongside the spin-off of its Taiwanese business, Manulife is also developing its asset management business in the Asian region. Recently, the company inked deals to expand its asset management business in Malaysia. The company also operates a separately managed asset management business in Taiwan.

Manulife is one of the dominant life insurers in the domestic Canadian market, and is rapidly expanding operations in the U.S. and in several Asian countries. It has a diverse global presence with 75% of its earnings coming from outside Canada.  It has been running its business in the Asian market for over a century now, and enjoys a healthy competitive advantage.  

Manulife is aligning its product offerings to focus better on higher-margin, low-risk products instead of higher-risk, capital intensive products. Currently, 88% of its total premiums and deposits are in these targeted (low-risk) products. Although this might result in subdued growth relative to its historical pace, Manulife will gain through achievement of more sustainable growth targets, improvement of product margins and earnings consistency over the long haul.

Manulife presently carries a Zacks Rank #2 (Buy). Other insurance stocks worth considering are Lincoln National Corp. (LNC), Primerica Inc. (PRI) and Torchmark Corp. (TMK). All these stocks carry the same Zacks Rank as Manulife.

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Read the Full Research Report on LNC
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Read the Full Research Report on PRI

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