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Manulife (MFC) Q3 Earnings Grow Y/Y, Asia Business Strong


Manulife Financial Corporation MFC reported third-quarter 2017 core earnings of $0.9 billion (C$1.1 billion), up 9% year over year.

The quarter witnessed double-digit core earnings and new business value growth in Asia and emerges as the 31st straight quarter of positive net flows in global Wealth and Asset Management business.

Manulife Financial Corp Price, Consensus and EPS Surprise

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

Premiums and deposits were $30.5 million (C$38.2 million), up about 2.4% year over year.

New business value in the quarter was $273.6 million (C$343 million), up 22% year over year. Strong growth in Asia drove this improvement.

Manulife’s total insurance sales were $0.9 billion (C$1.1 billion) during the period under review, up 10% year over year. This is because sales in Asia increased 15%, the U.S. life insurance sales increased 5% and Canadian sales improved slightly all on a year-over-year basis.

Wealth sales remained flat year over year at $1.5 billion (CS1.9 billion). Improved wealth sales in Asia were offset by lower business from the bank channel in Japan. In Canada too, sales declined 8% year over year.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 234% as of Sep 30, 2017 compared with 230% as of Jun 30, 2017. This sequential decline may be attributed to growth in retained earnings and net capital issuance. However, a moderate increase in required capital was partially offset.

As of Sep 30, 2017, Manulife’s financial leverage ratio deteriorated 30 basis points (bps) to 29.5% from Jun 30, 2017, driven by an issue of $350 million of subordinated debt and lower earnings.

As of Sep 30, 2017, assets under management were $802.7 billion (C$1000 billion), up 8% year over year.

Core return on equity, measuring the company’s profitability, expanded 80 bps year over year to 10.6%.

Segmental Performance

Asia division core earnings came in at $342 million, up 13.2% year over year, banking on growth in new business volumes and a continued rise of in-force business. However, a small charge related to policyholder experience in third-quarter 2017 compared with a small gain in the prior year, partially offset this upside. Annualized premium equivalents sales climbed 15% year over year to $734 million in the quarter.

Manulife’s Canadian division core earnings of $372 million (C$466 million) increased 32% year over year, driven by higher fee income in wealth and asset management businesses and a release of provisions for uncertain tax positions of prior years.

Insurance sales increased 2.8% year over year to $148 million (C$186 million) on the back of higher sales in the small and mid-market group benefits segments.

The U.S. division reported core earnings of $355 million, up 1.2% year over year. This upside was fueled by higher wealth and asset management earnings, primarily from higher average assets, lower amortization of deferred acquisition costs on in-force variable annuity business and higher tax benefits. Life insurance sales shot up 5% year over year owing to strong growth in Accumulation Universal Life, Index UL and term sales.

Dividend Update

The company’s board of directors approved a dividend of 20.5 cents per share to shareholders of record as of Nov 21, 2017. The dividend will be paid on and after Dec 19.

Zacks Rank

Manulife Financial 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 other players from the life insurance industry that have reported third-quarter earnings so far, the bottom line of Lincoln National Corporation LNC, Torchmark Corporation TMK and Reinsurance Group of America, Incorporated RGA beat the respective Zacks Consensus Estimate.

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