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On Dec 14, Zacks Investment Research upgraded Manulife Financial Corp. (MFC - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Manulife Financial has been witnessing rising earnings estimates on the back of its third quarter results as well as continued focus to grow its Asset management business. The life insurer’s earnings surprise over the last 4 quarters averaged 1%. The long-term expected earnings growth rate for this stock is 10%.   

During the most recently concluded third quarter, the company reported core earnings of $677 million (C$704 million) up 18.3% year over year. On a per share basis, earnings were in line with the Zacks Consensus Estimate. The company reported an increase in both insurance and wealth sales during the reported quarter.

Moreover, in sync with the long-term strategy to grow its Asset management business, Canadian life insurer, Manulife Financial has set up its latest unit named Manulife Asset Management Private Markets. The unit will offer solutions to customers interested in investing funds in private asset class. Manulife Financial announced that its unit Manulife Holdings Berhad (MHB) will acquire MAAKL Mutual Bhd (MAAKL) from MAA Group Berhad in Malaysia.  The transaction will fetch MHB one of the top ten positions in Asset Management in Malaysia.

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

Manulife is aligning its product offering for greater focus on higher margin, low risk products as against higher risk-capital intensive products. Currently, 88% of its total premiums and deposits are in these targeted (lower-risk) products. Although this will result in subdued growth relative to its historical pace, it will deliver more sustainable growth targets and improve product margins as well as earnings consistency over time.

The Zacks Consensus Estimate for 2013 increased 0.8% to $1.27 per share, as 1 of the 4 estimates was revised higher over the last 7 days.

Other Stocks to Consider

Other players also worth considering include StanCorp Financial Group Inc. (SFG - Analyst Report), American Equity Investment Life Holding Co. (AEL - Snapshot Report) and Prudential Financial Inc. (PRU - Analyst Report). While StanCorp sports a Zacks Rank #1 (Strong Buy), American Equity and Prudential Financial carry the same Zacks Rank as Manulife.
 

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