Manulife at a Fair Price

Fourth quarter '07 results for Manulife Financial Corporation (MFC - Analyst Report) came in slightly ahead of our expectations. In-force business growth, higher fee income from larger funds under management, and strong investment performance were partially offset by the impact of declining interest rates and the unfavorable impact of equity markets on its segregated fund guarantee reserves. Despite intensifying competition.

Manulife continues to generate strong growth in its business by expansion of its products and by international franchise. As a result, we would anticipate strong sales and earnings growth trends, strong capital position, and diverse operating platforms to benefit the company, going forward.

Based on 4Q07 results, we are maintaining our FY08 earnings expectation at $3.10 per share and are installing our early FY09 earnings expectation at $3.50 per share. Manulife currently trades at 11.6x our 2008 earnings estimate and 2.25x its 4Q07 book value of $16.11 per share, both of which are at substantial premiums to the industry median multiples.

Considering Manulife’s diversified business mix, leading position in most of its markets, strong business growth, improvement to its expense position, expansion of products and locales, and superior profitability relative to its peers, we think the current steep valuation is relatively justifiable. Even though we believe better-than peer earnings growth will result in additional upside in the stock, given the current valuation level, we are maintaining our Hold rating on the shares of Manulife.

Read the full analyst report on MFC.

Read the full analyst report on MFC