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Why Is Manulife (MFC) Down 10.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Manulife Financial (MFC - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Manulife due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Manulife Financial delivered fourth-quarter 2022 core earnings of 65 cents per share, which beat the Zacks Consensus Estimate by 6.6%. The bottom line declined 3% year over year.
Core earnings of $1.3 billion (C$1.7 billion) decreased 2% year over year. The decrease was attributable to lower net fee income from lower average assets under management and administration in Global Wealth and Asset Management, lower new business gains in Asia and the U.S., and lower in-force earnings in U.S. Annuities due to the variable annuity reinsurance transactions.
New business value (NBV) in the reported quarter was $290.2 million (C$525 million), down 9% year over year, attributable to lower sales volumes in Asia.
Annualized premium equivalent (APE) sales decreased 12% year over year to $0.9 billion (C$1.3 billion), attributable to lower sales in Asia, Canada and U.S. segments.
The expense efficiency ratio increased 190 basis points (bps) to 50.9%. As of Dec 31, 2023, Manulife Financial’s leverage ratio deteriorated 190 bps year over year to 27.7.
Wealth and asset management assets under management and administration were $575.7 billion (C$779.9 billion), down 8.9% year over year. The Wealth and Asset Management business generated net outflows of $6.1 billion (C$8.3 billion) against an inflow of C$8.1 million in the year-ago quarter. This was due to net outflows at Retirement and Retail.
Core return on equity, measuring the company’s profitability, expanded 50 bps year over year to 13.2%.
The Life Insurance Capital Adequacy Test ratio was 131% as of Dec 31, 2022, down from 142% as of Dec 31, 2021.
Segmental Performance
Global Wealth and Asset Management division’s core earnings were $197 million (C$ 267 million), down 31% year over year.
Asia division’s core earnings totaled $419 million (C$569 million), up 4% year over year. In Asia, NBV decreased 17% year over year, reflecting lower sales in Hong Kong and unfavorable changes in product mix in Asia Other, partially offset by the benefit of rising interest rates, and higher individual protection and other wealth sales in Japan.
APE sales decreased 9% due to lower sales in Hong Kong. It was partially offset by higher sales in Japan and Asia Other.
Manulife Financial’s Canada division’s core earnings of $258 million (C$350 million) were up 22.4% year over year. In Canada, NBV increased 6% year over year, with higher margins in our insurance businesses, partially offset by lower volumes in annuities.
APE sales decreased 15% due to lower segregated fund and participating insurance sales, partially offset by higher small business group insurance sales.
The U.S. division reported core earnings of $275 million (C$374 million), down 19.9% year over year. NBV increased 12% year over year, driven by higher interest rates, higher international sales volumes and product actions, partially offset by lower brokerage sales volumes.
APE sales decreased 21% primarily due to lower sales of domestic life insurance products, partially offset by an increase in international sales, which are reported as part of U.S. segment results.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Manulife has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Manulife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Manulife (MFC) Down 10.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Manulife Financial (MFC - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Manulife due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Manulife Financial Q4 Earnings Beat Estimates, Dip Y/Y
Manulife Financial delivered fourth-quarter 2022 core earnings of 65 cents per share, which beat the Zacks Consensus Estimate by 6.6%. The bottom line declined 3% year over year.
Core earnings of $1.3 billion (C$1.7 billion) decreased 2% year over year. The decrease was attributable to lower net fee income from lower average assets under management and administration in Global Wealth and Asset Management, lower new business gains in Asia and the U.S., and lower in-force earnings in U.S. Annuities due to the variable annuity reinsurance transactions.
New business value (NBV) in the reported quarter was $290.2 million (C$525 million), down 9% year over year, attributable to lower sales volumes in Asia.
Annualized premium equivalent (APE) sales decreased 12% year over year to $0.9 billion (C$1.3 billion), attributable to lower sales in Asia, Canada and U.S. segments.
The expense efficiency ratio increased 190 basis points (bps) to 50.9%. As of Dec 31, 2023, Manulife Financial’s leverage ratio deteriorated 190 bps year over year to 27.7.
Wealth and asset management assets under management and administration were $575.7 billion (C$779.9 billion), down 8.9% year over year. The Wealth and Asset Management business generated net outflows of $6.1 billion (C$8.3 billion) against an inflow of C$8.1 million in the year-ago quarter. This was due to net outflows at Retirement and Retail.
Core return on equity, measuring the company’s profitability, expanded 50 bps year over year to 13.2%.
The Life Insurance Capital Adequacy Test ratio was 131% as of Dec 31, 2022, down from 142% as of Dec 31, 2021.
Segmental Performance
Global Wealth and Asset Management division’s core earnings were $197 million (C$ 267 million), down 31% year over year.
Asia division’s core earnings totaled $419 million (C$569 million), up 4% year over year. In Asia, NBV decreased 17% year over year, reflecting lower sales in Hong Kong and unfavorable changes in product mix in Asia Other, partially offset by the benefit of rising interest rates, and higher individual protection and other wealth sales in Japan.
APE sales decreased 9% due to lower sales in Hong Kong. It was partially offset by higher sales in Japan and Asia Other.
Manulife Financial’s Canada division’s core earnings of $258 million (C$350 million) were up 22.4% year over year. In Canada, NBV increased 6% year over year, with higher margins in our insurance businesses, partially offset by lower volumes in annuities.
APE sales decreased 15% due to lower segregated fund and participating insurance sales, partially offset by higher small business group insurance sales.
The U.S. division reported core earnings of $275 million (C$374 million), down 19.9% year over year. NBV increased 12% year over year, driven by higher interest rates, higher international sales volumes and product actions, partially offset by lower brokerage sales volumes.
APE sales decreased 21% primarily due to lower sales of domestic life insurance products, partially offset by an increase in international sales, which are reported as part of U.S. segment results.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Manulife has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Manulife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.