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Manulife (MFC) Q3 Earnings Improve on Strong Asia Business

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Manulife Financial Corp. (MFC - Free Report) reported third-quarter 2016 core earnings of $764 million (C$996 million), up 14% year over year. The improvement was driven by core investment gains, in-force and new business growth in Asia, and improved policyholder experience due to the annual actuarial review. However, higher interest expenses due to debt issuances were partial dampeners.

Also, the quarter witnessed growth in new business volumes, particularly in Asia, and continued positive net flows in its wealth and asset management businesses.

Premiums and deposits were $28.6 million (C$37.3 million), up 6.8% year over year.  

New business value in the quarter was $230 million (C$300 million), up 5% year over year. Solid growth in Asia fueled the upside.

During the quarter, Manulife’s total insurance sales were $0.8 billion (C$1 billion), up 20% year over year. The improvement was supported by 28% higher sales in Asia and 27% increase in Canadian insurance sales. However, decline in U.S. insurance sales by 13% year over year was a partial offset.

Segment Performance

Asia division core earnings came in at $302 million, up 13% year over year. The increase was driven by solid in-force business growth and continued improvement in new business volumes. However, lower favorable policyholder experience and the impact of declining interest rates were dampeners. Sales of annualized premium equivalents increased 28% year over year to $663 million in the quarter.

Manulife’s Canadian division core earnings of $257 million (C$354 million) increased 5.4% year over year, driven by better policyholder experience and gains on reinsurance treaty recaptures. Insurance sales increased 27% year over year to $138.8 million (C$181 million) due to variability in large-case Group Benefits segment and increased Retail Insurance universal life sales.

The U.S. division reported core earnings of $302 million, up 5.6% year over year. The favorable impact of changes in actuarial methods and assumptions on policyholder experience as well as lower amortization of deferred acquisition costs on in-force variable annuity business supported the increase. However, the impact of lower John Hancock Insurance sales and lower tax benefits limited the upside. Insurance sales decreased 13% from the prior-year quarter to $110 million.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 234% as of Sep 30, 2016 compared with 236% as of Mar 31, 2016. The sequential decline resulted from an increase in required capital driven by alternative long-duration assets.

Manulife's financial leverage ratio improved 40 basis points (bps) sequentially to 29.3% as of Sep 30, 2016. This was driven by an increase in equity due to the solid earnings improvement.

As of Sep 30, 2016, assets under management were $737 billion (C$966 billion), up 8.8% year over year.

Core return on equity, which measures the company’s profitability, increased 60 bps year over year to 9.8%.  

Dividend Update

The board of directors approved a dividend of 18.5 cents per share. The dividend is payable on Dec 19, to shareholders of record on Nov 22, 2016.

Zacks Rank

Manulife Financial presently carries a Zacks Rank #4 (Sell).

MANULIFE FINL Price, Consensus and EPS Surprise


MANULIFE FINL Price, Consensus and EPS Surprise | MANULIFE FINL Quote

Performance of Other Life Insurers

Earnings of Torchmark Corp. (TMK - Free Report) and Reinsurance Group of America Inc. (RGA - Free Report) beat their Zacks Consensus Estimate, while that of Genworth Financial Inc. (GNW - Free Report) missed the same in the third quarter. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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