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Manulife (MFC) Down 6.6% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Manulife Financial Corp (MFC - Free Report) . Shares have lost about 6.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is MFC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Manulife Q4 Earnings Grow on Strong Asia Business

Manulife Financial Corporation reported fourth-quarter 2017 core earnings of $949 million (C$1,205 million), up 6% year over year.

The quarter witnessed strong growth in Asia and wealth and asset management businesses. Also, equity hedging costs lowered, realized gains on available-for-sale equities increased plus gains from policy-related items rose.

Moreover, the period under review marked the 32nd straight quarter of positive net flows in global Wealth and Asset Management business.

Premiums and deposits were $34.1 million (C$43.3 million), up about 13.4% year over year.

New business value in the reported quarter was $306 million (C$389 million), up 11% year over year. Strong growth in Asia drove this improvement.

Manulife’s total insurance sales declined 3% to $0.8 billion (C$1 billion) during the quarter due to 31% lower sales in Canada offsetting the respective 15% and 8% increase in Asia and the U.S. life insurance sales.

Wealth sales grew 25% year over year to $1.6 billion (CS2.1 billion) on improved wealth sales in Asia.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 224% as of Dec 31, 2017 compared with 230% as of Dec 31, 2016. This decline may be attributed to charges related to the U.S. Tax Reform and portfolio asset mix changes in the fourth quarter.

As of Dec 31, 2017, Manulife’s financial leverage ratio deteriorated 80 basis points (bps) to 30.3% from Dec 31, 2016 due to charges related to the U.S. Tax Reform and portfolio asset mix changes in the quarter under discussion.

As of Dec 31, 2017, assets under management were $0.8 trillion (C$1 trillion), up 11% year over year.

Core return on equity, measuring the company’s profitability, expanded 120 bps year over year to 11.3%.

Segmental Performance

Asia division core earnings came in at $422 million, up 8.9% year over year, banking on increase in new business volumes and solid in-force business growth, partially offset by an unfavorable policyholder experience. Annualized premium equivalents sales climbed 13% year over year to $696 million in the quarter on double-digit growth in Hong Kong, Singapore, Vietnam, Philippines and Cambodia.

Manulife’s Canadian division core earnings of $264 million (C$335 million) down 1.1% year over year, due to unfavorable policyholder experience in retail insurance, the non-recurrence of the prior year's gains from a reinsurance recapture and a number of other smaller items.

Insurance sales dropped 31% year over year to $128 million (C$163 million) due to pricing actions taken in 2017 and higher universal life prior-year sales in advance of regulatory changes as well as the timing of group benefit sales.

The U.S. division reported core earnings of $550 million, up 16.8% year over year. This upside was fueled by higher wealth and asset management earnings, primarily from higher average assets and an improvement in insurance policyholder experience. Life insurance sales shot up 8% 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 raise of 7% in 22 cents per share to shareholders of record as of Feb 21, 2018. The dividend will be paid on and after Mar 9.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

VGM Scores

At this time, MFC has an average Growth Score of C. However, its Momentum is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregte VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.


Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, MFC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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