Credit: Shutterstock photoSummary:
Manulife Financial's third-quarter earnings were up 7.2% year over year, led by improved policyholder experience, the impact of higher sales and a favorable business mix on new business strain and higher fee income. The company is aggressively developing its business in Asia, which remains crucial to its long-term growth. Manulife also enjoys a solid position in the global markets, and has effectively reduced exposure to potential equity markets as well as interest rate risks. It has also renewed its focus on less capital intensive lines of business while maintaining adequate regulatory risk-adjusted capitalization. The recently announced acquisition of the Canadian operations of Standard Life will increase the company's breadth in the Canadian region. In addition, Manulife has successfully witnessed strong growth in assets under management. However, the persistently low interest rate environment and foreign exchange exposure will continue to be a headwind. We thus maintain our Neutral recommendation on the company.
Overview:
Headquartered in Toronto, Canada, Manulife Financial Corporation was founded in 1887. Manulife is one of the three dominant life insurers within its domestic Canadian market and possesses rapidly growing operations in the U.S. and several Asian countries.
Manulife reports earnings through six divisions and has five major operating divisions Asia, Canada, U.S. Insurance and U.S. Wealth Management, and Corporate. The bulk of its adjusted earnings from operations is generated in Asia, Canada and the U.S., with each contributing about a third.
The Asia Division (16% of 2013 premium and deposits) Manulife Financial has been operating in Asia since 1897, beginning in Hong Kong and the Philippines and expanding thereafter into Singapore, Indonesia, Taiwan, China, Japan, Vietnam, Malaysia and Thailand. The segment provides protection and wealth management products in select markets throughout the region. Protection products include life insurance, group life and health, and hospital coverage. Wealth management products include mutual funds, pensions, variable annuities and segregated funds. The products are distributed through a multi-channel network, including exclusive agents, independent agents, banks, financial advisors and other alternative channels.
The Canadian Division (27%) is one of the leading insurance-based financial services organizations in Canada. The segment offers a diverse portfolio of products, services and distribution channels in order to meet the needs of a broad marketplace. The segment also markets life, health and specialty products, such as travel insurance, to consumers through a number of alternative distribution channels. In addition, through Manulife Bank, the segment offers a variety of lending products including fixed and variable rate mortgages, most notably the innovative Manulife One product, and investment loans.
The U.S. Insurance (12%) provides life and long-term care insurance products and services to select markets. John Hancock Life ("Life") focuses on high net worth and emerging affluent markets by providing estate and business planning and other solutions, with an array of protection and accumulation-oriented life insurance products. John Hancock Long-Term Care ("LTC") currently offers a portfolio of individual products designed for middle income groups in affluent markets.
The U.S. Wealth Management (44%) offers a broad range of personal and family oriented wealth management products and services focused on individuals and business markets, as well as institutional oriented products for employee benefit plan funding solutions. The U.S. Wealth Management has three core business lines John Hancock Wealth Asset Management, John Hancock Variable Annuities and John Hancock Fixed Products.
Corporate and Other (1.0%) is comprised of the earnings on assets backing capital, net of amounts allocated to operating divisions, changes in actuarial methods and assumptions and model enhancements, Investment Division's external asset management business, the John Hancock Accident and Health operation, settlement costs for macro equity hedges and other non operating items.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
