Manulife (MFC) Gains From Asia Business Amid Debt Woes

Manulife Financial Corporation’s MFC  strong Asia business, expanding wealth and asset management business and solid capital position poise it well. The company has a solid track of beating earnings estimates in each of the last four reported quarters.

Being one of the three dominant life insurers within its domestic Canadian market, Manulife is continually expanding in Asia, the major contributor to the company’s earnings. In-force business growth in Asia and favorable product mix should continue to drive its earnings.

Manulife’s Wealth and Asset Management (WAM) business continued to witness core earnings growth. While it already boasts a solid presence in North America and Asia, Manulife Asset Management has identified Europe (and the wider EMEA market) as a significant growth area.  The company thus has been making long-term investments in this region.

Manulife expects to lower costs, targeting an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022.  Its restructuring charges of $115 million in the first quarter of 2021 are projected to result in recurring annual expense savings of $250 million pre-tax by 2023. The company expects $100 million of these savings in 2021, which will increase to $200 million in 2022.

The company presently remains focused on ramping up growth in its highest potential businesses, and thus estimates these businesses to generate about 66% of total company core earnings by 2022.  Manulife Financial targets core EPS growth between 10% and 12% over the medium term.

Manulife possess a strong capital position. It exited the first quarter 2021 with $23 billion of capital above the supervisory target and LICAT ratio of 137. The company has increased its dividend at four-year CAGR of nearly 11%.  The company targets 30-40% dividend payout over the medium term. Manulife aims more than 13% return on equity in the medium term.

However, Manulife’s long-term debt has increased more than three-fold over the last five years, resulting in deterioration in leverage ratio. Yet, it targets leverage ratio of 25 over the medium term.

Other Industry Players

Some other stocks from the life insurance industry include Lincoln National Corporation LNC, Athene Holding Ltd. ATH and Brighthouse Financial, Inc. BHF.

Lincoln National delivered an earnings surprise of 22.97% in the last reported quarter.

Athene delivered an earnings surprise of 76.74% in the last reported quarter.

Brighthouse Financial delivered an earnings surprise of 100.83% in the last reported quarter.

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