Manulife (MFC) Q2 Earnings Decline, Asia Business Grows

Manulife Financial Corp. (NYSE:MFC) reported second-quarter 2016 core earnings of $643.5 million (C$833 million), down 8% year over year. The decline was due to the absence of core investment gains, higher expected macro hedging costs and lower earnings on surplus assets. However, decline was partially offset by favorable forex.

Nonetheless, 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 $6.3 billion (C$36.8 million), down 15.8% year over year.

New business value in the quarter was $210 million (C$272 million), up 34% year over year fueled by solid growth in Asia.

During the quarter, Manulife’s total insurance sales were $705 billion (C$914 million), up 11% year over year, led by 30% higher sales in Asia. U.S. insurance sales declined 9% year over year while Canadian insurance sales decreased 28%.

Segment Performance

Asia division core earnings came in at $266 million, up 16% year over year. This increase was driven by solid growth in new business volumes. However, less favorable policyholder experience and the impact of declining interest rates were partial dampeners. Sales of annualized premium equivalents increased 34% year over year to a record $627 million in the quarter.

Manulife’s Canadian division core earnings of $257 million (C$333 million) increased 10% year over year, driven by better policyholder experience, higher wealth and asset management fee income. Insurance sales declined 28% year over year to $93 million(C$120 million) due to the timing of large-case activity in Group Benefits.

The U.S. division reported core earnings of $280 million, down 11% year over year due to an unfavorable policyholder experience in JH Long Term Care, the non-recurrence of favorable policy-related items from the year-ago quarter and lower new business gains in Insurance. Insurance sales decreased 9% over the prior-year quarter to $107 million.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 236% as of Jun 30, 2016, up from 233% as of Mar 31, 2016.

Manulife's financial leverage ratio deteriorated 180 basis points to 29.7% on Jun 30, 2016 due to the issuance of $1.0 billion senior debt issuance in Taiwan, and $500 million subordinated note issuance in Singapore.

Assets under management were $718 billion (C$934 billion) as of Jun 30, 2016, up 5.8% year over year.

Core return on equity, which measures the company’s profitability, decreased 140 basis points year over year to 8.4%.

Dividend Update

The board of directors approved a dividend of 18.5 cents per share. The dividend is payable on Sep 19 to shareholders of record on Aug 16.

Zacks Rank

Manulife Financial presently carries a Zacks Rank #3 (Hold).

MANULIFE FINL Price, Consensus and EPS Surprise

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

Performance of Other Life Insurers

Earnings at Torchmark Corp. (NYSE:TMK) and Genworth Financial Group Inc. (NYSE:GNW) beat the respective Zacks Consensus Estimate in the second quarter. However, Lincoln National Corporation (NYSE:LNC) reported in line with the same.