Manulife's (MFC) Q4 Earnings Rise Y/Y On Business Growth

Manulife Financial Corporation (NYSE:MFC) delivered fourth-quarter 2019 core earnings of $1.1 billion (C$1.5 billion), up 22.2% year over year. This upside can be attributed to in-force and new business growth in the United States, Hong Kong and Asia Other, progress in Global Wealth and Asset Management and the non-recurrence of market losses on seed money investments in the company’s surplus portfolio.

New business value in the reported quarter was $398.5 million (C$526 million), up 5.1% year over year on the back of Canada new business value and U.S. new business value.

Annualized premium equivalent (APE) sales were almost flat year over year, leading to $1.1 billion (C$1.5 billion).

As of Dec 31, 2019, Manulife Financial’s financial leverage ratio contracted 350 basis points (bps) to 25.1% from the level on Dec 31, 2018.

As of Dec 31, 2019, wealth and asset management assets under management and administration were $516.6 billion (C$681.4 billion), down 2.9% year over year.

Core return on equity, measuring the company’s profitability, is flat at 12.5%.

The Office of the Superintendent of Financial Institutions' new Life Insurance Capital Adequacy Test (LICAT) regulatory capital regime came into effect in Canada on Jan 1, 2018, replacing the Minimum Continuing Capital and Surplus framework. LICAT ratio was 140% as of Dec 31, 2019, down from 143% as of Dec 31, 2018.

Full-Year Highlights

Core earnings of C$6 billion in 2019 were up 5% from the level in 2018. The company witnessed growth in Asia and Global Wealth and Asset Management, more new business, better investment income and the non-recurrence of 2018 market losses on seed money investments in surplus portfolio.

In Asia, it delivered an 8% increase in new business value to C$1.1 billion during 2019. This can be mainly attributable to growth in Hong Kong and Asia Other. However, the same was offset by a decline in Japan sales.

Expense efficiency ratio improved 100 bps to 54.2%.

Segmental Performance

Global Wealth and Asset Management division’s core earnings came in at $200.8 million (C$265 million), up 14.7% year over year.

Asia division’s core earnings totaled $374.2 million, down 18.5% year over year.

Manulife Financial’s core earnings in Canada division were $218.2 million (C$288 million), down 7.6% year over year. Annualized premium equivalent sales of $205.3 million (C$271 million) dipped 2.1% year over year.

The U.S. division reported core earnings of $370.4 million (C$489 million), down 20.3% year over year. Annualized premium equivalents sales of $115 million (C$271 million) decreased 24% year over year.

Dividend Update

The board of directors declared a dividend hike of 12%, to be paid out on and after Mar 19, 2020 to its shareholders as of Feb 25, 2020.

Zacks Rank and Performance of Other Insurers

Manulife Financial has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom-line results of Brown & Brown, Inc. (NYSE:BRO) and RLI Corp. (NYSE:RLI) beat estimates while that of Principal Financial (NASDAQ:PFG) met the mark.

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