Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for Manulife
- Fair Value Estimate: C$39.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Medium
What We Thought of Manulife’s Earnings
Manulife MFC posted strong numbers, with impressive growth in the Asian business. The firm reported core earnings of C$1.77 billion, or C$0.99 per share, in the first quarter, up 3% compared with the previous year. Adjusted return on equity was 15.6%.
Why it matters: The firm’s Asia segment is performing extremely well, with strong growth, but the overall profits were affected by relative weakness in the US business.
- The firm’s annualized premium sales grew by 37% and new business value was up by 36% in the quarter compared with the previous year. The impressive growth numbers were driven mostly by the Asia segment, where APE and NBV grew by 50% and 43%, respectively.
- Manulife’s profitability was adversely impacted by higher provisions related to expected credit losses and a provision for the California wildfires. Core earnings in the US business declined by 25% due to lower spreads, higher expected credit loss provisions, and the impact of actuarial review.
The bottom line: We are maintaining our C$39 per share fair value estimate for no-moat-rated Manulife after incorporating the latest results. The firm is benefiting from a favorable external environment and shares are in the overvalued territory.
- Higher interest rates and buoyant capital markets have been a tailwind for the company in recent quarters, resulting in higher investment earnings and assets under management. A correction in capital markets or lower rates would be a net negative for the company.
Long view: While all life insurance companies are benefiting from improved profitability, Manulife’s long-term growth potential makes it more attractive.
Key stats: Assets under management and administration in the wealth and asset management segment grew by 13% during the first quarter and were recorded at C$1.04 trillion. Core profitability in this segment was 24% higher on a year-over-year basis due to margin expansion and higher AUM.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.