We are reiterating our Neutral recommendation on
Manulife Financial Corp.
), following its solid first quarter results which included a
18.5% positive earnings surprise. This Zacks Rank # 3 (Hold) life
insurer performed reasonably well led by lower new business
strain, smaller amortization of deferred acquisition costs and
Manulife is aggressively developing its business from Asia.
The company has expanded its distribution network across the
region, securing and deepening strategically important
distribution agreements with key partners in Japan and Indonesia.
We expect the company to gain further advantage in the Asian
markets which remains a key to its long term growth.
Manulife's business exposes it to interest rate and equity
market volatility. To offset these involuntary forces affecting
its business, the company has effectively built its hedging
program. Manulife has achieved its 2014 hedging targets and
is now two years ahead of schedule. We believe these steps will
help the company to emerge as a stronger company, cushioning
earnings from uncountable market variables.
Manulife is aligning its product offering to concentrate on
higher margin, low risk products as against higher risk-capital
intensive products. While this will result in subdued growth
relative to its historical pace, we believe that it will deliver
more sustainable growth targets and improve product margins as
well as earnings consistency over time.
Moreover, Manulife is maintaining a strong capital position.
The company retains a high quality investment portfolio. Its
invested assets are highly diversified by sector and geography
and have limited exposure to the high-risk areas.
Nevertheless, low bond yields and a volatile equity markets
continue to pose headwinds for the company, dwarfing the
Protective Life Corp.
Stancorp Financial Group Inc.
), both with Zacks Rank #1 (Strong Buy) and
China Life Insurance Co.Ltd.
), carrying Zacks Rank #2 (Buy) and are worth considering.
CHINA LIFE INS (LFC): Free Stock Analysis
MANULIFE FINL (MFC): Free Stock Analysis
PROTECTIVE LIFE (PL): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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