We are reiterating our Neutral recommendation on
Manulife Financial Corp.
). Though we remain upbeat about the company's long-term growth
profile, exposure to interest rates and equity market volatility
keeps us on the sidelines.
Manulife is one of the dominant life insurers within its
domestic Canadian market and possesses rapidly growing operations
in the U.S. and several Asian countries. It has a diverse global
presence with 75% of its earnings coming from outside Canada.
Manulife has been doing business in the Asian market for
over a century, which gives it a competitive advantage.
Moreover, changing demographics have increased demand
for insurance and wealth management products in these regions and
the company will likely benefit from this due to its longstanding
Manulife is aligning its product offering to concentrate more
on higher margin, low risk products as against higher
risk-capital intensive products. Currently, 88% of its total
premiums and deposits are in these targeted (lower-risk)
products. Although 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.
Manulife's business exposes it to market volatility, though
the company is effectively building its hedging program to
decrease both interest rate and equity market exposure.
Manulife 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. We continue to
view the company's investment management as a significant
However, the company exposure to equity and interest rates
risk may pressure the company's capital position.
Manulife currently retains a Zacks Rank #4 (Sell).
StanCorp Financial Group Inc.
) with Zacks Rank #1 (Strong Buy),
Lincoln National Corp.
Protective Life Corp.
) with Zacks Rank #2 (Buy) are worth investing in.
LINCOLN NATL-IN (LNC): 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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