Manulife (MFC) Down 2.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Manulife Financial (MFC). Shares have lost about 2.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Manulife due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Manulife Q4 Earnings Surpass Estimates, Increase Y/Y

Manulife Financial Corporation delivered fourth-quarter 2023 core earnings of 68 cents per share, which beat the Zacks Consensus Estimate by 7.9%. The bottom line increased 4.6% year over year. Core earnings of $1.3 billion (C$1.7 billion) remained unchanged year over year. The results reflected a rise in average AUMA and fee spreads, growth in Hong Kong, higher yields, improved insurance experience and increased sales in the Asia, Canada and U.S. segments.

New business value (NBV) in the reported quarter was $463 million (C$630 million), up 59.5% year over year. Annualized premium equivalent (APE) sales increased 22% year over year to $1.1 billion (C$1.5 billion), attributable to higher sales in the Asia, Canada and U.S. segments.

Wealth and asset management assets under management and administration were $600 billion (C$817 billion), up 4.2% year over year. The Wealth and Asset Management business generated net outflows of $0.9 billion (C$1.3 billion) compared with net outflows of $8.4 billion in the year-ago quarter. Core return on equity, measuring the company’s profitability, expanded 230 basis points year over year to 16.4%. The Life Insurance Capital Adequacy Test ratio was 137% as of Dec 31, 2023.

Segmental Performance

Global Wealth and Asset Management division’s core earnings were $259 million (C$ 353 million), up 31.5% year over year owing to higher average AUMA and fee spreads, benefiting from favorable market impacts.

Asia division’s core earnings totaled $414 million, up 14% year over year, driven by higher net insurance results reflected by the net impact of updates to actuarial methods and assumptions, along with higher interest rates and business growth. In Asia, NBV rose 5% year over year.

APE sales increased 11%, primarily driven by strong growth in Hong Kong due to a return of demand from MCV customers.

Manulife Financial’s Canada division’s core earnings of $258 million (C$352 million) remained unchanged year over year. In Canada, NBV increased 60% year over year.

APE sales jumped 44% year over year, primarily due to higher large-case and mid-size sales in Group Insurance and improved fixed annuity sales, partially offset by lower travel sales.

The U.S. division reported core earnings of $349 million, up 16% year over year, primarily due to the net impact of higher yields and improved insurance experience. NBV surged 74% year over year. APE sales jumped 34%, primarily reflecting a rebound in demand from affluent customers.

Business Highlights

Manulife Financial entered into an agreement with Global Atlantic to reinsure four in-force blocks of legacy and low return on equity (ROE) business, including $6 billion of long-term care (LTC) insurance contract net liabilities. This agreement represents the largest-ever LTC reinsurance transaction and is intended to reshape its portfolio by reducing risk, improving ROE, strengthening capital, growing high-return businesses and delivering value to shareholders. The transaction is expected to see light by the end of this month.

In Global WAM, the company entered into an agreement to acquire multi-sector alternative credit manager CQS. The acquisition will provide Manulife Investment Management and CQS clients with improved access to combined global investment solutions.

In Canada, MFC partnered with League, a leading healthcare technology provider, to offer group benefits members with more personalized and integrated digital healthcare experiences. This will enable them to connect their benefits directly with healthcare options.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Manulife has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Manulife has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Manulife is part of the Zacks Insurance - Life Insurance industry. Over the past month, Reinsurance Group (RGA), a stock from the same industry, has gained 7.9%. The company reported its results for the quarter ended December 2023 more than a month ago.

Reinsurance Group reported revenues of $5.16 billion in the last reported quarter, representing a year-over-year change of +18.2%. EPS of $4.73 for the same period compares with $2.99 a year ago.

Reinsurance Group is expected to post earnings of $4.55 per share for the current quarter, representing a year-over-year change of -11.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.4%.

Reinsurance Group has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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