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Manulife (MFC) Q4 Earnings Improve on Strong Asia Business

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Manulife Financial CorporationMFC reported fourth-quarter 2016 core earnings of $963.9 million (C$1.3 billion), up 49.8% year over year. The improvement was largely driven by core investment gains, and in-force and new business growth in Asia.

Also, the quarter witnessed growth in new business volumes, particularly in Asia, and continued positive net flows in its wealth and asset management businesses.

Premiums and deposits were $36.1 million (C$48.2 million), up 18.1% year over year.

New business value in the quarter was $275 million (C$367 million), up 20% year over year. Strong annualized premium equivalents (APE) sales and improved product margins in Asia fueled the upside.

During the quarter, Manulife's total insurance sales were $0.8 billion (C$1.1 billion), up 3% year over year. The improvement was supported by 13% higher sales in Asia. However, a 22% decline in Canadian insurance sales and a 6% decrease in U.S. insurance sales partially limited the upside.

Segment Performance

Asia division core earnings came in at $388 million, up 16% year over year. The increase was driven by robust growth of in-force business and continued increase in new business volumes. However, lower favorable policyholder experience and the impact of declining interest rates were dampeners. Sales of annualized premium equivalents rose 13% year over year to $618 million in the quarter.

Manulife's Canadian division core earnings of $269 million (C$359 million) inched up about 2% year over year, driven by gains on reinsurance treaty recaptures in the fourth quarter. However, one-time charges partially offset the upside. Insurance sales decreased 22% year over year to $177.5 million (C$237 million) due to lower sales in the large-case Group Benefits segment. However, higher Retail Insurance universal life sales partially offset the downside.

The U.S. division reported core earnings of $353 million, up 42.3% year over year. Release of tax provisions of a considerable amount due to the closing of certain tax years improved policyholder experience in the reported quarter. Lower amortization of deferred acquisition costs on in-force variable annuity business supported the increase. However, lower fee income in wealth asset management (WAM) businesses owing to fee compression in the company's pension business and changes in business mix limited the upside. Insurance sales decreased 6% from the prior-year quarter to $120 million.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 230% as of Dec 31, 2016 compared with 234% as of Sep 30, 2016. The sequential decline may be attributed to the closure of the Mandatory Provident Fund distribution agreement and related acquisition with Standard Chartered Bank.

As of Dec 31, 2016, Manulife's financial leverage ratio deteriorated 570 basis points (bps) to 29.5% from year-end 2015. This was driven by an increase in net funding issuances in 2016, which acknowledged higher regulatory capital requirements through issuances in several markets as the company executed its global funding diversification strategy.

As of Dec 31, 2016, assets under management were $725 billion (C$977 billion), up 4.5% year over year.

Core return on equity, which measures the company's profitability, increased 420 bps year over year to 12.9%.

Dividend Update

The company's board of directors approved a dividend hike of 11% to 20.5 cents per share. This marks three straight years of dividend hike. The increased dividend will be paid on and after Mar 20, to shareholders on record as of Feb 22, 2017.

Manulife Financial Corp Price, Consensus and EPS Surprise

Manulife Financial Corp Price, Consensus and EPS Surprise | Manulife Financial Corp Quote

Zacks Rank

Manulife Financial presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Insurers

Among other players from the insurance industry that have reported their fourth-quarter earnings so far, the bottom line at Torchmark Corporation TMK , Reinsurance Group of America, Inc. RGA and Assurant, Inc. AIZ beat their respective Zacks Consensus Estimate.

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Torchmark Corporation (TMK): Free Stock Analysis Report

Manulife Financial Corp (MFC): Free Stock Analysis Report

Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report

Assurant, Inc. (AIZ): Free Stock Analysis Report

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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.


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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