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Why Is Manulife Financial (MFC) Down 0.9% Since the Last Earnings Report?

A month has gone by since the last earnings report for Manulife Financial CorpMFC . Shares have lost about 0.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 Q1 Earnings Rise on Improved Asia Business

Manulife Financial Corporation reported first-quarter 2017 core earnings of $0.8 billion (C$1.1 billion), up 22% year over year. The improvement was largely driven by an increase in wealth and asset management businesses, core investment gains, in-force and new business growth in Asia and lower equity hedging costs. Adverse forex, however, limited the upside.

Premiums and deposits were $32.6 million (C$43.1 million), up 10.6% year over year.

New business value in the quarter was $298 million (C$394 million), up 42% year over year. Strong annualized premium equivalents (APE) sales and improved product mix and scale benefits in Asia fueled the upside.

During the quarter, Manulife's total insurance sales were $0.98 billion (C$1.3 billion), up 39% year over year. This is because sales in Asia surged 38%, Canadian sales doubled and U.S. life insurance sales increased 8%, all on a year-over-year basis.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 233% as of Mar 31, 2017 compared with 230% as of Dec 31, 2016. The sequential increase may be attributed to capital issuance and growth in retained earnings. However, growth in capital requirements partially offset the improvement.

As of Mar 31, 2017, Manulife's financial leverage ratio deteriorated 60 basis points (bps) to 30.1% from Mar 31, 2017. This was driven by an issuance of $750 million in callable subordinated notes to pre-finance redemptions, partially offset by higher retained earnings.

As of Mar 31, 2017, assets under management were $0.75 billion (C$1000 billion), up 4.5% year over year.

Core return on equity, which measures the company's profitability, increased 180 bps year over year to 11.1%

Segment Performance

Asia division core earnings came in at $308 million, up 17% year over year. This was due to strong double-digit growth in new business volumes, continued increase of in-force business, and a more favorable product mix. Annualized premium equivalents sales rose 31% year over year to $771 million in the quarter.

Manulife's Canadian division core earnings of $241 million (C$319 million) declined 6% year over year due to unfavorable policyholder experience, primarily related to the higher claims incidence rates in group benefits long-term disability business. Higher fee income from wealth and asset management businesses due to higher asset levels partially mitigated the downside.

Insurance sales skyrocketed 93% year over year to $226 million (C$299 million) due to large case sales in group benefits business and higher permanent life sales.

The U.S. division reported core earnings of $389 million, up 37.5% year over year. The upside was fueled by long-term care and annuity policyholder experience gains, higher fee income from higher average assets in WAM businesses, and lower amortization of deferred acquisition costs on in-force variable annuity business. Life insurance sales increased 8% year over year due to extended distribution reach and greater acceptance of the Vitality feature.

Dividend Update

The company's board of directors approved a dividend of 20.5 cents per share to shareholders on record as of May 16, 2017. The dividend will be paid on Jun 19.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Manulife Financial Corp Price and Consensus

Manulife Financial Corp Price and Consensus | Manulife Financial Corp Quote

VGM Scores

At this time, the stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% 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.

The company's stock is suitable solely for value based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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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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