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Manulife Financial (MFC) Q1 Earnings Up on Asia Business

Manulife Financial Corp. MFC reported first-quarter 2016 core earnings of $643.5 million (C$905 million), up 14% year over year. The improvement was driven by growth in new business volumes, particularly in Asia, and favorable foreign currency translation. However, an increase in hedging costs limited the upside.

Premiums and deposits income was $6.3 billion (C$8.2 billion), up 13.9% year over year.  

During the quarter, Manulife’s total insurance sales were $736 billion (C$954 million), up 14% year over year, led by 36% year over year higher sales in Asia. U.S. insurance sales also improved 4%. However, Canadian insurance sales decreased 18% year over year.

Segment Performance

Asia division core earnings came in at $270 million, up 19% year over year. This increase was driven by solid growth in new business volumes, better product margins and favorable policyholder experience. Sales of annualized premium equivalents increased 48% year over year to $590 million in the quarter.

Manulife’s Canadian division core earnings of $261 million (C$338 million) increased 30% year over year, driven by better policyholder experience, higher wealth and asset management fee income, and the impact of an additional month of results from business acquired in 2015. Insurance sales declined 28% year over year to $120 million(C$155 million) due to the timing of large-case activity in Group Benefits.

The U.S. division reported core earnings of $283 million, down 6.3% year over year due to an unfavorable policyholder experience in JH Long Term Care. Insurance sales increased 4% over the prior-year quarter to $122 million, fueled by the Federal Long Term Care ("LTC") program.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 233% as of Mar 31, 2016, up from 223% as of Dec 31, 2015.

Manulife's financial leverage ratio deteriorated 410 basis points to 27.9% on Mar 31, 2016 due to the issuance of $1.75 billion senior debt, $326 million (C$425 million) preferred shares, and the impact of the weakening U.S. dollar compared with the Canadian dollar.

Assets under management were $694 billion (C$904 billion), up 8% year over year. The improvement was fueled by a 4% increase in U.S. insurance sales.

Return on equity, which measures the company’s profitability, increased 240 basis points year over year to 10.8%.  

Dividend Update

The board of directors approved a dividend of 18.5 cents per share. The dividend is payable on Jun 26 to shareholders of record on May 17.

Zacks Rank

Manulife Financial presently carries a Zacks Rank #3 (Hold).

Performance of Other Life Insurers

Earnings at Torchmark Corp. TMK and Genworth Financial Group Inc. GNW beat the respective Zacks Consensus Estimate in the first quarter. However, Lincoln National Corporation LNC missed the same.

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LINCOLN NATL-IN (LNC): Free Stock Analysis Report
 
TORCHMARK CORP (TMK): Free Stock Analysis Report
 
MANULIFE FINL (MFC): Free Stock Analysis Report
 
GENWORTH FINL (GNW): Free Stock Analysis Report
 
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