Conversely, almost all major life and health insurers have aggressive plans to expand in Asia which could prevent Manulife from achieving a greater market share. There could be a 10% downside to our price estimate if the company's market share were to fall below 0.7% during our forecast period.
Manulife Financial is a leading Canadian-based financial services group operating in 22 countries wordlwide. The company provides financial protection and wealth management products and services which include individual life insurance, group life and health insurance, long-term care services, pension products, annuities, mutual funds and banking products. The company also offers reinsurance services, specializing in life retrocession and property and casualty reinsurance.
Manulife's most valuable business is its Asian insurance and wealth management operation. The company's second most valuable business is its U.S. Retirement Solutions business which provides annuities and pension plans in the U.S. The third most valuable business is the investment of the insurance premiums collected across all of the company's insurance products in assets such as bonds, equities and mortgages.
0.7% Share in about $900 billion Asian Life Insurance and Wealth Management Market
Manulife's Asian life insurance and wealth management business is the company's largest source of value. This is due to the significance of the Asian insurance market, which we estimate to be cross $1 trillion in 2015.
Manulife has operated in Asia since 1897 and has developed a robust distribution network which includes exclusive agents, independent agents, banks, financial advisers and other alternative channels
1.2% Fees on $190 billion Variable Annuity Assets in the U.S.
The retirement solutions market in the U.S. has seen healthy growth over the past couple of years and Manulife is one of the leading providers of annuities and retirement plans. In 2014, the company managed about $334 billion in variable annuity assets and charged fees of 1.2%. We estimate that Manulife's variable annuity assets will grow at close to 5% annually over the Trefis forecast period.
Modest growth in the U.S. life and health insurance market
Growth in the U.S. life and health insurance business was adversely impacted by the financial crisis. However, employment levels have improved since then and so has the economy returned to growth path. As the economy further improves consumers who had reduced their insurance coverage in response to financial woes will likely return back. Accordingly, we expect improvement in the U.S. life and health insurance market going forward.
Investment losses are expected to decline
The financial crisis of 2008-09 caused financial services firms to book heavy losses on their invested assets. Insurance companies typically depend on investment income to pay off their liabilities (insurance benefits, claims and dividends). Heavy investment losses during the financial crisis caused operating margins to drop significantly. However, Manulife has been able to improve yields on certain assets with a smart mix that include equity and fixed income securities as well as certain other assets. Going forward, we expect the company to gain from improving economic conditions as well as invest smartly by reducing exposure to high risk securities.
Improved liquidity position to help drive growth
In addition to nearly $245 billion in invested assets, the firm has a strong liquidity position with close to $18 billion in cash at the end of 2014. As some of this cash is used for more high return opportunities, this could significantly improve operating earnings going forward.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
See more on: DCF Methodology
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
View All Help Topics