Manulife (NYSE:MFC) is a Canada based insurance company that has established operations in the U.S., and is rapidly expanding in Asia. The company reported around $50 billion in revenues for 2011, about half of which were through investment income. Asian operations and the U.S. life and health division accounted for 35% of the premiums each, the Canadian operations accounted for about 20% and the U.S. retirement solutions division accounted for the remaining 10% of premiums. The net income earned by Manulife during the period was around $250 million with about 35% coming from Asia and the U.S. each and 30% from Canada.
In previous articles we have extensively covered Manulife’s Asian and U.S. operations. (Please read A Look At Manulife’s Asian Strategy – China and Japan, A Look At Manulife’s Asian Strategy – ASEAN, India And Korea and A Look At Manulife’s U.S. Business for more details.) In this note, we will take a closer look at the company’s home ground, Canada.
We have a price estimate of $14 for Manulife’s stock which is in-line with the current market price.
Recovering Lost Ground
Manulife has been operating in Canada for over a century, with individual insurance products aimed at middle and upper income segments and group life, health, retirement and disability products for Canadian employers. The company claims to have served one in every five Canadians, but has been losing ground to competitors like Great-West Lifeco., Sun Life Financial and Desjardins Financial Security. Following the 2008 financial crisis, it had to enter into an external reinsurance agreement to reduce risk in 2009, which has had a big impact on its market share. Manulife’s market share in Canada dropped from 13% in 2008 to 6.5% at the end of 2011.
The insurer has shown signs of recovery recently. In the first half of 2012, Manulife’s Group retirement solutions and group benefits led the Canadian industry in sales, according to data compiled by LIMRA. The company is also looking to expand in travel insurance, reporting a 28% year-on-year increase in travel insurance premiums in the first nine months of 2012. Manulife recently completed the acquisition of Benesure Canada Inc., a Canadian mortgage insurance solutions provider with around 170,000 clients. 
Manulife reported a 200% increase in insurance sales in the second quarter of 2011, but was again set back by a 7% year-on-year decline in the September quarter. The decline was driven by a 10% decline in non-guaranteed long duration products sales. In contrast, its main competitors, Sun Life Financial and Great-West Lifeco reported strong third quarter performances. 
We maintain a conservative outlook for Manulife in Canada as we believe the company is looking to consolidate and retain market share, rather than expand aggressively. You can modify the interactive chart below to gauge the effect a change in forecast would have on our price estimate.Notes:
- Manulife Financial completes acquisition of Benesure Canada Inc., Press Release, 4th January [↩]
- Manulife narrows loss but delays C$4 billion profit target, Reuters, 8th November, 2012 [↩]