Manulife Sees Business Growth In Q1, Low Investment Returns Weigh On Earnings

-21.65%
Downside
24.99
Market
19.58
Trefis
MFC: Manulife Financial logo
MFC
Manulife Financial

Manulife (NYSE:MFC) reported mixed earnings for the first quarter of 2015, posting an 11% year-over-year decline in net income of C$723 million. [1] The decline in net income was largely due to lower returns on investments, especially from a fall in oil and gas prices as well as declines in commodity prices globally. However, the company reported strong growth in earnings from its operations. Core earnings increased nearly 11% y-o-y to C$797 million during the quarter on the back of an increase in fee income coming from appreciation in value of the assets under management (AUM) in the company’s wealth management business, strong sales growth in Asia and the strengthening U.S. dollar. In this earnings note, we take an in-depth look at Manulife’s performance for the quarter.

We have a price estimate of $19 for Manulife’s stock, which is about in line with the current market price.

See our full analysis of Manulife here

Relevant Articles
  1. Manulife Financial Stock Has A 40% Upside
  2. Is Manulife Financial Stock Oversold At $14?
  3. Manulife’s Revenues Very Likely Jumped 2x In 2019, But There’s More Here Than Meets The Eye
  4. Is Manulife’s Volatile Investment Income A Cause For Concern?
  5. Can Prudential’s International Premiums Contribute 30% To Its Top Line By 2021?
  6. Will Manulife’s Q4 Core Earnings Again Beat Street Estimates?

Higher Sales In Asia

Core earnings from Asia increased a solid 21% y-o-y, on the back of strong insurance sales and significant growth in the wealth management segment compared to a year ago. The insurance business in Asia recorded another solid quarter with 42% y-o-y growth in sales. [2] This was primarily due to strong growth in corporate products, the expansion of the company’s distribution network in Japan and new product launches in Hong Kong. The company also benefited from strong sales through the bancassurance distribution channel in Indonesia and higher sales in Singapore, Vietnam and China during the quarter.

U.S. Business Looking Better

Operating under the John Hancock brand in the U.S., the company holds over 3% of the life insurance market in the country in terms of premiums earned. ((NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS LIFE AND FRATERNAL INSURANCE INDUSTRY, 2015)) Continuing the momentum generated in the previous quarter, core earnings from U.S. operations increased 5% y-o-y to C$392 million during the first quarter. A 9% y-o-y increase in insurance sales on the back of product enhancements and the launch of new products added to the growth in core earnings in the segment. However, wealth management sales decreased by 8% compared to a year ago.

Going forward, we believe John Hancock is well positioned to grow in the U.S. market. The company recently completed the acquisition of New York Life’s retirement business. At the close of transaction, John Hancock’s retirement assets under management increased by nearly 60% to $135 billion.

Acquisition In Canada Lifts Business Performance

Operations in Canada also saw business growth, benefiting from the company’s acquisition of Standard Life plc that reflected in the first quarter results. The acquisition brought nearly 1.4 million additional customers under Manulife’s fold. Core earnings from Canada increased nearly 15% y-o-y to C$262 million in Q1 2015. [3] Strong sales in Standard Life’s wealth management business across different product lines, including mutual funds, group retirement solutions and segregated funds, lifted the company’s earnings during the quarter. This resulted in a 25% y-o-y increase in wealth product sales in Canada during the quarter. Insurance sales also increased by 60% y-o-y on the back of robust 84% y-o-y growth in institutional market sales. Going forward, we believe Manulife will be able to further strengthen its position in the Canadian market, which this should reflect well in the coming quarters.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

Notes:
  1. Manulife reports 1Q15 net income of $723 million, core earnings of $797 million; Press Release, Manulife Investor Relations []
  2. Fourth Quarter 2014 Financial & Operating Results, Manulife Investor Relations Presentation []
  3. Statistical Information Package, Manulife Investor Relations []