Manulife (NYSE:MFC) has been expanding operations in emerging Asian markets. Almost half of the company’s insurance sales originate from the Asia, making it an important geography for future growth. We have recently written a few articles covering this expansion: A Look At Manulife’s Asian Strategy – China and Japan and A Look At Manulife’s Asian Strategy – ASEAN, India And Korea. In this note we are focusing on Manulife’s operations in the U.S.
The Canadian insurer acquired John Hancock Financial Services for $10 billion at the end of 2003 and merged it with its own U.S. operations in the following year. Since then the company has flourished – almost half of Manulife’s total premium income in 2011 came from the U.S., making it an important segment for the company. John Hancock, named after one of the country’s founding fathers, now offers financial products like life insurance, mutual funds, 401(k) plans, long-term care insurance, and annuities in the U.S. market. The company uses a network of independent firms named John Hancock Financial Network for distribution along with distribution through licensed financial advisers.
The U.S. operations are divided into two segments: retirement solutions and life & health insurance. We take a closer look at both divisions below.
- Key Takeaways From Manulife’s Earnings
- How Important Is Asia For Manulife’s Growth?
- How Much Can Manulife’s Revenue Grow In The Next Five Years?
- How Did Manulife’s Operating Margins Change In The Last Five Years?
- How Much Did Manulife’s Revenue & EBT Grow In The Last Five Years?
- What Is Manulife’s Fundamental Value Based On Expected 2016 Results?
Life And Health
The U.S. Life and Health insurance division accounted for 35% of Manulife’s premium income in 2011. The company has been able to maintain a high-to-mid single digit growth rate in premium income over the last four years, but faced a setback this year as premium income dropped nearly 10% in the first nine months of 2012. This was primarily due to a 19% drop in John Hancock Long Term Care product sales influenced by an increase in insurance rates on the company’s part. Life insurance sales however remain strong with the company reporting a 14% y-o-y increase last quarter helped by the success of newly launched products like Protection UL and Indexed UL.
The industry as a whole has done well this year maintaining a year-to-date growth rate of 3% in annualized premiums.  This growth rate is in-line with the rate observed for the last two years. We expect the industry to maintain the historical growth rate. Manulife has lost some market share this year, but we expect a rebound in the coming years as the company revises and updates its pricing strategy.
The retirement solutions division accounted for just 10% of Manulife’s premium income last year. The division has seen negative growth over the last few years as the company cut back on new sales due to an unfavorable interest rate environment. Even though assets under management grew by 19% in the first nine months of the year, premium income was down by nearly 30%. The retirement plan services division launched a new service group “TotalCare” to drive sales in the 401(k) market in September. We expect the company to bounce back with a renewed focus on sales in the coming years.Notes: