It has been about a month since the last earnings report for Manulife Financial (MFC). Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Manulife due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Manulife Q2 Earnings Beat on Solid Segment Results
Manulife Financial delivered second-quarter 2021 core earnings of 68 cents per share, which beat the Zacks Consensus Estimate by 9.7%. The bottom line improved 21.4% year over year.
Core earnings of $1.4 billion (C$1.7 billion) increased 18% year over year. This upside was driven by higher new business gains across all insurance segments, increased net fee income from a rise in average AUMA in Global WAM and in-force business growth in Asia and Canada, partially offset by a modestly unfavorable net policyholder experience and lower net gains from seed money investments in new segregated and mutual funds during the period.
New business value (NBV) in the reported quarter was $456.5 million (C$550 million), up 64.8% year over year, attributable to solid sales volumes and favorable margins in Asia, Canada and U.S. segments.
Annualized premium equivalent (APE) sales surged 30% year over year to $1.16 billion (C$1.4 billion), attributable to better sales in Asia, Canada and U.S. segments.
Expense efficiency ratio improved 210 basis points (bps) to 46.8%. As of Jun 30, 2021, Manulife Financial’s leverage ratio improved 10 bps year over year to 25.9%.
Wealth and asset management assets under management and administration were $662.8 billion (C$798.5 billion), up 30% year over year. Wealth and Asset Management business generated net inflows of $7.1 billion (C$8.6 billion), boosted by double-digit growth in gross flows across all geographies and lower mutual fund redemptions in the United States.
Core return on equity, measuring the company’s profitability, expanded170 bps year over year to 13.9%.
Life Insurance Capital Adequacy Test (LICAT) ratio was 137% as of Jun 30, 2021, down from 155% as of Jun 30, 2020.
Global Wealth and Asset Management division’s core earnings came in at $295.5 million (C$356 million), up 71.8% year over year.
Asia division’s core earnings totaled $436.6 million (C$526 million), up 23.7% year over year. NBV increased 48%, primarily on higher sales volumes in Asia Other, favorable interest rates, robust sales volumes and product-management actions in Hong Kong as well as efficient expense control and a favorable product mix in Japan.
APE sales increased 34%, mainly amid growth in Asia Other and Hong Kong. It was partially offset by lower sales in Japan.
Manulife Financial’s Canada division core earnings of $263.9 million (C$318 million) were up 6.8% year over year. NBV soared 65% year over year, largely owing to solid sales volumes and healthier margins.
APE sales increased 15% year over year, primarily aided by higher sales of lower risk segregated fund products, improved retail insurance sales and a rise in small and mid-size group insurance sales. The same was partially offset by the non-recurrence of the large affinity markets sale of the prior-year period and lower large case group insurance sales.
The U.S. division reported core earnings of $396.8 million (C$478 million), down 8.6% year over year. NBV surged 110% year over year, primarily led by sales volume expansion and margin growth. APE sales increased 40%, backed by higher customer demand across all product lines.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Manulife has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Manulife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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