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Manulife (MFC) Q2 Earnings Miss on Soft Asia Business

Manulife Financial Corporation MFC delivered second-quarter 2022 core earnings of 61 cents per share, which missed the Zacks Consensus Estimate by 1.7%. The bottom line declined 10.3% year over year.

Core earnings of $1.3 billion (C$1.6 billion) decreased 9% from the prior-year quarter. The downside was due to unfavorable impact of markets on seed money investments in new segregated and mutual funds in Corporate and Other and on net fee income in Global WAM as well as lower new business gains across insurance segments, lower in-force earnings in U.S. Annuities and lower fee spread in Global WAM. The downside was limited by in-force business growth in Asia, U.S. Insurance and Canada, higher yields on fixed income investments and gains on AFS equities in Corporate and Other, and improved policyholder experience in the U.S.

New business value (NBV) in the reported quarter was $400 million (C$511 million), down 5% year over year due to lower business in Asia,

Annualized premium equivalent (APE) sales were $1.1 billion (C$1.4 billion), down 1% year over year due to lower sales in Asia.
           
The expense efficiency ratio deteriorated 240 basis points (bps) to 49.2%.

Manulife Financial Corp Price, Consensus and EPS Surprise

Manulife Financial Corp Price, Consensus and EPS Surprise
Manulife Financial Corp Price, Consensus and EPS Surprise

Manulife Financial Corp price-consensus-eps-surprise-chart | Manulife Financial Corp Quote

As of Jun 30, 2022, Manulife Financial’s financial leverage ratio deteriorated 260 bps year over year to 28.5%.

Wealth and asset management assets under management and administration were $578 billion (C$744.7 billion), down 6.7% year over year. The Wealth and Asset Management business generated a net inflow of $5.4 billion (C$6.9 billion), down 80.2% year over year.

Core return on equity, measuring the company’s profitability, contracted 180 bps year over year to 12.1% in the second quarter of 2022.

The Life Insurance Capital Adequacy Test (LICAT) ratio was 137% as of Jun 30, 2022, down from 140% as of Mar 31, 2022.

Book value per share excluding AOCI increased 11.4% to $25.49 as of Jun 30, 2022.u

Segmental Performance

Global Wealth and Asset Management division’s core earnings came in at $239 million (C$305 million), down 14.3% year over year.

Asia division’s core earnings totaled $402 million (C$513 million), down 2.5% year over year.  In Asia, NBV decreased 17%, reflecting lower sales in Hong Kong, Japan corporate owned life insurance ("COLI") and Asia Other, as well as an unfavorable product mix in Asia Other, partially offset by higher individual protection and other wealth sales in Japan. APE sales decreased 12%, reflecting continued adverse impacts from COVID-19 in Hong Kong, lower COLI product sales in Japan, and lower sales in Asia Other.

Manulife Financial’s Canada division core earnings of $270 million (C$345 million) were up 8.5% year over year. NBV increased 8% year over year, driven by higher volumes in large-case group insurance, partially offset by a less favorable business mix in Insurance. APE sales increased 32%, driven by higher large-case group insurance and individual insurance par sales, partially offset by lower segregated fund sales.

The U.S. division reported core earnings of $357 million (C$456 million), down 4.6% year over year. NBV increased 18% year over year, driven by improved margins due to product actions, higher international sales volumes, and higher interest rates. APE sales increased 6%, strong international sales, which are reported as part of the U.S. segment results.

Loss at Corporate and Other was $123 million (C$157 million), increasing 63.5% year over year.

Zacks Rank

Manulife currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Life Insurers

Of the insurance industry players that have reported second-quarter results so far, Sun Life Financial Inc. SLF and Reinsurance Group of America, Incorporated RGA beat the Zacks Consensus Estimate while Lincoln National Corporation LNC missed the mark.

Sun Life’s underlying net income of $1.19 per share beat the Zacks Consensus Estimate by 10.2%. The bottom line decreased 2.4% year over year. Insurance sales increased 19.5% year over year to $690.8 million (C$736 million), driven by increased sales in Canada and United States. Wealth sales increased 20% year over year to $53.8 billion (C$57.4 billion) in the quarter under review. Value of new business improved 10% to $254.4 million (C$271 million).

Reinsurance Group of America’s adjusted operating earnings were $5.78 per share, which beat the Zacks Consensus Estimate by 112.5% and increased 44.5% from the year-ago quarter’s figure. Operating revenues of $4.1 billion beat the Zacks Consensus Estimate by 3.3% and improved 2.9% year over year on higher net premiums.

Net premiums of $3.2 billion rose 4.3% year over year. Investment income increased 3.6% from the prior-year quarter to $397 million, reflecting a higher average asset balance. The average investment yield remained flat year over year at 4.63%.

Lincoln National’s adjusted earnings of $2.23 per share lagged the Zacks Consensus Estimate by 5.1% and fell 29.7% year over year. Adjusted operating revenues of $4,641 million declined 5.3% year over year but outpaced the consensus mark by 4.1%.


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