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Why Should You Retain Manulife Financial (MFC) Stock For Now?

Manulife Financial Corporation MFC should continue to benefit from higher sales volumes, favorable product mix in individual insurance, higher investment income and financial flexibility.

Growth Projections

The Zacks Consensus Estimate for Manulife Financial’s 2023 earnings per share is pegged at $2.55, indicating a year-over-year increase of 1.9%. The expected long-term earnings growth rate is pegged at 10%.

Earnings Surprise History

Manulife Financial has a solid track record of beating earnings estimates in five of the last seven quarters.

Zacks Rank & Price Performance

Manulife Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 20.1% compared with the industry’s decline of 21.3%.

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Return on Equity (ROE)

Manulife Financial’s trailing 12-month return on equity (ROE) was 12.5%, which was better than the industry average of 11.8%, reflecting efficiency in utilizing shareholders’ fund.

Business Tailwinds

The life insurer stands to gain from three of its highest potential operating division, Asia, Canada and Global Wealth and Asset Management (“WAM”).

Courtesy of higher sales volumes, a favorable product mix in individual insurance in Canada and the favorable impact of product repricing in Hong Kong, business gains are expected to be higher.  

The core earnings of Manulife Financial are likely to gain from higher new business gains along with solid net fee income from higher average assets under management and administration in the Global Wealth and Asset Management business. Higher investment income and double-digit in-force business growth in Canada and Asia should also add to the upside.

Manulife targeted an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022. MFC expects $200 million of these savings in 2022. The life insurer estimates these businesses to generate about 67% of total company core earnings by 2022. The insurer remains focused on driving efficient growth and ensuring scalable growth, outstanding customer experience as well as digital ways of working.

Manulife has an impressive inorganic growth story. Acquisitions have helped Manulife add scale its core business lines in Canada, including insurance, group benefits, group retirement and retail wealth, besides accelerating growth in Asia and consolidating its presence in the mid and large-case markets. Strategic buyouts also reflect the prudent use of capital in high-growth, less capital-intensive and higher-return businesses.

Manulife boasts a strong capital position. MFC targets a leverage ratio of 25 over the medium term. Manulife estimates more than 15% ROE in the medium term.

Solid balance sheet. along with strong operational performance and the insurer’s outlook for growth in the future, has enabled it to hike its dividend payout. It targets a 35-45% dividend payout over the medium term. Its current dividend yield of 6.5% is higher than the industry average of 4.2%.

Stocks to Consider

Some better-ranked stocks in the life insurance industry are Reinsurance Group of America, Incorporated RGA, Brighthouse Financial, Inc. BHF and Voya Financial, Inc. VOYA. While Reinsurance Group sports a Zacks Rank #1 (Strong Buy), Brighthouse Financial and Voya Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Reinsurance Group’s 2022 and 2023 earnings has moved 8.6% and 0.4% north, respectively, in the past 30 days. In the past year, Reinsurance Group stock has gained 9.7%.

The Zacks Consensus Estimate for RGA’s 2022 and 2023 earnings per share indicates a year-over-year increase of 1,057.5% and 20.4%, respectively.

Brighthouse Financial’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 42.34%. In the past year, BHF's stock has lost 3.5%.

The Zacks Consensus Estimate for BHF’s 2022 and 2023 earnings has moved 17.3% and 3.6% north, respectively, in the past 30 days.

Voya Financial’s earnings surpassed estimates in three of the last four quarters, while missing in one, the average earnings surprise being 10.81%.  In the past year, Voya Financial’s stock has lost 2.6%.

The Zacks Consensus Estimate for VOYA’s 2022 and 2023 earnings has moved 3.3% and 0.6% north, respectively, in the past 30 days.


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Manulife Financial Corp (MFC) : Free Stock Analysis Report
 
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
 
Voya Financial, Inc. (VOYA) : Free Stock Analysis Report
 
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
 
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