Manulife Financial Corporation MFC is well-poised for growth on strong Asian business, expanding wealth and asset management business, and solid capital position.
The company’s VGM Score of B is also encouraging. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Manulife has been growing its Asian business that continues to majorly contribute to its earnings. The company has been expanding its distribution network across the region, securing and deepening strategically important distribution agreements with key partners in Japan Indonesia and Cambodia. Recently, Manulife extended its exclusive strategic bancassurance arrangement with Bank Danamon Indonesia to 2036.
Manulife’s expanding Wealth and Asset Management business should continue to fuel its core earnings growth. While the life insurer boasts a compelling presence in North America and Asia, Manulife Asset Management has identified Europe (and the wider EMEA market) as a significant growth area. The company is thus making strategic investment for long-term growth.
Manulife’s strategic buyouts not only add scale to its core business but also mark prudent use of capital in high-growth, less capital-intensive, higher-return businesses. Manulife expects to lower costs, targeting an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022.
The expected long-term earnings growth is pegged at 10%, better than the industry average of 8.4%.
This Zacks Rank #3 (Hold) company boasts a strong capital position with $31 billion of capital above the supervisory target while LICAT ratio improved 1500 bps to 155% at first quarter 2020 end. Its leverage was 23%, marking an improvement of 500 bps over the last two years and lower than the targeted 25%.
Given a solid capital position, the company has increased dividend by 12% this February. Dividend yield of the company is 7.4%, higher than the industry average of 3.8%, making it an attractive investment option for yield-seeking investors.
Shares of Manulife have lost 36.6% year to date compared with the industry's decrease of 31.2%.
Stocks to Consider
Some better-ranked stocks from the insurance space are Brighthouse Financial BHF, American Equity Investment Life Holding Company AEL and Primerica Inc PRI, each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brighthouse Financial provides annuity and life insurance products in the United States. The company delivered a positive earnings surprise of 45.22% in the last reported quarter.
American Equity Investment provides life insurance products and services in the United States. The company delivered 32.65% positive earnings surprise in the last reported quarter.
Primerica provides financial products to middle-income households in the United States and Canada. The company delivered a positive surprise of 3.54% in the last reported quarter.
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Manulife Financial Corp (MFC) : Free Stock Analysis Report
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