Manulife Financial Sees Earnings Growth in Q4, Ups Dividend

Manulife Financial Corp. MFC reported fourth-quarter 2015 core earnings of $643.5 million (C$859 million), up 20.5% year over year. The improvement was driven by higher sales volumes and product margins in Asia, an increase in fee income, favorable foreign currency translation and synergies from acquisitions.

The company reported operating revenue of $9.2 billion (C$12.3 billion), up 25% year over year.

Net premium income was $5.0 billion (C$6.7 billion), up 40% year over year.  

Investment income increased 7.4% year over year to $2.2 billion (C$2.9 billion).

During the quarter, Manulife’s total insurance sales were $0.8 billion (C$1.1 billion), up 22% year over year, led by higher sales in Asia as well as large-case group benefit sales in Canada.

Segment Performance

Asia division core earnings came in at $264 million, up 15.3% year over year. This increase was driven by strong growth in new business volumes and improvement in product margins. However, expenses related to growth initiatives were partial dampeners. Premiums and deposits were $5.5 billion, up 24% year over year.

Manulife’s Canadian division core earnings of $265.2 million (C$354 million) increased 59% year over year. Premiums and deposits in the quarter were $5.2 billion (C$6.9 billion), up 27.8% year over year. The increase was driven by accretion from acquisitions and higher contribution from Wealth and Asset Management businesses.

The U.S. division reported core earnings of $262 million, down 11.8% year over year attributable to lower new business gains in insurance from product mix changes and lower sales, and an unfavorable policyholder experience. Premiums and deposits were $15.4 billion, up 40% year over year fueled by higher contribution form wealth and asset management products due to record mutual fund sales and the RPS acquisition.

Manulife Minimum Continuing Capital and Surplus Requirements ratio was 223% as of Dec 31, 2015, down from 226% as of Sep 30, 2015

Manulife's financial leverage ratio deteriorated to 23.8% on Dec 31, 2015 from 22.7% as of Sep 30, 2015 due to the issuance of $1 billion subordinated debt.

Assets under management were $674.3 billion (C$935 billion), up 35.3% year over year.

Return on equity, which measures the company’s profitability, decreased 580 basis points year over year to 2.3%.  

Dividend Update

The board of directors approved a hike of 9% to its quarterly dividend to 15 cents per share. This marks the third increase in a span of less than two years.

The dividend is payable to shareholders of record Feb 24, post Mar 21.

Zacks Rank

Manulife Financial presently carries a Zacks Rank #3 (Hold).

Performance of Other Life Insurers

Earnings at Torchmark Corp. TMK, Lincoln National Corporation LNC and StanCorp Financial Group Inc. SFG missed the respective Zacks Consensus Estimate in the fourth quarter. 

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