Manulife Ends Year With Middling Results

No-moat-rated Manulife Financial MFC ended the year with middling results, reporting core earnings of CAD 1,746 million or CAD 0.88 per share for the fourth quarter, up 2% compared with CAD 1,708 million or CAD 0.84 per share in the year-ago quarter. The fourth-quarter results equated to an annualized core return on equity of 13.2%. The company also increased its quarterly dividend to CAD 0.365 per share, up 11% from CAD 0.33. The shares are currently trading at a forward dividend yield of around 5.6%. We are maintaining our CAD 27.50 fair value estimate after incorporating fourth-quarter results.

Weak capital markets affected the firm’s global wealth and asset management unit, as assets under management or administration were reported at CAD 778 billion as of the fourth quarter, down 12% from the previous year. Net flows were reported at negative CAD 8.3 billion during the fourth quarter; the company had net flows of positive CAD 3.3 billion for the full year. Core EBITDA margin was 27.3% in the quarter compared with 31.4% in the year-ago period because of lower fee income and assets under management.

Core earnings increased 1% year over year in the Asia business to CAD 569 million in the fourth quarter, but new business value generated during the quarter fell 17% as a result of lower sales volume in Hong Kong and other changes in the business mix. Core earnings in the Canadian business increased 22% in the fourth quarter compared with the previous year on the back of favorable experience gains, higher bank earnings, and higher insurance in force earnings.

Thanks to the various steps taken by the company over the past two years, the earnings contribution from arguably the riskiest products (long-term care and variable annuities) has declined to 18% from 25% in 2020.