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Why Is Manulife (MFC) Up 5.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Manulife Financial (MFC). Shares have added about 5.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Manulife due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Manulife Q4 Earnings Rise Y/Y on Solid Asia Business

Manulife Financial delivered fourth-quarter 2018 core earnings of $0.9 billion (C$1.3 billion), up 8% year over year. This upside can be attributed to new business growth in Asia, favorable impact of lower U.S. tax rates, improved policyholder experience, and improved expense efficiency.

New business value in the reported quarter was $379 million (C$501 million), up 27% year over year on the back of robust growth across all insurance segments.

Annualized premium equivalent (APE) sales increased 14% year over year to $1.1 billion (C$1.5 billion) owing to higher sales in Asia and Canada.

As of Dec 31, 2018, Manulife Financial’s financial leverage ratio improved 170 basis points (bps) to 28.6% from Dec 31, 2017.

As of Dec 31, 2018, wealth and asset management assets under management and administration were $531.8 billion (C$608.8 billion), down 0.03% year over year.

Core return on equity, measuring the company’s profitability, expanded 240 bps year over year to 13.7%.

The Office of the Superintendent of Financial Institutions' new Life Insurance Capital Adequacy Test (LICAT) regulatory capital regime came into effect in Canada on Jan 1, 2018, replacing the Minimum Continuing Capital and Surplus framework. LICAT ratio was 143% as of Dec 31, 2018, up from 134% as of Sep 30, 2018.Full Year Highlights

Core earnings of C$5.6 billion in 2018 were up 23% from 2017. The company witnessed double-digit core earnings growth across all operating segments.

In Asia, the company delivered 19% increase in new business value to $1.1 billion in 2018.

Expense efficiency ratio improved 300 bps to 52%.

Segmental Performance

Global Wealth and Asset Management division’s core earnings came in at $175 million (C$231 million), up 16.7% year over year.

Asia division’s core earnings totaled $459 million, up 23.4% year over year.  Annualized premium equivalents sales improved 17.6% year over year to $1 billion in the quarter, riding on solid growth in Japan, Hong Kong and Asia Other.

Manulife Financial’s Canada division core earnings of $236 million (C$312 million) were up 14.3% year over year. Annualized premium equivalent sales were $209.6 million (C$277 million), which improved 24.7% year over year.

The U.S. division reported core earnings of $465 million, up 0.4% year over year. Annualized premium equivalents sales of $152 million decreased 0.7% year over year.

Dividend Update

The board of directors declared a dividend of 25 cents per share payable on Mar 19 to shareholders of record at the close of business on Feb 27.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Manulife has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Manulife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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