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Why Should You Hold Manulife (MFC) Stock in Your Portfolio?

Manulife Financial Corporation’s MFC strong Asia business, expanding wealth and asset management business, and solid capital position along with favorable growth estimates make it worthy of retention in one’s portfolio.

Manulife currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 8%, outperforming the industry’s increase of 5.3%.
 

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The company’s ROE for the trailing 12 months is 13.1%, better than the industry average of 11.4% the industry average. It reflects Manulife’s efficiency in utilizing shareholders’ fund.  The company targets 13% ROE over the medium term.

The life insurer has a decent track of delivering earnings surprise in three of the last four reported quarters, missing in one, with the average beat being 4.50%.

Why is it Worth Holding the Stock?

The Zacks Consensus Estimate for 2021 earnings is pegged at $2.62, indicating an increase of 27.8% from the year-ago reported figure while that for 2022 is pegged at $2.87, indicating an upside of 9.8% from the year-ago reported figure. The long-term earnings growth rate is currently pegged at 10%.

Manulife targets core EPS growth between 10% and 12% over the medium term.

The Zacks Consensus Estimate for MFC’s 2021 and 2022 earnings has moved 0.4% and 2.5% north in the past 30 days, reflecting analyst optimism.

In its effort to lower risk and equity sensitivities, a subsidiary of Manulife inked an annuity reinsurance transaction with Venerable Holdings. Manulife estimates a $2 billion capital release due to the deal and intends to deploy the same to buy back shares.  The life insurer expects the remaining capital to further boost its excess capital position. The funds can be utilized to capitalize on organic and inorganic opportunities.

Manulife, one of the three dominant life insurers within its domestic Canadian market, is continually growing its Asia business that contributes significantly to its earnings. This apart, MFC is also expanding the Wealth and Asset Management business and has identified Europe (and the wider EMEA market) as a significant growth area and is making long-term investments in this region. The life insurer remains focused on accelerating growth in the highest potential businesses and targets two-third of core earnings from these businesses.

Manulife is on track to achieve the targeted expense efficiency ratio of less than 50% by 2022.  

Manulife boasts a strong capital position. It targets a leverage ratio of 25% and 30-40% dividend payout over the medium term.

The company is well poised for progress, evident from its favorable VGM Score of B. Here V stands for Value, G for Growth, and M for Momentum, with the score being a weighted combination of all three factors.

Stocks to Consider

Some better-ranked stocks from the insurance space include American Equity Investment Life Holding AEL, Athene Holding ATH and Sun Life Financial SLF.

American Equity carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2021 and 2022 has moved up 3.9% and 5.1% in the past seven days. American Equity delivered a four-quarter average earnings surprise of 31.49%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2021 earnings of Athene, carrying a Zacks Rank #2 (Buy), has moved up 9.9% in the past 30 days and implies 123.7% year-over-year growth. Athene delivered a four-quarter average earnings surprise of 46.12%.

Sun Life carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 and 2022 earnings has moved up 1.5% and 1.6% in the past 30 days. Sun Life delivered a four-quarter average earnings surprise of 7.74%.

Shares of American Equity, Athene and Sun Life have gained 32.6%, 101.2% and 25.2%, respectively, year to date.  

 


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Manulife Financial Corp (MFC): Free Stock Analysis Report
 
American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report
 
Sun Life Financial Inc. (SLF): Free Stock Analysis Report
 
Athene Holding Ltd. (ATH): Free Stock Analysis Report
 
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