Yahoo Finance Manulife Financial (MFC) Shares Gain on New Financial Goals
Shares of Manulife Financial Corporation MFC gained 1.2% in the last three trading sessions, reflecting investor optimism about the company’s new financial goals, banking on operational efficiency. This Zacks Rank #3 (Hold) company expects to generate a return on equity (ROE) of 18% by 2027, up from 15% expected earlier.
Manulife is one of the three dominant life insurers within its domestic Canadian market and possesses rapidly growing operations in the United States and several Asian countries. Its Asia business is the major contributor to earnings, contributing 44% in the first quarter of 2024. MFC now expects core earnings from Asia to contribute 50% to earnings by 2027. Asia has been the fastest-growing insurance segment, supported by strong volume growth and attractive margins. This market appears attractive, given its changing demographics.
Manulife is scaling up its business across Asia by expanding its distribution network, securing and deepening strategically important distribution agreements with key partners in Japan, Indonesia and Cambodia, and enhancing the mainland Chinese visitor (MCV) capabilities to complement the prominent domestic franchise in Hong Kong, among others.
The life insurer is also investing in high ROE and growth segments in North America to achieve strategic priorities.
Manulife’s highest potential businesses, including operations in Asia, Global WAM, Canada group benefits and behavioral insurance products, currently contribute two-thirds to core earnings. The insurer now looks to increase it to 75% and thus is expediting growth in these highest potential businesses.
Manulife Asset Management has identified Europe (and the wider EMEA market) as a significant growth area and is making long-term investments in the region.
Manulife’s solid capital position is reflected through its LICAT ratio of 138%, which was $24 billion above the supervisory target ratio, and an improved financial leverage ratio. Strong operating cash generation and favorable market moves have enabled remittances of C$27 billion since 2017. The company now estimates cumulative remittances of C$22 billion in the 2024-2027 time frame. This apart, remittances are expected to be 60-70% of core earnings from 2028 onward.
A strong operational performance supports MFC’s capital deployment plan that outlines organic investment of about 15% of core earnings annually from 2024-2027, sustained dividend hikes and share buybacks. While the company targets 35-45% dividend payout over the medium term, the universal life reinsurance deal in Canada will release $800 million of capital that the company intends to deploy to buy back 5% of its shares. It also expects to lower $600 million of ALDA backing the transacted block. These efforts will contribute to creating long-term shareholder value apart from generating higher returns.
In tandem with the wave of accelerated digitalization in the insurance industry, MFC too is digitalizing and automating workflows through GenAI and advanced analytics. Manulife targets an expense efficiency ratio of less than 45% in the medium term.
All these factors combined should help Manulife deliver core EPS growth of 10-12% over the medium term.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Reinsurance Group of America RGA, HCI Group, Inc. HCI and Palomar Holdings PLMR. Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Reinsurance Group has a solid track record of beating earnings estimates in the last four quarters. RGA stock has gained 27.4% year to date. The Zacks Consensus Estimate for RGA’s 2024 and 2025 EPS indicates a year-over-year increase of 5.3% and 4.9%, respectively.
HCI Group’s earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, shares of HCI have gained 3.4%. The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 40.9%. The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 26% and 18% year-over-year growth, respectively.
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Manulife Financial Corp (MFC): Free Stock Analysis Report
Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report
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Palomar Holdings, Inc. (PLMR): Free Stock Analysis Report
