Manulife Financial Corporation is a leading international financial services company providing financial advice, insurance, as well as wealth and asset management solutions to individuals, groups, and institutions.
Manulife ranks amongst the top ten life insurers in the world by market capitalization value and has $1.1 trillion worth of assets under management. The company provides a suite of financial protection and wealth management solutions to meet the current and future needs of individuals and group customers. More than 80% of its assets are fixed income, of which 98% is investment grade.
Manulife serves 28 million customers in the USA, Canada, and Asia through a multi-channel distribution network of over 82,000 agents and thousands of distribution partners. Its operating segments are Asia (33% of 2018 core earnings), Canada (26%), US (35%), Global wealth and asset management (19%) and corporate and other (-13%). The company also owns reputed brands like Manulife and John Hancock in the USA.Investment Data
- Opportunity Score: 62
- Ticker: TSE:MFC
- Sector: Financial Services
- Industry: Insurance - Life
- Market Cap: 47.68B
- P/E: 8.84
- Dividend Yield: 4.11
- Dividend Payout Ratio: 36.36
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
With more than 125 years of experience, the company has developed strong customer relations and a deep understanding of their financial needs. Clients look to Manulife for its reliable, trustworthy and forward-thinking solutions. The company paid over $29 billion in benefits and claims to its customers over the last twelve months. Given Manulife’s rich experience and long history, the company has developed client relations which are highly sticky in nature.
Manulife offers unique product offerings for different markets it serves. It witnessed a double-digit earnings growth across all its operating segments in the last year. The company is targeting to achieve a 50% expense efficiency ratio and approximately $1 billion in expense savings by 2022. Manulife is also focusing on generating more than 70% of core earnings from high potential businesses (Asia, Global WAM, group insurance in Canada) by 2022 through the expansion of its distribution network, and product and service offerings.
The company continues its portfolio optimization to drive capital efficiency. Its strong focus on digitization and large scale should drive cost savings in the future. Manulife is adapting to the fast growing digitization trends and it became the first insurer in Canada to underwrite using artificial intelligence. Manulife is targeting future growth to come from Asia, as the Canadian market begins to mature. A balanced range of financial protection and wealth management solutions, wide geographic reach, a diversified distribution platform, and prudent risk management are Manulife’s key competitive advantages.
Manulife is a recent Canadian Dividend Aristocrat with an attractive dividend yield of 4.1%. It has delivered annual dividend increases averaging at 11% CAGR per annum over the last five years. The company last raised its dividend by more than 9.9% (on an annual basis) and has a very reasonable payout ratio of 36% at present.
Manulife has a target to achieve 10%-12% EPS growth and a 30%-40% payout ratio over the medium term, which should help the company sustain mid to high single-digit dividend growth rate in the future. A reasonable payout ratio will leave enough room for future growth. Technology initiatives and attractive Asian market continue to be the future growth drivers for Manulife. The company is rapidly expanding into the Asian market and has entered into several agreements with various financial institutions, quickly becoming one of the preferred financial partners for Asian clients.
Manulife’s diverse businesses provide ample cash flow to sustain operations without the need of external funds. The company has compounded its core earnings growth at a rate of 15% over the last five years. It has also delivered strong operating results during the same time. The company enjoys a sound capital position with increased financial flexibility. It also bought back shares worth $206 million in 1Q19.
Given its large and diverse footprint in some of the world’s leading markets, Manulife should gain from the growing demand for retirement and asset management solutions globally. Its wealth asset management is another big growth driver demonstrating a positive earnings trajectory and delivering steady asset expansion. A strong business model and financial stability have helped the company score strong credit ratings from all major rating agencies like Fitch, Moody’s and S&P.
Manulife competes with the likes of leading Canadian insurance companies such as Sun Life, Great West LifeCo, Industrial Alliance, and Intact Financial. The company operates in a highly competitive financial services market, comprising insurance, wealth and asset management industries. Manulife competes with both insurance and non-insurance financial services companies. Fintech and insurtech firms are also becoming an increasing threat to Manulife.
|MFC||Manulife||Financial Services||Insurance - Life||62||24.32||47.68||8.84||8.23||2.75||4.11||36.36||4||1.00||3.17||NO||NO||YES||NO||1|
|SLF||Sun Life Financial||Financial Services||Insurance||58||55.36||32.72||13.49||11.02||4.10||3.79||51.18||4||2.10||6.63||NO||NO||NO||NO||1|
|GWO||Great West Life||Financial Services||Insurance - Life||75||29.69||27.57||10.17||9.69||2.92||5.56||56.58||4||1.65||8.20||NO||NO||NO||NO||1|
|PWF||Power Financial||Financial Services||Insurance - Life||71||29.56||19.63||9.60||8.73||3.08||6.16||59.16||4||1.82||8.82||NO||NO||NO||NO||1|
|IFC||Intact Financial||Financial Services||Insurance - Property & Casualty||52||124.71||17.36||24.12||19.18||5.17||2.44||58.80||4||3.04||10.92||NO||YES||YES||NO||1|
|FFH||Fairfax Financial Holdings||Financial Services||Insurance - Property & Casualty||51||620.00||13.52||40.03||12.57||15.49||2.11||84.32||1||13.06||2.11||NO||NO||NO||NO||1|
|POW||Power Corporation||Financial Services||Insurance - Life||64||28.47||10.58||12.54||9.26||2.27||5.69||71.37||4||1.62||8.76||NO||NO||NO||NO||1|
|IAG||Industrial Alliance||Financial Services||Insurance||60||53.65||5.83||9.36||9.11||5.73||3.36||31.41||4||1.80||8.75||NO||NO||YES||NO||1|
|MIC||Genworth MI Canada Inc.||Financial Services||Insurance - Specialty||48||44.50||3.90||9.39||8.43||4.74||3.60||33.76||4||1.60||10.08||NO||NO||YES||NO||1|
As one of the largest insurers in Canada, Manulife is in a good position to benefit from its large footprint in Asia supported by fast growing markets and emerging middle class segment. Its diversified businesses have provided it the much needed immunity from fee compression and passive management. A reasonable payout ratio and sustained earnings growth represent enough room for future growth.
With MFC, the big question for investors is “What’s ahead for Manulife?”.They have been struggling for some years, and adjusting their strategy, at some point, if there is a minimum of success, it should result in better earnings and profits. As you can see, it’s performing like the TSX which is disappointing but the yield is good if you are willing to wait for the turnaround. Based on their earnings expectations though, it looks like they have steered the ship towards better waters so to speak.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.