Bullboard - Stock Discussion Forum Manulife Financial Corp T.MFC.PR.Q

Primary Symbol: T.MFC Alternate Symbol(s): T.MFC.PR.L | MNQFF | T.MFC.PR.M | T.MFC.PR.N | MFC | T.MFC.PR.P | T.MFC.PR.B | T.MFC.PR.C | T.MFC.PR.F | MNLCF | T.MFC.PR.I | MNUFF | T.MFC.PR.J | T.MFC.PR.K

Financial Services Insurance - Diversified

Manulife Financial Corporation is a Canada-based international financial services company. The Company operates as Manulife across its offices in Asia, Canada, and Europe, and primarily as John Hancock in the United States. It provides financial advice, insurance, and wealth and asset management solutions for individuals, institutions, and retirement plan members worldwide. Its segments include... see more

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Manulife Financial Corp > Scotia Analysis

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Post by SunsetGrill on May 12, 2022 4:19pm

Scotia Analysis

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MFC-T: C$24.35
MFC-N: US$18.72
Target: C$28.00
Rating: Sector Perform

Q1/22 First Look — MFC Delivers A Miss Due to COVID and Markets

OUR TAKE: Mixed. MFC’s Q1 core EPS may have missed the Street by 6% this quarter (5% versus us), but the gap to consensus overstates the weakness of these numbers. That is because this softer-than-expected result was driven by COVID (lower New Business Gains due to declining sales volumes in Asia) and falling markets (lower Earnings on Surplus as declining equities weighed on seed investments). In fact, Expected Profit came in largely in line with what we had expected, and core investment gains were better than we had forecast. On a segmented basis, WAM results missed our numbers, but net inflows of $6.9 BB are impressive in this environment. The fact that the firm’s (MLI) LICAT ratio was only down 2 points Q/Q is also notable given the steep rise in rates. Coming into the quarter we highlighted that the shares’ YTD outperformance made this name vulnerable heading into what was expected to be a challenging quarter. Well the reality is that Manulife's performance this quarter did come under pressure, but the silver lining is that there is nothing in these numbers that is terribly surprising or likely to particularly weigh on expectations.

KEY POINTS

Results: MFC reported core EPS of $0.77 which was 5% below our estimate at $0.81 and 6% below the Street at $0.82. This result was down 6% Y/Y and down 5% in constant currency terms, primarily driven by the unfavorable impact of markets and COVID, as well as the lost earnings from the company's recent VA sale. On a segmented basis relative to our numbers, the US beat, Asia was relatively in line, while Canada and WAM missed. MFC’s LICAT ratio was down 2 points Q/Q to 140% while the firm’s leverage ratio increased 61bp Q/Q to 26.4%, above it’s 25% target. The firm provided additional disclosure on IFRS 17 including an expected 20% decline in equity upon transition and a 10% decline in core earnings. As a result, the lifeco boosted its ROE guidance to 15%+ (from 13%+) and its payout ratio to 35%-45% (from 30%-40% previously). All other targets remain unchanged. This disclosure is welcome, but opens up a debate on the definition of core results.

A Closer Look at Sales: Total APE sales decreased 9% Y/Y, with sales in Asia down 17% Y/Y while the US was up 32% Y/Y and Canada up 2% Y/Y. Lower APE sales in Asia was primarily driven by continued adverse impacts from COVID in Hong Kong (-23% Y/Y) and lower sales in Japan (-48% Y/Y). WAM reported net inflows of $6.9B.

MFC will host an earnings call May 12 at 8 a.m. ET. The dial-in is 1-800-806-5484; passcode 9778458#.

Historical price multiple calculations use FYE prices. All values in C$ unless otherwise indicated.
Source: FactSet; company reports; Scotiabank GBM estimates.