August 4, 2021
Manulife Financial Corporation A solid quarter all around
Our view: We have a positive view on MFC's Q2/21 results.
MFC’s Q2/21 core EPS of $0.83 was above our estimate of $0.79
and consensus of $0.78. Reported EPS came in at $1.33, well above our estimate of $0.85 and consensus of $0.89, reflecting relatively high investment-related experience of $0.38 per share, including alternative long-duration asset gains.
Lower-than-forecast expected profit from in-force (EPIF) and earnings on surplus were offset by stronger-than-expected impact of new business. EPIF of $1,055 million (down ~-2% YoY) was a touch below our $1,071 million forecast. Earnings on surplus were $112 million, below our $150 million estimate, reflecting lower yields on fixed income investment and lower seed money investment gains. Impact of new business was $328 million, well above our $269 million estimate, mainly driven by the U.S. which more than offset lower-than-expected impact of new business in Asia.
From a business segment perspective, all segments had better-than- expected results except for Asia. Asia core earnings of $526 million (up ~8% YoY) were below our $545 million estimate largely driven by lower-than- forecast impact of new business and slightly lower-than-expected EPIF. U.S. core earnings were $478 million (down ~-21% YoY), but above our $458 million estimate. Canada core earnings were $318 million (down ~-7% YoY) and above our $303 million forecast.
Global Wealth and Asset Management (GWAM) reported strong net inflows of $8.6 billion versus net inflows of $1.4 billion last quarter. Asia had net inflows of $2.4 billion, Canada had net inflows of $3.8 billion and the U.S. and Other had net inflows of $2.5 billion. Overall, GWAM core earnings were $356 million (up ~50% YoY), above our forecast of $319 million.
MFC's LICAT ratios remained solid. MFC’s total LICAT ratio was unchanged QoQ at 137% at the operating company level as favourable market impacts were offset by capital redemptions. At the holding company level, total LICAT ratio was 127% (up ~3% QoQ).
Overall, we have a positive view on Q2/21 results. Core EPS was above our estimate and consensus as results in GWAM, U.S., and Canada were good and more than offset softer results in Asia. MFC's capital position remained solid.
MFC will host a conference call at 8:00AM ET on Thursday, August 5. The dial-in number is 1-800-806-5484, passcode 1763311#.