Manulife Financial Corporation is a leading international financial services company providing financial advisory, insurance, as well as wealth and asset management solutions to individuals, groups, and institutions. It is the largest Canadian life insurance company and the second-largest in North America.
Manulife ranks amongst the top ten life insurers in the world by market capitalization value and has $1.2 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 comprise fixed income assets of which 98% is investment grade. Manulife’s 130-year long history and global franchises help its 30 million customers to make easier and better decisions.
Manulife caters to 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 2019 core earnings), Canada (20%), the US (30%), Global wealth and asset management (17%), and corporate and others.
The company also owns reputed brands like Manulife and John Hancock in the USA.
- Opportunity Score: 63
- Ticker: TSE:mfc
- Sector: Financial Services
- Industry: Insurance - Life
- Market Cap: 38.65B
- P/E: 8.66
- Dividend Yield: 4.41%
- Payout Ratio (Earnings): 38.23%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 5/10
- Dividend Income Fit: 7/10
Revenue Growth & Market Exposure
With more than a century 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. Given Manulife’s rich experience and long history, the company has developed client relations that are highly sticky in nature.
The company offers unique product offerings for different markets it serves. Manulife continues its portfolio optimization to drive capital efficiency. Its strong focus on digitization and large scale should drive cost savings in the future. The company is adapting to the fast-growing digitization trends and it became the first insurer in Canada to underwrite using artificial intelligence.
It 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 will continue to focus on both organic and inorganic initiatives to optimize its legacy portfolio. The core EBITDA margin in the Global Wealth and Asset Management business also increased as the company continues to build scale. Manulife makes significant investments in technology and infrastructure to support its future growth.
The company is focusing to grow its high potential businesses like Asia, Global WAM, and group insurance in Canada through the expansion of its distribution network, and product and service offerings and is estimating to generate two-thirds of its core earnings from these businesses by 2022. These businesses represented 57% of Manulife’s total core earnings in 2019 improving from 55% in the prior year.
Manulife continues to witness robust demand for its products despite the challenging pandemic time. The company’s strong digital capabilities have succeeded in addressing customers’ insurance and wealth management needs globally. Manulife has made significant progress on its portfolio optimization, expense efficiency objectives, and accelerated growth in Asia and Global WAM businesses.
The company has so far released capital benefits worth $5.8 billion since 2018, from its legacy businesses through portfolio optimization activities. The company is focusing on driving customer engagement through the expansion of its behavioral insurance offerings like Manulife Vitality, John Hancock Vitality, and ManulifeMOVE, and other innovative programs.
Dividends
Manulife is a recent Canadian Dividend Aristocrat with a dividend yield of 4.6%. It has delivered annual dividend increases averaging at more than 11% CAGR per annum over the last five years. The company’s last annual dividend hike was 12% and it has a reasonable payout ratio of 42% currently. Manulife has returned over $900 million of capital to shareholders since the start of the NCIB and DRIP programs.
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 its dividend growth in the future. A reasonable payout ratio also leaves enough room for future expansion.
Technology initiatives and an 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. Its wealth asset management is another big growth driver demonstrating a positive earnings trajectory and delivering steady asset expansion.
Manulife’s diverse businesses provide ample cash flow to sustain operations without the need for external funds. The company has compounded its EPS growth at a rate of ~13% over the last decade. The company enjoys a sound capital position with increased financial flexibility and a LICAT ratio of 155%.
Manulife is making good progress on its expense efficiencies initiatives like streamlining real estate footprint in the U.S. and Canada, voluntary exit and early retirement programs, etc., and is on track to attain its target of $1 billion by 2022. It also reduced core general expenses by 5% YoY and achieved a core EBITDA margin exceeding 30% in the Global WAM business in the most recent quarter.
Competition
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.
| TickerKey | Ticker | Company | Sector | Industry | Score | Quote | Market Cap | P/E | FPE | EPS | Yield Raw | Yield | PayoutRatio | Payments | Dividend | Chowder | GrowthRating | IncomeRating | Tollbooth | Ambassador | Achiever | Aristocrat | King | Country | Graph |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| TSE:MFC | MFC | Manulife | Financial Services | Insurance - Life | 0.63 | 25.37 | 38.65 | 8.66 | 8.66 | 2.93 | 0.0441 | 4.41 | 0.3823 | 4 | 1.12 | 0.0693 | 5 | 7 | Tollbooth - Unregulated | NO | NO | YES | NO | Canada | 1 |
| TSE:GWO | GWO | Great West Life | Financial Services | Insurance - Life | 0.49 | 32.57 | 30.22 | 10.27 | 10.27 | 3.17 | 0.0538 | 5.38 | 0.5527 | 4 | 1.75 | 0.0836 | 3 | 7 | Tollbooth - Unregulated | NO | NO | YES | NO | Canada | 1 |
| TSE:POW | POW | Power Corporation | Financial Services | Insurance - Life | 0.49 | 30.68 | 19.24 | 12.24 | 12.24 | 2.51 | 0.0583 | 5.83 | 0.7131 | 4 | 1.79 | 0.0910 | 4 | 6 | Tollbooth - Unregulated | NO | NO | YES | NO | Canada | 1 |
| TSE:ELF | ELF | E-L Financial Corp | Financial Services | Insurance - Life | 0.31 | 812.00 | 3.01 | 16.05 | 16.05 | 50.58 | 0.0062 | 0.62 | 0.0989 | 4 | 5.00 | 0.0062 | 2 | 3 | Tollbooth - Unregulated | NO | NO | NO | NO | Canada | 1 |
Bottom Line
As one of the largest insurers in Canada, Manulife is in a good position to benefit from its growing footprint in Asia supported by fast-growing markets and emerging middle-class segments.
Its diversified businesses have provided it the much-needed immunity from fee compression and passive management. Though the company is facing headwinds in the Asian market as a result of the coronavirus outbreak, this segment has great potential and should do well once the situation normalizes.
Manulife’s large investments in technology, innovation, and growing demand for wealth management and insurance products are strong growth drivers for the future.
