Higher Interest Rates Help, but Manulife Faces Choppy Equity Markets and Mixed Underwriting Trends

Manulife, along with Sun Life and Great-West Life, are the Big Three Canadian life insurers. While Manulife has attempted to reposition itself from the global financial crisis, it is still arguably the worst positioned of the three as it generally has the lowest returns on equity. Not only does Manulife pay out the highest percentage of benefits to premiums, but the firm’s asset-management operations don’t generate the pretax margins that Sun Life’s does, while Great-West has a larger retirement record-keeping business via Empower. Returns on equity over the past five years have averaged around 10%, a touch below our estimated cost of equity of 11%.