Manulife Earnings: Steady Quarter for The Firm as It Transitions to IFRS 17

No-moat-rated Manulife Financial MFC reported a decent set of numbers to start the year and transitioned to IFRS 17 financial reporting standard. The company reported core earnings of CAD 1.53 billion or CAD 0.79 per share in the first quarter versus CAD 1.44 billion or CAD 0.69 per share in the first quarter of the previous year. The first-quarter results equated to an annualized core return on equity of 14.8%. The company paid a quarterly dividend of CAD 0.365 per share starting from the first quarter of 2023, which represents a 5.5% dividend yield as per the current stock price. The adjusted book value of the company stood at CAD 30.04 in the first quarter, up 9% compared with CAD 27.53 in the previous year. We are maintaining our CAD 29 fair value estimate for Manulife after incorporating the first-quarter results.

Weakness in capital markets over the past year affected the firm’s global wealth and asset management unit, as assets under management or administration were reported at CAD 814 billion as of the first quarter, down 5% compared with the previous year on a constant currency basis. Net flows were reported at CAD 4.4 billion during the first quarter compared with CAD 6.8 billion during the same quarter of the previous year. Core EBITDA margins were 22.4% in the current quarter, down 590 basis points compared with 28.3% in the year-ago period because of lower fee income and AUM levels.

Core earnings decreased by 1% on a year-over-year basis in the Asia business to CAD 361 million in the first quarter reflecting less favorable claims experience which was offset by higher expected investment income. Annualized Premium Equivalent, or APE, increased by 5% on a year-over-year basis in the Asia region but new business value, or NBV, generated during the quarter fell by 4% due to a less favorable product mix.