Manulife Earnings: Growth Remains Solid in the Asian Business

No-moat-rated Manulife Financial MFC reported a good set of numbers with solid growth in the Asian business. The company reported core earnings of CAD 1.64 billion or CAD 0.83 per share in the second quarter versus CAD 1.53 billion or CAD 0.76 per share in the second quarter of the previous year on a constant currency basis. The second-quarter results equated to an annualized core return on equity of 15.5%. The company paid a quarterly dividend of CAD 0.365 per share in the second quarter of 2023, which represents a 5.5% dividend yield as per the current stock price. The adjusted book value stood at CAD 29.42 in the second quarter, up 5% compared with the prior-year quarter. We are maintaining our CAD 29 fair value estimate for Manulife after incorporating the second-quarter results.

The assets under management or administration, or AUM, were reported at CAD 819 billion in the firm’s global wealth and asset management unit as of the second quarter, up 8% compared with the previous year on a constant currency basis. Net flows were reported at CAD 2.2 billion during the second quarter compared with CAD 1.7 billion during the prior-year quarter. Core EBITDA margins were 24.6% in the current quarter, down 350 basis points compared with 28.1% in the year-ago period mainly because of higher expenses.

The highlight for the quarter was the robust growth in the Asia business as the firm reported 26% growth in annualized premiums on a year-over-year basis in the second quarter. The premium growth in Hong Kong almost doubled, driven by rebounding customer demand following the reopening of the border between Hong Kong and mainland China. New business contractual service margin, or CSM, grew 26% compared with the previous year. Core earnings in the Asia business grew 1% during the second quarter compared with the previous year as higher investment income yields and business growth were offset by a slower CSM amortization.