Manulife Posts Strong Q1 Earnings

Manulife Financial Corp. (MFC) reported first-quarter 2014 core earnings of $653 million (C$719 million), up 14.0% year over year. The improvement was driven by higher fee income on increased asset under management, lower hedging costs and net modestly favorable currency impacts. However, lower favorable tax impact was a major drag.

Net income for Manulife in the quarter amounted to approximately $742 million (C$818 million) compared with a net income of $535.8 million (C$540 million) in the same period last year.

During the quarter under review, Manulife’s total insurance sales were $487 million (C$537 million), down 15% year over year. The decline was attributable to lower sales in Canada Group Benefits.

Wealth sales for the quarter came in at $12.5 billion (C$13.8 billion), up 5% year over year. The improvement stemmed from strong sales in the Canadian and North American markets.

Segment Details

Asia Division's core earnings were $221 million compared with $224 million in the year-ago quarter. The growth in core earnings was driven by higher new business margins and improved policyholder experience. However, premiums and deposits were $3.4 billion, down 18% year over year.

Manulife’s Canadian division’s core earnings of $206.7 million (C$228 million) in the reported quarter increased 27.4% year over year. The improvement in core earnings was driven by in-force business growth, including higher fee income from growing wealth management businesses; higher new business margins due to product changes and higher interest rates and improved claims experience. Premiums and deposits in the quarter were $5.5 billion (C$6.1 billion), up 13% year over year, driven by continued strong growth in Manulife Mutual Funds and Group Retirement Solutions.

The U.S. Division reported core earnings of $339 million, down 29% year over year. Premiums and deposits were $12.1 billion, up 4% year over year. The increase was driven by record sales in mutual funds, partially offset by lower life insurance premiums.

Financial Update

Manulife strengthened its Minimum Continuing Capital and Surplus Requirements ratio to 255% as of March 31, 2014, up 7% over the prior quarter.

Funds under management reached an all-time record high of $574 billion (C$635 billion) as of March 31, 2014.

Manulife Financial presently carries a Zacks Rank #3 (Hold).

Other life insurers like Lincoln National Corp. (LNC) and Torchmark Corp. (TMK) have reported better-than-expected first-quarter earnings. Another player, Protective Life Corp. (PL), with a Zacks Rank #2 (Buy), is scheduled to release its first-quarter earnings on May 8.