The journey that has led Manulife to its current position as a global financial leader has included many interesting events. (Photo: The Canadian Press)
Important Manulife Stock Facts to Remember:
• Manulife insurance is evolving and the company aims to continue growing in Asia.
• The insurer is developing its higher yield investment services and innovative behavioral reward programs.
• Manulife’s products are complex and its portfolio is riskier than other insurers, but interest rates are favorable and the company takes less risk with its fixed income assets.
Did you know that the first President of Manulife (MFC) was also the first Prime Minister of Canada? Or that in 1901 the company merged with the Temperance and General Life Insurance Company, a Canadian insurer that offered discounted rates to nondrinkers?
And do you also remember that Manulife only became a public company in 1999? Unless you own its stock, you probably also don’t know that the company has a dividend yield of 5% trailing twelve months while trading at a CCR of just 7.
The journey that has led Manulife to its current position as a global financial leader has included many interesting events. However, this growth that lasts for such a long period also includes some less pleasant twists, such as the maturation of some business sectors.
Manulife focuses on the most promising industries
Insurance has become commercialized and companies are struggling to grow in markets like the US and Canada. As a result, managers have been focusing on developing their business in Asia for several years. Financial analyst Suryansh Sharma says Asian markets and investment management are examples of “high potential” sectors for Manulife, where the company wants to make up 75% of its profits by 2025.
Manulife has gone through many changes during its long history, but of course this has brought some risks. The company is experimenting in innovative areas such as behavioral insurance, where policyholders receive financial rewards for a healthy lifestyle. We offer them, for example, gift vouchers and premium discounts. But what is probably much riskier is the amount of variable yield assets in his general account of 18%. This means that the 82% that will remain in the portfolio should benefit from current interest rates.
Bull
• Manulife could achieve good growth in Asia in the coming years, which would provide overall revenue growth and improved geographic diversification.
• Manulife has clearly outlined its plan to reduce exposure to higher risk in certain products such as long-term care insurance and variable annuities, as well as increase exposure to higher potential markets such as behavioral insurance, asset management and Asia.
• The company will be a net beneficiary of rising interest rates in the long run as it can reinvest its maturing fixed income securities for a higher return.
Bear
• Manulife offers comprehensive insurance products that expose it to underwriting, investment, capital market and interest rate risks. A higher general account allocation to variable income assets may also become risky in the context of a prolonged economic downturn.
• The market for life insurance and income-based pension products is competitive and commercial, and companies are seeking to achieve value-added growth in established markets such as the US and Canada.
• Fee pressure will have a dampening effect on the profitability of the company’s asset management activities.
By Andrew Willis, Editor-in-Chief, Morningstar Canada
Translated by Mélanie Pilon
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