What To Expect From Manulife’s Q3 Earnings
Manulife (NYSE: MFC) is scheduled to report its earnings for the third quarter of 2017 on November 9. In the second quarter, the company reported a 41% increase in core earnings driven by growth in Asia, higher wealth management income in the U.S., and a reduction in hedging costs. Manulife’s revenues also grew 12% in the second quarter due to strong insurance sales in Japan, China, and Singapore.
In the upcoming Q3 results, we expect Manulife to build on the growth momentum in Asia. However, Manulife’s Japan operations are likely to remain under pressure due to an increase in its effective tax rate, pricing competition, and declining interest rates. We expect Manulife to continue its growth momentum in the U.S. driven by its wealth management businesses.
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In Asia, Manulife has operations in Japan, China, Hong Kong, Thailand, Malaysia, Indonesia, Singapore and the Philippines, which together account for about a third of the company’s insurance premiums. In the second quarter, the company’s core earnings in Asia grew over 18%, driven by increased contribution across all of Manulife’s divisions. Manulife grew strongly in all the Asian markets except in Japan, where it grew moderately due to pricing competition and declining interest rates.
Manulife Japan is crucial for Manulife’s Asian operations, as half of the company’s Asian insurance sales and 30% of its wealth management product sales come from Japan. The strengthening of the Japanese Yen is likely to impact Manulife’s Q3 results. Due to the higher effective tax rate in Japan this year as compared to prior year, we expect Manulife’s Japan earnings to remain under some pressure. However, we expect all Manulife’s businesses to grow strongly this quarter in its other Asian markets.
Our $19 price estimate for Manulife is slightly below the current market price.
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