What Are Manulife Financial’s Key Sources Of Revenue?

Manulife Financial (NYSE: MFC), a Canadian multinational insurance company, is structured geographically into three major divisions – Asia, Canada, and the U.S. Below, we expand on these divisions, their recent performance and what to expect going forward. You can see more on our interactive dashboard for Manulife’s key sources of value. You can adjust any of the company’s key drivers to see the impact of changes on the overall revenues, earnings and valuation. In a subsequent note, we will discuss our detailed forecasts for each of these segments.

• The Asia business functions in 12 markets in the region and provides financial protection and wealth and asset management solutions. The solutions include life and health insurance, annuities, mutual funds, retirement solutions, and institutional asset management. The division contributes about 37% to Manulife’s total revenue and has been a strong performer over the last few years, with 2017 experiencing 13.9% revenue growth. This was on the back of strong growth in corporate and foreign-currency denominated products in Japan, solid APE (Annualized Premium Equivalent) sales due to newly-launched customer solutions in Hong Kong, and double-digit growth in Singapore and China. Meanwhile, the 23.5% increase in AUM fueled an impressive 94% growth in investment income. Given the strong performance from this division, we expect its revenue to grow at a CAGR of over 7% over the next two years.
• The Canada business offers coverage and asset management solutions to both businesses and individuals in Canada. While individuals are covered through solutions such as universal life, term life, and fixed and variable annuities, businesses utilize group life, health, and disability solutions to safeguard themselves and employees from potential risks. The division has remained fairly stable for the past few years, with 2017 experiencing just 3.3% revenue growth. This was largely driven by higher investment income, as AUM grew by 8%. However, pricing actions and the funding of two institutional asset management mandates resulted in lower premium and deposits. As a result, the aforementioned growth was slightly offset. For the next two years, we expect the revenue to grow at a CAGR of 3%.
• The U.S business functions under the John Hancock brand and provides solutions to both businesses and individuals. The solutions include mutual fund services, retirement plans, and insurance products. Over the last few years, this division has been the standout performer for the company. The 21.4% revenue growth in 2017 was largely driven by impressive growth in investment income. Higher inflows for fixed income equity products, strong fund performance, and higher sales in mid-market fueled the 11.7% growth in AUM to $480 billion. Consequently, investment income shot up by 36%. More recently, however, the company has stopped sales of corporate and bank-owned life insurance products in the U.S. For the next two years, we expect the revenue to decline at a CAGR of 3.3%

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