Manulife Financial Corp. Stock - MFC news, historical stock charts, analyst ratings, financials, and today’s Manulife Financial Corp.

1. Manulife Financial Stock Value

Manulife Financial Corporation (NYSE: MFC) has a history of successful investments and operations in Asian markets, and unsuccessful/risky equity investments. During the last few years, the company has attempted to increase former and reduce the later, with some success so far. The company has significant growth potential as its Asian operations grow, and interest rates continue to climb across the developed world, if management continues to de-risk the company's investment portfolio.

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• Historical daily stock prices for Manulife Financial Corp since 1999 adjusted for splits and dividends. Open, high, low, close (OHLC) data as well as percentage changes for multiple date ranges. Display 20, 50 and 200 day moving averages and export charts as images to use in articles and blogs. The latest closing price for.

Business Overview

Manulife Financial Corporation is a large Canadian insurer and financial services provider, with around $800 billion in assets and with significant operations in Canada, the United States and several Asian countries, including China. The company generates most, around 60% percent, of its earnings from life insurance premiums, more or less evenly distributed between its different locations (See pg. 4 of their quarterly report).

(Source: Morningstar)

The company operates John Hancock in the United States, and will probably will be more recognizable to readers by that name.

The company will have a new CEO, Roy Gori, starting next month (Read More: Manulife announces structural and leadership changes).

Industry Overview

Manulife's business model, as with most insurers, is simple. They collect insurance premiums from their customers' policies, invest (usually in fixed income securities) and then pay any claims. As long as the company does a decent job in underwriting and investing, the premiums plus interest should more than cover the claims. Insurers in most countries, including Canada, suffer from asset-liability maturity mismatch - they will pay claims many decades into the future, with most fixed income securities.

Manulife Financial Stock Value

Insurers in most countries, including Canada, suffer from asset-liability maturity mismatch - their liabilities will mature many decades into the future, while their assets (mostly fixed income securities) have shorter maturities. Due to this, financial performance tends to suffer when interest rates go down for significant periods of time, a greater share of their assets will start yielding less more quickly when compared to their liabilities. Low interest rates since the financial crisis of 2008 have had quite negative effects on the industry, with the IMF stating:

The solvency of many life insurance companies and pension funds is threatened by a prolonged period of low interest rates.

The obvious flipside is, then, that as interest rate climb up, income from their assets will start to increase quicker than the cost of their liabilities. Interest rates have been increasing a bit faster than expected in both Canada and the US, with the Bank of Canada recently approving an interest rate hike, and the Federal Reserve starting to unwind its balance sheet, the company is likely to experience increased earnings in the near future.

Asian Operations

Manulife's large operations in Asia are a key contributor to the company's long-term growth. The company has large operations in Japan, Vietnam, Hong Kong and Mainland China, and is expanding heavily into Singapore. Although only accounting for around a third of earnings, a around two-thirds of the company's growth has come from the region in the last few years:

(Source: Manulife 2Q2017 Report)

The company's Asian operations are a key competitive advantage, as the region is poised to grow significantly faster than the developed world in the coming years, and few insurers are currently operating in the Chinese market, due to regulatory constraints. Manulife, therefore, has the potential to grow in more attractive markets than many of its competitors, and will already have a foothold in the region if/when peers enter the market. Ernst and Young have estimated 10% growth in the insurance industry in China, more than twice the estimated 4% that is expected in Canada and the US:

(Source: EY Future Directions for Foreign Insurance Companies in China)

Risks

As mentioned previously, one of Manulife's main activities is investing their premiums. It, therefore, stands to reason that one the company's largest risks is achieving low returns on their investments, either due to bull markets, low-interest rates, or bad investing decisions.

Manulife's management has a history of failed investments, much more so than similar Canadian companies. The company had large losses after the financial crisis, as share prices tumbled down in most exchanges (Read more: Manulife reports record loss). Although most insurers had losses, Manulife's were larger than the competition's, and the company took longer to recover. Since then the company has instituted a larger hedging program meant to lessen the company's losses in case of a downturn in the equities market. Nevertheless, the company still remains relatively exposed to the stock market, and, after looking at the three companies' sensitivity analyses in their annual reports, it seems Manulife remains 6-10 times more exposed to the stock market than its competitors (Sun Life and Power Financial):

Since then the company has instituted a larger hedging program, meant to lessen the company's losses in case of a downturn in the equities market. Nevertheless, the company still remains relatively exposed to the stock market, and, after looking at the three companies' sensitivity analyses in their annual reports, it seems Manulife remains 6-10 times more exposed to the stock market than its competitors (Sun Life and Power Financial):

(Source: Manulife 2016 Annual Report)

As recently as 2016, the company booked a CAD $364 million loss due to its equity market exposure, implying a -5.7% loss in their investments in this area. This was not a good result, considering the S&P 500 was up 9% during the period, and the S&P/TSX Composite increased 30% during the year. The company's larger exposure to the stock market won't consistently deliver losses, but it is a risk for the company, especially so when compared to other insurance companies.

Dividend

The company's stock currently has a dividend yield of 3.25%, quite good, and with a dividend payout ratio of only 33.4% the dividend has a lot of room to grow. It has had quite high growth during the last few years, growing at a 16% CAGR for the last three years, although it had remained flat between 2008 and 2013 before.

It is important to note that, as a Canadian company, non-residents face withholding taxes on any dividends. United States residents face a 15% tax rate, although this can usually be offset against income tax, and certain qualified retirement accounts have the tax waived entirely.

Conclusion

Manulife's fundamentals and future growth prospects are solid, yet its overexposure to the equities market and history of investment portfolio losses is worrying. I believe the stock has better potential than most in the insurance and financial services industry, with higher risk as well. Moving forward, investors should take special note of the new CEO's actions, as he has the potential to further leverage the company's operations in China, and de-risk its investments.

Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.