Manulife: A Buy Amid Buybacks and 10% Earnings Yield

Manulife is a buy due to its share repurchases and 10% earnings yield. The company benefits from interest rate cuts, which can be detrimental to savers. The Federal Reserve's recent rate cut may impact money market funds and short-dated bonds, making Manulife a more attractive investment option.

Manulife Financial Corporation (TSX: MFC; NYSE: MFC) has been making significant strides in the life insurance industry, positioning itself as a prominent player with a market capitalization of $52.94 billion. The company's overall financial health score of 3.3 (GREAT) Manulife Financial's SWOT analysis: stock poised for ...^[1] underscores its strong performance, particularly in its Asia business, which has emerged as a key driver of growth and profitability.

Manulife's Asia operations rank as the third-largest in the pan-Asia region, outperforming major competitors such as AIA and Prudential UK. This performance is evident in several key metrics: core earnings growth in Asia outpaced competitors, with an 18% increase from 2022 to 2024. Annual Premium Equivalent (APE) showed a compound annual growth rate (CAGR) of 11% from 2019 to 2024, with a notable 41% year-over-year growth in the first half of 2025. New Business Value (NBV) demonstrated a CAGR of 9% from 2019 to 2024, excluding Japan, and a 36% year-over-year growth from the first half of 2024 to the first half of 2025. Asia NBV margins have remained consistent with pre-COVID levels, standing at 39% in the first half of 2025, while competitors have experienced declines. This robust performance positions Manulife well for future growth, as the region continues to present significant opportunities in the financial services sector.

Manulife's overall financial performance has been strong, with analysts projecting continued growth in the coming years. The company's core earnings per share (EPS) are expected to increase from $3.88 in fiscal year 2024 to $4.01 in 2025 and $4.45 in 2026. This trajectory aligns with Manulife’s medium-term core EPS growth target of 10-12%. Return on equity (ROE) is another key metric where Manulife is showing promise. Currently at 12%, the company has set a bold new ROE target of over 18%, which analysts believe is achievable given Manulife’s focus on high-growth and high-return businesses. The company’s P/E ratio of 14.28 appears attractive relative to its near-term earnings growth potential, and InvestingPro analysis suggests the stock is currently trading below its Fair Value.

Manulife's dividend yield of 4.2% and a price-to-book value (P/BV) of 1.7x further underscore its financial strength. The company's market capitalization stands at $71,373 million, with a book value of $24.90 per share.

The Federal Reserve's recent rate cut may impact money market funds and short-dated bonds, making Manulife a more attractive investment option. The company benefits from interest rate cuts, which can be detrimental to savers. Manulife's share repurchase program could contribute to improving ROE and supporting EPS growth. Analysts note that Manulife’s share repurchase program could contribute to improving ROE and supporting EPS growth. These initiatives position Manulife as a high-growth, high-return, and high-cash flow generator in the financial services sector.

Manulife's strong Asia performance is poised to be a significant driver of the company's overall growth. With Asia already contributing 46% of Manulife’s core earnings and projected to reach 50% by 2027, the region’s continued expansion will likely have a substantial positive impact on the company’s financial results. The strong growth in Annual Premium Equivalent (APE) and New Business Value (NBV) in Asia demonstrates Manulife’s ability to capture market share and generate value in this dynamic region.

Manulife’s bold ROE target of over 18% is viewed by analysts as achievable, given the company’s strategic focus and recent performance. Several factors support this optimistic outlook: 1. The company’s emphasis on high-growth and high-return businesses, particularly in Asia, is expected to drive profitability improvements. 2. Efficiency and scale initiatives should lead to cost savings and margin expansion, contributing to higher returns. 3. The share buyback program can help boost ROE by reducing the equity base. 4. Manulife’s strong position in the transforming life insurance industry may allow it to benefit from improved economics and capital inflows.

Market volatility remains a significant concern for life insurers, including Manulife. Fluctuations in equity markets and interest rates can affect the value of the company’s investment portfolio and the performance of its wealth management products. This volatility could lead to earnings pressures and potentially impact Manulife’s ability to meet its projected EPS growth targets. Additionally, market instability may influence consumer behavior, potentially leading to reduced demand for certain insurance and investment products. This could affect Manulife’s sales volumes and revenue growth, particularly in more economically sensitive segments of its business.

Slower global economic growth presents several challenges for Manulife’s operations. In a sluggish economic environment, consumers may have less disposable income to allocate towards insurance and investment products, potentially impacting Manulife’s sales and revenue growth across its various markets. Furthermore, a slowdown in economic activity could lead to increased unemployment rates, which may result in higher policy lapses and surrenders, affecting the company’s persistency rates and long-term profitability. Lower interest rates, often associated with periods of slow economic growth, could also pressure Manulife’s investment income and the profitability of its insurance products.