In a sign that the health of the global economy may be better than many pundits believe, financials continue to report solid full-year 2016 results. One standout performer was Canada’s largest insurer: Manulife Financial Corp. (TSX:MFC)(NYSE:MFC). These outstanding results highlight why it should be a core holding in every portfolio.
Now what?
An impressive aspect of Manulife’s 2016 results was a stunning 34% increase in net income. This can be attributed to a solid growth in new business in Asia and the release of tax as well as legal provisions in its U.S. business.
Key takeaways from Manulife’s impressive 2016 results, demonstrating that the company is poised to experience ongoing growth, were record insurance sales and solid investment inflows into its Asian business. Insurance sales in Asia surged by a an outstanding 33% compared to 2015, and investment inflows into Manulife’s Asian wealth management division shot up by 22%.
These were the most impressive performances of any of its divisions.
As a result, core earnings in Asia grew by 21%, causing enterprise-wide core earnings to surge by 17%.
The importance of Manulife’s Asian operations can’t be emphasized enough. The region has experienced tremendous growth in wealth, and along with a rapidly expanding middle-class, this will drive ever-greater demand for investment and insurance products.
More importantly, Manulife remains focused on expanding its presence in Asia and, in particular, China, which is fast becoming the most important market for wealth management products and services in the region. In early 2016, it entered a 15-year distribution agreement with Singapore-based bank DBS to distribute its insurance products across Singapore, Hong Kong, mainland China, and Indonesia. Then in November of that year, Manulife acquired two investment entities from international bank Standard Chartered, boosting its presence in Hong Kong.
Manulife’s considerable ongoing focus on expanding its Asian operations, especially in China, leaves it well positioned to become an important regional player in the provision of insurance, investment, and retirement solutions in what is arguably the world’s fastest-growing region.
This will drive ever-higher earnings over coming years, creating additional value for investors.
Manulife’s growing financial strength has allowed it to reward shareholders by increasing its dividend every year since 2013. It now yields a very tasty and sustainable 3%, and there are clear indications that these regular dividend hikes will continue as earnings, particularly from Asia, continue to grow.
The good news doesn’t stop there.
Because of Manulife’s extensive U.S. business, which is responsible for 40% of its core earnings, it will benefit from a stronger U.S. economy and a firmer U.S. dollar. This means that it will also profit from Trump’s planned fiscal stimulus and his push to reduce regulation for financial services providers.
Manulife is also focused on enhancing its U.S. brand, suite of products, and operating footprint by expanding the number of funds and ETFs it offers U.S clients.
So what?
Manulife is one of the best financial stocks available to investors at this time. Not only is it attractively priced, but it provides investors with considerable global diversification and exposure to emerging Asian markets and the developed U.S. and Canadian markets. For these reasons, it should form a core holding in every portfolio.
