Manulife Financial (TSX:MFC) and Sun Life Financial (TSX:SLF) are both powerhouses in the insurance world, with deep roots in Canada and expanding global footprints. Manulife’s strength lies in its diverse business lines, with solid growth in wealth management and a large presence in Asia. Meanwhile, Sun Life shines with its strong position in group benefits and a growing asset management business. Both have strengths, but which is the better buy?
Manulife stock
Manulife has a lot going for it, especially after its second-quarter 2024 results. The company reported core earnings of $1.7 billion, reflecting a 6% year-over-year increase, along with a core earnings per share (EPS) of $0.91. Now up 9% from the same period last year. This was bolstered by strong performance in Asia, particularly in new business growth and value. However, net income remained flat at $1 billion. A key strength is the company’s steady capital position, highlighted by a 139% LICAT ratio, which underscores its financial resilience. Plus, Manulife’s aggressive share-buyback program, with $1.1 billion worth of shares repurchased so far, shows its commitment to returning value to shareholders.
Despite these strengths, Manulife does face some challenges. While the core earnings grew, the company experienced a decline in net inflows within its Global Wealth and Asset Management division. This could be an area of concern for investors, as it reflects potential headwinds in certain market segments. Furthermore, while Manulife is making strides in areas like reinsurance and new business growth, its reliance on the Asian market could pose risks if conditions become unfavourable.
Looking ahead, Manulife seems well-positioned for growth, particularly with its focus on transformation into a higher-return, lower-risk business. The company’s future looks bright, especially with the expansion of its business in Asia and continued focus on shareholder value. From a valuation perspective, Manulife trades at a forward price-to-earnings (P/E) of about 10.04, thus making it attractive for value investors, especially given its solid dividend yield of around 4%.
Sun Life
Sun Life Financial had a solid second quarter in 2024, with underlying net income rising 9% to $1 billion, demonstrating its strong fundamentals. A key strength lies in its diversified business segments, particularly wealth and asset management. This saw a $36 million boost in net income thanks to higher fee income in both Canada and Asia. Plus, Sun Life’s group benefits and protection business in the U.S. showed robust growth, even though the dental segment experienced challenges. Despite this, overall business growth has helped Sun Life maintain momentum in competitive markets.
On the downside, Sun Life faced some headwinds in its group health and protection segment. This saw a decline of $55 million due to less favourable results in U.S. dental services following Medicaid redeterminations. Moreover, its reported net income dropped slightly by 2% to $646 million, largely due to a restructuring charge aimed at improving productivity. This initiative is expected to generate $200 million in savings by 2026. So, while it impacted short-term earnings, the long-term outlook seems optimistic.
Looking ahead, Sun Life remains a promising option for investors. Its strong capital position, demonstrated by a 150% LICAT ratio and a forward P/E of around 10.65, makes it an appealing investment. The company’s focus on business growth in Asia and North America, combined with efforts to streamline operations, positions it well for the future. As interest rates stabilize, Sun Life’s asset management and fee-related earnings are expected to continue driving growth.
Foolish takeaway
Between Manulife and Sun Life, Sun Life might edge out as the better long-term option right now. Its strong growth in asset management, particularly in Asia, and focus on streamlining operations with significant cost savings expected by 2026 position it for steady future gains. While both companies offer solid dividends and international exposure, Sun Life’s ability to generate higher returns on equity and maintain strong fundamentals despite some short-term restructuring gives it a slight advantage.
