Insurance companies and banks are financial intermediaries in the TSX’s financial services sector. From an investment perspective, Canada’s Big Banks are appreciated more because the banking sector is recognized as a bedrock of stability. However, an insurance icon is outperforming the giant lenders in 2025.
Manulife Financial Corporation (TSX:MFC) deserves serious consideration by dividend, value, or growth investors. Like banks, the Office of the Superintendent of Financial Institutions (OSFI) regulates and supervises life insurance companies to ensure financial stability and protect policyholders from loss.
Positive outlook
The outlook for Manulife is generally positive following its superb financial performance last year. Outgoing President and CEO, Roy Gori, said, “2024 was a banner year for Manulife on many fronts and we finished the year with very strong results.”
“We have created a robust foundation for sustained growth. I am confident about the future of Manulife and the value that we will continue to generate for our shareholders,” Gori added.
MFC trades at $44.92 per share and is approaching its 52-week high. At the current price, the year-to-date gain is 2.8%-plus. No Big Bank stock comes close to the trailing one-year price return of 43.4%-plus.
According to some market analysts, Manulife has beaten earnings estimates in each of the last four quarters, including more than 100% free cash flow (FCF) conversion. The dividend payout ratio guidance over the medium term is 35% to 45%. Furthermore, the dividend yield is attractive at 4%.
Manulife returned $6.1 billion to shareholders in 2024, including buying back 4.6% of outstanding common shares. The Board approved and declared a 10% dividend hike and announced a plan to repurchase 3% of outstanding common shares.
Banner year
In 2024, net income attributed to shareholders and core earnings increased 5% and 8% year-over-year to $5.4 billion and $7.2 billion, respectively. Notably, the annualized premium equivalent (APE) sales and new business contractual service margin (CSM) rose 30% and 32% to $8.4 billion and $2.9 billion, respectively.
The Asia business continues to deliver solid operational results as Manulife scales the business in the region. It could account for 50% of core earnings by 2025 and drive long-term growth. Manulife is also expanding its Wealth and Asset Management (WAM) business, targeting Europe and the wider Europe, Middle East and Africa (EMEA) market as a significant growth area.
Changing of the guard
Last year, Gori announced his plan to retire on May 8, 2025. The Board of Directors appointed Phil Witherington, the President and CEO of Manulife Asia, to be the successor. Chief actuary Steve Finch will assume the post of Witherington effective May 9. Gori will serve as company adviser until August 31.
“We’re now well-positioned to raise the bar on our aspirations for Manulife’s next chapter,” Gori said. “And I’m thrilled that Phil will lead that next phase in the company’s growth given his deep understanding of our global business and principled leadership.”
Growth on the horizon
Manulife Financial is a compelling investment opportunity. The insurer has balance sheet strength, a solid and growing Asia business, expanding WAM business, and FCF conversion ratio. Buy MFC if you don’t own the stock yet, hold if you do, but don’t sell and instaed hold it for healthy long-term returns.
