Manulife Financial Reports Record Profit, Raises Questions on Investment Strategy

Strategic Insights -

Manulife Financial Corp. delivered a string of profitable quarters, with its John Hancock Financial division playing a significant role in the success. The company has invested in share buybacks and raised its dividend, but investors are focusing on potential acquisitions. Manulife's shares climbed to a record high as investors redeployed capital from the income trust sector. The company's president and CEO, Dominic D'Alessandro, remains cautious about the impact of taxing income trusts on their dividend policy.

Key Takeaways:

  • Manulife Financial Corp. reported a record third-quarter profit of $968-million, a 31% increase from the previous year.
  • The company's John Hancock Financial division contributed to the success, with the life division's profit rising 32% to $131-million in the third quarter.
  • Return on common shareholders' equity was 16.6% for the quarter, and total funds under management rose 6% to a record $381-billion.
  • Manulife has invested in share buybacks and raised its dividend by 21/2 cents to 20 cents.
  • The company's earnings growth would have been 14% without the impact of hurricane Katrina and a tax-related gain in Japan.
  • Manulife's share price climbed 3.7% to a record high of $38.10.
  • Investors are focusing on potential acquisitions, with Stephen Gauthier, a partner at Gauthier & Cie, stating that a purchase won't be easy due to high prices in the sector.
  • Manulife's dividend policy remains unchanged, with the company aiming to pay out 25% to 35% of earnings.
  • The company's president and CEO, Dominic D'Alessandro, remains cautious about the impact of taxing income trusts on their dividend policy.

Statistics:

  • Third-quarter profit: $968-million
  • Increase from previous year: 31%
  • Life division's profit: $131-million
  • Return on common shareholders' equity: 16.6%
  • Total funds under management: $381-billion
  • Increase in funds under management: 6%
  • Share price: $38.10
  • Increase in share price: 3.7%
  • Earnings growth: 14%
  • Share buybacks: Invested in share buybacks to return value to shareholders
  • Dividend policy: Aim to pay out 25% to 35% of earnings

Sources:

  • Manulife Financial Corp. - Company reports
  • Gauthier & Cie - Partner Stephen Gauthier quoted in article
  • UBS Securities - Analyst Jason Bilodeau quoted in article