Is Manulife Still A 'Buy' Following Its Q2 2025 Earnings?

Manulife Financial reported mixed Q2 2025 results, with new business value up 20% and Annual Premium Equivalent (APE) sales up 15% year-over-year, largely driven by strong growth in Asia and positive wealth management inflows. However, core earnings remained flat at CAD $1.7 billion, impacted by higher U.S. life claims and elevated credit losses of CAD $102 million. Concurrently, Manulife acquired a 75% stake in Comvest Credit Partners for $937.5 million, a strategic move expected to be immediately accretive to core EPS and significantly expand its private credit assets under management. Despite the quarter's earnings headwinds, the company maintains a strong capital position and an attractive valuation, reinforcing its long-term growth prospects and capital return strategy.

Analysis

Manulife Financial (MFC) reported a mixed Q2 2025, characterized by strong top-line growth offset by headwinds in its U.S. operations. The company demonstrated robust business momentum with a 15% year-over-year increase in Annual Premium Equivalent (APE) sales to CAD $2.2 billion and a 20% rise in new business value (NBV) to CAD $846 million, primarily driven by its strategic exposure to Asia. The Asian segment's core earnings grew 13% YoY, reaffirming its role as the key growth engine. However, consolidated core earnings remained flat at CAD $1.7 billion, impacted by two main factors in the U.S.: higher-than-expected mortality claims, which the company attributes to normal volatility, and elevated credit loss provisions of CAD $102 million, substantially above the guided range of CAD $30-50 million per quarter. Despite these setbacks, Manulife maintains a strong financial position, evidenced by a LICAT ratio of 136% and a core ROE of 15.6%. The company also announced the accretive acquisition of a 75% stake in Comvest Credit Partners, a move that will add $14.7 billion in private credit AUM and is expected to immediately boost core EPS and ROE. Valuation stands at 1.6x book value, a premium to its history but justified by a de-risked business profile and superior growth prospects compared to peers.

Key Decisions for Investors

• Investors should weigh the strong top-line growth and strategic expansion into private credit against the short-term earnings pressure from U.S. mortality and credit losses.
• Monitor U.S. segment performance closely in the coming quarters to validate management's assertion that recent adverse claims are transient volatility rather than a structural trend.
• Given the attractive valuation relative to its growth outlook and a robust capital return program, consider the stock a long-term holding, focusing on the execution of the Comvest acquisition and sustained momentum in the Asia and Global Wealth Management segments.