Manulife Financial (New York Stock Exchange: MFC) stocks almost fall 9% in the Thursday morning exchanges, as BMO analyst Tom MacKinnon downgraded the Canadian insurer from Market Perform to Outperform.
MacKinnon specifically pointed to the company’s disappointing disclosure on IFRS 17, which is the new accounting standard that will come into effect in January 2023. Upon transition to IFRS 17, Manulife (MFC) expects a 20% decline in book value per share. , as well as a 10% decline in core EPS, the analyst wrote in a note.
“While we believe this impact may have been more negative than the Street was looking for, more importantly, the disclosure lacked detail on the size, composition and actual growth of the all-important contractual service margin,” noted MacKinnon, adding that “it’s better to pause and then reassess how MFC’s KPIs, including CSM, are actually performing in 2023 under IFRS17.
Note that the IFRS 17 “insurance contracts” standard will replace that of the IFRS 4 standard on the start date, specifies the company.
Meanwhile, first-quarter earnings were weaker than expected as “the rapid and unprecedented resurgence of COVID-19 disrupted new business activity across multiple markets in Asia,” CEO and Chairman Roy Gori said.
Similarly, the quantitative rating sees MFC stocks as a Hold, with the worst factor ratings in terms of growth and revisions. On the other hand, the average Wall Street analyst considers it a buy (4 strong buy, 4 buy, 6 hold, 1 strong sell).
In mid-April, SA contributor Bashar Issa tapped MFC as a buy, citing tailwinds to higher interest rates.