Manulife Financial (NYSE:MFC) shares are falling nearly 9% in Thursday morning trading, as BMO analyst Tom MacKinnon downgraded the Canadian insurer to Market Perform from Outperform.
MacKinnon specifically pointed to the firm’s disappointing disclosure on IFRS 17, which is the new accounting standards that’re going into effect Jan. 2023. Upon transition to IFRS 17, Manulife (MFC) is expecting a drop of 20% in book value per share, along with a decline of 10% in core EPS, the analyst wrote in a note.
“While we believe this impact was more negative than perhaps the Street was looking for, more importantly the disclosure was lacking in detail on the size, composition and actual growth of the all-important contractual service margin,” MacKinnon noted, adding that “it’s best to pause and then reassess how MFC’s KPI’s, including the CSM, actually unfold in 2023 under IFRS17.
Note that IFRS 17 “insurance contracts” will replace that of IFRS 4 at the start date, the company said.
Meanwhile, first-quarter earnings were weaker-than-expected, as “the rapid and unprecedented resurgence of COVID-19 disrupted new business activities in multiple markets in Asia,” said CEO and President Roy Gori.
Similarly, the Quant Rating screens MFC stock as a Hold, with the worst factor grades in growth and revisions. On the other hand, the Average Wall Street Analyst views it as a Buy (4 Strong Buy, 4 Buy, 6 Hold, 1 Strong Sell).
In mid-April, SA contributor Bashar Issa called on MFC as a Buy, citing rising interest rate tailwinds.