Manulife 2008 results

The top 5 largest life insurance company in the world, with business diversify among North America, Europe & Asia.

• Fair, 4q08 premium & deposit up 6% vs 4q07,
• Good, 4q08 EPS down from $0.76 to -$1.24, worse than analysts' expectations' -$0.95 and worse than CEO's -$0.98. but better than Billy's expectation -$1.30.
• Good, Once again (or once awhile:P) Billy's estimation is more accurate than Mac's CEO as well as all the big firms financial analysts.
• Fair, 2008 premium & deposit up 1% vs 08,
• Good, 2008 EPS down 88%, again worse than analysts' expectation, but slightly better than Billy's.
• Good, MFC keeps its quarterly dividend at $0.26 per share.

However, as I always said, "an insurance company's net income or EPS is meaningless to determine ones investment value."

Here are some other guidelines:

• Good, 2008 invested assets up 16% vs 2007 (thx to US$ up 24% in 4Q while the equity market down by 20%-23.5%, kind of offsetting each other)
• Good, 2008 Total equity up 13% (11.5% due to net income plus other comprehensive income, 9% due to new shares issues and -7.5% due to dividend paid out);
• Good, MFC rise its reserve margin from 10.4% to 14.8%, up 42% to become more conservative.
• Good, Book value up 6% to $16.62
• Good, Embedded value up 31% to $28.68. Again, mainly due to FX gain and capital injection.
• Good, Cash flow from operation remain strong, up 5.6%

There are 3 major drivers to estimate MFC's 2009 net income. 1) equity market performance 2) FX between USD & CAD 3) T-bill yield curve

• Bad, equity market performance 10% lower than 12/31/08 so far;
• Good, flat, FX basically no change, if Canada will cut interest rate further by 50 - 75 bop while oil price remain below US$40/bbl, CAD dollar won't rise/may fall in the near future.
• Fair, Canadian T-Bill rate may fall further while US T-Bill rate may rise a little bit, it will affect the actuarial liability calculation.

Given the 3 points listed above, I will say MFC will continue to suffer a loss around $500M in 1q09 (compare to $1870M loss in 4q08) and may get back to income in 2q09.
However, it is still too soon for me to estimate 2009 net income, but it should be an income instead of a loss.

I will keep my recommendation as BUY with a fair value of CA$31. (Assume the 2nd round of financial crisis won't happen out of control.)