Analysts: Manulife Financial Corp. Prepared for Big U.S. Acquisition

Manulife Financial Corp. (MFC) is well-positioned to make a large purchase in the United States to extend its lead over other Canadian financial services firms, said RBC Capital Markets analyst Andre-Philippe Hardy.

The life insurance giant — a financial services top pick for several analysts — is ready to make a splash following up on the integration of its acquisition of Boston-based John Hancock, Mr. Hardy said.

“We believe that an acquisition would be well received by most capital market participants, given the success of the John Hancock transaction,” he said.

At a Manulife investor day earlier this week, the company said that it has more than C$3-billion of capital above what it is required to hold back as a safety net by regulators — management has said it will return excess capital to shareholders through share buybacks or dividends, but will keep back enough for acquisitions. The company also said it would buy businesses that add to its mutual fund operations in Canada and the U.S.

UBS Investment Research analyst Jason Bilodeau — who agreed that “a deal would still be nice” — said Manulife’s existing platform is delivering strong earnings growth. Management said operations can produce 15% bottom line growth.

The company is “one of the better outlooks in the industry,” said Mr. Bilodeau, adding that excess capital “offers additional upside.”

Mr. Hardy maintained Manulife as a 'top pick' in the financial services sector, with a C$47 price target. Mr. Bilodeau left unchanged his 'buy' rating on the company’s stock. The UBS analyst also has a C$47 target price for Manulife.