Manulife Earnings Aided by Asia Unit Weathering Challenges

(Bloomberg) -- Manulife Financial Corp.'s Asian business -- once the biggest earnings contributor for the Canadian life insurer -- is showing resilience in the face of added challenges in the region.

The Covid-19 pandemic, social unrest in Hong Kong and new rules for corporate-owned life-insurance products in Japan have been working against Manulife's Asian operations in recent months. Yet Manulife shrugged off those issues in its second quarter, as the Asia division returned to growth after a drop in profit in the previous period. Overall earnings at the Toronto-based company beat analysts' estimates.

Chief Executive Officer Roy Gori said Asia and the insurer's other divisions performed well “in the face of a really challenging environment” that he expects will continue until there's a large-scale deployment of a vaccine to fight the Covid-19 pandemic.

“Until that point, we're going to see challenges that may exist in certain markets since you'll have second waves and even third waves,” Gori said Wednesday in a phone interview. “That's par for the course and having a globally diverse business is going to be a key enabler to help navigate through that.”

Key Insights

• Growth in Asia last year outperformed that of the Canadian and U.S. divisions. While that wasn't the case in the second quarter, profit in the Asia division still rose 3.8% to C$489 million ($369 million) in the period.
• A market rebound added $12.3 trillion in stock market value globally between April and June, helping money managers gain back some ground from a coronavirus-spurred slump earlier in the year. For Manulife's wealth division, assets under management and administration rose to C$696.9 billion from C$653.1 billion a year earlier. Global wealth and asset-management earnings fell 1.7% to C$238 million.
• Manulife's U.S. operations, through its John Hancock business, had been the second biggest earnings engine after Asia since the start of 2019. Core U.S. earnings rose 37% to C$602 million, making it the biggest contributor to overall profit. Meanwhile, core earnings from Canada rose 9.6% to C$342 million.
• Manulife said it expects to take a C$200 million charge tied to its annual review of actuarial methods and assumptions in the third quarter.

Market Reaction

• Manulife's stock has fallen 29% this year, trailing the 17% decline for the S&P/TSX Composite Financials Index.

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• Core earnings rose 7.5% to C$1.56 billion, or 78 Canadian cents a share, beating the 62-cent average estimate of 14 analysts in a Bloomberg survey.
• Net income totaled C$727 million, or 35 cents a share, compared with C$1.48 billion, or 73 cents, a year earlier.
• Read more about Manulife's quarterly results here.

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