Manulife Financial Corp. MFC-T missed analyst profit expectations after a $1.6-billion drop in earnings owing to market turmoil and extended COVID-19 restrictions in Asia.
The largest insurer in Canada reported second-quarter net income of $1.09-billion, or 53 cents a share – a $1.6-billion drop from the $2.64-billion, or $1.33 a share, that it reported in 2021′s second quarter.
Analysts had forecast net income of $1.47-billion, or 76 cents a share, according to financial markets data firm Eikon.
During an analyst call on Thursday, Manulife chief executive officer Roy Gori said while net income for the quarter was negatively impacted by market volatility this year, the company delivered net income of $4.1-billion in the first half of the year – $600-million more than the same period a year prior.
“We continue to operate in an increasingly complex and challenging environment,” Mr. Gori said. “A combination of lingering pandemic effects in most of Asia, elevated inflation, uncertain macroeconomic and geopolitical conditions have significantly impacted markets globally with increased volatility and resulted in negative consumer sentiment.”
Despite the challenges, Mr. Gori said, the insurer remains “strongly capitalized” and continues to execute against the company’s strategic priorities.
Manulife’s Asian operations – which account for more than 30 per cent of its revenue – saw a 17-per-cent decline in sales reflecting COVID-19 lockdown measures in Hong Kong and several other markets in Asia, as well as lower sales in Japan’s corporate-owned life insurance products.
The company’s new chief executive officer of Asia, Damien Green – who replaced Anil Wadhwani in May – said the insurer expects to see improvements “step by step” as the region emerges from pandemic conditions, and is confident the company will meet its medium-term core earnings growth target of 15 per cent for Asia.
“Whilst impacted in the short term by COVID-19 and facing the same set of challenges and constraints of our competitors – such as economic slowdown, tapered consumer sentiment and waves of regulatory changes – earnings have exceeded pre-pandemic levels,” Mr. Green told analysts.
“The franchise is in good shape. The distribution remains very diverse. And I think we continue to be placed to capture the secular trends as markets start to normalize.”
Manulife’s global wealth and asset management division also saw a drop in sales for the second quarter, reporting $1.7-billion in sales – a steep decline from the $8.6-billion in sales for the same quarter last year.
Sales for the quarter were largely driven by the institutional and retirement segments, while the retail market saw higher mutual fund redemptions with investors pulling $1.9-billion out of funds, compared to $7.3-billion in sales for the second quarter in 2021.
New business sales in both the United States and Canada helped reduce the impact of market and pandemic related headwinds for the insurer. In Canada, sales increased by 8 per cent, largely driven by higher volumes in group insurance plans, while the U.S. saw an increase of 18 per cent with jumps in higher international sales (which are reported in the U.S segment).
Scotiabank analyst Meny Grauman said in a note to investors that the weaknesses were largely where he thought they would be, and “in fact proved to be a little less negative than forecast.”
“More specifically, we had expected COVID to continue to pressure results in Asia, and challenging markets to pressure performance in Manulife’s Wealth and Asset Management (WAM) unit, and they did, but not by more than expected,” Mr. Grauman wrote.
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Clare O’Hara