Manulife announces $1.6 billion decline in profits amid market turmoil and extended COVID-19 restrictions in Asia

Manulife Financial Corp. MFC-T missed analysts’ earnings expectations after a $1.6 billion decline in earnings due to market turmoil and extended COVID-19 restrictions in Asia.

Canada’s largest insurer reported net income of $1.09 billion, or 53 cents per share, in the second quarter, down $1.6 billion from $2.64 billion, or $1.33 per share, which it reported in the second quarter of 2021.

Analysts had forecast net profit of $1.47 billion, or 76 cents per share, according to financial markets data firm Eikon.

On a call with analysts on Thursday, Manulife chief executive Roy Gori said while net income for the quarter was negatively impacted by market volatility this year, the company generated net income of $4. .1 billion in the first half of the year, or $600 million more. than in the same period the previous year.

“We continue to operate in an increasingly complex and demanding environment,” Mr. Gori said. “A combination of lingering pandemic effects across much of Asia, high inflation, uncertain macroeconomic and geopolitical conditions have significantly impacted global markets with heightened volatility and led to negative consumer sentiment.”

Despite the challenges, Mr. Gori said, the insurer remains “strongly capitalized” and continues to execute on the company’s strategic priorities.

Manulife’s Asian operations, which account for more than 30% of its revenue, experienced a 17% drop in sales due to the COVID-19 containment measures in Hong Kong and several other Asian markets, as well as a decline in sales in Japanese companies. proprietary life insurance products.

The company’s new managing director for Asia, Damien Green – who replaced Anil Wadhwani in May – said the insurer expects to see “step-by-step” improvements as the region emerges from the conditions of pandemic, and is confident that the company will achieve its medium-term objectives. core profit growth target of 15% for Asia.

“While impacted in the short term by COVID-19 and facing the same set of challenges and constraints as our competitors – such as the economic downturn, declining consumer sentiment and waves of regulatory change – earnings have exceeded levels pre-pandemic,” Green said. told analysts.

“The franchise is in good shape. The distribution remains very diversified. And I think we continue to be positioned to capture secular trends as markets begin to normalize. »

Manulife’s global wealth and asset management division also saw sales decline in the second quarter, posting sales of $1.7 billion – a sharp drop from sales of $8.6 billion. in the same quarter last year.

Sales in the quarter were largely driven by the institutional and pension segments, while the retail market saw an increase in mutual fund redemptions, with investors withdrawing $1.9 billion from funds, compared to 7.3 billion in sales for the second quarter of 2021.

New business sales in the United States and Canada helped reduce the impact of market and pandemic-related headwinds for the insurer. In Canada, sales increased by 8%, largely due to higher volumes in group insurance plans, while in the United States, an increase of 18 percent with jumps in higher international sales (which are reported in the US 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 turned out to be somewhat less negative than expected.”

“Specifically, we expected COVID to continue to pressure earnings in Asia and challenge markets to pressure the performance of Manulife’s Wealth and Asset Management (WAM) unit, and they did, but no more than expected,” Mr. Grauman wrote.

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