Manulife Sees 34% Earnings Drop With Pain From Oil Plunge, Virus

(Bloomberg) -- The coronavirus pandemic and plunging oil prices put a damper on Manulife Financial Corp.’s first-quarter earnings.

• Manulife posted a 34% drop in core earnings in the first quarter, with declines in its Asia, U.S. and Canada divisions, the Toronto-based insurer said Wednesday. The impact of the coronavirus pandemic on equity markets and a “sharp decline in oil prices” also hurt earnings, according to the company.

Key Insights

• The market upheaval from the pandemic erased more than $14 trillion in stock market globally in the first three months of this year. For Manulife’s wealth division, assets under management and administration fell 1.8% from a year earlier to C$636 billion ($450 billion), though core earnings rose 7.3% to C$250 million. “The Covid-19 pandemic continues to disrupt economies and capital markets worldwide, and our operating conditions during the first quarter were understandably affected,” Chief Executive Officer Roy Gori said in a statement.
• The Asia division started showing signs of slower growth even before the outbreak, the result of the Hong Kong protests and new rules in Japan around corporate-owned life insurance products that hurt sales. Profit from Asia fell 5.6% to C$491 million.
• U.S. operations, through Manulife’s John Hancock business, have played second fiddle to Asia since the start of 2019. Core U.S. earnings fell 12% to C$416 million, making it the second-biggest contributor to overall profit in the first quarter.
• Manulife has been pushing initiatives in Canada such as its Vitality health-incentive plan, new banking products aimed at millennials and its Manulife Par whole life policy. Core earnings from Canada fell 16% to C$237 million.
• Plunging oil prices were expected to hurt Manulife’s energy investments in its alternative long-duration asset portfolio, with RBC Capital Markets analyst Darko Mihelic estimating C$1.1 billion of oil and gas losses in the quarter.

Market Reaction

• Manulife’s stock has fallen 37% this year, trailing the 23% decline of the S&P/TSX Composite Financials Index.

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• Core earnings in the first quarter fell 34% to C$1.03 billion, or 51 cents a share, missing the 59-cent average estimate of 15 analysts in a Bloomberg survey.
• Net income fell 40% to C$1.3 billion, or 64 cents a share, from C$2.18 billion, or C$1.08, a year earlier.
• Read more about Manulife’s quarterly results here.

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