Manulife, Sun Life Get Market Boost While Asia Weighs on Outlook

Manulife, Sun Life Get 10% Profit Boost, Led by Asset Management

Doug Alexander

14 Feb 2020, 04:15 AM IST

(Bloomberg) -- The surging stock market is serving two of Canada’s largest life insurers well.

Manulife Financial Corp. and Sun Life Financial Inc. each posted a 10% gain in underlying quarterly earnings as improving equity markets helped their asset-management divisions, and Sun Life’s fourth-quarter profit beat analysts’ expectations. Even with its earnings increase, Manulife fell short of estimates, partly hurt by slowing growth in Asia.

“Weak sales trends in Japan were a drag on growth in the Asia segment,” National Bank Financial analyst Gabriel Dechaine said in a note to investors, calling Manulife’s results “mixed.” “On the other hand, we believe capital updates were clearly positive.”

While the Toronto-based insurers are at risk of continued pain from disruptions in Asia, both benefited from a rising equity market, with the S&P 500 index increasing 29% last year. Manulife had core earnings of C$1.48 billion ($1.11 billion) in the fourth quarter, with global wealth and asset management having the biggest gain among the insurer’s four main operating businesses. Sun Life also saw the largest increase at its asset-management division.

“We saw good growth growth across asset management in the U.S. and Canada,” Chief Financial Officer Kevin Strain said in an interview, adding that the company’s alternative assets management business “hit a high.”

Sun Life shares rose 0.4% to C$65.56 at 9:48 a.m. in Toronto and have surged 42% in the past year. Manulife slumped 1.5% to C$26.22. Its shares are up 25% in the past 12 months.

Sun Life’s core earnings of C$1.34 a share beat the C$1.30 average estimate of 14 analysts in a Bloomberg survey, while Manulife’s core earnings of 73 cents fell short of the 75-cent estimate. Manulife, Canada’s largest insurer, nevertheless posted record annual earnings, increased its dividend 12% and surpassed one of its long-term goals three years ahead of schedule.

Asia Growth

Both Manulife and Sun Life saw lower profit growth in Asia, which has been an important earnings driver. The 6.7% increase in Manulife’s Asian operations was the slowest in at least two years, with Chief Executive Officer Roy Gori citing the “headwinds” of the protests in Hong Kong and new rules in Japan around corporate-owned life insurance products, which hurt sales.

Sun Life’s Asia business rose 2% from a year earlier, the slowest growth among its four main divisions, due to what CFO Strain called an “unfavorable experience” in its China joint venture and some investment-related issues.

“This quarter had more to do with some one-time things,” he said. “I don’t see anything that takes us off our thesis of Asia growing at 15%” in the medium term.

RBC Capital Markets analyst Darko Mihelic said in a note that Sun Life’s “Asia results were softer than expected and future earnings could be at risk due to coronavirus and Hong Kong unrest.”