Manulife Beats Estimates as Rising Markets Boost Wealth Unit

(Bloomberg) -- Manulife Financial Corp.’s wealth and asset-management unit got a lift from surging markets and the insurer’s focus on expanding the business, helping second-quarter profit beat analysts’ estimates.

Core earnings in the global wealth and asset-management business rose 50% to C$356 million ($285 million) in the second quarter, the Toronto-based company said Wednesday. The unit had net flows of C$8.6 billion in the quarter, up 69% from a year earlier, led by gains in the U.S. and Asia.

Manulife is focusing on expanding its wealth and asset-management business and its presence in Asia for its next leg of growth. The company is seeking to increase its Asian insurance and wealth businesses to half of company earnings by 2025, up from 40% last year. It’s also looking to generate three-quarters of its earnings from what it calls “high-potential businesses,” which includes the wealth and asset-management unit.

“We have a positive view on second-quarter 2021 results,” Darko Mihelic, an analyst at Royal Bank of Canada, wrote in a note to clients late Wednesday. Core earnings per share were “above our estimate and consensus as results in global wealth and asset-management, U.S. and Canada were good.”

Core earnings in Manulife’s Asia business rose 7.6% to C$526 million in the second quarter, helped by higher sales in Hong Kong. Those results trailed some analysts’ estimates, including Mihelic’s C$545 million projection, because of lower-than-forecast new business.

After taking a bite out of first-quarter earnings, interest-rate moves helped Manulife’s second-quarter results. The direct effect of equity markets, interest rates and variable annuities added C$217 million to earnings last quarter. That compares with those factors subtracting C$835 million from profit in the previous quarter.

Net income more than tripled to C$2.65 billion, or C$1.33 a share. Excluding some items, profit was 83 Canadian cents a share. Analysts estimated 78 Canadian cents, on average.

Manulife rose 1.8% to C$24.56 in Toronto. The shares have risen 8.4% this year, compared with a 17% gain for the S&P/TSX Composite Index.

Sun Life

Rival ​​​​​​Sun Life Financial Inc. also topped analysts’ estimates, helped by gains in its U.S. and Canadian businesses. Net income in the Toronto-based insurer’s domestic unit more than tripled from a year earlier to C$404 million in the second quarter, while net income in the U.S. rose 33% to C$157 million. Total profit, excluding some items, was C$1.50 a share. Analysts estimated C$1.47.

The company’s asset-management unit posted a mixed performance. While the business’s profit excluding some items rose 20% to C$311 million, the retail-focused MFS business reported C$7 billion of outflows, a result that National Bank of Canada analyst Gabriel Dechaine called “disappointing.” Sun Life’s SLC Management alternatives arm saw C$8 billion of inflows.

Sun Life incoming Chief Executive Officer Kevin Strain said in an interview that the outflows at MFS were due to “a handful of institutional investors” who took profits after a long stretch of gains.

The shares fell 0.5% to C$64.72. They’ve gained 14% this year.

The reopening of economies in the U.S. and Canada has been a double-edged sword for Sun Life. While the paring back of restrictions helps sales and credit performance, clients also have been using more of their benefits for long-delayed visits to dentists and doctors. Sun Life came out ahead on that front last quarter, with so-called experience gains adding C$99 million to earnings as the company paid out less for claims than expected.

Sun Life’s U.S. group insurance business saw positive mortality and morbidity trends, while the Canadian business saw increased claims related to mental health, Strain said.

“When you think about the pandemic and the recovery, it’s very specific to the country,” Strain said. “We saw very different things in Canada, the U.S. and Europe this quarter than we started to see in Southeast Asia and India, for example, which are still more solidly into the pandemic.”

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