Canadian life insurers prosper in second quarter

By Mathieu Carbasse | August 08 2016 01:32PM

Photo: Freepik

Manulife, Great-West and Industrial Alliance just announced their results for the quarter ended June 30, 2016. Despite plummeting interest rates and rising market volatility, two factors that stunted results in the sector, Manulife and Great-West saw net earnings grow, while Industrial Alliance checked its income decline after a difficult first quarter.

Canadian life insurers’ results varied widely in Q1 2016. Manulife reported 45% growth in net income while Industrial Alliance and Great-West Lifeco saw their net income slide. 

“Disappointing net income” for Manulife

For the second quarter of 2016, Manulife reported net income of $704 million, $104 million (+17 %) higher than in the corresponding period in 2015. Since early 2016, the net income attributed to shareholders reached $1.75 billion, versus $1.32 billion (+32.6 %) for the corresponding period in 2015.

Manulife generated core earnings of $833 million, a decline from the $902 million reported in 2015. Insurance sales grew to $914 million, 11% higher than those of Q2 2015. In Asia, insurance sales advanced 30%, vs a 28% decrease in Canada.

“While both core earnings and net income this quarter were disappointing, having been impacted by the sharp decline in interest rates and heightened market volatility, I am pleased with how resilient our underlying businesses remained. Our key drivers of growth are continuing to perform very well,” Donald Guloien, President and Chief Executive Officer stated.

In Canada, insurance sales slumped by 28%, dragged by the inherent variability in group benefits sales. Core earnings was $333 million, versus $303 million in Q2 2015 (+10 %). This $30 million increase comes from the improvement of technical results and higher wealth and asset management fee income.

Net earnings gain 8% at Great-West

For the same quarter, Great-West Lifeco reported net earnings of $671 million, compared with $659 million for the corresponding period of 2015, equal to growth of $51 million (+8 %). For the six months ended June 30, 2016, the insurer’s net earnings were $1.29 million, compared with $1.36 million for the corresponding period of 2015 (a 5% decline).

Insurance sales in the second quarter of 2016 edged up by 1% compared with the corresponding quarter in 2015, to reach $24.9 billion. Premiums and deposits at Great-West totalled $28.2 billion, representing an increase of 28% since the corresponding quarter of 2015.

In Canada, net earnings were $327 million for Q2 2016, versus $389 for the same quarter of 2015 (+6 %). For the first half of 2016, net earnings were $603 million, down from $607 million for the corresponding period in 2015. Total sales slid to $2.7 billion in the second quarter of 2016 from $3.0 billion in the second quarter of 2015, dragged by weaker sales in the wealth management unit. 

Rosy results for iA

For the second quarter ended June 30, 2016, Industrial Alliance reported net income of $139.5 million, compared with $142.2 million in the second quarter of 2015 (almost 2% lower). Note that the Q2 results of last year include a tax recovery. 

Assets under management were $121.9 billion, corresponding to growth of 4% in the second quarter (8% for 12 months), mainly fuelled by market growth. 

Premiums and deposits remained stable ($1.9 billion), reflecting strong results in the insurance sector, offset by the decrease in gross mutual fund sales.    

Sales grew strongly in retail insurance across all segments. Sales totalled $72.9 million (+18%), for gains of 11% in Canada and 35% in the United States. Adjustable premium disability sales, which continue to gain new markets in Canada, climbed 37%. For this sector, sales in Canada reached $48.4 million (including $5.2 million for adjustable disability) compared with $24.5 million in the United States.