Manulife reported net income of $0.7 billion for the second quarter of 2020. This is a decline of $0.7 billion compared to the same quarter last year. Core earnings for Q2 2020, however, were $1.6 billion, an increase of 5% over the second quarter of 2019.
Return on common shareholders' equity (ROE) was 5.5% in Q2 2020 compared to 12.9% for Q2 2019.
Manulife showed capital strength with a Life Insurance Capital Adequacy Test (LICAT) ratio of 155%.
Accelerated rollouts of digital tools and platforms
"In the face of ongoing uncertainty brought on by the COVID-19 pandemic, our teams across the globe continued to support the evolving needs of our customers, employees, and communities throughout a challenging second quarter. We've made meaningful investments over the last few years in Manulife's digital transformation and the strong digital capabilities that we have in place, coupled with the accelerated rollouts of digital tools and platforms, have enabled us to continue to provide quality service to our existing customers and to those seeking to purchase our products," said Manulife President & Chief Executive Officer Roy Gori.
Global Wealth and Asset Management business
Manulife’s Chief Financial Officer, Phil Witherington, underlined that the company’s Global Wealth and Asset Management business generated net inflows of $5.1 billion, which was driven by positive contributions from its institutional business. “New business value in our insurance segments was affected by COVID-19 related impacts; however we saw positive momentum in Asia APE (annualized premium equivalent) sales in the final month of the quarter which is encouraging," he said.
Witherington stated that “expense discipline is of even greater importance in the challenging operating conditions” faced by the company. By reducing core general expenses by 5% in Q2 2020 compared to the same quarter last year, Manulife delivered a 3.6 percentage point improvement in its expense efficiency ratio, he explained. “I am pleased to report that we expect to achieve our target of $1 billion of expense efficiencies by the end of 2020, two years ahead of schedule," he added.
Among Manulife’s highlights for the second quarter, the company noted that in Canada approximately 97% of its product shelf is accessible to customers virtually.
New business value
Manulife’s new business value (NBV) was $384 million for the second quarter of 2020. This is a decline of 22% compared with Q2 2019. In Canada in particular, NBV was $46 million, a decrease of 29% compared to the Q2 2019. This decrease is primarily due to lower sales volumes, says the company.
Annualized premium equivalent sales
In Canada, APE sales decreased 18% primarily driven by variability in the large-case group insurance market.
The company’s Global Wealth and Asset Management net inflows of $5.1 billion in the Q2 2020, compared with neutral net flows for the same quarter a year earlier. Net inflows in Canada were $8.4 billion in Q2 2020 compared with net inflows of $0.1 billion for the same period a year earlier. This reflects the funding of a $6.9 billion mandate from a new institutional client and the non-recurrence of a large-case retirement plan redemption in the second quarter, says Manulife.
Estimate for Q3 charge
Manulife has also estimated a third quarter of 2020 post-tax charge for the annual review of actuarial methods and assumptions. The company says that this review is not complete, but “preliminary indications suggest that there will be a net post-tax charge to net income attributed to shareholders of approximately $200 million…Assumptions being reviewed this year include lapse assumptions for Canada and Japan life insurance, certain mortality assumptions in all segments, a complete review of our Canada variable annuities assumptions, as well as certain methodology refinements,” says the company.