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COVID-19 hits Manulife’s first quarter earnings

By Kate McCaffery | May 07 2020 10:30AM

Photo: rawpixel.com

Core earnings tumbled 34 per cent during the first quarter of 2020 for Manulife Financial Corp. The insurer’s net income attributed to shareholders also dropped from $2.176-billion in the first quarter of 2019 to $1.296-billion during the first quarter of 2020, announced the company May 6

“The COVID-19 pandemic continues to disrupt economies and capital markets worldwide, and our operating conditions during the first quarter were understandably affected,” says Manulife’s president and CEO, Roy Gori. “We’ve taken significant actions to strengthen our capital ratios, reduce our leverage, reduce risk in our legacy business and tightly manage our expense base,” he adds. “I’m confident Manulife is well positioned to navigate this crisis and achieve ongoing success in the long term.”

Unfavourable market impacts

Core earnings dropped from $1.548-billion in the first quarter of 2019 to $1.028-billion in the first quarter of 2020. The company says the decrease in core earnings was driven by the unfavourable impact of markets on seed money investments in new segregated funds and mutual funds, the absence of core investment gains, lower new business volumes in Japan and unfavourable policy holder experience in North America, including unfavourable travel claims related to COVID-19. These were partially offset by in-force business growth in Asia, and higher fee income from higher average assets under management and administration in the company’s Global Wealth and Asset Management business.

The company’s LICAT ratio sits at 155 per cent, up from the 144 per cent reported at the end of the first quarter in 2019.

Global Wealth and Asset Management business

The company says its Global Wealth and Asset Management business, meanwhile, generated net inflows of $3.2-billion with positive contributions from all business lines. Net inflows in Canada were $2.8-billion in the first quarter of 2020, compared with net inflows of $2.1-billion in the first quarter of 2019, driven by higher gross flows into institutional asset management equity mandates. These were partially offset by lower new plan sales and higher retail redemptions amid equity market declines in March.

The company’s board of directors also declared common and preferred share dividends in its announcement May 6. The company will pay a quarterly shareholders’ dividend of $0.28 per share on common shares of the company, payable after June 19, 2020 to shareholders of record at the close of business on May 19, 2020. Preferred share dividends ranging between $0.14 per share and $0.35 per share will be paid to preferred shareholders on or after June 19 to shareholders of record at the close of business on May 19.

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