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This earnings news
release for Manulife Financial Corporation ("Manulife" or the
"Company") should be read in conjunction with the Company's Second
Quarter 2020 Report to Shareholders, including our unaudited
Interim Consolidated Financial Statements for the three and six
months ended June 30, 2020, prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB"), which are
available on our website at
www.manulife.com/en/investors/results-and-reports. Additional
information relating to the Company is available on the SEDAR
website at http://www.sedar.com and on the U.S. Securities and
Exchange Commission's ("SEC") website at
http://www.sec.gov.
|
TORONTO, Aug. 5, 2020 /CNW/ - Today, Manulife
announced its 2Q20 results. Key highlights include:
- Net income attributed to shareholders of $0.7 billion in 2Q20, down $0.7 billion from 2Q19
- Core earnings1 of $1.6
billion in 2Q20, up 5%2 from 2Q19
- Strong LICAT ratio3 of 155%
- Core ROE1 of 12.2% and ROE of 5.5% in 2Q20
- NBV1 of $384 million
in 2Q20, down 22% from 2Q19
- APE sales1 of $1.2
billion in 2Q20, down 15% from 2Q19
- WAM net inflows1 of $5.1
billion in 2Q20 compared with neutral net flows in 2Q19
- Expense efficiency ratio1 of 48.9% in 2Q20, a
favourable decline of 3.6 percentage points from 2Q19
"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.
"I am confident that Manulife is well positioned to navigate
this challenging new environment. Our balance sheet and capital
levels remain strong, we continue to make solid progress against
our five priorities4 and we delivered solid core
earnings of $1.6 billion, up 5% from
the prior year quarter amid a challenging operating environment,
which highlights the diversity and resilience of our businesses,"
added Mr. Gori.
Phil Witherington, Chief
Financial Officer, said, "Our Global Wealth and Asset Management
business generated net inflows of $5.1
billion, driven by positive contributions from our
institutional business. New business value in our insurance
segments was affected by COVID-19 related impacts; however we saw
positive momentum in Asia APE sales in the final month of the
quarter which is encouraging."
_____________________
|
1
|
Core earnings, core
return on common shareholders' equity ("core ROE"), new business
value ("NBV"), annualized premium equivalent ("APE") sales, net
flows and expense efficiency ratio are non-GAAP measures. See
"Performance and Non-GAAP Measures" below and in our Second Quarter
2020 Management's Discussion and Analysis ("2Q20 MD&A") for
additional information.
|
2
|
All percentage growth
/ declines in financial metrics in this news release are reported
on a constant exchange rate basis. Constant exchange rate basis
excludes the impact of currency fluctuations and is a non-GAAP
measure. See "Performance and Non-GAAP Measures" below and in our
2Q20 MD&A for additional information.
|
3
|
Life Insurance
Capital Adequacy Test ("LICAT") ratio of The Manufacturers Life
Insurance Company ("MLI").
|
4
|
Our strategic
priorities include Portfolio Optimization, Expense Efficiency,
Accelerate Growth, Digital Customer Leader and High Performing
Team. For more information, please refer to "Strategic priorities
progress update" in our 2019 Annual Report.
|
"Expense discipline is of even greater importance in the
challenging operating conditions that we face and, by reducing core
general expenses by 5% versus the prior year quarter, we delivered
a 3.6 percentage point improvement in our expense efficiency ratio.
Our expense efficiency program continues to progress well, and 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 schedule1," added
Mr. Witherington.
BUSINESS HIGHLIGHTS:
In 2Q20, we continued to leverage and enhance our digital
capabilities, benefiting efforts to support our customers during
the COVID-19 pandemic. In Asia, we furthered our commitment to
digital enhancements and expanded our distribution capabilities,
with approximately 97%2 of our product shelf now
accessible to customers through non-face-to-face solutions. In
addition, we continued to expand our agency force, growing our
number of agents by 35% year-over-year. In Canada, we
continued to improve the client experience, with approximately 97%
of our product shelf accessible to customers virtually. We also
expanded our partnership with Akira Health to provide a broader
range of online medical services to our insurance clients to better
support their health and wellness. In the U.S., approximately 80%
of our product shelf is available to customers through virtual
solutions. We launched JH eApp, a digital new business platform to
simplify and accelerate the life insurance purchase experience and
also launched a new, fully underwritten term life product which
enables customers to purchase up to US$1
million in life insurance coverage digitally. In our Global
Wealth and Asset Management business, we launched a new retirement
planner tool in the U.S. to deliver an innovative and engaging way
for customers to visualize and plan for their retirement. We also
completed the formation of our previously announced joint venture
with Mahindra Finance in India.
FINANCIAL HIGHLIGHTS:
|
Quarterly
Results
|
YTD
Results
|
($ millions, unless
otherwise stated)
|
|
2Q20
|
|
2Q19
|
|
2020
|
|
2019
|
Profitability:
|
|
|
|
|
|
|
|
|
Net income attributed
to shareholders
|
$
|
727
|
$
|
1,475
|
$
|
2,023
|
$
|
3,651
|
Core
earnings(1)
|
$
|
1,561
|
$
|
1,452
|
$
|
2,589
|
$
|
3,000
|
Diluted earnings per
common share ($)
|
$
|
0.35
|
$
|
0.73
|
$
|
1.00
|
$
|
1.81
|
Diluted core earnings
per common share ($)(1)
|
$
|
0.78
|
$
|
0.72
|
$
|
1.29
|
$
|
1.48
|
Return on common
shareholders' equity ("ROE")
|
|
5.5%
|
|
12.9%
|
|
7.9%
|
|
16.4%
|
Core
ROE(1)
|
|
12.2%
|
|
12.7%
|
|
10.2%
|
|
13.4%
|
Expense efficiency
ratio(1)
|
|
48.9%
|
|
52.5%
|
|
53.9%
|
|
51.2%
|
Performance:
|
|
|
|
|
|
|
|
|
Asia new business
value
|
$
|
298
|
$
|
364
|
$
|
654
|
$
|
775
|
Canada new
business value
|
$
|
46
|
$
|
65
|
$
|
123
|
$
|
127
|
U.S. new business
value
|
$
|
40
|
$
|
50
|
$
|
76
|
$
|
96
|
Total new business
value(1)
|
$
|
384
|
$
|
479
|
$
|
853
|
$
|
998
|
Asia APE
sales
|
$
|
784
|
$
|
915
|
$
|
1,868
|
$
|
2,251
|
Canada APE
sales
|
$
|
238
|
$
|
290
|
$
|
614
|
$
|
551
|
U.S. APE
sales
|
$
|
154
|
$
|
154
|
$
|
295
|
$
|
297
|
Total APE
sales(1)
|
$
|
1,176
|
$
|
1,359
|
$
|
2,777
|
$
|
3,099
|
Wealth and asset
management net flows ($ billions)(1)
|
$
|
5.1
|
$
|
0.0
|
$
|
8.3
|
$
|
(1.4)
|
Wealth and asset
management gross flows ($ billions)(1)
|
$
|
33.1
|
$
|
25.5
|
$
|
71.2
|
$
|
53.4
|
Wealth and asset
management assets under management and administration ($
billions)(1)
|
$
|
696.9
|
$
|
653.1
|
$
|
696.9
|
$
|
653.1
|
Financial
Strength:
|
|
|
|
|
|
|
|
|
MLI's LICAT
ratio
|
|
155%
|
|
144%
|
|
155%
|
|
144%
|
Financial leverage
ratio
|
|
26.0%
|
|
26.4%
|
|
26.0%
|
|
26.4%
|
Book value per common
share ($)
|
$
|
25.14
|
$
|
22.89
|
$
|
25.14
|
$
|
22.89
|
Book value per common
share excluding AOCI ($)
|
$
|
20.36
|
$
|
19.52
|
$
|
20.36
|
$
|
19.52
|
(1)
|
This item is a
non-GAAP measure. See "Performance and Non-GAAP Measures" below and
in our 2Q20 MD&A for additional information
|
________________
|
1
|
See "Caution
regarding forward-looking statements" below.
|
2
|
This represents the
percentage of 2019 APE sales that are currently available for sale
via non-face-to-face methods.
|
PROFITABILITY:
Reported net income attributed to shareholders of
$0.7 billion in 2Q20, down
$0.7 billion from 2Q19
Net
income attributed to shareholders includes 2Q20 core earnings, as
well as charges from investment-related experience and the direct
impact of interest rates, driven by the narrowing corporate spreads
and the steepening of the yield curve in the U.S., partially offset
by gains from the sale of available-for-sale ("AFS") bonds held in
Corporate and Other, and gains from the direct impact of equity
markets and variable annuity guarantee liabilities from a global
equity market rebound. Investment-related experience in 2Q20
reflected lower-than-expected returns (including fair value
changes) on our alternative long-duration asset ("ALDA") portfolio,
including private equities, real estate and oil and
gas.
Achieved core earnings of $1.6
billion in 2Q20, an increase of 5% compared with
2Q19
The increase in core earnings in 2Q20 compared with
2Q19 was driven by favourable policyholder experience, the
favourable impact of markets on seed money investments in
segregated funds and mutual funds, and the impact of in-force
business growth in Asia. These
items were partially offset by the absence of core investment
gains1 in the quarter (compared with gains in the prior
year quarter), lower new business volumes, primarily due to lower
levels of activity related to COVID-19, and lower investment income
in Corporate and Other.
Estimate a third quarter of 2020 ("3Q20") post-tax charge of
approximately $200 million for the
annual review of actuarial methods and assumptions
In 3Q20,
we will complete our annual review of actuarial methods and
assumptions. While this review is not complete, preliminary
indications suggest that there will be a net post-tax charge to net
income attributed to shareholders of approximately $200 million in 3Q20.2 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.
BUSINESS PERFORMANCE:
New business value ("NBV") of $384
million in 2Q20, a decrease of 22% compared with
2Q19
In Asia, NBV decreased 21% to $298 million primarily due to a decrease in APE
sales in Hong Kong, Japan and Asia
Other3 and a decline in interest rates in
Hong Kong, partially offset by a
more favourable business mix in Asia
Other. In Canada, NBV of
$46 million was down 29% from 2Q19,
primarily due to lower sales volumes. In the U.S., NBV of
$40 million was down 22% from 2Q19,
primarily due to the impact of lower interest rates and lower sales
due to COVID-19.
Annualized premium equivalent ("APE") sales of $1.2 billion in 2Q20, a decrease of 15% compared
with 2Q19
In Asia, APE sales decreased 17% mainly due to the
adverse impact of COVID-19. Sales improved in the latter part of
the quarter following the relaxation of some containment measures
in certain markets in Asia. As a
result, APE sales in June 2020
increased 4% compared with the same period of 2019. Hong Kong APE
sales decreased 8% driven by lower sales to mainland Chinese
visitors due to COVID-19 travel restrictions, partially offset by
an increase in demand from local customers. Japan APE sales
decreased 18% due to a nationwide COVID-19 state of emergency in
April and May, which restricted the mobility of our distributors
and customers. Asia Other APE sales decreased 21% as COVID-19
containment measures were imposed across numerous markets,
partially offset by an increase in sales in mainland China and Vietnam, where COVID-19 containment measures
were gradually relaxed during 2Q20. In Canada, APE sales decreased 18% primarily
driven by variability in the large-case group insurance market. In
the U.S., APE sales declined 3% compared with the prior year
quarter due to the net impact of COVID-19.
Reported Global Wealth and Asset Management net inflows of
$5.1 billion in 2Q20, compared with
neutral net flows in 2Q19
Net inflows in Asia were neutral in 2Q20, compared with net
inflows of $1.7 billion in 2Q19,
driven by higher redemptions of retail funds in mainland
China and higher redemptions in
institutional asset management. Net inflows in Canada were $8.4
billion in 2Q20 compared with net inflows of $0.1 billion in 2Q19, reflecting 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 2Q19. Net outflows in the U.S. were
$3.3 billion in 2Q20 compared with
net outflows of $1.8 billion in 2Q19,
driven by outflows in retirement, from the redemption of a
large-case plan, and outflows in retail, from portfolio rebalancing
by several large advisors. These outflows were partially offset by
lower institutional redemptions.
_____________________
|
1
|
This item is a
non-GAAP measure. See "Performance and non-GAAP measures" below and
in our 2Q20 MD&A for additional information.
|
2
|
See "Caution
regarding forward-looking statements" below.
|
3
|
Asia Other excludes
Hong Kong and Japan.
|
QUARTERLY EARNINGS RESULTS CONFERENCE CALL
Manulife Financial Corporation will host a Second Quarter
Earnings Results Conference Call at 8:00
a.m. ET on August 6, 2020. For
local and international locations, please call 416-406-0743 or toll
free, North America 1-800-898-3989
(Passcode: 4952519#). Please call in 15 minutes before the call
starts. You will be required to provide your name and organization
to the operator. A replay of this call will be available by
11:00 a.m. ET on August 6, 2020 through November 6, 2020 by calling 905-694-9451 or
1-800-408-3053 (passcode: 3258921#).
The conference call will also be webcast through Manulife's
website at 8:00 a.m. ET on
August 6, 2020. You may access the
webcast at: manulife.com/en/investors/results-and-reports. An
archived version of the webcast will be available on the website
following the call at the same URL as above.
The Second Quarter 2020 Statistical Information Package is also
available on the Manulife website
at: www.manulife.com/en/investors/results-and-reports.
EARNINGS:
The following table reconciles core earnings to net income
attributed to shareholders:
|
Quarterly
Results
|
YTD
Results
|
($
millions)
|
|
2Q20
|
|
1Q20
|
|
2Q19
|
|
2020
|
|
2019
|
Core
earnings(1)
|
|
|
|
|
|
|
|
|
|
|
Global Wealth and
Asset Management
|
$
|
238
|
$
|
250
|
$
|
242
|
$
|
488
|
$
|
475
|
Asia
|
|
489
|
|
491
|
|
471
|
|
980
|
|
991
|
Canada
|
|
342
|
|
237
|
|
312
|
|
579
|
|
595
|
U.S.
|
|
602
|
|
416
|
|
441
|
|
1,018
|
|
916
|
Corporate and Other
(excluding core investment gains)
|
|
(110)
|
|
(366)
|
|
(114)
|
|
(476)
|
|
(177)
|
Core investment
gains(1)
|
|
-
|
|
-
|
|
100
|
|
-
|
|
200
|
Total core
earnings
|
$
|
1,561
|
$
|
1,028
|
$
|
1,452
|
$
|
2,589
|
$
|
3,000
|
Items excluded
from core earnings:
Investment-related
experience outside of core earnings
|
|
(916)
|
|
(608)
|
|
146
|
|
(1,524)
|
|
473
|
Direct impact of equity
markets and interest rates and variable annuity guarantee
liabilities
|
|
73
|
|
792
|
|
(144)
|
|
865
|
|
105
|
Reinsurance
transactions
|
|
9
|
|
12
|
|
63
|
|
21
|
|
115
|
Tax-related items and
other
|
|
-
|
|
72
|
|
(42)
|
|
72
|
|
(42)
|
Net income
attributed to shareholders
|
$
|
727
|
$
|
1,296
|
$
|
1,475
|
$
|
2,023
|
$
|
3,651
|
(1)
|
This item is a
non-GAAP measure. See "Performance and Non-GAAP Measures" below and
in our 2Q20 MD&A for additional information.
|
PERFORMANCE AND NON-GAAP MEASURES:
We use a number of non-GAAP financial measures to measure
overall performance and to assess each of our businesses. A
financial measure is considered a non-GAAP measure if it is
presented other than in accordance with generally accepted
accounting principles used for the Company's audited financial
statements. Non-GAAP measures referenced in this news release
include: core earnings; core ROE; diluted core earnings per common
share; core investment gains; core general expenses; expense
efficiency ratio; APE sales; new business value; gross flows; net
flows; assets under management and administration; average assets
under management and administration and constant exchange rate
basis (measures that are reported on a constant exchange rate basis
include percentage growth/decline in core earnings, APE sales, new
business value, and gross flows). Non-GAAP financial measures are
not defined terms under GAAP and, therefore, are unlikely to be
comparable to similar terms used by other issuers. Therefore, they
should not be considered in isolation or as a substitute for any
other financial information prepared in accordance with GAAP. For
more information on non-GAAP financial measures, including those
referred to above, see "Performance and Non-GAAP Measures" in our
Second Quarter 2020 MD&A and 2019 MD&A.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
From time to time, Manulife makes written and/or oral
forward-looking statements, including in this document. In
addition, our representatives may make forward-looking statements
orally to analysts, investors, the media and others. All such
statements are made pursuant to the "safe harbour" provisions of
Canadian provincial securities laws and the U.S. Private Securities
Litigation Reform Act of 1995.
The forward-looking statements in this document include, but are
not limited to, statements with respect to our business continuity
plans and measures implemented in response to the COVID-19 pandemic
and its expected impact on our businesses, operations, earnings and
results, our expense efficiency program and the completion of our
annual review of actuarial methods and assumptions, and also relate
to, among other things, our objectives, goals, strategies,
intentions, plans, beliefs, expectations and estimates, and can
generally be identified by the use of words such as "may", "will",
"could", "should", "would", "likely", "suspect", "outlook",
"expect", "intend", "estimate", "anticipate", "believe", "plan",
"forecast", "objective", "seek", "aim", "continue", "goal",
"restore", "embark" and "endeavour" (or the negative thereof) and
words and expressions of similar import, and include statements
concerning possible or assumed future results. Although we believe
that the expectations reflected in such forward-looking statements
are reasonable, such statements involve risks and uncertainties,
and undue reliance should not be placed on such statements and they
should not be interpreted as confirming market or analysts'
expectations in any way.
Certain material factors or assumptions are applied in making
forward-looking statements and actual results may differ materially
from those expressed or implied in such statements.
Important factors that could cause actual results to differ
materially from expectations include but are not limited to:
general business and economic conditions (including but not limited
to the performance, volatility and correlation of equity markets,
interest rates, credit and swap spreads, currency rates, investment
losses and defaults, market liquidity and creditworthiness of
guarantors, reinsurers and counterparties); the severity, duration
and spread of the COVID-19 outbreak, as well as actions that have
been or may be taken by governmental authorities to contain
COVID-19 or to treat its impact; changes in laws and regulations;
changes in accounting standards applicable in any of the
territories in which we operate; changes in regulatory capital
requirements; our ability to execute strategic plans and changes to
strategic plans; downgrades in our financial strength or credit
ratings; our ability to maintain our reputation; impairments of
goodwill or intangible assets or the establishment of provisions
against future tax assets; the accuracy of estimates relating to
morbidity, mortality and policyholder behaviour; the accuracy of
other estimates used in applying accounting policies, actuarial
methods and embedded value methods; our ability to implement
effective hedging strategies and unforeseen consequences arising
from such strategies; our ability to source appropriate assets to
back our long-dated liabilities; level of competition and
consolidation; our ability to market and distribute products
through current and future distribution channels; unforeseen
liabilities or asset impairments arising from acquisitions and
dispositions of businesses; the realization of losses arising from
the sale of investments classified as available-for-sale; our
liquidity, including the availability of financing to satisfy
existing financial liabilities on expected maturity dates when
required; obligations to pledge additional collateral; the
availability of letters of credit to provide capital management
flexibility; accuracy of information received from counterparties
and the ability of counterparties to meet their obligations; the
availability, affordability and adequacy of reinsurance; legal and
regulatory proceedings, including tax audits, tax litigation or
similar proceedings; our ability to adapt products and services to
the changing market; our ability to attract and retain key
executives, employees and agents; the appropriate use and
interpretation of complex models or deficiencies in models used;
political, legal, operational and other risks associated with our
non-North American operations; acquisitions and our ability to
complete acquisitions including the availability of equity and debt
financing for this purpose; the disruption of or changes to key
elements of the Company's or public infrastructure systems;
environmental concerns; our ability to protect our intellectual
property and exposure to claims of infringement; and our inability
to withdraw cash from subsidiaries.
Additional information about material risk factors that could
cause actual results to differ materially from expectations and
about material factors or assumptions applied in making
forward-looking statements may be found under "Risk Management",
"Risk Factors" and "Critical Actuarial and Accounting Policies" in
the Management's Discussion and Analysis in our most recent annual
report, under "Risk Management and Risk Factors Update" and
"Critical Actuarial and Accounting Policies" in the Management's
Discussion and Analysis in our most recent interim report, in the
"Risk Management" note to the consolidated financial statements in
our most recent annual and interim reports and elsewhere in our
filings with Canadian and U.S. securities regulators.
The forward-looking statements in this document are, unless
otherwise indicated, stated as of the date hereof and are presented
for the purpose of assisting investors and others in understanding
our financial position and results of operations, our future
operations, as well as our objectives and strategic priorities, and
may not be appropriate for other purposes. We do not undertake to
update any forward-looking statements, except as required by
law.
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