Mr. Roy Gori reports
MANULIFE REPORTS 2Q19 NET INCOME AND CORE EARNINGS OF $1.5 BILLION
Today, Manulife Financial Corp. released its second-quarter 2019 results. Key highlights include:
Net income attributed to shareholders of $1.5 billion in 2Q19, up $0.2 billion from 2Q18
- Core earnings1 of $1.5 billion in 2Q19, in line with 2Q18
- Core ROE1 of 12.7% and ROE of 12.9% in 2Q19
- NBV1 of $0.5 billion in 2Q19, up 14%2 from 2Q18
- APE sales1 of $1.4 billion in 2Q19, up 7% from 2Q18
- Neutral WAM net flows1 in 2Q19 compared with net inflows of $0.1 billion in 2Q18
- Strong LICAT ratio3 of 144%
- Indications of neutral impact from the annual actuarial review on 3Q19 net income; including a neutral impact from LTC4
"We delivered solid core earnings and net income of $1.5 billion in the quarter, with double-digit core earnings growth in Asia," said Manulife President & Chief Executive Officer Roy Gori.
"We have continued to focus on executing our strategy, with capital released from portfolio optimization increasing to $3.7 billion," added Mr. Gori. "We have also taken steps to further strengthen Manulife's long-term growth opportunity in Asia, including entering into an asset management joint venture agreement in India."
Phil Witherington, Chief Financial Officer, said, "We delivered strong growth in new business value of 14% while expense growth was a modest 3%. Neutral net flows in our Global Wealth and Asset Management business were in line with the prior year, but improved markedly from the first quarter."
"We will complete our annual actuarial review in the third quarter, which includes a comprehensive study of our long-term care ("LTC") experience, and although work is still ongoing, preliminary indications suggest that the impact to net income in 3Q19 will be neutral in total and for LTC," added Mr. Witherington.
1Core earnings, core return on common shareholders' equity ("core ROE"), annualized premium equivalent ("APE") sales, new business value ("NBV") and net flows are non-GAAP measures. See "Performance and non-GAAP measures" below and in our Second Quarter 2019 Management's Discussion and Analysis ("2Q19 MD&A") for additional information.
2All 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 2Q19 MD&A for additional information.
3Life Insurance Capital Adequacy Test ("LICAT") ratio of The Manufacturers Life Insurance Company ("MLI").
4See "Caution regarding forward-looking statements" below. The impact of changes to the Ultimate Reinvestment Rate issued by the Canadian Actuarial Standards Board in July, 2019 is not part of our annual actuarial review and is reported separately. See Section A10 "Updates to the ultimate reinvestment rate" of our 2Q19 MD&A for additional information.
We continued to make progress on our portfolio optimization initiative, executing on transactions that result in a capital benefit of approximately $400 million.1 In the U.S., we completed two new reinsurance transactions on universal life blocks, and in Canada we completed the second phase of our segregated fund transfer program, resulting in additional customers converting their contracts to a less capital-intensive product which offers them increased flexibility and higher potential returns.
During the quarter, we continued to make improvements in how we interact with customers. In Asia, we launched an end-to-end online insurance platform in collaboration with DBS Bank for the Singapore market. In Canada, Manulife Bank launched the new digital All-In Banking package, which aims to help customers develop better financial habits and improve their financial well-being by leveraging leading artificial intelligence technology.
Quarterly ResultsYTD Results
($ millions, unless otherwise stated) 2Q19 2Q18 2019 2018
Net income attributed to shareholders $ 1,475 $ 1,262$3,651$2,634
Core earnings(1) $ 1,452 $ 1,431$3,000$2,734
Diluted earnings per common share ($) $ 0.73 $ 0.61$ 1.81$ 1.28
Diluted core earnings per common share ($)(1) $ 0.72 $ 0.70$ 1.48$ 1.33
Return on common shareholders' equity ("ROE") 12.9% 12.3% 16.4% 13.2%
Core ROE(1) 12.7% 14.0% 13.4% 13.7%
Expense efficiency ratio(1) 52.5% 51.2% 51.2% 51.6%
Asia new business value $ 364 $ 334$ 775$ 659
Canada new business value $ 65 $ 65$ 127$ 114
U.S. new business value $ 50 $ 12$ 96$ 22
Total new business value(1) $ 479 $ 411$ 998$ 795
Asia APE sales $ 915 $ 918$2,251$1,902
Canada APE sales $ 290 $ 198$ 551$ 488
U.S. APE sales $ 154 $ 129$ 297$ 242
Total APE sales(1) $ 1,359 $ 1,245$3,099$2,632
Wealth and asset management net flows ($ billions)(1) $ 0.0 $ 0.1$(1.4)$ 10.1
Wealth and asset management gross flows ($ billions)(1) $ 25.5 $ 29.1$ 53.4$ 65.6
Wealth and asset management assets under management and
administration ($ billions)(1) $ 653.1 $ 639.9$653.1$639.9
MLI's LICAT ratio 144% 132% 144% 132%
Financial leverage ratio 26.4% 29.4% 26.4% 29.4%
Book value per common share ($) $ 22.89 $ 20.32$22.89$20.32
Book value per common share excluding AOCI ($) $ 19.52 $ 17.68$19.52$17.68
(1)This item is a non-GAAP measure. See "Performance and non-GAAP measures" below and in our 2Q19 MD&A for additional information.
Reported net income attributed to shareholders of $1.5 billion in 2Q19, up $0.2 billion from 2Q18
The increase compared with 2Q18 was primarily driven by the non-recurrence of a $200 million restructuring charge taken in 2Q18. Higher gains from investment-related experience compared with 2Q18 were offset by charges from the direct impact of markets in 2Q19. Investment-related experience in 2Q19 reflected higher-than-expected returns (including fair value changes) on alternative long-duration assets ("ALDA") and strong credit experience. Charges related to the direct impact of markets were primarily driven by narrowing corporate spreads.
1See "Caution regarding forward-looking statements" below.
Achieved core earnings of $1.5 billion in 2Q19, in line with 2Q18
On a constant exchange rate basis, core earnings decreased 1% compared with 2Q18. In-force business growth in Asia and higher investment income in our surplus portfolio was more than offset by the non-recurrence of both a tax-related benefit and notably positive group insurance policyholder experience in Canada, as well as the impact of actions to improve the capital efficiency of our legacy businesses. Core earnings in 2Q19 included net policyholder experience charges of $35 million post-tax compared with gains of $11 million post-tax in 2Q18.
Achieved new business value ("NBV") of $479 million in 2Q19, an increase of 14% compared with 2Q18
In Asia, NBV increased 7% to $364 million driven by a more favourable business mix, partially offset by lower sales in Japan as explained below. In Canada, NBV of $65 million was in line with the prior year period as higher insurance sales were offset by business mix changes in group insurance and the withdrawal of certain capital-intensive annuity products. In the U.S., NBV nearly quadrupled to $50 million, primarily as a result of recent actions to improve margins, as well as a more favourable product mix.
Reported annualized premium equivalent ("APE") sales of $1.4 billion in 2Q19, an increase of 7% compared with 2Q18
In Asia, APE sales decreased 2% as growth in Hong Kong and Asia Other
1 was more than offset by lower sales in Japan. APE sales in Japan decreased 41% due to the temporary suspension of the sale of corporate-owned life insurance products related to expected changes to tax regulations. Hong Kong APE sales increased 40% driven by the success of recently-launched health insurance and participating products. In Canada, APE sales increased 46% due to a large-case group insurance sale and growth across our individual insurance business including living benefits, term and permanent life insurance product lines. In the U.S., APE sales increased 16% as a result of higher universal life and international sales.
Reported neutral Global Wealth and Asset Management net flows in 2Q19 compared with positive net flows of $0.1 billion in 2Q18
Net flows in Asia were $1.7 billion in 2Q19, up $0.1 billion from 2Q18, driven by lower retail redemptions, partially offset by lower gross flows2. Net flows in Canada were $0.1 billion in 2Q19, a decrease of $0.6 billion from 2Q18, driven by the redemption of a large-case retirement plan. Net flows in the U.S. were negative $1.8 billion in 2Q19, an improvement of $0.4 billion from 2Q18, primarily due to the non-recurrence of three large-case retirement plan redemptions in 2Q18.
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 8, 2019. For local and international locations, please call 416-340-2218 or toll free, North America 1-800-377-0758. Please call in ten 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 8, 2019 through November 8, 2019 by calling 905-694-9451 or 1-800-408-3053 (passcode: 6780956#).
The conference call will also be webcast through Manulife's website at 8:00 a.m. ET on August 8, 2019. You may access the webcast at: http://manulife.force.com/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 2019 Statistical Information Package is also available on the Manulife website at: http://manulife.force.com/Reports.
1Asia Other excludes Japan and Hong Kong.
2Gross flows is a non-GAAP measure. See "Performance and non-GAAP measures" below and in our 2Q19 MD&A for additional information.
We seek Safe Harbor.
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