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Manulife Financial Corp
Symbol MFC
Shares Issued 1,948,811,715
Close 2020-02-12 C$ 26.62
Recent Sedar Documents

Manulife Financial earns $5.6B in 2019, boosts dividend

2020-02-12 17:29 ET - News Release

Mr. Roy Gori reports

MANULIFE REPORTS 2019 NET INCOME OF $5.6-BILLION AND CORE EARNINGS OF $6.0-BILLION, SOLID GROWTH IN ASIA AND A DIVIDEND INCREASE OF 12%

Manulife Financial Corp. has released its 2019 and fourth quarter 2019 results. Key highlights include:

  • Net income attributed to shareholders of $5.6-billion in 2019, up $800-million from 2018, and $1.2-billion in fourth quarter 2019, up $600-million from fourth quarter 2018;
  • Core earnings (1) of $6.0-billion in 2019, up 5 per cent (2) from 2018, and $1.5-billion in fourth quarter 2019, up 10 per cent from fourth quarter 2018;
  • Core ROE (return on equity) (1) of 13.1 per cent in 2019 and 12.5 per cent in fourth quarter 2019, and ROE of 12.2 per cent in 2019 and 10.3 per cent in fourth quarter 2019;
  • NBV (new business value) (1) of $2.0-billion in 2019, up 15 per cent from 2018, and $500-million in fourth quarter 2019, up 4 per cent from fourth quarter 2018;
  • APE (annualized premium equivalent) sales (1) of $6.0-billion in 2019, up 7 per cent from 2018, and $1.5-billion in fourth quarter 2019, up 1 per cent from fourth quarter 2018;
  • WAM (wealth and asset management) net outflows (1) of $900-million in 2019 compared with net inflows of $1.6-billion in 2018 and net inflows of $4.9-billion in fourth quarter 2019 compared with net outflows of $9.0-billion in fourth quarter 2018;
  • Leverage ratio of 25.1 per cent on Dec. 31, 2019, down 3.5 percentage points from Dec. 31, 2018;
  • Strong LICAT (life insurance capital adequacy test) ratio (3) of 140 per cent;
  • As of Dec. 31, 2019, released a total of $5.1-billion of capital through portfolio optimization initiatives, achieving the medium-term target three years ahead of schedule.

"We achieved solid operating results in 2019, delivered top-quartile shareholder returns and made important progress towards our bold ambition of becoming the most digital, customer-centric global company in our industry. Core ROE of 13.1 per cent was strong, and core earnings increased to over $6.0-billion, driven by continued double-digit growth in Asia," said Manulife president and chief executive officer Roy Gori.

"Our insurance businesses delivered 15-per-cent growth in new business value, and while full-year net flows in our global wealth and asset management business were impacted by a challenging operating environment, we generated net inflows of $4.9-billion in the fourth quarter with positive contributions from all geographies and business lines," added Mr. Gori.

Phil Witherington, chief financial officer, said: "We continued to make significant progress improving the capital efficiency of our legacy businesses and released a total of $5.1-billion of capital as of fourth quarter 2019, achieving our 2022 target three years ahead of schedule. We are also pleased to have achieved our medium-term leverage target of 25 per cent, after taking into account the $500-million redemption of debentures in January, 2020.

"On the basis of our strong operating results and outlook for growth going forward, the board today approved a 12-per-cent increase to our dividend," added Mr. Witherington.

(1) Core earnings, core return on common shareholders' equity, new business value, annualized premium equivalent sales and net flows are non-generally accepted accounting principle measures. See "Performance and Non-GAAP Measures" in the company's 2019 management's discussion and analysis 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" in the company's 2019 MD&A for additional information.

(3) Life insurance capital adequacy test ratio of The Manufacturers Life Insurance Company (MLI).

2019 business highlights

The company completed a number of initiatives in 2019 to improve the capital efficiency of its legacy businesses. In 2019, the company entered into four reinsurance transactions covering legacy universal life, par and fixed annuity blocks; renegotiated reinsurance agreements in Canada on its term and universal life blocks; entered into real estate transactions to transfer the lease renewal risk of real estate backing its legacy business; launched an annuity guaranteed minimum withdrawal benefit offer program in the United States; sold alternative long-duration assets; and introduced the second phase of its segregated fund transfer program in Canada. These initiatives released $2.1-billion in capital in 2019.

The company also delivered a number of digital, customer-centric initiatives. In Canada, its introduced the group insurance Manulife vitality program, designed to encourage its group benefit participants to make healthy choices using proven behavioural science. In Asia, the company launched its ManulifeMOVE behavioural insurance program in Vietnam and Cambodia, and enhanced its e-claims platform in Hong Kong, Japan and Vietnam. In the United States, it became the first company to offer life insurance designed specifically for individuals living with diabetes with the launch of John Hancock Aspire.

                                  FINANCIAL HIGHLIGHTS
                          ($ millions, unless otherwise stated)
                                                                Quarterly results       Full-year results
                                                              Q4 2019     Q4 2018        2019        2018
Profitability
Net income attributed to shareholders                          $1,228        $593      $5,602      $4,800
Core earnings (1)                                               1,477       1,337       6,004       5,610
Diluted earnings per common share ($)                            0.61        0.28        2.77        2.33
Diluted core earnings per common share ($) (1)                   0.73        0.65        2.97        2.74
Return on common shareholders' equity (ROE)                      10.3%        5.3%       12.2%       11.6%
Core ROE (1)                                                     12.5%       12.5%       13.1%       13.7%
Expense efficiency ratio (1)                                     54.2%       55.2%       52.0%       52.0%
                                                              -------     -------     -------     -------
Growth
Asia new business value                                           390         402       1,595       1,443
Canada new business value                                          59          51         237         207
U.S. new business value                                            77          48         218          98
Total new business value (1)                                      526         501       2,050       1,748
Asia APE sales                                                    975       1,040       4,278       4,012
Canada APE sales                                                  271         277       1,057         975
U.S. APE sales                                                    249         152         702         553
Total APE sales (1)                                             1,495       1,469       6,037       5,540
Wealth and asset management net flows ($ billions) (1)            4.9        (9.0)       (0.9)        1.6
Wealth and asset management gross flows ($ billions) (1)         32.9        26.3       114.2       119.0
Wealth and asset management assets under management and
administration ($ billions) (1)                                 681.4       608.8       681.4       608.8
                                                              -------     -------     -------     -------
Financial strength
MLI's LICAT ratio                                                 140%        143%        140%        143%
Financial leverage ratio                                         25.1%       28.6%       25.1%       28.6%
Book value per common share ($)                                 23.25       21.38       23.25       21.38
Book value per common share excluding AOCI ($)                  19.94       18.23       19.94       18.23
                                                              =======     =======     =======     =======

(1) This item is a non-generally accepted accounting principle measure. See "Performance and 
Non-GAAP Measures" in the company's 2019 management's discussion and analysis for additional 
information.

Profitability

Reported net income attributed to shareholders of $5.6-billion in 2019, an increase of $800-million compared with 2018, and $1.2-billion in fourth quarter 2019, an increase of $600-million compared with fourth quarter 2018.

The $800-million increase in net income attributed to shareholders in 2019 compared with 2018 was due to growth in core earnings of $400-million, the non-recurrence of a 2018 restructuring charge and higher investment-related experience gains. The direct impact of markets was a charge of $800-million in 2019 and a charge of $900-million in 2018. The 2019 amount included a $500-million charge related to updated ultimate reinvestment rate assumptions issued by the Canadian Actuarial Standards Board.

The $600-million increase in net income attributed to shareholders in fourth quarter 2019 compared with fourth quarter 2018 was primarily driven by $300-million higher investment-related experience and a lower charge of $300-million related to the direct impact of markets.

The company achieved core earnings of $6.0-billion in 2019, an increase of 5 per cent compared with 2018, and $1.5-billion in fourth quarter 2019, an increase of 10 per cent compared with fourth quarter 2018.

The increase in core earnings in 2019 compared with 2018 was driven by in-force growth in Asia and global wealth and asset management, higher new business, and higher investment income and the non-recurrence of 2018 market losses on seed money investments in the company's surplus portfolio. These items were partially offset by the impact on earnings of actions taken over the last 12 months to improve the capital efficiency of the company's legacy businesses, unfavourable policyholder experience and the impact of lower new business volumes in Japan.

The increase in core earnings in fourth quarter 2019 compared with fourth quarter 2018 was primarily driven by in-force and new business growth in the United States, Hong Kong and Asia other (1), growth in global wealth and asset management, and the non-recurrence of market losses on seed money investments in the company's surplus portfolio, partially offset by unfavourable policyholder experience in Canada and the United States, lower new business volumes in Japan, and the impact on earnings of actions on legacy businesses as noted herein.

Business growth

The company achieved new business value of $2.0-billion in 2019, an increase of 15 per cent compared with 2018, and $526-million in fourth quarter 2019, an increase of 4 per cent compared with fourth quarter 2018.

NBV was $2.0-billion in 2019, an increase of 15 per cent compared with 2018. In Asia, NBV increased 8 per cent to $1,595-million with growth in Hong Kong and Asia other, partially offset by a decline in Japan sales. In Canada, NBV of $237-million was up 14 per cent from 2018, driven by higher individual insurance sales. In the U.S., NBV doubled to $218-million, primarily as a result of recent actions to improve margins, as well as higher sales and a more favourable product mix.

NBV was $526-million in fourth quarter 2019, an increase of 4 per cent compared with fourth quarter 2018. In Asia, NBV decreased 4 per cent to $390-million, reflecting a decline in Japan sales, partially offset by higher sales in Hong Kong and volume growth and a more favourable business mix in Asia other. In Canada, NBV increased 16 per cent to $59-million, driven by higher individual insurance sales and a more favourable business mix in group insurance. In the U.S., NBV increased 61 per cent to $77-million, primarily as a result of higher sales.

The company reported annualized premium equivalent sales of $6.0-billion in 2019, an increase of 7 per cent compared with 2018, and $1.5-billion in fourth quarter 2019, an increase of 1 per cent compared with fourth quarter 2018.

APE sales were $6.0-billion in 2019, an increase of 7 per cent compared with 2018. In Asia, APE sales increased 4 per cent as double-digit growth in Hong Kong and Asia other was partially offset by lower sales in Japan due to a change in tax rules on the corporate-owned life insurance (COLI) product. In Canada, APE sales increased 8 per cent driven by higher Manulife par and small and mid-case group insurance sales, partially offset by variability in the large-case group insurance market. In the U.S., APE sales increased 24 per cent driven by domestic and international universal life sales.

APE sales were $1.5-billion in fourth quarter 2019, an increase of 1 per cent compared with fourth quarter 2018. In Asia, APE sales decreased 8 per cent as growth in Hong Kong and Asia other was more than offset by the impact of tax changes to COLI product sales in Japan. In Canada, APE sales decreased 2 per cent as higher Manulife par and small-case group insurance sales were more than offset by variability in the large-case group insurance market. In the U.S., APE sales increased 64 per cent, driven by growth in domestic and international universal life sales. Higher domestic universal life sales included the benefit of sales in advance of anticipated regulatory changes.

(1) Asia other excludes Japan and Hong Kong.

The company reported global wealth and asset management net outflows of $900-million in 2019, compared with net inflows of $1.6-billion in 2018, and net inflows of $4.9-billion in fourth quarter 2019 compared with net outflows of $9.0-billion in fourth quarter 2018.

Net outflows were $900-million in 2019, compared with net inflows of $1.6-billion in 2018. Net inflows in Asia were $4.8-billion in 2019, compared with net inflows of $5.7-billion in 2018, driven by lower gross flows (1) and higher redemptions in institutional asset management, partially offset by lower retail redemptions. Net outflows in Canada were $3.6-billion in 2019 compared with net inflows of $2.0-billion in 2018 driven by the decision by one institutional client in third quarter 2019 to internalize the management of several large, primarily fixed-income, mandates and the redemption of a large-case retirement plan in second quarter 2019, partially offset by strong retail net inflows. Net outflows in the U.S. were $2.0-billion in 2019 compared with net outflows of $6.1-billion in 2018, primarily due to lower retail redemptions amid improved equity market returns and the redemption of three large-case retirement plans in second quarter 2018.

Net inflows were $4.9-billion in fourth quarter 2019 compared with net outflows of $9.0-billion in fourth quarter 2018. Net inflows in Asia were $200-million in fourth quarter 2019 compared with $1.1-billion in fourth quarter 2018. The decrease was driven by higher redemptions and lower gross flows in institutional asset management, partially offset by higher net inflows in retail. Net inflows in Canada were $1.0-billion in fourth quarter 2019 compared with net outflows of $700-million in fourth quarter 2018. The increase was driven by continued sales momentum across the product lineup and lower redemptions in retail, as well as the financing of several large fixed-income mandates in institutional asset management. Net inflows in the U.S. were $3.7-billion in fourth quarter 2019 compared with net outflows of $9.4-billion in fourth quarter 2018 and represented the fourth consecutive quarter of growth. The growth compared with fourth quarter 2018 was driven by lower redemptions in retail amid improved equity market returns and higher gross flows from all business lines.

Quarterly earnings results conference call

Manulife Financial will host a fourth quarter and year-end 2019 earnings results conference call at 8 a.m. ET on Feb. 13, 2020. For local and international locations, please call 416-340-2218 or toll-free North America 1-800-377-0758. Please call in 10 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 a.m. ET on Feb. 13, 2020, through May 15, 2020, by calling 905-694-9451 or 1-800-408-3053 (passcode 4807438 followed by the number sign).

The conference call will also be webcast through Manulife's website at 8 a.m. ET on Feb. 13, 2020. You may access the webcast at the Manulife website. An archived version of the webcast will be available on the website.

The fourth quarter 2019 statistical information package is also available on the Manulife website.

(1) Gross flows is a non-generally accepted accounting principle measure. See "Performance and non-GAAP measures" in the company's 2019 MD&A for additional information.

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