Manulife Financial’s Earnings Call: Growth Amid Challenges

Manulife Financial ((TSE:MFC)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Manulife Financial presented a balanced sentiment, reflecting both optimism and challenges. The company reported strong growth in APE sales and positive net flows in Global WAM, alongside a strategic acquisition. However, it also faced hurdles such as unfavorable U.S. mortality experience and elevated credit loss provisions. Overall, the sentiment was cautiously optimistic, with a focus on future growth and strategic alignment.

Strong Business Growth

Manulife Financial reported a significant increase in APE sales, which rose by 15% from the previous year. The growth was particularly robust in Asia and the U.S., with both regions experiencing more than 30% growth. This surge in sales contributed to a 37% growth in new business CSM and a 20% increase in new business value, underscoring the company’s strong business performance.

Positive Net Flows in Global WAM

The Global Wealth and Asset Management (WAM) division delivered positive net flows of nearly $1 billion. This achievement highlights the strength and diversification of Manulife’s platform, reinforcing its position in the global market.

Acquisition of Comvest Credit Partners

Manulife announced the acquisition of a 75% stake in Comvest Credit Partners for USD 937.5 million. This strategic move is expected to be immediately accretive to core EPS, core ROE, and core EBITDA margin, enhancing Manulife’s private credit capabilities and expanding its private markets business.

Strong Capital Position

Manulife maintained a robust capital position with a LICAT capital ratio of 136% and a financial leverage ratio of 23.6%. These figures remain well below the company’s medium-term target of 25%, reflecting its strong financial health.

Continued Growth in Asia

The Asian market showed impressive growth, with APE sales increasing by 31% from the prior year. Significant growth was observed in key regions such as Hong Kong, Mainland China, and Singapore, highlighting the region’s importance to Manulife’s overall strategy.

Unfavorable U.S. Mortality Experience

The U.S. segment faced challenges, with core earnings decreasing by 53% from the prior year. This decline was primarily due to unfavorable mortality experience in the life insurance business, which impacted overall profitability.

Elevated Expected Credit Loss Provision

Manulife’s net investment result was affected by a net charge in the expected credit loss provision. This was mainly related to certain below-investment-grade loan investments in the U.S., which posed a challenge to the company’s financial performance.

Impact of eMPF Transition

The transition to the new eMPF platform in Hong Kong is anticipated to have a full quarterly run rate impact of approximately USD 25 million starting in the first quarter of 2026. This transition is a significant step in Manulife’s strategic development in the region.

Decline in U.S. Core Earnings

U.S. core earnings experienced a decline due to unfavorable mortality experience, lower investment spreads, and strengthened ECL provisions. These factors contributed to a challenging financial environment for Manulife’s U.S. operations.

Forward-Looking Guidance

Looking ahead, Manulife Financial remains confident in its strategic direction and growth prospects. The acquisition of Comvest Credit Partners is expected to bolster core EPS, ROE, and EBITDA margin. Despite a slight decrease in the LICAT ratio due to the acquisition, the company maintains a strong capital position. Manulife aims to achieve its 2027 targets, including an 18%+ ROE, supported by robust business growth and strategic capital deployment.

In conclusion, Manulife Financial’s earnings call highlighted a mix of strong growth and strategic challenges. The company demonstrated resilience with significant business growth, particularly in Asia, and strategic acquisitions. However, it also faced challenges in the U.S. market due to unfavorable mortality experience and elevated credit loss provisions. Overall, the sentiment was optimistic, with a clear focus on future growth and strategic alignment.