Canada's Manulife core profit beats expectations, rises on fewer payouts and markets

TORONTO (Reuters) - Manulife Financial Corp MFC.TO on Wednesday comfortably beat analyst estimates for second-quarter core profit, which rose from a year earlier due in part to favorable policyholder experience and market impacts.

Underlying profit rose to C$1.6 billion ($1.21 billion), or 78 Canadian cents a share, from C$1.45 billion, or 72 cents, a year earlier, Canada’s biggest life insurer said in a statement. That compared with expectations of 62 Canadian cents.

Favorable policyholder experience typically results in lower payouts for insurers and includes beneficial mortality trends and fewer claims.

Investors and analysts had forecast large drops in profit for Canadian life insurers during the quarter, driven by the pandemic-driven declines in interest rates and the hit to sales from economic shutdowns.

Some of that materialized in Manulife’s reported net income, which halved from a year ago to C$727 million, or 35 Canadian cents per share, weighed by lower interest rates and narrowing credit spreads.

Annual premium equivalent sales fell 13% during the quarter.

Despite the improvement in underlying earnings, growth was capped by the lack of core investment gains - expected due to mark-to-market losses in the prior quarter - and lower new business volumes, Manulife said.

U.S. core earnings posted the strongest growth, climbing 32%, while Canada’s rose 10%. Earnings from Asia grew a subdued 1% as fewer claims were offset by a decline in new business due to the pandemic.

Even as assets in the global wealth and asset management unit grew nearly 7% from a year ago, core earnings fell 4% due to lower fee revenues and tax benefits.

While new business value was affected by the pandemic, “positive momentum” in annual premium equivalent sales in Asia in the final month of the quarter was “encouraging,” Chief Financial Officer Phil Witherington said in the statement.

Reporting by Nichola Saminather in Toronto; Editing by Matthew Lewis and Leslie Adler