Manulife says cost containment to be key driver of targeted 10%-12% core earnings growth

TORONTO (Reuters) - Manulife Financial Corp's MFC.TO focus on containing costs will be a key driver of its target of 10% to 12% growth in core earnings per share next year and beyond, its chief executive said on Thursday.

Canada’s biggest life insurer comfortably beat analyst estimates for second-quarter core profit after markets closed on Wednesday.

Costs will be a “critical driver that gives us confidence in achieving that 10% to 12% core earnings growth,” CEO Roy Gori said on an analyst call. Manulife’s core general expenses in the quarter dropped 5% from a year earlier, and it expects C$1 billion ($753.64 million) in expense efficiencies by year-end, two years ahead of schedule.

Manulife’s shares jumped 4.8% to C$19.73 on Thursday morning in Toronto, putting it on track for its highest close in nearly two months.

The company maintained its growth target even as executives acknowledged uncertainties surrounding the future impact of the pandemic. The company attributed declines in new business and sales in Asia, which has been its growth driver in the past, to the re-emergence of the coronavirus in some parts of the region, particularly Hong Kong.

“It’s still way too early to declare what the long-term consequences of COVID are, and there are still way too many unknowns for that,” Gori said. “Navigating the short- to medium-term is really front and center.”

Chief Financial Officer Phil Witherington said he expects headwinds from the pandemic to persist for the remainder of 2020.

Manulife’s capital adequacy ratio, which is at the highest level in over two years, enables it to grow at a much faster pace, including a possible merger or acquisition, Gori said.

But the company doesn’t need a deal to meet its growth target, and, while it will continue to consider M&A, will do so “opportunistically, with a very sensible bar,” he said.

Reporting By Nichola Saminather; editing by Jonathan Oatis