Canada's Manulife profit declines on market woes, lower Japan sales

TORONTO (Reuters) - Manulife Financial Corp MFC.TO reported a 34% drop in first-quarter core earnings on Wednesday, missing analyst expectations, on unfavorable market conditions and lower sales in Japan that weighed on earnings from Asia.

While net income attributable to shareholders was helped by gains from widening credit spreads, that was offset by lower-than-expected investment returns, primarily because of the sharp declines in oil prices, the insurer said in a statement.

Global insurers have faced a double whammy as market volatility and plunging yields have slammed investment returns, while the COVID-19 outbreak has boosted some payout expenses.

“The COVID-19 pandemic continues to disrupt economies and capital markets worldwide, and our operating conditions during the first quarter were understandably affected,” Chief Executive Roy Gori said in the statement.

Global wealth and asset management was the only unit to see core earnings gains, with an increase of 7.3% from a year earlier, with net inflows of C$3.2 billion, compared with net outflows of C$1.3 billion a year earlier, largely driven by institutional allocations.

The decline in sales in Japan offset increases in Hong Kong and elsewhere in Asia to result in a 5.6% decline for the region, the insurer’s growth driver over the past few years.

Core earnings in Canada fell 16% from a year earlier, primarily due to unfavourable travel insurance claims related to COVID-19, while they declined 13% in the U.S. on higher life insurance claims, the insurer said.

Manulife in March provided a temporary extension here of emergency out-of-country coverage for Canadian group and individual customers who experienced travel delays.

Underlying profit, which excludes the impact of market movements and investment activities, fell to C$1 billion ($706.9 million), or 51 Canadian cents a share, in the three months ended March 31, from C$1.5 billion or 76 cents a share a year earlier, Manulife said. Analysts had expected C$1.1 billion, or 59 cents a share.

Reported net income was C$1.3 billion, or 64 Canadian cents a share, compared with analyst expectations of C$753 million, or 44 cents a share.

Reporting by Nichola Saminather; Editing by Peter Cooney and Grant McCool