Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Manulife Financial Corp (MFC, Financial) delivered record financial and operating results in the third quarter of 2024, including significant growth in core earnings, APE sales, and new business value.
- The company achieved 40% growth in APE sales, driven by strong performance in Asia, particularly in Hong Kong, and positive contributions from North America.
- Global Wealth and Asset Management (WAM) reported over $5 billion in net flows, marking positive net flows in 13 of the past 14 calendar years.
- Manulife Financial Corp (MFC) maintained a strong balance sheet with a LICAT ratio of 137% and a leverage ratio of 23.5%, providing ample financial flexibility.
- The company is leveraging advanced GenAI capabilities to enhance customer experience and operational efficiency, with successful implementations in Singapore and North America.
Negative Points
- The impact of global minimum taxes (GMT) reduced core earnings growth by approximately 3 percentage points in the quarter.
- Core earnings in the US segment decreased by 8% due to lower investment spreads and the impact of reinsurance transactions.
- The company's Asia segment experienced a decline in new business value margins, attributed to a shift in sales mix towards savings solutions.
- Manulife Financial Corp (MFC) faced challenges in its US long-term care insurance business, with negative experience driven by low mortality rates.
- The reinsurance transactions with Global Atlantic and RGA resulted in a $23 million reduction in core earnings across multiple lines.
Q & A Highlights
Q: Hi, good morning. A question on ALDA, whether this is an inflection point for your PE portfolio. Obviously, you mentioned the moderating impact from commercial real estate, but you didn't talk about PE. So just wondering what the outlook there from what you saw in Q3.
A: Hi, Meny. Thanks for the question. It's Trevor. So obviously, very happy to see the strong ALDA performance in the quarter. Still a little bit below target, but as you know, that I think substantially better than we've seen recently and actually the best over the last nine quarters. The main driver of the loss, as Colin mentioned, was real estate. The experience was actually similar to Q2 and just really reflect a flat performance for the asset class. In terms of the remaining classes, which I think was your question, it was really a mix of gains and losses. Infrastructure was substantially better than it had been in Q2, and private equity as well was also materially better than in the second quarter. In terms of the outlook, it's obviously difficult to say. We do expect, I think, a continued improvement in, I think, the overall portfolio and private equity as well. We do still think that we will get back to our long-term assumptions around the middle of 2025. And so I remain confident in the long-term performance of the strategy and the portfolio.
Q: Morning. I had a few questions on the actuarial review. Given the SGUL code, would you expect a related US statutory impact and would you expect this to impact your remittance plans for 2025? And I guess the same question in reverse for Asia, does the positive release of any cash flow impact when you think about Asian cash flows?
A: Sure, Tom. Thanks. It's Steve here. So with respect to the review, the impact in the US, we do not expect any negative impact -- immediate impact on remittances. There's no impact on the RBC ratio. It remains very strong and does not impact our remittance for 2025. I'd say, overall, the results of the review don't have an impact in terms of our commitment to the new target remittances that we set out at Investor Day. So yeah, no significant impact there at all.
Q: Hi. Good morning. Similar line of questioning, I guess, but more on the Asia business. I saw there were some negative experiences there, insurance experience. I assume that's labs related. And when I read the actuarial review details, it says you did strengthen reserves for lapse in the US and in Asia, but not like the Vietnam stuff, that's been a problem in the past. A, is that kind of dealt with now? And B, do you think that the actions you took this quarter will simmer down those lapse trends in the P&L?
A: Thanks, Gabriel. This is Phil. Maybe I'll make a start on that Asia question and hand over to Steve to supplement. What you see in the drivers of earnings analysis in terms of experience in an USD18 charge. I would say, that's within the range of normal variability quarter to quarter in policyholder experience. When you look at it on a year-to-date basis, it's a negative $6 million. So there are positives. There are negatives, and it will move around from quarter to quarter. There were a couple of larger claims this quarter relating to some of the high-net-worth business across our high net worth markets. But nothing beyond that that I would particularly highlight. You referenced Vietnam. I think it's important to note that some of the headwinds that we had seen from an experience perspective in Vietnam flowing through the CSM in prior quarters, that's now normalized substantially less and you can see an approximately neutral experience in the CSM for Asia. Steve, is there anything you'd like to say supplement?
Q: Hi. Good morning. First of all, I'll ask is on the sales in Hong Kong. I was just hoping you could unpack some of the success you're having in both the domestic market and elsewhere. Thank you.
A: Great. Thank you, Alex. Good morning. This is Phil. It has been a fantastic quarter in many respects across Asia, including sales, as you highlighted. And Hong Kong has been an important part of that, as of other markets, and I'll come onto that in a moment. But in Hong Kong, we're seeing an 80% -- 83% increase in new business value. That is a record level of NBV in Hong Kong. And we're seeing strong growth, as Colin said in his remarks, across all of our distribution channels, agency, bank, and broker, but notably as well, strong demand from both the domestic customer segments in Hong Kong, which is our core business in Hong Kong, the majority of our business, as well as the Mainland Chinese visitors customer segment, which is growing and reflecting the investments that we have made in MCV -- the MCV segments in order to deliberate actions in order to increase our market share there. Although, it does remain the -- it's not the majority of our business, the domestic segment is. Not what's driving the demand in Hong Kong is a combination of things. One is we are seeing favorable macroconditions and that is, in particular, driving customer interest and demand in saving solutions. And that's coincided with the fact that in the quarter across Asia and in Hong Kong, we have taken certain management actions. That include -- earlier this year, we launched a new competitive participating savings product, so the timing of that has worked well with the favorable macro conditions. We've also held a brand campaign across the region. And in Hong Kong, it's been -- the third quarter is when we hold our annual sales campaign within our agency channel. So a lot of good things have happened at the same time. Now of course, there can be variability quarter to quarter in sales levels. But I think the direction of travel is clear that we are owing and fulfilling a greater share of customer needs. And I think that's consistent with the thesis that we had articulated at our Investor Day in June. And just to emphasize, we're not only seeing growth in Hong Kong. We've seen similar levels of growth in NBV across Japan, Singapore, strong growth in the Philippines, Indonesia, and other markets across Asia, including Mainland China.
Q: Good morning. Roy, I'll take you back a few years. It was November 2007, so 17 years ago almost to the day, that Manulife was a $43 stock. So it's back there today. And when I look at how you got there is a great combination of growth and wealth in Asia, but also the company has been shrinking for some time now as you reinsure books and buy back stock. So when you meet your Board and you speak to your executive team, how do you think about the next five years or so? Is it more of the same, like focused on what you're good at wealth, Asia, buy back stock when you can? Or is the company going to become a
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
