PR Newswire
TORONTO, Aug. 9, 2023
C$ unless otherwise stated TSX/NYSE/PSE: MFC SEHK: 945
This earnings news release for Manulife Financial Corporation ("Manulife" or the "Company") should be read in conjunction with the Company's Second Quarter 2023 Report to Shareholders, including our unaudited interim Consolidated Financial Statements for the three and six months ended June 30, 2023, prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), which are both available on our website at www.manulife.com/en/investors/results-and-reports. The Company's Management's Discussion & Analysis ("MD&A") and additional information relating to the Company is available on the SEDAR+ website at http://www.sedarplus.com and on the U.S. Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. |
TORONTO, Aug. 9, 2023 /PRNewswire/ - Today, Manulife announced its second quarter of 2023 ("2Q23") results. Key highlights include:
- Net income attributed to shareholders of $1.0 billion in 2Q23, up $0.9 billion compared with transitional net income attributed to shareholders1 for the second quarter of 2022 ("2Q22"), and up $3.1 billion compared with 2Q22 net loss attributed to shareholders
- Core earnings1 of $1.6 billion in 2Q23, up 4% on a constant exchange rate basis2 from 2Q22
- Core EPS3 of $0.83 in 2Q23, up 6%2 compared with 2Q22, and diluted earnings per common share ("EPS") of $0.50 in 2Q23, up $0.44 compared with transitional EPS3 of $0.06 in 2Q22, and up $1.63 compared with EPS of -$1.13 in 2Q22
- Core ROE3 of 15.5% and ROE of 9.3% in 2Q23
- APE sales4 of $1.6 billion in 2Q23, up 12%4 from 2Q22
- NBV4 of $585 million in 2Q23, up 10% from 2Q22
- New business contractual service margin ("CSM")5 of $592 million in 2Q23, up 15%2 from 2Q22
- CSM balance net of NCI of $17.4 billion and post-tax CSM net of NCI1 of $14.9 billion as at June 30, 2023, an increase of $140 million and $218 million from December 31, 2022, respectively
- Global Wealth and Asset Management ("Global WAM") net inflows6 of $2.2 billion in 2Q23, compared with net inflows of $1.7 billion in 2Q22
- LICAT ratio7 of 136%
- Purchased for cancellation 0.9% of common shares outstanding, or approximately 17.3 million common shares, for $443 million in 2Q23
- Adjusted book value per common share8 of $29.42 and book value per common share of $21.30 as of June 30, 2023, an increase of $1.36 and $0.68 from June 30, 2022, respectively
"We are pleased to report strong topline performance during the second quarter including double-digit year-over-year growth in new business metrics9 from our global insurance business, particularly with new business CSM growing at our medium-term target of 15%," said Roy Gori, Manulife President & Chief Executive Officer. "Our Asia business generated 26% growth in both APE sales and new business CSM, as we capitalize on the recovery across the region, mainly in Hong Kong. In addition, Global WAM generated net inflows of $2.2 billion while core EBITDA margin improved by 2.2 percentage points quarter-over-quarter to 24.6%3. I am encouraged by the momentum we are driving across our global business and the future earnings we expect that these sales will generate."
"We delivered solid operating results in 2Q23, including core earnings of $1.6 billion, core ROE of 15.5% and core EPS growth of 6%," Mr. Gori continued. "Our net income of $1.0 billion increased from the prior year despite the impact of downward pressure on real estate valuations."
Colin Simpson, Chief Financial Officer, said, "Our capital position is strong with a LICAT ratio of 136%. We have repurchased 1.8% of our common shares so far this year10 which, along with an increase in core earnings, has resulted in strong second quarter core ROE. We have an enviable portfolio of businesses, which provide us with a strategic advantage and position us well for success, as evidenced by topline growth in 2Q23. We look forward to CSM growth translating into stable and growing insurance earnings."
To continue helping our customers live longer, healthier, better lives, we:
- launched enhanced healthcare coverage in Hong Kong to better address the growing demand for health and protection services. Customers can now use our expanded hospital network covering over 3,000 hospitals across mainland China. We are the first life insurer in the market to cover all Grade III public hospitals;
- continued to expand our behavioural insurance program in Canada by making Manulife Vitality available on new Manulife Par individual insurance policies; and
- deepened our collaboration with ŌURA to offer John Hancock Vitality members discounts on ŌURA rings and the ability to earn points for healthy sleep habits and mindfulness.
We remain committed to our Environmental, Social and Governance ("ESG") strategy:
- We strengthened our commitment to reducing emissions by disclosing science-based11 targets, including an increased ambition to reduce absolute scope 1 and 2 emissions 40% by 2035, and a combination of sector-specific and asset-class specific interim targets to reduce the General Account's financed emissions as outlined in our 2022 ESG Report published in May 2023.12 Currently, Manulife's owned timberland and agriculture properties remove more carbon from the atmosphere than emitted in our operations;
- We announced the launch of our industry-first ESG themed funds in Manulife Mandatory Provident Fund ("MPF") in Hong Kong Retirement. This makes our flagship MPF scheme the first in the MPF market to provide both sustainable equity and fixed income investment options; and
- Manulife was named one of Corporate Knights' Best 50 Corporate Citizens in Canada for the third consecutive year.
We continue to make progress on our digital journey:
- In Global WAM, we announced a new partnership with Envestnet in Canada Retail that will provide advisors with a leading-edge portfolio management platform to deliver a better client experience and improve advisor productivity. The Envestnet platform is a market tested portfolio management solution which will give advisors access to advanced trading and modelling capabilities, streamlined workflows and automated tasks, more robust and client-friendly reporting, and the ability to manage accounts in a unified structure. These benefits will enable advisors to increase their efficiency and focus on their client relationships and business growth. This partnership signifies another successful step in our digital transformation journey as a leader of advice in Canada;
- In Asia, we continued to drive utilization of connected agent profiles in Manulife Shop, our proprietary online channel in the Philippines, to enable us to enhance customer experience, fulfill a wider range of customer needs, and improve agent activity and productivity. In 2Q23, this contributed to a 16% increase quarter-over-quarter in organic lead submissions through the channel. We plan to roll out connected agent profiles to additional markets in the second half of 2023;
- In Canada, we reduced our call transfer rates by nearly half compared with 2Q22 in our Group Benefits contact centre, by leveraging Amazon AWS Connect, which contributed to a 14% improvement in the contact centre's transactional NPS. We continue to expand the use of this technology, which enables a more holistic digital customer experience and drives operational efficiency; and
- In the U.S., we received recognition from LIBRA Insurance Partners, the largest independently owned life insurance marketing organization in the U.S.13, as one of the carriers who provide a best-in-class experience on an electronic platform for permanent life insurance products. We also eliminated over 3 million pieces of paper by completing our first e-delivery of life insurance policy prospectuses.
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1 | Transitional net income attributed to shareholders, core earnings and post-tax CSM net of NCI ("post-tax CSM") are non-GAAP financial measures. For more information on non-GAAP and other financial measures, see "Non-GAAP and other financial measures" below and in our 2Q23 MD&A. |
2 | Percentage growth / declines in core earnings, diluted core earnings per common share ("core EPS") and new business CSM stated on a constant exchange rate basis are non-GAAP ratios. |
3 | Core EPS, transitional EPS and core return on common shareholders' equity ("Core ROE") are non-GAAP ratios. |
4 | For more information on annualized premium equivalent ("APE") sales and new business value ("NBV"), see "Non-GAAP and other financial measures" below. In this news release, percentage growth / declines in NBV and APE sales are stated on a constant exchange rate basis. |
5 | New business CSM is net of non-controlling interests ("NCI"). |
6 | For more information on net flows, see "Non-GAAP and other financial measures" below. |
7 | Life Insurance Capital Adequacy Test ("LICAT") ratio of The Manufacturers Life Insurance Company ("MLI"). LICAT ratio is disclosed under the Office of the Superintendent of Financial Institutions Canada's ("OSFI's") Life Insurance Capital Adequacy Test Public Disclosure Requirements guideline. |
8 | Adjusted book value per common share and core EBITDA margin are non-GAAP ratios. |
9 | Includes APE sales, NBV and new business CSM. |
10 | As of June 30, 2023. |
11 | Targets developed in alignment with the methodology for financial institutions outlined by the Science-based Targets Initiative (SBTi), in combination with Partnership for Carbon Accounting Financials (PCAF) methodologies for emissions accounting. |
12 | See "Caution regarding forward-looking statements" below. |
13 | Based on gross annual production according to Paradigm Partners International, a third-party research firm specializing in the insurance landscape. |
Quarterly Results | YTD Results | |||||||
($ millions, unless otherwise stated) | 2Q23 | 2Q22 | 2023 | 2022 Transitional | ||||
Profitability: | ||||||||
Net income (loss) attributed to shareholders(1) | $ | 1,025 | $ | 168 | $ | 2,431 | $ | 1,493 |
Return on common shareholders' equity ("ROE")(1) | 9.3 % | 1.1 % | 11.4 % | 7.1 % | ||||
Diluted earnings (loss) per common share ($)(1) | $ | 0.50 | $ | 0.06 | $ | 1.23 | $ | 0.71 |
Quarterly Results | YTD Results | |||||||
($ millions, unless otherwise stated) | 2Q23 | 2Q22 | 2023 | 2022 | ||||
Profitability: | ||||||||
Net income (loss) attributed to shareholders | $ | 1,025 | $ | (2,119) | $ | 2,431 | $ | (3,339) |
Core earnings | $ | 1,637 | $ | 1,526 | $ | 3,168 | $ | 2,919 |
EPS ($) | $ | 0.50 | $ | (1.13) | $ | 1.23 | $ | (1.79) |
Core EPS ($) | $ | 0.83 | $ | 0.76 | $ | 1.63 | $ | 1.45 |
ROE | 9.3 % | (22.4) % | 11.4 % | (17.9) % | ||||
Core ROE | 15.5 % | 15.1 % | 15.2 % | 14.5 % | ||||
Expense efficiency ratio(2) | 45.1 % | 43.1 % | 46.1 % | 44.7 % | ||||
Expenditure efficiency ratio(2) | 51.9 % | 50.1 % | 52.9 % | 51.7 % | ||||
General expenses | $ | 1,022 | $ | 884 | $ | 2,108 | $ | 1,815 |
Core expenses(3) | $ | 1,598 | $ | 1,381 | $ | 3,203 | $ | 2,797 |
Core expenditures(3) | $ | 2,099 | $ | 1,835 | $ | 4,211 | $ | 3,707 |
Business performance: | ||||||||
Asia APE sales | $ | 1,181 | $ | 900 | $ | 2,354 | $ | 1,987 |
Canada APE sales | $ | 322 | $ | 361 | $ | 615 | $ | 724 |
U.S. APE sales | $ | 130 | $ | 147 | $ | 264 | $ | 307 |
Total APE sales | $ | 1,633 | $ | 1,408 | $ | 3,233 | $ | 3,018 |
Asia new business value | $ | 424 | $ | 393 | $ | 796 | $ | 762 |
Canada new business value | $ | 106 | $ | 82 | $ | 198 | $ | 186 |
U.S. new business value | $ | 55 | $ | 35 | $ | 100 | $ | 76 |
Total new business value | $ | 585 | $ | 510 | $ | 1,094 | $ | 1,024 |
Asia new business CSM | $ | 432 | $ | 328 | $ | 733 | $ | 645 |
Canada new business CSM | $ | 57 | $ | 47 | $ | 103 | $ | 108 |
U.S. new business CSM | $ | 103 | $ | 118 | $ | 198 | $ | 230 |
Total new business CSM | $ | 592 | $ | 493 | $ | 1,034 | $ | 983 |
Asia CSM net of NCI | $ | 9,630 | $ | 9,025 | $ | 9,630 | $ | 9,025 |
Canada CSM | $ | 3,656 | $ | 3,626 | $ | 3,656 | $ | 3,626 |
U.S. CSM | $ | 4,106 | $ | 4,026 | $ | 4,106 | $ | 4,026 |
Corporate and Other CSM | $ | 31 | $ | 34 | $ | 31 | $ | 34 |
Total CSM net of NCI | $ | 17,423 | $ | 16,711 | $ | 17,423 | $ | 16,711 |
Post-tax CSM net of NCI | $ | 14,877 | $ | 14,224 | $ | 14,877 | $ | 14,224 |
Global WAM net flows ($ billions) | $ | 2.2 | $ | 1.7 | $ | 6.6 | $ | 8.5 |
Global WAM gross flows ($ billions)(4) | $ | 35.2 | $ | 34.1 | $ | 74.0 | $ | 72.5 |
Global WAM assets under management and administration ($ billions)(3) | $ | 819.6 | $ | 746.8 | $ | 819.6 | $ | 746.8 |
Global WAM total invested assets ($ billions) | $ | 5.5 | $ | 5.7 | $ | 5.5 | $ | 5.7 |
Global WAM segregated funds net assets ($ billions) | $ | 238.7 | $ | 213.3 | $ | 238.7 | $ | 213.3 |
Financial strength: | ||||||||
MLI's LICAT ratio | 136 % | 137 % | 136 % | 137 % | ||||
Financial leverage ratio(2) | 25.8 % | 26.0 % | 25.8 % | 26.0 % | ||||
Book value per common share ($) | $ | 21.30 | $ | 20.62 | $ | 21.30 | $ | 20.62 |
Adjusted book value per common share ($) | $ | 29.42 | $ | 28.06 | $ | 29.42 | $ | 28.06 |
(1) | 2022 results for transitional net income attributed to shareholders, transitional EPS and transitional ROE, a non-GAAP ratio, are adjusted to include IFRS 9 hedge accounting and expected credit loss principles ("IFRS 9 transitional impacts"). See 2Q23 MD&A for more information. For 2023, there are no IFRS 9 transitional adjustments as ECL and hedge accounting is effective January 1, 2023 and therefore the impact is included in net income attributed to shareholders. |
(2) | This item is a non-GAAP ratio. |
(3) | This item is a non-GAAP financial measure. See "Non-GAAP and other financial measures" below and in our 2Q23 MD&A for additional information. |
(4) | For more information on gross flows, see "Non-GAAP and other financial measures" below and in our 2Q23 MD&A. |
Reported net income attributed to shareholders of $1.0 billion in 2Q23, $0.9 billion higher than 2Q22 transitional net income attributed to shareholders, and $3.1 billion higher than 2Q22 net loss attributed to shareholders
The increase in 2Q23 net income attributed to shareholders compared with 2Q22 transitional net income attributed to shareholders was primarily driven by a smaller charge from market experience and growth in core earnings. The net charge from market experience in 2Q23 was driven by lower-than-expected returns (including fair value changes) on alternative long duration assets ("ALDA") mainly related to real estate and energy as well as changes in foreign currency exchange rates, partially offset by higher-than-expected returns on public equity. Net income attributed to shareholders in 2Q23 increased by $3.1 billion compared with 2Q22, driven by factors mentioned above and $2.3 billion of transitional impacts due to the application of IFRS 9 hedge accounting and ECL principles (transitional impacts are geography-related and do not impact total shareholders' equity as the corresponding offset is in other comprehensive income).
Delivered core earnings of $1.6 billion in 2Q23, an increase of 4% compared with 2Q22
The increase in core earnings compared with 2Q22 was driven by an increase in expected investment earnings related to higher investment yields and business growth, higher returns on surplus assets net of higher cost of debt financing and a smaller net charge in the provision for ECL. These were partially offset by higher workforce related costs, a charge from net unfavourable insurance experience (compared with a net gain in 2Q22) and a slower CSM amortization on certain variable fee approach ("VFA") contracts. In addition, lower core earnings in Global WAM were driven by an increase in workforce related costs and lower earnings from seed capital investments due to repatriations, partially offset by higher net fee income from increased fee spread and business mix.
Annualized premium equivalent ("APE") sales of $1.6 billion in 2Q23, an increase of 12% compared with 2Q22
In Asia, APE sales increased 26%, driven by growth in Hong Kong and Asia Other1, partially offset by lower sales in Japan. In Hong Kong, APE sales doubled, reflecting strong growth in our broker and bancassurance channels, primarily driven by a return of demand from mainland Chinese visitor ("MCV") customers following the reopening of the border between Hong Kong and mainland China since February 2023. In Japan, APE sales decreased 17%, driven by lower sales in other wealth and corporate-owned life insurance products. Asia Other APE sales increased 12%, as higher sales in mainland China through our bancassurance channel were partially offset by lower sales in Vietnam and international high net worth business2. In Canada, APE sales decreased 11%, driven by usual variability in the group insurance market with lower large-case sales partially offset by higher mid-size business sales, as well as lower sales of segregated fund products. In the U.S., APE sales decreased 15% due to the adverse impact of higher short-term interest rates on accumulation insurance products, particularly for our higher net worth customers. APE sales of products with the John Hancock Vitality PLUS feature represented 75% of overall U.S. sales in 2Q23, an increase from 71% in 2Q22.
New business value ("NBV") of $585 million in 2Q23, an increase of 10% compared with 2Q22
In Asia, NBV increased 3% from 2Q22 driven by higher sales volumes partially offset by business mix. In Canada, NBV increased 29% driven by higher margins in all business lines largely due to product mix, partially offset by lower sales volumes in Annuities and Group Insurance. In the U.S., NBV increased 43% due to pricing actions, higher interest rates, and product mix, partially offset by lower sales volumes.
New business CSM of $592 million in 2Q23, an increase of 15% compared with 2Q22
In Asia, new business CSM increased 26% from 2Q22 driven by higher sales volumes and model refinements, partially offset by business mix. In Canada, new business CSM increased 21% driven by product mix in Individual Insurance. Under IFRS 17, the majority of Group Insurance and affinity products are classified as premium allocation approach ("PAA") and do not generate CSM. In the U.S., new business CSM decreased 17% consistent with lower sales volumes.
CSM net of NCI was $17,423 million as at June 30, 2023, an increase of $140 million compared with December 31, 2022
The $140 million increase in CSM net of NCI reflects an incre
