Q2 results mixed for Canadian lifecos

by Leo Almazora10 Aug 2020

Canada’s life-insurance industry has turned in better-than-expected results for the second quarter as major companies managed to score key wins.

Manulife’s core profit for the quarter handily beat analyst estimates as favourable policyholder experience and market impacts helped its underlying profit reach $1.6 billion, up from $1.45 billion last year, reported Reuters.

The company’s reported net income took a beating, however, with a second-quarter showing of $727 million – just half the figure reported a year ago – because of lower interest rates and tightening credit spreads. Annual premium equivalent sales also declined by a reported 13% for the second quarter.

In spite of improvement in underlying earnings, lower volumes of new business and lack of core investment gains led to a cap on growth. Focusing on the company’s global wealth and asset management unit showed assets growing nearly 7% year-on-year, but lower fee revenues and tax benefits led core earnings to fall by 4%.

Meanwhile, Sun Life’s Q2 results were marred by a 22% decline in Canadian insurance sales, reported the Canadian Press. Across all markets, insurance sales were down by $619 million, or 6%.

“[I]t's better than the minus 20 per cent we mentioned on the first quarter call that we saw in April,” Sun Life CEO Dean Connor said on a call with analysts.

The company’s net income came in at $519 million for the period ended June 30, compared with $595 million in the same quarter last year. Analyst forecasts had predicted net income of $657.57 million.

Connor said that COVID-19led to increased death claims, but also led to a significant lift in wealth and asset management sales. He cited the popularity of Sun Life’s virtual offerings, with its digital health and wealth program Ella being used more than 13.5 million times over the course of the pandemic.

“COVID-19 has created much economic uncertainty, but we remain confident in our business mix, our financial strengths and our ability to execute well during these complex times,” Connor said.

Great-West Life was able to secure a big win on the earnings front, reporting net earnings at $863 million for the three-month period ended June 30. That was nearly double the $459 million reported in the same period last year. Base earnings totalled $706 million, up from $627 million in 2019.

“To a large extent, we saw a good recovery in equity markets,” president and CEO Paul Mahon said. “There is obviously going to be downsides related to economic impacts but we always believe they will be moderated because of our risk sense.”

The company reported lower health and dental claims, as well as reductions to premiums, as medical offices were closed during the early phase of the pandemic lockdown. Along with the closures came a rise in disability claims, lower levels of disability claim terminations, and strong life insurance sales.

Mahon also cited increased public use of virtual offerings as a beneficial factor for the company.

More recently, Great-West Life announced its Canadian subsidiary GLC Asset Management Group would be sold to Mackenzie Financial for $175 million in cash. As part of the deal, the Canada Life Assurance Company – Great-West operates the Canada Life brand – will pay Mackenzie $30 million in cash to acquire fund management contracts relating to the private-label Quadrus Group of Funds and other Canada Life branded investment funds.

Assuming the deal receives regulatory approval and achieves its fourth-quarter target closing date, Great-West Lifeco will receive net cash of $145 million.

“We believe successful wealth managers need to control their product shelf and customer solutions, but they also need access to asset managers with consistent, high-performance skill mandates and product innovation and breadth,” Mahon said. “By combining GLC with Mackenzie, Canada Life will have access to a product manager with these strengths.”

 

With files from the Canadian Press.