Man­ulife not bank­ing on rate hikes

National Post (Latest Edition) - - FINANCIAL POST - Bar­bara Shecter

• Re­cent in­ter­est rate hikes in North Amer­ica are per­ceived as pos­i­tive for the life in­sur­ance sec­tor, but they aren’t prompt­ing a change in strat­egy at Man­ulife Fi­nan­cial Inc., ac­cord­ing to Roy Gori, the new chief ex­ec­u­tive at Canada’s largest in­surer.

“We ob­vi­ously ben­e­fit from a more pos­i­tive out­look as it re­lates to in­ter­est rates, but we’re not bank­ing on that,” Gori, who took over as CEO from Don Gu­loien in Oc­to­ber, told the Fi­nan­cial Post in an interview Thurs­day.

“There’s still a lot of un­cer­tainty in terms of global growth and in­fla­tion and, as a re­sult, in­ter­est rates are still sig­nif­i­cantly low, cer­tainly lower than they have been his­tor­i­cally. And we’re work­ing on the as­sump­tion that that will con­tinue.”

In Septem­ber, the U. S. Fed­eral Re­serve sig­nalled plans to raise short-term in­ter­est rates one more time this year.

The Bank of Canada left rates un­changed last month af­ter two in­creases to the overnight rate this year, in July and Septem­ber.

Man­ulife turned in bet­terthan-ex­pected re­sults for the third quar­ter, which was re­ported late Wed­nes­day.

De­spite a bru­tal hur­ri­cane sea­son, the in­surer re­ported core earn­ings of 53 cents per share, ahead of an­a­lyst es­ti­mates of 50 cents, ac­cord­ing to John Aiken, an an­a­lyst at Bar­clays Cap­i­tal.

In a note to clients, he said Man­ulife was also able to ad­dress con­cerns that growth in the key mar­ket of Asia had paused.

“Asia had a solid quar­ter, with core earn­ings up 11 per cent from a year ago,” Aiken wrote.

“This was cou­pled with strong se­quen­tial growth in in­sur­ance and wealth man­age­ment prod­ucts in ad­di­tion to a healthy in­crease in the value of new busi­ness.”

Gori’s rapid as­cent with Man­ulife be­gan in Asia in 2015.

He was hired to run the op­er­a­tions in China, Hong Kong, In­done­sia, Ja­pan, Ma­cau, Malaysia, the Philip­pines, Sin­ga­pore, Tai­wan, Thai­land, Viet­nam and Cam­bo­dia.

Be­fore join­ing the Cana­dian firm, he worked in con­sumer and re­tail bank­ing at Cit­i­group.

Dur­ing the interview with the Fi­nan­cial Post on Thurs­day, Gori noted that Man­ulife added to a grow­ing list of bank part­ner­ships in the third quar­ter with a new ar­range­ment in Asia. A three- year part­ner­ship with Mekong Hous­ing Bank in Viet­nam will al­low Man­ulife Viet­nam to sell life in­sur­ance to Mekong Hous­ing Bank’s clients in Ho Chi Minh City and Hanoi.

Gabriel Dechaine, an an­a­lyst who tracks Man­ulife at Na­tional Bank Fi­nan­cial, said he be­lieves in­vestors are look­ing for growth, par­tic­u­larly in Asia.

“On that front, the com­pany didn’t dis­ap­point,” Dechaine wrote in a re­port af­ter the third- quar­ter fi­nan­cial re­sults were re­leased.

The an­a­lyst noted a 15-per-cent in­crease in yearover-year in­sur­ance prod­uct sales in Asia, and a nearly 40- per- cent in­crease in net flows to wealth man­age­ment.

In Canada, core earn­ings were up, both se­quen­tially and from a year ago, though sales of most prod­ucts and the value of new busi­ness was flat to down, Dechaine said.

Core earn­ings in the U.S. seg­ment were down from a strong sec­ond quar­ter, but up strongly from a year ago, he added.

Man­ulife of­fi­cials said the in­sur­ance giant has not al­tered its stance on John Han­cock, the firm’s wealth man­age­ment di­vi­sion in the United States, which was the sub­ject of spec­u­la­tion about a pos­si­ble sale or spinoff last sum­mer.

Fol­low­ing me­dia re­ports that these op­tions were be­ing ex­plored, ex­ec­u­tives said in Au­gust that they con­tinue to in­ves­ti­gate all op­por­tu­ni­ties to im­prove share­holder value.

“We be­lieve this is good gover­nance, plain and sim­ple,” Gu­loien said on an Au­gust 10 con­fer­ence call with an­a­lysts to dis­cuss sec­ondquar­ter fi­nan­cial re­sults, “and there is no news here.”

How­ever, he did ac­knowl­edge that Man­ulife con­tin­ues to deal with “some chal­leng­ing blocks of le­gacy busi­ness.”

Bos­ton- based John Han­cock Fi­nan­cial Ser­vices Inc. was bought with great fan­fare in 2003 by Gu­loien’s pre­de­ces­sor, Do­minic D’Alessan­dro, but Man­ulife has in­creas­ingly turned its focus to growth in Asia.


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