$590 million in payouts don't hamper life insurers

Manulife, Sun Life surpass estimates in Q4 earnings despite pandemic claims

A global pandemic that killed more than two million people and sickened over 100 million seems like a situation tailor-made to wreak havoc on the companies meant to protect people's finances against such circumstances. Instead, Canada's largest life insurers have emerged relatively unscathed.

Manulife Financial Corp. and Sun Life Financial Inc. on Wednesday both reported fourth-quarter earnings that beat analysts' estimates, capping full-year profits that, by different measures, increased from 2019. Those results came even after the companies paid out a combined $590 million to families of COVID-19 victims.

Pandemic lockdowns and stimulus programs that sent markets higher helped insurers limit certain costs and fuelled profits in other business lines. Manulife and Sun Life, Canada's largest life insurers by market value, also benefited from technology that helped them continue to sell policies.

“In some markets we saw some headwinds and challenges because of increased claims and in others we saw benefits,” Manulife CEO Roy Gori said in an interview. “Net-net, we did not see a headwind from a morbidity and mortality perspective.”

For example, lockdowns meant to halt the spread of the virus dramatically reduced payouts for routine procedures like dental visits and physiotherapy sessions, helping offset much of the costs for COVID-related payouts.

Manulife paid out more than $390 million to families of people who succumbed to COVID-19, Gori said. Despite that, the Toronto-based company saw net income rise 4.8 per cent to $5.87 billion last year. Fourth-quarter core earnings were little changed at $1.47 billion, or 74 cents a share. Analysts estimated 72 cents, on average.

Sun Life, also based in Toronto, settled almost $200 million of COVID-related death claims. Reduced payouts in the annuity business offset some of that, CEO Dean Connor said.

Sun Life saw a drop in shortterm disability claims because people weren't able to get procedures that would have kept them out of work. Some longer-term claims stretched on because of the unavailability of treatment.

While Sun Life reported a drop in full-year net income, its underlying net-income measure — which excludes impacts from things like interest rate changes — rose 5.1 per cent to $3.21 billion last year. Fourth-quarter underlying net income was $1.47 a share, topping analysts' $1.39 average estimate.

Manulife and Sun Life both also got a lift from their wealth- and asset-management businesses, which thrived on last year's market volatility. Manulife's insurance and wealth business across Asia, normalized for core investment gains, accounted for 41 per cent of earnings last year, up from 35 per cent in 2016, Gori said.

Manulife saw net inflows of $8.9 billion for wealth and asset management last year, compared with a $900 million outflow in 2019. Sun Life saw net inflows of mutual, managed and segregated funds of $23.1 billion last year.

Great-West Lifeco Inc., another major Canadian life insurer, also posted Q4 results that beat expectations. Adjusted earnings were 80 cents a share, compared with analysts' 74-cent average estimate.

“The pandemic has really highlighted the importance of insurance protection and wealth management,” Gori said.