(Bloomberg) — Manulife Financial Corp., Canada’s largest insurer, posted earnings that met analysts’ expectations as gains in insurance and asset management were tempered by rising interest rates.
The Toronto-based company said second-quarter net income declined 36 percent to CAD $600 million (USD $455 million), or 29 cents a share, according to a statement Thursday. Profit excluding some items was 44 cents a share, matching the average estimate of 13 analysts surveyed by Bloomberg.
“We continued to deliver robust growth in wealth management and life insurance,” Chief Executive Officer Donald Guloien said in the statement. “Net income, as a result of changes in interest rates, was lower than expected.”
Net income slipped as the company took a CAD $362 million hit as its accounting assumptions were negatively impacted by a steepening yield curve, mainly in the U.S. The value of instruments in Manulife’s interest-rate swap program changes with swings in interest rates, according to Chief Financial Officer Steve Roder.
Higher interest rates tend to benefit insurers over time as they push up bond returns and the assets used to meet policy guarantees, while lower rates squeeze those returns.
Core earnings, which strips out the impact of interest rates, rallied 29 percent to C$902 million, according to financial documents.
Insurance products jumped 27 percent to C$771 million with Asia, U.S., and Canada reporting sales increases. In Asia, benefits coverage sales rose 23 percent over the prior year to $374 million with Japan sales contributing a record $169 million. Canadian sales rose 28 percent to C$166 million and the U.S. was up 2 percent to $118 million.
Wealth and asset management flows, which include mutual fund sales, pension plan deposits, and the fees for managing institutional assets, rose in each region. Assets flowing into the Asian unit more than doubled to $5.2 billion as Manulife started new fund products and benefited from “strong market sentiment.” They rose by C$3.9 billion, or 64 percent, in Canada and rallied 11 percent, or $11.1 billion, in the U.S., according to financial documents.
The company’s overall assets also rose after the December acquisition of New York Life’s retirement services business. The life insurer now manages C$883 billion as of June 30.
Manulife rose 0.1 percent to C$23.29 Wednesday in Toronto. The stock has gained 5 percent this year, beating the 0.9 percent decline on the Standard & Poor’s/TSX Index of 247 companies.