Manulife, Sun Life say they are raising premiums to offset cost inflation
By Nichola Saminather - Thursday
© Reuters/John TilakFILE PHOTO - Roy Gori, chief executive of Manulife Asia, speaks at the company?s headquarters in Toronto
TORONTO (Reuters) -Manulife Financial Corp and Sun Life Financial, Canada's two biggest life insurers, are increasing premiums to offset higher costs this year from inflation that has risen to a three-decade high, executives said on Thursday.
A 50-basis-point increase in fixed income yields would also translate into a C$1.85 billion ($1.5 billion) rise in embedded value, Manulife Chief Executive Roy Gori told analysts on a post-earnings call.
Manulife on Wednesday posted core fourth-quarter earnings of 84 Canadian cents per share, up 13.5% from a year earlier and beating analysts' expectations.
Smaller rivals Sun Life Financial and Great-West Lifeco on Wednesday also reported higher earnings.
Manulife shares jumped 3.9% to C$27.95 in morning trading in Toronto, their highest intraday level since 2008. Sun Life, whose U.S. earnings dropped 51% due to higher COVID-related death claims, declined 3.9% to C$70.97, while Great-West shares fell 1.55%.
The main Toronto index rose 0.6%.
"There are some aspects of our business where higher rates will create some headwinds, but we have flexibility as it relates to driving scale through expenses or price changes to offset those," Gori said.
The company could push up prices in its long-term care business, which may be susceptible to increased costs, although a shift to cheaper home care prompted by the pandemic has offset some of that, Chief Actuary Steve Finch said.
Sun Life executives said higher costs due to inflation could be a positive in its stop-loss business, which protects employers against unpredictable losses.
As policies reprice every year, "we would be able to react very quickly," Dan Fishbein, president of the insurer's U.S business, said on an analysts call. "Not that we're hoping for medical inflation, but the primary impact of medical inflation on our stop-loss business would be more premium."
Sun Life has already raised premiums in its disability and group life businesses, but those will take some time to take effect as policies are longer, he said.
Sun Life's MFS Investment Management unit, which focuses primarily on equities, could see some challenges, CEO Michael Roberge said.
An expected increase in market volatility, higher interest rates and high stock valuations are likely to send more investors into cash, reducing flows into funds in 2022, he said.
($1 = 1.2647 Canadian dollars)
(Reporting By Nichola Saminather; Additional reporting by Manya Saini and Mehnaz Yasmin; editing by John Stonestreet and Chris Reese)
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The Sun Life Financial logo is seen at their corporate headquarters in Toronto
(Reuters) - Canadian insurers Manulife Financial and Sun Life Financial narrowly beat quarterly earnings expectations on Wednesday, driven by strong growth in their asset management units, but Sun Life warned that the spread of the Omicron variant will impact first-quarter earnings.
Government stimulus and pandemic savings over the past year have sparked a boom in the wealth and asset management businesses of Canadian insurers, helping offset the impact of claims related to the COVID-19 pandemic.
The chief executive of Manulife, Roy Gori, said in an interview that during the quarter "Asia saw the challenges associated with ... COVID, but over the full year, it had a tremendous performance."
Manulife's 27% increase in global wealth and asset management earnings helped offset declines in profits in Asia, Canada and the U.S.
Core earnings in the three months through December rose to 84 Canadian cents per share, up 13.5% from a year earlier and compared with analysts' expectations of 82 Canadian cents per share, according to IBES data from Refinitiv.
Manulife, Canada's biggest life insurer, also saw new business growth across all markets.
"Manulife came in ahead of expectations on the back of ongoing growth in its Asia platform," Barclays analyst John Aiken said in a note. "The recovery in profitability from the third quarter, increase in its book value, and outlook for 2022 should help support its valuation moving forward."
Smaller rival Sun Life reported underlying profit that was largely in line with estimates, thanks to 15% growth in its asset management unit, to C$382 million. That, combined with increases in profits in Canada and Asia, helped offset a 51% decline in the U.S. business and lifted overall earnings 4%.
"The death rate in the working age-group was significantly higher in the fourth quarter in the U.S.," related to the Delta variant, CEO Kevin Strain told Reuters. "Omicron has high numbers of infections, which is becoming a higher number of hospitalizations and deaths, and we see Omicron having an impact on the first quarter."
Growth in Asia was partially offset by COVID-19-related mortalities of C$12 million, mostly in the Philippines.
Sun Life's underlying quarterly profit grew 4.2% to C$898 million from a year earlier, or C$1.53 per share, compared with analysts estimates of C$1.52 per share.
($1 = 1.2669 Canadian dollars)
(Reporting by Sohini Podder in Bengaluru and Nichola Saminather in Toronto; Editing by Anil D'Silva and Leslie Adler)
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