Hong Kong company reporting season

Manulife battered by US storm payouts as third-quarter profit slips

Robust earnings in Asia were eroded by hefty compensation payouts for property damage caused by the spate of hurricanes in the US

PUBLISHED : Thursday, 09 November, 2017, 10:28am
UPDATED : Thursday, 09 November, 2017, 10:59pm

The succession of storms in the US this year has taken its toll on Canadian insurer Manulife Financial Corporation, which saw its third-quarter profit drop 1 per cent despite strong Asian sales growth.

Robust earnings in Asia were eroded by hefty compensation payouts for property damage caused by the spate of natural catastrophes in the US.

Manulife, which is listed in Hong Kong, Toronto and New York, reported profit of C$1.105 billion (US$866.98 million) on Thursday morning, or C$0.54 per share, during the three months to the end of September.

That is down 1 per cent from a year earlier but still above market expectations of profit growth of C$1.019 billion, according to the consensus estimate of analysts polled by Bloomberg.

“Our third-quarter results include a provision of C$240 million for the estimated financial impact

on our property and casualty reinsurance business from the significant damage caused by hurricanes Harvey, Irma and Maria. This marks our first significant loss in this business since 2011,” said Steve Roder, chief financial officer of Manulife, in the results statement.

Manulife’s corporate and other business lines reported a net loss of US$387 million, while core loss stood at C$254 million during the third quarter. The core loss widened by C$108 million year on year, mainly due to the C$240 million charge for the several hurricanes that hit the US.

Separately, Munich Re also posted 1.4 billion (US$1.62 billion) loss for the third quarter following losses caused by hurricanes Harvey, Irma and Maria, which together accounted for losses totalling €2.7 billion.

“Munich Re expects that together the three hurricanes will have caused insured market-wide losses totalling around US$100 billion, although claims settlement, and thus uncertainty about loss estimates, will continue for many months,” Munich Re said in a statement on Thursday.

Manulife said its US operation reported a net profit of C$507 million in the third quarter, up 18 per cent from a year earlier.

The loss related to the storms offset strong growth in Asia, where Manulife operates in China, Hong Kong and many major cities. Its Asia operation saw core earnings increase by 8.6 per cent to C$428 million during the third quarter because of strong sales of life insurance and wealth management products. In Hong Kong, its new business value up 51 per cent at HK$739 million (US$94.76 million) during the third quarter.

Net profit in Canada was up 3 per cent to C$448 million, boosted by strong retail sales through its online, mobile and traditional channels.

The company’s modest third-quarter performance represents a turnaround from a strong rally in the first half, when net profit climbed 49 per cent to C$2.605 billion.

The disappointing quarter drags profit growth in the first nine months of 2017 down to 30 per cent at C$3.7 billion. The company is still on track to hit its full-year profit forecast of 6 per cent growth to C$4.26 billion.

Manulife’s shares closed 0.56 per cent lower on Thursday at HK$160.3.

“We delivered solid core earnings and net income in the third quarter, particularly given the provision for catastrophe claims,” said Roy Gori, president and chief executive of Manulife.

“Our growth drivers maintained their momentum, with double-digit core earnings and new business value growth in Asia and the 31st consecutive quarter of positive net flows in our global wealth and

asset management business.”