Wednesday, March 22

Canadian lifecos end 2021 on a strong note but COVID-19 concerns loom

‘We continue to see significantly higher than expected mortality in the working-age population’

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Canada’s life insurance giants saw profits surge in 2021, buoyed in part by strength in their wealth management units, but the companies continue to face headwinds from the pandemic in certain segments.


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Manulife Financial Corp.’s core earnings hit $1.7 billion or $0.84 per share for the quarter ended Dec. 31, 2021, bringing full year core earnings to a record $6.5 billion, an increase of about 20 per cent on a constant exchange rate basis over the prior year.

Smaller rival Sun Life meanwhile, saw its underlying net income rise four per cent to $898 million or $1.53 per share in the quarter, while full-year net income hit $3.5 billion (a 10 per cent boost year-over-year).

Great-West Lifeco Inc. saw its base earnings reach $825 million or $0.89 per share, which amounted to a 11 per cent raise year-over-year.

In a conference call Thursday, Sun Life president and chief executive officer Kevin Strain noted that the company had been grappling with COVID-19 mortalities in its US segment.


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“US underlying earnings were down approximately 50 per cent, mostly reflecting adverse COVID-19 mortality experience,” Strain said. “US infection and mortality rates related to COVID-19 remained elevated and as a result, we continue to see significantly higher than expected mortality in the working-age population.”

Strain added that since the start of the pandemic, the company has paid nearly $900 million in COVID-related claims.

The Sun Life Financial building in Toronto.
The Sun Life Financial building in Toronto. Photo by Peter J Thompson/National Post files

“As Omicron spreads around the world we continue to see higher COVID incidence rates and, unfortunately, in cases where vaccine rates are lower, we are also seeing continued mortality,” Strain said.

While Manulife saw cash flows from its global wealth and asset management segments triple, analysts at National Bank noted that the company reported $97 million of negative policyholder experience throughout the quarter in the US Individual Life and Canadian Group businesses, which weighed on the company’s earnings.


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“We suspect most of this figure will be tied to COVID-19 and, as such, could be viewed as transient,” Gabriel Dechaine and other National Bank analysts wrote in a note. “However, we believe negative experience items should be expected going forward.”

Both companies also suggested premium hikes might be coming, especially amid inflation concerns and rising interest rates.

“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,” Manulife chief executive Roy Gori said on a conference call.


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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 US 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.”

Manulife’s shares closed up 3.5 per cent Thursday at $27.89 in Toronto.

Sun Life closed down 5.5 per cent at $69.72 while Great West was down more than two per cent at $40.38.

—with additional reporting from Reuters

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