Manulife Financial hopes to tap into Asia’s growth in wealth

Manulife Financial Corp.MFC-T +0.08%increase has raised the proportion of core profit it aims to earn from its fastest-growing businesses, including asset management and its operations in Asia, where it hopes to capitalize on the continent’s rapid growth in wealth.

Canada’s biggest life insurer aims to derive 75 per cent of core earnings from its “high-potential businesses” by 2025, chief executive Roy Gori said in an interview ahead of the company’s investor day on Tuesday.

That compares with its original goal that these units, which also include behavioral-linked insurance and group benefits, should account for two-thirds of earnings by 2022. In Manulife’s latest quarterly results, they made up 60 per cent of core earnings. Much of the targeted growth will come from Asia, which is expected to account for half of core earnings by 2025, Mr. Gori said, from about 41 per cent as of the end of 2020.

“The low penetration rates on the insurance side, and the growing middle class obviously mean that we’re going to see many more people interested in embracing insurance as a key way through which they think about their financial protection,” Mr. Gori said.

If insurance penetration rates – the ratio of total insurance premiums to gross domestic product – rise to 3 per cent, particularly in the Philippines, Indonesia, Vietnam and China, that could result in US$1-billion of additional annual premium-equivalent sales, Mr. Gori said in a speech at Manulife’s investor day. Total Asian APE sales were US$2.9-billion in 2020.

The gap between the amount of life insurance people need and have is set to increase 55 per cent by 2030 in Asia, providing a potential pool of US$350-billion in annual premiums, Mr. Gori said. Wealth and asset management also have a “tremendous opportunity,” given the rapid growth in net household wealth in Asia, and that a much greater proportion of this is held in cash than in North America, he added.

“All of these targets do not incorporate any M&A,” he said. “If there are opportunities to transact, we would absolutely consider them. But that’s not our area of focus.” Dividend increases, rather than deals, will be the first priority for Manulife’s $23-billion (US$18.64-billion) of excess capital, he said.

The company also aims to reduce the contribution of its long-term care and variable annuities businesses to less than 15 per cent of core earnings from 25 per cent in 2020. Manulife shares rose 0.3 per cent to $24.32 in morning trading in Toronto versus a 0.1-per-cent gain in the broader index.

Source: The globe and mail