“In fact, on a year-over-year basis, our Canadian and US segments achieved double-digit performance [new business value] growth driven by higher sales and improved margins,” Gorey added.
Canada posted underlying profit growth of 8.5% in the second quarter of 2022, C$345 million, compared to C$314 million in the same period last year. Gorey said this growth primarily reflected the favorable experience in individual insurance and annuities and higher forced earnings in their insurance business.
Annualized premium equivalent (APE) sales in Canada increased 32% to C$361 million compared to C$271 million in the second quarter of 2021, primarily due to higher large-occurrence group insurance and individual insurance sales and partially offset by lower sales of segregated funds. Manulife noted improvements to its Canadian website, including artificial intelligence and natural language processing to improve product search capabilities.
“We continue to make progress on our digital journey and our strong digital capabilities and investments, which were over $850 million as of 2018,” Gorey noted on the earnings call.
Meanwhile, the US had lower core earnings mainly due to the variable annuity (VA) reinsurance transaction that closed in the first quarter. Excluding the transaction, underlying earnings would have risen 2%, Manulife said.
US operations benefited from improved margins, higher international sales and higher interest rates. New Business Value (NBV) growth was 32%. International sales were at a record high in the second quarter, up 43% year-on-year.
“Overall, our global footprint, diversified business mix focused on operational sustainability and proven digital capabilities have uniquely positioned us to continue to deliver strong performance over the long term,” Gorey said.
Agent’s Troubles in Asia
A sharp decline in Manulife’s Asian sales force was one factor contributing to weak sales in the region. The number of agents in the Other Asia category, which includes mainland China, Singapore, Vietnam and other emerging markets, fell 17% to 86,329 in Q2 from 101,045 in the year-ago quarter.
The Toronto-based insurer attributed the decline to ongoing pandemic effects, continued pressure to professionalize agencies and the introduction of new rules on products and business practices in China. But Manulife said it sees these as “short-term factors.”
Changing labor dynamics have affected recruitment during the pandemic in China and Vietnam, according to Manulife Asia CEO Damien Green. “We have seen people return to their home provinces to support their families during the latest waves of the pandemic. But we expect recruitment to normalize as markets recover,” he explained.
“We have a diversified multi-channel, multi-segment franchise that, through multiple channels — from private banks to international high net worth brokers, all the way to mass market agency — gives us access to customer segments, high value, high growth customer segments,” Green said of the Asian segment.
Gorey emphasized Manulife’s focus on the quality, not the size, of its agent force. “We have seen a 23% CAGR increase in MDRT (Million Dollar Round Table), which is the recognized measure of the quality of the agency’s force, from pre-pandemic levels over the past two and a half years,” the CEO noted. The Million Dollar Round Table is a global association of the world’s leading life insurance and financial services professionals from more than 500 companies.
“Quality matters more and we have witnessed a tremendous growth in the quality of our agency. Another big strength of ours is the diversification of our channel mix,” Gorey told stakeholders on the earnings call.
Looking ahead, Manulife said it expects to see improvements as Asia and the rest of the world emerge from pandemic conditions. Green said they remain confident of achieving their medium-term target of 15% underlying revenue growth despite the current challenges.
“While the performance of our profitability and growth metrics was impacted by a challenging macro environment, our global strengths and diversity continue to provide remarkable compensation,” said Manulife Chief Financial Officer Phil Wetherington. “Our balance sheet remains strong and provides us with the financial flexibility to meet our strategic and capital deployment priorities.”