Manulife Financial Q3 Earnings Call Highlights

Key Points

• Manulife’s Q3 core earnings per share rose 6%, supported by growth in Asia and North American insurance, while share buybacks helped lift per-share results. Core return on equity was 17.8%, near the company’s target of more than 18% in 2027.
• Asia core earnings increased 17%, with strong sales growth in Hong Kong and Japan offset by weaker mainland China sales. Global Wealth and Asset Management faced $3.6 billion in net outflows, mainly from U.S. retirement, and segment core earnings fell 5%.
• Net income was $1.4 billion and was weighed down by lower-than-expected alternative asset and public equity returns, along with derivative and hedge-accounting losses. Manulife ended the quarter with a 136% LICAT capital ratio and said it remains on track to exceed $1 billion in cumulative enterprise AI value by 2027.

Manulife Financial NYSE: MFC reported a 6% increase in core earnings per share for the third quarter of 2026, as growth in Asia and North American insurance helped offset net outflows in its wealth and asset management business.

Net income was $1.4 billion, Chief Financial Officer Colin Simpson said on the company’s earnings call. Core earnings rose 4% from a year earlier, while share buybacks contributed to the higher per-share result. Core return on equity was 17.8%, approaching the company’s target of more than 18% in 2027.

Manulife’s contractual service margin (CSM), a measure of expected future insurance profits, rose 9% from a year earlier. Adjusted book value per share also increased 9%, to $41.78, while the company returned $5.3 billion to shareholders over the preceding 12 months.

Asia Growth Offsets Mainland China Decline

Asia core earnings increased 17% year over year, driven largely by business growth and several smaller items, including the annual review of actuarial assumptions. Increased expected credit loss provisions partly offset those gains, Simpson said.

Annualized premium equivalent sales rose 45% in Hong Kong and 39% in Japan, but lower sales in the Chinese mainland left the region’s overall sales largely unchanged. Simpson said mainland sales of participating savings products fell against a strong prior-year comparison, consistent with broader industry trends.

Steve Finch, president and CEO of Manulife Asia, said Hong Kong’s growth was driven primarily by demand for savings products from global high-net-worth customers. Those products carry somewhat lower margins, he said, but Manulife expects the business to contribute positively to its return-on-equity target.

Finch attributed Japan’s growth in part to higher interest rates and expanded product offerings. He said results could normalize as macroeconomic conditions change, while maintaining a favorable outlook for the market.

Asked about mainland Chinese visitor business in Hong Kong, Finch said regulatory changes had contributed to a slowdown since last year. He described recent tax-related news as a signal to enforce existing rules and said some customers were temporarily taking longer to make decisions. Over the longer term, he expects demand for Hong Kong products and currency diversification to continue.

Retirement Outflows Weigh on Wealth Business

Global Wealth and Asset Management recorded net outflows of $3.6 billion, driven primarily by retirement. U.S. retirement outflows reflected higher plan sponsor redemptions, while Canadian retirement outflows were modest and reflected lower new plan sales, Simpson said.

Institutional inflows, including contributions from Manulife | Comvest, partly offset the withdrawals. Retail flows were largely neutral, with strength in Canada and Asia offsetting outflows through third-party intermediaries in North America.

The segment’s core earnings fell 5% from a year earlier. Higher fee income and Comvest’s contribution were more than offset by factors including the Hong Kong eMPF transition, higher workforce expenses, investment in growth and lower performance fees.

Paul Lorentz, president and CEO of Global Wealth and Asset Management, said gross flows rose 16% to $56 billion. He acknowledged some investment performance challenges in the prior year and said the company had made talent changes. Lorentz expects operating leverage to improve as the business grows and said the segment remains on plan for targets outlined at Manulife’s investor day.

Investment Returns and Capital

Simpson said net income was affected by lower-than-expected alternative long-duration asset, or ALDA, returns, as well as weaker-than-expected public equity returns and losses from derivatives and hedge accounting ineffectiveness. ALDA charges were mainly related to private equity, real estate and farmland investments.

Chief Investment Officer Trevor Kreel said the portfolio’s annualized return for the quarter was about 7.5%. He expects near-term valuation headwinds that could last a couple of quarters, followed by a trend back toward the company’s long-term return assumption of 9% to 9.5%.

CEO Phil Witherington said the third quarter’s gap between core earnings and net income was larger than he would typically expect. He said ALDA performance has been a recurring contributor, but he does not see a material structural reason for a long-term disconnect, while noting that accounting can defer gains and recognize charges more quickly.

Manulife ended the quarter with a LICAT capital ratio of 136% and a financial leverage ratio of 23%, Simpson said. The company also sold more than $1 billion of equities during the quarter as part of its balance-sheet risk management.

Actuarial Review and AI Initiatives

Chief Actuary Sinéad O’Connor said the annual review of methods and assumptions reduced fulfillment cash flows by $128 million overall, resulting in a decrease in reserves. She said the review included a modest increase in U.S. mortality reserves, while U.S. mortality experience was positive both for the quarter and year to date.

Witherington said Manulife remains on track to achieve and exceed $1 billion in cumulative enterprise AI value by 2027. He also said AI-supported fraud initiatives had reduced the level of long-term care claims by 6 percentage points.

About Manulife Financial (NYSE:MFC)

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