Manulife Financial Corporation Q1 FY2025 earnings call

• Roy Gori highlighted strong first quarter results, with Asia AP sales up 50%, Global WAM generating positive net flows, and core EPS up 3%. Mentioned P&C reinsurance charge related to California wildfires and higher ECL provision, but core EPS up 9% when normalizing for these items. Discussed transformation, robust balance sheet with LICAT ratio 137% and leverage ratio 23.9%, and diversification as key strengths.
• Colin Simpson detailed financial results, noting impact of P&C reinsurance charge ($35M pre-tax) and ECL provision ($46M pre-tax) moderating core earnings growth. Highlighted Asia's strong new business metrics, Global WAM's sixth consecutive quarter of over 20% pre-tax core earnings growth, Canada's 9% AP sales growth, U.S.'s challenges, and book value growth to $36.66 per share with $6.4B capital returned to shareholders.

Asia: AP sales increased 50%, new business CSM grew 31%, new business value up 36%. Global WAM: Generated positive net flows of $500 million, pre-tax core earnings grew over 20% for sixth consecutive quarter. Canada: AP sales up 9%, new business CSM and value grew double-digit, core earnings up 3%. U.S.: AP sales up 6%, new business value up 30%, core earnings down 25% due to unfavorable net claims experience, lower investment spreads, increase in ECL provision, and basis change impact.

• Top line momentum, especially in Asia, expected to drive earnings for years to come. ECL provision guidance $30M to $50M. Balance sheet: LICAT ratio stable at 137%, leverage ratio 23.9% well below target. Continued focus on returning capital to shareholders via dividends and share buybacks.

• Macro-economic headwinds from trade tensions posing potential challenges. Impact of market volatility on ALDA returns, with recent negative experience in commercial real estate and private equity. ECL model updates reflecting deteriorating economic environment in first quarter. Potential impact of tariffs on consumer behavior, though no immediate signs of notable change seen yet.

Q: John Aiken asked about Asia sales outlook and translation for remainder of year.

A: Phil Witherington said strong start to 2025 in Asia, with sales likely to normalize but run rate sustainable.

Q: Doug Young inquired about Japan sales mix and Hong Kong sales drivers.

A: Phil Witherington stated Japan sales have large U.S. dollar-denominated component driven by diversification and yield differential, Hong Kong sales driven by strong customer demand across channels.

Q: Gabriel Dechaine asked about Asia sales mix impact on margins and U.S. expenses.

A: Phil Witherington said savings products are profitable, and U.S. expenses in Q1 were aberration due to gen-AI/digital investments with future efficiency gains.

Q: Tom MacKinnon asked about legacy transactions appetite and LICAT.

A: Marc Costantini said three transactions over 18 months released $2.8B capital, LICAT stable despite buybacks, and no immediate need for further large transactions.

Q: Paul Holden asked about ECL line drivers and ALDA returns.

A: Trevor Kreel explained ECL charge model-driven due to economic environment, and ALDA returns expected to return to long-term assumptions but timing deferred.

Q: Meny Grauman asked about ECL drivers and tariff impact on Asia.

A: Trevor Kreel said ECL charge model-driven, and no current signs of tariff impact on Asia consumer behavior.

Q: Mario Mendonca asked about Asia sales impact on CSM and buybacks philosophy.

A: Phil Witherington and Steve Finch said sustained sales decline would impact CSM but not immediate, and buybacks guided by capital position and business investment priority.

Q: Lemar Persaud asked about Canada/U.S. contributions and Asia outlook.

A: Roy Gori emphasized diversified business as strength, with Asia showing resilience despite uncertainties.