TORONTO — Tensions between Ottawa and Beijing have not had a direct impact on Manulife Financial Corp.’s business in China, chief executive Roy Gori said Thursday, adding that he expects its franchise in the Asian country to remain strong.
Gori told the company’s annual meeting that Manulife continues to work closely with relevant stakeholders and regulatory authorities to ensure it “can navigate this as well as we can.”
“This challenge that currently exists is one that we feel optimistic will be overcome,” he said at the meeting, in response to a shareholder question.
“And that we will continue to see a strength in our franchise in China and its contribution to our broader Asia business… We haven’t seen the challenge directly impact our business.”
Gori’s comments come after Canada’s biggest insurer reported first-quarter earnings that surged on strong growth in Asia, particularly in Japan where sales among corporate clients jumped ahead of potential tax changes.
It also comes as China suspended the export permits of two Canadian pork exporters apparently over package mislabelling. The move came amid ongoing diplomatic tensions between the two countries after the detention of senior Huawei executive Meng Wanzhou in December, at the behest of the United States. Since then, China has halted canola-seed shipments from two Canadian companies and arrested two Canadians.
Gori noted Thursday that Manulife has been operating in Asia for more than 120 years, with its first insurance policy in the region sold in Shanghai in 1897.
“Through the many years that we have operated in Asia, and in China, we have seen various challenges, points of tension and economic cycles,” he told the meeting.
Manulife’s business in Asia was again a strong contributor in its latest quarter, where its net income attributable to shareholders surged by 59 per cent to $2.18 billion or $1.08 per diluted share, up from $1.37 billion or 67 cents per share a year earlier.
The insurer’s core earnings rose 15 per cent to $1.55 billion or 76 cents per share for the three months ended March 31, beating the 70 cents per share expected by analysts polled by Thomson Reuters Eikon.
Core earnings from Asia was $520 million during the quarter, up 17 per cent from the same period a year earlier. Manulife said during a conference call to discuss its latest results on Thursday that this uptick in Asia growth was fuelled by sales of corporate-owned life insurance products in Japan, ahead of potential tax changes there.
For comparison, quarterly core earnings for Canada was $283 million, flat from a year ago. In the U.S., core earnings amounted to $475 million during the period, up seven per cent from the first quarter of 2018.
Strong sales of corporate-owned life insurance products in Japan were a major contributor to growth in Manulife’s earnings, contributing roughly $60 million during the quarter, analysts said.
Canada’s biggest insurer said sales of these products in Japan have been temporarily suspended until the tax changes are further clarified.
Gabriel Dechaine, an analyst with National Bank of Canada Financial Markets, said this presents a headwind for the coming quarter.
“As these sales drop off post the tax change, Asia segment earnings growth should decelerate,” he said.
However, Manulife executives said on the conference call that the insurer expects to be able to pivot its offerings in Japan, once the tax changes are finalized.
Anil Wadwhani, Manulife’s general manager for Asia, also said he anticipates continued growth in other markets such as Hong Kong.
“It’s not that we are only dependent upon one market. We have a diversified set of franchises,” he told analysts.
“And just given the opportunity and the potential that we have in our Asian markets, we feel there’s enough trajectory and enough runway for us to continue our growth.”