Manulife Financial Q2 2026 Earnings Call Transcript

On Thursday, Manulife Financial (NYSE: MFC ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. For comprehensive financial data and transcripts, visit View the webcast at Summary Manulife Financial reported strong Q2 2026 results with a 21% increase in APE sales and a 16% growth in core EPS, driven by robust performance in Asia and Global WAM.

The company executed a significant long-term care reinsurance transaction with Munich Re, marking its third such deal in three years, aimed at de-risking its portfolio. Strategic initiatives include a focus on AI adoption, leading to industry recognition, and expansion in wealth protection products and distribution capabilities, particularly in Asia. Management highlighted the strength of its diversified portfolio and capital position, with a LICAT ratio of 136% and continuous share buybacks supporting financial flexibility.

Challenges in the Canadian insurance market, particularly in disability claims, are being addressed through targeted interventions and potential repricing strategies. Full Transcript OPERATOR Thank you for standing by. This is the Conference Operator. Welcome to the Manulife Financial Corporation Second Quarter 2026 Results Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing the star key followed by zero.

I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead. Hung Ko, Global Head of Treasury and Investor Relations Thank you.

Welcome to Manulife's earnings conference call to discuss our second quarter 2026 financial and operating results. com. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 32 for a note on the non-GAAP and other financial measures used in this presentation. Please note that certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from what is stated.

Turning to Slide 4, we'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide the highlights of our second quarter 2026 results, a strategic update and an overview of our latest long-term care reinsurance transaction. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After their prepared remarks, we'll move to the live Q&A portion of the call. With that, I'd like to turn the call over to Phil.

Phil Witherington, President and CEO Thanks, Hung, and thank you everyone for joining us today. Before we begin, I'd like to take a moment to recognize and welcome the newest members of our Executive Leadership Team that we announced in May. Patrick Graham has assumed the role of President and CEO of Manulife Canada. Patrick previously led our Hong Kong and Macau business and brings deep expertise across both distribution and health that will help accelerate our Canada growth strategy.

I'd also like to congratulate Jody Wallace on her expanded mandate as Chief AI Officer, which now spans both AI and enterprise data. Jody remains instrumental in driving responsible AI adoption at scale to support growth, improve efficiency and enhance customer experience, and her appointment to the Executive Leadership Team further reflects the importance of this work across our enterprise. In addition, Stephanie Fadhoo and Seamus Weiland have taken on broader responsibilities.

These important leadership changes further strengthen our team both at the enterprise level and in our key markets, and I'm confident they position us to deliver on our strategic priorities and drive sustainable growth. I'll now provide an overview of our second quarter financial performance before turning to the standalone long-term care reinsurance transaction we just announced. Let's start on Slide 6. We delivered strong results this quarter, demonstrating disciplined execution and the benefits of our diversified portfolio.

Our insurance businesses generated strong top-line results with APE sales growth of 21% year over year, supported by double-digit growth across all segments. APE sales momentum remains strong in Asia, which was driven by broad-based contributions from key markets such as Hong Kong, Singapore and Japan, and was supported by a high-quality agency force, which I will discuss further momentarily. Growth in overall sales drove a double-digit increase in value metrics, including year-over-year new business CSM growth of 16%. This contributed to CSM balance growth of 20%, positioning us well for future earnings generation.

4 billion this quarter. Net inflows were driven by strength in our institutional business, including continued contributions from CQS and Comvest. In terms of profitability, core EPS grew 16%, reflecting 12% growth in core earnings and the benefits of continued share buybacks. This strong result was led by Asia, where core earnings grew 21% from the prior year to a record level, as well as Global WAM, where core earnings increased 9% despite the impact of the transition to EMPF.

3%, up 130 basis points from the prior year quarter. Turning to our balance sheet, we maintained a strong capital position with a LICAT ratio of 136% and a leverage ratio well below our medium-term target, providing us with substantial financial flexibility and supporting continued return of capital to shareholders through dividends and share buybacks. Turning to Slide 7, we continue to make strong progress in the execution of our strategy, which is underpinned by our ambition to be the number one choice for customers. Our distribution capabilities and product innovation remain important differentiators, positioning us to meet evolving customer needs.

In Asia, we achieved a 9% year-over-year increase in Million Dollar Round Table members, the highest increase among the top 10 multinational insurers, reflecting continued progress in scaling our high-quality agency force. In fact, APE sales per active agent increased over 30% year over year in the second quarter. This speaks to the effective execution of our agency strategy, including efforts to enhance the quality of our agency force through Manulife Business Academy training programs, AI-enabled capability building and broader advisor excellence initiatives.

In addition, we expanded our global high-net-worth offerings with two innovative insurance solutions that address the evolving wealth protection and legacy planning landscape. This includes the introduction of an insurance savings solution that uniquely combines the benefits of our participating life products with investment diversification through a Manulife CQS strategy, further differentiating our value proposition to high-net-worth individuals. S. we enhanced our variable universal life offering, broadening the reach of our life insurance solutions while delivering greater protection, flexibility and long-term value.

Being an AI-powered organization is a key priority within our refreshed strategy, and our continued innovation and industry recognition reflect the meaningful progress that we're making across the enterprise. We are proud to be recognized by Evident as the number one life insurer for AI maturity for the second consecutive year, ranking first in North America and top three overall among 30 major insurers across North America and Europe. We were also recognized for our AI-enabled underwriting capabilities in Canada and named the Model Insurer for Data, Analytics and AI by Celent. And in Global WAM, we launched new scalable agentic AI solutions.

The portfolio of solutions includes document intelligence readers and knowledge assistants, which are enhancing customer experience while driving greater operational efficiency. Finally, the rollout of our enterprise AI platform continues, providing our AI developers and data scientists with a scalable and secure foundation to design, build and govern AI responsibly. It allows us to reuse capabilities across businesses and markets, accelerating delivery and reducing duplication. This platform lays the foundation for accelerated development and AI value generation.

Overall, these achievements and the recognition we've received underscore the meaningful progress that Jody and the team have made embedding AI across our organization. Similarly, we're proud of our longevity leadership, where we're helping customers achieve better health and wealth outcomes across their lifespan while driving sustainable growth for our business. S. insurance and retirement businesses launched a first-of-its-kind longevity preparedness tool, helping customers assess and improve their readiness for living longer, healthier and better lives.

We also enhanced our health and wellness offerings for eligible Canada Group Retirement and Private Wealth customers through preferred-rate access to select health and wellness solutions. And in Hong Kong, we're providing customers with greater healthcare options, quadrupling our medical specialist network to more than 900 providers through our strategic partnership with BUPA. Collectively, these achievements highlight the meaningful impact that we're making to empower customer health, wealth and longevity.

Before I turn it over to Colin, I'd like to discuss the long-term care reinsurance agreement with Munich Re that we've just announced, which is our third long-term care transaction within the past three years. A couple of elements of this transaction differentiate it from our prior deals. 2 billion of reserves at 80% quota share, and second, it is a standalone long-term care block. The pricing is similar to our previous transactions, with a modest negative ceding commission, further reinforcing the robustness of our reserves and assumptions.

The transacted block is an older vintage but has richer benefits, including greater lifetime benefits and policyholder inflation protection, compared with our retained book. Inclusive of prior transactions, we will have reduced LTC morbidity risk by 24%, significantly improving our overall risk profile. The impact to capital is expected to be largely neutral as the benefit from reducing morbidity risk required capital is offset by the release of the associated risk adjustment and the ceding commission. Unlike our previous deals, there is no capital benefit from the disposal of investments, as no assets are being transferred.

Foregone core earnings is relatively immaterial at 30 million Canadian dollars per annum in the first year, and that will reduce over time as the block runs off. More broadly, this transaction demonstrates how we're continuing to de-risk our in-force portfolio through innovative actions. Looking ahead, we continue to focus on improving our long-term care portfolio through organic initiatives that will enhance risk-adjusted returns and drive shareholder value. For example, our Long-Term Care Transformation program is focused on helping customers remain healthier and more independent for longer and reducing fraud through enhanced claims management.

The program is already generating strong results, with current run-rate LTC claim savings of over 6%, which also helped contribute to the attractiveness of the transacted block. In closing, I am pleased with our performance this quarter and delighted to have delivered a third long-term care in-force reinsurance transaction. We continue to execute on our strategy, innovate across our diversified business, drive sustainable growth and deliver insights and solutions to help our customers across their lifespans and for generations to come. With that, I'll hand it over to Colin to discuss our quarterly results in more detail.

Colin. Steve Finch Thanks, Phil, and good morning, everyone. This quarter we delivered strong results underscoring our continued focus on high-quality growth and value creation. Before opening the line to questions, I'll walk you through our results.

Let's begin on slide 10 to discuss our top line. We delivered strong APE sales growth underpinned by double-digit increases across all insurance segments, including over 20% in both Canada and Asia. This momentum translated into double-digit growth in value metrics, with new business CSM increasing 16% year over year. 4 billion reflected strength in our institutional business, partially offset by outflows in retirement and, to a lesser extent, retail, which I will expand on shortly.

Turning to slide 11, I'll walk you through the key drivers of our earnings this quarter compared with the second quarter of 2025. Our higher net insurance service result was driven by continued growth in Asia as well as the net positive impact of last year's actuarial assumption review. S. Life.

S. momentarily. S. Lastly, Global WAM generated 10% growth in pre-tax earnings.

On to slide 12, and as Phil mentioned at the top of the call, core EPS increased 16% year over year, driven by strong core earnings growth and ongoing share buybacks. 1 billion, exceeding core earnings, as higher-than-expected returns on public equities more than offset lower-than-expected returns on ALDA. As we've seen across the industry, market conditions continue to weigh on valuations and returns in certain alternative asset classes. Moving on to the results by segment, we'll start with Asia on slide 13.

APE sales increased 21% from the prior year, driven by double-digit growth in Hong Kong, Singapore, and Japan, partially offset by lower sales in mainland China and other markets. The strong sales reflect double-digit growth across agency, bancassurance, and other third-party sales, demonstrating the strength of our diversified, multi-channel distribution network. It also drove strength in our value metrics, though this was partially offset by changes in business mix in Hong Kong. APE sales growth of 37% year on year reflected higher sales of savings products across all channels.

This performance reflects the breadth of our franchise, with our domestic customer base driving the majority of sales this quarter and remaining a core strength of our business. With regards to core earnings, Asia delivered another quarter of strong results year over year. Core earnings increased 21%, driven by continued business growth and the net favorable impact of last year's basis change, partially offset by less favorable insurance experience.

Now moving on to Global WAM on slide 14, we were encouraged to see a return to net inflows this quarter, driven by strength in our institutional business, including continued contributions from CQS and Comvest, and supported by another quarter of record gross flows. This positive result was partially offset by outflows in North American retirement and retail, though we did see continued momentum across Canada Wealth and Asia more broadly. In the retirement channel, outflows reflected higher plan sponsor redemptions and increased net member withdrawals due to higher account balances from market appreciation.

Retail outflows were primarily driven by active mutual fund redemptions through third-party intermediaries in Canada, although trends improved on a sequential basis. Even as we continue to navigate pressures in certain areas of the business, this quarter's positive net flow result reflects the strength and resilience of our diversified platform. We generated solid core earnings growth of 9% from the prior year, driven by higher average AUMA and contributions from the Comvest acquisition, partially offset by the impact of the eMPF transition in Hong Kong and higher expenses due to business growth. 2%, expanding 110 basis points from the prior year.

Next, turning to Canada on slide 15, this quarter APE sales increased 23% year over year, reflecting growth across all lines of business, led by higher large-case sales within group insurance and continued strong participating life sales within our individual business. This, along with increased margins in individual insurance and annuities, drove strong growth of 29% in new business CSM, while new business value was largely flat due to lower margins and product mix changes in group benefits.