Manulife CEO Sees Plenty of Middle-Class Opportunity Despite China’s ‘Slowdown’
November 13, 2015 by Dennis Gorski, managing editor-online, BestWeek: Dennis.Gorski@ambest.com
TORONTO – Manulife’s president and chief executive officer, Donald Guloien has a message for those in North America who keep asking what he’s doing about the slowdown in China. “It’s kind of ironic. We don’t get asked that question by those who know China well,” he said.
“It’s not hard dealing with the impact of an economy slowing down to ‘only’ 6.5%, which is roughly triple that experienced in the Western world,” Guloien said. “Two years growth in China is roughly equal to the entire economy of Australia. And five years’ growth in China is equivalent to creating a new German economy every five years.”
He pointed out the nation is moving from a manufacturing to a service economy “rapidly and successfully.”
“We sell insurance, mutual funds and hopefully soon, pension plans, and China is one of the few places in the world where the government has established specific targets in the five-year plan for both insurance and the establishment of retirement savings,” Guloien continued. “Its middle class is growing — in numbers, income and wealth. Our insurance sales in China are up over 30% and mutual fund sales are up over 25%. So, so much for slow growth in China.”
The company is actively exploring various ways to enter China’s promising pension market (Best’s News Service, Sept. 4, 2015).
Manulife has begun selling insurance via the messaging app WeChat in mainland China, the company reported. It also has a 15-year regional distribution agreement with DBS and is the exclusive provider of bancassurance products to DBS customers in mainland China as well as Singapore, Hong Kong, Indonesia starting in January.
Manulife reported a steep decline in third-quarter net income available to shareholders, the company said in its earnings statement. The results were “colored” by losses in its oil and gas valuations, Guloien said, as well as by charges associated with the company’s annual review of actuarial assumptions, he added.
Net income attributable to shareholders fell to C$622 million (US$468.9 million) from C$1.1 billion in the prior year.
Total revenue also fell to C$7.1 billion from C$10.9 billion , the company said. Guloien said the company “projects core earnings growth of 10% to 12% over the medium term.”
Manulife’s wealth and asset management business had core earnings of C$169 million, up 31%, resulting from gains in fee income and currency movements.
Total assets under management and administration rose 19% to C$888 billion, the company said.
Overall insurance sales rose 12% to C$803 million, the company reported.
Insurance sales in the Asian division reached US$379.5 million, up 19%, led by double-digit percent gains in Japan, Hong Kong and Singapore, but a 13% decrease in Indonesia, Manulife said.
In Canada, retail insurance sales of C$47 million increased by 15%, driven by strong universal life, term product and living benefits sales, according to the company.
U.S. insurance sales under the John Hancock brand hit US$126 million, a 2% increase, driven by sales of term, universal life and variable universal life products and international UL sales, Manulife said.
Asked if the company would return to share repurchasing, Guloien said, “We have the attitude that’s not the best use of capital.” He then added, “I never say never.”
The operating insurance members of Manulife Financial have a current Best’s Financial Strength Rating of A+ (Superior)
In late-day trading Nov. 12, shares of Manulife Financial (NYSE: MFC) were $16.06, down 3.83% from their previous close.
