Coronavirus: Manulife CEO warns of ‘devastation’ if economies are reopened too early
Manulife Financial Corp’s chief executive on Thursday cautioned against reopening economies shut by the COVID-19 pandemic despite challenges that contributed to a 40 per cent decline in first-quarter profit for Canada’s biggest life insurer.
A “dramatic increase” in testing and contact tracing, and progress on development of treatments and a vaccine are needed before economies can begin returning to normal, CEO Roy Gori said at Manulife’s annual shareholder meeting.
“We cannot afford to get this wrong,” Gori said. “Subsequent pandemic waves could create greater economic and social devastation than we’ve already seen.”
Investment gains this year look unlikely, and Manulife expects elevated credit losses through the recession, executives said on an analyst call earlier. The insurer will not meet its medium-term earnings-per-share growth target of 10-12 per cent this year, they said.
That has been compounded by a collapse in crude prices with closures due to the outbreak eroding demand. Many North American producers have responded by reducing output.
That contributed to the decline in the company’s earnings, reported late on Wednesday.
One-third of Manulife’s oil and gas bond holdings are in more resilient midstream companies, and 94 per cent are investment grade, Hartz said. Energy investments account for six per cent of Manulife’s ALDA portfolio.
“Given our limited exposure to high-yield issuers, we do not expect widespread defaults, although given the significant pressure on oil prices,” downgrades are likely, Hartz said.
“We would need to get north of $50 (U.S. crude) to encourage significant shale drillings,” he added. “We would expect significant recovery in our portfolio at those levels.”
U.S. crude was trading at about half that level on Thursday.
Smaller rival Great-West LifeCo on Wednesday posted a 45 per cent drop in first-quarter net income to 37 Canadian cents a share. Sun Life Financial also reported lower profit on Tuesday.
(US$1 = 1.4057 Canadian dollars)
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