Canada’s two largest insurers continue to feel the effects of COVID-19 as Asian businesses have seen insurance sales plummet after major virus outbreaks quarantined several regions and death rates skyrocketed in the United States in early 2022.

Manulife Financial Corp. – which saw its shares fall about 9% to $22.04 as of midday Thursday – reported “core earnings” of $1.5 billion, or 77 cents per share, for the first quarter of 2022, from $1.6 billion, or 82 cents per share, a year earlier.

Sun Life Financial Inc., which also released its first quarter results this week, saw its shares drop slightly 2% to $60.85 at noon Thursday.

The insurer said its “underlying net income” – an adjusted profit – of $843 million, or $1.44 per share, for the first three months of the year, compared to $850 million, or 1 $.45 per share, a year earlier.

Both insurers have rapidly increased their market share in Asian markets in recent years and have seen several quarters impacted by the continued spread of COVID-19 in various regions. At the same time, death rates in the United States jumped in the first three months of the year, with thousands of COVID-related deaths being reported daily.

Manulife saw core earnings in Asia decline 5%, due to lower new business volumes, primarily in Hong Kong – as well as several other markets in Asia, reflecting COVID-19 containment measures and lower sales in Japan.

Sales from Manulife’s Asian operations fell to $1.04 billion in the first quarter of 2022, down 9% from $1.28 billion in the same quarter last year.

On an earnings call, Manulife’s Roy Gori told analysts the impact was “temporary in nature”, but he may not see an “immediate rebound within a quarter”.

“During the first quarter, we have seen a rapid and unprecedented resurgence of COVID-19 in Asia,” Gori said on the call. “.. This has led to stricter containment measures, especially in Hong Kong, mainland China and Vietnam. These containment measures have tested the wider economy and the insurance industry as a whole.

Mr Gori said the company had seen recent signs of a return of “stronger” customer demand as the number of cases fell. For example, he said in Hong Kong, confirmed cases fell from the peak of 77,000 daily cases to 300 daily cases on May 1, and containment measures began to ease in late April.

Sun Life, which operates in eight Asian countries, reported lower profits in its Asian markets of $161 million in the first quarter. That’s down 19% from $198 million in the first quarter of 2021. Asia accounts for about 16% of Sun Life’s overall earnings.

Sun Life CEO Kevin Strain told The Globe in an interview that the company has paid around $1 billion in COVID-related claims globally since the pandemic began in early 2020.

But he is optimistic that Asian markets will recover as COVID lockdown measures have already been lifted in some regions, including Hong Kong – which accounted for most of the disruption to insurance sales.

Sun Life also announced that it will expand its partnership with CIMB Niaga in Indonesia, one of the first bancassurance partners that Sun Life began working with in 2010. Under the new agreement, Sun Life will be the provider insurance solutions to CMB Niaga customers through all channels from 2025.

Sun Life’s U.S. operations reported underlying net income of $118 million, down 31% from a year earlier, primarily due to an increase in deaths and morbidity.

“We are seeing COVID-related claims starting to decline – and we expect that trend to continue in the second quarter,” Mr. Strain said. “The combination of the number of people vaccinated and the number of people who have now had COVID brings us closer to herd immunity.”

Sun Life’s president of U.S. operations Dan Fishbein told analysts that external estimates predicted about 30,000 total deaths in the population in the second quarter, compared to about 160,000 total deaths in the United States in the first quarter.

“We should expect to see a significant improvement in our mortality…unfortunately, we don’t think COVID is going away completely,” Fishbein said on the call. “And we think there will be high mortality for a significant period of time. So we factor that into our pricing which we started increasing late last year, but it takes 3 years to go through the whole volume of business.

The wealth management of the two insurers offset some of the losses as investors in Canada and the United States continue to save.

Manulife reported increased net flows in its global wealth management business with $6.9 billion in net flows for the quarter, compared to $1.4 billion for the same period in 2021. Sun Life reported net income of $302 million for the quarter, compared with $230 million last year.

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