Manulife Financial Reaffirms 18% Core ROE Goal for 2027, Sees U.S. Mortality Normalizing
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Manulife reaffirmed a full-year 18% core ROE target for 2027, noting it posted 16.5% in 2025 with stronger H2 results (Q3 18.1%, Q4 17.1%) and saying the company is “pretty close” to the goal.
Management said U.S. mortality losses of about CAD 251 million pre-tax in 2025 trimmed roughly 50 basis points off ROE, but they expect the experience to normalize and are pushing a Vitality behavioral-insurance program to improve policyholder health.
Strategic moves include acquiring ~75% of private-credit manager Comvest for just under $1 billion (about $14B platform), a Hong Kong MPF fee change that will cut profit by about $25 million per quarter, and continued share buybacks (recently 2.5%).
Executives from Manulife Financial (NYSE:MFC) discussed the insurer’s profitability targets, recent U.S. mortality experience, growth in Asia, and capital allocation priorities during a Q&A-style appearance in Montreal. Management reiterated its goal of reaching an 18% core return on equity (ROE) in 2027 and argued that recent results show the company is “pretty close” to that objective.
Asked whether the 18% target is an exit-rate or full-year goal, management said it is a full-year 18% core ROE target in 2027. The discussion noted that Manulife posted 16.5% core ROE in 2025, but performance improved in the second half of the year, including 18.1% core ROE in Q3 and 17.1% in Q4.
Management framed the ROE target as a way to demonstrate the “quality” of the franchise, saying the company believes the market underappreciates the quality of the business and that consistently delivering an 18% core ROE would help prove its earnings profile.
Management attributed a major portion of the year’s ROE headwind to U.S. mortality experience, citing mortality losses of about CAD 251 million pre-tax in 2025. Excluding those losses, management said 16.5% core ROE would have been about 17%, implying roughly a 50-basis-point impact.
The company said the losses were linked to its focus on the high end of the market and “some big deaths,” with policyholders underwritten 10, 15, or 20 years ago. Management described Q2 as “the blip,” while characterizing Q3 and Q4 as closer to normal variability. The company said it does not expect the 2025 mortality experience to persist and highlighted efforts aimed at improving policyholder health through a “Vitality” or behavioral insurance scheme, including proactively offering cancer detection or health checks to certain large customers.
Management highlighted strong results in Asia, citing about 21% core ROE for the region in 2025. It also pointed to growth across key operating metrics, including:
Management said the region’s ROE reflects the benefits of being part of a larger, well-capitalized Canadian-headquartered group, allowing the Asia business to operate with “high margins” and “decent returns” without capitalizing as a standalone entity.
On Hong Kong, executives addressed a quarterly decline in sales, noting the prior-year comparison included a roughly 60% sales increase in 2024. Management attributed part of the recent sales softness to a regulatory change that affected the independent broker channel, which had been a major driver of the earlier surge. While APE declined as broker business fell in Q4, management said margins improved by 13 percentage points during the quarter, reflecting a mix shift toward the company’s own agents and bancassurance channels. Management also noted that Hong Kong core earnings were up 26% and emphasized the advantage of geographic diversification across 12 Asian markets.
Management discussed a regulatory change affecting Hong Kong’s Mandatory Provident Fund (MPF) system, where Manulife said it holds about 30% market share and is the market’s number one provider. Under the new framework, the government is taking over administration for the industry, and providers will pay the government basis points for administration rather than performing the work themselves.
The company quantified the net impact as $25 million per quarter, after accounting for expense reductions from no longer doing the administration. Management said it still needs to “right-size” the business and called the change disappointing, describing it as equivalent to “two years worth of growth” being given up. While the company said it will reduce administrative staff, it did not outline additional offsets beyond that and stated, “there’s no more to come on that.”
Management said it continues to look at opportunities to acquire MPF books of business, though it suggested the new rules may not necessarily drive more consolidation because smaller players will no longer need scale for administration if the government handles it.
On its acquisition of Comvest, described as a private credit manager, management said Comvest had about $14 billion on its platform and that Manulife paid just under $1 billion for 75% of the business. Executives characterized private credit as the “missing piece” in Manulife’s alternatives capabilities and said Comvest provides scale in areas such as sub-investment-grade, floating-rate private credit with a roughly five-year duration. Management also emphasized that Comvest’s funds are third-party and said there is “no real risk” on Manulife’s own balance sheet from those assets.
Addressing negative headlines around parts of private credit, management said Comvest is focused on the mid-market and “complex stuff” and that it has no exposure to retail perpetual BDCs, which management said are a focal point of liquidity-related concerns. Executives added that current conditions appear more attractive for lenders, citing wider spreads, and said they felt “very good” about the acquisition.
On interest rates, management said the company generally does not try to take interest-rate risk and hedges exposures once business is on the books. Executives said a higher and steeper yield curve tends to support demand for insurance products and cited a sensitivity that New Business Value increases by CAD 140 million for every 50 basis points increase. While lower rates could help valuations for commercial real estate and private equity holdings, management cautioned that rate cuts may coincide with a weaker economy.
Management also discussed Manulife Bank, describing it as the number eight player in the Canadian market and saying lending assets are up 12%. It attributed flat earnings to pressure on net interest margin because the bank is “not a deposit-funded finance business” and the short end of the curve has come down. Management said owning the bank “absolutely” makes sense but acknowledged the company has not yet maximized the value of integrating the bank into a more holistic offering for customers.
Finally, on capital allocation, management pointed to a progression of share repurchases—5% two years ago, 3% following another reinsurance transaction, and a newly announced 2.5%—and said prior larger buybacks were linked to capital released through reinsurance transactions. On further legacy portfolio optimization, management said reinsurers remain interested in doing deals with Manulife, but suggested additional transactions are not currently the company’s top priority. Regarding large M&A, management said it would be “unusual” and that the company is “not spending huge amounts of time” on it, though it did not rule it out entirely.
Manulife Financial Corporation is a multinational insurance and financial services company headquartered in Toronto, Ontario. Founded in the late 19th century as The Manufacturers Life Insurance Company, Manulife provides a broad range of financial products and services to individual and institutional clients. Its core businesses include life and health insurance, retirement and pension solutions, wealth and asset management, and group benefits.
In wealth and asset management, Manulife operates through Manulife Investment Management and offers mutual funds, segregated funds, institutional asset management, and retirement plan solutions.
