Canada's Manulife seeks to capitalize on Asia's growth in wealth

TORONTO, June 29 (Reuters) - Manulife Financial Corp has raised the proportion of core profit it aims to earn from its fastest-growing operations, including Asia and asset management, betting it will be able to capitalize on the continent’s rapid growth in wealth with its existing presence.

Canada’s biggest life insurer aims to derive 75% of core earnings from its “high-potential businesses” by 2025, Chief Executive Officer Roy Gori said in an interview ahead of its investor day on Tuesday.

That is a change from its original goal that these units, which also include behavioral-linked insurance and group benefits, should account for two-thirds of earnings by 2022.

It is almost at that original goal; in its latest quarterly results here, these businesses made up 60% of core earnings.

Much of the targeted growth will come from Asia, which is expected to account for half of core earnings by 2025, Gori said, from about 35% now.

“The low penetration rates on the insurance side, and the growing middle class obviously mean that we’re going to see many more people interested in embracing insurance as a key way through which they think about their financial protection,” Gori said.

“At the same time, wealth and asset management also have a tremendous opportunity” given the rapid growth in net household wealth in Asia, and that a much greater proportion of this is held in cash than in North America, he added.

Gori said he anticipates core earnings growth of 15% or higher in Asia and wealth and asset management in the medium term, which will help drive its overall growth target of between 10% and 12%.

“All of these targets do not incorporate any M&A,” he said. “If there are opportunities to transact, we would absolutely consider them. But that’s not our area of focus.”

Dividend increases, rather than deals, will be the first priority for its C$23 billion ($18.64 billion) of capital when the regulator lifts its moratorium on share buybacks and payout raises, he said.

Manulife also raised its target for automated processing of transactions, known as straight-through processing, to 88% by 2025, from 81% as of the end of 2020.

Manulife shares have performed in line with the broader Toronto stock index over the past year. ($1 = 1.2341 Canadian dollars) (Reporting by Nichola Saminather in Toronto Editing by Matthew Lewis)