Manulife Financial Corp.’s first-quarter results took a heavy hit from rising interest rates, but Chief Executive Officer Roy Gori expects the steepening yield curve to be a tailwind over the longer term.

The yield on the U.S. 10-Year Treasuries has gained more than half a percentage point this year, to about 1.57 per cent on Wednesday, boosting what Manulife can expect to earn on the lower-risk, long-term debt insurers are apt to hold.

“We’ve been in quite a low interest-rate environment, and this is starting to change that somewhat,” Gori said in an interview. “It’s still relatively low if you look back over multiple decades, but higher rates are a plus for us, and we’re enthusiastic about that.”

However, in the first quarter, the rising rates required accounting adjustments that contributed to an $835 million (US$681 million) reduction in net income. Total net income fell 40 per cent to $783 million, or 38 cents a share, Toronto-based Manulife said Wednesday. Gori called the charge “accounting noise” that the company isn’t concerned about.

The shares fell 4.2 per cent to $26.05 at 9:55 a.m. in Toronto. A close at that level would represent the biggest one-day drop since Nov. 4.

Manulife’s core earnings, which excluded that charge and other items, were 82 cents a share, more than analysts’ 77-cent average estimate.

Driving that gain was the firm’s Asia operations, which are shaking off the sluggishness of the pandemic. Core earnings in Manulife’s Asia business rose 16 per cent to $570 million in the first quarter, helped by higher sales through banking partners in Hong Kong. The unit also benefited from strength in China, Vietnam and Indonesia as Manulife expands its sales through banks and insurance agencies.

“You see markets in Asia that are not just fast-growing, they’re the lowest-penetrated from an insurance perspective and even from a wealth-management perspective,” Gori said. “That certainly bodes well for us.”