The surging stock market is serving two of Canada’s largest life insurers well.

Manulife Financial Corp. and Sun Life Financial Inc. each posted a 10 per cent gain in underlying quarterly earnings as improving equity markets helped their asset-management divisions, and Sun Life’s fourth-quarter profit beat analysts’ expectations. Even with its earnings increase, Manulife fell short of estimates, partly hurt by slowing growth in Asia.

“Weak sales trends in Japan were a drag on growth in the Asia segment,” National Bank Financial analyst Gabriel Dechaine said in a note to investors, calling Manulife’s results “mixed.” “On the other hand, we believe capital updates were clearly positive.”

Both Toronto-based companies benefited from a rising equity market, with the S&P 500 index increasing 29 per cent last year. Manulife had core earnings of $1.48 billion in the fourth quarter, with global wealth and asset management having the biggest gain among the insurer’s four main operating businesses. Sun Life also saw the largest increase at its asset-management division.

“We saw good growth growth across asset management in the U.S. and Canada,” Chief Financial Officer Kevin Strain said in an interview, adding that the company’s management of alternative assets “hit a high.”

Sun Life’s core earnings of $1.34 a share beat the $1.30 average estimate of 14 analysts in a Bloomberg survey, while Manulife’s core earnings of 73 cents fell short of the 75-cent estimate. Manulife, Canada’s largest insurer, nevertheless posted record annual earnings, increased its dividend 12 per cent and surpassed one of its long-term goals three years ahead of schedule.

Asia Growth

Both Manulife and Sun Life saw lower profit growth in Asia, which has been an important earnings driver. The 6.7  per cent increase in Manulife’s Asian operations was the slowest in at least two years, with Chief Executive Officer Roy Gori citing the “headwinds” of the protests in Hong Kong and new rules in Japan around corporate-owned life insurance products, which hurt sales.

Sun Life’s Asia business rose two per cent from a year earlier, the slowest growth among its four main divisions, due to what CFO Strain called an “unfavorable experience” in its China joint venture and some investment-related issues.

“This quarter had more to do with some one-time things,” he said. “I don’t see anything that takes us off our thesis of Asia growing at 15 per cent” in the medium term.

RBC Capital Markets analyst Darko Mihelic said in a note that Sun Life’s “Asia results were softer than expected and future earnings could be at risk due to coronavirus and Hong Kong unrest.”

Manulife, meanwhile, made progress on some of its long-term goals. The company freed up $5.1 billion of capital from legacy businesses by the fourth quarter, reaching its capital-efficiency target three years early. The insurer also achieved its medium-term leverage target of 25  per cent.

“I really feel good about the progress that we made on a very important initiative for the franchise,” Chief Executive Officer Roy Gori said in an interview. “That really not only strengthens our capital position and our balance sheet, but really puts us in good stead for the future in terms of how to deploy capital to create value for the shareholder.”