By Nichola Saminather

TORONTO (Reuters) – Manulife Financial Corp sees the higher inflation and interest rates expected this year as generally positive, and can at least partly offset the former through increased premiums, executives told a post-earnings analyst call on Thursday.

A 50-basis-point increase in fixed income yields would also translate into a C$1.85 billion rise in embedded value, Chief Executive Roy Gori told on the call.

Manulife earlier posted core fourth-quarter earnings of 84 Canadian cents per share, up 13.5% from a year earlier and compared with analysts’ expectations of 82 Canadian cents.

Manulife’s smaller rivals Sun Life Financial and Great-West Life had on Wednesday also reported higher earnings.

Manulife shares jumped 3.4% to C$27.81 in morning trading in Toronto, their highest intraday level since 2008. Sun Life, whose U.S. earnings dropped 51% from a rise in COVID-related death claims, declined 3.5% to C$71.21 while Great-West shares fell 1.3%.

The main Toronto index declined 1.6%.

“There are some puts and takes in the negatives of higher inflation is that you have higher costs and expenses,” Gori said. “There are some aspects of our business where higher rates will create some headwinds, but we have flexibility as it relates to driving scale through expenses or price changes to offset those.”

The company could increase rates in particular in its long-term care business, which may be susceptible to increased costs, though a shift from facility care to cheaper home care prompted by the pandemic has offset some of that, Chief Actuary Steve Finch said.

(Reporting By Nichola Saminather; Additional reporting by Manya Saini; editing by John Stonestreet)