Manulife returns to profit in fourth quarter

TORONTO Thu Feb 7, 2013 12:52pm EST

TORONTO (Reuters) - Manulife Financial Corp (MFC.TO) rebounded to profit in the fourth quarter on the back of investment and tax gains, and shares of Canada's No. 1 insurer rose on Thursday although its core profit came in just shy of estimates.

The result, which followed net losses in the year-before quarter as well as in the second and third quarters of the latest financial year, comes as Manulife has rebuilt its balance sheet to shed market risk and moved to train its focus on Asian growth.

Indeed, wealth management sales from Manulife's Asian division more than doubled during the quarter, although that didn't translate into profit growth as core earnings from the segment actually eased slightly.

Overall net profit came in at C$1.06 billion ($1.06 billion), or 56 Canadian cents a share, compared with a loss of C$69 million, or 5 Canadian cents, in the same quarter a year earlier.

The result included C$368 million in investment gains and C$264 million in tax-related gains, the company said.

Excluding those items, core profit was 28 Canadian cents a share, falling short of analysts' expectations of a profit of 32 Canadian cents, according to Thomson Reuters I/B/E/S.

Despite the miss, the company's shares were up 0.7 percent at C$14.51 on the Toronto Stock Exchange, maintaining the momentum that saw the shares rise 24.5 percent last year.

"I'd say (the results are) slightly positive because of the strength in Asian sales, but the earnings were not extraordinary," said Peter Routledge, an analyst at National Bank Financial.

Core profits from the company's Asian division slipped to C$180 million from C$213 million, which the company said was due to higher sales incentives and business strain, which refers to the upfront costs of selling insurance and wealth products.

The U.S. division, which includes insurer John Hancock, earned C$293 million, up from C$189 million a year earlier, while core profit at the company's Canadian business rose to C$233 million from C$142 million.

For the full year, core profit came in at C$2.19 billion, and Manulife said it was on track to meet its 2016 target of C$4 billion in core profit, a goal that depends heavily on Asian growth.

DE-RISKING

As was rival Canadian insurer Sun Life Financial Inc (SLF.TO), Manulife was hit hard by the 2008 financial crisis and resulting market turmoil, and in reaction has been both hedging its direct exposure to markets and reducing its dependence on market-sensitive businesses.

Manulife's minimum continuing capital and surplus requirements (MCCSR) ratio - a measure of stability for insurers - rose to 211 percent in the quarter from 204 percent in the third quarter, a sign of the increasing balance sheet stability that has helped drive its shares higher over the past year.

"Capital is no longer a key issue for this company due in part to the much improved global macroeconomic outlook, but more importantly the ongoing de-risking activities that the company continues to pursue," Robert Sedran, an analyst at CIBC World Markets, said in a note.

Manulife is the first Canadian life insurer to report year-end results. Great-West Lifeco Inc (GWO.TO) was also expected to release results on Thursday, while Sun Life and Industrial Alliance Insurance and Financial Services Inc (IAG.TO) will release results next week.

($1=$1.00 Canadian)

(Reporting By Cameron French; Editing by Peter Galloway)

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