* Manulife profit drops 56 pct, hit by markets
* Great-West profit up 15 pct, shifts management
By Cameron French
TORONTO, May 2 Canada's top life insurer,
Manulife Financial Corp, reported a 56 percent drop in
profit in the first quarter, while earnings at rival Great-West
Lifeco Inc rose 15 percent as both companies met
expectations in a tough market.
Shares of the two insurers were higher in midday trade on
Thursday as investors took the results in stride, accustomed to
wild swings in Canadian insurers' results over the past five
years as volatile stock and bond markets have roiled asset
Toronto-based Manulife cited weaker life insurance sales and
less favorable market conditions for the big drop in its
Net income fell to C$540 million ($535.63 million), or 28
Canadian cents a share, from C$1.22 billion, or 63 Canadian
cents a share, a year earlier.
Manulife's insurance sales dropped 23 percent due to tax
changes and the impact of higher prices, but the main weight on
its earnings came from continued low interest rates and volatile
Manulife said market movements stripped C$208 million from
its bottom line. In the year-earlier period, stronger markets
added C$75 million to its profit.
Excluding that impact and other special items, core profit
rose 18 percent to C$619 million, or 32 Canadian cents a share,
meeting analysts' expectations, according to Thomson Reuters
Rival Great-West, Canada's No. 2 insurer, said net income
rose 15 percent in the first quarter to C$517 million, or 54.4
Canadian cents a share, from C$449 million, or 47.4 Canadian
cents a share, a year earlier. That was just above analysts'
forecasts for profit per share of 53 Canadian cents, according
to Thomson Reuters I/B/E/S.
Total sales were up 23 percent, with strong profit growth in
Canada and Europe offsetting a small decline in U.S. earnings.
Its Putnam Investments banner notched up a net loss of C$14
million in the quarter, compared with a net loss of C$12 million
a year earlier.
"The first quarter largely reflected what we have come to
expect from GWO: stable operations combined with core earnings
growth," Barclays Capital analyst John Aiken said in a research
"Mid-term growth remains contingent on the macro environment
as well as the successful acquisition and integration of the
Irish Life transaction announced in February."
Winnipeg, Manitoba-based Great-West bought state-rescued
insurer Irish Life, Ireland's largest life and pensions company,
for 1.3 billion euros in February and plans to merge it with its
own Irish unit, Canada Life.
Great-West operates under the Canada Life, London Life and
Putnam Investments banners. Its parent, Power Financial, is a
subsidiary of Power Corp, which is controlled by
Montreal's Desmarais family.
Great-West also announced a slew of management changes at
its annual meeting on Thursday. It said Allen Loney would retire
as president and chief executive, positions he has held since
2008, to be replaced by Paul Mahon, who has been chief operating
officer for the past five years and associated with the company
for 27 years.
In early afternoon trade, Manulife's shares were up 4.6
percent at C$15.44, while Great-West shares rose 1.1 percent to
The insurers must make regular reserve adjustments to
reflect the effects of market activity on the portfolios they
have set up to cover policy obligations.
As a result, Manulife has hedged much of its exposure to
both stock markets and bond yields.
Barclays Capital's Aiken said core earnings growth was
strong at both companies, but expressed concern about how their
shares will react to market movements in the early weeks of the
"While Manulife's and its peers' shares have held up quite
well over the past month, we note that relatively flat equity
markets and declines in government yields may begin to pressure
absolute valuations," he said in a note.
Besides its Canadian operations, Manulife owns U.S.-based
John Hancock and is growing rapidly in Asia, where it has a
presence in 11 countries.
Helping offset the weakness in insurance was a 43 percent
increase in Manulife's wealth management sales.
Manulife has set a target of C$4 billion in core profit by
2016, well above the company's 2012 full-year core profit of