(Adds analyst, CFO comments, background)
By Cameron French
TORONTO Aug 7 Manulife Financial Corp
unexpectedly hiked its dividend for the first time since the
financial crisis on Thursday, as it reported quarterly profits
that jumped on stronger financial markets but was just shy of
Investors have awaited an improved dividend since Canada's
largest insurer halved the payout in 2009 as it struggled to
preserve capital amid plunging markets and unprofitable
The company had hinted that a dividend hike was possible in
2015 at the earliest.
"We believe that this is a distinct positive and may come
somewhat of a surprise to the market," Barclays Capital analyst
John Aiken said in the note.
In an interview, Manulife Chief Financial Officer Steve
Roder said the company decided to hike the dividend early due
largely to a faster-than-expected decline in the company's
leverage ratio, and growing comfort with the regulatory
environment, including capital rules for insurers.
Net income attributed to shareholders was C$943 million, or
49 Canadian cents a share, compared with C$259 million, or 12
Canadian cents a share, a year earlier.
The result benefited from C$267 million in
investment-related gains, due to strong returns on alternative
long-duration assets and the redeployment of government
securities into higher-yielding assets, and also from higher fee
income on increased assets under management, the company said.
Excluding one-time items and the bulk of the market-related
gains, Manulife earned 36 Canadian cents per share, just shy of
analysts' estimates of 40 Canadian cents, according to Thomson
Besides its Canadian operations, Manulife owns U.S. insurer
John Hancock and is growing in Asia, where it has a presence in
about a dozen countries.
The dividend move follows efforts in recent years to reduce
Manulife's exposure to financial markets through hedging and the
exit of unprofitable business lines.
The company also has a goal of reaching C$4 billion in core
profit, which excludes market-related impacts, by 2016. Core
profit was C$1.4 billion in the first half of 2014.
"As we move closer to the C$4 billion (target), we would
hope to have incremental step-ups in the dividend," Roder said.
Total insurance sales fell 38 percent on the year, due to a
strong performance a year earlier in single premium group
benefits sales. Excluding group benefits, insurance sales rose
10 percent, the company said.
Wealth management sales were down 7 percent on the year, in
part due to the non-recurrence of a closed end fund offering in
Canada, though funds under management rose 12 percent.
The company's shares, which are up about 5 percent
year-to-date, closed at C$21.97 on Wednesday.
The result follows a stronger-than-expected profit at rival
Sun Life Financial late on Wednesday.
(Editing by Lisa Von Ahn and Bernadette Baum)