* Expects growth in Canada, U.S. and Asia
* ROE seen at 13 pct by 2015, hedging equity exposure
* May enter India, South Korea markets
(Adds analyst, CEO comments)
By Cameron French
TORONTO, Nov 19 Manulife Financial Corp
(MFC.TO), which has struggled after the 2008 market crash, said
on Friday it is aiming for a nearly threefold increase in net
profit to C$4 billion ($3.9 billion) by 2015, and will reduce
risk by hedging aggressively against market swings.
The Toronto-based company, Canada's largest insurer and
owner of U.S.-based John Hancock, said it plans strong growth
in Asia and the United States, particularly in fee-based wealth
It is targeting a return on equity of 13 percent by 2015,
and said the figures were goals rather than formal guidance.
The targets would improve on the company's 2009 profit of
C$1.4 billion and return on equity of 5.2 percent, but they
would lag profitability before the crash sideswiped Manulife's
variable annuity business, forcing it to halve its dividend.
In pre-crisis 2007 the insurer earned C$4.3 billion, with a
return on equity of 18.4 percent, its unhedged equity exposure
helped by soaring stock markets.
Manulife shares, which have underperformed peers Sun Life
Financial (SLF.TO) and Great-West Lifeco (GWO.TO) with a 20
percent year-to-date drop, fell 34 Canadian cents, or 2.2
percent, to C$15.35 on the Toronto Stock Exchange.
The stock hit a 3-month high on Thursday, but it is still
trading at less than half of its pre-crisis levels.
"It's going to take a while to return to peak-type of
earnings, and it's going to take a while for the stock price to
get back to a price that we remember from several years ago,"
said Craig Fehr, an analyst at Edward Jones in St. Louis.
"That doesn't necessarily mean it can't be great investment
in the interim."
Such a rebound would likely depend on Manulife restoring
its dividend its previous level.
Donald Guloien, the company's chief executive, wasn't ready
to speculate when that might be.
"What we want is more stability in our earnings and more
growth in our earnings before we'd consider any dividend
action," he told Reuters.
He said he's also is concerned about pending regulatory
changes, including a shift to international accounting
standards in 2011, and stiffer capital rules proposed by
Canada's financial services regulator.
Manulife has aggressively hedged its exposure to stock
markets and interest rates to produce more predictable
It aims to hedge 75 percent of its earnings sensitivity to
equity markets movement by 2014, and said it hedged C$2.5
billion of equity futures contracts earlier this week.
That should reduce the risk of huge market-related hits to
earnings, but it also reduces Manulife's ability to make back
its previous losses through exposure to rebounding markets.
Manulife estimated the potential annual costs of hedges
added after Sept. 30 could reach C$400 million in 2015. But the
added reliability of the future results made it well worth it.
"These will be high quality earnings," said Guloien. "If
markets go up we'll be criticized for hedging to fast, and if
markets go down we'll be criticized for hedging too slow."
By 2015, Manulife hopes to earn C$1.5 billion from its
Asian operations, C$1.5 billion from its Canadian business, and
C$1.7 billion from the United States.
The company aims to become a dominant foreign insurer in
Asia, where it already has a significant presence, particularly
in Japan and China.
It targets high-return insurance and wealth management, and
will explore strategies to push into India and South Korea.
In the United States, Manulife aims to exploit the strong
brand awareness of John Hancock, the insurer it acquired in
2004, and push growth in its retirement and mutual fund
(Additional reporting by John McCrank; Editing by Frank