* Asia seen as driver of profit growth
* Insurer targets less earnings volatility
* Markets have weighed on earnings
* Paul Rooney promoted to COO
By Cameron French
TORONTO, Nov 15 Manulife Financial Corp
is increasing its dependence on Asia as a means to reach a C$4
billion core profit goal by 2016 and promises a departure from
the volatile earnings that have plagued recent quarters.
"We expect to see less volatile and far more sustainable
earnings than the earnings of the past," Donald Guloien, chief
executive of Canada's largest insurer, said at a company
investor presentation in Toronto.
The profit goal represents a near doubling of Manulife's
current level of profitability, as the insurer had core profit -
which excludes the direct impact of financial markets - of
C$1.65 billion through the first 9 months of 2012.
The goal, affirmed last week, represents a slight reduction
on its previous target of C$4 billion in net profit by 2015.
That projection assumed it would get the largest
contribution from its U.S. operation, which includes John
Hancock Insurance, and a slightly smaller profit from its
Canadian and Asian divisions.
Now, the insurer sees Asia producing the largest chunk of
profit where Manulife currently operates in 11 markets and is
considering entering more, including Myanmar, said Bob Cook,
head of the insurer's Asia division.
Manulife sees its Asian division producing $1.65 billion in
core profit by 2016, while its U.S. division is seen with $1.5
billion. It expects C$1.45 billion will come from its Canadian
In Asia, Manulife is looking to take advantage of a
demographic shift as hundreds of millions of people join the
ranks of the middle class over the next several years. Markets
such as Cambodia, which Manulife entered in the past year, are
just starting to embrace the idea of insurance.
"The story for Manulife Asia is essentially that very few
financial services companies are as well positioned as us to
exploit the trends currently under way in the region," said
Cook, noting that Manulife has been operating on the continent
Over the next four years, Manulife plans to double insurance
sales, quadruple wealth management sales and double wealth
management funds under management in the region.
While Asian growth is key to the company's earnings engine,
it is hedging that Manulife is relying on to remove the
volatility that has led to wild swings in its results since the
2008 financial crisis.
Under Canadian accounting rules, life insurers must
mark-to-market their huge investment portfolios each quarter to
make sure they can cover long-policy obligations, and take
reserves out of earnings if they fall short.
The company has been hedging its exposure to stock markets
and interest rates and has reduced its market volatility
sharply, the company said.
It recorded a net loss in three of the last four quarters,
including a loss of C$227 million in the third quarter ended
Sept. 30, after taking a C$1 billion charge due to a shift in
actuarial assumptions related to certain insurance products.
Guloien said the C$4 billion profit target assumes little
change in current low interest rate levels, although it does
assume an increase in equity markets, which one analyst said was
hardly a foregone conclusion.
"The issue is arguably (the target) is quite conservative on
the interest rate scenario and arguably it's optimistic on
equity markets," said Peter Routledge, an analyst at National
He noted Manulife's growth plan also depends more heavily on
wealth management growth than insurance growth, which also ties
its results to in improvement in equity markets.
The company's shares ended the session down 2 Canadian cents
Manulife also announced it had promoted Paul Rooney,
currently the head of the Canadian division, to chief operating
officer, a newly created position.
The insurer said Rooney will focus in his new job on
corporate strategy and corporate development, among other