* Core profit meets estimates
* Insurance sales down 23 percent
* Wealth sales stronger
By Cameron French
TORONTO, May 2 Manulife Financial Corp
reported a 56 percent drop in first-quarter earnings on
Thursday, citing weaker sales of its life insurance and less
favorable market conditions.
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.
Insurance sales dropped 23 percent due to tax changes and
the impact of higher prices, but the main weight on earnings
came from the continued slide in interest rates, as well as
volatile equity markets.
Manulife said market movements stripped C$208 million from
the bottom line. In the year-earlier period, stronger markets
added to profit by C$75 million.
Excluding that impact and other items, core profit rose 18
percent to C$619 million, or 32 Canadian cents per share,
meeting analysts' expectations, according to Thomson Reuters
Volatile stock and bond markets have led to wild swings in
Canadian insurers' results over the past four years as they must
make regular reserve adjustments to reflect the effects of
market activity on the portfolios they have set up to cover
future policy obligations.
As a result, Manulife has hedged much of its exposure to
both stock markets and bond yields.
Barclays Capital analyst John Aiken said core earnings
growth was strong, but expressed concern about how the company's
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.
Manulife, which closed at C$14.76 on the Toronto Stock
Exchange on Wednesday, is up 6.4 percent over the past two
weeks, but is trading essentially flat in April.
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 wealth management sales.
Toronto-based Manulife, the first Canadian life insurer to
report first-quarter results, has set a target of C$4 billion in
core profit by 2016, well above the company's 2012 full-year
core profit of C$2.19 billion.