Weak markets send Manulife Financial to loss

Thu Aug 9, 2012 9:17am EDT
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By Cameron French

TORONTO (Reuters) - Manulife Financial Corp MFC.TO fell to a second-quarter loss as weak financial markets forced the company to take a C$677 million ($680.4 million) charge to revalue long-term investment assumptions, but the result beat analysts' expectations.

Manulife, Canada's No. 2 insurer by market capitalization and owner of U.S. insurer John Hancock, also warned it could take a charge of as much as C$1 billion in the third quarter as part of its annual review of actuarial assumptions.

It said macroeconomic headwinds made achieving its 2015 profit goal "a stretch," the first time the company has acknowledged that it may fall short of the target.

In late 2010 Manulife said it was aiming for a nearly threefold increase in net profit to C$4 billion by 2015. That goal was dependent on financial markets rebounding from their post-crisis turmoil.

Instead, factors such as the European debt crisis have hurt equities and have sent bond yields lower, putting more pressure on Manulife's bottom line.

"It's not a fault of management, I view it more that they were more optimistic on the outlook for markets than what has actually occurred," said John Aiken, an analyst at Barclays Capital.

The Toronto-based company said it lost C$300 million, or 18 Canadian cents a share, compared with a year-before profit of C$490 million, or 26 Canadian cents.

The C$677 million charge was slightly smaller than expected, as Manulife had warned it would take a hit in the C$700-C$800 million range to alter investment assumptions to account for falling bond yields.   Continued...