August 8, 2008 / 11:14 AM / 9 years ago

Manulife profit falls on equity markets, currency

TORONTO (Reuters) - Manulife Financial Corp said net income dipped 8.5 percent in the second quarter, a bigger decline than expected, due to weak U.S. and Hong Kong equity markets, a stronger Canadian dollar and tax provisions.

But Manulife, North America’s No. 2 life insurer, also raised its dividend by 8 percent to 26 Canadian cents a share.

It earned C$1.01 billion ($963.3 million), or 66 Canadian cents a share, down from year-earlier C$1.1 billion, or 71 Canadian cents a share.

Analysts had expected profit of 71 Canadian cents a share before exceptional items, according to Reuters Estimates.

Manulife shares fell as low as C$36.29 early on the Toronto Stock Exchange, but recovered some ground as the session went on. By late morning the stock was down 1.8 percent at C$36.92.

“Obviously the headline number was short of consensus, it’s a slight miss,” said Jukka Lipponen, insurance analyst at KBW.

“In the corporate segment they had a loss, and I was looking for positive earnings. But in terms of top-line growth, they had a lot of strength in a number of areas.”

The higher Canadian dollar trimmed earnings by C$41 million in the quarter, Manulife said. About 70 percent of its income is denominated in foreign currencies.

The year-over-year currency drag should abate in upcoming quarters, RBC Capital Markets analyst Andre-Philippe Hardy said in a research note.

Toronto-based Manulife said upfront charges from insurance sales growth, less favorable credit and equity markets and tax-related related charges on leveraged lease investments more than offset improvements in earnings from a higher insurance in-force base and investment gains.

Equity market declines, primarily in the U.S. and Hong Kong, have reduced its fee income in recent quarters.

“We are pleased with our performance particularly given the very volatile and unsettled markets that prevail,” Chief Executive Dominic D‘Alessandro said in a statement.

D‘Alessandro is due to step down next May, and Manulife is looking for a new chief executive.

Despite the drop in quarterly earnings, operating results are strong and expenses are under control, Chief Financial Officer Peter Rubenovitch said.

The company, which has insurance and wealth management operations in Canada, the United States, Japan and other Asian countries, said premiums and deposits rose 5 percent to C$17.26 billion.

Excluding currency movements, insurance sales and wealth management sales were up 18 percent and 14 percent respectively, it said.

Annualized return on equity was 17 percent in the quarter, down from 18.5 percent a year earlier.

Total funds under management slipped 3 percent to C$400.3 billion due to turbulent markets and the stronger Canadian dollar, it said.

($1=$1.05 Canadian)

Reporting by Lynne Olver; Editing by Jeffrey Jones

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