Manulife gets C$3 billion loan, says profit fell

By Lynne Olver

TORONTO (Reuters) - Life insurer Manulife Financial Corp (MFC.TO: Quote) said on Thursday that it has obtained financing to shore up its regulatory capital position, easing recent concerns, but steep declines in stock markets and losses on fixed-income securities sliced its quarterly profit in half.

Manulife's capital position had been a key focus in recent weeks, and the company said that it will borrow C$3 billion from six large Canadian banks to provide additional regulatory capital to subsidiaries, as needed.

Manulife shares initially rose after the news, but by afternoon they had reversed course and were down 2 percent at C$25.28.

Moody's Investors Service changed the outlook on Manulife's operating subsidiaries to negative from stable, saying that the company's borrowing would modestly weaken its future flexibility. Moody's affirmed the company's current Aa1 financial strength ratings.

Responding to tough questions from analysts, Manulife Chief Executive Dominic D'Alessandro told a conference call the company did not hedge its exposure to equity market declines -- which would push up its reserve requirements -- because it did not expect such severe volatility.

"We didn't expect all of these financial institutions to fail, in one week we had massive reorganization of the financial sector," D'Alessandro said in one exchange with an analyst.

"Maybe you guys saw it at Citibank but we didn't see it."

It would have been "prohibitively expensive" to start hedging when volatility was at its peak, D'Alessandro added.