(Adds comments from CFO interview, market reaction)
By Jeffrey Hodgson
TORONTO, Feb 12 (Reuters) - Canadian insurer Manulife Financial Corp reported a weaker-than-expected fourth-quarter profit on Thursday, hurt by a jump in some types of claims, and warned macroeconomic factors like low interest rates would produce “headwinds” in 2015.
The insurer reported common shareholders’ net income fell to C$612 million ($487.11 million), or 33 Canadian cents a share, in the quarter ended Dec. 31, from C$1.26 billion, or 68 Canadian cents a share, a year earlier.
Canada’s largest life insurer said its core earnings were 36 Canadian cents per common share. Analysts on average had expected Manulife to earn 41 Canadian cents a share. Manulife shares fell 4 percent to C$20.95 in Toronto following the results.
“Core earnings, due to a variety of experience factors, were below our plan. Also, the macro environment, including low interest rates, produces headwinds for 2015,” Chief Executive Donald Guloien said in a statement.
The experience factors, as they’re referred to in the insurance industry, consisted mainly of increased claims, particularly dental claims in Canada and long-term care claims in the United States, said Steve Roder, Manulife’s chief financial officer.
“We have to examine these fluctuations and understand whether it means that we have to reconsider basic assumptions. But as of now, we have no indication that it has any implications for 2015,” he told Reuters.
Roder said Manulife, which hiked its dividend last August, had a solid solvency position. He said further hikes would be decided by the board, but that “we would like to think that was the first step of many.”
On the prospect of stock buybacks, Roder noted previous comments by Guloien that this was not a top priority for deploying excess capital because of the potential returns available from investing in organic growth and well-priced acquisitions.
“We’d like to think that we can find better opportunities than buying back shares,” Roder said.
Manulife took a C$353 million hit related mostly to the impact of the sharp drop in oil prices on the value of some of its investments. But its chief investment officer said in the earnings statement that given volatility and depressed asset valuations, the insurer views it as an opportune time to acquire additional oil and gas properties.
The results come a day after Manulife rival Sun Life Financial Inc also reported weaker-than-expected fourth-quarter results.
$1 = 1.2564 Canadian dollars Reporting by Jeffrey Hodgson Editing by W Simon