* Net profit tops estimates; core result misses
* Company takes tax, investment gains
* Manulife on track to meet 2016 profit target
* Shares rise 0.7 pct on Toronto Stock Exchange
* Company doesn't plan to sell U.S. annuity business
By Cameron French
TORONTO, Feb 7 (Reuters) - Manulife Financial Corp rebounded to profit in the fourth quarter on the back of investment and tax gains, and shares of Canada's No. 1 insurer rose on Thursday even though its core profit came in just shy of estimates.
The result, which followed net losses in the year-before quarter as well as in the second and third quarters of the latest financial year, comes as Manulife has rebuilt its balance sheet to shed risk and shifted its focus to Asian growth.
Wealth management sales from Manulife's Asian division more than doubled during the quarter to more than C$2 billion, although that didn't translate into profit growth as core earnings from the segment eased on the year to $180 million from C$213 million.
Analysts are watching the company's core profits closely as Manulife 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.
But Manulife Chief Executive Donald Guloien said he was comfortable with the target, noting that the weakness in Asian core earnings was largely due to business strain, or the upfront costs of expanding wealth and insurance sales.
The high level of strain reflects the company's fast growth in the region, Guloien said. "What we look to is the increase in sales, which will produce the (targeted) profits," he told Reuters.
Overall net profit came in at C$1.06 billion ($1.06 billion), or 56 Canadian cents a share, in the quarter, compared with a year-before loss of C$69 million, or 5 Canadian cents.
The result included C$368 million in investment gains and C$264 million in tax-related gains, the company said.
Excluding those items, core profit was 28 Canadian cents a share, falling short of analysts' expectations of a profit of 32 Canadian cents, according to Thomson Reuters I/B/E/S.
The company's shares still rose 1 percent to C$14.55 on the Toronto Stock Exchange on Thursday, maintaining momentum that saw the shares rise 24.5 percent last year.
"I'd say (the results are) slightly positive because of the strength in Asian sales. But the earnings were not extraordinary," said Peter Routledge, an analyst at National Bank Financial.
The U.S. division, which includes insurer John Hancock, posted core profits of C$293 million, up from C$189 million a year earlier, while its Canadian business earned C$233 million, up from C$142 million.
As with rival Canadian insurer Sun Life Financial Inc , Manulife was hit hard by the 2008 financial crisis and resulting market turmoil, and has both hedged its direct exposure to markets and reduced its dependence on market-sensitive businesses since the crisis.
The company said last year that it had hit its hedging targets ahead of schedule, and Guloien said on a conference call on Thursday it will now hedge on a opportunistic basis, depending on market movements.
He said Manulife is unlikely to follow Sun Life's lead and sell its U.S. variable annuity business, a key money-loser in the wake of the 2008 financial crisis.
Manulife has overhauled the business, and Guloien said there are still substantial profits to be wrung from it in the future.
"I'm not anxious to sell it... In our option that is not in the interest of shareholders," he said on the conference call.
Manulife's minimum continuing capital and surplus requirements (MCCSR) ratio - a measure of stability for insurers - rose to 211 percent in the quarter from 204 percent in the third quarter, a sign of the increasing balance sheet stability that has helped drive its shares higher over the past year.
"Capital is no longer a key issue for this company due in part to the much improved global macroeconomic outlook, but more importantly the ongoing de-risking activities that the company continues to pursue," Robert Sedran, an analyst at CIBC World Markets, said in a note.