* “Not a good quarter”, CEO admits
* Shares drop nearly more than pct
By Cameron French
TORONTO, Aug 5 (Reuters) - Manulife Financial (MFC.TO) is not backing down from making acquisitions, the company’s chief executive said on Thursday, despite writedowns and market volatility over coming quarters that could stretch its already declining capital position.
“We’re not retreating at all,” Donald Guloien said in an interview when asked whether the company still had an appetite for takeovers after reporting a C$2.4 billion ($2.35 billion) loss that reduced its capital levels in the midst of a campaign to rebuild the company’s health.
Manulife, which became one of North America’s biggest insurers with the 2004 acquisition of U.S.-based John Hancock, has maintained that acquisitions are a realistic goal despite concerns about the company’s capital levels that forced it to cut its dividend in half last year.
Shares of Manulife dropped more than 11 percent on Thursday on the quarterly loss, which was due to the impact of weak stock markets and bond yields, which forced it to increase reserves to cover future obligations on policies.
“Obviously it was not a good quarter in terms of earnings,” said Guloien, noting that the company is trying to reduce its exposure to volatile markets.
“We acknowledge that we can’t control interest rates or equity markets ... we think we’re on the right path in hedging these risks away as markets improve.”
Manulife’s closely watched minimum continuing capital and surplus ration (MCCSR) — the yardstick for insurers’ capital levels — fell to 221 percent in the quarter from 250 percent a quarter earlier.
Guloien wouldn’t say what MCCSR level would trigger actions to shore up capital, such as preferred share issuances or assets sales, but said it would take a decline from current levels.
“It’s only if we thought we had a very sustained problem that we would activate some of those plans,” he said.
However, he said capital levels will take a hit in the third quarter from charges that Manulife projects will total more than C$1.3 billion on items such as a re-evaluation of assumptions on bond returns and its long-term care business.
Manulife shares ended down C$1.80 at C$14.20 on the Toronto Stock Exchange on Thursday.
$1=$1.02 Canadian Reporting by Cameron French; editing by Rob Wilson