May 5, 2011 / 1:28 PM / in 7 years

UPDATE 4-Manulife profit dips on hedge costs, Japan quake

* Q1 EPS C$0.54 vs C$0.68 yr ago

* Unusual items help company beat analysts’ expectations

* Core businesses performed slightly better than expected

* Shares fall 1.19 pct as broad market drops (Adds details, closing share price)

By John McCrank

TORONTO, May 5 (Reuters) - Manulife Financial Corp MFC.TO posted a lower quarterly profit on Thursday as claims related to the Japanese earthquake and higher hedging costs outweighed strong results by the insurer’s U.S. and Canadian businesses.

North America’s largest life insurer also said it was actively on the lookout for acquisitions, especially in Asia.

Net income dropped to C$985 million ($1 billion), or 54 Canadian cents a diluted share, in the three months ended March 31, from C$1.2 billion, or 68 Canadian cents, a year earlier.

Peter Routledge, an analyst at National Bank Financial in Toronto, said a revaluing of alternative assets, such as real estate, oil, gas, and timber, added 14 Canadian cents to earnings per share, while reduced interest rate exposure added 10 Canadian cents.

After those items, earnings were 30 Canadian cents per share, compared with Routledge’s estimate of 26 Canadian cents.

“The core fundamental businesses did a little better than we expected, not a lot better,” he said. “So you get rid of the sort of left-field items and it’s still a pretty good quarter.”

The company, which owns Boston-based John Hancock Financial, said it generated record mutual fund sales in the United States where it has been trying to reposition its business, as well in Canada, and it saw strong growth in Asia, where it has extensive operations.

The insurer said costs from claims related to the destruction in Japan following the earthquake in March were around C$151 million, in line with earlier estimates.

Hedging costs aimed at reducing exposure to market and interest rate volatility came in at C$100 million.

Great-West Lifeco GWO.TO, Canada’s second biggest insurer, said on Thursday its quarterly profit slipped around 3 percent on charges related to the earthquakes in Japan as well as New Zealand. [ID:nN05289155]

Sun Life Financial SLF.TO, Canada’s No. 3 insurer, said on Wednesday its quarterly profit rose 5.8 percent, helped by a strong North American equity market performance that gave a boost to its investments. [ID:nN04199310]

Shares of Manulife ended down 1.19 percent at C$16.62 on the Toronto Stock Exchange as the broader market declined over 1 percent. Great West Lifeco was down 1.52 percent at C$26.61, while Sun Life dropped 1.92 percent to C$30.14. [ID:nTZO5GE7ZP]

$1=$0.97 Canadian Reporting by John McCrank; editing by Rob Wilson

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