February 14, 2008 / 4:06 PM / in 10 years

UPDATE 2-Manulife's wealth business may feel mkt pain - CEO

(Recasts with comments from conference call, adds share price)

By Lynne Olver

TORONTO, Feb 14 (Reuters) - Insurance company Manulife Financial Corp MFC.TO is in the best shape it has been in years, but management still worries about how financial market turmoil will affect the wealth-management side of the company, its top executive said on Thursday.

“We’re operating in a backdrop of very unsettled markets, our wealth businesses are going to be affected,” Dominic D‘Alessandro, president and chief executive of Canada’s largest insurer, said on a conference call.

If customers are worried about their jobs, they may buy fewer investment products, and when the market value of assets declines, it hurts fee income, D‘Alessandro noted.

But Manulife has a strong balance sheet and a conservative investment portfolio -- “we don’t mess around with exotic instruments,” D‘Alessandro said -- and it remains interested in potential acquisitions.

“We’re very interested, we have the capital ... so we keep our eyes and ears close to the ground,” D‘Alessandro said of potential deals.

With its business growth momentum and credit quality, Manulife is well placed to weather difficult markets and to capitalize on consolidation opportunities, BMO Capital Markets analyst John Reucassel said in a research note.

Earlier in the day, Manulife said that net income climbed 4 percent on higher fee income and healthy investment performance, although the strong Canadian dollar took a bite out of its profit, Canada’s largest life insurer said.

Net income was C$1.14 billion ($1.14 billion), or 75 Canadian cents a share, in the three months ended Dec. 31. That compares with earnings of C$1.10 billion, or 70 Canadian cents a share, a year earlier.

Analysts had expected Manulife to earn 70 Canadian cents a share, according to Reuters Estimates.

The company, which has operations in Canada, the United States, Japan and other Asian countries, said the strength of the Canadian currency reduced its earnings by C$163 million in the quarter. Excluding the effects of foreign exchange, profit was 19 percent higher than a year earlier, it said.

Almost all of Manulife’s businesses hit record sales levels for the quarter and the full year, the company said.

Fourth-quarter U.S. life and variable annuity sales at its John Hancock unit, as well as Canadian individual life and wealth-management sales, were particularly strong, it said.

Annualized return on equity, a measure of profitability, was 20.5 percent, up from 18.0 percent.

Premiums and deposits rose 10 percent to C$17.4 billion.

D‘Alessandro, who has been Manulife’s CEO for 14 years, was asked on the call about succession issues. His employment contract with the company expires on Dec. 31 this year. The CEO said that no decisions have been made yet.

Manulife stock was little changed at C$37.22 a share, down 12 Canadian cents, on the Toronto Stock Exchange on Thursday afternoon. The stock is down about 8 percent so far in 2008, outperforming its peers in the Canadian life insurance sector.

$1=$1.00 Canadian Reporting by Lynne Olver; Editing by Rob Wilson

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