Manulife reduces risk to markets, posts $1.79 billion profit in fourth quarter
Stung by the volatility of capital markets in past quarters, Manulife Financial Corp. says it is now ahead of schedule on a plan to reduce its exposure to risky investments en route to producing a record fourth-quarter profit of $1.79 billion.
Canada’s largest insurance company said Thursday that its earnings amounted to $1 per share, compared with a profit of $868 million or 51 cents per share in the prior-year period. Higher equity markets boosted the company’s earnings in the quarter by $441 million and improved interest rates contributed $604 million to the bottom line.
Analysts polled by Thomson Reuters had on average predicted earnings of 94 cents per share in the fourth quarter, but their expectations ranged widely from as low as 38 cents to as much as $1.27.
“We have made significant progress on our strategic goals,” CEO Donald Guloien said in a statement.
“We are diversifying our businesses and reducing our sensitivities to equity markets and interest rates, while strengthening our capital position.”
Stripping out the effect of equity markets and interest rates, the company earned $692 million – which was below its own projection for earnings between $700 million and $800 million for the quarter.
“Manulife appears well on its way to achieving its targets within its allotted timeline,” Barclays Capital analyst John Aiken wrote in a note to clients.
Aiken noted that a strong runup in Manulife stock – which has risen more than 40 per cent since it last reported earnings – came alongside an improvement in market conditions, the very thing to which Manulife is striving to reduce its exposure.
“Investors that desire a more stable earnings base from Manulife should continue to receive it, but with smaller incremental earnings growth when the markets move in its favour,” Aiken wrote.
“With this further limited and core earnings stuck in a holding pattern, we believe that near-term upside is limited.”
Shares in Manulife were down 72 cents or 3.8 per cent at $18.20 in early trading on the Toronto Stock Exchange.
For the full year, Manulife posted a net loss of $391 million after taking more than $3 billion in charges for goodwill impairment – stripping out those charges, it would have recorded adjusted earnings from operations of $2.87 million.
