Manulife Seeks to Boost Profit With U.S., Asia Growth
Manulife Financial Corp., the worst- performing financial stock in Canada this year, is aiming to increase profit to C$4 billion ($3.91 billion) by 2015 as it boosts sales in Asia and the U.S.
Profit will be driven by the Boston-based John Hancock Financial unit and an expansion of equity and interest-rate hedging programs, the Toronto-based insurer said today at an investor conference. Manulife expects return on equity of 13 percent by 2015, the firm said in a statement. At the end of the third quarter, it was negative 15.1 percent.
Canada’s largest insurer has posted losses in five of the last eight quarters as it boosted reserves to protect against falling interest rates. The firm cut its quarterly dividend in half last year.
“We’re dealing effectively with our issues and are putting them behind us,” Chief Executive Officer Donald Guloien said in a telephone interview today. “We’re preparing for what will hopefully be a great trajectory of growth and prosperity over the next five years.”
Manulife fell 34 cents, or 2.2 percent, to C$15.35 at 4:09 p.m. on the Toronto Stock Exchange. The shares have dropped 21 percent this year, the worst-performer among the 44-company S&P/TSX Financials Index.
At the conference today, Manulife declined to give specific earnings forecasts for future years. The C$4 billion goal is based on current accounting standards and doesn’t assume any net issuance of debt or equity capital.
Hedging Program
Manulife said it began a new “macro” hedging program, shorting C$2.5 billion of equity futures contracts. If the hedges were in place Sept. 30, they would have cut net-income volatility by about C$150 million, the insurer said in a statement.
Asia may produce net income of C$1.5 billion by 2015, said Robert Cook, Manulife’s senior executive vice president and general manager of Asia. For the first nine months of 2010, Asia produced profit of C$284 million. The company said it may expand in Korea and India.
“We’d be very interested in operating in Korea if the right opportunity developed,” said Guloien, 53. “We would hope to have a true partnership, a 50-50 partnership, if we were to operate in India.”
To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.
To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Dan Kraut at dkraut2@bloomberg.net.
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