Manulife Financial Corp. (MFC), Canada’s largest insurer, reported a second straight quarterly loss as low interest rates eroded investment returns. Chief Financial Officer Michael Bell, 48, plans to leave the company.
The fourth-quarter net loss was C$69 million ($69.3 million), or 5 cents a share, compared with a year-earlier profit of C$1.8 billion, or 96 cents, Toronto-based Manulife said today in a statement.
Manulife said it recorded a charge of C$665 million related to “low interest rates.” Falling rates reduce investment income while increasing costs from obligations to clients who bought guaranteed investment products.
“We would expect the impact of any future drop in interest rates to be less, now that we’ve done so much hedging,” Bell said today in a telephone interview. “Having said that, we’re not immune to further drops in interest rates.”
Bell, who was named CFO in June 2009, is returning to Philadelphia, where his family moved in June 2010. “We have come to a mutual arrangement regarding his departure,” Chief Executive Officer Donald Guloien said in the statement. The company is searching for a replacement.
“This is far from a positive as Michael had shown a very firm grasp on the company’s operations,” said John Aiken, an analyst at Barclays Capital in Toronto. Bell will be “difficult to replace,” he said.
Manulife was expected to have a net loss of 10 cents a share, according to the average estimate of 10 analysts surveyed by Bloomberg.
Manulife fell 1.9 percent to C$11.88 at 4 p.m. in Toronto trading. The shares had gained 12 percent this year before today, the sixth-best performer on the 42-company S&P/TSX Financials Index (STFINL).
Guloien said the insurer restructured its U.S. annuity business and completed a “repositioning” of its product mix, part of a plan to make the company less sensitive to stock- market swings.
Profit from Canada declined 51 percent to C$241 million because of equity market and interest rate declines. Manulife’s U.S. insurance business climbed 6.1 percent to C$434 million, while its U.S. wealth management business, which includes Boston-based John Hancock Financial, fell 89 percent to C$76 million.
“Wealth-management operations are still in turnaround mode,” said Barclays’s Aiken.
Profit from Asia declined 31 percent to C$285 million because of lower investment-related gains compared to the year- earlier period.
Manulife is the first of Canada’s four main insurers to report fourth-quarter results. Great-West Life Inc., Canada’s second-largest insurer, reported that profit rose 7.5 percent to C$500 million, or 52 cents a share.
Sun Life Financial Inc. (SLF) is scheduled to release results Feb. 15, followed by Industrial Alliance Insurance and Financial Services Inc. on Feb. 17.
To contact the reporter on this story: Sean B. Pasternak in Toronto at email@example.com.