Manulife Profit Misses Analysts’ Estimates as Rates Rise

Manulife Financial Corp. (MFC), Canada’s largest insurer, posted second-quarter profit that missed analysts’ estimates as increasing interest rates on bond funds pushed up liabilities.

Net income was C$259 million ($249 million), or 12 cents a share, compared with a restated loss of C$281 million, or 17 cents, a year earlier, the Toronto-based firm said today in a statement. Profit excluding some items was 31 cents a share, compared with the 32-cent average estimate of 13 analysts surveyed by Bloomberg.

“Second-quarter net income is not as strong as we would have liked, due to the impact of a number of market-related items,” Chief Executive Officer Donald Guloien, 56, said in the statement.

The company took a C$242 million charge as rates rose, increasing its unhedged policy liabilities. About C$180 million of these charges may reverse in future quarters, the company said. The charge also included C$50 million in hedging costs related to volatility in the Japanese stock market.

Guloien reaffirmed Manulife’s objective of reaching so-called core earnings of C$4 billion by 2016. Profit on that basis for the quarter was C$609 million, a 1.7 percent rise over last year.

Revenue from wealth management advanced 60 percent from the same period last year to C$13.7 billion, a record, as the company’s Asia unit doubled its sales. Manulife relies on Asia for about 33 percent of its profit.

‘A Breather’

Mutual-fund sales in the U.S. also doubled from a year earlier. Overall insurance revenue declined 3 percent as the Asian division adapted to higher product prices and a tax change in April 2012 caused a spike in sales last year.

While Manulife’s adjusted earnings were solid, “we would not be surprised to see its valuation take a bit of a breather based on the modestly disappointing second-quarter earnings,” John Aiken, an analyst at Barclays Plc in Toronto, said in a note to clients.

Manulife fell 0.6 percent to $17.93 at 10:22 a.m. in Toronto. The shares have gained 33 percent this year, outpacing the 6.1 percent gain of the 45-company Standard & Poor’s/TSX Financials Index.

Sun Life, Canada’s third-largest insurer, said yesterday that net income from continuing operations climbed 60 percent to C$391 million as wealth-management and insurance sales increased. Operating profit, which excludes some items, was 71 cents a share, beating by six cents the average estimate of 13 analysts surveyed by Bloomberg.

(Manulife will hold a conference call today at 2 p.m. in Toronto. To listen, dial 416-340-8018 or visit http://www.manulife.com/quarterlyreports)

To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net

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