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Manulife Profit Declines as Insurance Sales Fall

May 2 (Bloomberg) -- Manulife Financial Corp., Canada’s largest insurer, said first-quarter profit dropped 56 percent as sales in Asia and Canada declined.

Net income fell to C$540 million ($535.8 million), or 28 cents a share, from C$1.23 billion, or 63 cents, a year earlier, the Toronto-based firm said today in a statement. The insurer was expected to earn 27 cents a share, based on the average estimate of 11 analysts surveyed by Bloomberg.

Manulife, owner of Boston-based John Hancock Financial, said total insurance sales declined 23 percent in the quarter from a year earlier. Sales in Asia fell 31 percent to $232 million, while those in Canada dropped 24 percent as a slowdown in residential mortgages and “an aggressive competitive environment” hampered growth, according to the statement.

“The results were largely positive, but nothing that’s a huge standout, that’s going to make investors say ‘This is different, this is game-changing,’” John Aiken, an analyst at Barclays Plc, said in a phone interview from Toronto. “We’re still in an economic environment where things are not rosy or robust and the earnings reflect that.”

Among its competitors, Manulife is the most affected by changes in equity markets and the least linked to fluctuations in interest rates, Canadian Imperial Bank of Commerce analysts including Robert Sedran said in an April 15 note. Equities and rates reduced earnings by C$208 million in the quarter, Manulife said.

‘Right Direction’

Manulife had record wealth sales of C$12.4 billion, a 43 percent increase from last year, and record funds under management of C$555 billion. Core earnings, which exclude one-time items and the effect of interest rates and equity markets, grew 18 percent to C$619 million from a year earlier.

“The company is definitely moving in the right direction,” said Robert Gill, fund manager at Aston Hill Financial Inc., which manages C$6.7 billion including Manulife shares. “It continues to show an improvement quarter-over-quarter.”

Adjusted earnings, which exclude some items, were 32 cents a share, compared with the 31-cent average estimate of 15 analysts surveyed by Bloomberg.

“It was a very solid quarter,” Chief Executive Officer Donald Guloien, 56, said in a phone interview. “It proved the execution of our overall strategy, which is to reduce volatility in our earnings and generate earnings from a variety of sources.”

The U.S. economy is recovering “slowly but surely,” Guloien said. Manulife, which raised prices in Asia and Canada last year, plans to keep them high even as competitors haven’t, he said.

Earlier today, Great-West reported that first-quarter profit climbed 15 percent to C$517 million, or 54 cents a share, from $449 million, or 47 cents, a year earlier.

Manulife rose 3.9 percent to C$15.33 at 4 p.m. in Toronto, the most since September. The shares have gained 13 percent this year, outpacing the 0.4 percent decline of the 44-company Standard & Poor’s/TSX Financials Index over the same period.

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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