Manulife Profit Misses EstimatesKatia Dmitrieva
Manulife Financial Corp., Canada’s largest insurer, said fourth-quarter profit slid 51 percent as oil and gas investments languished and it paid out more for policies in North America.
Net income fell to C$640 million ($510 million), or 33 cents a share, from C$1.3 billion, or 68 cents, a year earlier, the Toronto-based company said Thursday in a statement. Profit excluding some items was 36 cents a share, missing the 41-cent average estimate of 15 analysts surveyed by Bloomberg.
“Core earnings, due to a variety of experience factors, were below our plan,” Chief Executive Officer Donald Guloien, 57, said in the statement. “The macro environment, including low interest rates, produces headwinds for 2015.”
Financial firms are grappling with low interest rates and plunging prices for oil, which has declined about 50 percent since June. Manulife has about $1.8 billion in oil and gas equity holdings through its NAL Resources Management Ltd., according to Bank of Montreal.
“Despite that and despite interest rates doing what they did, we ended up with net income of over C$600 million, which is way higher than we expected,” Chief Financial Officer Steve Roder said in a phone interview after results were released.
Manulife had to mark down its oil and gas holdings, including private equity, at the end of December, according to Roder, who said less than 1 percent of the insurer’s investments are in energy. The decline in oil drove down returns from energy assets held in Canada and the U.S. and resulted in a C$353 million loss in the period ended Dec. 31.
The volatility and low oil prices actually make it a good time for Manulife to buy more oil and gas properties, Chief Investment Officer Warren Thomson said in the statement.
Net income from each of Manulife’s regions declined in the quarter from a year earlier. The U.S. division’s profit slid 39 percent to C$506 million on losses on private-equity oil and gas holdings and higher payouts to policy holders, according to the statement. In Canada, net income slid 80 percent to C$73 million as lending competition increased, and the Asia unit’s results dropped 54 percent to C$336 million.
Net income includes variable charges such as the sale of the company’s Taiwan unit, hedging costs and currency charges that are stripped out from core earnings figures.
The firm continued expanding its wealth-management operations in Asia, benefiting from higher fee income and sales. Money management sales there rallied 64 percent in the quarter to $2.5 billion as the company increased marketing and sold new products. In Canada, wealth sales slipped 8 percent to C$2.9 billion as competitors lowered lending rates in a slowing mortgage market. In the U.S., asset managing sales of $7.1 billion were the same as last year.
At year-end, the company managed a record C$691 billion.