Manulife Financial Corporation’s (MFC) fourth quarter earnings of 48 cents per share were below of the Zacks Consensus Estimate of 51 cents. The miss was driven by mark-to-market adjustments in real estate investments, model refinements to actuarial liabilities and tax adjustments. However, the company benefited from equity market appreciation and increases in corporate bond yields.
On a GAAP basis, the company reported net income of $801 million compared to a net loss of $1.5 billion in the year-ago quarter, reflecting the equity market volatility and its impact on the variable annuity business.
In Canadian currency, Manulife reported a net income of C$868 million or 51 cents a share, compared with a net loss of C$1.87 billion or $1.24 in the prior-year period. For full-year 2009, the company reported net income of C$1.4 billion or 82 cents per share compared to C$517 million or 32 cents in the prior year.
For the quarter, premiums and deposits were C$6.5 billion, up 16% year over year and 28% on a constant currency basis. However, variable annuity premiums and deposits were C$1.9 billion, down 59% on a constant currency basis, reflecting the company’s ongoing risk management initiatives across all geographies and general economic conditions.
While insurance sales were in line with the prior-year quarter, full-year sales declined by 4% year-over-year on a constant currency basis. Though the company experienced solid growth in Asia, the drop in insurance sales is primarily attributable to a slower economic recovery in the U.S.
Wealth sales, excluding variable annuity products, increased by 7% year-over-year, driven by growth in both Asia and the U.S., and full-year sales were in line with the prior year on a constant currency basis. However, sales of variable annuity products declined by 60% compared to the prior-year quarter.
Total funds under management as of Dec 31, 2009 were C$439.6 billion, up from C$404.5 billion as of Dec 31, 2008. Results were up 22% on a constant currency basis, reflecting the positive policyholder cash flows and investment income and market gains on assets under management.
During the quarter, Manulife completed the merger of its U.S. operating subsidiaries and a C$2.5 billion common equity raise, which increased its capital levels to $33.2 billion as of Dec 31, 2009, from C$30.9 billion as of Dec 31, 2008.
The company also reported a Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of 240% as of Dec 31, 2009, up from 234% in the corresponding period a year ago.
Manulife has estimated its normalized earnings in the range of C$750 million and C$850 million per quarter in 2010 based on exchange rates in effect as of Jun 30, 2009. This would imply a return on equity of approximately 11%, down from the previous target of 12%, to reflect the common equity offering in the fourth quarter of 2009.
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