News

Manulife Financial Corp. MFC-T said Thursday it had a loss of $172-million in the latest quarter, compared to a profit of $510-million a year ago.

In a statement, chief executive officer Don Guloien said that the company's performance was solid but its results were hurt by lower corporate bond rates and higher reserves.

The reserve increases stem from a review the insurer carried out of its actuarial assumptions. The review caused a $783-million charge this quarter. About $469-million of that comes because Manulife updated the payouts it expects to have to make to its segregated fund customers. Much of the rest comes from updates to how long it expects insurance policy holders to live.

Manulife took a further $1.2-billion charge because of lower interest rates and corporate spreads. Interest rates have an effect on the value of insurance policies on its books because they affect the amount that the company estimates it will earn on investments in the future (and how much it must set aside now to ensure it can make payments to policy holders down the line).

Offsetting some of the pain, higher stock markets led to a gain of $1.2-billion. The S&P 500 SPX-I rose 15 per cent during the quarter, while the S&P/TSX composite TSX-I increased 10 per cent.

Manulife said the key measure of its capital levels, called the Minimum Continuing Capital and Surplus Requirements, or MCCSR ratio, was 229 per cent at the end of the quarter. Canada's regulator, the Office of the Superintendent of Financial Institutions, requires it to remain above 150 per cent.

Manulife also said Thursday that John Palmer, a former head of OSFI, is joining its board of directors.

The insurer expects adjusted earnings from operations to be between $750-million and $850-million per quarter for the rest of 2009 and 2010. That would imply a return on common shareholders' equity of about 12 per cent. Adjusted earnings from operations were $803-million this quarter.

Executives extended their remarks on a conference call with analysts Thursday afternoon upon learning that Standard & Poor's had just issued a notice on the insurer. The credit rating agency changed the outlook on the operating company's rating from “stable” to “negative,” Manulife's executives said.

Rating agencies have been particularly pessimistic about life insurance and equity market exposure, executives said.