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File photo of Manulife Financial CEO Donald Guloien.

ADRIEN VECZAN/REUTERS

Manulife Financial Corp.'s first-quarter profit fell to $540-million, less than half the amount the insurer earned in the same period last year, due in part to equity market changes.

The insurance company was helped by stronger equity markets and record sales in its wealth division, but it also reported a 23-per-cent drop in total insurance sales. The earnings compared to a profit of $1.2-billion in the same period last year, and gains of $1.1-billion in the prior quarter.

"While we are very pleased with our performance in our wealth management and asset businesses this quarter, we were disappointed with a decline in insurance sales," chief executive officer Donald Guloien told analysts on a conference call.

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Manulife's profit totalled 28 cents per share, down from 67 cents a year earlier. The company's core earnings were $619-million in the quarter – an increase of $65-million over the fourth quarter of 2012. Core earnings of 32 cents a share were in line with analyst estimates. The company uses this non-GAAP measure to show the strength of its underlying business, separate from the direct impact of interest rates and unsteady equity markets, as well as some other material and one-time items.

"Earnings excluding larger moving parts were modestly ahead of expectations," said RBC Dominion Securities analyst Andre-Philippe Hardy, stating Manulife's capital ratio also beat his estimates. "These positives should offset reported earnings being slightly lower than expectations."

Manulife has set an ambitious target of $4-billion in core earnings by the year 2016.

Amid low interest rates, but slightly more robust equity markets, the country's major insurers are expected to grow gradually, if unevenly, in 2013, and Manulife's earnings showed that this is likely to be a bumpy ride. The company reported a charge of $208-million related changes in equity markets and interest rates, among other factors.

The company attributed its lower insurance sales in part to a 31-per-cent decline in Asia to its tax and product changes, along with pricing changes. Analysts expected declining interest rates in Asian countries such as Japan, Indonesia and the Philippines would put pressure on earnings.

This quarter marks the one-year anniversary of its chief financial officer, Steve Roder, who said in the release that Manulife has strengthened its capital position by six points in the first quarter to 217 per cent. He was chosen in part for his experience in Asia, which continues to be an area of increasing focus for Manulife.

Insurance sales in Canada were down by 24 per cent, which the company said was due to pricing changes and variability in the some business lines.

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